SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended: June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File No. 33-33939
LINDSEY TECHNOLOGIES, INC. (formerly L.M. CAPITAL, INC.)
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Colorado 84-1121635
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3025 South Parker Road, Suite 109
Aurora, Colorado 80014
___________________________________________________________
(Address of principal executive offices, including zip code)
Issuer's Telephone Number: (303) 306-1988
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
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 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 X No
___ ___
As of June 30, 1998, 17,624,460 shares of common stock were outstanding, and the
aggregate market value of the common stock of the Registrant held by
nonaffiliates was approximately $-0-.
Documents incorporated by reference: None
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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: $9,948
This Form 10-KSB consists of 25 pages. The Exhibit Index begins on page 9.
<PAGE>
TABLE OF CONTENTS
Form 10-KSB Annual Report - 1998
Lindsey Technologies, Inc.
(formerly L.M. Capital, Inc.)
Page
Facing Page
Index
PART I
Item 1. Business 1
Item 2. Properties 2
Item 3. Legal Proceedings 2
Item 4. Submission of Matters to a Vote of Security Holders 2
PART II
Item 5. Market For Registrant's Common Equity
And Related Shareholder Matters 3
Item 6. Management's Discussion And Analysis Or Plan Of
Operations 4
Item 7. Financial Statements 5
Item 8. Disagreements On Accounting And Financial Disclosures 5
PART III
Item 9. Directors And Executive Officers Of The Registrant 6
Item 10. Executive Compensation 7
Item 11. Security Ownership Of Certain Beneficial Owners And
Management 8
Item 12. Certain Relationships And Related Transactions 8
PART IV
Item 13. Exhibits, Financial Statement Schedules, And
Reports On Form 8-K 9
SIGNATURES 10
<PAGE>
PART I
Item 1. Business
Lindsey Technologies, Inc. (formerly L.M. Capital, Inc.) (the "Company"
or the "Registrant") was organized under the laws of the state of Colorado on
August 17, 1989 for the primary purpose of engaging in a merger with, joint
venture with, or acquisition of a small number of private or public firms.
Such firms may be private or public corporations, partnerships, or sole
proprietorships. The Company's name was changed from L.M. Capital, Inc. to
Lindsey Technologies, Inc. on November 22, 1996.
On June 21, 1996 the Company entered into a joint venture with a team of
French software engineers (the "Associates") and their wholly owned French
corporation, Helvetius Ingenierie. The Company and the Associates formed
Heldol Corporation (Heldol) on October 25, 1996, a United States corporation
for the purpose of developing and marketing software for industrial, medical,
and commercial business applications.
The Company plans to capitalize Heldol with funds such that
its total investment in Heldol over 2 years will reach 10 million French
francs (approximately $2 million). As of June 30, 1998 the Company has
invested $211,286 and owns 50% of Heldol. After Heldol is fully capitalized,
Heldol shall be obligated to purchase 30% of the outstanding shares of
Helvetius for 10 million French francs (approximately $2,000,000).
Another agreement on June 21, 1996 between the Company and the Associates
allows the Associates to exchange their shares of Helvetius for shares in the
Company according to a market valuation formula, providing Helvetius attains
certain sales levels and the Company is on NASDAQ.
The Associates to date have developed software for bacteriological
identification, trade named HELLAC which is used by Institut Pasteur, software
for the management of educational and professional training institutions, trade
named HELISA currently used by French engineering and business schools such
as Ecole Normale Superieure, and inventory tracking software trade named
HAWK, used by NCR.
The Company has undertaken under its own umbrella the development of a
generic management information system that produces and harmonizes norms
and know-how with multimedia capabilities. This web based product is
multi-lingual. It uses the most up to date information technology standards.
1
<PAGE>
Item 2. Properties
The Company maintains its offices in Aurora, Colorado in office space
provided by one of the Directors of the Company.
Item 3. Legal Proceedings
The Company was involved in no legal proceedings during the fiscal year
ended June 30, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a shareholder vote during the fourth
quarter of the fiscal year ended June 30, 1998.
2
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Principal Market or Markets: During the fiscal year ended
June 30, 1998, no separate market developed for the Company's common stock,
units, or any outstanding warrants. The Company currently has no outstanding
trading market. High and low bids for the Company's common stock units for the
previous eight quarters are shown below.
