U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1998
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ________ to ________
Commission file number 333-07727
Allegiant Technologies Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Washington 98-0138706
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1500-609 Granville Street, Vancouver, B.C. Canada V7Y 1G5
(Address of Principal Executive Offices)
(604) 687-0888
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No _________
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes _____________ No __________
APPLICATION ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common stock, par value, $0.01
per share, 26,393,007 shares of common stock outstanding as of April 30, 1998
Traditional Small Business Disclosure Format (check one):
Yes _____________ No x
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS-MARCH 31, 1998
FINANCIAL STATEMENTS
(Unaudited)
ALLEGIANT TECHNOLOGIES INC.
THREE MONTH PERIOD ENDED MARCH 31, 1998
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
BALANCE SHEETS
(Expressed in United States Dollars)
AS AT MARCH 31
<TABLE>
<CAPTION>
1997 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 21,948 $ 16,682
Accounts receivable 59,001 6,079
Inventories 199,367 32,500
Prepaid expenses and other 15,387 11,250
----------------
Total current assets 295,703 66,511
Deposits 17,708 -
Property and equipment, net 174,451 1,750
Intangible assets, net 228,442 -
Deferred offering costs 15,000 -
----------------
$ 731,304 $ 68,261
================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Debentures payable $ 495,775 $ -
Notes payable - 156,000
Accounts payable and accrued liabilities 760,845 79,665
Deferred revenues 27,367 -
----------------
Total current liabilities 1,283,987 235,665
Deferred rent 36,502 -
Notes payable 100,000 -
----------------
Total liabilities 1,420,489 235,665
----------------
Shareholders' deficit:
Capital stock
Authorized
50,000,000 preferred shares, par value $0.01 per shares
100,000,000 common shares, par value $0.01 per share
Issued and outstanding
26,393,007 common shares (1997 - 8,393,007) 83,930 263,930
Additional paid-in capital 4,062,235 4,632,235
Accumulated deficit (4,835,350) (5,063,569)
--------------- ---------------
((689,185) (167,404)
--------------- ---------------
$ 731,304 $ 68,261
================ ===============
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
THREE MONTH PERIOD ENDED MARCH 31
<TABLE>
<CAPTION>
1997 1998
--------------- ----------------
<S> <C> <C>
NET REVENUE $ 315,512 $ 46,833
COST OF REVENUE 87,575 12,247
----------------
GROSS PROFIT 227,937 34,586
----------------
EXPENSES
Sales and marketing 191,992 16,143
Research and development 162,086 1,840
General and administrative 239,407 41,343
Amortization of purchased intangibles 31,149 -
----------------
624,634 59,326
----------------
LOSS FROM OPERATIONS (396,697) (24,740)
--------------- ---------------
OTHER INCOME (EXPENSE)
Loss on disposal of property and equipment - (4,570)
Gain on settlement of obligations - 5,413
Interest expense - (2,000)
---------------- --------------
- (1,157)
---------------- --------------
NET LOSS $ (396,697) $ (25,897)
================ ===============
LOSS PER SHARE $ (0.05) $ 0.00
================ ===============
SHARES USED IN COMPUTING PER SHARE AMOUNTS 6,107,295 26,393,007
================ ==============
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Total
Common Stock Additional Accumulated Shareholders'
Shares Amount Paid-in Deficit Deficit
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1996 7,292,295 $ 72,923 $ 2,651,898 $ (2,514,602) $ 210,219
Shares issued - cash 815,000 8,150 1,621,850 1,630,000
Offering costs (308,656) (308,656)
Net loss (1,924,051) (1,924,051)
------------ --------- ------------- ------------ -----------
Balances at December 31, 1996 8,107,295 81,073 3,965,092 (4,438,653) (392,488)
Shares issued - cash 285,712 2,857 97,143 100,000
Net loss (396,697) (396,697)
------------ --------- ------------- ------------ -----------
Balances at March 31, 1997 8,393,007 83,930 4,062,235 (4,835,350) (689,185)
Shares cancelled (650,000) (6,500) 6,500
Net loss (202,322) (202,322)
------------ --------- ------------- ------------ -----------
Balances at December 31, 1997 7,743,007 77,430 4,068,735 (5,037,672) (891,507)
Shares issued
- cash 5,600,000 56,000 154,000 210,000
- debt settlements 14,400,000 144,000 396,000 540,000
Shares cancelled (1,350,000) (13,500) 13,500
Net loss (25,897) (25,897)
------------ --------- ------------- ------------ -----------
Balances at March 31, 1998 $ 26,393,007 $ 263,930 $ 4,632,235 $ (5,063,569) $ (167,404)
============ ========= ============= ============ ===========
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
THREE MONTH PERIOD ENDED MARCH 31
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (396,697) $ (25,897)
Adjustments to reconcile net loss to net cash from
operating activities
Amortization and depreciation 56,739
Loss on disposal of property and equipment - 4,570
Changes in operating assets and liabilities
Accounts receivable (21,917) 6,563
Inventories 836 5,646
Prepaid expenses and other 32,734 (11,250)
Accounts payable and accrued liabilities 49,873 486
Deferred revenues (7,196) -
------------ -----------
(285,628) (19,882)
------------ -----------
INVESTING ACTIVITIES
Proceeds of property and equipment - 10,319
FINANCING ACTIVITIES
Proceeds from issuance of capital stock 100,000 750,000
Proceeds from notes payable 100,000 -
Payment on notes payable (9,034) (9,000)
Payment on share subscriptions payable - (750,000)
------------ -----------
190,966 (9,000)
------------ -----------
Change in cash and cash equivalents (94,662) (18,563)
Cash and cash equivalents, beginning of period 116,610 35,245
Cash and cash equivalents, end of period $ 21,948 $ 16,682
============= ===========
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in United States Dollars)
MARCH 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Allegiant Technologies Inc. was incorporated in Washington State, U.S.A. on
December 28, 1993 and was registered to carry on business in the State of
California on March 23, 1994.
