<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 3
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 21 pages
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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. The Company's financial
problems have been long standing. The Company had promoted its Salitron system
during the late 1980's and early 1990's, including promotion of the product
through independent "dry mouth centers," with the goal of generating enough
revenues to assist it with developing marketing programs for the Company's other
products. The inability to obtain Medicare approval, however made it difficult
for the company to receive reimbursement from private insurance carriers and
Medicare, although some payments from private insurance carriers and Medicare
have been received. The difficulties in obtaining Medicare reimbursement existed
both prior and subsequent to HCFA's notice on May 23, 1994 of its intention to
disapprove the Company's application for Medicare reimbursement for the Salitron
System. See "Business and Properties -- Government Regulation." Of the Company's
$40,774 in sales revenues in 1996 and $62,506 in sales revenues in 1995, $5,450
and $6,250, respectively, were received from Medicare and $15,500 and $26,750,
respectively were received from private insurance carriers during those years.
Also, revenues from Medicaid in 1996 were only $2,500 and no revenues from
Medicaid were receive in 1995. Because most of the patients who could use the
Salitron System for relief of dry mouth condition are within the Medicare age
group, the Company has lost the interest of patients and their physicians in the
Salitron System, who have been unwilling to wait during the long process of
reimbursement, which in some cases can be as long as one year. Reimbursements
from Medicare are processed on a case-by-case basis in which the Company usually
is required to go through a lengthy appeals process. The Company's operations,
therefore, have been dependent upon sales of its securities, loans and advances,
and the Company has had to shift to a marketing strategy for the Cystotron
Incontinence control System, as outlined below under "Plan of Operation for the
remainder of 1997 and 1998." there can be no assurance however, that this
strategy will be successful or that it can solve the Company's financial
problems.
Recent Capital Transactions
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 shares of Preferred
Stock into Common Stock of the Company pursuant to the formula set forth in
their respective Preferred Stock Agreements. The Series D Preferred Stock terms
were amended in May 1996 to increase the available Preferred Stock from 5,000
shares to 10,000 shares. The Series B Preferred Stock, terms were 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 Series B Preferred Stock.
In addition to the foregoing issuances and conversions, in July 1996 (i) the
Company issued an aggregate of 300,000 Common Stock shares to the Salitron
Advisory Board, and (ii) an aggregate of 280,000 shares of Common Stock were
issued to three doctors for medical consulting services rendered. Also, an
aggregate of 750,000 shares of Common Stock were issued in August and September
1996 to three outside consultants in connection with financial
2
<PAGE> 3
planning and consulting services provided to the Company. In August 1996, IMRCH
transferred 550,000 shares of the Company's Common Stock held by it to two
outside consultants for certain advertising and public relations services.
The Company also issued 15,368,820 shares of Common Stock in August 1996 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
shares of Biosonics Common Stock owned by IMRCH and canceled the indebtedness
owed from the Company to IMRC. In recent years, IMRC has acted as the receiving
and disbursing agent for all cash receipts and disbursements for the Company.
The resulting receivable or payable is reflected in the Company's balance sheets
and cash flow statements as advances to or from affiliates. The Company expects
to continue this arrangement through at least early 1998.
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
$138,000 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 reimbursed 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.
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. In May 1996, the Company granted an
option to an employee to purchase 250,000 shares to an employee at an exercise
price of $.05 per share. In March 1997, the company granted options to purchase
500,000 shares of Common Stock to an individual at an exercise price of $.05 per
share for 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.
During the quarter ended March 31, 1997, Biosonics issued Common Stock shares as
follows: (I) 310,000 shares at $.05 per share for payment of financial
consulting services, (ii) 12,000 shares at $.05 per share for payments to Dr.
