<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
-----------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -------------------------
1-10285
Commission File Number:
------------------------------------------------------
BIOMAGNETIC TECHNOLOGIES, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2647755
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9727 Pacific Heights Boulevard,
San Diego, California 92121-3719
- ------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(619) 453-6300
Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed since last
report)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of July 1, 1997 Registrant had only one class of common stock of
which there were 47,691,824 shares outstanding.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30,
1997 SEPTEMBER 30,
(UNAUDITED) 1996
----------- ----------
ASSETS
Cash and cash equivalents $ 440 $ 1,752
Short-term investments 0 744
Restricted cash and short-term investments 1,456 6,085
Accounts receivable 438 17
Inventories 4,254 5,627
Prepaid expenses and other current assets 437 338
----------- ----------
Total current assets 7,025 14,563
----------- ----------
Property and equipment 7,731 9,478
Less accumulated depreciation and amortization (7,201) (8,570)
----------- ----------
Net property and equipment 530 908
----------- ----------
Investment in Magnesensors 80 0
Note Receivable (net) 300 0
Restricted cash 180 500
Other assets 348 279
----------- ----------
Total assets $8,463 $16,250
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Accounts payable $2,495 $2,633
Accrued liabilities 966 1,897
Accrued salaries and employee benefits 607 860
Customer deposits 4,922 9,208
Note payable-related party 0 3,000
----------- ----------
Total current liabilities 8,990 17,598
L/T Deferred Revenue 90
Other liabilities 0 48
----------- ----------
Total liabilities 9,080 17,646
----------- ----------
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock--no par value, 100,000,000 shares
authorized; 47,691,824 and 39,974,222 shares issued
and outstanding in June and September, respectively 81,554 78,467
Accumulated deficit (82,171) (79,863)
----------- ----------
Total shareholders' (deficit) equity (617) (1,396)
----------- ----------
Total liabilities and shareholders' (deficit) equity $8,463 $16,250
----------- ----------
----------- ----------
See notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Product sales $5,198 $15 $6,733 $150
Contract research 0 0 0 29
Service revenue 91 176 278 355
Interest income 36 106 214 391
Other income (expense) 288 11 302 (96)
Fx effects (34) 22 267 36
------- ------- ------- -------
Total revenues 5,579 330 7,794 865
------- ------- ------- -------
EXPENSES
Production costs 2,857 326 3,941 876
Contract research costs 0 0 - 32
Service costs 47 32 119 83
Research and development 819 1,570 2,706 5,048
Marketing and sales 477 800 1,717 2,303
General and administrative 606 553 1,541 1,685
Interest expense 7 0 77 10
------- ------- ------- -------
Total expenses 4,813 3,281 10,101 10,037
------- ------- ------- -------
NET INCOME (LOSS) BEFORE INCOME TAXES $766 $(2,951) $(2,307) $(9,172)
Provision for income taxes 0 1 1 1
------- ------- ------- -------
NET INCOME (LOSS) $766 $(2,952) $(2,308) $(9,173)
------- ------- ------- -------
------- ------- ------- -------
NET INCOME (LOSS) PER SHARE $0.02 $(0.07) $(0.05) $(0.23)
------- ------- ------- -------
------- ------- ------- -------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 47,692 39,944 45,119 39,963
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
JUNE 30,
1997 1996
-------- --------
OPERATING ACTIVITIES
Net income (loss) $ 766 $(9,173)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 107 733
(Gain) loss on sale/retirement of assets (226) 229
Interest expense 0 (381)
Changes in operating assets & liabilities:
Restricted cash (1,456) 0
Accounts receivable 110 761
Inventories 1,672 (2,230)
Prepaid and other current assets (149) 110
Other assets (388) 23
Accounts payable 289 620
Accrued liabilities (66) (397)
Accrued salaries and employee benefits (230) 0
Customer deposits (4,178) 3,321
Other liabilities 90 43
-------- --------
Net cash provided by (used for)
operating activities (3,659) (6,341)
-------- --------
INVESTING ACTIVITIES
Change in short-term investments 2,695 6,400
Capital expenditures (22) (520)
Proceeds from sale of assets 326 0
-------- --------
Net cash (used for) provided by
investing activities 2,999 5,880
-------- --------
FINANCING ACTIVITIES
Proceeds from sale of common stock 0 34
Proceeds from bank loan 275 0
-------- --------
Net cash provided by financing
activities 275 34
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (385) (427)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 825 2,314
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 440 1,887
-------- --------
-------- --------
See notes to consolidated financial statements.
