-----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, MAV5IkwYuprj4KCAzJ7cEt8WpvSYePaQXJ+1K18uPLFlUC/3F0V0eW7wzI1uH9C4 QyqMqzvoo/4lQHPO2eCzhQ== 0001001277-03-000078.txt : 20030214 0001001277-03-000078.hdr.sgml : 20030214 20030214141945 ACCESSION NUMBER: 0001001277-03-000078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030214 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: 1934 Act SEC FILE NUMBER: 333-82900 FILM NUMBER: 03566163 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 for123102.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(b) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2002. Commission File Number: 0-16375 ThermoGenesis Corp. (Exact name of registrant as specified in its character) 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) 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of Exchange Act). Yes [ ] No [X] The number of shares of the registrant's common stock, $0.001 par value, outstanding on January 31, 2003 was 35,266,004. _______________________________ THERMOGENESIS CORP. INDEX Page Number ----------- Part I Financial Information Item 1. Financial Statements (Unaudited): Balance Sheets at December 31, 2002 and June 30, 2002 ................3 Statements of Operations for the Three and Six Months ended December 31, 2002 and 2001 ............................5 Statements of Cash Flows for the Three and Six Months Ended December 31, 2002 and 2001 ...................................6 Notes to Financial Statements ........................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .....................12 Item 3. Quantitative and Qualitative Disclosures About Market Risk. See Management's Discussion and Analysis of Financial Condition and Results of Operations Item 4. Controls and Procedures...............................................15 Part II Other Information Item 1. Legal Proceedings ...................................................16 Item 2. Changes in Securities and Use of Proceeds............................16 Item 3. Default Upon Senior Securities ......................................16 Item 4. Submission of Matters to a Vote of Security Holders .................16 Item 5. Other Information ...................................................16 Item 6. Exhibits and Reports on Form 8-K ....................................16 Signatures ...................................................................17 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) THERMOGENESIS CORP. Balance Sheets (Unaudited)
December 31, June 30, 2002 2002 --------------------- --------------------- ASSETS Current Assets: Cash and cash equivalents $3,450,000 $4,713,000 Short term investments -- 2,013,000 Accounts receivable, net of allowance for doubtful accounts of $80,000 ($84,000 at June 30, 2002) 1,423,000 1,916,000 Inventory 3,742,000 2,887,000 Other current assets 458,000 115,000 --------------------- --------------------- Total current assets 9,073,000 11,644,000 Equipment, at cost less accumulated depreciation of $2,471,000 ($2,389,000 at June 30, 2002) 521,000 537,000 Other assets 48,000 58,000 --------------------- --------------------- $9,642,000 $12,239,000 ===================== =====================
See accompanying notes to financial statements. THERMOGENESIS CORP. Balance Sheets (Cont'd) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, June 30, 2002 2002 -------------------- ------------------- Current liabilities: Accounts payable $1,379,000 $995,000 Accrued payroll and related expenses 270,000 204,000 Deferred revenue 394,000 436,000 Accrued liabilities 257,000 378,000 -------------------- ------------------- Total current liabilities 2,300,000 2,013,000 Long-term obligations 55,000 33,000 Commitments and contingencies -- -- Stockholders' equity: Series A convertible preferred stock, $0.001 par value, 1,200,000 shares authorized; 158,000 issued and outstanding (158,000 at June 30, 2002)($1,303,500 aggregate involuntary liquidation value at December 31, 2002) -- -- Preferred stock, $0.001 par value; 800,000 shares authorized; no shares issued and outstanding -- -- Common stock, $0.001 par value; 50,000,000 shares authorized; 35,266,004 issued and outstanding (35,230,254 at June 30, 2002) 35,000 35,000 Paid in capital in excess of par 59,308,000 59,268,000 Accumulated deficit (52,056,000) (49,110,000) -------------------- ------------------- Total stockholders' equity 7,287,000 10,193,000 -------------------- ------------------- $9,642,000 $12,239,000 ==================== ===================
See accompanying notes to financial statements. THERMOGENESIS CORP. Statements of Operations (Unaudited)
Three Months Ended Six Months Ended December 31, December 31, 2002 2001 2002 2001 ---------------- ----------------- ----------------- ---------------- Net revenues $2,350,000 $2,467,000 $4,403,000 $3,984,000 Cost of revenues 1,938,000 1,841,000 3,635,000 3,110,000 ---------------- ----------------- ----------------- ---------------- Gross profit 412,000 626,000 768,000 874,000 ---------------- ----------------- ----------------- ---------------- Expenses: Selling, general and administrative 1,185,000 1,156,000 2,369,000 2,249,000 Research and development 826,000 455,000 1,388,000 1,056,000 ---------------- ----------------- ----------------- ---------------- Total expenses 2,011,000 1,611,000 3,757,000 3,305,000 Interest expense 4,000 3,000 7,000 6,000 Interest income 19,000 33,000 50,000 69,000 ---------------- ----------------- ----------------- ---------------- Net loss ($1,584,000) ($955,000) ($2,946,000) ($2,368,000) ================ ================= ================= ================ Per share data: Basic and diluted net loss per common share ($0.04) ($0.03) ($0.08) ($0.07) ================ ================= ================= ================ Shares used in computing per share data 35,266,004 31,606,436 35,265,837 31,704,492 ================ ================= ================= ================
See accompanying notes to financial statements. THERMOGENESIS CORP. Statements of Cash Flows Six Months Ended December 31, 2002 and 2001 (Unaudited)
