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, 1998
|_| 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
7001 East Fish Lake Road
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Maple Grove, Minnesota 553111
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 420-2600
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 31, 1998 is 2,823,055.
<PAGE>
BIOSENSOR CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
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February 28, May 31,
1998 1997
(Unaudited)
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<S> <C> <C>
ASSETS
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CURRENT ASSETS
Cash $ 37,219 $ 4,739
Receivables 266,507 400,262
Inventories 246,153 307,265
Prepaid expenses and other 28,312 54,822
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Total Current Assets 578,191 767,088
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DEPOSITS 18,000 18,000
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PROPERTY AND EQUIPMENT at cost, net 44,131 59,460
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$ 640,322 $ 844,548
=========================================================================================
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Trade accounts payable 85,369 $ 50,246
Accrued expenses
Commissions 17,839 15,492
Compensation 43,733 48,872
Warranty 31,672 30,618
Litigation, current portion (Note 3) 25,000 352,000
Other 4,345 1,221
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Total Current Liabilities 207,958 498,449
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LITIGATION, less current portion (Note 3) 127,000 --
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STOCKHOLDERS' EQUITY
Common stock, par value $.05 per share 141,153 141,153
Additional paid-in capital 2,940,447 2,940,447
Accumulated deficit (2,776,236) (2,735,501)
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Total stockholders' equity 305,364 346,099
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$ 640,322 $ 844,548
=========================================================================================
</TABLE>
<PAGE>
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, February 28,
----------------------------------------------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
NET SALES $ 435,049 $ 745,867 $ 1,547,901 $ 1,923,834
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COSTS AND EXPENSES
Cost of products sold 251,407 388,039 782,856 924,031
Research, development and engineering 46,591 74,541 201,939 207,476
Sales and marketing 137,659 191,465 518,893 490,542
General and administrative 57,291 83,854 237,488 283,429
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492,948 737,899 1,741,176 1,905,478
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Operating income (loss) (57,899) 7,968 (193,275) 18,356
NONOPERATING INCOME (EXPENSE),
Litigation (Note 3) -- -- 149,976 (325,000)
Other, net (1,597) 1,804 2,974 1,363
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(1,597) 1,804 152,950 (323,637)
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Income (Loss) before income taxes (59,496) 9,772 (40,325) (305,281)
Federal and State Income Taxes -- 440 407 2,695
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Net Income (Loss) $ (59,496) $ 9,332 $ (40,732) $ (307,976)
======================================================================================================================
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE $ (.02) $ .00 $ (.01) $ (.11)
======================================================================================================================
WEIGHTED AVERAGE COMMON 2,823,055 2,823,055 2,823,055 2,820,143
======================================================================================================================
</TABLE>
<PAGE>
BIOSENSOR CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
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Nine Months Ended February 28, 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (40,732) $(307,976)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 21,915 26,430
Changes in assets and liabilities:
(Increase) decrease in:
Receivables 133,757 31,323
Inventories 61,112 (33,286)
Other assets 26,510 (8,551)
Increase (decrease) in:
Accounts payable 35,123 (69,914)
Accrued expenses (Note 3) (198,619) 290,388
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Net cash provided by (used in) operations 39,066 (71,586)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (6,586) (11,655)
Proceeds from sale of property and equipment 1,074
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Net cash used in investing activities (6,586) (10,581)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing from note payable to bank -- 100,000
Payments on note payable to bank -- (100,000)
Net proceeds from issuance of common stock -- 749
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Net cash provided by financing activities -- 749
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Increase (Decrease) in cash and cash equivalents 32,480 (81,418)
CASH AND CASH EQUIVALENTS
Beginning of period 4,739 163,422
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End of period $ 37,219 $ 82,004
==========================================================================================
</TABLE>
<PAGE>
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, 1997.
The results of operations for the three months and nine months ended February
28, 1998, are not necessarily indicative of the operating results for the full
year.
NOTE 3. LITIGATION
In December 1997, the Company entered into a settlement agreement with a former
vendor to reduce a previously recorded jury award by $150,000. The agreement
calls for annual payments of $25,000 per year through December 2002 with an
additional $25,000 due December 1999. In the event the Company defaults on any
of the annual payments, the full judgment, less any amounts paid under the
settlement agreement, will be reinstated.
