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 quarterly period ended June 30, 2000.
[ ] 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. 0-18809
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LIGHTNING ROD SOFTWARE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 41-1614808
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
7301 Ohms Lane, Suite 600 Minneapolis, MN 55439
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (952) 837-4000
Former name, former address and former fiscal year, if changed since
last report:
CE Software Holdings, Inc.
1801 Industrial Circle, P.O. Box 65580
West Des Moines, Iowa 50265
Prior Fiscal Year: September 30
--------------------------------------------------------------------------------
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
July 31, 2000 Common Stock 3,271,882
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
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LIGHTNING ROD SOFTWARE, INC.
Table of Contents
Part I FINANCIAL INFORMATION
Item 1. Financial Statements: Page
Balance Sheets
June 30, 2000 and December 31, 1999 3
Statements of Operations
Three Months and Six Months Ended June 30, 2000 and 1999 4
Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 5
Notes to Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
Part II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12 - 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13 - 14
SIGNATURES 15
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
Lightning Rod Software, Inc.
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
(Unaudited)
6/30/00 12/31/99
----------- --------
<S> <C> <C>
ASSETS
Current Assets
--------------
Cash and cash equivalents $ 6,358,377 $ 121,383
Accounts receivable (net) 65,427 183,643
Prepaid expenses 419,103 103,001
------------ -------------
Total Current Assets 6,842,907 408,027
Property and equipment (net) 457,568 344,394
------------ -------------
Total Assets $ 7,300,475 $ 752,421
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current Liabilities
-------------------
Accounts payable and accrued expenses $ 967,751 $ 2,379,458
Due to related parties 401,853 66,307
Deferred revenue 83,232 90,791
Notes payable 1,350,000 4,165,980
------------ -------------
Total Current Liabilities $ 2,802,836 $ 6,702,536
Redeemable common stock $ - $ 500,000
Shareholders Equity/(Deficit)
-----------------------------
Common stock at par (10,000,000 shares authorized,
3,215,482 and 1,673,836 outstanding at June 30, 2000
and 1999, respectively) $ 32,155 $ 16,738
Additional paid-in capital 21,129,234 6,667,350
Unearned compensation (15,250) (26,687)
Accumulated deficit (16,648,500) (13,107,516)
------------ -------------
Total Shareholders Equity/(Deficit) $ 4,497,639 $ (6,450,115)
------------ -------------
Total Liabilities and Shareholders Equity/(Deficit) $ 7,300,475 $ 752,421
============ =============
</TABLE>
See accompanying notes to financial statements.
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LIGHTNING ROD SOFTWARE, INC.
Statements of Operations
For the three and six months ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
--------------------------------- ---------------------------------
3 Month Period 3 Month Period 6 Month Period 6 Month Period
Ended 6/30/00 Ended 6/30/99 Ended 6/30/00 Ended 6/30/99
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
License $ 60,710 $ 501,531 $ 139,814 $ 950,908
Services and other 83,651 235,647 159,222 418,487
------------ ------------- ------------- -------------
Total Revenues $ 144,361 $ 737,178 $ 299,036 $ 1,369,395
COST OF REVENUES
License $ 2,169 $ 61,212 $ 11,255 $ 199,539
Services and other 283,167 269,774 588,965 420,499
------------ ------------- ------------- -------------
Total Cost of Revenues $ 285,336 $ 330,986 $ 600,220 $ 620,038
GROSS PROFIT $ (140,975) $ 406,192 $ (301,184) $ 749,357
OPERATING EXPENSES
Sales and marketing expenses $ 595,178 $ 642,599 $ 1,118,425 $ 1,058,394
Research and development 452,070 250,303 855,320 444,663
General and administrative 589,304 512,065 1,202,988 923,794
------------ ------------- ------------- -------------
Total Operating Expenses $ 1,636,552 $ 1,404,967 $ 3,176,733 $ 2,426,851
------------ ------------- ------------- -------------
Loss From Operations $ (1,777,527) $ (998,775) $ (3,477,917) $ (1,677,494)
Interest (income)/expense $ (37,814) $ 275,439 $ 63,066 $ 281,984
------------ ------------- ------------- -------------
Net Loss $ (1,739,713) $ (1,274,214) $ (3,540,983) $ (1,959,478)
============ ============= ============= =============
Earnings Per Share
Net loss per common share
basic and fully diluted $ (0.67) $ (0.80) $ (1.47) $ (1.24)
============ ============= ============= =============
Weighted average common shares 2,611,038 1,585,703 2,409,564 1,585,703
</TABLE>
See accompanying notes to financial statements.
