UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] 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
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Cytomedix, Inc.
---------------
(Exact name of small business issuer as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
23-3011702
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(I.R.S. Employer Identification Number)
1523 South Bowman Rd., Suite A, Little Rock, AR 72211
------------------------------------------------------
(Address of principal executive offices)
(501) 219-2111
--------------
(Issuer's telephone number)
------------------------------------------------------------------------------
(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 [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. 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. Cytomedix, Inc. had 9,671,211
outstanding shares of common stock, par value $.0001, as of November 8, 2002.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
CYTOMEDIX, INC.
(DEBTOR-IN-POSSESSION)
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Balance Sheets as of September 30, 2001 (unaudited) and December 31, 2000 3
Condensed Statements of Operations for the three months and nine months ended September
30, 2001 and 2000 (unaudited) and for the period December 11, 1998 (date of inception)
through September 30, 2001 (unaudited) 4
Condensed Statements of Cash Flows for the nine months ended September 30, 2001 and
2000 (unaudited) and for the period December 11, 1998 (date of inception) through
September 30, 2001 (unaudited) 5
Notes to Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22
Nature of Business 22
Results of Operations for Period Ending September 30, 2001 23
Liquidity and Capital Resources 27
Subsequent Events 27
Summary of the First Amended Plan of Reorganization with All Technical Amendments 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 34
Item 2. Changes in Securities and Use of Proceeds 34
Item 3. Defaults Upon Senior Securities 36
Item 4. Submission of Matters to a Vote of Security Holders 36
Item 5. Other Information 37
Item 6. Exhibits and Reports on Form 8-K 37
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CYTOMEDIX, INC.
(DEBTOR-IN-POSSESSION)
(A DEVELOPMENT STAGE ENTITY)
Condensed Balance Sheets
ASSETS
------
September 30, December 31,
2001 2000
------------- -------------
(Unaudited)
Current Assets
Cash $ 76,947 $ 2,116,232
Receivables and prepaid expenses and other current assets 202,928 144,128
Note receivable - related party 8,500 197,989
Inventory - 23,760
------------- -------------
Total Current Assets 288,375 2,482,109
Property and Equipment, Net - 514,713
Intangibles 660,963 -
Prepaid Expenses and Deposits 113,000 878,452
------------- -------------
$ 1,062,338 $ 3,875,274
============= =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
-------------------------------------------------
Current Liabilities
Short-term borrowings and current portion of long-term debt $ - $ 18,470
Notes payable and advances - related party - 87,083
Accounts payable and accrued expenses 298,294 964,644
Deferred revenue - 15,000
------------- -------------
Total Current Liabilities 298,294 1,085,197
------------- -------------
Long-Term Liabilities
Liabilities not subject to compromise 132,982 -
Liabilities subject to compromise 7,425,659 -
Dividends payable on Series A Preferred - 94,384
Deferred revenue 621,040 11,250
Other - 49,876
------------- -------------
Total Long-Term Liabilities 8,179,681 155,510
------------- -------------
Total Liabilities 8,477,975 1,240,707
------------- -------------
Commitment and Contingencies
Mandatorily redeemable Series A 5% cumulative preferred stock
(subject to compromise); $.0001 par value; $1 liquidation value;
authorized, issued and outstanding - 1,625,000 shares 1,625,000 1,625,000
------------- -------------
Stockholders' (Deficit) Equity
Series B preferred stock; $.0001 par value; $.0001 liquidation value;
authorized 7,500,000 shares; at 2001 and 2000 issued and outstanding -
5,115,000 shares 512 512
Common stock; $.0001 par value; authorized - 40,000,000 shares; 2001
issued and outstanding - 12,650,598 shares; 2000 issued and outstanding - 1,266 1,054
10,541,875 shares
Additional paid-in capital 51,269,663 44,881,270
Deferred compensation - (4,314,294)
Deficit accumulated in the development stage (60,312,078) (39,558,975)
------------- -------------
Total Stockholders' (Deficit) Equity (9,040,637) 1,009,567
------------- -------------
$ 1,062,338 $ 3,875,274
============= =============
See notes to condensed financial statements.
