UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarterly period ended February 28, 1997
|_|TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT For
the transition period from _____ to _____
COMMISSION FILE NUMBER 0-11408
BIOSENSOR CORPORATION
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MINNESOTA 41-1427114
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
13755 First Avenue North,
Plymouth, Minnesota 55441
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 449-9100
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 12 months (or for such shorter period
that registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO______
The number of shares outstanding of the registrant's common stock, $.05 par
value, as of March 17, 1997 is 2,823,055.
BIOSENSOR CORPORATION
CONDENSED BALANCE SHEETS
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February 28, May 31,
1997 1996
(Unaudited)
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ASSETS
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CURRENT ASSETS
Cash $82,004 $163,422
Receivables 574,213 605,536
Inventories 340,662 308,376
Prepaid expenses and other 28,252 17,163
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Total Current Assets 1,025,131 1,094,497
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DEPOSITS 8,666 11,204
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PROPERTY AND EQUIPMENT at cost, net 58,562 74,411
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$1,092,359 $1,180,112
===============================================================================
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Trade accounts payable 96,144 166,058
Accrued expenses
Commissions 40,526 55,280
Compensation 54,604 55,481
Warranty 29,457 30,657
Litigation (Note 3) 325,000 -
Other 9,567 27,348
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Total Current Liabilities 555,298 334,824
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STOCKHOLDERS' EQUITY
Common stock, par value $.05 per share 141,152 140,403
Additional paid-in capital 2,940,447 2,940,447
Accumulated deficit (2,544,538) (2,235,562)
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Total stockholders' equity 537,061 845,288
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$1,092,359 $1,180,112
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BIOSENSOR CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
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For the Three Months Ended For the Nine Months Ended
February 28 and 29, February 28 and 29,
---------------------------------------------------------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
NET SALES $ 745,867 $ 613,158 $ 1,923,834 $ 1,712,087
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COSTS AND EXPENSES
Cost of products sold 388,039 249,679 924,031 678,894
Research, development and engineering 74,541 39,124 207,476 119,063
Sales and marketing 191,465 143,973 490,542 447,007
General and administrative 83,854 113,482 283,429 329,466
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737,899 546,258 1,905,478 1,574,430
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Operating income 7,968 66,900 18,356 137,657
NONOPERATING INCOME (EXPENSE),
Litigation (Note 3) - - (325,000) -
Other, net 1,804 (535) 1,363 (2,142)
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1,804 (535) (323,637) (2,142)
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Income (Loss) before income taxes 9,772 66,365 (305,281) 135,515
Federal and State Income Taxes 440 - 2,695 1,689
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Net Income (Loss) $ 9,332 $ 66,365 $ (307,976) $ 133,826
================================================================================================================================
EARNINGS (LOSS) PER COMMON SHARE AND COMMON
EQUIVALENT SHARE $ .00 $ .02 $ (.11) $ .02
================================================================================================================================
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES 2,823,055 2,805,088 2,820,143 2,802,635
================================================================================================================================
</TABLE>
BIOSENSOR CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
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Nine Months Ended February 28 and 29, 1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(307,976) $ 133,826
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 26,430 20,977
Loss on sale of property and equipment - (73)
Changes in assets and liabilities:
(Increase) decrease in:
Receivables 31,323 (106,439)
Inventories (33,286) 64,761
Other assets (8,551) (1,102)
Increase (decrease) in :
Accounts payable (69,914) 22,561
Accrued expenses (Note 3) 290,388 5,005
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Net cash provided by (used in) operations (71,586) 139,516
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CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchase of product line - (20,000)
Purchase of property and equipment (11,655) (35,566)
Proceeds from sale of property and equipment 1,074 1,400
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Net cash used in investing activities (10,581) (54,166)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing from note payable to bank 100,000 110,000
Payments on note payable to bank (100,000) (130,000)
Net proceeds from issuance of common stock 749 563
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Net cash provided by financing activities 749 (19,437)
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Decrease in cash and cash equivalents (81,418) 65,913
CASH AND CASH EQUIVALENTS
Beginning of period 163,422 4,750
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End of period $ 82,004 $ 70,663
====================================================================================================
</TABLE>
BIOSENSOR CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS
The Company is engaged in the development, manufacture and marketing of
diagnostic equipment for physicians' offices, clinics and hospitals. The 24-hour
ambulatory cardiac monitoring, EKG telemetry, pulmonary function, EKG and
ambulatory blood pressure systems operate independently or in unison on an IBM
compatible office computer. The company also manufactures cardiac monitors for
OEM distributors.
NOTE 2. CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-KSB for the year ended May 31, 1996.
The results of operations for the three months and nine months ended February
28, 1997, are not necessarily indicative of the operating results for the full
year.
NOTE 3. LITIGATION
On September 19, 1996, a jury verdict in the amount of $325,000 was awarded to a
former vendor for its claims that the Company owed additional amounts under a
1988 software license agreement. The Company disputes this claim and has filed
an appeal. The Company is working with counsel to evaluate its further legal
options. The amount of the jury verdict was accrued as of August 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company's sales were $746,000 and $1,924,000 for the third quarter and nine
months ended February 28, 1997, respectively, compared to $613,000 and
$1,712,000 for the third quarter and nine months ended February 29, 1996. The
increase in sales is a result of increased sales in the US through independent
sales representatives. Cost of goods sold as a percentage of sales increased to
52% for the third quarter and 48% for the nine months ended February 28, 1997.
This is up from 40% for both of those same periods in the previous year. These
increases are due to lower margins in International sales as a result of
competitive activity and normal sales product mix variations and also due to
lower margins in the OEM products.
Research, development and engineering expenditures increased approximately
$35,000 or 89% for the third quarter and $88,000 or 74% for the nine months
ended February 28, 1997 compared to the previous year. These increases are due
to increased number of research and development personnel involved in the
development of new products intended to keep the Company competitive.
Sales and marketing expenses increased $47,000 for the third quarter and $43,000
for the nine months ended February 28, 1997. These increases are due to
increased commissions paid on increased US sales. In addition, several
telemarketing personnel were added to the US sales department during the second
and third quarters of 1997.
General and administrative costs decreased $30,000 for the third quarter and
$46,000 for the nine months ended February 28, 1997 compared to the prior year.
These decreases are due to decreases in personnel expenditures.
On September 19, 1996, a jury verdict in the amount of $325,000 was awarded to a
former vendor for its claims that the Company owed additional amounts under a
1988 software license agreement. The Company disputes this claim and has filed
an appeal. The Company is working with counsel to evaluate its further legal
options. The amount of the jury verdict had been accrued as of August 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ending February 28, 1997 cash used in operations
totaled $72,000 caused by the net loss of $308,000 partially offset by increased
accrued expenses of $290,000.
At February 28, 1997 the Company had working capital of $470,000. Management
believes its current working capital and anticipated cash flows from operations
will be sufficient to fund operating activities for the coming 12 months.
Legal proceedings described above may require the Company to pay a judgment
amount specified by the Court, pursue an appeal, or negotiate a settlement with
the plaintiff. If the Company is required to pay an entire judgment amount of
$325,000, working capital and cash flows from operations may not be sufficient
to pay the judgment amount and/or fund operations. In this event, the Company
may be unable to continue operations, and the Company may be required to seek
legal protection while the dispute is resolved.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 3 to the Financial Statements.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOSENSOR CORPORATION
/s/ B. Steven Springrose
B. Steven Springrose
President, Chief Executive Officer and Chief Financial Officer
Date: April 2, 1997
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