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LIGHTNING ROD SOFTWARE, INC.
Statements of Cash Flows
For the six months ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
---------------- ----------------
Six Month Six Month
Period ended Period ended
June 30, 2000 June 30, 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (3,540,983) $ (1,959,478)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 126,179 84,658
Compensatory stock options 11,438 11,439
Noncash principal shareholder transactions - 75,000
Warrants issued with Note Payable - 240,000
Warrants for terminated offering - 15,625
Changes in operating assets and liabilities:
Account receivable 118,216 (438,244)
Prepaid expenses (316,101) (71,591)
Accounts payable, accrued expenses and deferred revenue (987,527) 643,664
------------- -------------
Net cash used in operating activities $ (4,588,778) $ (1,398,927)
------------- -------------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (239,353) (82,407)
------------- -------------
Net cash used in investing activities $ (239,353) $ (82,407)
------------- -------------
Cash flows from financing activities:
Net advances from affiliates $ - $ 239,573
Proceeds from issuance of short-term notes 2,573,310 1,350,000
Proceeds from issuance of common stock 8,491,815 -
------------- -------------
Net cash provided by financiung activities $ 11,065,125 $ 1,589,573
------------- -------------
Net increase in cash $ 6,236,994 $ 108,239
Cash at beginning of period 121,383 300
------------- -------------
Cash at end of period $ 6,358,377 $ 108,539
============= =============
</TABLE>
See accompanying notes to financial statements.
5
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LIGHTNING ROD SOFTWARE, INC.
Notes to Financial Statements
June 30, 2000
(Unaudited)
1) Merger with Atio Corporation USA, Inc.
In accordance with a certain merger agreement dated December 28, 1999, as
amended ("Merger Agreement"), Atio Corporation USA, Inc., a Minnesota
corporation ("Atio") merged (the "Merger") with and into CE Software Holdings,
Inc. (CESH) effective as of April 28, 2000. In conjunction with the Merger, CESH
(the surviving corporation) changed its name to Lightning Rod Software, Inc.
(hereafter "LROD" or "Company" or "Registrant"). Based principally on the fact
that the officers, directors and operating activities of Atio became the
officers, directors and operating activities of LROD after the Merger, the
Merger was accounted for as a reverse acquisition and the financial statements
of Atio became the financial statements of LROD.
Atio was significantly undercapitalized during the year ended December 31, 1999.
As additional sources of capital were being sought, the operations were
significantly pared back, particularly sales and marketing activities, and its
results of operations for the three and six month period ended June 30, 2000,
reflect the resultant decrease in revenues. Atio's operations from October 28,
1999 (the effective date of a preliminary agreement of merger with CESH) through
the effective date of the Merger were primarily financed with advances from
CESH. Such funding was directed towards rebuilding the necessary resources and
infrastructure to actively market and sell products and to service customers,
the revenue impact of which has not been realized by June 30, 2000.
As a result of the Merger and a private financing completed immediately after
the Merger, LROD has approximately $6.4 million of cash and short-term
investments available to finance continuing operations at June 30, 2000.
2) Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods presented. The preparation of
financial statements in conformity with generally accepted accounting principles
in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
in the United States have been condensed or omitted. These financial statements
should be read in conjunction with the Company's financial statements and notes
thereto for the year ended December 31, 1999, which are contained in the Current
Report on Form 8-K filed on June 9, 2000. The results of operations for the
interim periods presented are not necessarily indicative of results that may be
expected for any other interim period or for the full fiscal year.
6
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3) Earnings Per Share
Net loss per share is computed under SFAS No. 128, "Earnings Per Share." Basic
net loss per share is computed using the weighted-average number of shares of
common stock outstanding. Diluted net loss per share does not differ from basic
net loss per share since potential shares of common stock from the exercise of
stock options and warrants and outstanding shares of common stock are
anti-dilutive for all periods presented. In April 2000, the Company completed a
merger which resulted in the conversion of Atio shares into shares of the
Company. All share data included in the Company's financial statements have been
retroactively restated to reflect the stock conversion.
4) Fair Value Disclosure of Financial Instruments
The Company's financial instruments consist of short-term trade receivables and
payables for which current carrying amounts are equal to or approximate fair
market value. Additionally, interest rates on outstanding debt are at rates
which approximate market rates for debt with similar terms and maturities.