BID
Quarter Ended High Low
Units Sept. 30, 1996 No Bid
Units Dec. 31, 1996 No Bid
Units Mar. 31, 1997 No Bid
Units June 30, 1997 No Bid
Units Sept. 30, 1997 No Bid
Units Dec. 31, 1997 No Bid
Units Mar. 31, 1998 No Bid
Units June 30, 1998 No Bid
(b) Common Stock: On June 30, 1998 there were 17,624,460 shares of
common stock issued and outstanding, which were held by 69 shareholders of
record excluding individuals holding securities in street name. In addition,
there were 413,000 (A) warrants and 413,000 (B) warrants outstanding held by
30 persons, and 415 Reg S (A) warrants and 415 Reg S (B) warrants outstanding.
The Company has never paid cash dividends on its common stock and currently
intends to continue its policy of retaining all of its earnings for use in its
business.
(c) Convertible Preferred Stock: Out of the authorized preferred stock,
the Company has designated a Series A Convertible Preferred Stock ("Series A").
The designated number of shares of the Series A is 5,000. One share of Series A
may be converted into 1,600 common shares of the Company at the election of the
holder anytime beginning September 1, 1994. The holders of outstanding shares of
Series A shall not be entitled to receive any dividends. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company, the holder of each share of Series A shall be entitled to
receive, from the assets of the Company available for distribution to its
stockholders, before any payment or distribution shall be made on the common
stock, an amount equal per share to $100. If the assets and funds to be
distributed among the holders of the Series A shall be insufficient to permit
the payment of the full aforesaid preferential amount to such holders, then
the entire assets and funds of the Company legally available for the
distribution shall be distributed among the holders of the Series A in
proportion to the aggregate preferential amount of all shares of Series A held
by them.
3
<PAGE>
After payment has been made to the holders of the Series A, the holders of the
common stock shall be entitled to share ratably in the remaining assets on the
basis of the number of shares of common stock held by them at the time of such
liquidation. The holder of each share of Series A stock shall have the right
to 1,600 votes for each share standing in his name on the books of the Company
and shall have the right to vote at all meetings of the stockholders. These
votes will be aggregated with the votes of the holders of the Company's
common stock and will not be treated as a separate class. As if June 30, 1998
there were 4,200 Series A shares outstanding held by 2 individuals.
Item 6. Management's Discussion and Analysis or Plan of Operations
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein.
The Company earned nominal interest in 1998 and incurred major losses from
general operations related to development of software and general
undertakings. Management believes that the Company has sufficient funds
to continue operations through the end of its current fiscal year on
June 30, 1999.
(a) Liquidity: The Registrant's securities are currently not liquid.
There is one market maker in the Company's securities. The Company's
management is attempting to interest market makers in the Company's
securities, so as to provide limited liquidity for holders of the free
trading units. The Company anticipates that liquidity of its stock will be
enhanced by its recent joint venture with Helvetius Ingeniere, as software
products are developed and marketed. Such liquidity, though not a certainty,
would in all likelihood stem from interest in the Company's product(s) and
business. The Company cannot insure liquidity at any time in the future,
regardless of whether or not it conducts successful future business
operations. To meet short term capital needs the Company is from time to
time lent money by its President.
(b) Capital Resources: The Company does not anticipate large
expenditures for capital goods such as plant or equipment at any time in
the foreseeable future. This expectation is subject to change based on
the Company's possible capital requirements for software development.
(c) Investments/Joint Ventures: On June 21, 1996 the Company entered
into a joint venture with a team of French software engineers
(the "Associates") and their wholly owned French corporation, Helvetius
Ingenierie. The Company and the Associates formed Heldol Corporation
("Heldol") on October 25, 1996, a United States corporation for the purpose
of developing and marketing software for industrial, medical, and commercial
business applications. The Company plans to
capitalize Heldol with funds such that its total investment in
Heldol over two years will reach 10 million French francs (approximately
$2 million), at which time the Company will own 80% of Heldol. As of
June 30, 1998 the Company has invested $211,286 and owns 50% of Heldol.
After Heldol is fully capitalized, Heldol shall be obligated to purchase 30%
of the outstanding shares of Helvetius for 10 million French francs
(approximately $2,000,000).