2002 2001 ------------------- ------------------- Cash flows from operating activities: Net loss ($2,946,000) ($2,368,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 137,000 233,000 Loss on retirement of equipment 9,000 -- Net change in operating assets and liabilities: Accounts receivable 493,000 (51,000) Inventory (907,000) (1,249,000) Other current assets (343,000) (127,000) Other assets 10,000 1,000 Accounts payable 384,000 198,000 Accrued payroll and related expenses 66,000 25,000 Deferred revenue (42,000) (206,000) Accrued liabilities (127,000) 515,000 ------------------- ------------------- Net cash used in operating activities (3,266,000) (3,029,000) ------------------- ------------------- Cash flows from investing activities: Capital expenditures (42,000) (93,000) Maturities of short-term investments 2,013,000 1,822,000 ------------------- ------------------- Net cash provided by investing activities 1,971,000 1,729,000 ------------------- ------------------- Cash flows from financing activities: Payments on capital lease obligations (8,000) (6,000) Exercise of stock options 40,000 13,000 ------------------- ------------------- Net cash provided by financing activities 32,000 7,000 ------------------- ------------------- Net decrease in cash and cash equivalents (1,263,000) (1,293,000) Cash and cash equivalents at beginning of period 4,713,000 3,544,000 ------------------- ------------------- Cash and cash equivalents at end of period $3,450,000 $2,251,000 =================== =================== Supplemental non-cash flow information: Equipment acquired by note payable $36,000 -- =================== =================== Cancellation of stockholder note receivable -- $425,000 =================== ===================
See accompanying notes to financial statements THERMOGENESIS CORP. Notes to Financial Statements December 31, 2002 (Unaudited) Interim Reporting The accompanying unaudited 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. 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 revenues. 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 six month period ended December 31, 2002 are not necessarily indicative of the results that may be expected for the year ended June 30, 2003. Summary of Significant Accounting Policies On December 3, 1999, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," and effective July 1, 2000, the Company changed its method of accounting for revenue recognition for BioArchive (registered trademark) Systems and certain licensing agreements. Previously, the Company recognized revenue for BioArchive units upon the delivery of the equipment to the customers. The costs of training and installation were accrued in the same period the installation and training was performed and the related training and installation revenue was recognized. Under the new accounting method for BioArchive Systems adopted retroactive to July 1, 2000, the Company now recognizes revenue for BioArchive Systems for which the Company is responsible for the installation and training upon completion of training and installation of the equipment at the end-user's site. If a third party vendor is responsible for the installation and training and the Company has no further obligations to the customer, the Company recognizes the revenue for the BioArchive device upon transfer of title. Previously, the Company recognized revenue for licensing agreements when payment was received and the Company performed all services required under the agreements. Under the new accounting method which was adopted retroactive to July 1, 2000 for licensing agreements pursuant to which the Company receives up-front licensing fees for products or technologies that will be provided by the Company over the term of the arrangements, the Company now defers the up-front fees and recognizes the fees as revenue on a straight-line method over the term of the respective contracts. The cumulative effect of the change on prior years resulted in an increase in the net loss of $282,000 (net of income taxes of $0), which is included in the net loss before the cumulative effect of a change in accounting principle for the year ended June 30, 2001, and $13,000 has been included in deferred revenue as of June 30, 2001. The $282,000 is comprised of revenues of $664,000 less cost of revenues of $382,000. The effect of the change on the year ended June 30, 2001 was to decrease the net loss before the cumulative effect of the accounting change by $179,000 ($0.01 per share). The $179,000 is comprised of revenues of $272,000 less cost of revenues of $93,000. For the three months ended December 31, 2002 and 2001, the Company recognized $0 and $138,000 respectively, in revenue that was included in the cumulative effect adjustment as of July 1, 2000. The effect of that revenue and related cost of revenue of $0 and $125,000 was to reduce the net loss by $0 and $13,000 during those periods, respectively. For the six months ended December 31, 2002 and 2001 the Company recognized $0 and $138,000 respectively, in revenue that was included in the cumulative effect adjustment as of July 1, 2000. The effect of that revenue and related cost of revenue of $0 and $125,000 was to reduce the net loss by $0 and $13,000 during those periods, respectively. THERMOGENESIS CORP. Notes to Financial Statements (Cont'd) December 31, 2002 (Unaudited) Summary of Significant Accounting Policies (Cont'd) Revenues from the sale of the Company's CryoSeal FS (registered trademark) System and ThermoLine (trademark) products to end-users are recognized upon transfer of title. The Company generally ships products F.O.B. shipping point at its office. There is no conditional evaluation on any product sold and recognized as revenue. All foreign sales are denominated in U.S. dollars. The Company's foreign sales are generally through distributors. There is no right of return provided for distributors. For sales of CryoSeal, BioArchive and ThermoLine products made to distributors, the Company considers a number of factors in determining whether revenue is recognized upon transfer of title to the distributor, or when the distributor places the product with an end-user. These factors include, but are not limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor's history of adhering to the terms of its contractual arrangements with the Company, the level of inventory maintained by the distributor, whether the Company has a pattern of granting concessions for the benefit of the distributor, or whether there are other conditions that may indicate that the sale to the distributor is not substantive. Shipping and handling fees billed to customers are included in product and other revenues, while the related costs are included in cost of product and other revenues. Service revenue is generally generated from contracts for providing maintenance of equipment. Service revenue is recognized at the time the service is completed. Recent Accounting Pronouncements