<PAGE> 1
UNITED STATES
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 quarter ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (no fee required)
For the transition period to
Commission File No. 0-24374
LUCAS EDUCATIONAL SYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 62-1690722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17950 PRESTON ROAD, SUITE 912, DALLAS, TEXAS 75252
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 267-7250
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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
--- ---
At June 30, 2000, the registrant had outstanding 3,697,157 shares of common
stock as adjusted for the one-for-four reverse split approved by shareholders on
July 29, 2000, par value $.001
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
2000 2000
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 960,613 $ 1,278,924
Related party receivables 4,039 --
Inventory 5,610 5,610
Other current assets 18,319 --
----------- -----------
Total current assets 988,581 1,284,534
Restricted cash 50,000 --
Property and equipment, net 68,416 52,252
Other 16,873 3,045
----------- -----------
$ 1,123,870 $ 1,339,831
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,344 $ 46,724
Related party notes payable -- 2,500
----------- -----------
Total current liabilities 5,344 49,224
Commitments -- --
Stockholders' equity:
Preferred stock; 1,000,000 shares authorized, $.001 par value; 89,974
shares issued and outstanding, (aggregate liquidation
preference $1,400,000) 90 90
Common stock 20,000,000 shares authorized,
$.001 par value; 3,697,157 and 14,788,619 shares issued
and outstanding at June 30, and March 31, 2000, respectively
(See note 2) 3,697 14,789
Additional paid-in capital 3,377,288 3,366,196
Unearned compensation (548,435) (548,435)
Accumulated deficit (1,714,114) (1,542,033)
----------- -----------
Total stockholders' equity 1,118,526 1,290,607
----------- -----------
$ 1,123,870 $ 1,339,831
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
AND CUMULATIVE AMOUNTS SINCE DECEMBER 5, 1996
(DATE OF COMMENCEMENT OF DEVELOPMENT STAGE)
<TABLE>
<CAPTION>
CUMULATIVE
2000 1999 AMOUNTS
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
General and administrative expenses 180,007 117,601 1,717,881
------------ ------------ ------------
Loss from operations (180,007) (117,601) (1,717,881)
Other income (expense):
Interest income 7,926 455 8,398
Interest expense -- (433) (4,631)
------------ ------------ ------------
Loss before benefit for income taxes (172,081) (117,579) (1,714,114)
Benefit for income taxes -- -- --
------------ ------------ ------------
Net loss $ (172,081) $ (117,579) $ (1,714,114)
============ ============ ============
Loss per common share -
basic and diluted, See note 2 $ (.05) $ (.01) $ (.56)
Weighted average shares -
Basic and diluted, See note 2 3,697,157 12,453,619 3,049,451
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 5, 1996
(DATE OF COMMENCEMENT OF DEVELOPMENT STAGE)
THROUGH JUNE 30, 2000
<TABLE>
<CAPTION>
TREASURY STOCK PREFERRED STOCK COMMON STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 5, 1996 -- $ -- -- $ -- -- $ --
Issuance of common stock for cash -- -- -- -- 8,700,000 8,700
Net loss from inception on December 5,
1996 through March 31, 1997 -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1997 -- -- -- -- 8,700,000 8,700
Common stock issued in recapitalization -- -- -- -- 1,849,869 1,850
Common stock issued for:
Cash and services -- -- -- -- 192,000 192
Debt -- -- -- -- 333,000 333
Services -- -- -- -- 168,750 169
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1998 -- -- -- -- 11,243,619 11,244
Proceeds from stock subscription
receivable -- -- -- -- -- --
Common stock issued for:
Cash -- -- -- -- 90,000 90
Debt and payables -- -- -- -- 400,000 400
Services -- -- -- -- 720,000 720
Contributed shares 455,000 -- -- -- -- --
Treasury stock issued for cash (455,00) -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 -- -- -- -- 12,453,619 12,454
Common stock issued for services -- -- -- -- 2,385,000 2,385
Convertible preferred stock issued for
cash -- -- 89,974 90 -- --
Cancellation of common stock issued for
services -- -- -- -- (50,000) (50)
Stock compensation -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 -- -- 89,974 $ 90 14,788,619 14,789
One-for-four common stock reverse
split, See note 2, (Unaudited) (11,091,462) (11,092)
----------- ----------- ----------- ----------- ----------- -----------
Net loss, (Unaudited) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000, (Unaudited) -- $ -- 89,974 $ 90 3,697,157 $ 3,697
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 5, 1996
(DATE OF COMMENCEMENT OF DEVELOPMENT STAGE)
THROUGH JUNE 30, 2000
<TABLE>
<CAPTION>
ADDITIONAL STOCK
PAID-IN UNEARNED SUBSCRIPTION ACCUMULATED
CAPITAL COMPENSATION RECEIVABLE DEFICIT TOTAL
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 5, 1996 $ -- $ -- $ -- $ -- $ --
Issuance of common stock for cash (8,600) -- -- -- 100
Net loss from inception on December 5,
1996 through March 31, 1997 -- -- -- (63) (63)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1997 (8,600) -- -- (63) 37