4
<PAGE>
Another agreement on June 21, 1996 between the Company and the Associates
allows the Associates to exchange their shares of Helvetius for shares in
the Company according to a market valuation formula, providing Helvetius
attains certain sales levels and the Company is on NASDAQ.
(d) Plan of Operations: The Company has undertaken under its own
umbrella the development of a generic management information system that
produces and harmonizes norms and know-how with multimedia capabilities.
This web product is multi-lingual. It uses the most up to date information
technology standards.
Item 7. Financial Statements
The Report of the Independent Certified Public Accountant appearing at
page F-1 and the Financial Statements and Notes to Financial Statements
appearing at pages F-2 through F-11 are incorporated herein by reference.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
5
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
The Directors and Officers of the Registrant as of the date of this report are
as follows:
Served as a
Name Age Position Director Since
Lionel Mauclaire 37 President, Treasurer, Director August 17, 1989
Jean-Michel
Mauclaire 41 Director September, 1995
Robert Mauclaire 69 Director November, 1996
Ronald R. Chadwick 43 Director, Secretary August 17, 1989
Family Relationships: The Company's President and Director, Lionel Mauclaire
and Jean-Michel Mauclaire, a Director, are brothers, and Robert Mauclaire, a
Director, is the father of Lionel Mauclaire and Jean-Michel Mauclaire.
All Directors of the Company will hold office until the next annual meeting of
the shareholders, and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors at the first
meeting of the Company's shareholders, and hold office until their death,
resignation, or removal from office.
Lionel Mauclaire. President, Treasurer, and a Director. Mr. Mauclaire has been
President, Treasurer, and a Director of the Company since August, 1989. Since
September, 1987, Mr. Mauclaire has conducted his business under the name
L.M. International, Inc., a company which was formed for the purpose of
engaging in financing, investment banking, mergers and acquisitions. From
May, 1985 to November, 1986 he was employed as a marketing executive with
I.M.M., S.A., a Paris, France based company engaged in the business of robots.
From February, 1983 to July, 1985 he was employed by Malterie Mauclaire, S.A.,
a family business which supplied breweries with barley. Mr. Mauclaire received
his business degree in 1982 from IMAC, Paris, France.
Ronald R. Chadwick, Secretary and a Director. Mr. Chadwick has served as
Secretary and a Director since August, 1989. From 1993 until present he has
operated his own certified public accounting firm, Ronald R. Chadwick, P.C.
From 1986 until present he has been President and a Director of Petramerica
Oil, Inc., an oil and gas company. Mr. Chadwick received an MBA degree in
finance from Arizona State University in 1980 and a Bachelor of Science degree
from Oregon State University in 1979.
6
<PAGE>
Jean-Michel Mauclaire, a Director. Mr. Mauclaire resides in Paris, France.
He is a graduate of Ecole Superieure de Commerce de Paris (1980), holds a
graduate degree in international business from Paris University (1983)
and a French Certified Public Accountant degree (1993). After 5 years
in an international accounting firm, Mr. Mauclaire has held several
executive positions in the Lafarge Group, a worldwide marker of cement
products, in the finance, information systems and European business
development areas.
Robert Mauclaire, a Director. Mr. Mauclaire received his Baccalaureate degree
in 1950 and Law degree in 1954 from Paris University. From 1957 to 1968 he
served first as a sales representative at IBM France, then as International
Accounts Manager at IBM World Trade Europe and Oil Industry Debt Manager at
IBM France. From 1969 to 1987 Mr. Mauclaire served in an executive capacity
(including as CEO from 1981-1987) to the Mauclaire family malting business,
Malterie Mauclaire, S.A. From 1987 to 1993 Mr. Mauclaire was counsel to the
CEO of Soufflet Group, a French company with annual sales of approximately
$4 billion. From 1992 to present he has served as a Judge at the local
Tribunal of Commerce. For the past 20 years Mr. Mauclaire has held a number
of highly regarded civil positions including Chairman of the Finance
Committee of the Chamber of Commerce of the District of Aube, membership on
the Board of Banque Populaire de Champagne, Chairman of the Finance Committee
of the Regional Chamber of Commerce of Champagne-Ardennes, Vice President of
the National Committe of Business Legal and Fiscal Studies of the Association
of French Chambers of Commerce, membership on the Committee of Counsels of
the Banque de France, and Vice President of the Board of Banque Populaire de
Champagne.
