-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EwraDlqU6gY7POW8z0hIliWYJpdMW8rTO2I9HMcDq8Fv2n5AbKwu2QyZHuV3tIT5 tS4yMXyR6zDnldZNrTyJCg== 0000950131-97-002929.txt : 19970501 0000950131-97-002929.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950131-97-002929 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTICAL SENSORS INC CENTRAL INDEX KEY: 0000907658 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411643592 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27600 FILM NUMBER: 97590947 BUSINESS ADDRESS: STREET 1: 7615 GOLDEN TRIANGLE DRIVE STREET 2: STE A CITY: EDEN PRARIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6179445857 MAIL ADDRESS: STREET 1: 7615 GOLDEN TRIANGLE DR STE A CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 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: 0-27600 OPTICAL SENSORS INCORPORATED (Exact name of registrant as specified in its charter) Delaware 41-1643592 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7615 Golden Triangle Drive, Suite A, Minneapolis, Minnesota 55344-3733 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (612) 944-5857 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 requirements for the past 90 days. [X] Yes [ ] No As of April 28, 1997, the Registrant had 8,369,279 shares of Common Stock outstanding. Index OPTICAL SENSORS INCORPORATED Part I. Financial Information Item 1. Financial Statements (Unaudited) Balance Sheets - March 31, 1997 and December 31, 1996 Statements of Operations - Quarters ended March 31, 1997 and March 31, 1996 Statements of Cash Flows - Quarters ended March 31, 1997 and March 31, 1996 Notes to Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 1 Optical Sensors Incorporated (A Development Stage Company) Balance Sheets
March 31, 1997 December 31, 1996 ------------------------------------ (Unaudited) (Note) Assets Current assets: Cash and cash equivalents $ 26,278,686 $ 30,134,800 Accounts receivable 71,193 91,040 Inventory 1,037,579 931,917 Prepaid expenses and other current assets 436,608 200,731 ------------------------------------ Total current assets 27,824,066 31,358,488 Property and equipment: Research and development equipment 340,131 292,488 Leasehold improvements 201,200 199,211 Furniture and equipment 96,192 77,895 Marketing equipment 767,863 344,448 Production equipment 188,229 167,635 ------------------------------------ 1,593,615 1,081,677 Less accumulated depreciation (578,846) (488,043) ------------------------------------ 1,014,769 593,634 Other assets: Patents 359,354 328,630 Other assets 82,393 88,445 ------------------------------------ 441,747 417,075 ------------------------------------ Total assets $ 29,280,582 $ 32,369,197 ==================================== Liabilities and shareholders equity Current liabilities: Accounts payable $ 503,513 $ 740,804 Employee compensation 320,722 577,228 Other liabilities and accrued expenses 1,703 1,541 ------------------------------------ Total current liabilities 825,938 1,319,573 Commitments Shareholders equity Convertible Preferred Stock, par value $.01 per share: Authorized shares--5,000,000 Issued and outstanding shares 1997--0 and 1996--0 --- --- Common Stock, par value $.01 per share: Authorized shares--30,000,000 Issued and outstanding shares 1997--8,369,279 and 1996--8,341,497 83,693 83,415 Additional paid-in capital 66,998,478 66,974,345 Deficit accumulated during the development stage (37,916,247) (35,215,362) Deferred compensation (466,280) (547,774) Note receivable from officer (245,000) (245,000) ------------------------------------ Total shareholders equity 28,454,644 31,049,624 ------------------------------------ Total liabilities and shareholders equity $ 29,280,582 $ 32,369,197 ====================================
Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 2 Optical Sensors Incorporated (A Development Stage Company) Statements of Operations (Unaudited)
Cumulative May 23, 1989 Three Months Ended (inception) to March 31, March 31, March 31, 1997 1996 1997 -------------------------------------------- Net Sales $ 52,770 $ 14,905 $ 215,838 Cost of goods sold 434,533 321,714 1,803,754 -------------------------------------------- Gross Margin (381,763) (306,809) (1,587,916) Operating Expenses: Research and development expenses 1,216,911 1,265,783 26,239,777 Selling, general and administrative expenses 1,472,690 688,597 12,493,649 -------------------------------------------- Operating loss (3,071,364) (2,261,189) (40,321,342) Interest expense --- --- (141,385) Interest income 370,479 194,495 2,546,480 -------------------------------------------- Net loss $(2,700,885) $(2,066,694) $(37,916,247) ============================================ Net loss per common share $(.32) $(.53) =========================== Shares used in calculation of net loss per share 8,348,368 3,915,594 ===========================
