SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/AMENDED
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File No. 33-33939
LINDSEY TECHNOLOGIES, 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
______________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 December 31, 1998, 17,641,460 shares of common stock
were outstanding.
Transitional Small Business Disclosure Format:
Yes No x
____ ____
<PAGE>
TABLE OF CONTENTS
Form 10-QSB
2nd Quarter Ended December 31, 1998
Lindsey Technologies, Inc.
Page
PART I: FINANCIAL INFORMATION
Item 1.
Balance Sheet 2
Statement Of Income
and Comprehensive Income 3
Statement of Cash Flows 4
Notes to Financial Statements 5
Item 2.
Management's Discussion And
Analysis Or Plan Of Operation 9
PART II: OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
PART I. FINANCIAL INFORMATION
<PAGE> 1
ITEM 1. LINDSEY TECHNOLOGIES, INC.
BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
ASSETS
Current assets
Cash $ 48,749
Securities 8,155
Accounts receivable 8,498
____________
Total current assets 65,402
Investment in Heldol 126,150
____________
Total Assets $ 191,552
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued payables $ 916,650
Accounts payable - rel. parties 20,240
Note payable - rel. parties 115,151
____________
Total current liabilities 1,052,041
____________
Total Liabilities 1,052,041
____________
Stockholders' equity
Preferred stock: no par
value, 20,000,000 total,
5,000 Series A authorized,
4,200 shares issued
& outstanding 304,257
Common stock: no par
value, 100,000,000 shares
authorized, 17,641,460 shares
issued & outstanding 10,111,477
Underwriter's warrants,
20,000 issued and outstanding 120
Accumulated other comp. income 541
Accumulated deficit (11,276,884)
____________
Stockholders' Equity $( 860,489)
____________
Total Liabilities And
Stockholders' Equity $ 191,552
============
See Notes to Financial Statements
<PAGE> 2
LINDSEY TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
Three Months Ended Six Months Ended
December 31 December 31
1998 1997 1998 1997
____ ____ ____ ____
Revenues $ 14,652 $ - $ 24,958 $ -
Operating expenses:
Research & development 3,617,923 - 3,679,245 $ 500,000
Gen. & administrative 16,899 15,522 26,899 984,649
___________ ________ ___________ ___________
Income (loss) from
operations (3,620,260) (15,522) (3,681,186) (1,484,649)
___________ ________ ___________ ___________
Other income (expense):
Gain on securities sales 480 50 531 84
Interest income 1 1 2 2
___________ ________ ___________ ___________
Total other income 409 51 533 86
___________ ________ ___________ ___________
Income (loss) before
income taxes (3,619,851) (15,471) (3,680,653) (1,484,563)
___________ ________ ___________ ___________
Provision for income tax - - - -
___________ ________ ___________ ___________
Net income (loss) (3,619,851) (15,471) (3,680,653) (1,484,563)
___________ ________ ___________ ___________
Other comprehensive income,
net of tax:
Foreign curr. trans. adj. 262 - 8,157 -
Unrealized loss on avail-
able-for-sale securities ( 855) - ( 855) -
___________ ________ ___________ ___________
Comprehensive income $(3,620,444) $(15,471) $(3,673,351) $(1,484,563)
=========== ======== =========== ===========
Net income (loss)
per share $( .20 ) $( * ) $( .20 ) $( .09 )
=========== ========= =========== ===========
Weighted average number of
common shares
outstanding 18,181,460 16,502,260 18,181,460 16,502,260
=========== ========== ========== ==========
*Less than $.01 per share
See Notes to Financial Statements
<PAGE> 3
LINDSEY TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
Six Months Ended
December 31,
1998 1997
____ ____
Cash Flows From Operating Activities:
Net income (loss) $(3,673,351) $(1,484,563)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Amortization 16,363 -
Decrease in accounts receivable 1,388 -
Compensatory stock issuance 3,565,000 1,374,000
Increase (Decrease) in accts. pay. 39,897 ( 139)
Increase in accts. pay. - rel. par. 627 3,782
Foreign curr. trans. adj. ( 8,157) 5,136
Share of loss in Heldol 11,045 -
Unrealized loss on securities 855 -
___________ ___________
Net cash provided by
(used for)
operating activities ( 46,333) ( 101,784)
___________ ___________
Cash Flows From Investing Activities:
Securities ( 8,155) -
Investment in Heldol ( 37,272) ( 2,907)
___________ ___________
Net cash provided
by (used for)
investing activities ( 45,427) ( 2,907)
___________ ___________
Cash Flows From Financing Activities:
Issuance of common stock 40,518 126,064
Increase in notes payable 82,171 -
___________ ___________
Net cash provided
by (used for)
financing activities 122,689 126,064
___________ ___________
Net Increase (Decrease) In Cash 30,929 21,373
Cash At The Beginning Of The Period 17,820 4,837
___________ ___________
Cash At The End Of The Period $ 48,749 $ 26,210
=========== ===========
See Notes to Financial Statements
<PAGE> 4
LINDSEY TECHNOLOGIES, INC.
