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As filed with the Securities and Exchange Commission on April 30, 2001
REGISTRATION NO. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 7 POST EFFECTIVE AMENDMENT NO. 5
TO TO
FORM SB-2 FORM SB-2
REGISTRATION STATEMENT REGISTRATION STATEMENT
UNDER UNDER
THE SECURITIES ACT OF 1933 THE SECURITIES ACT OF 1933
REGISTRATION NO. 33-80347 REGISTRATION NO. 333-40895
POST EFFECTIVE AMENDMENT NO. 2 POST EFFECTIVE AMENDMENT NO. 2
TO ON FORM SB-2
FORM SB-2 TO
REGISTRATION STATEMENT FORM S-3
UNDER REGISTRATION STATEMENT
THE SECURITIES ACT OF 1933 UNDER
REGISTRATION NO. 333-89225 THE SECURITIES ACT OF 1933
REGISTRATION NO. 333-55951
POST EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REGISTRATION NO. 333-40920
CELL ROBOTICS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Colorado 5049-05 84-1153295
(State or other jurisdiction of (Primary Standard Industrial Classification Code Number) (IRS Employer Identification Number)
incorporation or organization)
Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
(505) 343-1131
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Dr. Ronald K. Lohrding, President and CEO
Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
(505) 343-1131
(Name, address, including zip code, and telephone number
of agent for service of process)
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Copy to:
W. Crews Lott
Baker & McKenzie
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
(214) 978-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the date this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND
RELATES TO AND CONSTITUTES POST EFFECTIVE AMENDMENT NO. 7 TO REGISTRATION NO.
33-80347, POST EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION NO. 333-89225, POST
EFFECTIVE AMENDMENT NO. 5 TO REGISTRATION NO. 333-40895, POST EFFECTIVE
AMENDMENT NO. 2 TO REGISTRATION NO. 333-55951 AND POST EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION NO. 333-40920.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission becomes effective. This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 30, 2001
PROSPECTUS
CELL ROBOTICS INTERNATIONAL, INC.
2,972,251 SHARES OF COMMON STOCK
297,576 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This offering relates to the resale of an aggregate of 1,594,675 shares of our
common stock and 217,576 of our redeemable common stock purchase warrants, or
Redeemable Warrants, by persons who are referred to in this prospectus as
selling securityholders. The selling securityholders holding Redeemable Warrants
may also resell 217,576 shares of their common stock when they exercise their
Redeemable Warrants.
We are also registering our offering of 920,000 shares of our common stock
issuable upon exercise of the Redeemable Warrants sold in the 1998 public
offering of our securities. Further, we are offering 160,000 shares of our
common stock and 80,000 of our Redeemable Warrants, which may be acquired upon
exercise of warrants, or Representative Warrants, issued to an underwriter and
its officers in connection with the 1998 public offering of our securities. This
prospectus also relates to our offering of 80,000 shares of our common stock
issuable upon exercise of the Redeemable Warrants underlying the Representative
Warrants.
Our common stock is quoted on the OTC Bulletin Board under the trading symbol
"CRII" and our Redeemable Warrants are quoted on the OTC Bulletin Board under
the trading symbol "CRII.W." On April 24, 2001, the closing bid price per share
of our common stock and the closing bid price of our Redeemable Warrants were
$0.770 and $0.156, respectively.
INVESTING IN OUR SECURITIES INVOLVES RISKS. YOU SHOULD PURCHASE OUR SECURITIES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS APRIL ___, 2001.
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TABLE OF CONTENTS
SUMMARY.............................................1
The Company.........................................1
How to Contact Us...................................2
The Offerings.......................................2
Summary Financial Data..............................4
Market Price Information............................4
Dividends...........................................5
RISK FACTORS........................................6
Risks Related to Our Business and Industry..........6
Risks Related to Our Securities and This Offering..12
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS.........13
USE OF PROCEEDS....................................14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............15
Results of Operations -- Year Ended December 31,
2000 Compared to the Year Ended December 31,
1999............................................15
Results of Operations -- Year Ended December 31,
1999 Compared to the Year Ended December 31,
1998............................................16
Liquidity and Capital Resources....................17
BUSINESS...........................................19
Overview...........................................19
Products...........................................19
Laser-Based Medical Devices -- The Lasette.........19
Scientific Research Instruments -- The Cell
Robotics Workstation............................23
Continuing Interest in the IVF Workstation.........24
Competition........................................24
Business Strategy..................................25
Intellectual Property..............................25
Research and Development...........................25
Government Regulation; Product Approval Process....26
Employees..........................................26
Facilities.........................................26
Legal Proceedings..................................27
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES....27
EXECUTIVE COMPENSATION.............................28
Summary Compensation Table.........................28
Employment Agreements..............................29
Stock Incentive Plan...............................29
Option Grants......................................30
Option Exercises and Option Values.................30
Board Structure....................................30
Director Compensation..............................30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT..................................31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....32
INDEMNIFICATION....................................32
DESCRIPTION OF SECURITIES TO BE REGISTERED.........33
Common Stock.......................................33
Preferred Stock....................................34
Redeemable Warrants................................34
SELLING SECURITYHOLDERS............................35
PLAN OF DISTRIBUTION...............................37
Selling Securityholders' Securities................37
Redeemable Warrants................................38
LEGAL MATTERS......................................38
EXPERTS............................................38
WHERE YOU CAN FIND MORE INFORMATION................38
INDEX TO FINANCIAL STATEMENTS.....................F-1
You should rely only on the information contained in, or incorporated by
reference into, this prospectus. We have not authorized anyone to provide you
with information that is different from what is contained in this prospectus.
The delivery of this prospectus shall not, under any circumstances, create any
implication that there has been no change in the affairs of the company since
the date of this prospectus.
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SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and does not contain all of the information that you
should consider before deciding to invest in our securities. We urge you to read
this entire prospectus carefully, including the "Risk Factors" section and the
consolidated financial statements and related notes included elsewhere in this
prospectus. As used in this prospectus, the words "we," "us," "our" and "the
company" refer to Cell Robotics International, Inc. and its subsidiary, Cell
Robotics, Inc. Lasette(R), Personal Lasette(TM), Professional Lasette(TM),
LaserTweezers(R), LasorScissors(TM), CellSelector(TM) and SmartStage(TM) are
trademarks of the company used in this prospectus. This prospectus also includes
trademarks of other companies.
THE COMPANY
We were incorporated in Colorado on September 28, 1988, under the name
Intelligent Financial Corporation. In February 1995, we acquired all of the
issued and outstanding shares of Cell Robotics, Inc., a New Mexico corporation,
which had been formed in 1988 to develop the Cell Robotics Workstation. In May
1995, we changed our name from Intelligent Financial Corporation to Cell
Robotics International, Inc. We manufacture, market and sell sophisticated
laser-based medical devices and scientific research instruments.
As a pioneer in the development of optical trapping technology, we have evolved
from being a developer of laser-based laboratory instruments to a supplier of
novel medical laser products. Our product lines consist of a laser-based medical
device, which uses a laser to draw a blood sample to allow diabetics to measure
their glucose levels, and the laser-based research workstation marketed under
the name Cell Robotics Workstation. Until recently, we also produced and
marketed the In Vitro Fertilization Workstation, or the IVF Workstation. The IVF
Workstation and associated technology were sold to Hamilton Thorne Research in
May 2000 for $100,000 cash and future royalty payments of 12% of net sales of
the IVF Workstation and related technology.
Our primary focus is distributing and selling our laser-based medical device to
consumers, hospitals, clinics and doctors' offices. We previously marketed two
laser-based medical devices, the Personal Lasette and the Professional Lasette.
The Personal Lasette was marketed for home use, while the Professional Lasette
was targeted for clinical applications. In the third quarter of 2000, we made a
strategic decision to discontinue marketing the Professional Lasette and
completed modifications to the Personal Lasette so that it could be used for
either home or clinical use. In this prospectus, we sometimes refer to the
Personal Lasette as the "Lasette." The primary difference between the Lasette
used in these home and clinical environments is that a different disposable lens
shield is attached to the product for clinical applications than that attached
for home use. We believe that focusing on a single product line will reduce
direct costs associated with manufacturing the Lasette and promote brand
awareness of the Lasette. Our key targets include the clinical and the diabetes
care markets for the Lasette and the scientific research market for the Cell
Robotics Workstation.
The Lasette is a compact, lightweight, portable laser skin perforator that
allows diabetics to perform capillary blood sampling with little pain and
residual soreness. The Lasette is the only alternative to the steel lancet or
needle that has been approved by the Food and Drug Administration, or the FDA,
that allows diabetics to sample their blood for glucose testing so they can
determine their subsequent insulin injections. The Lasette has also been cleared
by the FDA for all blood screening test applications for home and clinical
settings. The FDA clearance allows us to commercially market the Lasette in the
United States to diabetics for home and clinical use. The Lasette has also
received the European Community's CE Mark. The CE Mark certification permits us
to market the Lasette in countries comprising the European Union, as well as
certain other countries such as Brazil and Australia.
We also believe the following trends in blood sampling will provide us with
unique opportunities:
o an increasing demand for less painful alternatives for
capillary blood sampling;
o an increasing desire to eliminate cross-contamination from
accidental needle or lancet sticks in hospitals and clinics;
o the enactment of the Needlestick Safety and Prevention Act, or
the Needlestick Safety Act, which requires health facilities
to employ measures to reduce or eliminate the accidental
needlesticks
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suffered by health care workers by providing safety engineered
sharps devices or needleless systems;
o a growing number of diagnosed diabetics seeking better insulin
control; and
o a growing understanding of the need to provide testing methods
for needle-phobic individuals.
To capitalize on these opportunities, we introduced the Lasette and intend to
position the company as a leader in the development of technologically-advanced
medical devices that offer more effective, safer and less painful solutions than
conventional procedures.
Our scientific research instrument consists of the Cell Robotics Workstation.
The Cell Robotics Workstation allows scientists to use a laser to manipulate
objects in micro-space, upgrading the microscope to an interactive
micro-laboratory. The Cell Robotics Workstation enhances the usefulness and
importance of the conventional laboratory microscope as a tool in medical,
biological and genetic applications in the life sciences. Scientists can use the
technology for cell separation, cell-to-cell interaction, micro-dissection and
intercellular manipulation of living cells. Third parties currently use the Cell
Robotics Workstation for cancer, immunology, neurobiology, assisted reproductive
techniques and genome research. Principal markets for the Cell Robotics
Workstation are colleges, universities, research laboratories, biotechnology and
pharmaceutical companies and commercial laboratories conducting biological
research. The Cell Robotics Workstation has received the European Community's CE
Mark. It is not subject to FDA regulatory clearances. While we intend to focus
on the development, distribution and sale of laser-based medical devices, we
will continue to promote and market the Cell Robotics Workstation through direct
sales, dealers, representatives and distribution arrangements.
Other products and technology that we are considering for development include
the following:
o a laser finger perforator that will also test the patient's
glucose level using the same instrument;
o a new broad-based technology based upon our United States
patent that applies laser energy to initiate a molecular
reaction, including amplifying DNA molecules in a process
known as polymerase chain reaction, or PCR; and
o a low-cost laser myringotomy instrument that could provide a
safer and less damaging alternative to placing tubes in
children's ears as a treatment for repeat ear infections.
HOW TO CONTACT US
Our principal offices are located at 2715 Broadbent Parkway N.E., Albuquerque,
New Mexico 87107. Our telephone number is (505) 343-1131.
THE OFFERINGS
This prospectus relates to multiple offerings by the company and the selling
securityholders identified in this prospectus under the section entitled
"Selling Securityholders." See also "Description of Securities to Be
Registered."
The offerings by the selling securityholders under this prospectus consist of
the following:
o REDEEMABLE WARRANTS AND UNDERLYING COMMON STOCK. The resale by
six selling securityholders of 217,576 Redeemable Warrants. We
are also registering the resale by these selling
securityholders of 217,576 shares of our common stock issuable
upon the exercise of their Redeemable Warrants. These
Redeemable Warrants were acquired either in connection with
previous private placements or as payment of legal services
provided to us. These Redeemable Warrants have an exercise
price of $2.40 per share.
o COMMON STOCK. The resale by 13 selling securityholders of
1,594,675 shares of our common stock. Of the 1,594,675 shares
being registered:
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(1) three selling securityholders acquired a total of
829,475 shares in a private placement completed in
May 2000 and upon their February 2000 exercise of
warrants, or Placement Agent's Warrants, issued for
services provided in connection with our September
1995 private offering of our securities;
(2) two selling securityholders acquired 50,000 shares in
connection with a previous private placement;
(3) two selling securityholders acquired 5,000 shares as
payment for legal services provided to us;
(4) one selling securityholder acquired 500,000 shares
upon conversion of a secured convertible promissory
note;
(5) one selling securityholder acquired 40,200 shares
upon its exercise of a common stock purchase warrant
exercisable at an exercise price of $2.40 per share;
(6) one selling securityholder may acquire 100,000 shares
upon exercise of stock options issued to it as
payment for public relations services provided to us,
which stock options are exercisable at exercise
prices between $0.8438 and $3.25 per share; and
(7) three selling securityholders may acquire 70,000
shares for resale upon exercise of common stock
purchase warrants issued to them as payment for
public relations services provided to us exercisable
at an exercise price of $2.40 per share.
The offerings by the company under this prospectus consist of the following:
o COMMON STOCK. The offering by the company of 920,000 shares of
our common stock issuable to the Redeemable Warrant holders
upon the exercise of their Redeemable Warrants. These
Redeemable Warrants were acquired in connection with the 1998
public offering of our securities and have an exercise price
of $2.40 per share.
o COMMON STOCK AND REDEEMABLE WARRANTS UNDERLYING REPRESENTATIVE
WARRANTS. The offering by the company of 160,000 shares of our
common stock and 80,000 of our Redeemable Warrants issuable
upon exercise of the underlying Representative Warrants. We
are also registering the issuance by the company of 80,000
shares of our common stock upon exercise of those Redeemable
Warrants. The Representative Warrants were issued to an
underwriter and its officers in connection with the 1998
public offering of our securities. The Representative Warrants
are exercisable for 40,000 units at an exercise price of $9.90
per unit. Each unit consists of four shares of common stock
and two Redeemable Warrants. The exercise price of the
Redeemable Warrants is $2.40 per share. The securities
comprising the units will be immediately separated and
transferable. The units are not being separately registered
and there will be no public trading market developed for the
units.
We will receive $396,000 as gross proceeds from exercise of the Representative
Warrants, if and when exercised. Additionally, if the Redeemable Warrants
underlying the Representative Warrants are exercised then we will receive gross
proceeds of $192,000. We will also receive $2,208,000 as gross proceeds from
exercise of the Redeemable Warrants sold in the February 1998 offering, if and
when exercised. If all of the selling securityholders exercise their Redeemable
Warrants, stock options and other common stock purchase warrants, then we will
receive additional proceeds of $880,965.
Presently, the exercise prices of these stock options, stock purchase warrants,
Redeemable Warrants and Representative Warrants are below the trading price of
our common stock. Accordingly, it is unlikely that these securities will be
exercised unless the trading price of our common stock increases. Whether or not
our common stock trades at a price above the exercise price of these securities,
we cannot assure you that any of our securityholders will exercise any of the
stock options, common stock purchase warrants, Redeemable Warrants or
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Representative Warrants. We will not receive any proceeds from the sale of our
common stock or the sale of our Redeemable Warrants.
SUMMARY FINANCIAL DATA
YEAR ENDED DECEMBER 31,
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2000 1999
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Statement of Operations:
Total revenues $ 1,007,063 $ 1,417,317
Operating expenses $ 3,404,166 $ 2,165,551
Net loss applicable to common shareholders $(5,036,182) $(2,424,630)
Basic and diluted net loss applicable to common shareholders per common share $ (0.54) $ (0.31)
Shares used in computing basic and diluted loss per share 9,286,128 7,734,762
MARKET PRICE INFORMATION
Our common stock and Redeemable Warrants are traded over-the-counter and quoted
on the OTC Bulletin Board on a limited and sporadic basis under the symbols
"CRII" and "CRII.W," respectively. The reported high and low bid prices for our
common stock and the high and low bid and ask prices for our Redeemable
Warrants, each as reported by the OTC Bulletin Board, are shown below for our
two prior fiscal years through April 24, 2001. These over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
COMMON STOCK
BID
-----------------------
LOW HIGH
--------- ---------
1999
First Quarter $ 1.813 $ 2.813
Second Quarter $ 1.500 $ 2.188
Third Quarter $ 1.531 $ 2.125
Fourth Quarter $ 1.563 $ 2.313
BID
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LOW HIGH
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2000
First Quarter $ 1.531 $ 7.750
Second Quarter $ 3.128 $ 5.813
Third Quarter $ 1.813 $ 4.125
Fourth Quarter $ 0.500 $ 2.250
BID
-----------------------
LOW HIGH
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2001
First Quarter $ 0.453 $ 1.313
Through April 24, 2001 $ 0.2812 $ 0.770
REDEEMABLE WARRANTS
LOW - BID HIGH - ASK
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1999
First Quarter $ 0.813 $ 0.938
Second Quarter $ 0.813 $ 1.063
Third Quarter $ 0.875 $ 0.969
Fourth Quarter $ 0.688 $ 0.938
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LOW - BID HIGH - ASK
--------- ----------
2000
First Quarter $ 2.813 $ 3.000
Second Quarter $ 1.750 $ 2.000
Third Quarter $ 0.906 $ 1.063
Fourth Quarter $ 0.250 $ 0.375
LOW - BID HIGH - ASK
--------- ----------
2001
First Quarter $ 0.156 $ 0.234
Through April 24, 2001 $ 0.156 $ 0.156
As of April 24, 2001, there were approximately 164 holders of record of our
common stock and seven holders of record of our Redeemable Warrants.
DIVIDENDS
We have not paid any dividends on our common stock and do not expect to do so in
the foreseeable future. We anticipate that any earnings generated from our
operations will be used to finance our ongoing operations. No contractual
restrictions exist upon our ability to pay dividends.
Our Series A Convertible Preferred Stock automatically converted into shares of
our common stock in January 1999, when the sum of the closing bid prices of our
Series A Convertible Preferred Stock and two Redeemable Warrants was at least
$12.375 for ten consecutive days. Due to the automatic conversion, a final
dividend in the form of shares of our common stock was accrued for all
shareholders of record on February 2, 1999.
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RISK FACTORS
An investment in our securities is very speculative and involves a high degree
of risk. You should carefully consider the following risk factors, along with
the other matters referred to in this prospectus, before you decide to buy our
securities. If you decide to buy our securities, you should be able to afford a
complete loss of your investment.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
WE WILL NEED ADDITIONAL FINANCING DURING THE QUARTER ENDING JUNE 30, 2001 TO
MEET OUR FUTURE OPERATIONAL REQUIREMENTS AND EXECUTE ON OUR BUSINESS PLAN. IF WE
CANNOT RAISE FUNDS ON ACCEPTABLE TERMS, WE MAY NOT BE ABLE TO CONTINUE OUR
OPERATIONS, GROW MARKET SHARE, TAKE ADVANTAGE OF FUTURE OPPORTUNITIES OR RESPOND
TO COMPETITIVE PRESSURES OR UNANTICIPATED REQUIREMENTS. We expect that our
existing current working capital, the $1 million loan and loan commitment from
our board of directors and future product sales will be sufficient to allow us
to meet operational obligations through June 2001. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Certain Relationships and Related Transactions."
Accordingly, it is imperative that we complete a significant financing during
the quarter ending June 30, 2001. Although we have had discussions with
potential investors, we have not been able to obtain financing on acceptable
terms as of the date of this prospectus that will allow us to continue our
operations after June 2001. We intend to continue to seek to raise equity or
debt financing. However, no assurance can be given that we will be able to
obtain additional financing on favorable terms, if at all. Borrowing money may
involve pledging some or all of our assets. Raising additional funds by issuing
common stock or other types of equity securities would further dilute our
existing shareholders and the purchasers of the securities offered under this
prospectus. If new equity securities are issued, those securities may have
rights, preferences or privileges senior to those of existing holders of our
common stock. If we cannot obtain additional financing as needed, we may not be
able to continue our operations, grow our market share, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This would have a material adverse effect on our business, financial condition,
results of operation and our ability to continue as a going concern.
TO DATE, WE HAVE BEEN UNABLE TO FUND OUR OPERATIONS WITH CASH GENERATED FROM
SALES OF OUR PRODUCTS. IF WE OBTAIN ADDITIONAL FINANCING TO ALLOW US TO CONTINUE
OUR OPERATIONS AFTER JUNE 30, 2001, WE WILL STILL NEED TO GENERATE SUFFICIENT
REVENUES OR OBTAIN ADDITIONAL FINANCING TO FUND OUR OPERATIONS. To date, we have
funded our operations primarily from the sale of equity securities and short
term borrowings as we have not generated sufficient cash from our operations.
Even if we are able to obtain additional financing during the quarter ending
June 30, 2001 to allow us to continue our operations, we still will need to
generate significant revenues or obtain additional financing to fund anticipated
capital requirements and to achieve and maintain profitability. Our capital
requirements depend upon several factors, including the rate of market
acceptance of our products, particularly the Lasette, our level of expenditures
for marketing and sales, costs associated with our staffing and other factors.
We will need additional cash to fund the costs associated with manufacturing,
marketing and selling our products. We may also need cash to file, prosecute,
defend and enforce patent claims and other intellectual property rights,
purchase capital equipment, develop new products and maintain or obtain
necessary regulatory approvals. If our capital requirements vary materially from
those currently planned, we may require more financing during 2001 than
currently anticipated. Our inability to finance our growth, either internally or
externally, may limit our growth potential and our ability to execute our
business plan. External financing may not be available to us on favorable terms
or at all. In addition, we have received a report from our independent auditors
covering our fiscal years ended December 31, 2000 and 1999 financial statements.
