================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM-10QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1998
------------------
( ) 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
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(Exact name of small business issuer as specified in its charter)
DELAWARE 06-1339248
--------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer ID #)
of 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
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(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 _X_ 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 ___
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: NOVEMBER 10, 1998
COMMON STOCK: 3,006,140
================================================================================
<PAGE>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
BALANCE SHEET
SEPTEMBER 30 JUNE 30
1998 1998
------------ -----------
ASSETS (UNAUDITED) (AUDITED)
Current Assets
<S> <C> <C>
Cash and equivalents $ 1,688,509 $2,001,569
Accounts Receivable, less allowance for doubtful accounts
of $19,000 111,942 112,044
Finance Receivables, net 27,980 33,151
Inventories 385,914 390,141
Prepaid expenses and other assets 17,277 15,363
----------- ----------
Total Current Assets 2,231,622 2,552,268
----------- ----------
Equipment, Furniture and Fixtures less accumulated depreciation 78,044 82,244
Patent, less accumulated amortization 69,335 53,478
Long term finance receivables, net 60,923 55,752
----------- ----------
TOTAL ASSETS $ 2,439,924 $2,743,742
=========== ==========
LIABILITIES AND STOCKHOLDER EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 93,140 $ 56,154
COMMITMENTS
Stockholder's Equity
Preferred Stock $.001 par value:
Authorized 100,000 shares, no shares issued
Common Stock $.001 par value:
Authorized 10,000,000 shares, issued 2,998,640
shares at 6/30/98 and 3,006,140 at 9/30/98 3,007 2,999
Additional Paid in Capital 8,767,556 8,719,440
Deficit Accumulated during the development stage (6,423,779) (6,034,851)
----------- ----------
Total Stockholder's Equity 2,346,784 2,687,588
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 2,439,924 $2,743,742
=========== ==========
</TABLE>
<PAGE>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
MARCH 27,
THREE THREE 1992 DATE OF
MONTHS MONTHS INCEPTION
ENDED ENDED THROUGH
SEPT. 31 SEPT. 30 SEPT 30
1998 1997 1998
-------- -------- ------------
<S> <C> <C> <C>
Sales of workstations and Related supplies 62,527 102,141 1,725,228
Rental/Lease Revenue 3,835 6,513 52,191
--------- --------- ----------
Net sales 66,362 108,654 1,777,419
Cost of Goods Sold 25,505 32,674 603,002
--------- --------- -----------
Gross Profit 40,857 75,980 1,174,417
% of Gross Profit 61.57% 69.93% 66.07%
OPERATING EXPENSES
Selling 203,173 226,678 3,204,856
General & Administrative. 151,782 134,312 2,269,117
Investment banking advisory services 0 247,500 990,000
Research/Development 95,663 107,170 1,552,094
--------- --------- ----------
450,618 715,660 8,016,067
--------- --------- ----------
Income (Loss) from operations (409,761) (639,680) (6,841,650)
Interest expense to stockholders and related party 0 0 (4,500)
Interest income 20,830 9,901 422,371
--------- --------- ----------
Net Income (Loss) (388,931) (629,779) (6,423,779)
========= ========= ==========
Weighted average number of outstanding 3,006,140 2,414,200 3,006,140
========= ========= ===========
Loss per Common share:
Basic and diluted ($0.13) ($ 0.26)
</TABLE>
<PAGE>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPT. 30 SEPT. 30
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss ($388,931) ($629,779)
Adjustments to reconcile net loss to net cash flows from
operating activities
Investment Banking Advisory Services 0 247,500
Amortization of patents 9,000 7,850
Depreciation of equipment, furniture & fixtures 6,000 4,375
Changes in operating assets and liabilities
Accounts Receivable 102 108,686
Inventory 4,227 (76,935)
Prepaid expenses and other current assets (1,913) 0
Accounts payable and accrued expenses (36,986) (8,913)
---------- ----------
Net cash flows from operating activities (334,529) (329,390)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment, furniture and fixtures (1,800) 0
Cost of Patents (24,856) 0
---------- ----------
Net Cash flows from investing activities (26,656) 0
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering Costs 0 (11,675)
Net Proceed from exercise of warrants 48,125 0
---------- ----------
Net Cash flows from financing 48,125 (11,675)
---------- ----------
NET CHANGE IN CASH AND EQUIVALENTS (313,060) (341,065)
CASH AND EQUIVALENTS-BEG. OF PERIOD 2,001,569 1,123,486
---------- ----------
CASH AND EQUIVALENTS-END OF PERIOD $1,688,569 $ 782,421
========== ==========
SUPPLEMENTAL CASH FLOW ACTIVITIES
Interest paid $ 0 $ 0
Income taxes paid $ 0 $ 0
NON CASH FINANCING ACTIVITIES
Issuance of common stock for investment
Banking Advisory Services $ 0 $ 300,000
</TABLE>
<PAGE>
DIASYS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
DEFICIT
ACCUMULATED
COMMON STOCK DURING THE
------------ PAID-IN DEVELOPMENT
SHARES PAR VALUE CAPITAL STAGE
------ --------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE JUNE 30,1998 2,998,640 $2,999 $8,719,440 $(6,034,851)
YEAR ENDED JUNE 30,1999:
Exercise of 5,000 options at $6.00 5,000 5 29,995
Exercise of 2,500 options at $7.25 2,500 3 18,122
Net Loss -- -- -- (388,931)
--------- ------ ---------- -----------
BALANCE, SEPT. 30, 1998 3,006,140 3,007 8,767,557 (6,423,782)
</TABLE>
<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.
