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Proc-Type: 2001,MIC-CLEAR
Originator-Name: [email protected]
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<SEC-DOCUMENT>0000897101-02-000368.txt : 20020514
<SEC-HEADER>0000897101-02-000368.hdr.sgml : 20020514
ACCESSION NUMBER: 0000897101-02-000368
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020514
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: APPLIED BIOMETRICS INC
CENTRAL INDEX KEY: 0000816568
STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
IRS NUMBER: 411508112
STATE OF INCORPORATION: MN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-22146
FILM NUMBER: 02646891
BUSINESS ADDRESS:
STREET 1: 501 E HGWY 13 STE 108
CITY: BURNSVILLE
STATE: MN
ZIP: 55337
BUSINESS PHONE: 6128901123
MAIL ADDRESS:
STREET 1: 501 EAST HWY 13
CITY: BURNSVILLE
STATE: MN
ZIP: 55337
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>appbio022547_10k.txt
<DESCRIPTION>APPLIED BIOMETRICS, INC. FORM 10K
<TEXT>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-22146
--------------------
APPLIED BIOMETRICS, INC.
(Exact name of Registrant as specified in its charter)
--------------------
MINNESOTA 41-1508112
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. BOX 583457 55458-3457
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of Principal Executive Offices)
(612) 338-4722
(Registrant's Telephone Number, including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The registrant has adopted liquidation basis accounting as of September 1, 2000.
As of April 15, 2002, 5,883,404 shares of common stock of the registrant were
outstanding, and the aggregate market value of the registrant's outstanding
common stock (based upon the last reported sale price of the common stock on the
Over-The-Counter Bulletin Board) excluding outstanding shares owned beneficially
by executive officers, directors and principal shareholders, was approximately
$294,170.
================================================================================
<PAGE>
CERTAIN STATEMENTS CONTAINED IN THIS FORM 10-K INCLUDE "FORWARD LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF WORDS SUCH AS
"EXPECT," ANTICIPATE," "PLAN," "MAY," "ESTIMATE" OR OTHER SIMILAR EXPRESSIONS.
SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULT TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED IN OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SEE ITEM 6 "MANAGEMENT'S DISCUSSION AND ANALYSIS - CERTAIN FACTORS"
FOR IMPORTANT FACTORS KNOWN TO US THAT COULD CAUSE SUCH MATERIAL DIFFERENCES.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
INTRODUCTION
Applied Biometrics, Inc. ("Applied Biometrics" or the "Company"), a corporation
founded in 1984 to develop and market a cardiac output monitoring system, ceased
its ongoing business operations in August 2000 because the Company determined
that it would be unable to complete the development of its primary product, the
Basis Cardiac Output Monitor and RealFlow Cardiac Output Probe (collectively,
the "Basis System"), for market and sale.
CESSATION OF BUSINESS OPERATIONS
In connection with its decision to cease business operations, in August 2000 the
Company's Chief Executive Officer resigned, all other employees were laid off
and all but two of the Company's directors resigned. At that time, the Board of
Directors retained Manchester Companies, Inc. ("Manchester"), a Minneapolis,
Minnesota investment banking firm, to provide management services to facilitate
the winding down and liquidation of the Company, and to act as the Company's
exclusive agent to assist it with a merger, sale, exchange, combination or any
similar transaction related to the Company. As part of the engagement of
Manchester, the Board of Directors appointed James D. Bonneville as the Acting
Chief Executive Officer, Chief Financial Officer and Secretary of the Company.
During the latter part of 2000, the Company wound down its business operations,
eliminated most expenses and negotiated the termination or satisfaction of all
of its obligations. This process was essentially completed in January 2001. In
April 2001, the remaining two members of the Company's Board of Directors
resigned.
As part of its engagement by the Company's Board of Directors, Manchester has
been actively seeking merger candidates for the Company. In connection with
these activities and since the resignation of the remaining board members in
April 2001, Manchester and Mr. Bonneville have consulted from time to time with
David B. Johnson, the only beneficial owner who holds more than 5% of the Common
Stock of the Company. To date, no candidate or transaction has emerged as a
viable option for merging with the Company. Because no acceptable merger
candidate has emerged, Mr. Johnson has requested that the Company liquidate and
dissolve and distribute the remaining assets to the shareholders of the Company.
In furtherance of this request, on May 13, 2002 the Company received a formal
notice from shareholders holding more than 10% of the Company's outstanding
stock, including Mr. Johnson, requesting that the Company call and hold a
shareholder meeting for the purposes of:
* approving a plan of complete liquidation and dissolution of the
Company;
* setting the number of members of the Board of Directors at one;
1
<PAGE>
* electing one director, Richard Nigon, to serve until dissolution of
the Company (or, if the Company is not dissolved for any reason, for a
term ending at the next annual shareholder meeting or until his
successor is elected and qualified); and
* ratifying, approving and confirming the engagement of Manchester,
pursuant to the terms of its current engagement agreement with the
Company, to take all appropriate actions, on behalf of the Company, in
connection with the liquidation and dissolution of the Company.
The Company no longer occupies any office space. The Company can be contacted at
P.O. Box 583457, Minneapolis, MN 55458-3457 or by telephone at (612) 338-4722.