The report contains an explanatory paragraph that states that our recurring
losses and negative cash flows from operations raise substantial doubt about our
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
WE HAVE A HISTORY OF LOSSES, AND EXPECT TO INCUR LOSSES IN THE FUTURE. IF WE DO
NOT ACHIEVE PROFITABILITY, OUR FINANCIAL CONDITION AND THE PRICE OF OUR COMMON
STOCK AND THE REDEEMABLE WARRANTS WILL SUFFER. To date, we have generated only
limited revenues from the sale of our products and have been unable to
profitably market our products. We incurred net losses of $5,036,182 and
$2,424,630 in 2000 and 1999, respectively. We expect to experience operating
losses and negative cash flow for the foreseeable future. We anticipate that our
existing current working capital, the $1 million loan and loan commitment from
our board of directors and future product sales will be sufficient to allow us
to meet operational obligations through June 2001. See "Management's
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Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources," and "Certain Relationships and Related
Transactions." However, we do not have sufficient cash to sustain continuing
operating losses after June 2001 without additional financing. Even if we are
able to obtain additional financing to allow us to continue operations, we will
still need to generate significant revenues to fund anticipated manufacturing
and marketing costs and to achieve and maintain profitability. We cannot assure
you that we will ever generate sufficient revenues to achieve profitability,
which will have a negative impact on the price of our common stock and the
Redeemable Warrants. If we do achieve profitability, we cannot assure you that
we will be able to sustain or increase profitability in the future.
THE PERSONAL LASETTE WAS ONLY INTRODUCED IN DECEMBER 1999 AND IT IS DIFFICULT TO
PREDICT WHETHER IT OR OTHER PRODUCTS THAT WE MAY DEVELOP IN THE FUTURE WILL GAIN
MARKET ACCEPTANCE OR PROFITABILITY. Demand and market acceptance for newly
developed products are subject to a high level of uncertainty and risk. The
risks associated with the introduction of innovative technologies, like our
medical laser products, include the following, among others:
o the difficulty in predicting the medical laser product's
future growth rate;
o the possibility that the cost of the product may not be
covered by private insurance or Medicare;
o our current and future products may have features which render
them uneconomical, either to manufacture or to market;
o the demand for our products may fail to develop or develop
slower than expected or our products may not achieve or
sustain market acceptance;
o the prices at which our products are accepted by purchasers
may be too low, which may prevent us from operating
profitably;
o third parties may manufacture and market a product superior in
performance and price; and
o the possibility that any proposed product, or enhancement to
existing products, may fail to receive necessary regulatory
clearances.
We cannot assure you that we will be successful in addressing these risks, and
our failure to do so could have a negative impact on our business, operating
results and financial condition.
WE HAVE LIMITED EXPERIENCE IN MARKETING, DISTRIBUTING AND SELLING LASER-BASED
MEDICAL AND RESEARCH PRODUCTS. We have limited experience marketing,
distributing and selling our products. To successfully market, distribute and
sell our current or future products, we must build a more extensive marketing
sales force and distribution network. Alternatively, we can enter into
arrangements with third parties to market, distribute and sell our products. We
cannot assure you that we will be able to successfully develop such a network or
that we will enter into acceptable agreements with third parties to provide our
products. If we maintain our own marketing, distribution and sales capabilities,
we will compete against other companies with experienced and well-funded
marketing, distribution and sales operations. Alternatively, if we enter into a
marketing arrangement with a third party, we will likely have to pay a sales
commission or discount the retail price of our products. Further, our revenues
would depend on the efforts of third parties. If we are unable to develop a plan
to market, distribute and sell our products, we may be unable to successfully
bring them to market. We cannot assure you that we will be able to recruit and
retain marketing personnel with the required skills or that we will be able to
enter into the strategic relationships needed to effectively market and
distribute our products.
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL. To successfully operate and grow our business, we must retain key
scientific, technical, managerial, marketing and financial personnel as well as
attract and retain additional highly qualified personnel for these areas. We
face intense competition for qualified personnel in these areas, and we cannot
assure you that we will be able to attract and retain qualified personnel. If we
lose our key personnel or are unable to hire and retain additional qualified
personnel in the future, our business, financial condition and operating results
could be adversely affected.
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We have employment agreements with Ronald K. Lohrding, Ph.D., our President,
Chief Executive Officer and Chairman of the Board of Directors, and Paul
Johnson, our Chief Financial Officer and Secretary. Our key employees, including
those with employment agreements, may voluntarily terminate their employment
with us at any time. We do not have key person life insurance covering our
management personnel or other key employees, other than a $500,000 term policy
on the life of Dr. Lohrding.
WE DO NOT HAVE A BROAD RANGE OF PRODUCTS TO SELL. Since selling the IVF
Workstation and associated technology to Hamilton Thorne Research in May 2000,
our exclusive product lines consist of the Lasette and the Cell Robotics
Workstation. Our primary focus is distributing and selling the Lasette, a laser
skin perforator that replaces the steel lancets or needles diabetics primarily
use. There is an inherent risk in not having a broad base of products in
development, because we will not have alternate sources of revenue if we are not
successful with our current lines. We cannot assure you that we will be able to
profitably sell this narrow line of products. The failure of the Lasette would
have a material adverse affect on the future of our business.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, INCLUDING OUR PATENTS,
WHICH COULD ADVERSELY AFFECT THE VALUE OF YOUR INVESTMENT. Our success will
depend, in part, upon our ability to develop superior products that we can
market at competitive prices. Our ability to do this will depend, in part, on
our ability to protect and defend our intellectual property rights and the
competitive advantages those rights offer. We rely primarily on patent, trade
secret, copyright and trademark laws, confidentiality procedures and other
intellectual property protection methods to protect our proprietary technology.
Despite the precautions we have taken, unauthorized parties may attempt to
engineer, reverse engineer, copy or obtain and use our products and other
proprietary information. Misappropriations of our intellectual property could
adversely affect our business, results of operations and financial condition.
As of the date of this prospectus, we have been issued three patents for our
laser-based medical devices and their disposables. We cannot assure you that any
additional patents will be issued. Our products have only limited patent
protection. We are aware of several patents held by third parties that relate to
certain aspects of our products. Others may use these patents to challenge our
current or future patents, limit the scope of our patents or limit our ability
to obtain additional or broader patent rights. A successful challenge to our
existing or future patents would materially adversely affect our competitive
position.
Any proceeding in the United States or abroad involving our intellectual
property can be expensive and can divert the attention of our technical and
management personnel. We may be required to litigate to enforce our patents,
protect trade secrets or know-how and defend against infringement charges. In
this regard, we have entered into discussions with Becton Dickinson and Company
regarding a license or similar arrangement involving a United States patent
relating to the use of a laser for blood sample collection. In this prospectus,
we refer to this patent as the Tankovich Patent. Becton Dickinson is the
exclusive licensee of the Tankovich Patent. There can be no assurance that we
will reach an agreement with Becton Dickinson on terms acceptable to us, if at
all. If we fail to reach an agreement with Becton Dickinson, there can be no
assurance that Becton Dickinson will not claim that the Lasette infringes the
Tankovich Patent. While we believe that the Tankovich Patent is invalid and
unenforceable due to public disclosure of the laser perforation concept, as well
as public commercialization of primitive perforator products in the former
Soviet Union, there can be no assurance that any infringement claims by Becton
Dickinson would be resolved without costly litigation. See "Business -- Products
- -- Laser-Based Medical Devices -- The Lasette -- Intellectual Property." An
adverse ruling in any infringement proceedings, including any proceedings with
Becton Dickinson, could subject us to significant liability or require us to
seek licenses from third parties. Patent and intellectual property disputes in
the medical and research device areas have often been settled through licensing
or similar arrangements. The costs associated with these arrangements could be
substantial and include ongoing royalties. Furthermore, we cannot assure you
that necessary licenses would be available to us on satisfactory terms, if at
all. An adverse ruling or judgment or a failure to obtain necessary licenses
could prevent us from manufacturing and selling our products, which could
materially adversely affect us.
OUR INDUSTRY IS HEAVILY REGULATED, AND STRINGENT ONGOING REGULATION AND
INSPECTION OF OUR PRODUCTS COULD LEAD TO DELAYS IN THEIR MANUFACTURE, MARKETING
AND SALE. United States government agencies and comparable agencies in countries
outside the United States regulate the testing, manufacture, labeling,
distribution, marketing and advertising of the Lasette and our ongoing research
and development activities. While the Lasette has received all necessary FDA
clearances and has received the European Community's CE Mark, its manufacture
and marketing will be subject to ongoing regulation. We are subject to
inspection and market surveillance by the FDA and the European Community for
compliance with good manufacturing practices and other requirements, which
include
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testing, design, quality control and documentation procedures. The FDA conducts
periodic audits of the Lasette, and has notified us that it intends to conduct
an audit in 2001. In order to manufacture and sell the Lasette under the CE
Mark, we must also pass annual International Standards Organization, or ISO,
maintenance audits, as well as comprehensive ISO audits every three years. While
we have historically been in compliance with all FDA and ISO requirements, there
can be no assurance that we will continue to do so in the future. Our failure to
meet FDA or ISO requirements or the loss of the CE Mark could bar us from
further marketing the Lasette in the United States and in other markets, which
would have a material adverse affect on our business.
Besides the FDA and the European Community, the Occupational Safety and Health
Act, or OSHA, regulates our manufacturing activities. If we fail to comply with
OSHA regulations, the government may impose regulatory or judicial enforcement
actions, including, but not limited to, product recall or seizures, injunctions,
civil penalties, criminal prosecution, refusals to approve new products and
withdrawal of existing approvals. We have historically been in compliance with
all OSHA requirements; however, there can be no assurance that we will continue
to do so in the future.
WE MAY BE REQUIRED TO OBTAIN ADDITIONAL REGULATORY CLEARANCES FOR ANY NEW
PRODUCTS OR IMPROVEMENTS TO EXISTING PRODUCTS AND WE MUST OBTAIN REGULATORY
APPROVALS IN SOME FOREIGN JURISDICTIONS TO MARKET OUR PRODUCTS ABROAD. We have
received all necessary FDA clearances to commercially market the Lasette in the
United States. Further, CE Mark certification of the Lasette will also allow us
to commercially market the Lasette for home and clinical use in countries
comprising the European Union, and several other countries, such as Brazil and
Australia. However, comparable government agencies in a number of other foreign
countries require lengthy and detailed clinical testing and other compliance
procedures before they permit the introduction of enhancements to the Lasette
and new medical laser products in the marketplace. The cost of complying with
these regulations is significant and time consuming. These applications may
require the completion of preclinical and clinical studies and disclosure of
information relating to manufacturing and controls.
Based upon new data or design review, we may modify our products to enhance
their functionality and performance. Any improvements may require further
regulatory review, which would delay testing, approval and commercialization of
our products. Any improvements to the Lasette may not ultimately receive FDA or
CE Mark clearance, which would have a material adverse affect on our business.
Any new products we may develop in the future may require regulatory approval.
However, the time required for completing testing and obtaining additional
approvals is uncertain, and FDA and CE Mark clearance may never be obtained for
new products or applications. The FDA or the European Community may reject our
new products and future applications. Furthermore, we may encounter delays or
rejections based upon changes in FDA or European Community policy during the
period of product development. We may also encounter delays with similar
agencies in other markets. Even if the FDA, the European Community or comparable
agencies grant clearance for our future products, it may limit the indicated
uses for which our products may be marketed.
WE MAY BE ADVERSELY AFFECTED BY REFORMS IN THE HEALTH CARE INDUSTRY OR BY
LIMITATIONS IMPOSED ON THIRD PARTY REIMBURSEMENT OF HEALTH CARE COSTS. The
United States government and third parties continue efforts to contain or reduce
the costs of health care, which may adversely affect our future success. We
cannot predict the effect health care reforms may have on us, and we cannot
assure you that any reforms will not have a material adverse affect on our
business. In both the United States and elsewhere, the use of elective medical
procedures by many consumers depends on such consumer's ability to be reimbursed
by third-party payers, such as government and private insurance plans.
Third-party payers are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement. Some health insurance
companies have covered the consumer's costs of the Lasette if a physician
provides documentation indicating a medical necessity. However, currently the
cost of the Lasette does not qualify as a reimbursable expense under most health
insurance programs. Further, although we are pursuing obtaining Medicare
coverage for the Lasette, this is a lengthy approval process of which we are
only in the early stages. There can be no assurance that Medicare coverage will
be obtained. Our failure to obtain Medicare or third-party coverage of the
Lasette will limit our ability to successfully target the Lasette for home use
to those persons that cannot purchase the Lasette without such assistance, which
could adversely affect the growth of our business.
THE COMPETITIVE ADVANTAGE OF OUR LASER PRODUCTS IS DEPENDENT, IN PART, UPON OUR
RELATIONSHIP WITH THE SOLE SUPPLIER OF CRYSTALS USED IN OUR ERBIUM:YAG LASERS.
The Erbium:YAG laser rod we use in the Lasette is made from crystals that are
produced and processed from a single supplier in Russia. Although we believe
alternative
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crystal suppliers will be available, prices quoted by these alternative crystal
suppliers are significantly higher than the prices we currently pay. Therefore,
we realize a significant cost savings by having our crystals manufactured by
this Russian supplier. Our business could be materially adversely effected if we
had to use these alternative suppliers.
To date, we have experienced no material interruptions in the supply of our
laser components. However, if our source of supply were restricted due to events
flowing from Russia's political or economic instability, or due to the
supplier's non-performance, it is likely that alternative sources of supply
would be more expensive. If any of these or other events beyond our control
occur, we could lose our strategically important source of supply for laser
crystals. This would increase our manufacturing costs and impair our competitive
advantage.
Also see the risks entitled "We do business internationally, which subjects us
to various risks" and "We depend on various manufacturers for our product
components. If any of these manufacturers fail to provide the components, it
could adversely affect our business."
WE DEPEND ON VARIOUS MANUFACTURERS FOR OUR PRODUCT COMPONENTS. IF ANY OF THESE
MANUFACTURERS FAIL TO PROVIDE THE COMPONENTS, IT COULD ADVERSELY AFFECT OUR
BUSINESS. We rely on third parties to produce and manufacture certain components
for our products. We do not have written agreements with these third party
suppliers and they are not obligated to supply these components to us on an
on-going basis. Consequently, these third parties may not commit resources to us
as we need them. Any interruption in the supply of a sole-sourced component
could have a material adverse affect on our ability to manufacture products
until a new source of supply was found. We cannot assure you that we would be
successful in finding alternative sources of supply on a timely basis, if ever.
This failure could have a material adverse affect on our business, financial
condition and results of operations.
THE COMPETITION IN THE LASER BIOMEDICAL PRODUCTS INDUSTRY IS INTENSE AND OUR
BUSINESS MAY BE ADVERSELY AFFECTED BY NEW TECHNOLOGIES. Our industry is
characterized by extensive research efforts, rapid technological progress,
evolving industry standards, frequent new product and service introductions and
enhancements and intense competition. The principal factor affecting our
competitive position is the suitability of our instruments for, and performance
in, a particular application.
Our competition includes pharmaceutical and medical diagnostic equipment
companies, academic institutions and others. Many of these companies and
institutions are developing products that will be used for the same purposes as
our products. In many cases, our competitors have substantially greater
resources, research and development staffs and facilities than we do, as well as
greater experience in developing and marketing products. Our competitors may
succeed in developing products that are more effective or less costly than our
products. If these new products are developed and become widely available and
accepted, then we may be forced to reduce the price of our products. As a
result, we may not be able to sell our products at a price that will allow us to
realize a return on our investment. Further, these new technologies may render
some or all of our products non-competitive, obsolete and/or unmarketable, which
would have a material adverse affect on our business. For example, our
competitors are developing glucose-testing products based on partially invasive
or non-invasive technologies that could be an alternative to the Lasette. These
non-invasive technologies include needle implants, watches with skin patches and
non-invasive laser products that are designed to read glucose levels through the
skin. If these products or other new products are approved for sale and become
commercially available in the United States or Europe in the future, they could
have a material adverse affect on sales of the Lasette and on our business and
financial condition.
Some of these companies and other companies are marketing traditional stainless
steel lancets. Additionally, several companies are developing or have developed
safety lancets that are intended to reduce accidental needlesticks and
cross-contamination, in compliance with the Needlestick Safety Act. The Lasette
will compete directly with companies that are manufacturing, marketing and
distributing stainless steel lancets and safety lancets, which cost pennies
apiece. Many of these competitors have more established sales and customer
support organizations than we do. In addition, many of these competitors have
greater name recognition, more extensive customer bases, better developed
distribution channels and broader product offerings than we have. These
companies can leverage their customer bases and broader product offerings and
adopt aggressive pricing policies to gain market share.
OUR PRODUCTS MAY NOT GAIN MARKET ACCEPTANCE AND MAY NOT ACHIEVE A COMPETITIVE
POSITION IN THE MARKETPLACE. We cannot assure you that the marketplace will
accept our products or that customers will be willing to pay more for our
products than for existing products. For example, the Lasette will compete
directly with stainless steel lancets and safety lancets, which cost pennies
apiece, as well as with non-invasive procedures and products that are
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currently being developed by other companies. Market acceptance will depend, in
large part, upon our ability to educate potential customers, including
third-party distributors, about our products' distinctive benefits. We cannot
assure you that we will be successful in these educational efforts or that our
products will gain market acceptance or be competitive.
OUR SUCCESS DEPENDS IN PART ON ENHANCING OUR CURRENT PRODUCTS AND DEVELOPING NEW
PRODUCTS; HOWEVER, WE ARE NOT CERTAIN THAT THOSE PRODUCTS WILL BE CLEARED FOR
SALE OR ACCEPTED IN THE MARKET. In order to be successful, we will need to
continue to enhance our existing products and develop new products. Enhanced and
new products may require a significant investment, including preclinical and
clinical testing, before we can sell them in the marketplace.
From time to time, we have experienced delays or setbacks in the development of
our products. We cannot assure you that we will be able to successfully address
problems that may arise during the development and commercialization process. In
addition, we cannot assure you that any of our products or their enhancements
can or will:
o be successfully developed;
o prove to be safe and effective in clinical trials;
o meet applicable regulatory standards;
o be capable of being manufactured in commercial quantities at a
reasonable cost;
o be marketed successfully; or
o achieve market acceptance.
Any unsuccessful development programs, our failure to obtain regulatory
approvals and/or a commercial failure of any of our products could materially
adversely affect our business, financial condition and results of operations.
WE DO BUSINESS INTERNATIONALLY, WHICH SUBJECTS US TO VARIOUS RISKS. We sell our
products internationally and purchase some of the components used in their
manufacture from an international supplier. In particular, we purchase the
Erbium:YAG laser we use in the Lasette from a single supplier in Russia. The
risks associated with these international activities include, but are not
limited to, the following:
o regulation of fund transfers by foreign governments and the
United States;
o foreign export and import duties and tariffs;
o political and economic instability;
o compliance by our foreign suppliers with export laws and
licenses; and
o fluctuating exchange rates.
We cannot assure you that any of the foregoing will not have a material adverse
affect on our business.
WE MAY NOT MANAGE OUR GROWTH PROPERLY. The medical device industry is
characterized by extensive research efforts, rapid technological progress,
evolving industry standards and frequent new product and service introductions.
Our success depends on our ability to timely deliver state-of-the-art products
and provide meaningful customer support for a highly technical product. For this
reason, our long-term growth strategy is to develop our product lines,
particularly the Lasette, strengthen our market position through continued
research and development efforts and make appropriate acquisitions. This
strategy will require the continued improvement and expansion of our management,
operational and financial systems and controls. Any measurable growth in our
business will demand more from our customer support, sales, marketing,
administrative and technical resources. It will also place significant strain on
our management and financial resources. We cannot assure you that we will be
able to
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successfully address these additional demands. Additionally, we cannot assure
you that our operating and financial control systems will be adequate to support
our future operations and anticipated growth. Failure to manage our growth
properly could have a material adverse effect on our business, financial
condition and results of operations.
OUR LICENSE WITH LUCENT TECHNOLOGIES IS COSTLY, AND THERE CAN BE NO ASSURANCE
THAT THE LASERTWEEZERS PRODUCT WILL GAIN WIDE MARKET ACCEPTANCE. Our Cell
Robotics Workstation is based on our LaserTweezers, LaserScissors, CellSelector
and SmartStage technologies. The LaserTweezers application of our Cell Robotics
Workstation is based upon a non-exclusive patent license from AT&T, which was
transferred by AT&T to Lucent Technologies, Inc. Our license will expire in
September 2007, the end of the term of the licensed patent. We were in default
under this license agreement, and renegotiated its terms in 1998. Under the
renegotiated agreement, we paid Lucent $100,000 in lieu of all sums due and
owing for prior years. Additionally, we agreed to increase the royalty from five
to seven percent of the value of each product sold utilizing the patent.
Finally, the minimum annual royalties under the license have been reduced to
$35,000 per year for the term of the license. Even with these changes to the
license, we may not be able to increase sales of the Cell Robotics Workstation
that include the LaserTweezers application to a level that renders use of that
application in our product economically attractive.
Furthermore, at least two European companies have developed and are marketing
products that we believe violate Lucent's patent. These products compete with
the Cell Robotics Workstation. To date, Lucent has elected not to pursue patent
infringement claims against these companies and their distributors. Under the
terms of the license, we cannot compel Lucent to initiate these proceedings.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS, WHICH COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS WHETHER OR NOT THEY ARE CONCLUDED IN OUR FAVOR.
The design, development, manufacture and use of our products can involve product
liability claims and associated adverse publicity. Producers of medical products
such as ours may face substantial liability for damages if their products fail
or consumers allege that their products caused harm. We currently maintain
$2,000,000 of product liability insurance, but this insurance is expensive and
difficult to obtain. We cannot assure you that we will not be subject to product
liability claims. Additionally, we cannot assure you that our current insurance
would cover any claims, or that adequate insurance will continue to be available
on acceptable terms in the future. If damages for successful product liability
claims exceed our insurance coverage limits, or if any claim or product recall
creates significant adverse publicity, then our business, financial condition
and results of operations could be materially and adversely affected.
WE COULD BE ADVERSELY AFFECTED IF THE GOVERNMENT REDUCES ITS SUPPORT OF
SCIENTIFIC RESEARCH AND DEVELOPMENT. The principal markets for our Cell Robotics
Workstation are colleges, universities and other institutions engaged in
scientific research. Most, if not all, of these potential customers rely upon
federal and state funding in order to support their research activities. The
ability of these institutions to purchase our products is dependent upon
receiving adequate funding from the public sector. A reduction or withdrawal of
government support of scientific pursuits could result in a lower demand for our
products, which could adversely affect our ability to become profitable.
