-----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, WudiByFNPPXiIjTF+/IUiTNWFO6+f8M0X3Alk4v/K99+J86c3K/9KDmSdWohsn/s 14P7v6s2Q5BviQzuMBAhdA== 0000950131-96-001804.txt : 19960701 0000950131-96-001804.hdr.sgml : 19960701 ACCESSION NUMBER: 0000950131-96-001804 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTICAL SENSORS INC CENTRAL INDEX KEY: 0000907658 STANDARD INDUSTRIAL CLASSIFICATION: 3841 IRS NUMBER: 411643592 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27600 FILM NUMBER: 96553856 BUSINESS ADDRESS: STREET 1: 7615 GOLDEN TRIANGLE DRIVE STREET 2: STE A CITY: EDEN PRARIE STATE: MN ZIP: 55344 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, 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: 0-27600 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. [ ] Yes [X] No AS OF APRIL 30, 1996, THE REGISTRANT HAD 8,253,699 SHARES OF COMMON STOCK OUTSTANDING. INDEX OPTICAL SENSORS INCORPORATED PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Balance Sheets - March 31, 1996 and December 31, 1995 Statements of Operations - Quarters ended March 31, 1996 and March 31, 1995 Statements of Cash Flows - Quarters ended March 31, 1996 and March 31, 1995 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, DECEMBER 31, 1996 1995 -------------------------------- (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 37,789,989 $ 5,394,721 Prepaid expenses and other current assets 307,329 436,503 -------------------------------- Total current assets 38,097,318 5,831,224 Property and equipment: Research and development equipment 252,369 375,124 Manufacturing equipment 123,750 -- Leasehold improvements 174,673 174,673 Furniture and equipment 35,796 35,796 -------------------------------- 586,588 585,593 Less accumulated depreciation (392,751) (373,237) -------------------------------- 193,837 212,356 Other assets: Patents 259,806 230,549 Other assets 90,204 93,002 -------------------------------- 350,010 323,551 -------------------------------- Total assets $ 38,641,165 $ 6,367,131 ================================ LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable $ 541,448 $ 116,609 Employee compensation 273,640 468,952 Other liabilities and accrued expenses 2,759 3,753 -------------------------------- Total current liabilities 817,847 589,314 Commitments SHAREHOLDERS EQUITY Convertible Preferred Stock, Series A through E, par value $.01 per share: Authorized shares--4,250,938 Issued and outstanding shares 1996--0 and 1995--4,213,069 -- 42,131 Common Stock, par value $.01 per share: Authorized shares--30,000,000 Issued and outstanding shares 1996-- 8,253,699 and 1995--610,443 82,537 6,105 Additional paid-in capital 66,901,972 32,975,897 Deficit accumulated during the development stage (27,900,827) (25,830,090) Deferred compensation (1,015,364) (1,171,226) Note receivable from officer (245,000) (245,000) -------------------------------- Total shareholders equity 37,823,318 5,777,817 -------------------------------- Total liabilities and shareholders equity $ 38,641,165 $ 6,367,131 ================================
Note: The balance sheet at December 31, 1995 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, 1996 1995 1996 ------------------------------------------ Net Sales $ 14,905 $ --- $ 14,905 Costs and expenses: Cost of product sold and manufacturing development cost 321,714 --- 321,714 Research and development 1,265,783 1,273,881 20,656,191 Selling, general and administrative expenses 688,597 376,133 7,607,409 ------------------------------------------ Operating loss (2,261,189) (1,650,014) (28,570,409) Interest expense --- (3,080) (141,385) Interest income 194,495 25,150 815,010 ------------------------------------------ Net loss $(2,066,694) $(1,627,944) $(27,896,784) ========================================== Net loss per common share $(.53) $(.54) ========================= Shares used in calculation of net loss per share 3,915,594 2,987,067 =========================
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, 1996 1995 1996 ------------------------------------------ OPERATING ACTIVITIES Net loss $(2,066,694) $(1,627,944) $(27,896,784) Adjustments to reconcile net loss to net cash used in 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 24,663 26,394 535,115 Amortization of deferred loss on sale leaseback 11,196 Deferred compensation amortization 155,863 --- 1,164,330 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 notes payable 35,412 Issuance of warrants in connection with debt and lease financings 3,016 --- 49,014 Issuance of options in connection with consulting services --- 3,500 55,690 Changes in operating assets and liabilities: Prepaid expenses and other assets 97,566 (46,182) (652,430) Accounts payable and accrued expenses 228,533 (67,596) 817,847 ------------------------------------------ Net cash used in operating activities (1,557,053) (1,711,828) (25,380,699) INVESTING ACTIVITIES Proceeds from disposal of equipment 