<PAGE> 1
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K/A
----------------
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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: 0-11371
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) (Zip Code)
(215) 646-7100
---------------------------------------------------
(Registrant's telephone number including area code)
N/A
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Based on the average of the closing bid and asking prices as reported in the
pink sheets on March 31, 1997, the aggregate market value of the Registrant's
Common Stock held by non-affiliates was approximately $8,312,885.
Indicate the number of shares outstanding of each of the issuers shares of
common stock, as of the latest practicable date: As of December 31st 1996,
there were outstanding 287,863,936 shares of the Registrant's Common Stock,
$.0001 par value.
Documents Incorporated by Reference: None
- -------------------------------------------------------------------------------
Page 1 of 17 pages
<PAGE> 2
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
1996 High Bid Low Bid
---- -------- -------
<S> <C> <C>
First Quarter $ .08 $ .025
Second Quarter .12 .055
Third Quarter .195 .065
Fourth Quarter .12 .04
1995
----
First Quarter .055 .01
Second Quarter .065 .02
Third Quarter .05 .01
Fourth Quarter .042 .01
</TABLE>
The quotations set forth above reflect inter-dealer prices without mark-up,
mark-down or commissions, and may not necessarily represent actual
transactions. As of December 31, 1996, there were approximately 10,500 record
holders of the Company's Common Stock. The Company has not, since its
inception, declared any dividends.
Biosonics' Common Stock was issued in an aggregate of 75,000 shares for
interest on loans received, and 200,000 shares were issued for funds received
by the Company. Additional funds were received and loaned to the Company
without any stock issuances.
In February 1995, the Company granted non-employees common stock options for
10,000,000 shares, exercisable at $.01 per share. In January and February 1996,
the Company granted common stock options to non-employees for 6,000,000 shares,
exercisable at $.02 per share. These options were issued in exchange for
various services performed on the Company's behalf. Transfer of the shares
issued upon the exercise of the options will be restricted subject to
registration requirements of the Securities Act of 1933 or an exemption from
such requirements such as Rule 144 of the SEC.
In May 1996, the Company issued a stock option to an employee for 250,000
shares, exercisable at $.05 per share. Transfer of the shares issued upon the
exercise of the options will be restricted subject to registration requirements
of the Securities Act of 1933 or an exemption from such requirements such as
Rule 144 of the SEC.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------
Statement of Loss Data: 1996 1995 1994 1993 1992
- ----------------------- ---- ---- ---- ---- ----
(Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Development stage expenses:
Research and development costs $ 21,500 $ 20,117 $ 5,160 $ 8,669 $ 8,866
Professional fees 130,050 54,697 49,507 101,750 77,448
Other development stage expenses 636,488 560,476 338,102 271,048 294,088
-------- -------- -------- -------- --------
Total development stage expenses $788,038 $635,290 $426,713 $329,224 $404,624
Less: Revenue from cost recovery program - - - - -
-------- -------- -------- -------- --------
Net development stage expenses $788,038 $635,290 $426,713 $329,224 $404,624
Sales $ 40,774 $ 62,506 $ 21,939 $ 30,578 $ 26,687
Cost of sales 30,208 41,980 17,817 45,461 30,432
-------- -------- -------- -------- --------
Gross profit (loss) $ 10,566 $ 20,526 $ 4,122 $(14,883) $ (3,745)
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C>
Other income
Investment income $ - $ 5,279 $ - $ - $ -
Miscellaneous income 75 - - - -
Gain on sale of equipment - - - 75 2,778
-------- -------- -------- -------- --------
$ 75 $ 5,279 $ - $ 75 $ 2,778
-------- -------- -------- -------- --------
Net loss ($777,397) ($609,485) ($422,591) ($344,107) ($408,294)
Loss per common share ($.003) ($.002) ($.002) ($.001) ($.002)
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------------------------
Balance Sheet Data: 1996 1995 1994 1993 1992
- ------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working Capital (Deficit) ($2,150,027) ($2,709,883) ($2,477,004) ($2,059,248) ($1,723,651)
Total Assets $ 96,190 $ 133,650 $ 119,445 $ 125,009 $ 160,803
Total Liabilities $2,222,779 $2,810,091 $2,574,151 $2,157,124 $1,848,811
Shareholders' Deficit ($2,126,589) ($2,676,441) ($2,454,706) ($2,032,115) ($1,688,008)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Liquidity and Capital Resources
Biosonics' primary sources of funds to date have been proceeds from the sale of
its securities and investment income on such proceeds including loans and
advances for security purchases through offerings.
In July 1996, the Company amended its Articles of Corporation pursuant to which
the Company increased the authorized number of shares of Common Stock from
250,000,000 shares to 750,000,000 shares. On July 30, 1996, all stock that had
been previously purchased but unissued due to the unavailability of shares of
authorized Common Stock of the Company were issued. The total number of shares
issued was 14,200,000 shares. In addition, all holders of Preferred Stock,
including Series A, Series B and Series D, converted their Preferred Shares
into Common Stock of the Company pursuant to the formula set forth in their
respective Preferred Stock Agreements. Series D Preferred Stock was amended in
May 1996 to increase the available Prefered Stock from 5,000 shares to 10,000
shares. Series B Preferred Stock, was amended in April 1996 to allow the
holders of Series B to convert their stock. The total number of shares of
Common Stock issued as a result of the conversion of all the Preferred Stock
was 28,725,000 shares, including 7,000,000 shares to IMRCH and 4,375,000 shares
issued to Jack Paller pursuant to the conversion of their respective shares of
Preferred Stock Series B.
In addition to the foregoing issuances and conversions, (i) the Company issued
an aggregate of 300,000 Common Stock shares to the Salitron Advisory Board, and
(ii) an aggregate of 750,000 shares of Common Stock were issued to three
outside consultants in connection with financial planning and consulting
services provided to the Company. Also IMRCH issued 550,000 shares of the
Company's Common Stock held by it to two outside consultants for certain
advertising and public relations services. Further, the Company issued an
aggregate of 280,000 shares to three doctors for medical consulting services
rendered. An aggregate of 14,200,000 shares of Common Stock were issued to
eighteen persons who had previously wished to acquire stock, but which at the
time, the Company was restricted from issuing because such issuances would have
exceeded the total authorized shares of Common Stock.
The Company also issued 15,368,820 shares of Common Stock to approximately 25
individuals in conversion of loans. These loans were originally to IMRC, which
then loaned the money to the Company to use for working capital. None of the
individuals making the loans were officers, directors or affiliates of the
Company. The terms of the loans allowed the loans to be converted into Common
Stock of Biosonics, Inc. held by IMRCH. In consideration of the Company's
assuming the obligations under the loans, including the obligation to issue
stock upon conversion of the loans, IMRCH, transferred to the Company
15,368,820
<PAGE> 4
shares of Biosonics Common Stock owned by IMRCH and canceled the indebtedness
from the Company to IMRC.
In February 1995, the Company granted non-employees common stock options for
10,000,000 shares, exercisable at $.01 per share. In January and February 1996,
the Company granted common stock options to non-employees for 6,000,000 shares,
exercisable at $.02 per share. These options were issued in exchange for
various services performed on the Company's behalf. Transfer of the shares
issued upon the exercise of the options will be restricted subject to
registration requirements of the Securities Act of 1933 or an exemption from
such requirements such as Rule 144 of the SEC.
In May 1996, the Company issued a stock option to an employee for 250,000
shares, exercisable at $.05 per share. Transfer of the shares issued upon the
exercise of the options will be restricted subject to registration requirements
of the Securities Act of 1933 or an exemption from such requirements such as
Rule 144 of the SEC.