RISKS RELATED TO OUR SECURITIES AND THIS OFFERING
WE MAY CONTINUE TO SELL STOCK OR OTHER SECURITIES TO RAISE MONEY. IF WE DO SO,
THESE SALES COULD SUBSTANTIALLY DILUTE OUR SECURITYHOLDERS' INVESTMENT. We have
the authority to issue up to 50,000,000 shares of common stock and to issue
options and warrants to purchase shares of our common stock without shareholder
approval. Further, we may authorize the issuance, without shareholder approval,
of our preferred stock with rights preferential to the rights of investors in
this offering. We will be required to raise additional funds before the end of
June 2001, which may be through the issuance of equity securities. We may issue
additional equity securities without shareholder approval. If we do issue
additional equity securities, those securities may have rights, preferences or
privileges senior to those of existing holders of our common stock.
Additionally, the issuance of additional equity securities could substantially
dilute the holdings of our existing shareholders and the investors in this
offering.
TRADING IN OUR SECURITIES IS LIMITED AND SPORADIC, THEREFORE YOU MAY NOT BE ABLE
TO LIQUIDATE YOUR INVESTMENT WITHOUT CONSIDERABLE DELAY, OR AT ALL.
ADDITIONALLY, OUR SECURITIES MAY BE REGULATED BY THE SECURITIES ENFORCEMENT AND
PENNY STOCK REFORM ACT OF 1990. While there currently exists a limited and
sporadic public trading market for our common stock and the Redeemable Warrants,
the price paid for these securities and the amount of securities traded are
volatile. We cannot assure you that these markets will improve in the future. As
a result, you may not be able to liquidate your investment without considerable
delay, if at all.
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Because our common stock is not listed or quoted on any exchange or on NASDAQ,
and no other exemptions currently apply, the Securities and Exchange Commission,
or SEC, "penny stock" rules govern the trading in our common stock. These rules
require any broker engaging in a transaction in our securities to provide its
customers with certain disclosures and information both before and after
effecting the transaction. Brokers are generally less willing to effect
transactions in our securities because of these rules. This may make it more
difficult for investors to dispose of our common stock. In addition, the broker
prepares the information provided to its customer. Because we do not prepare the
information, we cannot assure you that such information is accurate, complete or
current.
WE HAVE NOT PAID DIVIDENDS TO OUR SHAREHOLDERS IN THE PAST, AND WE DO NOT
ANTICIPATE PAYING DIVIDENDS IN THE NEAR FUTURE. We have not declared or paid
cash dividends on our common stock. We intend to retain all future earnings, if
any, to fund the operation of our business, and therefore we do not anticipate
paying dividends on our common stock in the future.
PROVISIONS OF OUR CHARTER DOCUMENTS AND CERTAIN AGREEMENTS WITH OUR OFFICERS MAY
HAVE ANTI-TAKEOVER EFFECTS THAT COULD DISCOURAGE OR PREVENT A CHANGE OF CONTROL,
WHICH MAY SUPPRESS OUR STOCK PRICE OR CAUSE IT TO DECLINE. Our articles of
incorporation authorize the issuance of up to 2,500,000 shares of preferred
stock. Our board of directors has the authority to fix and determine the
relative rights and preferences of preferred stock, as well as issue preferred
stock without shareholder approval. As a result, our board of directors could
authorize the issuance of a series of preferred stock which would grant to
holders preferred rights to our assets upon liquidation, the right to receive
dividends before dividends would be declared to common shareholders, and the
right to the redemption of preferred shares, together with a premium, prior to
the redemption of common stock. Common shareholders have no redemption rights.
In addition, we have agreements with some of our officers that have change of
control provisions. The ability to issue preferred stock without shareholder
approval and our arrangements with officers may discourage, delay or prevent
someone from acquiring or merging with us.
WE MAY REDEEM THE REDEEMABLE WARRANTS AT TIMES WHICH MAY BE DISADVANTAGEOUS TO
THE HOLDERS. We may redeem the Redeemable Warrants at a price of $0.25 per
Redeemable Warrant upon 30 days notice, mailed after the closing bid price of
our common stock has equaled or exceeded $4.80 for a period of ten consecutive
trading days. Holders of the Redeemable Warrants have exercise rights until the
close of the business day preceding the date fixed for redemption. Redemption of
the Redeemable Warrants could force the holders to exercise their Redeemable
Warrants and pay the exercise price at a time when it may be disadvantageous for
them to do so, to sell the Redeemable Warrants at the then-current market price
when they might otherwise wish to hold the Redeemable Warrants, or to accept the
redemption price, which is likely to be substantially less than the market value
of the Redeemable Warrants at the time of redemption. The Redeemable Warrants
may not be redeemed or exercised unless a registration statement covering the
underlying shares of common stock has been filed and is current and such shares
have been qualified for sale, or there is an exemption from applicable
qualification requirements, under the securities laws of the holder's state of
residence. See "Description of Securities to Be Registered."
HOLDERS OF REDEEMABLE WARRANTS MAY EXERCISE THE REDEEMABLE WARRANTS TO ACQUIRE
SHARES OF OUR COMMON STOCK ONLY IF THERE IS A CURRENT REGISTRATION STATEMENT AND
PROSPECTUS COVERING THOSE SHARES OF COMMON STOCK. Holders of the Redeemable
Warrants may exercise their Redeemable Warrants to acquire shares of our common
stock only if there is a current and effective registration statement and
prospectus covering the shares of common stock issuable upon such exercise, and
only if the shares are qualified for sale under the securities laws of the
applicable state or states. While we have undertaken and plan to do so, there
can be no assurance that a current registration statement and prospectus will be
in effect when any of the holders attempt to exercise their Redeemable Warrants.
Although we will seek to qualify the shares of common stock underlying the
Redeemable Warrants for sale in those states in which the securities are to be
offered, we cannot assure you that we will be successful in achieving
qualification in the necessary states. The Redeemable Warrants may be deprived
of any value if a prospectus covering the shares issuable upon their exercise is
not kept effective and current, or if such underlying shares are not, or cannot
be, registered in the applicable states. See "Description of Securities to Be
Registered."
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases,
forward-looking statements can be identified by terminology, for instance the
terms "may," "will," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential" or "continue," the
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negative of these terms or other comparable terminology. The forward-looking
statements are made pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. In addition, these forward-looking statements
include, but are not limited to, statements regarding the following:
o anticipated operating results and sources of future revenue;
o growth;
o adequacy of our financial resources;
o development of new products and markets;
o obtaining and maintaining regulatory approval and changes in
regulations;
o competitive pressures;
o commercial acceptance of new products;
o changing economic conditions;
o expectations regarding competition from other companies; and
o our ability to manufacture and distribute our products.
Potential investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties. Actual results will differ and
could differ materially from these forward-looking statements. The factors that
could cause actual results to differ materially from those in the
forward-looking statements include the following: (1) industry conditions and
competition, (2) reforms in the health care industry or limitations imposed on
third party reimbursement of health care costs, (3) the rate of market
acceptance of our products, particularly the Lasette, (4) operational risks and
insurance, (5) risks associated with operating in foreign jurisdictions, (6)
product liabilities which may arise in the future which are not covered by
insurance or indemnity, (7) the impact of current and future laws and government
regulation, as well as repeal or modification of same, affecting the medical
device industry and our operations in particular, (8) the ability to retain key
personnel, (9) renegotiation, nullification or breach of contracts with
distributors, suppliers or other parties, (10) the relationship with our
suppliers, particularly our supplier of crystals used in our Ebrium:YAG lasers
and (11) the risks described elsewhere herein and from time to time in our other
filings with the SEC. In light of these risks and uncertainties, there can be no
assurance that the matters referred to in the forward-looking statements
contained in this prospectus will in fact occur. We do not intend to update any
of the forward-looking statements after the date of this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock offered by
the selling securityholders, or the sale of our Redeemable Warrants. We will,
however, receive proceeds if any of the following occurs:
o If the Representative Warrants are exercised in full, then we
will receive additional gross proceeds of $396,000.
Additionally, if the Redeemable Warrants underlying the
Representative Warrants are exercised in full, then we will
receive gross proceeds of $192,000;
o If all of the shares we are offering are purchased pursuant to
the exercise of the Redeemable Warrants sold in the February
1998 public offering, then we will receive additional gross
proceeds of $2,208,000; and
o If all of the selling securityholders exercise their
Redeemable Warrants, stock options and other stock purchase
warrants in full, then we will receive additional gross
proceeds of $880,965.
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Presently, the exercise prices of these stock options, stock purchase warrants,
Redeemable Warrants and Representative Warrants are below the trading price of
our common stock. Accordingly, these securities will likely not be exercised
unless the trading price of our common stock increases. Whether or not our
common stock trades at a price above the exercise price of these securities, we
cannot assure you that any of our securityholders will exercise any of the stock
options, common stock purchase warrants, Redeemable Warrants or Representative
Warrants. We will not receive any proceeds from the resale of our common stock
or the sale of our Redeemable Warrants by the selling securityholders.
If we were to receive proceeds from any of the foregoing, we anticipate that the
proceeds will be used as working capital in our day-to-day operations. While we
regularly evaluate possibilities for the acquisition of other businesses,
technologies and products, we do not have any arrangements, agreements or
understandings with respect to any such acquisitions. At this time, we do not
anticipate the proceeds we receive from the exercise of the Representative
Warrants, the Redeemable Warrants, stock options or other common stock purchase
warrants will be used to repay debt.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1999
Product sales for the year ended December 31, 2000 decreased $302,226, or 23%,
to $992,710 from $1,294,936 in the comparable period of 1999. The decrease is
due to our change in emphasis from our scientific instrumentation products and
Professional Lasette to the Lasette that can be used for either home or clinical
use. Sales of scientific instrumentation products and the Professional Lasette
decreased $130,740 and $300,667, respectively, during the year ended December
31, 2000 when compared with 1999. The sales decline in scientific
instrumentation products is due to fewer resources being allocated to achieve
sales of those products. We terminated our distribution arrangement with the
distributor of the Professional Lasette in August 2000 because of low sales
activity by the distributor. Also, in May 2000, we sold the IVF Workstation and
related technology. This resulted in a decline of revenues in the year ended
December 31, 2000 of approximately $126,000 when compared with the prior year.
Sales of our Lasette that can be used for either home or clinical use increased
approximately $250,000 during 2000 when compared with no sales in 1999. As
previously mentioned, we have made a strategic decision to focus our efforts to
develop and market the Lasette that can be used for either home or clinical use.
Our gross margin on product sales decreased from 18% during 1999 to a negative
gross margin of 53% for 2000. The decrease is primarily due to an accrual of
$400,000 that we made during the third fiscal quarter of 2000 as an estimate of
the financial impact of settling our lawsuit with Big Sky Laser Technologies,
Inc. The lawsuit was settled in January 2001. See "Business -- Legal
Proceedings." Additionally, during the third fiscal quarter we accrued
approximately $64,000 in cost of sales to pay the cost associated with a design
improvement in one of the main components of the Lasette. As a result of the
design modification, certain parts in stock had to be reworked. Additionally,
the negative gross margin is due to a lack of efficiencies in the production of
our laser-based medical products that we market. We expect our margins to
improve as sales increase and our manufacturing process becomes more efficient;
however, there are several risk factors that need to be considered, such as our
ability to effectively market the products and significantly increase sales and
our ability to achieve economies of scale and efficiently manufacture the
products. We are working to achieve sales and manufacturing efficiencies, but no
assurances can be given that we will succeed in these areas.
Operating expenses increased $1,238,615 from $2,165,551 for the period ended
December 31, 1999 to $3,404,166 for the year ended December 31, 2000. A large
portion of the increase is due to a significant increase in our marketing and
selling expenses as we launched an aggressive campaign to sell our laser-based
medical products. Another reason for the increase is the legal fees we incurred
in the second quarter of fiscal 2000 primarily to update previous registration
statements filed with the SEC and for legal services in connection with a
secured convertible note. We paid these legal fees by issuing shares of our
common stock rather than by expending working capital resources.
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Interest income increased $49,977, or 191%, in the year ended December 31, 2000
compared to the prior year. The increase is due to additional cash investments
primarily as a result of the $2 million private placement that was completed in
May 2000 and proceeds from the issuance of the $1.2 million convertible note in
March 2000. Interest expense increased because of a required beneficial
conversion charge to interest expense associated with our conversion of a $1.2
million convertible note in August 2000 into 500,000 shares of common stock. In
accordance with accounting rules, we made a non-cash charge of $1.2 million to
interest expense when the $1.2 million convertible note was converted to our
common stock. The increase in other income resulted from the sale of the IVF
Workstation and related technology.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1998
During the year ended December 31, 1999, our operating activities primarily
included continuing efforts to complete the development of our laser-based
medical devices and marketing of the Lasette. Product sales for the period were
generated from sales of our scientific research instruments and our Professional
Lasette.
o Total revenues from product sales and grant revenue decreased
0.8% from $1,429,001 during the 1998 period to $1,417,317
during 1999.
o Research and development grant revenue decreased 31.7% from
$179,298 during 1998 to $122,381 during 1999.
o The gross profit realized by our product sales generated
during fiscal 1999 was $230,806, or 17.8%, compared to a gross
profit of $401,463, or 32.1%, realized during fiscal 1998.
This decrease was primarily attributed to a reduction in
retail selling prices due to competitive pricing pressures as
well as increased warranty expenses associated with the
Professional Lasette.
Operating expenses incurred during fiscal 1999 were $2,165,551, a decrease of
$103,712, or 4.6%, compared to fiscal 1998 operating expenses of $2,269,263.
This decrease was principally attributable to a reduction in research and
development expenses.
o Research and development expenses decreased by $297,680, or
35.1%, in 1999 due primarily to a reduction in professional
design and engineering consulting fees required by our
laser-based medical devices.
o Marketing and sales related expenses incurred during fiscal
1999 were $625,777, an increase of $16,489, or 2.7%, when
compared to fiscal 1998 marketing and sales related expenses
of $609,288. Expenses related to the marketing introduction of
our new Personal Lasette product were primarily responsible
for this increase.
o General and administrative expenses associated with the
conduct of our business increased from $810,809 during the
year ended December 31, 1998 to $988,288 for the year ended
December 31, 1999, an increase of $177,479 or 21.9%. This
increase is primarily attributed to our effort to maintain ISO
9001 certification, increased product liability premiums,
increased SEC compliance costs and increased investor
relations' activities.
During the fiscal year ended December 31, 1999, other income and expenses
decreased from an $84,454 net contribution to income for the year ended December
31, 1998 to a $25,395 net contribution to income. This decrease was due almost
exclusively to the reduction of interest earned on declining cash balances.
As a result of the foregoing, our net loss applicable to common shareholders for
the year ended December 31, 1999 increased by $367,057, or 17.8%, when compared
to the year ended December 31, 1998. Our net loss applicable to common
shareholders was $2,057,573 for the year ended December 31, 1998, and $2,424,630
for the comparable period ended December 31, 1999. We had a net loss of $0.31
per share on 7,734,762 weighted average shares outstanding for the year ended
December 31, 1999 compared to a net loss of $0.39 per share on 5,278,347
weighted average shares outstanding for the comparable period ended December 31,
1998.
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LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have relied principally upon the proceeds of both debt
and equity financing to provide working capital for our product development and
marketing activities and, to a lesser extent, the proceeds of Small Business
Innovative Research grants. We have not been able to generate sufficient cash
from operations and, as a consequence, we must seek additional financing to fund
ongoing operations. Recent financings include the following:
o In February 1998, we sold 460,000 units, each unit consisting
of one share of Series A Convertible Preferred Stock,
convertible into four shares of our common stock, and two
Redeemable 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 OTC
Bulletin Board under the symbol "CRIIU" for a period of 30
days through March 4, 1998. In March 1998, the units
automatically separated and, as a result, the Series A
Convertible Preferred Stock and Redeemable Warrants traded
separately over-the-counter, and were quoted on the OTC Global
Change Bulletin Board under the symbols "CRII.P" and "CRII.W,"
respectively. In January 1999, the Series A Convertible
Preferred Stock automatically converted into shares of our
common stock.
o In July 1999, we sold 9.5 units to four investors in a private
placement of our securities. Each unit consisted of 35,000
shares of our common stock and 7,500 Redeemable Warrants. We
also granted 15,000 Redeemable Warrants to two placement
agents. Gross proceeds received from this private placement
totaled $475,000. We also granted an additional 15,000
Redeemable Warrants for legal services rendered that were
unrelated to this private placement.
o The February 2000 exercise of the warrants issued to an
underwriter and its officers in connection with a previous
offering of our securities, or the Private Placement Warrants,
and underlying class A warrants resulted in $466,756 of
proceeds to the company. The Private Placement Warrants were
issued to Paulson Investment Company, Inc. and its officers,
who served as placement agent in connection with a 1995
private offering. The Private Placement Warrants were
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 our common stock and our class A warrants
exercisable for 10,000 shares of our common stock.
o In February 2000, we executed a secured convertible promissory
note payable to Oton Tisch, a member of our board of
directors, which was amended in March 2000. Mr. Tisch advanced
$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 under the note. The principal amount of $1,200,000 was
paid in full with and converted into 500,000 shares of common
stock on August 30, 2000. An SB-2 registration statement
registering the resale of the shares issuable upon conversion
of the promissory note was declared effective by the SEC on
July 20, 2000. In connection with the beneficial conversion of
this note, we recorded a non-cash charge of $1,200,000 in the
quarter ended September 30, 2000.
o On May 26, 2000, we issued 500,000 shares of our common stock
for $2,000,000 in a private placement with Paulson Investment
Company, Inc. A five percent placement fee (or $100,000) was
paid to Bridgeworks Capital, Inc. after the close of the
transaction. Mark Waller, one of our directors, is an officer
and majority owner of Bridgeworks Capital.
In January 2001, certain members of our board of directors or their affiliated
entities also agreed to make term loan advances to us in an aggregate amount of
$500,000. An aggregate of $100,000 of the loans was made in February 2001, while
the loan for the remaining $400,000 was made in March 2001. The loans are
evidenced by unsecured promissory notes, bear interest at the rate of ten
percent per annum and are due on January 31, 2002. Additionally, in January
2001, as part of the same loan transaction, Oton Tisch, a member of our board of
directors, agreed to loan us, at our request at any time between March 15, 2001
and May 30, 2001, an additional $500,000. As of the date of this prospectus, we
have not requested any loan advances under Mr. Tisch's $500,000 commitment. In
connection with the January 2001 loan commitment, each lender was issued a
warrant in proportion to the amount of the loan made by that lender. The
warrants allow the lenders to purchase an aggregate of 150,000 shares of our
common
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stock. The warrants may be exercised until January 31, 2004, at a price equal to
$1.125 per share of our common stock; provided that warrants covering 75,000
shares of our common stock will not become exercisable by Mr. Tisch until he has
loaned us the remaining amount available under his $500,000 loan commitment. We
used $45,000 of the proceeds of the above loans by our directors as payment
against the outstanding balance of the $250,000 note payable to Humagen
Fertility Diagnostic, Inc., whose president, chief executive officer and
majority shareholder is Dr. Debra Bryant, one of our directors.
Cash used in operations for the years ended December 31, 2000 and 1999 was
$2,959,301 and $1,584,722, respectively. The primary reasons for the increase in
cash used in operations during the year ended December 31, 2000, as compared to
the prior year, are increases in selling and marketing expenses during that
period.
Cash provided by financing activities for the years ended December 31, 2000 and
1999 was $3,864,805 and $887,551, respectively. The increase in net cash
provided by financing activities resulted primarily from net proceeds from the
debt and equity financings closed during those periods, as discussed above.
Our liquidity and capital resources improved in 2000 due to the debt and equity
financings discussed above, but will decrease in the future due primarily to our
ongoing operating losses. Our current ratio at December 31, 2000 was 1.9 to 1,
compared to a current ratio of 1.6 to 1 on December 31, 1999. Total assets
increased from $2,013,666 at December 31, 1999 to $3,135,816 at December 31,
2000, an increase of $1,122,150 or 56%.
o The increase in our current assets of $1,062,848, or 71%, was
the result of the increased cash received from the debt and
equity transactions completed in 2000 and, to a lesser extent,
by increases in accounts receivable and inventory as discussed
below.
o Accounts receivable increased $172,575 from $206,278 at
December 31, 1999 to $378,853 at December 31, 2000. A
substantial increase in fourth quarter sales during 2000 over
1999 was the primary reason for the increase. The fourth
quarter sales in 2000 were $243,655 compared with fourth
quarter sales of $23,643 in 1999. Inventory increased by
$181,115, or 20%, to $1,079,086 at December 31, 2000 from
$897,971 at December 31, 1999 due to manufacturing ramp up for
expected sales in 2001.
o At December 31, 2000, our total current liabilities increased
$441,482 from $908,833 at December 31, 1999 to $1,350,315 at
December 31, 2000. Increases in current liabilities resulted
from the $400,000 accrual for the BSLT lawsuit and the
reclassification to current, from long term, of the $250,000
note that was outstanding at the end of 1999 and payable to
Humagen Fertility Diagnostics, Inc., whose president, chief
executive officer and majority shareholder is Dr. Debra
Bryant, one of our directors.
Our working capital increased to $1,211,704 at December 31, 2000 from $590,338
at December 31, 1999, an increase of $621,366. This increase was primarily
attributed to the financing provided by the debt and equity transactions in 2000
as described above.
To date, we have funded our operations primarily from the sale of equity
securities and short term borrowings as we have not generated sufficient cash
from our operations. We expect cash used in operating activities will increase
during 2001 as a more aggressive sales and marketing campaign is launched and as
full-scale production of the Lasette is implemented.
In December 1999, we borrowed $250,000 from Humagen Fertility Diagnostic, Inc.,
whose president, chief executive officer and majority shareholder is Dr. Debra
Bryant, a director of the company. The note did not bear interest until June
2000, at which time the unpaid balance of the note began to accrue interest at
six percent per annum. In January 2001, we used $45,000 of the proceeds of the
above loans by our directors as payment against the outstanding balance of
$250,000. The remaining balance is payable in monthly installments of $10,000
each commencing February 15, 2001.
