UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________________ to
Commission file number: 0-27840
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CELL ROBOTICS INTERNATIONAL, INC.
---------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1153295
-------- ----------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
2715 Broadbent Parkway N.E., Albuquerque, New Mexico 87107
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 343-1131
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 [_]
As of May 12, 2000, 8,818,763 shares of Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 2000 (unaudited) and
December 31, 1999 (audited)
Consolidated Statement of Operations for the Three Months ended
March 31, 2000 and March 31, 1999 (unaudited)
Consolidated Statement of Cash Flows for the Three Months ended
March 31, 2000 and March 31, 1999 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
-2-
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements contained in this
report have been prepared by Cell Robotics International, Inc. ("Cell" or the
"Company") and, in the opinion of management, reflect all material adjustments
which are necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods presented. Such
adjustments consisted only of normal recurring items. Certain information and
footnote disclosure made in the Company's last annual report on Form 10-KSB have
been condensed or omitted for the interim statements. These statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's annual report on Form 10-KSB for the year ended December 31,
1999. The results of the interim periods are not necessarily indicative of
results which may be expected for any other interim period or for the full year.
Forward-Looking Statements
- --------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, competitive pressures, changing economic conditions,
those discussed in the Section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and other factors, some of which
will be outside the control of the Company. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. Readers should refer to and
carefully review the information in future documents the Company files with the
Securities and Exchange Commission.
-3-
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
As of As of
3-31-00 12-31-99
------------ ------------
(UNAUDITED)
Assets
- ------
Current assets:
Cash and cash equivalents $ 1,187,240 $ 358,379
Accounts receivable, net of allowance for
doubtful accounts of $23,841 in 2000 and
1999 240,487 206,278
Inventory 913,215 897,971
Other 36,847 36,543
------------ ------------
Total current assets 2,377,789 1,499,171
Property and equipment, net 464,026 485,556
Other assets, net 27,731 28,939
------------ ------------
Total assets $ 2,869,546 $ 2,013,666
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current portion of notes payable $ 825,000 $ 0
Accounts payable 457,841 684,403
Payroll related liabilities 164,774 116,617
Royalties payable 60,002 67,519
Other current liabilities 35,980 40,294
------------ ------------
Total current liabilities 1,543,597 908,833
------------ ------------
Notes payable 125,000 250,000
------------ ------------
Total liabilities 1,668,597 1,158,833
------------ ------------
Stockholders' equity:
Common stock, $.004 par value. Authorized
12,500,000 shares, 8,818,763 and 8,244,121 shares
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 35,275 32,976
Additional paid-in capital 20,218,018 19,154,908
Accumulated deficit (19,052,344) (18,333,051)
------------ ------------
Total stockholders' equity 1,200,949 854,833
------------ ------------
$ 2,869,546 $ 2,013,666
============ ============
See accompanying notes to unaudited consolidated financial statements
-4-
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
UNAUDITED
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Product sales $ 214,594 $ 497,009
Research and development grants 5,960 19,147
-------------- --------------
Total revenues 220,554 516,156
-------------- --------------
Product cost of goods sold (170,994) (337,900)
SBIR direct expenses (5,960) (19,147)
-------------- --------------
Total cost of goods sold (176,954) (357,047)
-------------- --------------
Gross profit 43,600 159,109
-------------- --------------
Operating expenses:
General and administrative 503,080 334,290
Marketing & Sales 134,278 136,402
Research and development 125,267 121,032
-------------- --------------
Total operating expenses 762,625 591,724
-------------- --------------
Loss from operations (719,025) (432,615)
-------------- --------------
Other income (deductions):
Interest income 3,287 10,395
Interest expense (3,555) (49)
-------------- --------------
Total other income (deductions) (268) 10,346
-------------- --------------
Net loss (719,293) (422,269)
-------------- --------------
Preferred stock dividends - (514,548)
-------------- --------------
Net loss applicable to common shareholders $ (719,293) $ (936,817)
============== ==============
Weighted average common shares
outstanding, basic and diluted 8,513,547 6,681,998
============== ==============
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.08) $ (0.14)
