UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM JANUARY 1, 1999 TO
JUNE 30, 1999.
COMMISSION FILE NUMBER ______________________
LIFESTREAM TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 82-0487965
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 Clearwater Loop, Suite 101, Post Falls, ID 83854
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(Address of principal executive offices)
(208) 457-9409
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, PAR VALUE OF $0.001
---------------------------------
TITLE OF CLASS
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 [ _ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $51,229.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the closing price of $.98 at which the
common equity was sold, as of June 30, 1999 was $11,992,658.
The number of shares outstanding of the registrant's common stock as of June 30,
1999 was 12,187,661.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III Information will appear in the Registrant's Proxy Statement in
connection with its 1999 Annual Meeting of Stockholders, scheduled for December
9, 1999. Such information will be incorporated by reference as of the date of
the filing of such Proxy Statement to be filed no later than October 28, 1999.
Transitional Small Business disclosure format. Yes [ ] No [X]
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LIFESTREAM TECHNOLOGIES, INC.
TRANSITION REPORT ON FORM 10-KSB
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
INDEX
INDEX
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<S> <C>
PART I
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 13
Item 6. Management's Discussion and Analysis or Plan of Operation 15
Item 7. Financial Statements F-1 to F-20
Item 8. Change in and Disagreements with Accountants or Accounting
and Financial Disclosures 18
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 18
Item 10. Executive Compensation 18
Item 11. Security Ownership of Certain Beneficial Owners and Management 18
Item 12. Certain Relationships and Related Transactions 18
Item 13. Exhibits, List and Reports on Form 8-K 18
Signatures 20
Exhibit Index 21
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
This Transition Report on Form 10-KSB, including the information incorporated by
reference herein, includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All of the statements contained in this Transition Report on Form 10-KSB,
other than statements of historical fact, should be considered forward looking
statements, including, but not limited to, those concerning the Company's
strategies, objectives and plans for expansion of its operations, products and
services and growth in demand for the Lifestream TechnologiesTM Cholesterol
Monitor. There can be no assurance that these expectations will prove to have
been correct. Certain important factors that could cause actual results to
differ materially from the Company's expectations (the "Cautionary Statements")
are disclosed in this Transition Report on Form 10-KSB. All subsequent written
and oral forward looking statements by or attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by such
Cautionary Statements. Investors are cautioned not to place undue reliance on
these forward looking statements, which speak only as of the date hereof and are
not intended to give any assurance as to future results. The Company undertakes
no obligation to publicly release any revisions to these forward-looking
statements to reflect events or reflect the occurrence of unanticipated events.
OVERVIEW
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Lifestream Technologies, Inc. (the "Company" or "Lifestream"), which was
formerly Utah Coal and Chemicals Corporation, is a Nevada corporation,
reorganized on February 11, 1994 and has as its current address 510 Clearwater
Loop, Suite 101, Post Falls, ID 83854. The Company currently operates through
its two wholly owned subsidiaries, Lifestream Diagnostics, Inc. ("Lifestream
Diagnostic") and Secured Interactive Technologies, Inc. ("Secured" or "SITI")
(See "Acquisition of Secured Interactive Technologies, Inc.") Since the close of
the six month transition period ending June 30, 1999, the Company has
consolidated all company functions to the Post Falls facility in an effort to
reduce operating expense.
Lifestream is a developer and provider of Internet Medical Information Solutions
through the use of "Smart Card" enabled health care diagnostic instruments to
domestic and international markets. Lifestream's initial product offering is the
Lifestream TechnologiesTM Cholesterol Monitor (the "cholesterol monitor")
(formerly marketed as the Cholestron TM Pro II), a hand held instrument that
measures total cholesterol levels in the blood with medical laboratory accuracy
in approximately three minutes. It is used in conjunction with a disposable
dry-chemistry test strip.
Lifestream's professional-use cholesterol monitor measures total cholesterol
levels to aid in the detection of persons who may be at risk for coronary heart
disease and in the management of patients undergoing therapy with lipid lowering
drugs. Initially, the Company will focus its marketing efforts on domestic and
international pharmacists offering on-site testing to their customers and to
pharmaceutical companies who sell cholesterol-lowering drugs. There are
approximately 200,000 pharmacists in the United States, working in more than
52,000 pharmacies located in drug stores, food stores and mass merchants.
Because of the identification of the pharmacy as a convenient place where
consumers can easily access healthcare, the pharmacy market has been identified
by the Company as a new market for cholesterol screening for adults in the
United States.
The Company believes its inexpensive, quantitative and timely approach to
screening and monitoring high cholesterol will set the Lifestream cholesterol
monitor apart from competing devises. The Company expects competition from
several companies, including those using "single use" cholesterol test strips
for screening purposes and those using an instrument/strip for monitoring and
diagnostics. The Company believes that no competitor to date has introduced a
quantitative monitoring product into the U.S. over-the-counter or retail market,
or met the Company's price range for a quantitative monitor for the professional
market.
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Additionally, the Company believes the Lifestream cholesterol monitor offers
important educational features absent in many competing technologies. Using the
keypad, the user is able to enter risk factors associated with heart health. The
monitor uses these factors to calculate the patient's risk of a cardiac event
over periods of five and ten years. By changing parameters, a patient can learn
how his or her "cardiac age" will improve by changing certain habits, such as
quitting smoking or beginning to exercise. The medical record card ("smart
card"), which holds up to 75 bytes of information, can be used in conjunction
with the monitor. The smart card contains a patient's cholesterol readings and
other risk factors downloaded from the Lifestream monitor. This information can
be transferred to the physician's office computer via the smart card to provide
a record detailing the total cholesterol test results for that particular
patient.
The Company is conducting product research and development to introduce a
medical data storage and transmission system compatible with Lifestream's
cholesterol monitor. 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 the Lifestream smart card. This
information combined with content from a secure website can then be transferred
to the computer of a healthcare professional to print a report.
Once this system is developed, a healthcare professional will be able to access
Lifestream's secured Intranet program (being created jointly with Secured, a
health information software company and subsidiary of Lifestream). Using this
program, 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 monitor a patient's
health.
CORPORATE FORMATION:
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Lifestream Development Partners ("LDP") was organized in 1989 as a general
partnership for the purpose of developing the Cholestron lipid monitor device.
The primary purpose of the original partnership was to engage in product
chemistry research and development, purchase production and exclusive
distribution rights to certain technology and to engage in various pre-marketing
and pre-production programs. During this first phase of research and development
and technology acquisition, LDP was capitalized for $2,500,000 by the three
investors.
For the second phase of business, the principals of the LDP organized Lifestream
Diagnostics, Inc. ("Lifestream Diagnostics"), as a Nevada corporation on June 1,
1992. On August 7, 1992, LDP transferred its net assets, consisting primarily of
purchased patent rights to the dry strip chemistry, to Lifestream Diagnostics in
exchange for 3,327,000 shares of the Company's common stock.
On February 11, 1994, Lifestream Diagnostics entered into a plan of
reorganization whereby Lifestream Diagnostics executed an exchange agreement
with Utah Coal & Chemical ("UTCC"), pursuant to which Lifestream Diagnostic
became a subsidiary corporation of UTCC. Prior to the acquisition of Lifestream
Diagnostics by UTCC, there were 3,295,650 shares of common stock issued and
outstanding that were owned by 685 registered shareholders of UTCC. The
3,295,650 shares were reverse split on a basis of 4 to 1, resulting in 823,913
shares outstanding at the time of acquisition. Lifestream Diagnostics was
acquired in exchange for the issuance of 4,200,000 shares of restricted common
stock. On a post acquisition basis, the total outstanding shares were 5,023,913.
Simultaneously, UTCC changed its name to Lifestream Technologies, Inc., and
Lifestream Diagnostics became a subsidiary of the Company.
ACQUISITION OF SECURED INTERACTIVE TECHNOLOGIES, INC.:
On September 1, 1999 the Company completed the acquisition of SITI by
effectuating a merger whereby the stockholders of SITI received one share of the
Company's common stock for each share of SITI common stock owned by such
stockholder. The Company issued a total of 1,944,000 shares of common stock to
the stockholders of Secured. Secured is the developer of the PrivalinkTM System,
patent pending, a suite of secure Internet medical software and information
services for healthcare data management of Personal Medical Records. Lifestream
previously owned 20% of Secured and worked closely with Secured on the
integration of the Company's cholesterol monitor with Secured's Medical Internet
Solution.
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INDUSTRY OVERVIEW AND PRODUCT TECHNOLOGY SUMMARY:
- -------------------------------------------------
The American Heart Association estimates half of American adults (97 million
people) have blood cholesterol high enough to warrant medical attention.
Coronary Heart Disease ("CHD") affects approximately 1.25 million Americans
annually and accounts for 500,000 deaths, consuming over $100 billion in health
care and related costs each year. The ongoing Framingham Heart Disease
Epidemiological Study (the "Framingham Study") which began in 1948, tracks more
than 5,000 adults to identify the major risk factors associated with CHD. The
Framingham Study has identified high cholesterol as a major risk factor for CHD
and has proved that adults with lower cholesterol levels live longer.
Because of the recognized medical importance of managing cholesterol and
preventing CHD, the National Cholesterol Education Program ("NCEP") was formed
to educate consumers and professionals about the importance of knowing an
individual's cholesterol level and establishing guidelines for the detection,
evaluation and treatment of high cholesterol in adults. To detect cholesterol
risk and aid in therapy compliance, the NCEP recommends a whole blood total
cholesterol test at least once every five years, and if cholesterol levels are
categorized as high risk, testing is recommended once every three months.
Traditionally, cholesterol testing has been done using bench top analyzers.
Cholesterol testing using these analyzers has required large samples of whole
blood for use in separating the red blood cells from serum/plasma and produces
results in 24 to 48 hours. The separation of blood cells is vital to assure
proper color change during cholesterol testing. In addition, these machines
require exact amounts of whole blood to be used in the test. Although some bench
top analyzers are now using chemistry/strip technology, they continue to require
relatively large amounts of whole blood. Such machines cost can be in excess of
$2,000. Further, the analyzers using the chemistry/strip technology can take a
minimum of four to five minutes to determine results, in addition to the time
required for blood drawing and centrifugation.
Based on the characteristics of existing devices for cholesterol testing, the
Company believes that there is a large need in the professional market for
affordable, timely and convenient on-site testing. Further, the Company believes
that the Lifestream cholesterol monitor can be a cost-effective instrument that
enhances compliance with regular cholesterol screening and can provide
inexpensive, ongoing testing to aid in monitoring of cholesterol treatment
programs.
