U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(mark one)
__X__ Quarterly report under Section 13 or 15 of the Securities Exchange Act
of 1934.
For the quarterly period ended September 30, 1998
______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 0-11408
BIOSENSOR CORPORATION
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1427114
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
6 Woodcross Drive, Columbia, South Carolina 29212
(Address of principal executive offices) (Zip code)
(803) 407-3044
(Issuer's telephone number, including area code)
Former address- 7001 East Fish Lake Road, Maple Grove, MN 55311
Former fiscal year- May 31st
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (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 ______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,008,055 at November 25,
1998.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
BIOSENSOR CORPORATION
Consolidated Balance Sheets - Note 1
September 30, 1998 June 30, 1998
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $730,834 $772,415
Accounts receivable, net of allowance
for doubtful accounts 1,504,753 1,364,546
Refundable income taxes 30,708 30,708
Inventories--Note 2 1,465,034 1,366,232
Deferred income taxes 138,868 138,868
Prepaid expenses 138,688 102,299
Total Current Assets 4,008,885 3,775,068
PROPERTY AND EQUIPMENT--Net of depreciation 839,784 891,764
OTHER ASSETS
Goodwill, net of accumulated amortization
-- Note 3 1,206,210 1,220,934
Other assets, net--Note 4 206,857 216,166
1,413,067 1,437,100
$6,261,736 $6,103,932
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $252,711 $265,923
Current maturities of related party
obligations 168,784 161,136
Current maturities of capital lease
obligations 14,269 14,791
Notes payable--Note 5 304,837 295,798
Trade accounts payable 966,813 1,017,962
Accrued payroll and related liabilities 292,243 224,601
Deferred service contract revenue 314,639 312,971
Other accrued expenses 414,305 330,974
Total Current Liabilities 2,728,601 2,624,156
LONG-TERM DEBT, less current maturities 1,127,608 1,044,232
RELATED PARTY OBLIGATIONS, less
current maturities-Notes 5,9 1,628,129 1,638,507
CAPITAL LEASE OBLIGATIONS, less
current maturities 5,875 7,757
DEFERRED TAX LIABILITY 3,855 3,855
STOCKHOLDERS' EQUITY - Notes 1,9
Common stock, $.05 par value;
4,850,000 shares authorized,
2,843,055 shared issued at
September 30, 1998: $.20 par value
4,000,000 shares authorized, 1,987,002
issued at June 30, 1998 142,153 397,400
Preferred stock--Note 1 715,321 0
Additional paid-in capital 916,963 1,267,152
Accumulated deficit (1,006,769) (879,127)
767,668 785,425
$6,261,736 $6,103,932
The accompanying notes are an integral part of these financial statements.
BIOSENSOR CORPORATION
Pro forma Combined Balance Sheets - Notes 1, 10
September 30, 1998 June 30, 1998
ASSETS (Unaudited) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $730,834 $822,497
Accounts receivable, net of
allowance for doubtful accounts 1,504,753 1,566,614
Refundable income taxes 30,708 30,708
Inventories 1,465,034 1,583,454
Deferred income taxes 138,868 138,868
Prepaid expenses 138,688 144,807
Total Current Assets 4,008,885 4,288,948
PROPERTY AND EQUIPMENT--Net of
depreciation 839,784 925,175
OTHER ASSETS
Goodwill, net of accumulated amortization
-- Note 3 1,206,210 1,220,934
Other assets, net--Note 4 206,857 216,166
1,413,067 1,437,100
$6,261,736 $6,651,223
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $252,711 $292,923
Current maturities of related party
obligations 168,784 161,136
Current maturities of capital lease
obligations 14,269 14,791
Notes payable--Note 5 304,837 295,798
Trade accounts payable 966,813 1,069,402
Accrued payroll and related liabilities 292,243 257,111
Deferred service contract revenue 314,639 354,022
Other accrued expenses 414,305 471,379
Total Current Liabilities 2,728,601 2,936,562
LONG-TERM DEBT, less current maturities 1,127,608 1,169,232
RELATED PARTY OBLIGATIONS, less
current maturities-Notes 5,9 1,628,129 1,638,507
CAPITAL LEASE OBLIGATIONS, less
current maturities 5,875 7,757
DEFERRED TAX LIABILITY 3,855 3,855
STOCKHOLDERS' EQUITY - Notes 1,9
Common stock, $.05 par value; 4,850,000
shares authorized, 2,843,055 shared
issued at June 30, and September 30,
1998 142,153 142,153
Preferred stock--Note 1 715,321 715,321
Additional paid-in capital 916,963 916,963
Accumulated deficit (1,006,769) (879,127)
767,668 895,310
$6,261,736 $6,651,223
The accompanying notes are an integral part of these financial statements.
