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, 2000
( ) 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
(State or other jurisdiction of incorporation or organization)
06-1339248
(I.R.S. Employer ID #)
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: XXX Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 7, 2000, the Company had 6,285,644 common shares outstanding.
DiaSys Corporation
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of the Business and Basis of the Presentation:
Nature of the Report: The accompanying consolidated financial statements
include the accounts of DiaSys Corporation and Intersep Ltd. from the date of
acquisition on September 30, 2000. The balance sheet for the end of the
preceding fiscal year has been derived from the Company's last audited
balance sheet contained in the Company's Form 10-KSB 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.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company' Form 10-KSB for the most recent fiscal 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.
Note 2. Intersep Ltd. Acquisition:
Effective September 30, 2000, the Company acquired all of the capital stock of
Intersep Ltd., a United Kingdom based manufacturer of diagnostic laboratory
products and test kits. Under the terms of acquisition, the Company will pay to
Intersep stockholders a number of shares of DiaSys common stock determined by
multiplying Intersep's EBITDA for the year ending December 31, 2000 by 7.5x and
deducting from such sum $500,000 and the amount of Intersep's indebtedness as of
December 31, 2000 and by dividing the result by the closing price of $8.33.
Assuming other conditions are met, additional consideration may be paid by
DiaSys in DiaSys common stock based on Intersep's EBITDA results for the
years ending December 31, 2001; 2002; and, 2003.
The acquisition has been accounted for using the purchase method of accounting,
and, therefore, the purchase price has been allocated to the assets purchased
and the liabilities assumed. It is estimated that additional purchase price
will be paid at December 31, 2000 resulting in an excess of purchase price
over the fair value of the net assets. Such additional purchase price will
be allocated to capitalized technology and goodwill.
The following unaudited summary, prepared on a pro forma basis, combines the
consolidated results of operations as if the Company had acquired Intersep
Ltd. as of the beginning of the period presented.
Given effect of the Intersep acquisition, revenues on a pro forma basis for the
quarter ending September 30, 2000 would have been $637,902 as compared to
$416,858 for the same period last year. Net loss would have been $(155,432)
or $(0.02) per share for the period ending September 30, 2000 as compared to
$(157,432) or $(0.02) per share for the same period last year.
The unaudited pro forma information is provided for informational purposes
only. This information is based on historical information and is not
necessarily indicative of what the actual consolidated results of operations
might have been if the acquisition had been effective at the beginning of the
period, nor is it indicative of future results of operations of the combined
entities.
Note 3. Legal Proceedings:
As previously disclosed, the Company was awarded damages of $335,000 in a
certain arbitration action against Intelligent Medical Imaging, Inc. (NASD:
IMII OB). Subsequent to the award, IMI filed for bankruptcy protection
against the Company and numerous other creditors. The Company has submitted its
claim to the bankruptcy court and has been approved as one of IMI's unsecured
creditors. In light of IMI's insolvency, the Company has elected not to
recognize a receivable in this matter, and to recognize any payment as and
when received.
Note 4. Stock Options
The Company accounts for stock option grants using the intrinsic value based
method prescribed by APB Opinion No. 25. Since the exercise price equaled or
exceeded the estimated fair value of the underlying shares at the date of
grant, no compensation was recognized in 2000.
Had compensation cost been based upon the fair value of the option on the date
of grant, as prescribed by SFAS No. 123, the Company's pro forma net loss and
net loss per share would have been approximately $(383,859) $(0.06) per share
atSeptember 30, 2000, using the Black-Scholes option pricing model.