3
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Condensed Statements of Operations
December 11,
1998
Three Months Ended Nine Months Ended (Date of Incep-
September 30, September 30, tion) through
-------------------------- ---------------------------- September 30,
2001 2000 2001 2000 2001
------------ ------------ ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 29,166 $ 73,264 $ 63,815 $ 237,601 $ 391,234
Cost of Sales - 15,840 - 52,167 87,822
------------ ------------ ------------- ------------- -------------
Gross Profit 29,166 57,424 63,815 185,434 303,412
------------ ------------ ------------- ------------- -------------
Operating Expenses
Salaries and wages 134,760 2,421,999 1,114,682 5,267,464 24,143,778
Consulting expense 137,152 1,802,937 1,225,864 7,834,335 11,521,702
Professional fees 166,484 492,420 1,221,591 1,091,603 3,092,474
Merger costs - - - - 2.678,700
General and administrative expenses 525,528 435,169 1,555,212 927,604 3,595,093
------------ ------------ ------------- ------------- -------------
Total Operating Expenses 963,924 5,152,525 5,117,349 15,121,006 45,031,747
------------ ------------ ------------- ------------- -------------
Loss From Operations (934,758) (5,095,101) (5,053,534) (14,935,572) (44,728,335)
------------ ------------ ------------- ------------- -------------
Other (Income) Expense
Interest expense 252,245 3,107 5,489,430 9,141 5,508,685
Interest and Other income (27,715) (61,234) (53,609) (152,715) (283,074)
------------ ------------ ------------- ------------- -------------
Total Other (Income) Expense, Net 224,530 (58,127) 5,435,821 (143,574) (5,225,611)
------------ ------------ ------------- ------------- -------------
Net Loss From Continuing Operations (1,159,288) (5,036,974) (10,489,355) (14,791,998) (49,953,946)
Discontinued Operations:
Loss from discontinued Procuren
operations (less applicable income
taxes of $0) 4,087,292 - 8,215,185 - 8,215,185
Loss on disposal of Procuren
operations (less income taxes of $0) - - 1,185,794 - 1,185,794
Reorganization item-debt discount
and issue cost 815,373 - 815,373 - 815,373
------------ ------------ ------------- ------------- -------------
Net Loss (6,061,953) (5,036,974) (20,705,707) (14,791,998) (60,170,298)
------------ ------------ ------------- ------------- -------------
Preferred Dividend on Series A
Preferred Stock 6,772 20,314 47,396 60,938 141,780
------------ ------------ ------------- ------------- -------------
Net loss to common stockholders $(6,068,725) $(5,057,288) $(20,753,103) $(14,852,936) $(60,312,078)
============ ============ ============= ============= =============
Basic and Diluted Loss Per Common
Share $ (.48) $ (.48) $ (1.82) $ (1.46)
============ ============ ============= =============
Weighted Average Shares Outstanding 12,636,440 10,538,875 11,428,206 10,140,238
============ ============ ============= =============
See notes to condensed financial statements.
4
See notes to condensed financial statements.
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Condensed Statements of Cash Flows
December 11,
Nine Months Ended 1998 (Incep-
September 30, tion) through
-------------------------- September 30,
2001 2000 2001
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net Cash Used in Operating Activities $(2,736,532) $(3,450,597) $(7,861,423)
------------ ------------ ------------
Cash Flows from Investing Activities
Purchase of equipment (38,883) (476,205) (621,726)
Purchase of business (2,441,650) - (2,441,650)
Cash acquired in merger - - 398,934
Acquisition costs, pre-closing - - (721,939)
Repayment from employees and related parties 189,488 (6,739) 86,890
------------ ------------ ------------
Net Cash Used in Investing Activities (2,291,045) (482,944) (3,299,491)
------------ ------------ ------------
Cash Flows from Financing Activities
Proceeds from line of credit - 76,276 100,000
Proceeds from short-term borrowings 2,970,701 - 2,970,701
Proceeds from notes payable - stockholder - - 193,324
Repayments of line of credit and short-term debt - - (119,000)
Proceeds from notes payable - related parties - - (95,391)
Repayment on long-term debt (8,989) (14,528) (34,390)
Repayment of notes payable - stockholders - (56,969) (252,469)
Proceeds from sale of common stock, net of offering costs paid 26,580 8,003,233 8,475,086
------------ ------------ ------------
Net Cash Provided by Financing Activities 2,988,292 8,008,012 11,237,861
------------ ------------ ------------
Net Decrease in Cash (2,039,285) 4,074,471 76,947
Cash, Beginning of Period 2,116,232 123,795 -
------------ ------------ ------------
Cash, End of Period $ 76,947 $ 4,198,266 $ 76,947
============ ============ ============
Cash Paid for Interest $ 117,020 $ 9,141 $ 137,641
============ ============ ============
Cash Paid for Income Taxes $ - $ - $ -
============ ============ ============
See notes to condensed financial statements.
5
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Cytomedix, Inc. (the "Company," "our" and "we") has prepared the financial
statements included herein without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
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 Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2000.
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 (except the impairment
adjustment, discontinued operations and debtor-in-possession as described in the
following footnotes 9 and 10), necessary to present fairly its financial
position as of September 30, 2001 and the results of its operations and its cash
flows for the interim periods presented and the period from December 11, 1998
(inception) through September 30, 2001. These financial statements do not
purport to present the current financial condition of the Company. Therefore,
this report must be read in conjunction with all reports filed with the SEC
after September 30, 2001 and other subsequent information included in this
report.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for any period after
September 30, 2001.
Cytomedix is a development stage enterprise, and accordingly, certain additional
financial information is required to be included in the condensed financial
statements from the inception of Cytomedix to the date of this balance sheet.
Basic and diluted net 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 of
6,666,532, in total, 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.
Certain amounts from December 31, 2000 have been reclassified to conform to the
September 30, 2001 presentation.
