Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1998
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____________ to
_____________
Commission File Number 0-24372
- ------------------------------
THE THORSDEN GROUP, LTD.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0611746
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4505 South Wasatch Blvd., Suite 340
Salt Lake City, Utah 84124
(Address of principal executive offices and Zip Code)
(801) 424-0044
(Registrant's telephone number, including Area Code)
Check whether the registrant: (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 October 31, 1998, there were issued and outstanding 20,742,335 shares of
the Company's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one): Yes No X
------ ------
<PAGE>
Table of Contents
Page No.
Part I. Financial Information..................................................3
1. Financial Statements
CondensedConsolidated Balance Sheet as of September 30, 1998
(unaudited) and March 31, 1998 (audited)...............................3
Unaudited Condensed Consolidated Statements of Income for the three and
six months ended September 30, 1998 and 1997...........................4
Unaudited Condensed Consolidated Statements of Cash Flows for the three
and six months ended September 30, 1998 and 1997.......................5
Notes to Unaudited Condensed Consolidated Financial Statements.........6
2. Management's Discussion and Analysis or Plan of Operation..............7
Part II. Other Information...................................................16
Page 2 of 18
<PAGE>
Part 1
Item 1 - Financial Statements
The Thorsden Group, Ltd.
(A Development Stage Company)
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1998 March 31, 1998
------------------ --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 955,419 $ 568,612
Marketable securities - available for sale 7,125 681,600
Accounts receivable -- 8,313
Prepaid expenses -- --
----------- -----------
Total current assets 962,544 1,258,525
----------- -----------
Equipment 245,313 199,099
Less accumulated depreciation 26,457 6,418
----------- -----------
Equipment, Net 218,856 192,681
Other Assets 142,589 128,980
----------- -----------
TOTAL ASSETS $ 1,323,989 $ 1,580,186
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 117,293 $ 93,288
Deferred income on maintenance contracts -- 10,417
Equipment lease obligations 50,882 30,653
Accrued liabilities 42,900 70,928
----------- -----------
Total current liabilities 211,075 205,286
----------- -----------
Equipment lease obligations 28,387 26,319
STOCKHOLDERS' EQUITY
Common stock 20,493 20,133
Additional paid-in capital 2,665,315 2,192,174
Accumulated unrealized loss on investments (13,884) (159,010)
Accumulated (deficit) (1,587,397) (704,716)
----------- -----------
Total stockholders' equity 1,084,527 1,348,581
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,323,989 $ 1,580,186
=========== ===========
See Notes to Consolidated Financial Statements
Page 3 or 18
<PAGE>
THE THORSDEN GROUP, LTD.
(A Development Stage Company)
Condensed Consolidated Statement of Income (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended From Inception
---------------- ------------------ --------------
June 11, 1996
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997 to Sept 30, 1998
<S> <C> <C> <C> <C> <C>
Net Revenues $ 11,167 $ -- $ 4,917 $ -- $ 155,438
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 999 -- 148 -- 3,109
Research and
development 445,034 19,643 247,396 22,313 730,394
Marketing, general and 463,115 33,225 217,002 29,061 1,042,166
administrative ------------ ------------ ------------ ------------ ------------
Total costs and expenses 909,148 52,868 464,546 51,374 1,775,669
------------ ------------ ------------ ------------ ------------
Operating (loss) (897,981) (52,868) (459,629) (51,374) (1,620,231)
Interest income 18,069 169 10,266 147 38,913
Interest expense (2,869) (1,633) -- (6,071)
Other expense -- (110) -- (110) (110)
Other income 100 -- -- -- 100
------------ ------------ ------------ ------------ ------------
Net (loss) $ (882,681) $ (52,809) $ (450,996) $ (51,337) $ (1,587,399)
------------ ------------ ------------ ------------ ------------
Net (loss) per share $ (.04) $ (0.12) $ (0.02) $ (0.12) $ (0.08)
Weighted average number of 20,492,335 424,600 20,492,335 424,600 20,492,335
shares outstanding ------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 4 of 18
<PAGE>
THE THORSDEN GROUP, LTD.
