U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-28443
CYTOMEDIX, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 23-2958959
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1523 Bowman Road, Suite A, Little Rock, Arkansas 72211
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(Address of principal executive offices) (Zip Code)
(501) 225-8400
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Issuer's telephone number
AuTologous Wound Therapy, Inc.
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(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
COMMON STOCK, $.0001 PAR VALUE: 10,500,934
AS OF MAY 12, 2000
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
condensed financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Cytomedix, Inc. believes that such
financial disclosures are adequate to assure that the information presented is
not misleading in any material respect. The following condensed financial
statements should be read in conjunction with the year-end financial statements
and notes thereto included in Cytomedix's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1999.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Balance Sheet
ASSETS
March 31,
2000
(Unaudited)
-----------
Current Assets
Cash $ 7,388,239
Receivables and prepaid expenses 101,581
Note receivable - related party 5,500
-----------
Total Current Assets 7,495,320
Property and Equipment, Net 203,284
Prepaid Expenses and Deposits 14,500
-----------
$ 7,713,104
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and current portion of long-term debt $ 90,441
Notes payable - related party 100,052
Accounts payable and accrued expenses 276,229
Deferred revenue 30,000
-----------
Total Current Liabilities 496,722
Long-Term Liabilities 91,349
-----------
Total Liabilities 588,071
-----------
Commitment and Contingencies
Mandatorily redeemable Series A 5% cumulative preferred stock;
$.0001 par value; $1 liquidation value; authorized, issued and outstanding -
1,625,000 shares 1,625,000
-----------
Stockholders' Equity
Series B preferred stock
$.0001 par value; $.0001 liquidation value;
authorized - 7,500,000; at March 31, 2000,
issued and outstanding - 5,705,000 shares 570
Common stock; $.0001 par value; at March 31, 2000, authorized -
40,000,000 shares; issued and outstanding - 10,528,875 shares 1,053
Additional paid-in capital 42,509,903
Stock subscription note receivable (1,000)
Deferred compensation (24,296,572)
Deficit accumulated in the development stage (12,713,921)
-----------
Total Stockholders' Equity 5,500,033
-----------
$ 7,713,104
===========
See notes to condensed financial statements
2
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Statements of Operations
December 11, 1998
Three Months Ended March 31, (Date of Incep-
------------------------------ tion through
1999 2000 March 31, 2000
(Unaudited) (Unaudited) (Unaudited)
----------- ------------ -------------
Revenues $ 1,100 $ 34,504 $ 43,104
Cost of Sales - 5,236 31,106
----------- ------------ -------------
Gross Profit 1,100 29,268 11,998
----------- ------------ -------------
Operating Expenses
Salaries and wages 217,555 434,178 1,449,691
Consulting expense - 5,688,023 7,654,386
Professional fees - 196,004 477,931
Merger costs - - 2,678,700
General and administrative expenses 52,121 199,262 446,409
----------- ------------ -------------
Total Operating Expenses 269,676 6,517,467 12,707,117
----------- ------------ -------------
Loss from Operations (268,576) (6,488,199) (12,695,119)
----------- ------------ -------------
Other (Income) Expense
Interest expense - 2,692 5,584
Interest income - (19,795) (20,228)
----------- ------------ -------------
Total Other (Income), Net - (17,103) (14,644)
----------- ------------ -------------
Net Loss (268,576) (6,471,096) (12,680,475)
Preferred Dividend - 20,312 33,446
----------- ------------ -------------
Net loss to common stockholders $ (268,576) $ (6,491,408) $ (12,713,921)
=========== ============ =============
Basic and Diluted Loss Per Common Share $ (0.05) $ (0.69)
=========== ============
Weighted Average Shares Outstanding 4,936,111 9,343,089
=========== ============
See notes to condensed financial statements
3
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Statements of Cash Flows
Three Months Ended March 31, December 11, 1998
----------------------------- (Inception) through
1999 2000 March 31, 2000
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- ---------------------
Cash Flows from Operating Activities
Net loss $(268,576) $(6,471,096) $(12,680,475)
--------- ----------- ------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization - 6,532 10,587
Consulting expense recorded for issuance of warrants
and options under service agreement - 5,573,500 7,427,301
Compensation expense recorded for issuance of stock
options under stock option plan - employees and officer 185,625 261,452 1,003,952
Compensation expense recorded for the assumption of
debt of an officer - related party - - 67,000
Merger expenses recorded for issuance of common stock
in connection with merger with Informatix - - 2,678,700
Changes in assets 3,348 (36,584) (86,249)
Changes in liabilities (1,674) 73,271 307,214
--------- ----------- ------------
Total Adjustments 187,299 5,878,171 11,408,505
--------- ----------- ------------