The Company, as of December 31, 1996, owes an aggregate of $150,000 in interest
bearing loans, $115,000 of which is payable to Jack Paller, and an aggregate of
$93,000 in non-interest bearing loans. In 1989, Biosonics offered to its
shareholders the right to subscribe for 11-1/2% convertible subordinated
debentures, which offering was terminated by Biosonics prior to completion. The
debentures were never issued and, due to a lack of funds, except for $4,000
which was paid back to investors in 1990, the proceeds raised were never
returned to the investors. In 1990, Biosonics offered the investors the right
to convert their debentures into Common Stock, and investors who purchased an
aggregate of $16,000 of the debentures converted their debentures into
1,180,000 shares of Common Stock.
Biosonics will require additional funds in the immediate future to continue its
operations. Biosonics may receive a portion of such funds from sales of the
Salitron System. Biosonics is considering obtaining funds through venture
capital or other private or public financing, joint venture or merger
transactions and research and development partnership financing. Biosonics has
engaged a consultant to find funding sources. There is no assurance that the
Company will be successful in obtaining financing or terms favorable to the
Company, or at all.
Biosonics does not have any material commitments for capital expenditures,
although management is considering making capital expenditures during 1997 in
connection with the manufacturing of the Cystotron System, if funds become
available. The extent of the development or testing, if any, of Biosonics'
other devices will depend on the availability of funds, and there is no
assurance that development or testing of the devices will occur or be
successful.
Results of Operations
Biosonics' net development stage expenses increased, $152,748 or 27%, in 1996
as compared to 1995 primarily due to arrangements with consultants for the
Company in the areas of public relations and as medical advisors, and one-time
expenses incurred in connection with the Company's special shareholders
meeting. Professional fees were increased due to the special shareholders
meeting, and a retainer was paid to the new attorneys hired as counsel to the
Company on securities related issues.
Product sales decreased to $40,774 in 1996 as compared to $62,506 in 1995 as a
result of the discontinuance of the marketing program due to lack of funds.
The lack of investment income during 1996 and 1994 reflects the absence of
funds available for investment, and the increase in 1995 as compared to 1996
and 1994 was due to Biosonics' private offering of its
<PAGE> 5
Preferred Stock in 1995. During 1996 and 1995, Biosonics concentrated its
efforts and resources on obtaining Medicare approval which was not obtained;
see "Item 1, Part 1-Business". Biosonics' professional fees consist primarily
of legal, accounting and consulting fees. Other development stage expenses
include primarily salaries, rent, supplies, transfer agent fees, manufacturing,
marketing, public relations and travel expenses.
The Company believes there will be no significant adverse impact from inflation
and changing prices on the Company's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of Biosonics are set forth in this report beginning on
page F-1.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K.
(A) Financial Statements & Exhibits
<TABLE>
<CAPTION>
1. Financial Statements Page
----
<S> <C>
Auditors' Report F-1
Balance Sheets at December 31, 1995 and 1996 F-3
Statements of Operations for Each of the Three Years in the
Period Ended December 31, 1996 and the period from
November 13, 1980 (Inception) to December 31, 1996 F-5
Statements of Changes in Shareholders' Equity (Deficiency)
for the Period from November 13, 1980 (Inception) to
December 31, 1996 F-6
Statements of Cash Flows for each of the Three Years in the
Period ended December 31, 1996 and the period from
November 13, 1980 (Inception) to December 31, 1996 F-14
Notes to Financial Statements F-16
</TABLE>
2. All schedules have been omitted because they are not
applicable or the required information is show in the
consolidated financial statements or notes therein.
3. Exhibits
*3.1 Articles of Incorporation as ammended
(Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996)
*3.5 By-laws of Registrant, as amended. (Exhibit to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1983 ["1983 Form 10-K"]).
*3.6 Amended and Restated Article VlI of the
Registrant's Bylaws as adopted on May 7, 1987.
(Exhibit to 1988 Form 10-K) .
*3.7 Amendment to Registrant's By-Laws (Exhibit 3.7 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 ["1994 Form 10-K"]).
<PAGE> 6
*10.1 Agreement between Registrant and IMRC with
respect to opportunities in the field of medical
technology. (Exhibit to 1981 Form 10-K).
*10.2 Lease dated October 1, 1996, between Biosonics
and New York Drive Associates L.L.C.
*10.6 Securities Restriction Agreement dated
September 30, 1987 between Registrant and
International Management & Research Corporation,
Jack and Sarah Paller, and Henry S. Brenman.
(Exhibit to 1987 Form 10-K).
*10.16 Note in the amount of $250,000, dated
June 27, 1989, of Biosonics, Security Agreement,
dated June 27, 1989, between Biosonics and Jack
and Sarah Paller and Assignment of Patent as
Collateral Security, dated June 27, 1989, of
Biosonics. (Exhibit 10. 16 to Form 10-K).
*21. Subsidiaries. (Exhibit 21 to 1994 Form 10-K).
27. Financial Data Schedule
(B) Reports on 8-k
The Registrant did not file any reports on Form 8-K during the
quarter ended December 31, 1996.
- ----------------------------
* Incorporated by reference.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIOSONICS, INC.
By: /s/ JACK PALLER
-------------------------------------------------
Jack Paller, President, Chairman & CEO
Date: 7/31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ JACK PALLER
------------------------------------------------
Jack Paller, President, Chairman (Principal
Executive Officer), Treasurer (Principal
Financial Officer and Principal Accounting
Officer) and Director
Date: 7/31, 1997
<PAGE> 7
BIOSONICS, INC.
(A Development Stage Enterprise)
* * *
December 31, 1996, 1995 and 1994
<PAGE> 8
BIOSONICS, INC.
(A Development Stage Enterprise)
CONTENTS
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Page number
<S> <C>
Auditors' Report F-1 & F-2
Financial Statements:
Balance Sheets (Restated) at December 31, 1996
and 1995 F-3 & F-4
Statements of Operations (Restated) for Each of the Three Years in the Period
Ended December 31, 1996 and the Period from November
13, 1980(Inception) to December 31, 1996 F-5
Statements of Changes in Shareholders' Equity
(Deficiency) (Restated) for the Period from
November 13, 1980 (Inception) to December
31, 1996 F-6 through F-13
Statements of Cash Flows (Restated) for Each of the Three Years in the Period
Ended December 31, 1996 and the Period from November 13, 1980
(Inception) to December 31, 1996 F-14 & F-15
Notes to Financial Statements F-16 through F-30
</TABLE>
<PAGE> 9
INDEPENDENT AUDITORS' REPORT
Board of Directors
Biosonics, Inc.
(A Development Stage Enterprise)
We have audited the accompanying balance sheets of Biosonics, Inc. (a
development stage enterprise) as of December 31, 1996 and 1995, and the related
statements of operations, changes in shareholders' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1996. Such
financial statements have been restated as described in Note 3 to the financial
statements. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Biosonics, Inc. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
F-1
<PAGE> 10
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has suffered recurring losses from operations
and has a net shareholders' deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding these
matters are also described in Note 4. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 3 to the financial statements, certain errors
resulting from the Company's not recording stock options issued in 1996 and 1995
were subsequently discovered by management. Accordingly, the Company has
restated its 1996 and 1995 financial statements to conform with generally
accepted accounting principles.
Also, in our opinion, the amounts shown in the statements of operations
and cash flows under the caption "Period from November 13, 1980 (Inception) to
December 31, 1996" have been properly compiled from the financial statements for
the period November 13, 1980 (Inception) to December 31, 1980 and for each of
the sixteen years in the period ended December 31, 1996.
