SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________
TO _____________
COMMISSION FILE NUMBER 0-15873
LASERGATE SYSTEMS, INC.
----------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 59-2543206
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2189 CLEVELAND STREET, SUITE 230, CLEARWATER, FLORIDA 33765
-----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (727) 803-1574
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR
SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND
(2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [ ] NO [X]
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICAL DATE.
CLASS OUTSTANDING AT OCTOBER 3, 1999
- ----- ------------------------------
COMMON STOCK $0.03 PAR VALUE 15,299,393
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)
YES [ ] NO [X]
1
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
-----
Part I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets as of June 30, 1999
(unaudited) and December 31, 1998 3
Consolidated Statements of Operations
(unaudited) for the three months and six months ended
June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows
(unaudited) for the six months ended
June 30, 1999 and 1998 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis or Plan
of Operation 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Agreement and Plan of Merger 10
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
2
<PAGE>
LASERGATE SYSTEMS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30 December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,565 $ 71,952
Accounts receivable, net of allowances 293,273 109,537
of $3,900 and $35,000
Note receivable, current portion 70,677 65,210
Inventories 61,890 21,697
Prepaid expenses 38,931 44,948
------------ ------------
Total current assets $ 489,336 $ 313,344
Property and equipment, net 148,559 232,718
Systems and software costs, net of amortization
of $1,764,753 and $1,713,754 737,887 714,871
Goodwill, net of amortization of $598,041 and $531,546 2,050,234 2,116,727
Other assets, net 16,637 16,637
------------ ------------
Total Assets 3,442,653 3,394,297
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 1,139,782 317,956
Accounts payable, trade 845,653 920,157
Deferred revenues 959,990 421,197
Accrued warranty costs 469,044 473,775
Accrued expenses 400,415 419,941
------------ ------------
Total current liabilities 3,814,884 2,553,026
------------ ------------
Total liabilities 3,814,884 2,553,026
Stockholders' equity:
Preferred stock, $.03 par value,
2,000,000 shares authorized,
5,700 shares issued and
outstanding at June 30, 1999
and December 31, 1998, respectively 171 171
Common stock, $.03 par value,
20,000,000 shares authorized,
15,299,393 issued and outstanding
at June 30, 1999 and
December 31, 1998 458,982 458,982
Additional paid-in capital 20,888,218 20,888,218
Accumulated deficit (21,719,602) (20,506,100)
------------ ------------
Total stockholder's equity (372,231) 841,271
Total liabilities and Stockholder's Equity $ 3,442,653 $ 3,394,297
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 298,313 $ 762,669 $ 1,197,442 $ 1,977,998
Operating Expenses:
Cost of revenues 403,094 415,442 640,034 1,138,206
Development -- 18,934 -- 44,828
Selling, general and administrative 1,129,713 662,365 1,774,037 1,444,200
------------ ------------ ------------ ------------
Operating Loss (1,234,494) (334,072) (1,216,629) (649,236)
Other income (expense) 1,826 5,857 3,127 8,916
------------ ------------ ------------ ------------
Net Loss $ (1,232,668) $ (328,215) $ (1,213,502) $ (640,320)
------------ ------------ ------------ ------------
Net loss per common share (.081) (0.02) (.079) (0.06)
Weighted Average Common Stock Outstanding 15,299,393 14,438,148 15,299,393 10,969,375
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
LASERGATE SYSTEMS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED,
----------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net Loss $(1,213,502) $ (640,320)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation of property and equipment 84,168 84,462
Amortization of intangibles 117,494 117,494
Increase (decrease) in provision for doubtful accounts (31,100) (10,396)
Decrease (increase) in:
Accounts receivables, trade (152,635) 337,639
Inventories (40,193) 122,348
Prepaid Expenses 6,017 (4,117)
Notes receivable plus accrued expenses (5,467) (5,187)
Increase (decrease) in:
Accounts payable and accrued expenses (94,030) (68,425)
Accrued product cost (4,731) (4,737)
Deferred revenue 538,793 6,269
----------- -----------
Net cash used in operating activities (795,186) (64,970)
----------- -----------
Cash flow from investing activities:
(Additions) to, disposal of, property and equipment (9) (7,696)
Capitalized software development cost (74,016) (204,183)
----------- -----------
Net cash used in investing activities 74,025 (211,879)
----------- -----------
Cash flows from financing activities: 825,000 --
Repayment of loans, other loan proceeds (3,176) (1,353)
----------- -----------
Net increase (decrease) in cash and cash equivalents (47,387) (278,202)
Cash and cash equivalents, beginning of period 71,952 390,762
----------- -----------
Cash and cash equivalents, end of period $ 24,565 $ 112,560
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 1 - FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION
INTERIM PRESENTATION
The interim consolidated financial statements of Lasergate Systems, Inc. (the
"Company") are unaudited and should be read in conjunction with the consolidated
financial statements and notes thereto in its Form 10-KSB, for the year ended
December 31, 1998. In the opinion of management, the accompanying consolidated
financial statements (with all explanations contained in these Notes) contain
all adjustments necessary for a fair presentation for the results of operations
for this interim period. Interim results are not necessarily indicative of the
results for a full fiscal year.