46,947 Purchases of property and equipment (995) (2,368) (1,209,440) ------------------------------------------ Net cash used in investing activities (995) (2,368) (1,162,493) FINANCING ACTIVITIES Proceds from sale leaseback 283,030 Net proceeds from issuance of Common Stock 33,953,315 --- 34,982,463 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 --- 85,776 3,177,926 ------------------------------------------ Net cash provided by financing activities 33,953,315 85,776 64,333,180 ------------------------------------------ Increase (decrease) in cash and cash equivalents 32,395,267 (1,628,420) 37,789,988 Cash and cash equivalents at beginning of period 5,394,721 2,851,095 --- ------------------------------------------ Cash and cash equivalents at end of period $37,789,988 $ 1,222,675 $ 37,789,988 ==========================================
See accompanying notes. 4 Optical Sensors Incorporated (A Development Stage Company) Notes to Financial Statements (Unaudited) March 31, 1996 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, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Optical Sensors Incorporated Prospectus dated February 14, 1996. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Optical Sensors Incorporated (the Company) is a development stage enterprise. Since its inception in 1989, the Company has been engaged in the design, development, pre-commercial manufacturing and testing of point-of-care arterial blood gas (ABG) monitoring systems. In late 1993, in conjunction with Marquette Electronics, Inc. (MEI), the Company began developing a prototype, solid-state, modular system that would plug into MEI's commercially available bedside monitor. MEI began developing this module, designated "OnlineABG Module", while the Company began developing a disposable sensor assembly, designated the "SensiCath Sensor". The module and the sensor together comprise the "SensiCath System". In early 1994, the Company began developing the current version of the SensiCath System, based on a module that would use one of four slots in Marquette's bedside monitor. The Company completed product development activities in June 1995 and received 510(k) clearance to market the SensiCath System from the FDA in January 1996. In April 1996, MEI completed development of the ABG Module and released the module from its research and development department to manufacturing for commercial production and sale. Both the OnlineABG Module and the Sensicath Sensor are now available for commercial sale. In September 1995, the Company entered into an agreement with MEI which gave the Company control and sole ownership of all the technology incorporated in the SensiCath System, subject to certain rights retained by MEI to use the technology that it developed in non-competing products it manufactures. The Company was required to pay MEI a total of up to $2,000,000, of which $500,000 was paid in 1995. An additional $500,000 is payable upon completion of documenting manufacturing integration and transfer of the technology developed by MEI to the Company. This documentation and transfer is expected to occur in the second quarter of 1996. The balance of $1,000,000 is payable in two installments of $500,000 each conditioned upon MEI selling certain minimum quantities of OnlineABG Modules. In addition, the Company paid MEI $300,000 for engineering support, $250,000 in 1995 and $50,000 in January 1996. All payments made or to be made under this agreement have or will be recorded as research and development expenses. Since inception, the Company has experienced significant operating losses, and, as of March 31, 1996, had an accumulated deficit of $27.9 million. To date, the Company has had only nominal revenues. The Company expects MEI to begin receiving orders for the OnlineABG Module in May 1996, which the Company expects to lead to sales of the SensiCath Sensor. The Company plans to exhibit the SensiCath System at a number of medical conferences in the next few months, at which abstracts are expected to be presented and subsequent journal articles are expected to be published. 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. The Company expects that research and development expenses will remain at relatively high levels for the foreseeable future due to scheduled payments of $1,500,000 to MEI, which are expected to be made in 1996, planned development of new products and alternative cost saving configurations of its existing product. The foregoing forward looking statements could be affected by certain risks and uncertainties, including: market acceptance of the SensiCath System; the ability of the Company and MEI to effectively ramp-up 6 commercial production of the SensiCath Sensor and the OnlineABG Module, respectively; successful development and introduction of new configurations of the SensiCath System or other products; actions relating to regulatory matters and health care cost reimbursement; and