============== =============
See accompanying notes to unaudited consolidated financial statements
-5-
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
UNAUDITED
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Cash flows from operating activities:
- -------------------------------------
Net loss $ (719,293) $ (422,269)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 27,587 28,163
Amortization of options issued for services 0 7,279
Common stock issued for services 156,039 0
Options and warrants issued for services 84,509 70,815
Increase in accounts receivable (34,209) (111,036)
Increase in inventory (15,244) (47,789)
Increase in other current assets (304) (31,575)
Increase (decrease) in current liabilities (190,236) 11,504
-------------- --------------
Net cash used in operating activities ( 691,151) (494,908)
-------------- --------------
Cash flows from investing activities:
- -------------------------------------
Purchase of fixed assets (4,849) (148,034)
-------------- --------------
Net cash used by investing activities (4,849) (148,034)
-------------- --------------
Cash flows from financing activities:
- -------------------------------------
Proceeds from exercise of options 133,105 0
Proceeds from exercise of warrants 691,756 0
Proceeds from notes payable 700,000 0
-------------- --------------
Net cash provided by financing activities 1,524,861 0
-------------- --------------
Net increase (decrease) in cash and cash equivalents: 828,861 (642,942)
- -----------------------------------------------------
Cash and cash equivalents:
Beginning of period 358,379 1,375,575
-------------- --------------
End of period $ 1,187,240 $ 732,633
============== ==============
Supplemental information:
- -------------------------
Stock dividend on preferred stock $ 0 $ 514,548
============== ==============
See accompanying notes to unaudited consolidated financial statements
-6-
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
March 31, 2000
1. Presentation of Unaudited Consolidated Financial Statements
-----------------------------------------------------------
These unaudited consolidated financial statements have been prepared in
accordance with the rules of the Securities and Exchange Commission and,
therefore, do not include all information and footnotes otherwise necessary for
a fair presentation of financial position, results of operations and cash flows,
in conformity with generally accepted accounting principles. However, the
information furnished, in the opinion of management, reflects all adjustments
necessary to present fairly the Company's financial position, results of
operations and cash flows. The results of operations are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole.
2. Issuance of Equity Securities and Convertible Note
--------------------------------------------------
In February 1998, the Company sold 460,000 Units (including the
Underwriter's "Over-Allotment Option", which consisted of 60,000 Units), each
Unit consisting of one share of Series A Convertible Preferred Stock (the
"Preferred Stock"), convertible into four common shares, and two common stock
purchase warrants each exercisable to acquire one share of common stock at an
exercise price of $2.40 per share (the "Warrants"), in a registered offering to
the public. Each Unit was sold at a price to the public of $8.25 resulting in
gross proceeds of $3,795,000. The Unit Price of $8.25 per Unit was based on the
public trading price of the four shares of Common Stock issuable upon conversion
of the Preferred Stock, which, on the effective date of the Registration
Statement, was $1.938 per share, or $7.75, with each Warrant being valued at
$0.25 per Warrant, resulting in the Unit price of $8.25. The value of each
Warrant was determined by the underwriter and was based on the difference
between the public trading price of four shares of Common Stock on the Friday
preceding the effective date of the Registration Statement, which was $7.75,
resulting in a Warrant value of $0.25 each. After consideration of the
Underwriter's commission and discount and other offering costs, net proceeds to
the Company were approximately $3.0 million.
Each Warrant entitles the holder thereof to purchase at any time prior to
February 2003, one share of Common Stock at a price of $2.40 per share. The
Warrants may be redeemed by the Company for a redemption price of $0.25 per
Warrant under certain conditions.
In September 1998, the Company sold 200,000 shares of Common Stock for
$300,000 to Chronimed, Inc. This investment was made as part of the exclusive
distribution agreement entered into by the companies in August 1998. In March
1999, the Company shipped prototypes of the Personal Lasette(R) to Chronimed. As
part of, what was then, an exclusive distribution agreement, Chronimed was
obligated to make an additional $150,000 investment in the Company upon
acceptance of the prototypes. Chronimed made that investment in April 1999. In
December 1999, the Company and Chronimed mutually agreed to convert their
exclusive distribution agreement to a non-exclusive distribution agreement with
no further equity or other commitments on behalf of either party.