(A Development Stage Company)
Condensed Consolidated Statement of Income (Unaudited)
<TABLE>
<CAPTION>
Cumulative from
---------------
Six Months Ended Three Months Ended Inception
---------------- ------------------ ---------
Sept 30 Sept 30 June 11, 1996
1998 1997 1998 1997 to Sept 30, 1998
<S> <C> <C> <C> <C> <C>
Cash Flows (used for) Operating Activities:
Net (Loss) $ (882,681) $ (52,809) $ (450,996) $ (51,337) $(1,587,399)
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation 20,040 223 10,054 223 26,459
Changes in Assets and Liabilities:
Accounts Receivable 8,313 (30,000) 6,250 40,000 --
Prepaid Expenses -- -- -- -- --
Accounts Payable 24,005 (3,005) (1,099) 3,685 117,294
Deferred Income (10,417) 125,000 (4,167) -- --
Accrued Liabilities (28,028) (35,803) 10,320 -- 42,901
---------------------------------------------------------------------------------
Net Cash (used for) Operating Activities (868,768) 3,606 (429,638) (7,429) (1,400,745)
---------------------------------------------------------------------------------
Cash Flows (provided by) Investing Activities:
Additions to Equipment (46,215) -- (44,265) -- (245,316)
Disposition of Marketable Securities 819,600 -- 520,278 -- 819,600
Lease Deposits -- -- -- -- (107,247)
Patent costs (13,609) (9,374) (12,332) (9,374) (35,342)
---------------------------------------------------------------------------------
Net Cash Flow Provided By: 759,776 (9,374) 463,681 (9,374) 431,695
---------------------------------------------------------------------------------
Cash Flows Provided By Financing Activities:
Proceeds from Private Placement of Shares 473,501 -- 323,250 -- 1,844,199
Increase in Lease Obligations 22,298 -- 27,256 -- 79,270
Cash Contribution -- -- -- -- 1,000
---------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 495,799 -- 350,506 -- 1,924,469
---------------------------------------------------------------------------------
Net Increase/(Decrease) in Cash and Cash 386,807 (5,768) 384,549 (16,803) 955,419
Equivalents
Beginning Cash Balance 568,612 11,614 570,870 22,649 --
---------------------------------------------------------------------------------
Ending Cash Balance $ 955,419 $ 5,846 $ 955,419 $ 5,846 $ 955,419
---------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 5 of 18
<PAGE>
THE THORSDEN GROUP, LTD.
Notes to Consolidated Financial Statements
Preliminary Note
The Company has prepared the accompanying condensed consolidated financial
statements, without audit, according to the applicable regulations of the
Securities and Exchange Commission. Certain information and disclosures normally
included in those financial statements prepared according to generally accepted
accounting principles have been condensed or omitted. The Company believes that
the following disclosures are adequate to present clear, unequivocal
information. These condensed consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) that, in the
Company's opinion, are necessary to present fairly the financial position and
results of operations of the Company for the periods presented. We suggest that
these condensed consolidated financial statements are read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998.
Note 1 Concentration
The Company is still in the development stage, and its revenues to date are from
one customer. This customer has prepaid on a service contract, which has been
recorded as deferred income on maintenance contract.
Note 2 Intangible Assets
The Company has applied for patent protection for its proprietary software and
has expended $33,408 for these rights. The patents are still in the process of
being granted, but recent communications with the Patent and TradeMark Office
suggests a favorable outcome. The Company will begin to amortize these assets
upon completion of patent registration or at the point when the products begin
to generate revenue.
Note 3 New Subsidiary Company
The Board of Directors created a new subsidiary, Qui Vive, Inc., on June 5,
1998, for the development of a new product. This new entity has required the
restructuring of current management as well as the recruitment of new personnel.
The team members will likely receive equity ownership interests in Qui Vive,
Inc. as part of their compensation for successfully developing the project.