MORRIS J. COHEN & CO., P.C.
February 21, 1997
(except for Notes 3 and 10, as to which
the date is July 18, 1997)
F-2
<PAGE> 11
BIOSONICS, INC.
(A Development Stage Enterprise)
BALANCE SHEETS (RESTATED)
December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets
Cash $ 260 $ 260
Accounts receivable (net of
allowance for doubtful
accounts of $2,000 in 1996
and $6,000 in 1995) 8,196 21,013
Inventories 64,271 70,084
Prepaid expenses and other
current assets 25 8,851
------- --------
Total current assets 72,752 100,208
Equipment, furniture and leaseholds,
net of accumulated depreciation
and amortization 15,007 25,011
Deposits 8,431 8,431
------- --------
Total assets $96,190 $133,650
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 12
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilities
Notes payable $ 288,000 $ 660,444
Accounts payable and accrued
expenses 1,707,779 1,691,647
Payments received for unissued
debentures 187,000 187,000
Payments received for unissued
securities 40,000 271,000
------------ ------------
Total current liabilities 2,222,779 2,810,091
------------ ------------
Commitments and contingencies (Note 12)
Shareholders' deficiency
Preferred stock - authorized
10,000,000 shares (inclusive
of Series A, B, C and D) at
$1 par value
Series A, authorized 1,000 shares,
issued and outstanding 1,000 shares
in 1995 1,000
Series B, authorized 10,000 shares,
issued and outstanding 3,250
shares in 1995 3,250
Series D, authorized 10,000 shares
in 1996, 5,000 shares in 1995,
issued and outstanding 3,000 shares
in 1995 3,000
Common stock - $.0001 par value;
authorized 750,000,000 shares in 1996, 250,000,000
shares in 1995, issued and outstanding 287,863,936
shares in 1996, 243,333,936 shares in 1995 28,787 24,333
Capital in excess of par value 11,763,002 10,432,957
Deficit accumulated during
development stage (13,918,378) (13,140,981)
------------ ------------
Shareholders' deficiency (2,126,589) ( 2,676,441)
------------ ------------
Total liabilities and
shareholders' deficiency $ 96,190 $ 133,650
============ ============
</TABLE>
F-4
<PAGE> 13
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS (RESTATED)
<TABLE>
<CAPTION>
Period from
November 13,
1980
(Inception)
to
Year Ended December 31, December 31,
--------------------------------------------
1996 1995 1994 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Development stage
expenses
Research and develop-
ment costs $ 21,500 $ 20,117 $ 5,160 $ 4,166,053
Professional fees 130,050 54,697 83,451 2,752,487
Other development
stage expenses 636,488 560,476 338,102 8,165,558
--------- --------- --------- ------------
Total development
stage expenses 788,038 635,290 426,713 15,084,098
Less - Revenue from
cost recovery program 118,082
--------- --------- --------- ------------
Net development
stage expenses 788,038 635,290 426,713 14,966,016
--------- --------- --------- ------------
Sales 40,774 62,506 21,939 837,377
Cost of sales 30,208 41,980 17,817 544,985
--------- --------- --------- ------------
Gross profit 10,566 20,526 4,122 292,392
--------- --------- --------- ------------
Other income
Investment and
other income 75 5,279 727,626
Management fees 20,000
Gain on sale of
equipment 7,620
--------- --------- --------- ------------
75 5,279 755,246
--------- --------- --------- ------------
Net loss ($777,397) ($609,485) ($422,591) ($13,918,378)
========= ========= ========= ============
Loss per common
share ($ .003) ($ .002) ($ .002) ($ .056)
========= ========= ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 14
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Capital subscriptions received
Net loss for the period from
November 13, 1980 (Inception) to
December 31, 1980
Balance, December 31, 1980
Common stock issued January 1981
($.0001 per share) 125,010,000 $12,501
Common stock issued January 1981
($.0001 per share) 24,990,000 2,499
Common stock issued January 1981
($.025 per share) 4,400,000 440
Common stock issued January 1981
($.025 per share) 200,000 20
Common stock issued March 1981
($.025 per share) 200,000 20
Common stock issued October 1981
($.05 per share) 20,000,000 2,000
Offering expenses
Warrants to purchase 1,000,000
shares of common stock at $.06
per share issued October 1981
($.0001 per share)
Net loss for the year ended
December 31, 1981
----------- -------
Balance, December 31, 1981 174,800,000 17,480
Common stock issued November 1982
($.40 per share) 20,000 2
Common stock issued November 1982
($.20 per share) 97,500 10
Common stock issued pursuant to
exercise of warrants December
1982 ($.06 per share) 1,000,000 100
Adjustment of offering expenses
Net loss for the year ended
December 31, 1982
----------- -------
Balance, December 31, 1982 175,917,500 17,592
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
- ------ ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C>
$ 65,000 $ 65,000
($ 50) ( 50)
---------- ---------- ----------
65,000 ( 50) 64,950
12,501 (1)
1 2,500 (3)
44,560 45,000 (3)
4,980 5,000 (2)
4,980 5,000 (2)
998,000 1,000,000 (3)
( 277,766) ( 277,766)
100 100
( 150,446) ( 150,446)
---------- ---------- ----------
839,855 ( 150,496) 706,839
7,998 8,000 (2)
19,490 19,500 (2)
59,900 60,000 (3)
1,500 1,500
( 428,634) ( 428,634)
---------- ---------- ----------
928,743 ( 579,130) 367,205
</TABLE>
F-6
<PAGE> 16
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Balance forward at December 31, 1982 175,917,500 17,592
Common stock issued January 1983
($.20 per share) 22,500 2
Common stock issued March 1983
($.020 per share) 30,000 3
Common stock issued pursuant to
exercise of stock options April
1983 ($.235 to $.305 per share) 100,000 10
Common stock issued June 1983
($.50 per share) 20,000 2
Common stock issued November 1983
($.50 per share) 6,500,000 650
Offering expenses
Common stock issued December 1983
($.50 per share) 800,000 80
Net loss for the year ended
December 31, 1983
----------- ------
Balance, December 31, 1983 183,390,000 18,339
Common stock issued pursuant to
exercise of Series A warrants
March 1984 to December 1984 ($.50
per share) 5,948 1
Common stock issued pursuant to
exercise of Series B warrants
March 1984 to October 1984 ($1.00
per share) 390
Common stock issued May 1984 to
December 1984 ($.25 per share) 76,500 8
Common stock issued May 1984 and
September 1984 ($.375 per share) 3,000
Common stock issued December 1984
($.20 per share) 350,000 35
Adjustment of offering expenses
Net loss for the year ended
December 31, 1984
----------- ------
Balance, December 31, 1984 183,825,838 18,383
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
- ------ ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C>
928,743 ( 579,130) 367,205
4,498 4,500 (2)
5,997 6,000 (2)
28,740 28,750 (4)
9,998 10,000 (2)
3,249,350 3,250,000 (3)
( 94,685) ( 94,685)
399,920 400,000 (3)
( 702,429) ( 702,429)
---------- ---------- ----------
4,532,561 ( 1,281,559) 3,269,341
2,973 2,974 (3)
390 390 (3)
19,117 19,125 (2)
1,125 1,125 (2)
69,965 70,000 (2)
( 8,129) ( 8,129)
( 1,071,417) ( 1,071,417)
---------- ---------- ----------
4,618,002 ( 2,352,976) 2,283,409
</TABLE>
F-7
<PAGE> 18
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Balance forward at December 31, 1984 183,825,838 18,383
Common stock issued January 1985 to
October 1985 ($.28 per share) 26,500 3
