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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period N/A to N/A
Commission File number: 0-24974
DIASYS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 06-1339248
- -------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer ID #)
incorporation or organization)
49 LEAVENWORTH STREET, WATERBURY, CT 06702
- --------------------------------------------------------------------------------
(Address of principal executive offices)
203-755-5083
- --------------------------------------------------------------------------------
(Issuer's Telephone number including area code)
NONE
- --------------------------------------------------------------------------------
(Former name, address and/or fiscal year if changed from last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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 requirement for the past 90
days: YES XX NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court:
YES NO XX
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: MAY 10, 1997
COMMON STOCK: 2,304,000
WARRANTS: 566,000
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Page 1 of 11
<PAGE>
DIASYS CORPORATION
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF THE BUSINESS AND BASIS OF THE PRESENTATION:
NATURE OF THE REPORT: THE BALANCE SHEET FOR THE END OF THE PRECEDING FISCAL YEAR
HAS BEEN DERIVED FROM THE COMPANY'S LAST AUDITED BALANCE SHEET AND IS PROVIDED
FOR COMPARATIVE PURPOSES. ALL OTHER FINANCIAL STATEMENTS ARE UNAUDITED. IN THE
OPINION OF MANAGEMENT, ALL ADJUSTMENTS, WHICH INCLUDE ONLY NORMAL RECURRING
ADJUSTMENTS NECESSARY TO FAIRLY PRESENT THE FINANCIAL POSITION, RESULTS OF
OPERATIONS AND CHANGES IN CASH FLOWS FOR ALL PERIODS PRESENT, HAVE BEEN MADE.
THE RESULTS OF OPERATIONS FOR INTERIM PERIODS ARE NOT NECESSARILY INDICATIVE OF
THE OPERATING RESULTS FOR THE FULL YEAR.
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS, BUT ARE
FORWARD LOOKING STATEMENTS THAT ARE BASED UPON NUMEROUS ASSUMPTIONS ABOUT FUTURE
CONDITIONS THAT COULD PROVE NOT TO BE ACCURATE. ACTUAL EVENTS, TRANSACTIONS AND
RESULTS MAY MATERIALLY DIFFER FROM THE ANTICIPATED EVENT, TRANSACTIONS OR
RESULTS DESCRIBED IN SUCH STATEMENTS. THE COMPANY'S ABILITY TO CONSUMMATE SUCH
TRANSACTIONS AND ACHIEVE SUCH EVENTS OR RESULTS IS SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THE
EXISTENCE OF DEMAND FOR AND ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES,
REGULATORY APPROVALS AND DEVELOPMENTS, ECONOMIC CONDITIONS, THE IMPACT OF
COMPETITION AND PRICING RESULTS OF FINANCING EFFORTS AND OTHER FACTORS AFFECTING
THE COMPANY'S BUSINESS THAT ARE BEYOND THE COMPANY'S CONTROL. THE COMPANY
UNDERTAKES NO OBLIGATION AND DOES NOT INTEND TO UPDATE, REVISE OR OTHERWISE
PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS
THAT MAY BE MADE TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES.
DiaSys Corporation (the "Company") was organized in 1992 in the State of
Connecticut and effected a statutory merger into a Delaware Corporation of the
same name in 1993. The Company's first product family is the "R/S" series
workstations used to automate and standardize routine urine sediment analysis
conducted in hospitals, private clinics and physician group practices. The "R/S"
series has three workstations products, each serving distinct market segments.
In addition to the "R/S" series of workstations, the Company in May of 1996
announced its "FE" family of products. The "FE" series is designed to automate,
standardize and reduce the cost of microscopic analysis of fecal concentrates.
The target market for the "FE" series of products for fecal concentrates and the
"R/S" series of urine sediment workstations are substantially the same.
The Company is in its developmental stage and since its inception on March 27,
1992 has engaged in organizational activities, development of several
proprietary products, and establishment of sales and distribution channels. As
planned, the Company has operated at a loss since its inception.
