SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 0-22146
APPLIED BIOMETRICS, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1508112
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 E. Highway 13, Burnsville, MN 55337
(Address of principal executive office and zip code)
Issuer's telephone number, including area code (612) 890-1123
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 reports), and (2) has been
subject to such filing requirements for at least the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 5, 1996, there were outstanding 4,168,987 shares of common stock,
$0.01 par value.
APPLIED BIOMETRICS, INC.
Form 10-QSB Index
June 30, 1996
Part I: Financial Information
Item 1. Financial Statements
Balance Sheets Unaudited at June 30, 1996 and
Audited at December 31, 1995.............................. 3
Unaudited Statements of Operations for the
Three Month and Six Month Periods ended June 30, 1996
and 1995.................................................. 4
Audited Statements of Shareholder's Equity for the year
ended December 31, 1995 and unaudited for the Six
Month Period ended June 30, 1996.......................... 5
Unaudited Statements of Cash Flows for the
Six Month Periods Ended June 30, 1996 and
1995...................................................... 6
Notes to Unaudited Financial Statements................... 7
Item 2. Management's Discussion and Analysis or Plan
of Operation.............................................. 8
Part II: Other Information......................................... 10
Item 1. Legal Proceedings......................................... 10
Item 2. Changes in Securities..................................... 10
Item 3. Defaults Upon Senior Securities........................... 10
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 10
Item 5. Other Information......................................... 11
Item 6. Exhibits and Reports of Form 8-K.......................... 11
Signatures........................................................... 11
Part 1: Financial Information
Item 1. Financial Statements
APPLIED BIOMETRICS, INC.
Balance Sheets
June 30,
1996 December 31,
(Unaudited) 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 3,077,357 $ 457,322
Short-term investments 4,443,872 1,753,265
Accounts receivable 26,350 --
Inventory 174,857 --
Prepaid expenses and other current assets 74,738 46,583
------------ ------------
TOTAL CURRENT ASSETS 7,797,174 2,257,170
Property and equipment, net 314,946 246,755
Patents and trademarks, less accumulated
amortization of $ 44,684 and $ 40,093 respectively 123,975 128,566
------------ ------------
TOTAL ASSETS $ 8,236,095 $ 2,632,491
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 129,960 $ 125,797
Accrued expenses and other liabilities 56,441 59,192
------------ ------------
TOTAL CURRENT LIABILITIES 186,401 184,989
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares
authorized: 4,168,987 shares outstanding at
June 30, 1996 and 2,943,410 shares outstanding
at December 31, 1995 41,690 29,434
Additional paid-in capital 19,703,468 13,507,155
Accumulated deficit (11,695,464) (11,089,087)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 8,049,694 2,477,502
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,236,095 $ 2,632,491
============ ============
APPLIED BIOMETRICS, INC.
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ---------- ----------
Net sales $ 26,350 -- $ 43,725 $ --
Cost of sales 12,000 -- 21,875 $ --
----------- ----------- ---------- ----------
GROSS PROFIT 14,350 -- 21,850 $ --
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Research and Development 167,172 178,335 329,740 346,748
Sales and Marketing 72,801 75,271 147,604 149,324
General and Administrative 158,236 113,760 283,545 226,738
----------- ----------- ---------- ----------
Total Operating Expenses 398,209 367,366 760,889 722,810
----------- ----------- ---------- ----------
OPERATING LOSS (383,859) (367,366) (739,039) (722,810)
Interest income 86,806 22,088 132,662 42,479
----------- ----------- ----------- ----------
NET LOSS $ (297,053) $ (345,278) $ (606,377) $ (680,331)
=========== =========== =========== ==========
LOSS PER COMMON SHARE ($0.07) ($0.12) (0.17) (0.24)
=========== =========== =========== ==========
Weighted average common shares
outstanding 4,017,096 2,886,450 3,662,782 2,885,767
=========== =========== =========== ==========
APPLIED BIOMETRICS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
Additional
Common Stock Paid -in Accumulated
Shares Amount Capital Deficit Total
------------------- ---------- ----------- -----
December 31, 1994 2,885,076 $28,851 $13,332,736 $ (9,801,029) 3,560,558
Stock options exercised 58,334 583 174,419 175,002
Net loss (1,288,058) (1,288,058)
--------- ------- ----------- ------------- -----------
December 31, 1995 2,943,410 29,434 13,507,155 (11,089,087) 2,447,502
Private Placement net
of offering expenses of $587,133 860,000 8,600 4,564,267 4,572,867
Exercise of options and
warrants 365,577 3,656 1,632,046 1,635,702
Net loss (606,377) (606,377)
--------- ------- ----------- ------------- -----------
June 30, 1996 4,168,987 41,690 $19,703,468 $($11,695,464) $ 8,049,694
========= ====== =========== ============== ===========
APPLIED BIOMETRICS, INC.