Talal as final payment for his services on the Salitron Advisory Board, (iii)
10,000 shares at $.05 per share for interest payment on one loan established in
1991; and (iv) 5,000,000 shares at $.01 per share plus 1,000,000 shares at $.02
per share were issued to two investors, respectively, in exercise of stock
options, for which the Company received promissory notes in the aggregate
principal amount of the purchase price of $70,000 and for which such shares are
being held as collateral. All shares issued and explained above are restricted
and may not be sold except in accordance with the registration requirements
under the Act or an exemption from such requirements such as Rule 144.
In 1996, the Company had net positive cash flow from financing activities of
$356,000. This consisted of $515,000 from the issuance of preferred and common
stock, $40,000 received as subscriptions for stock to be issued in a
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private placement, $45,000 raised from the issuance of notes payable which were
subsequently repaid. The repayment of IMRC notes payable totaling $235,000
offset these receipts. The Company had negative cash flow from operating
activities of $365,000.
In 1995, the Company had positive cash flow from financing activities of
$310,000, consisting of $300,000 received from the sale of preferred stock and
$10,000 from the issuance of a note payable to IRMC. The Company expended
$31,261 for capital expenditures in connection with computer and telephone
equipment and had negative cash flow from operating activities of $278,739.
In 1994, the Company received $240,544 from the proceeds of notes payable to
IMRC. The Company had negative cash flows from operations of $240,544.
Plan of Operation for the Remainder of 1997 and 1998
Biosonics will require additional funds estimated to be approximately $3.0
million in the immediate future to continue its operations and implement current
manufacturing and marketing plans. The Company has completed a tentative
marketing plan for the Cystotron product. This plan includes matters relating to
the manufacturing and sales of the devices as well as the production of a
six-month marketing study for the product. The purpose of the study is to
provide further data for physicians to assist them in deciding whether to
prescribe the Cystotron System for their patients. In connection with this
tentative marketing plan, the Company has recently added an engineer to its
staff to review and implement a manufacturing bid process for the product. It is
intended that this engineer will also review the Company's other products in
connection with the possible updating of the technology associated with such
products. The Company is also planning to develop a strategy to market its
products in the international market. For example, the Company is looking to
hire a consultant to proceed with bringing the Salitron, Cystotron and Anotron
devices to the international conferences in late 1997.
The Company's anticipated funding needs result from the following breakdown:
<TABLE>
<CAPTION>
Allocation Item Funds Required
<S> <C>
Operating costs $ 750,000
Manufacturing costs fro 1,000 units (with accessories) 450,000
Finders fees for approximately $2.0 million international 100,000
distributorship arrangement (does not include any
fees and expenses to be negotiated with distributor)
Cystotron Advisory Board fees 60,000
Marketing study with 500 women 1,000,000
Marketing and advertising costs for Cystotron 375,000
Seminar for Physicians post study 250,000
Total $2,985,000
</TABLE>
The above numbers are estimated based on certain compilations of expenses.
Operating costs are estimated based on certain staff, office space, equipment
and professional fees required for administrating the Company in 1998 in
connection with its proposed plan of operation. Manufacturing costs are based on
estimated costs from manufacturing to produce the Cystotron System and
accessories, for services required from the marketing study and
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for sales in 1998. The finder's fee is the anticipated cost of paying the
company's consultant to generate a $2 million arrangement for European
distribution. These costs do not include any further expenses for exporting and
acquiring the European CE Mark required for importing the Europe, and the
company believes that these additional fees will be negotiated as part of the
distributor contract. The Cystotron Advisory Board fee is based upon an estimate
provided by the proposed head of the board. The $1 million for the marketing
study includes fees to the physicians for their study of patients as well as
nursing staff, biostatisticians and laboratory costs to be incurred to produce
the results of the study. Marketing and advertising costs for the Cystotron are
estimated amounts derived in connection with publications advertising and
TV/cable/radio advertising, for introducing the product to the public. The
seminar/symposium for the physicians at the end of the study will be the
Company's method of verifying the product's efficacy to the medical community,
inasmuch much as the Company's products must be prescribed by a physician prior
to sale. These estimated costs are for printing expenses, location and media
required for the symposium.
