-----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, F+XCAnHZUeKh/xS+NVS5v/9VswdSjWzaXXAzB2PCFYReO8CRsQKYc88rQICC0Ygk /+C1xwjVlW6STPe+Z1JWzw== 0000950133-99-001596.txt : 19990503 0000950133-99-001596.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950133-99-001596 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990328 FILED AS OF DATE: 19990430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRYOMEDICAL SCIENCES INC CENTRAL INDEX KEY: 0000834365 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 943076866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-18170 FILM NUMBER: 99607206 BUSINESS ADDRESS: STREET 1: 1300 PICARD DR STE 102 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3014177070 MAIL ADDRESS: STREET 1: 1300 PICCARD DRIVE SUITE 102 CITY: ROCKVILLE STATE: MD ZIP: 20850 10QSB 1 FORM 10-QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20459 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 28,1999 Commission file number 0-18170 ------------- ------- CRYOMEDICAL SCIENCES, INC. -------------------------- (Exact name of small business issuer as specified in its charter) Delaware 94-3076866 (State of Incorporation) (IRS Employer I.D. Number) 1300 Piccard Drive Suite L-105 Rockville, Maryland 20850 ------------------------- (Address of principal executive offices) Issuer's telephone number, including area code: (301) 417-7070 -------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --- --- 33,454,302 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001 per share, were outstanding as of April 15, 1999. 2 CRYOMEDICAL SCIENCES, INC. FORM 10-QSB QUARTER ENDED MARCH 28, 1999 INDEX
Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets at March 28, 1999 (unaudited) and December 27, 1998 3 Consolidated Statements of Operations for the thirteen weeks ended March 28, 1999 and March 29, 1998 (unaudited) 4 Consolidated Statements of Cash Flows for the thirteen weeks ended March 28, 1999 and March 29, 1998 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis or Plan of Operation 7-9 Part II. Other Information Item 2. Changes in Securities and Use of Proceeds 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
2 3 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 28, December 27, 1999 1998 ---- ---- (unaudited) ASSETS - ------ Current assets Cash and cash equivalents $ 31,805 $ 135,183 Receivables, net allowance for doubtful accounts 487,157 486,773 of $467,270 and $677,634 Inventories 1,135,753 1,225,982 Prepaid expenses and other current assets 119,800 80,510 --------------------- ------------------------ Total current assets 1,774,515 1,928,448 Fixed assets, net accumulated depreciation and amortization 708,195 780,307 of $2,406,487 and $2,334,375 Other assets 18,727 18,727 --------------------- ------------------------ Total assets $ 2,501,437 $ 2,727,482 ===================== ======================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities Accounts payable $ 365,793 $ 593,021 Accrued expenses 356,252 367,104 Short-term credit facility 90,775 120,000 Unearned revenues 38,350 60,839 Warranty reserves 6,000 11,400 Extended warranties - current portion 13,479 16,179 Capital leases - current portion 37,285 37,285 --------------------- ------------------------ Total current liabilities 907,934 1,205,828 --------------------- ------------------------ Extended warranties, net of current portion 11,609 14,096 Capital leases, net of current portion 39,958 50,035 Deferred rent 23,116 25,884 --------------------- ------------------------ Total liabilities 982,617 1,295,843 --------------------- ------------------------ Stockholders' equity Preferred stock, $.001 par value per share, 9,378,800 authorized; 384 and 128 shares issued respectively - - Common stock, par value $.001 per share, 50,000,000 shares authorized; 33,454,302 issued and outstanding 33,454 33,454 Additional paid-in capital 31,151,263 30,751,263 Accumulated deficit (29,665,897) (29,353,078) --------------------- ------------------------ Total stockholders' equity 1,518,820 1,431,639 --------------------- ------------------------ Total liabilities and stockholders' equity $ 2,501,437 $ 2,727,482 ===================== ========================
See notes to consolidated financial statements 3 4 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen weeks ended March 28, March 29, ------------------------------------------------------------------------- 1999 1998 ---- ---- (unaudited) Revenues $ 390,830 $ 538,517 Cost of sales 300,144 331,470 -------------------------------------- ---------------------------- Gross profit 90,686 207,047 Expenses Research and development 56,169 403,066 Sales and marketing 67,916 130,827 General and administrative 271,744 332,010 -------------------------------------- ---------------------------- Total expenses 395,829 865,903 -------------------------------------- ---------------------------- Operating loss (305,143) (658,856) Interest income, net of interest expense (7,676) (7,430) -------------------------------------- ---------------------------- Net loss $ (312,819) $ (666,286) ====================================== ============================ Net loss per common share $ (0.01) $ (0.02) ====================================== ============================ Weighted average number of common shares outstanding 33,454,302 33,454,302 ====================================== ============================
