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, 1997
-------------
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, 1997, 22,979,051 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>1
<TABLE>
PART I FINANCIAL STATEMENTS
DIASENSE, INC.
(A Development Stage Company)
Consolidated Balance Sheets
<CAPTION>
June 30, 1997 September 30, 1996
(Unaudited) (Note)
--------------- ------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,600 $ 1,143,312
Due from BICO 2,054,603 1,777,197
Inventory deposit - BICO 1,000,000 1,000,000
Prepaid expenses 14,859 14,313
------------ ------------
Total current assets 3,079,062 3,934,822
Property and equipment - net
Property and equipment 226,870 237,088
------------ --------------
TOTAL ASSETS $ 3,305,932 $ 4,171,910
============= ==============
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 30,102 $ 20,095
Other accrued liabilities 25,442 529
------------ -----------
Total current liabilities 55,544 20,624
Stockholders' equity
Preferred stock, 1,000,000 shares authorized, none issued
Common stock, 40,000,000 shares of $.01 par
value authorized; issued and outstanding
22,979,051 at Jun. 30, 1997 and
23,006,051 at Sep. 30, 1996 229,791 230,061
Additional paid-in capital 26,888,581 26,982,811
Warrants 17,920,723 12,334,348
Deficit accumulated during the
development stage (41,788,707) (35,395,934)
------------- -------------
3,250,388 4,151,286
TOTAL LIABILITIES AND ------------- -------------
STOCKHOLDERS' EQUITY $ 3,305,932 $ 4,171,910
============= =============
Note: The Balance Sheet at September 30, 1996 has been derived from audited
financial statement at that date.
See notes to the financial statements.
</TABLE>
<PAGE>2
<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
1997 1996 1997 1996 June 30, 1997
------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ - $ - $ - $ 10,556,405
General and administrative expenses 846,417 1,109,453 212,775 389,184 11,070,757
Warrant extensions 5,586,375 7,560,000 299,375 3,456,000 17,880,408
Technology and patent rights acquired - - - - 2,650,000
Interest expense - 1,204 - 472 10,529
Other income (40,019) (110,482) (10,684) (23,354) (446,797)
Other expense - - - - 37,405
------------- ------------- ------------- ----------- -------------
Net loss $ (6,392,773) $ (8,560,175) $ (501,466) $ (3,822,302) $ (41,758,707)
============== ============== ============= ============= ==============
Net loss per common share $ (0.28) $ (0.37) $ (0.02) $ (0.17) $ (2.35)
============== ============= ============= ============= ==============
See notes to the financial statements.
</TABLE>
<PAGE>3
<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
1997 1996 1997 1996 June 30, 1997
--------------------------- ------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,392,773) $ (8,560,175) $ (501,466) $ (3,822,302) $(41,758,707)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 10,218 10,555 3,395 4,758 52,543
Stock issued in exchange for services - 52,500 - - 138,950
Stock issued for License and Marketing Agreement - - - - 80,000
Warrant extensions 5,586,375 7,560,000 299,375 3,456,000 17,880,408
Inventory Deposit - BICO - - - - (1,000,000)
(Increase) decrease in prepaid expenses (546) (764) (9,051) 15,474 (14,859)
Increase (decrease) in payable due to BICO - (1,287,012) - - 10,500,000
Increase (decrease) in accounts payable 10,007 (27,243) (7,773) (28,289) 30,102
Increase (decrease) in accrued liabilites 24,913 (5,475) 24,933 (1,840) 25,442
------------ ------------ ------------- ---------- -----------
Net cash used in operating activities (761,806) (2,257,614) (190,587) (376,199) (14,066,121)
Cash flows from investing activities:
Purchase of property and equipment - (5,468) - (5,468) (279,413)
------------ ------------ ------------- ----------- -----------
Net cash used in investing activities - (5,468) - (5,468) (279,413)
Cash flows from financing activities:
Advances to BICO (1,625,646) (3,137,925) (104,095) (804,343) (3,921,215)
Repayment of advances to BICO 1,348,240 991,673 228,779 260,319 2,433,198
Proceeds from issuance of common stock (94,500) 1,345,543 - (257,498) 10,968,334
Proceeds from issuance of common stock to BICO - - - - 4,200,000
Proceeds from warrants exercised - 28,000 - 2,000 118,066
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 (371,906) (772,709) 124,684 (799,522) 14,355,134
------------ ------------ ------------ ----------- ------------
Net increase (decrease) in cash & equivalents (1,133,712) (3,035,791) (65,903) (1,181,189) 9,600
Cash and cash equivalents at beg. of period 1,143,312 4,149,163 75,503 2,294,561 -
------------ ------------ ----------- ----------- ------------
Cash and cash equivalents at end of period $ 9,600 $ 1,113,372 $ 9,600 $ 1,113,372 $ 9,600
============ ============ ============ =========== ============
See notes to the financial statements.