Net Cash Used in Operating Activities (81,277) (592,925) (1,271,970)
--------- ----------- ------------
Cash Flows from Investing Activities
Purchase of equipment - (144,199) (162,275)
Cash acquired in merger with Informatix - - 398,934
Advances to employees and related parties, net of repayments (775) 3,541 (11,470)
--------- ----------- ------------
Net Cash (Used in) Provided by Investing (775) (140,658) 225,189
--------- ----------- ------------
Cash Flows from Financing Activities
Proceeds from line of credit - 43,590 67,314
Repayments on long-term debt - (4,797) (15,565)
Proceeds from notes payable - stockholders 83,221 - 193,324
Repayment of notes payable - stockholders - (44,000) (258,500)
Proceeds from sale of common stock, net of offering costs paid - 8,003,234 8,448,447
--------- ----------- ------------
Net Cash Provided by Financing Activities 83,221 7,998,027 8,435,020
--------- ----------- ------------
Net Increase in Cash 1,169 7,264,444 7,388,239
Cash, Beginning of Period 92 123,795 -
--------- ----------- ------------
Cash, End of Period $ 1,261 $ 7,388,239 $ 7,388,239
========= =========== ============
Cash Paid for Interest $ - $ 2,692 $ 6,950
========= =========== ============
Cash Paid for Income Taxes $ - $ - $ -
========= =========== ============
See notes to condensed financial statements
4
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein have been prepared by Cytomedix,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Cytomedix's Annual Report
on Form 10-KSB for the year ended December 31, 1999.
In the opinion of Cytomedix's management, the accompanying unaudited
condensed financial statements contain all adjustments, consisting solely of
those adjustments which are of a normal recurring nature, necessary to present
fairly its financial position as of March 31, 2000 and the results of its
operations and its cash flows for the three months ended March 31, 2000 and
1999, and the period from December 11, 1998 (inception) through March 31, 2000.
Interim results are not necessarily indicative of results for the full
fiscal year.
Cytomedix is a development stage enterprise, and accordingly, certain
additional financial information is required to be included in the financial
statements from the inception of Cytomedix to the current balance sheet date.
The combination of Cytomedix and AuTologous Wound Therapy, Inc. has been
treated as a recapitalization of Cytomedix. Cytomedix was the legal acquirer in
the merger. AuTologous Wound Therapy, Inc. was the accounting acquirer since its
shareholders acquired a majority ownership interest in Cytomedix. Consequently,
the historical financial information included in these financial statements
prior to November 1999 is that of AuTologous Wound Therapy, Inc. All significant
intercompany transactions and balances have been eliminated. Pro forma financial
information is not presented since the combination is a recapitalization and not
a business combination.
Basic and diluted loss per share was calculated based upon the net loss
available to common shareholders divided by the weighted average number of
shares of common stock outstanding during the period. Options and warrants to
purchase common stock are not included in the computation of diluted loss per
share because the effect of these instruments would be anti-dilutive for loss
periods presented.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
On January 12, 2000, Cytomedix and The Kriegsman Group entered into a
three-year consulting agreement, whereby Kriegsman agreed to assist Cytomedix in
recruiting members for its Board of Directors, Advisory Board and senior
executives to complete Cytomedix's management team. In consideration for these
services, Kriegsman received a non-refundable consulting fee of $25,000 and is
entitled to a consulting fee of $5,000 per month over the life of the agreement
for every $3,000,000 raised on behalf of Cytomedix by Kriegsman through equity
placements, strategic alliances, joint ventures or license agreements up to a
maximum of $25,000 per month. The monthly consulting fee will commence once
Kriegsman has raised the first $3,000,000. For signing the agreement in January
2000, Kriegsman received options to purchase 150,000 shares of common stock of
Cytomedix. The options have a term of five years and an exercise price of $4.00
per share. Cytomedix is required to register the common stock underlying these
options in a registration statement following Kriegsman's exercise of its
options, and filed by Cytomedix on behalf of stockholders possessing demand
registration rights. Kriegsman is also entitled to receive additional options to
purchase up to a maximum of 450,000 shares of common stock with a term of five
years and an exercise price of $4.00, based on Kriegsman meeting certain
performance criteria. Out of these additional options, in March 2000 Kriegsman
received options to purchase 150,000 shares of common stock for placement of a
senior executive and options to purchase 125,000 shares of common stock for
placement of two
5
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
members on the Board of Directors of Cytomedix. Kriegsman will receive options
to purchase 125,000 shares of common stock for every $1,000,000 dollars raised
by Kriegsman over the first $3,000,000 until the maximum options are received.
