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 August 31, 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
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MINNESOTA 41-1427114
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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 October 10, 1996 is 2,823,055.
BIOSENSOR CORPORATION
CONDENSED BALANCE SHEETS
August 31,
1996 May 31,
(Unaudited) 1996
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 135,098 $ 163,422
Receivables 503,399 605,536
Inventories 380,457 308,376
Prepaid expenses and other 26,895 17,163
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Total Current Assets 1,045,849 1,094,497
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DEPOSITS 8,666 11,204
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PROPERTY AND EQUIPMENT at cost, net 68,290 74,411
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$ 1,122,805 $ 1,180,112
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 166,975 166,058
Accrued expenses
Commissions 21,228 55,280
Compensation 34,895 55,481
Warranty 24,430 30,657
Litigation (Note 3) 325,000 --
Other 24,137 27,348
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Total Current Liabilities 596,665 334,824
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STOCKHOLDERS' EQUITY
Common stock, par value $.05 per share 141,153 140,403
Additional paid-in capital 2,940,447 2,940,447
Accumulated deficit (2,555,460) (2,235,562)
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Total stockholders' equity 526,140 845,288
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$ 1,122,805 $ 1,180,112
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BIOSENSOR CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended August 31 1996 1995
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NET SALES $ 549,666 $ 528,872
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COSTS AND EXPENSES
Cost of products sold 240,843 211,215
Research, development and engineering 60,703 39,597
Sales and marketing 136,701 152,901
General and administrative 106,219 114,265
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544,466 517,978
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Operating income 5,200 10,894
NONOPERATING INCOME (EXPENSE)
Litigation (Note 3) (325,000) --
Interest Income, net 1,136 (656)
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(323,864) (656)
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Income (Loss) before income taxes (318,664) 10,238
Federal and State Income Taxes 1,234 1,689
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Net Income (Loss) $ (319,898) $ 8,549
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ (.11) $ .00
=========== ===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES 2,814,413 2,800,555
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BIOSENSOR CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended August 31, 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(319,898) $ 8,549
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,121 6,175
Loss on sale of property and equipment -- 74
Allowance for doubtful accounts 16,000 --
Changes in assets and liabilities:
(Increase) decrease in:
Receivables 86,137 (15,671)
Inventories (72,081) 24,527
Other assets (7,194) (5,800)
Increase (decrease) in :
Accounts payable 917 (5,627)
Accrued expenses (Note 3) 260,924 363
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Net cash provided by (used in) operations (29,074) 12,590
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CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchase of product line -- (10,000)
Purchase of property and equipment -- (4,620)
Proceeds from sale of property and equipment -- 1,000
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Net cash used in investing activities -- (13,620)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing from note payable to bank -- 55,000
Payments on note payable to bank -- (50,000)
Net proceeds from issuance of common stock 750 --
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Net cash provided by financing activities 750 5,000
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Increase (decrease ) in cash and cash equivalents (28,324) 3,970
CASH AND CASH EQUIVALENTS
Beginning of period 163,422 4,750
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End of period $ 135,098 $ 8,720
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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, 1996.
The results of operations for the three months ended August 31, 1996, are not
necessarily indicative of the operating results for the full year.
NOTE 3. LITIGATION
On September 19, 1996 a jury verdict in the amount of $325,000 was awarded to a
former vendor for its claims that the Company owed additional amounts under a
1988 software license agreement. The Company disputes this claim and has filed
post-trial motions seeking dismissal of the case as a matter of law and a new
trial. The Company expects to receive a judgment from the Court in the second
quarter ended November 30, 1996. The Company is working with counsel to evaluate
its further legal options. The amount of the jury verdict has been accrued at
August 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company's sales were $550,000 for the first quarter ended August 31, 1996
compared to sales of $529,000 for the first quarter ended August 31, 1995. In
those same periods, cost of products sold as a percentage of sales were 44% and
40% respectively. Model mix variations result in quarter to quarter and year to
year variation in cost of products sold as a percentage of sales revenues.
Research, development and engineering expenditures increased approximately
$21,000 for the first quarter of fiscal 1997 compared to the first quarter of
fiscal 1996. The increase is due to increases in personnel expenditures.
Sales and marketing expenses decreased $16,000 for the first quarter of fiscal
1997 compared to the first quarter of 1996. The decrease is as a result of
reductions in personnel expenditures in conjunction with the Company's
implementation of a sales organization using independent representatives.
General and administrative costs in the first quarter of 1997 were comparable
with those in the first quarter of 1996.
On September 19, 1996 a jury verdict in the amount of $325,000 was awarded to a
former vendor for its claims that the Company owed additional amounts under a
1988 software license agreement. The Company disputes this claim and has filed
post-trial motions seeking dismissal of the case as a matter of law and a new
trial. The Company expects to receive a judgment from the Court in the second
quarter ended November 30, 1996. The Company is working with counsel to evaluate
its further legal options. The amount of the jury verdict has been accrued at
August 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations totaled $29,000 caused by the net loss of $319,000
primarily offset by the increase in accrued expenses of $260,000. Cash provided
by financing activities totaled $750 from issuance of common stock.
At August 31, 1996 the Company had working capital of $450,000. Management
believes its current working capital and anticipated cash flows from operations
will be sufficient to fund operating activities for fiscal 1997. The Company had
a line of credit of $150,000 that expired on September 30, 1996. The Company is
currently pursing a line of bank line of credit with a new bank on substantially
the same terms.
Legal proceedings described above may require the Company to pay a judgment
amount specified by the Court, pursue an appeal, or negotiate a settlement with
the plaintiff. If the Company is required to pay an entire judgment amount of
$325,000, capital resources and cash flows from operations may not be sufficient
to pay the judgment amount and/or fund operations. In this event, the Company
may be unable to continue operations, and the Company may be required to seek
legal protection while the dispute is resolved.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 3 to the Financial Statements.
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 October 10, 1996