5) Research and Development
Research and development expenditures are expensed as incurred.
6) Software Development Costs
Costs incurred internally in creating computer software are charged to expense
when incurred. Technological feasibility is established upon completion of a
working model. No costs have been capitalized pursuant to Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," since the period between achieving
technological feasibility and completion of such software is relatively short
and software development costs qualifying for capitalization have been
insignificant.
7) Revenue Recognition
Revenue on software sales is recognized upon shipment, if no significant vendor
obligations remain and collection is probable. The Company evaluates
arrangements that include professional services to determine whether those
services are essential to the functionality of other elements of the
arrangement. When professional services are considered essential, revenues from
the arrangement are recognized using contract accounting, generally on a
percentage of completion basis. Revenue from maintenance contracts is recognized
on a straight-line basis over the contract period which is typically twelve
months. Other service revenues, such as training and consulting, are recognized
when services are performed.
8) Income Taxes
The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recorded based on differences between
the tax basis of assets and liabilities and their carrying amounts for financial
reporting purposes using enacted tax rates in effect for the years in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
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9) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial reporting purposes using the straight-line method over the estimated
useful lives (three to five years) of the assets and for tax purposes using
accelerated methods. Upon sale or retirement of property and equipment, the
related cost and accumulated depreciation or amortization are removed from the
accounts and any gain or loss is included in operations. Leasehold improvements
are amortized over the shorter of their useful life or the lease term.
10) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable. The Company
monitors its customers' financial condition to minimize its risks associated
with trade accounts receivable, but generally does not require collateral from
its customers.
11) Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The new
statement establishes accounting and reporting standards for derivative
instruments and hedging activities related to those instruments, as well as
other hedging activities. SFAS No. 133, as amended by SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of FASB Statement No. 133," is effective for the Company beginning January
1,2001. The Company does not expect SFAS No. 133 to materially affect its
financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." The SAB
summarized certain of the SEC's views regarding revenue recognition. The
provisions of SAB 101, as amended by SAB 101A, are effective for the year
beginning January 1, 2000. The Company has analyzed the effect of the guidance
outlined in SAB Nos. 101 and 101A, and does not believe that it will impact the
Company's revenue recognition practices or financial statements.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes included elsewhere herein. Historical results and
percentage relationships are not necessarily indicative of the operating results
for any future period. Within this discussion and analysis, all dollar amounts
have been rounded to the nearest thousand.
REVENUES
Three Months Ended June 30, 1999 and 2000: Revenues decreased from $737,000
during the three months ended June 30, 1999 to $144,000 during the same period
in 2000, a decrease of 80%. Approximately 42% of 2000 revenues and 68% of 1999
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revenues were from licenses, all of which were from the Interaction Manager
product. Revenue from software licenses decreased by 88% compared to the same
period a year ago. Revenues from services decreased by 65% for the three month
period ended June 30, 2000 compared to the same period in 1999, and accounted
for approximately 58% of revenues for this three month period in 2000. The
overall decrease in revenues and the lower percentage of software revenues were
primarily due to the limited financial resources that had restricted new sales
and marketing efforts.
Six Months Ended June 30, 1999 and 2000: Revenues decreased from $1,369,000
during the six months ended June 30, 1999 to $299,000 during the same period in
2000, a decrease of 78%. Approximately 47% of 2000 revenues and 69% of 1999
revenues were from licenses, all of which were from the Interaction Manager
product. Revenue from software licenses decreased by 85% compared to the same
period a year ago. Revenues from services decreased by 62% for the six month
period ended June 30, 2000 compared to the same period in 1999, and accounted
for approximately 53% of revenues for this six month period in 2000. As
discussed above, the overall decrease in revenues and the lower percentage of
software revenues were primarily due to the limited financial resources that had
restricted new sales and marketing efforts.
COST OF REVENUES
LROD's cost of revenues is composed primarily of: 1) the costs of product
materials such as manuals, diskettes, CD-ROMS, and packaging; 2) the cost of
servers and related peripheral equipment used by customers to run Interaction
Manager and warehouse data; and 3) the labor required to install, implement and
support the solution for customers.
