-----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, RtDnwvCpDtVNAAI42TMV9P9vlBXSddYEV0FTkJADixDIrjdRpdM5islEG4mYFv/N lYshY3DXfbscnVD78QGYxQ== 0000950133-97-003018.txt : 19970819 0000950133-97-003018.hdr.sgml : 19970819 ACCESSION NUMBER: 0000950133-97-003018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970818 SROS: NASD 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: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18170 FILM NUMBER: 97666007 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 10-Q 1 CRYOMEDICAL SCIENCES, INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20459 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For The Quarterly Period Ended June 29, 1997 Commission File Number 0-18170 ------------- ------- CRYOMEDICAL SCIENCES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 94-3076866 (State of Incorporation) (IRS Employer I.D. Number) 1300 Piccard Drive Suite L105 Rockville, Maryland 20850 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (301) 417-7070 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 --- --- 33,395,087 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001 per share, were outstanding as of August 13, 1997. 2 CRYOMEDICAL SCIENCES, INC. FORM 10-Q QUARTER ENDED JUNE 29, 1997 INDEX Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets at June 29, 1997 and December 29, 1996. 3 Consolidated Statements of Operations for the Three Months and Six Months ended June 29, 1997 and June 29, 1996. 4 Consolidated Statements of Cash Flows for the Six Months ended June 29, 1997 and June 30, 1996. 5 Notes to Consolidated Condensed Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Part II. Other Information Item 1. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 3 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited)
June 29, December 29, 1997 1996 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 773,931 $ 1,769,243 Short-term investments 110,150 110,150 Receivables - net allowance for doubtful accounts of $250,173 and $246,908 1,137,811 1,374,814 Inventories 1,627,071 1,691,301 Prepaid expenses and other 156,803 66,395 ------------ ------------ Total current assets 3,805,766 5,011,903 EQUIPMENT AND LEASEHOLD IMPROVEMENTS - less accumulated depreciation and amortization of $1,836,163 and $1,625,635 1,078,616 1,014,114 OTHER ASSETS 18,727 18,727 ------------ ------------ $ 4,903,109 $ 6,044,744 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 864,709 $ 1,070,786 Accrued vacation 115,547 94,947 Customer deposits 10,000 10,000 Deferred revenue 172,280 144,210 Warranty reserves 75,515 97,600 Extended warranties - current 234,513 420,350 Current portion of capital lease obligations and notes payable 10,114 9,706 ------------ ------------ Total current liabilities 1,482,678 1,847,599 EXTENDED WARRANTIES, net of current portion 30,699 97,338 DEFERRED RENT 84,187 105,524 ------------ ------------ Total liabilities 1,597,564 2,050,461 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $.001; authorized, 9,378,800 shares; issued and outstanding, none -- -- Common Stock, par value $.001; authorized, 50,000,000 shares; issued and outstanding, 33,395,643 and 27,849,745 shares 33,396 27,850 Additional paid-in capital 30,534,209 30,483,765 Accumulated deficit (27,222,535) (26,494,744) Unearned compensation (39,525) (22,588) ------------ ------------ Total stockholders' equity 3,305,545 3,994,283 ------------ ------------ $ 4,903,109 $ 6,044,744 ============ ============
See notes to consolidated financial statements. 3 4 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 ------------- ------------- ------------- ------------- SALES & OTHER REVENUES $ 860,462 $ 1,135,207 $ 1,847,310 $ 3,161,800 COST OF SALES 660,694 1,110,343 1,005,186 2,124,446 ------------ ------------ ------------ ------------ GROSS PROFIT 199,768 24,864 842,124 1,037,354 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Research and development 318,638 465,110 594,418 778,137 Sales and marketing 245,957 580,246 449,107 1,173,200 General and administrative 332,884 969,720 602,583 1,492,694 ------------ ------------ ------------ ------------ TOTAL OPERATING EXPENSES 897,479 2,015,076 1,646,108 3,444,031 ------------ ------------ ------------ ------------ OPERATING LOSS (697,711) (1,990,212) (803,984) (2,406,677) INTEREST INCOME, net of interest expense 60,220 2,130 76,193 5,927 ------------ ------------ ------------ ------------ NET LOSS $ (637,491) $ (1,988,082) $ (727,791) $ (2,400,750) ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 33,190,094 26,343,473 32,702,041 25,277,944 ============ ============ ============ ============ NET LOSS PER SHARE $ (0.02) $ (0.08) $ (0.02) $ (0.09) ============ ============ ============ ============
