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 December 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 December 31, 1996, 22,979,051 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>
<TABLE>
PART I FINANCIAL STATEMENTS
DIASENSE, INC.
(A Developmental Stage Company)
Consolidated Balance Sheets
<CAPTION>
December 31, 1996 September 30, 1995
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 781,928 $ 1,143,312
Due from BICO 1,749,831 1,777,197
Inventory deposit-BICO 1,000,000 1,000,000
Prepaid expenses 10,234 14,313
------------ ------------
Total current assets 3,541,993 3,934,822
Property and equipment - net
Property & equipment 233,661 237,088
------------ ------------
TOTAL ASSETS $ 3,775,654 $ 4,171,910
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 18,686 $ 20,095
Other accrued liabilities 583 529
------------ -----------
Total current liabilities 19,269 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 Dec. 31, 1996 and
23,006,051 at Sep. 30, 1996 229,791 230,061
Additional paid-in capital 26,888,581 26,982,811
Warrants 13,906,348 12,334,348
Deficit accumulated during the
development stage (37,268,335) (35,395,934)
------------- ------------
3,756,385 4,151,286
TOTAL LIABILITIES AND ------------- ------------
STOCKHOLDERS' EQUITY $ 3,775,654 $ 4,171,910
============= ============
Note: The Balance Sheet at September 30, 1996 has been derived from
audited financial statement at that date.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<CAPTION>
For the For the From July 5, 1989
three months ended three months ended (inception) through
December 31, 1996 December 31, 1995 December 31, 1996
-------------------- ------------------ -----------------
<S> <C> <C> <C>
Research and development expenses $ - $ - $ 10,556,405
General and administrative expenses 316,726 382,003 10,541,066
Warrant extensions 1,572,000 645,000 13,866,033
Technology and patent rights acquired - - 2,650,000
Interest expense _ 448 10,529
Other income (16,325) (55,072) (423,103)
Other expense - - 37,405
-------------- ------------- --------------
Net loss $ (1,872,401) $ (972,379) $ (37,238,335)
============== ============== ==============
Net loss per common share $ (0.08) $ (0.04) $ (2.15)
=============== ============== ==============
See notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
DIASENSE, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
For the For the From July 5, 1989
three months ended three months ended (Inception) through
December 31, 1996 December 31, 1995 December 31, 1996
------------------ ------------------ ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,872,401) $ (972,379) $ (37,238,335)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 3,427 3,192 45,752
Stock issued in exchange for services - 45,500 138,950
Stock issued for License and Marketing Agreement - - 80,000
Warrant extensions 1,572,000 645,000 13,866,033
Inventory Deposit - BICO - - (1,000,000)
(Increase) decrease in prepaid expenses 4,079 5,992 (10,234)
Increase (decrease) in payable due to BICO - (1,287,012) 10,500,000
Increase (decrease) in accounts payable (1,409) 12,398 18,686
(Increase) decrease in accrued liabilites 54 (1,823) 583
------------------ ------------------ ------------------
Net cash used in operating activities (294,250) (1,549,132) (13,598,565)
Cash flows from investing activities:
Purchase of property and equipment - - (279,413)
------------------ ------------------ ------------------
Net cash used in investing activities - - (279,413)
Cash flows from financing activities:
Advances to BICO (698,798) (1,283,282) (2,994,367)
Repayment of advances to BICO 726,164 - 1,811,122
Proceeds from issuance of common stock (94,500) 1,442,970 10,968,334
Proceeds from issuance of common stock to BICO - - 4,200,000
Proceeds from warrants exercised - 26,000 118,066
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 (67,134) 185,688 14,659,906
Net increase (decrease) in cash & equivalents (361,384) (1,363,444) 781,928
Cash and cash equivalents at beg. of period 1,143,312 4,419,163 -
------------------ ------------------ ------------------
Cash and cash equivalents at end of period $ 781,928 $ 2,785,719 $ 781,928
================== ================== ==================
See notes to the financial statements.
</TABLE>
<PAGE>
8
NOTES TO FINANCIAL STATEMENTS
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, 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 December 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 - Net Loss Per Common Share
Net loss per common share is based on the weighted average number of
outstanding common shares which amounted to 22,979,344 and 22,830,765 for
the three months ended December 31, 1996 and for the three months ended
December 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 December 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 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 17,357,690 for the period from
July 5, 1989 (inception) to December 31, 1996.
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 $781,928 at
December 31, 1996. This decrease was primarily attributable to the
Company's $294,250 net cash flow used by operations.
Results of Operations
There were no research and development expenses during the three month
periods ended December 31, 1996 and 1995 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 first quarter
from $382,003 for the three month period ended December 31, 1995 to $316,726
for the three month period ended December 31, 1996. This decrease was
primarily due to a larger decrease in payroll during the first quarter of 1996
than during the first quarter of 1995.
Other income during the first quarter decreased from $55,072 for the
three month period ended December 31, 1995 to $16,325 for the three month
period ended December 31, 1996. The decrease was due to the Company having
lower cash reserves to invest for the first quarter of 1996 than during the
first quarter of 1995.
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 14th day of February, 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 781,928
<SECURITIES> 0
<RECEIVABLES> 1,749,831
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 3,541,993
<PP&E> 279,413
<DEPRECIATION> 45,752
<TOTAL-ASSETS> 3,775,654
<CURRENT-LIABILITIES> 19,269
<BONDS> 0
0
0
<COMMON> 229,791
<OTHER-SE> 3,526,594
<TOTAL-LIABILITY-AND-EQUITY> 3,775,654
<SALES> 0
<TOTAL-REVENUES> 16,325
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,888,726
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,872,401)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