On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS"), SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Intangible assets whose lives are not indefinite are amortized over their useful lives, and reviewed for impairment in accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to be Disposed of". SFAS No. 141 was adopted as of July 1, 2001 and had no impact on our financial statements. SFAS No. 142 was adopted as of July 1, 2002 and had no impact on our financial statements. In October 2001, the FASB issued SFAS No. 144 on "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121. The primary objectives of SFAS No. 144 are to develop one accounting model based on the framework established in SFAS No. 121 for long-lived assets to be disposed of by sale, and to address significant implementation issues. SFAS No. 144 was adopted on July 1, 2002 and had no impact on our financial statements. THERMOGENESIS CORP. Notes to Financial Statements (Cont'd) December 31, 2002 (Unaudited) Recent Accounting Pronouncements (Cont'd) In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB No. 4, 44 and 64, Amendment of FASB No. 13 and Technical Corrections". SFAS No. 145 updates, clarifies and simplifies existing accounting pronouncements. SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30 will now be used to classify those gains and losses because SFAS No. 4 has been rescinded. SFAS 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This amendment is consistent with the FASB's goal of requiring similar accounting treatment for transactions that have similar economic effects. SFAS No. 145 also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. The Company adopted the provisions of SFAS 145 for fiscal 2003, which did not result in a material impact to financial position, cash flows or results of operations. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS No. 146 and Issue 94-3 relates to SFAS No. 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. A fundamental conclusion reached by the FASB in SFAS No. 146 is that an entity's commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, SFAS No. 146 eliminates the definition and requirements for recognition of exit costs in Issue 94-3. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect the adoption of SFAS No. 146 will have a material impact on financial position, cash flows or results of operations. In November 2002, the EITF reached a consensus on Issue 00-21, "Multiple-Deliverable Revenue Arrangements" ("EITF 00-21"). EITF 00-21 addresses how to account for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. The consensus mandates how to identify whether goods or services or both that are to be delivered separately in a bundled sales arrangement should be accounted for separately because they are "separate units of accounting." The guidance can affect the timing of revenue recognition for such arrangements, even though it does not change rules governing the timing or pattern of revenue recognition of individual items accounted for separately. The final consensus will be applicable to agreements entered into in fiscal years beginning after June 15, 2003 with early adoption permitted. Additionally, companies will be permitted to apply the consensus guidance to all existing arrangements as the cumulative effect of a change in accounting principle in accordance with APB Opinion No. 20, Accounting Changes. We are assessing, but at this point do not believe the adoption of EITF 00-21 will have a material impact on the Company's financial position, cash flows or results of operations. THERMOGENESIS CORP. Notes to Financial Statements (Cont'd) December 31, 2002 (Unaudited) Recent Accounting Pronouncements (Cont'd) In November 2002, the FASB issued Interpretation Number 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods after December 15, 2002 and the Company has adopted those requirements for the financial statements included in this Form 10-Q. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002. The Company is assessing, but at this point do not believe the adoption of the recognition and initial measurement requirements of FIN 45 will have a material impact on financial position, cash flows or results of operations. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation and provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. Adoption of SFAS No. 148 is not expected to materially impact our financial statements. Inventory Inventory consisted of the following at: December 31, 2002 June 30, 2002 ------------------------ ------------------ Raw materials $1,903,000 $1,456,000 Work in process 640,000 765,000 Finished goods 1,199,000 666,000 ------------------------ ------------------ $3,742,000 $2,887,000 ======================== ================== THERMOGENESIS CORP. Notes to Financial Statements (Cont'd) December 31, 2002 (Unaudited) Warranty The Company offers a one-year warranty for parts only on all of its products. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company's warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and cost per claim. Additionally, the Company sells extended warranties on its BioArchive and freezers. The customer pays for the extended warranty at the beginning of the contract period and the resulting liability is included in deferred revenue. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Changes in the Company's product liability during the period are as follows: July 1, 2002 balance $267,000 Warranties issued during the period 149,000 Settlements made during the period (145,000) Changes in liability for pre-existing warranties during the period, including expirations (61,000) ------------ December 31, 2002 balance $210,000 ============ Related Party Transactions During the three and six months ended December 31, 2002, the Company paid a board member $30,000 and $73,000 respectively, for consulting services related to the Company's strategic initiatives. THERMOGENESIS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2002 and 2001 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements - -------------------------- This report contains forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. When used in this report, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. The Company wishes to caution readers of the important factors, among others, that in some cases have affected, and in the future could affect the Company's actual results and could cause actual results for fiscal year 2003, and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. These factors include without limitation, the