SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) 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 0-22146
APPLIED BIOMETRICS, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1508112
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 E. Highway 13, Burnsville, MN 55337
(Address of principal executive office and zip code)
Issuer's telephone number, including area code (612) 890-1123
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 at least the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
At November 7, 1997, there were outstanding 4,257,087 shares of common
stock, $0.01 par value.
<PAGE>
APPLIED BIOMETRICS, INC.
Form 10-QSB Index
September 30, 1997
Page
Part I: Financial Information.............................................3
Item 1. Financial Statements..............................................3
Balance Sheets Unaudited at September 30, 1997 and
Audited at December 31, 1996......................................3
Unaudited Statements of Operations for the
Three Month and Nine Month Periods ended September 30,
1997 and 1996.....................................................4
Audited Statements of Shareholders' Equity for the year ended
December 31, 1996 and for the unaudited Nine Month Period
ended September 30, 1997..........................................5
Unaudited Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1997 and
1996..............................................................6
Notes to Unaudited Financial Statements...........................7
Item 2. Management's Discussion and Analysis or Plan
of Operation......................................................8
Part II: Other Information.................................................10
Item 1. Legal Proceedings.................................................10
Item 2. Changes in Securities.............................................10
Item 3. Defaults Upon Senior Securities...................................10
Item 4. Submission of Matters to a Vote of Security
Holders...........................................................10
Item 5. Other Information.................................................10
Item 6. Exhibits and Reports of Form 8-K..................................10
Signatures...................................................................11
<PAGE>
Part 1: Financial Information
Item 1. Financial Statements
APPLIED BIOMETRICS, INC.
Balance Sheets
<TABLE>
<CAPTION>
September 30
1997 December 31,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 852,438 $ 741,661
Short-term investments 3,974,308 5,632,791
Accounts Receivable 15,979 19,417
Inventory 180,397 222,476
Prepaid expenses and other current assets 125,318 226,665
------------ ------------
TOTAL CURRENT ASSETS 5,148,440 6,843,010
Property and equipment, net 603,734 528,398
Patents, net 102,422 109,307
Other assets 9,585 9,585
------------ ------------
TOTAL ASSETS $ 5,864,181 $ 7,490,300
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 105,233 $ 126,257
Accrued expenses and other liabilities 100,967 76,933
------------ ------------
TOTAL CURRENT LIABILITIES 206,200 203,190
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares
authorized: 4,172,087 and 4,168,987 shares
issued and outstanding at September 30, 1997
and December 31, 1996, respectfully 41,721 41,690
Additional paid-in capital 19,714,250 19,703,468
Accumulated deficit (14,097,990) (12,458,048)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 5,657,981 7,287,110
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,864,181 $ 7,490,300
============ ============
</TABLE>
<PAGE>
APPLIED BIOMETRICS, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ -- $ 34,075 $ 64,940 $ 77,800
Cost of sales -- 17,500 32,175 39,375
----------- ----------- ----------- -----------
GROSS PROFIT -- 16,575 32,765 38,425
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and Development 401,236 254,778 1,111,509 584,518
Sales and Marketing 97,681 52,327 280,103 199,931
General and Administrative 159,615 173,747 519,468 457,292
----------- ----------- ----------- -----------
Total Operating Expenses 658,532 480,852 1,911,080 1,241,741
----------- ----------- ----------- -----------
OPERATING LOSS (658,532) (464,277) (1,878,315) (1,203,316)
Interest income 73,955 101,368 238,873 234,030
----------- ----------- ----------- -----------
NET LOSS ($ 584,577) ($ 362,909) ($1,639,442) ($ 969,286)
=========== =========== =========== ===========
LOSS PER COMMON SHARE ($ 0.14) ($ 0.09) ($ 0.39) ($ 0.25)
=========== =========== =========== ===========
Weighted average common shares
outstanding 4,171,109 4,168,987 4,170,067 3,832,749
