<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number 0-21537
PACIFIC BIOMETRICS, INC.
--------------------------------------------------------------
(Exact name of small business issuer specified in its charter)
Delaware 93-1211114
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1370 Reynolds Avenue, Suite 119, Irvine, CA 92614
-------------------------------------------------
(Address of principal executive offices)
714-263-9933
---------------------------
(Issuer's telephone number)
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, and (2) has been
subject to such filing requirements for the past 90 days. Yes ( X ) No ( )
As of October 30, 1997, shares of the issuer's common stock outstanding were
3,705,522.
<PAGE>
PACIFIC BIOMETRICS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1 - FINANCIAL STATEMENTS ----
<S> <C>
Consolidated Balance Sheet................................................. 2
Consolidated Statements of Operations...................................... 3
Condensed Consolidated Statements of Cash Flows............................ 4
Notes to Consolidated Financial Statements................................. 5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................... 8
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS................................................. 14
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS......................... 14
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES................................... 16
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 16
ITEM 5 - OTHER INFORMATION................................................. 16
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.................................. 16
</TABLE>
<PAGE>
PACIFIC BIOMETRICS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1,613,782
Investments, net of unamortized discount of $27,480 1,772,520
Accounts receivable, net of allowance for doubtful
accounts of $31,268 451,245
Other receivable 6,261
Supplies 25,789
Prepaid expenses and other 269,179
------------
Total current assets 4,138,776
------------
Property and equipment, net 696,840
Other assets:
Technology license 85,937
Prepaid financing costs 34,579
Restricted cash 100,000
Deposit and other 28,649
------------
Total assets $ 5,084,781
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to related parties $ 252,413
Accounts payable 153,599
Accrued liabilities 341,605
Advances from customers 409,154
Capital lease obligations 202,404
------------
Total current liabilities 1,359,175
------------
Capital lease obligations - long term portion 278,290
------------
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued and outstanding
Common stock, $0.01 par value, 30,000,000 shares
authorized, 3,705,522 shares issued and outstanding 37,055
Additional paid-in capital 15,768,753
Deficit accumulated during the development stage (12,358,492)
------------
Total stockholders' equity 3,447,316
------------
Total liabilities and stockholders' equity $ 5,084,781
------------
------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
PACIFIC BIOMETRICS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996,
AND FOR THE PERIOD FROM INCEPTION (DECEMBER 1992) TO SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
For the Period
Three Month Period from Inception
Ended September (December 1992)
------------------------- to September 30,
1997 1996 1997
---------- ---------- ------------
<S> <C> <C> <C>
Revenues $ 638,347 $ 576,786 $ 5,651,029
---------- ---------- ------------
Operating expenses:
Laboratory expense and cost of goods sold 394,680 409,357 3,970,166
Research and product development 477,859 190,990 2,891,387
General and administrative 439,785 442,052 4,413,908
Manufacturing relocation expense 0 0 100,000
Purchased in-process research and development 0 0 6,373,884
Amortization of goodwill 0 0 428,368
---------- ---------- ------------
Total operating expenses 1,312,324 1,042,399 18,177,713
---------- ---------- ------------
Operating loss (673,977) (465,613) (12,526,684)
---------- ---------- ------------
Other income (expense):
Interest expense (13,474) (105,137) (225,323)
Interest income 63,406 739 216,934
Grant and other income 164 44,940 176,581
---------- ---------- ------------
50,096 (59,458) 168,192
---------- ---------- ------------
Net loss $ (623,881) $ (525,071)$ (12,358,492)
---------- ---------- ------------
---------- ---------- ------------
Net loss per share $ (0.17) $ (0.21) $ (9.11)
---------- ---------- ------------
---------- ---------- ------------
Number of shares used in per-share calculation 3,705,522 2,504,296 1,356,499
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
PACIFIC BIOMETRICS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996,
AND FOR THE PERIOD FROM INCEPTION (DECEMBER 1992) TO SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
For the Period
Three Month Period from Inception
Ended September (December 1992)
------------------------- to September 30,
1997 1996 1997
---------- ---------- ------------
<S> <C> <C> <C>
Increase (Decrease) in cash and cash equivalents:
Cash (used) provided by operations $ (404,778) $(222,780) $(4,366,418)
Cash (used) provided by investing activities (840,899) 3,692 (2,037,465)
Cash (used) provided by financing activities (57,236) 223,993 8,017,665
----------- --------- -----------
Increase (Decrease) in cash and cash equivalents (1,302,913) 4,905 1,613,782
Cash and cash equivalents:
Beginning of period 2,916,695 192,899 0
----------- --------- -----------
End of period $ 1,613,782 $ 197,804 $ 1,613,782
----------- --------- -----------
----------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PACIFIC BIOMETRICS, INC.