4
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included herein
include the accounts of Biomagnetic Technologies, Inc. and its subsidiary
(the "Company") and have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although the
Company believes that the disclosures made in this report are adequate to
make the information not misleading, it is suggested that these financial
statements be read in connection with the financial statements and notes
thereto included in the Company's annual report on Form 10-K for the fiscal
year ended September 30, 1996.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
accruals, necessary to present fairly its financial position at June 30, 1997
and the results of operations and its cash flows for the periods presented.
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 these estimates.
2. NET PROFIT (LOSS) PER SHARE
Shares used in computing net profit (loss) per share include the weighted
average of common stock outstanding. Common stock equivalents are
antidilutive and are excluded from the computation of net profit (loss) per
share.
3. INVENTORIES
The composition of inventories is as follows:
JUNE 30, SEPTEMBER 30,
1997 1996
--------- -------------
Raw materials $ 310 $ 546
Work-in process 2,610 3,356
Finished goods 1,334 1,725
------ ------
$4,254 $5,627
------ ------
------ ------
4. MAGNES-Registered Trademark- WHOLE HEAD SYSTEM PRODUCTION AND DELIVERY RISK
The Company's backlog at June 30, 1997 amounted to $7,736,000 and is composed
of orders for the new Magnes 2500 Whole Head Magnetic Source Imaging System
("Magnes 2500 WH"), service contracts and government contracts. The Company
has shipped eight (8) of its Magnes 2500 WH systems to customers and one (1)
system to the Company's application development site at Scripps Clinic and
Research Foundation, which is company owned. As of June 30, 1997 there have
been five (5) final acceptances received on the eight (8) shipped systems.
The delay in receipt of customer acceptances has been primarily due to a
hardware upgrade, the need for which was not identified prior to installing
the systems at customer sites, and additional software development required
to meet unique customer contractual agreements. The required hardware
upgrades were shipped to customer sites during the second quarter, and were
either installed, or in the process of installation at the customer sites
during the second and third quarters, thus facilitating the receipt of five
(5) acceptances in the third quarter. The Company anticipates that the
additional system hardware upgrades and specific customer software tools will
be completed for the remaining three (3) already shipped and installed
systems during the fourth quarter of fiscal year 1997. However, there can be
no assurances that this will be accomplished. In the event that the hardware
upgrade and software tools are not completed as anticipated for the three (3)
systems, the remaining three customers final
5
<PAGE>
acceptances could be further delayed, which could have a material adverse
effect on the cash flow and cash resources of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Except for the historical information contained herein, the following
discussion may contain (and the Notes to the Consolidated Financial
Statements may contain) forward-looking statements that involves risks and
uncertainties. The Company's future results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include, but are not specifically limited to, failure to satisfy
performance obligations, timely product development, changes in economic
conditions in various markets the Company serves, and uncertainty regarding
the Company's patents and propriety rights, as well as the other risks
detailed in this section. The Company does not undertake to update the
results discussed herein as a result of changes in risks or operating results.
OVERVIEW
Biomagnetic Technologies, Inc. ("BTi") is a leader in magnetic source imaging
("MSI") and has developed the Magnes system, a family of instruments designed
to assist in the noninvasive diagnosis of a broad range of medical disorders.
