<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 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 No. 0-12374
Deucalion Research, Inc.
------------------------
(Exact Name of Registrant as Specified in its Charter)
North Dakota 45-0375367
----------------------- ------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6601 East Grant Road, Suite 101
Tucson, Arizona 85715
--------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(520) 886-5354
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
------ -----
Number of shares of common stock outstanding: 501,610,127 Shares of Common
Stock, par value $.0001 per share, were outstanding as of July 13, 1999.
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DEUCALION RESEARCH, INC.
Part 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DEUCALION RESEARCH, INC.
BALANCE SHEET
MARCH 31, 1999
(Unaudited)
ASSETS
Current assets:
Cash $ 3,912
Prepaid expenses 4,500
---------
Total current assets 8,412
---------
Equipment 11,440
---------
11,440
Less accumulated depreciation 11,440
---------
---------
$ 8,412
=========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable:
Related parties $ 1,170
Other 78,381
Accrued management service fees, related party 93,412
---------
Total liabilities (all current) 172,963
---------
Commitment
Shareholders' equity (deficit):
Common stock, $.0001 par value; authorized 1,500,000,000
shares; issued 501,610,127 shares 50,161
Capital in excess of par value 2,130,016
Accumulated deficit (2,344,728)
---------
(164,551)
---------
$ 8,412
=========
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DEUCALION RESEARCH, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
------------ ------------
Expenses:
General and administrative $ 1,603 $ 644
------------ ------------
Net loss $ (1,603) $ (644)
============ ===========
Basic and diluted loss per common share $ * $ *
============ ============
Weighted average number of shares outstanding 501,610,127 501,610,127
*Less than $.01 per share
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DEUCALION RESEARCH, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common stock Capital in Treasury stock
------------------------- excess Accumulated --------------------------
Shares Amount of par deficit Shares Amount Total
----------- ---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1999 517,859,353 $ 51,786 $2,384,509 $(2,343,125) 16,249,226 (256,118) $ (162,948)
Retirement of treasury shares (16,249,226) (1,625) (254,493) (16,249,226) 256,118
Net loss (1,603) (1,603)
----------- ---------- ---------- ----------- ----------- ----------- ----------
Balances, March 31, 1999 501,610,127 50,161 2,130,016 (2,344,728) 0 0 (164,551)
=========== ========== ========== =========== =========== =========== ==========
</TABLE>
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See notes to financial statements.
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DEUCALION RESEARCH, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
-------- -------
Cash flows from operating activities:
Net loss $ (1,603) $ (644)
-------- -------
Adjustments to reconcile net loss to net cash
used in operating activities:
Change in operating liabilities:
Increase in accounts payable and accrued
expenses 0 644
------ -----
Total adjustments 0 644
------ -----
Net cash used in operating activities (1,603) 0
------ -----
Decrease in cash (1,603) 0
Cash, beginning 5,515 5,722
------ -----
Cash, ending $ 3,912 $ 5,722
========= =======
During the three months ended March 31, 1999 and 1998 no cash was paid for
interest or income taxes.
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See notes to financial statement
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DEUCALION RESEARCH, INC.
Selected Notes to Financial Statements
(Not a Complete Presentation)
March 31, 1999
(Unaudited)
NOTE 1. Basis of presentation:
The financial statements of Deucalion Research, Inc. (The "Company") included
in this Form 10-QSB have been prepared without audit in accordance with the
rules and regulations of the Securities and Exchange Commission. Although
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, the Company believes that the
disclosures are adequate to make the information presented not misleading.
The accompanying financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.
In the opinion of management, all adjustments, including normal recurring
adjustments, necessary for a fair presentation of the results of operations
for the three month periods ended March 31, 1999 and 1998 have been included.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
There has not been any change in the significant accounting policies of the
Company for the periods presented.