Common stock issued March 1985 ($.34
per share) 5,000
Common stock issued March 1985 ($.25
per share) 20,000 2
Common stock issued pursuant to exercise
of Series A ($.50 per share) and
Series B ($1.00 per share) warrants 550
Common stock issued August 1985
($.375 per share) 2,000
Common stock issued November 1985
($.156 per share) 7,500 1
Net loss for the year ended
December 31, 1985
----------- ------
Balance, December 31, 1985 183,887,388 18,389
Common stock issued January 1986 to
October 1986 ($.19 per share) 85,000 8
Common stock issued February 1986
($.28 per share) 11,650 1
Common stock issued March 1986 ($.22
per share) 100,000 10
Common stock issued March 1986 ($.18
per share) 10,665,000 1,067
Offering expense
Common stock issued April 1986 to
September 1986 ($.16 per share) 202,000 20
Common stock issued November 1986 and
December 1986 ($.31 per share) 70,000 7
Common stock issued pursuant to
exercise of Series A ($.50 per
share) and Series B ($1.00 per
share) warrants 6,882 1
Common stock issued pursuant to
exercise of Series A and Series B
($.20 per share) warrants 134,855 13
Net loss for the year ended
December 31, 1986
----------- ------
Balance, December 31, 1986 195,162,775 19,516
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
- ------ ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C>
4,618,002 ( 2,352,976) 2,283,409
7,450 7,453 (2)
1,719 1,719 (2)
4,998 5,000 (2)
300 300 (3)
750 750 (2)
1,171 1,172
( 1,649,361) ( 1,649,361)
---------- ---------- ----------
4,634,390 ( 4,002,337) 650,442
15,929 15,937 (2)
3,244 3,245 (2)
21,865 21,875 (2)
1,928,670 1,929,737 (5)
( 94,415) ( 94,415)
31,542 31,562 (2)
21,868 21,875 (2)
3,472 3,473 (3)
26,958 26,971 (3)
( 1,790,003) ( 1,790,003)
---------- ---------- ----------
6,593,523 ( 5,792,340) 820,699
</TABLE>
F-8
<PAGE> 20
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
<S> <C> <C>
Balance forward at December 31, 1986 195,162,775 19,516
Common stock issued January 1987
($.33 per share) 263,430 26
Common stock issued May and June 1987
($.25 per share) 145,500 14
Common stock issued July 1987
($.14 per share) 7,000 1
Common stock issued August 1987
($.24 per share) 67,180 7
Common stock issued October 1987
($.31 per share) 15,000 2
Common stock issued October 1987
($.20 per share) 240,000 24
Common stock issued December 1987
($.22 per share) 100,000 10
Common stock issued pursuant to
exercise of Series A and Series B
warrants ($.20 per share) 7,613,551 761
Net loss for the year ended
December 31, 1987
----------- ------
Balance, December 31, 1987 203,614,436 20,361
Common stock issued January 1988
($.25 per share) 125,000 12
Common stock issued January 1988
($.22 per share) 2,500 1
Common stock issued March 1988
($.20 per share) 10,000 1
Common stock issued March 1988
($.25 per share) 100,000 10
Common stock issued June 1988
($.20 per share) 4,227,000 423
Common stock issued September 1988
($.16 per share) 25,000 2
Common stock issued December 1988
($.01 per share) 11,000 1
Preferred stock-Series A issued
December 1988 ($100.00 per share)
Net loss for the year ended
December 31, 1988
----------- ------
Balance, December 31, 1988 208,114,936 20,811
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
<S> <C> <C> <C> <C>
6,593,523 ( 5,792,340) 820,699
87,657 87,683 (4)
36,723 36,737 (4)
999 1,000 (3)
16,163 16,170 (4)
4,686 4,688 (4)
47,976 48,000 (3)
21,865 21,875 (4)
1,521,949 1,522,710 (3)
( 1,655,959) ( 1,655,959)
----------- ----------- ----------
8,331,541 ( 7,448,299) 903,603
31,238 31,250 (2)
546 547 (2)
1,999 2,000 (3)
24,990 25,000 (3)
844,977 845,400 (3)
3,904 3,906 (2)
142 143 (2)
1,000 $1,000 99,000 100,000 (3)
( 1,372,913) ( 1,372,913)
- ----- ------ ----------- ----------- ----------
1,000 1,000 9,338,337 ( 8,821,212) 538,936
</TABLE>
F-9
<PAGE> 22
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Balance forward December 31, 1988 208,114,936 20,811
Common stock issued March 1989 and
May 1989 ($.08 per share) 500,000 50
Common stock issued May 1989 ($.09
per share) 3,000
Preferred stock-Series B issued
June 1989 and September 1989
($100.00 per share)
Net loss for the year ended
December 31, 1989
----------- ------
Balance, December 31, 1989 208,617,936 20,861
Common stock issued January 1990
($.01 per share) 25,000 3
Common stock issued July 1990
($.01 per share) 20,311,000 2,031
Common stock issued December 1990
($.01 per share) 10,500,000 1,050
Net loss for the year ended
December 31, 1990
----------- ------
Balance, December 31, 1990 239,453,936 23,945
Common stock issued January 1991
($.01 per share) 1,200,000 120
Common stock issued January 1991
($.0625 per share) 48,000 5
Common stock issued April 1991
($.01 per share) 1,500,000 150
Common stock issued April 1991
($.01 per share) 600,000 60
Common stock issued April 1991
($.0625 per share) 32,000 3
Common stock issued June 1991
($.01 per share) 500,000 50
Net loss for the year ended
December 31, 1991
----------- ------
Balance, December 31, 1991 243,333,936 24,333
Net loss for the year ended
December 31, 1992
----------- ------
Balance, December 31, 1992 243,333,936 24,333
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
- ------ ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C>
1,000 1,000 9,338,337 ( 8,821,212) 538,936
39,950 40,000 (3)
281 281 (2)
3,250 3,250 321,750 325,000 (6)
( 1,116,882) ( 1,116,882)
- ----- ------ ----------- ----------- ----------
4,250 4,250 9,700,318 ( 9,938,094) ( 212,665)
247 250 (2)
201,080 203,111 (3)
103,950 105,000 (3)
( 1,046,939) ( 1,046,939)
- ----- ------ ----------- ----------- ----------
4,250 4,250 10,005,595 ( 10,985,033) ( 951,243)
11,880 12,000 (4)
2,995 3,000 (7)
14,850 15,000 (4)
5,940 6,000 (7)
1,997 2,000 (7)
4,950 5,000 (7)
( 371,471) ( 371,471)
- ----- ------ ----------- ----------- ----------
4,250 4,250 10,048,207 ( 11,356,504) ( 1,279,714)
( 408,294) ( 408,294)
- ----- ------ ----------- ----------- ----------
4,250 4,250 10,048,207 ( 11,764,798) ( 1,688,008)
</TABLE>
F-10
<PAGE> 24
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Balance forward December 31, 1992 243,333,936 24,333
Net loss for the year ended
December 31, 1993
Balance, December 31, 1993 243,333,936 24,333
----------- ------
Net loss for the year ended
December 31, 1994
----------- ------
Balance, December 31, 1994 243,333,936 24,333
Stock options granted February
1995
Preferred stock-Series D issued
between June 1995 and December
1995 ($100.00 per share)
Net loss for the year ended
December 31, 1995
----------- ------
Balance, December 31, 1995 243,333,936 24,333
Stock options granted January
and February 1996
Preferred stock-Series D issued
January 1996 to July 1996
Common stock issued pursuant to
the conversion of preferred stock,
July 1996 Series A ($.08 per share),
Series B ($.0286 per share) and Series
D ($.05 per share) 28,725,000 2,873
Common stock contributed to the
Company by IMRCH August 1996 (15,368,820) (1,537)
Common stock issued July 1996
($.01 per share) 1,300,000 130
Common stock issued July 1996
($.02 per share) 12,900,000 1,290
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Preferred Stock Deficit Shareholders'
Series A, B and D Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
<S> <C> <C> <C> <C>
4,250 4,250 10,048,207 ( 11,764,798) ( 1,688,008)
( 344,107) ( 344,107)
----- ------ ----------- ----------- ----------