<PAGE>
PART I
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 urinalysis, the Company manufacturers workstations which
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 expects to announce additional workstation
products designed to automate and standardize the testing of most human and some
non-human fluids.
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 July 24, 1997 the Company filed a post effective amendment consisting of
566,000 shares of Common Stock, par value $.001 (the "Common Stock"), issuable
upon the exercise of 566,000 Redeemable Common Share Purchase Warrants, (the
"Redeemable Warrants"). The Redeemable Warrants were issued in connection with
the Company's initial public offering in January 1995 and subsequently amended
as to the expiration date and exercise price. Each Redeemable Warrant as amended
entitled the registered holder thereof to purchase one share of Common Stock at
a price of $4.50 per share, subject to adjustment in certain circumstances. Any
Redeemable Warrant unexercised as of April 10, 1998 expired. As of April 10,
1998, 552,640 Redeemable Warrants were exercised. Accordingly, the Company
received $2,497,068 in proceeds from the exercise of such Warrants.
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 three models: 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.
<PAGE>
Users of the "R/S" series workstations include: (i) large scale clinical
laboratory chains performing in excess of 20,000 urine tests per night; (ii)
major medical centers performing hundreds of urine tests per day; and, (iii)
local hospital laboratories performing as few as 100 tests per week. 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.
The "R/S" series workstations are the preferred practice for major laboratory
networks such as SmithKline Beecham and Kaiser Permanente (California), and was
profiled in 1997 Spinoff, the annual report of technology published by the
National Aeronautical And Space Administration (NASA).
The Company has also entered into a strategic cooperation agreement regarding
the promotion and sale of its "R/S" series workstations with and by Bayer
Corporation in the United States and with and by Bayer Incorporated in Canada
(See: STRATEGIC RELATIONSHIPS below).
"FE" SERIES: The Company's fourth workstation product, 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.
THE CYTOCOUNTER: The Company has developed a new methodology for cell
counting, sorting and analysis for research applications, especially with regard
to the study of human diabetes. Work with cultured cells often requires a
precise knowledge of the cell count both to standardize conditions and to carry
out quantitative experiments. Although not yet released to market, the
CytoCounter has been successfully tested in Germany and is the subject of a
scholarly article published in one of the world's leading research magazines.
The Company expects to release the CytoCounter early next year.
ADDITIONAL PRODUCT DEVELOPMENT: The Company is developing several additional
workstation products which automate and standardize routine analysis of human
and non-human fluids, one of which is currently being tested in Germany. Each
workstation is or will be designed to increase the precision and reduce the cost
of performing an otherwise labor intensive, manually oriented laboratory
procedure.
SALES PLAN:
NORTH AMERICA: The Company sells and services its workstation-products
through its headquarter offices in Waterbury, CT and four decentralized
locations throughout the United States and Canada. Each sales office is staffed
by a manager and each manager is responsible for sales and service of he
Company's products in his/her region or area. North American sales efforts are
supported by a manager of marketing information systems, a director of strategic
accounts and a marketing associate each located at the Company's headquarter
office.
Each sales manager and area director earns a base salary, increasing commissions
based upon achievement of sales quota and an incentive bonus based upon; (i)
producing a specified level of net operating profit for the region; (ii)
displacing competition with the Company's workstation products; (iii)
implementing network standardization programs for laboratory networks and
affiliations; and, (iv) promoting the Company's workstation products as part of
a system with Bayer Corporation (see: STRATEGIC RELATIONSHIPS below).