The above options provide that if the Food and Drug Administration requires
Cytomedix to go through regulatory approval, Kriegsman will be granted a
one-time three-year extension to the term of its options. The agreement also
calls for Kriegsman to receive a fee of 8% of the proceeds raised from any
equity or debt placement initiated by Kriegsman (see Note 3). In the first
quarter of 2000, Kriegsman raised $2,650,000 and consequently received a fee of
approximately $213,000. Cytomedix has also agreed to issue Kriegsman warrants
representing the rights to purchase 10% of the shares issued in the equity
placement (or shares into which debt is convertible). The warrants will have a
term of five years and an exercise price equal to the per share price of any
equity raised or the conversion price of common stock for any convertible debt
offerings. In the event Kriegsman arranges for the merger, sale or acquisition
of Cytomedix, then all remaining outstanding options shall immediately vest and
Kriegsman will be paid a success fee on the closing of the transaction equal to
6% of the value of the consideration received in such transaction by Cytomedix
or its stockholders.
NOTE 3 - CAPITAL STOCK ACTIVITY
In February 2000, Cytomedix completed a private placement offering to
one accredited investor. The private placement offering was for 250,000 shares
of Cytomedix's common stock at $3.00 per share, raising gross proceeds of
$750,000. Costs paid for investment banking fees relating to this offering
amounted to $75,000.
In March 2000, Cytomedix completed another private placement offering
of its common stock. Cytomedix sold 771,500 shares of it common stock at $10.00
per share, raising gross proceeds of $7,715,000. In connection with this private
placement, Cytomedix paid investment banking fees of approximately $441,267. In
addition, 10,000 shares of Cytomedix's common stock were issued to an investment
banker as a placement fee; and warrants for 26,500 shares of common stock were
issued as a placement fee pursuant to an agreement between Kriegsman (see Note
2) and Cytomedix, based on gross funds raised by Kriegsman. This private
placement also completed the requirements of the Agreement of Merger and
Reorganization between Cytomedix and old AuTologous Wound Therapy, whereby
Cytomedix was required to raise gross proceeds of $1,200,000 in a series of
private placements over one year following the merger. The merger agreement
called for the conversion of one share of Series B preferred stock into three
shares of Cytomedix's common stock for each share of common stock sold in
private placements to raise the $1,200,000. Therefore, Cytomedix, issued 885,000
shares of its common stock in conversion of 295,000 shares of Series B preferred
stock.
Cytomedix has 1,625,000 shares of Series A 5% cumulative preferred
stock outstanding, with a par value of $.0001, a liquidation preference of $1.00
per share and pays a 5% cumulative dividend on the liquidation value. The Series
A preferred stock has a mandatory redemption feature, whereby at the earlier of
seven years after issuance or Cytomedix meeting certain performance criteria,
Cytomedix is obligated to redeem the shares in cash at the liquidation value
plus all accrued and unpaid dividends. Cytomedix may, in its sole discretion,
pay the dividends in cash or in common stock of Cytomedix. Each share of Series
A preferred stock has one vote in all matters voted on by holders of the common
stock of Cytomedix. As of March 31, 2000, Cytomedix had accrued cumulative
preferred dividends in the amount of $33,446.
NOTE 4 - OPTIONS AND WARRANTS GRANTED
During the quarter ended March 31, 2000, Cytomedix issued 425,000
options to Kriegsman representing the 150,000 options guaranteed per the
agreement, and 275,000 for the placement of the senior executive and placement
of the Board members. Cytomedix recorded consulting expense in the amount of
$4,985,000 in connection with the issuance of these options. In addition,
Kriegsman raised approximately $2,650,000 of the proceeds from the March private
placement (see Note 3) and was issued warrants for 26,500 shares of Cytomedix's
common stock with an exercise price equal to the offering price of $10.00 per
share, as per its agreement with
6
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 4 - OPTIONS AND WARRANTS GRANTED (CONTINUED)
Cytomedix. The issuance of these warrants was considered to be a cost of raising
capital. Therefore, the warrants were recorded by an increase and corresponding
decrease to additional paid in capital.