4,250 4,250 10,048,207 ( 12,108,905) ( 2,032,115)
( 422,591) ( 422,591)
----- ------ ----------- ----------- ----------
4,250 4,250 10,048,207 ( 12,531,496) ( 2,454,706)
87,750 87,750
3,000 3,000 297,000 300,000 (3)
( 609,485) ( 609,485)
----- ------ ----------- ----------- ----------
7,250 7,250 10,432,957 ( 13,140,981) ( 2,676,441)
75,530 75,530
5,050 5,050 499,950 505,000 (3)
(12,300) (12,300) 9,427 -0-
1,537 -0-
12,870 13,000 (3)
256,710 258,000 (3)
</TABLE>
F-11
<PAGE> 26
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
Shares Amount
------ ------
<S> <C> <C>
Common stock issued August 1996
($.02 per share) 11,150,000 1,115
Common stock issued August 1996
($.0238 per share) 420,000 42
Common stock issued August 1996
($.0258 per share) 350,000 35
Common stock issued July 1996
($.03 per share) 300,000 30
Common stock issued August 1996
($.035 per share) 428,600 43
Common stock issued August 1996
($.0345 per share) 1,695,000 170
Common stock issued August 1996
($.04 per share) 250,000 25
Common stock issued November 1996
($.04 per share) 75,000 7
Common stock issued July 1996
to November 1996 ($.05 per share) 480,000 48
Common stock issued
($.05 per share) August 1996 1,075,220 108
Common stock issued September 1996
($.065 per share) 100,000 10
Common stock issued July 1996
($.08 per share) 400,000 40
Common stock issued September 1996
($.085 per share) 250,000 25
Net loss for the year
ended December 31, 1996 ----------- -------
287,863,936 $28,787
=========== =======
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Preferred Stock
Series A, B and D Deficit Shareholders'
- ----------------- Capital in Excess Accumulated During Equity
Shares Amount of Par Value Development Stage (Deficiency)
- ------ ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C>
221,885 223,000 (10)
9,958 10,000 (10)
8,997 9,032 (10)
8,970 9,000 (10)
14,957 15,000 (10)
59,005 59,175 (10)
9,975 10,000 (10)
2,993 3,000 (10)
23,952 24,000 (10)
53,654 53,762 (10)
6,490 6,500 (10)
31,960 32,000
21,225 21,250 (10)
( 777,397) ( 777,397)
- ------ -------- ----------- ----------- ----------
-0- $ -0- $11,763,002 ($13,918,378) ($2,126,589)
====== ======== =========== =========== ==========
</TABLE>
F-12
<PAGE> 28
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
(1) Shares were issued to International Management & Research
Corporation in consideration for all rights to develop certain
products. The rights were valued at the par value of the shares
issued.
(2) Shares were issued in consideration for services rendered at
various dates. The services were valued at the market price of
the stock on the date of the transaction.
(3) Shares were issued for cash.
(4) Shares were issued for cash and services.
(5) Shares were issued for cash and surrendering of warrants
as a credit against the March 1986 offering.
(6) Shares were issued for cash and repayment of a note
payable in the amount of $125,000.
(7) Shares were issued as repayment of funds received for
convertible debentures, which were never issued.
(8) Shares were issued as repayment of notes payable.
(9) Shares were issued as payment of interest on loans.
(10) Shares were issued as payment for liabilities of IMRC,
assumed by Biosonics, Inc.
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 29
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS (RESTATED)
<TABLE>
<CAPTION>
Period from
November 13,
1980
Year Ended December 31, (Inception) to
------------------------------------------------------ December 31,
1996 1995 1994 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from
operating activities
Net loss ($777,397) ($609,485) ($422,591) ($13,918,378)
-------- -------- -------- -----------
Adjustments to
reconcile net loss
to net cash used
in operating
activities
Depreciation and
amortization 10,004 20,117 4,835 378,687
Increase (decrease)
in allowance for
doubtful accounts ( 4,000) ( 7,000) 2,000
Increase (decrease)
in reserve for
inventory
obsolescence ( 13,000) 27,000
Loss on lease
abandonment 19,550
Gain on sale of
equipment ( 7,620)
Common stock issued
for services 85,750 543,959
Common stock
options issued
for services 75,530 87,750 163,280
Common stock
issued for
product rights 12,501
Changes in
operating assets
and liabilities
Accounts
receivable 16,817 ( 16,543) 10,161 ( 10,196)
Inventories 18,813 15,603 3,687 ( 91,271)
Prepaid expenses
and other
current assets 8,828 ( 2,121) ( 6,119) ( 25)
Accounts payable
and accrued
expenses 213,655 225,940 176,483 1,973,304
-------- -------- -------- -----------
412,397 330,746 182,047 3,011,169
-------- -------- -------- -----------
Net cash used
in operating
activities ( 365,000) ( 278,739) ( 240,544) ( 10,907,209)
-------- -------- -------- -----------
</TABLE>
F-14
<PAGE> 30
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS (RESTATED)
(Continued)
<TABLE>
<CAPTION>
Period from
November 13,
1980
Year Ended December 31, (Inception) to
--------------------------------------------- December 31,
1996 1995 1994 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from
investing activities
Capital expenditures ( 31,261) ( 363,305)
Proceeds from sale
of equipment 10,825
Issuance of note
receivable ( 30,000)
Increase in deposits ( 8,431)
Decrease in note
receivable 30,000
Patent expenditures ( 45,690)
-------- -------------
Net cash used in
investing activities ( 31,261) ( 406,601)
-------- -------------
Cash flows from
financing activities
Payments received for
unissued debentures
and securities 40,000 498,000
Principal payments
of note payable (235,000) ( 307,000)
Proceeds from issuance
of notes payable 45,000 10,000 240,544 834,444
Increase in capitalized
organization costs ( 7,453)
Proceeds from
issuance of
preferred stock 505,000 300,000 1,105,000
Proceeds from issuance
of common stock 10,000 9,191,079
------- -------- -------- -------------
Net cash provided
by financing
activities 365,000 310,000 240,544 11,314,070
------- -------- -------- -------------
Net increase in cash 260
Cash, beginning 260 260 260
------- -------- -------- -------------
Cash, ending $ 260 $ 260 $ 260 $ 260
======= ======== ======== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE> 31
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
1. Organization
Since November 1980, Biosonics, Inc. has pursued the development of medical
devices. Since the Company has not significantly commenced the production
and sale of the medical devices, it is classified as a development stage
enterprise in accordance with Statement of Financial Accounting Standard
No. 7.
IMRC Holdings, Inc. (IMRCH) owned 38% and 50% of the Company's common stock
at December 31, 1996 and 1995, respectively. IMRCH is a wholly-owned
subsidiary of International Management & Research Corporation (IMRC). The
Company's president owns approximately 4% of the common stock of the
Company and also owns approximately 40% of the common stock of IMRC.
2. Summary of significant accounting policies
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash transactions
During 1996, 1995 and 1994, IMRC acted as the receiving and disbursing
agent for all cash receipts and disbursements for the Company.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by use of the first-in, first-out method. The Company provides a reserve
for inventories which may become obsolete.