<PAGE>
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 and has retained a Sales Agent in Japan
to assist with and oversee European and Pacific-Asian operations, respectively.
The country manager is not an employee of the Company. The country manager and
Sales Agent are paid a monthly retainer and incentive bonus based upon
achievement of certain goals.
The Company has installed workstations in Portugal, Spain, France,
Belgium/Luxembourg, Italy, Switzerland, Israel, Qatar, Mexico, Brazil, and
Bolivia. The Company has started to implement its distribution plan for China,
Japan, Taiwan and Singapore.
STRATEGIC RELATIONSHIPS:
BAYER CORPORATION: On December 29, 1997, the Company announced that it
entered into a Strategic Cooperation Agreement with the Diagnostics Division of
Bayer Corporation, the United States subsidiary of the international chemical
and health care conglomerate, Bayer AG headquartered in Germany. Under the
Cooperation Agreement, Bayer and DiaSys recommend and refer each other's
urinalysis workstations to hospital and commercial laboratory customers in the
United States. The companies also confer on account strategy and provide unified
network standardization plans through Bayer at the request of the customer. Each
company installs and services its own equipment.
BAYER INCORPORATED: 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 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.
OTHER SIGNIFICANT CONTRACTS: The Company has established a number of important
relationships with large scale customers. These relationships include:
SmithKline Beecham Clinical Laboratories; Quest Diagnostics; Kaiser Permanente,
California; AmeriNet, Inc. of St. Louis Missouri; Mid-Atlantic Group Network of
Shared Services, Inc. (MAGNET); and, the Purchase Connection.
The Company has also been awarded a supplier's contract by the General Services
Administration (GSA) of the United States of America.
PROPRIETARY RIGHTS:
PATENTS: The Company has been granted numerous patents on its "R/S" and "FE"
series technology. Three such patents have been issued by the United States
Department of Commerce both on the concept and specific architecture of the
Company's urine and feces workstation products. The Company has also been
granted similar patent protection in Japan, Singapore, Taiwan, Austria, Belgium,
Denmark, England, France, Germany, Greece, Ireland, Italy, Luxembourg,
Liechtenstein, Monaco, the Netherlands, Portugal, Spain, Sweden and Switzerland.
TRADE NAMES: The Company has been granted trade name protection for UriZyme, an
enzyme based cleaning material for its workstation products. The Company has
four additional applications for trade names in the United States. Europe and
Japan.
MANUFACTURING AND WARRANTY OBLIGATION:
The Company internally designs and manufactures its workstation products. The
Company purchases sub-assemblies and parts designed according to Company
specifications, and assembles and final tests the sub-assemblies and parts
<PAGE>
within its own facility. The Company has developed alternate qualified vendors
for its critical raw material and supplies that could fulfill its requirements
if needed. Implementation of the plan has resulted in higher manufacturing
quality, reduced lead time to deliver and reduced costs in manufacturing.
The Company provides its customers with a one year "swap out" warranty against
defects in parts or workmanship on all new or refurbished units from the date of
delivery, generally defined as FOB, DiaSys. This means that in the event a unit
fails from a defect in parts and/or workmanship during the warranty period, the
Company will replace the unit with a new or refurbished unit at the Company's
option. For service after the initial year of warranty, the Company offers
optional extended warranty protection plans and provides repair and service at
an hourly rate plus parts and material. The Company experiences minimal
additional costs associated with its warranty obligations.
FINANCIAL CONDITION:
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1998 the Company had cash and equivalents of $1,688,509, a
decrease of $313,060 from $2,001,569 as of June 30, 1998. The decrease in cash
and equivalents was primarily due to continued expenditures for sales and
marketing-related activities and new product development.
The Company's inventory decreased by $4,227 from $390,141 as of June 30, 1998 to
$385,914 as of September 30, 1998.
Management believes that it has sufficient funds to meet its obligations when
due for more than the next twelve months.
RESULTS OF OPERATIONS:
NET REVENUE AND BACKLOG:
The Company's Net Revenue decreased by $42,292 for the three month period ended
September 30, 1998 as compared to the same period in the previous year. The
decrease in Net Revenue was caused by: (i) a reallocation of senior management's
time to pursue the Company's legal rights against Intelligent Medical Imaging
Inc. (see LEGAL PROCEEDINGS below) ; (ii) the Company's inability to ship a
portion of its backlog due to its rejection of certain subassemblies which did
not pass the Company's incoming inspection criteria; and, (iii) customer
paperwork on a number of orders was inadequate to warrant shipment. Each of
these causes were temporary, and management has resumed its focus on sales.