Note 4 Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers cash on
deposit in the bank and other unrestricted investments with original maturities
of three months or less at the time of purchase to be cash equivalents.
Page 6 of 18
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION and Analysis or Plan of Operation
Preliminary Note Regarding Forward-Looking Statements
The Company considers all forward-looking statements contained in this Quarterly
Report to be covered by and to qualify for the safe harbor protection provided
by the Private Securities Litigation Reform Act of 1995. Shareholders and
prospective shareholders should understand that several factors govern whether
any such forward-looking statement will be or can be achieved. Any one of those
factors could cause actual results to differ materially from those projected in
this Report.
These forward-looking statements include plans and objectives of management for
future operations, relating to the products and the economic performance of the
Company. Assumptions applicable to the foregoing involve judgments with respect
to, among other things, future economic, competitive, and market conditions,
future business decisions, and the time and money required to successfully
complete development projects, all of which are difficult or impossible to
predict accurately and many of which are beyond the Company's control. Although
the Company believes that the assumptions underlying the forward-looking
statements are reasonable, any of those assumptions could prove inaccurate.
Therefore, we cannot assure that the results contemplated in any of the
forward-looking statements contained herein will be realized. The impact of
actual experience and business developments may cause the Company to alter its
marketing, capital expenditure plans, or other budgets, which may in turn affect
the Company's results of operations. In light of the inherent uncertainties in
forward-looking statements, the inclusion of any such statement does not
guarantee that the objectives or plans of the Company will be achieved.
The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto appearing elsewhere in this Quarterly
Report on Form 10-QSB.
Overview
The Thorsden Group, Ltd. (the "Company") is a Delaware corporation organized in
1992 for the purpose of seeking and acquiring business opportunities. In October
1997, the Company acquired Arkona, Inc., a Utah corporation ("Arkona"), through
a wholly-owned Subsidiary Corporation in a reverse triangular merger, accounted
for as a purchase. Arkona's predecessor, Arkona LLC, a Utah limited liability
company, was founded in September 1996 and had limited business operations prior
to the acquisition. On June 5, 1998 the Company formed a new subsidiary company,
Qui Vive Inc., in Delaware ("Qui Vive").
The core business of the Company is developing, marketing, and selling software
products for use in portable and distributed network computing and secure email
applications. Business is conducted through its subsidiaries, Arkona and Qui
Vive.
Arkona
During the quarter ended September 30, 1998, and since that date, the Company's
management has directed much of its efforts in maintaining the continued
capability required to build world class software products. The first of these
products, Universal Update(TM), will be in beta testing in the quarter ending
December 31, 1998, and the first revenues from this product are expected in
1999.
Page 7 of 18
<PAGE>
Arkona's enabling technology allows Arkona and/or its partners to provide
dynamic solutions to a variety of end-user markets. The Company's market
strategy focuses on recruiting and motivating solution partners in key vertical
markets. The first of these partnerships is in place, and solutions for the
publishing industry are being developed.
During the quarter, the Company hired a seasoned Vice President of Sales to head
the efforts to recruit partners and penetrate key accounts with Arkona
technology.
Distributed Computing
For more than a decade, the computer industry has endeavored to extend the value
of stored information from large enterprise systems to networked desktop
computers. Networked computing allows corporations to empower workers by giving
them direct control of information and applications. As a result, productivity
has skyrocketed. In recent years, the Internet has made it possible for
companies to extend the scope and value of their networks even further. Members
of the Internet's "connected" community can obtain a wide variety of corporate
data.
The Company believes a third iteration of this theme is quietly but forcefully
gaining momentum. Information access is once again being extended further than
ever before--this time to a wave of mobile, disconnected, and geographically
distributed employees, partners, and customers. Organizations that take
advantage of this third wave can finally apply corporate knowledge at its
ultimate and most critical destination--the customer point of service.
