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, 2000
Commission file number 33-56574
DIASENSOR.COM
(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, 2000, 22,980,051 shares of
Diasensor.com, Inc. common stock, par value $.01 were
outstanding.
<PAGE>1
DIASENSOR.COM,INC.
(A Development Stage Company)
Consolidated Balance Sheets
March 31, September 30,
ASSETS 2000 1999
(Unaudited)
----------- -----------
Current assets
Cash and cash equivalents (note A) $ 4,741 $ 6,525
Prepaid expenses 2,638 130
----------- -----------
Total current assets 7,379 6,655
Property and equipment - at cost(note A)
Furniture and fixtures 42,750 42,750
Less accumulated depreciation 31,384 28,331
------------ -----------
11,366 14,419
----------- -----------
Other Assets
Due from BICO (note A) - 1,458,809
Allowance for doubtful account - (1,458,809)
Investment - MicroIslet,Inc. (note E) 479,167 -
Investment - Diabecore (note E) 500,784 -
Security Deposit 17,500 17,250
----------- ----------
997,451 17,250
----------- ----------
TOTAL ASSETS $ 1,016,196 $ 38,324
=========== ==========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 12,500 $ -
Due to BICO 435,141 -
Accrued payroll and withholdings 91,839 91,214
----------- -----------
Total current liabilities 539,480 91,214
Committments and Contingencies (note A)
Stockholders' equity (deficiency)
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 Mar. 31, 2000 and 22,980,051 at
Sep. 30, 1999 229,801 229,801
Additional paid-in capital 26,892,071 26,892,071
Warrants 18,454,943 18,453,839
Deficit accumulated during the development stage(45,100,099) (45,628,601)
----------- -----------
476,716 (52,890)
TOTAL LIABILITIES AND ----------- -----------
STOCKHOLDERS' EQUITY $ 1,016,196 $ 38,324
=========== ===========
[FN]
See notes to the financial statements.
DIASENSOR.COM, INC.
(A Development Stage Company)
<TABLE>
Consolidated 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
2000 1999 2000 1999 March 31, 2000
------------------------- -------------------------- -------------------
</CAPTION>
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ - $ - $ - $ 10,556,405
General and administrative expenses 920,848 242,489 552,966 81,390 14,192,979
Provision for(recovery of)doubtful accounts (1,458,809) - (1,093,900) - -
Warrant extensions - - - - 18,184,986
Technology and patent rights acquired 9,459 49,237 5,675 47,552 2,659,459
Interest expense - 1,499 - 1,499 10,529
Other income - (26,406) - (13,175) (571,664)
Other expense - - - - 37,405
-------------------------- -------------------------- -------------------
Net Income (loss) $ 528,502 $ (266,819) $ 535,259 $ (117,266) $(45,070,099)
=========== =========== =========== =========== ===================
Net income (loss) per common share $ 0.02 $ (0.01) $ 0.02 $ (0.01) $ (2.38)
=========== =========== =========== =========== ===================
See notes to the financial statements.
</TABLE>
<TABLE>
DIASENSOR.COM, 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 March 31, March 31, (Inception) thru
2000 1999 2000 1999 March 31, 2000
------------------------ -------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net Income (loss) $ 528,502 $ (266,819) $ 535,259 $(117,266) $(45,070,099)
Adjustments to reconcile net loss to net
cash used by operating activites:
Depreciation 3,053 3,020 1,527 (342) 78,680
Amortization of goodwill 20,833 - 20,833 - 20,833
Provision for (recovery of) doubtful accounts (1,458,809) - (1,093,900) - -
Impairment loss - - - - 14,367
Stock in exchange for services - - - - 138,950
Stock issued for License and Marketing Agreement - - - - 80,000
Warrants issued for services 1,104 - - - 229,642
Warrent extensions - - - - 18,184,986
Inventory deposit-BICO - - - - (1,000,000)
(Increase)Decrease in prepaid expenses (2,508) (15,221) (2,638) (17,210) (2,638)
Increase in payable due to BICO 472,535 - 435,141 - 10,972,535
Increase (Decrease) in accounts payable 12,500 (12,499) 4,296 (59,935) 12,500
Increase in accrued payroll and withholdings 625 - 625 - 91,839
(Increase) in other assets (250) - (250) - (17,500)
------------ ----------- ------------ ------------ ----------------
Net cash used in operating activities (422,415) (291,519) (99,107) (194,753) (16,265,905)
Cash flows from investing activities:
Disposal of property and equipment - 175,000 - 175,000 175,000
Purchase of property and equipment - - - - (279,413)
Investment - MicroIslet, Inc. (500,000) - (500,000) - (500,000)
Investment - Diabecore (500,784) - (500,784) - (500,784)
Increase in Notes Receivable - - - - (125,000)
Increase in Interest Receivable - (5,142) - (2,544) (13,538)
------------ ------------ ------------ ------------- ------------
Net cash used in investing activities (1,000,784) 169,858 (1,000,784) 172,456 (1,243,735)
Cash flows from financing activities:
Advances to BICO (437,405) (176,437) (436,420) (151,733) (7,498,369)
Repayment of advances to BICO 1,858,820 283,888 1,530,320 231,523 9,166,099
Proceeds from issuance of common stock - - - - 10,971,834
Proceeds from issuance of common stock to BICO - - - - 4,200,000
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 1,421,415 107,451 1,093,900 79,790 17,514,381
-------------- -------------- ------------- ------------ -------------
Net increase (decrease) in cash and cash equiv. (1,784) (14,210) (5,991) 57,493 4,741
Cash and cash equivalents at beginning of period 6,525 41,811 10,732 6,285 -
-------------- -------------- ------------- ------------ -------------
Cash and cash equivalents at end of period $ 4,741 $ 27,601 $ 4,741 $ 63,778 $ 4,741
============== ============== ============= ============ =============
See notes to the financial statements.