(A DELAWARE CORPORATION)
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Pacific Biometrics, Inc. ("PBI-Delaware" or the "Company") was incorporated
in Delaware in May 1996. PBI-Delaware was formed in connection with the
acquisitions of BioQuant, Inc. ("BioQuant"), a Michigan corporation, and Pacific
Biometrics, Inc. ("PBI"), a Washington corporation. On June 28, 1996, the
Company completed the mergers whereby BioQuant and PBI became wholly-owned
subsidiaries of the Company in separate stock-for-stock exchange transactions.
The unaudited financial statements of the Company presented herein, have
been prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-QSB and do not include all of the information
and footnote disclosures required by generally accepted accounting principles.
These statements should be read in conjunction with the financial statements and
notes thereto for the year ended June 30, 1997 included in the Company's Form
10-KSB.
In the opinion of management, the financial statements include all
adjustments (consisting solely of normal, recurring adjustments) necessary for a
fair presentation of results for these interim periods.
The Company is at an early stage of development. Revenues are derived from
the laboratory business and a nominal amount of sales from the Company's
cholesterol diagnostic product. All of the Company's potential products are
currently in research and development, and no material revenues have been
generated from these potential products to date. Consequently, the Company is a
development stage enterprise.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated statement of
operations for the first quarter of fiscal 1997 and for the period from
inception to September 30, 1997 in order to conform to the presentation of the
first quarter of fiscal 1998 and the presentation of fiscal 1997 in Form 10-KSB.
5
<PAGE>
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share". SFAS No. 128 requires companies to adopt its provisions for periods
ending after December 15, 1997, including interim periods, and requires
restatement of all prior period earnings per share (EPS) data presented.
Earlier application is not permitted. SFAS No. 128 specifies the computation,
presentation and disclosure requirements for EPS. The implementation of SFAS
No. 128 is not expected to have a material effect on the EPS data presented by
the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130, which is effective for fiscal years beginning after
December 15, 1997 and requires restatement of earlier periods presented,
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. The implementation of SFAS No. 130 is not expected to have a
material effect on the Company's results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". SFAS No. 131, which is effective for
fiscal years beginning after December 15, 1997 and requires restatements of
earlier periods presented, establishes standards for the way that a public
enterprise reports information about key revenue-producing segments in the
annual financial statements and selected information in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. The implementation of SFAS
No. 131 is not expected to have a material effect on the Company's current
reporting.
3. COMMITMENTS AND CONTINGENCIES
The Company is currently evaluating its alternatives for continuing
production of the SPINPRO-Registered Trademark- product. The Company estimated
the total cost of the relocation to be $100,000, which has been charged to the
accompanying consolidated statement of operations for the period from inception
(December 1992) through September 30, 1997. As of September 30, 1997, a
liability of approximately $70,000 remains in order to cover the remaining costs
of identifying a manufacturer, placing equipment and personnel, and resuming
production. This amount is included in accrued liabilities on the accompanying
consolidated balance sheet.