In January 1999, the Company's Preferred Stock automatically converted into
shares of Common Stock, when the sum of closing bid prices of the Preferred
Stock and two Warrants was at least $12.375 for ten consecutive days. Due to the
automatic conversion, a final dividend in the form of 183,211 shares of the
Company's Common Stock was accrued and subsequently paid with the issuance of
shares of
-7-
Common Stock for all preferred shareholders of record on February 2, 1999.
In July 1999, the Company sold 9.5 units to four investors in a private
placement of its securities. Each unit consisted of 35,000 shares of Common
Stock and 7,500 common stock purchase warrants. Each warrant is exercisable
through February 2, 2003 to purchase one share of Common Stock for a price of
$2.40 per share. In connection with this private placement, the Company granted
15,000 warrants to two placement agents. In connection with other investment
banking services the Company granted an additional 15,000 warrants to one of the
placement agents for those services unrelated to this private placement. These
30,000 warrants are exercisable through February 2, 2003 to purchase one share
of Common Stock for a price of $2.40 per share.
In January 2000, the Company terminated its public and investor relations
agreement with RCG Capital Markets Group, Inc. effective January 1, 2000. In
lieu of payment for three additional months of service retainer fees, options
for an additional 25,000 shares at an exercise price equal to the closing price
of the Company's Common Stock on February 15, 2000 were granted. Due to early
termination of this agreement, 50,000 unvested options were cancelled.
Additionally, in January 2000, the Company issued a total of 40,000 common
stock purchase warrants to an investment research firm and its new public
relations firm. The Company is also committed under the terms of the agreement
with the new public relations firm to issue an additional 30,000 warrants if
representation continues beyond six months. The warrants are exercisable
through February 2, 2003 to purchase one share of Common Stock for a price of
$2.40 per share. Of the additional 30,000 warrants, 15,000 vested after three
months of services and the remaining 15,000 vest after six months of services.
The fair value of these performance-based options has been and will be measured
upon vesting and charged to operations at such time.
In February 2000 and subsequently amended in March 2000, the Company executed
a secured convertible promissory note from a private investor. The principal
amount of $1,200,000 will be paid in full with 500,000 shares of the Company's
Common Stock at the time such shares are registered with the SEC. The private
investor paid $250,000 on March 3, 2000; $250,000 on March 9, 2000; $200,000 on
March 28, 2000; and the remaining $500,000 on April 26, 2000. The note will bear
interest from July 25, 2000 at the Bank of America prime rate as of March 3,
2000 plus 500 basis points with no interest accruing until July 25, 2000. The
principal amount and any accrued unpaid interest will be due and payable on
February 25, 2001 but the creditor can elect to defer payment until any date
thereafter through February 25, 2002. This note is secured by accounts
receivable and inventory of the Company. In connection with the beneficial
conversion of this note, the Company will record a charge of $1,200,000 upon
registration of the common stock with the SEC and conversion of the note into
Common Stock.
Additionally, in February 2000, an underwriter in a previous offering
exercised a portion of its Placement Agent's Warrants to purchase a total of
10.9825 private units at a price of $25,000 per unit. Each unit consists of
20,000 shares of Common Stock and 10,000 Class A common stock purchase warrants.
Proceeds to the Company were approximately $467,000.
In March 2000, a previous distributor of the Company exercised its common
stock purchase warrant to purchase 100,000 shares of Common Stock at a price of
$2.25 per share. The Company is currently in discussions to rescind the exercise
of the warrant which may result in the cancellation of the 100,000 Common Shares
and the refund of the aggregate exercise price. If the transaction is
rescinded, the original warrant will be reinstated with the right to exercise
the warrant during the remaining exercise period or any extensions granted.