OPERATIONAL AND FUNDING MATTERS AND REPORTING BASIS
The Company's financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. In the Company's Annual Report on Form 10-KSB, for
the year ended December 31, 1998, the Company's auditors qualified their opinion
as to a going concern. The information contained in Note 3 to the Financial
Statements included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998 remains current related to the status of certain of
the Company's operational and funding matters and, accordingly, should be
referred to in conjunction with this Form 10-QSB.
For the six months ended June 30, 1999, the Company had a loss of $1,213,502 and
used cash in operating activities of $795,186. From its inception in March, 1985
through June 30, 1999, the Company has an accumulated deficit of $21,719,602. In
recent years the Company has relied upon proceeds from private and public
placements of equity securities (some of which were converted to stock) and
loans in order to fund its operations.
In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the Company's balance
sheet is dependent upon continued operation of the Company, which in turn is
dependent upon the Company's ability to succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
REVENUE RECOGNITION
Revenues from the sale of equipment and software licenses, which have been
predominately under short-term contracts during the periods presented herein,
are recognized upon the acceptance of the system by the customer provided that
no significant vendor or post-contract support obligations remain outstanding
and collection of the resulting receivable is probable. Revenues from special
sales sold under evaluation periods are recognized at the end of this period.
Revenues from the sale of equipment and software licenses with a planned
installation period exceeding 90 days are accounted for using the percentage of
completion method.
Revenues from post contract customer support and maintenance are recognized
ratably over the maintenance period if collectibility is probable.
CLASSIFICATION OF EXPENSES
Cost of revenues includes the costs associated with the hardware and software
acquired for the Company's customers and the estimated direct costs associated
with the engineering (mostly software customization) and installation of the
system. Cost of revenues also includes the estimated direct cost related to the
support and maintenance of the Company's service contracts and amortization of
capitalized software development costs.
6
<PAGE>
NET INCOME (LOSS) PER COMMON SHARE
The net income (loss) per common share amount is based on the weighted average
number of common shares outstanding during the period.
NOTE 2 - SYSTEMS AND SOFTWARE COSTS
Systems and software costs represent the capitalized software costs (at full
cost) of software development for the Company's new Admits for Windows(R)
product plus $200,000 of remaining acquisition costs for old products (Admits,
Delta, and Select-a-Seat) which was estimated to be the value of a detailed
product plan for the new products (the Company did not incur any costs for a
detailed product plan - it was able to use the old products to serve that
purpose). Such costs are amortized on a product-by -product basis.
All development costs are capitalized once technological feasibility has been
achieved on a product until the product is released for general sale, at which
time only the costs of development of significant additions to a product's
features and functions are capitalized. Technological feasibility is determined
on a project-by-project basis.
NOTE 3 - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)
An accrued warranty allowance of $469,044 has been provided to cover the cost of
enhancements to be made (free of charge) to systems installed in prior periods
and to provide for Year 2000 compliance of legacy products. Management has
reviewed warranty costs incurred within the past year, and believes this
provision is a conservative estimate of these costs but will continue to monitor
them to ensure they are provided for on a current basis in order to match the
cost with associated revenue.
NOTE 4 - LEGAL PROCEEDINGS
On or about June 27, 1997, a class action was commenced in the United States
District Court for the Eastern District of New York (CV97-3775) by Andrew Petit
and Michael A. Lepera, on behalf of themselves individually, and on behalf of
all others similarly situated against INTER ALIA, the Company, Sterling Foster,
& Co., Inc. ("Sterling Foster"), the Company's former underwriter, counsel for
Sterling Foster and certain issuer defendants for whom Sterling Foster acted as
underwriter. The Complaint alleges that in connection with an offering of the
Company's securities which became effective on October 17, 1994, Sterling Foster
engaged in a campaign to inflate the price of the Company's stock, to create a
short position at the inflated price and then cover the short position with
shares from shareholders who had been secretly released from "lock-up"
agreements. With respect to the Company, the Complaint alleges that it failed to
disclose in its Registration Statement that prior to the date the offering
became effective, Sterling Foster had secretly agreed to release certain
shareholders from "lock-up" agreements for the purpose of selling their shares
to Sterling Foster at reduced prices. The Plaintiffs' claims allege that the
Company violated Sections 11 and 12(2) of the securities Act of 1933, Sections
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and Section 349 of the New York General Business law, as well as
making negligent misrepresentations. Since the Complaint was filed, it has been
amended twice, but the allegations against the Company have remained the same.