To date, we have funded our operations primarily from the sale of equity
securities and short term borrowings as we have not generated sufficient cash
from our operations. We expect that our existing current working capital, the $1
million loan and loan commitment from our board of directors and future product
sales will be sufficient to allow us to meet operational obligations through
June 2001. Accordingly, it is imperative that we complete a significant
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financing during the quarter ending June 30, 2001. Although we have had
discussions with potential investors, we have not been able to obtain financing
on acceptable terms as of the date of this prospectus that will allow us to
continue our operations after June 2001. We intend to continue to seek to raise
equity or debt financing. However, no assurance can be given that we will be
able to obtain additional financing on favorable terms, if at all. Borrowing
money may involve pledging some or all of our assets. Raising additional funds
by issuing common stock or other types of equity securities would further dilute
our existing shareholders and the purchasers of the securities offered under
this prospectus. If new equity securities are issued, those securities may have
rights, preferences or privileges senior to those of existing holders of common
stock. If we cannot obtain additional financing as needed, we may not be able to
continue our operations, grow our market share, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This would have a material adverse effect on our business, financial condition,
results of operation and our ability to continue as a going concern.
Even if we are able to obtain additional financing during the quarter ending
June 30, 2001 to allow us to continue our operations, we still will need to
generate significant revenues or obtain additional financing to fund anticipated
capital requirements and to achieve and maintain profitability. Our capital
requirements depend upon several factors, including:
o the rate of market acceptance of our products, particularly
the Lasette;
o our level of expenditures for marketing and sales;
o costs associated with our staffing; and
o other factors, including unforseen factors and developments.
We will need additional cash to fund the costs associated with manufacturing,
marketing and selling our products. We may also need cash to file, prosecute,
defend and enforce patent claims and other intellectual property rights,
purchase capital equipment, develop new products and maintain or obtain
necessary regulatory approvals. If our capital requirements vary materially from
those currently planned, we may require more financing during 2001 than
currently anticipated. Our inability to finance our growth, either internally or
externally, may limit our growth potential and our ability to execute our
business plan. External financing may not be available to us on favorable terms
or at all. In addition, we have received a report from our independent auditors
covering our fiscal years ended December 31, 2000 and 1999 financial statements.
The report contains an explanatory paragraph that states that our recurring
losses and negative cash flows from operations raise substantial doubt about our
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
BUSINESS
OVERVIEW
We manufacture, market and sell a sophisticated laser-based medical device and a
scientific research instrument. Our key targets include hospitals and clinics
and the diabetes care market for the Lasette and the scientific research market
for the Cell Robotics Workstation. We were incorporated in Colorado on September
28, 1988, under the name Intelligent Financial Corporation. In February 1995, we
acquired all of the issued and outstanding shares of Cell Robotics, Inc., a New
Mexico corporation, which had been formed in 1988 to develop the Cell Robotics
Workstation. In May 1995, we changed our name from Intelligent Financial
Corporation to Cell Robotics International, Inc.
PRODUCTS
LASER-BASED MEDICAL DEVICES -- THE LASETTE
GENERAL. The Lasette is a compact, lightweight, portable crystal laser that
utilizes laser light to vaporize a small hole in the finger for capillary blood
sampling. At nine ounces, the Lasette is slightly larger than a handheld
cellular telephone and it fits into a suit-coat pocket or a purse. The Lasette
is a better alternative for capillary blood sampling for many diabetics because,
for many patients, it causes less pain and residual soreness than the
traditional
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steel lancet. The Lasette may be a better alternative for children with
diabetes, newly diagnosed diabetics and needle-phobic or needle-adverse
individuals.
The Lasette for home use allows diabetics to test their glucose levels at home.
This application requires a disposable lens shield, which is a cassette of
specialized plastic film. The film advances with each use of the device and has
the capacity for 120 applications. We designed the disposable cassette to
provide a one-month supply of film for diabetic patients who test four times per
day.
The Lasette for clinical use is used to draw blood for various tests, including
testing glucose levels, in the clinical setting. This application requires a
single disposable lens shield that inserts into the device for each use. The
patented disposable lens shield is replaced after each use in a clinical setting
which prevents the patient's blood from contaminating the Lasette unit and
therefore minimizes the risk of cross-contamination. The disposable shield also
uses a specialized plastic film to prevent any vapors from condensing on the
laser lens.
We have encountered some design and quality problems with the Lasette since we
introduced it on a limited basis in December 1999. For instance, we had to
modify the design to limit the effect extreme temperatures had on the Lasette's
functionality. We believe that we have resolved these problems; however, we
cannot provide any assurances that quality and design problems will not occur in
the future with the Lasette or enhancements to the Lasette.
The Lasette has received several awards. In June 2000, the Personal Lasette
received the Silver "Medical Design Excellence Award" from the Medical Design
and Manufacturing Conference and Exposition in New York City. In making their
selection, the nine judges focused on criteria such as form and function,
aesthetics, efficiency, business impact, innovation, ease of use and
cost-benefit ratio. The Personal Lasette was a winner in the "Over-the-Counter
and Self-Care Product" category. The laser industry's Photonics Spectra journal,
which has the "Circle of Excellence" award, has recognized the Lasette
technology as one of the 25 most significant worldwide laser developments in
1999. R&D Magazine gave the Lasette its "R&D 100" award for being one of the 100
most significant overall technical worldwide developments in 1999. In November
2000, the Lasette received the GOOD DESIGN(R) award for product distinction by
the Chicago Athenaeum: Museum of Architecture and Design.
MARKETS. There are an estimated 100 million people with diabetes worldwide. In
the United States, an estimated 15.7 million people have some form or variation
of diabetes. However, only 10.3 million people in the United States have been
diagnosed with diabetes. Approximately 4.7 million diabetics must inject insulin
on a daily basis to survive. Further, doctors diagnose approximately 800,000 new
cases annually in the United States. Most of the insulin-injecting diabetic
patients are required to test their glucose levels approximately four times per
day to determine when and how much insulin to inject. The Lasette collects
capillary blood from fingertips, which according to industry data is a procedure
performed approximately one billion times per year in homes, hospitals, clinics
and doctors' offices.
We will market the Lasette for home use primarily to children with diabetes,
newly diagnosed diabetics, high frequency testing diabetics with sore fingers
and needle-phobic and needle-adverse patients. The needle-phobic and
needle-adverse market is an attractive market for this model. Presently, a
diabetic must stick himself or herself with a steel lancet or needle to draw a
blood sample for glucose testing. Diabetics' needle phobia prevents them from
testing their glucose levels on the regularly recommended basis. Others dislike
the pain of the steel lancet sticks and the continual residual soreness in their
fingertips from the multiple daily sticks. In medical literature, needle phobics
are estimated to number between 5 and 25% of the diabetic population. The
Lasette draws blood in a way that eliminates the effects of needle phobia,
minimizes pain and eliminates the long-term finger soreness.
Capillary blood sampling is performed in virtually all clinical settings. These
include hospitals, dialysis clinics, blood banks, nursing facilities, home
health agencies and physicians' offices. Presently, the most commonly used
device for capillary blood sampling is the stainless steel lancet. In the
hospital setting, inadvertent transmission of disease from accidental lancet
sticks is a recognized problem. We believe that the Lasette for clinical use can
substantially reduce the pain and trauma involved with this procedure as well as
the risk of inadvertent cross-contamination for both the clinician and the
patient.
The Needlestick Safety Act was recently enacted, which requires health
facilities to employ measures to reduce or eliminate the accidental needlesticks
suffered by health care workers by providing safety engineered sharps devices or
needleless systems. The needle-free, laser-based design of the Lasette
eliminates the risk of accidental
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needlesticks because a patient's blood sample is obtained by the use of a laser
pulse rather than by a needle or lancet. We believe this feature of the Lasette
will be an important selling strategy for developing the market for the Lasette
for clinical use.
MANUFACTURING. We are currently manufacturing the Lasette at our Albuquerque,
New Mexico facility. We have instituted the record keeping, quality control and
production procedures needed to meet the manufacturing regulatory requirements
of the FDA MDQSR, ISO 9001 and EN 46001. We believe our manufacturing capacity
at our existing facilities are adequate to meet customer demands for the Lasette
for the foreseeable future.
MARKETING AND DISTRIBUTION. We employ different marketing and distribution
strategies for the Lasette for home use and the Lasette for clinical use.
Currently, we are selling the Lasette for home use directly to home-use
customers, eliminating distributor costs. However, we are pursuing distribution
and marketing partners for this Lasette product line. If we can obtain these
partnerships, we believe they will enhance our ability to rapidly ramp-up our
marketing and distribution of the Lasette to end users. Several of the drug
store, supermarket and superstore chains have expressed interest in distributing
the Lasette for home use, but we have not entered into any formal discussions or
reached any definitive agreements.
We advertise the Lasette for clinical use in journals placed with clinics and
direct marketing to medical device distributors and other groups and
organizations that may have an interest in the benefits of the Lasette for
themselves and for their clients. The Lasette for clinical use is distributed
through several regional distributors within and outside the United States. In
January 2001 we also entered into a three year non-exclusive distribution
agreement with a national distributor covering the United States. To date these
distribution relationships have not generated significant revenues. We believe
that we will accomplish marketing and distribution of this Lasette product line
through a collection of large national and international distributors of
diabetic supplies or through manufacturers' representatives. We are currently
holding discussions with certain other large national and international
distributors and intend to pursue additional non-exclusive regional and national
distribution relationships.
COMPETITION. The Lasette represents a technological alternative to the
traditional stainless steel lancet and the safety lancet for routine capillary
blood sampling. It eliminates the risk of cross-contamination and attendant
indirect costs. We designed it to reduce the pain, fear and anxiety associated
with drawing blood. It also eliminates the cost and risk of lancet waste
disposal. In response to the Needlestick Safety Act, which requires health
facilities to employ measures to reduce or eliminate accidental needlesticks,
several companies have begun marketing or are developing safety lancets. Safety
lancets have retractable blades or nails intended to reduce accidental
needlesticks and, thus, the threat of cross-contamination. While these devices
will not eliminate the pain associated with using a traditional steel lancet,
the safety lancets may reduce the threat of cross-contamination.
While the initial investment in the Lasette is significantly higher than that
for either a steel lancet or safety lancet, we believe that users of the Lasette
will be able to recover this initial investment over time through cost savings.
Although the cost for each stainless steel lancet or safety lancet may be
minimal, they have indirect costs associated with them, such as disposal costs.
Users of the Lasette, on the other hand, may obtain thousands of uses from the
disposable shield before it must be replaced. By eliminating the indirect costs
associated with the steel lancets and safety lancets, we believe that the
Lasette provides a competitive alternative to stainless steel lancets and safety
lancets.
While we believe there is no direct competition to the Lasette, its position in
the market is threatened by corporate research and development efforts
throughout the world that are focusing on the development of new, advanced
non-invasive and partially invasive technologies for determining and/or
controlling glucose levels in diabetic patients. Several companies have
developed or are attempting to develop minimally invasive or non-invasive
glucose testing products. The technologies that appear to be receiving the most
attention are the GlucoWatch(R) by Cygnus, Inc. and the continuous glucose
monitoring system, or CGMS, by MiniMed Inc.
Cygnus' GlucoWatch(R) has recently been approved by the FDA for detecting trends
and tracking patterns in adult diabetics' glucose levels. Information released
by MiniMed states that the CGMS has been cleared by the FDA for use by
physicians to track trends and patterns in patients' glucose levels as well. The
CGMS is only for use by physicians and is not for determining the amount of
insulin to inject or pump into a patient at a given time. The GlucoWatch(R) and
CGMS study the trends or track the patterns of diabetics who do not have their
diabetes under control. For those particular patients, either the GlucoWatch(R)
or the CGMS is a good supplement to the Lasette
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product line as each require multiple daily finger sticks to calibrate the
devices. Currently, neither product is a substitute or a replacement for testing
the blood from a traditional finger-stick and meter. We are not aware of any
product similar to the Lasette that has received FDA clearance or the CE Mark
certification for commercial marketing in either the United States or European
Union.
REGULATORY STATUS. Our products are subject to a great deal of regulation. See
"Business - Government Regulation; Product Approval Process" for a description
of government regulations affecting our products. The following details the
regulatory clearances we have obtained for the Personal Lasette and the
Professional Lasette since mid-1997:
o FDA clearance for use of the Professional Lasette for testing
glucose and hematocrit in healthy adult patients in a clinical
setting (August 1997);
o FDA clearance for use of the Professional Lasette for testing
glucose and hematocrit in diabetic adult patients in a
clinical setting (October 1997);
o CE Mark testing complete for Professional Lasette (May 1998);
o FDA clearance for use of the Professional Lasette for testing
glucose and hematocrit in all juvenile patients in a clinical
setting (June 1998);
o ISO 9001/EN 46001/Medical Device Directive Certification
(September 1998; recertified in September 1999 and September
2000);
o FDA clearance for use of all glucose meters with the
Professional Lasette (September 1998);
o FDA Variance for Professional Lasette design (October 1998);
o FDA clearance for home use of the Professional Lasette for
glucose monitoring (December 1998);
o FDA approval of 510(k) amendment to include Personal Lasette
safety and efficacy (January 1999);
o FDA clearance of the Lasette for all screening blood tests in
a clinical setting (January 1999);
o CE Mark certification for the Professional Lasette (March
1999);
o Registration Certificate of the Lasette for medical devices
granted by China (May 1999);
o CE Mark certification for the Personal Lasette (August 2000);
and
o Medical device license granted in Canada for the Personal
Lasette (August 2000).
The Lasette has received 510(k) clearance from the FDA for drawing capillary
blood samples. In addition, the FDA has cleared the Lasette for capillary blood
sampling for all clinical screening tests. The Lasette has also received the CE
Mark designation. The Lasette is the only alternative to the steel lancet or
needle that has been approved by the FDA that allows diabetics to sample their
blood for glucose testing so they can determine their subsequent insulin
injections. Clearance of the Lasette by the FDA allows us to market the Lasette
in the United States. The CE Mark designation of the Lasette also permits us to
market the Lasette in the European Union and certain other countries such as
Brazil and Australia.
INTELLECTUAL PROPERTY. The Lasette was originally developed using the
multifaceted crystal resonator, or MCR, patent acquired from Tecnal Products, a
subsidiary of Lovelace Scientific Resources, Inc., in January 1996. The patent
expires in 2014. We have also acquired a foreign patent application and a
strategic license from Tecnal Products. These acquisitions comprised a package
of technological assets covering two laser products: (1) a low-cost, high-power,
solid-state laser that eliminates many of the delicate optical components
required by conventional solid-state lasers and (2) a laser perforator. The MCR
patent was originally developed under a license agreement
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with New Technology Engineering Center of Russia. However, new developments in
crystal laser coating technologies have decreased the value of the MCR patent.
We have since advanced the Lasette's laser design and have sought, or are
preparing to seek, continuations of existing patents and/or new patents
protecting those designs. Two issued United States patents cover certain
technological foundations of the current Lasette product line. These patents
were issued in September 1996 and June 1999 and include claims regarding
mechanisms to create and control laser energy distribution profiles that are
essential for reducing pain in laser lancing devices. In November 1999, we
received a United States patent for the disposable finger shield used with the
Lasette for clinical use. We also have received a United States patent covering
the disposable finger shield mechanism used in the Lasette for home use. Other
mechanisms for reducing the size and cost and improving the reproducibility and
painlessness of laser lancing devices are regarded as trade secrets, or are the
subject of planned patent applications. Finally, we have registered the mark
"Lasette" with the United States Patent and Trademark Office.
Mr. Tankovich, a former employee of the Russian Academy of Science now residing
in San Diego, California, holds the United States patent relating to the use of
a laser for blood sample collection. In this prospectus, we sometimes refer to
Mr. Tankovich's patent as the "Tankovich Patent." Becton Dickinson and Company,
a leading producer of blood collection products, licensed the Tankovich Patent
from Mr. Tankovich in December 1995.
We have entered into discussions with Becton Dickinson and Company regarding a
license or similar arrangement including the Tankovich Patent. The costs
associated with these arrangements could include up-front payments and ongoing
royalties which may adversely affect our operating results. There can be no
assurance that we will reach an agreement with Becton Dickinson on terms
acceptable to us, if at all. If we fail to reach an agreement with Becton
Dickinson, there can be no assurance that Becton Dickinson will not claim that
the Lasette infringes the Tankovich Patent. While we believe that the Tankovich
Patent is invalid and unenforceable due to public disclosure of the laser
perforation concept in the international scientific literature, as well as
public commercialization of primitive perforator products in the former Soviet
Union, as early as October 1990, there can be no assurance that any infringement
claims by Becton Dickinson would be resolved without costly litigation. An
adverse ruling or judgment in any litigation could have a significantly negative
effect on the Lasette product line and our operating results. Moreover, if we
are found to infringe, we could be subject to significant liability and could be
prevented from manufacturing and selling the Lasette, which would materially
adversely affect our business, financial results and operations. Management
attention consumed by and legal costs associated with any litigation could also
have a negative effect on our operating results.
In October 1997, Transmedica (formerly Venisect) commenced a patent infringement
action against us in which it claimed the Lasette infringed the United States
patent underlying Transmedica's skin perforator. A federal court dismissed the
suit on procedural grounds. Transmedica appealed the federal court ruling, but
subsequently withdrew its appeal. Transmedica was recently purchased by Norwood
Abbey Ltd. Transmedica did not begin any further proceedings against us prior to
being acquired by Norwood Abbey. As of the date of this prospectus, Norwood
Abbey has also not begun any further proceedings against us.
SCIENTIFIC RESEARCH INSTRUMENTS -- THE CELL ROBOTICS WORKSTATION
APPLICATIONS OF THE SCIENTIFIC RESEARCH INSTRUMENTS. The Cell Robotics
Workstation allows scientists to manipulate objects in micro-space, upgrading
the microscope to an interactive micro-laboratory. The scientific research
instruments enhance the usefulness and importance of the conventional laboratory
microscope as a tool in medical, biological and genetic applications in the life
sciences. Scientists can use the technology for cell separation, cell-to-cell
interaction, micro-dissection and intercellular manipulation of living cells.
Third parties currently use the Cell Robotics Workstation for cancer,
immunology, neurobiology, assisted reproductive techniques and genome research.
DESCRIPTION. In 1996, we introduced the computer-controlled Cell Robotics
Workstation for optical trapping, micromanipulation and microsurgery. This
workstation is based on our core LaserTweezers, LaserScissors, CellSelector and
SmartStage technologies. The LaserTweezers application of the Cell Robotics
Workstation is based upon a non-exclusive license from AT&T, which was
transferred by AT&T to Lucent Technologies, Inc. Computer control provides
powerful, user-friendly features such as interactive software with mouse or
keyboard control, a unique motorized stage and a motorized focus drive providing
motion in three directions. The Cell
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Robotics Workstation integrates our research instruments into a complete
computer-controlled optical trapping and ablation workstation.
MARKETS. Principal markets for the Cell Robotics Workstation are colleges,
universities, research laboratories, biotechnology and pharmaceutical companies
and commercial laboratories conducting biological research. We intend to
identify scientists that have specific research applications particularly well
suited to the company's instruments.
MANUFACTURING. To minimize capital outlay, we outsource parts of the Cell
Robotics Workstation to machine shops and circuit board companies. We complete
final assembling and testing at our Albuquerque, New Mexico, facility to ensure
the quality of the final product. We plan to continue this approach for the
foreseeable future.
MARKETING AND DISTRIBUTION. While we intend to focus on the distribution and
sale of our laser-based medical devices, we will continue to promote and market
the scientific research instruments through direct sales, dealers,
representatives and distribution arrangements. We currently have an agreement
with Mitsui Engineering and Shipbuilding granting exclusive distribution rights
for the Cell Robotics Workstation in Japan. The agreement expires in September
2005. Mitsui has assigned these distribution rights to Meiwa Shoji Company Ltd.
We have also expanded domestic and international non-exclusive distribution
channels for the Cell Robotics Workstation to include distributors in 17
countries.
COMPETITION. Third party competitors of the Cell Robotics Workstation include
P.A.L.M. and S&L Microtest, both German companies, Sigma Koki, a Japanese
company, and Arcturus, a United States company. P.A.L.M., S&L Microtest and
Sigma Koki make multi-trap and custom trapping instruments that compete with the
Cell Robotics Workstation. Arcturus offers a laser micro-dissection system.
REGULATORY STATUS. We received the CE Mark for the Cell Robotics Workstation in
September 1997. This product line does not currently require other regulatory
clearances, including clearance from the FDA.
CONTINUING INTEREST IN THE IVF WORKSTATION
In May 2000, we sold the IVF Workstation product line to Hamilton Thorne
Research, a major producer and marketer of sperm analysis equipment worldwide,
for $100,000 in cash and 12% royalty payments on future net sales. We do not
expect these royalty payments will have a material effect on our cash flow. We
decided to sell the IVF Workstation and associated technology to further focus
our efforts on the development and sale of the Lasette.
The IVF Workstation is a computer-controlled multi-functional workstation that
combines, for the first time, a technological solution to both the functional
and informational requirements of clinicians working in the in vitro
fertilization environment. Utilizing a microscope, computer-controlled motorized
stage, video camera, sophisticated laser-based technology and data storage and
retrieval systems, the IVF Workstation permits standardized evaluation,
measurement and diagnosis of eggs and embryos, sperm injection and
laser-assisted embryo hatching in one integrated system. With its computer
hardware and software, the IVF Workstation also permits the detailed cataloguing
and documentation of each in vitro fertilization procedure and the organization
and retrieval of data and other information.
In vitro fertilization is a rapidly-growing area of human fertility treatment.
However, success rates with current procedures vary significantly from clinic to
clinic. The IVF Workstation is designed to improve success rates for clinics and
in vitro fertilization patients.
COMPETITION
While the Lasette currently has no direct competitors and the Cell Robotics
Workstation has a few competitors as detailed above, specialized laser-based
medical device companies as well as other companies, colleges, universities,
governmental agencies and other public and private research institutions will
continue to conduct research and protect technologies that they may develop or
have developed, some of which will be directly competitive to us. The principal
factor affecting our competitive position is the suitability of our instruments
for, and their performance in, a particular application. We face potential
competition from a number of established domestic and international companies,
all of which have substantially greater engineering, manufacturing, marketing
and financial capabilities.
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Our ability to compete successfully in existing and future markets will depend
on elements both within and outside of our control.
BUSINESS STRATEGY
We hope to become a leader in the development and sale of technologically
advanced laser-based medical devices. To achieve this goal, our business
strategy capitalizes on our core laser technologies to develop unique products
targeted at large markets in which we can compete effectively. Key components of
our business strategy include the following:
o DEVELOP UNIQUE TECHNOLOGY. Through know-how and core
technology, we plan to develop products that offer more
effective, safer and less painful solutions than conventional
procedures. This development strategy includes using patents,
licenses and collaboration where appropriate.
o DEVELOP MARKET RECOGNITION. We are positioning our laser-based
medical devices as preferred technological solutions to
clearly-defined medical needs. We seek to create significant
brand awareness for the Lasette, our signature product,
particularly with consumers that use the Lasette for home use.