In January of 1995, the Company completed its initial public offering
("Offering") of 1,000,000 shares of its Common Stock, par value $.001 ("Common
Shares") and 500,000 Common Stock Purchase warrants, each exercisable at a fixed
price into one Common Share ("Warrants"). The Company received net proceeds
after expenses of $3,961,179 from the Offering. In addition, on February 2,
1995, the Company's underwriter exercised its option to purchase 130,000
additional Common Shares and 70,000 Warrants from the Company pursuant to an
over-allotment option granted to the underwriter as part of the Offering. The
Company received an additional $561,425 in net proceeds from the exercise.
Accordingly, the Company realized $5,735,500 in proceeds from its Offering with
net proceeds after expenses of $4,522,604.
On April 17, 1997, the Board of Directors of the Company passed a resolution
authorizing the filing of a Post Effective Amendment to the Company's original
SB-2 Registration Statement, which Post Effective Amendment, when declared
"Effective" by the Securities and Exchange Commission, would lower the exercise
price of the publicly traded Redeemable Warrants from $7.00 to $5.25 per share
for the balance of the remaining term of the Warrants (through July 10, 1997).
The Company intends to file the Post Effective Amendment with the SEC prior to
May 30, 1997.
Page 2 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT'S
OF OPERATION:
OVERVIEW:
DiaSys Corporation ("the Company") was organized in 1992 in the State of
Connecticut and effected a statutory merger into a Delaware Corporation of the
same name in 1993. Since inception, the Company has engaged primarily in
organizational activities and implementing its strategic product development and
distribution plan.
PRODUCT STRATEGY:
The Company's product strategy is to develop workstation products and systems
that improve accuracy and reduce the costs to perform routine medical testing
procedures.
"R/S" SERIES: The Company's first family of products is the "R/S" series of
urine sediment workstations. These workstations increase the accuracy,
productivity and safety of the numerous laboratories which routinely analyze
urine sediment. The "R/S" family is comprised of the: (i) R/S 2000 which was the
Company's first product; (ii) R/S 1000 which was introduced in May of 1995; and,
(iii) R/S 2003 which was introduced in September of 1995. The R/S 1000 serves
the needs of laboratories conducting fewer than 20 urine tests at a time such as
doctor office laboratories, out patient clinics, and "stat" labs where accuracy,
standardization and quick turnaround are of utmost importance. The R/S 2000
serves mid-sized laboratories such as general hospitals. The R/S 2003
accommodates high volume laboratories such as clinical reference labs.
Users of the "R/S" series workstations include hospital laboratories performing
as few as 10 urine tests per day and clinical laboratory chains performing in
excess of 10,000 urine tests per night. The "R/S" series workstations have also
been the subject of numerous favorable evaluations and publications including
the Journal of Laboratory Medicine, American Clinical Laboratory magazine,
European Clinical Laboratory magazine, and College Of American Pathology Today.
"FE" SERIES: In May of 1996, the Company introduced its fourth workstation
product, the FE-2. The FE-2 is the first of a new family of products designed by
the Company for use in microbiology. More specifically, the FE-2 is a counter
top instrument which automates and reduces the cost of microscopic analysis of
fecal concentrates. Microscopic analysis of feces is performed by thousands of
hospital, public health and private commercial laboratories world wide in order
to detect the presence of ova (eggs), cysts, and parasites in the lower
intestinal tract of humans and animals. The presence of such organisms is
critical to the proper care of the patient. The test is non-invasive, can be
performed on an out-patient basis, and quickly provides confirmatory results.
The FE-2 increases the level of safety and precision by automating the
aspiration, resuspension, staining or diluting, transfer, presentation and
disposal of fecal concentrates. It also eliminates the need and cost of
disposable pipettes, microscope slides, and cover slips. The FE-2 reduces
analysis time and increases accuracy by establishing strict physical parameters
of the viewing area. Moreover, since the fecal concentrate is contained in and
manipulated through a sealed system, the technologist is no longer exposed to
prolonged inhalation of the noxious nature of the fecal material.
