<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
--------------------------
[CHECK MARK HERE] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1996
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: 0-11586
--------------------------
BIOSONICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2161932
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
260 New York Drive
Fort Washington, Pennsylvania 19034
(Address of principal executive offices)
(215) 646-7100
(Registrant's telephone number including area code)
----------------------------------------------------------
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 [CHECK MARK HERE] No
----------------- ----
As of August _____, 1996, there were outstanding 243,333,936 shares of the
Registrant's Common Stock, $.0001 par value.
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Page 1 of 13 pages
Exhibit Index is on Page 12
<PAGE>
BIOSONICS, INC.
---------------
INDEX
-----
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets:
June 30, 1996 and December 31, 1995 2
Statements of Loss:
Three and Six Months Ended June 30, 1996 and 1995 3
Statements of Deficit Accumulated:
Six Months Ended June 30, 1996 and 1995 4
Statements of Cash Flows:
Six Months Ended June 30, 1996 and 1995 5
Statements of Shareholders' Equity - Paid-In-Capital:
November 30, 1980 (inception) to June 30, 1996 7
Note to Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
BALANCE SHEETS
--------------
- --------------------------------------------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
Unaudited
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Current assets
Cash (including interest bearing deposits
of $10 in 1996 and 1995) $ 260 $ 260
Accounts receivable (net of allowance for
doubtful accounts of $6,000 in 1996 and 1995) 16,211 21,013
Inventory 65,889 70,084
Prepaid expenses and other current assets 12,198 8,851
----------- -----------
Total current assets 94,558 100,208
Equipment, furniture and leaseholds, net
of accumulated depreciation 22,341 25,011
Deposits 8,431 8,431
----------- -----------
Total assets $ 125,330 $ 133,650
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Deficit
-------------------------------------
<S> <C> <C>
Current liabilities
Notes payable $ 435,444 $ 660,444
Accounts payable and accrued expenses 1,787,531 1,691,647
Bonds unissued 187,000 187,000
Proceeds for common stock unissued 271,000 271,000
----------- -----------
Total current liabilities 2,680,975 2,810,091
=========== ===========
Shareholders'deficit
Preferred stock - Series A, authorized
10,000,000 shares at $1 par value;
issued and outstanding - 1,000 shares 1,000 1,000
Preferred stock - Series B, authorized
10,000 shares at $1 par value;
issued and outstanding - 3,250 shares 3,250 3,250
Preferred stock - Series D, authorized
10,000 shares at $1 par value;
issued and outstanding - 6,650 shares 6,650 3,000
Common stock - authorized 250,000,000
shares at .0001 par value; issued
and outstanding 243,333,936 shares 24,333 24,333
Capital in excess of par value 10,706,557 10,345,207
Deficit accumulated during development stage (13,297,435) (13,053,231)
----------- -----------
Total shareholders' deficit ( 2,555,645) ( 2,676,441)
----------- -----------
Total liabilities and shareholders'
deficit $ 125,330 $ 133,650
=========== ===========
</TABLE>
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The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENTS OF LOSS
------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS ENDED 11/13/80 (INCEPTION)
---------------- ------------------
JUNE 30, 1996 JUNE 30 TO JUNE 30
------------- -------- ----------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Development stage expenses
Research and development costs $ 0 $ 7,324 $ 0 $ 5,940 $ 4,144,553 $ 4,131,760
Professional fees 37,000 53,524 18,044 12,039 2,659,437 2,621,264
Other developement stage expenses 220,238 267,203 122,835 144,570 7,661,558 7,235,797
-------- -------- --------- --------- --------- ---------
Total development stage expenses 257,238 328,051 140,879 162,549 14,465,548 13,988,821
Less: Revenues from cost recovery
program - - - - 118,082 118,082
