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 March 31, 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 March 31, 1996, 23,081,622 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>
PART I FINANCIAL STATEMENTS
DIASENSE, INC.
(A Development Stage Company)
Balance Sheets
March 31, 1996 September 30, 1995
ASSETS (Unaudited) (Note)
Current assets
Cash and cash equivalents $ 2,294,561 $ 4,149,163
Accounts receivable 1,007 1,007
Due from BICO 1,602,228 -
Inventory deposit 1,000,000 1,000,000
Prepaid expenses 30,013 13,775
Total current assets 4,927,809 5,163,945
Property and equipment - at cost
Building and improvements 234,863 234,863
Furniture and fixtures 37,545 37,545
Subtotal 272,408 272,408
Less accumulated depreciation 34,749 28,952
Total PPE 237,659 243,456
TOTAL ASSETS $ 5,165,468 $ 5,407,401
LIABILITIES and STOCKHOLDERS' EQUITY (Deficit)
Current Liabilities
Accounts payable $ 30,871 $ 29,825
Other accrued liabilities 3,508 7,143
Due to BICO - 1,287,012
Total current liabilites 34,379 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 23,081,622 at Mar. 31, 1996 230,816 225,243
and 22,524,320 at Sep. 30, 1995
Additional paid-in capital 27,217,942 25,541,974
Warrants 8,794,315 4,690,315
Deficit accumulated during
develompment stage (31,111,984) (26,374,111)
5,131,089 4,083,421
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (Deficit) $ 5,165,468 $ 5,407,401
Note: The Balance Sheet at September 30, 1995 has been derived from
audited financial statement at that date.
See notes to the financial statements.
<PAGE>
<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Statement of Operations
(Unaudited)
<CAPTION>
For the six months ended For the three months ended From July 5, 1989
March 31, March 31, (inception) through
1996 1995 1996 1995 March 31, 1996
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ 2,202,702 $ - $ 1,070,684 $ 10,556,405
General and administrative expenses 720,269 1,470,505 338,265 648,725 9,465,311
Warrant extensions 4,104,000 - 3,459,000 - 8,754,000
Technology and patent rights acquired - - - - 2,650,000
Interest expense 732 2,871 284 2,132 9,686
Other income (87,128) (22,057) (32,055) (4,806) (360,823)
Other expense - - - - 37,405
Net loss (4,737,873) $ (3,654,021) $ (3,765,494) $ (1,716,735) $ (31,111,984)
Net loss per common share $ (0.21) $ (0.20) $ (0.16) $ (0.10) $ (1.88)
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
<CAPTION>
For the six months ended For the three months ended From July 5,1989
March 31, March 31, (Inception) thru
1996 1995 1996 1995 March 31, 1996
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net Loss $ (4,737,873) $ (3,654,021) $ (3,765,494) $(1,716,735) $(31,081,984)
Adjustments to reconcile net loss to net
cash used by operating activites:
Depreciation 5,797 4,759 2,604 2,437 34,749
Stock in exchange for services 52,500 26,250 7,000 26,250 138,950
(Increase) decrease in receivable - - - 59,861 496,811
Warrent extensions 4,104,000 - 3,459,000 - 8,754,000
Inventory Deposit-BICO - - - - (1,000,000)
(Increase) decrease prepaid expenses (16,238) 4,796 (22,229) 6,489 (30,013)
Increase in payable due to BICO (1,287,012) 3,200,087 - 1,737,071 10,500,000
Increase (decrease) in accounts payable 1,046 (9,222) (11,352) (31,239) 30,871
Increase in accrued liabilities (3,635) (1,514) (1,812) (2,572) 3,508
Stock issued for License and Marketing Agreement - - - - 80,000
Net cash provided (used) in operating activities (1,881,415) (428,865) (332,283) 81,562 (12,073,108)
Cash flows from investing activities:
Purchase of property and equipment - (1,456) - - (272,408)
Net cash used in investing activities - (1,456) - - (272,408)
Cash flows from financing activities:
Advances to BICO (1,602,228) - (318,946) - (2,120,600)
Repayment of advances to BICO - - - - 587,140
Proceeds from issuance of common stock 1,603,041 96,670 160,071 56,337 11,300,720
Proceeds from issuance of common stock to BICO - - - 4,200,000
Proceeds from warrants exercised 26,000 4,267 - 400 116,066
Proceeds from treasury stock - - - - (35,000)
Proceeds from Regulation S - - - - 288,751
Proceeds from issuance of notes payable - - - - 303,000
Net cash provided by financing activities 26,813 100,937 (158,875) 56,737 14,640,077
Net increase (decrease) in cash and cash equivalents (1,854,602) (329,384) (491,158) 138,299 2,294,561
Cash and cash equivalents at beginning of period 4,149,163 448,738 2,785,719 (18,945) -
Cash and cash equivalents at end of period $ 2,294,561 $ 119,354 $ 2,294,561 $ 119,354 $ 2,294,561
See notes to the financial statements.
