1
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 June 30, 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
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(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 August 7, 2000, 9,465,644 shares of Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 (unaudited) and December 31, 1999
(audited)
Consolidated Statements of Operations for the Three Months ended June 30, 2000 and
June 30, 1999 (unaudited)
Consolidated Statements of Operations for the Six Months ended June 30, 2000 and June
30, 1999 (unaudited)
Consolidated Statements of Cash Flows for the Six Months ended June 30, 2000 and June
30, 1999 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Conditions 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
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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.
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CELL ROBOTICS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF AS OF
6-30-00 12-31-99
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 2,735,923 $ 358,379
Accounts receivable, net of allowance for
doubtful accounts of $1,841 and $23,841
in 2000 and 1999, respectively 331,451 206,278
Inventory 937,743 897,971
Other 62,603 36,543
------------ ------------
Total current assets 4,067,720 1,499,171
Property and equipment, net 422,102 485,556
Other assets, net 62,535 28,939
------------ ------------
Total assets $ 4,552,357 $ 2,013,666
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 256,855 $ 684,403
Notes payable 1,450,000 --
Payroll related liabilities 145,345 116,617
Royalties payable 72,624 67,519
Other current liabilities 51,355 40,294
------------ ------------
Total current liabilities 1,976,179 908,833
Note payable -- 250,000
------------ ------------
Total liabilities 1,976,179 1,158,833
------------ ------------
Stockholders' equity:
Preferred stock, $.04 par value. Authorized
2,500,000 shares, no shares issued and outstanding
at June 30, 2000 and December 31, 1999 0 0
Common stock, $.004 par value. Authorized
50,000,000 shares, 9,403,763 and 8,244,121 shares
issued and outstanding at June 30, 2000
and December 31, 1999, respectively 37,615 32,976
Additional paid-in capital 22,403,310 19,154,908
Accumulated deficit (19,864,747) (18,333,051)
------------ ------------
Total stockholders' equity 2,576,178 854,833
------------ ------------
$ 4,552,357 $ 2,013,666
============ ============
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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CELL ROBOTICS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
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Product sales $ 261,828 $ 568,540
Research and development grants 1,334 32,084
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Total revenues 263,162 600,624
----------- -----------
Product cost of goods sold (354,535) (417,388)
SBIR direct expenses (1,334) (32,084)
----------- -----------
Total cost of goods sold (355,869) (449,472)
----------- -----------
Gross profit (loss) (92,707) 151,152
----------- -----------
Operating expenses:
General and administrative 337,422 217,376
Marketing & Sales 206,068 234,938
Research and development 164,688 132,616
----------- -----------
Total operating expenses 708,178 584,930
----------- -----------
Loss from operations (800,885) (433,778)
----------- -----------
Other income (expense):
Interest income 16,080 4,662
Interest expense (27,598) (91)
----------- -----------
Total other income (expense) (11,518) 4,571
----------- -----------
Net loss (812,403) (429,207)
----------- -----------
Net loss applicable to common shareholders $ (812,403) $ (429,207)
=========== ===========
Weighted average common shares
outstanding, basic and diluted 9,037,152 7,803,264
=========== ===========
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.09) $ (0.06)
=========== ===========
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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CELL ROBOTICS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
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Product sales $ 476,422 $ 1,065,549
Research and development grants 7,294 51,231
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Total revenues 483,716 1,116,780
----------- -----------
Product cost of goods sold (525,529) (755,289)
SBIR direct expenses (7,294) (51,231)
----------- -----------
Total cost of goods sold (532,823) (806,520)
----------- -----------
Gross profit (loss) (49,107) 310,260
----------- -----------
Operating expenses:
General and administrative 840,502 551,665
Marketing & Sales 340,346 371,340
Research and development 289,955 253,648
----------- -----------
Total operating expenses 1,470,803 1,176,653
----------- -----------
Loss from operations (1,519,910) (866,393)
----------- -----------
Other income (expense):
Interest income 19,367 15,057
Interest expense (31,153) (140)
----------- -----------
Total other income (expense) (11,786) 14,917
----------- -----------
Net loss (1,531,696) (851,476)
----------- -----------
Preferred stock dividends -- (515,280)
----------- -----------
Net loss applicable to common shareholders $(1,531,696) $(1,366,756)
=========== ===========
Weighted average common shares