Three and Six Months Ended June 30, 1999 and 2000: Total cost of revenues, as a
percentage of revenues, increased from 45% for the three and six months ended
June 30, 1999, respectively to 198% and 201% for the same periods in 2000,
reflective of the increases in the number of service staff and travel costs as
well as the costs of supporting our customer base. Given the relative fixed
nature of the implementation and support expenses, as revenues decline, margins
decline as well.
SALES AND MARKETING
Three Months Ended June 30, 1999 and 2000: Sales and marketing expenses
decreased 7% from $643,000 to $595,000 for the three months ended June 30, 1999
and 2000, respectively. Sales and marketing expenses as a percentage of revenue
increased from 87% to 413%, primarily a function of the lower revenue.
Six Months Ended June 30, 1999 and 2000: Sales and marketing expenses increased
6% from $1,058,000 to $1,118,000 for the six months ended June 30, 1999 and
2000, respectively. Sales and marketing expenses as a percentage of revenue
increased from 77% to 374%, again, primarily a function of the lower revenue.
RESEARCH AND DEVELOPMENT
Three Months Ended June 30, 1999 and 2000: Research and development expense
increased from $250,000 to $452,000 for the three months ended June 30, 2000
compared to the same period in 1999. Research and development expenses as a
percentage of revenue increased from 34% to 314%. The higher expense is due to
increasing development efforts directed at the Interaction Manager product.
Six Months Ended June 30, 1999 and 2000: Research and development expense
increased from $445,000 to $855,000 for the six months ended June 30, 2000
compared to the same period in 1999. Research and development expenses as a
percentage of revenue increased from 33% to 286%. The higher expense is due to
increasing development efforts directed at the Interaction Manager product.
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GENERAL AND ADMINISTRATIVE
General and administrative expenses are composed principally of salaries of
administrative and technical support personnel, fees for legal and accounting
services, amortization of other intangible assets, and facilities expenses.
Three Months Ended June 30, 2000 and 1999: General and administrative expenses
increased from $512,000 for the three months ended June 30, 1999 to $589,000 for
the same period in 2000. As a percentage of revenues, general and administrative
expenses increased from 69% to 409%, primarily a function of the lower revenue.
Six Months Ended June 30, 2000 and 1999: General and administrative expenses
increased from $924,000 for the six months ended June 30, 1999 to $1,203,000 for
the same period in 2000. As a percentage of revenues, general and administrative
expenses increased from 67% to 402%, primarily a function of the lower revenue.
NET INTEREST EXPENSE / INCOME
Three Months Ended June 30, 2000 and 1999: Net interest income was $38,000 for
the three months ended June 30, 2000, as compared to a net interest expense
total for the corresponding period in 1999 of $275,000. The net change from year
to year was due to a significant reduction in debt as a result of the merger
concluded in the second quarter of fiscal 2000. This, combined with the growth
in interest income associated with the cash received from both the merger of the
businesses as well as the private placement money received, effectively allowed
LROD to produce net interest income in 2000.
Six Months Ended June 30, 2000 and 1999: Net interest expense was $63,000 for
the six months ended June 30, 2000, as compared to $282,000 in 1999, a net
decrease of 78%.
LIQUIDITY AND CAPITAL RESOURCES
Atio began seeking equity financing from institutional investors in March 1999.
To finance its operations while it was seeking this financing, Atio obtained a
$1,350,000 credit line and issued warrants to the participants of the lender.
Nevertheless, Atio's equity financing efforts were impaired by market conditions
and Atio's deteriorating financial condition. Atio terminated its equity
financing efforts in August 1999. Because it did not meet the objectives for
equity financing contained in a certain credit agreement, Atio went into default
under such agreement. Atio was forced to significantly scale back the scope of
its operations starting in August 1999 because of the unavailability of further
financing.
Atio began negotiation of an agreement with CESH in September 1999, and reached
preliminary agreement in October with respect to a proposed business
combination. As part of this preliminary agreement, Atio received short-term
financing of $150,000 from one of its two largest shareholders and a commitment
of its other largest shareholder to continue to fund its development efforts.
Atio also received a limited amount of financing from CESH at this time in the
form of secured promissory notes. Atio also entered into a preliminary
agreement, which was conditioned on the closing of the Merger, to restructure
its credit agreement. As a result of this preliminary agreement, and the closing
of the Merger, the credit agreement's maturity date was extended to June 30,
2001, and LROD issued shares of its common stock to participants in the credit
agreement in exchange for certain warrants to purchase Atio common stock such
participants held.