Intelligent Synchronization
Arkona's unique software solutions are helping to bring about this "distributed"
information wave by extending user access to a business's applications and most
critical information--large knowledge databases. These databases are monolithic
in size and complexity, making them inherently poor applications for mobile
workers such as field sales and service representatives. However, field sales
and service personnel and other disconnected employees and partners have an
acute and growing need for immediate access to large corporate databases.
When field personnel visit customers for sales or service calls, it is critical
that they arrive with all pertinent information, including detailed product,
pricing, and contract data and any other information, which might affect the
customer. Traditionally, however, this kind of structured information is ideally
suited for large corporate databases and workhorse computers, but poorly suited
for portable devices. To complicate matters, the information is rarely stored in
a single repository. The result is a complex computing environment which is
difficult to mobilize for field service professionals.
Efficiently extracting information from larger, disparate databases and
seamlessly synchronizing it upon request from the field is a vital and necessary
requirement. The Company believes this current inability costs corporations
millions in lost knowledge, capital, sales, and customers. The need to resolve
this dilemma was the genesis of the Company's software solutions.
Instead of aiming to displace large corporate databases, which function very
well in the home office environment where there is ample computing power, the
Company extends the value of these databases by cleanly extracting mission
critical information for use at the point of service. The Company's software
thus maximizes existing software investments by working equally well with any of
the widely used database systems, including Oracle, Sybase, Informix,
PeopleSoft, BAAN, SAP, Microsoft, and others.
Page 8 of 18
<PAGE>
How the Customer Benefits
The Company's products and services help customers to:
Reduce the High Cost of Information and Application Updates: The Company's
synchronization solutions eliminate data "snapshots" mailed to the field,
costly downtime for application updates, and time-consuming support of
remote installation procedures. Arkona allows customers to simply,
inexpensively, and securely update and synchronize critical information and
distributed applications.
Optimize Synchronization of Data and Applications: Arkona's Universal
Update technology optimizes the process of synchronizing distributed and
mobile data sources. This technology reduces bandwidth requirements by
distributing and reconciling only incremental differences between client
and server data sources. Administrators may also define profiles for
individual users, groups, or other servers. Information is then customized
and distributed based on business logic stored in the user profile.
Simplify the Delivery of Information: End-users can update information and
applications with the click of a button, avoiding data/application
reconciliation problems.
Profit From Flexible Synchronization Solutions: True object design and
reusable code libraries allow the Company to quickly and efficiently create
proven synchronization solutions to a customer's exact specifications.
Arkona's custom solutions take advantage of multiple data sources, data
types, OS platforms, and various mobile devices.
Leverage and Revitalize Legacy Systems: Arkona's custom solutions easily
integrate with existing corporate information and knowledge systems. The
Company designs distributed applications that extend a company's
information system investments instead of replacing them.
The Arkona Solutions
UNIVERSAL UPDATE(TM)
The Universal Update Client and Server represent Arkona's core technology. These
modules work as embedded components within specific industry solutions.
Customers and solution providers may choose to license the Universal Update
technology for use in their own products, or they can work with Arkona to build
more specific vertical solutions.
ARKONA OnSite(TM) FIELD SERVice
Arkona OnSite Field Service was the Company's first industry solution. It used
an earlier iteration of our Universal Update enabling technology which was
custom designed specifically for one customer's field service engineers to gain
access to critical customer, product, and inventory information even when
disconnected at the customer's site. Using this product, these field service
workers gather data from a legacy database and store a replica of the database
in a laptop at the customer's site. They can then access information with the
OnSite product without being connected to a network. Later, when network
connection is conveniently available, stored reports and other information can
be transmitted. The system is useful where telephones or network ports are not
readily available or where wireless networking technologies are not practical or
allowed (such as hospitals). The OnSite product was developed in collaboration
with OEC Medical Systems, Inc. ("OEC"), an unaffiliated customer of Arkona.
