UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended February 29, 1996 |_| TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT For the transition period from _____ to _____ COMMISSION FILE NUMBER 0-11408 BIOSENSOR CORPORATION ------------------------------------------------------------------------------ MINNESOTA 41-1427114 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 13755 First Avenue North, Plymouth, Minnesota 55441 (Address of principal executive offices) (Zip Code) Issuer's telephone number (612) 449-9100 Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO______ The number of shares outstanding of the registrant's common stock, $.05 par value, as of April 8, 1996 is 2,805,555. BIOSENSOR CORPORATION CONDENSED BALANCE SHEETS February 29, May 31, 1996 1995 (Unaudited) - ----------------------------------------------- ----------- ----------- ASSETS - ----------------------------------------------- ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 70,663 $ 4,750 Receivables 501,748 395,309 Inventories 367,725 432,486 Prepaid expenses and other 24,111 22,032 - ----------------------------------------------- ----------- ----------- Total Current Assets 964,247 854,577 - ----------------------------------------------- ----------- ----------- DEPOSITS 8,666 9,643 - ----------------------------------------------- ----------- ----------- PROPERTY AND EQUIPMENT at cost, net 78,595 65,334 - ----------------------------------------------- ----------- ----------- $ 1,051,508 $ 929,554 =============================================== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note Payable to bank $ -- $ 20,000 Accounts payable Trade 118,681 96,120 Other -- 20,000 Accrued expenses Commissions 27,221 22,350 Compensation 57,893 43,333 Warranty 23,521 22,467 Other 16,225 27,182 - ----------------------------------------------- ----------- ----------- Total Current Liabilities 243,541 251,452 - ----------------------------------------------- ----------- ----------- DEFERRED RENT 672 5,195 - ----------------------------------------------- ----------- ----------- STOCKHOLDERS' EQUITY Common stock, par value $.05 per share 140,278 140,028 Additional paid-in capital 2,940,260 2,939,947 Accumulated deficit (2,273,243) (2,407,068) - ----------------------------------------------- ----------- ----------- Total stockholders' equity 807,295 672,907 - ----------------------------------------------- ----------- ----------- $ 1,051,508 $ 929,554 =============================================== =========== =========== BIOSENSOR CORPORATION CONDENSED STATEMENTS OF INCOME (Unaudited) For the Three Months Ended For the Nine Months Ended February 29 and 28, February 29 and 28, ----------------------------- ------------------------------ 1996 1995 1996 1995 - ------------------------------------------- ----------- ----------- ----------- ----------- NET SALES $ 613,158 $ 542,525 $ 1,712,087 $ 1,901,433 - ------------------------------------------- ----------- ----------- ----------- ----------- COSTS AND EXPENSES Cost of products sold 232,541 248,306 631,967 824,893 Research, development and engineering 39,124 58,870 119,063 196,914 Sales and marketing 143,973 220,443 447,007 695,849 General and administrative 130,620 114,746 376,393 366,881 - ------------------------------------------- ----------- ----------- ----------- ----------- 546,258 642,365 1,574,430 2,084,537 - ------------------------------------------- ----------- ----------- ----------- ----------- Operating income (loss) 66,900 (99,840) 137,657 (183,104) Nonoperating Income (Expense), net (535) 5,472 (2,142) 8,783 - ------------------------------------------- ----------- ----------- ----------- ----------- Income (Loss) before income taxes 66,365 (94,368) 135,515 (174,321) Federal and State Income Taxes -- 842 1,689 3,464 - ------------------------------------------- ----------- ----------- ----------- ----------- Net Income (Loss) $ 66,365 $ (95,210) $ 133,826 $ (177,785) =========================================== =========== =========== =========== =========== EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ .02 $ (.03) $ .05 $ (.06) =========================================== =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 2,805,088 2,800,555 2,802,635 2,797,258 =========================================== =========== =========== =========== =========== BIOSENSOR CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended February 29 and 28, 1996 1995 - ---------------------------------------------------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 133,826 $(177,785) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 20,977 16,618 (Gain) loss on sale of property and equipment (73) (73) Changes in assets and liabilities: (Increase) decrease in: Receivables (106,439) 183,793 Inventories 64,761 (46,958) Other Assets (1,102) (5,869) Increase (decrease) in: Accounts payable 22,561 (22,299) Accrued expenses 5,005 (75,117) - ---------------------------------------------------- --------- --------- Net cash provided by (used in) operations 139,516 (127,690) - ---------------------------------------------------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchase of product line (20,000) (40,000) Purchase of property and equipment (35,566) (5,926) Proceeds from sale of property and equipment 1,400 600 - ---------------------------------------------------- --------- --------- Net cash used in investing activities (54,166) (45,326) - ---------------------------------------------------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowing from note payable to bank 110,000 60,000 Payments on note payable to bank (130,000) -- Net proceeds from issuance of common stock 563 1,500 - ---------------------------------------------------- --------- --------- Net cash provided by (used in) financing activities (19,437) 61,500 - ---------------------------------------------------- --------- --------- Increase (decrease) in cash and cash equivalents 65,913 (111,516) CASH AND CASH EQUIVALENTS Beginning of period 4,750 125,208 - ---------------------------------------------------- --------- --------- End of period $ 70,663 $ 13,692 ==================================================== ========= ========= BIOSENSOR CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS The Company is engaged in the development, manufacture and marketing of diagnostic equipment for physicians' offices, clinics and hospitals. The 24-hour ambulatory cardiac monitoring, EKG telemetry, pulmonary function, EKG and ambulatory blood pressure systems operate independently or in unison on an IBM compatible office computer. The Company also manufactures cardiac monitors for OEM distributors. NOTE 2. CONDENSED FINANCIAL STATEMENTS The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB for the year ended May 31, 1995. The results of operations for the three months and nine months ended February 29, 1996, are not necessarily indicative of the operating results for the full year. NOTE 3. MAJOR CUSTOMER During the nine months ended February 29, 1996, and February 28, 1995, there were sales to one unaffiliated customer of $288,000 and $215,000 respectively. During the third quarter ended February 29, 1996 sales to the same customer totaled $77,000 and sales to another unaffiliated customer totaled $140,000. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The Company's sales were $613,000 and $1,712,000 for the third quarter and nine months ended February 29, 1996, respectively, compared to $542,000 and $1,901,000 for the third quarter and nine months ended February 28, 1995. The increase in sales in the third quarter ended February 29, 1996 is due to increases in international sales. Cost of goods sold as a percentage of sales were 38% for the third quarter and 37% for the nine months ended February 29, 1996. This is down from 46% and 43% for those same periods in the previous year. In the second and third quarters of fiscal 1995, the Company reorganized its US sales force by moving to the use of independent sales representatives and increasing the emphasis on the profitability versus volume of sales in the United States. This reorganization has resulted in a lower volume but more profitable sales in the U.S. market. The decrease in sales was also the result of decreased OEM equipment sales. The Company believes U.S. healthcare reforms have resulted in a reduction in purchases of diagnostic equipment sold. These decreases in sales were slightly offset by increases in international sales. Research, development and engineering expenditures decreased approximately $20,000 for the third quarter and $78,000 for the nine months ended February 29, 1996 compared to the previous year. These decreases are due to decreases in research supplies and personnel expenditures. Sales and marketing expenses decreased $76,000 for the third quarter and $249,000 for the nine months ended February 29, 1996. These decreases are a result of the reorganization of the U.S. sales force to change to sales representatives who are compensated solely through commission on sales versus base salaries and expense paid to employee sales representatives in the previous year. General and administrative costs increased $16,000 in the third quarter and $10,000 for the nine month period ended February 29, 1996. The increase is the result of personnel expenditures which are offset by the decrease in administrative costs relating to OEM equipment sales. LIQUIDITY AND CAPITAL RESOURCES For the nine month period ending February 29, 1996, cash provided by operations totaled $140,000. The net income of $134,000, decrease in inventory of $65,000, and increase in liabilities were offset by an increase in receivables. The Company used cash of $55,000 for payments on the product line purchased in 1994 and for purchases of property and equipment. At February 29, 1996 the Company had working capital of $721,000 including $59,000 in investments. The Company also has a bank line of credit available of $150,000 due October 31, 1996 with interest at 2 percent over prime. The Company used $20,000 for payments against the bank line of credit in the third quarter ended February 29, 1996 to reduce the outstanding borrowings to $0 as of February 29, 1996. Advances are limited to a percentage of receivables and are secured by substantially all the assets of the Company. The line contains certain financial and other covenants which include current ratio and tangible net worth covenants, and prohibit the payment of dividends. Management believes that these sources, along with cash flows from operations will be sufficient to fund operations for the next year. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable. ITEM 2. CHANGES IN SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIOSENSOR CORPORATION /s/ B. Steven Springrose B. Steven Springrose President and Chief Executive Officer Date April 8, 1996