The Company's principal line of business includes developing, marketing and
supporting interactive multimedia development software.
Management Plans on Continued Existence
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, in the United States, which
contemplates the continuation of the Company as a going concern. However, the
Company has sustained substantial operating losses and used substantial amounts
of working capital in its operations in recent years. As of March 31, 1998,
current liabilities exceed current assets by $169,154, and total liabilities
exceed total assets by $167,404.
Subsequent to March 31, 1998, the Company reached an agreement to sell its
technology assets and product inventory, subject to shareholder approval, for
$40,000. The sale is scheduled to close on June 4, 1998. The proceeds from the
sale will be used to settle certain remaining obligations. After completing the
sale the Company will remain dormant until additional financing is secured and
new operations are determined.
2. PROPERTY AND EQUIPMENT
Property and equipment at March 31 consists of:
<TABLE>
<CAPTION>
1997 1998
------------ ---------
<S> <C> <C>
Furniture and fixtures $ 154,240 $ -
Office equipment 23,723 1,000
Computer equipment 187,473 750
------------ ---------
365,436 1,750
Accumulated depreciation (190,985) -
------------ ---------
$ 174,451 $ 1,750
============ =========
</TABLE>
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in United States Dollars)
MARCH 31, 1998
3. NOTES PAYABLE
<TABLE>
<CAPTION>
1997 1998
------------ -----------
<S> <C> <C>
Note payable - On February 13, 1997 the Company issued a note payable (the
"Note") in connection with a proposed private placement of debt securities in
the amount of $750,000. The Company was advanced the sum of $100,000 under the
Note. The Note is secured by the assets of the Company and bears interest at the
First National Bank & Trust Company of Chicago prime rate plus 2% per annum,
which is payable quarterly commencing on July 15, 1997. Amounts advanced under
the Note, together with accrued interest, are due on the earlier of the date on
which the Company completes any offering of equity securities for an amount of
not less than $1,500,000, or February 13, 1999. On July 15, 1997 and for each
subsequent quarter, the Company failed to make an interest payment as required
under the terms of the Note. As a consequence of this default, the Note,
together with accrued interest, is currently due and payable upon demand.
$ 100,000 $ 100,000
Note payable, due November 4, 1998. The note is unsecured, non-interest bearing
and convertible into common shares of the Company at the option of the holder at
any time after October 30, 1998 and before November 4, 1998 at a deemed price
per share equal to the average closing price of the Company's shares on the
Vancouver Stock Exchange for the ten days immediately proceeding November 4,
1998.
- 42,500
Notes payable in increments of $3,000 per month. The note is unsecured and
non-interest bearing.
- 13,500
--------------- ---------
100,000 156,000
Less: current portion - (156,000)
--------------- ---------
Long-term portion $ 100,000 $ -
=============== =========
</TABLE>
4. CAPITAL STOCK
Stock options
The Company established a stock option plan ("the Plan") to grant options
to purchase common stock to employees, officers, non-employee directors of the
Company and certain other individuals. The Plan authorizes the Company to issue
or grant stock options to purchase up to 2,517,902 shares of its common stock as
of March 31, 1998.
At March 31, 1998, there were no stock options granted.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in United States Dollars)
MARCH 31, 1998
4. CAPITAL STOCK (cont'd.....)
Warrants
As of March 31, 1998, the Company has outstanding warrants entitling the
holders to purchase a total of 924,712 common shares of the Company as follows:
<TABLE>
<CAPTION>
Number Exercise
of Shares Price Expiration Date
<S> <C> <C>
150,000 Cdn$ 3.62 April 26, 1998*
489,000 2.30 April 26, 1998*
285,712 0.40 April 15, 1999
-------
924,712
=======
* These warrants were not exercised prior to expiration.