DIASYS CORPORATION & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
September 30, 2000 June 30, 2000
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and equivalents $1,549,591 $2,415,256
Accounts receivable, less
allowance for doubtful
accounts of $40,000 678,828 426,267
Finance receivables, net 159,515 118,597
Inventories 443,517 314,309
Prepaid expenses and other
current assets 159,285 112,604
Total Curent Assets 2,990,736 3,387,033
EQUIPMENT, FURNITURE AND
FIXTURES, LESS ACCUMULATED
DEPRECIATION 295,845 88,032
OTHER ASSETS:
Computer software, less
accumulated amortization 18,348 27,500
Patents, less accumulated
amortization 58,008 43,687
Deferred acquisition and
offering costs 13,795 13,395
Capitalized technology, less
accumulated amortization 216,439 -
Long-term finance receivables,
net 260,145 146,978
Total Assets $3,853,316 $3,706,625
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $343,688 $115,161
Line of Credit 109,007 -
Total Current Liabilities 452,695 115,161
COMMITMENTS:
Long-term debt 50,455 -
Total Liabilities 503,150 115,161
STOCKHOLDERS' EQUITY:
Preferred stock $.001 par value:
Authorized 100,000 shares,
2,000 shares outstanding 2 2
Common stock $.001 par value:
Authorized 99,900,000 shares,
outstanding 6,285,644 at
9/30/00 and 6,274,768
outstanding at 6/30/00 6,285 6,275
Additional-paid-in-capital 11,655,253 11,657,434
Accumulated deficit (8,311,374) (8,072,247)
Total Stockholders' Equity 3,350,166 3,591,464
Total Liabilities and
Stockholders' Equity $3,853,316 $3,706,625
DIASYS CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended, September 30,
2000 1999
NET SALES $364,464 $225,804
COST OF GOODS SOLD 109,200 80,882
GROSS PROFIT 255,264 144,922
OPERATING EXPENSES:
Selling 228,043 153,727
General and administrative 178,922 74,700
Research and development 120,034 81,304
526,999 309,731
LOSS FROM OPERATIONS (271,735) (164,809)
INTEREST INCOME 32,608 10,437
NET LOSS $(239,127) $(154,372)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,285,053 6,512,280
BASIC AND DILUTED LOSS
PER COMMON SHARE $(0.04) (0.02)
DIASYS CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Common Stock Preferred Stock Paid-in- Accumulated
Shares Par Value Shares Par Value Capital Deficit
BALANCE, JUNE
30, 2000 6,274,768 $6,275 2,000 $2 11,657,434 $(8,072,247)
YEAR ENDED JUNE 30, 2001
Exercise of
warrants to
purchase 5,476
shares of
common stock 5,476 5 -- -- (5) --
Exercise of
warrants to
purchase 5,400
shares of
common stock 5,400 5 -- -- (5) --
Offering costs
of prior year
sale of preferred
stock -- -- -- -- (2,171) --
Net Loss -- -- -- -- -- (239,127)
BALANCE SEPTEMBER
30, 2000 6,285,644 $6,285 2,000 $2 11,655,253 $(8,311,374)
DIASYS CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended, September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(239,127) $(154,372)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Amortization of patents and software 9,825 7,000
Depreciation of equipment, furniture and
fixtures 8,450 6,000
Bad debt expense -- --
Changes in operating assets and liabilities:
Accounts receivable (86,314) (38,102)
Inventories 14,710 22,413
Prepaid expenses and other current
assets (822) (29,348)
Accounts payable and accrued expenses 96,813 (17,111)
Net cash flows from operating activities (196,465) (203,520)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, furniture and
fixtures (5,666) (7,703)
Costs of computer software --
Costs of patents (14,321) (5,629)
Deferred Acquisition cost (33,875) --
Acquisition of Intersep Ltd. (500,000) --
Increase in finance receivables (113,168) (9,433)
Net cash flows from investing activities (667,030) (22,765)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of
preferred stock (2,170) --
Proceeds from issuance of
common stock and warrants -- (18,938)
Net cash flows from financing activities (2,170) (18,938)
NET CHANGE IN CASH AND EQUIVALENTS (865,665) (207,347)
CASH AND EQUIVALENTS, BEGINNING
OF PERIOD 2,415,256 724,415
CASH AND EQUIVALENTS, END OF PERIOD 1,549,591 517,068
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 completed its initial public offering on
January 10, 1995 and trades on NASDAQ under the symbol "DIYS". On September
30, 2000, the Company acquired all of the capital stock of Intersep Limited,
a United Kingdom based manufacturer of diagnostic laboratory products and
test kits.
STRATEGY
Since its inception, the Company has adhered to a precise business strategy;
namely: to identify gaps in the product offerings of leading medical
diagnostic manufacturers; to fill the gaps with practical, cost effective
automation; to protect the technology with broad-based patents and
trademarks; to secure market acceptance of the technology; and, to then build
strategic sales and distribution alliances with the leaders in the industry
(see: STRATEGIC RELATIONSHIPS below). The strategy also contemplates growth
through strategic business combinations (see: NOTE 2. above).