The bid process in connection with the manufacturing of the Cystotron product is
expected to result in a bid being awarded in December 1997 or early in 1998. The
"manufacturing bid process" consists of the Company's generating a "request for
proposal" document, which sets forth the manufacturing, quality assurance and
other particulars regarding the Cystotron and the completion of turnkey
manufacturing, ie., full assembly, packaging and labeling of the product. The
Company will also supply drawings for the bidder to review. Each prospective
manufacturer of the Cystotron must bid on the project by a specified date. The
Company will review the bids based upon the price, service and qualifications of
the respective manufacturers and award the project to the manufacturer selected
by the Company as a result of this process. The manufacturer will then have the
responsibility to produce the product within the outlined time frame, in
accordance with the specifications provided by the Company in compliance with
applicable regulations. In connection with the Company's marketing efforts in
connection with the Cystotron, the Company is planning to establish a medical
board of advisors to perform the above-described six-month study of the
Cystotron product.
Depending on the Company's ability to raise additional funds to commence and
implement its marketing plan for the Cystotron product and the establishment of
the market study and a sales team for the product, of which there can be no
assurance, the Company anticipates that sales of the product will commence in
the latter part of 1998.
The Company does have current inventory for the Salitron, but none for the
Cystotron. The Company believes that this existing inventory is not obsolete and
that the Company can sell and ship such units after testing the equipment. The
Company believes that the amount of revenue that could be generated from such
sales is approximately $375,000. Therefore, the bulk of the additional funds to
arrive at the $3.0 million will need to be derived from other sources, including
the following: (i) private or public offering of securities in early 1998; (ii)
sales from off-shore marketing arrangements of the Company's Cystotron
Incontinence Control System to be negotiated and (iii) other joint ventures or
domestic distribution of product.
If the Company cannot obtain the approximately $3.0 million it believes will be
necessary to implement the proposed Cystotron marketing plan, the Company will
need to find other sources for funds, such as other joint ventures or strategic
partnerships or the sale of the rights, including patent rights, to one or two
of its products (e.g., the Salitron System).
Biosonics does not have any material commitments for capital expenditures,
although management is considering making capital expenditures during 1997 and
1998 in connection with the manufacturing of the Cystotron System, if funds
become available, as described above. The extent of the development or testing,
if any, of Biosonics' other
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<PAGE> 6
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 24%, in 1996 as
compared to 1995 ($788,038 and $365,290 respectively) 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 with respect to 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 of the Salitron system 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 Preferred Stock in 1995. During
1996 and 1995, Biosonics concentrated its efforts and resources on obtaining
Medicare approval of the Salitron System, which was not obtained.
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.
Jack Paller, President and chief executive officer of the Company, has loaned
money to fund certain of the Company's operations from time to time. The
principal amount of a secured note payable to Mr. Paller is currently $90,000
bearing interest at the prime rate plus 1.5% per annum. This note is secured by
the Company's assets, including, but not limited to, the Company's patents.
Also, other vendors of the Company have recorded judgements or liens against the
Company in the aggregate amount of $257,526.
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.
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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 and for
the period from November 13, 1980 (Inception) to 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. The amounts shown in the statements of
operations and cash flows under the caption "Period from November 13, 1980
(Inception) to December 31, 1996" include the period from November 13, 1980
(Inception) to December 31, 1985 which we did not audit. Those financial
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts for the period
November 13, 1980 (Inception) to December 31, 1985, is based solely on the
reports of the other auditors.
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 and the reports of the other auditors provide a
reasonable basis for our opinion.
F-1
<PAGE> 8
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 and for the
period from November 13, 1980 (Inception) to December 31, 1996 in conformity
with generally accepted accounting principles.
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.
/s/ Morris J. Cohen & Co., P.C.
MORRIS J. COHEN & CO., P.C.