</TABLE>
In addition, the Company is obligated to issue warrants entitling the
holders to purchase the equivalent of 6,733,332 shares of common stock at
$0.0375 per share until October, 1998 and thereafter at $0.04312 per share until
October 1999. These warrants will be issued after the Company completes a
proposed four for one reverse split of its common stock. The number of warrants
issued and the exercise price will be adjusted accordingly.
5. RELATED PARTY TRANSACTIONS
During the three month period ended March 31, 1997 and 1998, the Company
paid or accrued, the following amounts to related parties:
<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
Management fees $ 15,000 $ 9,000
Rent - 3,750
Interest - 2,000
------------ ----------
$ 15,000 $ 14,750
============ ==========
</TABLE>
Included in notes payable and accrued liabilities is the aggregate amount
of $117,500, including accrued interest of $10,000, owing to directors of the
Company or to companies controlled by directors and officers of the Company.
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has a limited history of operations and no history of
profitability. It was actively engaged in the business of developing and
marketing interactive multimedia software. As at March 31, 1998 the Company had
cumulative net losses of $5,056,569. During the last year the Company was forced
to cease product development, reduce its full time staff from twenty-six to two,
close down its offices in San Diego, sell the majority of its tangible capital
assets and commence a capital reorganization, described below.
On April 27, 1998 the Company entered into an arms length agreement,
subject to shareholder approval, to sell its technology assets and product
inventory for $40,000. The sale is scheduled to close on June 4, 1998.
Management intends to cease its current operations on May 31, 1998. The proceeds
from the sale will be used to settle certain remaining obligations after which
time the Company shall remain dormant until additional financing is secured and
new operations are determined. Management intends to explore and enter into as
yet undetermined new lines of business, which may be highly speculative ventures
and which may not be profitable.
Reorganization
During the three months ended March 31, 1998 the Company effected a
reorganization of its capital as follows:
1. Principals of the Company surrendered for cancellation 1,350,000
escrowed shares of common stock.
2. The Company issued 14,400,000 shares of common stock in partial
settlement of debts in the amount of $540,000.
3. The Company issued 5,600,000 shares of common stock pursuant to a
private placement agreement. The subscription proceeds of $210,000 were
primarily used to settle certain obligations of the Company.
The Company intends to seek approval of a four for one reverse split of its
issued common stock at its upcoming annual general meeting scheduled for June 1,
1998.
Liquidity and Capital Resources
As of March 31, 1998 the Company had cash equivalents of $16,682 and a
working capital deficit of $169,154 Total liabilities exceed the book value of
total assets by $167,404. The Company's ability to satisfy projected working
capital requirements through December 31, 1998 is dependent upon the receipt of
proceeds from the sale of assets and its ability to secure additional funding
through public or private sales of securities, including equity securities of
the Company. There are no assurances that the Company will be able to secure
such requisite funding.
Results of Operation
The Company's revenues decreased by 85% from $315,512 for the three months
ended March 31, 1997 to $46,833 for the three months ended March 31, 1998. This
precipitous decline is a direct result of the Company's inability to effectively
market, develop and support its products due to insufficient resources. As a
consequence, management intends to cease its software operations. Effective June
1, 1998 the Company will not have any employees or facilities in California,
which served as its principal base of operation over the last four years. It
will maintain administrative offices only in Vancouver, Canada until it enters
into as yet undetermined new lines of business.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has received notices of judgement liens against the assets of
the Company, in the approximate amount of $15,000, for failure to pay amounts
due for the purchase of goods or services. Such amounts are properly recorded in
the Company's accounts as due and payable. The Company expects that other trade
creditors will eventually commence proceedings against the Company for failure
to pay amounts due.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company borrowed the sum of $100,000 pursuant to a secured promissory
note dated February 13, 1997. The terms of the note provided for the payment of
interest quarterly commencing on July 15, 1997. The Company failed to make any
payment of interest on or since July 15, 1997. The note is secured by a
registered lien against all of the assets of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a report on FORM 8-K on January 16, 1998 regarding a
capital reorganization plan. Such report is incorporated into this report by way
of reference.
Items 2, 4, AND 5 OF PART II ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
<PAGE>
SIGNATURE
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, in the City of
Chicago, State of Illinois, on May 14, 1998.
ALLEGIANT TECHNOLOGIES INC.
By: /s/ Steven A. Rothstein
Steven A. Rothstein C.E.O.
<PAGE>