CLINICAL USE OF CARDIAC OUTPUT
Cardiac output (or "CO") is a measure of the volume of blood pumped by the heart
into the aorta and is one of the most basic physiological parameters of the
body's hemodynamic system. There are typically two types of parameters measured
in the heart for diagnostic and monitoring purposes: electro-physiological, such
as the electrocardiogram ("ECG"), and hemodynamic, such as heart rate, blood
pressure and cardiac output. In many cases, ECG, heart rate and pressures are
used as a proxy to understand cardiac output. Surgical, electrical and drug
therapies, as well as life support systems, such as bypass machines and heart
assist devices, are often designed to develop and sustain a specified level of
cardiac output.
Since the advent of open-heart surgery, surgeons, anesthesiologists and
intensivists have desired a reliable, accurate, continuous and real-time measure
of cardiac output. The Company believed that medical practitioners recognize the
importance of measuring cardiac output and that there is significant demand for
accurate, real-time cardiac output capability, especially for intra-operative
and post-operative heart surgery settings. In these settings, surgeons,
anesthesiologists and intensivists require continuous, real-time information
about cardiac output to guide surgery, drug delivery and life support systems.
The Company believed that practitioners were particularly interested in
immediate cardiac output data for certain patients undergoing cardiac surgery,
including heart transplant and coronary artery bypass surgeries, where the
ability to provide real-time, beat-to-beat, continuous cardiac output data can
allow surgeons, cardiologists and anesthesiologists to react quickly to changes
in a patient's condition.
PRODUCTS
Prior to deciding to cease its business operations, the Company was developing a
system designed to measure CO on a continuous and real-time basis during and
after cardiac surgery called the Basis System. The Basis System was designed for
use on a broad range of aortic diameters in both adults and children. By using
ultrasound to monitor CO directly from the ascending aorta, the Basis System was
expected to provide real-time accuracy never before available. In contrast to
conventional CO techniques, the Basis System was designed to directly measure
the patient's aortic diameter and blood velocity 44 times each second for a
true, real-time view of cardiac output.
The Basis System consisted of the patented, disposable, ultrasonic RealFlow
Probe and the Basis Cardiac Output Monitor. The RealFlow Probe consisted of an
ultrasound sensor mounted in the probe head, a power cable and an integrated
release mechanism. The release mechanism involved two nitinol "release" wires
integrated into the sensor head, which the surgeon sutures to the patient's
aorta during open-heart surgery. Later, after the chest cavity has been closed,
the physician released the sutures by withdrawing the release wires, permitting
the probe to be removed from the chest without additional surgical intervention.
2
<PAGE>
The Basis System monitor consisted of both software and electronic hardware and
display, which energized the Basis System's RealFlow probe, senses the probe's
signal, determines cardiac output and provides a graphical and numeric display
to the physician. The electro-luminescent flat panel display provided numerical,
waveform and trend information of the patient's cardiac output, stroke volume,
blood velocity, aortic diameter and blood velocity. The monitor was designed to
be automatic, requiring no user calibration, and to automatically adjust its
analysis and readout to each individual patient.
The Basis System was specifically designed to address the need for continuous,
real-time, cardiac output data in surgical and post-operative settings by
reporting cardiac output accurately and without subjective user intervention.
The Basis System readings were thought to be used to guide cardiac surgeons
during surgical procedures and to assist intensivists and anesthesiologists by
monitoring vital signs and managing life support systems both during and after
the procedures.
In July of 2000, the Company determined that significant technical issues faced
the Basis System which made commercialization of the Basis System unlikely in
the near term. Two significant issues were identified. The first issue involved
the Basis System's ability to work successfully in the event of considerable
variability or turbulence in a patient's blood flow. The second issue involved
errors arising from the positioning of the Basis System's probe during and after
surgical procedures. Both of these problems significantly impacted the
performance, reliability and market potential of the Basis System.
RESEARCH AND DEVELOPMENT
Prior to deciding to cease its business operations, the Company's professionals
researched and developed proprietary competencies in ultrasound transducers,
signal processing, cardiac anatomy and pathology and the fluid dynamics of blood
flow. These funds were used primarily to develop the Basis System and its
underlying core technologies.
PATENTS AND PROPRIETARY RIGHTS
The Company developed extensive proprietary technology and knowledge in a
variety of fields that relate to cardiac output, blood flow and associated
diagnostic and monitoring products. These include ultrasound transducer design
and manufacturing, signal processing, cardiac anatomy, pathology and clinical
procedures, the fluid dynamics of blood flow and acoustic properties of the
human anatomy.
The Company obtained U.S. and foreign patents and patents pending, which relate
to devices and methods used to measure blood flow through a major mammalian
artery using ultrasound technology, the release mechanism employed by the
RealFlow probe, and certain methods and techniques which relate to minimally
invasive surgery, beating heart surgery and advanced signal processing. In
addition to its patented technology, the Company relied heavily on trade secrets
and unprotected proprietary technology. The Company always maintained the
confidentiality of such information through its internal security and secrecy
measures and the employment agreements requiring employees and agents of the
Company to maintain the confidentiality of Company information and to assign to
the Company inventions developed in the course of work for the Company.
On January 31, 2001, as part of its decision to cease business operations, the
Company sold certain patented technology to Transonic Systems, Inc. for a
purchase price of $23,000. This patented technology consisted of technology that
relates to devices and methods used to measure blood flow through arteries using
ultrasound technology, and certain methods and techniques which relate to
minimally invasive surgery, beating heart surgery and advanced signal
processing.
3
<PAGE>
EMPLOYEES
As of December 31, 2001, the Company had no employees. James D. Bonneville, the
Company's Acting Chief Executive Officer, Chief Financial Officer and Secretary
is an employee of Manchester who is performing these functions pursuant to the
agreement between the Company and Manchester.
ITEM 2: PROPERTIES
The Company does not currently occupy any space.