BIOSENSOR CORPORATION
Consolidated Statements of Operations - Note 1
For the Quarters Ended September 30, 1998 1997
(Unaudited) (Unaudited)
NET SALES AND SERVICES $2,333,590 $517,581
COST OF SALES AND SERVICES 1,319,703 311,774
GROSS PROFIT 1,013,887 205,807
OPERATING EXPENSES:
Selling, general and administrative 833,311 148,793
Research and development 233,202 38,210
1,066,513 187,003
OPERATING PROFIT (LOSS) (52,626) 18,804
OTHER EXPENSES, net (75,649) (10,475)
NET PROFIT (LOSS) BEFORE INCOME TAXES (128,275) 8,329
PROVISION FOR INCOME TAXES 633 269
NET PROFIT (LOSS) (127,642) 8,598
ACCUMULATED SURPLUS (DEFICIT)--BEGINNING OF PERIOD (879,127) 34,790
ACCUMULATED SURPLUS (DEFICIT)--END OF PERIOD ($1,006,769) $43,388
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES ($127,642) $8,598
BASIC EARNINGS (LOSS) PER COMMON SHARE - Note7 ($0.04) $0.00
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - Note 9 2,843,055 1,987,002
The accompanying notes are an integral part of these financial statements.
BIOSENSOR CORPORATION
Pro forma Combined Statements of Operations - Notes 1, 10
For the Quarters Ended September 30, 1998 1997
(Unaudited) (Unaudited)
NET SALES AND SERVICES $2,333,590 $2,931,165
COST OF SALES AND SERVICES 1,319,703 1,715,616
GROSS PROFIT 1,013,887 1,215,549
OPERATING EXPENSES:
Selling, general and administrative 833,311 895,160
Research and development 233,202 339,786
1,066,513 1,234,946
OPERATING PROFIT (LOSS) (52,626) (19,397)
OTHER EXPENSES, net (75,649) (92,495)
NET PROFIT (LOSS) BEFORE INCOME TAXES (128,275) (111,892)
PROVISION FOR INCOME TAXES 633 0
NET PROFIT (LOSS) (127,642) (111,892)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES ($127,642) ($141,605)
BASIC EARNINGS (LOSS) PER COMMON SHARE - Note7 ($0.04) ($0.05)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - Note 9 2,843,055 2,843,055
The accompanying notes are an integral part of these financial statements
BIOSENSOR CORPORATION
Consolidated Statements of Cash Flows -Note 1
For the Quarters Ended September 30, 1998 1997
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net profit (loss) ($127,642) $8,598
Adjustment to reconcile net loss to net cash
Provided by operating activities:
Depreciation 99,661 11,992
Amortization 35,239 0
(Increase) decrease in current assets:
Accounts receivable 63,861 14,447
Inventories 118,420 37,201
Prepaid and other current asset 6,119
Increase (decrease) in current liabilities:
Accounts payable (122,589) (31,013)
Accrued payroll and related liabilities 35,132
Deferred service contract revenue (39,383)
Other accrued expenses (57,074) 11,760
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 11,744 52,985
INVESTING ACTIVITIES
Purchase of property and equipment (14,270) (9,000)
Capitalization of product software (6,040)
Capitalization of costs related to mergers (5,166)
Increase in deposits and other assets (1,882)
CASH USED BY INVESTING ACTIVITIES (27,358) (9,000)
FINANCING ACTIVITIES
Proceeds from issuance of long term debt 0
Net change in short term debt 9,039 (52,673)
Payments of long term debt (85,088)
Cash acquired in merger with Biosensor--
Note 1 50,082
CASH PROVIDED BY FINANCING ACTIVITIES (25,967) (52,673)
NET DECREASE IN CASH AND CASH EQUIVALENTS (41,581) (8,688)
CASH AT BEGINNING OF PERIOD 772,415 138,667
CASH AT END OF PERIOD $730,834 $129,979
The accompanying notes are an integral part of these financial statements.