Page 9 of 18
<PAGE>
ARKONA OnSite(TM) PUBLISher
Arkona OnSite Publisher is currently being designed in collaboration with an
Arkona solution provider. The Company believes that OnSite Publisher will allow
large reference publishers to virtually eliminate production and distribution of
CD ROM publications in favor of on-line distribution. Electronic titles will be
synchronized automatically with publisher archives and placed directly into a
subscriber's own electronic library solution.
Qui Vive
The digital revolution has evolved around a simple notion: that information
should be permanent. Unlike other media formats, digital information (email) can
be stored forever, recovered at will, copied with ease, and shared anywhere.
Unfortunately, these attributes can also give digital information a more
sinister side. Email can just as easily be saved, copied, recovered, and
redistributed by anyone at any time with or without consent and frequently
without knowledge. Once an electronic email message has been sent, an author
loses all control of his or her words. According to industry analyst Esther
Dyson, the challenge is not to keep everything secret, but to limit misuse of
such information.?
Qui Vive is developing a solution to these problems, the purpose of which is to
facilitate communication and give content control back to the author. The
project is presently in the design and architecture phase of developing an
enhanced email product. When the first version of the product is launched, we
expect it to give email users the chance to direct:
how their words will be released,
who can see them,
how they can be redistributed, and
if they can be printed, copied, or saved.
We cannot assure that the safeguards of enhanced email will not be abused or
circumvented by someone with the requisite degree of computer sophistication and
a malicious motive. However, subsequent versions of the product will continue to
raise the bar against potential abuse and compromise of security that is so
easily breached, often accidentally, with current systems.
The Company believes that the level of security embedded in the first
implementation will be sufficient to address the needs of approximately 80% of
the market. Enhancements to increase security and further simplify the product`s
usability will be added over time.
Key Features
The first version of the product is expected to include the following key
features:
Content Restrictions. Authors can decide whether their email messages can
be printed, copied, or saved by the recipient
Forwarding Restrictions. Authors can prohibit recipients from forwarding
their email in whole or in part.
Lifespan Limits. Authors can configure messages to self-destruct after a
predefined period or be accessed only at certain times.
Dynamic Self-Destruction. Authors can set messages to destroy themselves
as they are read.
Page 10 of 18
<PAGE>
Persistence Limits. Authors can define the number of times any message
can be viewed.
Message Withdrawal. Authors can retract their messages even after they
have been sent over the Internet.
PHASE 1 FUNCTIONALITY
The key features listed above will include the following functionality:
Email is created using the sender's existing email software. Currently being
designed as an add-on to existing email software, the enhanced email will be
sent from any Java-enabled email client, including email products from
Netscape, Microsoft, Lotus, and others. Once an email message has been
authored, the user selects appropriate security and auditing options from a
simple, easy-to-use GUI or relies on either the user-preset or embedded
defaults.
The email message is secured. The product's mail server encapsulates and
encrypts the email message. The mail server can reside within a corporation
or with an Internet service provider.
Email recipient is notified. The server notifies the email recipient that a
secured email message has been received. Each notification includes a
hypertext link that quickly takes the recipient to the secured
message.
Access is granted using a personal password. Before the recipient can open a
secured email message, the recipient must first be authenticated. This
authentication process will employ industry standard authentication
mechanisms.
Content is controlled through sender-defined options. Even after access has
been granted, secured email continues to be restricted by the sender-defined
options. Recipients cannot forward, save, or manipulate the original email
message in any way forbidden by the sender.
FUTURE FUNCTIONALITY
Subsequent versions of the software will include significant
enhancements which will be announced as the products are released.
How the Customer Benefits
The Company expects this product to be a critical solution, which it believes
may well become the legally required standard of care for a wide variety of
industries, professions, and situations. In fact, the Company believes secured
email should be used in any situation requiring discretion. It is an ideal
solution for:
Legal communications
Governmental agencies
Contract negotiations
Medical information
Sensitive human resource information
Communication of non-public corporate information
Any information which should not be public
Page 11 of 18
<PAGE>
Additional Funding
The Company anticipates the product will evolve from its initial implementation,
which, as described above, will represent a level of functionality sufficient to
cover most email users' privacy concerns. However, the Company intends to
implement other designs that eliminate intermediary services, further simplify
the functionality and usability of the product, and simultaneously increase the
level of security in the product.