ability to obtain capital and other financing in the amounts and at the times needed to complete clinical trials and product marketing for new products, market acceptance of new products, regulatory approval and time frames for such approval of new products and new claims for existing products, realization of forecasted income and expenses, initiatives by competitors, price pressures, and the risk factors listed from time to time in the Company's SEC reports, including, in particular, the factors and discussion in the Company's Form 10-K for its last fiscal year. Introduction - ------------ The Company designs and manufactures medical devices and disposables used for the distributed manufacturing of biotherapeutic products such as concentrated mononuclear cells from umbilical cord blood, fibrin sealant and thrombin from blood plasma and other related blood products. Initially the Company developed its ThermoLine products for ultra rapid freezing and thawing of blood components, which the Company distributes to blood banks and hospitals. After extensive research and development, two new technology platforms (the BioArchive System and the CryoSeal System) have evolved products which provide new biotherapeutic products to patients in need. Beginning in late 1993, and with accelerated research and development efforts from 1996 to 1999, the Company completed development of the BioArchive and CryoSeal technology platforms, each of which will give rise to multiple medical products targeted at a number of different surgical and transplant indications. To achieve completion of these research projects and add experienced executive talent to launch the products and move the Company to new levels of growth and revenues, considerable capital resources were used. 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. THERMOGENESIS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2002 and 2001 (Cont'd) Critical Accounting Policies - ---------------------------- The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its judgements and estimates, including those related to revenue recognition, bad debts, inventories, warranties, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements. The Company recognizes revenue for BioArchive Systems upon transfer of title if we are not responsible for training and installation services, otherwise, we recognize revenue upon completion of training and installation of the equipment at the end-user's site. For licensing arrangements pursuant to which the Company receives up-front licensing fees for products or technologies that will be provided by the Company over the term of the arrangements, the Company defers the upfront fees and recognizes the fees as revenue on a straight-line method over the term of the respective contracts. For sales of CryoSeal, BioArchive and ThermoLine products made to distributors, the Company considers a number of factors in determining whether revenue is recognized upon transfer of title to the distributor, or when the distributor places the product with an end-user. These factors include, but are not limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor's history of adhering to the terms of its contractual arrangements with the Company, the level of inventory maintained by the distributor, whether the Company has a pattern of granting concessions for the benefit of the distributor, or whether there are other conditions that may indicate that the sale to the distributor is not substantive. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company's warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company's estimates, revisions to the estimated warranty liability would be required. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. THERMOGENESIS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2002 (Cont'd) Results of Operations - --------------------- Net Revenues: Revenues for the three and six months ended December 31, 2002 were $2,350,000 and $4,403,000, compared to $2,467,000 and $3,984,000 for the fiscal 2002 periods, a decrease of $117,000 or 5% and an increase of $419,000 or 11%, respectively. BioArchive revenues were $985,000 and $1,978,000 for the three and six months ended December 31, 2002, compared to $962,000 and $1,687,000 for the corresponding fiscal 2002 periods, an increase of $23,000 or 2% and $291,000 or 17%, respectively. The increase in BioArchive revenue is primarily due to disposables sold to existing customers due to the increased demand from private and public cord blood banks in Asia. Revenues generated by the CryoSeal product line for the three and six months ended December 31, 2002 were $111,000 and $362,000 versus $24,000 for the three and six months ended December 31, 2001. Cost of Revenues: Cost of revenues as a percent of revenues was 82% and 83% for the three and six months ended December 31, 2002, as compared to 75% and 78% for the corresponding fiscal 2002 periods. The cost of revenues percentage increased primarily due to the significant overhead costs associated with building and maintaining an infrastructure that is required to meet FDA regulatory requirements and standards for productions of Class II medical devices and the mix of products sold. Selling, General and Administrative Expenses: Selling, general and administrative expenses were $1,185,000 and $2,369,000 for the three and six months ended December 31, 2002 compared to $1,156,000 and $2,249,000 for the fiscal 2002 periods, an increase of $29,000 or 3% and $120,000 or 5%, respectively. The increases were primarily the result of professional fees paid in connection with the executive search for a new President and Chief Operating Officer and additional travel expenses. Research and Development Expenses: Research and development expenses for the three and six months ended December 31, 2002 were $826,000 and $1,388,000 compared to $455,000 and $1,056,000 for the corresponding fiscal 2002 periods, an increase of 82% and 31% respectively. The increase is primarily due to the costs associated with the CryoSeal FS human clinical trials. Liquidity and Capital Resources Our cash balance at December 31, 2002 was $3,450,000, a decrease of $1,263,000 from the balance at June 30, 2002. Additionally, the short-term investment balance has decreased $2,013,000 since June 30, 2002. The cash and short-term investments were used to fund operations and other cash needs of the Company. In addition to product revenues we have primarily financed our operations through the private placement of equity securities. Since its inception, the