To accomplish this, we are advertising in diabetes-related
publications, direct mailings, tradeshows and print and
Internet media. We use trademarked product names that can be
clearly recognized by customers, such as Lasette and
LaserTweezers.
o EXPAND DISTRIBUTION CHANNELS. We are presently pursuing
non-exclusive distribution agreements for our Lasette for
clinical use with national, international and regional
distributors of medical products to take advantage of their
existing distribution channels and name recognition.
Currently, we are marketing and selling the Lasette for home
use directly to the end user. Several drug store, supermarket
and superstore chains have inquired about distributing the
Lasette for home use; however, we have not entered into any
formal discussions with them. We sell the Cell Robotics
Workstation in the United States and internationally through
distributors and manufacturers' representatives.
INTELLECTUAL PROPERTY
Our success will depend, in part, upon our ability to develop superior products
that we can market at competitive prices. Our ability to do this will depend, in
part, on our ability to protect and defend our intellectual property rights and
the competitive advantages those rights offer. We rely primarily on patent,
trade secret, copyright and trademark laws, confidentiality procedures and other
intellectual property protection methods to protect our proprietary technology.
As of the date of this prospectus, we have been issued three patents and have
applied for additional patent protection for our laser-based medical devices.
Our products have only limited patent protection. It is our policy to require
our employees to execute confidentiality agreements upon the commencement of
such relationships.
RESEARCH AND DEVELOPMENT
To succeed, we must continually enhance existing products and develop new
products incorporating the latest improvements in laser technology. Accordingly,
we are committed to investing resources in research and development activities.
During the years ended December 31, 2000 and 1999, we spent $816,659 and
$551,486, respectively, on internal research and development programs. As of
April 24, 2001, five of our scientists and engineers were engaged in research
and development activities. We channeled the majority of the proceeds from
equity financing, short-term borrowings and the sale of securities in 1995
through 2000 to fund our internal research and development activities. We do not
have research arrangements with any outside research and development firms. We
received a Small Business Innovative Grant from the National Cancer Institute in
April 1997. Originally, the grant awarded funds for two years of development of
a proprietary laser instrument for semi-automated single cell sorting. The grant
was recently modified to validate capabilities of applying laser energy in
connection with a polymerase chain reaction or PCR. Additionally, the period
during which funds can be expended was extended until September 30, 2001. The
total grant award that is available to us is approximately $635,000. We have
received approximately $487,000 to date.
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GOVERNMENT REGULATION; PRODUCT APPROVAL PROCESS
Government regulations govern various aspects of our marketing, sales and
manufacturing processes. We have successfully obtained many of the regulatory
clearances necessary to market and sell our products in our current markets;
however, we may require additional clearances if we enter new markets, improve
existing products or develop new products. We must also maintain our current FDA
clearances by periodic audits. There can be no assurance that we will obtain,
maintain or receive additional necessary clearances.
For research applications, our products are subject only to FDA safety
regulations. However, the European Community requires that research instruments
receive the CE Mark before they can be exported to Europe. We received the CE
Mark for the Cell Robotics Workstation and all of its modules in September 1997.
We also received the CE Mark for the Personal Lasette in August 2000.
In the United States, federal and state statutes regulate the testing,
manufacture, safety and efficacy, labeling, record keeping, approval,
advertising and promotion of our products. Product development and approval
within this regulatory framework may take many months and may involve the
expenditure of substantial resources. In addition to obtaining FDA clearances
for each product, we must register and seek FDA approval for each manufacturing
establishment. These establishments must be certified to meet ISO 9001 and EN
46001 requirements.
The FDA has separate review procedures for medical devices before such products
may be commercially marketed in the United States. There are two basic review
procedures for medical devices in the United States. Certain products may
qualify for a Section 510(k) procedure, under which the manufacturer gives the
FDA a Pre-Market Notification, or 510(k) Notification, of the manufacturer's
intention to commence marketing of the product at least 90 days before the
product will be introduced for clinical use. The manufacturer must obtain
written clearance from the FDA before it can commence marketing the product.
Among other requirements, the manufacturer must establish in the 510(k)
Notification that the product to be marketed is "substantially equivalent" to
another legally-marketed, previously existing product. If a device does not
qualify for the 510(k) Notification procedure, the manufacturer must file a
Pre-Market Approval Application. The Pre-Market Approval Application requires
more extensive pre-filing testing than the 510(k) Notification procedure and
involves a significantly longer FDA review process. See "Business -- Products --
Laser-Based Medical Devices -- The Lasette -- Regulatory Status" for a listing
of the regulatory clearances we have obtained for the Personal Lasette and
Professional Lasette since mid-1997.
We can market the Lasette for essentially all applications requiring capillary
blood drawing for blood screening and/or sampling in the United States. For
marketing outside of the United States, we will be subject to foreign regulatory
requirements governing clinical trials and marketing approval for the products.
Requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. Although we have
employees who are experienced with the regulatory procedures of the European
Community and other jurisdictions, we do not currently have any facilities or
employees outside of the United States. In some cases, we will rely on our
strategic partners in foreign markets to satisfy the regulatory requirements
imposed by those jurisdictions.
EMPLOYEES
As of April 24, 2001, we had 27 permanent full-time employees and 1 temporary
full-time employee. Of the employees, 5 were principally engaged in product
development, 9 in manufacturing, including quality control, 10 in marketing and
sales and the balance in administration and finance. Our employees are not
represented by a labor organization or covered by a collective bargaining
agreement. We have not experienced work stoppages and we believe that our
relationship with our employees is good.
FACILITIES
Our facilities are located in approximately 12,000 square feet in Albuquerque,
New Mexico. This facility contains our executive and administrative offices, as
well as facilities for our assembly, production, testing, storage and inventory
functions. Our monthly rent payments are $8,745, subject to a three percent
annual increase. We renegotiated our lease to terminate in November 2002. We
believe that this facility is adequate for our present and near-term
requirements. Our equipment, fixtures and other assets located within the
facility are insured against loss.
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LEGAL PROCEEDINGS
During 2000, Big Sky Laser Technologies, Inc., or BSLT, filed a lawsuit alleging
that we were in breach of contract. In January 2001, we reached a settlement
with BSLT and the lawsuit was dismissed with prejudice. Under the settlement
agreement, we paid BSLT $350,000. As consideration for this payment, BSLT
completed and shipped to us 100 units of the Professional Lasette that BSLT had
previously been manufacturing for us and will ship to us all remaining parts
inventory in their possession. We had accrued $400,000 for the anticipated costs
of settling the lawsuit during the quarter ended September 30, 2000.
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The name, age and position of our directors, executive officers and key
employees are as follows:
NAME AGE POSITION
---- --- --------
Dr. Ronald K. Lohrding 60 President, Chief Executive Officer and Chairman of the Board of Directors
Paul Johnson 37 Chief Financial Officer and Secretary
C. Thomas Goslau 34 Vice President of Sales and Marketing
Richard Zigweid 53 Vice President of Manufacturing
Steve Aiken 51 Vice President of Research and Development
Dr. Larry Keenan 54 Product Manager, Cell Robotics Workstation
Mark T. Waller 50 Director
Dr. Raymond Radosevich 62 Director
Dr. Debra Bryant 46 Director
Dipl. Ing. Oton Tisch 70 Director
Steven A. Crees 46 Director
DR. RONALD K. LOHRDING has served as our Chief Executive Officer, President and
Chairman of the Board of Directors since February 23, 1995. He co-founded our
wholly-owned subsidiary, Cell Robotics, Inc., in 1988, and has served as the
Chairman, President and Chief Executive Officer of the subsidiary since its
incorporation. Dr. Lohrding has over 25 years of management experience. Dr.
Lohrding worked at Los Alamos National Laboratory as a manager and as a
scientist from 1968 to 1988. While at Los Alamos National Laboratory, Dr.
Lohrding served as Assistant Director for Industrial and International
Initiatives, Deputy Associate Director for Environment and Biosystems and
Program Director for Energy, Environment and Technology, among other senior
management positions. Concurrently, he has been a general partner in seven real
estate partnerships, two of which are currently active. He received his Ph.D. in
mathematical statistics from Kansas State University in 1969.
PAUL JOHNSON was appointed as our Chief Financial Officer in July 2000 and
Secretary in November 2000. From September 1994 to July 2000, he served as
Assistant Controller and then the Controller for Helen of Troy Limited, a $300
million manufacturer and distributor of personal care products. From November
1987 to September 1994, he was employed by KPMG Peat Marwick LLP, now known as
KPMG LLP. He has a degree in accounting and a masters degree in accountancy from
Brigham Young University.
C. THOMAS GOSLAU was appointed as our Vice President of Sales and Marketing in
March 2001. Mr. Goslau was the general manager of international sales and
marketing for Sooil Development Co., LTD, Seoul, Korea, from September 1999 to
October 2000. From 1993 to 1999 he served in various positions in Asia for ESC
Medical Systems, Inc. Mr. Goslau received a Bachelor of Arts degree in
International Affairs from Lafayette College, Easton, Pennsylvania in 1989.
RICHARD ZIGWEID was appointed as our Vice President of Manufacturing in August
1996. Mr. Zigweid was Manufacturing Manager at Olympus America from May 1994 to
August 1996. He served as engineering manager at Bausch & Lomb from 1991 to 1994
and as engineering manager and manufacturing engineer at Baxter Healthcare from
1983 to 1991. He received his B.S. degree in Mechanical Engineering from the
University of Wyoming.
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STEVE AIKEN was appointed as our Vice-President for Research and Development in
October 2000. Mr. Aiken joined the company as a laser engineer in July 2000. Mr.
Aiken worked as an engineer from March 1995 to June 2000 for Decade Optical
Systems and from May 1991 to February 1995 for the Core Group.
DR. LARRY KEENAN was appointed as our Sales Representative in January 1993 and
has been Product Manager for the Cell Robotics Workstation since July 1997. Dr.
Keenan was the Regional Sales Manager of BioRad for the confocal microscope
product line of BioRad from 1991 through 1992. He received his Ph.D. in
Biological Sciences at the University of California at Irvine and was an
Associate Research Scientist in Neurobiology at Yale University.
MARK T. WALLER has served as a director of the company since February 1995.
Since 1990, Mr. Waller has been President and founder of Bridgeworks Capital, a
sole proprietorship that arranges public and private financing for, and provides
public relations services to, client companies. Mr. Waller was Interim President
and Director of Totem Health Sciences, Inc., a Canadian medical products and
research company, from 1988 to 1990.
DR. RAYMOND RADOSEVICH was elected as a director of the company in 1995. From
November 1998 to the present, Dr. Radosevich has been a limited partner for
Valley Ventures II, a venture capital fund. Dr. Radosevich was a director of
BioDetect, Inc. from 1997 to November 1999. He is currently a director of three
additional companies: Charter Bank since 1994, Cryo Fuel Systems Inc. since 1997
and Quasar International Inc. since January 2000. From 1985 to 1989, he was Dean
of the Anderson School of Management at the University of New Mexico. Dr.
Radosevich was also a Professor of Management at the University of New Mexico
from 1976 until he retired from active teaching in December 1997. As a Professor
of Management, he specialized in business strategy and the management of
technology. In addition, he taught a course in Technology Entrepreneurship and
lectured on the subject nationally and internationally. Dr. Radosevich earned
his Ph.D. from Carnegie-Mellon University, a B.S. in Mechanical Engineering and
M.S. in Industrial Engineering from the University of Minnesota.
DR. DEBRA BRYANT was elected to our board of directors in July 1997. She is
President, Chief Executive Officer and majority shareholder of Humagen Fertility
Diagnostics, Inc., the largest manufacturer of micropipets for the worldwide in
vitro fertilization market. In 1984, Dr. Bryant joined Humagen, Inc. as a Senior
Scientist. In 1991, Dr. Bryant purchased the fertility diagnostics division of
Humagen, Inc. and founded Humagen Fertility Diagnostics, Inc. She has been with
Humagen Fertility Diagnostics, Inc. since 1991. Dr. Bryant received her Ph.D. in
Medical Microbiology from Bowman Gray School of Medicine, Wake Forest
University, and completed a National Institutes of Health postdoctoral
fellowship in molecular biology at the University of Virginia.
DIPL. ING. OTON TISCH was appointed to our board of directors as an interim
director in February 2000 and was elected as a director in May 2000. Mr. Tisch
is an international businessman and is the President, Chief Executive Officer
and sole owner of Obras Electromecanicas TKV, Caracas, Venezuela, and its
subsidiary in Zurich, Switzerland, both of which were incorporated in 1980. Mr.
Tisch's business specializes in equipment procurement and building and financing
high voltage turn-key substations up to 400 kV, including the electronic and/or
digital automatic control.
STEVEN A. CREES previously served as an advisor to our board of directors and
was elected as a director in May 2000. In March 2000, Mr. Crees started HaeMedic
LLC, a medical distribution and manufacturing company. In March 2000, he
resigned as Senior Vice President and General Manager of the Medical Diagnostic
Products Division of Chronimed, Inc., where he had been employed since 1986.
While at Chronimed, Mr. Crees was responsible for planning and implementing
distribution strategies for proprietary and licensed medical products to the
hospital, long term care, physician, alternative care and retail markets for
this $32 million dollar business unit emphasizing the diabetic market. He also
served as Vice President for Marketing and Sales and managed the diabetes
centers. Prior to 1986, he was Territory Manager for the Medical Products
Division of Baxter Healthcare Corporation. He has a B.S. in Economics and
Business Administration from the University of Minnesota.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the summary of compensation paid to our Chief
Executive Officer and our other most highly compensated executive officers in
fiscal years 1998 through 2000.
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ANNUAL COMPENSATION
----------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
--------------------------- ---- -------- ------------
Ronald K. Lohrding, Chief Executive Officer, President 2000 $119,799 $2,625
and Chairman of the Board 1999 $123,115 $6,343
1998 $123,115 $6,343
H. Travis Lee, Vice President of Sales and Marketing(1) 2000 $113,611 $ 0
1999 $110,000 $3,898
1998 $110,000 $4,204
- ----------
(1) Mr. Lee resigned on March 2, 2001.
EMPLOYMENT AGREEMENTS
On July 1, 2000, we entered into a new employment agreement with Dr. Lohrding
under which he will serve as our Chief Executive Officer, President and Chairman
of the Board. The employment agreement expires on June 30, 2003. Dr. Lohrding
agreed to serve as Chief Executive Officer and President on a full-time basis
through June 30, 2002. During the third year of his contract, Dr. Lohrding has
asked to be able to resign as Chief Executive Officer and President, but agreed
that he will continue to serve as a consultant to the company through June 2003.
As a consultant, Dr. Lohrding agreed to devote no less than one-half of his time
to the company's business. Dr. Lohrding will receive a base salary of $130,513
during the first year of the contract, which will be increased in the second
year by the average increase of compensation to all of our employees, or as
determined by the Compensation Committee of our board of directors. Dr. Lohrding
will be paid one-half of his second year base salary during the third year of
his contract. The contract granted Dr. Lohrding 100,000 stock options that
vested immediately and expire on July 1, 2005. These options were granted
outside of the company's Stock Incentive Plan. Dr. Lohrding is also entitled to
bonuses based upon the achievement of specified target sales of the Lasette. If
a third party acquires at least 30% of our capital stock, then Dr. Lohrding will
be entitled to the following:
o a lump sum payment, in cash, equal to his base salary under
his employment agreement, which may not be less than $50,000;
o a lump sum payment, in cash, equal to any accrued but unpaid
bonus; and
o all options, warrants and other rights subject to vesting will
accelerate and vest on his termination of employment.
We entered into an employment agreement with Paul Johnson, our Chief Financial
Officer and Secretary, on June 28, 2000. Under the employment agreement, if
there is a change in control that results in his termination or he resigns
within 45 days of the change in control, then we must pay Mr. Johnson in 12
equal monthly installments commencing after the termination date an aggregate
amount equal to Mr. Johnson's then prevailing annual total compensation,
including base salary but excluding fringe benefits.
STOCK INCENTIVE PLAN
During fiscal 1992, we adopted a Stock Incentive Plan. Pursuant to the Stock
Incentive Plan, stock options granted to eligible participants may be incentive
stock options, or ISOs, under Section 422 of the Internal Revenue Code of 1986,
as amended, or non-qualified stock options, or NSOs. Eligible participants under
the Stock Incentive Plan include our directors, officers and other salaried key
employees.
Under the Stock Incentive Plan, an option is not transferable, except by will or
the laws of descent and distribution. The board of directors may administer the
Stock Incentive Plan, or delegate administration of the plan to a committee
comprised of disinterested directors. Currently, the Stock Incentive Plan is
administered by our board of directors. The administrator decides when and to
whom to make grants, the number of shares to be covered by the grants, the
vesting schedule, the type of award and the terms and provisions relating to the
exercise of the awards. An aggregate of 1,500,000 shares of our common stock is
available for issuance under the Plan.
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As of December 31, 2000, we have granted options to purchase a total of 830,242
shares of our common stock under the Stock Incentive Plan consisting of ISOs and
NSOs to purchase 650,272 shares and 179,970 shares, respectively. The ISOs are
exercisable at prices ranging from $1.375 to $4.47 per share. The NSOs are
exercisable at prices ranging from $1.75 to $4.38 per share. All options have
been issued with exercise prices at or above market value on the date of grant.
OPTION GRANTS
The following table sets forth certain information concerning individual grants
of stock options made during the last completed fiscal year to each of the named
executive officers:
NUMBER OF % OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE PRICE
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) EXPIRATION DATE
---- ---------------- ------------------ -------------- ---------------
Dr. Ronald K. Lohrding 100,000 37% $2.734 08/05/05
H. Travis Lee -0- -0- -0- -0-
OPTION EXERCISES AND OPTION VALUES
The following tables sets forth certain information concerning the exercise of
options during the last completed fiscal year by each of the named executive
officers and the fiscal year-end value of such named executive officers'
unexercised options on an aggregated basis:
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(2)
SHARES --------------- --------------
ACQUIRED ON VALUE REALIZED(1) UNEXERCISABLE/ UNEXERCISABLE/
NAME EXERCISE (#) ($) EXERCISABLE EXERCISABLE
---- ------------ ----------------- --------------- --------------
Dr. Ronald K. Lohrding -0- -0- 300,000/425,000 $0/$0
H. Travis Lee -0- -0- 0/74,174 $0/$0
- ----------
(1) Value realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market value
of our common stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal year end and the exercise price of the options. The
closing bid price of our common stock at fiscal year end 2000 was $0.50.
BOARD STRUCTURE
Our board of directors currently has six members. Each director is elected to
serve for a term of one year until the next annual meeting of shareholders or
until a successor is duly elected and qualified.
DIRECTOR COMPENSATION
The members of our board of directors that are not employees of the company are
reimbursed for the expenses they incur in attending meetings of the board. No
officer of the company receives any additional compensation for his services as
a director, and we do not contribute to any retirement, pension or profit
sharing plans covering our directors. We do, however, maintain a group health
insurance plan and retirement plan for our employees, and those directors who
are also our employees are eligible to participate in each plan. Our directors
are also entitled to participate in the Stock Incentive Plan. Non-employee
directors may also receive stock option grants outside of the
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Stock Incentive Plan. No member of any committee of our board of directors
receives any additional compensation for his service as a member of that
committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 24, 2001, for the following: (1) each
person who is known by us to own beneficially five percent or more of our
outstanding common stock, (2) each of our directors and officers who
beneficially own such shares and (3) our officers and directors as a group.
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED
------------------------ -------------------------------
NUMBER PERCENT
------------- -------
Chester L. Paulson(1) 1,185,989(2) 10.69
Paulson Investment Company, Inc.(3) 1,133,389(4) 10.22
Dr. Ronald K. Lohrding(5) 728,750(6) 6.57
Dipl. Ing. Oton Tisch(5) 565,000(8) 5.09
Mark T. Waller(7) 200,000(9) 1.98
Dr. Debra Bryant(5) 23,000(10) *
Dr. Raymond Radosevich(5) 29,000(11) *
Steven Crees(5) 11,500(12) *
All officers and directors as a group (7 persons) 1,651,424(13) 14.88
- ----------
* Represents ownership interests of less than one percent.
(1) The business address is c/o Paulson Investment Company, 811 S.W., Naito
Parkway, Suite 200, Portland, Oregon 97204.
(2) Includes 21,600 shares issuable upon exercise of Representative
Warrants and the underlying Redeemable Warrants exercisable within 60
days of April 24, 2001 and 31,050 shares of our common stock owned
directly by Mr. Paulson. Also includes 1,133,339 shares of our common
stock beneficially owned by Paulson Investment Company of which Mr.
Paulson is an officer. Mr. Paulson is also the controlling shareholder
of Paulson Capital Corp., the parent company of Paulson Investment
Company. Mr. Paulson disclaims beneficial ownership of the shares
beneficially owned by Paulson Investment Company, Inc.
(3) The business address of Paulson Investment Company, Inc. is 811 S.W.,
Naito Parkway, Suite 200, Portland, Oregon 97204.
(4) Includes 178,800 shares subject to the Representative Warrant and
underlying Redeemable Warrants exercisable within 60 days of April 24,
2001.
(5) The business address is c/o Cell Robotics International, Inc., 2715
Broadbent Parkway N.E., Albuquerque, New Mexico 87107.
(6) Includes 425,000 shares subject to options exercisable within 60 days
of April 24, 2001 and 3,750 shares underlying immediately exercisable
warrants.
(7) The business address of Mr. Waller is 1820 North Shore Road, Lake
Oswego, Oregon 97304.
(8) Includes 5,000 shares subject to options exercisable within 60 days of
April 24, 2001 and 60,000 shares underlying immediately exercisable
warrants. Also includes 500,000 shares issued upon conversion of a
$1,200,000 secured promissory note in August 2000.
(9) Represents shares subject to options exercisable within 60 days of
April 24, 2001.
(10) Includes 11,250 shares subject to options exercisable within 60 days of
April 24, 2001. Also includes 6,750 shares underlying immediately
exercisable warrants held by Humagen Fertility Diagnostics, Inc., of
which Dr. Bryant is president, chief executive officer and a majority
shareholder.
(11) Represents shares subject to options exercisable within 60 days of
April 24, 2001 and 3,000 shares underlying immediately exercisable
warrants.