Cytomedix recorded consulting expense in the amount of $338,500 in
connection with the issuance of options to purchase 50,000 shares of common
stock granted to Sigma Healthcare Consulting in January 2000. The options have
an exercise price of $4.00 per share and a term of five years.
In March 2000, Cytomedix issued options to purchase 1,600,000 shares of
Cytomedix's common stock to four new executives under their respective
employment agreements with Cytomedix. The options have an exercise price of
$7.00 per share. The deferred compensation related to the options will be
amortized over the three year vesting period, ending on December 31, 2002.
However, all options shall become immediately exercisable at such time that the
common stock of Cytomedix trades at or above 37 and 5/8ths dollars per share
(the "Target Price"), as quoted on the securities exchange where Cytomedix stock
is currently being traded and during either of the two periods, chosen at the
option of the respective executive, the closing price for the stock is at or
above the Target Price for fifteen consecutive trading days; or the closing
price for the stock is at or above the Target Price for twenty out of thirty
consecutive trading days.
The 1,600,000 options issued to the new executives have anti-dilution
provisions, which would prevent the value of the options from being reduced
should Cytomedix issue any type of equity security, or act in any other way that
would immediately reduce the value of the options. Therefore, as a result of the
March 2000 private placement, Cytomedix is required under the anti-dilution
provisions to issue 173,440 additional options. The options to purchase shares
expire ten years from the date each option becomes exercisable. Cytomedix
recorded $18,754,128 of deferred compensation in connection with the 1,773,440
options to be issued to the new executives. As of March 31, 2000 Cytomedix had
amortized approximately $29,375 of the above deferred compensation.
Cytomedix issued options to purchase 45,000 shares of Cytomedix's
common stock to other employees. These options have exercise prices ranging from
$4.00 to $5.00 per share. The options all carry terms of five years from the
date of issuance, and vest 12 months after issuance. Cytomedix recorded $478,063
of deferred compensation in connection with the issuance, $46,452 of which was
expensed as compensation during the quarter. The remaining balance of $431,611
will be ratably expensed over the vesting period.
NOTE 5 - LOSS PER SHARE
As of March 31, 1999 and 2000 Cytomedix had issued and issuable
warrants and options to acquire 750,000 and 4,067,490 shares of common stock of
Cytomedix, respectively, with exercise prices ranging from $.0002 to $10.00 per
share. These options and warrants were not included in the calculation of
weighted average common stock outstanding as of March 31, 1999 and 2000 because
the effect would have been anti-dilutive to the presentation of loss per share.
NOTE 6 - NEW CORPORATE HEADQUARTERS
Cytomedix is relocating its corporate headquarters to suburban Chicago,
Illinois while maintaining its current offices in Little Rock, Arkansas. In
April 2000, Cytomedix, Inc. entered into a three year lease for this office
space at an annual rental rate of approximately $149,000 per year.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The following discussion should be read in conjunction with our
condensed financial statements and related notes thereto included in Item 1
above and our audited financial statements and related notes thereto, and
management's discussion and analysis for the year ended December 31, 1999,
included in our annual report filed on Form 10-KSB for such period.
The terms "Cytomedix," "our" and "we," as used in this quarterly
report, refer to Cytomedix, Inc.
When used in this Form 10-QSB and in other filings by Cytomedix with
the Securities and Exchange Commission, the words "believes," "plans,"
"anticipates", "will likely result," "will continue," "projects," "expects," and
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, which could cause
actual results to differ materially from those projected.
Cytomedix cautions the readers not to place undue reliance on any
forward looking statements, which are based on certain assumptions and
expectations which may or may not be valid or actually occur, and which involve
risks of product demand, market acceptance, economic conditions, competitive
products and pricing, difficulties in product development, adequacy and
availability of reimbursement or other payments from private and public
insurance programs, adverse changes in government regulation or policy,
commercialization, and technology and other risks. In addition, sales and other
revenues may not commence and/or continue as anticipated due to delays or
otherwise. As a result, our actual results for future periods could differ
materially from those anticipated or projected.
These forward-looking statements speak only as of the date hereof. We
do not intend to update the forward-looking statements contained in this report,
so as to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as may occur as part of our ongoing
periodic reports filed with the Securities and Exchange Commission.