-8-
On May 1, 2000 the Company reached an agreement for a $2,000,000 private
placement selling 500,000 shares of its Common Stock to Paulson Investment
Company of Portland, Oregon. The Company reached agreement on a term sheet, to
sell the shares of restricted Common Stock at $4 per share, which is a less than
20% discount to the market price. This transaction is contingent upon
shareholders authorizing additional shares at the May 19, 2000 annual
shareholders meeting. A 5% placement fee will be paid to a current member of
the Company's Board of Directors after the close of the transaction.
3. Notes Payable
-------------
In December 1999 the Company obtained a note payable for $250,000, from a
member of its Board of Directors. The note does not bear interest if the note
is paid in full at the end of six months. However, at the end of six months,
any unpaid balance will begin to accrue interest at 6% .The balance as of
January 15, 2001 is payable in 6 monthly installments beginning on that date.
See also Note 2 for discussion of issuance of convertible promissory note.
4. Earnings Per Share
------------------
Basic loss per share is computed on the basis of the weighted average
number of common shares outstanding during the quarter. Diluted loss per share,
which is computed on the basis of the weighted average number of common shares
and all potentially dilutive common shares outstanding during the quarter, is
the same as basic loss per share for the quarters ended March 31, 2000 and 1999,
as all potentially dilutive securities were anti-dilutive.
Options to purchase 1,469,623 and 1,631,820 shares of common stock were
outstanding at March 31, 2000 and 1999, respectively. Warrants to purchase
1,589,351 and 1,662,576 shares of common stock were outstanding at March 31,
2000 and 1999. These were not included in the computation of diluted loss per
share as the assumed exercise of the options would have been anti-dilutive
because of the net losses incurred in the quarters ended March 31, 2000 and
1999.
5. Operating segments
------------------
The Company has two operating segments: scientific research instruments and
laser-based medical devices. The scientific research instruments segment
produces research instruments for sale to universities, research institutes, and
distributors. The laser-based medical devices segment produces medical devices
for sale to diabetic patients and diabetic nurse educators as well as the
physician community, medical clinics, and to distributors.
The Company evaluates segment performance based on profit or loss from
operations prior to the consideration of unallocated corporate general and
administrative costs. The Company does not have intersegment sales or
transfers.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business utilizes different technologies and marketing strategies.
Operating Segments
-9-
March 31, 2000
--------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- -------------- --------- ---------
Revenues from customers $ 71,478 143,116 - 214,594
Research and development
grants 5,960 - - 5,960
Loss from operations (30,214) (192,458) (496,353) (719,025)
Segment assets 397,267 1,184,925 1,287,354 2,869,546
March 31, 1999
--------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- -------------- --------- ---------
Revenues from customers $208,624 288,385 - 497,009
Research and development
grants 19,147 - - 19,147
Profit (loss) from operations 61,377 (163,306) (330,686) (432,615)
Segment assets 541,038 658,788 1,043,276 2,243,102
6. Capital Resources
-----------------
Since inception, the Company has incurred operating losses and other equity
charges, which have resulted in an accumulated deficit of $19,052,344 and
operations that used net cash of $691,151 in the quarter ended March 31, 2000.
The Company's ability to improve cash flow and ultimately achieve
profitability will depend on its ability to significantly increase sales.
Accordingly, the Company is manufacturing and marketing a series of laser-based
medical devices, which leverage the Company's existing base of patented
technology. The Company believes the markets for these new products are broader
than that of the scientific instrumentation market and, as such, offer a greater
opportunity to significantly increased sales. In addition, the Company is
pursuing development and marketing partners for several of its new medical
products. These partnerships will enhance the Company's ability to rapidly ramp-
up its marketing and distribution strategy, and possibly offset the products'
development costs.
Although the Company has begun manufacturing and marketing its laser-based
medical devices and continues to market its scientific instrument line, it does
not anticipate achieving profitable operations any earlier than the third
quarter of fiscal 2000. As a result, the Company's working capital surplus is
expected to erode over the next twelve months. Nevertheless, the Company expects
that its present working capital surplus, increased sales, and the proceeds from
private convertible debt and equity placements will be sufficient to cover its
expected operational deficits through 2000.