On August 5, 1999 the Company moved to dismiss The Second Amended and
Consolidated Class Action Complaint in its entirety. The Company believes that
it has defenses to these claims and intends to vigorously defend itself in this
action.
NOTE 5 - NOTES PAYABLE
On July 31, 1998 the Company borrowed $300,000 from RBB Bank, AG. The loan is
payable in one (1) year at an interest rate of 10% per annum. The loan also
included issuance of 300,000 stock warrants, which have an exercise price of
$.09375 per share, and is secured by Admits source code. The loan is currently
in default.
On June 23, 1999, the Company borrowed $800,000 from Tickets.com. The loan is
payable on demand, but not prior to August 31, 1999. It bears interest at the
rate of 10% per annum.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Due to the Company's net loss for 1998 of $799,713, its excess of current
liabilities over current assets of $2,239,682 and its history of operating
losses that have accumulated to $20,506,100 at December 31, 1998, our
independent certified public accountants have
7
<PAGE>
qualified their accountants' report dated August 31, 1999, on the Company's 1998
financial statements as to a going concern uncertainty. The following commentary
within Management's Discussion and Analysis addresses the Company's plans with
regard to these matters and subsequent events that have a direct bearing on
these matters.
The Company's operations for 1998 were adversely affected by tight cash flows.
This resulted in 1998 staff reductions that, in turn, have resulted in the
Company not being able to effectively develop new software product releases or
achieve the software revenues that its 1998 strategic plan envisioned. This has
resulted in the Company not being able to sustain 1998 revenues to the level
achieved in 1997 as potential customers could not be provided assurance that
development and/or support of new and current products would continue. To help
fund its operations during 1998, it was necessary for the Company to borrow
$300,000 from RBB Bank, an entity acting as an agent representative for various
common shareholders owning approximately 51% of the outstanding common stock and
owning all of the outstanding Series "G" preferred shares. This debt obligation
is in default as of August 31, 1999. The Company has also delayed payments on
its vendor obligations, further compounding its ability to produce revenues.
During the 1998 fourth quarter and through May 1999, the Company's primary focus
had been that of pursuing financing alternatives to remain in existence. In
January 1999, Company management contemplated a bankruptcy filing, as its
reduced operations, without additional funding, could not continue to adequately
support its obligations. Discussion with several potential suitors since January
1999 resulted in the Company signing a proposed Agreement and Plan of Merger in
June 1999 with Tickets.com., and Advantix Acquisition Corporation. Subsequent to
the signing of this Agreement, Tickets.com has advanced the company $1,433,000,
which the Company used to support its operations and had a remaining cash
balance of approximately $70,000 at August 31, 1999. On September 16, 1999 the
Company received an additional advance of $350,000 from Tickets.com to sustain
operations through October, 1999, at which time it believes that Company's Admit
9.2 product will be completed and ready for market. If the Agreement and Plan of
Merger is not consummated, the Company does not currently have any further
funding alternatives and will most likely invoke bankruptcy proceedings, unless
another strategic funding partner can be located which can not be assured.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30,1998
REVENUES:
Revenues were $298,313 and $762,669 in the second quarter of 1999 and the second
quarter of 1998, respectively, representing a decrease of $464,356 or 61%.
Product sales represented $107,565 and $625,747 in the second quarter of 1999
and 1998, respectively, and revenue from maintenance and support of existing
customers represented $190,748 and $136,922 in the second quarter of 1999 and
1998, respectively.
COST OF REVENUES:
Cost of revenues were $403,094 and $415,442 in the second quarter of 1999 and
the second quarter of 1998, respectively, representing a $12,348, or 3%,
decrease. As a percentage of revenues, cost of revenues in the second quarter of
1999 was 135% of revenues compared to 54% of revenues in the second quarter of
1998. This was primarily due to the timing of purchasing computer equipment for
customers whose revenue had already been recognized in the first quarter.