OVERVIEW
We are a Delaware corporation formed on April 29, 1998. Prior to
November 4, 1999, we were known as Informatix Holdings, Inc., which was
originally a public shell company, defined as an inactive, publicly-traded
company with nominal assets and liabilities. On November 4, 1999, AuTologous
Wound Therapy, Inc., an Arkansas corporation formed on December 11, 1998, merged
with and into Informatix Holdings. In the merger, each share of issued and
outstanding common stock of AuTologous Wound Therapy was converted into fifty
shares of common stock and fifty shares of Series B convertible preferred stock
of Informatix Holdings after giving effect to a one-for-two reverse stock split
of Informatix Holdings' common stock effective November 8, 1999. Simultaneously
with the consummation of the merger, the name of the surviving corporation,
Informatix Holdings, was changed to AuTologous Wound Therapy, Inc. We
subsequently changed our name to Cytomedix, Inc., effective March 30, 2000.
PLAN OF OPERATIONS
Prior to the above merger, we had no products or services and we were
not conducting any viable enterprise. By virtue of the merger, we acquired the
business of AuTologous Wound Therapy. We are continuing this business, which
involves the development, marketing and sale of a proprietary system, known as
the AuTolo-Cure(TM) System, for the treatment of chronic, non-healing wounds.
The AuTolo-Cure(TM) System is based upon the use of a process for the
application of an autologous platelet-rich concentrated gel, known as
AuTolo-Gel(TM), to chronic, non-healing wounds. To date, we have realized
minimal revenues from the sale and licensing of the AuTolo-Cure(TM) System.
Since the inception of our predecessor, we have been engaged in extensive
research and testing of AuTolo-Gel(TM) and the development of the
AuTolo-Cure(TM) System. Our current activities include:
8
1. Research and testing of AuTolo-Gel(TM).
2. Development of testing results and case studies.
3. Development and negotiation of licensing agreements.
4. Filing patent and trademark applications with the relevant government
agencies.
5. Raising working capital.
6. Development of our marketing plan and distribution methods.
7. Recruiting key management and sales representatives.
8. Development of reimbursement and third party payor strategies.
9. Development of AuTolo-Cure treatment packs and packaging.
For the next twelve months, we plan to continue to engage in the
activities enumerated above. We also intend to evaluate and pursue a broader
range of opportunities in cellular therapy and molecular biotechnology markets,
beyond our existing autologous treatments for chronic, non-healing wounds. We
expect to incur additional costs for the continued development of the
AuTolo-Cure(TM) System, legal and professional fees for licensing, patent and
trademark services, streamlining and rationalizing existing operations, and to
expand the promotion and marketing of AuTolo-Gel(TM) and the AuTolo-Cure(TM)
System. Management believes that the working capital described under the caption
"Liquidity and Capital Resources" below, and the collection of fees from the
initial licensing fees and sales of the AuTolo-Cure treatment packs, will be
sufficient to meet our operating needs for the next twelve months.
We do not anticipate any significant purchases or sales of plant or
significant equipment. While in the past we leased the sequestration machines
provided to licensees of the AuTolo-Cure(TM) System, we intend to require future
licensees of our AuTolo-Cure(TM) System to purchase the sequestration machines
directly from third-party manufacturers. In the event that we are unable to
impose such requirement on the licensees, or if we can no longer obtain our own
leasing agreements and are required to purchase the machines, our need for
working capital to fund the acquisition of these machines could increase.
However, because we now intend to require future licensees of the
AuTolo-Cure(TM) System to purchase the sequestration machines directly from
third-party manufacturers, we anticipate that we will not need significant
working capital for leases or purchases of the sequestration machines.
We currently have 19 employees and anticipate adding seven employees to
our staff. Five of the new employees will be site implementation personnel hired
to install and train a licensee's personnel in connection with the use of the
AuTolo-Cure(TM) System at the licensee's location, and the remaining two
employees will provide administrative support at the headquarters of Cytomedix.
The timing of the hiring of such site implementation personnel will be based
upon licensing activities and on an as needed basis. The working capital to fund
the cost of the site implementation teams would be provided from the initial
licensing fees paid by the licensees and is a variable cost to us.
The potential market response to the AuTolo-Cure(TM) System and the
timing of our receipt of the patents necessary to conduct our business could
significantly increase demands on our personnel and resources. While most of the
expenses relating to the AuTolo-Cure(TM) System and the sale of the treatment
packs are variable costs based on demand, we could require significant
additional working capital if the response to our product is as anticipated, our
pending patent applications are granted, and third party reimbursement is
obtained for the AuTolo-Cure (TM) System treatment.