outstanding, basic and diluted 8,777,218 7,245,733
=========== ===========
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.17) $ (0.19)
=========== ===========
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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CELL ROBOTICS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,531,696) $ (851,476)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 101,331 41,275
Amortization of options issued for services -- 7,279
Options and warrants issued for services 134,398 70,815
Common stock issued for services 551,405 --
Increase in accounts receivable (125,173) (114,001)
Increase in inventory (39,772) (77,720)
Decrease (increase) in other assets (62,071) 16,180
Increase (decrease) in current liabilities (382,654) 247,347
----------- -----------
Net cash used in operating activities (1,354,232) (660,301)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities -
purchase of fixed assets (35,462) (193,544)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,735,502 150,000
Proceeds from notes payable 1,200,000 --
Proceeds from exercise of stock options 139,980 --
Proceeds from exercise of warrants 691,756 --
----------- -----------
Net cash provided by financing activities 3,767,238 150,000
----------- -----------
Net increase (decrease) in cash and cash equivalents: 2,377,544 (703,845)
Cash and cash equivalents:
Beginning of period 358,379 1,375,575
----------- -----------
End of period $ 2,735,923 $ 671,730
=========== ===========
SUPPLEMENTAL INFORMATION:
Stock dividend issued on preferred stock $ -- $ 515,280
=========== ===========
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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CELL ROBOTICS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 Common Stock for all preferred shareholders of record on February 2,
1999.
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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. If
certain conditions are not met 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. Proceeds to the Company were approximately $225,000.
On May 26, 2000 the Company issued 500,000 shares of its Common Stock for
$2,000,000 in a private placement with Paulson Investment Company of Portland,
Oregon. A 5% placement fee was paid to a current member of the Company's Board
of Directors after the close of the transaction.
In February, May and June 2000 the Company issued a total of 150,000 shares
of its common stock to Pollet & Richardson as payment for legal services.
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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 a secured 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 periods ended June 30, 2000 and 1999,
as all potentially dilutive securities were anti-dilutive.
Options to purchase 1,499,623 and 1,270,320 shares of common stock were
outstanding at June 30, 2000 and 1999, respectively. Warrants to purchase
1,504,351 and 1,762,576 shares of common stock were outstanding at both June 30,
2000 and 1999, respectively. These were not included in the computation of
diluted earnings per share as the exercise of the options would have been
anti-dilutive because of the net losses incurred in the periods ended June 30,
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 fertility 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
administration 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.
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SIX MONTHS ENDED
JUNE 30, 2000
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ---------
Revenues from customers $ 217,470 258,952 -- 476,422
Research and development
grants 7,294 -- -- 7,294
Loss from operations (71,984) (618,178) (829,748) (1,519,910)
SIX MONTHS ENDED
JUNE 30, 1999
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ---------
Revenues from customers $ 556,244 509,305 -- 1,065,549
Research and development
grants 51,231 -- -- 51,231
Profit (loss) from operations 86,764 (411,490) (541,667) (866,393)
THREE MONTHS ENDED
JUNE 30, 2000
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ---------
Revenues from customers $ 145,993 115,835 -- 261,828
Research and development
grants 1,334 -- -- 1,334
Loss from operations (43,515) (423,974) (333,396) (800,885)
THREE MONTHS ENDED
JUNE 30, 1999
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ---------
Revenues from customers $ 347,620 220,920 -- 568,540
Research and development
grants 32,084 -- -- 32,084
Profit (loss) from operations 34,295 (212,050) (256,023) (433,778)
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6. Capital Resources
Since inception, the Company has incurred operating losses and other equity
charges, which have resulted in an accumulated deficit of $19,864,747. During
the six-month period ended June 30, 2000 the Company's operations used net cash
of $1,354,232.
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 those of the scientific instrumentation market and, as such, offer a
greater opportunity of 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 fourth
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 and increased sales will be sufficient
to cover its expected operational deficits through 2000.
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 (i) 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.