(12) Represents shares subject to options exercisable within 60 days of
April 24, 2001. Also includes 1,500 shares underlying immediately
exercisable warrants held by HaeMedic LLC, of which Mr. Crees is the
president and principal equity holder.
(13) Includes 966,824 shares subject to options exercisable within 60 days
of April 24, 2001 and 75,000 shares underlying immediately exercisable
warrants.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1999, we borrowed $250,000 from Humagen Fertility Diagnostic, Inc.,
whose president, chief executive officer and majority shareholder is Dr. Debra
Bryant, a director of the company. The note did not bear interest until June
2000, at which time the unpaid balance of the note began to accrue interest at
six percent per annum. In January 2001, we used $45,000 of the proceeds of the
loans by our directors as payment against the outstanding balance of $250,000.
The remaining balance is payable in monthly installments of $10,000 each
commencing February 15, 2001.
In February 2000, as subsequently amended in March 2000, we executed a secured
convertible promissory note in the principal amount of $1,200,000 payable to
Dipl. Ing. Oton Tisch, a director of the company. In August 2000, the note was
converted into 500,000 shares of our common stock. We recorded a charge of
$1,200,000 upon registration of the common stock for resale with the SEC and
conversion of the note into our common stock.
Bridgeworks Capital, Inc., of which Mark Waller, one of our directors, is an
officer and majority owner, received a placement fee of 5% (or $100,000) in
connection with our May 2000 private placement.
In January 2001, the following members and affiliates of members of our board of
directors agreed to make term loan advances to us in the following amounts:
Dipl. Ing. Oton Tisch, $400,000; Ronald K. Lohrding, Ph.D., $25,000; Raymond
Radosevich, Ph.D., $20,000; HaeMedic LLC, $10,000; and Humagen Fertility
Diagnostics, Inc., $45,000. Mr. Tisch and Dr. Radosevich are members of our
board of directors. Steven A. Crees, a member of our board of directors, is
president and principal equity holder of HaeMedic LLC. Dr. Lohrding also serves
as our President, Chief Executive Officer and Chairman of the Board. All of the
loans were made in February 2001, other than Mr. Tisch's loan, which was made in
March 2001. The loans are evidenced by unsecured promissory notes, bear interest
at the rate of ten percent per annum and are due on January 31, 2002. We used
$45,000 of the proceeds from the foregoing loans as payment against the
outstanding balance of the $250,000 promissory note issued to Humagen Fertility
Diagnostics, Inc.
Additionally in January 2001, as part of the same loan transaction, Mr. Tisch
agreed to loan us, at our request at any time between March 15, 2001 and May 30,
2001, an additional $500,000. As of the date of this prospectus, no amounts have
been loaned to us under Mr. Tisch's $500,000 commitment. In connection with the
loans, each lender was issued a warrant to purchase that number of shares of our
common stock equal to 15% of the amount of the lender's respective loan. The
warrants allow the lenders to purchase an aggregate of 150,000 shares of our
common stock The warrants may be exercised until January 31, 2004, at a price
equal to $1.125 per share of our common stock; provided that warrants covering
75,000 shares of our common stock will not become exercisable by Mr. Tisch until
he has loaned us the remaining amount available under his $500,000 loan
commitment.
We believe that any transactions between us and our officers, directors,
principal shareholders or other affiliates have been on terms no less favorable
to us than could be obtained from unaffiliated third parties on an arms-length
basis.
INDEMNIFICATION
Section 7-109-102 of the Colorado Business Corporation Act, or the CBCA,
provides that a company may indemnify a person who was, is or is threatened to
be made a named defendant or respondent in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (a "proceeding"), because the
person is or was a director against liability incurred in the proceeding if:
o the person conducted himself or herself in good faith;
o the person reasonably believed, in the case of conduct in an
official capacity with the company, that his or her conduct
was in the company's best interests;
o in all other cases, that his or her conduct was at least not
opposed to the company's best interests; and
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o in the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
A company may not indemnify a director in connection with a proceeding by or in
the right of the company in which the director was adjudged liable to the
company or in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which proceeding the director was adjudged liable on the
basis that he or she derived an improper personal benefit. Unless limited by its
articles of incorporation, Sections 7-109-103 and 7-109-107 of the CBCA states
that a company shall indemnify a person who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which the person was a party
because the person is or was a director or officer against reasonable expenses
(including attorneys' fees) incurred in connection with the proceeding. Section
7-109-107 also states that unless provided in its articles of incorporation, a
company may indemnify an officer, employee, fiduciary or agent of the company to
the same extent as a director.
Our Articles of Incorporation provide that we may and shall indemnify each of
our directors, officers, employees or agents, and their respective heirs,
executors and administrators, against any and all expenses or liability
reasonably incurred by them in connection with any action, suit or proceeding to
which he may be a party by reason of his being or having been a director,
officer, employee or agent of the company to the full extent required or
permitted by the CBCA.
Article XIII of our Amended and Restated Bylaws also states that may indemnify
against liability incurred in any proceeding an individual who was, is or is
threatened to be made a named defendant or respondent in any proceeding because
he is or was a director if that person meets the conditions for indemnification
under Section 7-109-102 of the CBCA, as described above. We may not indemnify a
director in connection with a proceeding by or in the right of the company in
which the director was adjudged liable to the company or in connection with any
proceeding charging improper personal benefit to the director, whether or not
involving action in his official capacity, in which he was adjudged liable on
the basis that personal benefit was improperly received by him. We must
indemnify a person who is or was a director or officer of the company and who
was wholly successful, on the merits or otherwise, in defense of any proceeding
to which he was a party against reasonable expenses incurred by him in
connection with the proceeding.
Under the sections of the CBCA and the company's Bylaws included in this
prospectus, a "director" includes an individual who is or was a director of a
company or an individual who, while a director of a company, is or was serving
at the company's request as a director, an officer, an agent, an associate, an
employee, a fiduciary, a manger, a member, a partner, a promoter or a trustee
of, or to hold any similar position with, another domestic or foreign
corporation or other person or of an employee benefit plan.
We may purchase and maintain insurance on behalf of an individual who is or was
a director, officer, employee, fiduciary or agent of the company and who, while
a director, officer, employee, fiduciary or agent of the company, is or was
serving at the request of the company as a director, officer, partner, trustee,
employee, fiduciary or agent of any other foreign or domestic company or of any
partnership, joint venture, trust, other enterprise or employee benefit plan.
The insurance may cover any liability asserted against or incurred by him in any
of the above capacities or arising out of his status as such, whether or not we
would have the power to indemnify him against such liability under the
provisions of Article XIII of the our Bylaws. We currently maintain a $1,000,000
insurance policy that covers directors and officers' liability. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
DESCRIPTION OF SECURITIES TO BE REGISTERED
COMMON STOCK
Each holder of our common stock is entitled to one vote for each share held of
record. There is no right to cumulative voting of shares for the election of
directors. The shares of common stock are not entitled to preemptive rights and
are not subject to redemption or assessment. Each share of common stock is
entitled to share ratably in distributions to shareholders and to receive
ratably any dividends we may declare out of funds legally available for
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the payment of dividends. Upon our liquidation, dissolution or winding up, the
holders of common stock are entitled to receive, pro-rata, that portion of our
assets which are legally available for distribution to shareholders, subject to
the rights of preferred shareholders, if any. The issued and outstanding shares
of common stock are validly issued, fully paid and non-assessable.
PREFERRED STOCK
We are authorized to issue up to 2,500,000 shares of preferred stock. Our
preferred stock can be issued in one or more series as may be determined from
time to time by our board of directors. Our board of directors has the
authority, without shareholder approval, to fix the rights, preferences,
privileges and restrictions of any series of preferred stock, including:
o the rate of distribution;
o the price at and the terms and conditions on which shares can
be redeemed;
o the amount payable upon shares for distributions of any kind;
o sinking fund provisions for the redemption of shares;
o the terms and conditions on which shares may be converted if
shares of any series are issued with the privilege of
conversion; and
o voting rights except as limited by law.
We do not currently have any plans to issue shares of preferred stock, or to
designate any series of preferred stock. However, there can be no assurance that
we will not issue preferred stock in the future. In the near future, we will be
required to raise additional funds to finance our operations, which may be
through the issuance of preferred stock. Any issuance of preferred stock may
grant to holders preferred rights to our assets upon liquidation, the right to
receive dividend coupons before dividends would be declared to common
shareholders, and the right to redemption of their preferred shares, together
with a premium, prior to the redemption of our common stock. Common shareholders
have no redemption rights. The ability to issue preferred stock without
shareholder approval may discourage, delay or prevent someone from acquiring or
merging with us.
REDEEMABLE WARRANTS
Redeemable Warrants exercisable for 1,503,826 shares of our common stock have
been issued or reserved for issuance, of which 80,000 shares are issuable upon
exercise of Representative Warrants. Each Redeemable Warrant is exercisable to
purchase one share of our common stock at a price of $2.40, subject to
adjustment. The exercise price of the Redeemable Warrants is subject to
adjustment upon certain events such as stock splits, stock dividends and similar
transactions. We can redeem the Redeemable Warrants in accordance with the
provisions described below. The Redeemable Warrants expire at 5:00 p.m.,
Mountain time, on February 2, 2003. We may at any time and from time to time
extend the term of the Redeemable Warrants or reduce their exercise price,
provided written notice of any extension or reduction is given to the registered
holders of the Redeemable Warrants prior to the expiration date then in effect.
We do not presently contemplate any extension of the Redeemable Warrant term or
reduction in the Redeemable Warrant exercise price.
Subject to compliance with applicable securities laws, Redeemable Warrant
certificates may be transferred or exchanged for new certificates of different
denominations at the offices of the warrant agent described below. The holders
of Redeemable Warrants, as such, are not entitled to vote, to receive dividends
or to exercise any of the rights of shareholders for any purpose.
EXERCISE. The Redeemable Warrants may be exercised during their term only upon
surrender of the Redeemable Warrant certificate at our offices with the
completed and signed form of "Election to Purchase" on the reverse side of the
Redeemable Warrant certificate. The Election to Purchase must be accompanied by
payment of the full exercise price for the number of Redeemable Warrants being
exercised. Holders of the Redeemable Warrants will receive one share of our
common stock for each Redeemable Warrant exercised, subject to any adjustment
required
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by the warrant agreement with the warrant agent. For a holder to exercise his or
her Redeemable Warrants, there must be a current registration statement in
effect with the SEC and various state securities authorities registering the
shares of common stock underlying the Redeemable Warrants, or alternatively, in
our sole determination, there must be a valid exemption from these requirements.
We have undertaken, and intend, to maintain a current registration statement,
which will permit the exercise of the Redeemable Warrants during their term.
Maintaining a current effective registration statement could result in
substantial expense. Although we believe that we will be able to register or
qualify the shares of common stock underlying the Redeemable Warrants for sales
in those states where the securities are offered, we cannot assure you that any
registration or qualification, or an exemption from these requirements, can be
accomplished without undue hardship or expense. The Redeemable Warrants may be
deprived of any value if a registration statement covering the shares issuable
upon exercise of the Redeemable Warrants, or an exemption from these
requirements, cannot be filed or obtained without undue expense or hardship or
if the underlying shares are not registered or exempted from registration in the
states in which the holder of a Redeemable Warrant resides. In the latter event,
the only option available to a holder of a Redeemable Warrant may be to attempt
to sell his or her Redeemable Warrants into the market, if a market then exists,
and only then in compliance with applicable securities laws and restrictions on
transfer.
REDEMPTION. We have the right, at our discretion, to call all or less than all
of the Redeemable Warrants for redemption on 30 days' prior written notice at a
redemption price of $.25 per Redeemable Warrant if:
o the closing bid price of our common stock exceeds $4.80 per
share for at least ten consecutive trading days;
o we have in effect a current registration statement covering
the common stock issuable upon exercise of the Redeemable
Warrants; and
o the expiration of the 30-day notice period is within the term
of the Redeemable Warrant.
If we elect to exercise our redemption right, holders of Redeemable Warrants may
either exercise their Redeemable Warrants, sell the Redeemable Warrants in the
market until the date next preceding the date fixed for redemption or tender
their Redeemable Warrants to us for redemption. Within five business days after
the end of the 30-day period, we will mail a redemption check to each registered
holder of a Redeemable Warrant who holds unexercised Redeemable Warrants as of
the end of the 30-day period, whether or not the holder has surrendered the
Redeemable Warrant certificates for redemption. The Redeemable Warrants may not
be exercised after the end of the 30-day notice period.
NO RIGHT TO COMPEL EXERCISE. We do not have the right to compel the exercise of
our outstanding Redeemable Warrants and no one has committed to exercise any of
our outstanding Redeemable Warrants. Whether any Redeemable Warrants are
exercised will depend upon several factors, including the prevailing market
price of our common stock, the liquidity of that market, if any, and the
personal investment objectives of the warrant holders. Accordingly, there can be
no assurance of the number of shares, if any, that will be purchased pursuant to
the exercise of our outstanding Redeemable Warrants.
WARRANT SOLICITATION FEES. We have no agreement or any arrangement whereby any
fees or other compensation will be paid to any person or entity upon exercise of
the Representative Warrants or Redeemable Warrants.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR. The transfer agent, warrant agent
and registrar for our common stock and Redeemable Warrants is Corporate Stock
Transfer, Inc., located in Denver, Colorado.
SELLING SECURITYHOLDERS
The following table sets forth the names of the selling securityholders who may
sell their common stock or Redeemable Warrants pursuant to this prospectus. No
selling securityholder has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates, except as noted below.
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The following table sets forth certain information as of April 24, 2001, to the
best of our knowledge, regarding the ownership of our common stock and our
Redeemable Warrants by the selling securityholders and as adjusted to give
effect to the sale of all the common stock and our Redeemable Warrants offered
by the selling securityholder pursuant to this prospectus.
NUMBER OF NUMBER OF
SHARES SECURITIES BEING OFFERED SHARES PERCENTAGE
BENEFICIALLY ------------------------- BENEFICIALLY BENEFICIAL
SELLING OWNED BEFORE COMMON REDEEMABLE OWNED AFTER OWNERSHIP AFTER
SECURITYHOLDER OFFERING(1) STOCK WARRANTS THE OFFERING THE OFFERING
-------------- --------------- ------------ ----------- ------------ ---------------
Paulson Investment Company, Inc.(2) 1,133,389(3) 781,175(4) -- 352,214 3.17
Chester L. Paulson(5) 1,185,989(6) 31,050(7) -- 373,814 3.37
Wayne Hamersly 26,850(8) 17,250(7) -- 9,600 *
Richard S. Hall 92,184(9) 78,788(10) 78,788 13,396 *
Richard S. Hall, Jr. 46,092(9) 39,394(11) 39,394 6,697 *
William R. Hall 46,092(9) 39,394(11) 39,394 6,697 *
Paul Bardacke(12) 155,000 70,000(12) 30,000(12) 85,000 *
Thomas Pennello 10,000 10,000 -- -- --
GL Investment Group, Inc.(13) 20,000 20,000(13) 20,000(13) -- --
Jean Ellan Canavan(14) 12,000 10,000(14) 10,000(14) 2,000 *
Oton Tisch 565,000(15) 500,000(15) -- 65,000 *
RCG Capital Markets Group, Inc. 100,000 100,000(16) -- -- --
GEM Edwards, Inc. 40,200 40,200(17) -- -- --
Coffin Communications, Inc. 60,000 60,000(18) -- -- --
Alan Stone & Co., LLC 6,667 6,667(19) -- -- --
Richard Goldman 3,333 3,333(20) -- -- --
Nimish P. Patel 3,333 3,333(21) -- -- --
Mona Buchanan 1,667 1,667(21) -- -- --
TOTAL 1,812,251 217,576
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* Represents ownership interests of less than one percent.
(1) Includes shares of our common stock issuable upon exercise of our
warrants and stock options within 60 days of April 24, 2001.
(2) Paulson Investment Company, Inc. is an investment banking firm that has
served as our underwriter and placement agent in our prior private and
public offerings. For their services as our underwriter and placement
agent, we have paid Paulson Investment Company, Inc. various fees as
well as issued our securities to them, including shares of common stock
and warrants.
(3) Includes 178,800 shares issuable upon exercise of Representative
Warrants and the underlying Redeemable Warrants.
(4) Includes 281,175 shares of our common stock acquired from the February
2000 exercise of the Placement Agent's Warrants and underlying class A
warrants. The Placement Agent's Warrants were issued in connection with
services rendered in the September 1995 private offering of our
securities.
(5) Serves as an officer of Paulson Investment Company, Inc.
(6) Includes 21,600 shares issuable upon exercise of Representative
Warrants and the underlying Redeemable Warrants and 31,050 shares of
our common stock owned directly by Mr. Paulson. Also includes 1,133,339
shares of our common stock beneficially owned by Paulson Investment
Company of which Mr. Paulson is an officer. Mr. Paulson is also the
controlling shareholder of Paulson Capital Corp., the parent company of
Paulson Investment Company. Mr. Paulson disclaims beneficial ownership
of the shares beneficially owned by Paulson Investment Company, Inc.
(7) Represents shares of our common stock acquired from the February 2000
exercise of the Placement Agent's Warrants and underlying class A
warrants. The Placement Agent's Warrants were issued in connection with
services rendered in the September 1995 private offering of our
securities.
(8) Includes 9,600 shares issuable upon exercise of Representative Warrants
and the underlying Redeemable Warrants.
(9) Based upon information obtained from Richard S. Hall, as of April 24,
2001, Richard S. Hall, Richard S. Hall, Jr. and William R. Hall may be
deemed to be the beneficial owner of 92,184 shares, 46,092 shares and
46,092 shares, respectively, of our common stock.
(10) Represents 78,788 shares of our common stock issuable upon exercise of
Redeemable Warrants.
(11) Represents 39,394 shares of our common stock issuable upon exercise of
Redeemable Warrants.
(12) Mr. Bardacke is an attorney who has provided services to us for which
we issued him a Redeemable Warrant exercisable for 15,000 shares of our
common stock. Mr. Bardacke also acquired 40,000 shares of our common
stock and 15,000 Redeemable Warrants in a private offering.
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(13) GL Investments Group, Inc. served as one of our placement agents in our
private placement for which it received Redeemable Warrants exercisable
for 5,000 shares of our common stock. In addition, it has provided
various investment banking services to us for which we issued it an
additional Redeemable Warrant exercisable for 15,000 shares of our
common stock.
(14) Ms. Canavan served as a placement agent in our private offering for
which she received Redeemable Warrants exercisable for 10,000 shares.
(15) Mr. Tisch serves on our board of directors. We issued Mr. Tisch 500,000
shares of our common stock upon conversion of a secured convertible
promissory note in the principal amount of $1,200,000. Also includes
60,000 shares issuable upon exercise of a common stock purchase warrant
issued to Mr. Tisch in connection with a loan made by him to us in
March 2001 and stock options covering 5,000 shares issued to Mr. Tisch
for serving as a director.
(16) Represents 100,000 shares issuable under the stock options issued to
RCG Capital Markets Group as payment for public relations services
provided to us. The stock options are exercisable as follows: 35,000
shares at $0.8438 per share, 40,000 shares at $2.00 per share and
25,000 shares at $3.25 per share. Options covering 75,000 shares and
25,000 shares expire September 4, 2003 and February 15, 2004,
respectively.
(17) Represents shares beneficially owned by GEM Edwards, a previous
distributor of our products, acquired upon exercise of its common stock
purchase warrant.
(18) Represents 60,000 shares issuable under the common stock warrants
issued to Coffin Communications Group as payment for public relations
services provided to us. The warrants expire on February 3, 2003 and
have an exercise price of $2.40 per share.
(19) Represents 6,667 shares issuable under the common stock purchase
warrant issued to Alan Stone & Co. as payment for public relations
services provided to us. The warrants expire on February 3, 2003 and
have an exercise price of $2.40.
(20) Represents 3,333 shares issuable under the common stock warrant issued
to Richard Goldman, a director of Alan Stone & Co., as payment for
public relations services provided to us. The warrants expire on
February 3, 2003 and have an exercise price of $2.40.
(21) Shares were issued under a shares for debt agreement entered into
between us and the law firm Pollet & Richardson and certain of its
employees for providing legal services to us.
We will pay all expenses to register the common stock and the Redeemable
Warrants. The selling securityholders will pay any underwriting and brokerage
discounts, fees and commissions, specified attorneys' fees and other expenses to
the extent applicable to them.
PLAN OF DISTRIBUTION
SELLING SECURITYHOLDERS' SECURITIES
The selling securityholders may offer their shares of common stock and/or
Redeemable Warrants at various times in one or more of the following
transactions:
o on any of the United States securities exchanges where our
common stock and/or Redeemable Warrants are listed or may be
listed in the future;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in connection with short sales of our common stock and
Redeemable Warrants;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions and in
settlement of other transactions in standardized or
over-the-counter options; or
o in a combination of any of the above transactions.
The selling securityholders may sell their common stock and/or Redeemable
Warrants at market prices prevailing at the time of sale, prices related to such
prevailing market prices, negotiated prices or fixed prices.
37
41
The selling securityholders may use broker/dealers to sell their shares of
common stock and/or Redeemable Warrants. In this event, the broker/dealers will
either receive a discount or commission from the selling securityholder, or they
will receive commissions from the purchaser of common stock and/or Redeemable
Warrants for whom they acted as agent.
The selling securityholders and any broker/dealers who sell their shares of
common stock and Redeemable Warrants may be deemed to be "underwriters" within
the meaning of the Securities Act. The commissions, discounts or other
compensation paid to such persons may be regarded as underwriters' compensation.
These shares may later be distributed, sold, pledged, hypothecated or otherwise
transferred. In addition to any other applicable laws or regulations, selling
securityholders must comply with regulations relating to distributions by
selling securityholders, including Regulation M under the Securities Exchange
Act of 1934.
To comply with the securities laws of certain jurisdictions, the securities
offered in this prospectus will be offered or sold in those jurisdictions only
through registered or licensed broker/dealers. In addition, in certain
jurisdictions the securities offered in this prospectus may not be offered or
sold unless they have been registered or qualified for sale in those
jurisdictions, or unless an exemption from registration or qualification is
available and is complied with.