Common stock issued in recapitalization (1,810) -- -- -- 40
Common stock issued for:
Cash and services 114,808 -- (25) -- 114,975
Debt 199,667 -- -- -- 200,000
Services 101,081 -- -- -- 101,250
Net loss -- -- -- (351,181) (351,181)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1998 405,146 -- (25) (351,244) 65,121
Proceeds from stock subscription
receivable -- -- 25 -- 25
Common stock issued for:
Cash 179,910 -- -- -- 180,000
Debt and payables 299,600 -- -- -- 300,000
Services 364,280 (106,875) -- -- 258,125
Contributed shares -- -- -- -- --
Treasury stock issued for cash 227,500 -- -- -- 227,500
Net loss -- -- -- (895,509) (895,509)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 1,476,436 (106,875) -- (1,246,753) 135,262
Common stock issued for services 546,050 (548,435) -- -- --
Convertible preferred stock issued for 0
cash 1,399,910 -- -- -- 1,400,00
Cancellation of common stock issued for
services (56,200) 56,250 -- -- --
Stock compensation -- 50,625 -- -- 50,625
Net loss -- -- -- (295,280) (295,280)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 3,366,196 (548,435) -- (1,542,033) 1,290,607
One-for-four common stock reverse
split, See note 2, (Unaudited) 11,092 -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss, (Unaudited) -- -- -- (172,081) (172,081)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000, (Unaudited) 3,377,288 (548,435) (1,714,114) 1,118,526
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
AND CUMULATIVE AMOUNTS SINCE DECEMBER 5, 1996
(DATE OF COMMENCEMENT OF DEVELOPMENT STAGE)
<TABLE>
<CAPTION>
CUMULATIVE
2000 1999 AMOUNTS
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (172,081) $ (117,579) $(1,714,114)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,053 7,146 64,289
Exchange of assets for services -- -- 1,262
Common stock issued for services and payables -- -- 844,375
Stock compensation -- -- 50,625
(Increase) decrease in:
Related party receivables (4,039) 400 (4,039)
Inventories -- -- (5,610)
Other current assets (18,319) -- (18,319)
Restricted cash (50,000) -- (50,000)
Other (13,828) -- (16,873)
Increase (decrease) in:
Accounts payable (41,380) 10,001 5,344
Accrued liabilities -- 17,860 --
----------- ----------- -----------
Net cash (used in) operating activities (291,594) (82,172) (843,060)
CASH FLOWS FROM INVESTING ACTIVITIES-
Purchases of property and equipment (24,217) (13,789) (133,967)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party notes payable -- -- 36,000
Payments on related party notes payable (2,500) -- (21,000)
Issuance of convertible preferred stock -- -- 1,400,000
Issuance of common stock -- 16,875 295,115
Issuance of treasury stock -- -- 227,500
Proceeds from stock subscription receivable -- -- 25
----------- ----------- -----------
Net cash (used in) provided by financing activities (2,500) 16,875 1,937,640
----------- ----------- -----------
Net increase (decrease) in cash (318,311) (79,086) 960,613
Cash, beginning of period 1,278,924 89,546 --
----------- ----------- -----------
Cash, end of period $ 960,613 $ 10,460 $ 960,613
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
LUCAS EDUCATIONAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
1. BASIS OF PRESENTATION
The March 31, 2000 Annual Report on Form 10-KSB of Lucas Educational Systems,
Inc. (the "company") includes a description of the company and a summary of
significant accounting policies and should be read in conjunction with this
Quarterly Report on Form 10-QSB ("Quarterly Report"). The financial statements
for the periods presented herein are unaudited and do not contain all
information required by generally accepted accounting principles to be included
in a full set of financial statements. In the opinion of management, all
material adjustments necessary to present fairly the results of operations have
been included. All such adjustments are of a normal, recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results of operations for the entire year.
2. ONE-FOR-FOUR REVERSE SPLIT OF COMMON STOCK
On July 29, 2000 the Stockholders approved a proposal to execute a reverse stock
split and voted to subsequently amend the company's Certificate of Incorporation
to return the number of authorized shares to 20,000,000. Effective August 1,
2000 the company's stock began trading post-split under the symbol LCSE on the
OTC Bulletin Board. The Balance Sheet as of June 30, 2000, the Loss per common
share for the Three Months Ended June 30, 2000 and Cumulative Amounts as well as
the Consolidated Statement of Stockholders' Equity have been stated to reflect
this event as if it had occurred on April 1, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
In March 2000, the company completed a private placement of 89,974
shares of Series A Convertible Preferred Stock to accredited investors as
defined in Regulation D promulgated pursuant to the Securities Act of 1933, as
amended. The capital raised in connection with the private placement is being
used by the company to further develop its initial product line and commence the
marketing and distribution of its products. The company has begun pursuing its
business of providing a learning system for users of all ages based on the Lucas
learning techniques.