DEVELOPMENT COSTS:
Development costs were $0 and $18,934 in the second quarter of 1999 and the
second quarter of 1998, respectively, representing a decrease of $18,934, or
100%. Development costs for the second quarter of 1998 do not include $109,858
of capitalized costs related to the new Admits for Windows(R) product, $9,800 of
costs charged to the warranty allowance, or $22,484 charged to cost of revenues.
Development activity was ceased in the second quarter of 1999 due to lack of
funding.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative expenses were $1,129,713 and $662,365 for
the second quarter of 1999 and 1998, respectively, representing a $467,348 or
71% decrease. The increase in SG&A expense is primarily attributable to
additional expenses related to the proposed merger agreement, including
severance and other costs.
8
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30,1999 VERSUS SIX MONTHS ENDED JUNE 30, 1998
REVENUES:
Revenues were $1,197,442 and $1,977,998 for the six months ended June 30, 1999
and 1998, respectively, representing a decrease of $780,556 or 39%. Product
sales represented $135,222 and $1,644,516 for the six months ended June 30, 1999
and 1998, respectively, and revenue from maintenance and support of customers
represented $260,872 and $333,482 for the six months ended June 30, 1999 and
1998, respectively.
COST OF REVENUES:
Cost of revenues were $640,034 and $1,138,206 in the six months ended June 30,
1999 and 1998, respectively, representing a $498,172, or 44%, decrease. The
ratio of cost-of-revenues to revenues is a function of whether the sales or
services are hardware or software intensive. Hardware sales result in lower
gross margins as hardware is not developed by the Company, but acquired for
customers, as is a small portion of software. Sales of the Company's software
provide the Company with significantly higher gross margins.
DEVELOPMENT COSTS:
Development costs were $0 and $44,828 for the six months ended June 30, 1999 and
1998, respectively, representing a decrease of $44,828, or 100%. This decrease
is due to the fact that the Company did not have available funds to continue
development efforts. As of October 10, 1999, development efforts are underway to
finalize the Admits 9.2 product before the end of the year.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative expenses were $1,774,037 and $1,444,200 for
the six months of 1999 and 1998, respectively, representing a $329,837 or 23%
increase. The increase in SG&A expense is primarily attributable to additional
expense related to the proposed merger agreement, including severance and other
costs.
Net loss increased to $1,213,502 ($.079 a share) for the six months ended June
30, 1999 from $640,320 ($.06 a share) for the six months ended June 30, 1998.
LIQUIDATION AND CAPITAL RESOURCES
The Company's ability to continue operations is entirely dependent upon its
ability to receive further funding. While no assurances can be made, the Company
believes that the June 1999 Agreement and Plan of Merger will be consummated by
the end of November 1999. On September 16, 1999 the Company received an
additional advance of $350,000 from tickets.com to sustain operations through
October, 1999, at which time it believes that the Admit 9.2 product will be
completed and ready for market. If the Agreement and Plan of Merger is not
consummated, the Company does not currently have any futher funding alternatives
and will most likely invoke bankruptcy proceedings, unless another strategic
funding partner can be located, which can not be assured.
IMPACT OF THE YEAR 2000 ISSUE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning around January
1999, these date code fields will need to distinguish twenty-first century dates
from twentieth century dates. As a result, in less than one year, computer
systems and/or software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists in the
software industry concerning the potential effects associated with such
compliance. Although the Company's current products (its new WINDOWS(R) products
and the current version of its reserved seat product, Select-a-seat) are
designed to be Year 2000 compliant, some legacy products are not Year 2000
compliant. These legacy products are few in number and each customer has been
notified that these products are not Y2K compliant and that the Company will no
longer support these products in the future. All licenses for these
non-compliant products have expired or will expire prior to December 31, 1999.
As of August 1999 Management believes all Year 2000 issues have been addressed
for the currently supported
9
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products and in addition has taken all reasonable steps to ensure the software
products used internally and for development purposes are Year 2000 compliant.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On or about June 27, 1997, a class action was commenced in the United States
district Court for the Eastern District of New York (CV 97-3775) by Andrew Petit
and Michael A. Lepera, on behalf of themselves individually, and on behalf of
all others similarly situated against INTER ALIA, the Company, Sterling Foster,
& Co., Inc. ("Sterling Foster"), the Company's former underwriter, counsel for
Sterling Foster and certain issuer defendants for whom Sterling Foster acted as
underwriter. The Complaint alleges that in connection with an offering of the
Company's securities which became effective on October 17, 1994, Sterling Foster
engaged in a campaign to inflate the price of the Company's stock, to create a
short position at the inflated price and then cover the short position with
shares from shareholders who had been secretly released from "lock-up"
agreements. With respect to the Company, the Complaint alleges that it failed to
disclose in its Registration Statement that prior to the date the offering
became effective, Sterling Foster had secretly agreed to release certain
shareholders from "lock-up" agreements for the purpose of selling their shares
to Sterling Foster at reduced prices. The Plaintiffs' claims allege that the
Company violated Sections 11 and 12 (2) of the Securities Act of 1933, Sections
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and Section 349 of the New York General Business law, as well as
making negligent misrepresentations. Since the Complaint was filed, it has been
amended twice, but the allegations against the Company have remained the same.