6
<PAGE>
3. COMMITMENTS AND CONTINGENCIES (CONT.)
The Company is not a party to any material legal proceedings. However, the
former manufacturer of SPINPRO-Registered Trademark- has demanded arbitration in
connection with alleged breaches of the contract relating to the manufacture of
SPINPRO-Registered Trademark-. The Company does not believe that the claims
have any merit and believes that the ultimate outcome of this proceeding will
not have a material impact on the Company. The Company is vigorously contesting
such claims.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the preceding consolidated financial statements and notes in this Form 10-QSB.
OVERVIEW
Pacific Biometrics, Inc. ("PBI-Delaware" or the "Company") was incorporated
in Delaware in May 1996. PBI-Delaware was formed in connection with the
acquisitions of BioQuant, Inc. ("BioQuant"), a Michigan corporation, and Pacific
Biometrics, Inc. ("PBI" or "PBI-WA"), a Washington corporation. On June 28,
1996, the Company completed the mergers whereby BioQuant and PBI-WA became
wholly-owned subsidiaries of the Company in separate stock-for-stock exchange
transactions.
The Company, through its wholly-owned subsidiaries, develops diagnostic and
laboratory products and provides laboratory services primarily in the fields of
cardiovascular disease and osteoporosis laboratory testing. The Company's
strategy is to focus on the development of cost-effective, non-invasive
diagnostic tests and improved laboratory techniques in order to achieve early
diagnosis, prevention, and therapeutic monitoring with respect to certain
diseases. The Company plans to (i) finalize development and commercialize a
patented skin patch product that measures bone loss markers in human
perspiration (the "Osteopatch-TM-"); (ii) expand its specialty reference
laboratory business; and (iii) evaluate the feasibility of non-invasive testing
using SalivaSac-Registered Trademark-, its patented saliva collection device.
To date, the Company's revenues have consisted primarily of fees charged by
the laboratory for services provided to customers, a nominal amount of sales
from the SPINPRO-Registered Trademark- cholesterol testing device, and U.S.
Government grants awarded to the Company under the National Institute of Health
Small Business Innovative Research ("SBIR") programs to support research
activities. Expenses consist, and are expected to continue to consist,
primarily of operating expenses necessary to conduct the commercial laboratory
operation, research and development costs for products under development,
administration expenses and payment of license and royalty fees to acquire and
maintain the Company's intellectual property rights.
Through September 30, 1997, the Company had an accumulated deficit of
$12,358,492 which included a one-time charge of $6,373,884 for the value of
purchased research and development expenses relating to the Company's merger
with BioQuant and a one-time charge of $428,368 relating to a prior merger
involving PBI-WA in 1995.
8
<PAGE>
RESULTS OF OPERATIONS:
Comparison of the three month periods ending September 30, 1997 and September
30, 1996:
Rounded to Nearest Three
Thousand Dollars Months
- ------------------ ------
Revenues:
Ending 9/30/97 $ 638 Excluding non-recurring revenue of $272 from a
Ending 9/30/96 $ 577 diagnostic clinical trial and other non-laboratory
Dollar variance $ 62 business; laboratory service revenue increased
Percent variance 11% 109% from $305 to $638.
Laboratory expenses:
Ending 9/30/97 $ 395 The decrease is related directly to the type of
Ending 9/30/96 $ 409 studies conducted and the Company's
Dollar variance $ (15) investment in labor saving technology.
Percent variance (4)%
Research and product development:
Ending 9/30/97 $ 478 The increase is in line with the Company's
Ending 9/30/96 $ 191 development program and ongoing clinical trials
Dollar variance $ 287 for the Osteopatch-TM-.
Percent variance 150%
General and administration expenses:
Ending 9/30/97 $ 440 Excluding a one-time charge of $221 incurred in
Ending 9/30/96 $ 442 the quarter ended 9/30/96, administrative expense
Dollar variance $ (2) have increased 99% due to the cost of being a
Percent variance (1)% publicly held company, establishment of marketing
and sales departments and hiring of related
personnel.