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Until the completion of the Merger and private placement funding, Atio was
dependent on short-term funding provided principally by CESH. At the closing of
the Merger, however, funds in the amount of approximately $8,300,000 were made
available to Atio, consisting of approximately $1,550,000 from CESH and
$6,440,000 of net proceeds from a private offering of 875,000 shares of common
stock, and $300,000 pursuant to a sale of new shares to an existing shareholder.
In addition to the funds discussed above, as part of the Merger LROD received a
note for approximately $510,000 from Venturian Software, Inc. ("Venturian").
This note represented Venturian's obligation to purchase an additional 78,666
LROD shares. This note was collected in full, and 78,666 LROD shares were
accordingly issued, on June 30, 2000.
Additionally, under the Merger Agreement, LROD is currently holding as
collateral 314,062 LROD shares owned by Atio Pty to secure Atio Pty's obligation
to purchase an additional 314,062 shares of LROD common stock at $6.48 per share
($2,035,000 in the aggregate). This original commitment was scheduled to be paid
by May 31, 2000, but has not been fulfilled as of the date of this report. Atio
Pty has been granted an extension until September 30, 2000 to complete this
transaction.
The funds from all of these activities are being used by LROD for marketing,
sales, product development, professional services, and expansion of
infrastructure. LROD anticipates that the cash provided from the aforementioned
capital sources as well as from anticipated revenues will be sufficient to fund
its operating activities through the end of the year 2001. If revenues are less
than management's expectations, LROD may need to obtain financing prior to the
end of 2001. LROD's ability to meet its cash requirements will be dependent upon
its ability to successfully execute its plan of operations and on resulting cash
flow and the market value of its securities.
RISK AND UNCERTAINTY
Certain statements contained on this Form 10-QSB and other written and oral
statements made from time to time by the Company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "will," "forecast," and similar words or
expressions. LROD's forward-looking statements generally relate to its growth
strategy, product development and financial results. Forward-looking statements
involve a variety of risks and uncertainties, known and unknown, including, but
not limited to, the risk that new products may not achieve market acceptance,
and the risk that LROD would not be able to fund its working capital needs from
cash flows. Consequently, no forward-looking statement can be guaranteed and
actual results may vary materially.
The Company undertakes no obligation to update any forward-looking statement,
but investors are advised to consult any further disclosures by the Company on
this subject in its filings with the Securities and Exchange Commission,
especially on Forms 10-KSB, 10-QSB and 8-K (if any), in which the Company
discusses in more detail various important factors that could cause actual
results to differ from expected or historic results. The Company notes these
factors as permitted by the Private Securities Litigation Reform Act of 1995. It
is not possible to foresee or identify all such factors. As such, investors
should not consider any list of such factors to be an exhaustive statement of
all risks, uncertainties or potentially inaccurate assumptions.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
In connection with the Merger, LROD: (1) issued an aggregate of 1,044,429 shares
of its common stock to Atio shareholders and warrant holders; (2) assumed the
obligation to issue up to an additional 189,571 shares of its common stock upon
exercise of Atio options; and (3) assumed the obligation to issue up to 168,750
shares of its common stock upon the conversion of certain Atio convertible debt.
In addition, as provided in the Merger Agreement, LROD also sold to one of the
Atio shareholders (now a LROD shareholder) a total of 70,234 shares at a price
of $6.48 per share paid in cash and by cancellation of certain indebtedness at
the effective time of the Merger. In addition, at the time of the Merger the
same shareholder executed a promissory note in the amount of $509,725.65 to
secure its obligation to purchase an additional 78,666 LROD shares. In June
2000, this note was paid in full and the corresponding shares were issued. As
provided in the Merger Agreement, one of Atio's shareholders (now a LROD
shareholder) is obligated to purchase an additional 314,062 shares of LROD's
common stock. This purchase obligation is secured by a like number of LROD
shares such shareholder already holds, which shares will be forfeited to LROD if
its purchase obligation is not fulfilled. The Company relied on Section 4(2) and
Regulation D (Rule 506) under the Securities Act of 1933 for an exemption for
registration of such shares. A restrictive securities legend has been, or will
be, as the case may be, placed on the certificates representing the shares.