Item 10. Executive Compensation
Compensation paid to Officers and Directors is set forth in the Summary
Compensation Table below. The Company may reimburse its Officers and
Directors for any and all out-of-pocket expenses incurred relating to the
business of the Company.
SUMMARY COMPENSATION TABLE
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation
Lionel Mauclaire, 1996 - - -
President, CEO 1997 - - -
1998 - - -
7
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this Report, the stock
ownership of each person known by the Registrant to be the beneficial owner
of five percent or more or the Registrant's common stock, each Officer and
Director individually and all Directors and Officers of the Registrant as a
group:
NO. OF % OF
NAME CLASS SHARES CLASS
Lionel Mauclaire Common 14,471,968 (1) 82.11
3025 S. Parker Rd (S) 109 Preferred 4,000 (2) 95.24
Aurora, Colorado 80014
Ronald Chadwick Common 400,000 2.27
3025 S. Parker Rd (S) 109
Aurora, Colorado 80014
Jean-Michel Mauclaire Common 1,118,560 6.35
3025 S. Parker Rd (S) 109
Aurora, Colorado 80014
Directors and Common 15,990,528 90.73
Officers as a Group Preferred 4,000 95.24
(1) In addition to the 14,471,968 common shares currently owned by him,
Lionel Mauclaire also owns 326,000 A warrants and 326,000 B warrants. If
exercised these warrants, each of which convert into eight shares of common
stock, would give Mr. Mauclaire ownership of an additional 5,226,560 shares
of common stock. He also holds warrants to purchase a further 198,240
common shares.
(2) Each share of preferred stock is convertible into 1,600 shares of the
Company's common stock anytime beginning September 1, 1994.
Item 12. Certain Relationships and Related Transactions
None.
8
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
-- The following Exhibits were filed with the Securities and Exchange
Commission in the Exhibits to Form S-18 on March 26, 1990, and are
incorporated by reference herein:
3.1 Articles of Incorporation
3.2 By Laws
(b) Reports on Form 8-K
-- The following reports were filed on Form 8-K during the fourth
quarter of the fiscal year ended June 30, 1998:
8-K filed June 26, 1998 for sale of common stock under Reg. S.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on November 4, 1998.
LINDSEY TECHNOLOGIES, INC.
(formerly L.M. Capital, Inc.)
By: /s/Lionel Mauclaire
Lionel Mauclaire, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated, on November 4, 1998.
Principal Executive Officer, Financial Officer, Accounting Officer and Director:
/s/Lionel Mauclaire
Lionel Mauclaire
Directors:
/s/Ronald R. Chadwick
Ronald R. Chadwick
/s/Jean-Michel Mauclaire
Jean-Michel Mauclaire
/s/Robert Mauclaire
Robert Mauclaire
10
<PAGE>
Lindsey Technologies, Inc.
Financial Statements
June 30, 1998
<PAGE>
Lindsey Technologies, Inc.
Financial Statements
June 30, 1998
Table of Contents
Page
Independent Auditor's Report F-1
Financial Statements
Balance sheet F-2
Statements of operations F-3
Statements of cash flows F-4
Statements of stockholders' equity F-5
Notes to Financial Statements F-6-F-11
<PAGE>
Larry O'Donnell, CPA, P.C.
2280 South Xanadu Way Telephone 745-4545
Suite 370
Aurora, Colorado 80014
Board of Directors
Lindsey Technologies, Inc.
Aurora, Colorado
Independent Auditor's Report
I have audited the accompanying balance sheet of Lindsey Technologies, Inc.
as of June 30, 1998 and the related statements of
operations, stockholders' equity and cash flows for the years ended June 30,
1998 and 1997. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the 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. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lindsey Technologies, Inc.
as of June 30, 1998, and the results of its
operations and its cash flows for the years ended June 30, 1998 and 1997
in conformity with generally accepted accounting principles.
Larry O'Donnell, CPA, P.C.
October 7, 1998
<PAGE>
Lindsey Technologies, Inc.