The Magnes system developed by the Company uses advanced superconductor
technology to measure and locate the source of magnetic fields created by the
human body. While traditional medical imaging methods provide anatomical
detail, the measurement of the body's magnetic fields by MSI provides
information about normal and abnormal functions of the brain, heart and other
organs. The Company is focusing the development of its technology on
potentially large commercial market applications such as pre-surgical
planning for neurosurgery, the diagnosis and surgical planning for treatment
of epilepsy and evaluation of the fetal heart.
Since 1984, the primary business of the Company has been the development of
MSI systems that measure magnetic fields generated by the human body and
assist in the noninvasive diagnosis of a broad range of medical disorders.
The measurement of the body's magnetic fields by MSI provides information
about the normal and abnormal functions of the brain, heart and other organs.
Twenty-one (21) Magnes systems were installed in medical and research
institutions worldwide at the end of the third quarter 1997. To date, more
than 5,000 MSI examinations have been performed on patients and control
subjects at the Company's application development sites. Related findings by
BTi and its collaborators have been published in more than 80 scientific and
medical papers. Since the first reimbursement for MSI procedures was received
in September 1993, 95 insurance companies have approved reimbursement for
certain MSI procedures performed with the Company's Magnes MSI systems and
173 reimbursements have been received.
In fiscal 1995, BTi announced development of the Magnes 2500 WH, an expansion
of the existing Magnes I and Magnes II systems product line. Development of
the Magnes 2500 WH hardware was substantially completed in fiscal year 1996.
The Magnes 2500 WH allows simultaneous examination of the entire brain and is
designed for evaluating ambulatory or critically ill patients in a seated or
fully reclined position. The Company commenced shipments of its Magnes 2500
WH prior to the end of fiscal year 1996. However, although the Company
received provisional acceptance from two customers, no final acceptances were
received either in fiscal year 1996 or in the first quarter of fiscal year
1997 which ended December 31, 1996. In the second quarter of fiscal year 1997
the Company received its first final acceptances from two customers for its
Magnes 2500 WH system. In the third quarter of fiscal year 1997 the Company
received additional final acceptances from three customers. The Company
anticipates that final acceptances will be received for the remaining three
systems in the fourth quarter, although there can be no assurances that this
will be accomplished. In the event that the hardware upgrade and software
tools are not completed as anticipated, the remaining customer final
acceptances could be delayed, which could have a material adverse effect on
the cash flow and cash resources of the Company.
In June, 1997, BTi successfully negotiated with representatives of the
University of California at San Francisco, ("UCSF") the sale of the BTi owned
Magnes II System and magnetically shielded room which has been used since
January 1994, and is currently being used for research conducted at UCSF in
the area of Magnetic Source Imaging. The revenues of $5,579,000 for the third
quarter include the sale of this system to UCSF.
6
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The current price of BTi's MSI systems ranges from approximately $1.5 to $2.5
million, depending upon system configuration. A significant portion of the
Company's sales have been, and are expected to continue to be, in foreign
markets. The Company generally prices its European sales in the currency of
the country in which the product is sold and the prices of such products in
dollars will vary as the value of the dollar fluctuates against the quoted
foreign currency price. There can be no assurance that currency fluctuations
will not reduce the dollar return to the Company on such sales. The Company
periodically enters into forward exchange contracts to hedge a portion of
such foreign currency exposure.
In the third quarter, and as part of the Company's restructuring and cost
reduction program, BTi entered into a collaboration with Quantum Magnetics,
Inc., a privately owned San Diego company specializing in advanced magnetic
instrumentation and systems, to form a new company called Magnesensors, Inc.
BTi and Quantum Magnetics each own 38% of the outstanding stock of the new
company (on a fully diluted basis) with 24% owned by management of the new
company. BTi has licensed certain technology to the new company and will
receive royalty-free licenses to any technology developed by Magnesensors.
Magnesensors will continue the superconductor development research formerly
performed by BTi. Magnesensors delivered a secured promissory note to BTi for
the purchase from BTi of certain fixed assets used for the research activity
of Magnesensors..