NOTE 4. SUBSEQUENT EVENTS
On March 19, 1998, the Company entered into a letter of intent, subject to
shareholder approval, to acquire all of the outstanding shares of Carolina
Medical, Inc., a privately held company located in North Carolina. Under the
terms of the letter of intent, the shareholders of Carolina Medical would obtain
approximately an 80% majority interest in Biosensor.
The letter of intent provides, among other things, that Biosensor shareholders
would approve a Plan of Merger which would alter the capital structure and
change the name of the Company to BIOTEL, Inc.
<PAGE>
NOTE 5. EARNINGS (LOSS) PER SHARE
Effective for the period ending February 28, 1998, the Company has adopted
Statement of Financial Accounting Standards Number 128, EARNINGS PER SHARE. The
Statement requires restatement of all prior period earnings (loss) per share
data however, there was no effect on the Company's prior period amounts.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company's sales were $435,000 and $1,548,000 for the third quarter and nine
months ended February 28, 1998, respectively, compared to $746,000 and
$1,924,000 for the third quarter and nine months ended February 28, 1997. In the
third quarter the Company experienced decreased sales in the International
market of approximately $200,000 and in the US of approximately $100,000. These
decreases primarily account for the decrease in sales for the nine months ended
February 28, 1998. Cost of goods sold as a percentage of sales was 58% for the
third quarter and 51% for the nine months ended February 28, 1998. This is up
from 52% for the third quarter and 48% for the nine months ended February 28,
1997. As reported in previous quarters, the Company continues to experience
strong competitive pressures, especially in the international market caused
primarily by health care reforms. These pressures are negatively affecting both
sales and gross margins. In addition, international sales have been affected by
the Asian economic crisis.
Research, development and engineering expenditures decreased approximately
$28,000 for the third quarter and $5,000 for the nine months ended February 28,
1998 compared to the previous year. The decrease in the third quarter is due to
decreased number of personnel. Year to date, these decreases were offset by
increased expenditures in new product development and enhancements on current
product lines.
Sales and marketing expenses decreased $54,000 for the third quarter and
increased $28,000 for the nine months ended February 28, 1998 from the prior
year. The decrease in the third quarter was due to decreased commissions on
lower US and international sales. Year to date, these decreases were offset by
increased personnel in the first two quarters of 1998. These positions were
eliminated in the second quarter of 1998 when sales levels did not reach
expected levels.
General and administrative costs decreased $27,000 for the third quarter and
$46,000 for the nine months ended February 28, 1998 compared to the prior year.
These decreases are due to decreases in legal costs and recovery on receivables
that were previously charged off.
In December 1997, the Company entered into a settlement agreement with a former
vendor to reduce a previously recorded jury award by $150,000. The agreement
calls for annual payments of $25,000 per year through December 2002 with an
additional $25,000 due December 1999. In the event the Company defaults on any
of the annual payments, the full judgment, less any amounts paid under the
settlement agreement, will be reinstated.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ending February 28, 1998 cash provided by operations
totaled $39,000 The net loss of $41,000 and increase in accrued expenses of
$199,000 were offset by a decrease in receivables of $134,000.
At February 28, 1998 the Company had working capital of $370,000. In March 1998,
the Company was notified that the bank line of credit in the amount of $25,000
was no longer available. There was no outstanding balance on the line. The
Company is making every effort to increase sales, decrease operating expenses
and manage assets to maximize cash flows. If these efforts are unsuccessful,
cash flows from operations may not be sufficient to fund operations and the
Company may be required to seek additional capital through equity offerings or
other financing sources.
On March 19, 1998, the Company entered into a letter of intent, subject to
shareholder approval, to acquire all of the outstanding shares of Carolina
Medical, Inc., a privately held company located in North Carolina. Under the
terms of the letter of intent, the shareholders of Carolina Medical would obtain
approximately an 80% majority interest in Biosensor. The Company believes its
profitability, capital resources and cash flow would be improved by this
acquisition.
<PAGE>
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
See Note 4 to the Financial Statements.
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
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B. Steven Springrose
President, Chief Executive Officer and Chief Financial Officer
Date: April 13, 1998
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<CIK> 0000708282
<NAME> BIOSENSOR CORPORATION
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 37
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0
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