<PAGE>
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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission file number 0-26998
ALCOHOL SENSORS INTERNATIONAL, LTD.
(Exact name of small business issuer as specified in its charter)
New York 11-310 4480
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
11 Oval Drive, Islandia, New York 11722
(Address of principal executive offices)
516-342-1515
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such report (s), and
(2) has been subject to such filing requirements 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 filed all documents and reports required
to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Common Stock, $.001 par value - 8,419,470 shares outstanding as of
May 10, 1996.
Transitional Small Business Disclosure Format: Yes ____ No X
<PAGE>
INDEX
ALCOHOL SENSORS INTERNATIONAL, LTD.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets - December 31, 1995 and March 31,
1996 (unaudited).
Condensed statements of operations - Three months ended
March 31, 1996 and 1995 (unaudited).
Condensed statements of cash flows - Three months ended
March 31, 1996 and 1995 (unaudited).
Notes to condensed financial statement -
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
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PART I. Item 1
ALCOHOL SENSORS INTERNATIONAL, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $524,231 $173,426
Marketable Securities.......................... 1,980,383 1,496,826
Accounts Receivable............................ -- 160,321
Inventory...................................... 142,890 560,378
Prepaid expenses............................... 189,699 228,918
---------- ----------
Total current assets........................... 2,837,203 2,620,369
Fixed Assets-Net............................... 367,664 384,900
Restricted Cash................................ 1,017,317 1,017,317
Other assets .................................. 23,084 23,084
------------ -----------
TOTAL................................... $4,245,268 $4,045,670
============= ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Deposits....................................... $49,036 $52,517
Due to officers/stockholders................... 132,782 132,782
Notes payable and accrued interest............. 17,317 417,317
Accounts payable and accrued expenses.......... 428,436 430,948
Accrued litigation settlement cost............. 990,000 990,000
------------ -----------
Total current liabilities................... 1,617,571 2,023,564
------------ -----------
STOCKHOLDERS EQUITY
Common stock $.001 par value, 25,000,000 shares authorized,
8,116,870 and 8,119,470 issued and outstanding at
December 31, 1995 and March 31, 1996........... 8,117 8,120
Additional paid-in capital........................... 9,398,354 9,402,701
Accumulated deficit.................................. (6,778,857) (7,407,417)
Unrealized gain on marketable securities............... 83 18,702
---------- ----------
Total stockholders equity...................... 2,627,697 2,022,106
---------- ----------
TOTAL ................................................. $4,245,268 $4,045,670
========== ==========
</TABLE>
The attached notes are made a part hereof.
3
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ALCOHOL SENSORS INTERNATIONAL, LTD.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ending
March 31
-----------------------------
1995 1996
---- ----
<S> <C> <C>
Net sales........................... -- $161,952
Cost of goods sold.................. -- 100,402
---------- -----------
Gross profit........................ -- 61,550
---------- -----------
Costs and expenses:
Research and development........ $136,749 111,156
Selling, general
and administrative.............. 131,029 605,955
------- -------
Loss from operations................ (267,778) (655,561)
Interest and other income 35,997
Interest expense.................... (8,497) (8,996)
----------- -----------
NET (LOSS).......................... $(276,275) $(628,560)
=========== ===========
Net loss per common share........... $(.04) $(.07)
=========== ===========
Weighted average number of common
shares outstanding 6,921,155 8,418,170
=========== =========
</TABLE>
The attached notes are made a part hereof.
4
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ALCOHOL SENSORS INTERNATIONAL, LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(276,275) $(628,560)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization 1,078 14,000
Common stock issued for
services ................................... 14,500 --
Changes in operating assets and liabilities:
(Increase in accounts receivable) -- (160,821)
(Increase) in inventory................... (120,000) (417,488)
(Increase) decrease in prepaid expenses and
other current assets................... 7,500 (41,219)
Increase in accounts payable and
accrued expenses........................... 151,996 2,512
Increase in deposits.......................... -- 3,481
--------- -----
Net cash (used in) operating activities... (221,201) (1,226,095)
--------- -----------
Cash flows from investing activities:
Sales of marketable securities -- 502,176
Acquisition of fixed assets.................. (2,686) (31,236)
--------- --------
Net cash provided by (used in) financing
activities.............................. (2,686) 470,940
------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock........... 232,000 4,350
Proceeds from notes payable -- 400,000
------- -------
Net cash provided by financing activities.... 232,000 404,350
------- -------
NET INCREASE (DECREASE) IN CASH..................... 8,113 (350,805)
Cash--beginning of period........................... 6,266 524,231
------- -------
CASH--END OF PERIOD................................ $14,379 $173,426
======= ========
Supplemental disclosure of cash flow information:
Interest paid during the period $2,694
</TABLE>
The attached notes are made a part hereof.