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, June 30,
1996 1995
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (606,377) $ (680,331)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 44,197 32,743
Cash flows provided by (used for) changes in:
Accounts receivables (26,350) --
Inventory (174,857) --
Prepaid expenses and other assets 28,155 (14,800)
Accounts payable 4,163 (25,577)
Accrued expenses (2,751) (17,291)
----------- ---------
Net cash flows used by operating
activities (790,130) (675,656)
Cash flows from investing activities:
Sales and maturities of short-term
investment 1,769,519 1,924,518
Purchases of short-term investment (4,460,126) (902,567)
Purchase of property and equipment (107,797) (19,981)
----------- ---------
Net cash used in investing activities 2,798,404 1,001,970
----------- ---------
Cash flows from financing activities:
Net proceeds from private placement
of common stock 4,572,867 --
Proceeds from exercise of stock options
and warrants 1,635,702 125,001
----------- ---------
Net cash flows from financing activities 6,208,569 125,001
----------- ---------
Net (decrease) increase in cash and cash equivalents 2,620,035 451,315
CASH AND CASH EQUIVALENTS:
Beginning of period 457,322 386,349
----------- -----------
End of period $ 3,077,357 $ 837,664
=========== ===========
APPLIED BIOMETRICS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1. Unaudited Interim Results
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
Operating results for the three and six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year 1996.
These statements should be read in conjunction with the audited financial
statements and related notes for the year ended December 31, 1995 included in
the Company's Form 10-KSB for the year ended December 31, 1995.
Note 2.
In February of 1996, the Company sold 860,000 shares of common stock in a
private placement at $6.00 per share. Net proceeds to the Company, after selling
agent expenses and other offering expenses of $587,133 were $4,572,867. In
connection with this private placement, the Company issued warrants to purchase
86,000 common shares. These warrants are excercisable at $6.00 per share and
expire in 2003.
During the first six months of 1996, options and warrants to purchase 365,577
shares of common stock were exercised. Proceeds to the Company were $1,635,702.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
OVERVIEW
Since its inception in 1984, the Company has been involved in the development of
cardiac output monitoring products. Prior to 1992, the Company focused its
resources on the development and commercialization of the TTD device. The TTD
device is an endotracheal tube with an ultrasound transducer which determines
cardiac output by measuring blood flow through the ascending aorta. That device
was introduced in 1989 and, due to technical difficulties, the Company
discontinued active marketing of the TTD device in 1991. At that time, the
Company began to substantially downsize its operations and redirected its
business focus to the development of the EVD probe. The EVD probe is attached by
a surgeon directly to the ascending aorta or the pulmonary artery to measure
cardiac output.
The Company is now primarily engaged in the development of the EVD probe, which
uses the same Doppler ultrasound technology to measure cardiac output as the TTD
device. The development of the EVD probe is substantially completed and the
Company commenced limited shipments of its cardiac output monitoring system in
the first half of 1996. The Company has been unprofitable since inception; in
order to commercialize its products it will be required to make significant
expenditures for research, development, marketing, sales and manufacturing and
expects to incur additional operating losses for at least the next 12 months.
RESULTS OF OPERATIONS
For the three months and six months ended June 30, 1996 and 1995:
The Company began limited shipment of the EVD probe and the ABCOM 2000 monitor
in the first and second quarter of 1996. These shipments were made to a small
group of pediatric hospitals and a European distributor. The Company expects to
expand its shipments in the second half of 1996 as it completes the EVD
development and expands its manufacturing capability. The Company did not
actively market any products in 1995.