REDEEMABLE WARRANTS
We are also offering up to 920,000 shares of our common stock issuable upon
exercise of 920,000 Redeemable Warrants currently owned by certain investors who
acquired the Redeemable Warrants as part of the units sold in the 1998 public
offering or purchased from the secondary trading markets. The shares of common
stock to be issued upon exercise of the Redeemable Warrants are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.
LEGAL MATTERS
The legality of the common stock and Redeemable Warrants offered under this
prospectus was passed on for us by Neuman & Drennen, LLC.
EXPERTS
Our consolidated financial statements as of December 31, 2000 and 1999, and for
the years then ended, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
The report of KPMG LLP covering the December 31, 2000 and 1999 financial
statements contains an explanatory paragraph that states that the company's
recurring losses and negative cash flows from operations raise substantial doubt
about the company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file with the SEC at the SEC's Public Reference Room in
Washington, D.C. at 450 Fifth Street, N.W., Washington, D.C. 20549, in New York,
New York at 7 World Trade Center, Suite 1300, New York, New York 10048 and in
Chicago, Illinois at Citicorp Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. Our electronic SEC filings are also
available on the web site maintained by the SEC, which is found at
http://www.sec.gov. Our SEC filings are also available from commercial document
retrieval services.
38
42
CELL ROBOTICS INTERNATIONAL INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report....................................................................................F-2
Consolidated Balance Sheets - December 31, 2000 and December 31, 1999...........................................F-3
Consolidated Statements of Operations - for the years ended December 31, 2000 and 1999..........................F-4
Consolidated Statements of Stockholders' Equity - for the years ended December 31, 2000 and 1999................F-5
Consolidated Statements of Cash Flows - for the years ended December 31, 2000 and 1999..........................F-6
Notes to Consolidated Financial Statements......................................................................F-7
F-1
43
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cell Robotics International, Inc.
We have audited the accompanying consolidated balance sheets of Cell Robotics
International, Inc. and subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cell Robotics
International, Inc. and subsidiary as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 to
the consolidated financial statements, the Company has suffered recurring losses
and negative cash flows from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 11. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ KPMG LLP
Albuquerque, New Mexico
March 15, 2001
F-2
44
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,043,230 $ 358,379
Accounts receivable, net of allowance for
doubtful accounts of $1,841 in 2000 and
$23,841 in 1999 378,853 206,278
Inventory 1,079,086 897,971
Other current assets 60,850 36,543
------------ ------------
Total current assets 2,562,019 1,499,171
Property and equipment, net 549,688 485,556
Other assets, net 24,109 28,939
------------ ------------
Total assets $ 3,135,816 $ 2,013,666
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 350,399 $ 684,403
Note payable 250,000 --
Payroll related liabilities 152,860 116,617
Royalties payable 79,046 67,519
Other current liabilities 518,010 40,294
------------ ------------
Total current liabilities 1,350,315 908,833
Note payable -- 250,000
------------ ------------
Total liabilities 1,350,315 1,158,833
------------ ------------
Stockholders' equity:
Preferred stock, $.04 par value. Authorized
2,500,000 shares, zero shares
issued and outstanding at December 31, 2000
and 1999 -- --
Common stock, $.004 par value. Authorized
50,000,000 shares, 9,965,644 and 8,244,121
shares issued and outstanding at December 31,
2000 and 1999, respectively 39,863 32,976
Additional paid-in capital 25,114,871 19,154,908
Accumulated deficit (23,369,233) (18,333,051)
------------ ------------
Total stockholders' equity 1,785,501 854,833
------------ ------------
Commitments and contingencies $ 3,135,816 $ 2,013,666
============ ============
See accompanying notes to consolidated financial statements.
F-3
45
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
Product sales $ 992,710 $ 1,294,936
Research and development grants 14,353 122,381
----------- -----------
Total revenues 1,007,063 1,417,317
----------- -----------
Product cost of goods sold (1,516,846) (1,064,130)
SBIR direct expenses (14,353) (122,381)
----------- -----------
Total cost of goods sold (1,531,199) (1,186,511)
----------- -----------
Gross profit (loss) (524,136) 230,806
----------- -----------
Operating expenses:
General and administrative 1,297,779 988,288
Marketing & Sales 1,289,728 625,777
Research and development 816,659 551,486
----------- -----------
Total operating expenses 3,404,166 2,165,551
----------- -----------
Loss from operations (3,928,302) (1,934,745)
----------- -----------
Other income (expense):
Interest income 76,088 26,111
Interest expense (1,258,453) (716)
Other, net 74,485 0
----------- -----------
Total other income (expense) (1,107,880) 25,395
----------- -----------
Net loss (5,036,182) (1,909,350)
Preferred stock dividends -- (515,280)
----------- -----------
Net loss applicable to common shareholders $(5,036,182) $(2,424,630)
=========== ===========
Weighted average common shares
outstanding, basic and diluted 9,286,128 7,734,762
=========== ===========
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.54) $ (0.31)
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
46
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Preferred Stock Common Stock
-------------------------- ------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 465,533 $ 18,622 5,739,248 $ 22,957 17,916,565 (15,908,421)
Conversion of series A preferred stock (465,533) (18,622) 1,862,132 7,449 11,173 --
Stock dividend paid on
series A preferred stock -- -- 183,211 732 514,548 (515,280)
Options issued for services -- -- -- -- 76,909 --
Issuance of shares at $1.50 -- -- 100,000 400 149,600 --
Exercise of stock options -- -- 27,030 108 37,058 --
Issuance of units at $8.25, less
costs of offering -- -- 332,500 1,330 449,055 --
Net loss for 1999 -- -- -- -- -- (1,909,350)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 -- -- 8,244,121 32,976 19,154,908 (18,333,051)
Shares issued for services -- -- 130,000 520 550,885 --
Exercise of stock options -- -- 162,048 649 224,418 --
Exercise of stock warrants -- -- 429,475 1,718 690,038 --
Issuance of shares at $4.00 in a private
placement, less costs of offering -- -- 500,000 2,000 1,733,502 --
Options & warrants issued
for services -- -- -- -- 350,640 --
Issuance of stock on conversion of notes, less
costs of offering -- -- 500,000 2,000 2,410,480 --
Net loss for 2000 -- -- -- -- -- (5,036,182)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 -- $ -- 9,965,644 $ 39,863 25,114,871 (23,369,233)
=========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
47
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $(5,036,182) (1,909,350)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 126,351 116,914
Beneficial conversion charge 1,200,000 --
Loss on sale of property and equipment 35,000 --
Amortization of options issued for services -- 7,279
Options and warrants issued for service 350,640 76,909
Common stock issued for services 551,405 --
(Increase) decrease in accounts receivable (172,575) 40,295
Increase in inventory (181,115) (371,722)
(Increase) decrease in other current assets (24,307) 79,449
(Decrease) increase in accounts payable
and payroll related liabilities (297,761) 329,146
Increase in other current
liabilities and royalties payable 489,243 46,358
----------- -----------
Net cash used in operating activities (2,959,301) (1,584,722)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 232,500 --
Purchase of property and equipment (453,153) (320,025)
----------- -----------
Net cash used in investing activities (220,653) (320,025)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,735,502 150,000
Proceeds from exercise of stock options 225,067 37,166
Proceeds from exercise of warrants 691,756 --
Proceeds from sale of units, net of offering costs -- 450,385
Proceeds from loan -- 250,000
Proceeds from issuance of secured convertible
note, net of expenses 1,212,480 --
----------- -----------
Net cash provided by financing activities 3,864,805 887,551
----------- -----------
Net increase (decrease) in cash and cash equivalents: 684,851 (1,017,196)
Cash and cash equivalents:
Beginning of year 358,379 1,375,575
----------- -----------
End of year $ 1,043,230 358,379
=========== ===========
Supplemental information:
Conversion of secured convertible note $ 1,200,000 --
Stock options and warrants issued for services $ -- 76,909
Stock dividends on Series A Preferred Stock $ -- 515,280
Interest paid $ -- 716
=========== ===========
See accompanying notes to consolidated financial statements.
F-6
48
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(1) BUSINESS AND ACTIVITIES
The Company has developed and is manufacturing and marketing a series
of laser-based medical devices with applications in the blood sample
and glucose collection and in vitro fertilization markets. During
fiscal 2000 the Company sold the technology related to its in vitro
fertilization products to Hamilton Thorne Research. The Company also
develops, produces and markets a line of advanced scientific
instruments that increase the usefulness and importance of the
conventional laboratory microscope. The Company markets its scientific
instruments in both domestic and international markets.
The Company's customers consist primarily of research institutes,
universities, the diabetic patient and diabetic nurse educator as well
as the physician community, medical clinics, and distributors.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of
Cell Robotics International, Inc. and its wholly owned
subsidiary (the Company). All significant intercompany
accounts and transactions have been eliminated in
consolidation.
(b) Financial Statement Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all short-term investments with original maturities
of three months or less to be cash equivalents. The Company
has included as cash a certificate of deposit of approximately
$85,000 that is used as a guarantee for loans to three
employees.
(d) Inventory
Inventory is recorded at the lower of cost, determined by the
first-in, first-out method, or market.
Inventory at December 31 consists of the following:
2000 1999
---------- ----------
Finished goods $ 56,273 $ 78,358
Parts and components 1,022,813 741,841
Sub-assemblies -- 77,772
---------- ----------
$1,079,086 $ 897,971
========== ==========
F-7
49
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation is
calculated on a straight-line basis over the estimated useful
lives of the assets, which range from five to seven years.
Leasehold improvements are amortized over the life of the
lease.
(f) Earnings Per Share
Basic loss per share is computed on the basis of the weighted
average number of common shares outstanding during the year.
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 year, is the
same as basic loss per share for 2000 and 1999, as all
potentially dilutive securities were anti-dilutive.
Options to purchase 1,594,575 and 1,618,123 shares of common
stock were outstanding at December 31, 2000 and 1999,
respectively. Additionally, warrants to purchase 1,503,826 and
1,878,826 shares of common stock were outstanding at December
31, 2000 and 1999, respectively. These were not included in
the computation of diluted earnings per share as the exercise
of these options and warrants would have been anti-dilutive
because of the net losses incurred in 2000 and 1999.
(g) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, payroll related liabilities,
royalties payable and accrued liabilities in the consolidated
financial statements approximate fair value because of the
short-term maturity of these instruments. The fair value of
the note payable at December 31, 2000 cannot be determined
without excessive costs due to its related party nature.
(h) Income Taxes
The Company follows the asset and liability method for
accounting for income taxes whereby deferred income taxes are
recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities.
(i) Revenue
The Company recognizes revenue on sales of its products when
the products are shipped from the plant and ownership is
transferred to the customer. In certain cases where the
Company is required to install its products at a customers
site, the recognition of revenue is deferred until the
installation is completed. Appropriate allowances are made for
returns.
F-8
50
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(j) Research and Development
Research and development costs related to both present and
future products are expensed as incurred. Research and
development costs consist primarily of salaries, materials and
supplies.
(k) Warranties
The Company warrants their products against defects in
materials and workmanship for one year. The warranty reserve
is reviewed periodically and adjusted based upon the Company's
historical warranty costs and its estimate of future costs.
(l) Stock Option Plan
The Company accounts for its stock option plan in accordance
with the provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price
of the underlying stock exceeds the exercise price. SFAS No.
123, "Accounting for Stock Based Compensation," permits
entities to recognize as an expense over the vesting period
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro
forma net income and pro forma earnings per share disclosures
for employee stock option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
(m) New accounting pronouncements
In June 1999, Statement of Financial Accounting Standards
("SFAS") No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, was issued. SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. The provisions of this
statement are now effective for financial statements for
fiscal years beginning after June 15, 2000, although early
adoption is allowed. We plan to adopt the provisions of SFAS
No. 133 on January 1, 2001. We do not expect the adoption of
this standard to have a material effect on our results of
operations or financial position.
In March 2000, the Financial Accounting Standards Board
("FASB") issued FASB Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation: an
Interpretation of APB Opinion No. 25. This interpretation
clarifies the application of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and was effective July 1, 2000.
Our adoption of this interpretation did not have a material
effect on our results of operations or financial position.
F-9
51
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
In December 1999, the SEC issued Staff Accounting Bulletin
("SAB") No. 101, Revenue Recognition in Financial Statements.
This bulletin summarizes certain of the staff's views in
applying generally accepted accounting principles to revenue
recognition in financial statements. In June 2000, the SEC
issued SAB No. 101B, which delayed the implementation date of
SAB No. 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999, although early adoption is
allowed. Our adoption of the provisions of this statement did
not have a material effect on our results of operations or
financial position.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
2000 1999
----------- -----------
Furniture and fixtures $ 14,791 $ 10,688
Computers 391,487 350,059
Equipment 970,581 830,459
Leasehold improvements 48,961 48,961
----------- -----------
1,425,820 1,240,167
Accumulated depreciation (876,132) (754,611)
----------- -----------
Net property and equipment $ 549,688 $ 485,556
=========== ===========
(4) OTHER ASSETS
Other assets consist of the following at December 31:
2000 1999
-------- --------
Patents 48,246 48,246
Non-compete agreements 8,116 8,116
-------- --------
56,362 56,362
Accumulated amortization (32,253) (27,423)
-------- --------
Net other assets $ 24,109 $ 28,939
======== ========
(5) STOCK OPTIONS AND WARRANTS
(a) Stock Options
The Company has adopted a Stock Incentive Plan (the Plan)
pursuant to which the Company's Board of Directors may grant
to eligible participants options in the form of Incentive
Stock Options (ISO's) under Section 422 of the Internal
Revenue Code of 1986, as amended, or options which do not
qualify as ISO's (Non-Qualified Stock Options or NQSO's). An
aggregate of 1,500,000 shares of the Company's common stock is
reserved for issuance under the Plan. Generally, stock options
granted under the Plan have five-year terms and become fully
exercisable after three or four years from the date of grant.
F-10
52
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(5) STOCK OPTIONS AND WARRANTS, CONTINUED
Following is a summary of activity in the Company's options for
employees, directors, outside consultants, and technical advisors:
YEAR ENDED DECEMBER 31,
2000 1999
----------------------- ----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
PRICE NUMBER PRICE NUMBER
--------- ----------- --------- ---------
Outstanding at beginning of year $ 1.73 1,618,123 $ 1.81 1,631,820
Granted $ 2.56 605,833 $ 1.81 20,000
Exercised $ 1.39 (162,048) 1.38 (27,030)
Forfeited $ 1.87 (467,333) $ 1.38 (6,667)
--------- ----------- --------- ---------
Outstanding at end of year $ 2.14 1,594,575 $ 1.82 1.618.123
========= =========== ========= =========
Exercisable at end of year $ 2.06 1,110,993 $ 1.73 1,119,565
========= =========== ========= =========
The following summarizes certain information regarding outstanding
stock options at December 31, 2000:
TOTAL EXERCISABLE
-------------------------------------------- --------------------
WEIGHTED-
WEIGHTED- AVERAGE WEIGHTED-
AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE CONTRACTUAL EXERCISE
PRICE RANGE NUMBER PRICE LIFE (YEARS) PRICE NUMBER
- --------------- --------- --------- ------------- --------- ---------
$ 0.78 to 2.06 1,106,075 $ 1.80 2.34 $1.71 760,243
2.69 to 4.47 488,500 2.91 4.34 2.83 350,750
--------- ----- ---- ----- ---------
Total 1,594,575 $ 2.14 2.95 $2.06 1,110,993
========= ===== ==== ===== =========
During 2000 and 1999, the Company granted 403,000 and 40,000,
respectively, options outside of the Plan, for the purchase of
the Company's common stock to directors, consultants and a
provider of public relations services for the Company. Such
options are included in the above table.
At December 31, 2000, there were 716,710 additional shares
available for grant under the Plan. The weighted-average fair
value of stock options granted in 2000 and 1999 was $1.68 and
$1.08, respectively, calculated on the date of grant using the
Black Scholes option-pricing model using the following
assumptions for 2000 and 1999, respectively. Expected dividend
yield of 0% and 0%, risk-free interest rate of 5% and 5.25%,
expected life of option of 4 years and 4 years, and expected
volatility of 92% and 75.2%.
F-11
53
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(5) STOCK OPTIONS AND WARRANTS, CONTINUED
The Company applies APB Opinion No. 25 in accounting for its
Plan and, accordingly, no compensation cost has been
recognized for its employee and director stock options in the
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the date of grant
for its employee stock options under SFAS No. 123, the
Company's net loss would have been increased to the pro forma
amounts indicated below:
2000 1999
------------- ------------
Reported net loss applicable to common
shareholders $ (5,036,182) $ (2,424,630)
Pro forma net loss applicable to common
shareholders (5,889,284) (2,828,058)
Pro forma net loss per share applicable to
common shareholders - basic and diluted $ (.63) $ (.37)
============= ============
(b) Warrants
The Company has a Representative's Warrant outstanding that
was granted to an underwriter. The Representative's Warrant is
exercisable through February 2, 2002 to purchase 160,000
shares of common stock at a price of $2.475 per share. The
Representative's Warrant also includes 80,000 Common Stock
Purchase Warrants exercisable through February 2, 2003 to
purchase 80,000 shares of common stock for a price of $2.40
per share.
In conjunction with the Offering completed in February 1998,
and the exchange of common shares for Units in February 1998,
the Company has an additional 1,077,576 warrants outstanding
exercisable through February 2, 2003 to purchase 1,077,576
shares of common stock for a price of $2.40 per share.
In connection with the private placement completed in July
1999, the Company has an additional 101,250 warrants
outstanding exercisable through February 2, 2003 to purchase
101,250 shares of common stock for a price of $2.40 per share.
In consideration for services received, the Company issued
15,000 warrants to a provider of corporate legal services. The
warrants are exercisable through February 2, 2003 to purchase
15,000 shares of common stock for a price of $2.40 per share.
In 2000 the Company issued 70,000 common stock purchase
warrants to an investment research firm and a public relations
firm. The warrants are exercisable through February 2, 2003 to
purchase one share of common stock for a price of $2.40 per
share.
(c) Employee Stock Purchase Plan
The board of directors and stockholders have approved an
Employee Stock Purchase Plan (ESPP). As of December 31, 2000
and 1999, no shares of common stock have been issued under the
ESPP and there have been no subscriptions of employees to
participate in the ESPP.
F-12
54
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(6) ROYALTY AGREEMENTS
The Company is party to several royalty agreements under which it must
make payments to the original holders of patents on components used in
its products. Such royalties, equal to 1 to 2 percent of the net sales
of the products containing patented components, are generally due upon
sale of the products.
Additionally, one royalty agreement requires a royalty payment equal to
7 percent of revenue generated from sales of the Company's products and
pertains to the Company's worldwide, non-exclusive license agreement
which continues until March 31, 2016. Beginning with the year 1999, the
minimum royalty payable each year is $35,000 payable as follows:
$17,500 sixty days after the end of each semiannual period ending June
30th and December 31st.
(7) INCOME TAXES
No provision for federal or state income tax expense has been recorded
due to the Company's losses. The Company has net operating loss
carryforwards and temporary differences that give rise to the following
deferred tax assets and liabilities:
DECEMBER 31,
2000 1999
----------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 7,155,000 $ 5,375,500
Inventory capitalization 71,000 150,000
Vacation and sick leave payable 30,000 30,000
Allowance for doubtful accounts -- 7,500
Accrued expenses -- 48,000
Depreciation 7,000 --
----------- -----------
7,263,000 5,610,500
Less valuation allowance (7,234,000) (5,573,500)
----------- -----------
Net deferred tax asset $ 29,000 37,000
----------- -----------
Deferred tax liabilities:
Amortization $ 29,000 31,000
Depreciation -- 6,000
----------- -----------
Net deferred income taxes $ -- --
=========== ===========
The net deferred taxes have been fully offset by a valuation allowance
since the Company cannot currently conclude that it is more likely than
not that the benefits will be realized. The net operating loss
carryforward for income tax purposes of approximately $21,000,000
expires beginning in 2006 through 2018. Ownership changes resulting
from the Company's reorganization in 1995 will limit the use of this
net operating loss under applicable Internal Revenue Service
regulations.
(8) COMMITMENTS
The Company is obligated under a non-cancellable operating lease for
building facilities which is subject to 3 percent annual increases and
expires on November 30, 2002. Rent expense for 2000 and 1999 was
$116,111 and $112,939, respectively. Minimum annual lease commitments
for all building facilities at December 31, 2000 are: $105,195 for
2001; and $98,977 for 2002.
F-13
55
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(9) EQUITY TRANSACTIONS
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 at a price of $2.40 per share. In connection with this private
placement, the Company granted 15,000 warrants to two placement agents.
The Company granted an additional 15,000 warrants to one of these
placement agents for other investment banking services, which were
unrelated to the private placement. These 30,000 warrants are
exercisable through February 2, 2003 to purchase one share of Common
Stock at 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, the Company granted options for an additional
25,000 shares of Common Stock at an exercise price equal to $3.25, the
closing price of the Company's Common Stock on February 15, 2000. 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 a new
public relations firm. The Company was also committed under the terms
of the agreement with the new public relations firm to issue an
additional 30,000 warrants if representation continued 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 April 1, 2000, after
three months of service, and the remaining 15,000 vested on July 1,
2000, after six months of service. The fair value of these
performance-based options has been measured upon vesting and charged to
operations at such time.
In February 2000, the Company executed a secured convertible promissory
note from a member of the Company's Board of Directors, which was
amended in March 2000. The director advanced $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 under the note. The principal
amount of $1,200,000 was paid in full with and converted into 500,000
shares of Common Stock on August 30, 2000. An SB-2 registration
statement registering the shares issuable upon conversion of the
promissory note was declared effective by the SEC on July 20, 2000. In
connection with the beneficial conversion of this note, the Company
recorded a non-cash charge of $1,200,000 in the quarter ended September
30, 2000.
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 units at a price of $25,000 per unit. Each unit consists of
20,000 shares of Common Stock and class A warrants exercisable for
10,000 shares of Common Stock. The underwriter exercised the underlying
class A warrants simultaneously with the exercise of the Private
Placement Warrants. Proceeds to the Company were approximately
$467,000.
In March 2000, a previous distributor of the Company exercised its
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.
F-14
56
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(9) EQUITY TRANSACTIONS, CONTINUED
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,
Inc. of Portland, Oregon. A five percent placement fee was paid to Mark
T. Waller of Bridgeworks Capital, a 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 130,000
shares of its Common Stock to Pollet & Richardson as payment for legal
services.