On August 5, 1999 the Company moved to dismiss The Second Amended and
Consolidated Class Action Complaint in its entirety. The Company believes that
it has defenses to these claims and intends to vigorously defend itself in this
action.
ITEM 2 - AGREEMENT AND PLAN OF MERGER
On June 21, 1999, the Company entered into a proposed Agreement and Plan of
Merger (the "Agreement") with Tickets.com, Inc., and Advantix Acquisition
Corporation (Advantix). It is the intention of the Agreement that LSi and
Advantix will merge together and become a wholly-owned subsidiary of
Tickets.com. The proposed merger is subject to LSi shareholder approval and the
shareholders have not yet voted on this matter. In connection with this
Agreement, Tickets.com agrees to cause all of its shares of LSi common stock to
be voted in favor of the approval of the proposed merger. Tickets.com and RBB
signed a contract whereby RBB has agreed to vote all of its shares of LSi common
stock in favor of the proposed merger. RBB is the representative agent for
approximately 52% of the outstanding voting shares.
Under the Agreement, the holders of each share of LSi common stock will receive
$.10 per share.
Also under the Agreement, LSi is to terminate its stock option plan immediately
before the effective date and will issue no further stock options or any other
securities convertible into common stock. In addition, LSi will cancel all
outstanding options and all outstanding warrants at or before the Closing of the
Merger (see Note 9). In exchange for cancellation of these equity instruments,
each holder is to receive cash consideration equal to $.10 less the exercise
price for each option or warrant held. The consideration to be paid on these
equity instruments upon cancellation is not expected to exceed $2,000.
In connection with the signing of the Agreement, former executives (including
the President/CEO and Chairman of the Board) and the former board of directors
resigned and two new individuals became President, CEO and CFO and were
appointed to the Board of Directors (which consists of these two members as of
August 31, 1999). In addition, two of the former board members signed 1 year
consulting agreements and non-compete agreements extending three months after
the end of the consulting agreements calling for the Company to make payments
totaling $50,000 each.
Six employees signed severance agreements that call for the severance amounts in
case of involuntary termination or voluntary termination on or before August 16,
1999 totaling $250,000. As of August 16, 1999, a total of $140,000 has been paid
under these severance agreements. In addition, a former executive received
$70,000 upon the signing of an inducement letter in connection with his
resignation.
Also in connection with the Merger documents, RBB will pay the former President
and CEO $200,000 and give her 10,000 shares of Tickets.com common stock. In
addition, the former President and CEO is granted the opportunity to purchase
20% (up to 20,000 shares) of Tickets.com common stock that Tickets.com allocates
to RBB in its initial public offering (IPO) at the IPO price, of which
10
<PAGE>
the first 10,000 shares will be purchased by RBB at its sole cost. This
consideration is in lieu of the amount that would be due this individual in
accordance with "Chance in Control of Company" provisions included in her
employment agreement.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27.1 Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any reports on Form 8-K
during the quarter ended March 31, 1999.
11
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Lasergate Systems, Inc.
Registrant
/s/ STEVE H. NOBLE, III
-----------------------
Date: October 6, 1999 STEVE H. NOBLE, III
Vice President
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 24,565
<SECURITIES> 0
<RECEIVABLES> 293,273
<ALLOWANCES> 3,900
<INVENTORY> 61,890
<CURRENT-ASSETS> 489,336
<PP&E> 148,559
<DEPRECIATION> 412,106
<TOTAL-ASSETS> 3,442,653
<CURRENT-LIABILITIES> 3,814,884
<BONDS> 0
0
171
<COMMON> 458,982
<OTHER-SE> 20,888,218
<TOTAL-LIABILITY-AND-EQUITY> 3,442,653
<SALES> 1,197,442
<TOTAL-REVENUES> 1,197,442
<CGS> 640,034
<TOTAL-COSTS> 2,414,071
<OTHER-EXPENSES> (3,127)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,213,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,213,502)
<DISCONTINUED> 0
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<NET-INCOME> (1,213,502)
<EPS-BASIC> (0.079)
<EPS-DILUTED> (0.079)
</TABLE>
