-----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, U2s/4w/CKa8ZK4B0QhN5hMfmLoBcWViekdDBkn/7NtK8+9qL+gNHUJV3vIhBfT1H PdQlfjxbYQzhTxD8hgUllw== 0000950133-99-003464.txt : 19991115 0000950133-99-003464.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950133-99-003464 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990926 FILED AS OF DATE: 19991112 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: 99746524 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 September 26,1999 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 --- --- 33,854,302 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001 per share, were outstanding as of November 10, 1999. 2 CRYOMEDICAL SCIENCES, INC. FORM 10-QSB QUARTER ENDED SEPTEMBER 26, 1999 INDEX
Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets at September 26, 1999 (unaudited) and December 27, 1998 3 Consolidated Statements of Operations for the thirteen and thirty nine weeks ended September 26, 1999 and September 27, 1998 (unaudited) 4 Consolidated Statements of Cash Flows for the thirty nine weeks ended September 26, 1999 and September 27, 1998 (unaudited) 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis or Plan of Operation 8-10 Part II. Other Information Item 1. Legal Proceedings 11 Item 2. Changes in Securities and use of Proceeds 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
2 3 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
September 26, December 27, 1999 1998 ------------- ------------ (unaudited) ASSETS Current assets Cash and cash equivalents $ 5,972 $ 135,183 Receivables, net allowance for doubtful accounts 376,935 486,773 of $48,120 and $677,634 Inventories 1,211,795 1,225,982 Prepaid expenses and other current assets 132,480 80,510 ------------ ------------ Total current assets 1,727,182 1,928,448 Fixed assets, net accumulated depreciation and amortization 556,869 780,307 of $2,529,657 and $2,334,375 Intangible assets 377,111 - Other assets 18,727 18,727 ------------ ------------ Total assets $ 2,679,889 $ 2,727,482 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 666,930 $ 593,021 Accrued expenses 363,037 367,104 Short-term credit facility 120,000 120,000 Unearned revenues 30,713 60,839 Warranty reserves - 11,400 Extended warranties - current portion 9,949 16,179 Capital leases - current portion 37,285 37,285 ------------ ------------ Total current liabilities 1,227,914 1,205,828 ------------ ------------ Extended warranties, net of current portion 6,634 14,096 Capital leases, net of current portion 20,422 50,035 Deferred rent 12,947 25,884 ------------ ------------ Total liabilities 1,267,917 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; 33,854,302 and 33,454,302 issued and outstanding, respectively 33,854 33,454 Additional paid-in capital 31,313,343 30,751,263 Accumulated deficit (29,935,225) (29,353,078) ------------ ------------ Total stockholders' equity 1,411,972 1,431,639 ------------ ------------ Total liabilities and stockholders' equity $ 2,679,889 $ 2,727,482 ============ ============
See notes to consolidated financial statements 3 4 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen weeks ended Thirty-nine weeks ended September 26, September 27, September 26, September 27, --------------------------------- --------------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Revenues $ 377,236 $ 697,454 $ 1,218,360 $ 1,956,813 Cost of sales 261,966 354,467 806,113 1,023,048 ------------ ------------ ------------ ------------ Gross profit 115,270 342,987 412,247 933,765 Expenses Research and development 59,061 74,640 182,512 600,794 Sales and marketing 58,950 101,058 204,409 382,885 General and administrative 173,764 261,234 584,933 843,104 ------------ ------------ ------------ ------------ Total expenses 291,775 436,932 971,854 1,826,783 ------------ ------------ ------------ ------------ Operating loss (176,505) (93,945) (559,607) (893,018) Interest income, net of interest expense (8,287) (5,111) (22,540) (18,453) ------------ ------------ ------------ ------------ Net loss $ (184,792) $ (99,056) $ (582,147) $ (911,471) ============ ============ ============ ============ Net loss per common share $ (0.01) $ 0.00 $ (0.02) $ (0.03) ============ ============ ============ ============ Weighted average number of common shares outstanding 33,806,476 33,454,302 33,572,550 33,454,302 ============ ============ ============ ============
See notes to consolidated financial statements 4 5 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-nine weeks ended September 26, September 27, ------------- ------------- 1999 1998 --------- --------- (unaudited) Cash flows from operating activities: Net loss $(582,147) $(911,471) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 208,890 263,612 Amortization 5,587 Provision for bad debt 79,028 87,828 Write off of accounts receivable (692,240) - Sale of rental equipment 14,548 - Gain on disposal of fixed assets - (2,951) Amortization of unearned compensation - 39,525 Changes in operating assets and liabilities: Decrease in receivables 723,050 187,339 Decrease in inventories 14,187 447,843 Increase in prepaid and other current assets (51,970) (6,191) Increase in intangible assets (382,698) - Increase in other assets - 0 Decrease in accounts payable 73,909 58,638 Decrease in accrued expenses (4,067) (32,402) Decrease in unearned revenue (30,126) (58,590) Decrease in warranty reserves (11,400) (42,606) Decrease in extended warranties (13,692) (61,875) Decrease in capital leases (29,613) (25,348) Decrease in deferred rent (12,937) (4,679) --------- --------- Net cash used in operating activities (691,691) (61,328) --------- --------- Cash flows from investing activities: Proceeds from disposal of fixed assets - 46,636 Purchase of equipment - (214,107) --------- --------- Net cash used in investing activities - (167,471) --------- --------- Cash flows from financing activities: Issuance of Preferred Stock 400,000 - Line of Credit - 120,000 Issuance of Common Stock 162,480 - --------- --------- Net cash provided by financing activities 562,480 120,000 --------- --------- Net decrease in cash and cash equivalents (129,211) (108,799) Cash and cash equivalents at beginning of period 135,183 124,000 --------- --------- Cash and cash equivalents at end of period $ 5,972 $ 15,201 ========= ========= Supplemental Cash Flow Information: Cash paid for interest $ 25,028 $ 20,954 ========= =========