Notes to Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to
Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting
principles for complete financial statements. All
adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of
operations for the interim periods have been made and are
of a recurring nature unless otherwise disclosed herein.
The results of operations for such interim periods are not
necessarily indicative of operations for a full year.
Note 2. Significant Accounting Policies
Foreign currency translations
The Company has quarterly foreign currency translation adjustments
due to its day to day operational research and development activities in
France conducted in French Francs.
For these operations with the local currency as the functional currency,
assets and liabilties are translated at year end exchange rates, and
statements of operations are translated at the average exchange rates during
the year.
Note 3. Business Combinations
On November 5th, 1998, the Company acquired Distributed Quality Corp. ("DQC"),
a Colorado based company involved in marketing Networking and CORBA framework
software platforms for distributing quality related knowledge throughout
organizations using Internet technology, for $2,700,000 consisting of 540,000
restricted common shares of the Company valued at $5 per share and the
assumption of $865,000 in liabilities. DQC was acquired in a merger
transaction pursuant to the terms of a merger agreement, dated November 5th,
1998.
These acquisitions were accounted for under the purchase method, and the
purchase price was allocated to acquired in process technology. Prior to
completing these acquisitions, the Company conducted reviews in order to
determine the fair market value of the organizations and technologies to
be acquired. These reviews consisted of an evaluation of existing products,
research and development in process (projects that had not reached
technological feasibility and had no alternative future use), customers,
financial position and other matters. The acquired in process research and
development represents unique and emerging technologies.
On August 31, 1998 DQC signed an agreement with Stellarx SA, a French
software startup company that provides software infrastructure for developing
Internet based application software solutions.
<PAGE> 5
This agreement stipulates that DQC buys the Stellarx Framework Development
Toolkit(tm) license for a price of $300,000. This software environment
includes an XML document manager and repository, a workflow engine and an
application designer. It also includes a Versant(tm) ODMS development
license. (Versant is a trademark of Versant Corp.; Stellarx is a trademark
of Stellarx S.A.).
Under the terms of this agreement, DQC also has a right to integrate Stellarx
and Versant ODBMS runtime software pieces in its own application software
and distribute the whole as a package to its clients. This right is
worldwide, unlimited in time and exclusive for application software related
to quality, regardless of the business sector. DQC is required to pay 10%
of its application license revenues and 5% of its license maintenance
revenues to Stellarx as compensation for this right and to contribute to
research and development costs of Stellarx for each year ended December 31
as follows: 1998 $15,000 1999 $100,000 2000 $$200,000 2001 $250,000.
The deal gives the Company the right to have access to DQC's technology and
distribution agreements.
Prior to the transaction, the Company has evaluated the establishment of
technological feasibility of acquired in process technology. Due to the
early stage of completion at the date of acquisition, The Company has concluded
that it cuold not determine, with any reasonable degree of accuracy,
technological feasibility until the acquired in process technology was
delivered and tested. The purchased software was not fully delivered to
DQC at the date of the merger transaction.
In conformity with SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed", the total purchase price
of DQC has been allocated to R & D expenses. The purchase price and costs
directly attributable to the completion of the acquisition were not significant.
No significant adjustments were required to conform the accounting policies
of the acquired companies.
The Company may continue to incur charges for acquired in process technology
in connection with future acquisitions, which will increase operating and
net losses for the periods in which the acquisitions are consummated.
<PAGE> 6
Note 4. Research & Development Expenses
The Company conforms to the requirements of SFAS No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed", which
requires capitalization of costs incurred in developing new software once
technological feasibility, as defined, has been reached. Costs of
developing software and research and developement are expensed as incurred.
The Company did not capitalize any software development costs during the
years ended June 30, 1998, 1997, and 1996.
Except for the expenses related to the merger transaction with DQC, research
and development expenses for all periods presented consisted primarily of
compensation and consulting fees to support research and development for
conception, modeling and development of the Company's application software
called Key-Qual, a net based tool for certification and organization of all
existing production processes covering industry, services, administration and
medical sectors.
These expenses may vary from one period to the other because expenses are
recorded when cooperation contracts have been signed and stock issuances have
been authorized by a board meeting, which does not occur everyday.
Such wide variation of expenses may occur in the future.
The Company believes it has budgeted adequate research and development
resources to complete the contemplated projects over time periods ranging
from six to eighteen months from the dates of acquisition in order to
finalize development of finished application software.