For the three months and six months ended June 30, 1996, Research and
Development expenses decreased $11,163 and $17,008, respectively over the same
periods in 1995. This decrease is the result of the Company beginning to
inventory its purchased parts in 1996 as it completes the EVD development. Prior
to 1996, all purchased parts were expensed as part of the EVD development costs.
The Company expects Research and Development to increase in the future as it
commences redevelopment of the TTD device.
For the three months and six months ended June 30, 1996, Sales and Marketing
expenses decreased slightly compared to the same periods in 1995. Overall Sales
and Marketing expenses are expected to increase in the second half of 1996 as
the Company expands the rollout of the EVD probe.
For the three months and six months ended June 30, 1996, General and
Administrative expenses increased $44,476 and $56,807, respectively over the
same time period in 1995. This increase in expenses is the result of increased
personnel cost and other administrative expenses.
For the three and six months ended June 30, 1996 interest income increased
$64,718 and $90,183, respectively over the same periods in 1995. This increase
is the result of more funds available for investment. These additional funds
resulted from the private placement of common stock in February 1996 and the
exercise of options and warrants during the first half of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Prior to 1993, the Company funded its operations through the sale of private
securities and notes from certain shareholders. In July , 1993, the Company
completed an initial public offering and raised $5,137,648 in net proceeds.
In February 1996, the Company sold 860,000 shares of common stock at $6.00 per
share in a private placement. Net proceeds to the Company after offering
expenses of $587,133 were $4,572,867.
During the first six months of 1996, options and warrants to purchase 365,577
shares of common stock were exercised. Proceeds to the Company were $1,635,702.
Cash and short-term investments were $7,521,229 at June 30, 1996 and working
capital was $7,610,773.
Although there can be no assurance, the Company believes that the remaining
proceeds from the initial public offering, proceeds from the February 1996
private placement and funds generated from operations will enable the Company to
meet its liquidity and capital needs for at least the next 12 months.
FORWARD LOOKING STATEMENTS
Information included in this Form 10-QSB which can be identified by use of
forward-looking terminology such as "may", "will", "expect", "plan", "intend",
"anticipate", "estimate", "believe", or "continue" or the negative thereof or
other variations thereon or comparable terminology constitutes forward-looking
information within the meaning of the Private Securities Litigation Reform Act
of 1995. The factors set forth below constitute cautionary statements
identifying important factors that could cause actual results to differ
materially from those in such forward-looking statements: (i) the Company's
limited product revenues, history of losses and uncertainty of future results;
(ii) the uncertainty of the market acceptance of the Company's products; (iii)
the Company has limited manufacturing experience and has not yet manufactured
the EVD probe in commercial quantities; and (iv) the Company has limited
experience marketing its products on a commercial basis.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Change in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
On May 15, 1996, Applied Biometrics, Inc. held its annual shareholders
meeting. There were 3,880,970 shares of common stock eligible to vote.
(1) The votes cast for the five directors to serve until the next
annual meeting or until their successors are elected and qualify were:
FOR WITHHELD
Joseph A. Marino 3,230,185 -
Peter R. Peterson 3,230,185 -
George E. Kline 3,230,185 -
William E. Engbers 3,230,185 -
Patrick Delaney 3,230,185 -
(2) The votes cast to ratify and approve the Applied Biometrics, Inc.
1996 Stock Plan were: FOR: 2,346,046 AGAINST: 257,605 ABSTAIN: 11,957
(3) The votes cast to ratify and approve the appointment of Price
Waterhouse as independent public accountants for the Company for the
year ended December 31, 1996 were:
FOR 3,225,785 AGAINST 1,000 ABSTAIN 3,400
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Applied Biometrics, Inc.
Registrant
/s/ Joseph A. Marino
-------------------------------------
Joseph A. Marino
President and
Chief Executive Officer
Date: August 5, 1995
/s/ Gerald J. Prescott
-------------------------------------
Gerald J. Prescott
Vice President and
Chief Financial Officer