NOTE 2. Stock purchase agreement:
Effective August 31, 1999, the Company completed a transaction whereby the
Company sold approximately 67% of the post transaction voting common stock
for an aggregate purchase price of $110,000. Also, effective August 31, 1999
("the Initial Closing Date"), the directors and officers of the Company
resigned and the purchasers were elected as directors and officers of the
Company.
Pursuant to the terms of the transaction, the purchasers paid the Company
$100,000 of the purchase price in exchange for 998,000,000 of shares of the
Company's common stock. Upon obtaining shareholder approval, the Company
will effect a recapitalization of the Company, which may include a reverse
stock split. After the reverse stock split and recapitalization, the
purchasers have agreed to pay the remaining $10,000 purchase price in
exchange for shares of the Company's common stock which will result in the
purchasers owning 95% of the Company.
The stock purchase agreement also provided for the settlement of certain
Company liabilities, including $38,836 owed for legal fees and $93,412 owed
for management service fees. The Company intends to settle these liabilities
through the issuance of common stock equal to 1/2% and 1%, respectively, of
the total outstanding common stock of the Company after completion of the
proposed transaction.
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DEUCALION RESEARCH, INC.
Selected Notes to Financial Statements
(Not a Complete Presentation)
March 31, 1999
(Unaudited)
NOTE 3. Subsequent Event:
Effective September 1, 1999, the Company completed an agreement with Farley &
Associates, Inc., an Arizona corporation, which is wholly owned by Michael R.
Farley, whereby the Company acquired the rights to purchase 516,667 shares of
SiteScape in exchange for a $200,000 note payable (Due on demand, bearing
interest at 9%). To date, the Company has purchased 258,334 shares of
SiteScape Preferred Stock in exchange for $500,000. The Company is further
obligated to purchase an additional 258,333 shares of Preferred Stock for
$500,000 in March 2000. The Company funded the purchase of the Preferred
Stock by purchasing Mr. Farley's investment in SiteScape for a $400,000 note
payable (Due on demand, bearing interest at 9%) and the payment of $100,000
cash to SiteScape.
F-6
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Part 1. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FORWARD LOOKING STATEMENTS
THIS REPORT MAY CONTAIN CERTAIN "FORWARD-LOOKING" STATEMENTS AS SUCH TERM IS
DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE
SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH
REPRESENT THE REGISTRANT'S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED
TO, STATEMENTS CONCERNING THE REGISTRANT'S OPERATIONS, ECONOMIC PERFORMANCE,
FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE
OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE
NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS
"MAY", "WILL", "EXPECT", "BELIEVE", "ANTICIPATE", "INTENT", "COULD", "ESTIMATE",
"MIGHT", OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE
TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN
OF WHICH ARE BEYOND THE REGISTRANT'S CONTROL, AND ACTUAL RESULTS MAY DIFFER
MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY
RELATED TO THE REGISTRANT'S OPERATIONS, MERGERS OR ACQUISITIONS, GOVERNMENTAL
REGULATION, THE VALUE OF THE REGISTRANT'S ASSETS AND ANY OTHER FACTORS DISCUSSED
IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Management's Discussion and Analysis for the three months ended March 31, 1999
and 1998
Results of Operations
During September 1992, the Company ceased active operations. Since that
time, the Company's activities have primarily consisted of maintaining the
corporation's status as a corporation in good standing with the state of
North Dakota. During the quarter ended March 31, 1999 the Company incurred
legal expense of $1,500. Because of the Company's inactivity it has been able
to minimize its expenses and there were no other significant expenses during
the three months ended March 31, 1999 or 1998.
Liquidity and Capital Resources.
The independent auditors' report on the Company's financial statements as of
December 31, 1998, and for each of the years in the two-year period ended
December 31, 1998, includes a
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"going concern" paragraph that describes substantial doubt about the
Company's ability to continue as a going concern. The Company's plan with
regard to future operations involve the sale of a majority of its common
stock as described in Note 2 to the financial statements.
As of March 31, 1999, the Company had a working capital deficiency of
$164,551. As described in Note 2 to the financial statements, the Company
has agreed to settle approximately $142,000 of current liabilities in
exchange for one and one-half percent of the Company's old common stock.