Although the Company does have securities registered under the Securities
Exchange Act of 1934 (the "Act") and is a reporting company under the Act, it
has been unable to file the required periodic reports with the SEC. The Company
filed its last periodic report with the SEC on Form 10-QSB for the quarter ended
June 30, 2001. Since June 30, 2001, the Company has reported current events and
filed its monthly operating reports (required by the Court as defined in Note 2)
under the cover of Form 8-K. The Company plans to file all of its missed
periodic reports for past periods and resume filing all periodic reports and
other reports which become due.
As a result of the adoption of the plan to discontinue the Procuren operations
(see Note 3), the Company's financial statement presentation has changed. In
Accordance with Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB 30"), the results of the Procuren operations have been
reported separately as discontinued operations for all periods presented.
Paragraph 18 of APB 30 requires the net assets and liabilities (current and
noncurrent) of the discontinued segment to be segregated for all periods
presented. However, they have been included in liabilities subject to
compromise.
6
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION (CONTINUED)
Upon entering Chapter 11 bankruptcy protection, the Company began preparing its
financial statements in conformity with the American Institute of Certified
Public Accountants Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7") on a going concern
basis, which assumes continuity of operations and realization of assets and
settlement of liabilities and commitments in the normal course of business.
"Liabilities Subject to Compromise" refers to liabilities incurred prior to the
commencement of the Chapter 11 filings. These liabilities, consisting primarily
of short-term and long-term debt, accounts payable, accrued liabilities,
represent the Company's estimate of known or potential pre-petition claims to be
resolved in connection with the Chapter 11 filings. Such claims remain subject
to future adjustments based on negotiation, actions of the Court (defined
below), further developments with respect to disputed claims, future rejection
of executory contracts or unexpired leases, determination as to the value of any
collateral securing claims, treatment under the First Amended Plan of
Reorganization with All Technical Amendments (the "Plan") and other events.
Payment terms for these amounts are established in connection with the Plan.
Debt discounts have been expensed as necessary to report the debt at the allowed
amount. This expense has been recorded as a reorganization item in the
statement of operations.
Likewise, the redeemable Series A preferred stock whose disposition is also
dependent upon the outcome of the Chapter 11 case has been segregated as
"Mandatorily Redeemable Series A 5% Cumulative Preferred Stock Subject to
Compromise," and we ceased accruing dividends as of August 7, 2001.
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
The Company filed a voluntary petition for bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court of the Northern District of
Illinois, Eastern Division (the "Court") (Case No. 01- 27610) on August 7, 2001
(the "Petition Date"). After the Petition Date, the Company was authorized to
continue to conduct its business as debtor and debtor-in-possession. As a
debtor-in-possession, the Company was authorized to operate its business but
could not engage in transactions outside its ordinary course of business without
the approval of the Court. While the Chapter 11 filings constituted a default
under the Company's various financing arrangements, Section 362 of the
Bankruptcy Code imposes an automatic stay that generally precludes creditors and
other interested parties under such arrangements from taking any remedial action
in response to any such resulting default without prior Court approval. In
addition, under the Bankruptcy Code the Company could assume or reject executory
contracts, including lease obligations. Parties affected by these rejections
could file claims with the Court in accordance with the reorganization process.
The Company actively engaged in this process and reviewed all claims and
executory contracts, reaching final decisions with respect to assuming or
rejecting the contracts. These decisions were included in the Company's Plan.
No trustee or creditors' committee was appointed in this case. The management at
the time of the Petition Date moved to retain a business broker that would
market the Company's assets, including its intellectual property assets, with a
view towards conducting an auction of the Company's assets. A group of
shareholders objected to this contemplated disposition of the Company's assets
and sought to remove the Company's then-existing board of directors by
soliciting support from other shareholders.
7
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
Shareholders representing a majority of the Company's voting shares submitted
written consents for the removal of the then-existing board of directors and the
election of the following three new directors: Messrs. Robert Burkett, Charles
Worden and David Crews. Initially, former management objected to the consent
solicitation, but later withdrew that objection and tendered their resignation
as officers; the new directors were recognized by the Court on October 16, 2001.
This event was reported on a Form 8-K filed with the SEC on October 17, 2001.
The newly constituted board of directors appointed Mr. Kent T. Smith as Chief
Executive Officer. Mr. Smith had served as the Company's Vice President of
Sales and Marketing from April 2000 until being laid off in late June 2001. The
new board also approved the hiring of Jimmy D. Swink, Jr., as Reorganization
Manager for the Company. Mr. Swink has been a contract consultant with the
Company since its inception, the collateral agent for the holders of the
outstanding 10% convertible secured promissory notes of the Company and a holder
of a substantial amount of the Company's equity. The Court allowed the Company
to obtain approximately $800,000 in debtor-in-possession financing ("DIP
Financing"), which was used during the bankruptcy for operations.
The Company began developing a new business model that would enable the Company
to provide a simpler, lower cost method of wound care. This new sales and
distribution plan includes the sale of single use, licensed disposable packs to
qualifying physicians and wound care centers. The Company has directly and
indirectly entered into license agreements that have enabled the Company to
introduce its treatment capabilities for testing in nationally recognized wound
care treatment centers and long-term nursing home facilities.