Total other income (expense):
Ending 9/30/97 $ 50 The quarter ended 9/30/97 includes interest income
Ending 9/30/96 $ (59) earned from investing net proceeds from the
Dollar variance $ 110 Company's initial public offering (IPO)
Percent variance 184% compared to interest expense incurred in the
quarter ended 9/30/96.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical
matters, the matters discussed in the Form 10-QSB are forward-looking
statements that involve risks and uncertainties. The following sections
contain forward-looking statements of management's beliefs based on, among
other things, assumptions made by, and information currently available to
management, including management's own knowledge and assessment of the
Company's industry, competition and current regulatory environment. Such
forward-looking statements involve risk and uncertainties that could cause
actual results to differ materially.
The Registration Statement pertaining to the Company's IPO was declared
effective by the Securities and Exchange Commission on October 29, 1996. Gross
proceeds from the public offering were $8,075,000. The Company used
approximately $1.2 million to repay debt. The Company is using the net proceeds,
after debt repayment, from the offering (approximately $5.1 million) for
product development activities relating to the Osteopatch-TM-, for funding the
growth of its central reference laboratory operations and for working capital.
Successful future operations depend primarily upon the Company's ability to
complete development of the Osteopatch-TM- product, obtain FDA clearance, and
achieve successful product commercialization. Although the number of people at
risk of osteoporosis is large in both the United States and worldwide, there can
be no assurance that the Company will be able to meet its objective to develop
and commercialize a cost effective osteoporosis related diagnostic product. The
risks facing the Company include the ability to obtain regulatory approval which
is dependent upon such factors as the results of clinical trials, the discretion
of regulatory officials, and potential changes in regulations, all of which may
be beyond the control of the Company. In addition, successful commercialization
of any product will be dependent upon market acceptance, competition,
technological change, and dependence on collaborators for research, development
and marketing assistance.
The Company's future operations also depend on its ability to grow a
profitable reference laboratory operation. Although the Company has increased
laboratory revenues, operated the laboratory at a profit and has established
cardiovascular and osteoporosis expertise, there can be no assurances that the
Company will be able to continue such growth or maintain profitability on
contracts for laboratory services. In addition, contracts are entered into for
a specified period (usually less than a year) but can be canceled at any time.
Accordingly, the laboratory operation is dependent on a few large contracts and
on the Company's ability to replace such contracts upon expiration or
termination, of which there can be no assurance.
10
<PAGE>
During fiscal 1997, the Company received notification of the termination of
its manufacturing agreement with a third party related to the manufacture of the
SPINPRO-Registered Trademark- product. As a result of this termination, the
Company has reimbursed the third party for the value of molds and production
equipment through the form of a capital equipment leasing facility. As of
September 30, 1997, the remaining inventory, molds and production equipment, had
been relocated to a storage facility.
The Company is currently evaluating its alternatives for continuing
production of the SPINPRO-Registered Trademark- product. The Company estimated
the total cost of the relocation to be $100,000, which has been charged to the
accompanying consolidated statement of operations. As of September 30, 1997, a
liability of approximately $70,000 remains in order to cover the remaining costs
of identifying a manufacturer, placing equipment and personnel, and resuming
production. This amount is included in accrued liabilities on the accompanying
consolidated balance sheet. On September 26, 1997 the Company received from the
former manufacturer of SPINPRO-Registered Trademark- a demand for arbitration in
connection with alleged breaches of the contract relating to the manufacture of
SPINPRO-Registered Trademark-. The Company does not believe that the claims
have any merit and believes that the ultimate outcome of this proceeding will
not have a material impact on the Company. The Company is vigorously contesting
such claims.
In July 1997, the Company signed a letter of intent outlining research
collaboration terms with a small privately held company which has strip assay
technology to support the continued development of a non-invasive glucose test.