Philadelphia, Pennsylvania
February 21, 1997
(except for Notes 3 and 10, as to which
the date is July 18, 1997)
F-2
<PAGE> 9
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
Advances to affiliate 77,997
Prepaid expenses and other
current assets 25 8,851
-------- --------
Total current assets 150,749 100,208
Equipment, furniture and leaseholds,
net of accumulated depreciation
and amortization 15,007 25,011
Deposits 8,431 8,431
-------- --------
Total assets $174,187 $133,650
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 10
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current liabilities
Notes payable
Officer and affiliate $ 115,000 $ 532,444
Other 173,000 128,000
Accrued payroll, officer 669,500 566,500
Accrued interest
Officer and affiliate 55,905 103,606
Other 173,131 147,838
Accounts payable and other
accrued expenses 824,790 849,132
Advances from affiliates 62,450 24,571
Payments received for unissued
debentures 187,000 187,000
Payments received for unissued
securities 40,000 271,000
------------ ------------
Total current liabilities 2,300,776 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 $ 174,187 $ 133,650
============ ============
</TABLE>
F-4
<PAGE> 11
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS (RESTATED)
<TABLE>
<CAPTION>
Period from
November 13,
1980
(Inception)
Year Ended December 31, to
------------------------------------- December 31,
1996 1995 1994 1996
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
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
--------- --------- --------- ------------
Development stage
expenses
Research and
development 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
--------- --------- --------- ------------
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) ($13,918,378)
========= ========= ========= ============
Loss per common
share ($ .00) ($ .00) ($ .00) ($ .06)
========= ========= ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 12
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> 13
<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>
$ 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> 14
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> 15
<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>
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> 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, 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> 17
<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>
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> 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, 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> 19
<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>
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 $1,000 99,000 100,000 (3)
(1,372,913) (1,372,913)
- ----- ------ ----------- ----------- ----------
1,000 1,000 9,338,337 (8,821,212) 538,936
</TABLE>
F-9
<PAGE> 20
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIENCY)(RESTATED)(Continued)
Period from November 13, 1980 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Common Stock
---------------------
Shares Amount
----------- ------
<S> <C> <C>
Balance forward December 31, 1988 208,114,936 20,811
Common stock issued March 1989 and
May 1989 ($.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> 21
<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>
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> 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, 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> 23
<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>
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- (11)
12,870 13,000 (3)
256,710 258,000 (3)
</TABLE>
F-11
<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>
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
($.05 per share) 280,000 28
Common stock issued August 1996
($.05 per share) 1,075,220 108
Common stock issued November 1996
($.05 per share) 200,000 20
Common stock issued September 1996
($.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> 25
<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 (2)
14,957 15,000 (10)
59,005 59,175 (10)
9,975 10,000 (10)
2,993 3,000 (9)
13,972 14,000 (2)
53,654 53,762 (10)
9,980 10,000 (3)
6,490 6,500 (2)
31,960 32,000 (2)
21,225 21,250 (2)
(777,397) (777,397)
- ------ -------- ----------- ----------- ----------
-0- $ -0- $11,763,002 ($13,918,378) ($2,126,589)
====== ======== =========== =========== ==========
</TABLE>
F-12
<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
(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.
(11) Shares of Biosonics, Inc. contributed by IMRCH as a
capital contribution.