The Lifestream cholesterol monitor is relatively small having dimensions of 6.5"
x 4.5" x 2" and an approximate weight of one pound. The hand-held monitor
utilizes test strips that are inserted into the monitor's optics and a single
blood drop is placed on the strip. The "user friendly" instrument incorporates a
keypad which is used to turn on the instrument, recalibrate it by use of a code
which is unique to each batch of chemistry strips and to enter information
relating to the eight risk factors identified as indicators of heart health.
There is also an easy-to-read, quantitative liquid crystal display ("LCD") on
the face of the instrument on which test results are displayed.
Lifestream's technology is differentiated from current cholesterol measuring
technology by dry chemistry, in vitro diagnostics resulting from a single finger
stick drop of blood that measures cholesterol levels in the blood with medical
laboratory accuracy. The quantitative cholesterol result is obtained in three
minutes and does not require an exact amount of whole blood. The structure of
the technology consists of a multi-layer test strip manufactured by Roche
Diagnostics GmbH (formerly Boehringer Mannheim GmbH) ("Roche"). The strip uses a
chroma-graphic reaction with lipoprotein to produce a color change in direct
proportion to the quantity of total cholesterol in the blood sample. The
resulting color change is "read" by the instrument's photometry system and then
converted electronically to a quantitative cholesterol digital read-out, which
is displayed on the LCD screen of the instrument. The Lifestream cholesterol
monitor meets NCEP guidelines for precision in testing. The cholesterol monitor
also includes a cardiac risk calculator, allowing the professional operator to
determine the cardiac condition of the patient based on eight different cardiac
risk factors, including gender, age and total cholesterol among others, as
determined by the Framingham Study.
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To perform a cholesterol test on the Lifestream monitor, the operator sticks the
finger, using a reusable lance device, equipped with a disposable lancet. Then a
drop of blood is placed on the dry chemical strip, which has been inserted into
an opening of the optical head on the face of the unit. In approximately three
minutes the cholesterol level (which is actually the milligrams of cholesterol
per deciliter of blood) is displayed on the screen. The Company believes that
there is no other CLIA-waived, hand-held, quantitative system on the market
today that is easier to use, more accurate and quicker in obtaining results than
the Lifestream monitor. The Company has set the initial retail price under $300
compared to more than $2,000 for available bench top analyzers.
If the introduction of the Lifestream monitor system is successful, the Company
will proceed with development of follow-on tests which may include glucose,
high-density lipoprotein ("HDL"), and the triglycerides (or amount of fat) in
the sample, as well as the calculation of low density lipoprotein ("LDL").
STATUS OF PUBLICLY ANNOUNCED PRODUCTS AND PRODUCTDEVELOPMENT:
- -------------------------------------------------------------
The Lifestream Technologies Cholesterol Monitor: There are two primary
components to the Lifestream cholesterol monitor: the monitor and the disposable
test strips. The Company is currently manufacturing the professional-use,
handheld monitor in its leased production facility located in Post Falls, Idaho.
The Company leased this 6,500 square foot facility in June 1998.
The test strip and in vitro diagnostic optic hardware required for the
cholesterol monitor are manufactured by Roche. After Roche produces the test
strips, the packaged test strips are shipped to the Company's production
facility for final quality assurance inspection and packaging with the monitor
for shipment to customers. Lifestream signed a license and manufacturing supply
agreement with Roche in November 1997, pursuant to which Roche agreed to license
and supply the test strips and optic hardware to the Company for an initial term
of five years. By entering into this agreement, the Company is able to use its
capital in the manufacture and marketing of the cholesterol monitor rather than
production of its own patented chemistry. However, Lifestream is still able to
pursue the commercialization of its own chemistry, if required or if the Company
intends to pursue the enhancement of its device to include the ability to read
HDL cholesterol, triglycerides and glucose, and such additional testing would
require chemistry different from that used in the Roche manufactured test
strips. Currently, the agreement with Roche constitutes the Company's sole
source of supply to the test strips and optic hardware used in the cholesterol
monitor. The inability of the Company to meet its supply needs through its
agreement with Roche or its inability to replace Roche as a source for
components of the cholesterol monitor would have a material adverse effect on
the ability of the Company to manufacture its product.
Privalink Software and the Smart Card Technology: Lifestream's entrance into
medical Internet markets will be through the proliferation and use of the
Company's "Smart Card" in this highly visible medical segment. The Company's
solutions meet all the business-flow requirements in the physician's office.
This business flow is made up of five basic components starting with
1) diagnostic testing, which leads to;
2) a patient diagnosis, which in turn determines;
3) the prognosis, which indicates;
4) a specific recommendation, which all require
5) medical recording.
Lifestream Technologies accomplishes all these requirements in a
simple, transparent and easy-to-use system called "Privalink(TM)", which
seamlessly links its patented diagnostic device with its proprietary encrypted
web-site via the Company's medical "Smart Card". Present testing practice
currently requires time-consuming and inconvenient laboratory tests, which can
take up to 48 hours, thus taking the physician out of the required business
flow. This delay leaves them unable to make specific and meaningful
recommendations to the patient at the time of the office visit. The market is
positioned to accept a quick and functional approach to cholesterol and other
blood analyte testing.
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The main problem presently confronting the healthcare system is how to
integrate the medical business flow with the communication technologies
presently being utilized throughout all other industries. The Lifestream
solution is based on two assumptions:
1) the Internet will be the communication platform for the transfer of
medical information and storage of medical records, and
2) the integrated circuit (IC) Smart Cards will be used as security
access keys over the Internet as well as medical ID cards.
Lifestream believes linking patients, physicians, pharmacists, and scientific
literature through an Internet/Smart Card-based interface will be the
communication platform eventually adopted across the medical industry.
Lifestream's Over-the-Counter or Consumer Cholesterol Monitor: The Company plans
to introduce, in early calendar year 2000, a consumer over-the-counter (OTC)
product for personal monitoring of cholesterol-lowering programs. The consumer
product can store cholesterol test results on the Smart Card at home and can
then interact with the physician's technology platform, using the Company's
Smart Card and/or Internet communication links, thus creating the first
consumer-based "Smart Card communication link of its kind. Each diagnostic
instrument will have the ability to read and write to the Company's proprietary
"Smart Card", which creates conductivity with Lifestream's Internet-based,
Privalink(TM) operating software system.
Distribution of the Consumer products is scheduled for six to twelve months
after the introduction of the Professional products. Upon successful completion
of the FDA regulatory process, the retail product will be sold in all common
establishments and distributed either directly or through wholesale, starting
with catalogue and direct selling, moving to general merchandisers and
concluding with mass merchandisers.
COMPETITION:
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The development and marketing of medical products is intensely competitive.
There are other companies that are seeking to market or are marketing diagnostic
products to compete with Lifestream's cholesterol instrument for the physician
office, pharmacy or consumer retail markets. Some of these competing products
have received FDA marketing clearance for the U.S. physician office market, but
the Company is not aware of any filings for, or receipt of, FDA marketing
clearance for the U.S. consumer retail market for such products, with the
exception of ChemTrak, Inc. which is currently marketing a single use,
non-quantitative, non-instrument based test that relies on visual determination
of the results based on a color-matching chart. In addition, several companies
offering similar products to those of the Company have substantially greater
financial, marketing and technological resources than the Company. No assurance
can be given that the Company's products will be competitive with existing or
future products.
Currently, most blood analysis is performed by laboratories removed from the
patient setting. The Company's products will directly compete with such
laboratories. Some of the Company's laboratory competitors currently offer
services which may be perceived as being priced lower than the products the
Company expects to offer. Lifestream cannot provide the same range of tests
provided by laboratories. In addition, health care providers may choose not to
change their established means of having such tests performed or to make the
necessary capital investment to buy the Company's products. The Company also
faces competition in the alternate-site market from makers of bench top
multi-test blood analyzers and from other point-of-care blood analyzers.
While the Company believes that its products will be able to compete with
clinical laboratories, bench top multi-test analyzers and other point-of-care
blood analyzers on the basis of ease of use, portability, the ability to conduct
tests without a skilled technician, cost effectiveness and quality of results,
there is no assurance that the Company will be able to compete successfully.
Blood analysis is a well-established field in which there are a number of
competitors, which have substantially greater financial resources and larger,
more established marketing, sales and service organizations than the Company.
Competition can be separated into two groups, those firms pursuing single-use
cholesterol screening tests and those developing an instrument/strip
diagnostic/monitoring instrument-based tests. A summary of what is known by the
Company about potential competitors in both groups is listed below:
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Consumer Market Disposable Testing - Single Use
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Several companies have introduced or are working on disposable cholesterol
testing cards or instruments. These are very basic tests where the user takes a
blood sample, drops it on the test card and visually compares the resulting
color change or color movement (similar to a thermometer) of the sample to a
color chart. These tests require user interpretation and are semi-quantitative
which are not usually acceptable standards for the professional market. For
these types of tests, specific accuracy is not available, cholesterol counts are
given in ranges (e.g. 150-200) and the additional issues of user color blindness
or printing accuracy of the color chart must be considered. The Company feels
that these tests will not provide competition for the segment of the
marketplace, which is interested in more accurate cholesterol level testing and
maintenance.
Instrument/Disposable Strip - Multiple Use Instruments
- ------------------------------------------------------
Companies currently selling products in this market segment are focused
primarily on the professional market. The barriers to entering the consumer
market have been, and continue to be, the cost of the instrument and the fact
that, for most of these instruments, a large and exact quantity of blood is
required for the test. Companies having a significant presence in the
professional market for diagnostic screening and therapeutic monitoring, such as
Abbott Laboratories, Clinical Diagnostic Systems, a division of Johnson &
Johnson, Cholestec Corporation and Boehringer Mannheim GmbH, a subsidiary of
Roche Holdings Ltd., have developed or are developing analyzers designed for
preventive care testing. These competitors have substantially greater financial,
technical, research and other resources and larger, more established marketing,
sales, distribution and service organizations than the Company. However, the
Company believes that it currently has a competitive advantage due to the design
and cardiac risk factor analysis capabilities of the Lifestream cholesterol
monitor as a hand-held, quantitative, affordable and regulatory-approved
instrument.
There can be no assurance that the Lifestream cholesterol monitor will be able
to compete with these other analyzers and testing devices or that the Company's
competitors will not succeed in obtaining further government approvals or in
developing or marketing technologies or products that are more commercially
attractive than the Company's current or future products.