PRODUCT DEVELOPMENT: The Company develops its workstation products by
analyzing current procedures and collecting customer observations and
suggestions. The Company can therefore better define workstations which more
closely meet customer needs. The Company is aggressively developing several
additional workstation products and has doubled its developmental work force in
order to accelerate the release of the workstations that are presently in
development.
SALES PLAN:
NORTH AMERICA: The Company sells and services its workstation-products
through its headquarter offices in Waterbury, CT and seven regional sales
offices located throughout the United States and Canada. Each sales office is
staffed by a manager and each manager is responsible for coordinating sales
efforts with the dealers and independent
Page 3 of 11
<PAGE>
sales representatives in and for the region. The regional sales offices are
supported by a manager of marketing information systems, a director of field
services and support, and a newly appointed vice president of sales and
marketing, each located at the Company's headquarter office.
Each sales manager earns a base salary and an incentive bonus based upon
achievement of: (i) a stipulated number of product demonstrations; and, (ii) a
quarterly sales quota.
Independent sales representatives are given non-exclusive territories and
compensated on a commission basis only. Dealers are generally provided with
non-overlapping territories and are compensated by purchasing product against an
established discount schedule. Independent sales representatives and dealers do
not generally occupy the same sales territory.
Sales in North America are facilitated by a series of marketing programs which
include telemarketing, direct mail campaigns, advertising in key trade journals,
participation in technical workshops, and exhibitions at national trade shows.
INTERNATIONAL: The Company is commencing distribution operations in Europe,
South America, Central America, China and parts of Pacific-Asia. The Company has
appointed a country manager in England to assist with and oversee European
operations. The country manager is not an employee of the Company and is
compensated on a percentage of European sales only. The Company has installed
workstations in Ireland, Italy, Spain, Belgium, France, Switzerland, Portugal
and Luxembourg. The Company has started to implement its distribution plan for
Japan, Taiwan and Singapore.
STRATEGIC RELATIONSHIPS:
BAYER INC: On June 27, 1996 the Company entered into a strategic
cooperation agreement with Bayer Inc. of Canada. Under the agreement, Bayer's
Health Care Division and the Company will jointly market their urine analysis
workstations to hospitals and clinical reference laboratories in Canada. The two
companies have also agreed to engage in joint product development if and as
mutually advisable. Bayer Inc. is the Canadian subsidiary of the health care
giant Bayer A.G. headquartered in Germany.
INTELLIGENT MEDICAL IMAGING: On November 19, 1996, the Company announced
that it entered into a product integration agreement with Intelligent Medical
Imaging, Inc. (NASD: IMII). Under the agreement, IMI will purchase 200 of the
Company's workstation products by June 30, 1997 and integrate such products into
IMI's new core laboratory workstation which will fully automate microscopic
analysis of several key body fluids including white blood cells, urine sediment
and fecal concentrates. On March 27, 1997 the Company completed delivery of the
first 100 workstations to IMI. The remaining 100 units are pending the
assignment of a delivery date.
OTHER SIGNIFICANT CONTRACTS: The Company has established a number of
important relationships with large scale customers. These relationships include:
SmithKline Beecham Clinical Laboratories; Mid-Atlantic Group Network of Shared
Services, Inc. (MAGNET); Kaiser Permanente, Southern California region; and,
AmeriNet, Inc. of St. Louis Missouri. The Company is also an approved vendor to
the Federal Government pursuant to a contract with the General Services
Administration (GSA).
PROPRIETARY RIGHTS:
PATENTS: The Company has been granted two patents from the United States
Department of Commerce: one effective May 28, 1992; the other, February 28,
1995. The first patent pertains to the concept and overall function of the "R/S"
series workstation. The second patent pertains to the unique and novel features
of the optical slide assembly.
The Company was also granted patent protection in Taiwan effective September 10,
1993 and in Australia effective December 16, 1994.