See accompanying notes. 3 Optical Sensors Incorporated (A Development Stage Company) Statements of Cash Flows (Unaudited)
Cumulative May 23, 1989 Three Months Ended (inception) to March 31, March 31, March 31, 1997 1996 1997 -------------------------------------------- Operating activities Net loss Adjustments to reconcile net loss to net cash used in $(2,700,885) $(2,066,694) $(37,916,247) operating activities: Loss on write-off of research and development equipment 133,919 Loss on write-off of prepaid royalties 135,201 Depreciation and amortization 93,644 24,663 728,548 Amortization of deferred loss on sale leaseback 11,196 Deferred compensation amortization 81,494 155,863 1,713,413 License fee financed with long-term debt 193,700 Issuance of Common Stock for services 37,091 Issuance of Common Stock in lieu of interest payments on 35,412 notes payable Issuance of warrants in connection with debt and lease 4,525 3,016 68,622 financings Issuance of options in connection with consulting services 55,690 Changes in operating assets and liabilities: Receivables 19,847 (15,329) (71,193) Inventories (105,662) (196,484) (1,037,579) Prepaid expenses and other assets (263,389) 309,379 (880,783) Accounts payable and accrued expenses (493,635) 228,533 825,938 -------------------------------------------- Net cash used in operating activities (3,364,061) (1,557,053) (35,967,072) Investing activities Proceeds from disposal of equipment 46,947 Purchases of property and equipment (511,938) (995) (2,216,467) -------------------------------------------- Net cash used in investing activities (511,938) (995) (2,169,520) Financing activities Proceeds from sale leaseback 283,030 Net proceeds from issuance of Common Stock 19,885 33,953,315 35,064,561 Net proceeds from issuance of Preferred Stock 27,290,155 Reimbursement to founder and shareholder (3,500) Payments on long-term debt (1,396,894) Proceeds from notes payable 3,177,926 -------------------------------------------- Net cash provided by financing activities 19,885 33,953,315 64,415,278 -------------------------------------------- Increase (decrease) in cash and cash equivalents (3,856,114) 32,395,267 26,278,686 Cash and cash equivalents at beginning of period 30,134,800 5,394,721 --- -------------------------------------------- Cash and cash equivalents at end of period $26,278,686 $37,789,988 $ 26,278,686 ============================================
See accompanying notes. 4 Optical Sensors Incorporated (A Development Stage Company) Notes to Financial Statements (Unaudited) March 31, 1997 Note A - Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of 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 month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Optical Sensors Incorporated 1996 Annual Report to Shareholders incorporated by reference into the Annual Report on Form 10-K for the year ended December 31, 1996. Note B - Net Loss Per Share Net loss per share is computed using the weighted average number of common shares outstanding during the period. Common equivalent shares from stock options and warrants are excluded from the computation as their effect is antidilutive. In February 1997, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 128, "Earnings Per Share." This Statement replaces the presentation of primary earnings per share (EPS) with basic EPS and also requires dual presentation of basic and diluted EPS for entities with complex capital structures. This Statement is effective for the fiscal year ended December 31, 1997. For the quarter ended March 31, 1997, there is no difference between basic earnings per share under Statement No. 128 and primary net loss per share as reported. 5 Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Optical Sensors Incorporated (the "Company") has developed the SensiCath system, a patient-attached, on-demand arterial blood gas ("ABG") monitoring system, which provides precise and accurate ABG results within 60 seconds without exposure to potentially infectious blood or depleting the patient's blood supply (the "SensiCath System"). The SensiCath System utilizes a disposable, fiberoptic sensor device ("the SensiCath Sensor") connected to a small modular instrument that can be configured to integrate with bedside monitoring systems or to serve as a stand-alone monitor. The SensiCath System is currently available in two configurations. The first configuration of the SensiCath System combines the SensiCath Sensor with a module (the "OnlineABG Module") that plugs into bedside monitors manufactured by Marquette Medical Systems, Inc. ("Marquette"). The second configuration of the SensiCath System consists of the SensiCath Sensor, the