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, 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 March 31, 1997, 22,979,051 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>1
PART I FINANCIAL STATEMENTS
DIASENSE, INC.
(A Development Stage Company)
Consolidated Balance Sheets
March 31, 1997 September 30, 1996
(Unaudited) (Note)
-------------- ------------------
ASSETS
Current assets
Cash and cash equivalents $ 75,503 $ 1,143,312
Due from BICO 2,179,287 1,777,197
Inventory deposit-BICO 1,000,000 1,000,000
Prepaid expenses 5,808 14,313
------------ ------------
Total current assets 3,260,598 3,934,822
Property and equipment - net
Property and equipment 230,265 237,088
------------ ------------
TOTAL ASSETS $ 3,490,863 $ 4,171,910
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 37,875 $ 20,095
Other accrued liabilities 509 529
------------ ------------
Total current liabilites 38,384 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 Mar. 31, 1997 229,791 230,061
and 23,006,051 at Sep. 30, 1996
Additional paid-in capital 26,888,581 26,982,811
Warrants 17,621,348 12,334,348
Deficit accumulated during
develompment stage (41,287,241) (35,395,934)
------------- -------------
3,452,479 4,151,286
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,490,863 $ 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.
<PAGE>2
<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
1997 1996 1997 1996 March 31, 1997
------------------------- -------------------------- -------------------
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ - $ - $ - $ 10,556,405
General and administrative expenses 633,642 720,269 316,916 338,265 10,857,982
Warrant extensions 5,287,000 4,104,000 3,715,000 3,459,000 17,581,033
Technology and patent rights acquired - - - - 2,650,000
Interest expense - 732 - 284 10,529
Other income (29,335) (87,128) (13,010) (32,055) (436,113)
Other expense - - - - 37,405
Net loss (5,891,307) $ (4,737,873) $ (4,018,906) $ (3,765,494) $ (41,257,241)
------------ ------------- ------------- ------------- --------------
Net loss per common share $ (0.26) $ (0.21) $ (0.17) $ (0.16) $ (2.35)
============ ============= ============= ============= ==============
See notes to the financial statements.
</TABLE>
<PAGE>3
<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
1997 1996 1997 1996 March 31, 1997
------------------------ -------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net Loss $ (5,891,307) $ (4,737,873) $ (4,018,906) $(3,765,494) $(41,257,241)
Adjustments to reconcile net loss to net
cash used by operating activites:
Depreciation 6,823 5,797 3,396 2,604 49,148
Stock in exchange for services - 52,500 - 7,000 138,950
Stock issued for License and Marketing Agreement - - - - 80,000
Warrent extensions 5,287,000 4,104,000 3,715,000 3,459,000 17,581,033
Inventory Deposit-BICO - - - - (1,000,000)
Increase (decrease) prepaid expenses 8,505 (16,238) 4,426 (22,229) (5,808)
Increase (decrease) in payable due to BICO - (1,287,012) - - 10,500,000
Increase (decrease) in accounts payable 17,780 1,046 19,189 (11,352) 37,875
Increase (decrease) in accrued liabilities (20) (3,635) (74) (1,812) 509
-------------- -------------- ------------- ------------ -------------
Net cash (used) in operating activities (571,219) (1,881,415) (276,969) (332,283) (13,875,534)
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 (1,521,551) (2,333,582) (822,753) (1,048,375) (3,817,120)
Repayment of advances to BICO 1,119,461 731,354 393,297 729,429 2,204,419
Proceeds from issuance of common stock (94,500) 1,603,041 - 160,071 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 (496,590) 26,813 (429,456) (158,875) 14,230,450
-------------- -------------- ------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents (1,067,809) (1,854,602) (706,425) (491,158) 75,503
Cash and cash equivalents at beginning of period 1,143,312 4,149,163 781,928 2,785,719 -
-------------- -------------- ------------- ------------ -------------
Cash and cash equivalents at end of period $ 75,503 $ 2,294,561 $ 75,503 $ 2,294,561 $ 75,503
============== ============== ============= ============ =============
See notes to the financial statements.
</TABLE>
<PAGE>4
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 of March 31, 1997. 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 22,979,199 and 22,943,906 for
the six months ended March 31, 1997, and for the six months ended March 31,
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 March 31, 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 17,580,841 for the period from July
5, 1989 (inception) to March 31, 1997.
NOTE D - Stockholders Equity
During the period ending March 31, 1997, Diasense Inc., extended the
exercise date of warrants to purchase 1,486,000 shares of common stock to
certain officers, directors, employees and consultants. 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 $3,715,000 expense for
the difference between the fair market value and the warrant price times
the number of shares.
<PAGE>5
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 $75,503 at
March 31, 1997. This decrease was primarily attributable to the Company's
$571,219 net cash flow used by operations and $402,090 net advances to
BICO.
Results of Operations
There were no research and development expenses during the six month
periods ended March 31, 1997 and 1996 due to the agree-upon suspension of
billings by Diasense and BICO pursuant to the Research and Development
Agreement.
General and administrative expenses decreased during the second
quarter from $338,265 for the three month period ended March 31, 1996 to
$316,916 for the three month period ended March 31, 1997 and decreased from
$720,269 for the six month period ended March 31, 1996 to $633,642 for the
six month period ended March 31, 1997. These decreases were primarily due
to minor administrative changes.
Other income during the second quarter decreased from $32,055 for the
three month period ended March 31, 1996 to $13,010 for the three month
period ended March 31, 1997 and decreased from $87,128 for the six month
period ended March 31, 1996 to $29,335 for the six month period ended March
31, 1997. These decreases were due to the Company having lower cash
reserves to invest for the periods ending March 31, 1997 than during the
periods ended March 31, 1996.
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>6
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 May, 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>7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 75,503
<SECURITIES> 0
<RECEIVABLES> 2,179,287
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 3,260,598
<PP&E> 279,413
<DEPRECIATION> 49,148
<TOTAL-ASSETS> 3,490,863
<CURRENT-LIABILITIES> 38,384
<BONDS> 0
0
0
<COMMON> 229,791
<OTHER-SE> 3,222,688
<TOTAL-LIABILITY-AND-EQUITY> 3,490,863
<SALES> 0
<TOTAL-REVENUES> 29,335
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,920,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,891,307)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> 0
</TABLE>