ITEM 3: LEGAL PROCEEDINGS
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fiscal year
covered by this Report.
ITEM 4A: EXECUTIVE OFFICERS OF THE REGISTRANT
As of April 15, 2002, the Company, through its engagement of Manchester, has one
individual who is serving as its Acting Chief Executive and Chief Financial
Officer. His age and biographical information is as follows:
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
James D. Bonneville 62 Acting Chief Executive Office, Chief Financial
Officer and Secretary
JAMES D. BONNEVILLE - Mr. Bonneville has been a Vice President at Manchester
Companies since March 2000. Mr. Bonneville served as the Chief Executive Officer
of Linguistic Technologies, Inc. from March 1999 to January 2000. During 1999
Mr. Bonneville served as a consultant to MinCorp Investment Network. From 1993
to 1998 Mr. Bonneville served as the President and Chief Operating Officer of
Connect Computer Company, which merged into Norstan in 1996.
4
<PAGE>
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock has traded in the over-the-counter market on the OTC
Bulletin Board, under the symbol "ABIO," since November 30, 2000. Prior to
November 30, 2000, the Company's Common Stock was traded on the Nasdaq SmallCap
Market under the symbol "ABIO."
The following table sets forth, for the periods indicated, the high and low sale
prices for each calendar quarter indicated, as reported by the OTC Bulletin
Board and the Nasdaq SmallCap Market. The prices in the table may not represent
actual transactions. These quotations reflect inter-dealer prices without retail
mark up, mark down or commissions and may not represent actual transactions.
OTC BULLETIN BOARD
2001 HIGH LOW
---- ---- ---
First Quarter............... $0.10 $0.05
Second Quarter.............. $0.10 $0.06
Third Quarter............... $0.14 $0.07
Fourth Quarter.............. $0.21 $0.06
NASDAQ SMALLCAP MARKET
2000 HIGH LOW
---- ---- ---
First Quarter............... $4.00 $2.28
Second Quarter.............. $3.50 $2.38
Third Quarter............... $2.19 $0.25
Fourth Quarter.............. $0.34 $0.09
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. As of January 16, 2002, there were approximately 562
beneficial owners of the Company's Common Stock.
5
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
SUMMARY STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION DATA:
TWELVE MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
--------- ---------
Net assets in liquidation, beginning of period $ 732,527 $ 925,557
Changes in nets assets in liquidation ........ (40,653) (193,030)
--------- ---------
Net assets in liquidation, end of period ..... $ 691,874 $ 732,527
========= =========
SUMMARY STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
AUGUST 31
YEARS ENDED DECEMBER 31,
2000(2) 1999 1998 1997(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue ........................ $ -- $ -- $ -- $ 64,940
Gross margin ....................... -- -- -- 32,765
Operating Expenses:
Selling, general & administrative 911,766 1,028,065 946,721 1,061,579
Research & development .......... 1,500,337 1,469,001 805,459 1,409,280
----------- ----------- ----------- -----------
Net Loss from continuing operations (2,354,876) (2,445,942) (1,563,991) (2,134,604)
Discontinued Operations:
Loss from operations of
Trans-catheter closure business . -- -- (1,838,147) (457,866)
----------- ----------- ----------- -----------
Net Loss ........................... -- -- (3,402,138) (2,592,470)
=========== =========== =========== ===========
Basic and diluted loss per share
Continuing operations ........... $ (0.42) $ (0.52) $ (0.36) $ (0.51)
Discontinued operations ......... -- -- $ (0.43) $ (0.11)
----------- ----------- ----------- -----------
$ (0.42) $ (0.52) $ (0.79) $ (0.62)
=========== =========== =========== ===========
Weighted average shares
outstanding, basic and
diluted ......................... 5,655,380 4,659,300 4,312,077 4,186,896
</TABLE>
- --------------------------------------------
(1) In 1997, the Company ceased marketing efforts of two cardiac output
devices: one that was integrated into an endotrachial tube, and the other a
predecessor to the Basis System.
(2) The Company's weighted average shares outstanding were increased by the
issuance of 525,000 shares of Common Stock from two private placements in
April 2000.
6
<PAGE>
SUMMARY BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT DECEMBER 31,
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents & short-
term investments ..... $ 909,510 $1,109,537 $1,910,356 $2,369,413 $4,420,180
Total assets ............ 937,010 1,218,263 2,827,739 3,296,711 5,437,923
Net assets in liquidation 691,874 732,527 -- -- --
Shareholders' equity .... -- -- 2,516,625 2,151,564 5,271,202
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company ceased its ongoing business operations in August 2000 because the
Company determined it would be unable to complete the development of its primary
product, the Basis System, for market and sale. In August 2000 the Company's
Chief Executive Officer resigned, all other employees were laid off and all but
two of the Company's directors resigned. At that time, the Board of Directors
retained Manchester Companies, Inc. to provide management services to facilitate
the winding down or liquidation of the Company, and to act as the Company's
exclusive agent to assist it with a merger, sale, exchange, combination or any
similar transaction related to the Company. As part of the engagement of
Manchester, the Board of Directors appointed James D. Bonneville as the Acting
Chief Executive Officer, Chief Financial Officer and Secretary of the Company.
During the latter part of 2000, the Company wound down its business operations,
eliminated most expenses and negotiated the termination or satisfaction of all
of its obligations. This process was essentially completed in January 2001.
Since August 2000, the Company's management and accounting functions have been
performed through Manchester. In April 2001, the remaining two members of the
Company's Board of Directors resigned.
