-----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, VgCmw1JubCS6szT27qKvmcnYQ5QEPYgwrR6JKwUEN57cMrC1AR7ryRsYrchL+4D8 xOSqZKJOvxtza3oS2Hhfmw== 0000950133-00-001901.txt : 20000510 0000950133-00-001901.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950133-00-001901 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000326 FILED AS OF DATE: 20000509 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: 623444 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 26, 2000 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 April 30, 2000. 2 CRYOMEDICAL SCIENCES, INC. FORM 10-QSB QUARTER ENDED MARCH 26, 2000 INDEX
Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets at March 26, 2000 (unaudited) and December 26, 1999 3 Consolidated Statements of Operations for the thirteen weeks ended March 26, 2000 and March 28, 1999 (unaudited) 4 Consolidated Statements of Cash Flows for the thirteen weeks ended March 26, 2000 and March 28, 1999 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis or Plan of Operation 7-8 Part II. Other Information Item 1. Legal Proceedings 9 Item 2. Changes in Securities and Use of Proceeds 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10
2 3 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 26, December 26, 2000 1999 ---- ---- (unaudited) ASSETS - ------ Current assets Cash and cash equivalents $ 29,281 $ 7,952 Receivables, net allowance for doubtful accounts 215,375 246,436 of $11,437 and $11,927, respectively Inventories 905,543 952,298 Prepaid expenses and other current assets 188,922 79,372 --------------- ----------------- Total current assets 1,339,121 1,286,058 Fixed assets, net accumulated depreciation 434,929 494,452 of $2,651,597 and $2,592,074, respectively Intangible assets, net 363,443 370,277 Other assets 33,107 8,328 --------------- ----------------- Total assets $ 2,170,600 $ 2,159,115 =============== ================= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities Accounts payable $ 357,483 $ 648,578 Accrued expenses 456,587 484,473 Short-term credit facility 120,000 120,000 Unearned revenues 21,871 19,608 Extended warranties - current portion 9,949 9,949 Capital leases - current portion 28,651 36,657 --------------- ----------------- Total current liabilities 994,541 1,319,265 --------------- ----------------- Extended warranties, net of current portion 1,659 4,146 Capital leases, net of current portion 8,154 9,908 Notes payable 500,000 - Deferred rent 1,851 7,399 --------------- ----------------- Total liabilities 1,506,205 1,340,718 --------------- ----------------- Stockholders' equity Preferred stock, $.001 par value per share, 9,378,800 authorized; 384 shares issued and outstanding - - Common stock, par value $.001 per share, 50,000,000 shares authorized; 33,854,302 issued and outstanding 33,854 33,854 Additional paid-in capital 31,313,343 31,313,343 Accumulated deficit (30,682,802) (30,528,800) --------------- ----------------- Total stockholders' equity 664,395 818,397 --------------- ----------------- Total liabilities and stockholders' equity $ 2,170,600 $ 2,159,115 =============== =================
See notes to consolidated financial statements 3 4 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen weeks ended March 26, March 28, ------------------------------------------------ 2000 1999 ---- ---- (unaudited) Revenues $ 399,157 $ 390,830 Cost of sales 133,426 300,144 ---------------------- --------------------- Gross profit 265,731 90,686 Expenses Research and development 186,625 56,169 Sales and marketing 35,435 67,916 General and administrative 192,679 271,744 ---------------------- --------------------- Total expenses 414,739 395,829 ---------------------- --------------------- Operating loss (149,008) (305,143) Interest income, net of interest expense (4,994) (7,676) ---------------------- --------------------- Net loss $ (154,002) $ (312,819) ====================== ===================== Net loss per common share $ (0.00) $ (0.01) ====================== ===================== Weighted average number of common shares outstanding 33,854,302 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 26, March 28, --------------- --------------- 2000 1999 ---- ---- (unaudited) Cash flows from operating activities: Net loss $ (154,002) $ (312,819) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 59,523 72,112 Amortization 6,834 - Provision for bad debt 3,919 30,605 Write off of accounts receivable (4,409) (219,444) Changes in operating assets and liabilities: Decrease in receivables 31,551 188,455 Decrease in inventories 46,755 90,229 Increase in prepaid and other current assets (109,550) (39,290) Increase in other assets (24,779) - Decrease in accounts payable (291,095) (227,228) Decrease in accrued expenses (27,886) (10,852) Increase (decrease) in unearned revenue 2,263 (22,489) Decrease in warranty reserves - (5,400) Decrease in extended warranties (2,487) (5,187) Decrease in deferred rent (5,548) (2,768) --------------- --------------- Net cash used in operating activities (468,911) (464,076) --------------- --------------- Cash flows from investing activities: Purchase of equipment - - --------------- --------------- Net cash used in investing activities - - --------------- --------------- Cash flows from financing activities: Issuance of preferred stock - 400,000 Decrease in capital leases (9,760) (10,077) Line of credit - (29,225) Issuance of notes payable 500,000 - --------------- --------------- Net cash provided by financing activities 490,240 360,698 --------------- --------------- Net decrease in cash and cash equivalents 21,329 (103,378) Cash and cash equivalents at beginning of period 7,952 135,183 --------------- --------------- Cash and cash equivalents at end of period $ 29,281 $ 31,805 =============== =============== Supplemental Cash Flow Information: Cash paid for interest $ 7,407 $ 8,742 =============== ===============
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 26, 2000, the Consolidated Statements of Operations for the thirteen-week periods ended March 26, 2000 and March 28, 1999, and the Consolidated Statements of Cash Flows for the thirteen-week periods ended March 26, 2000 and March 28, 1999, 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 26, 2000, and for the period 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 26, 1999 included in the Company's Annual Report on Form 10-KSB for the year ended December 26, 1999. The results of operations for the thirteen-week period ended March 26, 2000 is 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 26, 2000 and March 28, 1999. 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 26, 2000 December 26, 1999 -------------- ----------------- Raw materials and purchased parts $ 603,219 $ 653,529 Work in process 8,117 22,604 Finished goods 294,207 276,165 ------- ------- 905,543 952,298