PATENTS AND PROPRIETARY INSTRUMENTS:
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The Company has applied for six patents covering various technologies. One
patent, issued August 4, 1992, covers the invention of the direct measurement of
HDL cholesterol with dry chemistry strips. The remaining five patent
applications are pending and relate to varying aspects of the Lifestream
cholesterol monitor.
With the recent acquisition of Secured Interactive, the Company will have one
additional patent filing, added to its pending patent applications. This
additional patent pending is for the Privalink(TM) software and business model.
The medical products industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and any such
litigation could result in substantial loss or diversion of Company revenues and
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that pending
patent applications filed by the Company will be approved or that the Company's
issued or pending patents will not be challenged or circumvented by competitors.
The Company believes that its future success will depend primarily upon the
technical expertise, creative skills and management abilities of its officers,
directors and key employees, as well as on patent ownership.
DISTRIBUTION AND MARKETING:
- ---------------------------
The Lifestream cholesterol monitor is the first product commercially introduced
by the Company. The Company has selected and qualified its initial sources of
supply of key components, including the test strips and optic hardware from
Roche, however, there are no assurances that the Company will be able to
manufacture the cholesterol monitor in compliance with regulatory requirements,
in sufficient quantities, with appropriate quality and at acceptable costs. At
present the Company's manufacturing capabilities are supported by Good
Manufacturing Guidelines ("GMP") standard operating procedures and factory work
instructions as well as an ISO-9001 based quality system. The Company has
finalized this process and began manufacturing operations to achieve commercial
production levels in October of 1998. The Company continues to develop the
management infrastructure necessary to manage the progression required by the
manufacturing operations.
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While certain members of the Company's management have relevant marketing
experience, Lifestream has no experience marketing its product directly to
end-users. The Company intends to use third party medical product distributors
to market to alternate care sites. In the event that the Company does not enter
into third party distribution agreements for its products, significant
additional capital expenditures and management resources will be required to
develop and expand its direct sales force. While the Company has identified
potential domestic distributors, no formal distribution contracts have been
executed. There can be no assurance that the Company will be able to establish
such a sales force or enter into such third party distribution agreements to
gain market acceptance for its products.
GOVERNMENTAL REGULATION:
- ------------------------
The Company's products are governed under the regulation of the United States
Food and Drug Administration ("FDA"). Prior to any marketing of devices, the
Company must first obtain pre-clearance from the FDA, either through the
notification ("510(k) Notification") process or the pre-market approval
application ("PMA") process.
In April 1998, the Company completed clinical studies for the Lifestream
cholesterol monitor. Upon completion of the clinical studies, the Company filed
a 510(k) Notification with the FDA. On October 1, 1998, Lifestream's cholesterol
monitor 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 FDA. Subsequently, Lifestream is developing
additional instrument and system functionality including expanded health risk
assessments and the ability to access the internet for secure data storage, data
analysis and reports. The Company is in the process of submitting additional
material and is preparing a supplementary filing to the FDA for these new
features and functions. These new features will not be able to be incorporated
into the cholesterol monitor until they have received approval by the FDA.
On February 24, 1999, the Centers for Disease Control and Prevention ("CDC")
granted a waiver from the requirements of the Clinical Lab Improvement
Amendments of 1988 ("CLIA") to the Lifestream cholesterol monitor. The
CLIA-waiver is granted by the CDC to products that meet strict ease-of-use,
accuracy and precision guidelines. The significance of the CLIA-waiver is that
it will allow Lifestream to market its product to healthcare professionals in
medical clinics, hospitals, pharmacies and other settings without meeting
extensive CDC regulatory requirements.
On June 7, 1999, Lifestream submitted a 510[k] pre-market notification to the US
Food and Drug Administration for the unique PrivalinkTM software accessory, that
combines a regulated medical device and patient information through the Internet
using industry-standard Smart Cards and high level encryption.
The Company plans to develop and market an over the counter home-use personal
cholesterol monitor. The personal monitor 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. The Company has reviewed it's over the counter clinical trial protocol with
the FDA and is preparing to start the clinical trials. The Company anticipates
filing a 510(k) Notification after the successful completion of clinical trials.
Clinical trials will require the Company to raise additional capital. Lifestream
is positioned to start its clinical studies for this over the counter home-use
personal cholesterol monitor upon receipt of an appropriate level of third party
funding. There is no assurance that the Company will receive an appropriate
level of funding or that it can successfully complete these clinical studies or
subsequently receive FDA approval for a consumer instrument.
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In general, the Company intends to develop and market tests that will require no
more than 510(k) Notification clearance. However, if the Company cannot
establish that a proposed technology is substantially equivalent to a legally
marketed device, the Company will be required to seek pre-market approval of the
proposed test cassette from the FDA through the submission of a PMA application.
If a future product were to require submission of a PMA application, regulatory
approval of such product would involve a much longer and more costly process
than a 510(k) Notification clearance. A PMA application generally must be
supported by extensive data, including laboratory, pre-clinical and clinical
data to demonstrate safety and efficacy, as well as a complete description of
the device and its components and a detailed description of the methods,
facilities and controls used to manufacture the device. In addition, the PMA
submission must include the proposed labeling, advertising literature and
training methods. The Company does not believe that its products under
development will require the submission of a PMA application.
All products manufactured or distributed by the Company pursuant to FDA
clearance or approvals are subject to pervasive and continuing regulation by the
FDA and certain state agencies, including record keeping requirements and
reporting of adverse experience with the use of the device. In addition,
labeling and promotional activities are subject to scrutiny by the FDA.
RESEARCH AND DEVELOPMENT ACTIVITIES:
- ------------------------------------
During the six month period ended June 30, 1999 and the years ended December 31,
1998 and 1997, the Company expended funds on research and development activities
of approximately $28,922, $304,432 and $106,999 respectively. In addition, a
significant portion of all other operating expense amounts incurred were
indirectly related to product development. It is expected that the Company will
continue to expend significant amounts for research and development for the
foreseeable future periods.
PRODUCT LIABILITY AND INSURANCE:
- --------------------------------
The clinical testing, marketing and manufacturing of the Company's products
necessarily involves the risk of product liability. The Company currently has
product liability insurance. The amount and scope of any current and future
insurance coverage may acquire may not be adequate to protect the Company in the
event of a product liability claim.
COMPANY EMPLOYEES:
- ------------------
As of June 30, 1999, the Company had 14 full time employees. The Company
anticipates that it will continue to modify the number of employees as the
demand on manufacturing operations changes, although this may not be the case.
The Company seeks to attract and retain skilled and experienced employees,
although there can be no assurance that it will continue to do so in the future.
The loss of key personnel or the inability to hire or retain qualified personnel
could have a material adverse effect on the Company's business, financial
condition, and results of operations. None of the Company's employees is covered
by a collective bargaining agreement, and management considers relations with
employees to be good.
ITEM 2. PROPERTIES.
The Company leases 2,400 square feet of office space in Fort Collins, Colorado,
which served as the administrative offices of the Company. Recently, the Company
made plans to close its Fort Collins office and will negotiate with its landlord
regarding the remaining four years of lease payments. In addition, the Company
has leased 6,500 square feet of space in Post Falls, Idaho for a term of sixty
months for the manufacturing and product development of the cholesterol product.
The Post Falls facility now houses the corporate and administrative functions as
well.
The Company does not currently make any investments in real estate or interests
in real estate, including real estate mortgages or securities issued by person's
primarily engaged in real estate activities, and the Company does not intend to
make such investments in the future.
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
No matters for inclusion herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters for inclusion herein.
12
<PAGE>
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades in the OTC bulletin board market (OTC
BB:LFST). The following table shows the quarterly high and low bid prices for
1997, 1998 and 1999 as reported by the National Quotations Bureau Incorporated.
These prices reflect inter-dealer quotations without adjustments for retail
markup, markdown or commission, and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
CALENDAR
YEAR PERIOD HIGH LOW
---- ------ ---- ---
<S> <C> <C> <C> <C>
1997 First Quarter $1.03 $ .43
Second Quarter $ .81 $ .43
Third Quarter $1.06 $ .35
Fourth Quarter $1.59 $ .59
1998 First Quarter $1.00 $ .50
Second Quarter $6.13 $ .94
Third Quarter $4.38 $ 2.50
Fourth Quarter $4.38 $ 1.59
1999 First Quarter $2.44 $ 1.06
Second Quarter $1.32 $ 0.81
</TABLE>
At June 30, 1999 there were approximately 2,000 holders of record of the
Company's Common Stock.
The Company has never and has no intentions at this time to declare dividends on
its common stock. The Company presently intends to retain future earnings, if
any, to finance the expansion of its business. The future dividend policy will
depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors.
RECENT SALES OF UNREGISTERED SECURITIES
In June 1999, the Company sold 200,000 shares of Common Stock at a price of
$1.00 per share in a private placement of securities.
In June 1999, the Company issued 184,328 shares of its Common Stock to six
noteholders in full repayment of $440,000 of convertible debt and accrued
interest at a price of $2.50 per share as specified in the convertible note
agreements.
In April 1999, the Company issued 16,000 shares of Common Stock to a former
employee for services rendered to the Company valued at $41,600.
In March 1999, the Company received $535,000 cash pursuant to the issuance of a
convertible note. The note, which matured two years from the date of grant,
accrued interest at prime plus 2% and was convertible at anytime into shares of
the Company's Common Stock at a per share rate of $2.50. In addition, as an
inducement to execute the note, the Company issued 80,250 shares of the
Company's Common Stock to the creditor. The note was immediately converted into
214,000 shares of the Company's Common Stock.
In February 1999, the Company received a total of $215,000 cash pursuant to the
issuance of four separate convertible notes. The notes, which mature two years
from the date of grant, accrue interest at prime plus 2% and are convertible at
anytime into shares of the Company" Common Stock at a per share rate of $2.50.
In connection with the debt, the Company issued 15,000 shares of its Common
Stock to the shareholders as an inducement to execute the notes.
13
<PAGE>
In 1999, the Company issued 312,007 shares of Common Stock for services rendered
to the Company by third parties at prices ranging from $0.94 to $2.25 per share.
In 1999, the Company issued 90,750 shares of Common Stock for thirty day
extensions on various bridge loans owed by the Company at prices ranging from
$0.94 to $1.50 per share.
