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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2000
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
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APPLIED BIOMETRICS, INC.
(Exact name of Registrant as specified in its charter)
State of Incorporation: Minnesota
I.R.S. Employer Identification No.: 41-1508112
Principal Executive Offices: P.O. Box 3170
Burnsville, Minnesota 55337
Telephone Number: (952) 890-1123
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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. Yes ___X___ No ______
On October 31, 2000, there were 5,883,404 shares of the Registrant's common
stock, par value $.01 per share, outstanding.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
APPLIED BIOMETRICS, INC.
STATEMENT OF NET ASSETS IN LIQUIDATION
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<TABLE>
<CAPTION>
September
30,
2000
----
(Unaudited)
<S> <C>
ASSETS
Cash and cash equivalents ........................................... $ 978,696
Prepaid expenses and other current assets ........................... 78,766
Equipment, machinery and furniture, net ............................. 242,430
Patents and other intangibles, net .................................. 23,000
------------
Total assets ...................................................... $ 1,322,892
============
LIABILITIES
Accounts payable .................................................... $ 104,225
Other current liabilities ........................................... 43,226
Reserve for estimated costs during period of liquidation ............ 347,250
------------
Total liabilities ................................................. 494,701
------------
Net assets ........................................................ $ 828,191
============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
2
<PAGE>
APPLIED BIOMETRICS, INC.
CONDENSED BALANCE SHEET
(GOING CONCERN BASIS)
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<TABLE>
<CAPTION>
December 31,
1999
----
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 1,910,356
Inventories, net ........................................................ 167,109
Prepaid expenses and other current assets ............................... 90,577
------------
Total current assets .................................................. 2,168,042
Equipment and leasehold improvements, net ............................... 550,675
Patents and other intangibles, net ...................................... 99,437
Other assets ............................................................ 9,585
------------
Total assets .......................................................... $ 2,827,739
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 95,255
Accrued expenses and short-term debt obligations ........................ 195,849
Current maturities of capital lease obligations ......................... 8,333
------------
Total current liabilities ............................................. 299,437
Non-current liabilities:
Capital lease obligation ................................................ 11,677
------------
Total liabilities ..................................................... 311,114
------------
Shareholders' equity:
Undesignated stock: authorized 5,000,000 shares of $.01 par value;
None issued or outstanding at June 30, 2000 and December 31, 1999 ..... --
Common stock: authorized 20,000,000 shares of $.01 par value;
5,883,404 issued and outstanding at June 30, 2000 and 5,229,004 at
December 31, 1999 ..................................................... 52,990
Additional paid-in capital .............................................. 23,362,233
Accumulated deficit ..................................................... (20,898,598)
------------
Total shareholders' equity ............................................ 2,516,625
------------
Total liabilities and shareholders' equity ............................ $ 2,827,739
============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
3
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
SEPTEMBER 1, 2000 THROUGH SEPTEMBER 30, 2000
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Net assets in liquidation as of September 1, 2000................ $925,557
Change in net assets............................................. (97,366)
---------
Net assets in liquidation as of September 30, 2000............... $ 828,191
=========
The accompanying notes are an integral part of the unaudited financial
statements.
