SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission file number 0-26504
DIASENSE, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1605848
- ----------------------------------------------------------------------
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification no.)
2275 Swallow Hill Road, Bldg. 2500; Pittsburgh, PA 15220
--------------------------------------------------------
(Address of principal executive offices) ( Zip Code)
(412) 279-9740
--------------
Registrant's telephone number, including area code
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
As of June 30, 1996, 23,012,051 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>
<TABLE>
PART I FINANCIAL STATEMENTS
DIASENSE, INC.
(A Developmental Stage Company)
Balance Sheets
<CAPTION>
June 30, 1996 September 30, 1995
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,113,372 $ 4,149,163
Accounts receivable 1,007 1,007
Due from BICO 2,146,252 -
Inventory deposit 1,000,000 1,000,000
Prepaid expenses 14,539 13,775
------------ ------------
Total current assets 4,275,170 5,163,945
Property and equipment - net
Property & equipment 238,369 243,456
------------ ------------
TOTAL ASSETS $ 4,513,539 $ 5,407,401
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY (Deficit)
Current liabilities
Accounts payable $ 2,582 $ 29,825
Other accrued liabilities 1,668 7,143
Due to BICO - 1,287,012
------------ -----------
Total current liabilities 4,250 1,323,980
Stockholders' equity (Deficit)
Preferred stock, 1,000,000 shares authorized, none issued
Common stock, 40,000,000 shares of $.01 par
value authorized; issued and outstanding
23,012,051 at Jun. 30, 1996 and
22,524,320 at Sep. 30, 1995 230,121 225,243
Additional paid-in capital 26,963,139 25,541,974
Warrants 12,250,315 4,690,315
Deficit accumulated during
development stage (34,934,286) (26,374,111)
------------- ------------
4,509,289 4,083,421
TOTAL LIABILITIES AND ------------- ------------
STOCKHOLDERS' EQUITY (Deficit) $ 4,513,539 $ 5,407,401
============= ============
Note: The Balance Sheet at September 30, 1995 has been derived from audited
financial statement at that date.
See notes to financial statements.
</TABLE>
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<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<CAPTION>
For the nine months ended For the three months ended From July 5, 1989
June 30, June 30, (inception) through
1996 1995 1996 1995 June 30, 1996
------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ 3,487,882 $ - $ 1,285,180 $ 10,556,405
General and administrative expenses 1,109,453 2,003,099 389,184 532,594 9,824,495
Warrant extensions 7,560,000 4,650,000 3,456,000 4,650,000 12,210,000
Technology and patent rights acquired - - - - 2,650,000
Interest expense 1,204 3,011 472 140 10,158
Other income (110,482) (42,400) (23,354) (20,343) (384,177)
Other expense - - - - 37,405
------------- ------------- ------------- ----------- -------------
Net loss $ (8,560,175) $ (10,101,592) $ (3,822,302) $ (6,447,571) $ (34,904,286)
============== ============== ============= ============= ==============
Net loss per common share (note C) $ (0.37) $ (0.55) $ (0.17) $ (0.35) $ (2.00)
============== ============= ============= ============= ==============
See notes to the financial statements.
</TABLE>
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<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
For the nine months ended For the three months ended From July 5, 1989
June 30, June 30, (inception) through
1996 1995 1996 1995 June 30, 1996
---------------------------- --------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (8,560,175) $ (10,101,592) $ (3,822,302) $ (6,447,571) $ (34,904,286)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 10,555 7,195 4,758 2,436 39,507
Stock issued in exchange for services 52,500 47,250 - 21,000 138,950
Stock issued for License and Marketing Agreement - - - - 80,000
Warrant extensions 7,560,000 4,650,000 3,456,000 4,650,000 12,210,000
Inventory Deposit - BICO - - - - (1,000,000)
(Increase) decrease in receivable - - - - 496,811
(Increase) decrease in prepaid expenses (764) 11,196 15,474 6,400 (14,539)
Increase (decrease) in payable due to BICO (1,287,012) 4,801,664 - 1,601,577 10,500,000
Increase (decrease) in accounts payable (27,243) (45,000) (28,289) (35,778) 2,582
Increase (decrease) in accrued liabilites (5,475) (2,417) (1,840) (903) 1,668
----------- ------------ ------------- ------------ -----------
Net cash used in operating activities (2,257,614) (631,704) (376,199) (202,839) (12,449,307)
Cash flows from investing activities:
Purchase of property and equipment (5,468) (2,501) (5,468) (1,045) (277,876)
----------- ------------ ------------- ------------ -----------
Net cash used in investing activities (5,468) (2,501) (5,468) (1,045) (277,876)
Cash flows from financing activities:
Advances to BICO (2,146,252) - (544,024) - (2,664,624)
Repayment of advances to BICO - - - - 587,140
Proceeds from issuance of common stock 1,345,543 1,344,524 (257,498) 1,247,854 11,043,222
Proceeds from issuance of common stock to BICO - - - - 4,200,000
Proceeds from warrants exercised 28,000 6,767 2,000 2,500 118,066
Treasury stock - - - - (35,000)
Proceeds from Regulation S - - - - 288,751
Proceeds from issuance of notes payable - - - - 303,000
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities (772,709) 1,351,291 (799,522) 1,250,354 13,840,555
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash & equivalents (3,035,791) 717,086 (1,181,189) 1,046,470 1,113,372
Cash and cash equivalents at beg. of period 4,149,163 448,738 2,294,561 119,354 -
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,113,372 $ 1,165,824 $ 1,113,372 $ 1,165,824 $ 1,113,372
=========== =========== =========== =========== ===========
See notes to the financial statements.