In December 1998, the Company received a total of $225,000 cash pursuant to the
issuance of three separate convertible notes. The notes, which mature two years
from the date of grant, accrue interest at prime plus 2% (9.75% at December 31,
1998) and are convertible at anytime into shares of the Company's Common Stock
at a per share rate of $2.50. In connection with the debt, the Company issued
33,750 shares of its Common Stock to the noteholders as an inducement to execute
the notes.
In June 1998 and July 1998, the Company sold 89,000 shares of Common Stock to
certain employees at a price of $1.25 per share and issued 89,000 shares of
Common Stock for future services in connection with the execution of employment
agreements by such employees.
In June 1998, the Company issued 155,045, 26,020 and 200,000 shares of the
Common Stock for conversion of short-term debt at a price of $0.75, $1.00 and
$1.25 per share, respectively.
In May 1998 and September 1998, the Company issued 12,500 and 15,000 shares of
Common Stock, respectively, to employees for services rendered to the Company
valued at $12,500 and $37,500, respectively.
In May 1998, the Company sold 1,560,372 shares of the Company's Common Stock at
a price of $1.25 per share in a private offering to accredited investors in
reliance on Rule 506 of Regulation D, promulgated pursuant to the Securities Act
of 1933, as amended (the "1933 Act").
In March 1998, the Company received $250,000 cash from the issuance of a
convertible promissory note from a third party. This note converts to shares of
the Company's Common Stock at any time prior to maturity at a per share rate of
$1.25. In addition, as an inducement to execute the promissory note, the Company
issued 125,000 shares of the Company's Common Stock to the creditor.
In January 1998, the Company sold 35,683 and 125,000 shares of Common Stock at a
price of $0.75 and $1.00 per share, respectively in a private placement of
securities.
In 1998, the Company issued 53,413, 34,176, 53,000 and 10,000 shares of Common
Stock for services provided to the Company by third parties at prices ranging
from $0.75 to $2.00 per share.
In December 1997, the Company sold 261,333 shares of the Company's Common Stock
at a price of $0.75 per share in a private offering to accredited investors in
reliance on Rule 506 of Regulation D, promulgated pursuant to the 1933 Act.
The Company issued 20,000 and 14,210 shares of Common Stock for services
provided to the Company by third parties at a price of $0.75 in January 1997 and
September 1997, respectively.
In September 1997, the Company issued 8,318 shares of the Common Stock for
repayment of debt at $0.75 price per share.
14
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS:
The following selected financial data should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Transition Report on Form 10-KSB.
The following Management Discussion Analysis contains forward-looking statements
which involves 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 elsewhere in this
document.
OVERVIEW:
- ---------
On July 2, 1999, the Company changed its fiscal year end from December 31 to
June 30, beginning with and effective for the transition period for the six
months ended June 30, 1999. Accordingly, the accompanying consolidated financial
statements are presented as of June 30, 1999 and as of December 31, 1998 and
1997, and for six months ended June 30, 1999, and the years ended December 31,
1998 and 1997. The Company was considered to be a development stage company
through December 31, 1998.
In October of 1998 the Company received 501(k) clearance from the FDA, and a
CLIA (Clinical Laboratory Improvement Amendment) waiver on March of 1999. The
Company began shipments of its first product, the Professional Use Cholesterol
Monitor, in the fourth quarter of fiscal year 1998, at which time the Company
recorded its first revenues. Since the completion of the approval process in
March, the Company has signed distribution agreements with a number of
companies, including D&K Healthcare Resources, Inc. and Pharmanex, Inc. The
Company is presently in discussions with other major distributors, but as yet,
has not received other significant commitments regarding the purchase of any
products, and there can be no assurances that any other commitments will be
forthcoming in the future.
Lifestream Technologies is an Internet-based healthcare company that links
Internet information services to medical diagnostic product through
encryption-based "Smart Cards." Lifestream's first product was the Lifestream
Technologies(TM) Cholesterol Monitor, a hand-held instrument that in
approximately three minutes identifies total cholesterol from just one drop of
blood. The Lifestream Cholesterol monitor enables healthcare professionals to
easily and inexpensively test and monitor patients' cholesterol as well as
monitor their progress on a cholesterol-lowering regimen. The Privalink(TM)
system is a subscription-based, closed encrypted Internet web site, allowing
healthcare professionals within a few minutes to seamlessly transmit test
results and personal health data from the Lifestream Cholesterol Monitor, access
peer reviewed scientific literature, publish a personal recommendation booklet
and to maintain a single-source medical record.
Results of operations in the future will be influenced by numerous factors
including technological developments, regulatory approvals and requirements,
increases in expenses associated with sales growth, market acceptance of the
Company's products, the capacity of the Company to maintain and increase the
quality of its products, competition and the ability of the Company to control
costs, among others. There can be no assurance that revenue growth or
profitability on a quarterly or annual basis will be achieved.
OPERATING RESULTS - FISCAL 1999 COMPARED TO FISCAL 1998
- -------------------------------------------------------
REVENUES:
The Company's revenues for the six months ended June 30, 1999 were $51,229
compared to no revenues for the same period in 1998 primarily due to the Company
moving from the development stage to full operations. The Company is currently
selling its Cholesterol Monitor to health care provider in the physician,
pharmacy and wellness center markets. The Company has discounted its product
prices to its initial customers, which has reduced revenues and contributed to
the negative gross margin. The Company expects to continue discounting its
product prices until its products receive more widespread market acceptance.
15
<PAGE>
COST OF SALES:
Cost of sales includes direct labor, direct material, and overhead. Cost of
sales for the six months ended June 30, 1999 were $60,889 compared to no cost of
sales in the same period in 1998, which was primarily as a result of the Company
beginning to ship product in March, 1999. Due to the limited quantity of sales
for the period ended June 30, 1999, the Company incurred negative gross profit
as it has not been able to take advantage of purchasing components with volume
discounts or efficiently use its production staff or facilities which increases
the cost of its products. As the Company ramps up its production efforts, the
Company expects to reduce product costs and efficiencies should be gained
through economies of scale.
OPERATING EXPENSES:
Operating expenses include those costs incurred to bring the Company's product
to market relative to research and development, sales and marketing, and general
administration. Operating expenses increased $1,215,478, to $2,208,697 for the
six months ended June 30, 1999 as compared to $993,219 for the same period in
1998. The increase was primarily due to increases in professional expenses of
$82,702 and salary costs of $1,193,659 offset by a decrease in research and
development and other general administration of $60,833 as the Company
accelerated its efforts to bring the Lifestream cholesterol monitor to market.
Finally, the Company has employed certain individuals in order to begin
marketing the product and to create consumer 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 six months ended June 30, 1999, net other
expenses was $1,245,834 as compared to $16,274 for the same period ending June
30, 1998. This net increase of $1,229,560 in other expense was primarily
attributable to the increase in convertible debt for which interest and
financing costs were accrued, and the recognition of a contingent stock
liability for certain issuance's of debt which include provisions for future
shares to be issued if certain stock performance criteria are not met.
NET LOSS:
Primarily as a result of the foregoing factors, the Company's net loss was
$3,464,191 for the six months ended June 30, 1999 as compared to $1,009,493 for
the same period in 1998. This represents an increase in the loss for the same
period of $2,454,698.
FINANCIAL CONDITION:
During the six months ended June 30, 1999, the Company used cash in operating
activities of $1,102,403 as compared to $565,054 for the same period in 1998.
This increase of $537,349 was primarily due to the increase in the net loss for
the period partially offset by certain noncash reconciling items associated with
the issuance of common stock. As of June 30, 1999, the Company had a balance of
$81,656 in cash and cash equivalents. The Company has historically financed its
operations through funds raised through the offering of its common stock and
issuance of debt securities.
During the six months ended June 30, 1999 the Company used cash for investing
activities of $74,808 as compared to $197,633 for the comparable period of the
prior year. This decrease of $122,825 was primarily as result of a decrease in
capital expenditures of $143,248, partially offset by an increase in the
advances to a related party company of $76,638.
16
<PAGE>
During the six months ended June 30, 1999 financing activities provided the
Company with cash of $1,167,312 as compared to $2,357,804 for the comparable
period of the prior year. This decrease of $1,190,492 in cash provided by
financing activities was as a result of a decrease in the sale of the Company's
common stock of $1,858,031, primarily offset by an increase in the funds
received from the issuance of convertible debt of $725,000.
As of June 30, 1999, Lifestream had limited revenues and had incurred losses
since its inception and had a working capital deficiency. Primarily as a result
of these factors, the Company's independent certified public accountants
included an explanatory paragraph in their report on the Company's 1999
consolidated financial statements which expressed substantial doubt about the
Company's ability to continue as a going concern. Management of the Company
believes 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 products
in North America 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 medical devices and related products is capital
intensive. The Company has funded operations to date through private equity and
debt financing arrangements. 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 June 30, 1999, the Company had a
working capital deficit of $512,437 and requires additional funding in order to
continue as a going concern.
Subsequent to June 30, 1999, the Company has obtained approximately $800,000 in
debt and equity financing, and is currently offering $2,000,000 to qualified
investors in a private placement offering in reliance upon Rule 506 of
Regulation D of the Securities Act of 1933, as Amended. 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 June 30, 2000.
YEAR 2000 COMPLIANCE:
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 part of
a program developed by the FDA Center for Devices and Radiological Health, the
Lifestream cholesterol monitor was certified in June of 1998 to be Year 2000
compliant. The Company is responsive to the Year 2000 compliance mandate from
the FDA. As of June 30, 1999, 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.
ITEM 7. FINANCIAL STATEMENTS.
The Company's consolidated financial statements and notes thereto appear
beginning on page F-1 of this Form 10-KSB Transition Report.