Company has raised approximately $51 million, net of expenses, through common and preferred stock financings and option and warrant exercises. As of December 31, 2002, the Company has no off-balance sheet arrangements. Net cash used in operating activities for the six months ended December 31, 2002 was $3,266,000, primarily due to the net loss of $2,946,000. Inventory utilized $907,000 of cash as a result of purchasing materials for the BioArchive System and CryoSeal disposables to continue our revenue growth and ensure that we fill our customer orders on a timely basis. Other current assets utilized $343,000 of cash primarily due to a $385,000 prepayment to a Clinical Research Organization (CRO) for services with respect to the Company's CryoSeal FS human clinical trials. THERMOGENESIS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2002 (Cont'd) Liquidity and Capital Resources (Cont'd) - ---------------------------------------- The report of independent auditors on the Company's June 30, 2002 financial statements includes an explanatory paragraph indicating there is substantial doubt about the Company's ability to continue as a going concern. The Company believes that it has developed a viable plan to address these issues and that its plan will enable the Company to continue as a going concern through the end of fiscal year 2003. The plan includes the realization of revenues from the commercialization of new products, the consummation of debt or equity financings and the reduction of certain operating expenses as required. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. There is no assurance that the Company will be able to achieve additional financing or that such events will be on terms favorable to the Company. At December 31, 2002, the Company has $900,000 outstanding in cancelable orders to purchase inventory, supplies and services for use in normal business operations and no significant outstanding capital commitments. Backlog - ------- The Company's cancelable backlog at December 31, 2002 was $580,000. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ 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 revenues. The Company has no long-term debt or investments and therefore is not subject to interest rate risk. Item 4. Controls and Procedures - ------------------------------- Within the 90 days prior to the date of this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer along with the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in this Form 10-Q. There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings. In the normal course of operations, the Company may have disagreements or disputes with vendors or employees. These disputes are seen by the Company's management as a normal part of business, and there are no pending actions currently or no threatened actions that management believes would have a significant material impact on the Company's financial position, results of operations or cash flows. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Default Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. All nominees were elected to the board of directors and all resolutions passed. The following is the results of the votes at the Annual Meeting of stockholders held January 30, 2003. Proposal #1 Election of Directors For Withhold --------------------- --- -------- Philip H. Coelho 23,837,292 61,333 George J. Barry 23,832,592 66,033 Edward Cape 23,833,592 65,033 David Howell 23,833,192 65,433 Hubert Huckel 23,808,592 90,033 Patrick McEnany 23,450,764 447,861 Proposal #2 Approval of amendment to the 1998 Equity Incentive Plan to add an additional 1,000,000 shares of common stock underlying that plan. For Withhold Abstain 21,749,280 2,010,515 138,830 Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 10.1 Employment Agreement with Kevin Simpson 99.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K - None. THERMOGENESIS CORP. Signatures In accordance with 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. THERMOGENESIS CORP. (Registrant) Dated February 11, 2003 s/Philip H. Coelho ------------------------------------ Philip H. Coelho Chief Executive Officer (Principal Executive Officer) s/Renee M. Ruecker ------------------------------------ Renee M. Ruecker Chief Financial Officer (Principal Financial and Accounting Officer) CERTIFICATION I, Philip H. Coelho, Chief Executive Officer for THERMOGENESIS CORP. certify that: 1. I have reviewed this quarterly report on Form 10-Q of THERMOGENESIS CORP.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: February 11, 2003 s/Philip H. Coelho ----------------------------- Philip H. Coelho Chief Executive Officer (Principal Executive Officer) CERTIFICATION I, Renee Ruecker, Chief Financial Officer for THERMOGENESIS CORP. certify that: 1. I have reviewed this quarterly report on Form 10-Q of THERMOGENESIS CORP.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: February 11, 2003 s/Renee M. Ruecker -------------------------------------------- Renee M. Ruecker Chief Financial Officer (Principal Financial and Accounting Officer) EX-10 3 exhibit101.txt Exhibit 10.1 THERMOGENESIS CORP. EMPLOYMENT AGREEMENT for Kevin Simpson THERMOGENESIS CORP. ("Employer") and Kevin Simpson ("Employee"), agree as follows: 1. Employment. Employer employs Employee and Employee accepts employment with Employer on the terms and conditions set forth in this Employment Agreement ("Agreement"). 2. Position; Scope of Employment. Employee shall have the position of President and Chief Operating Officer for Employer, and shall have the duties and authority set forth below, and as detailed on the position description attached as Exhibit "A", which duties and authority may be modified from time to time by Employer. As President and Chief Operating Officer, Employee shall report directly to Employer's Chief Executive Officer. 2.1. Entire Time and Effort. Employee shall devote Employee's full working time, attention, abilities, skill, labor and efforts to the performance of his employment. Employee shall not, directly or indirectly, alone or as a member of a partnership or other organizational entity, or as an officer of any corporation (other than any which are owned by or affiliated with Employer) (i) be substantially engaged in or concerned with any other commercial duties or pursuits, (ii) engage in any other business activity that will interfere with the performance of Employee's duties under this Agreement, except with the prior written consent of Employer, or (iii) join the board of directors of any other corporation; provided, however, that Employee may join the board of directors of no more than two unaffiliated corporations so long as such corporations are not competitive to the current or future operations of Employer and those corporations offer some synergistic prospects or other support for Employer's goals. 