Balance Sheet
June 30, 1998
Assets
Current assets
Cash in Bank $ 17,820
Accounts receivable 9,886
----------
Total current assets 27,706
----------
Investment in Heldol Corporation 88,878
----------
$116,584
==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 26,753
Accounts payable-related parties 19,613
Notes payable-major shareholder 32,979
----------
Total current liabilities 79,345
----------
Stockholders' equity
Preferred stock, no par value, 20,000,000
total; 5,000 Series A shares authorized
4,200 issued and outstanding 304,257
Common stock, no par value,
100,000,000 shares authorized,
17,624,460 issued and outstanding 7,335,853
Underwriter's warrants 20,000 issued, and
outstanding 120
Foreign currency translation adjustment (6,761)
Deficit accumulated during the
development stage (7,596,230)
----------
37,239
----------
$116,584
==========
See Notes to Financial Statements.
F-2
<PAGE>
Lindsey Technologies, Inc.
Statements of Operations
Years Ended June 30, 1998 and 1997
1998 1997
Revenues $ 9,948
---------
General & administrative expenses 171,102 $ 48,097
Research & development 6,909,282
--------- ---------
Net (loss)-from operations (7,070,436) (48,097)
--------- ---------
Other income (expense):
Share of loss of Heldol Corp. (100,862)
Amortization (21,546)
Gain (loss) on sale of trade securities 160 209
Interest income 4 741
--------- ---------
(122,244) 950
--------- ---------
Net income (loss) $(7,192,680) $ (47,147)
========= =========
Net income (loss) per share $(.44) (*)
======
Weighted average number of
common shares and equivalent
units outstanding 16,318,017 15,462,578
========== ==========
*Less than $(.01) per share
See Notes to Financial Statements.
F-3
<PAGE>
Lindsey Technologies, Inc.
Statements of Cash Flows
Years Ended June 30, 1998 and 1997
1998 1997
Cash flows from operating
activities:
Net income (loss) $(7,192,680) $(47,147)
Adjustments to reconcile
net income to net cash
provided by operations:
Share of loss of
Heldol Corp. 100,862
Amortization 21,546
Foreign currency translation
adjustment (4,025) (2,736)
Common stock issued
for services 7,014,000
(Increase) decrease in:
Cash in escrow 84,817
Accounts receivable (9,886)
Increase (decrease) in:
Accounts payable 16,837 25,312
--------- ---------
Net cash provided by
(used in) operating
activities (53,346) 60,246
--------- ---------
Cash flows from investing
activities:
Investment in Heldol
Corporation (22,031) (189,255)
--------- ---------
Net cash used in investing
activities (22,031) (189,255)
--------- ---------
Cash flows from financing
activities:
Due to shareholder 6,985
Sale of common stock 88,360 195,064
Common stock proceeds
returned (71,000)
--------- ---------
Net cash flow provided by
financing activities 88,360 131,049
--------- ---------
Net increase (decrease) in
cash equivalents 12,983 2,040
Cash at beginning of year 4,837 2,797
--------- ---------
Cash at end of year $ 17,820 $ 4,837
========= =========
See Notes to Financial Statements.
F-4
<PAGE>
Lindsey Technologies, Inc.
Statements of Stockholders' Equity
Years Ended June 30, 1998 and 1997
<TABLE>
<S> <C> <C> <C> <C>
Foreign
Currency
Common Stock Preferred Stock Accumulated Translation
Shares Amount Shares Amount Deficit Adjustment
Balance, June 30, 1996 14,782,400 $ 109,549 4,200 $304,257 $(356,403)
Proceeds returned to stockholders (71,000)
Common stock issued for cash 1,218,860 195,064
Foreign currency translation adjustment (2,736)
Net loss for the year (47,147)
---------- --------- ----- -------- ---------- ---------
Balance, June 30, 1997 16,001,260 $ 233,613 4,200 $304,257 $(403,550) $ (2,736)
Common stock issued for cash 21,200 88,360
Common stock issued for services 1,602,000 7,014,000
Foreign currency translation adjustment (4,025)
Net loss for the year (7,192,680)
---------- --------- ----- -------- ----------- ---------
17,624,460 $7,335,973 4,200 $304,257 $(7,596,230) $ (6,761)
========== ========= ===== ======== =========== =========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies:
Organization - L.M. Capital, Inc. (the Company) was organized under the laws of
the state of Colorado on August 17, 1989. On November 8, 1996, the Company
changed its name to Lindsey Technologies, Inc. The Company is developing
software and marketing software for industrial, medical, and commercial
operations through its joint venture discussed in Note 2. The Company
operates in Europe and North America. In prior years, the Company was a
development stage company.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results differ from those estimates.