-10-
7. Legal Matters
-------------
Paradigm Group, LLC ("Paradigm"), an investment and financial consulting
company, has alleged that the Company agreed to issue 185,000 shares of the
Company's Common Stock to Paradigm for $2.40 per share as part of a proposed
private placement offering. The allegation is based upon an alleged oral
agreement between the Company and Paradigm. The Company denies that any binding
agreement was reached, that any and all discussions between the two parties were
preliminary discussions about a proposed private placement offering, which was
at all times subject to the authorization and approval by the Company's Board of
Directors, which did not occur and a material condition precedent to the
consummation of any agreement between the parties. Currently, no action has
been filed for this claim to the Company's knowledge.
Big Sky Laser Technologies, Inc., ("BSLT"), an OEM manufacturer and
developer of laser-based medical devices, has alleged that the Company is in
breach of contract under an exclusive OEM supplier agreement dated May 20, 1998
entered into by the parties (the "Agreement"). Under the terms of the
Agreement, BSLT was granted exclusive manufacturing rights to the Professional
Lasette(R) product while the Company maintained the exclusive distribution
rights to the same, subject to certain minimum order requirements. BSLT has
given the Company notice of termination and notice of breach of the Agreement,
alleging in pertinent part that the Company (1) failed to take delivery of 1,012
units of the Professional Lasette(R) product; (2) failed to provide laser rods
and other components necessary in the manufacture of 1,000 units ordered by the
Company; and (3) failed to make the required payment for certain products
already delivered to the Company. The Company disagrees with these allegations.
BSLT and the Company are currently in discussions seeking to restructure their
relationship and/or reach an amicable resolution involving the Agreement.
-11-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF CELL ROBOTICS INTERNATIONAL, INC.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
Liquidity and Capital Resources - March 31, 2000 compared to December 31, 1999
Since its inception, the Company has relied principally upon the proceeds
of both debt and equity financing to provide working capital for its product
development and marketing activities and, to a lesser extent, the proceeds of
two small SBIR grants. The Company has not been able to generate sufficient cash
from operations and, as a consequence, additional financing has been required to
fund ongoing operations. In 1995, the Company completed a private offering of
equity in which it raised approximately $2.875 million. As part of that private
offering, the Company issued a series of warrants, whose exercise during the
third quarter of 1996 resulted in an additional capital infusion of
approximately $2 million. In connection with that private offering, the Company
issued to Paulson Investment Company, Inc., who served as placement agent,
warrants exercisable for a period of five years to purchase 11.5 units at a
price of $25,000 per unit, each unit consisting of 20,000 shares of Common Stock
and 10,000 Class A Warrants. As discussed in Note 2 and below, 10.9825 of these
units were exercised in February 2000. In August 1997, the Company completed a
private sale of 200,000 shares of Common Stock for gross proceeds of $650,000.
The Company agreed to exchange the 200,000 shares of Common Stock for 78,788 of
the Units as offered in the secondary offering (the "Secondary Offering")
completed in February 1998. In December 1997, the Company obtained a short-term
loan from Paulson in the principal amount of $500,000 that was repaid, without
interest, out of the proceeds of the Secondary Offering.
In February 1998, the Company sold 460,000 Units (including the
Underwriter's "Over-Allotment Option," which consisted of 60,000 Units), each
Unit consisting of one share of Series A Convertible Preferred Stock (the
"Preferred Stock"), convertible into four Common Shares, and two Common Stock
Purchase Warrants (the "Warrants"), in a registered offering to the public. Each
Unit was sold at a price to the public of $8.25. The Units were traded over-the-
counter and quoted on the Bulletin Board under the symbol "CRIIU" for a period
of thirty (30) days through March 4, 1998 (the "Unit Trading Period"). At the
end of the Unit Trading Period, the Units automatically separated and, as a
result, the Preferred Stock and Warrants traded separately over-the-counter, and
were quoted on the Bulletin Board under the symbols "CRIIP" and "CRIIW,"
respectively.