GROSS PROFIT:
The Company's gross profit (Net Revenue less cost of goods sold) decreased by
$31,670 for the three month period ended September 30, 1998. The Company's gross
profit percentage (Gross profit divided by Net Revenue) decreased from 69.9% to
61.7%. Management attributes this decrease in gross profit and gross profit
percentage as temporary and due primarily to the Company's inability to ship a
portion of its backlog as described above.
SELLING GENERAL AND ADMINISTRATIVE (SG&A):
For the three month period ended September 30, 1998, the Company's expenses
decreased from $608,490 to $354,955 over the same three month period in 1997, a
decrease of $253,535 or 41.7%. The decrease in SG&A expenses was due primarily
to the completion of the Company's obligations under a certain investment
banking relationship ("Agreement") made with Lester Morse, Esq. P.C., as
assigned to WR Consulting, Inc. ("Investment Banker"). The Agreement expires on
December 31, 1998.
Additionally the Company incurred $45,970 for the period ended September 30,
1998 of non recurring legal fees in its arbitration action against Intelligent
Medical Imaging Inc. (see LEGAL PROCEEDINGS below.)
<PAGE>
Without the effect of the Agreement and IMI litigation, SG&A expenses would have
decreased from $360,990 to $308,985 over the same three month period for 1997.
RESEARCH AND DEVELOPMENT:
For the three month period ended September 30, 1998, research and development
expenses decreased from $107,170 to $95,663 over the same three month period for
1997, a decrease of $11,507 or 10.7%.
NET (LOSS) OR GAIN:
The Company reported a net loss of $388,931 for the three month period ended
September 30, 1998 compared to a net loss of $629,779 for the same period ended
September 30, 1997. Management attributes the decrease in net loss to: the
"non-cash" effect of the investment banking relationship described in SELLING
GENERAL AND ADMINISTRATIVE (SG&A) above; and, (ii) vigilant cost control.
Management anticipated a loss for the three month period ended September 30,
1998 as part of the Company's over-all strategic business plan.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
As previously disclosed, the Company announced on November 19, 1996, that it
entered into a product integration agreement ("Agreement") with Intelligent
Medical Imaging, Inc. (NASD: IMII). Under the Agreement, IMI was to purchase 200
of the Company's workstation products by June 30, 1997 and integrate such
products into IMI's new core laboratory workstation for further resale by IMI to
its customers. On March 27, 1997 the Company completed delivery of the first 100
workstations to IMI. The remaining 100 units were pending the assignment of a
delivery date as prescribed by the Agreement. On June 16, 1997, IMI advised the
Company that it was rejecting all workstations as non-conforming under the terms
of the Agreement. On July 2, 1997 and following several communications between
the parties, the Company notified IMI that it had suspended the Agreement
pending the resolution of the outstanding disputes including any issues of
conformity of goods and non-payment for the goods delivered. On July 17, 1997,
IMI notified the Company that it had terminated the IMI agreement due to the
Company's alleged breach(es) of the Agreement.
On January 12, 1998. DiaSys served IMI a formal notice and request for
arbitration. DiaSys sought $2.7 million in damages. IMI counter claimed for
damages of $2.1 million. The matter went to arbitration on October 5, 1998, a
judgment from which is expected prior to year-end. The Company believes that it
will ultimately prevail in the arbitration and that IMI's counter claim lacked
merit, was asserted only for strategic purposes, and is procedurally barred by
the specific provisions of the Agreement.
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
-------------------------------------------
/s/ TODD M. DEMATTEO
- ----------------------- -------------------------------------------
Date: November 18, 1998 Todd M. DeMatteo
President, Chief Executive Officer
/s/ MICHAEL F. PRIMINI
-------------------------------------------
Michael F. Primini
Vice President/Finance & Administration
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 1689
<SECURITIES> 0
<RECEIVABLES> 158
<ALLOWANCES> (19)
<INVENTORY> 386
<CURRENT-ASSETS> 2232
<PP&E> 144
<DEPRECIATION> (66)
<TOTAL-ASSETS> 2,440
<CURRENT-LIABILITIES> 93
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 2,347
<TOTAL-LIABILITY-AND-EQUITY> 2,440
<SALES> 63
<TOTAL-REVENUES> 66
<CGS> 26
<TOTAL-COSTS> 430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (390)
<INCOME-TAX> 0
<INCOME-CONTINUING> (390)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (390)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