Equipment, furniture and leaseholds
Equipment, furniture and leaseholds are recorded at cost. Depreciation for
financial and income tax reporting purposes is provided over the estimated
useful lives of the assets using the straight-line and double
declining-balance methods.
F-16
<PAGE> 32
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
2. Summary of significant accounting policies (Continued)
Loss per share
Loss per share was calculated based on the weighted average number of
shares outstanding of 261,976,354 in 1996 and 243,333,936 in 1995 and 1994.
Common stock equivalents, including convertible preferred stock and common
stock options outstanding, are not included in the calculation of loss per
share amounts for each period because they would be anti-dilutive.
Deferred income taxes
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax bases of the Company's assets and
liabilities.
Stock based compensation
In 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," which
encourages, but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued To Employees," and the related
interpretations. Accordingly, compensation cost is measured as the excess
of the quoted market price of the Company's stock on the grant date over
the price which the employee must pay to acquire the stock. Also in
accordance with SFAS No. 123, the Company records an expense for the fair
value of stock options issued in exchange for services provided by
non-employees.
3. Restatement of financial statements
The Company has restated its financial statements for the years ended
December 31, 1996 and 1995. This was necessary because the Company had
granted stock options to non-employees in 1996 and 1995 in exchange for
various services provided to the Company. The value of these options and
the related services received were not previously reflected in the
Company's 1996 and 1995 financial statements.
The effect on the Company's financial statements as originally reported is
as follows:
F-17
<PAGE> 33
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
3. Restatement of financial information (Continued)
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
As reported As restated As reported As restated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other development
stage expenses $ 560,958 $ 636,488 $ 472,726 $ 560,476
Net loss (701,867) (777,397) (521,735) (609,485)
Loss per common
share ($.003) ($.003) ($.002) ($.002)
Capital in excess
of par value 11,599,722 11,763,002 10,345,207 10,432,957
Accumulated
deficit, ending (13,755,098) (13,918,378) (13,053,231) (13,140,981)
</TABLE>
4. Results of operations
The Company incurred net losses of $777,397, $609,485 and $422,591 for the
years ended December 31, 1996, 1995 and 1994, respectively, and at December
31, 1996, the Company had a shareholders' deficiency of $2,126,589.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered
recurring losses from operations and has a net shareholders' deficiency
that raise substantial doubt about its ability to continue as a going
concern.
Management plans to meet its financial requirements necessary to continue
in operations by seeking additional equity and debt financing through
private placement or public offerings, joint venture arrangements and
product sales. Management believes that the steps it has taken in revising
its operating and financial requirements provides the Company with the
ability to continue in existence. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
5. Inventories
Inventories at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Raw material 20,166 $ 36,803
Finished goods 71,105 73,281
------- --------
91,271 110,084
Less reserve for obsolescence 27,000 40,000
------- --------
$64,271 $ 70,084
======= ========
</TABLE>
F-18
<PAGE> 34
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
6. Equipment, furniture and leaseholds
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Leasehold improvements $ 3,100 $ 3,100
Machinery and equipment 48,745 48,745
Office equipment 64,325 64,325
Furniture and fixtures 138,636 138,636
-------- --------
254,806 254,806
Less accumulated depreciation
and amortization 239,799 229,795
-------- --------
$ 15,007 $ 25,011
======== ========
</TABLE>
Depreciation expense was $10,004 in 1996, $20,117 in 1995 and $4,835 in
1994.
7. Accounts payable and accrued expenses
Included in accounts payable and accrued expenses are amounts due from (to)
affiliates totalling $70,574 and ($24,571) at December 31, 1996 and 1995,
respectively.
8. Notes payable
Notes payable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Unsecured notes payable on demand to
an officer of the Company, bearing
interest at prime plus 1.5% per
annum (effective rate of 8.25% at
December 31, 1996) $115,000 $135,000
Two notes payable on demand,secured
by inventory, bearing interest at 12%
per annum on $10,000 and 11 1/2%
per annum on $25,000 35,000 35,000
Unsecured, non-interest bearing
notes payable on demand 138,000 93,000
Unsecured notes payable on demand to
IMRC, bearing interest at 7% per
annum 397,444
-------- --------
$288,000 $660,444
======== ========
</TABLE>
See also Note 12 - "Unissued Securities".
F-19
<PAGE> 35
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
9. Payments received for unissued debentures and securities
Payments received for unissued debentures and securities at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
In October 1989, the Company offered
to its shareholders the right to
subscribe to 11.5% convertible
debentures. Interest is accrued at
11.5% on these funds (See Note 12). $187,000 $187,000
Cash received for stock, not yet
issued (See Notes 10 & 12). 40,000 271,000
-------- --------
$227,000 $458,000
======== ========
</TABLE>
10. Shareholders' equity
IMRCH and the Company's current officers and directors held in the
aggregate, approximately 42% of the Company's outstanding common stock at
December 31, 1996 and 59% at December 31, 1995. Some of these shares have
been gifted to various entities and individuals. These shares are subject
to a securities restriction agreement which provides that such shareholders
will not sell any of their shares of the Company's common stock for less
than $.05 per share.
In July 1996, the Company amended its articles of incorporation to increase
the number of shares of authorized common stock from 250,000,000 to
750,000,000. The Company then issued a total of 1,300,000 shares to various
entities who performed consulting services for the Company. The Company
also issued 14,200,000 shares to individuals who had given the Company a
total of $271,000 for common and preferred stock in prior years, when the
Company did not have enough shares authorized to issue them.
The Company received 15,368,820 shares of its common stock in July 1996
from IMRCH and then issued these shares to various individuals to settle
liabilities of IMRC (See Note 12).
F-20
<PAGE> 36
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
In 1987, the Company issued 591,110 shares of common stock to individuals
as compensation for services rendered.
During the year ended December 31, 1983, the Company issued 7,300,000
warrants to purchase Company common stock at $.50 per share until November
23, 1984 ("Series A warrants") and 3,650,000 warrants to purchase Company
common stock at $1.00 per share until April 23, 1985 ("Series B warrants")
in connection with the sale to its shareholders of 3,650,000 units,
consisting of two shares of common stock, two Series A warrants and one
Series B warrant, at $1.00 per unit. On October 15, 1984, the Company
extended the expiration date for the Series A warrants and Series B
warrants to November 23, 1985 and April 23, 1986, respectively.
On March 31, 1986, the Company extended the expiration date of the Series A
and B warrants to April 23, 1987 and the exercise price of such warrants
was reduced to $.20 per share. As a result, the terms of the Series A and B
warrants were identical. There were 9,446,286 Series A and B warrants
outstanding at December 31, 1986. In 1987, 7,613,551 Series A and Series B
warrants were exercised. As a result, the Company issued 7,613,551 shares
of common stock and received $1,522,710 of additional equity. The remaining
1,832,735 of Series A and Series B warrants expired on April 23, 1987.
During the year ended December 31, 1983, the shareholders approved an
incentive stock option plan for the Company's employees. Two million shares
of common stock were reserved for issuance under the plan. Under the plan,
options may be granted to purchase shares of the Company's stock at a price
equal to at least the average of the closing bid and asked prices of the
Company's stock on the date of grant. The options generally become
exercisable upon the achievement of certain milestones in the development
of the Company's products. The options terminate after ten years from the
date of grant or after termination of the individual's services to the
Company, whichever comes first. No charge to income will result from the
grant or exercise of the options. As of December 31, 1996 and 1995, there
were no options outstanding under the employee incentive stock option plan.