Loss Per Common Share - Loss per common share is computed on the basis of the
weighted average number of common shares during the respective periods.
Cash Equivalents - For the purposes of reporting cash flow, the Company
considers cash and savings deposits to be cash equivalents.
Foreign Currency Translation - Financial statements for the Company's
subsidiaries outside the United States are translated in U.S. dollars at
year end exchange rates for assets and liabilities and weighted average
exchange rates for income and expenses. The resulting translation adjustments
are recorded as a separate component of shareholders' equity.
Amortization - The Company's investment in Heldol Corporation includes the
unamortized excess of the Company's investment over its equity in Heldol's
net assets. This excess was $118,746 at June 30, 1998, and is being
amortized on a straight-line basis over its estimated useful life of
five years.
F-6
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements (continued)
2. Joint Venture Agreement
On June 21, 1996, the Company entered into a joint venture with a team of
French software engineers (the Associates) and their wholly owned French
corporation, Helvetius Ingenierie. The Company and the Associates formed
Heldol Corporation (Heldol) a United States corporation, on October 25,
1996. The Company capitalized Heldol for $70,000, giving the Company
35% ownership of Heldol and the Associates 65%.
The Company will also capitalize Heldol with an additional 10 million French
francs (approximately $2 million) over two years at which time the Company
will own 80% of Heldol. As of June 30, 1998 the Company has invested $211,286
and owns 50% of Heldol. The Company is accounting for the investment under
the equity method.
After Heldol is fully capitalized, Heldol shall be obligated to purchase 30% of
the outstanding shares of Helvetius for 10 million French francs (approximately
$2 million).
Another agreement on June 21, 1996 between the Company and the
Associates allows the Associates to exchange their shares of Helvetius for
shares in the Company according to a market valuation formula, providing
Helvetius attains certain sales levels and the Company in on NASDAQ.
Condensed financial information of Heldol Corporation as of and for the
year ended June 30, 1998.
Current assets $ 8,489
Other 140
---------
Other assets $ 8,629
=========
Current liabilities $ 8,539
Stockholders' equity 90
---------
Total liabilities and
stockholders' equity $ 8,629
=========
Provision for loss on
investment in Helvetius
Ingeniere $(175,772)
Operating expenses (25,952)
---------
Net loss $(201,724)
=========
F-7
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements (continued)
3. Related Party Transactions
The Company has an oral agreement with the secretary of the Company
to utilize office space provided by the secretary free
of charge. A company wholly owned by the secretary was reimbursed for out of
pocket expenses in the amount of $14,500 and $14,389 for the years ended
June 30, 1998 and 1997 respectively.
The Company has reimbursed a family member of its president for out of
pocket expenses of $2,650 and $18,957 during the years ended June 30, 1998
and 1997.
The Company has borrowed and paid back funds from the major shareholders'
wholly owned company. These loans are at zero percent interest to the
Company.
4. Public Offering
The Company successfully completed a public offering of 20,650 units at $6.00
per unit in March 1991, with gross proceeds of $123,900. Each unit consisted
of twelve common shares, no par value, plus twenty Class A and Class B
warrants to purchase common stock. The Class A warrants expired twelve
months after the date of the prospectus on September 13, 1990. The Board
of Directors had extended the time to exercise these warrants until
June 30, 1998. However, these warrants have not been exercised. These
warrants allowed the holder to purchase eight common shares of stock at
an exercised price of twelve and one-half cents per share. As of June 30,
1998, 413,000 warrants were issued and outstanding. The other class of
warrants, Class B, has expired on September 13, 1992. The Board of
Directors extended the period to exercise the warrants through June 30,
1998. However these warrants have not been exercised. The holder of
these warrants could purchase eight common shares of stock at an
exercised price of eighteen and three-quarter cents per share. As of
June 30, 1998, 413,000 warrants were issued and outstanding.
The Company has the right to redeem these warrants upon a thirty day written
notice at a price of $.0001 per warrant commencing three months from the date
the prospectus becomes effective. As of June 30, 1998, the Company has
redeemed no warrants.