-------- ------- ------- ------- --------- ---------
Net development stage expenses 257,238 328,051 140,879 162,549 14,347,466 13,870,739
--------- --------- --------- --------- ---------- ----------
Sales 29,125 22,526 11,609 11,931 825,728 756,623
Cost of sales 16,166 15,075 13,111 8,098 530,943 487,872
-------- -------- -------- ------- --------- ---------
Gross profit 12,959 7,451 ( 1,502) 3,833 294,785 268,751
------- ------- ---------- ------- -------- --------
Other income
Investment income - - - - 727,551 722,272
Gain on sale of fixed assets - - - - 7,620 7,620
Other income 75 5,265 - 84 20,075 20,000
------- ------- ------- ------- -------- --------
Total other income 75 5,265 - 84 755,246 755,157
------- ------- ------- ------- -------- --------
Net loss ($ 244,204) ($ 315,335) ($ 142,381) ($ 158,632) ($13,297,435) ($12,846,831)
============ ============ ============ ============ ============= =============
Loss per common share ($.001) ($.001) ($.000) ($ .000) ($.054) ($.052)
======= ======= ======= ======== ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENTS OF DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
----------------------------------------------------------
(UNAUDITED)
-----------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/13/80 (INCEPTION)
JUNE 30, TO JUNE 30,
---------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BEGINNING BALANCE (13,053,231) ($12,531,496) $ - $ -
- -----------------
NET LOSS ( 244,204) ( 315,335) (13,297,435) (12,846,831)
-------- --------- --------- ---------- ----------
ENDING BALANCE (13,297,435) ($12,846,831) ($13,297,435) ($12,846,831)
-------------- ========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/13/80 (INCEPTION)
---------------- ---------------------
JUNE 30, TO JUNE 30,
-------- -----------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows used in operating activities
Net loss ($ 244,204) ($ 315,335) ($ 13,297,435) ($ 12,846,831)
------------ ------------ ------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 2,670 7,324 371,353 355,890
Increase in allowance for doubtful accounts - - 2,000 2,000
Increase in reserve for inventory obsolescence - - 40,000 40,000
Loss on lease abandonment - - 19,550 19,550
Gain on sale of fixed assets - - (7,620) (7,620)
Common stock issued for services - - 458,209 458,209
Common stock issued for product rights - - 12,501 12,501
Change in
Accounts receivable 4,802 (8,274) (18,211) (14,744)
Inventory 4,195 1,887 (105,889) (123,800)
Prepaid expenses and other current assets (3,347) (2,701) (12,198) (9,431)
Accounts payable and accrued expenses 95,884 258,829 1,855,531 1,792,536
------------ ------------ ------------ ------------
Total adjustments 104,204 257,065 2,615,226 2,525,091
------------ ------------ ------------ ------------
Net cash used in operating activities (140,000) (58,270) ( 10,682,209) (10,321,740)
------------ ------------ ------------ ------------
Cash flows from investing activities
Sale of fixed assets $ - $ - $ 10,825 $ 10,825
Capital expenditures - (26,730) (363,305) (358,774)
Issuance of note receivable - - (30,000) (30,000)
(Increase) decrease in deposits - - (8,431) (8,431)
Decrease in note receivable - - 30,000 30,000
Decrease in capitalized patents - - (45,690) (45,690)
------------ ------------ ------------ ------------
Net cash provided (used) in investing activities - (26,730) (406,601) (402,070)
------------ ------------ ------------ ------------
</TABLE>
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENTS OF CASH FLOWS (CONTINUED)
------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/13/80 (INCEPTION)
---------------- ---------------------
JUNE 30, TO JUNE 30,
-------- -----------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from financing activities
Proceeds for bonds unissued - - 190,000 190,000
Repayments for bonds unissued - - (3,000) (3,000)
Proceeds for common stock unissued - - 271,000 271,000
Principal payments of note payable ( 225,000) - (297,000) (72,000)
Proceeds from issuance of note payable - 35,000 789,444 814,444
Decrease in capitalized organization costs - - (7,453) (7,453)