The ultimate design goal is to meet the most stringent secure messaging
requirements up to and including the standards of the US Department of Defense.
Increasingly rigorous levels of security will be implemented en route to
achieving this final goal. Once the email solution is successfully launched,
implementations beyond email will be designed and marketed. Markets to be
targeted after the initial releases will include, but not necessarily be limited
to: voice mail, pagers, databases, Usenet newsgroups, and web publishing tools.
The Company is currently seeking additional capital to complete and move from
the design and architecture phase of development, including securing all
intellectual property protections available, to completion and marketing the
first product version.
The Company believes that the initial version of the product will be released by
the end of calendar year 1998. However, there can be no assurance that the
Company will successfully complete the project, that as completed, the product
will include all or substantially all of the elements described above, or that
any of the other risks described herein will not adversely affect the outcome of
the project.
Page 12 or 18
<PAGE>
Results of Operations
Three Months Ended September 30, 1998 and 1997
Revenues for the quarter ended September 30, 1998 were $4,917 (1997: $0). Cost
of revenues totaled $464,546 in the quarter ended September 30, 1998 (1997:
$51,374). The 1998 expenses included $247,396 in research and development
expense (1997: $22,313). The increased expenses in 1998 reflect the addition of
personnel and costs associated with the merger of the Company with Arkona. The
Company expects that research and development expenditures will continue to
increase during the next twelve months as development of existing and new
products continues. We expect that adding new personnel in this area will
increase these expenses by approximately 10% in the next quarter.
The Company had $10,266 in interest income during the quarter ended September
30, 1998 (1997: $147). The increase in interest income is due to increased cash
balances maintained in banks following private placements of the Company's
common stock. The net loss for the quarter was $450,996 (or $.02 per share)
compared to a loss $51,337 (or $.12 per share) in 1997.
Revenues for the quarter were provided by an ongoing service contract with a
single customer (OEC Medical Systems, Inc. - "OEC"), and cost of sales reflects
the costs associated with delivery of these services. Arkona is currently
bidding for a number of projects utilizing its core technologies and expects to
report successes in subsequent quarters. Expenses for the quarter reflect the
cost of people, engineering research, and marketing and selling efforts, which
will form the foundation of future increased revenue and profitability growth.
The primary marketing focus for the quarter continued to establish Arkona's
identity in the marketplace and to build a secure platform for future growth,
including recruiting the key partners required to build end-user solutions.
During the three months ended September 30, 1998, the Company provided support
services for OEC according to the service agreement with that company. The
Company has entered into a license agreement with this same customer to whom the
Company has agreed to pay a royalty on revenues generated from the licensing or
use of a software product developed by Arkona in 1997. The royalty is equal to
five percent of net revenues until OEC has recovered $125,000, the amount paid
to Arkona to develop the product. Thereafter, the royalty is two percent of net
revenues thereafter until OEC has been paid $250,000 and one percent of revenues
thereafter. No royalties have been paid by the Company to date under this
arrangement.
Six Months Ended September 30, 1998 and 1997
Revenues during the six months ended September 30, 1998 were $11,167 (1997: $0).
Cost of revenues totaled $909,148 during the six months ended September 30, 1998
(1997: $52,868). The 1998 expenses included $445,034 in research and development
expense (1997: $19,643). The increased expenses in 1998 reflect the addition of
personnel and costs associated with the merger of the Company with Arkona. The
Company expects that research and development expenditures will continue to
increase during the next 12 months as development of existing and new products
continues.
The Company had $18,069 in interest income during the six months ended September
30, 1998 (1997: $169). The net loss for the period was $882,681 (or $.04 per
share) compared to a loss $52,809 (or $.12 per share) in 1997.