OnlineABG Module and the Company's OpticalCAM ABG monitor ("the OpticalCAM/TM/") that can be used as a stand-alone monitoring device or can interface with bedside monitors supplied by other manufacturers of patient monitoring equipment. Currently, the OpticalCAM is able to interface with patient monitoring systems sold by the Hewlett-Packard Company and SpaceLabs Medical, Inc. The two configurations of the SensiCath System give the Company access to over 80 percent of the monitored critical care beds in the United States. The Company completed product development of the initial configuration of the SensiCath System in June 1995 and received 510(k) clearance to market the SensiCath System from the FDA in January 1996. The Company completed development of the OpticalCAM in September 1996 and received 510(k) clearance to market the OpticalCAM from the FDA in January 1997. In April 1997, the Company received 510(k) clearance to market from the FDA for the expanded use of the SensiCath Sensor from 72 to 144 hours and from 100 to 200 ABG measurements. The extended use of the SensiCath Sensor enables the Company's customers the ability to realize additional cost savings for their high acuity patients. 6 Results of Operations Net sales in the first quarter of 1997 increased $37,865 from $14,905 in the first quarter in 1996. Approximately 50% of the sales for the quarter were to hospitals in the United States. The remainder were to U.S. and European distributors and monitoring companies for demonstration and evaluation purposes. First quarter sales for 1996 were all to monitoring companies for demonstration and evaluation purposes. Costs of products sold in the first quarter of 1997 increased $112,819 or 35% from the first quarter in 1996. The major component of cost of products sold for both quarters is manufacturing infrastructure costs necessary for anticipated future sales levels. The Company has the capacity to increase production levels to approximately 50,000 sensors per year without materially increasing manufacturing infrastructure costs. Accordingly, the Company expects an improving relationship between sales and cost of product sold once sales volumes begin to increase. Research and development costs in the first quarter of 1997 decreased $48,872 or 4% from the first quarter of 1996. Research and development expenses in the first quarter of 1996 included a payment of $50,000 under an agreement with Marquette Medical Systems, Inc. entered into in September 1995 pursuant to which the Company acquired ownership of the technology used in the SensiCath System. No payments were made under this agreement in the first quarter of 1997. Total payments in 1995 and 1996 to Marquette were $553,250 and $759,750, respectively. The Company is obligated to make two additional payments of $500,000 each subject to Marquette selling certain minimum quantities of OnlineABG Modules. The Company currently expects to make these payments to Marquette in 1997. The Company's research and development activities during 1996 focused on development of the OpticalCAM (which was released for commercial sale in the first quarter of 1997), a further miniaturized sensor and new sensors to measure additional blood analytes. Both the first quarter of 1996 and 1997 contained outside development expenditures for the OpticalCAM of approximately $200,000. The Company's planned development activities for the remainder of 1997 include those initiated in 1996, as well as several product cost reduction projects. Excluding anticipated payments to Marquette, the Company expects that the level of research and development expenses during the remainder of 1997 will be comparable to the first quarter of 1997. Selling, general and administrative expenses in the first quarter of 1997 increased $784,093 or 114% from the first quarter of 1996. The increase is attributable primarily to organizational expansion of sales and marketing, product positioning and initial product launch activities in the latter half of 1996. During late 1996, the Company completed the initial hiring of its sales and marketing staff to support product positioning and initial product launch activities. Salaries and benefits for the expanded sales and marketing staff and travel expenses related to sales and marketing activities accounted for a significant portion of the increase in selling, general and administrative expenses in the first quarter of 1997 compared to the first quarter of 1996. Administrative expenses also increased primarily due to the higher level of activity associated 7 with initial commercialization of the Company's products and additional costs associated with being a public company. The Company expects to operate through the balance of 1997 without materially