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, 1997
-----------------
Commission file number 0-26504
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DIASENSE, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-1605848
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(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
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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, 1997, 22,980,051 shares of Diasense, Inc. common
stock, par value $.01 were outstanding.
<PAGE>1
DIASENSE, INC.
(A Development Stage Company)
Consolidated Balance Sheets
December 31, September 30,
ASSETS 1997 1997
(Unaudited) (Note)
----------- -----------
Current assets
Cash and cash equivalents $ 1,087,606 $ 1,871,070
Due from BICO 521,981 -
Notes receivable - related parties 125,000 -
Interest receivable - related parties 1,558 -
Inventory deposit - BICO 1,000,000 1,000,000
Prepaid expenses 7,940 13,698
----------- -----------
Total current assets 2,744,085 2,884,768
Property and equipment - at cost
Building and improvements 236,663 236,663
Furniture and fixtures 42,750 42,750
----------- -----------
279,413 279,413
Less accumulated depreciation 59,334 55,938
------------ -----------
220,079 223,475
----------- -----------
TOTAL ASSETS $ 2,964,164 $ 3,108,243
=========== ===========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,313 $ 9,433
Other accrued liabilities 12,956 12,986
----------- -----------
Total current liabilities 21,269 22,419
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
22,980,051 at Dec. 31, 1997 and
22,979,051 at Sep. 30, 1997 229,801 229,791
Additional paid-in capital 26,892,071 26,888,581
Warrants 17,953,223 17,928,223
Deficit accumulated during the
development stage (42,132,200) (41,960,771)
----------- -----------
2,942,895 3,085,824
TOTAL LIABILITIES AND ----------- -----------
STOCKHOLDERS' EQUITY $ 2,964,164 $ 3,108,243
=========== ===========
[FN]
Note: The Balance Sheet at September 30, 1997 has been derived from audited
financial statement at that date.
See notes to the financial statement.
<PAGE>2
DIASENSE, INC.
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the From July 5, 1989
three months ended three months ended (inception) through
December 31, 1997 December 31, 1996 December 31, 1997
-------------------- ------------------ -----------------
<S> <C> <C> <C>
Research and development expenses $ - $ - $ 10,556,405
General and administrative expenses 168,212 316,726 11,416,513
Warrant extensions 25,000 1,572,000 17,912,908
Technology and patent rights acquired - - 2,650,000
Interest expense _ - 10,529
Other income (21,783) (16,325) (481,560)
Other expense - - 37,405
-------------- ------------- --------------
Net loss $ (171,429) $ (1,872,401) $ (42,102,200)
============== ============== ==============
Net loss per common share $ (0.01) $ (0.08) $ (2.43)
=============== ============== ==============
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 For the From July 5, 1989
three months ended three months ended (Inception) through
December 31, 1997 December 31, 1996 December 31, 1997
------------------ ------------------ ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (171,429) $ (1,872,401) $ (42,102,200)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 3,396 3,427 59,334
Stock issued in exchange for services - - 138,950
Stock issued for License and Marketing Agreement - - 80,000
Warrant extensions 25,000 1,572,000 17,912,908
Inventory Deposit - BICO - - (1,000,000)
(Increase) decrease in prepaid expenses 5,758 4,079 (7,940)
Increase in payable due to BICO - - 10,500,000
Increase (decrease) in accounts payable (1,120) (1,409) 8,313
Increase (decrease) in accrued liabilites (30) 54 12,956
------------------ ------------------ ------------------
Net cash used in operating activities (138,425) (294,250) (14,397,679)
Cash flows from investing activities:
Purchase of property and equipment - - (279,413)
Increase in Notes Receivable (125,000) - (125,000)
Increase in Interest Receivable (1,558) - (1,558)
------------------ ------------------ ------------------
Net cash used in investing activities (126,558) - (405,971)
Cash flows from financing activities:
Advances to BICO (1,649,070) (698,798) (5,758,931)
Repayment of advances to BICO 1,127,089 726,164 5,803,536
Proceeds from issuance of common stock - (94,500) 10,968,334
Proceeds from issuance of common stock to BICO 3,500 - 4,203,500
Proceeds from warrants exercised - - 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 (518,481) (67,134) 15,891,256
------------------ ------------------ ------------------
Net increase (decrease) in cash & equivalents (783,464) (361,384) 1,087,606
Cash and cash equivalents at beg. of period 1,871,070 1,143,312 -
------------------ ------------------ ------------------
Cash and cash equivalents at end of period $ 1,087,606 $ 781,928 $ 1,087,606
================== ================== ==================
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,
1997.
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
December 31, 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 periods ended December
31, 1997 and December 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 December 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 18,170,753 for the period from July
5, 1989 (inception) to December 31, 1997.
<PAGE>5
DIASENSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE D - Stockholders' Equity
During the three months ended December 31, 1997, the
company sold 1,000 shares of its common stock pursuant to
its registration statement dated July 19, 1993 as amended.
In addition, the exercise date was extended on a
warrant to purchase 10,000 shares of common stock to a
former consultant. The warrant was 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
extension was granted was $3.50. Diasense Inc. recorded a
$25,000 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 $1,871,070 at September 30, 1997,
to $1,087,606 at December 31, 1997. This decrease was
primarily attributable to the Company's $138,425 net cash
flow used by operations and $521,981 net advances to BICO.
Results of Operations
There were no research and development expenses
during the three month period ended December 31, 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 first quarter from $316,726 for the three month period
ended December 31, 1996 to $168,212 for the three month
period ended December 31, 1997. The decrease was primarily
due to reductions in administrative overhead.
Other income during the first quarter increased from
$16,325 for the three month period ended December 31, 1996
to $21,783 for the three month period ended December 31,
1997. This increase was due to the Company having higher
cash reserves to invest for the period ending December 31,
1997 than during the period ending December 31, 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 13th day of February, 1998.
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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,087,606
<SECURITIES> 0
<RECEIVABLES> 648,539
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 2,744,085
<PP&E> 279,413
<DEPRECIATION> 59,334
<TOTAL-ASSETS> 2,964,164
<CURRENT-LIABILITIES> 21,269
<BONDS> 0
0
0
<COMMON> 229,801
<OTHER-SE> 2,713,094
<TOTAL-LIABILITY-AND-EQUITY> 2,964,164
<SALES> 0
<TOTAL-REVENUES> 21,783
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 193,212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171,429)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