</TABLE>
<PAGE>4
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 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,
1996.
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, 1997. 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 22,979,150 and 22,974,349 for the nine months ended June
30, 1997 and June 30, 1996, respectively. The loss per share
does not include common stock equivalents since the effect
would be anti-dilutive.
From July 5, 1989 (inception) to June 30, 1997, 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 17,789,897 for the period from July
5, 1989 (inception) to June 30, 1997.
<PAGE>5
DIASENSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOTE D - Stockholders' Equity
During the period ending June 30, 1997, Diasense Inc.,
extended the exercise date of warrants to purchase 119,750
shares of common stock to certain directors and employees.
The warrants were originally granted at an exercise price of
$1.00 per share and extended at the same price. The fair
market value of the stock when the extensions were granted
was $3.50. Diasense Inc. recorded a $299,375 expense for
the difference between the fair market value and the warrant
price times the number of shares.
Management's Discussion and Analysis of Financial Condition and Cash Flows
- --------------------------------------------------------------------------
Liquidity and Capital Resources
Cash decreased from $1,143,312 at September 30, 1996,
to $9,600 at June 30, 1997. This decrease was primarily
attributable to the Company's $761,806 net cash flow used by
operations and $277,406 net advances to BICO.
Results of Operations
There were no research and development expenses
during the nine month periods ended June 30, 1997 and 1996
due to the agreed-upon suspension of billings by Diasense
and BICO pursuant to the Research and Development Agreement.
General and Administrative expenses decreased during
the third quarter from $389,184 for the three month period
ended June 30, 1996 to $212,775 for the three month period
ended June 30, 1997 and decreased from $1,109,453 for the
nine month period ended June 30, 1996 to $846,417 for the
nine month period ended June 30, 1997. These decreases were
primarily due to minor administrative changes.
Other income during the third quarter decreased from
$23,354 for the three month period ended June 30, 1996 to
$10,684 for the three month period ended June 30, 1997 and
decreased from $110,482 for the nine month period ended June
30, 1996 to $40,019 for the nine month period ended June 30,
1997. These decreases were due to the Company having lower
cash reserves to invest for the periods ending June 30, 1997
than during the periods ending June 30, 1996.
<PAGE>6
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>7
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 15th day of August, 1997.
DIASENSE, INC.
By /s/ Fred E. Cooper
---------------------------
Fred E. Cooper
President and Director (principal
executive officer, principal financial
officer and principal accounting
officer)
<PAGE>8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,600
<SECURITIES> 0
<RECEIVABLES> 2,054,603
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 3,079,062
<PP&E> 279,413
<DEPRECIATION> 52,543
<TOTAL-ASSETS> 3,305,932
<CURRENT-LIABILITIES> 55,544
<BONDS> 0
0
0
<COMMON> 229,791
<OTHER-SE> 3,020,597
<TOTAL-LIABILITY-AND-EQUITY> 3,305,932
<SALES> 0
<TOTAL-REVENUES> 40,019
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,432,792
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,392,773)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
</TABLE>