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 September 26, 1999, the Consolidated Statements of Operations for the thirteen and thirty-nine week periods ended September 26, 1999 and September 27, 1998, and the Consolidated Statements of Cash Flows for the thirteen and thirty-nine week periods ended September 26, 1999 and September 27, 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 September 26, 1999, 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 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 and thirty-nine week periods ended September 26, 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 and thirty-nine week periods ended September 26, 1999 and September 27, 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: September 26, 1999 December 27, 1998 ------------------ ----------------- Raw materials and purchased parts $ 673,663 $ 702,758 Work in process 141,679 111,140 Finished goods 396,453 412,084 ---------- ---------- 1,211,795 1,225,982
6 7 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. 7 8 ITEM 2. 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 Solutions, 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 and thirty-nine week periods ended September 26, 1999 totaled $377,236 and $1,218,360, respectively, compared to $697,454 and $1,956,813, respectively, for the comparable periods of the prior year, representing decreases of 46% and 38%, respectively. The decreases in revenues reflects a decline in the number of CMS AccuProbe(R) Systems and accessories sold. Gross profit for all products for the thirteen and thirty nine-week periods ended September 26, 1999 totaled $115,270 and $412,247, respectively, or 31% and 34% of revenues, respectively, compared to gross profits of $342,987 and $933,765, respectively or 49% and 48% of revenues, respectively, for the comparable periods of the prior year. Gross profit as a percent of revenues decreased compared to the prior year periods due to changes in the mix of product sales. Research and development expenses for the thirteen and thirty-nine week periods ended September 26, 1999 totaled $59,061 and $182,512, respectively, compared to $74,640 and $600,794, respectively, for the comparable periods of the prior year, representing a decrease of 21% and 70%, respectively, from the respective prior year periods. Research and development 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 and thirty-nine week periods ended September 26, 1999 totaled $58,950 and $204,409, respectively, compared to $101,058 and $382,885, respectively, for the comparable periods of the prior year, representing a decrease of 42% and 47%, respectively, from the prior year periods. 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 and thirty-nine week periods ended September 26, 1999 totaled $173,764 and $584,933, respectively, and $ 261,234 and $834,104, respectively, for the comparable periods of the prior year, representing a decrease of 33% and 8 9 31%, respectively, from the prior year periods. 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 and thirty-nine week periods ended September 26, 1999 totaled $291,775 and $971,854, respectively, and $436,932 and $1,826,783, respectively, for the comparable years of the prior year, representing a decrease of 33% and 47%, respectively, from the prior year periods. The Company sustained net losses of $184,792 and $582,147 for the thirteen and thirty-nine week periods ended September 26, 1999, respectively, compared to net losses of $99,056 and $911,471, respectively, for the comparable periods 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 September 26, 1999, the Company had cash and cash equivalents totaling $5,972 and working capital of $499,268, as compared to $135,183 and $722,620, respectively, at December 27, 1998. The Company's cash and working capital positions decreased from December 27, 1998 due primarily to the net loss of $582,147 sustained by the Company in the thirty-nine week period ended September 26, 1999 net of the infusion of capital from ValorInvest. Capital expenditures for equipment totaled $0, including $0 in consignment and loaner CMS AccuProbe(R) Systems, in the thirty-nine week period ended September 26, 1999, compared to $214,107 and $164,101, respectively, in the comparable period of the prior year. The Company does not expect to spend more than $100,000 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 for cryosurgery of the prostate. 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 institutions, the Company would likely become subject to restrictive covenants relating to its operations and finances. The Company currently had 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. 9 10 FORWARD LOOKING INFORMATION This Report contains certain forward-looking information 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. 10 11 CRYOMEDICAL SCIENCES, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings For information concerning Legal proceedings, reference is made to Part II, item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q for the Quarter ended June 27, 1999. Item 2. Changes in Securities and Use of Proceeds On July 12, 1999 the Company entered into a Settlement Agreement with Concept Group, Inc. ("Concept") in connection with a lawsuit filed in June 1997 by Concept against the Company in the United States District Court for the Eastern District of Pennsylvania. Pursuant to the Settlement Agreement, in addition to granting to Concept a world-wide, non-transferable, royalty-free license to make, have made, sell, use, import, manufacture, produce and /or market cryogenic surgical instruments based upon the techniques and specifications as described and detailed in U.S. Patent Number 5,573,532, the Company (a) issued to Concept and its attorney an aggregate of 400,000 shares of Company's common stock (the "Initial Shares'), and (b) if the aggregate average cash value (as defined in the Settlement Agreement) of the Initial Shares is less than $550,000 one year from the execution of the Settlement Agreement, agreed to issue such additional shares of Common Stock (up to a maximum of 600,000 shares) ("Contingent Shares") such the total shares issued (Initial Shares plus Contingent Shares) shall be worth not less than $550,000. The issuance of the shares of Common Stock was exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof and Rule 506 promulgated thereunder. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule. (b) Reports on Form 8-K; none 11 12 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: November 10, 1999 /s/Richard J. Reinhart, Ph.D. ---------------------------------- Richard J. Reinhart, Ph.D. President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-27-1998 DEC-28-1998 SEP-26-1999 5,972 0 425,055 (48,120) 1,211,795 132,480 3,086,526 (2,529,657) 2,679,889 1,227,914 0 0 0 33,854 1,378,118 2,679,889 733,043 1,218,360 431,032 806,113 971,854 0 (25,028) (582,147) 0 0 0 0 0 (582,147) (.02) (.02)
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