The Company emerged from Bankruptcy on July 11, 2002, pursuant to the terms of
the Plan as approved by the Court. The Plan was filed with the SEC under cover
of Form 8-K on June 28, 2002. In connection with the Plan, the Company
completed the initial phase of its financing plan by raising $2.8 million
through a private offering of common stock with warrants, pursuant to Rule 506
of Regulation D, promulgated under 4(2) of the Securities Act of 1933. Since
that time, an additional $414,252 has been raised in the private offering.
SUMMARY OF CLASSIFICATION AND TREATMENT OF ALLOWED CLAIMS AND EQUITY INTERESTS
UNDER THE PLAN
Under the Plan, allowed claims against and equity interests in the Company
are divided into classes according to their relative seniority and other
criteria. A "Claim" is any claim against the Debtor, whether or not asserted,
as defined in section 101(5) of the Bankruptcy Code. An "Equity Interest" in
the Company is defined as any ownership interest evidenced by any share
certificate or other instrument, whether or not transferable or denominated
"stock" (including, without limitation, interests denominated as common stock or
preferred stock), or similar security, and any warrant or right (other than a
right to convert) to purchase or subscribe to any such ownership interest. The
term "Allowed" as used in this report means that the Claim or Equity Interest
has been approved by final order of the Court or authorized by the Plan.
Section 1122 of the Bankruptcy Code requires that a plan of reorganization
classify Claims and Equity Interests. The classes of Claims and Equity
Interests, the treatment of those classes under the Plan, and the securities and
other property to be distributed under the Plan are described below. The
Bankruptcy Code also provides that, except for certain Claims classified for
administrative convenience, a plan of reorganization may place a Claim or Equity
Interest in a particular class only if such Claim or Equity Interest is
substantially similar to the other Claims of such class. The Plan separates
the classified Claims and Equity Interests into the following classes:
"Class 1A Claims" Secured Claims under the 12% Convertible Secured
Promissory Notes ("12% Notes")
8
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
"Class 1B Secured Claims" Secured Claims under the 10% Convertible Secured
Promissory Notes ("10% Notes")
"Class 1C Claims" Secured Claims of Charles Worden, Sr.
"Class 1D Claims" Secured Claims Under the Curative Royalty Agreement
"Class 2 Claims" Priority Employee Claims
"Class 3 Claims" General Unsecured Claims
"Class 4A Claims" Existing Series A Preferred Stock
"Class 4B Claims" Existing Series B Preferred Stock
"Class 5 Claims" Existing Common Stock
"Class 6 Claims" Existing Stock Options
"Class 7 Claims" Other Equity Interests
Securities outstanding prior to the effective date of the Plan (the
"Effective Date") are identified as "Existing." Securities issued upon or after
the Effective Date are identified as "New."
The Plan also provides treatment for certain unclassified Claims
represented by Administrative Claims, Postpetition Senior Secured Notes, and
certain Priority Tax Claims.
Administrative Claims, Priority Tax Claims, and Secured Tax Claims have not been
classified and are excluded from classification in accordance with Bankruptcy
Code section 1123(a)(1). The treatment under the Plan of these unclassified
Claims is set forth below.
- - Administrative Claims represent Claims for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code,
including, but not limited to, Postpetition Senior Secured Notes
(representing the Debtor-In-Possession Financing), the actual and necessary
costs and expenses incurred after the Petition Date of preserving the
estate and operating the business of the Cytomedix (including wages,
salaries, or commissions for services rendered after the Petition Date),
Professional Claims, and all fees and charges assessed against the estate
under chapter 123 of title 28, United States Code. These are collectively
referred to as Allowed Administrative Claims.
The Plan provides that each holder of an Allowed Administrative Claim that has
not been satisfied during the reorganization case will receive, on account of
and in full satisfaction of such Allowed Administrative Claim, cash equal to the
Allowed amount of such Claim on the latest of (i) the Effective Date, (ii) if
disputed (or in the case of a Professional Claim not yet Allowed), upon entry of
a final order of the Court allowing such Claim, and (iii) the date on which the
Allowed Administrative Claim becomes due and payable in the ordinary course.
9
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
In lieu of receiving cash on account of its Allowed Administrative Claim,
if agreed to by the Company in its sole and absolute discretion, each
holder of an Allowed Administrative Claim may elect to exchange its Allowed
Administrative Claim for shares of New Common Stock at the administrative
rate of $1.00 per share (a Claimholder receives one share of New Common
Stock in exchange for each $1.00 of Allowed Claim, the "Administrative
Rate").
- - Allowed Tax Claims are unclassified if they are "Allowed Priority Tax
Claims" (defined as a Claim entitled to priority under Bankruptcy Code
section 507(a)(8)) or "Allowed Secured Tax Claims" (defined as a Claim of
any taxing authority that is a Secured Claim). Based on the Company's
review of filed proofs of claim, the Company estimates total Allowed
Priority Tax Claims at $17,993 as of September 30, 2001. This figure
primarily represents Claims for unpaid withholding or sales taxes.