RESULTS OF OPERATIONS
Total revenues for the third quarter of fiscal 1997 were $5,579,000 compared
to $330,000 for the third quarter of fiscal 1996. Net income in the third
quarter of fiscal 1997 amounted to $766,000 compared to a net loss of
$2,952,000 for the comparable period in the prior fiscal year. The increase
in revenues for the third quarter resulted from the final acceptances of
three (3) Magnes 2500 WH systems, whereas, in the prior year's third quarter
there were no Magnes 2500 WH systems shipped or accepted.
Revenues for the first nine months of fiscal 1997 amounted to $7,794,000
compared to $865,000 for the first nine months of the prior fiscal year 1996.
Net loss for the first nine months of 1997 was $2,308,000, compared to a net
loss of $9,173,000, in the prior fiscal year. The revenues for the first
nine months of fiscal 1997 resulted from the sale and final acceptance of
five (5) Magnes 2500 WH systems and service contract income for Magnes I,
Magnes II, and Magnes 2500 WH systems, whereas in the first nine months of
fiscal 1996 the Company's revenue consisted solely of Magnes components and
service contract income for Magnes I and Magnes II systems, sold in prior
fiscal years.
Service Revenues for the third quarter of fiscal year 1997 and the first nine
months of fiscal year 1997 amounted to $91,000 and $176,000 respectively,
compared to $278,000 and $355,000 respectively in the prior year. The
reduction in service revenue is the result of first year service contracts
on the Magnes I and Magnes II systems having been completed. Service
contracts pertaining to the Magnes 2500 WH systems are now commencing as the
new systems get customer acceptance.
Production costs of $2,857,000 for the third quarter of this year and
$3,941,000 for the year to date have increased from $326,000 and $876,000 for
the respective periods in the prior year due to the fact that three Magnes
2500 WH systems were accepted in the current fiscal year's third quarter,
whereas, in the prior fiscal year there were no system acceptances.
Research and development expenses amounted to $819,000 for the third quarter
and $2,706,000 for the first nine months of fiscal year 1997. In fiscal year
1996 these expenses amounted to $1,570,000 and $5,048,000, respectively, for
the comparable periods. The decrease is due to reduction of research and
development expenses related to the completion of the development of the
Magnes 2500 WH system.
Marketing and sales expenses which amounted to $477,000 in the third quarter
of fiscal 1997, decreased by $323,000 from the comparable period in fiscal
1996 when the expenses amounted to $800,000. For the nine months of fiscal
1997 these expenses amounted to $1,717,000 a decrease of $586,000 as compared
to the same period of the prior year expenses of $2,303,000. These decreases
were primarily due to the restructuring of operations, including a reduction
in marketing and sales personnel, which commenced in December 1996.
General and administrative expenses amounted to $606,000 and $1,541,000 for
the third quarter and nine month period ended June 30, 1997, respectively.
In fiscal year 1996 these expenses amounted to $553,000 and
7
<PAGE>
$1,685,000, for the comparable periods. The increase in expenses in the
third quarter is a result of additional expenses incurred in company efforts
to obtain additional sources of equity funding.
Interest expense amounted to $7,000 in this current fiscal year's third
quarter and $77,000 for the year to date. In the prior fiscal year there was
no interest expense in the third quarter and the total for the first nine
months of fiscal year 1996 amounted to $10,000. The increase in the current
year is due to short-term working capital borrowings and includes the
interest on a $3,000,000 loan entered into in July 1996 and converted to
capital stock of the company in December 1996.