17
<PAGE>
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Lifestream Technologies, Inc. and Subsidiary
Report of Independent Certified Public Accountants...................................................F-2
Consolidated Balance Sheets..........................................................................F-3.to.F-4
Consolidated Statements of Loss......................................................................F-5
Consolidated Statements of Changes in Stockholders' Equity...........................................F-6.to.F-7
Consolidated Statements of Cash Flows................................................................F-8.to.F-9
Summary of Accounting Policies.......................................................................F-10.to.F-12
Notes to Consolidated Financial Statements...........................................................F-13.to F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors of
Lifestream Technologies, Inc. and Subsidiary
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of Lifestream
Technologies, Inc. and Subsidiary, as of June 30, 1999 and as of December 31,
1998 and 1997, and the related consolidated statements of loss, changes in
stockholders' equity and cash flows for the six month period ended June 30, 1999
and the years ended December 31, 1998 and 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lifestream Technologies, Inc. and Subsidiary as of June 30, 1999, and as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for the six month period ended June 30, 1999 and the years ended December 31,
1998 and 1997, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred substantial losses
since inception and, at June 30, 1999, has negative working capital. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
BDO Seidman, LLP
Spokane, Washington
September 1, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS (Note 1)
June 30, December 31,
------------- -------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Current assets:
Cash........................................................... $ 81,656 $ 91,555 $ 6,160
Accounts receivable............................................ 27,829 247 -
Inventories (Note 2)........................................... 235,418 129,140 30,802
Prepaid expenses............................................... 2,132 2,152 2,068
----------- ----------- -----------
Total current assets.............................................. 347,035 223,094 39,030
----------- ----------- -----------
Equipment and leasehold improvements, net (Notes 3 and 9)......... 412,033 486,795 23,754
----------- ----------- -----------
Other assets:
Patent and license rights, net of accumulated amortization of
$680,141, $617,795 and $493,103 (Note 5)....................... 1,436,724 1,499,070 1,623,762
Note receivable, officer (Note 4).............................. 25,531 97,090 79,104
Note receivable, related company (Note 4)...................... 416,372 289,416 -
Deferred financing costs (Note 7).............................. 8,181 59,738 -
Other.......................................................... 34,291 8,515 1,500
----------- ----------- -----------
Total other assets................................................ 1,921,099 1,953,829 1,704,366
----------- ----------- -----------
Total assets...................................................... $ 2,680,167 $ 2,663,718 $ 1,767,150
=========== =========== ===========
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
------------- ------------------------------
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable............................................... $ 416,666 $ 367,763 $ 216,918
Accrued wages and payroll taxes................................ 122,125 112,931 -
Interest payable............................................... 16,521 1,442 20,371
Current maturities of note payable (Note 6).................... 36,330 36,330 -
Current maturities of capital lease obligation (Note 9)........ 17,830 6,580 -
Related party payable.......................................... - - 12,435
Convertible debt (Note 7)...................................... 250,000 - -
----------- ---------- -----------
Total current liabilities......................................... 859,472 525,046 249,724
Notes payable, less current maturities (Note 6)................... 105,962 127,220 41,144
Capital lease obligation, less current maturities (Note 9)........ 47,146 18,492 -
Contingent stock liability (Note 7)............................... 867,000 - -
Convertible debt (Note 7)......................................... - 225,000 100,000
----------- ---------- -----------
Total liabilities................................................. 1,879,580 895,758 390,868
----------- ---------- -----------
Commitments and Contingencies (Notes 6, 7, 8, 9, 11 and 12)
Stockholders' equity (Notes 8, 11 and 12):
Preferred stock, $.001 par value; 5,000,000 shares authorized;
no shares issued or outstanding.............................. - - -
Common stock, $.001 par value; 50,000,000 shares authorized;
12,187,661, 11,077,326 and 8,041,500 shares issued and
outstanding.................................................. 12,188 11,077 8,041
Additional paid-in capital..................................... 9,780,003 7,895,968 3,773,536
Unearned stock compensation.................................... - (610,442) -
Stock subscription receivable.................................. - (1,230) -
Accumulated deficit............................................ (8,991,604) (5,527,413) (2,405,295)
----------- ---------- -----------
Total stockholders' equity........................................ 800,587 1,767,960 1,376,282
----------- ---------- -----------
Total liabilities and stockholders' equity........................ $ 2,680,167 $ 2,663,718 $ 1,767,150
=========== ========== ===========
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
Six Months Ended June 30, Years Ended December 31,
-------------------------------- --------------------------------
1999 1998 1998 1997
-------------- ------------- --------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 51,229 $ - $ 9,610 $ -
Cost of sales..................................... 60,889 - 6,167 -
------------ ----------- ------------- -----------
Gross profit (loss)............................... (9,660) - 3,443 -
------------ ----------- ------------- -----------
Operating expenses:
Advertising and promotion 47,295 - - -
Depreciation and amortization................ 138,398 72,081 223,898 130,781
Professional fees............................ 331,911 249,209 516,808 95,527
Travel....................................... 47,431 55,442 166,806 45,430
Research and development..................... 28,922 177,665 304,432 106,999
Salaries and wages - stock (Note 11)......... 799,974 - 475,202 6,676
Salaries and wages - cash.................... 571,184 177,499 714,280 100,000
Selling, general and administrative.......... 243,582 261,323 644,295 52,261
------------ ----------- ------------- -----------
Total operating expenses.......................... 2,208,697 993,219 3,045,721 537,674
------------ ----------- ------------- -----------
Loss from operations.............................. (2,218,357) (993,219) (3,042,278) (537,674)
------------ ----------- ------------- -----------
Other income (expense):
Interest income.............................. 16,486 11,549 32,596 5,532
Interest expense............................. (1,257,984) (27,823) (112,436) (15,067)
Other, net................................... (4,336) - - (12,634)
------------ ----------- ------------- -----------
Total other expense............................... (1,245,834) (16,274) (79,840) (22,169)
------------ ----------- ------------- -----------
Net loss $ (3,464,191) $ (1,009,493) $ (3,122,118) $ (559,843)
============ =========== ============= ===========
Net loss per share - Basic and diluted............$ (0.30) $ (0.12) $ (0.32) $ (0.07)
============ =========== ============= ===========
Weighted average number of shares -
Basic and diluted................................. 11,686,691 8,343,371 9,812,680 7,831,675
============ =========== ============= ===========
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Stock Unearned
Common Stock Paid-in Subscription Stock
Shares Amount Capital Receivable Compensation
--------------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances as of January 1, 1997............... 7,387,639 $ 7,387 $ 3,415,368 $ - $ -
Common stock issued for services............. 34,210 34 25,624 - -
Common stock issued for cash................. 261,333 262 195,738 - -
Common stock issued for repayment of debt
and accrued interest (Note 5)............. 8,318 8 6,230 - -
Exercise of stock options.................... 350,000 350 23,900 - -
Compensatory stock options issued............ - - 6,676 - -
Contributed services......................... - - 100,000 - -
Net loss..................................... - - - - -
------------- ---------- ------------ ------------ -------------
Balances as of December 31, 1997............. 8,041,500 8,041 3,773,536 - -
Exercise of stock options.................... 326,867 327 46,454 - -
Common stock issued for services............. 242,589 242 467,564 - -
Common stock issued for cash................. 1,721,055 1,721 2,100,508 - -
Common stock issued for cash and matching
employee purchase at $4.12 per share...... 178,000 178 732,410 - -
Common stock issued for cash and matching
employee purchase at $1.00 per share...... 12,500 13 12,487 - -
Common stock issued as compensation.......... 15,000 15 37,485 - -
Common stock issued with convertible debt.... 158,750 159 215,829 - -
Common stock issued on conversion of debt.... 381,065 381 391,923 - -
(RESTUBBED TABLE)
Accumulated
Deficit Total
-------------- --------------
<C> <C>
Balances as of January 1, 1997............... $ (1,845,452) $ 1,577,303
Common stock issued for services............. - 25,658
Common stock issued for cash................. - 196,000
Common stock issued for repayment of debt
and accrued interest (Note 5)............. - 6,238
Exercise of stock options.................... - 24,250
Compensatory stock options issued............ - 6,676
Contributed services......................... - 100,000
Net loss..................................... (559,843) (559,843)
------------ ------------
Balances as of December 31, 1997............. (2,405,295) 1,376,282
Exercise of stock options.................... - 46,781
Common stock issued for services............. - 467,806
Common stock issued for cash................. - 2,102,229
Common stock issued for cash and matching
employee purchase at $4.12 per share...... - 732,588
Common stock issued for cash and matching
employee purchase at $1.00 per share...... - 12,500
Common stock issued as compensation.......... - 37,500
Common stock issued with convertible debt.... - 215,988
Common stock issued on conversion of debt.... - 392,304
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Stock Unearned
Common Stock Paid-in Subscription Stock
Shares Amount Capital Receivable Compensation
--------------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Unearned compensation, net of amortization
of $138,308............................... - - - - (610,442)
Compensatory stock options issued............ - - 117,772 - -
Stock subscription receivable................ - - - (1,230) -
Net loss..................................... - - - - -
------------- ---------- ------------ ------------ -------------
Balances as of December 31, 1998............. 11,077,326 11,077 7,895,968 (1,230) (610,442)
Common stock issued for cash................. 200,000 200 199,800 - -
Common stock issued with convertible debt.... 95,250 95 123,167 - -
Common stock issued on conversion of debt
and accrued interest...................... 398,328 399 995,191 - -
Common stock issued for services............. 312,007 312 336,269 - -
Common stock issued on bridge loan extensions
90,750 91 107,596 - -
Expiration of stock subscription............. (2,000) (2) (7,728) 1,230 6,500
Common stock issued as compensation.......... 16,000 16 41,584 - -
Compensatory stock options issued............ - - 88,156 - -
Amortization of deferred compensation........ - - - - 603,942
Net loss..................................... - - - - -
------------- ---------- ------------ ------------ -------------
Balances as of June 30, 1999................. 12,187,661 $ 12,188 $ 9,780,003 $ - $ -
============= ========== ============ ============ =============
(RESTUBBED TABLE)
Accumulated
Deficit Total
-------------- --------------
<C> <C>
Unearned compensation, net of amortization
of $138,308............................... - (610,442)
Compensatory stock options issued............ - 117,772
Stock subscription receivable................ - (1,230)
Net loss..................................... (3,122,118) (3,122,118)
------------ ------------
Balances as of December 31, 1998............. (5,527,413) 1,767,960
Common stock issued for cash................. - 200,000
Common stock issued with convertible debt.... - 123,262
Common stock issued on conversion of debt
and accrued interest...................... - 995,589
Common stock issued for services............. - 336,581
Common stock issued on bridge loan extensions
- 107,688
Expiration of stock subscription............. - -
Common stock issued as compensation.......... - 41,600
Compensatory stock options issued............ - 88,156
Amortization of deferred compensation........ - 603,942
Net loss..................................... (3,464,191) (3,464,191)
------------ ------------
Balances as of June 30, 1999................. $ (8,991,604) $ 800,587
============ ============
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Six Months Ended June 30, Year Ended December 31,
-------------------------------- -------------------------------
1999 1998 1998 1997