The Plan provides that each holder of an Allowed Tax Claim will receive
deferred cash payments over a period not exceeding six years from the date
of assessment of such Allowed Tax Claim, in an aggregate amount equal to
the amount of such Allowed Tax Claim, plus interest from the beginning of
the month following entry of the order confirming the Plan (the
"Confirmation Order") on the unpaid portion thereof, without penalty of any
kind, at a rate of four percent (4%) per annum. The payment of each such
Allowed Tax Claim shall be made in equal semi-annual installments, with the
first installment due on the latest of (i) the first business day following
the end of the first full fiscal quarter following the Effective Date, (ii)
the first business day following the end of the first full fiscal quarter
following the date on which an order allowing such Allowed Tax Claim
becomes a final order, and (iii) such other time or times as may be agreed
with the holder of such Allowed Tax Claim. Each installment shall include
simple interest on the unpaid balance of the Allowed Tax Claim, without
penalty of any kind. In exchange for the treatment provided herein, all
liens securing an Allowed Secured Tax Claim shall be deemed discharged and
released as of the Effective Date.
CLASS 1A - HOLDERS OF 12% NOTES:
Class 1A is comprised of the Allowed Secured Claims of the holders of the 12%
Notes. Allowed Class 1A Claims as of September 30, 2001 are approximately
$2,235,000. The treatment of Class 1A Claims is as follows:
- - On the Effective Date, a minimum of 25% of each holder's Allowed Class 1A
Claim (and, at the election of such holder, up to 50% of its Allowed Class
1A Claim) is converted into shares of New Common Stock at the
Administrative Rate.
- - Partial Conversion into New Series A Convertible Preferred Stock
- - On the Effective Date, all remaining Allowed Class 1A Claims not converted
to shares of New Common Stock at the Administrative Rate are converted to
New Series A Convertible Preferred Stock at a rate of one (1) share of New
Series A Convertible Preferred Stock for each one dollar ($1.00) of said
remaining Allowed Class 1A Claim.
- - The Amended and Restated Certificate of Designation provides that the
Company is prohibited, so long as any shares of New Series A Convertible
Preferred Stock are outstanding, from granting any security interest, lien,
or encumbrance on any of the Company's intellectual property assets.
10
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
CLASS 1B - HOLDERS OF 10% NOTES:
Class 1B is comprised of the Allowed Secured Claims of the holders of the 10%
Notes. Allowed Class 1B Claims as of September 30, 2001 are approximately
$2,526,167. The treatment of Class 1A Claims is as follows:
- - On the Effective Date, a minimum of 25% of each holder's Allowed Class 1B
Claim (and, at the election of such holder, up to 50% of its Allowed Class
1B Claim) is converted into shares of New Common Stock at the
Administrative Rate
- - Partial Conversion into New Series B Convertible Preferred StockOn the
Effective Date, all remaining Allowed Class 1B Claims not converted to
shares of New Common Stock at the Administrative are converted to New
Series B Convertible Preferred Stock at a rate of one (1) share of New
Series B Convertible Preferred Stock for each one dollar ($1.00) of said
remaining Allowed Class 1B Claim.
- - The Amended and Restated Certificate of Designation provides that the
Company is, so long as any New Series B Convertible Preferred Stock are
outstanding, from granting any security interest, lien, or encumbrance on
any of the Company's intellectual property assets.
CLASS 1C - SECURED CLAIMS OF WORDEN:
Class 1C is comprised of the Allowed Secured Claims of Charles Worden Sr. which
total approximately $102,822 as of September 30, 2001. This estimate includes
projected accrued interest on the principal balance of $72,100 notes payable and
reimbursement claims of $22,125. The treatment of Class 1C Claims shall be as
follows:
- - Each holder of an Allowed Class 1C Claim receives New Common Stock at the
Administrative Rate in full and complete satisfaction of such holder's Allowed
Class 1C Claim.
CLASS 1D - SECURED CLAIMS UNDER THE CURATIVE ROYALTY AGREEMENT:
Class 1D is comprised of the Allowed Secured Claims under the royalty agreement
entered into as of December 26, 2000, between Curative and the Company, as
amended by a first amendment thereto dated as of April 20, 2001 (collectively,
the "Curative Royalty Agreement" ). The total Allowed Class 1D Secured Claims
are $30,842 based on payments on the DePuy Royalty received through the period
ending September 30, 2001, that have not been distributed to the holders of
Class 1D Secured Claims.
The Plan provides that each holder of an Allowed Class 1D Secured Claims will
receive cash on the Effective Date in an amount equal to the Allowed amount of
its Class 1D Secured Claim. The Plan also provides that, from and after the
Effective Date, all rights under the Curative Royalty Agreement shall continue
in full force and effect, and the legal, equitable, and contractual rights
arising thereunder shall be unaltered (including the retention of all
prepetition liens granted under the Curative Royalty Agreement); provided,
however, that following the Effective Date, distributions to Waverly Holdings,
LLC, an Arkansas Limited Liability Company ("Waverly") of its proportionate
share of royalties payable under the Curative Royalty Agreement may be made
directly to Waverly instead of to Curative.