8. Subsequent Events
On July 6, 2000 the Company filed an SB-2 registration statement with the
Securities and Exchange Commission. The primary purpose of this registration
statement was to register the 500,000 common shares issued to Paulson Investment
Company in May 2000 and to register the 500,000 common shares required for the
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secured convertible promissory note issued in March 2000. The SB-2 was declared
effective by the Securities and Exchange Commission on July 20, 2000 and the
secured convertible promissory note converted to common stock in August 2000.
In connection with the beneficial conversion to Common Stock in August 2000
of the secured convertible promissory note issued in March 2000, the Company
recorded a charge to interest expense of $1,200,000.
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 - JUNE 30, 2000 COMPARED TO DECEMBER 31, 1999
The Company's working capital increased to $2,091,541 at June 30, 2000 from
$590,338 at December 31, 1999. The Company's current ratio increased to 2.1:1 at
June 30, 2000 compared with 1.7:1 at December 31, 1999. This increase in
liquidity is primarily due to the $2 million private placement that the Company
completed in May 2000. The private placement completed in May 2000 and a $1.2
million secured convertible note issued in March 2000 were the primary reasons
that total assets increased from $2,013,666 at December 31, 1999 to $4,552,357
at June 30, 2000.
Accounts receivable and inventory increased $125,173, or 61% and $39,772,
or 4%, respectively, as of June 30, 2000 when compared with December 31, 1999 as
a result of increased sales during the quarter ended June 30, 2000 when compared
with the quarter ended December 31, 1999.
As of June 30, 2000, the Company's total liabilities were $1,976,179
compared to $1,158,833 at December 31, 1999. This increase was primarily due to
the issuance of a $1,200,000 secured convertible note payable during the period
ended June 30, 2000.
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. Until revenues from operations can be
realized through future product sales, the Company may not have other sources of
capital available to satisfy its cash requirements. If the Company is unable to
obtain additional financing as 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 and potential increased future
product sales will be sufficient to allow the Company to meet 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.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1999
Sales for the three-month period ended June 30, 2000 decreased $337,462 or
56% to $263,162 from $600,624 in the same period of 1999. The decrease is due to
the Company's change in emphasis from its scientific instrumentation products
and its laser-based medical products marketed to the professional medical
community to its laser-based medical products marketed to the general public.
Sales of scientific instrumentation products and laser-based medical products
marketed to the professional medical community decreased $201,627 and $213,466,
respectively, in the quarter ended June 30, 2000 when compared with the quarter
ended June 30, 1999. The sales decline in scientific instrumentation products is
due to fewer resources being allocated to achieve sales of those products. The
Company's distributor of the laser-based medical products marketed to the
professional medical community did not purchase any of these products from the
Company during the quarter ended June 30, 2000.
Sales of laser-based medical products marketed to the general public
increased $124,552 or 100% in the quarter ended June 30, 2000 when compared with
no sales in the same period in the prior year. As previously mentioned the
Company has made a strategic decision to develop and market these types of
products.
The Company's gross margin decreased from 27% for the quarter ended June
30, 1999 to a negative gross margin of 35%. The decrease is due to fewer
products being sold and the lack of efficiencies in the production of
laser-based medical products marketed to the general public. The Company expects
its margins to return to a profitable level; however, there are several risk
factors that need to be considered such as the Company's ability to effectively
market the products and significantly increase sales and the ability of the
Company to efficiently manufacturer the products. The Company is working to
achieve sales and manufacturing efficiencies, but no assurances can be given
that the Company will succeed in these areas.
Operating expenses increased $123,248 from $584,930 for the quarter ended
June 30, 1999 to $708,178 for the quarter ended June 30, 2000. The increase is
primarily due to legal fees. The cost of legal fees incurred during the quarter
ended June 30, 2000 was settled by issuing common stock of the Company rather
than by expending working capital resources. Additionally the company
experienced an increase in research and development costs as the manufacturing
process of the laser-based medical products marketed to the general public was
refined during the quarter ended June 30, 2000.
Interest income increased in the quarter ended June 30, 2000 over the
amount in the quarter ended June 30, 1999 due to the Company having more cash to
invest as a result of the $2 million private placement that was completed in May
and to the issuance of the $1.2 million convertible note March 2000. Interest
expense increased because of interest charges associated with the $1.2 million
convertible note and the $250,000 note to one of the Company's directors.