9
RESULTS OF OPERATIONS
This discussion and analysis of our results of operations utilizes our
financial statements which, for the period prior to November 4, 1999, are those
of AuTologous Wound Therapy, Inc., since the merger that occurred as of that
date has been treated as a recapitalization for accounting purposes, and not as
a business combination.
We are a development stage company as defined in Statement of Financial
Accounting Standards No. 7 and had only limited operations through March 31,
2000. Our main activities during this start-up phase have consisted of
recruiting and hiring a new management team and corresponding personnel, as well
as the development of the licensing strategy for, and market expansion of, our
AuTolo-Cure(TM) System. We generated minimal revenues from inception through
March 31, 2000, and recognized $34,504 of revenues during the three-month period
ended March 31, 2000.
Our net loss to common stockholders for the three months ended March
31, 2000 was $6,491,408, as compared to a net loss of $268,576 for the same
period in 1999. The increase in the net loss in 2000 compared to 1999 was
primarily due to higher consulting expenses, $5,573,500 of which was from
non-cash costs incurred from the issuance of stock and options to acquire our
common stock, and higher salaries, professional fees, and other general and
administrative expenses.
Our net sales for the three months ended March 31, 2000 were $34,504,
as compared to $1,100 for the same period in 1999. The increase in revenue in
the 2000 compared to 1999 was due to our entering into three license agreements,
which were not in effect during 1999.
Our general and administrative expenses for the three months ended
March 31, 2000, were $199,262 compared to $52,121 for the same period in 1999.
The increase was primarily due to an increase in most components of our general
and administrative expenses, such as rent, insurance, utilities, supplies,
marketing and travel.
Our compensation expense for the three months ended March 31, 2000
was approximately $434,178, as compared to $217,555 for the same period in 1999.
The increase in the compensation expense in 2000 compared to 1999 was primarily
due to our employment of additional personnel. We expect compensation expense to
grow as we amortize our deferred compensation and retain additional employees to
help us with administrative, marketing and support efforts as we continue to
grow our business. In March 2000 we granted 1,773,440 options (including
anti-dilutive options issued) to our new executives with an exercise price of
$7.00, which was less than the fair market value of our common stock on that
date. Consequently, we recorded deferred compensation expense for the difference
between the stock purchase price and the fair market value of our common stock
on the date of this grant. As of March 31, 2000 we had deferred approximately
$19,713,000 of compensation expense. We expect to amortize this deferral into
stock based compensation expense as follows: $6,030,182 in 2000, $6,892,747 in
2001 and $6,790,310 in 2002. As of March 31, 2000 we have deferred approximately
$4,583,000 of consulting fees which will be amortized ratably to expense through
September 2004.
Our consulting expenses for the three months ended March 31, 2000 were
approximately $5,668,023, as compared to $0 for the same period in 1999. The
increase in the consulting expenses in 2000 compared to 1999 was primarily due
to the costs incurred from the issuance of stock and options to acquire our
common stock, which amounted to $5,573,500 in the three months ended March 31,
2000. These expenses were mainly related to services provided to us in the areas
of marketing, investor relations and management placement.
During the three-month period ended March 31, 2000, we incurred
professional fees of approximately $196,004, as compared to $0 for the same
period in 1999. The increase in the professional fees in 2000 compared to 1999
was primarily due to an increase in legal and accounting fees.
Our interest income for the three months ended March 31, 2000, was
$19,795 compared to $0 for the three months ended March 31, 1999. This change
was primarily due to an increase of cash.
10
LIQUIDITY AND CAPITAL RESOURCES
As of the date of this report, we have not generated positive cash flow
from our operations. This is primarily due to the start-up nature of our
operations, investment in development and testing of AuTolo-Gel(TM) and building
of a corporate infrastructure to support our future operations. During the first
quarter of 2000, we raised capital through private placements of our common
stock.
At March 31, 2000, we had cash and cash equivalents of approximately
$7,400,000. Working capital at March 31, 2000 was approximately $7,000,000. For
the three months ended March 31, 2000, we invested approximately $145,000 in
capital and leasehold improvements. These expenditures represent, primarily,
additional investment in program medical equipment and office furniture and
equipment.