CLASS 2 - ALLOWED PRIORITY UNSECURED CLAIMS OF EMPLOYEES:
Class 2 is comprised of the Allowed Claims of employees against Cytomedix that
are specified as having priority in Bankruptcy Code sections 507(a)(3) or
507(a)(4), not to exceed $4,650 per employee. Such Claims include certain
Claims against the Company by its employees for unpaid prepetition wages,
salaries, or commissions. We estimate total Allowed Class 2 Claims as of
September 30, 2001 are approximately $114,989.
11
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
Claims in Class 2 are unimpaired under the Plan ("Unimpaired" and "Impaired" as
defined by 1124 of the Bankruptcy Code). Each holder of an Allowed Class 2
Claim will receive cash on the Effective Date equal to the amount of said
holder's Allowed Class 2 Claim. In lieu of receiving cash for its Allowed Class
2 Claim, if agreed to by the Company in its sole and absolute discretion, each
holder of an Allowed Class 2 Claim (or its successors or assigns) may elect in
writing before or after the Effective Date to exchange each $1.00 of its Allowed
Class 2 Claim into shares of New Common Stock at such rate as is agreed to by
the Company in its sole and absolute discretion.
The New Common Stock to be issued as a result of said conversion will be
distributed in twelve (12) equal monthly installments commencing on the initial
distribution date (the "Initial Distribution Date" is the last business day of
the first full month following the Effective Date) and continuing on each of the
succeeding eleven monthly anniversaries following the Initial Distribution Date.
Upon receipt of shares of New Common Stock as provided hereunder, said recipient
shall be deemed to have affirmatively covenanted to the Short-Selling Bar
Representation which requires the recipient of the New Common Stock to refrain
from engaging in short sales for a period of five years following the Effective
Date.
CLASS 3 - ALLOWED GENERAL UNSECURED CLAIMS:
Class 3 is comprised of the Allowed General Unsecured Claims of Cytomedix that
are not cured, paid, released, or waived pursuant to the Plan, assumed by the
Company pursuant to the Plan or agreements incorporated in the Plan, or
classified in any other class of Claims. Class 3 Claims include, without
limitation, (i) Claims for goods sold and services rendered, (ii) Claims for
monies lent, (iii) Claims based upon guarantees of performance or payment of the
obligations or duties of any person, (iv) Claims for contribution,
reimbursement, or indemnity (excluding Claims for indemnification rights), (v)
Claims for fines, penalties, or assessments, (vi) Claims for tort liability,
(vii) Claims arising from the rejection of executory contracts and unexpired
leases, and (viii) Claims arising for environmental or bio-hazardous remediation
at locations that are not included in the assets vesting in the Company on the
Effective Date.
Option 3A (Distribution of Cash Only)
The Company pays to holders of Allowed Class 3 Claims under Option 3A a sum of
cash equal to twelve percent (12%) of such Allowed Class 3 Claim according to
the following distribution schedule: one-third shall be paid on the Initial
Distribution Date; one-third on the sixth month anniversary of the Initial
Distribution Date; and one-third on the first anniversary of the Initial
Distribution Date.
Option 3B (Distribution of New Common Stock Only)
The holders of Allowed Class 3 Claims under Option 3B
will receive one share for each $5.00 of Allowed Class 3 Claims under Option 3B,
with the New Common Stock to be distributed in twelve (12) equal monthly
installments commencing on the Initial Distribution Date and continuing on each
of the succeeding eleven (11) monthly anniversaries. Upon receipt of shares of
New Common Stock as provided hereunder, said recipient shall be deemed to have
affirmatively covenanted to the Short-Selling Bar Representation and to be bound
by its terms.
Holders of Allowed Class 3 Claims aggregating less than $1,000.00 are treated
under Option 3A in respect of such Claims and may not elect treatment of such
Claims under Option 3B.
12
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
CLASS 4 - ALLOWED PREFERRED STOCK INTERESTS:
Class 4A is comprised of all Allowed Equity Interests represented by the
1,625,000 shares of Existing Series A Preferred Stock issued and outstanding
prior to the Effective Date. The Existing Series A Preferred Stock had a
liquidation preference in the event of the Cytomedix's liquidation, dissolution,
or winding up of $1.00 per share in all assets remaining after payment of
liabilities. Additionally, Cytomedix was required to redeem the Existing Series
A Preferred Stock on the earlier of the seventh anniversary of the date of
issuance of the securities or the end of the fiscal quarter at which the Company
had gross revenues for four consecutive fiscal quarters of not less than $50
million.
At such time, if at all, that the Company attains aggregate gross revenues for
four consecutive fiscal quarters of not less than $10 million (the "Series A
Precondition"), holders of Allowed Class 4A Equity Interests will receive one
(1) share of New Common Stock for every five (5) shares of Existing Series A
Preferred Stock held as of the Effective Date. The New Common Stock to be
issued hereunder will be distributed in twelve equal monthly installments
commencing on the ninetieth (90th) day following satisfaction of the Series A
Precondition and continuing on each of the succeeding eleven (11) monthly
anniversaries that follow said initial distribution.