F-21
<PAGE> 37
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
In December 1988, the Company sold 1,000 shares of its preferred
stock-Series A for $100,000 ($100 per share). Each share of preferred
stock-Series A is convertible, upon the option of the holder, into 1,250
shares of common stock. In addition, the holders of the preferred
stock-Series A shall have the right to vote on all matters as to which
holders of common stock have a right to vote, and such voting rights shall
be exercised on an as-converted basis.
In June 1989, the Company sold 2,000 shares of its preferred stock-Series B
for $200,000 ($100 per share). The preferred stock-Series B is non-voting
and does not participate in dividends. Each share of the preferred
stock-Series B is entitled to a liquidation preference of $100. These
shares are redeemable for cash at the option of the Company at $105 per
share.
In September 1989, the Company issued 1,250 shares of its preferred
stock-Series B to an officer in exchange for $125,000 of a demand note
payable. In April, 1996 the Company amended its resolution of June 1989,
which authorized preferred stock, Series B, to allow shares to be
convertible, upon the option of the holder, into 3500 shares of common
stock.
The Company has authorized 1,000 shares of preferred stock-Series C, none
of which was issued at December 31, 1995 and 1994. Each share of preferred
stock-Series C is convertible, upon the option of the holder, into 10,000
shares of common stock and does not participate in dividends. In addition,
the holders of the preferred stock-Series C shall have the right to vote on
all matters as to which holders of common stock have a right to vote, and
such voting rights shall be exercised on an as-converted basis.
F-22
<PAGE> 38
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
Between June and December, 1995, the Company authorized 5,000 and issued
3,000 shares of its preferred stock-Series D for $300,000 ($100 per share).
Between January and July 1996, the Company authorized an additional 5,000
shares and issued an additional 5,050 shares of its preferred stock-Series
D for $505,000 ($100 per share). Each share of preferred stock-Series D is
convertible, upon the option of the holder, into 2,000 shares of common
stock. Each share of the preferred stock-Series D is entitled to a
liquidation preference of $100. These shares are redeemable for cash at the
option of the Company at $120 per share any time on or after May 1, 1997.
In addition, the holders of the preferred stock-Series D shall have the
right to vote on all matters as to which holders of common stock have a
right to vote, and such voting rights shall be exercised on an as-converted
basis.
In July 1996, all holders of preferred stock - Series A, B and D converted
their shares of preferred stock into common stock of the Company, pursuant
to the formulas in the respective preferred stock agreements. The total
number of shares of common stock issued as a result of these conversions
was 28,725,000, including 7,000,000 to IMRC and 4,375,000 to the Company's
president.
In February 1995, the Company granted to non-employees common stock options
for 10,000,000 shares, exercisable at .01 per share. In January and
February 1996, the Company granted common stock options to non-employees
for 6,000,000 shares, exercisable at .02 per share. These options were
issued in exchange for various services performed on the Company's behalf.
Transfer of the shares, issued upon the exercise of the options, will be
restricted subject to registration requirements of the Securities Act of
1933 or an exemption from such requirements such as Rule 144 of the SEC.
The fair value of these options was estimated on the grant dates using the
Black-Scholes option-pricing model with the following assumptions used for
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Dividend yield 0% 0%
Expected volatility 125%-132% 138%
Risk-free interest rate 6% 6%
Expected lives 2 years 2-4 years
Discount for lack of marketability 35% 35%
Estimated fair value $75,530 $87,750
</TABLE>
The estimated fair value of these options is included in other development
stage expenses in the accompanying financial statements.
F-23
<PAGE> 39
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
In May 1996, the Company issued a stock option to an employee for 250,000
shares, exercisable at .05 per share. Transfer of the shares, issued upon
the exercise of the options, will be restricted subject to registration
requirements of the Securities Act of 1933 or an exemption from such
requirements such as Rule 144 of the SEC. The Company has adopted the
disclosure- only provisions of Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for this option. Had compensation
costs been recognized for this option, the Company's 1996 net loss would
have been increased by $10,644 and there would have been no effect on the
Company's loss per common share. This estimated fair value was also based
on the Black-Scholes option-pricing model with the following assumptions:
Dividend yield of 0%; expected volatility of 128%; risk-free interest rate
of 6%; expected life of 2 years; discount for lack of marketability of 35%.
At December 31, 1996, none of the stock options issued in 1996 and 1995 had
been exercised.
11. Income taxes
The Company has available at December 31, 1996, unused operating loss
carryforwards and tax credits, which may provide future tax benefits
expiring as follows:
<TABLE>
<CAPTION>
Year of expiration Carryforwards Credits
------------------ ------------- -------
<S> <C> <C>
1997 $ 384,000 $224,000
1998 766,000
1999 1,055,000 7,000
2000 1,642,000 2,000
2001 1,781,000
2002 1,617,000
2003 1,364,000
2004 1,105,000
2005 788,000
2006 434,000
2007 278,000
2008 250,000
2009 308,000
2010 401,000
2011 643,000
----------- --------
$12,816,000 $233,000
=========== ========
</TABLE>
F-24
<PAGE> 40
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
11. Income taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carryforwards $4,357,000 $4,220,000
Tax credits 79,000 79,000
Accrued payroll, officer 228,000 193,000
Stock options outstanding 55,000 30,000
Other temporary differences 14,000
---------- ----------
4,733,000 4,522,000
Less valuation allowance 4,733,000 4,522,000
---------- ----------
Net deferred tax asset $ -0- $ -0-
========== ==========
</TABLE>
SFAS No. 109 requires that the Company record a valuation allowance when it
is "more likely than not that some portion or all of the deferred tax
assets will not be realized." It further states that "forming a conclusion
that a valuation allowance is not needed is difficult when there is
negative evidence such as cumulative losses in recent years." As the
ultimate utilization of net operating loss carryforwards and tax credits
depends on the Company's ability to generate sufficient taxable income in
the future, the losses in recent years and the Company's desire to be
conservative make it appropriate to record a valuation allowance.
12. Commitments and contingencies
Lease
The Company leases its executive offices under a noncancellable operating
lease which expires in September 1998. The minimum future rental payments
required under this lease are $40,035 in 1997 and $30,026 in 1998.
Rent expense was $39,333, $33,861 and $31,206 for the years ended December
31, 1996, 1995 and 1994, respectively.
Liens
Included in accounts and notes payable are liabilities for which certain
vendors and officers have secured liens against the Company's assets.
F-25
<PAGE> 41
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
12. Commitments and contingencies (Continued)
Consulting arrangement
The Company formed a Salitron Medical Advisory Board whose chairman is
entitled to receive compensation in the amount of $25,000 at December 31,
1995. In addition, upon serving a minimum of two years, board members are
entitled to certain shares of the Company's common stock. In 1996, 300,000
shares valued at $9,000 were issued under this arrangement.
Legal matters
Convertible debenture offering
In 1989 Biosonics, Inc. raised $207,000 through a public offering of its
11.5% convertible debentures. The Company terminated the offering prior to
completion. Debentures were not returned to the investors with the
exception of $4,000. Biosonics did offer investors the right to convert
amounts paid for the unissued debentures into the Company's common stock
and $16,000 of said amount was converted into 1,180,000 shares of common
stock.
Unissued securities
In 1996, Biosonics, Inc. received $40,000 for 800,000 shares of common
stock which are expected to be issued in 1997. In 1990 and 1992 Biosonics
raised $271,000 for common and convertible preferred stock which was issued
in 1996.