Other than the foregoing, management knows of no trends, or other demands,
commitments, events or uncertainties that will result in, or are reasonably
likely to result in, a material impact on the Company's results of operations.
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15
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1999
Sales for the period ended June 30, 2000 decreased $633,064 or 57% to
$483,716 from $1,116,780 in the same period of 1999. The reasons for the
decrease are the same as those discussed above for the quarter. Sales of
scientific instrumentation products and laser-based medical products marketed to
the professional medical community decreased $338,774 and $385,456,
respectively, in the period ended June 30, 2000 when compared with the period
ended June 30, 1999.
Sales of laser-based medical products marketed to the general public
increased $159,166 or 100% in the period ended June 30, 2000 when compared with
no sales in the same period in the prior year. As previously mentioned the
Company has made a strategic decision to develop and market these types of
products.
The Company's gross margin decreased from 29% for the period ended June 30,
1999 to a negative gross margin of 10%. The reason for the decrease is explained
above.
Operating expenses increased $294,150 from $1,176,653 for the period ended
June 30, 1999 to $1,470,803 for the period ended June 30, 2000. As previously
explained, the increase is primarily due to legal fees. The cost of legal fees
incurred was settled by issuing common stock of the Company rather than by
expending working capital resources.
Interest income increased in the period ended June 30, 2000 over the amount
in the quarter ended June 30, 1999 due to the Company having more cash to invest
as a result of the $2 million private placement that was completed in May and to
the issuance of the $1.2 million convertible note March 2000. Interest expense
increased because of interest charges associated with the $1.2 million
convertible note and the $250,000 note to one of the Company's directors.
Other than the foregoing, management knows of no trends, or other demands,
commitments, events or uncertainties that will result in, or are reasonably
likely to result in, a material impact on the Company's results of operations.
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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 the Notes to Unaudited Consolidated
Financial Statements.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held May 19, 2000, in
Albuquerque, New Mexico. At that meeting, the shareholders voted on the
following proposals:
Proposal 1. Election of directors;
Proposal 2. To consider approval of an amendment to the Company's 1992
Incentive Stock Option Plan;
Proposal 3. To approve an increase in the Company's authorized shares of
Common Stock;
Proposal 4. To ratify the selection of KPMG LLP as independent
accountants for the Company's year ending December 31, 2000;
Proposal 1 was a proposal to elect the Board of Directors' seven nominees
for the Board of Directors. Those nominees are each listed below in the
summary of the vote on Proposal 1. Proposal 2 was a proposal to amend the
Company's Incentive Stock Option Plan to increase the number of shares
available for granting under the plan by 750,000 shares. Proposal 3 was a
proposal to amend the Company's Articles of Incorporation to increase the
Company's authorized Common Stock from 12,500,000 to 50,000,000 shares.
Proposal 4 was a proposal to ratify KPMG, LLP as the Company's principal
accountant for the fiscal year ending December 31, 2000.
With respect to Proposal 1, the Directors received the following votes:
For Against Abstained
Mark Waller 6,754,813 800 16,214
Dr. Raymond Radosevich 6,754,813 800 16,214
Dr. Debra Bryant 6,754,813 800 16,214
Andrew Pollet 6,754,813 800 16,214
Oton Tisch 6,754,813 800 16,214
Steven Crees 6,754,813 800 16,214
Dr. Ronald Lohrding 6,754,813 800 16,214
Proposal 2 received the following votes: 1,869,104 0 37,080
Proposal 3 received the following votes: 6,330,673 408,624 32,530
Proposal 4 received the following votes: 6,714,810 11,808 45,209
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Exhibit 10.1 Form of Employment Agreement between Cell
Robotics International, Inc. and Dr. Ronald
K. Lohrding, filed herewith.
Exhibit 27 Financial Data Schedule, filed herewith.
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: August 14, 2000 By: /s/ Ronald K. Lohrding
-------------------- ----------------------
Ronald K. Lohrding, President & CEO
Dated: August 14, 2000 By: /s/ Paul C. Johnson
-------------------- -------------------
Paul C. Johnson, Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Form of Employment Agreement between Cell Robotics International,
Inc. and Dr. Ronald K. Lohrding, filed herewith.
27 Financial Data Schedule, filed herewith.