</TABLE>
<PAGE>
DIASENSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying financial statements of Diasense, Inc. (the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information, and with the
instructions to Form 10Q and Rule 10-O Regulation SX. Accordingly, they
do not include all of 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. For further information, refer to the financial
statements and footnotes included in the Company's annual report on Form
10-K for the fiscal year ended September 30, 1995.
NOTE B - Organization
The Company was incorporated on July 5, 1989 as a wholly owned
subsidiary of Biocontrol Technology, Inc. (BICO). BICO owns 52% of the
stock of the Company as of June 30, 1996. Diasense is currently
developing a noninvasive glucose sensor (Sensor). The Sensor would use
electromagnetic technology to measure blood without requiring the user
to take a blood sample.
NOTE C - Net Loss Per Common Share
Net loss per common share is based on the weighted average
number of outstanding common shares which amounted to 22,974,349 and
18,281,040 for the nine months ended June 30,1996 and June 30, 1995,
respectively. The loss per share does not include common stock
equivalents since the effect would be antidilutive.
From July 5, 1989 (inception) to June 30, 1996, net loss per
common share is based on the weighted average number of common shares
outstanding and the number of common shares issuable on the exercise of
1,708,000 warrants issued in 1992; reduced by 488,000 common shares that
were assumed to have been purchased with the proceeds from the exercise
of the warrants at an assumed price of $3.50 per share. The inclusion of
the warrants in the loss per share calculation is required by the rules
of the Securities and Exchange commission relative to the initial
registration statement which included the Company's financial statements
through the period ended March 31, 1993. The registration statement
became effective July 19, 1993. The weighted average number of common
shares including the effect of the conversion of the warrants amounted
to 17,494,171 for the period from July 5, 1989 (inception) to June 30,
1996.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Cash Flows
==========================================================================
Liquidity and Capital Resources
- ------------------------------
Cash decreased from $4,149,163 at September 30, 1995, to
$1,113,372 at June 30, 1996. This decrease was attributable to the
Company's $2,257,614 net cash flow used by operations during the nine
months ended June 30, 1996. These operating expenditures consisted
primarily of paying off the Company's debt owed to BICO in connection
with expenses related to the Sensor and Sensor related general and
administrative expenses.
Results of Operations
- ---------------------
Research and Development expenses decreased during the third
quarter from $1,285,180 for the three month period ended June 30, 1995
to $0 for the three month period ended June 30, 1996 and decreased from
$3,487,882 for the nine month period ended June 30, 1995 to $0 for the
nine month period ended June 30, 1996. These decreases were due to an
agreement between the Company and BICO to suspend billings pursuant to
the Research and Development Agreement. Accordingly, associated
research and development activity was suspended and the associated
charges from BICO to the Company were discontinued.
General and Administrative expenses decreased during the third
quarter from $532,594 for the three month period ended June 30, 1995 to
$389,184 for the three month period ended June 30, 1996 and decreased
from $2,003,099 for the nine month period ended June 30, 1995 to
$1,109,453 for the nine month period ended June 30, 1996. These
decreases were primarily due to the suspension of reimbursements of BICO
as discussed above.
During the three month period, the Company extended warrants to
purchase 1,152,000 shares of common stock to certain officers,
directors, employees and consultants. The warrants were originally
granted at an exercise price of $.50 per share and extended at the same
price. The fair market value of the stock when the extensions were
granted was $3.50. The Company recorded an expense of $3,456,000
against income, which is the difference between the fair market price
and warrant share price times the number of warrants shares.
Other income during the third quarter increased from $20,343 for
the three month period ended June 30, 1995 to $23,354 for the three
month period ended June 30, 1996 and increased from $42,400 for the nine
month period ended June 30, 1995 to $110,482 for the nine month period
ended June 30, 1996. These increases were due to the increase in
interest income as a result of the investment of the Company's liquid
assets.
<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes 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. Reports on Form 8-K
None.
<PAGE>
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 on this 15 day of August, 1996.
DIASENSE, INC.
By /s/ Fred E. Cooper
---------------------
Fred E. Cooper
President and Director(principal
executive officer, principal financial
officer and principal accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,113,372
<SECURITIES> 0
<RECEIVABLES> 2,147,259
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 4,275,170
<PP&E> 227,876
<DEPRECIATION> (39,507)
<TOTAL-ASSETS> 4,513,539
<CURRENT-LIABILITIES> 4,250
<BONDS> 0
0
0
<COMMON> 230,121
<OTHER-SE> 4,279,168
<TOTAL-LIABILITY-AND-EQUITY> 4,513,539
<SALES> 0
<TOTAL-REVENUES> 110,482
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,669,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,204
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,560,175)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> 0
</TABLE>