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 27
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS (RESTATED)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from
operating activities
Net loss ($777,397) ($609,485) ($422,591)
--------- --------- ---------
Adjustments to reconcile
net loss to net cash
used in operating activities
Depreciation and amortization 10,004 20,117 4,835
Increase (decrease) in
allowance for doubtful
accounts (4,000) (7,000)
Increase (decrease)in reserve
for inventory obsolescence (13,000)
Loss on lease abandonment
Gain on sale of equipment
Common stock issued
for services 85,750
Common stock options
issued for services 75,530 87,750
Common stock issued for
product rights
Changes in operating assets
and liabilities
Accounts receivable 16,817 (16,543) 10,161
Inventories 18,813 15,603 3,687
Prepaid expenses and other
current assets 8,828 (2,121) (6,119)
Accrued payroll, officer 103,000 103,000 103,000
Accrued interest
Officer and affiliate 26,502 41,771 26,541
Other 25,293 24,842 25,588
Accounts payable and
accrued expenses (24,342) 16,309 65,661
Advances from (to)
affiliates 83,202 40,018 (44,307)
--------- --------- ---------
412,397 330,746 182,047
--------- --------- ---------
Net cash used in operating
activities (365,000) (278,739) (240,544)
--------- --------- ---------
</TABLE>
<PAGE> 28
Period from
November 13,
1980
(Inception) to
December 31,
1996
- ---------------
($13,918,378)
378,687
2,000
27,000
19,550
(7,620)
543,959
163,280
12,501
(10,196)
(91,271)
(25)
669,500
130,108
173,131
892,792
107,773
3,011,169
(10,907,209)
F-14
<PAGE> 29
BIOSONICS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS (RESTATED)
(Continued)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Cash flows from
investing activities
Capital expenditures (31,261)
Proceeds from sale of equipment
Issuance of note receivable
Increase in deposits
Decrease in note receivable
Patent expenditures
--------
Net cash used in investing
activities (31,261)
--------
Cash flows from financing
activities
Payments received for unissued
debentures and securities 40,000
Principal payments of note
payable (235,000)
Proceeds from issuance of
notes payable 45,000 10,000 240,544
Increase in capitalized
organization costs
Proceeds from issuance of
preferred stock 505,000 300,000
Proceeds from issuance of
common stock 10,000
--------- -------- --------
Net cash provided by
financing activities 365,000 310,000 240,544
--------- -------- --------
Net increase in cash
Cash, beginning 260 260 260
--------- -------- --------
Cash, ending $ 260 $ 260 $ 260
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 30
Period from
November 13,
1980
(Inception) to
December 31,
1996
-----------
(363,305)
10,825
(30,000)
(8,431)
30,000
(45,690)
-----------
(406,601)
-----------
498,000
(307,000)
834,444
(7,453)
1,105,000
9,191,079
-----------
11,314,070
-----------
260
-----------
$ 260
===========
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. The
resulting receivable or payable is reflected in the accompanying balance
sheets as advances to or from affiliates.
Inventories
Inventories consist primarily of finished products and 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 ($ .00) ($ .00) ($ .00) ($ .00)
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. Advances to/from affiliates
At December 31, 1996, the Company had advances to IMRC of $77,997 and
advances from IMRCH of $62,450. At December 31, 1995, advances from
affiliates consisted of $17,121 from IMRC and $7,450 from IMRCH.
8. Notes payable
Notes payable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Notes payable on demand to an
officer of the Company, secured by
Company assets, bearing interest at
prime plus 1.5% per annum (effective
rate of 8.25% at December 31, 1996) $115,000 $135,000
Unsecured notes payable on demand,
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. Certain of these
shares held by officers and directors 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 3,500 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.
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,
F-22
<PAGE> 38
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
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 life 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.
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."
F-23
<PAGE> 39
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
10. Shareholders' equity (Continued)
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%.
Stock options granted by the Company during 1995 and 1996 vested upon
issuance and expire in two to four years from the date of grant.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Stock options, beginning of year 10,000,000 0
Options issued 6,250,000 10,000,000
Options terminated or expired 0 0
---------- ----------
Stock options, end of year 16,250,000 10,000,000
========== ==========
</TABLE>
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 totalling
$372,526 (1996) and $392,526 (1995), for which certain vendors and
officers have secured liens against the all of Company's assets
totalling $174,187 (1996) and $133,650 (1995).
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, as the Company was unable to raise the minimum specified
in the offering document. Debentures were not issued and amounts were
not returned to the investors with the exception of $4,000.
Subsequently, $16,000 of said amount was converted into 1,180,000 shares
of common stock. The Company has accrued interest on these funds
totalling $153,599 and $132,094 at December 31, 1996 and 1995,
respectively. The Company plans to repay the investors, with interest,
when there is sufficient cash flow to permit such repayments.