Proceeds from issuance of preferred stock 365,000 50,000 965,000 350,000
Proceeds from issuance of common stock - - 9,181,079 9,181,079
---------- ------- ----------- -----------
Net cash provided by financing activities 140,000 85,000 11,089,070 10,724,070
---------- ------- ----------- -----------
Net increase (decrease) in cash and cash equivalents - - 260 260
Cash and cash equivalents, beginning 260 260 - -
---------- ------- ----------- -----------
Cash and cash equivalents, ending $ 260 $ 260 $ 260 $ 260
========== ======= =========== ===========
</TABLE>
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL
---------------------------------------------------
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30, 1996
----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE STOCK
ISSUED NUMBER OF SHARES PRICE PER SHARE AMOUNT RECEIVED NOTES
------- ---------------- --------------- --------------- -----
<S> <C> <C> <C> <C>
1/13/81 150,000,000 $.0001 $ 15,001 (A)
1/31/81 4,400,000 .025 110,000 (B)
1981 400,000 .025 10,000 (C)
1981 20,000,000 .05 1,000,000 (B)
1982 20,000 .40 8,000 (C)
1982 97,500 .20 19,500 (C)
1982 1,000,000 .06 60,100 (D)
1983 52,500 .20 10,500 (C)
1983 75,000 .305 22,875 (E)
1983 25,000 .235 5,875 (E)
1983 20,000 .50 10,000 (C)
12/29/83 7,300,000 .50 3,650,000 (F)
1984 390 1.00 390 (G)
1984 5,948 .50 2,975 (G)
1984 1,000 .375 375 (C)
1984 72,500 .25 18,125 (C)
1984 2,000 .375 750 (H)
1984 4,000 .25 1,000 (C)
1984 350,000 .20 70,000 (C)
1985 26,500 .281 7,453 (C)
1985 20,000 .25 5,000 (H)
1985 500 .50 250 (G)
1985 5,000 .344 1,719 (C)
1985 50 1.00 50 (G)
1985 2,000 .375 750 (H)
1985 7,500 .156 1,172 (C)
1986 6,882 .50 3,472 (G)
1986 85,000 .1875 15,938 (H)
1986 11,650 .281 3,276 (H)
1986 100,000 .219 21,875 (H)
1986 10,665,000 .181 1,929,737 (I)
1986 202,000 .156 31,562 (H)
1986 70,000 .313 21,875 (H)
1986 134,855 .20 26,939 (H)
1987 7,613,551 .20 1,522,710 (G)
1987 476,110 .295 140,478 (H)
1987 7,000 .159 1,113 (B)
1987 15,000 .312 4,687 (C)
1987 240,000 .20 48,000 (B)
1987 100,000 .218 21,875 (C)
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</TABLE>
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL (CONTINUED)
---------------------------------------------------------------
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30 , 1996
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE STOCK NUMBER OF PRICE PER AMOUNT
ISSUED SHARES SHARE RECEIVED NOTES
------- --------------- ---------- ------------- -----
<S> <C> <C> <C> <C>
1988 125,000 .25 31,250 (C)
1988 2,500 .218 547 (H)
1988 10,000 .20 2,000 (G)
1988 100,000 .25 25,000 (B)
1988 4,227,000 .20 845,400 (B)
1988 25,000 .156 3,906 (C)
1988 11,000 .013 143 (H)
1989 400,000 .080 32,000 (B)
1989 3,000 .0938 282 (H)
1989 100,000 .080 8,000 (B)
1990 25,000 .010 250 (H)
1990 20,311,000 .010 203,110 (B)
1990 10,500,000 .010 105,000 (B)
1991 1,100,000 .010 11,000 (B)
1991 100,000 .010 1,000 (H)
1991 48,000 .0625 3,000 (L)
1991 32,000 .0625 2,000 (L)
1991 1,100,000 .010 11,000 (L)
1991 1,100,000 .010 11,000 (B)
1991 400,000 .010 4,000 (C)
------------ ---------
TOTAL SHARES - COMMON STOCK 243,333,936
- --------------------------- ============
TOTAL PAID-IN CAPITAL 10,125,285
- ---------------------
LESS: Offering Expenses 473,495
- ---- ----------
NET PAID-IN CAPITAL - COMMON STOCK 9,651,790
- ---------------------------------- ----------
TOTAL SHARES - PREFERRED STOCK
- -------------------------------
1988 - Series A 1,000 100.00 100,000 (J)
1989 - Series B 2,000 100.00 200,000 (J)
1989 - Series B 1,250 100.00 125,000 (K)
1995 - Series D 3,000 100.00 300,000 (J)
1996 - Series D 3,650 100.00 365,000 (j)
----- ------ -------
10,900 1,090,000
------ ---------
TOTAL NET PAID-IN CAPITAL $10,741,790
- ------------------------- ===========
- --------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL (CONTINUED)
---------------------------------------------------------------
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30, 1996
----------------------------------------------
(UNAUDITED)
-----------
- --------------------------------------------------------------------------------
NOTES
- -----
(A) $1 additional was paid on stock certificate #3.
