1
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001 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)
820 Bear Tavern Road
Suite 106
Ewing, New Jersey 08628
-----------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (609) 771-1100
--------------
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
-
12,413,209 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001
per share, were outstanding as of April 30, 2001.
2
CRYOMEDICAL SCIENCES, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2001
INDEX
Part I. Financial Information Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets at March 31,
2001 (unaudited) and December 31, 2000 3
Consolidated Statements of Operations for
the periods ended March 31, 2001 and
2000 (unaudited) 4
Consolidated Statements of Cash Flows
for the periods ended March 31, 2001 and
2000 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 7-9
Part II. Other Information 10
Signatures 11
2
3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
---- ----
(unaudited)
ASSETS
- ------
Current assets
Cash and cash equivalents $ 1,086,756 $ 2,150,112
Receivables, net allowance for doubtful accounts 420,928 86,956
of $15,102 and $13,018, respectively
Inventories 513,667 653,945
Prepaid expenses and other current assets 215,179 135,547
------------------ ----------------
Total current assets 2,236,530 3,026,560
Fixed assets, net accumulated depreciation
of $1,939,736 and $1,879,927, respectively 398,041 433,655
Intangible assets, net of accumulated amortization of
$56,939 and $46,634, respectively 502,015 512,320
Other assets 16,284 16,284
------------------ ----------------
Total assets $ 3,152,870 $ 3,988,819
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable $ 185,544 $ 120,066
Accrued expenses 404,456 225,195
Extended warranties - current portion 1,658 4,146
Capital leases - current portion 7,986 10,858
------------------ ----------------
Total current liabilities 599,644 360,265
------------------ ----------------
Total liabilities 599,644 360,265
------------------ ----------------
Stockholders' equity
Preferred stock, $.001 par value per share,
1,000,000 authorized; 0 shares issued and outstanding - -
Common stock, par value $.001 per share,
25,000,000 shares authorized; 12,413,209
issued and outstanding 12,413 12,413
Additional paid-in capital 36,916,868 36,916,868
Accumulated deficit (34,376,055) (33,300,727)
------------------ ----------------
Total stockholders' equity 2,553,226 3,628,554
------------------ ----------------
Total liabilities and stockholders' equity $ 3,152,870 $ 3,988,819
================== ================
See notes to consolidated financial statements
3
4
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-months ended
March 31,
2001 2000
---- ----
(unaudited)
Revenues $ 475,949 $ 399,157
Cost of sales 262,047 133,426
------------------- -----------------
Gross profit 213,902 265,731
Expenses
Research and development 449,485 186,625
Sales and marketing 462,117 35,435
General and administrative 396,718 192,679
------------------- -----------------
Total expenses 1,308,320 414,739
------------------- -----------------
Operating loss (1,094,418) (149,008)
Interest income 22,284 2,413
Interest expense (3,194) (7,407)
------------------- -----------------
Net loss $ (1,075,328) $ (154,002)
=================== =================
Net loss per common share $ (0.09) $ (0.02)
=================== =================
Weighted average number
of common shares outstanding 12,413,209 6,770,860
=================== =================
See notes to consolidated financial statements
4
5
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-months ended
March 31,
2001 2000
---- ----
(unaudited)
Cash flows from operating activities:
Net loss $ (1,075,328) $ (154,002)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 59,809 59,523
Amortization 10,305 6,834
Provision for bad debt 5,140 3,919
Write off of accounts receivable (3,056) (4,409)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (336,056) 31,551
Decrease in inventories 140,278 46,755
Increase in prepaid and other current assets (79,632) (109,550)
Increase in other assets - (24,779)
Increase (decrease) in accounts payable 65,478 (291,095)
Increase (decrease) in accrued expenses 179,261 (27,886)
Increase in unearned revenue - 2,263
Decrease in extended warranties (2,488) (2,487)
Decrease in deferred rent - (5,548)
----------------- -----------------
Net cash used in operating activities (1,036,289) (468,911)
----------------- -----------------
Cash flows from investing activities:
Purchase of equipment (24,195) -
----------------- -----------------
Net cash used in investing activities (24,195) -
----------------- -----------------
Cash flows from financing activities:
Decrease in capital leases (2,872) (9,760)
Issuance of notes payable - 500,000
----------------- -----------------
Net cash (used in) provided by financing activities (2,872) 490,240
----------------- -----------------
Net (decrease) increase in cash and cash equivalents (1,063,356) 21,329
Cash and cash equivalents at beginning of period 2,150,112 7,952
----------------- -----------------
Cash and cash equivalents at end of period $ 1,086,756 $ 29,281
================= =================
Supplemental Cash Flow Information:
Cash paid for interest $ 3,194 $ 7,407
================= =================
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 cryoablation and preservation of cells, tissues and organs in low
temperature environments.
The Consolidated Balance Sheet as of March 31, 2001, the Consolidated
Statements of Operations for periods ended March 31, 2001 and 2000, and the
Consolidated Statements of Cash Flows for the periods ended March 31, 2001
and 2000, 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 31, 2001, 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 31, 2000 included
in the Company's Annual Report on Form 10-KSB for the year ended December
31, 2000.