In July 1999, the Company sold 9.5 units to four investors in a private
placement of its securities. Each unit consisted of 35,000 shares of Common
Stock and 7,500 common stock purchase warrants. Each warrant is exercisable
through February 2, 2003 to purchase one share of Common Stock for a price of
$2.40 per share. In connection with this private placement, the Company granted
15,000 warrants to two placement agents. In connection with legal services the
Company granted an additional 15,000 warrants to one of the investors for those
services unrelated to this private placement. These 30,000 warrants are
exercisable through February 2, 2003 to purchase shares of Common Stock for a
price of $2.40 per share. Gross proceeds received from this private placement
totaled $475,000.
In February 2000, an underwriter in a previous offering exercised a portion
of its Placement Agent's Warrants to purchase a total of 10.9825 private units
at a price of $25,000 per unit. Each unit consists of 20,000 shares of Common
Stock and 10,000 Class A Common Stock Purchase Warrants. Proceeds to the Company
were approximately $467,000.
-12-
In March 2000, a previous distributor of the Company exercised its common
stock purchase warrant to purchase 100,000 shares of Common Stock at a price of
$2.25 per share. The Company is currently in discussions to rescind the exercise
of the warrant which may result in the cancellation of the 100,000 Common Shares
and the refund of the aggregate exercise price. If the transaction is
rescinded, the original warrant will be reinstated with the right to exercise
the warrant during the remaining exercise period or any extensions granted.
The Company's current ratio at December 31, 1999, was 1.6:1, compared to a
current ratio of 1.5:1 on March 31, 2000. This decrease in liquidity is
primarily due to cash used in operations net of cash received from exercised
employee stock options and common stock purchase warrants.
The increase in the Company's current assets of $878,618, or 58.6%, was
driven by an inflow of cash from proceeds due to exercised stock options and
warrants As a result, cash and cash equivalents increased $828,861, or 231.3%.
Net property and equipment decreased $21,530, or 4.4%, due primarily to
depreciation and amortization of capital product tooling and molding, while
other assets decreased from $28,939 to $27,731, a decrease of $1,208 or 4.2%.
During the three month period ended March 31, 2000, the Company's total
liabilities increased from $1,158,833 to $1,668,597, or 44.0%. This increase was
primarily due to the secured convertible promissory note with a private
investor.
The Company's working capital increased from $590,338 at December 31, 1999
to $834,192, or 41.3%, at March 31, 2000, an increase of $243,854, due primarily
to cash received from exercised employee stock options and common stock purchase
warrants.
Cash used in operations for the three month periods ended March 31, 2000
and March 31, 1999 was $691,151 and $494,908, respectively. The primary reasons
for the increase in cash used in operations during this period, as compared to
the prior period, were the reduction in accounts payable partially offset by an
improvement in accounts receivable collection.
The Company expects that cash used in operating activities will increase
throughout the remainder of 2000 as a more aggressive sales and marketing
campaign is launched and as full-scale production is implemented. The timing of
the Company's future capital requirements, however, cannot accurately be
predicted. The Company's capital requirements depend upon numerous factors,
including, most notably, the market acceptance of its new laser-based medical
devices. If capital requirements vary materially from those currently planned,
the Company may require additional financing, including, but not limited to, the
sale of equity or debt securities. The Company reached an agreement for a
$2,000,000 private placement selling 500,000 shares of its Common Stock to
Paulson Investment Company of Portland, Oregon. The Company reached agreement
on a term sheet, to sell the shares of restricted Common Stock at $4 per share,
a less than 20% discount to the market price. This transaction is contingent
upon shareholders authorizing additional shares at the May 19th annual
shareholders meeting. A 5% placement fee will be paid to a current member of
the Company's Board of Directors after the close of the transaction. The
Company also received $500,000 from a private investor in exchange for a
convertible secured promissory note on April 26, 2000 pursuant to an agreement
reached in February 2000 and subsequently amended in March 2000. At this time,
the Company does not have available other sources of capital to satisfy its cash
requirements until revenues from operations can be realized through future
product sales. If the Company is unable to obtain additional financing as
-13-
needed, the Company may be required to reduce the scope of its operations, which
could have a material adverse effect upon the Company's business, financial
condition and results of operation. The Company anticipates that its current
working capital, increased product sales, the Paulson supplemental equity and
financing discussed above will be sufficient to meet the Company's operational
obligations through fiscal 2000.