(B) Cash purchases.
(C) Represents stock issued in consideration for services rendered. The value
assigned was based on the fair market value of the stock on the date the
transaction was authorized.
(D) 1,000,000 common stock warrants were issued to the underwriter, Monarch
Funding Corporation, at par value ($.0001). On November 15, 1982, these
warrants were exercised at $.06 per share.
(E) Represents stock issued in consideration for services rendered and $7,500
cash. The value assigned was based on the fair market value of the stock
on the date the transaction was authorized.
(F) Stock issued as part of unit offering. Each unit consisted of 2 shares
common stock, 2 Series "A" warrants and 1 Series "B" warrant. No separate
value was assigned to the warrants.
(G) Issued pursuant to the exercise of warrants described in (F).
(H) Issued pursuant to the employee incentive stock bonus plan.
(I) Issued as part of an offering completed March 26, 1986 for cash and
redemption of warrants described in (F).
(J) Preferred stock cash purchases.
(K) Preferred stock - Series "B" (1,250 shares) to Jack and Sarah Paller in
satisfaction of $125,000 of their loan.
(L) Liabilities converted to common stock.
- --------------------------------------------------------------------------------
The accompanying note is an integral part of these financial statements.
<PAGE>
BIOSONICS, INC.
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
NOTE TO FINANCIAL STATEMENTS
----------------------------
JUNE 30 , 1996
--------------
- --------------------------------------------------------------------------------
Note 1 - The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures
required by generally accepted accounting principles. These
statements should be read in conjunction with the financial
statements and notes there to included in the Company's Form
10-K for the year ended December 31, 1995. In the opinion of
management, these financial statements include all
adjustments, consisting only of normal recurring adjustments,
necessary to summarize fairly the Company's financial
position and results of operations. The results of operations
for the six month period ended June 30 , 1996 may not be
indicative of the results that may be expected for the year
ending December 31, 1996.
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
- -------------------------------
The Company's primary source of funds to date has been proceeds from the
sale of its securities, investment income on such proceeds and loans. The
Company will require additional funds in the immediate future to continue its
operations. The Company may receive a portion of such funds from sales of the
SALITRON System. The Company is considering obtaining funds through venture
capital or other private or public financing, joint venture or merger
transactions, the sale of certain assets and research and development
partnership financing. The Company has engaged a consultant to assist in
obtaining additional funding. There is no assurance that any such funding or
other financing will be completed.
The Company does not have any material commitments for capital
expenditures, although the Company may make capital expenditures during 1996 or
in connection with the manufacture of the SALITRON and CYSTOTRON Systems, if
funds are available. The extent of the development or testing, if any, of the
Company's other devices will depend on the availability of funds.
Results of Operations
- ---------------------
Net development stage expenses for the six and three months ended June 30,
1996 ($257,238 and $140,879 respectively) were lower than those for the
comparable periods of the prior year ($328,051 and $162,549 respectively) due to
a decrease in funds being spent on advertising and training of tele-marketers
relating to the discontinuation of the Company's marketing program. The
Company's professional fees for the six months ended June 30, 1996 ($37,000)
were lower than those for the comparable period of the prior year ($53,524) due
to office staff performing daily accounting procedures and current filing
requirements with the SEC. The Company's professional fees for the three months
ended June 30, 1996 ($18,044) were higher than those for the comparable period
of the prior year ($12,039) due to expenses relating to the Company's
Shareholders meeting. Other development stage expenses include primarily
salaries, rent, supplies, transfer agent fees, manufacturing, marketing, public
relations and travel expenses. The Company's sales for the six months ended
June 30, 1996 were $29,125 and $11,609 respectively as compared to $22,526 and
$11,931 respectively for the same periods of the prior year. These increases in
sales resulted primarily from a change in the Company's approach to marketing
its SALITRON System.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
<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 thereunder duly authorized.
BIOSONICS, INC.
Date: August __________, 1996 By:
--------------------------
Jack Paller, President, Chairman
and Executive Officer, Principal
Financial Officer and Principal
Accounting Officer