The Company adopted liquidation basis accounting as of September 1, 2000. This
basis of accounting is considered appropriate when liquidation of a company
appears imminent and the net realizable value of its assets are reasonably
determinable. Under this basis of accounting, assets and liabilities are stated
at their net realizable value and estimated costs through the liquidation date
are provided to the extent reasonably determinable.
As part of its engagement by the Company's Board of Directors, Manchester has
been actively seeking merger candidates for the Company. In connection with
these activities and since the resignation of the remaining board members in
April 2001, Manchester and Mr. Bonneville have consulted from time to time with
David B. Johnson, the only beneficial owner who holds more than 5% of the Common
Stock of the Company. To date, no candidate or transaction has emerged as a
viable option for merging with the Company. Because no acceptable merger
candidate has emerged, shareholders holding more than 10% of the Company's
outstanding stock, including Mr. Johnson, have requested that the Company call
and hold a shareholder meeting for the purposes of (a) approving a plan of
complete liquidation and dissolution of the Company, which will include
distributing the Company's remaining assets to the shareholders; (b) setting the
number of directors at one and electing a director to serve until dissolution of
the Company; and (c) ratifying and approving the engagement of Manchester,
pursuant to the terms of its current engagement agreement with the Company, to
take all appropriate actions, on behalf of the Company, in connection with the
liquidation and dissolution of the Company.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, net assets in liquidation were $691,874. Cash, cash
equivalents and marketable securities were $909,510 as of December 31, 2001 as
compared to $1,109,537 at December 31, 2000, a decrease of $200,027.
Net cash provided by investing activities was $20,700 for the year ended
December 31, 2001 as compared to $193,000 provided by investing activities for
the year ended December 31, 2000.
Based on its expected rate of spending the Company believes that its existing
cash and cash equivalents will be more than sufficient to fund any further
expenses related to the Company for several years.
RESULTS OF OPERATIONS
EIGHT MONTHS ENDED AUGUST 31, 2000 AND TWELVE MONTHS OF 1999
Selling costs and general and administrative expenses were $912,000 for the
first eight months of 2000, compared to selling costs and general and
administrative expenses of $1,028,000 for the twelve months ended December 31,
1999. One-time expenses in the first eight months of 2000 were $100,000 from
termination costs and a non-cash compensation charge of $153,000 related to
stock granted to the Company's three non-employee directors for prior and
current Board service. There were no selling costs for this period.
Research and development costs for the first eight months of 2000 were
$1,500,000 compared to $1,469,000 for the twelve months ended December 31, 2000.
These expenses increased for the first eight months of 2000 because of a
$100,000 of employee termination costs related to the Company's termination of
operations and, a second quarter write-off by the Company of $210,000 of its
monitor and probe component inventory.
Other income, primarily interest, earned was $57,000 for the first eight months
of 2000 compared to $51,000 for the twelve months ended December 31, 1999.
The net loss for the first eight months of 2000 was $2,355,000, or $0.40 per
share, as compared to a net loss of $2,446,000, or $0.52 per share, in the
twelve-month period ending December 31, 1999.
INFLATION
Management believes inflation has not had a material effect on the Company's
financial condition.
CERTAIN FACTORS
CESSATION OF BUSINESS OPERATIONS; NOT A GOING CONCERN.
As indicated, the Company has terminated its business operations due to
technical difficulties with its sole product, the Basis System. The Company has
attempted to position itself for a sale or liquidation. Although the Company may
seek to complete a merger of the Company with another operating entity, there
can be no assurance as to the Company's ability to conclude such a transaction
or the business, financial condition or results of operations of any successor
entity.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
8
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements can be found on pages 15 to 24 of this
Report. The index to such items is included on page 13 in Item 14(a)(1).
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant.
Messrs. Andrew M. Weiss and Jeffrey Green, the last two remaining directors of
the Company resigned as directors in April of 2001. Currently, there are no
members of the Board of Directors.
(b) Executive Officers of the Registrant.
Information concerning Executive Officers of the Company is included in this
Report under Item 4A, "Executive Officers of the Registrant."
(c) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Executive officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during, or with respect to, the period ended December
31, 2001, the Company's directors, executive officers and greater than 10%
shareholders complied with the applicable Section 16(a) filing requirements.
9
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 2001 and
2000, the compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to each person serving as the
Company's President and Acting Chief Executive Officer during 2001 and each
executive officer who received more than $100,000 in compensation during 2001.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
James D. Bonneville (1)................. 2001 $60,000 -- -- $0
ACTING CHIEF EXECUTIVE OFFICER 2000 45,000 -- -- 24,000
</TABLE>
- -------------------------------
(1) The services of Mr. Bonneville as Acting Chief Executive Officer and Chief
Financial Officer and Secretary are provided through the agreement between
the Company and Manchester, pursuant to which the Company paid Manchester a
monthly fee equal to $10,000 for the months of August 2000 through November
2000 and $5,000 for each month from December 2000 to December 2001.
Manchester received a commission payment in 2000 of $24,000 under the
agreement with the Company. Mr. Bonneville is an employee of Manchester and
therefore does not directly receive the payments made to Manchester by the
Company.