increasing its selling, general and administrative expenses from the current level. Interest income in the first quarter of 1997 increased $175,984 from the first quarter of 1996, due to interest earned on the proceeds from the Company's initial public offering, which was completed in the first quarter of 1996. Since its inception, the Company has experienced significant operating losses. The Company incurred a net loss of $2,700,885 for the quarter ended March 31, 1997, compared to a net loss of $2,066,694 for the quarter ended March 31, 1996, and as of March 31, 1997, the Company had an accumulated deficit of $37,916,247. The increase in the net loss was primarily due to the increase in operating expenses described above. The Company anticipates that its operating losses will continue for the foreseeable future because it plans to expend substantial resources in funding sales and marketing activities, commercial manufacturing, and research and development. Except for historical information contained herein, the disclosures in this report are forward looking statements which could be affected by certain risks and uncertainties, including: market acceptance of the SensiCath System; timely installation of the SensiCath System at hospitals with Marquette patient monitoring systems; increasing sales to Marquette's installed base of Tramscope and Solar patient monitoring systems; actions taken and alternative products introduced or marketed by the Company's competitors; actions related to future regulatory matters; and continued supply of instrumentation and other key components for which the Company relies on sole suppliers. These risks are described in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Liquidity and Capital Resources In the first quarter of 1996, the Company completed an initial public offering of 2,875,000 shares of Common Stock. The net proceeds to the Company from the public offering were approximately $33,916,000. The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "OPSI." The Company's cash and cash equivalents were $26,278,686 and $30,134,800 at March 31, 1997 and December 31, 1996, respectively. The Company incurred cash expenditures for the quarter ended March 31, 1997 of $3,364,061 for operations and $511,938 for capital expenditures. The capital equipment expenditures were principally for the acquisition of OpticalCAM monitors and OnlineABG Modules for demonstration purposes to support commercial launch of the Company's products. As of March 31, 1997 the Company had no material commitments outstanding for tooling and equipment. 8 The Company continued to increase its inventory during the first quarter of 1997 to support future product sales. The amount of the increase, however, was not as significant as the increase in inventory in late 1996. A substantial portion of the inventory level at March 31, 1997 consisted of key components and OnlineABG Modules for which the Company relies on sole suppliers. In addition, as of March 31, 1997, the Company had commitments outstanding for approximately $2,100,000 to purchase OpticalCAM monitors and OnlineABG Modules for resale purposes. SensiCath(R) and OpticalCAM/TM/ are trademarks of the Company. OnlineABG/TM/, Tramscope(R) and Solar/TM/ are trademarks of Marquette Medical Systems, Inc. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) The following exhibit is included herein: (11) Statement Re: Computation of Per Share Loss (27) Financial Data Schedule (b) Reports on Form 8-K None 9 Signatures Pursuant to 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. OPTICAL SENSORS INCORPORATED Date April 30, 1997 ---------------------------------------------- Sam B. Humphries President and Chief Executive Officer (Principal Executive Officer) Date April 30, 1997 ---------------------------------------------- Wesley G. Peterson Chief Financial Officer, Vice President of Finance and Administration and Secretary (Principal Financial and Accounting Officer) 10 EX-11 2 COMPUTATION OF PER SHARE LOSS Optical Sensors Incorporated Exhibit 11 - Statement Re: Computation of Per Share Loss
Three Months Ended March 31, March 31, Primary and Fully Diluted: 1997 1996 --------------------------- Weighted average shares outstanding 8,348,368 3,915,594 --------------------------- Total 8,348,368 3,915,594 =========================== Net loss $(2,700,885) $(2,066,694) =========================== Per share amount $ (.32) $ (.53) ===========================
EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 395,660 25,883,026 71,193 0 1,037,579 27,824,066 1,593,615 578,846 29,280,582 825,938 0 0 0 83,693 28,370,951 29,280,582 52,770 52,770 434,533 434,533 2,689,601 0 0 (2,700,885) 0 0 0 0 0 (2,700,885) (.32) 0
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