results of additional clinical marketing studies. RESULTS OF OPERATIONS The Company had no sales in 1995, and net sales in the first quarter of 1996 consisted primarily of demonstration units of the SensiCath Sensor sold to MEI. The demonstration units were for use by MEI in promotion of its OnlineABG Module. Costs of products sold in the first quarter of 1996 consisted of costs related to the establishment of commercial manufacturing operations. Beginning in the first quarter of 1996, a significant portion of expenses related to establishing commercial manufacturing that had been recorded as research and development expenses in prior periods because the Company had no sales, were recorded as cost of sales. A total of $233,640 of expenses incurred in the first quarter of 1995 which were recorded as research and development expenses would have been recorded as cost of sales had the Company had sales in that period. Research and development costs in the first quarter of 1996 increased $225,542 or 22% from the first quarter of 1995, after adjusting for reclassifications to cost of products sold as described above. The increase is attributable primarily to development expenses incurred for the Company's planned stand-alone ABG monitoring system. Selling, general and administrative expenses in the first quarter of 1996 increased $312,464 or 83% from the first quarter of 1995. Approximately $156,000 of the increase is attributable to amortization of deferred compensation expense for options granted in 1995. The remaining increase is attributable primarily to organizational expansion of sales and marketing, product positioning and market research activities. Interest income in the first quarter of 1996 increased $169,345 from the first quarter of 1995, due to interest earned on the proceeds from the Company's initial public offering, which was completed in the first quarter of 1996. 7 LIQUIDITY AND CAPITAL RESOURCES In February 1996, the Company completed an initial public offering of 2,500,000 shares of common stock. In March 1996, the underwriter exercised its overallotment option to purchase an additional 375,000 shares of common stock. The net proceeds to the Company from the public offering was approximately $33,953,000. The Company's common stock is quoted on NASDAQ under the symbol "OPSI". The Company's cash and cash equivalents were $37,789,989 and $5,394,721 at March 31, 1996 and December 31, 1995, respectively. The company incurred cash expenditures of $1,557,053 for operations and $995 for equipment for the quarter ended March 31, 1996. As of March 31, 1996, the Company did not have any commitments for material capital equipment acquisitions, although the Company does anticipate making capital equipment acquisitions of approximately $1.0 million in 1996, primarily for commercial manufacturing of the Company's products. With the proceeds of the initial public offering, the Company believes that sufficient liquidity is available to satisfy its working capital needs at least through 1997. 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 (b) Reports on Form 8-K None 8 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, 1996 /s/ Sam B. Humphries --------------------------------------------- Sam B. Humphries President and Chief Executive Officer (Principal Executive Officer) Date April 30, 1996 /s/ Wesley G. Peterson --------------------------------------------- Wesley G. Peterson Chief Financial Officer, Vice President of Finance and Administration and Secretary (Principal Financial and Accounting Officer) 9 EX-11 2 STATEMENT RE:COMP. OF PER SHARE LOSS Optical Sensors Incorporated Exhibit 11 - Statement Re: Computation of Per Share Loss
THREE MONTHS ENDED MARCH 31, March 31, PRIMARY: 1996 1995 ------------------------- Weighted average shares outstanding 3,915,594 290,642 Dilutive stock options - based on the treasury stock method using the initial public offering price (1) --- 2,696,425 ------------------------- Total 3,915,594 2,987,067 ========================= Net loss $(2,066,694) $(1,627,944) ========================= Per share amount $ (.53) $ (.54) ========================= FULLY DILUTED: Weighted average shares outstanding 3,915,594 290,642 Dilutive stock options - based on the treasury stock method using the initial public offering price (1) --- 2,696,425 Convertible preferred stock - using the if-converted method 2,658,319 4,766,974 ------------------------- Total 6,573,913 7,754,041 ========================= Net loss $(2,066,694) $(1,627,944) ========================= Per share amount $(.31) $(.21) =========================
(1) In accordance with SAB No. 83. EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 2,894,900 34,895,089 0 0 0 38,097,318 586,588 392,751 38,641,165 817,847 0 82,537 0 0 37,740,781 38,641,165 14,905 14,905 321,714 321,714 1,954,380 0 0 (2,066,694) 0 (2,066,694) 0 0 0 (2,066,694) (.53) (.31)
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