Page 13 of 18
<PAGE>
Liquidity and Capital Resources
At September 30, 1998, the Company had cash and cash equivalents of $955,419, as
compared to cash and cash equivalents of $568,612 as of March 31, 1998. Cash was
provided during the period through the private placement of its stock.
Capital spending of $44,265 in the quarter was primarily for computer and
related equipment used in the Company's operations.
The Company held marketable securities available for sale at September 30, 1998.
Although the Company does not intend to engage in the business of investing in
or buying and selling securities of other companies, these securities were
received as consideration in the private placement of the Company's common stock
in October 1997. They are comprised of 3,000 shares of common stock of Eurogas
Corp. ("EUGS"). During the six months ended September 30, 1998, the Company sold
its remaining shares of InterJetNet Corp. for $5.00 per share in a private
placement.
At September 30, 1998, the sale price of Eurogas Corp. common stock, as reported
by the over-the-counter ("OTC") electronic bulletin board, was $2.38 per share.
Shares traded in the OTC markets are characterized by volatile changes in price
and thin trading volumes. The relatively low volume of securities traded and the
dramatic effect that sales of even a few shares can have on the market price of
such securities may have an adverse effect on the Company's ability to liquidate
its holdings or to realize the values shown above.
Management believes that the cash available to the Company from the recently
completed sales of marketable securities, proceeds from the continued sale of
its own securities in a private placement, and cash provided by operations will
be sufficient to meet the business requirements of the Company for the next
twelve months. If the Company expands its efforts to develop new products, or
the projected revenues do not materialize in the timeframe anticipated, seeking
additional funding through the sale of its securities or through borrowing may
be required. Presently the Company does not have an established bank line of
credit or similar facility.
Year 2000 Issues
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900, rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company relies on computer hardware, software and related technology,
together with data, in the operation of its business. Such technology and data
are used in the Company's internal operations, such as billing and accounting.
The Company is currently investigating the technology and data used in its
operations and has yet to determine whether Year 2000 Issues will affect its
business. The Company intends to evaluate its technology and data to determine
what, if any, remedial action may be required to address these issues. This
includes remediating any Year 2000 Issues that are related to the Company's
customers, suppliers and distributors. There is, however, no assurance that such
third parties will successfully remediate their own Year 2000 Issues over which
the Company has no control.
Page 14 of 18
<PAGE>
The Company believes it will substantially complete its evaluation and
remediation prior to the beginning of the year 2000, and that upon substantial
completion of such actions, and assuming that the Company's customers, suppliers
and distributors successfully remediate their own Year 2000 Issues over which
the Company has no control, the Company will have no material business risk from
such issues. The Company has not yet determined the total cost of such an
evaluation and any necessary remediation.
The Company develops its software and designs its products to be Year 2000
compliant. Customers may require the Company to certify that its products are
Year 2000 compliant. If its products were shown to have been the cause of a Year
2000 problem in a customer's system or business, the Company could incur
liabilities for breaching the warranty, if any, that it may give its customers
concerning the status of its products under applicable Year 2000 standards.
Outlook
This section contains forward-looking statements, all of which are based on
current expectations. The purpose of this section is to inform shareholders of
anticipated developments in the Company. We also caution readers that the
Company's business and the industry in which the Company operates contain
certain risks, some of which are outside the Company's control and may cause
actual results to vary from those anticipated. Such risks and related factors
may include, but are not limited to the following:
potential financial and other effects of future acquisitions
one-time charges and operational risks associated with such transactions
progress into new market segments and the cost of managing growth of the
business
business and economic condition and growth of the Company's target market
segments and of the economy in general
changes in customer order patterns, including timing of project initiation
and completion
competitive factors
timing of the release of new products
failure to remediate or the cost of remediating Year 2000 problems
possible litigation involving intellectual property matters
The Company's plans are dependent on having sufficient funding. Should the
Company not successfully complete the current private offering of its stock, or
if completion of the offering is delayed beyond the end of the next quarter, the
Company will have to re-evaluate its plans.