Class 4B is comprised of all Allowed Equity Interests represented by the
Existing Series B Preferred Stock issued and outstanding prior to the Effective
Date. There are approximately 5,115,000 shares of Existing Series B Preferred
Stock issued and outstanding. The Existing Series B Preferred Stock had a
liquidation preference in the event of the Company's liquidation, dissolution,
or winding up of $0.0001 per share in all assets remaining after payment of
liabilities and the liquidation preference of the Existing Series A Preferred
Stock.
Allowed Class 4B Equity Interests will be redeemed in cash by the Company on the
Effective Date at the stipulated liquidation preference of $0.0001 per share, or
$511.50 in the aggregate.
CLASS 5 - EXISTING COMMON STOCK:
Class 5 is comprised of all Allowed Equity Interests represented by the Existing
Common Stock of Cytomedix that is issued and outstanding as of the Effective
Date.
Holders of Allowed Class 5 Existing Common Stock receive one share of New Common
Stock for every five (5) shares of Existing Common Stock. As a result of this
exchange, holders of Allowed Class 5 Equity Interests receive approximately
2,530,120 shares of New Common Stock in exchange for the estimated 12,650,598
shares of Existing Common Stock outstanding on the Petition Date. Upon receipt
of shares of New Common Stock as provided hereunder, said recipient shall be
deemed to have affirmatively covenanted to the Short-Selling Bar Representation
and to be bound by its terms.
CLASS 6 - EXISTING STOCK OPTIONS:
Class 6 is comprised of all Allowed Equity Interests represented by the Existing
Stock Options. Cytomedix had over six (6) million options or warrants
representing contractual rights of persons prior to the Effective Date to
purchase or acquire Existing Common Stock. Holders of Allowed Class 6 Existing
Stock Options do not receive or retain any property or distributions for such
Allowed Claims or Allowed Equity Interests.
13
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (CONTINUED)
EXISTING STOCK OPTIONS (CLASS 6)
CLASS 7 - OTHER EQUITY INTERESTS, INCLUDING SECTION 510(B) CLAIMS:
Class 7 is comprised of all other Allowed Claims or Equity Interests in
Cytomedix, including Allowed Section 510(b) Claims, any Allowed Claims arising
from the rejection of agreements granting Existing Stock Options (to the extent,
if any, that they constitute executory contracts), and any Claims based upon
indemnification rights. The Company is not aware of any filed or scheduled
Class 7 Claims and estimates these Claims at zero.
Class 7 is Impaired under the Plan. Holders of Class 7 Claims and Equity
Interests, if any, do not receive or retain any property or distributions on
account of such Allowed Claims or Allowed Equity Interests.
NOTE 3 - BUSINESS COMBINATION
On January 2, 2001, Cytomedix acquired certain technology and other assets of
Curative Health Services, Inc., a Minnesota corporation ("Curative"), and CHS
Services, Inc., a Delaware corporation ("CHS"), pursuant to an asset purchase
agreement (the "Procuren Acquisition"). The technology and other assets
acquired by us included the intellectual property rights related to development
and production of Curative's chronic wound treatment agent, Procuren, and other
platelet-derived growth factors and all production equipment, leasehold
improvements and certain other fixed assets. In addition, approximately fifty
of Curative's employees associated with Procuren production were hired by the
Company.
The consideration paid to Curative and CHS at closing was the sum of (1)
$3,782,571 in the form of cash and a promissory note (the net book value of the
assets acquired); (2) the assumption of liabilities arising after the closing in
connection with any contracts sold or assigned to Cytomedix by Curative or CHS
and relating to the Procuren operations; and (3) an obligation to pay future
royalties to Curative as set forth in the royalty agreement dated as of December
26, 2000, as amended on April 20, 2001,by and between Cytomedix and Curative.
This acquisition was recorded using the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed. The Company has recorded all production equipment,
leasehold improvements and certain other fixed assets at estimated disposal
value. Purchased patents and intellectual property were recorded with a useful
life of nine years established. The Company did not record any goodwill in
conjunction with this acquisition.
In connection with the Procuren Acquisition, Cytomedix also entered into supply
and royalty agreements with Curative. Under the supply agreement, Cytomedix was
responsible for supplying all of Curative's requirements for Procuren in the
United States unless it would result in a net loss to the Company. Under the
royalty agreement, Cytomedix must make royalty payments to Curative for sales of
Procuren products.
In consideration for Curative's agreement to enter into a Consent, Waiver,
Payoff and Exchange Agreement as described in Note 4, Cytomedix agreed to amend
the royalty agreement on April 20, 2001, to give Curative a security interest in
and a lien on all of the patents Cytomedix acquired from Curative as collateral
to secure royalty payments Cytomedix is required to make to them. Cytomedix
also agreed to certain other amendments to the royalty agreement including
providing Curative with 30% of all aggregate proceeds Cytomedix may recover from
third-parties for infringement of the patents Cytomedix acquired from Curative
and 20% of any up-front license fees Cytomedix may acquire from third parties
from future licenses Cytomedix may grant using patents acquired from Curative.