Page 4 of 11
<PAGE>
On February 18, 1997, the Company announced that its technology was granted
patent protection in Austria, Belgium, Denmark, England, France, Germany,
Greece, Ireland, Italy, Luxembourg, Monaco, the Netherlands, Portugal, Spain,
Sweden, Switzerland/Liechtenstein, and Singapore.
The Company has applied for patent protections for its FE-2 fecal concentrate
workstation and other novel inventions.
TRADE NAMES: The Company has five applications pending for trade names:
three in the United States, one in Europe and one in Japan.
MANUFACTURING:
The Company manufactures and tests all of its own workstation products against
drawings and other documentation devised by the Company's Engineering
Department. It is the Company's plan to promote self sufficiency and exclusive
dominion over its workstation products. Management believes that it has taken
those steps necessary and appropriate to build the Company's foundation for long
term growth and viability.
FINANCIAL CONDITION:
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 1997 the Company had cash and equivalents of $1,568,306 a
decrease of $1,204,162 from $2,772,468 as of June 30, 1996. The decrease in cash
and equivalents was caused primarily by increased expenditures in sales-related
activities, new product marketing, and new product development.
The Company's inventory increased by $74,517 from $291,447 as of June 30, 1996
to $365,964 as of March 31, 1997. The increase in inventory was due primarily
to: (i) additional purchases of long lead time items; and, (ii) creation of an
adequate level of finished goods.
Management believes that it has sufficient funds and resources to meet its
financial obligations for at least the next twelve months and does not perceive
a need for additional funding or cash generated through non-operational
activities.
RESULTS OF OPERATIONS
NET REVENUE AND BACKLOG:
The Company's Net Revenue increased by $419,535 and $486,183 for the three-month
and nine-month periods ended March 31, 1997 as compared to the same periods in
the previous year. As of March 31, 1997, the Company's backlog was approximately
$434,000, $20,000 of which was immediately shippable.
Management attributes the increase in Net Revenue to: (i) continued market
acceptance of the Company's workstation products; and, (ii) initial success of
several of the Company's sales distribution plans. Management expects that Net
Revenue will increase as benefits from the Company's strategic growth plan are
realized.
GROSS PROFIT:
The Company's gross profit (Net Revenue less cost of goods sold) increased by
$355,430 and $402,218 for the three-month and nine-month periods ended March 31,
1997. The Company's gross profit percentage (gross profit divided by Net
Revenue) increased for the three month period ended March 31, 1997 from 60.3% to
80.8%. For the nine month period ended March 31, 1997, gross profit margin
increased to 77.4% as compared to 66.5% for the same period in 1996. Management
believes that the increases in gross profit and gross profit margins are the
combined result of savings realized through greater economies of scale and
initial success from the Company's strategic growth plan.
Management believes that gross profit and gross profit margins will not change
significantly for the remainder of 1997.
page 5 of 11
<PAGE>
SELLING GENERAL AND ADMINISTRATIVE (SG&A):
For the three month period ended March 31, 1997, the Company's expenses
increased from $256,517 to $476,570 over the same three month period in 1996, an
increase of $220,053 or 85.8%. For the nine month period ended March 31, 1997,
SG&A expenses increased from $752,901 to $1,371,280 over the same nine month
period in 1996, an increase of $618,379 or 82.1%.
The increase in SG&A expenses was due primarily to the effect of a certain
investment banking relationship ("Agreement") made with Lester Morse, Esq. P.C.
("Morse"). Under the terms of the Agreement, Morse or its assignee are providing
the Company with the following services and/or undertake the following tasks, as
the case may be, ("Services"):
a. Attract and maintain reputable market makers of and for the Company's
common stock and common stock purchase warrants;
b. Posture and present the Company in the investment community through
means including but not limited to: (i) implementation of a national
investor relations program; (ii) assistance with format, layout,
presentation and timeliness of the Company's financial results in each
Annual Report to Shareholders, press release, proxy statement and
report on form 10-K and 10-Q; (iii) attraction of media and trade
publication coverage of the Company and/or its products; and, (iv)
arranging and managing presentation of the Company by its senior
management to strategic members of the investment community such as
brokers, stockholders, financial analysts, other investment bankers,
and institutions; and,
c. Assist the Company with implementing its strategic plan including but
not limited to: (i) design and development of merger and acquisition
(M&A) strategies; (ii) identification and introduction of M&A
candidates for such strategies; (iii) analysis of M&A proposals and
counter-proposals; (iv) development and implementation of a cash
investment and management program; (v) analysis of and advice in
relation to the Company's anticipated cash needs; and, (vi)
identification and introduction to potential joint venture and/or
trading partners.