2.2. Rules and Regulations. Employee agrees to observe and comply with Employer's rules and regulations as provided by Employer and as may be amended from time to time by Employer and will carry out and perform faithfully such orders, directions and policies of Employer. To the extent any provision of this Agreement is contrary to an Employer rule or regulation, as such may be amended from time to time, the terms of this Agreement shall control. 2.3. Limitations Upon Authority to Bind Employer. Employee shall not engage in any of the following actions on behalf of Employer without the prior approval of Employer: (i) borrow or obtain credit in any amount or execute any guaranty, except for items purchased from vendors in the ordinary course of Employer's operations; (ii) expend funds for capital equipment in excess of expenditures expressly budgeted by Employer, if applicable, or in the event not budgeted, not to exceed the amounts set forth in subparagraph (iii); (iii) sell or transfer capital assets exceeding One Hundred thousand Dollars ($100,000) in market value in any single transaction or exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate during any one fiscal year; (iv) execute any lease for real or personal property; or (v) exercise any authority or control over the management of any employee welfare or pension benefit plan maintained by Employer or over the disposition of the assets of any such plan. 3. Term. The term of this Agreement shall be for a period of five (5) years which shall commence on January 15, 2003 and end on January 14, 2008 (subject to adjustment to an earlier start date and termination date by mutual agreement); unless terminated earlier as provided below in section 5. 4. Compensation. Employer shall pay to or provide compensation to Employee as set forth in this section 4. All compensation of every description shall be subject to the customary withholding tax and other employment taxes as required with respect to compensation paid to an employee. 4.1. Base Salary. Employer shall pay Employee a base salary of Two Hundred Seventeen Thousand Two-hundred Dollars ($217,200) per year commencing on January 1, 2003 ("Base Salary"). Employee's Base Salary shall be payable in accordance with Employer's regular pay schedule, but not less frequently than twice per month. 4.2. Annual Review. On the date of Employer's annual meeting of stockholders and on each subsequent annual meeting of stockholders during the term of this Agreement, or at such other time as Employer may establish in its discretion, Employer shall review the previous year's performance of Employee for the purpose of making reasonable increases to Employee's Base Salary; provided that Employer shall not be required to increase Employee's Base Salary, but may do so at its discretion. 4.3. Cash/Stock Bonuses. In addition to the Base Salary provided for in sections 4.1 and 4.2, Employee is eligible to receive discretionary bonuses based on Employer performance and Employee's attainment of objectives periodically established by Employer. Such discretionary bonuses may be paid in cash, through issuance of stock or grant of stock options, or any combination thereof, subject to Board discretion. Annual bonuses that may be awarded to Employee shall not exceed thirty-five percent (35%) of Employee's Base Salary then in effect in any given year. 4.4. Stock Option Grants. In addition to Base Salary provided for in sections 4.1 and 4.2, Employee is eligible to receive, in addition to any cash bonus provided for in section 4.3, an award of stock options as may be determined from time to time by Employer's Compensation Committee which consists of disinterested directors who administer Employer's Amended 1994 Stock Option Plan and Amended 1998 Employee Equity Incentive Plan. At the inception of this Agreement, and subject to Plan requirements, Employee shall be granted an initial option to acquire 300,000 shares of the Company's common stock, which option shall be fully vested at the time of grant. Incident to the provisions of Section 4.3., Employer's Compensation Committee will establish an incentive program whereby Employee may earn and be granted additional options, up to an additional 300,000 options in year 2, up to an additional 200,000 options in each of year 3 and year 4 of this contract, and thereafter on a sliding scale based on achieving a percentage of objectives in the prior three years. 4.5. Vacation and Sick Leave. Employee shall be entitled to accrue up to four (4) weeks vacation annually; provided, however, that vacation time may not accrue beyond two weeks of accrued and unused time. Vacation pay shall not accrue beyond two (2) weeks at any given time. Employee shall be entitled to sick leave in accordance with Employer's sick leave policy, as amended from time to time. At the end of each anniversary of this Agreement, subject to the limit on two weeks accrued and unused vacation, all such unused and accrued vacation time shall be paid in cash. 4.6. Other Fringe Benefits. Employee shall participate in all of Employer's fringe benefit programs in substantially the same manner and to substantially the same extent as other similar employees of Employer, excluding only those benefits expressly modified by the terms hereof. 4.7. Expenses. Employee shall be reimbursed for his reasonable business expenses; subject to the presentation of evidence of such expenses in accordance with established policies adopted by Employer from time to time. 4.8. Compensation From Other Sources. Any proceeds that Employee shall receive by virtue of qualifying for disability insurance, disability benefits, or health or accident insurance shall belong to Employee. Employee shall not be paid Base Salary in any period in which he receives benefits as determined and paid under Employer's long-term disability policy. Benefits paid to Employee under Employer's short-term disability policy shall reduce, by the same amount, Base Salary payable to Employee for such period. 4.9. Initial Signing Bonus. Employee shall be paid an initial signing bonus of $35,000, which shall be paid on the first full payroll following Employee's commencement of services under this Agreement. 