--------------- ------------- -------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $ (3,464,191) $ (1,009,493) $ (3,122,118) $ (559,843)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization................ 138,398 117,034 223,898 130,781
Issuance of common stock for services....... 336,581 154,720 467,806 25,658
Issuance of common stock with convertible
debt....................................... 107,688 - 215,988 -
Issuance of compensatory stock and options
for services............................... 733,698 35,345 104,409 6,676
Contributed services......................... - - - 100,000
Contingently issuable stock.................. 867,000 - - -
Noncash compensation......................... 69,455 - - -
Provision for inventory obsolescence......... 11,000 - - -
Changes in assets and liabilities:
Accounts receivable.......................... (27,582) - (247) -
Inventories.................................. (117,278) - (98,338) 4,929
Prepaid expenses............................. 20 (9,039) (84) 24,932
Other........................................ 149,043 113,055 (7,015) 9,206
Accounts payable............................. 48,903 7,135 138,410 7,576
Other current liabilities.................... 44,862 26,189 94,002 15,367
------------- ----------- ------------ -----------
Net cash used in operating activities............. (1,102,403) (565,054) (1,983,289) (234,718)
------------- ----------- ------------ -----------
Cash flows from investing activities:
Capital expenditures........................... (1,290) (144,538) (313,099) (13,705)
Proceeds from sale of fixed assets............. 51,334 - - -
Advance to related party company............... (126,956) (50,318) (289,416) -
Advances to officer............................ 2,104 (2,777) (17,986) (20,896)
------------- ----------- ------------ -----------
Net cash used in investing activities............. (74,808) (197,633) (620,501) (34,601)
------------- ----------- ------------ -----------
Cash flows from financing activities:
Proceeds from issuance of convertible debt..... 1,000,000 275,000 500,000 50,000
Proceeds from exercise of stock options........ - 32,326 46,781 24,250
Payments on capital lease obligations.......... (11,430) - (2,520) -
Payments on note payable....................... (21,258) (7,553) (8,006) -
Proceeds from sale of common stock............. 200,000 2,058,031 2,152,930 196,000
------------- ----------- ------------ -----------
Net cash provided by financing activities......... 1,167,312 2,357,804 2,689,185 270,250
------------- ----------- ------------ -----------
Net increase (decrease) in cash................... (9,899) 1,595,117 85,395 931
Cash at beginning of period....................... 91,555 6,160 6,160 5,229
------------- ----------- ------------ -----------
Cash at end of period............................. $ 81,656 $ 1,601,277 $ 91,555 $ 6,160
============= =========== ============ ===========
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Six Months Ended June 30, Year Ended December 31,
-------------------------------- -------------------------------
1999 1998 1998 1997
--------------- ------------- -------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Supplemental schedule of non-cash investing
and financing activities:
Issuance of common stock in exchange for:
Reduction of note payable.................... $ - $ - $ 41,144 $ 5,000
Reduction of accrued interest................ 20,589 17,304 - 1,238
Conversion of debt........................... 975,000 375,000 375,000 -
Note payable for leasehold improvements...... - 243,374 249,148 -
Deferred financing costs..................... 123,262 156,250 59,738 -
Supplemental schedule of cash activities:
Interest paid in cash.......................... $ 1,119,103 $ 17,068 $ 3,128 $ -
</TABLE>
See accompanying independent certified public accountants' report,
summary of accounting policies and notes to consolidated financial
statements.
F-9
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
(Information for the six month period ended June 30, 1998 is unaudited)
Nature of Business
Lifestream Technologies, Inc. ("Lifestream Technologies" or "the Company") holds
exclusive manufacturing and marketing rights in the United States for the
Cholestron, a hand held instrument that measures cholesterol levels as well as
other components in blood. The Company was incorporated pursuant to the laws of
the state of Nevada in June 1992. On July 2, 1999, the Company changed its
fiscal year end to June 30. The Company was considered to be a development stage
enterprise through December 31, 1998.
Basis of Presentation
The consolidated financial statements include the operations of the Company and
its wholly owned subsidiary, Lifestream Diagnostics, Inc. All intercompany
accounts and transactions have been eliminated.
Cash Equivalents
For financial reporting purposes, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be a
cash equivalent. Financial instruments which potentially subject the Company to
a concentration of credit risk consist of cash and cash equivalents. Cash and
cash equivalents consist of funds deposited with various high credit quality
financial institutions.
Inventories
Inventories consists of supplies, component parts and assembled devices.
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost. Depreciation and
amortization are provided using the straight-line method over the useful lives
or lease term of the respective assets. Major additions and betterments are
capitalized. Upon retirement or disposal, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or loss
is reflected in operations.
Patent
The costs associated with acquiring patented technology have been capitalized
and are being charged to expense using the straight line method of amortization
over seventeen years, the estimated useful life of the patent.
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.
F-10
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
(Information for the six month period ended June 30, 1998 is unaudited)
Income Taxes
Income taxes are provided based on the liability method of accounting pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under this approach, deferred income taxes are recorded to
reflect the tax consequences on future years of differences between the tax
basis of assets and liabilities and their financial reporting amounts at each
year end. A valuation allowance is recorded against deferred tax assets if
management does not believe the Company has met the "more likely than not"
standard imposed by SFAS 109 to allow recognition of such an asset.
Research and Development
Research and development costs are charged to expense as incurred.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets as of June 30,
1999, December 31, 1998 and 1997 for cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
immediate or short-term maturity of these financial instruments. The fair value
of the notes receivable from an officer and a related company cannot be
determined. The fair value of long-term debt and notes payable approximate
carrying value as the stated or discounted rates of the debt reflect recent
market conditions.
Stock Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations and to furnish the pro forma disclosures
required under SFAS No. 123, if material. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
F-11
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
(Information for the six month period ended June 30, 1998 is unaudited)
Net Loss Per Share
Basic earnings per share ("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. As the
Company's stock options, which cover 1,467,398, 981,665 and 591,745 shares of
the Company's common stock at June 30, 1999, December 31, 1998 and 1997,
respectively, are antidilutive only basic EPS is presented. These securities
could potentially dilute future EPS calculations.
Unaudited Consolidated Financial Statements
In the opinion of the Company's management, the unaudited consolidated
statements of loss and cash flows for the six month period ended June 30, 1998,
contain all adjustments (consisting of only normal recurring accruals and
adjustments) necessary to present fairly the information set forth therein.
F-12
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
1. Going Concern
Until the six month period ended June 30, 1999, the Company was in the
development stage. The Company has incurred operating losses since inception
and, at June 30, 1999, 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 the proposed sale of common stock through a
private placement to qualified investors, the negotiation with certain lenders
to provide for the issuance of additional convertible debt or bridge financing
arrangements and the increase in revenues from the sale of the Company's current
product, the Cholestron. In addition, the Company will continue to seek a major
source of funds sufficient to allow the Company to continue the application
process with the Federal Drug Administration (the "FDA") which would permit the
Cholestron to be sold over-the-counter to the general public. There can be no
assurances that the Company will be successful in executing its plans.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December
------------- ----------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Raw materials........................................ $ 199,963 $ 118,803 $ 30,802
Work in process...................................... 42,767 6,594 -
Finished goods....................................... 3,688 3,743 -
Provision for inventory obsolescence................. (11,000) - -
----------- ----------- ----------
Total inventories.................................... $ 235,418 $ 129,140 $ 30,802
=========== =========== ==========
</TABLE>
3. Equipment and Leasehold Improvements
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, December
------------- ----------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Office and data processing equipment................. $ 314,445 $ 314,445 $ 35,146
Vehicles............................................. 33,800 33,800 -
Leasehold improvements............................... 250,438 256,058 6,910
----------- ----------- ----------
598,683 604,303 42,056
Less accumulated depreciation and amortization....... 186,650 117,508 18,302
----------- ----------- ----------
Property and equipment, net.......................... $ 412,033 $ 486,795 $ 23,754
=========== =========== ==========
</TABLE>
F-13
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
4. Notes Receivable
The Company's Chief Executive Officer has received various cash advances
pursuant to terms of an unsecured promissory note. In June 1999, the Company
issued a non-cash bonus of $69,455 to the Chairman, which was recorded as a
direct reduction to the note receivable. Advances under the note accrue interest
at 8% and have no stated maturity date.
During 1999 and 1998, the Company advanced funds totaling $32,035 and $91,282 to
a company affiliated through common ownership. Advances under the note accrue
interest at a rate of 8% and have no stated maturity date. Interest accrued on
the note totaled $16,005 and $2,334 at June 30, 1999 and December 31, 1998.
During 1999 and 1998, the Company paid certain direct expenses and shared
certain facilities and resources with this related party company. As of June 30,
1999 and December 31, 1998, approximately $277,050 and $195,800 was owed to the
Company as the agreed-upon estimate of the fair value of the benefits received.
See Note 12. As repayment is not expected during the next year, the entire
balance is classified as noncurrent.
5. Intangible Assets
In 1992, the Company acquired all of the assets and liabilities of a related
party Partnership in exchange for 3,327,000 shares of the Company's common
stock. The net assets acquired, which were recorded on the Company's books at
the historical cost basis of the partnership, by the Company primarily included
license and distribution rights which had been previously acquired by the
related party from an unrelated company. In 1993, the Company acquired the
patents and technology from this same unrelated company to complete the asset
acquisition. The patent and technology were acquired through the issuance of
470,000 shares of common stock, valued at $1,410,000. The patent and related
assets relate to a dry chemistry process used to measure cholesterol levels in
blood samples which will be used in the Company's product.
6. Notes Payable
Notes payable consist of the following:
<TABLE>
<CAPTION>
June 30, December
------------- ----------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C> <C>
Note payable to a corporation (1).................... $ 142,292 $ 163,550 $ -
Note payable to an individual (2).................... - - 6,000
Note payable to a corporation (3).................... - - 35,144
----------- ----------- ----------
Total notes payable.................................. 142,292 163,550 41,144
Less current maturities.............................. 36,330 36,330 -
----------- ----------- ----------
Notes payable, less current maturities............... $ 105,962 $ 127,220 $ 41,144
=========== =========== ==========
</TABLE>
F-14
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
Scheduled annual principal maturities of the note payable at June 30, 1999 are
as follows:
<TABLE>
<CAPTION>
Years ending June 30, Amount
------------
<S> <C> <C>
2000............................................................. $ 36,330
2001............................................................. 36,330
2002............................................................. 36,330
2003............................................................. 33,302
-----------
$ 142,292
===========
</TABLE>
(1) During May 1998, the Company executed a note payable for certain costs
incurred in connection with leasehold improvements which were a
prerequisite to the Company signing an operating lease for office and
production space located in Post Falls, Idaho. See Note 9. The note is
payable in monthly installments of $3,028.