BIOSENSOR CORPORATION
Notes to Financial Statements
1. Basis of Presentation
Background
On July 23, 1998, effective July 1, 1998 Biosensor Corporation ("Biosensor"
or the "Company") acquired through a "reverse merger" all outstanding shares of
capital stock of Carolina Medical Inc. ("Carolina Medical" or "CMI") in
exchange for 149,025.15 shares of the Company's Series A Preferred Stock and
adopted a Plan of Reorganization and Agreement (the "Plan") dated May 29, 1998.
This Plan requires the Company to submit to its shareholders proposals i) to
change the Company's name to BIOTEL, Inc., ii) to effect a one-for-six
reverse stock split of its common stock (the "Reverse Stock Split"), and iii)
to increase the authorized number of shares of common stock to 10,000,000 and
the authorized number of shares of preferred stock to 2,000,000. These
proposals will be set forth in a proxy solicitation, which the Company expects
to mail to shareholders on or about December 10, 1998.
CMl develops, manufactures, markets and services digital ultrasound imagers,
electronic instruments for detecting circulatory system disorders and measuring
the flow and pressure of blood. CMI has two subsidiaries: Braemar, Inc., and
Advanced Medical Products, Inc. Braemar, Inc. is a wholly owned subsidiary
of CMI that develops, manufactures and markets tape recording devices and
digital electronics for ambulatory ECG (Holter) monitoring devices. CMI owns
approximately 55% of the issued and outstanding common stock of Advanced
Medical Product, Inc., a publicly held Delaware corporation, that develops,
manufactures, markets and services ambulatory ECG and blood pressure monitors.
Each share of Series A Preferred Stock is convertible into 96 shares of the
Company's Common Stock prior to the proposed one share for six reverse stock
split, or 16 shares of common stock after the proposed reverse stock split.
Each share of Series A Preferred Stock votes and participates in dividends and
liquidations on an as-if-converted basis. The Series A Preferred Stock will
automatically convert into common stock as of the end of business on the
first day following the date that the Company's Articles of Incorporation
authorize sufficient common stock to accommodate conversion of all issued and
outstanding shares of Series A Preferred Stock. As a result, shareholders of
the Series A preferred stock effectively own approximately 83% of the
Company's outstanding common stock. Because this transaction was a "reverse
merger", the historical financial statements of the Company for Fiscal 1997
and Fiscal 1998 are those of Carolina Medical consolidated with its
subsidiaries. The net assets of Biosensor acquired in the reverse merger were
recorded at the June 30, 1998 fair market value.
On July 23, 1998, the Company determined to change its fiscal year end to June
30, 1998 from May 31, 1998. The Company has adopted the fiscal year of CMI, the
accounting acquiror. The accompanying unaudited financial statements for the
quarter ended September 30, 1998 are those of the combined Company,
consolidating the balance sheets and statements of operations of Carolina
Medical, Braemar, Biosensor and Advanced Medical (the Company's
55% subsidiary), with all appropriate consolidating adjustments. The compara-
tive statement of operations for the quarter ended September 30, 1997 is that
of the acquiror, and does not include the results of Braemar, which had not
been acquired at that time; or Biosensor, as the September 1997 period was
prior to the merger of Biosensor and Carolina Medical; or
Advanced Medical which as a minority owned subsidiary was accounted for at that
time using the equity method. A pro forma combined statement of operations is
also included for comparative purposes.
Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-QSB and
Article 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principals for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three-
month period ended September 30, 1998 are not necessarily indicative of the
results that may be expected for fiscal year 1999. These unaudited financial
statements should be read in conjunction with the financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended May 31, 1998, and in the Company's report on Form 8K filed
July 23, 1998 and the Financial Amendment to Form 8K filed on November 24,
1998.
2. Inventory Sept. 30, 1998 June 30, 1998
(unaudited)
Inventory consisted of:
Raw materials and work in process $ 1,326,865 $ 1,270,522
Finished goods 589,213 505,667
Reserve for obsolescence (451,044) (409,957)
1,465,034 $ 1,366,232
3. Business Combinations and Goodwill
Carolina Medical acquired the assets of Braemar Inc. and certain other assets at
purchase prices greater than the fair market value of the acquired net assets;
the difference was allocated to goodwill totaling $1,266,082, which is being
amortized over 15 years. Accumulated amortization totaled $45,148 at June 30,
1998 and $59,872 at September 30, 1998.