PRODUCTS
With the acquisition of Intersep, the Company's products can be broadly
classified into two categories, (i) workstation-systems which increase the
accuracy and reduce the cost to perform routine laboratory analysis of
various body fluids; and, (ii) disposable diagnostic reagents and test kits
which provide accurate, early diagnosis of certain medical conditions,
especially parasites in blood and feces. Each category can be further
described as follows:
Workstations
The Company's workstation-systems are composed of the "R/S", "FE", and,
"CytoSys" series of products. The "R/S" workstation-systems increase the
accuracy, productivity and cost-efficiency of the thousands of medical
laboratories worldwide, 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. There
are hundreds of "R/S" series workstation-systems installed around the world
within numerous national laboratory networks and core medical facilities.
The "R/S" series workstation-systems are currently the Company's main source
of revenue.
The "FE" series workstation-systems are composed of the FE-2, FE-2i, collection
tubes and fecal concentrators. These workstation-systems automate and reduce
the cost of microscopic analysis of fecal concentrates; a procedure performed
by thousands of hospital, public health and private commercial laboratories
worldwide 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 outpatient basis, and quickly provides
confirmatory results. The "FE" series workstation-systems are being newly
introduced to the world markets in combination with the collection tubes and
concentrators acquired through the Intersep acquisition.
The CytoSys 1 is the first of a family of workstation-systems, which automate
and reduce the cost to perform microscopic analysis of multiple body fluids
including cerebral spinal fluid, fine needle aspirations, serous, amniotic
and other cell suspensions. The Company announced the CytoSys 1 at the
international meeting of American Association of Clinical Chemists/American
Society of Clinical Laboratory Scientists (AACC/ASCLS) in July 2000. The
Company expects to release "first" production CytoSys workstations to market
in January 2001.
Disposable Diagnostic Test Products and Kits
Through its acquisition of Intersep, the Company manufactures and distributes
numerous consumable reagents and test kits. The markets for these products
are hospital and commercial laboratories, bioteches, and pharmaceuticals.
The Company is in the process of developing the plans necessary to assimilate
the products and markets of each company.
COMPETITION
"R/S" Series
The Company knows of no other products, which competes directly with the "R/S"
series workstations. There are however five competing technologies for the
"R/S" series: (i) traditional use of a microscope to examine a glass slide of
urine sediment; (ii) traditional use of a microscope to examine urine sediments
introduced into a pre-formed plastic slide assembly; (iii) a video imaging
system which automatically "recognizes" and "counts" pre-stored images of
"common shapes" found in urine sediment; (iv) a laser based system which
detects "abnormal" urines thereby reducing the number which must be manually
analyzed; and, (v) pre-screening using chemically treated reagent or "dip"
strips.
The oldest technology is the use of a microscope to examine a glass slide of
urine sediment. However, as described elsewhere, the use of microscope
slides and cover slips is time consuming, prone to inconsistencies, and
expensive. Pre-formed plastic slides are easier to handle than glass and
provide more standardization. However, the optical quality seen through
plastic slides tends to be significantly inferior to that of glass and the
cost is generally higher. The video imaging system on the market provides a
"standard procedure" for urinalysis, dispenses with the need for costly
consumable items such as glass or plastic slides, and, sharply reduces
exposure to potentially infectious materials carried in urine. However,
since the instrument requires expensive proprietary reagents to operate, and
costs between $85,000 and $200,000 to acquire, the Company believes that only
the largest laboratories with the most liberal budgets can justify the
purchase and/or use of such a system. The laser-based system screens-out
"normal" urines thereby reducing the number of "abnormal" urines requiring
manual analysis. In addition to still requiring manual analysis of some
samples, the laser-based system costs approximately $120,000. Lastly,
reagent strips are very efficient for determining chemical compositions, but
they do not detect the existence of many types of particulate matter
otherwise having clinical significance.
"FE" Series
The Company knows of no other workstation product, which automates the
resuspension, aspiration and presentation of fecal concentrates for
microscopic analysis.
"CytoSys" Series
The Company knows of no other workstation product, which automates the
microscopic analysis of multiple body fluids for under $50,000.
Disposable Diagnostic Products and Test Kits
The disposable diagnostic product and test kit market is a multi-billion dollar
industry made up of numerous companies, many of which have more financial
resources, research and development, marketing, and distribution capabilities
than the Company. The Company therefore believes that the commercial success
of these products will depend upon their continued high quality, competitive
advantages including price and acceptance by the Company's strategic trading
partners.