</TABLE>
<PAGE>
DIASENSE, INC.
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 10-Q and Rule 10-O Regulation S-X. 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 March 31, 1996. Diasense is currently
developing a non invasive glucose sensor (Sensor). The Sensor would use
electromagnetic technology to measure blood without requiring the user to
take a blood sample.
NOTE C - Common Stock
During the three months ended March 31, 1996, the Company sold 48,247
shares of its common stock pursuant to its registration statement dated
July 19, 1993 as amended. In addition 2,000 shares were granted in
exchange for services rendered to the Company.
NOTE D - Net Loss Per Common Share
Net loss per common share is based on the weighted average number of
outstanding common shares which amounted to 22,943,906 and 17,866,398 for
the six months ended March 31, 1996, and for the six months ended March 31,
1995, respectively. The loss per share does not include common stock
equivalents since the effect would be anti-dilutive.
From July 5, 1989 (inception) to March 31, 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
<PAGE>
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 16,585,316 for the
period from July 5, 1989 (inception) to March 31, 1996.
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 $2,294,561 at
March 31, 1996. This decrease was attributable to the Company's $1,881,415
net cash flow used by operations during the six months ended March 31,
1996. These operating expenditures consisted primarily of Sensor related
general and administrative expenses.
Results of Operations
Research and development expenses decreased during the second quarter
from $1,070,684 for the three month period ended March 31, 1995 to $0 for
the three month period ended March 31, 1996 and decreased from $2,202,702
for the six month period ended March 31, 1995 to $0 for the six month
period ended March 31, 1996. These decreases were due to an agreement
between the Company and BICO to suspend billings pursuant to the Research
and Development Agreement pending the outcome of the FDA's review of the
Diasensor 1000. Accordingly, associated research and development activity
was suspended and the associated charges from BICO to the Company were
discontinued.
During the three month period, the Company extended warrants to
purchase 1,153,000 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 a $3,459,000 charge against income, which is the
difference between the fair market price and warrant share price times the
number of warrants shares.
General and administrative expenses decreased during the first quarter
from $648,725 for the three month period ended March 31, 1995 to $338,265
for the three month period ended March 31, 1996 and decreased from
$1,470,505 for the six month period ended March 31, 1995 to $720,269 for
the six month period ended March 31, 1996. These decreases were primarily
due to the suspension of reimbursements of BICO as discussed above.
Other income during the first quarter increased from $4,806 for the
three month period ended March 31, 1995 to $32,055 for the three month
period ended March 31, 1996 and increased from $22,057 for the six month
period ended March 31, 1995 to $87,128 for the six month period ended March
31, 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
1. A Report on Form 8-K dated February 20, 1996, with respect
to Item 5, Other Events and Item 7(c), Exhibit.
2. A Report on Form 8-K dated February 26, 1996, with respect
to Item 5, Other Events and Item 7(c), Exhibit.
3. A Report on Form 8-K dated February 27, 1996, with respect
to Item 5, Other Events and Item 7(c), Exhibit.
4. A Report on Form 8-K dated April 10, 1996, with respect to
Item 5, Other Events and Item 7(c), Exhibit.
5. A Report on Form 8-K dated May 8, 1996, with respect to
Item 5, Other Events and Item 7(c), Exhibit.
<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 14th day of May, 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,294,561
<SECURITIES> 0
<RECEIVABLES> 1,007
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,927,809
<PP&E> 272,408
<DEPRECIATION> 34,749
<TOTAL-ASSETS> 5,165,468
<CURRENT-LIABILITIES> 34,379
<BONDS> 0
0
0
<COMMON> 230,816
<OTHER-SE> 36,012,257
<TOTAL-LIABILITY-AND-EQUITY> 5,165,468
<SALES> 0
<TOTAL-REVENUES> 87,128
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (4,824,269)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 732
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,737,873)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