4. Other Long Term Assets Sept. 30, 1998 June 30, 1998
(unaudited)
Product software costs net of amortization
at 9/30/98 of $330,287 and 6/30/98 of
$319,381 $ 47,885 $ 52,751
Deferred charges, net of amortization 52,500 60,000
Acquisition assets, net of amortization 56,305 52,748
Other 45,667 40,667
$ 206,857 $216,166
5. Related Party Transactions
The Company has a note payable to a stockholder of the Company in the amount of
$1,600,000 at an annual interest of prime plus 1.5%, interest paid monthly and
the principal due October 20, 1999. At September 30, 1998, interest of
$6,667 was accrued on this note. In addition, the Company has a note payable
to another stockholder of the Company in the amount of $150,000 at an annual
interest rate of 12%, with interest paid monthly and the principal due
January 1, 1999. At September 30, 1998, $19,329 in interest was due on this
note, and was accrued.
In July 1996, the Company entered into a loan agreement with Advanced Medical
Products, Inc., a majority owned subsidiary of the Company, under which the
Company loaned Advanced Medical $150,000 12 percent annual rate of interest.
This note, originally set to mature September 30, 1996 has subsequently been
extended to December 31, 1999. At September 30, 1998, $3,000 in interest was
due the Company, in addition to the principle of $150,000. Inter-company debt
and expense has been eliminated in the consolidated financial statements.
During July and August 1998, the Company loaned to Advanced Medical an
additional $70,000 to meet working capital needs, of which $30,000 was repaid in
September 1998.
Advanced Medical purchased approximately $151,000 of finished goods from
Braemar, Inc. a subsidiary of the Company, and approximately $70,000 of
finished goods from Biosensor during the quarter ended September 30, 1998,
in addition to $240,000 of finished goods purchased from Braemar prior to
June 30, 1998. At September 30, 1998, approximately $327,000 was owed to
the Company and its subsidiary by Advanced Medical as accounts payable for
finished goods that had been purchased by Advanced Medical from the Company and
its subsidiaries. Inter-company receivables and payables have been
eliminated in the consolidated financial statements. Inter-company profits
were not material. (see Note 9, Subsequent Events)
6. Capital Stock Transactions
In May 1998, Carolina Medical, Inc. sold shares of Carolina Medical's common
stock to two investors for $470,000, net of costs of the transaction. As a
result of the July 23, 1998 exchange of Carolina Medical's common stock for the
Company's Series A Preferred Stock, these two investors own 15,000 Shares of
the Company's Series A Preferred Stock or 10% of the total Series A
Preferred Stock issued and outstanding.
Also in May 1998, Carolina Medical, Inc., issued shares of its common stock
to acquire 300,000 shares of Advanced Medical Products, Inc. common stock
previously owned by Nishimoto Sangyo Company, Ltd., which increased the
Company's ownership in Advanced Medical from 51% to 55.3% of the issued and
outstanding common stock.
During May and June 1998 Carolina Medical, Inc. issued additional shares of
its common stock to acquire all of the issued and outstanding shares of
Advanced Medical's Preferred Stock totaling 2,377 shares, 2,217 previously
owned by Nishimoto and 160 shares previously owned by SCANA, including all
unpaid dividends of $162,981. (See Note 9, Subsequent Events) As a result
of the share exchange of Carolina Medical common stock for the Company's
Series A Preferred Stock, Nishimoto, a distributor for certain of the
Company's products, owns 15,000 Shares of the Company's Series A Preferred
Stock or 10% of the total Series A Preferred Stock issued and outstanding.
7. Per Share Earnings
Basic earnings (loss) per common share were computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Earnings per share calculations did not include the impact of outstanding
options as they would be antidilutive.
8. Plan to Acquire Advanced Medical Products, Inc. by Merger
In July 1998 the Company's Board of Directors approved a Plan of Reorganization
and Merger, which plan was subsequently approved by the Board of Directors of
Advanced Medical, authorizing the merger of a wholly owned subsidiary of
Biosensor, which has not yet been organized, with and into Advanced Medical
Products, Inc., subject to certain terms and conditions. The Company and
Advanced Medical are currently preparing a definitive agreement to combine
their cardiac monitor businesses, and to do business as Advanced Biosensor
Inc.