The public offering was subject to the provisions of 1990 Colorado Securities
Act. These provisions required that at least 80% of the net proceeds be placed
into a separate escrow bank account.
On October 3, 1996, the Company returned $71,000 of the proceeds to its
shareholders and retained $14,536 for its use. Certain shareholders
returned $70,000 to the Company.
F-8
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements (continued)
5. Preferred Stock Series A
Out of the authorized preferred stock, the Company has designated a
"Series A Convertible Preferred Stock" (Series A) with 5,000 as the
designated number of shares. The Series A holders are not entitled to
receive dividends but can convert one share of Series A into 1,600 shares of
common stock.
As a provision of the Series A - " In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, the holder of each share of Series A shall be entitled to receive,
of the assets of the Company available for distribution, an amount per
share equal to $100."
If the assets and funds to be distributed among the holders of the Series A
shall be insufficient to permit the payment of the full foresaid
preferential amount to such holders then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
holders of the Series A in proportion to the aggregate preferential amount
of all shares held by them.
After payment has been made to the holders of the Series A, the holders of the
common stock shall be entitled to share ratably in the remaining assets on the
basis of the number or shares held by them.
The holder of each share of Series A shall have the right to two hundred votes
for each share standing in his name on the books of the Company. The
holders shall have the right to vote at all meetings of the stockholders
held in respect to any matter upon which voting is required, including the
election of directors. These votes will be aggregated with the votes of
the holders of the Company's common stock and will not be treated as a
separate class.
6. Sale of Securities
The Company has sold its securities under a Regulation S Offshore
Securities Agreement. The securities may not be sold in the United States
unless they become registered under a securities act or under an exemption
of a securities act. The securities are sold in units at $500 per unit. Each
unit consists of 100 common shares, no par value, plus twenty Class A
warrants to purchase common stock at $7 per share and twenty Class B
warrants to purchase common stock at $9 per share. The Class A warrants
expire December 15, 1997. The Class B warrants expire December 15, 1998.
The Company sold 212 and 203 units during the years ended June 30, 1998
and 1997, respectively.
F-9
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements (continued)
7. Incentive Stock Option Plan
On August 17, 1989, the Company adopted an Incentive Stock Option Plan under
which options are intended to qualify as "incentive stock options' under
Section 422A of the Internal Revenue Code of 1954 as amended. The options
to purchase up to 500,000 shares of the Company's common stock may be
granted to the employees of the Company. The plan is administered by the
Board of Directors, which are empowered to determine the terms and
conditions of each option, subject to the limitation the exercise price
cannot be less than the market value of the common stock on the date of
grant (110% of the market value in the case of options granted to an
employee who owns of the Company's outstanding common stock) and no
option can have a term in excess of 10 years (5 years in the case of options
granted to employees who own 10% or more of the Company's common stock). As
of June 30, 1998 no options have been granted.
8. Income taxes
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
A deferred tax asset arising from the net operating loss carryover of
approximately $2,500,000 has been offset by a valuation allowance.
At June 30, 1998, the Company has approximately $7,500,000 of unused
Federal net operating loss carryforwards, which principally expire
in the year 2018.
9. Going Concern
The statement of operations presented in the financial statements reflects
a net loss for the year ended June 30, 1998 of $(7,192,680). This
created an uncertainty about the Company's ability to continue as a going
concern. However, the Company has been able to improve it's financial
position through stock offerings and has been able to raise $7,102,360
(including $7,014,000 in services) in 1998 and $195,064 in 1997 through
private placements.
F-10
<PAGE>
Lindsey Technologies, Inc.
Notes to Financial Statements (continued)
9. Going Concern (Continued)
Management believes that the Company's future success will be achieved
through the development under its own umbrella of a generic management
information system that produces and harmonizes norms and know-how with
multi-media capabilities.
While Management believes the Company will be profitable in the future,
there can be no assurances of future success. The financial statements
do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
10. Contingency
The Company issued shares for services during the year ended June 30, 1998
and valued those shares at $5 per share. Should the trading price of
those shares be below that amount when the two year holding period expires,
the Company must make up the difference in cash. The total amount of the
contingency is $80,000.
F-11
<PAGE>
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