Note 5. Stock Issuance
During the quarter ended December 31, 1998, the Company issued 540,000 common
shares pursuant to its merger with DQC, and 16,000 shares pursuant to
Regulation S, thereby increasing its total common shares outstanding from
17,625,460 to 18,181,460.
Compensation for R & D performed for the Company is usually paid with the
issuance of common shares fo services.
Note 6. Marketable Securities
The Company holds available-for-sale securities recorded at their cost of
$8,155. At December 31, 1998 the fair market value of these securities were
$7,300, resulting in an unrealized loss of $855.
<PAGE> 7
Note 7. Investment in HELDOL
LTI currently owns 50% of a Colorado based software development company
named Heldol Corporation, with operations in France. The Company accounts
for its investment, currently $126,150, under the equity method. Any excess
of the cost of the Company's investment over book value is amortized over
five years. No contingent or convertible securities exist in Heldol which
would significantly affect LTI's share of Heldol's income. Condensed
financial information for Heldol Corporation as of and for the six months
ended December 31, 1998 is set forth below:
Current assets $ 12,568
Other assets 21,783
_________
Total assets $ 34,351
=========
Current liabilities 3,970
Stockholders' equity 30,381
_________
Total liab. and stockholders' equity $ 34,351
=========
Net income (loss) $( 22,090)
=========
<PAGE> 8
LINDSEY TECHNOLOGIES, INC.
ITEM 2. Management's Discussion and Analysis or Plan of
Operation
FORWARD LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFROMATION, THIS FORM 10-QSB CONTAINS FORWARD
LOOKING STATEMENTS. IN THIS FORM 10-QSB, THE WORDS "EXPECTS", "ANTICIPATES",
"BELIEVES", "INTENDS", "WILL" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD
LOOKING STATEMENTS, WHICH ARE BASED UPON INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY, SPEAK ONLY AS OF THE DATE HEREOF AND ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY
FORWARD LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THE RESULTS DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT
MAY CAUSE SUCH A DIFFERENCE MAY INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THIS SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION -- FACTORS THAT MAY AFFECT FUTURE RESULTS". READERS SHOULD CAREFULLY
REVIEW THE RISK FACTORS DESCRIBED IN OTHER DOCUMENTS THAT THE COMPANY FILES
FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION"), INCLUDING THE 1998 ANNUAL REPORT ON FORM 10-KSB AND
THE QUARTERLY REPORTS ON FORM 10-QSB TO BE FILED BY THE COMPANY IN FISCAL 1999.
ALL PERIOD REFERENCES ARE TO THE COMPANY'S FISCAL YEARS ENDED
JUNE 30, 1999, 1998, AND 1997, UNLESS OTHERWISE INDICATED.
THE COMPANY'S PROJECT
For the last two years the Company has undertaken the development of its own
software solution implementing business to business E-commerce as an
application software provider with its own set of tools, notably Key-Qual(R).
Key-Qual is a net based tool for the organization and certification of all
existing production processes. It covers industry, services, administration
and medical sectors.
The system enables entities to fully describe all the desired functions of
production processes taking into account all the particularities of any
connected end user. Through normalization, professional individuals will be
able to communicate and interact in the most effective way.
By connecting and running Key-Qual quality system applications, a company will
have all of its production know how online. Therein lies a great enhancement
of productivity and added value to the whole organization. Any user will be
able to ask or be asked relevant information regarding production.
The system will help perform all relevant analyses and cross-reference them
with clients' procedures, production cycle and accompanying knowledge
database.
WHO MAY BE INTERESTED
All small and large organizations concerned in raising customer satisfaction
by improving quality throughout its processes.
<PAGE> 9
Industrial and corporate environment
The Company is currently working on a generic industrial Key-Qual application.
Key-Qual has the ambition to cover all noncomputerized personnel in any
given company regardless of its business activity.
In the industrial sector, actually only 15-20% of the employees of a company
use a desktop system with acces to an information system mainly for
administrative tasking. We presume the same model prevails in any other
sectors at large: health care, services, administration. The 80-85% remaining
employees are affected to production within the company.
Professionals and individuals and specific fields of expertise
The Company's business model is to release a packaged Key-Qual title for any
professional and business activity that can generate over 3 years a minimum
of ten thousand basic $380/month contracts and set up the portal for delivery
and servicing worldwide through internet providers and portal companies. These
titles can be marketed through the setup of subsidiaires with partners and
investors.
The Company is planning to work on:
- -- a Key-Qual application for the certification of software editors and
independent developers,
- -- a Key-Qual application for dentists and orthodontists
- -- a Key-Qual application for managing and normalizing on the Web the
information stored in databases and ERP systems i.e. SAP, BAAN, JD Edwards, etc.
ADVANTAGES
The resulting interaction between the system and its users will eiminate most
of the cost associated with the back and forth running between all different
activities running in the company.