4 5 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended June 29, June 30, 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (727,791) $(2,400,750) ----------- ----------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 210,528 180,987 Amortization of unearned compensation 26,062 -- Write-off of fixed assets -- 29,023 Changes in assets and liabilities: Decrease (increase) in receivables 237,003 69,896 (Increase) decrease in inventories (71,196) 472,657 Increase in prepaid expenses and other assets (90,408) 70,983 Decrease in warranty reserves (22,085) (49,800) Increase (decrease) in accounts payable, accrued expenses, accrued vacation and deferred rent (178,336) 477,097 Increase in customer deposits -- (40,000) Decrease in extended warranties (252,476) (468,363) ----------- ----------- Total Adjustments (140,908) 742,480 ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (868,699) 1,658,270 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturities of short-term investments -- (4,761) Purchase of equipment (139,604) (22,105) ----------- ----------- NET CASH USED FOR INVESTING ACTIVITIES (139,604) (26,866) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes receivable from officers -- (937) Common stock issued for cash -- 1,910,000 Issuance of shares for employee stock purchase plan 12,991 16,700 Exercise of employee stock option -- 282,204 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 12,991 2,207,967 ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (995,312) 522,831 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,769,243 728,040 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 773,931 $ 1,250,871 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest expense $ 1,392 $ 5,908 =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY: Capitalization of inventories into equipment $ 135,426 $ -- =========== =========== Issuance of warrants $ 42,999 $ -- =========== ===========
See notes to consolidated condensed financial statements. 5 6 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 29, 1997 AND JUNE 30, 1996 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 June 29, 1997, the Consolidated Statements of Operations for the three and six month periods ended June 29, 1997 and June 30, 1996, and the Consolidated Statements of Cash Flows for the six month periods ended June 29, 1997 and June 30, 1996, 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 June 29, 1997, and for all periods then ended, 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 six-month transition period ended December 29, 1996 included in the Company's Annual Report on Form 10-K for the six-month transition period ended December 29, 1996. The results of operations for the period ended June 29, 1997 are not necessarily indicative of the operating results anticipated for the fiscal year ending December 28, 1997. B. NET LOSS PER SHARE Net loss per share is based on the weighted average number of common shares outstanding during the three and six month periods ended June 29, 1997 and June 30, 1996. No effect has been given to unexercised stock options or warrants because the effect would be antidilutive. 6 7 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 29, 1997 AND JUNE 30, 1996 C. INVENTORIES Inventories consist of the following:
June 29, 1997 December 29, 1996 ------------- ----------------- Raw materials and purchased parts $ 946,782 $ 1,068,645 Work in process 279,084 216,254 Finished goods 580,584 586,402 ----------- ----------- 1,806,450 1,871,301 Less reserves (179,379) (180,000) ----------- ----------- $ 1,627,071 $ 1,691,301 =========== ===========
D. CONTINGENCIES In November 1996, the Company filed suit against EndoCare, Inc. and ZhoaHua Chang in the Circuit Court for Montgomery County, Maryland (Case No. 161496). The lawsuit alleges, among other things, that EndoCare misappropriated trade secrets of Cryomedical Sciences, Inc., and that EndoCare tortiously interfered with the Company's contracts, its relationships with employees, and Cryomedical Sciences, Inc.'s contractual and potential business relationships with customers. The lawsuit, which contains six counts, also alleges that Dr. Chang and EndoCare engaged in unfair competition against the Company and civil conspiracy, and that Dr. Chang, who was formerly employed as a Vice President of Cryosurgical Engineering by Cryomedical Sciences, Inc., breached contractual and fiduciary obligations owed to the Company by his employment by EndoCare, his retention and misuse of Cryomedical Sciences' confidential information, and his improper solicitation of the Company's employees to disclose trade secret information and/or to become employed by EndoCare. Cryomedical Sciences, Inc. has asserted that by accepting employment with EndoCare, Dr. Chang violated the covenant not to compete contained in his employment agreement with the Company. In an Order dated April 3, 1997, the Circuit Court of Montgomery County, Maryland has ordered a hearing on Cryomedical Sciences, Inc.'s motion seeking a preliminary injunction to enforce the covenant not to compete contained in the employment agreement between the Company and Dr. Chang. In the hearing which occurred on July 2, 1997, the Court issued a preliminary injunction against EndoCare, Inc.'s Vice President of Research and Development, Dr. Chang, and ordered Dr. Chang