The results of operations for the periods ended March 31, 2001 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 periods ended March 31, 2001 and 2000. 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 31, 2001 December 31, 2000
-------------- -----------------
Raw materials and purchased parts $ 247,676 $ 264,254
Work in process 875 9,643
Finished goods 265,116 380,048
------- -------
$ 513,667 $ 653,945
============ ==============
6
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has developed cryosurgical systems called the CMS
AccuProbe(R) System (the "AccuProbe"), the CMS Blizzard(TM) Series (the
"Blizzard"), and the Cryo-Lite(R) Series (the "Cryo-Lite"). The AccuProbe, the
Blizzard and the Cryo-Lite are sophisticated cryosurgical devices designed to
freeze and destroy diseased tissue. They are particularly applicable where
diseased tissue cannot be removed surgically or where surgery is likely to have
extensive adverse side effects. The Company plans to utilize its AccuProbe,
Blizzard and Cryo-Lite in the various fields for which the devices have received
clearance from the United States Food and Drug Administration (the "FDA").
The Company completed initial development of the AccuProbe in 1992 and has
marketed this system to hospitals, surgeons and radiologists in the United
States and abroad. In addition to the AccuProbe, the Company sells single use
probes and other disposables used with the AccuProbe and offers service warranty
contracts. Although the Cryo-Lite received FDA clearance in July 1997 and the
Blizzard received FDA clearance in February 1998, no Blizzard or Cryo-Lite
devices have been shipped for commercial sale.
The Company is also attempting to develop and commercialize a series of
hypothermic preservative solutions (the "Solutions"). Some of these Solutions
are designed to maintain the fluid and chemical balances of human organs while
body temperature is significantly lowered. Other Solutions have been developed
that may be utilized in preserving certain cells and tissues utilized by
scientists in research labs and academic institutions. All of these Solutions
continue to be tested in laboratory settings. Commercialization of certain
Solutions is presently being pursued for those markets not subject to FDA
regulations through the Company's wholly-owned subsidiary, BioLife Solutions,
Inc. ("BioLife"), formed in 1998. At present, development of the Solutions for
human organ transplantation is in the laboratory and preclinical stage. The
Company is seeking funds from various government and non-government granting
agencies as well as third party investors to continue the development of the
Solutions.
RESULTS OF OPERATIONS
Revenues for the period ended March 31, 2001 totaled $475,949, compared to
$399,157, for the comparable period of the prior year, representing an increase
of 19%. The increase in revenues in the period reflects an increase in the
number of CMS AccuProbe(R) Systems and accessories sold during this period.
Gross profit for all products for the period ended March 31, 2001 totaled
$213,902, or 45% of revenues, compared to gross profits of $265,731, or 66% of
revenues for the comparable period of the prior year. In 2001, gross profit as a
percent of revenues decreased compared to the prior year period due to changes
in production volume and expenses, and the mix of product sales.
Research and development expenses for the period ended March 31, 2001 totaled
$449,485, compared to $186,625, for the comparable period of the prior year,
representing an increase of 141% from the respective prior year period. Research
and development expenses increased due to expenditures for clinical trials
related to the Hypothermosol(TM) solutions and other expenses related to the
development of the 800 series Accuprobe system.
Sales and marketing expenses for the period ended March 31, 2001 totaled
$462,117, compared to $35,435, for the comparable period of the prior year,
representing an increase of 1,204% from the prior
7
8
year period. Sales and marketing expenses increased over the comparable period
of the previous year due to an increase in the number of marketing and sales
personnel, an increase in sales commissions, and an increase in travel and
related expenses.
General and administrative expenses for the period ended March 31, 2001 totaled
$396,718, and $192,679, for the comparable period of the prior year,
representing an increase of 106%, respectively, from the prior year period.
General and administrative expenses increased due to an increase in consulting
expenses and costs associated with personnel.
Operating expenses for the period ended March 31, 2001 totaled $1,308,320, and
$414,739, for the comparable period of the prior year, representing an increase
of 215% from the prior year period. The Company sustained a net loss of
$1,075,328 for the period ended March 31, 2001, compared to a net loss of
$154,002, for the comparable period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had cash and cash equivalents totaling $1,086,756
and working capital of $1,636,886, as compared to $2,150,112 and $2,666,295,
respectively, at December 31, 2000. The decrease in the Company's cash and
working capital positions from December 31, 2000 was due primarily to net losses
during the period.
Capital expenditures for equipment totaled $24,195, in the period ended March
31, 2001, 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, 2001.
The Company believes that sales for the remainder of the 2001 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
The information set forth in this Report (and other reports issued by the
Company and its officers from time to time) contain certain statements
concerning the Company's future results, future performance, intentions,
objectives, plans and expectations that are or may be deemed to be
"forward-looking statements." Such statements are made in reliance upon safe
harbor provisions of the Private Securities Litigation Act of 1995. These
forward-looking statements are based on current expectations that involve
numerous risks and uncertainties, including those risks and uncertainties
discussed in the Company's Annual Report on Form 10KSB for the year ended
December 31, 2000. Assumptions relating to the foregoing involve judgements with
respect to, among other things, future economic, competitive, and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, the Company cannot assure you that the results
discussed or implied in such forward-looking statements will prove to be
accurate. In light of the significant uncertainties inherent in such
forward-looking statements, the inclusion of such statements
8
9
should not be regarded as a representation by the Company or any other person
that the Company's objectives and plans will be achieved. 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 obligations to
revise any of these forward-looking statements.
9
10
PART II - OTHER INFORMATION
Not Applicable
10
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Cryomedical Sciences, Inc.
--------------------------
Date: May 11, 2001 By: /s/Richard J. Reinhart, Ph.D.
-----------------------------
Richard J. Reinhart, Ph.D
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
11