OPTION GRANTED
The following tables summarize individual grants of options to purchase shares
of Common Stock during fiscal 2001 to each of the executive officers named in
the Summary Compensation Table above and the value of the options held by such
persons at December 31, 2001.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (1) POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ---- --------- ------------- -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
James D. Bonneville(2) -- -- -- -- -- --
</TABLE>
- -------------------------------
(1) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock will appreciate at the assumed annual
rates shown (5% and 10%), compounded annually from the date of grant of the
option until the end of the option term. These assumed rates are applied
pursuant to the Securities and Exchange Commission rules and therefore are
not intended to forecast possible future appreciation, if any, of the
Common Stock. Actual gains, if any, on stock option exercises are dependent
upon the future performance
10
<PAGE>
of the Common Stock, overall market conditions and continued employment of
the named executive by the Company. There can be no assurance that the
amounts reflected in this table will be realized.
(2) The services of Mr. Bonneville as Acting Chief Executive Officer and Chief
Financial Officer and Secretary are provided through the agreement between
the Company and Manchester. Mr. Bonneville is an employee of Manchester and
therefore does not directly receive the payments made to Manchester by the
Company.
OPTIONS EXERCISED
No options were exercised by the named executive officer during fiscal 2001.
Options granted under the Company's 1994, 1996 and 1998 Stock Plans
(collectively, the "Stock Plans") terminated three months after the termination
of the employees, unless otherwise agreed to by the Company and the terminated
employee. The Company's option plans generally provide that the exercise price
of options must be paid in cash, except that the Compensation Committee, in its
sole discretion, could have allowed payment by delivery of shares of Common
Stock having an aggregate fair market value equal to the exercise price or may
allow the exercise price to be financed by the Company upon such terms and
conditions as the Compensation Committee may determine. Based upon the
difference between the fair market value of one share of Common Stock on the
date exercised and the exercise price of the options exercised.
COMPENSATION COMMITTEE
Since the Company has ceased doing business, the Company no longer has a
Compensation Committee.
SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
limits the deductibility of certain compensation paid to each of the executive
officer and four other of the most highly compensated executives of a publicly
held corporation to $1,000,000. In fiscal 2001, the Company did not pay
"compensation" within the meaning of Section 162(m) to such executive officers
in excess of $1,000,000 and it will not do so in the future. Therefore, the
Company does not have a policy at this time regarding qualifying compensation
paid to its executive officers for deductibility under Section 162(m).
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 15, 2001 the number and percentage of
outstanding shares of Common Stock beneficially owned by each person who is
known to the Company to beneficially own more than five percent (5%) of the
Common Stock, by each director of the Company, by each executive officer named
in the Summary Compensation Table, and by all directors and executive officers
of the Company as a group:
NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP(2)
- ---------------- --------------------- ------------
David B. Johnson (3)
c/o Miller, Johnson & Kuehn, Incorporated
Suite 800 - Eighth Floor
5500 Wayzata Boulevard 516,511 8.7%
Minneapolis, MN 55416
James D. Bonneville 0 --
11
<PAGE>
- ----------------------------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power over such shares. Shares not outstanding but deemed beneficially
owned by virtue of the right of a person or member of a group to acquire
them within 60 days are treated as outstanding only when determining the
amount and percent owned by such person or group.
(2) As of April 15, 2002, there were 5,883,404 shares of Common Stock
outstanding.
(3) Based on an amended Schedule 13G dated February 14, 2002 filed with the
Securities and Exchange Commission. Of the 516,511 shares reported, Mr.
Johnson has sole voting and dispositive power with respect to 141,002
shares and shares voting and dispositive power with respect to 375,509
shares.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED TRANSACTION
In August 2000, the Company entered into a six month Engagement Agreement with
Manchester, pursuant to which Manchester agreed to provide management services
to facilitate the winding down or liquidation of the Company. Under the
Engagement Agreement, the Company has retained Manchester as the Company's
exclusive agent to assist it with a merger, sale, exchange, combination or any
similar transaction related to the Company. In the event the Board of Directors
of the Company approves a liquidation of the Company, Manchester is entitled
under the Engagement Agreement to receive a $25,000 payment upon the final
dissolution of the Company. Pursuant to the terms of the Engagement Agreement,
Mr. Bonneville was elected by the Board of Directors to serve as the Company's
Acting Chief Executive Officer and Chief Financial Officer. During 2001, the
Company paid Manchester monthly fees totaling $60,000. The Engagement Agreement
expired in February 2001. Currently the Company and Manchester have been
operating on a month-to-month basis.
David B. Johnson, a beneficial owner of more than 5% of the Company's Common
Stock, is a principal shareholder in the firm of Miller Johnson Steichen
Kinnard, Inc., formerly known as Miller, Johnson & Kuehn, Incorporated ("MJK").
During 2000, the Company engaged MJK as its sales agent in connection with a
private placement of 525,000 shares of Common Stock and warrants to purchase
525,000 shares of Common Stock. In consideration of MJK's services, the Company
paid MJK selling commissions of $170,625 equal to 10% of the aggregate price of
the shares of Common Stock sold by MJK in the private placement, and issued MJK
five-year warrants to purchase 52,500 shares of Common Stock at an exercise
price of $3.25 per share. Subsequent to the closing of the placement, MJK
transferred these warrants to Mr. Johnson. The Company also provided MJK with a
non-accountable expense allowance equal to 1% of the aggregate price of the
shares sold by MJK, and reimbursed MJK for its legal fees in connection with the
placement.
12
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
(1) Financial Statements
The following financial statements are included hereinafter
contained on pages 15 to 24 in this Annual Report on Form 10-K:
Report of Independent Auditors
Statements of Net Assets in Liquidation as of December 31, 2001
and 2000
Statements of Changes in Net Assets in Liquidation for the year
ended December 31, 2001 and for the period from September 1, 2000
to December 31, 2000
Statements of Operations for the Eight Months Ended August 31,
2000 and the Year Ended December 31, 1999
Statements of Cash Flows for the year ended December 31, 2001,
the Four Months Ended December 31, 2000, Eight Months Ended
August 31, 2000 and Year Ended December 31, 1999
Notes to Financial Statements
(2) Financial Statement Schedules
All information required by this section that is applicable to
the Company is included in the Financial Statements or Notes
thereto.