Other than the foregoing, management knows of no other trend, or other
demands, commitments, events or uncertainties that will result in, or that are
reasonably likely to result in, a material impact on the liquidity and capital
resources of the Company.
Results of Operations - Three months ended March 31, 2000 compared to the three
months ended March 31, 1999
The Company's total revenue decreased $295,602, or 57.3% to $220,554 from
$516,156 for the three month periods ended March 31, 2000 and 1999,
respectively. Revenues from the sale of products during the three months ended
March 31, 2000, were $214,594, as compared to $497,009 during the comparable
period in 1999. This represents a decrease in sales of 56.8% while gross margin
realized on product sales during this period declined from 32.0% in 1999, to
20.3% during 2000. Lower than expected product sales was primarily due to the
Company's focus on troubleshooting and re-engineering efforts associated with
its newly introduced medical devices. Gross margin was negatively affected by a
reduction in retail selling prices due to competitive pricing pressures, an
introductory low margin associated with the laser-based medical devices
introduced into our product mix, as well as increased warranty expenses
associated with newly released products.
The Company also recognized $5,960 of revenue from "Small Business
Innovative Research" (SBIR) grants during the three months ended March 31, 2000.
These SBIR grants have been issued by the National Institutes of Health (NIH),
an agency of the U.S. Department of Health and Human Services. The highly
competitive grants provide financial assistance for approved tasks of high-risk
research that can lead to future products for small businesses. Normally,
awards do not exceed $750,000 for a period ordinarily not to exceed two years.
The Company's current Phase II grant expired on March 31, 2000. Additional Phase
II grant applications will be submitted to continue research efforts initiated
under previously awarded Phase I grants.
The Company's loss from operations incurred during the three months ended
March 31, 2000, was $719,025, as compared to an operating loss of $432,615
incurred during the same period in 1999. Total operating expenses increased
$170,901, or 28.9%, from $591,724 to $762,625. Research and development
expenses increased $4,235 or 3.5%. General and administrative expenses
increased $168,790, or 50.5%, reflecting an increase in legal, accounting,
investor relations and insurance fees as well as the fair value of performance-
based options issued in lieu of cash. Marketing and sales expenses decreased
1.6%, or $2,124.
During the three months ended March 31, 2000 other income and expenses
decreased from a $10,346 net contribution to income during the period in 1999,
to a $268 net reduction to income during the period in 2000.
As a result of the foregoing, net loss applicable to the common
shareholders was $719,293 for the three months ended March 31, 2000. During the
comparable period in 1999, and after including the payment of preferred stock
dividends of $514,548, the net loss applicable to common shareholders was
$936,817. On a per share basis, this amounts to a $0.08 loss per weighted
average outstanding share during the three month period ended March 31, 2000,
compared to a $0.14 loss per weighted average outstanding share during the same
period of 1999.
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Subsequent Events
On May 1, 2000 the Company reached an agreement for a $2,000,000 private
placement selling 500,000 shares of its common stock to Paulson Investment
Company of Portland, Oregon. The Company reached agreement on a term sheet, to
sell the shares of restricted common stock at $4 per share, a less than 20%
discount to the market price. This transaction is contingent upon shareholders
authorizing additional shares at the May 19, 2000 annual shareholders meeting.
A 5% placement fee will be paid to a current member of the Company's Board of
Directors after the close of the transaction.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company hereby incorporates by reference the information set forth in
Part I of this report under Note 7 of Notes to Unaudited Consolidated Financial
Statements.
Item 2. Change in Securities
The Company hereby incorporates by reference the information set forth
in Part I of this report under Note 2 of Notes to Unaudited Consolidated
Financial Statements.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELL ROBOTICS INTERNATIONAL, INC.
Dated: May 15, 2000 By: /s/ Ronald K. Lohrding
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Ronald K. Lohrding, President & CEO
Dated: May 15, 2000 By: /s/ Jean M. Scharf
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Jean M. Scharf, Chief Financial Officer
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