Order backlog for the Company's products at June 30, 1997 was $7,736,000, as
compared to $14,345,000 at June 30, 1996 and $16,254,000 at September 30,
1996. The receipt of final customer acceptances of five (5) Magnes 2500 WH
systems, in the second and third quarters of fiscal 1997 combined, and the
reporting of $6,251,000 of product revenue associated with the five systems
is the primary factor for the reduction in backlog as of June 30, 1997 as
compared to the September 30, 1996 backlog. There were no new system orders
received in the first three quarters of the current fiscal year. If the
remaining three (3) Magnes 2500 WH systems which have been shipped and are
installed at customer sites receive customer acceptances during the quarter ,
and if no new customer orders are received during the fourth quarter, the
remaining backlog of $7,736,000 will be reduced further by the end of the
fiscal year.
LIQUIDITY, CAPITAL RESOURCES
At June 30, 1997 the Company had a net working capital deficit of $1,965,000,
a decrease in the deficit of $616,000 from the end of the second quarter of
the current fiscal year at which time the deficit was $2,619,000. Similarly,
the net working capital deficit of $1,965,000 reflects a decrease of
$1,070,000 from the September 30, 1996 net working capital deficit of
$3,035,000. The decrease in the working capital deficit is primarily due to
the decrease in liabilities resulting from the fact that customer deposits
were converted to revenue as systems were accepted.
Restricted cash and short-term investments at June 30, 1997 amounted to
$1,456,000 compared to $6,085,000. The reduction of $4,629,000 is entirely
due to the release of customer deposits as systems were accepted in the
current fiscal year.
Current liabilities at June 30, 1997 include customer deposits totaling
$4,922,000, of which $2,006,000 are secured by standby letters of credit
through a credit facility with a bank.
Based on the Company's current operating plans, capital and working capital
expenditures necessary to support the completion of engineering development,
and production of the Company's products through September 30, 1997 may
substantially exceed cash generated from operations and may, therefore,
result in a further decline in the Company's liquidity. As of June 30, 1997
three Magnes 2500 WH systems were shipped and installed at customer sites but
were not sufficiently complete to permit final customer acceptances due to
the need for certain hardware upgrades and additional software tools required
by the customers. Recognition of revenue on these three systems can,
therefore, not take place until these customer requirements are completed.
The Company's ability to meet its expected cash needs for the remainder the
fiscal year will depend on a number of factors, including the Company's
ability to obtain the timely customer acceptance of the three (3) Magnes 2500
WH systems shipped and installed, the market's acceptance and sales of the
Magnes WH system, as well as the Company's ability to raise working capital
as may be needed which cannot be accurately predicted at this time. The
Company may also attempt to obtain additional sources of funding through
government grants and strategic alliances with other entities. However,
there can be no assurance that additional funds will be available when needed
and on terms favorable to the Company, that grant applications will be
approved or funded, that applications of the Company's technology will be
successfully developed or that any agreements will be reached related to
strategic alliances. If the Company is unable to obtain the timely
acceptance of the three (3) Magnes 2500 WH systems, which have been shipped
and installed, during the fourth quarter of the current fiscal year, and
should additional funding not be available, the cash resources of the company
may be insufficient to meet the Company's operations through September 30,
1997 and, therefore, the Company would be required to significantly reduce
the scope of its operations.
8
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ADDITIONAL RISK FACTORS
The Company believes that the Magnes 2500 WH final development will be
completed in fiscal year 1997. Although significant effort continues to be
expended to complete the engineering development so that the remaining
shipments will be accepted by the customers on a timely basis prior to the
end of fiscal year 1997, there can be no assurance that this will be
accomplished. In the event such development is not completed as anticipated,
customer final acceptances of systems already shipped and installed at
customer sites will be further delayed, which would have a further material
adverse effect on the Company's cash flow and cash resources. Furthermore,
the Company generally recognizes revenues on a contract only after customer
final acceptance of the system. Thus, there is a delay varying typically
from one month to three or more months (or, in the case of special problems
as have been experienced with Magnes 2500 WH, longer) from the time shipment
takes place and the system is installed at the customer site, tested and
adjusted and final acceptance is obtained from the customer before revenue is
recognized by the Company.