=========== =========== =========== ===========
</TABLE>
<PAGE>
APPLIED BIOMETRICS, INC.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
shares amount Capital Deficit
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
December 31, 1995 2,943,410 $ 29,434 $ 13,507,155 $(11,089,087)
Private Placement net
of offering expenses of $587,133 860,000 8,600 4,564,267
Exercise of stock options warrants 365,577 3,656 1,632,046
Net loss (1,368,961)
------------ ------------ ------------ ------------
December 31, 1996 4,168,987 41,690 19,703,468 (12,458,048)
Exercise of stock options (unaudited) 3,100 31 10,782
Net loss nine months ended September
30, 1997 (1,639,942)
------------ ------------ ------------ ------------
Balance September 30, 1997 (unaudited) 4,172,087 $ 41,721 $ 19,714,250 $(14,097,990)
============ ============ ============ ============
</TABLE>
<PAGE>
APPLIED BIOMETRICS, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1997 1996
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,639,942) $ (969,286)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 124,218 70,905
Cash flows provided by (used for) changes in:
Accounts receivables 3,438 (34,089)
Inventory 42,079 (191,030)
Prepaid expenses and other assets 101,347 (88,605)
Accounts payable (21,024) (5,236)
Accrued expenses 24,034 21,935
----------- -----------
Net cash flows used by operating
activities (1,365,850) (1,195,406)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and maturities of short term investments 3,259,009 2,454,567
Purchases of short-term investments (1,600,526) (6,772,665)
Purchase of property and equipment (192,669) (242,916)
----------- -----------
Net cash provided (used) in investing activities 1,465,814 (4,561,014)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from private placement of
common stock - 4,572,867
Proceeds from exercise of stock options
and warrants 10,813 1,635,702
----------- -----------
Net cash provided by financing activities 10,813 6,208,569
----------- -----------
Net (decrease) increase in cash and cash equivalents 110,777 452,149
CASH AND CASH EQUIVALENTS:
Beginning of period 741,661 457,322
----------- -----------
End of period $ 852,438 $ 909,471
=========== ===========
</TABLE>
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1. Unaudited Interim Results
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all
the information and footnotes required by generally accepted accounting
principles 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 and nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for
the year 1997.
These statements should be read in conjunction with the audited financial
statements and related notes for the year ended December 31, 1996
included in the Company's Form 10-KSB for the year ended December 31,
1996.
Note 2. Sale of Common Stock
In February of 1996 the Company sold 860,000 shares of common stock in a
private placement at $6.00 per share. Net proceeds to the Company, after
selling agent expenses and other offering expenses of $587,133, were
$4,572,867. In connection with this private placement, the Company issued
warrants to purchase 86,000 common shares. These warrants were
exercisable at $6.00 per share and were exercised in 1996.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1997.
NET SALES. For the three and nine months ended September 30, 1997 the
Company had net sales of $0 and $64,940, respectively, compared to
$34,075 and $77,800 in the same periods in 1996. The decrease in net
sales for the nine months ended September 30, 1997 is the result of the
Company making a strategic decision, in the third quarter of 1997, not to
continue to market its present cardiac output monitoring system until the
completion of the development of the next generation system. The new
system is presently undergoing lab and clinical testing and is expected
to be available to the market upon successful completion of the testing
sometime in late 1997 or early 1998. The Company believes that because of
the early stage of its product roll-out that its net sales will continue
to fluctuate on a quarter to quarter basis in future periods.
GROSS PROFIT. The Company's gross profit margin for the nine months ended
September 30, 1997 was 50.5%, compared to 49.4% in the same periods in
1996. The increase in the gross profit margin for the nine months ended
September 30, 1997 is due to the mix of monitor sales and EVP Probe sales
in 1997 compared to 1996. The Company believes that these margins are not
necessarily representative of the margins it will realize in the future.