Unissued securities
In 1996, Biosonics, Inc. received $40,000 from two individuals for
800,000 shares of common stock which were issued upon the initial
closing of the Company's private placement in April 1997. In 1990 and
1992 Biosonics raised $271,000 for common and convertible preferred
shares. The shares were unissued since the Company's number of
authorized shares would have been exceeded. In 1996, with the approval
of shareholders, the authorized number of shares was increased and these
shares were issued.
F-26
<PAGE> 42
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
12. Commitments and contingencies (Continued)
Legal matters (Continued)
Unissued Securities (Continued)
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.
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.
F-27
<PAGE> 43
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
12. Commitments and contingencies (Continued)
Legal matters (Continued)
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.
13. 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-28
<PAGE> 44
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
13. 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.
14. Interest expense
Interest expense for the years ended December 31, 1996, 1995, and 1994
was $55,608, $66,742 and $52,129, respectively.
F-29
<PAGE> 45
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
14. 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.
15. Other development stage expenses
Other development stage expenses consist primarily of salaries, rent and
utilities, interest and marketing costs.
16. Quarterly results, as restated (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 ($177,353) ($ .00)
2nd Quarter 11,609 3,855 (142,381) (.00)
3rd Quarter 5,786 (1,164) (324,708) (.00)
4th Quarter 5,863 (1,043) (132,955) (.00)
------- -------- --------- -----------
Total $40,774 $ 10,566 ($777,397) ($ .00)
======= ======== ========= ===========
1995 - 1st Quarter $ 10,595 $ 3,618 ($244,453) ($ .00)
2nd Quarter 11,931 3,833 (158,632) (.00)
3rd Quarter 23,190 5,168 (114,027) (.00)
4th Quarter 16,790 7,907 (92,373) (.00)
------- -------- --------- -----------
Total $62,506 $ 20,526 ($609,485) ($ .00)
======= ======== ========= ===========
1994 - 1st Quarter $ 4,636 $ 4,592 ($ 66,160) ($ .00)
2nd Quarter 6,680 (581) (72,732) (.00)
3rd Quarter 5,248 (1,979) (85,605) (.00)
4th Quarter 5,375 2,090 (198,094) (.00)
------- -------- --------- -----------
Total $21,939 $ 4,122 ($422,591) ($ .00)
======= ======== ========= ===========
</TABLE>
F-30
<PAGE> 46
BIOSONICS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
16. Quarterly results, as restated (Unaudited)(Continued)
The following is a reconciliation of 1996 and 1995 quarterly results
(unaudited) as originally reported in the Company's Form 10-Q filings
adjusted for reclassifications of costs of goods sold, previously
unrecorded non-employee stock options in the quarters ended March 31,
1996 and 1995, 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
========= ========= =========
Net loss as Net loss
originally (Restated)
reported Adjustment as adjusted
------------ ----------- ----------
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)
========= ========= =========
Net loss as Net loss
originally (Restated)
reported Adjustment as adjusted
------------ ----------- ---------
1995 - 1st Quarter $(156,703) $( 87,750) $(244,453)
2nd Quarter (158,632) (158,632)
3rd Quarter (114,027) (114,027)
4th Quarter (92,373) (92,373)
--------- --------- ---------
$(521,735) $( 87,750) $(609,485)
========= ========= =========
</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-31
<PAGE> 47
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
& Chief Executive Officer
Date: February 11, 1998.
------------------
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: February 11, 1998.
------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<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> 150,749
<PP&E> 254,806
<DEPRECIATION> 239,799
<TOTAL-ASSETS> 174,187
<CURRENT-LIABILITIES> 2,300,776
<BONDS> 187,000
0
0
<COMMON> 28,787
<OTHER-SE> (2,126,589)
<TOTAL-LIABILITY-AND-EQUITY> 174,187
<SALES> 40,774
<TOTAL-REVENUES> 40,849
<CGS> 30,208
<TOTAL-COSTS> 788,038
<OTHER-EXPENSES> 636,488
<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>