to terminate his employment with Endocare in any capacity, or any other entity in the research, development, production, marketing, sale or distribution of cryosurgical equipment in the United States, Canada, Europe and Taiwan, pending a full trial on 7 8 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 29, 1997 AND JUNE 30, 1996 the merits of Cryomedical Sciences, Inc.'s lawsuit against EndoCare and Dr. Chang. The Company is currently seeking compensatory damages of $10,000,000 and punitive damages of $20,000,000 in the lawsuit. On June 2, 1997, the Company received notice that Concept Group, Inc. ("Concept"), a vendor of the Company, had filed suit against the company in the United States District Court for the Eastern District of Pennsylvania, Civil Action No. 97-W-3803. Concept alleges amongst other things that on or about January 1995, the Company filed a patent application constituting a breach in the Development Agreement between Concept and the Company. The lawsuit, which contains seven counts, seeking approximately $3,000,000, alleges the patent application filing by Cryomedical Sciences, Inc. demonstrated a theft of proprietary information from the Plaintiff. Lastly, the Plaintiff believes and avers that shortly after January 1994 the Defendant embarked on a fraudulent scheme to place and cancel orders in an effort to financially ruin the Plaintiff and force early termination of the Development Agreement. The defendants have admitted no liability, believe the suits are completely without merit and will continue to defend the Company's position vigorously. E. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share," was recently issued by the Financial Accounting Standards Board. SFAS No. 128 is effective for periods ending after December 15, 1997 and early adoption is not permitted. SFAS No. 128 requires the company to compute and present a basic and diluted earnings per share. Had the Company computed net loss per share in accordance with SFAS No. 128 for the three and six months ended June 29, 1997, there would be no difference in the reported net loss per share. 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 will comply with all requirements no later than fiscal 1998. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cryomedical Sciences, Inc.'s business activities focus primarily on manufacture and marketing related to its cryosurgical systems (the "AccuProbe"). The Company plans to continue to market its AccuProbe Systems in the various fields for which the original 400 series device received clearance from the FDA in April 1991 and the 500 series received FDA clearance in December 1995. In March 1997 the Company received FDA clearance for the AccuProbe 600 series and submitted a 510(k) application for the new Cryo-lite(R) family of hand held cryosurgical products. The CMS AccuProbe Systems are cleared for marketing in the fields of dermatology, general surgery, neurosurgery, thoracic surgery, ENT, gynecology, oncology, proctology and urology. RESULTS OF OPERATIONS Sales and other operating revenues for the three and six months ended June 29, 1997 totaled $860,462 and $1,847,310, respectively, compared to $1,135,207 and $3,161,800, respectively, for the comparable periods of the prior fiscal year, representing decreases of 24% and 42%, respectively. The Company believes revenues in the three and six months ended June 29, 1997 reflect a decline in the number of AccuProbe Systems sold and fewer procedures performed using single-use AccuProbe accessories due primarily to lack of formal Medicare reimbursement for urologic cryosurgery. The Company hopes that the FDA clearance of the CMS AccuProbe 600 series and the Cryo-lite(R) series hand-held cryosurgical products will increase system, disposable probe and other accessory revenue from current levels, although there can be no assurance in this regard. Through June 29, 1997, the Company has placed a total of 149 AccuProbe Systems since the product was introduced in June 1992. Gross Profits for all products for the three months ended June 29, 1997 totaled $199,768, or 23% of sales, compared to gross profits of $24,864, or 2% of sales, for the three months ended June 30, 1996. For the six months ended June 29, 1997, gross profits totaled $842,124 or 46% of sales compared to gross profits of $1,037,354, or 33% of sales, for the comparable period of the prior fiscal year. Gross profits as a percent of sales increased in the six months ended June 29, 1997, as compared to the comparable period of the prior fiscal year due to a change in the mix in product sales, and continued cost reduction measures by the Company. Research and development expenses for the three months ended June 29, 1997 totaled $318,638, a decrease of 31% compared to $465,110 for the comparable period of the prior fiscal year. Research and development expenses for the six months ended June 29, 1997, totaled $594,418, a decrease of 24%, compared to $778,137 in the comparable period of the prior fiscal year. Development expenses decreased due to