RESEARCH AND DEVELOPMENT. For the three and nine months ended September
30, 1997, Research and Development expenses increased $146,458 or 57.5%
and $526,991 or 90.2%, respectively, over the same periods in 1996. This
increase is the result of the continued development of the next
generation Cardiac Output Monitoring System that is expected to be
completed in late 1997 or early 1998. In future periods, the Company
expects Research and Development expenses to continue at approximately
the same level as the Company commences redevelopment of the TTD device
upon completion of the next generation Cardiac Output Monitoring System.
SALES AND MARKETING. For the three and nine months ended September 30,
1997, Sales and Marketing expenses increased $45,354 or 86.7% and $80,172
or 40%, respectively over the same periods in 1996. This increase is the
result of increased sales personnel and other costs associated with the
roll-out of the Company's Cardiac Output Monitoring System.
<PAGE>
GENERAL AND ADMINISTRATIVE. General and Administrative expenses decreased
$14,132 or 8.1% for the three months ended September 30, 1997 and
increased $62,176 or 13.6% for the nine months ended September 30, 1997
as compared to the same periods in 1996. The decrease in expenses for the
three months is a result of a decrease in legal expenses in 1997 as
compared to 1996. The increase in expenses for the nine months in 1997 is
a result of increased personnel and salary expenses and other
administrative expenses associated with a higher level of activity.
INTEREST INCOME. Interest Income decreased $27,413 for the three months
ended September 30, 1997 compared to the same period of 1996 because of
fewer funds available for investment. For the nine months ended September
30, 1997, Interest Income increased $4,843 as a result of more funds
available for investment. These additional funds came from a private
placement of common stock in February, 1996 and from the exercise of
options and warrants.
LIQUIDITY AND CAPITAL RESOURCES
Prior to 1993 the Company funded its operations through the sale of
private placement securities and notes from certain shareholders. In July
1993 the Company completed an initial public offering of common stock and
raised $5,137,648 in net proceeds.
In February 1996 the Company sold 860,000 shares of common stock at $6.00
per share in a private placement. Net proceeds to the Company were
$4,572,867.
Cash and short-term investments were $4,826,746 at September 30, 1997 and
working capital was $4,942,240 at September 30, 1997. The Company used
$1,365,850 of cash in its operating activities including a net loss of
$1,639,942.
The Company believes that its existing cash, cash equivalents and
short-term investments together with funds generated from operations will
enable the Company to meet its liquidity and capital needs for the next
twelve months.
FORWARD LOOKING STATEMENTS
Statements included in this Form 10-QSB that are not historical in nature
or current facts are "forward-looking statements" made pursuant to the
safe harbor provisions of the Private Securities Reform Act of 1995 and
are subject to certain risks and uncertainties that could cause actual
results to differ materially. Among these risks and uncertainties are (1)
the Company's limited revenues, history of losses and uncertainty of
future results; (2) the uncertainty of market acceptance of the Company's
product, and (3) the fact the Company has limited experience in
manufacturing its product in commercial quantities.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Change in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the
quarter ended September 30, 1997.
<PAGE>
SIGNATURES
In accordance with 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.
Applied Biometrics, Inc.
Registrant
/s/ Joseph A. Marino
Joseph A. Marino
President, CEO
/s/Gerald J. Prescott
Gerald J. Prescott,
Vice President and
Chief Financial Officer
Date: November 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 852,438
<SECURITIES> 3,974,308
<RECEIVABLES> 15,979
<ALLOWANCES> 0
<INVENTORY> 180,397
<CURRENT-ASSETS> 5,148,440
<PP&E> 964,940
<DEPRECIATION> (361,206)
<TOTAL-ASSETS> 5,864,181
<CURRENT-LIABILITIES> 206,200
<BONDS> 0
0
0
<COMMON> 41,721
<OTHER-SE> 5,616,260
<TOTAL-LIABILITY-AND-EQUITY> 5,864,181
<SALES> 64,940
<TOTAL-REVENUES> 64,940
<CGS> 32,175
<TOTAL-COSTS> 32,175
<OTHER-EXPENSES> 1,111,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,639,442)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,639,442)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,639,442)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