(3) Exhibits:
The exhibits to this Annual Report on Form 10-K are listed in the
Exhibit Index hereinafter contained on page E-1 of this Annual
Report on Form 10-K. The Company will furnish a copy of this
report and any exhibit to a shareholder who requests a copy in
writing upon payment to the Company of a fee of $5.00 per
exhibit. Requests should be sent to: James D. Bonneville, c/o
Manchester Companies, Inc. at P.O. Box 583457 Minneapolis,
Minnesota 55458-3457.
13
<PAGE>
The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Report
pursuant to Item 14(c):
A. Applied Biometrics 1996 Stock Option Plan, amended July 2, 1999
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1999).
B. Applied Biometrics Amended 1994 Stock Option Plan, amended July
2, 1999 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1999).
C. Applied Biometrics 1998 Stock Plan, amended January 1, 2000
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
2000).
D. Engagement Agreement, dated August 24, 2000, by and between
Manchester Companies, Inc. and Applied Biometrics, Inc
(incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 8-K/A filed on January 8, 2001).
(b) Reports on Form 8-K
On January 8, 2001 the Company filed an amendment to its Current Report on
Form 8-K filed on September 8, 2000.
(c) Exhibits
The response to this portion of Item 14 is included as a separate section
of this Report. See the Exhibit Index on page E-1 of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is included as a separate section
of this Report.
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
APPLIED BIOMETRICS, INC.
We have audited the accompanying statements of operations, shareholders' equity,
and cash flows of Applied Biometrics, Inc. for the eight months ended August 31,
2000 and for the year ended December 31, 1999. In addition, we have audited the
statement of net assets in liquidation as of December 31, 2001 and 2000 and the
related statements of changes in net assets in liquidation and cash flows in
liquidation for the year ended December 31, 2001 and the period from September
1, 2000 to December 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company decided to
liquidate in the third quarter of 2000 and commenced liquidation shortly
thereafter. As a result, the Company has changed its basis of accounting for
periods subsequent to August 31, 2000 from the going concern basis to the
liquidation basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and its cash flows of Applied
Biometrics, Inc. for the eight months ended August 31, 2000 and for the year
ended December 31, 1999, the net assets in liquidation as of December 31, 2001
and 2000 and the changes in net assets in liquidation and cash flows in
liquidation for the year ended December 31, 2001 and the period from September
1, 2000 to December 31, 2000, in conformity with accounting principles generally
accepted in the United States applied on the basis described in the preceding
paragraph.
Ernst & Young LLP
Minneapolis, Minnesota
April 23, 2002
15
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENT OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 31, 2001
AND DECEMBER 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
2001 2000
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 909,510 $1,107,537
Prepaid expenses and other current assets .............. 27,500 85,726
Patents and other intangibles, net ..................... -- 23,000
---------- ----------
Total current assets ................................ $ 937,010 $1,218,263
========== ==========
LIABILITIES
Accounts payable ....................................... $ 35,510 $ 119,954
Other current liabilities .............................. 29,199 40,007
Reserve for estimated costs during period of liquidation 167,666 272,250
----------
Short-term obligations ................................. 12,761 53,525
---------- ----------
Total current liabilities ........................... 245,136 485,736
---------- ----------
Net assets in liquidation .............................. $ 691,874 $ 732,527
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
PERIOD FROM JANUARY 1, 2001 THROUGH DECEMBER 31, 2001
- --------------------------------------------------------------------------------
Net assets in liquidation as of January 1, 2001 . $ 732,527
Change in net assets in liquidation ............. (40,653)
---------
Net assets in liquidation as of December 31, 2001 $ 691,874
=========
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENTS OF OPERATIONS
FOR EIGHT MONTHS ENDED AUGUST 31, 2000 AND YEAR
ENDED DECEMBER 31, 1999
(GOING CONCERN BASIS)
- --------------------------------------------------------------------------------
EIGHT MONTHS ENDED YEAR ENDED
AUGUST 31, DECEMBER 31,
2000 1999
----------- -----------
Operating expenses:
Selling, general and administrative . $ 911,766 $ 1,028,065
Research and development ............ 1,500,337 1,469,001
----------- -----------
Operating loss ...................... (2,412,103) (2,497,066)
Other income, net ................... 57,227 51,124
----------- -----------
Net loss ............................ $(2,354,876) $(2,445,942)
=========== ===========
Basic and diluted net loss per share:
Weighted average common shares
outstanding ......................... 5,655,380 4,659,300
=========== ===========
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001,
FOUR MONTHS ENDED DECEMBER 31, 2000,
EIGHT MONTHS ENDED AUGUST 31, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31,
2001 2000 2000 1999
----------- ----------- ----------- -----------
(Liquidation (Liquidation (Going Concern (Going Concern
Basis) Basis) Basis) Basis)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Increase (decrease) in net assets in liquidation $ (40,653) $ 911,766 -- --
Net loss ....................................... -- -- $(2,354,875) $(2,445,942)
Net loss from discontinued operations .......... -- -- -- --
----------- ----------- ----------- -----------
Loss from continuing operations ................ -- -- (2,354,875) (2,445,942)
Adjustments to reconcile net loss from
continuing operations to net cash used in
operating activities:
Depreciation and amortization
of capital leases .............................. -- -- 152,428 191,391
Amortization of patents and other intangible
assets ......................................... -- -- 27,467 25,012
Value of common stock issued in lieu of cash
compensation ................................... -- -- 153,150 --
Value of stock options and warrants issued in