4
<PAGE>
APPLIED BIOMETRICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
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<TABLE>
<CAPTION>
Eight Months Nine Months
Ended Ended
August 31, September 30,
2000 1999
---- ----
<S> <C> <C>
Operating expenses:
Selling, general and administrative ................... $ 911,766 $ 778,949
Research and development .............................. 1,500,337 972,210
------------ ------------
Operating loss ........................................ (2,412,103) (1,751,159)
Other income, net ..................................... 57,227 56,711
------------ ------------
Net loss .............................................. $ (2,354,876) $ 1,694,448)
============ ============
Basic and diluted net loss per share .................. $ (0.42) $ (0.38)
============ ============
Weighted-average common shares outstanding ............ 5,655,380 4,443,723
============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
5
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(GOING CONCERN BASIS)
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<TABLE>
<CAPTION>
Additional
Common Stock Paid in Accumulated
Shares Amount Capital Deficit
--------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997 ............... 4,276,117 $ 42,761 $ 20,278,959 $(15,050,518)
Exercise of stock options ....... 61,000 610 281,890
1998 Net loss ................... (3,402,138)
--------------------------------------------------------------
December 31, 1998 ............... 4,337,117 43,371 20,560,849 (18,452,656)
Exercise of stock options ....... 146,887 1,469 1,076,143
Issuance of stock, net of
offering costs ................ 815,000 8,150 2,059,412
Distribution of the net assets of
Cardia, Inc. .................. (334,171)
1999 Net loss ................... (2,445,942)
--------------------------------------------------------------
December 31, 1999 ............... 5,299,004 $ 52,990 $ 23,362,233 $(20,898,598)
Stock option activity ........... 9,400 94 33,440
Non-employee stock awards ....... 50,000 500 152,650
Warrant issued in capital lease
transaction ................... 4,506
Issuance of stock, net of
offering costs ................ 525,000 5,250 1,485,590
Net loss for the eight-month
period ended August 31, 2000 .. (2,354,876)
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August 31, 2000 (unaudited) ..... 5,883,404 $ 58,834 $ 25,038,419 $(23,253,474)
==============================================================
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
6
<PAGE>
APPLIED BIOMETRICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
One Month Eight Months Nine Months
Ended Ended Ended
September 30, August 31, September 30,
2000 2000 1999
------------ ------------ ------------
(Liquidation (Going Concern (Going Concern
Basis) Basis) Basis)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Decrease in net assets in liquidation ........................... $ (97,366)
Net loss ........................................................ -- $ (2,354,875) $ (1,694,448)
Adjustments to reconcile net loss from continuing operations
to net cash used by operating activities:
Depreciation and amortization of capital leases ................. -- 152,428 145,585
Amortization of patents and other intangible assets ............. -- 27,467 10,848
Value of common stock issued in lieu of cash compensation ....... -- 153,150 --
Value of stock options and warrants issued in lieu of cash ...... -- 11,901 --
Gain on disposal of assets ...................................... -- (1,857) --
Changes in operating assets and liabilities:
Inventories ..................................................... 167,109 5,704
Prepaid expenses, other current assets and other assets ......... (4,977) 57,851 (10,187)
Accounts payable and accrued expenses ........................... (385,142) (103,795) 193,016)
------------ ------------ ------------
Net cash used in continuing operations .......................... (487,485) (1,890,621) (1,349,482)
Net cash used in discontinued operations ........................ -- -- (120,548)
------------ ------------ ------------
Net cash used in operating activities ........................... (487,485) (1,890,621) (1,470,030)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of marketable securities ............................... -- -- 500,000
Purchase of equipment and improvements .......................... -- (25,647) (303,824)
Investments in patents and trademarks ........................... -- (19,763) (6,323)
Discontinued operations, net .................................... -- -- (10,981)
------------ ------------ ------------
Net cash provided by (used in) investing activities ............. -- (45,410) 178,872
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock, net of .............. 1,490,840 2,057,941
Proceeds from exercise of stock options ......................... 26,139 75,001
Proceeds from capital lease obligations, net of repayments ...... (20,413) (4,710) (1,479)
------------ ------------ ------------
Net cash provided by financing activities ....................... (20,413) 1,512,269 2,131,463
------------ ------------ ------------
Net decrease in cash and cash equivalents ....................... (507,898) (423,762) (840,305)
Cash and cash equivalents at beginning of year .................. 1,486,594 1,910,356 1,869,413
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 978,696 $ 1,486,594 $ 2,709,718
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
7
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
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(1) BASIS OF PRESENTATION AND LIQUIDATION BASIS OF ACCOUNTING:
The accompanying unaudited condensed financial statements of Applied Biometrics,
Inc. ("Applied Biometrics" or the "Company") have been prepared by the Company
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
The Company adopted the liquidation basis of accounting as of September 1, 2000.
This basis of accounting is considered when the liquidation of a company appears
imminent and the net realizable value of its assets is reasonably determinable.
Under this basis of accounting, assets and liabilities are stated at their net
realizable value and estimated costs through the liquidation date are provided
to the extent reasonably determinable.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS FORM 10-Q INCLUDE "FORWARD LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. ALL FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE BASED ON INFORMATION
AVAILABLE TO THE COMPANY AS OF THE DATE HEREOF AND THE COMPANY ASSUMES NO
OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT. SUCH STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE
ACTUAL RESULT TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESS OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE
FACTORS INCLUDE, AMOUNT OTHERS, THE COMPANY'S ABILITY TO IDENTIFY, NEGOTIATE AND
COMPLETE THE SALE OR DISPOSITION OF ITS CORPORATE ASSETS AND ACHIEVE VALUE FOR
ITS SHAREHOLDERS.