9. Subsequent Events
In July 1998, the Board of Directors of the Company and the Board of Directors
of Advanced Medical approved a plan for Carolina Medical to purchase from
Advanced Medical the Micros QV ultrasound product line, including inventory
valued at June 30, 1998 at $135,152 and all rights and related intellectual
property, in exchange for the return to Advanced Medical of all of the 2,377
shares of the Advanced Medical's Preferred Stock having a face value of
$2,377,000 and forgiveness of all of the accrued unpaid dividends totaling
$162,981 as of June 30, 1998. The Company also agreed to waive any payment of
dividends on the Preferred Stock for the quarter ended September 30, 1998; thus
no dividend income was accrued by the Company and no dividend expense accrued
by Advanced Medical for the quarter ended September 30, 1998. This
transaction, approved by both company's boards in July, was completed In
October 1998.
In November 1998, 150,000 shares of the Company's common stock were issued to
the President of Braemar, Inc., a wholly owned subsidiary of the Company, as a
stock bonus. Expense was accrued in the September 1998 quarter at fair
market value of the stock over the prior 30 day period. Also in November,
15,000 shares of the Company's common stock were issued to a prior employee
of Biosensor upon exercise of stock options under the Company's incentive
stock option plan and a stock option agreement dated December 30, 1997.
10. Pro forma Combined Financial Statements
Included herewith are Pro forma Combined Balance Sheets and Pro forma
Combined Statements of Operations showing what the financial results would have
been at June 30, 1998 and for the comparative quarter ended September 30,
1997 if the acquisition of Braemar Inc., the purchase of majority ownership
of Advanced Medical, and the merger of Carolina Medical and Biosensor had all
taken place on June 30, 1997.
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS
Forward Looking Statements
This and other sections of this report contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which represent the Company's expectations concerning future events including
future cash flows, results of operations, expected continuing availability of
the credit line, the Company's continuing ability to sell its Holter and
ambulatory blood pressure products to office practices, and the Company's
belief regarding future recovery from declining revenues in the medical
device industry. By their very nature, forward-looking statements are
subject to known and unknown risks and uncertainties relating to the
Company's future performance that may cause actual results to differ
materially from those expressed or implied in such forward-looking
statements. The Company does not undertake and assumes no obligation to
update any forward-looking statement that may be made herein or from time to
time by or on behalf of the Company.
Results of Operations
The following discussion should be read in conjunction with the accompanying
ConsolidatedFinancial Statements, including the notes thereto, and the Proforma
Combined Financial Statements, appearing elsewhere herein.
The Company's consolidated revenues from sales of products and services were
$2,333,590 for the three months ended September 30, 1998 compared to $517,581
for the comparable quarter ended September 30, 1997. Carolina Medical's
sales for the three months ended September 30, 1998 of $436,950 were off
approximately $81,000 from the comparable quarter in 1997. Of the net
increase in consolidated sales of $1,816,000, approximately $1,028,000
resulted from the acquisition of Braemar, Inc., $194,000 resulted from the
merger of Biosensor and Carolina Medical, and $675,000 was due to the change
from the equity method to consolidation accounting when Carolina Medical's
ownership in Advanced Medical increased to a majority.
Gross profit margin was 43.4% of net sales for the three months ended September
30, 1998 compared to 39.8% for the three months ended September 30, 1997.
Sales of Advanced Medical's and Biosensor's products contributed to higher
gross margins.
Selling, general and administrative expenses of $833,311 for the three months
ended September 30, 1998 were 35.7% of net sales for the period compared to
expenses of $148,793 or 28.7% of net sales for the same period last year. The
higher percentage of sales for selling, general and administrative expenses was
a result of the consolidation of Advanced Medical, which has substantially
higher selling expenses as a percentage of sales, and because legal and audit
expenses were higher than usual as a result of merger and acquisition
activities.
Research and development costs during the first quarter of fiscal 1999 were 10%
of sales at $233,202, the majority of which was spent on the Braemar DXP1000
digital Holter monitor development. Research and development expenditures by
Carolina Medical during the first quarter last year were $38,210 or 7.4% of
sales. The Company expects to continue to spend 7% to 10% of sales on new
product development in order to remain technologically competitive.
Consolidated net income for the quarter ended September 30, 1998 was a loss of
$127,642 compared to a profit of $8,598 for the same period last year. Of the
consolidated loss in the quarter ended September 30, 1998, $93,530 was
non-recurring legal, accounting and transitional costs related to merger and
acquisition activities. Net interest and other non-operating expenses for
that quarter were $75,649. The Company is taking steps to consolidate
operations to reduce expenses, and is pursuing alternate financing in an
attempt to reduce interest costs.