5
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ALCOHOL SENSORS INTERNATIONAL, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(NOTE A) - Basis of Presentation and the Company
(1) Basis of presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-QSB and
Article 3 of Regulations S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principals
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
fair presentation have been included. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996 During 1996, the Company
is no longer in the development stage.
The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principals
for complete financial statements. For further information, refer to the audited
financial statements and footnotes thereto included in the annual report on Form
10-KSB.
(2) The Company
Alcohol Sensors International, Ltd., ("the Company") was incorporated
on February 14, 1992, for the development and commercial exploitation of a
Breath Alcohol Ignition Interlock Device ("BAIID").
(NOTE B) - Summary of Significant Accounting Policies
(1) Loss per share of common stock:
Net loss per share of common stock is based on the weighted average
number of shares outstanding during each period, and for the three months ended
March 3, 1995, excludes 1,000,000 shares contributed to the Company in
conjunction with the initial public offering. Common stock, options and warrants
issued within twelve months of the Company's initial public offering are
considered outstanding through June 30, 1995, using the treasury stock method.
6
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ALCOHOL SENSORS INTERNATIONAL, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(2) Inventory
Inventory consisting of electronic components, is stated at the lower
of cost (first in - first out basis) or market. Inventory is comprised of
finished goods, work in progress and components.
(NOTE C): Public Offering
In November 1995, the Company completed its initial public offering,
whereby it sold 1,000,000 units at $6.25. Each unit comprises two shares of
common stock, one class A warrant and one half Class B warrant. The Company
realized net proceeds of approximately $4,900,000. In December 1995, pursuant
to an over allotment option, the Company sold 150,000 units and realized net
proceeds of approximately $800,000. In connection with the offering, certain
officers and shareholders contributed to the Company 1,000,000 of their common
shares.
(NOTE D:) Notes Payable
The Company has a line of credit of $500,000, bearing interest at the
prime rate, and is secured by its portfolio of marketable securities. The amount
outstanding at March 31, 1996 was $400,000.
(NOTE E:) Pending Litigation
The Company and certain of its officers were named as defendants in
an action commenced in the Supreme Court Suffolk County seeking money damages
of $2,500,000 and various forms of provisional relief. This action was
commenced by an individual claiming an equity interest in the Company based
upon a purported agreement with another company, Alcohol Sensors, Inc. with
which the claimant, certain officers of the Company and others were affiliated
in 1989. Alcohol Sensors, Inc. ceased active operations in 1990 and was
subsequently dissolved in 1993. The Company removed the action to the Unites
States District Court for the Eastern Court for the Easter District of New
York in December 1995 and moved to dismiss an amended complaint in February
1996. The Company believes the claims made against it are without foundation
or merit and plans to vigorously defend the action. Pursuant to an order of
the state court prior to removal, the Company has escrowed $1,000,000 in
connection with this action. The Company commenced a separate action against
the above claimants in the same federal court in which the above action is
pending, alleging securities fraud and RICO violations and has moved to
consolidate the two actions. Both lawsuits are in their initial stages and no
prediction as to the outcome can be made at this time.
The Company and certain of its officers were named as defendants in
an action commenced in the United States District Court for the Eastern
District of New York in March 1996 by a stockholder seeking $2 million dollars
in alleged damages as a result of the company's handling of the above action.
Management believes the claims alleged in the lawsuit are frivolous and
intends to vigorously defend the action including a demand for sanctions.
Accordingly, the accompanying financial statements make no provision for such
legal action. The defendants time to respond to the complaint has not yet
expired.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
General
Since the Company's founding in February, 1992 it has engaged
primarily in the research, development and design of an innovative,
technologically advanced ignition interlock system to detect various
intoxication levels of automobile drivers. The Company has been in a
development stage prior to 1996, devoting substantially all of
its resources to research and development including potential new applications
of its technology beyond ignition interlock. The Company concluded development
of an operational prototype for its breath sensor device in July, 1995, and it
uses subcontractors to manufacture and ship its products.
Results of Operations
Three Months Ended March 31, 1996, and March 31, 1995
The Company had net sales of $161,952 for the three months ending
March 31, 1996 and had no sales for the three months ending March 31, 1995. Cost
of goods sold was $100,400 and 60% of sales.