(2) During the year ended December 31, 1995, the Company borrowed $6,000 from
an individual pursuant to terms of an unsecured promissory note. The note
had a stated interest rate of prime plus two percent. The holder was also
granted warrants to purchase 24,000 shares of the Company's common stock
at a per share price of $.001. The promissory note was paid in full and
retired during 1998.
(3) During the years ended December 31, 1994 and 1993, the Company was
advanced $75,000 from a corporation. During the year ended December 31,
1995, the Company retired $50,000 of this obligation through the issuance
of 100,000 shares of its common stock. The remaining $25,000, together
with accrued interest of $10,144 was converted into an unsecured
promissory note bearing interest at 8%. The promissory note was paid in
full and retired during 1998.
7. Convertible Debt
In January 1998, the Company received $25,000 from a shareholder of the Company
pursuant to terms of an unsecured convertible promissory note. This note was
convertible into shares of the Company's common stock at any time prior to
maturity at a per share rate of $1.00, which approximated the then-fair value of
the Company's common stock. During 1998, the note, and accrued interest thereon
of $1,020, was converted into 26,020 shares of Company's common stock.
In March 1998, the Company received $250,000 from the issuance of a convertible
promissory note. This note contained terms which allowed the note holder to
convert the debt to shares of the Company's common stock at any time prior to
maturity at a per share rate of $1.25 which amount approximated the then-fair
value of the stock. In addition, as an inducement to execute the promissory
note, the Company issued 125,000 shares of the Company's common stock to the
creditor. The issuance of these shares was recorded by the Company as a debt
financing cost of $156,250. During 1998, the note and accrued interest thereon
were converted into shares of the Company's common stock.
F-15
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
During each of the years ended December 31, 1997 and 1996, the Company received
$50,000 pursuant to the terms of two convertible promissory notes. The unsecured
promissory notes, together with accrued interest thereon of $16,284 were
converted to shares of the Company's common stock during 1998, at a per share
rate of $0.75.
During 1998 the Company commenced an offering of convertible promissory notes
pursuant to which it received proceeds of $225,000 in 1998 and $635,000 in 1999.
A director of the Company purchased $150,000 of these notes. The promissory
notes are unsecured, mature two years after issuance and bear interest at prime
plus 2% (9.75% at December 31, 1998). The notes were convertible at any time
subsequent to issuance at a per share rate of $2.50, which price exceeded the
then fair value of the Company's common stock. In connection with the issuance
of the notes, the Company issued each noteholder 7,500 shares of its common
stock for each $50,000 of debt. A total of 129,000 shares, valued at
approximately $183,000, were issued and recorded as debt financing costs.
During 1999, in order to induce conversion, the Company guaranteed each
converting noteholder that the per share value of their shares would be at least
$3.50 on the one year anniversary date of their conversion or the Company would
issue additional shares to achieve that value. As a result of the offer,
$860,000 of notes and $15,780 accrued interest thereon were converted into
350,312 shares of the Company's common stock in June 1999.
During 1999, the Company received $115,000 from a director pursuant to terms of
two convertible promissory notes. The notes were unsecured, bore interest at 10%
and were convertible into shares of the Company's common stock at a per share
rate of $2.50. The notes had an initial maturity date of thirty days, with
provisions for two additional thirty day extensions. In connection with the
issuance and maturity extension of the notes, the Company issued 15,750 shares
of its common stock, valued at approximately $26,000 to the director. During
June 1999, the notes, together with accrued interest thereon of approximately
$5,000, were converted into 48,016 shares of the Company's common stock. The
noteholder was provided with the same guaranteed share price as noted above. As
a result of the share value guarantees offer of $3.50 per share and based on the
market price of the Company's common stock of $0.98 per share, the Company
recorded an estimated liability of $867,000, which is calculated as the
difference in per share price multiplied by the number of shares as if these
shares would have been issued as of June 30, 1999.
During February 1999, the Company received $250,000 from an investor pursuant to
terms of a convertible promissory note. The note bears interest at 18% and is
secured by the pledge of stock held by the Company's chairman of the board. The
note had an original maturity date of thirty days, with provisions for the
extension of the maturity date for two additional thirty day periods. In
connection with the origination and extension of the note, the Company issued to
the noteholder 75,000 shares of its common stock, valued at approximately
$81,000. The note was repaid in July 1999 with funds received pursuant to a
short-term advance. In connection with this advance, the Company issued 25,000
shares of its common stock to the lender. This advance was repaid in July 1999
with proceeds from three separate convertible notes totaling $270,000, including
$70,000 from a director. The notes have a maturity of one month and are
F-16
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
convertible into shares of the Company's common stock at a per share rate of
$1.00 plus an option per share to acquire a share of the Company's common stock
at $1.25. As consideration for these notes, the Company issued the holders
54,000 shares of common stock.
8. Stock Options
The Company has an Employee Stock Option Plan (the "Plan") which provides for
the grant of options to purchase shares of the Company's common stock at
exercise prices determined by the Board of Directors. As of June 30, 1999,
1,800,000 options originally made available under the Plan, remain available for
grant. The Company grants from time to time stock options to directors, vendors
and others to purchase shares of the Company's common stock at exercise prices
as determined by the Chief Executive Officer and approved by the Board of
Directors. These options are granted as payment of services or as an inducement
to provide the Company funds to further develop the Company's product.
The fair value of option grants is estimated on the date of grant utilizing the
Black-Scholes option pricing model with the following weighted average
assumptions as to option grants: expected life of option of five years, expected
volatility of 58%, risk-free interest rate of 6% and a dividend yield of 0%.
The following table summarizes the stock option activity since inception:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
------------- -----------
<S> <C> <C>
Options outstanding at January 1, 1997............ 971,834 $ 0.11
Granted........................................... 95,745 0.37
Expired........................................... (125,834) (0.11)
Exercised......................................... (350,000) (0.07)
-----------
Options outstanding at December 31, 1997.......... 591,745 0.19
Granted........................................... 831,665 2.04
Expired........................................... (179,378) (0.21)
Exercised......................................... (326,867) (0.14)
-----------
Options outstanding at December 31, 1998.......... 917,165 1.76
Granted........................................... 570,233 1.22
Expired........................................... (20,000) (0.20)
-----------
Options outstanding at June 30, 1999.............. 1,467,398 $ 1.59
===========
</TABLE>
The per share fair value at the date of grant of the options granted was
approximately $1.02 for the six month period ended June 30, 1999 and $1.56 and
$0.07 during the years ended December 31, 1998 and 1997.
F-17
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
If compensation cost for the Company's Plan had been determined based on the
fair value at the grant dates for awards under the Plans consistent with SFAS
123, the Company's net loss and net loss per share as reported would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, 1999 December 31, 1998 December 31, 1997
--------------------------- ---------------------------- --------------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net loss............ $ (3,464,191) $ (3,932,571) $ (3,122,118) $ (3,841,121) $ (559,843) $ (702,411)
========== ========== ========== ========== ========== =========
Net loss per share
- basic and
diluted.......... $ (0.30) $ (0.34) $ (0.32) $ (0.39) $ (0.07) $ (0.09)
========== ========== ========== ========== ========== =========
</TABLE>
The following table summarizes information about outstanding options at June 30,
1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ---------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (YRS) Price Exercisable Price
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.20-$0.25 140,000 3.03 $ 0.23 140,000 $ 0.23
$1.00-$1.25 1,017,398 5.42 0.99 631,957 1.22
$2.00-$2.25 110,000 4.27 2.23 100,000 2.25
$3.00 100,000 4.27 3.00 - -
$5.00 100,000 4.27 5.00 - -
------------------------------------------------------------------------------------------
$0.20-$5.00 1,467,398 4.98 $ 1.59 871,957 $ 1.18
==========================================================================================
</TABLE>
In July 1999, options to purchase 25,000 shares of the Company's common stock at
a per share price of $1.25 were granted to both an officer and a director.
9. Lease Commitments
The Company leases a vehicle under a capital lease that expires in 2002. In
addition, during the six month period ended June 30, 1999, the Company sold to a
financing company certain computer equipment and then executed a capital lease
for this same equipment.
The Company leases its primary corporate and manufacturing office space in Post
Falls, Idaho pursuant to an operating lease. In addition, the Company leases
office space relative to its previous corporate headquarters in Ft. Collins,
Colorado. The Company is currently pursuing a sublease or buy-out arrangement
for this location. Both operating lease arrangements include provisions which
allow for increasing monthly payments.
F-18
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
Future minimum lease payments required under these lease agreements are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Years ending June 30, Lease Leases
------------- ------------
<S> <C> <C> <C>
2000.............................................. $ 26,855 $ 47,700
2001.............................................. 26,855 57,984
2002.............................................. 22,808 62,357
2003.............................................. - 66,897
----------- -------------
Total lease payments.............................. 76,518 $ 234,938
=============
Less imputed interest............................. 11,542
-----------
Present value of net minimum lease payments....... 64,976
Less current maturities........................... 17,830
-----------
Total long-term capital lease obligation.......... $ 47,146
===========
</TABLE>
The capital leases are collateralized by fixed assets having a book value of
$51,050 at June 30, 1999. Rent expense for the six month period ended June 30,
1999 and 1998 was $24,083 and $8,223. Rent expense for the years ended December
31, 1998 and 1997 was $41,832 and $10,284.
10. Income Taxes
At June 30, 1999, December 31, 1998 and 1997, the Company had deferred tax
assets of approximately $3,759,000, $2,092,000 and $870,000 principally arising
from net operating loss carryforwards for income tax purposes. The total net
operating loss carryforward includes IRC Section 382 losses, which restricts the
total amount of loss that can be used for tax purposes in any one year. As
management of the Company cannot determine that it is more likely than not that
the Company will realize the benefit of the deferred tax asset, a valuation
allowance equal to the deferred tax asset has been established for all periods
presented.
At June 30, 1999, the Company has net operating loss carryforwards totaling
approximately $8,350,000 which expire in the years 2005 through 2019.