RESULTS OF OPERATIONS
Net loss for the quarter ended June 30, 2000 was $172,081 as compared
to a Net loss of $117,579 for the quarter ended June 30, 1999. Loss from
operations increased $62,406 as the company amplified its focus on development
of product and increased activity to establish marketing and distribution
channels. The increased Loss from operations was partially offset by an increase
in Other income of $7,904 resulting from increased Interest income due to higher
cash balances during the three months ended June 30, 2000.
LIQUIDITY
Available cash at June 30, 2000 of $960,613 represents an increase of
$950,153 compared to available cash at June 30, 1999. The increase is primarily
related to the company's sale of $1,400,000 of Series A Convertible Preferred
Stock in March, 2000, offset partially by the settlement of various outstanding
liabilities and increased development cost. As of June 30, 2000 the company had
no significant credit facilities available.
FORWARD LOOKING INFORMATION
This report contains certain forward-looking statements and information
relating to the company that are based on the beliefs of the company's
management as well as assumptions made by and information currently available to
the company's management. When used in this report, words such as "anticipate,"
"believe,"
7
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"estimate," "expect," "intend," "should," and similar expressions, as they
relate to the company or its management, identify forward-looking statements.
Such statements reflect the current views of the company with respect to future
events and are subject to certain risks, uncertainties and assumptions relating
to the operations, results of operations, liquidity and growth strategy of the
company, including competitive factors and pricing pressures, changes in legal
and regulatory requirements, interest rate fluctuations, and general economic
conditions, as well as other factors described in this report. Should one or
more of the risks materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described herein as
anticipated, believed, estimated, expected or intended.
PART II
ITEM 1. LEGAL PROCEEDINGS
The action filed July 22, 1999, in the Third Judicial District Court of
Salt Lake County, State of Utah, styled Martineau & Company, Plaintiff vs. Lucas
Educational Systems, Inc., Jerry R. Lucas, Cheryl Lucas, William Husa and David
E. Nelson, claiming $23,079 for services rendered, expenses and the balance due
on a loan, together with interest at the rate of 2% per month until paid in full
was settled on April 4, 2000 for a total of $28,143, inclusive of all legal fees
and related settlement charges.
The company was not engaged in any legal proceedings on the date of
this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of stockholders at the July 29,
2000 annual meeting of stockholders.
Election of Directors
Upon nomination, Mr. Jerry R. Lucas, Mr. Jeffrey R. Gullo, and Mr. J. D. Young
were elected as Directors of the company to hold office for a term expiring at
the 2001 annual meeting, and thereafter until his successor has been duly
elected and qualified. Each of the above received 20,821,205 affirmative votes
with respect to the election of directors.
Amendment of the Certificate of Incorporation
A proposal to amend the Certificate of Incorporation to decrease the number of
authorized shares of common stock from Twenty Million (20,000,000) to Five
Million (5,000,000), and the thereby effect a one-for-four reverse split of the
common stock, and, after giving effect to the reverse split, restore the
authorized number of shares of common stock to Twenty Million (20,000,000). The
votes cast were as follows: 19,637,965 shares were voted in favor of the
amendment, 324,937 shares were voted against the amendment and no shares
abstained from voting.
Adoption of the Company's 2000 Employee Stock Option Plan
The Company's 2000 Employee Stock Option Plan was approved by a vote of
19,637,965 shares voted in favor, 324,937 shares voted against the resolution
and no shares abstained.
Adoption of the Company's 2000 Executive Incentive Plan
The company's 2000 Executive Incentive Plan was approved by a vote of 19,671,087
shares were voted in favor of the resolution, 291,815 shares were voted against
the resolution and no shares abstained from voting.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibits
------- -----------------------
**27 Financial Data Schedule
----------
** Filed herewith
(b) Reports on Form 8-K
A Form 8-K was filed on August 9, 2000, disclosing in Item 5 the
Stockholders' approval of an Amendment to the Certificate of
Incorporation to decrease the number of authorized shares of
common stock from Twenty Million (20,000,000) to Five Million
(5,000,000) and to recapitalize the common stock to effect a
one-for-four reverse split of the common stock of the company.
Further the Stockholders approved that, after giving effect to
the reverse split, the authorized number of shares of common
stock will be restored to Twenty Million (20,000,000).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
LUCAS EDUCATIONAL SYSTEMS, INC.
Date: August 14, 2000 By: /s/ Jeffrey R. Gullo
-------------------------------------
Jeffrey R. Gullo
President and Chief Executive Officer
/s/ Steven R. Crowell
-------------------------------------
Steven R. Crowell
Chief Financial Officer and
Chief Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