If negotiations can be concluded successfully and subject to definitive
documentation the Company will have exclusive use of such technology for
diabetes testing in saliva. There can be no assurance that these negotiations
can be concluded successfully.
The capital equipment leasing facility entered into in April 1997 with
Transamerica Business Credit Corporation, an institutional lender (the
"Facility"), provides credit for equipment purchases of up to $1,500,000. On
July 10, 1997 the immediately available portion of the credit line was increased
from $725,000 to $1,000,000. The remaining $500,000 of additional credit is
contingent on the Company meeting certain objectives established under the
Facility. Of the $1,000,000 available under the Facility, the Company has
utilized $485,000 for equipment purchases.
In August 1997, the Company announced an agreement with Segix Italia,
S.p.A. ("Segix") for a market and technical evaluation of the Company's
OsteopatchTM diagnostic system for the Italian market. At the end of the
evaluation period (May 1998), Segix has the option to exercise an exclusive long
term supply and distribution agreement with the Company for the Italian market.
If Segix exercises its option to execute the supply and
11
<PAGE>
distribution agreement it will give the Company access to the Italian market
through Segix's 70 person direct sales force.
In September 1997, the Company announced that it had signed a letter of
intent with Sudormed, Inc. ("Sudormed") and Sudor Partners which would
provide to the Company an exclusive world-wide license to all applications
(except for those relating to alcohol and drugs of abuse) of the skin patch
technology. Subject to due diligence and execution of definitive agreements
by December 31, 1997, the Company will pay Sudor Partners $2.8 million over a
fifteen month period, which includes a lump-sum payment of $1.6 million due
December 31, 1998. The definitive agreement will also provide more favorable
terms for the Company regarding the price, royalty and minimum purchases
related to the existing Osteopatch-TM- supply agreement with Sudormed.
In September 1997, the Company was awarded a $98,000 SBIR grant to research
non-invasive tests for cholesterol in saliva.
The Company expects to continue to incur significant and increasing
operating losses for at least two years due to anticipated increases in research
and development activities associated with the Osteopatch-TM- product,
establishment of a marketing program for the Osteopatch-TM- product and the
reference laboratory and general and administrative expenses.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds of the IPO, together with
projected revenues from operations, and current debt arrangements will be
sufficient to satisfy its contemplated cash requirements for the 1998 fiscal
year. The Company is actively working to raise additional funds through equity
or debt arrangements to cover longer term requirements and to fund additional
licensing opportunities.
The adequacy of the Company's available cash equivalents and revenue from
operations to sustain current and anticipated levels of operations are subject
to a number of variables including maintaining and increasing existing
laboratory revenues and profitability, performance of products in clinical
trials, the level and timing of research and development costs necessary to
obtain FDA clearance of products under development, the costs and timing
associated with commercial production and marketing of such products, the
execution of definitive agreements with key partners, intensified competition,
third party reimbursement, and technology obsolescence prior to successful
commercialization.
If adequate funds are not available through increased revenues or existing
cash flows, for the short or long term objectives of the Company, the Company
may have to seek additional sources of financing, which may include debt or
equity or a combination of both. However, there can be no assurance that such
external sources of funding, if necessary, will
12
<PAGE>
be available on terms favorable to the Company, or at all, in which event,
the Company may be required to delay, scale back or eliminate one or more of
its research and development programs, including but not limited to the
development of the Osteopatch-TM-, or to obtain funds through entering into
arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies or potential
products that the Company would not otherwise relinquish, or require
substantial dilution or changes in shareholder rights in order to raise
additional funds.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings. However, the
former manufacturer of SPINPRO-Registered Trademark- has demanded arbitration in
connection with alleged breaches of the contract relating to the manufacture of
SPINPRO-Registered Trademark-. The Company does not believe that the claims
have any merit and believes that the ultimate outcome of this proceeding will
not have a material impact on the Company. The Company is vigorously contesting
such claims.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
1. Name of issuer: Pacific Biometrics, Inc.
2. a) Effective date of the registration statement: October 29, 1996
b) Commission file number assigned to issuer: 333-11551
3. Offering commencement date: October 29, 1996
4. Managing underwriter: Paradise Valley Securities, Inc.
5. Title of each class of security
(a) Common stock, par value $.01 per share ("Common Stock").
