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, 2000
Commission file number 33-56574
DIASENSOR.COM
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1605848
(State or 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, 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
June 30, September 30,
ASSETS 2000 1999
(Unaudited)
----------- -----------
Current assets
Cash and cash equivalents (note A) $ 13,324 $ 6,525
Prepaid expenses - 130
----------- -----------
Total current assets 13,324 6,655
Property and equipment - at cost (note A)
Furniture and fixtures 42,750 42,750
Less accumulated depreciation 32,911 28,331
----------- -----------
9,839 14,419
----------- -----------
Other assets
Due from BICO (note A) - 1,458,809
Allowance for doubtful account - (1,458,809)
Investment - MicroIslet, Inc. (note E) 454,167 -
Investment - Diabecore (note E) 500,784 -
Security Deposit 17,500 17,250
----------- -----------
972,451 17,250
----------- -----------
TOTAL ASSETS $ 995,614 $ 38,324
=========== ===========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ - $ -
Due to BICO 884,275 -
Accrued payroll and withholdings 91,840 91,214
----------- -----------
Total current liabilities 976,115 91,214
Commitments and Contingencies (notes A and D)
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
Jun. 30, 2000 and 22,980,051 at
Sep. 30, 1999 229,801 229,801
Additional paid-in capital 26,892,071 26,892,071
Warrants 18,684,017 18,453,839
Deficit accumulated during the
development stage (45,786,390) (45,628,601)
----------- -----------
19,499 (52,890)
TOTAL LIABILITIES AND ----------- -----------
STOCKHOLDERS' EQUITY $ 995,614 $ 38,324
=========== ===========
[FN]
The accompanying notes are an integral part of this statement.
<PAGE>2
DIASENSOR.COM, INC.
(A Development Stage Company)
<TABLE>
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
2000 1999 2000 1999 June 30, 2000
------------------------- -------------------------- -------------------
</CAPTION>
<S> <C> <C> <C> <C> <C>
Research and development expenses $ - $ - $ - $ - $ 10,556,405
General and administrative expenses 1,603,807 628,438 682,959 349,613 14,875,938
Provision for (recovery of) doubtful (1,458,809) (488,016) - (451,680) -
accounts
Warrant extensions - - - - 18,184,986
Technology and patent rights acquired 12,791 49,857 3,332 620 2,662,791
Interest expense - 1,499 - - 10,529
Other income - (37,394) - (10,988) (571,664)
Other expense - - - - 37,405
------------------------- -------------------------- -------------------
Net loss $ (157,789) $ (154,384) $ (686,291) $ 112,435 $ (45,756,390)
=========== =========== =========== =========== ===================
Net income (loss) per common share $ (0.01) $ (0.01) $ (0.03) $ 0.00 $ (2.40)
=========== =========== =========== =========== ===================
See notes to the financial statements.
</TABLE>
<PAGE>3
<TABLE>
DIASENSOR.COM, INC.
(A Development Stage Company)
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) thru
2000 1999 2000 1999 June 30, 2000
------------------------ -------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net Income (Loss) $ (157,789) $ (154,384) $ (686,291) $ 112,435 $ (45,756,390)
Adjustments to reconcile net loss to net
cash used by operating activites:
Depreciation 4,580 (42,749) 1,527 1,527 80,207
Amortization of goodwill 45,833 - 25,000 - 45,833
Provision for (recovery of) doubtful (1,458,809) (505,916) - (469,580) -
accounts
Impairment loss - - - - 14,367
Stock in exchange for services - - - - 138,950
Stock issued for License and Marketing Agreement - - - - 80,000
Warrants issued for services 230,178 - 229,074 - 458,716
Warrent extensions - - - - 18,184,986
Inventory deposit-BICO - - - - (1,000,000)
(Increase) Decrease in prepaid expenses 130 (14,771) 2,638 18,350 -
Increase in payable due to BICO 921,669 - 449,134 - 11,421,669
Increase (Decrease) in accounts payable - (23,606) (12,500) (11,107) -
Increase in accrued payroll and withholdings 626 24,176 1 (12,136) 91,840
(Increase) in other assets (250) - - - (17,500)
------------ ----------- ------------ ------------- ------------
Net cash used in operating activities (413,832) (717,250) 8,583 (360,511) (16,257,322)
Cash flows from investing activities:
Disposal of property and equipment - 222,296 - - 175,000
Purchase of property and equipment - - - - (279,413)
Investment - MicroIslet, Inc. (500,000) - - - (500,000)
Investment - Diabecore (500,784) - - - (500,784)
Increase in Notes Receivable - - - - (125,000)
Increase in Interest Receivable - (5,142) - - (13,538)
------------- ------------- ------------ ------------ -------------
Net cash (used) in investing activities (1,000,784) 217,154 - - (1,243,735)
Cash flows from financing activities:
Advances to BICO (437,405) (377,727) - (203,290) (7,498,369)
Repayment of advances to BICO 1,858,820 938,011 - 656,123 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 1,421,415 560,284 - 452,833 17,514,381
-------------- -------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash equiv. 6,799 60,188 8,583 92,322 13,324
Cash and cash equivalents at beginning of period 6,525 41,811 4,741 9,677 -
-------------- -------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 13,324 $ 101,999 $ 13,324 $ 101,999 $ 13,324
============== ============== ============= ============ ==============
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 BICO, Inc. BICO owns 52% of the
stock of the Company as of June 30, 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 June 30,
2000 and June 30, 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 June 30, 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 19,551,945 for the period from July
5, 1989 (inception) to June 30, 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 has produced documents 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
During the nine months ended June 30, 2000 funds were
transferred to Diasensor from BICO to repay advances and
provide working capital. These funds were used in operating
activities and for investments in unconsolidated
subsidiaries. The net effect of these cash transactions was
to increase cash from $6,525 at September 30, 1999, to
$13,324 at June 30, 2000.
As of June 30, 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 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.
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 $454,167 and
$500,784, respectively, as of June 30, 2000, as compared to
zero at September 30, 1999.
Amounts due to BICO from the Company increased from
zero as of September 30, 1999 to $884,275. This increase is
due to intercompany transfers from BICO to the Company for
working capital.
Results of Operations
There were no research and development expenses during
the nine months period ended June 30, 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 $349,613 for the three month period
ended June 30, 1999 to $682,959 for the three month period
ended June 30, 2000 and increased from $628,438 for the nine
month period ended June 30, 1999 to $1,603,807 for the nine
month period ended June 30, 2000. The increase was
primarily due to an increase in salaries and administrative
staff, along with administrative overhead.
The Company recovered $1,458,809 in doubtful accounts
during the nine month period ended June 30, 2000. All of
these recoveries were prior to March 31, 2000 and therefore
none were recognized in the three month period ended June
30, 2000. Similar recoveries of $488,016 were recognized in
the nine month period ended June 30, 1999 of which $451,680
were in the three months ended June 30, 1999. 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 the fluctuations in General and
Administrative expenses and recovery of doubtful accounts,
as discussed above, the Company's net loss was ($157,789)
for the nine months ended June 30, 2000 and ($686,291) for
the three months ended June 30, 2000, as compared to a net
loss of ($154,384) and net income of $112,435 for the prior
years' periods, respectively.
Other income during the third quarter decreased from
$10,998 for the three month period ended June 30, 1999 to $0
for the three month period ended June 30, 2000 and decreased
from $37,394 for the nine month period ended June 30, 1999
to $0 for the nine month period ended June 30, 2000. This
decrease was due to a reduction in rental income and the
Company having lower cash reserves to invest during the
period ending June 30, 2000 than during the period ending
June 30, 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 August, 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)