reduction in headcount and development of smaller, less expensive products. Sales and marketing expenses for the three months ended June 29, 1997 totaled $245,957, a decrease of 58% compared to $580,246 for the comparable period of the prior fiscal year. Sales and marketing expenses for the six months ended June 29, 1997 9 10 totaled $449,107, a decrease of 62%, compared to $1,173,200 for the comparable period of the prior fiscal year. Sales and marketing expenses decreased over the comparable period of the previous year due to reduced headcount and the associated reduction in travel and entertainment expenses. General and administrative expenses for three months ended June 29, 1997 totaled $332,884, a decrease of 66% compared to $969,720 for the comparable period of the prior fiscal year. General and administrative expenses for the six months ended June 29, 1997 totaled $602,583, a decrease of 60% compared to $1,492,694 for the comparable period of the prior fiscal year. General and administrative expenses decreased due to reductions in headcount, insurance premiums and the use of consultants. Despite a reduction in revenues, compared to the prior year's comparable period, the Company achieved decreases in operating expenses and increased gross profits from product cost reductions, particularly in the first quarter of 1997. As a result the Company sustained net losses of $637,491 and $727,791, respectively, for the three and six months ended June 29, 1997 compared to net losses of $1,988,082 and $2,400,750 in the comparable periods of the prior fiscal year. Sales of the AccuProbe are increasingly affected by the level of reimbursement by public and private insurers in connection with procedures in which the AccuProbe is utilized. The availability of consistent, uniform insurance reimbursement guidelines for hospitals and physicians is an important factor often considered by some potential customers when making a decision regarding the purchase of any new medical device, including the AccuProbe System. Reimbursement of hospitals and urologists by public and private insurers such as Medicare and Blue Cross and Blue Shield is a necessary part of gaining general acceptance for use of the AccuProbe for urological cryosurgery. Although no national payment guidelines for urological cryosurgery have been established by Medicare's Health Care Financing Administration ("HCFA"), the Company was advised in October 1996 that HCFA is planning to put into effect its Technology Advisory Committee's recommendation that a national noncoverage policy be adopted in regard to cryoablation of the prostate. It is the Company's understanding that HCFA is exploring the possibility of working with various agencies, including the American Urology Association, in establishing a nationwide randomized prospective clinical study to collect data on a comparative basis between cryosurgery and radiation therapies. The results of this study will provide the basis on which a future determination regarding Medicare reimbursement will be made. When insurance coverage is not available, patients may either elect to pay for treatment themselves or undergo traditional therapies which are covered by their insurers. Uncertainty and added efforts required for the Company's customers, or potential customers, to secure payment has constrained sales and utilization of AccuProbe systems to a large degree and may continue to do so until formal national coverage guidelines are established. 10 11 LIQUIDITY AND CAPITAL RESOURCES At June 29, 1997, the Company had cash, cash equivalents, and short-term investments totaling $884,081 and working capital of $2,323,088, as compared to $1,879,393 and $3,164,304, respectively, at December 29, 1996. The Company's cash and working capital positions decreased from December 29, 1996 due primarily to purchases of equipment, reduction in accounts receivable and the net loss of $727,791 sustained by the Company in the six months ended June 29, 1997. Capital expenditures for leasehold improvements, and equipment totaled $275,030, including $135,426 in consignment and loaner AccuProbe Systems, in the six months ended June 29, 1997, compared to $56,252 and $0 respectively, in the comparable period of the prior fiscal year. The Company does not expect to spend more than $750,000 in total for additional equipment in the year ending December 28, 1997. The Company expects to incur expenditures over the next 12 months related to development, manufacturing and testing of its products and for sales and marketing efforts and other operating expenses. The Company's management assumes that sales for the remainder of the quarterly periods in 1997 may be less than the level experienced in comparable year ago periods and believes that its current cash and working capital position will be sufficient to fund the operations of the Company for the next 12 months, dependent, in part, on the level of sales and marketing activity engaged in by the Company, and the amounts of development funded by the Company. However, the Company expects to continue to reduce expenditures if necessary and to pursue various forms of short term financing to supplement working capital during the next 12 months and possibly additional equity financing. Except for the sale of its products, the Company currently has no other major sources of liquidity and has no commitments with regard to obtaining any additional funds. 