Applied Biometrics, Inc. ("Applied Biometrics" or the "Company") ceased
operations August 22, 2000 due to continuing technical difficulties facing its
cardiac output monitor development and its limited financial capabilities. The
Company engaged Manchester Companies, Inc. ("Manchester"), a Minneapolis-based
advisory and investment-banking firm, to sell the Company's remaining corporate
assets and to perform the final termination of its operations. In concert with
the decision to engage Manchester, two of the Company's four directors resigned
their Board positions and a representative of Manchester was elected as interim
Chief Executive Officer. The Company's former Chief Executive Officer continues
as a Director. The Company will attempt to sell its intellectual property and
corporate shell and conduct a final liquidation of its assets.
The Company has adopted the liquidation basis of accounting as of September 1,
2000. This basis of accounting is considered appropriate when the liquidation of
a company appears imminent and the net realizable value of its assets is
reasonably determinable. Under this basis of accounting, assets and liabilities
are stated at their net realizable value and estimated costs through the
liquidation date are provided to the extent reasonably determinable.
Selling, general and administrative expenses for the eight months ended August
31, 2000 were $912,000 as compared to $779,000 in the nine-month period ended
September 30, 1999. In conjunction with the termination of the Company's
operations, $100,000 of employee termination costs was incurred during the
eight-month period. During the second quarter, the Company incurred a non-cash
compensation charge of $153,000 related to stock granted to the Company's three
non-employee directors for prior and current board service. Non-employee
directors of the Company served without cash compensation.
Research and development expenses were $1,500,000 for the 2000 eight-month
period as compared to $972,000 in the 1999 nine-month period. In conjunction
with the termination of the Company's operations, $100,000 of employee
termination costs was incurred during the eight-month period. Additionally, in
the second quarter the Company wrote-off $210,000 of its monitor and probe
component inventory.
Other income, primarily interest income, in the 2000 eight-month period was
$57,000 as compared to $56,000 in the 1999 nine-month period.
On a going concern basis, the net loss for the 2000 eight-month period was
$2,355,000, or $0.42 per share, compared to a net loss of $1,694,000, or $0.38
per share in 1999 nine-month period.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $979,000 at September 30, 2000 as compared to
$1,910,000 of cash and cash equivalents at December 31, 1999, a decrease of
$931,000. Operating activities during the period used cash of $2,378,000,
consisting primarily of the decrease in net assets and the net loss for the
eight-month period and $489,000 decrease in current liabilities offset by
approximately $345,000 of non-cash expenses. Cash was provided to operations by
decreases in inventory of $167,000 and $53,000 of prepaid expenses. Investing
activities used $45,000 for the purchase of equipment and legal costs related to
the preparation of patent applications. Financing activities provided $1,492,000
of cash primarily from two private equity financings in April, 2000 offset by
$25,000 of net capital lease obligation repayments.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
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The Company believes based on its current estimates that it will have sufficient
cash to settle its remaining liabilities and obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
10
<PAGE>
APPLIED BIOMETRICS, INC.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULT 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) Exhibits. The exhibits to this quarterly report on Form 10-Q are listed in
the exhibit index beginning on page 13.
(b) Form 8-K. On August 23, 2000 the Company filed a report on Form 8-K
reporting that its Board of Directors had reached a final decision to
terminate business operations and to dispose of its remaining corporate
assets and on September 4, 2000 the Company file a report Form 8-K
reporting that its Board of Directors had engaged Manchester Companies,
Inc., a Minneapolis-based advisory and investment banking firm, to sell
the remaining corporate assets and to perform the final termination of its
operations.
11
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report signed on its behalf by the undersigned
hereunto duly authorized.
APPLIED BIOMETRICS, INC.
Dated: November 14, 2000
/s/ James D. Bonneville
----------------------------------------
James D. Bonneville
Interim Chief Executive Officer
(Principal Financial Officer)
12
<PAGE>
APPLIED BIOMETRICS, INC.
INDEX TO EXHIBITS
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10.1 Confidential Separation Agreement dated August 15, 2000 between Applied
Biometrics and Andrew M. Weiss (filed herewith electronically).
27.1 Financial Data Schedule for the eight-month period ended August 31, 2000
(filed herewith electronically).
13