During 1993 and 1994, IMRC borrowed an aggregate of $335,000, $120,000 of
which was pursuant to loans that were convertible into Biosonics common
stock owned by IMRCH, at $.01 and $.02 per share. With respect to $215,000
of the loans, IMRCH agreed to issue to the lenders 3,000,000 shares of
Biosonics common stock owned by IMRCH. These shares were issued by IMRCH in
1996. In addition, during 1994, IMRCH raised $190,161 through the sale of
Biosonics common stock owned by IMRCH at a range of $.02 to $.05 per share.
In 1996, Biosonics assumed the obligations of the IMRC loans totaling
$335,000. In addition, Biosonics assumed IMRC's obligation in connection
with the $190,161 raised by IMRC for the sale of Biosonics stock. Biosonics
also assumed $68,207 in loans and accrued interest owed to family members
of the Company's president by IMRC. These obligations were then settled by
Biosonics through the conversion of these liabilities into 15,368,820
shares of Biosonics common stock.
F-26
<PAGE> 42
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
11. Commitments and contingencies (Continued)
Legal matters (Continued)
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors and entities owning more than ten per cent of a Company's common
stock to file reports of changes in ownership with the SEC and to provide
the Company with copies of such forms.
The Company has noted that IMRCH may have been required to file and has not
filed required forms reporting the transactions described in the preceding
paragraph. In addition, the Company's president did not file required forms
reflecting gifts aggregating approximately 3,800,000 shares of the
Company's stock in 1992, 1993 and 1996, and the conversions of preferred
stock to common stock in 1996.
Other
The Company and its president were parties to a lawsuit filed by a
shareholder in March 1996 in connection with certain of the Company's
common stock restricted under Rule 144 of the Securities Exchange Act. The
suit alleged that the Company and its President failed to provide
documentation to the shareholder for release of the Rule 144 restriction.
The shareholder sought damages in excess of $50,000. The lawsuit was
settled and voluntarily terminated by the shareholder in May 1996. Neither
the Company or its president incurred any liability in connection with
resolution of the matter.
12. Supplemental disclosure of cash flow information
<TABLE>
<CAPTION>
Period from
November 13,
Year Ended December 31, 1980 (Inception)
------------------------------------ to December 31,
1996 1995 1994 1996
---- ---- ---- ---------------
<S> <C> <C> <C> <C>
Cash paid for
Interest $-0- $128 $-0- $33,031
=== ==== === =======
</TABLE>
F-27
<PAGE> 43
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
12. Supplemental disclosure of cash flow information (Continued)
Supplemental schedule of noncash financing activities
The Company issued the following amounts of common stock for noncash
consideration:
<TABLE>
<CAPTION>
Period from
November 13,
Year Ended December 31 1980 (Inception)
------------------------------------ to December 31,
1996 1995 1994 1996
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Common stock not
previously
issued $271,000 -- -- $ 271,000
Employee
compensation,
consulting
services 82,750 -- -- 536,959
Services provided
in exchange for
stock options 75,530 87,750 -- 163,280
Loan origination
fee -- -- -- 4,000
Acquisition of
product rights -- -- -- 12,501
Repayment of
accrued expenses
to IMRC 197,524 -- -- 197,524
Interest expense 3,000 -- -- 3,000
Repayment of
notes payable
to IMRC 182,444 -- -- 182,444
-------- ------- ------- ----------
$812,248 $87,750 $ -0- $1,370,708
======== ======= ======= ==========
</TABLE>
In September 1989, preferred stock-Series B was issued upon the conversion
of $125,000 of demand note payable.
In 1993, the Company converted accounts payable to a note payable on demand
for $68,000.
13. Interest expense
Interest expense for the years ended December 31, 1996, 1995, and 1994 was
$55,608, $66,742 and $52,129, respectively.
F-28
<PAGE> 44
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
13. Interest expense (Continued)
Included in interest expense is $11,917, $13,591 and $11,872 for loans from
the Company's president for the years ended December 31, 1996, 1995 and
1994, respectively.
Also included in interest expense is $14,595, $27,646 and $15,193 for a
loan from IMRC for the years ended December 31, 1996, 1995 and 1994,
respectively.
14. Quarterly results (Unaudited)
<TABLE>
<CAPTION>
Gross
Profit Net Loss
Sales (Loss) Net Loss Per Share
----- ------ -------- ---------
<S> <C> <C> <C> <C>
1996 - 1st Quarter $17,516 $ 8,918 ($177,353) ($.001)
2nd Quarter 11,609 3,855 (142,381) (.001)
3rd Quarter 5,786 (1,164) (324,708) (.001)
4th Quarter 5,863 (1,043) (132,955) (.000)
------- -------- --------- -----
Total $40,774 $ 10,566 ($777,397) ($.003)
======= ======== ========= =====
1995 - 1st Quarter $10,595 $ 3,618 ($244,453) ($.001)
2nd Quarter 11,931 3,833 (158,632) (.001)
3rd Quarter 23,190 5,168 (114,027) (.000)
4th Quarter 16,790 7,907 (92,373) (.000)
------- -------- --------- -----
Total $62,506 $ 20,526 ($609,485) ($.002)
======= ======== ========= =====
1994 - 1st Quarter $ 4,636 $ 4,592 ($ 66,160) ($.000)
2nd Quarter 6,680 (581) (72,732) (.000)
3rd Quarter 5,248 (1,979) (85,605) (.001)
4th Quarter 5,375 2,090 (198,094) (.001)
------- -------- --------- -----
Total $21,939 $ 4,122 ($422,591) ($.002)
======= ======== ========= =====
</TABLE>
F-29
<PAGE> 45
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
14. Quarterly results (Unaudited)(Continued)
The following is a reconciliation of 1996 quarterly results (unaudited) as
originally reported in the Company's 1996 Form 10-Q filings adjusted for
reclassifications of costs of goods sold and an overstatement of interest
expense for the quarter ended September 30, 1996:
<TABLE>
<CAPTION>
Gross profit
(loss) as Gross profit
originally (loss) as
reported Adjustment Adjusted
-------- ---------- --------
<S> <C> <C> <C>
1996 - 1st Quarter $ 14,461 ($ 5,543) $ 8,918
2nd Quarter (1,502) 5,357 3,855
3rd Quarter (1,164) (1,164)
4th Quarter (1,229) 186 (1,043)
-------- -------- --------
$ 10,566 $-0- $ 10,566
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Net loss Net loss
as originally as
reported Adjustment Adjusted
-------- ---------- --------
<S> <C> <C> <C>
1996 - 1st Quarter ($101,823) ($ 75,530) ($177,353)
2nd Quarter (142,381) (142,381)
3rd Quarter (354,708) 30,000 (324,708)
4th Quarter (132,955) (132,955)
--------- --------- ---------
($731,867) ($ 45,530) ($777,397)
========= ========= =========
</TABLE>
The Company filed an amended Form 10-Q for the quarter ended September 30,
1996 concurrent with its annual Form 10-K filing for the year ended
December 31, 1996.
F-30
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000352715
<NAME> BIOSONICS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 260
<SECURITIES> 0
<RECEIVABLES> 10,196
<ALLOWANCES> 2,000
<INVENTORY> 64,271
<CURRENT-ASSETS> 72,752
<PP&E> 254,806
<DEPRECIATION> 239,799
<TOTAL-ASSETS> 96,190
<CURRENT-LIABILITIES> 2,222,779
<BONDS> 187,000
28,787
0
<COMMON> 0
<OTHER-SE> (2,126,589)
<TOTAL-LIABILITY-AND-EQUITY> 96,190
<SALES> 40,774
<TOTAL-REVENUES> 40,849
<CGS> 30,208
<TOTAL-COSTS> 788,038
<OTHER-EXPENSES> 130,050
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,796
<INCOME-PRETAX> (777,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> (777,397)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (777,397)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