(10) SHORT-TERM BORROWINGS
In December 1999, the Company issued a note payable for $250,000 to a
member of its Board of Directors. The note bears interest at six
percent. The balance as of February 15, 2001 is payable in monthly
installments beginning on that date.
(11) CAPITAL RESOURCES
Since inception, the Company has incurred operating losses and other
equity charges which have resulted in an accumulated deficit of
$23,369,233 and operations using net cash of $2,959,301 in 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
until possibly the final month of fiscal 2001. 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
anticipated equity placements will be sufficient to cover its expected
operational deficits through 2001.
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America which contemplate continuation of the Company
as a going concern. The ultimate continuation of the Company is
dependent on attaining additional financing and profitable operations.
F-15
57
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(12) SUBSEQUENT EVENTS
On January 31, 2001 the Company entered into a loan agreement with
certain members of the board of directors. The aggregate amount of the
loan is $1 million. The loan pays interest quarterly at an annual rate
of 10%. Additionally the participating directors received 150,000
warrants to purchase the Company's stock. The warrants are exercisable
into common stock at a price of $1.125, the market price for the
Company's stock when the deal was signed. During 2000 Big Sky Laser
Technologies, Inc. (BSLT) filed a lawsuit alleging that the Company was
in breach of contract. In January 2001 the Company and BSLT reach a
settlement and the lawsuit was dismissed with prejudice. Under the
settlement agreement the Company paid BSLT $350,000 and BSLT will
complete and ship to the Company 100 units of the Professional Lasette
that BSLT had previously been manufacturing for the Company. The
Company had accrued for the anticipated costs of settling the lawsuit
during the quarter ended September 30, 2000.
(13) OPERATING SEGMENTS
The Company has two operating segments: scientific research instruments
and laser-based medical devices. The scientific research instruments
segment procedures research instruments for sale to universities,
research institutes, and distributors. The laser-based medical devices
segment produces medical devices for sale to clinics, individual
consumers and to distributors.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. 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.
F-16
58
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(13) OPERATING SEGMENTS, CONTINUED
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.
DECEMBER 31, 2000
--------------------------------------------------------
Scientific Laser-Based
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- ---------- ----------
Revenues from customers 605,877 386,833 -- 992,710
Research and development
grants 14,353 -- -- 14,353
Profit (loss) from operations 2,506 (2,646,140) (1,284,668) (3,928,302)
Segment assets 285,049 1,366,985 1,483,782 3,135,816
DECEMBER 31, 1999
----------------------------------------------------------
Scientific Laser-Based
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ----------
Revenues from customers $ 736,616 558,320 -- 1,294,936
Research and development
grants 122,381 -- -- 122,381
Profit (loss) from operations (3,416) (953,230) (978,099) (1,934,745)
Segment assets 397,050 1,095,976 520,640 2,013,666
Segment assets for scientific research instruments and laser-based
medical devices represent accounts receivable, inventory and
specifically identifiable manufacturing equipment. The remaining assets
are not allocated between the segments, as there is no practical method
to allocate those assets between the segments.
The Company has no foreign operations. However, total export sales for
the years ended December 31, 2000 and 1999 were approximately $406,000
and $644,000, respectively. The sales were primarily to companies in
Asia, Europe, Australia, Brazil and South Africa. Export sales are
attributed to the country where the product is shipped. The Company had
sales to one customer in fiscal 2000 that accounted for 16% of its
consolidated sales. In fiscal 1999 the Company recorded sales to two
related parties that accounted for 25% and 13% of consolidated sales.
F-17
59
================================================================================
Cell Robotics International, Inc.
2,972,251 Shares of Common Stock
297,576 Redeemable Common Stock Purchase Warrants
----------
PROSPECTUS
APRIL ___, 2001
----------
================================================================================
60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 7-109-102 of the Colorado Business Corporation Act, or the CBCA,
provides that a company may indemnify a person who was, is or is threatened to
be made a named defendant or respondant in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (a "proceeding"), because the
person is or was a director against liability incurred in the proceeding if the
person conducted himself or herself in good faith; and the person reasonably
believed, in the case of conduct in an official capacity with the company, that
his or her conduct was in the company's best interests, and in all other cases,
that his or her conduct was at least not opposed to the company's best
interests; and in the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful. A company may not
indemnify a director in connection with a proceeding by or in the right of the
company in which the director was adjudged liable to the company or in
connection with any other proceeding charging that the director derived an
improper personal benefit, whether or not involving action in an official
capacity, in which proceeding the director was adjudged liable on the basis that
he or she derived an improper personal benefit. Unless limited by its articles
of incorporation, Section 7-109-103 of the CBCA states that a company shall
indemnify a person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the person is
or was a director against reasonable expenses (including attorneys' fees)
incurred in connection with the proceeding. Unless otherwise provided in a
company's articles of incorporation, Section 7-109-107 of the CBCA states that
an officer is entitled to mandatory indemnification under Section 7-109-103 of
the CBCA. Section 7-109-107 also states that unless provided in its articles of
incorporation, a company may indemnify an officer, employee, fiduciary or agent
of the company to the same extent as a director.
The company's Articles of Incorporation provide that the company may and shall
indemnify each director, officer and any employee or agent of the company, his
heirs, executors and administrators, against any and all expenses or liability
reasonably incurred by him in connection with any action, suit or proceeding to
which he may be a party by reason of his being or having been a director,
officer, employee or agent of the company to the full extent required or
permitted by the CBCA, as amended.
Article XIII of the company's Amended and Restated Bylaws states that the
company may indemnify against liability incurred in any proceeding an individual
who was, is or is threatened to be made a named defendant or respondant in any
proceeding because he is or was a director if he conducted himself in good
faith; he reasonably believed, in the case of conduct in his official capacity
with the company, that his conduct was in the company's best interests, or in
all other cases, that his conduct was at least not opposed to the company's best
interests; and in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. The company may not indemnify a
director in connection with a proceeding by or in the right of the company in
which the director was adjudged liable to the company or in connection with any
proceeding charging improper personal benefit to the director, whether or not
involving action in his official capacity, in which he was adjudged liable on
the basis that personal benefit was improperly received by him. The company
shall indemnify a person who is or was a director or officer of the company and
who was wholly successful, on the merits or otherwise, in defense of any
proceeding to which he was a party against reasonable expenses incurred by him
in connection with the proceeding.
Under the sections of the CBCA and the company's Bylaws included in this
prospectus, a "director" includes an individual who is or was a director of a
company or an individual who, while a director of a company, is or was serving
at the company's request as a director, an officer, an agent, an associate, an
employee, a fiduciary, a manger, a member, a partner, a promoter or a trustee
of, or to hold any similar position with, another domestic or foreign
corporation or other person or of an employee benefit plan.
The company may purchase and maintain insurance on behalf of an individual who
is or was a director, officer, employee, fiduciary or agent of the company and
who, while a director, officer, employee, fiduciary or agent of the company, is
or was serving at the request of the company as a director, officer, partner,
trustee, employee, fiduciary or agent of any other foreign or domestic company
or of any partnership, joint venture, trust, other enterprise or employee
benefit plan against any liability asserted against or incurred by him in any
such capacity or arising out of his status as such, whether or not the company
would have the power to indemnify him against such liability under
II-1
61
the provisions of Article XIII of the company's Bylaws. The company currently
maintains a $1,000,000 insurance policy that covers directors and officers'
liability.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, or the Securities Act, may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the offering, all of which are to be borne by the
company, are as follows:
Printing Expenses* $ 5,000
Accounting Fees and Expenses* 3,000
Legal Fees and Expenses* 10,000
Registrar and Transfer Agent Fee* 1,000
Miscellaneous* 1,000
--------
Total* $ 20,000
- ----------
* Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On September 11, 1998, we sold to one investor 200,000 shares of our common
stock, at a price of $1.50 per share, for gross proceeds of $300,000. The
investor qualified as an "accredited investor" within the meaning of Rule 501(a)
of Regulation D under the Securities Act. The securities, which were taken for
investment and were subject to appropriate transfer restrictions, were issued
without registration under the Securities Act in reliance upon the exemption
provided in Section 4(2) of the Securities Act.
In June 1999, we sold an additional 100,000 shares of our common stock, at a
price of $1.50 per share, for gross proceeds of $150,000. The investor was an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act. The securities, which were taken for investment and were
subject to appropriate transfer restrictions, were issued without registration
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act.
In July 1999, we sold to four investors a total of 9.5 units, each unit
consisting of 35,000 shares of our common stock and 7,500 warrants. Each unit
was sold at a price of $50,000, resulting in gross proceeds of $475,000. The
investors were persons who qualified as "accredited investors" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The securities,
which were taken for investment and were subject to appropriate transfer
restrictions, were issued without registration under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 506 of Regulation D.
In July 1999, in connection with our sale to four investors of 9.5 units, we
issued 62,500 warrants to four persons for services rendered in connection with
the offering. The services were valued at $.40625 per warrant. The persons
receiving the warrants were all qualified investors in terms of their investment
sophistication or "accredited investors" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which were taken for
investment and were subject to appropriate transfer restrictions, were issued
without registration under the Securities Act in reliance upon the exemption
provided in Section 4(2) of the Securities Act and Rule 506 of Regulation D.
In August 1999, we issued to one person 15,000 warrants in consideration of
services rendered. We valued the services at $.40625 per warrant. The warrants
were issued to one person who qualified as an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The securities,
which were taken for investment and were subject to appropriate transfer
restrictions, were issued without registration under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 506 of Regulation D.
II-2
62
In January 2000, we terminated our 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 our common
stock on February 15, 2000 were granted. The options were issued directly to the
investor relations company, which qualified as an "accredited investor" within
the meaning of Rule 501(a) of Regulation D under the Securities Act. The
securities, which were taken for investment and were subject to appropriate
transfer restrictions, were issued without registration under the Securities Act
in reliance upon the exemption provided in Section 4(2) of the Securities Act
and Rule 506 of Regulation D.
In January 2000, we issued a total of 40,000 common stock purchase warrants to
an investment research firm and our new public relations firm. The warrants are
exercisable through February 2, 2003 to purchase one share of common stock at a
price of $2.40 per share. The warrants were issued to entities which qualify as
"accredited investors" within the meaning of Rule 501(a) of Regulation D under
the Securities Act. The securities, which were taken for investment and were
subject to appropriate transfer restrictions, were issued without registration
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act and Rule 506 of Regulation D.
In February 2000 and subsequently amended in March 2000, we executed a secured
convertible promissory note in favor of a private investor. The principal amount
of $1,200,000 was converted into 500,000 shares of the company's common stock in
August 2000. The note was issued to one person who qualified as an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the Securities
Act. The securities, which were taken for investment and were subject to
appropriate transfer restrictions, were issued without registration under the
Securities Act in reliance upon the exemption provided in Section 4(2) of the
Securities Act and Rule 506 of Regulation D.
In May 2000, we entered into an agreement for a $2,000,000 private placement
selling 500,000 shares of our common stock to Paulson Investment Company, Inc.
The shares were issued to Paulson, which qualified as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act. The
securities, which were taken for investment and were subject to appropriate
transfer restrictions, were issued without registration under the Securities Act
in reliance upon the exemption provided in Section 4(2) of the Securities Act
and Rule 506 of Regulation D. A 5% placement fee (or $100,000) was paid to
Bridgeworks Capital, Inc., of which Mark Waller, one of our directors, is an
officer and majority owner.
In February, May and June of 2000, we issued 150,000 shares to Pollet &
Richardson pursuant to a shares-for-debt agreement. Pollet & Richardson served
as our legal counsel. The shares were issued directly to the law firm and to
certain of its employees who qualified as "accredited investors" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The securities,
which were taken for investment and were subject to appropriate transfer
restrictions, were issued without registration under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 506 of Regulation D.
In January and February 2001, we issued promissory notes in the aggregate
principal amount of $500,000 to certain members of our board of directors or
their affiliated entities. In connection with the issuance of the promissory
notes, each investor was issued a warrant in proportion to the principal amount
of the promissory note issued to that investor. The warrants allow the investors
to purchase an aggregate of 150,000 shares. The warrants may be exercised until
January 31, 2004, at a price equal to $1.125 per share of our common stock;
provided that warrants covering 75,000 will not become exercisable by Mr. Tisch
until he has loaned us the remaining amount available under his $500,000 loan
commitment. The notes and the warrants were issued to persons who qualified as
"accredited investors" within the meaning of Rule 501(a) of Regulation D under
the Securities Act. The securities, which were taken for investment and were
subject to appropriate transfer restrictions, were issued without registration
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act and Rule 506 of Regulation D under the Securities Act.
II-3
63
ITEM 27. EXHIBITS
EXHIBIT NO. TITLE
3.2(1) Amended and Restated Bylaws
3.3(2) Amended and Restated Articles of Incorporation
4.1(1) Specimen Certificate of Common Stock
4.2(3) Representative Common Stock Purchase Warrant
4.3(4) Warrant Agreement between the company and Corporate Stock
Transfer, Inc.
4.4(3) Option Agreement between the company and Ronald K. Lohrding, Ph.D.
4.5(3) Specimen Common Stock Purchase Warrant Certificate
5.1(10) Legal Opinion of Neuman & Drennen, LLC
10.1(5) Agreement and Plan of Reorganization among the company,
Intelligent Financial Corporation, MiCel, Inc., Bridgeworks
Investors I, L.L.C. and Ronald K. Lohrding
10.2(6) Amended and Restated Employment Agreement between the company and
Ronald K. Lohrding
10.3(4) Employment Agreement between the company and Travis Lee
10.4(5) Financing and Capital Contribution Agreement among the company,
Intelligent Financial Corporation, MiCel, Inc., and Bridgeworks
Investors I, L.L.C.
10.5(5) Irrevocable Appointment of Voting Rights by Ronald K. Lohrding,
Ph.D. to MiCel, Inc.
10.6(5) Stock Pooling and Voting Agreement
10.7(1) Royalty Agreement dated September 11, 1995 between the company,
Cell Robotics, Inc. and Mitsui Engineering & Shipbuilding Co.,
Ltd.
10.8(1) Agreement of Contribution and Mutual Comprehensive Release dated
September 11, 1995 between the company, Cell Robotics, Inc. and
Mitsui Engineering & Shipbuilding Co., Ltd.
10.9(1) Distribution Agreement dated December 15, 1994 between MiCel, Inc.
and the company
10.10(1) Purchase Agreement between the company and Tecnal Products, Inc.
10.11(1) License Agreement between the company and NTEC
10.12(7) Patent License Agreement between American Telephone and Telegraph
Company and Cell Robotics, Inc.
10.13(7) Amendment to Patent License Agreement between Lucent Technologies,
Inc., successor to American Telephone and Telegraph Company, and
Cell Robotics, Inc.
10.14(8) Development and Distribution Agreement dated September 10, 1999
between Hamilton Thorne Research and the company
10.15(8) Amendment to Development and Distribution Agreement dated May 18,
2000 between Hamilton Thorne Research and the company
10.16(9) Employment Agreement between the company and Paul Johnson
21.1(1) Subsidiaries
23.1(10) Consent of KPMG LLP
23.2(10) Consent of Neuman & Drennen, LLC (included in Exhibit 5.1)
24.1(10) Power of Attorney (included on signature page)
- -------------
(1) Incorporated by reference from the company's Pre-Effective Amendment No. 1
to Registration Statement on Form SB-2 which was declared effective by the
SEC on February 14, 1996.
(2) Incorporated by reference from the company's Post-Effective Amendment No. 1
to Registration Statement on Form SB-2 filed with the SEC on July 15, 1996.
(3) Incorporated by reference from the company's Pre-Effective Amendment No. 2
to Registration Statement on Form SB-2 which was declared effective by the
SEC on February 2, 1998, SEC File No. 333-40895.
(4) Incorporated by reference from the company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996, as filed with the SEC on April
15, 1997.
(5) Incorporated by reference from the company's Current Report on Form 8-K
dated February 23, 1995, as filed with the SEC on March 10, 1995.
(6) Incorporated by reference from the company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000, as filed with the SEC on August 14,
2000.
(7) Incorporated by reference from the company's Pre-Effective Amendment No. 2
to Registration Statement on Form S-3, SEC File No. 333-55951, as filed
with the SEC on November 18, 1998.
II-4
64
(8) Incorporated by reference from the company's Registration Statement on Form
SB-2, SEC File No. 333-40920, as filed with the SEC on July 6, 2000.
(9) Incorporated by reference from the company's Post-Effective Amendment on
Form SB-2 which was declared effective by the SEC on January 3, 2001, SEC
File No. 333-40895.
(10) Filed herewith.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the company
pursuant to the foregoing provisions, or otherwise, the company has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the company of expenses incurred or paid by a director,
officer or controlling person of the company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) include any additional or changed material information on the
plan of distribution.
2. That, for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
3. To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-5
65
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Albuquerque, State of New Mexico, on the 30th of
April 2000.
CELL ROBOTICS INTERNATIONAL, INC.
By: /s/ Ronald K. Lohrding, Ph.D.
---------------------------------------------
Ronald K. Lohrding, Ph.D., Chief Executive
Officer, President and Chairman of the Board
POWER OF ATTORNEY
Each person whose signature to this registration statement appears below hereby
appoints Ronald K. Lohrding, Ph.D. as his attorney-in-fact and agent to sign on
his or her behalf, individually and in the capacities stated below, and to sign
and file (1) any or all amendments and post-effective amendments to this
registration statement and (2) any registration statement relating to the same
offering pursuant to Rule 462(b) under the Securities Act, which amendment or
amendments or registration statement may make any changes and additions that the
attorney-in-fact deems necessary or appropriate. In accordance with the
requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
/s/ Ronald K. Lohrding, Ph.D. April 30, 2001
- -------------------------------------------------
Ronald K. Lohrding, Ph.D., Chairman of the Board,
President and Chief Executive Officer
/s/ Paul Johnson April 30, 2001
- -------------------------------------------------
Paul Johnson, Chief Financial Officer, Chief
Accounting Officer and Secretary
/s/ Mark T. Waller April 30, 2001
- -------------------------------------------------
Mark T. Waller, Director
/s/ Raymond Radosevich, Ph.D. April 30, 2001
- -------------------------------------------------
Raymond Radosevich, Ph.D., Director
/s/ Steven A. Crees April 30, 2001
- -------------------------------------------------
Steven A. Crees, Director
/s/ Dipl. Ing. Oton Tisch April 30, 2001
- -------------------------------------------------
Dipl. Ing. Oton Tisch, Director
/s/ Debra Bryant, Ph.D. April 30, 2001
- -------------------------------------------------
Debra Bryant, Ph.D., Director
II-6
66
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.2(1) Amended and Restated Bylaws
3.3(2) Amended and Restated Articles of Incorporation
4.1(1) Specimen Certificate of Common Stock
4.2(3) Representative Common Stock Purchase Warrant
4.3(4) Warrant Agreement between the company and Corporate Stock
Transfer, Inc.
4.4(3) Option Agreement between the company and Ronald K. Lohrding, Ph.D.
4.5(3) Specimen Common Stock Purchase Warrant Certificate
5.1(10) Legal Opinion of Neuman & Drennen, LLC
10.1(5) Agreement and Plan of Reorganization among the company,
Intelligent Financial Corporation, MiCel, Inc., Bridgeworks
Investors I, L.L.C. and Ronald K. Lohrding
10.2(6) Amended and Restated Employment Agreement between the company and
Ronald K. Lohrding
10.3(4) Employment Agreement between the company and Travis Lee
10.4(5) Financing and Capital Contribution Agreement among the company,
Intelligent Financial Corporation, MiCel, Inc., and Bridgeworks
Investors I, L.L.C.
10.5(5) Irrevocable Appointment of Voting Rights by Ronald K. Lohrding,
Ph.D. to MiCel, Inc.
10.6(5) Stock Pooling and Voting Agreement
10.7(1) Royalty Agreement dated September 11, 1995 between the company,
Cell Robotics, Inc. and Mitsui Engineering & Shipbuilding Co.,
Ltd.
10.8(1) Agreement of Contribution and Mutual Comprehensive Release dated
September 11, 1995 between the company, Cell Robotics, Inc. and
Mitsui Engineering & Shipbuilding Co., Ltd.
10.9(1) Distribution Agreement dated December 15, 1994 between MiCel, Inc.
and the company
10.10(1) Purchase Agreement between the company and Tecnal Products, Inc.
10.11(1) License Agreement between the company and NTEC
10.12(7) Patent License Agreement between American Telephone and Telegraph
Company and Cell Robotics, Inc.
10.13(7) Amendment to Patent License Agreement between Lucent Technologies,
Inc., successor to American Telephone and Telegraph Company, and
Cell Robotics, Inc.
10.14(8) Development and Distribution Agreement dated September 10, 1999
between Hamilton Thorne Research and the company
10.15(8) Amendment to Development and Distribution Agreement dated May 18,
2000 between Hamilton Thorne Research and the company
10.16(9) Employment Agreement between the company and Paul Johnson
21.1(1) Subsidiaries
23.1(10) Consent of KPMG LLP
23.2(10) Consent of Neuman & Drennen, LLC (included in Exhibit 5.1)
24.1(10) Power of Attorney (included on signature page)
- -------------
(1) Incorporated by reference from the company's Pre-Effective Amendment No. 1
to Registration Statement on Form SB-2 which was declared effective by the
SEC on February 14, 1996.
(2) Incorporated by reference from the company's Post-Effective Amendment No. 1
to Registration Statement on Form SB-2 filed with the SEC on July 15, 1996.
(3) Incorporated by reference from the company's Pre-Effective Amendment No. 2
to Registration Statement on Form SB-2 which was declared effective by the
SEC on February 2, 1998, SEC File No. 333-40895.
67
(4) Incorporated by reference from the company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996, as filed with the SEC on April
15, 1997.
(5) Incorporated by reference from the company's Current Report on Form 8-K
dated February 23, 1995, as filed with the SEC on March 10, 1995.
(6) Incorporated by reference from the company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000, as filed with the SEC on August 14,
2000.
(7) Incorporated by reference from the company's Pre-Effective Amendment No. 2
to Registration Statement on Form S-3, SEC File No. 333-55951, as filed
with the SEC on November 18, 1998.
(8) Incorporated by reference from the company's Registration Statement on Form
SB-2, SEC File No. 333-40920, as filed with the SEC on July 6, 2000.
(9) Incorporated by reference from the company's Post-Effective Amendment on
Form SB-2 which was declared effective by the SEC on January 3, 2001, SEC
File No. 333-40895.
(10) Filed herewith.