-----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, TMsrB331BktqSDb8ejXYI5Otg1wp5v/64Z3ypO552WlL1mMMi8ozGmxF92CyvnjR rvuaobpcWN+6nh9pJpdjyA== 0000811212-98-000005.txt : 19980218 0000811212-98-000005.hdr.sgml : 19980218 ACCESSION NUMBER: 0000811212-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMOGENESIS CORP CENTRAL INDEX KEY: 0000811212 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 943018487 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16375 FILM NUMBER: 98537481 BUSINESS ADDRESS: STREET 1: 3146 GOLD CAMP DRIVE CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 BUSINESS PHONE: 9168585100 MAIL ADDRESS: STREET 1: 3146 GOLD CAMP DRIVE CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 FORMER COMPANY: FORMER CONFORMED NAME: INSTA COOL INC OF NORTH AMERICA DATE OF NAME CHANGE: 19920703 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 1997. Commission File Number: 0-16375 __________________________ THERMOGENESIS CORP. (Exact name of Registrant as specified in its charter) DELAWARE 94-3018487 (State of Incorporation) (I.R.S. Employer Identification No.) 3146 GOLD CAMP DRIVE RANCHO CORDOVA, CA 95670 (916) 858-5100 (Address, including zip code, and telephone number, including area code, of principal executive offices) Securities registered pursuant to section 12(b) of the Act: NONE Securities registered pursuant to section 12(g) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, $.001 Par Value Nasdaq SmallCap Market 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 No __ The number of shares of the registrant's common stock, $.001 par value, outstanding on February 5, 1998 was 18,762,544. _______________________________ THERMOGENESIS CORP. INDEX PAGE NUMBER PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Balance Sheets at December 31, 1997 and June 30, 1997................................................... 3 Statements of Operations for the Three and Six Months ended December 31, 1997 and 1996............... 5 Statements of Cash Flows for the Three and Six Months Ended December 31, 1997 and 1996.......... 6 Notes to Financial Statements....................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................. 13 SIGNATURES................................................................ 14 PART I FINANCIAL INFORMATION THERMOGENESIS CORP. BALANCE SHEETS (UNAUDITED)
December 31, June 30, ASSETS 1997 1997 Current Assets: Cash and cash equivalents $4,782,841 $3,510,861 Accounts receivable, net of allowance for doubtful accounts of $97,913 ($97,913 at June 30, 1997) 862,931 2,067,990 Inventory 3,198,204 2,579,368 Other current assets 264,189 247,819 Total current assets 9,108,165 8,406,038 Equipment, at cost less accumulated depreciation of $868,387 ($670,269 at June 30, 1997) 1,383,444 1,358,747 Prepaid royalties, net of accumulated amortization of $415,911 ($388,185 at June 30, 1997) 138,589 166,315 Other assets 233,517 256,626 $10,863,715 $10,187,726
See accompanying notes to financial statements. THERMOGENESIS CORP. BALANCE SHEETS (CONTINUED) (UNAUDITED)
December 31, June 30, LIABILITIES AND SHAREHOLDER'S EQUITY 1997 1997 Current liabilities: Accounts payable and accrued liabilities $1,009,258 $1,523,647 Accrued payroll and related expenses 164,666 274,008 Customer deposits 145,511 49,310 Current portion of capital lease obligations 144,336 151,836 Total current liabilities 1,463,771 1,998,801 Long-term capital lease obligations 101,126 164,283 Commitments --- --- Shareholders' equity: Preferred stock, $.001 par value; 2,000,000 shares authorized; no shares issued and outstanding --- --- Common stock, $.001 par value; 50,000,000 shares authorized; 18,756,919 issued and outstanding (15,865,305 at June 30, 1997) 18,756 15,866 Paid in capital in excess of par 25,912,933 19,197,526 Accumulated deficit (16,632,871) (11,188,750) Total shareholders' equity 9,298,818 8,024,642 $10,863,715 $10,187,726
See accompanying notes to financial statements. THERMOGENESIS CORP. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended December 31, December 31, 1997 1996 1997 1996 Net sales $815,992 $2,650,690 $1,527,092 $4,348,286 Cost of sales 1,386,575 1,513,956 2,481,632 2,487,921 Gross profit (loss) (570,583) 1,136,734 (954,540) 1,860,365 Expenses: General and administrative 637,494 307,062 1,102,952 438,316 Selling and marketing 628,000 405,578 1,156,633 769,958 Research and development 1,120,727 625,432 2,202,542 1,194,167 Issuance of stock options for services 21,000 14,000 42,000 28,000 Interest 13,716 15,208 26,142 36,447 Total expenses 2,420,937 1,367,280 4,530,269 2,466,888 Interest income 9,327 33,711 40,688 41,804 Net loss ($2,982,193) ($196,835) ($5,444,121) ($564,719) Per share data: Basic and diluted loss per share ($0.18) ($0.01) ($0.33) ($0.04) Shares used in computing per share data 16,899,943 14,511,000 16,386,166 13,755,000
See accompanying notes to financial statements. THERMOGENESIS CORP. STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