lieu of cash ................................... -- -- 11,901 --
(Gain) loss on disposal of assets .............. 2,300 4,047 (1,857) 31,776
Changes in operating assets and liabilities:
Inventories .................................... -- -- 167,109 7,969
Prepaid expenses, other current assets and other
assets ......................................... 58,226 (11,936) 57,851 (52,744)
Accounts payable and accrued expenses .......... (240,600) (394,107) (103,795) 147,718
----------- ----------- ----------- -----------
Net cash used in continuing operations ......... -- (595,026) (1,890,621) (2,094,820)
Net cash used in discontinued operations ....... -- -- -- (120,548)
----------- ----------- ----------- -----------
Net cash used in operating activities .......... (220,727) (595,026) (1,890,621) (2,215,368)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
APPLIED BIOMETRICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001, FOUR MONTHS ENDED DECEMBER 31, 2000, EIGHT
MONTHS ENDED AUGUST 31, 2000 AND THE YEAR ENDED DECEMBER 31, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31,
2001 2000 2000 1999
----------- ----------- ----------- -----------
(Liquidation (Liquidation (Going Concern (Going Concern
Basis) Basis) Basis) Basis)
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of marketable securities ............. -- -- -- 500,000
Purchase of equipment and improvements ........ -- -- (25,647) (323,148)
Proceeds from sale of furniture, equipment and
machinery ..................................... 20,700 238,382 -- --
Investments in patents and trademarks ......... -- -- (19,763) (49,375)
Investment in marketable securities ........... -- -- -- --
Discontinued operations, net .................. -- -- -- (10,981)
----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities .................................... 20,700 238,382 (45,410) 116,496
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock, net
of expenses ................................... -- -- 1,490,840 2,067,941
Proceeds from exercise of stock options ....... -- 26,139 75,001
Repayment of capital lease obligations ........ -- (20,413) (4,710) (3,598)
----------- ----------- ----------- -----------
Net cash provided by financing activities ..... -- (20,413) 1,512,269 2,139,814
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents ................................... (200,027) (377,057) (423,762) 40,943
Cash and cash equivalents at beginning of year 1,109,537 1,486,594 1,910,356 1,869,413
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .... $ 909,510 $ 1,109,537 $ 1,486,594 $ 1,910,356
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS DESCRIPTION:
Applied Biometrics, Inc. ("Applied Biometrics" or the "Company") is a medical
device company that was engaged in the research and development of advanced
cardio-vascular and hemodynamic diagnostic and monitoring systems.
LIQUIDATION BASIS OF ACCOUNTING:
The consolidated financial statements for fiscal 1999 and for the eight months
ended August 31, 2000 were prepared on the going concern basis of accounting
which contemplates realization of assets and satisfaction of liabilities in the
normal course of business. As a result of the Company's plans to cease
operations, the Company adopted the liquidation basis of accounting effective
September 1, 2000. This basis of accounting is considered appropriate when,
among other things, liquidation of a company appears imminent and the net
realizable value of assets are reasonably determinable. Under this basis of
accounting, assets are valued at their estimated net realizable values and
liabilities are valued at their estimated settlement amounts. At December 31,
2001, the Company has recorded a reserve of $167,666 for costs to be incurred
during the liquidation period.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepting
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of cash and highly liquid investments
purchased with an original maturity of three months or less. Cash at December
31, 2001 and 2000 was primarily invested in a money market fund.
INVENTORIES:
Inventories were comprised of component parts and were valued at the lower of
first-in, first-out (FIFO) cost or market. In 2000, the Company wrote-off the
inventories because of its determination that near term commercialization of the
Company's product was unlikely.
21
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
During 2000, all of the Company's equipment and leasehold improvements were
either sold or abandoned upon the adoption of the liquidation basis of
accounting. Upon the adoption of the liquidation basis, the Company recorded a
write-down of $198,456 to record the equipment and leasehold improvements at
their net realizable value.
LONG-LIVED ASSETS:
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. Impairment losses are recorded whenever
indicators of impairment are present.
PATENTS AND OTHER INTANGIBLE ASSETS:
Patents and other intangible assets are recorded at cost and are amortized using
the straight-line method over their estimated useful lives ranging from ten to
fifteen years. In 2001, the Company sold to a third party its rights in all of
its patents.
RESEARCH AND DEVELOPMENT:
Research and development costs are expensed as incurred.
STOCK-BASED COMPENSATION:
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standard ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
The Company continues to account for employee stock-based compensation using the
intrinsic value method as prescribed under Accounting Principles Board Opinion
("APB") No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations.
INCOME TAXES:
The Company accounts for income taxes using the asset and liability method. The
asset and liability method provides that deferred tax assets and liabilities are
recorded based on the differences between the tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes
("temporary differences").
LOSS PER COMMON SHARE:
Upon the adoption of the liquidation basis of accounting on September 1, 2000,
the presentation of per common share information was not considered to be
meaningful and has been omitted.
22
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The basic loss per common share, for periods prior to September 1, 2000 was
computed based upon the weighted average number of common shares outstanding.
All outstanding options have been excluded from the calculation since the effect
of their inclusion would have been anti-dilutive.