Further delay in final customer acceptances would necessitate the need to
obtain additional working capital during the balance of fiscal year 1997
since $1,456,000 of customer deposits are secured and are, therefore, not
available to be used as working capital until such time as the systems for
which the customer deposits are restricted and which have been shipped are
accepted by the customers, and the customer deposit guarantees are released.
To date the Company has traditionally been engaged in research and
development activities, and has made only low volume sales to research and
medical institutions primarily in Europe and Japan, and has only made one MSI
system sale for commercial/clinical use in the U.S. Such sales require FDA
approval.
The Company had secured FDA approval for its Magnes I System, had also
received 510(k) clearance to market its Magnes II System in the U.S. In May,
1997, the Company also received 510(k) clearance for its Magnes 2500 WH
system. The FDA clearance to market the Magnes 2500 WH system specifically
states that the " Use of the Magnes 2500 WH is indicated for the patient
whose physician believes that information about magnetic fields produced by
that patient's brain and information about the location of the sources of
those magnetic fileds could contribute to diagnosis or therapy planning".
In May, 1997 the Japanese Ministry of Health and Welfare ("JMHW") also
granted approval to market the Magnes 2500 WH system in Japan.
The Company is dependent on its Magnes systems as its principal product for
which there are currently few demonstrated clinical applications. Additional
clinical applications development needs to be conducted with the MSI systems
at major medical centers before the Company can begin to penetrate the
commercial clinical market. However, there can be no assurance that a
market will develop for diagnostic or monitoring uses of the MSI system.
The Company's commercial success is highly dependent on the availability of
reimbursement for procedures using its MSI system. To date reimbursements
from third-party payors are on a case-by-case basis. As of July 20, 1997,
and since the initial payment in September 1993, there have been a total of
173 reimbursements from 95 different third party payors in the U.S. There is
no assurance that third party reimbusements will become more widely
available. Reimbursement is not currently provided for such procedures by the
United States government, nor is there any assurance that the U.S. government
will authorize or budget for such procedures in the future. The Company also
cannot predict what legislation relating to its business or the health care
industry may be enacted in the future, including legislation relating to
third party reimbursement, or what effect such legislation may have on the
results of its operations. Regardless of legislation, industry trends are
not favorable for generous third-party reimbursement of diagnostic procedures
requiring big-ticket equipment.
The Company operates in an industry characterized by rapid technological
change. New products using other technologies or improvement of existing
products may reduce the size of the potential markets for the Company's
products, and may render them obsolete or non-competitive by competitors'
development of new or different products using technology or imaging
modalities that may provide or be perceived as providing greater value than
the Company's products.
9
<PAGE>
Additionally, there has been recently, and continues to be, ongoing
significant price competition from the Company's competitors for the
currently very limited number of whole head magnetic source imaging systems
being purchased worldwide. This aggessive competition is likely to affect
potential profitability of the Company's whole head system, the extent to
which is not presently determinable.
10
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ITEM 6 . EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K have been filed during the quarter ended June 30,
1997. The exhibits filed as part of this report are listed below.
EXHIBIT NO. DESCRIPTION
---------- -----------
27 Financial Data Schedule
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOMAGNETIC TECHNOLOGIES, INC.
July 25, 1997
Date /s/ D. S. Buchanan
-------------------------------------
D. Scott Buchanan
President and Chief Executive Officer
July 25, 1997
Date /s/ Herman Bergman
-------------------------------------
Herman Bergman
Vice President Finance, Chief Financial
Officer, Secretary
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 440
<SECURITIES> 1,456
<RECEIVABLES> 438
<ALLOWANCES> 0
<INVENTORY> 4,254
<CURRENT-ASSETS> 7,025
<PP&E> 7,731
<DEPRECIATION> 7,201
<TOTAL-ASSETS> 8,463
<CURRENT-LIABILITIES> 8,990
<BONDS> 0
0
0
<COMMON> 81,554
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,463
<SALES> 6,733
<TOTAL-REVENUES> 7,794
<CGS> 3,941
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