In return for Services, the Company has agreed to issue Morse up to 120,000 of
the Company's common stock of which 60,000 such shares have been issued. Under
applicable accounting principles, the stock has been valued at $5.75 per share
and will be recognized as an SG&A expense of $172,500 for each of the four
quarters commencing October 1, 1996. The increase in the Company's SG&A expenses
for the periods ended March 31, 1997 includes the effect of the Agreement. Morse
is entitled to no other compensation for Services under the Agreement. Without
the effect of the Agreement, SG&A expenses would have increased from $256,517 to
$304,069 over the same three month period in 1996, and from $752,901 to
$1,015,280 over the same nine month period in 1996. The increase in Selling
General and Administrative for the three month period ended March 31, 1997 is a
direct result of; (i) increased sales related travel; and, (ii) wages and
benefits associated with two additional employees over the comparable period.
The increase in Selling General and Administrative for the nine month period
ended March 31, 1997 is a direct result of; (i) increased legal fees associated
with negotiating the product integration agreement with IMI; (ii) wages and
benefits associated with four additional employees over the comparable period;
(iii) increased product marketing expenses; and, (iv) increased sales related
travel.
RESEARCH AND DEVELOPMENT:
For the three month period ended March 31, 1997, research and development
expenses increased from $51,388 to $93,762 over the same three month period for
1996, an increase of $42,374 or 82.5%. For the nine month period ended March 31,
1997, research and development expenses increased from $170,761 to $243,805 over
the same nine month period for 1996, an increase of $73,044 or 42.7%. Increases
in research and development expenses over the above periods were directly
related to purchase of materials for the prototype of two new products to be
introduced in 1997 and costs associated with creating a software interface for
units delivered to IMI pursuant to a certain product integration agreement
between IMI and the Company.
page 6 of 11
<PAGE>
NET (LOSS) OR GAIN:
The Company reported a net loss of: (i) $142,275 for the three month period
ended March 31, 1997 compared to a net loss of $223,782 for the same period
ended March 31, 1996; and, (ii) a net loss $976,709 for the nine month period
ended March 31, 1997 compared to a net loss of $612,804 for the nine month
period ended March 31, 1996.
Management attributes the increased net loss to expenses associated with: (i)
the effect of the investment banking relationship described in SELLING GENERAL
AND ADMINISTRATIVE (SG&A) above; (ii) wages and benefits associated with four
additional employees over the comparable period; (iii) increased product
marketing expenses; (iv) increased sales related travel; and, (v) increased
legal fees associated with negotiating the product integration agreement with
IMI.
Without the effect of the investment banking relationship described in SELLING,
GENERAL AND ADMINISTRATIVE (SG&A) the Company would have reported a (i) net gain
for the three month period ended March 31, 1997 of $30,225 compared to a net
loss of $224,782 for the same period ended March 31, 1996; and (ii) a net loss
of $631,769 for the nine month period ended March 31, 1997 compared to a net
loss of $612,804 for the nine month period ended March 31, 1996.