11. Commitments and Contingencies
In April 1999, the Company executed employment agreements with substantially all
of its employees. The employment agreements contain terms, which specified a
reduced salary for a 90 day period and granted the employees options to purchase
101,000 shares of the Company's common stock at a per share price of $1.25. At
conclusion of this 90 day period, employees who remained in the employment of
the Company were to receive a cash bonus based on a percentage of the employee's
annualized salary, totaling, in aggregate approximately $69,000. On July 9,
1999, the Company did not have adequate funds to pay the bonus, and the
employees received options to purchase, in aggregate, an additional 94,000
F-19
<PAGE>
LIFESTREAM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six month period ended June 30, 1998 is unaudited)
shares of the Company's common stock at a per share price of $1.25. The cash
bonus will be paid to the employees at such time when funds become available,
and are accrued at June 30, 1999.
The Company entered into an employment agreement in March 1996 with its
president. This agreement was terminated as a result of the president's
resignation during 1998. The agreement specified an annual salary of $100,000,
and provided for six months of severance pay in the event this individual left
the employment of the Company. The officer had elected to forego payments for
services provided in 1997. Compensation due to the officer under this agreement
in 1997 of $100,000 was expensed and has been reflected as contributed services
in the Company's financial statements.
In January 1998, the Company entered into a license and supply agreement with a
third party foreign manufacturer pursuant to which the manufacturer will supply
the Company with cholesterol measurement modules, which incorporate the
Company's technology. During the six month period ended June 30, 1999, the
Company purchased $100,000 from this manufacturer. As of June 30, 1999, this
manufacturer remains the Company's sole supplier of certain key components
necessary in the production of the Cholestron.
12. Subsequent Events
In June 1999, the Company's Board of Directors approved the acquisition of
Secured Interactive Technologies, Inc., ("Secured Interactive") a development
stage company related through common ownership. Secured Interactive has
developed and intends to produce and market an integrated software which uplinks
to a closed intranet system for health evaluation and individual condition
analysis. The merger was completed in September 1999 and will be accounted for
as a combination of entities under common control in a manner similar to a
pooling of interests. The Company issued 1,944,000 shares of common stock in
exchange for all of the outstanding common stock of Secured Interactive. This
stock for stock transaction is intended to qualify as a tax free exchange of
stock under Section 368(a) of the Internal Revenue Code.
The following supplemental information is an audited condensed balance sheet as
of June 30, 1999 and a condensed statement of loss for the six month period
ended June 30, 1999, for Secured Interactive:
<TABLE>
<CAPTION>
Amount
------------
<S> <C>
Current assets................................................... $ 78
Other assets..................................................... 40,675
----------
Total assets..................................................... $ 40,753
==========
Current liabilities.............................................. $ 20,421
Long-term liabilities............................................ 425,228
Shareholders' deficit............................................ (404,896)
----------
Total liabilities and shareholders' deficit...................... $ 40,753
==========
Revenues......................................................... $ -
Total Operating expenses......................................... 127,969
----------
Net loss......................................................... $ 127,969
==========
</TABLE>
F-20
<PAGE>
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No matters for inclusion herein.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Information in response to this item will appear in the Company's definitive
Proxy Statement distributed in connection with its 1999 Annual Meeting of
Stockholders, scheduled for December 9, 1999. Such Proxy Statement will be filed
with the SEC pursuant to Regulation 14A within 120 days after the close of the
fiscal year covered by this report on Form 10-KSB, is incorporated herein by
reference.
ITEM 10. EXECUTIVE COMPENSATION.
Information in response to this item will appear in the Company's definitive
Proxy Statement distributed in connection with its 1999 Annual Meeting of
Stockholders, scheduled for December 9, 1999. Such Proxy Statement will be filed
with the SEC pursuant to Regulation 14A within 120 days after the close of the
fiscal year covered by this report on Form 10-KSB, is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information in response to this item will appear in the Company's definitive
Proxy Statement distributed in connection with its 1999 Annual Meeting of
Stockholders, scheduled for December 9, 1999. Such Proxy Statement will be filed
with the SEC pursuant to Regulation 14A within 120 days after the close of the
fiscal year covered by this report on Form 10-KSB, is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Christopher Maus, Chairman of the Board of Directors and a Director of the
Company received cash advances from the Company which were formalized into a
promissory note executed in favor of the Company by Mr. Maus on December 31,
1995. The note matures upon demand by the Company and bears interest at 8% per
annum. The outstanding balance of the promissory note was $25,531, $97,090 and
$79,104 at June 30, 1999, December 31, 1998 and 1997, respectively.
During 1999 and 1998, the Company advanced funds totaling $32,035 and $91,282 to
Secured Interactive. Advances under the note accrue interest at a rate of 8% and
have no stated maturity date. Interest accrued on the note totaled $76,005 and
$2,334 at June 30, 1999 and December 31, 1998. The Company also paid certain
direct expenses and shared certain facilities and resources with Secured
Interactive. As of June 30, 1999 and December 31, 1998, $416,372 and $289,416
was owed by Secured Interactive to the Company as the agreed-upon estimate of
the fair value of the benefits received.
The Company and Messrs. Maus, Boyle, Crane, Connolly, and Sweezy are
shareholders of Secured Interactive. On September 1, 1999 the Company completed
the acquisition of Secured Interactive by effectuating a merger whereby the
stockholders of Secured Interactive received one share of the Company's common
stock for each share of Secured Interactive common stock owned by such
stockholder. The Company issued a total of 1,944,000 shares of common stock to
the stockholders of Secured Interactive.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) Exhibits are listed in the Exhibit Index on page 21 of this Form
10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K.
The Company filed two current reports on Form 8-K with the Securities
and Exchange Commission during the quarter ended September 30, 1999.
18
<PAGE>
The following item was reported in the Form 8-K dated July 2,
1999: Item 8. Change in Fiscal Year - On July 2, 1999, The
Company changed its fiscal year end to June 30. The Company
will report the transition period on Form 10-KSB.
The following item was reported in the Form 8-K dated
September 1, 1999: Item 2. Acquisition Or Disposition Of
Assets - On September 1, 1999, the Company completed the
acquisition of Secured Interactive Technologies, Inc., the
developer of the PrivalinkTM System, a suite of secure
Internet medical software and information services for
healthcare data management of personal medical records. The
Company issued a total of 1,944,000 shares of common stock to
the stockholders of Secured. The Company financed the entire
acquisition by effectuating a merger whereby the stockholders
of Secured Interactive Technologies, Inc. received one share
of the Company's common stock for each share of Secured
Interactive Technologies, Inc. common stock owned by such
stockholder. The foregoing description is qualified in its
entirety by reference to the Agreement and Plan of Merger by
and among Lifestream Technologies, Inc., Secured Interactive
Technologies, Inc. and the Stockholders of Secured Interactive
Technologies, Inc. dated June 24, 1999. No financial
statements were filed as part of such report.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
LIFESTREAM TECHNOLOGIES, INC.
BY: /s/ Christopher Maus
-------------------------------------
President, Chief Executive Officer and Chairman of the Board
DATE: September 28, 1999
-------------------------------------
BY: /s/ Brett Sweezy
-------------------------------------
Chief Financial Officer
DATE: September 28, 1999
-------------------------------------
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
- -------------
<S> <C>
3.1 Articles of Incorporation of Lifestream Technologies, Inc.,
dated April 6, 1979.1
3.2 Amended Articles of Incorporation of Lifestream Technologies, Inc.,
dated February 11, 1994.1
3.3 By-laws of Lifestream Technologies, Inc.1
10.1 Exchange Agreement and Plan of Reorganization dated February 11, 1994.1
10.2 Lease between Jacklin Land Company Limited Partnership and Lifestream
Diagnostics, Inc., a wholly-owned subsidiary of Lifestream
Technologies, Inc. dated as of May 19, 1998.2
10.3 Employment Agreement between Criss Sakala and Lifestream Technologies,
Inc dated as of June 25, 1998.2
10.4 License and Supply Agreement between Lifestream Diagnostics, Inc.
and Boehringer Mannheim GmbH.1
10.5 Agreement and Plan of Merger by and among Lifestream Technologies,
Inc., Secured Interactive Technologies, Inc. and the Stockholders of
Secured Interactive Technologies, Inc. dated June 24, 1999.4
16.1 Letter on Change in Certifying Accountant.3
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
</TABLE>
- --------
1 Filed as an Exhibit to the Company's Form 10-SB on December 26, 1996 and
incorporated herein by reference.
2 Filed as an Exhibit to the Company's Form 10-QSB on August 14, 1998 and
incorporated herein by reference.
3 Filed as an exhibit to the Company's Form 8-K on May 15, 1998 and incorporated
herein by reference.
4 Filed as an exhibit to the Company's Form 8-K on September 1, 1999 and
incorporated herein by reference.
21
SUBSIDIARIES
Lifestream Diagnostics, Inc.
Secured Interactive Technologies, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
financial statements of the Company for the sixth month periods ended June 30,
1998 and June 30, 1999, and for the years ended December 31, 1997 and December
31, 1998, and should be read in conjunction with, and is qualified in its
entirety by, such audited financial statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1999 JUN-30-1998 DEC-31-1998 DEC-31-1997
<CASH> 81,656 0 91,555 6,160
<SECURITIES> 0 0 0 0
<RECEIVABLES> 27,829 0 247 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 235,418 0 129,140 30,802
<CURRENT-ASSETS> 347,035 0 223,094 39,030
<PP&E> 598,683 0 604,303 42,056
<DEPRECIATION> 186,650 0 117,508 18,302
<TOTAL-ASSETS> 2,680,167 0 2,663,718 1,767,150
<CURRENT-LIABILITIES> 859,472 0 525,046 249,724
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 12,188 0 11,077 8,041
<OTHER-SE> 9,780,003 0 7,895,968 3,773,536
<TOTAL-LIABILITY-AND-EQUITY> 2,680,167 0 2,663,718 1,767,150
<SALES> 51,229 0 9,610 0
<TOTAL-REVENUES> 51,229 0 9,610 0
<CGS> 60,889 0 6,167 0
<TOTAL-COSTS> 60,889 0 6,167 0
<OTHER-EXPENSES> 2,208,697 993,219 3,045,721 537,674
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1,257,984 27,823 112,436 15,067
<INCOME-PRETAX> 3,464,191 1,009,493 3,122,118 559,843
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 3,464,191 1,009,493 3,122,118 559,843
<EPS-BASIC> 0.30 0.12 0.32 0.07
<EPS-DILUTED> 0.30 0.12 0.32 0.07
</TABLE>