See notes to consolidated financial statements 4 5 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen weeks ended March 28, March 29, --------------------- --------------------- 1999 1998 ---- ---- (unaudited) Cash flows from operating activities: Net loss $ (312,819) $ (666,286) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 72,112 95,612 Provision for bad debt 30,605 39,791 Write off of accounts receivable (219,444) - Gain on disposal of fixed assets - (28) Amortization of unearned compensation 39,525 Changes in operating assets and liabilities: Decrease in receivables 188,455 399,353 Decrease in inventories 90,229 216,903 (Increase) decrease in prepaid and other current assets (39,290) 18,748 Decrease in accounts payable (227,228) (4,984) (Decrease) increase in accrued expenses (10,852) 13,334 Decrease in unearned revenue (22,489) (24,157) Decrease in warranty reserves (5,400) (33,002) Decrease in extended warranties (5,187) (41,437) Decrease in capital leases (10,077) (13,768) Decrease in deferred rent (2,768) (50) --------------------- --------------------- Net cash (used in) provided by operating activities (474,153) 39,554 --------------------- --------------------- Cash flows from investing activities: Proceeds from disposal of fixed assets - 5,436 Purchase of equipment - (150,006) --------------------- --------------------- Net cash used in investing activities - (144,570) --------------------- --------------------- Cash flows from financing activities: Issuance of Preferred Stock 400,000 - Decrease in short-term credit facility (29,225) - --------------------- --------------------- Net cash provided by financing activities 370,775 - --------------------- --------------------- Net decrease in cash and cash equivalents (103,378) (105,016) Cash and cash equivalents at beginning of period 135,183 124,000 --------------------- --------------------- Cash and cash equivalents at end of period $ 31,805 $ 18,984 ===================== ===================== Supplemental Cash Flow Information: Cash paid for interest 8,742 1,486 ===================== =====================
See notes to consolidated financial statements 5 6 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. GENERAL Cryomedical Sciences, Inc. (the "Company") is engaged in the research, development, marketing and manufacture of products for use in the field of low-temperature medicine. The Consolidated Balance Sheet as of March 28, 1999, the Consolidated Statements of Operations for the thirteen week periods ended March 28, 1999 and March 29, 1998, and the Consolidated Statements of Cash Flows for the thirteen week periods ended March 28, 1999 and March 29, 1998, have been prepared without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows at March 28, 1999, have been recorded. All adjustments recorded were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto for the year ended December 27, 1998 included in the Company's Annual Report on Form 10-KSB for the year ended December 27, 1998. The results of operations for the thirteen week period ended March 28, 1999 are not necessarily indicative of the operating results anticipated for the full year. B. NET LOSS PER SHARE Net loss per share is based on the weighted average number of common shares outstanding during the thirteen week periods ended March 28, 1999 and March 29, 1998. No effect has been given to unexercised stock options or warrants because the effect would be anti-dilutive. C. INVENTORIES Inventories consist of the following:
March 28, 1999 December 27, 1998 -------------- ----------------- Raw materials and purchased parts $ 610,653 $ 702,758 Work in process 138,529 111,140 Finished goods 386,571 412,084 ------- ------- $ 1,135,753 $ 1,225,982
D. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" was issued, which is effective for fiscal years beginning after December 15, 1997. The Company is complying with all requirements, but has no items of comprehensive income. 