Management anticipated a loss for the nine month period ended March 31, 1997 as
part of the Company's over-all strategic growth plan.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
DiaSys Corporation
Date: May 12, 1997 Todd M. DeMatteo
President, Chief Executive Officer
Michael F. Primini
Vice President/Finance & Administration
and Chief Financial Officer
Page 7 of 11
<PAGE>
<TABLE>
<CAPTION>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31 JUNE 30
1997 1996
---------- ---------
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
Current Assets
Cash and equivalents .................................... $1,568,306 $ 2,772,468
Accounts Receivable, less allowance
for doubtful accounts of $19,000 .................... 517,798 47,803
Inventories ............................................. 365,964 291,447
Prepaid expenses and other assets ....................... 39,371 27,967
---------- -----------
Total Current Assets .............................. 2,491,439 3,139,685
---------- -----------
Equipment, Furniture and Fixtures
less accumulated depreciation ......................... 81,973 58,235
Patent, less accumulated amortization ................... 58,398 45,436
---------- -----------
TOTAL ASSETS ...................................... $2,631,810 $ 3,243,356
========== ===========
LIABILITIES AND STOCKHOLDER EQUITY
Current Liabilities
Accounts Payable ........................................ 73,190 53,677
Accrued Expenses ........................................ 2,120 29,411
---------- -----------
Total Current Liabilities ......................... 75,310 83,088
---------- -----------
Stockholder's Equity
Common Stock $.001 par value: Authorized
10,000,000, issued and to be issued
2,364,000 at March 31, 1997 and
2,240,000 at June 30, 1996 ............................. 2,304 2,240
Additional Paid in Capital ............................... 5,582,596 5,209,660
Deficit Accumulated during the development state ......... (3,028,400) (2,051,632)
---------- -----------
Total Stockholder's Equity ............................... 2,556,500 3,160,268
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY .............................. $2,631,810 $ 3,243,356
---------- -----------
</TABLE>
Page 8 of 11
<PAGE>
<TABLE>
<CAPTION>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
MARCH 27,
NINE NINE THREE THREE 1992 DATE OF
MONTHS MONTHS MONTHS MONTHS INCEPTION
ENDED ENDED ENDED ENDED THROUGH
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1997 1996 1997
----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sales of workstations
and Related supplies .......... 705,331 239,861 489,819 81,222 1,534,354
Rental/Lease Revenue ............ 20,713 0 10,938 0 20,713
--------- --------- --------- --------- ----------
Net sales ....................... 726,044 239,861 500,757 81,222 1,555,067
Cost of Goods Sold .............. 164,418 80,453 96,380 32,275 468,861
--------- --------- --------- --------- ----------
Gross Profit .................... 561,626 159,408 404,377 48,947 1,086,206
% of Gross Profit ............... 77.35% 66.46% 80.75% 60.26% 69.85%
OPERATING EXPENSES
Selling ........................ 674,013 431,358 200,648 160,763 1,793,451
General & Admin ................ 352,267 321,543 103,422 95,754 1,426,618
Investment banking
advisory services ............ 345,000 0 172,500 0 345,000
Research/Development ........... 243,805 170,761 93,762 51,388 885,742
--------- --------- --------- --------- ----------
1,615,085 923,662 570,332 307,905 4,450,811
--------- --------- --------- --------- ----------
Income (Loss) from
operations ................... (1,053,459) (764,254) (165,955) (258,958) (3,364,605)
Interest expense to
stockholders and
related party ................ 0 0 0 0 (4,500)
Interest expense ............... (1,885) 0 0 0 (1,885)
Interest income ................ 78,575 151,450 23,680 35,176 342,589
--------- --------- --------- --------- ----------
Net Income (Loss) .............. (976,769) (612,804) (142,275) (223,782) (3,028,081)
--------- --------- --------- --------- ----------
Number of Common and
common equivalent
shares deemed
outstanding ................. 2,364,000 2,240,000 2,364,000 2,240,000 2,364,000
--------- --------- --------- --------- ----------
Net Loss per Common and
Common equivalent share:
Primary ..................... ($0.41) ($.27) ($.06) ($.10)
--------- --------- --------- --------- ----------