Cash flows from operating activities: 1997 1996 Net loss ($5,444,121) ($564,719) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 225,844 148,267 Issuance of stock options for inventory - - 414,426 Issuance of stock options for services 42,000 28,000 Net change in operating assets and liabilities: Accounts receivable 1,205,059 (1,570,880) Inventory (618,836) (173,809) Other current assets (16,370) (177,537) Other assets 23,109 13,946 Accounts payable and accrued liabilities (514,389) (253,831) Accrued payroll and related expenses (109,342) (52,203) Customer deposits 96,201 28,023 Net cash used in operating activities (5,110,845) (2,160,317) Cash flows from investing activities: Capital expenditures (222,815) (218,159) Cash flows from financing activities: Principal payments on long-term lease obligations (70,657) (25,100) Exercise of stock options and warrants 206,301 -- Issuance of common stock 6,469,996 7,892,611 Net cash provided by financing activities 6,605,640 7,867,511 Net increase in cash and cash equivalents 1,271,980 5,489,035 Cash and cash equivalents at beginning of period 3,510,861 1,243,079 Cash and cash equivalents at end of period $4,782,841 $6,732,114
See accompanying notes to financial statements THERMOGENESIS CORP. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (UNAUDITED) 1. Interim Reporting These Financial Statements should be read in conjunction with the Company's Annual Report (Form 10-K) for the year ended June 30, 1997. All sales, domestic and foreign, are made in U.S. dollars and therefore currency fluctuations are believed to have no impact on the Company's net sales. In the opinion of management, all adjustments (which consist only of normally recurring adjustments) necessary for a fair presentation of the Financial Statements have been made. The results of operations for the six months ended December 31, 1997 are not necessarily indicative of the results expected for the full year. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share". Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. The adoption of Statement 128 had no impact on the basic and diluted loss per share for the three and six months ended December 31, 1997 and 1996. In addition, the adoption of Statement 128 had no impact on net loss per share amounts for all periods presented in the Selected Consolidated Financial Data and the financial statements included in the Company's Annual Report (Form 10-K) for the year ended June 30, 1997. INVENTORIES Inventories are stated at the lower of cost (First-In, First-Out) or market and consist approximately of the following: DECEMBER 31, 1997 JUNE 30, 1997 Raw materials $ 2,285,528 $ 1,574,388 Work in process 614,957 525,067 Finished goods 297,719 479,913 Total $ 3,198,204 $ 2,579,368 Included in the December 31, 1997 inventory is $737,000 in raw materials and work in process to manufacture the BioArchive System and CryoSeal System. EQUITY The Company completed a private financing on December 31, 1997, in which it received $6,469,996 net of expenses. The proceeds from the offering were received from the sale of 2,781,000 shares of common stock at $2.50 per share and issued three year warrants to the purchasers representing the right to acquire an additional 278,100 shares in the aggregate, at an exercise price of $3.00 per share. THERMOGENESIS CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 The Company designs and sells products and devices which utilize its proprietary thermodynamic technology for the processing of biological substances including the cryopreservation, thawing, and harvesting of blood components ("Proprietary Technology"). Historically, the Company's primary revenues have been from sales of its FDA Class I blood plasma freezers and thawers ("Core Line Products") to hospitals, blood banks and blood transfusion centers in 32 countries. The Company has under development five new FDA Class II blood and/or tissue processing systems ("Pipe Line Products"), each consisting of a thermodynamic device designed to process blood and/or tissues through use of proprietary, sterile, disposable processing containers and applicators. During the fiscal years 1988 through 1994, the Company focused its research and development efforts on refining Core Line Products. Since July 1994, the Company has aggressively sought new applications for its Proprietary Technology, which culminated in five FDA Class II products, two of which the Company expects to market launch in fiscal 1998. The new FDA Class II products are indicative of the Company's efforts to develop systems and processes for therapeutic use in larger markets; products which by their inherent nature require consumable disposable components for the processing of blood and/or tissue. The following is Management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the period included in the accompanying financial statements. RESULTS OF OPERATIONS SALES