6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Company's business activities focus primarily on the manufacturing and marketing related to its cryosurgical systems. The CMS AccuProbe(R) System Model 450 was cleared by the FDA in April 1991, the CMS AccuProbe(R) System Models 530 and 550 were cleared in December 1995, the CMS AccuProbe(R) 600 series was cleared in March 1997 and the Cryo-lite(R) series was cleared in July 1997. The Company plans to continue to market these systems in the various fields for which they received clearance from the FDA. The Company received clearance in November 1997 to expand its indications for use (labeling) for the AccuProbe(R) system family. In September 1998 the Company received FDA clearance for its AccuProbe(R) 800 series. The Company is presently in the process of seeking funds for its wholly-owned subsidiary, BioLife Technologies, Inc. ("BioLife"), for the purpose of commercializing its Hypothermosol(R) series of preservation solutions. There can be no assurance that such funding will be obtained. RESULTS OF OPERATIONS Revenues for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $390,830 and $538,517 respectively, representing a decrease of 27%. The decrease in revenues for the recent thirteen week period reflects a decline in the number of CMS AccuProbe(R) Systems and accessories sold and a $65,000 back order in CMSI cryoprobes. The Company believes that this decline continues to be due primarily to a lack of the establishment of formal Medicare reimbursement for prostate cryosurgery. In February 1999 the Health Care Finance Administration ("HCFA") announced a new national coverage policy for cryosurgery of the prostate for patients with localized prostate cancer. It is anticipated that such a coverage policy will provide the Company with an opportunity to realize revenues from cryosurgical operations of the prostate, but there can be no assurance that such revenues will be realized. In April 1999 HCFA announced that it had established two reimbursement codes for cryosurgery of the prostate and that all covered procedures performed after July 1, 1999 would be considered for reimbursement. There has been no indication from HCFA regarding the reimbursement levels for the two procedural codes. The Company believes that upon the issuance of the reimbursement levels for cryosurgery of the prostate, it may realize additional revenues from cryosurgical operations subsequent to July 1, 1999. There can be no assurance that such revenues will be realized. An increase in revenues will be, to a large extent, dependent upon the levels of reimbursement established by HCFA for cryosurgery of the prostate, as these levels will influence both patients and physicians in regard to their choice of cryosurgery as opposed to other modalities that may be used to treat prostate cancer. The revenues of the Company have also been negatively impacted by an FDA advisory that all companies involved in thermal ablation can no longer advertise or promote uterine cryosurgical applications, specifically endometrial ablation. Gross profit for all products for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $90,686 and $207,047, respectively, or 23% and 38% of revenues respectively. Gross profit as a percent of revenues decreased in the thirteen week periods ended March 28, 1999 compared to the prior year period due to changes in the mix of product sales and a decrease in the revenue base over which certain manufacturing expenses are applied. Research and development expenses for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $56,169 and $403,066, respectively, a decrease of 86%. Development 7 8 expenses decreased due to a reduction in personnel and a decrease in raw material inventory used in R&D projects. Sales and marketing expenses for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $67,916 and $130,827, respectively, a decrease of 48%. Sales and marketing expenses decreased over the comparable period of the previous year due to reduced commissions, reduced number of personnel, and a reduction in travel and related expenses. General and administrative expenses for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $271,744 and $332,010, respectively, a decrease of 18%. General and administrative expenses decreased due to general cut backs in discretionary expenses and a reduction in the amount of leased space. Operating expenses for the thirteen week periods ended March 28, 1999 and March 29, 1998 totaled $395,829 and $865,903, respectively, a decrease of 54%. The Company sustained net losses of $312,819 for the thirteen week period ended March 28, 1999 compared to net losses of $666,286 in the comparable period of the prior year. The Company is continuing to make reductions in all discretionary expenses in an attempt to maintain its viability as an operating entity. LIQUIDITY AND CAPITAL RESOURCES On September 30, 1998, the Company entered into a Stock Purchase Agreement with ValorInvest, Ltd. ("ValorInvest"), a Geneva, Switzerland based investment bank, pursuant to which, among other things, ValorInvest purchased securities from the Company for $200,000 and subsequently purchased additional securities for $400,000 in the first quarter of the 1999 fiscal year. At March 28, 1999, the Company had cash and cash equivalents totaling $31,805 and working capital of $866,581, as compared to $135,183 and $722,620, respectively, at December 27, 1998. The Company's cash