In February 2000, we issued an aggregate of 250,000 shares of our
common stock to one accredited investor at a purchase price of $3.00 per share,
in a private placement pursuant to Rule 506 of Regulation D under the Securities
Act of 1933, as amended. We received gross cash proceeds from this placement of
$750,000, from which we paid aggregate advisory and placement fees of $75,000 to
SPH Investments, Inc. and LCP Capital Corporation.
In March 2000, we issued an aggregate of 771,500 shares of our
common stock to 31 accredited investors at a purchase price of $10.00 per share,
in a private placement pursuant to Rule 506 of Regulation D under the Securities
Act. We received gross proceeds from this placement of $7,715,000, from which we
paid aggregate advisory and placement fees of $441,267, and issued 10,000 shares
of our common stock and warrants representing the right to purchase 26,500
shares of common stock at $10.00 per share as additional placement fees. See
Notes 2 and 3 to the condensed financial statements included in Item 1 of Part I
of this report.
We believe that the working capital provided by the February and March
2000 private placements and the collections generated from the initial licensing
fees and sales of the AuTolo-Cure (TM) System treatment packs will be sufficient
to meet our operating needs and capital requirements for at least the next 12
months. There can be no assurance, however, that we will achieve profitability
in the near future. The continuation of our operating losses, together with the
risks associated with our ability to gain new client contracts, the sale of
disposable packs under existing contracts and other changes in our operating
assets and liabilities, may have a material adverse effect on our liquidity. In
this regard, we may need to raise additional capital in the foreseeable future
by way of equity or debt offerings in order to implement our business, sales or
marketing plans, and take advantage of opportunities that may present themselves
in the future, such as more rapid expansion, acquisitions of or partnerships
with complementary businesses. We may also need to respond to unforeseen
difficulties, such as the decrease in demand for our products and services,
meeting applicable regulatory requirements, or the timing of revenues due to a
variety of factors previously discussed. We may otherwise have to react to
unanticipated competitive or other market pressures. The need to raise
additional working capital may require us to delay, curtail or terminate some of
our development and clinical testing, sales and marketing efforts and could
otherwise have a material adverse effect on our operations. An additional equity
financing required in such event may involve a significant dilution to the
holdings of our shareholders.
11
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
For a complete discussion of the private placements of our common stock
during the first quarter of 2000, please see "Liquidity and Capital Resources"
under Item 2 of Part I of this report. Other issuances of unregistered options
and warrants are described in notes 2, 3 and 4 to the condensed financial
statements included in Item 1 of Part I of this report.
We plan to use the proceeds from the above private placements to fund our
operating needs, product development and clinical testing, sales and marketing
efforts, and for general corporate purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended March 31, 2000, we solicited consent of our
shareholders to the filing of a Certificate of Amendment to our Certificate of
Incorporation that would change our name from AuTologous Wound Therapy, Inc. to
Cytomedix, Inc. A copy of the Certificate of Amendment to Certificate of
Incorporation, as filed with the Secretary of State of the State of Delaware on
March 30, 2000, was made an exhibit to the Form 8-K discussed below under Item
6(b) of this report. This action was approved by shareholders consent by written
action in lieu of a meeting by shareholders representing more than 50 percent
of our issued and outstanding stock.
ITEM 5. OTHER INFORMATION
We wish to report certain information with respect to a change in our
senior management. Our press release announcing the change in management, dated
April 6, 2000, is attached hereto as Exhibit 99.1 and is incorporated by
reference in its entirety.
On April 14, 2000, we appointed Mr. James A. Cour to our Board of
Directors, and to serve as our President and Chief Executive Officer. Prior to
joining us, Mr. Cour served in a variety of management positions at Baxter
International Inc.
In addition, on April 14, 2000, we appointed Dr. Robin L. Geller to serve
as our Vice President of Science and Technology. Before this appointment, Dr.
Geller served in a variety of technical positions at Baxter Healthcare
Corporation since 1993, most recently serving as Associate Director of
Regulatory and Clinical Affairs. Prior to her Baxter employment, she was a
member of the faculty of the University of Minnesota in the departments of
Laboratory Medicine & Pathology and Pediatrics, where she also conducted
post-doctoral research in cellular immunology.
Further, on April 14, 2000, we appointed Mr. Christopher J. Caywood to
serve as our Vice President of Strategy & Business Development. Mr. Caywood has
been with Baxter International Inc. since 1998, where he worked as Director of
Business Planning and Development, and prior to that, Mr. Caywood was employed
in various financial and legal capacities by Sears, Roebuck and Co.