AND REVENUES: Net sales decreased for the three and six months ended December 31, 1997 by approximately 69% and 65%, respectively, from the corresponding 1997 period. The decrease in the fiscal 1998 periods is reflective of one time sales of $2,300,000 of the Company's human blood plasma freezers to a single customer during the six month period ended December 31, 1996. The Company also experienced slower demand among other customers for the Company's core line products and delays in the introduction of the Company's new FDA Class II medical devices. The Company delivered the first two Beta BioArchive Systems for use by IND/IDE sites in December 1997. Production has begun on the CryoSeal CS-1 device and CP-1 processing container as the Company expects to market and sell those products in Europe and Canada, pending FDA clearance for marketing in the U.S. At this time, the Company is unable to project an FDA clearance date that would be sooner than the first quarter of fiscal 1999. THERMOGENESIS CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (CONT'D) RESULTS OF OPERATIONS (CONT'D) COST OF SALES: Cost of sales as a percent of sales was approximately 170% and 163% for the three and six months ended December 31, 1997, as compared to 57% for the corresponding fiscal 1997 periods. Cost of sales increased as a percentage of revenues as a result of four factors: 1) Labor costs for the start-up production of the CryoSeal System and the BioArchive System; 2) Production labor diverted to the upgrading of the manufacturing facility; 3) higher warranty reserves for Pipe Line Products used in clinical studies; and 4) Further, significant overhead costs incurred in building and maintaining an infrastructure that is required to meet FDA regulatory requirements and standards for production of Class II medical devices. Those costs include: quality control, document control, production control, production management, equipment, facilities and support personnel. The Company believes that the increases in overhead expenses are consistent with the needs to manufacture the two new Pipe Line products within the FDA guidelines and achieve ISO 9003 certification by June 1998. GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for the three and six months ended December 31, 1997 increased by 108% and 152% from the corresponding fiscal 1997 periods. In November 1997, the Company made significant changes in senior management to improve operations, replacing the Chief Operating Officer and Director of Manufacturing. Approximately $200,000 of the increase was due to accrual of severance payments to departing executives and signing bonuses for the new President and the new Vice President of Manufacturing Operations. The additional increase is also attributable to expansion of facilities, personnel and additions to management that are required for the Company to manufacture and market Class II medical devices and achieve ISO 9003 certification by June 1998. SALES AND MARKETING EXPENSES: Selling and marketing expenses for the three and six months ended December 31, 1997 increased by 55% and 50% over the corresponding fiscal 1997 periods. The increase was primarily due to an increase in salaries for additional executives and support personnel to plan and implement the expected market introduction of the N{2} BioArchive System and the CryoSeal System. THERMOGENESIS CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 RESULTS OF OPERATIONS (CONT'D) RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses for the three and six months ended December 31, 1997 increased by 79% and 84% over the corresponding fiscal 1997 periods. A significant portion of the increase was due to accelerated research and development of these programs:(i) N{2} BioArchive System: a computerized liquid nitrogen biological storage and retrieval system and (ii) CryoSeal System: a system that harvests cryoprecipitated AHF from a donor's blood plasma for use as an intravenous treatment for hemophilia and as an autologous surgical tissue sealant and hemostatic agent. The Company also expensed the cost of CryoSeal devices and surgical disposables during the period that were utilized in the clinical surgery trials underway in Milan, Italy. Management believes that research and development is essential to maintaining the Company's market position and therefore, considers such expenses a continuing cost of doing business. ISSUANCE OF STOCK OPTIONS FOR SERVICES: During the six months ended December 31, 1997, the Company recorded $42,000 of consulting expense for issuance of stock options issued to two key advisors related to the CryoSeal System development and market. The options are exercisable at the fair market value as determined by the closing bid price for the Company's common stock as quoted by the Nasdaq SmallCap market on the date of grant. While the $42,000 is a non-monetary transaction, the Company has recorded the estimated fair