The Company anticipates a significantly increased need for working capital
during 1999 and 2000 as it brings its required filings under the Securities
and Exchange Act of 1934 current and proceeds with the Stock Purchase
Agreement, Recapitalization and shareholder's meeting.
No capital expenditures have been made by the Company since December 1998.
Management's Discussion and Analysis and Plan of Operation.
Plan of Operation
On July 29, the Stock Purchase Agreement between the Company and Michael R.
Farley and Forrest L. Metz was closed. All of the officers and directors
tendered their resignations and Messrs. Farley and Metz were elected to the
Board of Directors. Mr. Metz was appointed Chairman of the Board, and Mr.
Farley was appointed Chief Executive Officer. In August, the Company hired
Grant S. Papanikolas as Chief Operating Officer. The new management is
preparing the necessary documents to cause the Company to have a special
shareholders meeting for the following purposes: 1) effect a
recapitalization of the Company which will include a reverse stock split
with a magnitude not yet determined; 2) change the name of the Company to
Digital Fuel, Inc.; 3) appoint independent accountants; 4) change the
domicile of the Company to Delaware. As per the Stock Purchase Agreement,
at the completion of the reverse stock split and recapitalization, Messrs.
Farley and Metz will purchase additional shares of the common stock of the
Company and will end up owning 95% of the common stock of the Company.
Effective September 1, 1999, the Company completed an agreement with Farley
& Associates, Inc., an Arizona corporation, which is wholly owned by
Michael R. Farley, whereby the Company acquired the rights to purchase
516,667 shares of SiteScape in exchange for a $200,000 note payable. To
date, the Company has purchased 258,334 shares of SiteScape Preferred Stock
in exchange for $500,000. The Company is further obligated to purchase an
additional 258,333 shares of Preferred Stock for $500,000 in March 2000.
The Company funded the purchase of the Preferred Stock by purchasing Mr.
Farley's investment in SiteScape for a $400,000 note payable and the
payment of $100,000 cash to SiteScape.
F-8
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SiteScape acquired AltaVista FORUM from Compaq Computer in April 1999, just
prior to CMGI's acquisition of the popular AltaVista search engine. FORUM
was conceived and developed by the Digital AltaVista team at a cost of tens
of millions of dollars in product development. The transaction provides
value to SiteScape in four areas.
1. A product with five years of rich technical development and broad
industry wide use.
2. All intellectual property and technical resources, including the
development team's senior engineering personnel.
3. An estimated global installed base of over 1,200 customers, the best of
the Fortune 1000.
4. The rights to use AltaVista Search engine, which is embedded in the
product.
Originally, AltaVista created FORUM to fulfill a variety of "team
collaboration" or "groupware" needs. Today, the product leverages the
Internet for organizations that seek to enhance the functionality of
existing application investments. In the near future, FORUM will be used
to extend existing enterprise applications into the supply chain, the field
and the front office. Tomorrow, because of its open source and platform
independence, FORUM could become the standard web nervous system that
provides the platform for web-based applications.
F-9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibit 27 - Financial data schedule
(b) The Company filed no reports on Form 8-K during the quarter
covered by this report
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEUCALION RESEARCH, INC.
(Registrant)
By /s/ Michael R. Farley
----------------------------------------------
Michael R. Farley, Chief Executive Officer
By /s/ Forrest L. Metz
----------------------------------------------
Forrest L. Metz, President and Chief Financial
Officer
Date: February __, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
March 31, 1999 Financial Statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,912
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,412
<PP&E> 11,440
<DEPRECIATION> (11,440)
<TOTAL-ASSETS> 8,412
<CURRENT-LIABILITIES> 122,963
<BONDS> 0
0
0
<COMMON> 50,161
<OTHER-SE> (214,712)
<TOTAL-LIABILITY-AND-EQUITY> 8,412
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,603)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,603)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