The Company expects to encounter competition in the laboratory equipment
industry. While the Company believes that the "R/S", "FE" and CytoSys series
workstations are currently the only products of their type in the market,
many of the Company's competitors and potential competitors have
substantially greater resources, including capital, research and development,
personnel and manufacturing and marketing capabilities, and also may offer
well established, broad product lines and ancillary services. Some of the
Company's competitors have long-term or preferential supply arrangements with
hospitals. Such arrangements may act as a barrier to market entry to the
Company's products. Competing companies may succeed in developing products
that are more efficacious or less costly, and such companies may also be more
successful than the Company in production and marketing. Rapid technological
development by others may result in the Company's products becoming obsolete
before the Company recovers a significant portion of the research,
development and commercialization expenses incurred with respect to those
products. There can be no assurance that the Company will be able to compete
successfully.
SALES, MARKETING, AND DISTRIBUTION
North America
The Company sells and services its workstation-systems and consumable products
through its headquarter offices in Waterbury, Connecticut. North America is
organized into six distinct sales regions. A manager staffs each region and
is responsible for sales and service of the Company's products in his/her
region. North American sales efforts are supported by a Director of Sales, a
Director of Marketing and a Manager of Field Services, each located at the
Company's headquarter office. Each sales manager earns a base salary,
commissions and bonuses based upon achievement of monthly, quarterly and
yearly quota objectives.
Sales in North America are facilitated by strategic marketing and distribution
alliances with Bayer Corporation and Allegiance Healthcare in the United
States and Bayer Incorporated in the Canada (see: Strategic Relationships
below). Additionally, sales in North America are supported by telemarketing,
direct mail campaigns, advertising in key trade journals, participation in
technical workshops, and exhibitions at national trade shows.
International
The Company sells and services its workstation-systems and consumable products
in Europe, the Middle East and Africa through its subsidiary based in the
United Kingdom. DiaSys Europe, Ltd. sells and services the Company's
products almost exclusively through independent third party distributors.
There is some direct selling in the United Kingdom. Distributors are
generally exclusive to the territory they are assigned, and are required to
meet certain minimum revenue commitments within the terms of the Company's
distribution plan and agreement.
Chinese and Pacific Asian operations are managed by local distributors under
the direction and guidance of the Company's President (see: Strategic
Relationships below).
STRATEGIC RELATIONSHIPS
Bayer Corporation
The Company has 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.
The Company has started to recognize sales of its workstations through its
strategic relationship with Bayer. The Company's activities have also
assisted Bayer with the sale of its urine chemistry analyzers.
As of September 30, 2000, there were over 250 customers using one or more
Bayer/DiaSys systems in North America.
Bayer Incorporated
On June 27, 1996 the Company entered into a strategic cooperation agreement
with Bayer Inc., the Canadian subsidiary of the international chemical and
health care giant, Bayer AG (Germany). 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. The parties renewed their agreement for an additional
two years on June 30, 1999.
Allegiance
On June 27, 2000, the Company entered into a multiple year distribution
agreement with Allegiance Healthcare Corp., a subsidiary of Cardinal Health,
Inc. (NYSE:CAH). Allegiance is America's leading provider of health-care
products and cost-management services needed by hospitals, laboratories and
others in health care. Under the terms of the agreement, Allegiance will
promote and distribute the Company's urine sediment workstations through its
120 sales reps and numerous supply relationships. The Company is in the
process of training Allegiance's sales represenatives in the field.
Hua Sin Science Co. LTD
Effective March 1, 1999, the Company entered into a multi-year sales and service
agreement with Hua Sin Science Co. LTD, located in Guangzhou China. Hua Sin
manufactures and distributes instruments and reagents to China's 60,000
hospital and medical laboratories. Hua Sin is also the exclusive distributor
of BAYER's CLINITEK series urine chemistry analyzers in China. The Company
officially commenced joint operations with Hua Sin in Guangzhou during the
week of April 12, 1999. As of September 30, 2000, Hua Sin ordered 107 R/S
2003 urine sediment workstations, 85 of which have been delivered.
Additionally, on May 4, 2000, the Health Ministry of China certified the
Company's urinalysis and fecal concentrate workstations for use by all 60,000
medical laboratories in China. The Health Ministry of China is the
equivalent of the Food and Drug Administration (FDA) in the United States.
Kaiser Permanente
Effective April 1, 1999, the Company entered into a three-year product supply
agreement with Kaiser Foundation Health Plan, Inc., the nations leading not
for profit integrated health system. The DiaSys Urine Sediment Analyzer was
selected by the Kaiser Permanente Standards and Sourcing Team for Hematology
as the recommended product to be used in conjunction with their standard
urinalysis analyzers whenever a microscopic urine test is required. The
agreement does not include minimum commitments. However, as of September 30,
2000, there were 14 Kaiser-managed laboratory facilities using one or more
DiaSys workstations.