During the first three months of fiscal 1999, accounts receivable increased
from $1,364,546 at June 30, 1998 to $1,504,753 at September 30, 1998;
inventory increased from $1,366,232 to $1,465,034; current accrued payroll
and other expenses increased from $555,575 to $706,548. These net increases
in both current assets and current liabilities were primarily a result of
the consolidation of Biosensor's and Carolina Medical's assets and
liabilities on July 1, 1998.
Comparing the actual results to the Pro forma results shows consolidated
revenues from sales of products and services were down $597,575 or 20% for
the three months ended September 30, 1998 compared to the pro forma three
months ended September 30, 1997.
Gross profit margin was 43.4% of net sales for the three months ended
September 30, 1998 compared to 41.5% for the pro forma three months ended
September 30, 1997.
Selling, general and administrative expenses of $833,311 for the three months
ended September 30, 1998 were 35.7% of net sales for the period compared to
expenses of $895,160 or 30.5% of net sales for the pro forma period last year.
These expenses were lower in the recent quarter even though legal and audit
expenses were higher than usual as a result of merger and acquisition
activities.
Research and development costs during the first quarter of fiscal 1999 were 10%
of sales at $233,202, the majority of which was spent on the Braemar DXP1000
digital Holter monitor development. Pro forma combined research and
development expenditures during the first quarter last year were $339,786 or
11.6% of sales. The Company expects to continue to spend 7% to 10% of sales
on new product development in order to remain technologically competitive.
Consolidated net income for the quarter ended September 30, 1998 was a loss of
$127,642 compared to a loss of $111,892 on a pro forma combined basis for the
same period last year.
Of the consolidated loss in the quarter ended September 30, 1998, $93,530 was
non-recurring legal, accounting and transitional costs related to merger and
acquisition activities. Net interest and other non-operating expenses for
that quarter were $75,649 compared to $92,495 for the quarter ended September
30, 1997. The Company would have had an additional loss applicable to
common shares in the September 1997 quarter due to dividends on Advanced
Medical Preferred Stock.
During the first three months of fiscal 1999, current assets decreased by
approximately $280.000 and current liabilities decreased by approximately
$208,000 from the pro forma June numbers.
Liquidity and Capital Resources
Operating activities provided $ 11,744 of cash during the quarter ended
September 30, 1998 compared with $52,985 provided during the quarter ended
September 30, 1997. Investing and financing activities during the first
quarter of fiscal 1999 used $53,325 compared to $$61,673 used by investing
and financing activities during the same period last year. Net
cash decreased by $41,581 during the fiscal 1999 first quarter to $730,834 at
September 30, 1998, and by $8,688 during the fiscal 1998 first quarter to
$129,979 at September 30, 1997.
The Company and its subsidiaries at September 30, 1998 had total debt with
several unrelated lenders of approximately $1,700,000 of which $572,000 was
current or current portions of long term debt and $1,128,000 was long term
debt. Advanced Medical is in violation of certain covenants of its credit
agreement, however the lender has waived the covenant violations through
December 31, 1998. During the quarter ended September 30, 1998 the Company
loaned additional funds to Advanced Medical, and credit has been extended to
Advanced Medical by a subsidiary of the Company to enable Advanced Medical
to purchase finished goods for resale.
In addition to the various loans outstanding with unrelated parties, the
Company has loans outstanding in the amounts of $150,000 and $1,600,000 with
two stockholders of the Company. Annual interest costs of 12% and 10%
respectively are due monthly on these loans, the principal amounts of which
are due in January 1999 and October 1999 respectively. Discussions are in
process with several lending institutions regarding possible credit
facilities that would replace both the related party loans and the unrelated
party loans with one consolidated credit facility.
The Company at June 30, 1998 and September 30, 1998 had net working capital
(current assets minus current liabilities) of $1,150,912 and $1,'280,284
respectively. Net stockholder equity was $785,425 on June 30, 1998 and $767,668
on September 30, 1998. The Company believes that internally generated funds
and existing borrowing resources will provide sufficient funds to meet current
commitments and future working capital needs. However, the Company is
actively seeking alternative financing that could increase working capital
and reduce interest costs.
The Company currently does not have plans for any major capital expenditures in
fiscal 1999.
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - The Company filed a report on Form 8-K on July 23,
1998, which report was amended on November 24, 1998, regarding the merger of
Carolina Medical and Biosensor Corporation.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned hereunto duly
authorized.
BIOSENSOR CORPORATION
(Registrant)
By: __RONALD G. MOYER____
Ronald G. Moyer, President
Dated: November 25, 1998
1
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