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 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, the Cryo-lite(R) series was cleared in July 1997, and the Blizzard Series was cleared in June 1998. 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. At the American Urological Association meeting held in Atlanta, Georgia in May of this year the Company introduced the 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-week period ended March 26, 2000 totaled $399,157, compared to $390,830, for the comparable period of the prior year, representing an increase of 2%. The increase in revenues reflects an increase in the number of CMS AccuProbes(R) and accessories sold. Gross profit for all products for the thirteen-week period ended March 26, 2000 totaled $265,731, or 67% of revenues, compared to gross profits of $90,682, or 23% of revenues, for the comparable period of the prior year. Gross profit as a percent of revenues increased compared to the prior year period due to changes in the mix of product and service sales and a decrease in the overhead charged to costs of goods sold based on a reduction in staff and related expenses. Research and development expenses for the thirteen-week period ended March 26, 2000 totaled $186,625, compared to $56,169 for the comparable period of the prior year, representing an increase of 232% from the prior year period. Research and development expenses increased due to an increase in resources used in development projects. Sales and marketing expenses for the thirteen-week period ended March 26, 2000 totaled $35,435, compared to $67,916 for the comparable period of the prior year, representing a decrease of 48%, from the prior year period. Sales and marketing expenses over the comparable period of the previous year decreased due to reduced commissions and a reduction in travel and related expenses. General and administrative expenses for the thirteen-week period ended March 26, 2000 totaled $192,679 compared to $271,744, for the comparable period of the prior year, representing a decrease of 29%, from the prior year period. General and administrative expenses decreased due to general cut backs in discretionary expenses. Operating expenses for the thirteen-week period ended March 26, 2000 totaled $414,739 compared to $395,829 for the comparable period of the prior year, representing a increase of 5%, 7 8 from the prior year period. The Company sustained net losses of $154,002 for the thirteen-week period ended March 26, 2000, compared to a net losses of $312,819, for the comparable period of the prior year. LIQUIDITY AND CAPITAL RESOURCES At March 26, 2000, the Company had cash and cash equivalents totaling $29,281 and working capital of $344,580, as compared to $7,952 and ($33,207), respectively, at December 26, 1999. The increase in the Company's cash and working capital positions from December 26, 1999 was due primarily to the receipt by the Company, on February 25, 2000, of $500,000 from the sale of promissory notes to two individuals, each note being in the amount of $250,000 and bearing interest at the rate of 10% per annum. The notes are due and payable three years from the date of issuance and, in the event they are outstanding at the time of an equity financing which equals or exceeds $2,500,000 ($500,000 under certain circumstances), together with accrued and unpaid interest, automatically convert into equity securities of the Company on the same terms and conditions provided for in such equity financing. Capital expenditures for equipment totaled $0 in the thirteen-week period ended March 26, 2000, compared to $0 in the comparable period of the prior year. The Company does not expect to spend more than $500,000 in total for equipment in the year ending December 31, 2000. The Company believes that sales for the remainder of the 2000 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 implement manufacturing and testing protocols for its products, increase sales and marketing efforts, and reestablish its education and retraining programs. 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. 8 9 CRYOMEDICAL SCIENCES, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings On April 6, 2000, Endocare, Inc. filed a suit against the Company in the United States District Court, Central District of California, alleging that the Company is infringing United States Letters Patent No. 5,647,868 (the "868 patent"), entitled "Cryosurgical Integrated Control and Monitoring System and Method," owned by Endocare, Inc. as assignee, in that the Company is manufacturing, using and selling and offering for sale products embodying the patented invention. The complaint among other things, seeks to enjoin the Company from infringing the 868 patent and to recover lost profits, compensatory damages, treble damage for willful infringement, and costs and attorneys fees. The Company has filed an answer to the complaint denying the critical allegations therein and counterclaiming for a declaratory judgement of invalidity, unenforceability, and noninfringement of the 868 patent, on the basis of prior art and the fact that the patent applicant, or those acting on his behalf, failed to exercise the duty of candor and to meet the duty of disclosure that is required of those seeking a patent, damages, and reasonable attorneys fees and costs because Endocare's actions make this an exceptional case. Item 2. Changes in Securities and Use of Proceeds On February 25, 2000, the Company received $500,000 from the sale of promissory notes to two individuals, each note being in the amount of $250,000 and bearing interest at the rate of 10% per annum. The notes are due and payable three years from the date of issuance and, in the event they are outstanding at the time of an equity financing which equals or exceeds $2,500,000 ($500,000 under certain circumstances), together with accrued and unpaid interest, automatically convert into equity securities of the Company on the same terms and conditions provided for in such equity offering. The sales were exempt from registration under the Securities Act pursuant to Rule 506 of Regulation D. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule. (b) Reports on Form 8-K, None 9 10 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: May 9, 2000 /s/Richard J. Reinhart, Ph.D. ----------------------------- Richard J. Reinhart, Ph.D President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-26-1999 DEC-27-1999 MAR-26-2000 29,281 0 226,812 11,437 905,543 1,339,121 3,086,526 2,651,597 2,170,600 994,541 0 0 0 33,854 630,541 2,170,600 220,690 399,157 70,510 62,916 414,739 0 (4,994) (154,002) 0 0 0 0 0 (154,002) .00 .00
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