(2) INCOME TAXES:
The Company has approximately $23,000,000 of net operating loss carryforwards
that begin to expire in 2003 and $450,000 of research and experimentation
credits. As a result of limitations imposed under ss.382 and ss.383 of the
Internal Revenue Code of 1986, both the annual amount and timing of the
utilization of these carryforwards will be limited. As the Company issues
additional common stock, the Company's carryforwards may be subject to further
limitation. A valuation allowance has been established that offsets the
Company's entire net deferred tax asset, as the realization of the deferred tax
asset is uncertain.
(3) SHAREHOLDERS' EQUITY:
The Company's authorized capital stock consists of 20,000,000 shares of common
stock and 5,000,000 shares of undesignated stock.
At December 31, 2001 and 2000, the Company had 5,833,40 shares of common stock
outstanding, respectively.
In 2000, the Company sold 525,000 units, resulting in net proceeds to the
Company of approximately $1,491,000. Each unit consisted of one share of common
stock and one warrant to purchase an additional share of common stock at an
exercise price of $3.625 per share. The warrants are exercisable for a period of
five years after the date of grant. In connection with the sale of units, the
Company issued the private placement agent a warrant to purchase 52,500 shares
of common stock at an exercise price of $3.25 per share. The warrant expires in
April 2005.
Also in 2000, the Company granted a total of 50,000 shares of common stock to
its three non-employee members of its Board of Directors for prior and current
board service. In connection with this issuance, the Company recorded
approximately $153,000 of non-cash compensation expense. In addition, during
2000, the Company recorded approximately $11,900 of expense related to the
granting of warrants and options for services.
SFAS NO. 123 DISCLOSURE:
For the year ended December 31, 1999 the Company did not record any compensation
expense for stock-based compensation awards.
Had compensation expense for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates consistent with SFAS No.
123, the Company's net loss and loss per share would have been increased to the
pro forma amounts indicated below:
23
<PAGE>
APPLIED BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1999
Net loss
As reported $ (2,445,942)
Pro forma (3,388,707)
Basic and diluted loss per share
As reported (.52)
Pro forma (.73)
The weighted average fair value per option granted during 1999 was $ 2.41. The
weighted average fair value was calculated by using the fair value of each
option on the date of grant. The fair value of the options was estimated using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
1999
Expected option term 3 years
Expected volatility factor 63%
Expected dividend yield 0.0%
Risk-free interest rate 5.2%
(4) EMPLOYEE BENEFIT PLAN:
SALARY REDUCTION PLAN:
During 1999, the Company established a salary reduction plan for all full-time
employees, which qualify under Section 401(k) of the Internal Revenue Code.
Employee contributions are limited to 20% of their annual compensation, subject
to annual limitations. At its discretion, the Company may make matching
contributions equal to a percentage of the salary reduction or other
discretionary amount. The Company has made no contributions to the plan during
2001, 2000 and 1999.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: May 13, 2002 APPLIED BIOMETRICS, INC.
By: /s/ James D. Bonneville
------------------------------
James D. Bonneville
Acting Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on May 13, 2002 by the following persons on behalf of the
Registrant and in the capacities indicated.
NAME AND SIGNATURE TITLE
------------------ -----
/s/ James D. Bonneville Acting Chief Executive Officer
- ----------------------- (Principal Executive Officer/Principal
James D. Bonneville Financial and Accounting Officer)
25
<PAGE>
APPLIED BIOMETRICS, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2001
EXHIBIT NO. EXHIBIT METHOD OF FILING
- ---------- ------- ----------------
3.1 Restated Articles of Incorporation
of the Company, as amended........... Incorporated by reference to
Exhibit 10.1 to the
Company's Annual Report on
Form 10-K for the fiscal
year ended December 31, 1999
3.2 Bylaws of the Company................ Incorporated by reference to
Exhibit 3.2 to the
Company's Registration
Statement on Form SB-2
(Commission File No.
33-63754C)
10.1 Applied Biometrics 1996 Stock Plan,
amended July 2, 1999................. Incorporated by reference to
Exhibit 10.1 to the
Company's Quarterly Report
on Form 10-Q for the period
ended June 30, 1999
10.2 Applied Biometrics Amended 1994 Stock
Plan, amended July 2, 1999........... Incorporated by reference to
Exhibit 10.2 to the
Company's Quarterly Report
on Form 10-Q for the period
ended June 30, 1999
10.3 Applied Biometrics 1998 Stock Plan,
amended January 1, 2000.............. Incorporated by reference to
Exhibit 10.1 to the
Company's Quarterly Report
on Form 10-Q for the period
ended June 30, 2000
26
<PAGE>
10.4 Engagement Agreement, dated August
24, 2000, by and between Manchester
Companies, Inc. and Applied
Biometrics, Inc...................... Incorporated by reference to
Exhibit 10.1 to the
Company's Report on Form
8-K/A filed on January 8,
2001
10.5 Master Lease dated October 18, 1999
by and between the Company and
Dexxon Capital Corporation........... Incorporated by reference to
Exhibit 10.2 to the
Company's Report on Form
10-Q filed June 30, 2000
10.6 Amendment to Lease Agreement dated
April 10, 2000 by and between the
Company and Dexxon Capital
Corporation.......................... Incorporated by reference to
Exhibit 10.3 to the
Company's Report on Form
10-Q filed June 30, 2000
10.7 Asset Purchase Agreement dated
January 31, 2001 by and between the
Company and Transonic Systems, Inc... Incorporated by reference to
Exhibit 10.11 to the
Company's Annual Report on
Form 10-K filed April 17,
2001
27
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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