decreased from December 27, 1998 due primarily to the net loss of $312,819 sustained by the Company in the thirteen-week period ended March 28, 1999. The Company's working capital position increased from December 27, 1998 due to the infusion of capital from the ValorInvest purchase of additional securities. Capital expenditures for equipment totaled $0, including $0 in consignment and loaner CMS AccuProbe(R) Systems, in the thirteen week period ended March 28, 1999, compared to $150,006 and $100,000 respectively, in the comparable period of the prior year. The Company does not expect to spend more than $300,000 in total for equipment in the year ending December 26, 1999. The Company has reduced expenditures in order to ensure its viability in light of its limited cash and cash equivalents on hand. Although the Company believes that it can continue to operate if additional cost cutting steps are implemented, additional financing is needed if the Company wants the opportunity to grow. The Company believes that sales for the remainder of the 1999 fiscal year may be greater than the level experienced in the comparable prior year periods due to the favorable reimbursement environment created by HCFA's new coverage policy. However, the level of increased sales, if any, will depend in part on the Company's ability to finance the development, manufacturing and testing of its products, its sales and marketing efforts, and its education and retraining programs. If funds are raised by issuing equity securities, it may result in substantial dilution to existing stockholders. If capital is raised through a debt financing with financial 8 9 institutions, the Company would likely become subject to restrictive covenants relating to its operations and finances. The Company currently has no commitments for obtaining any additional funds, and the sale of its products represents its only current source of liquidity. There can be no assurance that a financing will be consummated on reasonable terms or at all. YEAR 2000 ISSUE Many computer systems record years in a two-digit format. Such systems, if not modified will be unable to recognize and properly process information with dates beyond the year 1999. The potential problems arising out of this inability commonly are referred to as the "Year 2000 Issue". The Company believes that the computers and software programs currently utilized by the Company are Year 2000 ready. To date, no assessment has been made as to the effect, if any, third party non-compliance will have on the Company's operations. However, given the large number of suppliers available to the Company and its ability, if necessary, to manufacture its products totally in house, the Company does not believe that third party non-compliance would have a material impact on the Company's operations. FORWARD LOOKING INFORMATION This Report contains certain forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including statements regarding Medicare reimbursement, the Company's liquidity and capital resources, and its ability to continue its operations in the absence of additional financing, are based on current expectations that involve numerous risks and uncertainties. Actual results could differ materially from those anticipated in such forward-looking statements as a result of various known and unknown factors including, without limitation, future economic, competitive, regulatory, and market conditions, future business decisions, the receipt of financing, market acceptance of the Company's products, and those factors discussed in this Report. Words such as "believes," "anticipates," "expects," "intends," "may," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. The Company undertakes no obligation to revise any of these forward-looking statements. 9 10 CRYOMEDICAL SCIENCES, INC. PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds In February, 1999, the Company raised $400,000 in gross proceeds from the sale of 256 Series E Units to ValorInvest, Ltd. pursuant to Regulation S promulgated under the Securities Act of 1933. Each Series E unit consists of one share of Series E Convertible Preferred Stock, convertible into 10,000 shares of Common Stock, and a warrant to purchase 5,000 shares of Common Stock at $.25 per share. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule. (b) Reports on Form 8-K: none 10 11 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Cryomedical Sciences, Inc. -------------------------- (Registrant) Date: April 30, 1999 /s/Richard J. Reinhart, Ph.D. ----------------------------- Richard J. Reinhart, Ph.D President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-27-1998 DEC-28-1998 MAR-28-1999 31,805 0 954,427 (467,270) 1,135,753 119,800 3,114,682 (2,406,487) 2,501,437 907,934 74,683 0 0 33,454 1,485,366 2,501,437 254,618 390,830 95,653 300,144 395,829 0 (7,676) (312,819) 0 0 0 0 0 (312,819) (.01) (.01)
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