4.10. Moving Expenses. Employer shall reimburse Employee for actual moving expenses, as incurred, up to an aggregate amount of $10,000. Employee shall submit invoices and required reports for reimbursement. In addition, Employer shall reimburse Employee $7,500 for actual travel costs incurred that are associated with relocation and commencement of work during the first year of this Agreement. 5. Early Termination. Employee's employment with Employer may be terminated prior to the expiration of the term of this Agreement, upon any of the following events: (i) the mutual agreement of Employer and Employee in writing; (ii) the disability of Employee, which shall, for the purposes of this Agreement, mean Employee's inability, for a period exceeding three (3) months as determined by a qualified physician, and which qualifies Employee for benefits under Employer's long-term disability policy, to perform in the usual manner the material duties usually and customarily pertaining to Employee's long-term employment; (iii) Employee's death; (iv) notice of termination by Employer for cause; (v) Employer's cessation of business; (vi) written notice of termination by Employer without cause upon fourteen (14) days' notice, subject to the provisions for compensation upon early termination in section 5.3(b); (vii) debarment by any federal agency that would limit or prohibit Employee from serving in his capacity for Employer under this Agreement, or (viii) upon a Change in Control (as defined below) of Employer (as defined in and under the circumstances described in section 5.4). 5.1. Definition of Cause. For purposes of this Agreement, any of the following shall constitute cause: (i) willful or habitual breach of Employee's duties; (ii) fraud or intentional material misrepresentation by Employee to Employer or any others; (iii) theft or conversion by Employee; (iv) unauthorized disclosure or other use of Employer's trade secrets, customer lists or confidential information; (v) habitual misuse of alcohol or any nonprescribed drug or intoxicant; (vi) debarment by any federal agency that would limit or prohibit Employee from serving in his capacity for Employer under this Agreement, or (vii) willful violation of any other standards of conduct as set forth in Employer's employee manual. 5.2. Damages. If Employer terminates Employee for cause, Employer shall be entitled to damages and all other remedies to which Employer may otherwise be entitled. 5.3. Compensation Upon Early Termination. (a) If Employee resigns during the term of this Agreement (without mutual consent of Employer), or if this Agreement is terminated by Employer for cause, Employee shall be entitled to all accrued but unpaid Base Salary and vacation pay accrued through the date of delivery of the notice of termination, and all non-vested options shall be deemed canceled as of that date. (b) If Employee is terminated without cause, as defined in subsection (i) through (vii) of section 5 above, Employer shall pay to Employee as liquidated damages and in lieu of any and all other claims which Employee may have against Employer the greater of (i) six (6) months of Employee's salary excluding any amounts for benefits; or (ii) an amount equal to the then current per month Base Salary in accordance with the following schedule: (i) If terminated within the first full year of this Agreement, an amount equal to two (2) years Base salary, payable twice monthly in accordance with the Company's payroll dates; or (ii) If terminated in the second or third year of this Agreement, an amount equal to one (1) year Base salary, pay payable twice monthly in accordance with the Company's payroll dates. Employer's payment pursuant to this subparagraph shall fully and completely discharge any and all obligations of Employer to Employee arising out of or related to this Agreement and shall constitute liquidated damages in lieu of any and all claims which Employee may have against Employer not including any obligation under the workers' compensation laws including Employer's liability provisions. Initials: Employee _________ Employer _________ (c) If Employee's employment is terminated as a result of death or total disability, Employee shall be entitled to accrued but unpaid Base Salary to date of termination. The date of termination shall be deemed the date of death or, in the event of disability, the date Employee qualified for total disability payments under Employer's long-term disability plan. (d) If Employee's employment is terminated as a result of a Change in Control of Employer, Employee shall be entitled to a lump-sum payment equal to three times Employee's Base Salary at the time. A "Change in Control" shall mean an event involving one transaction or a related series of transactions in which one of the following occurs: (i) Employer issues securities equal to 33% or more of Employer's issued and outstanding voting securities, determined as a single class, to any individual, firm, partnership or other entity, including a "group" within the meaning of section 13(d)(3) of the Securities Exchange Act of 1934; (ii) Employer issues securities equal to 33% or more of the issued and outstanding common stock of Employer in connection with a merger, consolidation or other business combination; (iii) Employer is acquired in a merger or other business combination transaction in which Employer is not the surviving company; or (iv) all or substantially all of Employer's assets are sold or transferred. (e) Except as expressly provided in paragraph (d) above, all compensation described in this section 5.3 shall be due and payable in installments at least twice monthly or at the time of the delivery of notice of termination, at Employer's sole discretion and election. 6. Confidential Information of Customers of Employer. Employee during the course of his duties will be handling financial, accounting, statistical, marketing and personnel information of customers of Employer. All such information is confidential and shall not be disclosed, directly or indirectly, or used by Employee in any way, either during the term of this Agreement or at any time thereafter except as required in the course of Employee's employment with Employer. 