value of the options under generally accepted accounting principles. LIQUIDITY AND CAPITAL RESOURCES During the six month periods ended December 31, 1997 and 1996, the Company had consumed cash resources for operating activities. These resources were primarily used to fund increases in inventory, and the net loss resulting from marketing activities and product development. The increase in inventory was primarily due to the purchase of materials for production of the BioArchive and CryoSeal Systems. Working capital increased by $1,237,157. The increase was primarily due to the net proceeds received from the private financing. The Company used $5,110,846 for operations for the six months ended December 31, 1997. This was due to increased research and development, lower sales volume in relationship to manufacturing fixed costs and added personnel in anticipation of new products production. The Company believes, based upon its current business plan, its existing cash equivalents and/or future investment capital, that it has adequate capital to satisfy its immediate current working capital needs, for approximately 12 months. The Company is also pursuing bank lines of credit to assist in product distribution. No assurances can be made, however, that financing will be available to fully execute the Company's business plan, or that it will be available on terms favorable to the Company. THERMOGENESIS CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 LIQUIDITY AND CAPITAL RESOURCES (CONT'D) During the second quarter of fiscal 1998, the Company initiated a restructuring of its operations to improve the sales and marketing expense trends noted during the first six months of the fiscal year. The initial phase of the restructuring involved replacing the Chief Operating Officer and Director of Manufacturing, as discussed above and putting policies and procedures in place to ensure that the Company transitions toward positive gross margins and expenses that reflect a percentage of revenues consistent with other companies in the medical device industry. In January 1998, the second phase of the restructuring focused on the Sales and Marketing function to increase sales and decrease the expenses of those departments. As part of this phase, the Vice President of Marketing and the Director of Customer Service left the Company. The third phase of the restructuring will focus on the manufacturing process and decreasing the cost of sales of the Company's products. The Company has entered into discussions with a foreign distributor to accelerate launch and coverage of distribution of the CryoSeal System throughout Europe. At December 31, 1997, the Company has no significant outstanding capital commitments. BACKLOG The Company's cancelable backlog at June 30, 1997 was $360,000, and was $1,230,000 at December 31, 1997. The backlog at December 31, 1997 included $865,000 in orders for the BioArchive System. The Company increased personnel for the production of the two new products and is analyzing its current facilities capacity to ensure that the backlog orders will be filled. FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF COMMON STOCK GOVERNMENT REGULATION ASSOCIATED WITH PRODUCTS The European Economic Community (EEC) is requiring medical devices that the Company manufactures to comply with the Medical Device Directive and CE Marking requirements by June 14, 1998. In order to achieve CE marking, the Company must be certified by a Notified Body of the EEC countries to meet the EN 46000 quality standard (APPLICATION OF ISO/EN 9000 TO THE MANUFACTURE OF MEDICAL DEVICES) In the six months ended December 31, 1997, approximately 30% of the Company's revenues were generated from European sales. The Company has established a plan to achieve certification by June 14, 1998, however, there is no assurance that the Company will receive certification. PART II - OTHER INFORMATION Item 1. Legal proceedings. None. Item 2. Changes in Securities. None. Item 3. Default Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits None. (b) Reports on Form 8-K. Form 8-K for event dated December 2, 1997 Announcing Closing of Equity Offering Form 8-K for event dated December 31, 1997 Announcing Closing of Equity Offering. THERMOGENESIS CORP. Signatures In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THERMOGENESIS CORP. (Registrant) Dated February 11, 1998 S/PHILIP H. COELHO Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) S/RENEE M. RUECKER Director of Finance (Principal Accounting Officer) EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOGENESIS CORP.'S FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-1998 DEC-31-1997 4,782,841 0 960,844 97,913 3,198,204 9,108,165 2,251,831 868,387 10,863,715 1,463,771 0 0 0 18,756 9,280,062 10,863,715 1,527,092 1,567,780 2,481,632 2,481,632 0 51,862 26,142 (5,444,121) 0 (5,444,121) 0 0 0 (5,444,121) (0.33) (0.33)
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