The Company's loss from operations for the three months ended March
31, 1996 was $655,561 as compared to $267,778 for the three months ended March
31, 1995, an increase of approximately $388,000 or 145%. Expenditures on
research and development decreased to $111,156 for the period compared to
$136,749 for the prior period, and a decrease of approximately $26,000 or 19%
reflecting the Company's successful efforts to obtain certification for its
ignition interlock device in numerous jurisdictions and the completion of
the first prototype. General administrative expenses increased to $605,955
for the period compared to $131,029 for the prior period, an increase of
approximately $475,000 or 362%, reflecting the fact that the Company has left
the development stage and has started operating in its new facilities, at a
significantly higher level of rent. In addition, the Company has hired a staff,
which includes ancillary payroll costs, which it did not have in the prior year.
In 1996 the Company also started to expend funds for marketing and selling its
product. During the three months ended March 31, 1996 the Company recognized
$35,997 of interest and other income as a result of its marketable security
portfolio transactions as compared with none in the three months ended March 31,
1995.
8
<PAGE>
Liquidity and Capital Resources
From inception, through November, 1995. the Company financed its
operations primarily from private placements of equity and debt securities
totaling approximately $2,500,000. On November 17, 1995, the Company
successfully completed its initial public offering selling 1,000,000 Units,
each comprised of two shares of common stock, one redeemable Class "A" common
stock purchase warrant exercisable after November 9, 1996 at $3.75 per share
and 1/2 redeemable Class "B" common stock purchase warrant exercisable after
November 9, 1996 at $5.00 per share. In December 19, 1995 the Underwriters"
overallotment option of 150,000 Units was exercised in full. The Company's net
proceeds including the overallotment, were approximately $5,800,000.
Management believes its current cash, investments and future funds from
operations will be sufficient to satisfy the Company's cash requirements through
May, 1997. The Company has obtained a $500,000 line of credit with Chemical Bank
in February 199 6 at the prime rate, of which $400,000 was drawn down in March
1996 to pay for furnishings, fixtures, and equipment. The Company's marketable
securities are collateral for the line of credit. The Company has litigation in
the preliminary stages and no prediction as to the outcome can be made at this
time. In connection with a court order, the Company has escrowed $1,000,000 in
an interest bearing account.
As of March 31, 1996, the Company had shipped approximately 580 units
and recorded revenues of approximately $162,000.
The Company has completed its renovation of office space,
furnishings, and equipment, as well as established a networked management,,
inventory control, and customer and fulfillment information systems.
The Company is negotiating with several subcontractors to secure
manufacturing facilities and manufacturing redundancies.
As of March 31, 1996, the Company has established a network of 18
representatives and 66 dealer installers to support its products nationwide,
and continuing its initiative to grow this network.
Much of the Company's efforts subsequent to the initial public
offering has been placed in the setting up of Company systems and personnel to
assist the Company in fulfilling its business plan and to capitalize on the
opportunities available to it.
On May 9, 1996, the Company signed a Distribution Agreement with Digital
Vehicle Security Systems, Ltd. in the UK, to market and distribute the Company's
line of interlock devices in 17 European countries.
The Contract calls for Digital to purchase 1.6 million of the Company's
interlock devices during the 60 month period commencing November 1996.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Footnote D to Financial Statement
Item 2. Changes in Securities
NONE
Item 3. Defaults upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALCOHOL SENSORS INTERNATIONAL, LTD.
(Registrant)
May 15, 1996 By:_______________________________________
Robert B. Whitney
President and Chief Executive Officer
May 15, 1996 By:_______________________________________
John T. Ruocco
Sr. Executive Vice President
May 15, 1996 By:_______________________________________
Dr. Steven A. Martello
Vice President, Chief Operating Officer
May 15, 1996 By:_______________________________________
Michael A. Sylvester
Treasurer, Chief Financial Officer
11
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EXHIBIT
NO. EXHIBIT INDEX
- ------- -------------
11 COMPUTATION OF LOSS PER SHARE
12
<PAGE>
Exhibit 11
COMPUTATION OF LOSS PER SHARE
ALCOHOL SENSORS INTERNATIONAL, LTD.
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March
--------------------------
1995 1996
---- ----
<S> <C> <C>
Net (loss).............................. $(276,275) $(628,560)
=============== ===============
Shares:
Weighted average number of common
shares outstanding................... 7,370,495 8,418,170
Add common stock equivalents issued
within twelve months of an initial
public offering (determined by the
"treasury stock" method)(1).......... 550,660 -
Shares contributed in connection
with the initial public offering..... (1,000,000) -
--------------- ---------------
TOTAL........................ 6,921,155 8,418,170
=============== ===============
(Loss) per common share................. $(.04) $(.07)
=============== ===============
</TABLE>
- ---------------
(1) In accordance with Securities and Exchange Commission requirements,
common shares, options and warrants issued during the twelve-month
period prior to the filing of the initial public offering have been
included in the calculation as if they were outstanding for all periods
through June 30, 1995 applying the treasury stock method.