(b) Redeemable Common Stock Purchase Warrants (the "Warrants"). Each
Warrant is exerciseable into one share of Common Stock at an exercise
price of $12 at any time up until 1/31/1998.
6. Amount and aggregate offering price
(a) Common Stock and Warrants:
Amount registered (1) 3,825,000 Shares
Aggregate price of offering amount registered (2) $10,255,250
Amount sold 1,700,000 Units
Aggregate offering price of amount sold (2) $ 8,075,000
(1) Includes 1,700,000 units (the "Units") (each Unit consisting of one
share of Common Stock and one Warrant) an underwriters over-allotment option
(which was not exercised) for 255,000 Units, and a Warrant to purchase 170,000
shares of Common Stock at $5.70 per share that was issued to the underwriter.
The amount registered includes 1,700,000 and 255,000 shares of common stock
underlying Warrants contained in the Units.
(2) Does not include exercise price of Warrants outstanding, none of which
have been exercised to date.
14
<PAGE>
<TABLE>
<CAPTION>
Direct or indirect payments to Direct or indirect
directors, officers, general payments to
partners of the issuer or their others
associates; to persons owning
ten percent or more of any class
For the period ending September 30, 1997 of equity securities of the issuer;
and to affiliates
----------------------------------- -------------------
<S> <C> <C>
7. Costs of offering:
(01) Underwriting discounts and commissions 807,500
(02) Finder's fees 0
(03) Expenses paid to or for underwriters 242,250
(04) Other expenses 740,540
(05) Total expenses 1,790,290
8. Net offering proceeds after expenses in item 7: 6,284,710
9. Use of net offering proceeds:
(01) Construction of plant, building and facilities 0
(02) Purchase of machinery and equipment 154,166
(03) Purchase of real estate 0
(04) Acquisition of other business(es) 0
(05) Repayment of indebtedness 60,193 1,115,774
(06) Working capital 194,810
(07) Government securities - greater than 90 days 1,772,520
(08) Cash and investments - less than 90 days 1,613,782
(11) Research & development 1,373,465
10. Do the use(s) of proceeds in Item 9 represent a material change [ ] YES
in the use(s) of proceeds described in the prospectus? [X] NO
</TABLE>
15
<PAGE>
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
Not Applicable.
ITEM 5 - OTHER INFORMATION - Not Applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) (27.1) Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
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.
DATED: November 10, 1997
/S/PAUL G. KANAN President and Chief Executive
- ---------------- Officer
Paul G. Kanan
/S/PETER B. LUDLUM Vice President and Chief Financial
- ------------------ Officer (Principal Financial
Peter B. Ludlum and Accounting Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 1,613,782
<SECURITIES> 1,772,520
<RECEIVABLES> 482,513
<ALLOWANCES> (31,268)
<INVENTORY> 25,789
<CURRENT-ASSETS> 4,138,776
<PP&E> 895,994
<DEPRECIATION> (199,154)
<TOTAL-ASSETS> 5,084,781
<CURRENT-LIABILITIES> 1,359,175
<BONDS> 0
0
0
<COMMON> 37,055
<OTHER-SE> 3,410,261
<TOTAL-LIABILITY-AND-EQUITY> 5,084,781
<SALES> 638,347
<TOTAL-REVENUES> 638,347
<CGS> 394,680
<TOTAL-COSTS> 1,312,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,474
<INCOME-PRETAX> (623,881)
<INCOME-TAX> 0
<INCOME-CONTINUING> (623,881)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (623,881)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>