7. Unfair Competition. During the term of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, stockholder, or otherwise, promote, participate, or engage in any activity or other business which is competitive in any way with Employer's business. The obligation of Employee not to compete with Employer shall not prohibit Employee from owning or purchasing any corporate securities that are regularly traded on a recognized stock exchange or on over-the-counter market. In order to protect the trade secrets of Employer, after the term, or upon earlier termination of this Agreement, Employee shall not, directly or indirectly, either as an employee, employer, consultants, agent, principal, partner, stockholder, corporate officer, director, or any other individual or representative capacity, engage or participate in any business that is in direct competition with the business of Employer for a period of one (1) year from the date of the expiration of this Agreement in the areas related to blood processing equipment or procedures. 8. Trade Secrets. Employee shall not disclose to any others, or take or use for Employee's own purposes or purposes of any others, during the term of this Agreement or at any time thereafter, any of Employer's trade secrets, including without limitation, confidential information, customer lists, computer programs or computer software of Employer. Employee agrees that these restrictions shall also apply to (i) trade secrets belonging to third parties in Employer's possession and (ii) trade secrets conceived, originated, discovered or developed by Employee during the term of this Agreement. Information of Employer shall not be considered a trade secret if it is lawfully known outside of Employer by anyone who does not have a duty to keep such information confidential. 8.1 Inventions; Ownership Rights. Employee agrees that all ideas, techniques, inventions, systems, formulas, discoveries, technical information, programs, prototypes and similar developments ("Developments") developed, created, discovered, made, written or obtained by Employee in the course of or as a result, directly or indirectly, of performance of his duties hereunder, and all related industrial property, copyrights, patent rights, trade secrets and other forms of protection thereof, shall be and remain the property of Employer. Employee agrees to execute or cause to be executed such assignments and applications, registrations and other documents and to take such other action as may be requested by Employer to enable Employer to protect its rights to any such Developments. If Employer requires Employee's assistance under this section 8.1 after termination of this Agreement, Employee shall be compensated for his time actually spent in providing such assistance at an hourly rate equivalent to the prevailing rate for such services and as agreed upon by the parties. 9. Arbitration. Any disputes regarding the rights or obligations of the parties under this Agreement shall be conclusively determined by binding arbitration. Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 10. Actions Contrary to Law. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law, and whenever there is any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract, then the latter shall prevail; but in such event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within legal requirements. 11. Miscellaneous. ------------- 11.1. Notices. All notices and demands of every kind shall be personally delivered or sent by first class mail to the parties at the addresses appearing below or at such other addresses as either party may designate in writing, delivered or mailed in accordance with the terms of this Agreement. Any such notice or demand shall be effective immediately upon personal delivery or three (3) days after deposit in the United States mail, as the case may be. EMPLOYER: THERMOGENESIS CORP. 3146 Gold Camp Drive Rancho Cordova, California 95670 EMPLOYEE: Kevin Simpson 11.2. Attorneys' Fees; Prejudgment Interest. If the services of an attorney are required by any party to secure the performance hereof or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law. 11.3. Choice of Law, Jurisdiction, Venue. This Agreement is drafted to be effective in the State of California, and shall be construed in accordance with California law. The exclusive jurisdiction and venue of any legal action by either party under this Agreement shall be the County of Sacramento, California. 11.4. Amendment, Waiver. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Employee and Employer. A waiver of any term or condition of this Agreement shall not be construed as a general waiver by Employer. Failure of either Employer or Employee to enforce any provision or provisions of this Agreement shall not waive any enforcement of any continuing breach of the same provision or provisions or any breach of any provision or provisions of this Agreement. 11.5. Assignment; Succession. It is hereby agreed that Employee's rights and obligations under this Agreement are personal and not assignable. This Agreement contains the entire agreement and understanding between the parties to it and shall be binding on and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties hereto. 11.6. Independent Covenants. All provisions herein concerning unfair competition and confidentiality shall be deemed independent covenants and shall be enforceable without regard to any breach by Employer unless such breach by Employer is willful and egregious. 11.7. Entire Agreement. This document constitutes the entire agreement between the parties, all oral agreements being merged herein, and supersedes all prior representations. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein. 11.8. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated. 11.9. Captions. All captions of sections and paragraphs in this Agreement are for reference only and shall not be considered in construing this Agreement. EMPLOYER: THERMOGENESIS CORP. By: --------------------------------------------- Philip H. Coelho, Chairman & Chief Executive Officer By: --------------------------------------------- David Howell, Chairman Compensation Committee) EMPLOYEE: By: ---------------------------------------------- Kevin Simpson, an individual EX-99 4 exhibit991.txt Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly report of ThermoGenesis Corp. (the "Company") on Form 10-Q for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), We, Philip H. Coelho, Chief Executive Officer and Renee M. Ruecker, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Dated: February 11, 2003 s/Philip H. Coelho -------------------------------------------- Philip H. Coelho, Chief Executive Officer (Principal Executive Officer) s/Renee M. Ruecker -------------------------------------------- Renee M. Ruecker, Chief Financial Officer (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----