12
Further, on April 14, 2000, we appointed Mr. David C. Demarest to serve
as our Vice President, General Counsel and Corporate Secretary. Mr. Demarest
practiced law with the firm of Preston, Gates & Ellis, LLP during the past three
years, where he specialized in biotechnology, pharmaceutical transactions,
high-technology research and development projects, and corporate transactional
matters. During the previous fourteen years, Mr. Demarest served as in-house
counsel for Baxter World Trade Corporation in a variety of expatriate
assignments.
Also, on April 13, 2000, William Brown and W. Michael Chunn resigned as
our Chief Operating Officer and Vice President of Technical Operations,
respectively. In addition, on April 17, 2000, Dennis Hendren resigned as our
President and Chief Executive Officer. These three individuals simultaneously
resigned as members of our Board of Directors. They did not have any
disagreement with our operating policies or practices.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
10.1 Securities Purchase Agreement, dated as of January 25, 2000,
between AuTologous Wound Therapy, Inc. and Lancer Offshore,
Inc.
10.2 Form of Securities Purchase Agreement, dated as of March 1,
2000, among AuTologous Wound Therapy, Inc. and the investor
parties thereto
10.3 Consulting Agreement, dated as of January 12, 2000, between
AuTologous Wound Therapy, Inc. and The Kriegsman Group
10.4 First Amendment to Consulting Agreement, dated as of
February 22, 2000, between AuTologous Wound Therapy, Inc. and
The Kriegsman Group
10.5 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and James A. Cour
10.6 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and Robin L. Geller
10.7 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and Christopher J. Caywood
10.8 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and David C. Demarest
10.9 Lease, dated as of April 19, 2000, between Cytomedix, Inc. and
CarrAmerica Realty Corporation
99.1 Press Release, dated April 6, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 4, 2000, we filed the following report on Form 8-K describing
a change of our name and completion of a private placement of our
common stock to certain investors.
Summary
On March 30, 2000, we filed a Certificate of Amendment to our
Certificate of Incorporation changing our name from AuTologous Wound Therapy,
Inc. to Cytomedix, Inc., so as to more accurately reflect our management's
intention to pursue diverse opportunities in cellular therapy and molecular
biotechnology markets. This change was approved by shareholder consent by
written action in lieu of a meeting by shareholders representing more than fifty
percent of our issued and outstanding voting common stock.
13
In March 2000, we also completed a private placement of our common
stock to 31 accredited investors, at the purchase price of $10.00 per share, and
raised $7,715,000 in gross proceeds to be used for working capital and general
corporate purposes. We paid advisory fees of $212,000, and issued stock options
to acquire 26,500 shares at an exercise price of $10.00 per share, to The
Kriegsman Group for services relating to this offering. In addition, placement
fees of approximately $230,000 were paid, and 10,000 shares of our common stock
were issued, as a fee to other placement agents in connection with the offering.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CYTOMEDIX, INC.
Dated: May 12, 2000 /s/ James A. Cour
--------------------------------------------
James A. Cour
President and Chief Executive Officer
(Principal Executive Officer)
Dated: May 12, 2000 /s/ Glenn M. Charlesworth
--------------------------------------------
Glenn M. Charlesworth
Chief Financial Officer
(Principal Financial and Accounting Officer)
14
EXHIBIT LIST
10.1 Securities Purchase Agreement, dated as of January 25, 2000,
between AuTologous Wound Therapy, Inc. and Lancer Offshore,
Inc.
10.2 Form of Securities Purchase Agreement, dated as of March 1,
2000, among AuTologous Wound Therapy, Inc. and the investor
parties thereto
10.3 Consulting Agreement, dated as of January 12, 2000, between
AuTologous Wound Therapy, Inc. and The Kriegsman Group
10.4 First Amendment to Consulting Agreement, dated as of February
22, 2000, between AuTologous Wound Therapy, Inc. and The
Kriegsman Group
10.5 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and James A. Cour
10.6 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and Robin L. Geller
10.7 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and Christopher J. Caywood
10.8 Employment Agreement, dated as of March 3, 2000, between
AuTologous Wound Therapy, Inc. and David C. Demarest
10.9 Lease, dated as of April 19, 2000, between Cytomedix, Inc. and
CarrAmerica Capital Corporation
99.1 Press Release, dated April 6, 2000
27 Financial Data Schedule
15