The likely outcome of using Key-Qual is huge productivity gains, turbo
charged R & D and management of internal know how for corporations and
greater quality service and knowledge for individuals.
Most processes and transactions in industry, healthcare and services are
duplicative and paper based, clobbering the value added process of all
participants. Normalization in these activities is particularly well suited
for Internet use.
The growing number of users on the Internet is becoming more and more
important for business to business as well as business to consumer interaction.
HOW IT WORKS
Key-Qual is a mission critical application that can be deployed on the
Internet, Extranet and Intranet platforms.
It uses the most up to date technological standards such as a modular tiered
Corba based architecture, so any connected users can interact without the
need for expensive hardware.
<PAGE> 10
It runs on any desktop system with a browser, is self deploying and requires
zero client maintenance. Thanks to JAVA technology, it will work on most
server platforms available on the market for large application software.
It carries services like scalability, interoperability, fault tolerance and
security and can handle high volumes of transactions. Key-Qual allows the
integration of diverse applications, in the same manner as Healtheon Corp.'s
platform works.
CURRENT SITUATION
All research & development on the Key-Qual software project has been conducted
in Paris, France.
The conception phase started about two years ago. All R & D expenses recorded
until December, 1998 have been geared toward conception only. This means
engineering, industry and quality management specialists are paid for coming
up with a satisfactory solution for encapsulating know how. Solutions will
then be translated into a workable system software application.
The modeling phase has currently commenced. It consists of creating a model
which will be used for the development of the application software. The model
must show all the layers of what the application software will be. Key-Qual
global model should be completed in the fall of 1999. The Company is also
working with experts in specific fields in order to create models for specific
application.
The development of the final prototype product will take into consideration
the architecture of the application, its functions, ergonomics and GUI. The
specification for basic engines for the application are being currently
written. The Company expects to have a commercially viable prototype in the
fall of 1999.
By merging with DQC, the Company will have access to Stellarx's and Versant's
technologies, which shall have substantial beneficial effects on the
development time and costs of its application software.
Moreover, the Company believes that the limited amount of fees to be paid to
Stellarx for runtimes distribution will considerably reduce future costs of
revenues when installing application software and Database Management Systems
runtimes on the Company's customers' computers.
IMPACT OF YEAR 2000
The Company has determined that the purchased software applications it uses
and software applications developed internally are Year 2000 compliant.
However, there is no guarantee that other systems of other companies on
which the Company's systems rely will be timely converted and would not have
an adverse effect on the Company's systems.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Working capital needed to finance the Company's overhead in the past has
been provided by cash on hand, share subscriptions and loans from related
parties.
The Company expects to continue to incur substantial expenses related to
further research and development of its technologies and products,
increased staffing levels, acquisition and support of patent rights,
additional capital equipment for research and development activities, and
starting commercial activities. The Company may occur additional losses in
the near term.
The Company estimates that research and development expenses required for
completing the development of Key-Qual application software will be
covered with issuance of stock as compensation for such services.
If the Company's currently available funds and internally generated cash flow
are not sufficient to satisfy its financing needs, the Company would be
required to seek additional funding through other arrangements with
collaborative partners, through bank borrowings and through public or
private sales of its securities, including equity securities through a
Private Placement. There can be no assurance that additional funds, if
required, will be available to the Company on favorable terms, if at all.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results have varied significantly in the past and
may do so in the future. Factors affecting the Company's operating results
include, but are not limited to: important research & development expenses
to finish development of software product, delays in commercializing
software, and the degree of acceptance of the Company's products by the
markets and industries served by the Company.
The Company expects that fluctuations in its operating results will continue
for the foreseeable future. Consequently, the Company believes that period
to period comparisons of its financial results should not be relied upon as
an indication of future performance.
The Company intends to continue making significant expenditures on research
and development to finish development of current product and to develop new
products. While the Company believes that these current research and
development expenditures will be beneficial in the long term development of
its business, there can be no assurances that the development of products
will be successful or will not be rendered obsolete by future technology
acquisitions or developments. Research and development expenditures are
incurred substantially in advance of related revenue and in some cases may
not result in the generation of revenue.
<PAGE> 12
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 Securities
Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange
Act, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
LINDSEY TECHNOLOGIES, INC.
By: /s/Lionel Mauclaire
Lionel Mauclaire, President
and Director
Date: July 16, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AT 12/31/98 (UNAUDITED)
AND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED 12/31/98
(UNAUDITED). IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 48749
<SECURITIES> 8155
<RECEIVABLES> 8498
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65402
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<CURRENT-LIABILITIES> 1052041
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0
304257
<COMMON> 10111477
<OTHER-SE> (11276223)
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<SALES> 24958
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<CGS> 0
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<LOSS-PROVISION> 0
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</TABLE>