Lenta LTD
Effective August 1, 1999, the Company entered into a multiple year Sales and
Service agreement with Lenta Teshis Orunleri Ticaret ve Sanayi Ltd. St.
(Lenta). Lenta is a leading distributor of urinalysis and diagnostic
equipment with headquarter offices in Istanbul and 14 correspondent offices
throughout Turkey. The Company officially commenced joint operations with
Lenta on September 7, 1999 in Istanbul. As of September 30, 2000, Lenta has
ordered 120 workstations, 71 of which have been delivered.
Government Contracts
The Company has been awarded two Federal supply contracts: (i) one by the
General Services Administration (GSA), and (ii) one by the Department of
Veteran's Affairs (FSS). The GSA contract allows government agencies to
purchase workstations, and the FSS allows the network of veteran and military
hospitals to install workstations on a "cost-per-test" basis. As of
September 30, 2000, the Company has installed 35 workstations under these
awards.
Other Significant Relationships
The Company has established a number of other important relationships with
large-scale national laboratory networks and buying groups. The Company's
workstations are used in multiple sites in each of the five largest
commercial laboratory networks in the nation.
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
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-delivery 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 an optional extended warranty protection plan, a service plan,
and also provides repair and service at an hourly rate plus parts. The Company
experiences minimal additional costs associated with its warranty obligations.
FINANCIAL CONDITION:
Liquidity and Capital Resources:
As of September 30, 2000, the Company had cash and equivalents of $1,549,591
compared to $2,415,256 at June 30, 2000. The decrease in cash and
equivalents was mainly due to the acquisition of Intersep Ltd.
Based on cash and continuing operations, management believes that it has
sufficient funds and resources on hand to discharge its obligations as they
become due for at least the next 12 months.
RESULTS OF OPERATIONS
Net Revenue:
The Company's net revenue increased $138,660 or 61% to $364,464 for the quarter
ended September 30, 2000 compared to $225,804 for the same period last year.
The increase in Net Revenue was due to continued implementation of the
Company's strategic growth plan.
Gross Profit and Gross Profit Margins:
Gross profit and gross profit margins increased to $255,264 or 70% for the
period ended September 30, 2000, up from $144,922 or 64% compared to the same
period last year. The increase in gross profit and gross profit margins was
due to continued sales growth and production efficiencies.
Selling General And Administrative (SG&A):
SG&A increased $178,538 or 78% to $406,965 for the period ended September 30,
2000 up from $228,427 for the same period last year. The increase in SG&A
was mainly due to sales-related commissions and bonuses; a $17,500 NASDAQ
assessment based on an increase of outstanding shares due to the stock split;
legal and accounting fees associated with the Company's merger and acquisition
plan; additional personnel in Finance; and, sales-related travel.
Research And Development (R&D):
R&D expenses increased $38,730 or 48% to $120,034 for the period ended
September 30, 2000, up from $81,304 for the same period last year. The
increase in R&D was due to a temporary addition to personnel in connection
with the test and development of new products.
Net (Loss):
Net loss increased $84,755 or 55% to $(239,127) for the period ended September
30, 2000, up from $(154,372) for the same period last year. The increase in
loss was mainly attributable to the increase in SG&A as noted above. The
Company believes that its net loss will continue to decrease as the Intersep
acquisition and related selling plans are implemented.
PART II OTHER INFORMATION
Item 1. Other Information:
On February 7, 2000, Registrant entered into an Agreement pursuant to which it
agreed to sell up to 4,000 Series "A" Convertible Preferred Shares (the
"Preferred") and accompanying 5 year warrants (the "Warrants") to purchase
common shares, to two unaffiliated accredited investors, B.H. Capital
Investments, L.P. and Excalibur Limited Partnership, both of Toronto,
Ontario, Canada. The terms of the Preferred are as provided for in
Certificate of Designations filed with the Secretary of the State of
Delaware. The Agreement provides that the investors will purchase the
Preferred and Warrants in three tranches: the first tranche of $1 million was
purchased on February 7th, 2000; the second tranche of $2 million was
purchased on June 28th, 2000; and the final tranche of $1 million is
estimated to be drawn down in November, 2000.
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: November 14, 2000
Todd M. DeMatteo,
President and Chief Executive Officer
Marshall A. Smith
Vice President and Chief Financial Officer
2
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