</TABLE>
DIASENSOR.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying financial statements of Diasensor.com,
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,
1999.
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, 2000. Diasensor.com 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 22,980,051 and 22,980,051 for the periods ended March 31,
2000 and March 31, 1999, 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, 2000, 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 18,950,660 for the period from July
5, 1989 (inception) to March 31, 2000.
DIASENSOR.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE D - Legal Proceedings
In April, 1998, the Company and its affiliates were
served with subpoenas by the U.S. Attorneys' office; the
Company continues to produce documents and information in
response to such subpoenas. The class action suit which
names the Company as a defendant remains in the pre-trial
pleading stage pursuant to consent of all the parties.
NOTE E - Investments in Unconsolidated Subsidiaries
In January 2000, the Company acquired a ten percent
(10%) interest in MicroIslet, Inc. for an investment of
$500,000. MicroIslet is a California company which has
licensed several diabetes research technologies from Duke
University with a specific focus on optimizing
microencapsulated islets for transplantation.
In March 2000, the Company acquired an equity interest
in Diabecore Medical, Inc., a Toronto-based company working
to develop a new insulin for the treatment of diabetes, for
$500,784. With this initial investment, the Company owns
12% of Diabecore, advancing to a 35% ownership at completion
of funding through July 2001.
Both investments are being reported on the equity basis
and differences in the investment and the underlying net
assets of the unconsolidated subsidiaries is being amortized
as goodwill over a 5 year period.
Management's Discussion and Analysis of Financial Condition
and Cash Flows
Liquidity and Capital Resources
Cash decreased from $6,525 at September 30, 1999, to
$4,741 at March 31,2000.
As of March 31, 2000, amounts due from BICO to the
Company was zero, compared to $1,458,809 as of September 30,
1999. The decrease was due to BICO's repayment of funds
transferred from the Company to BICO. Due to BICO's
financial condition an allowance for doubtful accounts in
the same amount as the funds due to the Company from BICO
had been established in the fiscal year ended September 30,
1999. Because the full amount was repaid, the allowance for
doubtful accounts was also adjusted in the same amount from
($1,458,809) to zero.
As discussed in Note E, above, the Company's
investments in MicroIslet, Inc. and Diabecore, Inc. occurred
during the quarter ended March 31, 2000. As a result, these
other assets were $479,167 and $500,784, respectively, as of
March 31, 2000, as compared to zero at September 30, 1999.
Accounts Payable increased from zero as of September
30, 1999 to $12,500 as of March 31, 2000. The increase
resulted from invoices occurring in the normal course of
business. Amounts due to BICO from the Company increased
from zero as of September 30, 1999 to $435,141. This
increase is due to intercompany transfers from BICO to the
Company for working capital and to fund the Company's
investments in MicroIslet and Diabecore as discussed in Note
E.
Results of Operations
There were no research and development expenses during
the six month period ended March 31, 2000 and 1999 due to
the agreed-upon suspension of billings by Diasensor.com and
BICO pursuant to the research and development agreement.
General and Administrative expenses increased during
the second quarter from $81,390 for the three month period
ended March 31, 1999 to $552,966 for the three month period
ended March 31, 2000 and increased from $242,489 for the six
month period ended March 31, 1999 to $920,848 for the six
month period ended March 31, 2000. The increase was
primarily due to an increase in salaries and administrative
staff, along with administrative overhead.
The Company recovered $1,093,900 and $1,458,809 in
doubtful accounts during the three month and six month
periods ended March 31, 2000, respectively, as compared to
no similar recovery during the prior year's periods. This
recovery was due to BICO's repayments of intercompany
transfers, which had been fully reserved as doubtful
accounts as a result of BICO's financial condition during
the prior years.
Because of BICO's repayments of all amounts due to the
Company, and the corresponding allowance for doubtful
accounts, as discussed above, the Company's net income was
$528,502 for the six months ended March 31, 2000 and
$535,259 for the three months ended March 31, 2000, as
compared to net losses of ($266,819) and ($117,266) for the
prior year's periods, respectively.
Other income during the second quarter decreased from
$13,175 for the three month period ended March 31, 1999 to
$0 for the three month period ended March 31, 2000 and
decreased from $26,406 for the six month period ended March
31, 1999 to $0 for the six month period ended March 31,
2000. This decrease was due to a reduction in rental income
and the Company having lower cash reserves to invest during
the period ending March 31, 2000 than during the period
ending March 31, 1999.
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.
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, 2000.
DIASENSOR.COM, INC.
By /s/ Fred E. Cooper
Fred E. Cooper
President and Director
(principal executive officer,
principal financial officer
and principal accounting
officer)