</TABLE>
Page 9 of 11
<PAGE>
<TABLE>
<CAPTION>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ..................................................... $ (976,769) $ (612,804)
Adjustments to reconcile net loss
to net cash flows from
operating activities
Investment Banking Advisory Services ......................... 345,000 0
Amortization of patents ...................................... 16,600 2,175
Depreciation of equipment,
furniture & fixtures ....................................... 9,000 3,375
Changes in operating assets and liabilities
Accounts Receivable ........................................ (469,995) (47,443)
Inventory .................................................. (74,517) (55,358)
Prepaid expenses and other current assets .................. (11,404) (15,873)
Accounts payable and accrued expenses ...................... (7,778) (53,384)
Net cash flows from operating activities ................... (1,169,683) (779,312)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment, furniture and fixtures ............... (34,299) (8,310)
Net Cash flows from investing activities ..................... (34,299) (8,310)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash flows from financing activities ..................... 0 0
---------- ----------
NET CHANGE IN CASH AND EQUIVALENTS ............................. (1,204,162) (787,622)
CASH AND EQUIVALENTS-BEG. OF PERIOD ............................ 2,772,468 2,915,303
---------- ----------
CASH AND EQUIVALENTS-END OF PERIOD ............................. $1,568,306 $2,127,681
---------- ----------
SUPPLEMENTAL CASH FLOW ACTIVITIES
Interest paid ................................................ $ 1,885 $ 0
Income taxes paid ............................................ $ 0 $ 0
NON CASH FINANCING ACTIVITIES
Issuance of common stock for investment
Banking Advisory Services .................................. $ 345,000 $ 0
</TABLE>
Page 10 of 11
<PAGE>
<TABLE>
<CAPTION>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
DEFICIT
ACCUMULATED
DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES PAR VALUE CAPITAL STAGE
------------ --------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 .................... 2,005,000 $2,005 $ 662,336 $ (355,551)
YEAR ENDED JUNE 30, 1995:
Issuance of common stock
and 570,000 warrants to
purchase common stock for
cash in a public offering
at $5.00 per share and $.15
per warrant, less related
expenses of offering
$1,212,896 .............................. 1,130,000 1,130 4,521,474 --
Issuance of common
stock for finders fee
at $5.00 per share ...................... 5,000 5 24,950 --
Shares of stock of
founding stockholders
returned on the
effective date of the
offering at no cost and
later canceled .......................... (900,000) (900) 900 --
Net Loss .................................. -- -- -- (657,055)
--------- ----------- ---------- -----------
BALANCE, JUNE 30, 1995 .................... 2,240,000 2,240 5,209,660 (1,012,606)
YEAR ENDED JUNE 30, 1996:
Net Loss ................................ -- -- -- (1,039,026)
--------- ----------- ---------- -----------
BALANCE, JUNE 30, 1996 .................... 2,240,000 2,240 5,209,660 (2,051,632)
Issuance of common stock
for Investment Banking
Advisory Services at
$5.75 per share. 60,000
shares issued and to be
issued 60,000 shares .................... 120,000 60 344,940
Conversion of 4,000
warrants at $7.00 per share ............. 4,000 4 27,996
Net loss .................................. -- -- -- (976,769)
--------- ----------- ---------- -----------
BALANCE MARCH 31, 1997 .................... 2,364,000 $ 2,304 $5,582,596 $(3,028,401)
--------- ----------- ---------- -----------
</TABLE>
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,568,306
<SECURITIES> 0
<RECEIVABLES> 536,798
<ALLOWANCES> 19,000
<INVENTORY> 365,964
<CURRENT-ASSETS> 2,491,439
<PP&E> 111,886
<DEPRECIATION> 29,913
<TOTAL-ASSETS> 2,631,810
<CURRENT-LIABILITIES> 75,310
<BONDS> 0
0
0
<COMMON> 2,364,000
<OTHER-SE> 2,556,500
<TOTAL-LIABILITY-AND-EQUITY> 2,631,810
<SALES> 726,044
<TOTAL-REVENUES> 726,044
<CGS> 164,418
<TOTAL-COSTS> 1,615,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,885
<INCOME-PRETAX> 976,769
<INCOME-TAX> 0
<INCOME-CONTINUING> 976,769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (976,769)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.34)
</TABLE>