11 12 CRYOMEDICAL SCIENCES, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings In November 1996 the Company filed suit against EndoCare, Inc. and ZhoaHua Chang in the Circuit Court for Montgomery County, Maryland (Case No. 161496). The lawsuit alleges, among other things, that EndoCare misappropriated trade secrets of Cryomedical Sciences, Inc., and that EndoCare tortiously interfered with the Company's contracts, its relationships with employees, and Cryomedical Sciences, Inc.'s contractual and potential business relationships with customers. The lawsuit, which contains six counts, also alleges that Dr. Chang and EndoCare engaged in unfair competition against the Company and civil conspiracy, and that Dr. Chang, who was formerly employed as a Vice President of Cryosurgical Engineering by Cryomedical Sciences, Inc., breached contractual and fiduciary obligations owed to the Company by his employment by EndoCare, his retention and misuse of Cryomedical Sciences' confidential information, and his improper solicitation of the Company's employees to disclose trade secret information and/or to become employed by EndoCare. Cryomedical Sciences, Inc. has asserted that by accepting employment with EndoCare, Dr. Chang violated the covenant not to compete contained in his employment agreement with the Company. In an Order dated April 3, 1997, the Circuit Court of Montgomery County, Maryland has ordered a hearing on Cryomedical Sciences, Inc.'s motion seeking a preliminary injunction to enforce the covenant not to compete contained in the employment agreement between the Company and Dr. Chang. In the hearing which occurred on July 2, 1997, the Court issued a preliminary injunction against EndoCare, Inc.'s Vice President of Research and Development, Dr. Chang, and ordered Dr. Chang to terminate his employment with EndoCare in any capacity, or any other entity in the research, development, production, marketing, sale or distribution of cryosurgical equipment in the United States, Canada, Europe and Taiwan, pending a full trial on the merits of Cryomedical Sciences, Inc.'s lawsuit against EndoCare and Dr. Chang. The Company is currently seeking compensatory damages of $10,000,000 and punitive damages of $20,000,000 in the lawsuit. On June 2, 1997, the Company received notice that Concept Group, Inc. ("Concept"), a vendor of the Company, had filed suit against the company in the United States District Court for the Eastern District of Pennsylvania, Civil Action No. 97-W-3803. Concept alleges amongst other things that on or about January 1995, the Company filed a patent application constituting a breach in the Development Agreement between Concept and the Company. The lawsuit, which contains seven counts, seeking approximately $3,000,000, alleges the patent application filing by Cryomedical Sciences, Inc. demonstrated a theft of proprietary information from the Plaintiff. Lastly, the Plaintiff believes and avers that shortly after January 1994 the Defendant embarked on a fraudulent scheme to place and cancel orders in an effort to financially ruin the Plaintiff and force early termination of the Development Agreement. The defendants have admitted no liability, believe the suits are completely without merit and will continue to defend the Company's position vigorously. Item 4. Submission of Matters to a Vote of Security Holders On June 26, 1997, the Company held its Annual Meeting of Stockholders. The Stockholders voted on and approved the following: 1. The election of the following individuals to serve as Directors until the next annual meeting and until their successors are duly elected and qualified: Richard J. Reinhart, Ph.D. Howard S. Breslow J. Donald Hill 2. The ratification of the selection by the Board of Directors of Deloitte & Touche to serve as Independent Auditors for the fiscal year ended December 28, 1997. In this connection, 27,309,837 shares were voted for ratification, 126,689 shares were voted against ratification, and 184,981 shares abstained. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule. 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Cryomedical Sciences, Inc. ---------------------------------------- (Registrant) Date: August 18, 1997 /s/ Richard J. Reinhart, Ph.D. ---------------------------------------- Richard J. Reinhart, Ph.D. President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-28-1997 DEC-30-1996 JUN-29-1997 773,931 110,150 1,387,984 (250,173) 1,627,071 3,085,766 2,914,779 1,856,163 4,903,109 1,482,678 0 0 0 33,396 3,272,149 4,903,109 1,483,835 1,847,310 803,440 1,005,186 1,567,381 0 2,535 (727,791) 0 (727,791) 0 0 0 (727,791) (.02) (.02)
-----END PRIVACY-ENHANCED MESSAGE-----