On April 28, 2000, LROD sold 875,000 "Units" (each Unit consisting of one share
of common stock and a warrant to purchase one share of common stock) at a price
of $8.00 per Unit. The Units were sold to 106 accredited investors through John
G. Kinnard and Company, Incorporated, as agent, who received commissions of
$560,000. The Company relied on Rule 506 of Regulation D under the Securities
Act of 1933 for an exemption for registration of such securities. The purchasers
represented their intention to acquire the securities for investment purposes
only and not with a view to the distribution thereof; in addition, a restrictive
securities legend has been placed on the certificates representing the
securities.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on April 27, 2000, the following
proposals were adopted by the margins indicated:
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1. To elect five directors to hold office for the ensuing year until their
successors are elected and qualified.
Number of Shares
For Withheld
Christian F. Gurney 1,067,370 19,760
Richard A. Skeie 1,067,390 19,740
John S. Kirk 1,067,390 19,740
Sheldon T. Fleck 1,067,390 19,740
David J. Lundquist 1,067,390 19,740
2. To approve the agreement and plan of merger dated as of December 28, 1999.
For 753,886
Against 1,780
Abstain 1,180
Broker Non-vote 330,284
3. To authorize the issuance of a maximum of 875,000 shares of common
stock in a private offering, at a per share price of $8.00, plus
warrants to purchase an equal number of additional shares of common
stock at an exercise price of $10.00.
For 734,171
Against 21,540
Abstain 1,135
Broker Non-vote 330,284
4. To amend the 1990 Stock Option Plan, 1992 Stock Option Plan, and
Non-employee Directors Stock Option Plan.
For 749,701
Against 5,440
Abstain 1,705
Broker Non-vote 330,284
5. To adopt the 2000 Stock Option Plan
For 720,941
Against 34,100
Abstain 1,805
Broker Non-vote 330,284
Item 5. Other Information
LROD entered into a sub-lease agreement dated July 12, 2000 with Creative
Publishing international, Inc. (Cpi) whereby LROD will lease office space from
CPi from August 1, 2000 through May 31, 2002. This agreement has been included
as Exhibit 10.1 to this Form 10-QSB.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Sub-Lease Agreement dated July 12, 2000 with Creative Publishing
international, Inc.
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, LROD filed the following reports on Form
8-K:
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On April 5, 2000 LROD filed a Form 8-K reporting under Item 5 a private
placement of securities and its proposed merger with Atio.
On May 15, 2000 LROD filed a Form 8-K, which was amended by Amended Forms 8-K
filed on June 9 and July 25, 2000, reporting (i) the completion of its Merger
with Atio and describing the business of LROD subsequent to the Merger, (ii) the
change in its certifying accountants, (iii) changes in its directors and
officers, (iv) the closing of its private placement and (v) the change in its
fiscal year, and filing the following financial statements of businesses
acquired:
(a) Financial statements of Atio Corporation USA, Inc.:
- Balance sheets as of December 31, 1999 and December 31, 1998
- Statements of Operations for the years ended December 31, 1999 and
December 31, 1998
- Statement of Changes in Stockholders' Equity for the years ended
December 31, 1999 and December 31, 1998
- Notes to Financial Statements
- Report of Independent Accountants
(b) Financial statements of Atio Corporation USA, Inc.:
- Unaudited balance sheets as of March 31, 2000 and March 31, 1999
- Unaudited statement of operations for the three months ended March
31, 2000 and March 31, 1999
- Unaudited statement of cash flows for the three months ended March
31, 2000 and March 31, 1999
(c) Pro Forma Financial Information:
- Unaudited pro forma combined balance sheet at December 31, 1999
- Unaudited pro forma combined summaries of operations for the three
months ended December 31, 1999 and the year ended September 30, 1999
- Notes to unaudited pro forma combined balance sheet and summaries of
operations
- Unaudited pro forma combined balance sheet as of March 31, 2000
- Unaudited pro forma combined summary of operations for the three
month period ended March 31, 2000
- Notes to unaudited pro forma combined balance sheet and summaries of
operations
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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.
LIGHTNING ROD SOFTWARE, INC.
(Registrant)
Signature Title Date
/s/ Willem J. Ellis President, Chief Executive August 10, 2000
(Willem J. Ellis) Officer, and Director
/s/ Jeffrey D. Skie Executive Vice President August 10, 2000
(Jeffrey D. Skie) and Chief Financial Officer
15
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EXHIBIT INDEX
Exhibit
Number Description
10.1 Sub-Lease Agreement, dated July 12, 2000, with Creative Publishing
international, Inc.
27 Financial Data Schedule