The formal launch of Arkona's Universal Update(TM) product will take place in
November 1998 during a large publishing trade show in Boston. This product will
be showcased to a wide variety of end users and potential partners during this
show, and V1.0 of the software is expected to be available by the end of
calendar 1998.
Page 15 of 18
<PAGE>
Part II. Other Information
ITEM 2. CHANGES IN SECURITIES
Unregistered sales of equity securities during quarter (other than in
reliance on Regulation S).
Recent Sales of Unregistered Securities. During the period covered by this
report, the Company issued equity securities that were not registered under the
Securities Act of 1933, as amended (the "Act"). Specifically, the Company issued
215,500 shares of common stock and warrants to purchase 215,500 shares of common
stock. Gross proceeds to the Company of $323,250 were generated by the sale of
these securities. The Company issued such shares without registration under the
Act in reliance on exemptions from registration under the Section 4(2) and/or
3(b), as well as Regulation D promulgated under the Act. The shares of common
stock were (and the shares issueable upon exercise of the warrants will be)
issued as restricted securities and the certificates representing such shares
are or will be stamped with a restrictive legend to prevent any resale without
registration under the Act or compliance with an exemption. In each case, the
purchasers of the securities were accredited investors, as that term is defined
by Rule 501 under the Act, or represented to the Company that they were
sophisticated investors who were experienced in making investments of this type,
either alone or with a purchaser representative, and that they or their
purchaser representatives were otherwise suitable (under state and federal
regulations) and possessed adequate means of providing for their current needs
and personal contingencies and who had no need for liquidity in an investment in
securities such as the Company's common stock, which are subject to certain
risks, including the possible loss of a person's investment in whole or in part.
The Company's common stock is quoted on the over-the-counter ("OTC") electronic
bulletin board under the symbol TRDG. To date there has been only limited
trading activity in the Company's stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At it Annual Meeting of Shareholders on Wednesday, October 28, 1998, the
following actions were submitted and approved by vote of the majority of the
issued and outstanding shares of the company:
1. Election of six directors; and
2. Approval of the Board of Directors, selection of Mantyla &
McReynolds as the Company's independent certified public
accountants.
A total of 14,432,221 shares (approximately 69%) of the issued and outstanding
shares of the Company were represented by proxy or in person at the meeting.
These shares were voted on the matters described above as follows:
Page 16 of 18
<PAGE>
1. For the directors:
<TABLE>
<CAPTION>
Name Number Shares For Number Shares Against Number Shares
Abstaining/Withheld
<S> <C> <C> <C>
John Blumenthal 14,432,221 0 0
Stephen Russell 14,432,221 0 0
Tim Kapp 14,432,221 0 0
John Zollinger 14,432,221 0 0
Joseph Ward 14,432,221 0 0
Jerral Pulley 14,432,221 0 0
</TABLE>
2. For the ratification of Mantyla & McReynolds as the independent certified
accountants of the Company, a total of 14,432,221 shares were voted for the
ratification and no shares abstained or voted against this proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (previously filed)
Page 17 of 18
<PAGE>
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.
THE THORSDEN GROUP, LTD.
(Registrant)
Date: November 3, 1998 /s/ John Blumenthal
--------------------------------
John Blumenthal, Chief Executive
Officer
Date: November 3, 1998 /s/ Steve Russell
----------------------------------------------
Stephen Russell, Chief Financial Officer and
Controller (Principal Financial and Accounting
Officer)
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 955419
<SECURITIES> 7125
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 962544
<PP&E> 245313
<DEPRECIATION> 26457
<TOTAL-ASSETS> 1323989
<CURRENT-LIABILITIES> 211075
<BONDS> 0
0
0
<COMMON> 20493
<OTHER-SE> 1064034
<TOTAL-LIABILITY-AND-EQUITY> 1323989
<SALES> 11167
<TOTAL-REVENUES> 11167
<CGS> 999
<TOTAL-COSTS> 909148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2869)
<INCOME-PRETAX> (882681)
<INCOME-TAX> 0
<INCOME-CONTINUING> (882681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (882681)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