14
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 3 - BUSINESS COMBINATION (CONTINUED)
Cytomedix financed the $3,782,571 cash portion of the Procuren Acquisition price
through a combination of a loan from Curative evidenced by 10% convertible
secured promissory notes ("10% Notes"), given by us to Curative in the aggregate
principal amount of $1,682,571, and to three third-party lenders (the "Lenders")
in the aggregate principal amount of $2,100,000. Principal and interest on the
convertible secured promissory notes issued to Curative and to the Lenders
matured on April 15, 2002 (as extended pursuant to the terms of the Consent,
Waiver, Payoff and Exchange Agreement as described below). At any time between
the issuance date and the repayment date, Curative and the Lenders had the
option to convert the 10% Notes into shares of our common stock at a conversion
price per share equal to the lesser of (1) $1.00; or (2) the price equal to
eighty percent of the average of the lowest three intraday sale prices as
reported by Bloomberg during the twenty trading days preceding the date of any
request by Curative or the Lenders to exercise their conversion options. This
conversion price was subject to adjustment for stock splits and combinations,
dividends and distributions, reclassifications, reorganizations, mergers,
consolidations or sales of assets, as well as issuances of our common stock or
securities convertible into our common stock at a share price below the
applicable conversion price.
In conjunction with theProcuren Acquisition financing, Cytomedix also issued to
Curative and the Lenders warrants to purchase shares of its common stock.
Cytomedix issued to Curative a warrant to purchase 600,846 shares of its common
stock and to each of the threeLenders a warrant to purchase 250,000 shares of
its common stock, or 1,350,846 shares in total. The purchase price per share is
the lesser (i) $0.50; or (ii) the price equal to eighty percent of the average
of the lowest three intraday sale prices as reported by Bloomberg during the
twenty trading days preceding the date on which Curative and the Lenders may
elect to exercise their warrants. The warrants issued to Curative and the
Lenders vested fully upon their funding of the 10% Notes. This exercise price
was subject to adjustment for stock splits and combinations, dividends and
distributions, as well as issuances of Cytomedix's common stock or securities
convertible into Cytomedix's common stock at a share price below the applicable
exercise price. The exercise period of the warrant was to remain in effect
until December 26, 2010. Cytomedix also entered into a security agreement,
which granted to Curative and the Lenders a pro-rata security interest in all of
Cytomedix's personal property and assets in connection with each of the 10%
Notes.
The Company has recorded the fair value of the warrants, which has been limited
to the proceeds received, as a discount on the notes. This debt discount
relating to the fair value of the warrants was amortized as interest expense
through April 15, 2001. After allocation of fair value to the warrants, the
carrying value of the 10% Notes was zero. Accordingly, no additional amounts
were available for allocation to the beneficial conversion feature of the 10%
Notes.
Cytomedix issued to the Kriegsman Group and FAC Enterprises, Inc. warrants
representing the right to purchase an aggregate of 25,000 and 350,000 shares of
its common stock, respectively, as placement fees in connection with the
financing provided by Curative and the Lenders. These warrants were immediately
exercisable at a price per share equal to the lesser of: (i) $0.50; or (ii) the
price equal to eighty percent of the average of the lowest three intraday sales
prices as reported by Bloomberg during the twenty trading days preceding the
date on which the warrant is exercised. The exercise period of each of the
warrants was to remain in effect until January 2, 2011. In February 2001, FAC
Enterprises, Inc. assigned its right to purchase 250,000 shares of Cytomedix's
common stock to Smoke Rise Investments, LLC. The fair value of the warrants
have been recorded as debt issuance costs and is being amortized to interest
expense through April 15, 2001.
15
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 3 - BUSINESS COMBINATION (CONTINUED)
Under the terms of both the 10% Notes and the warrants, neither Curative, the
Lenders, Kriegsman Group nor FAC Enterprises were entitled to exercise a number
of warrants or to convert any portion of the 10% Notes in excess of the number
of warrants (or portions thereof) or that portion of the 10% Notes upon exercise
or conversion of which the sum of (1) the number of shares of common stock
beneficially owned by Curative and its affiliates or the Lenders (other than
shares of common stock which may be deemed beneficially owned through the
ownership of the unexercised warrants and the unconverted portion of the 10%
Note) and (2) the number of shares of common stock issuable upon exercise of the
warrants or conversion of the 10% Note with respect to which the determination
is being made, would at the time of exercise or conversion result in beneficial
ownership by Curative and its affiliates or the Lenders of more than 4.9% of the
outstanding shares of common stock, as determined in accordance with Section
13(d) of the Act, as amended, and Regulation 13D-G thereunder.
NOTE 4 - LICENSING AGREEMENT
On March 21, 2001, Cytomedix signed an exclusive licensing agreement with DePuy
AcroMed, Inc. ("DePuy"), a subsidiary of DePuy, Inc. Under this agreement,
Cytomedix has granted to DePuy an exclusive, worldwide license to use certain of
the U.S. and foreign issued patents relating to platelet-based growth factors
that Cytomedix acquired from Curative. This license is limited to a specific
field of use, which is defined as covering diagnostic and therapeutic spinal,
neurosurgery and orthopedic surgery (including soft tissue damage resulting from
such surgery). DePuy has no rights to use the technology embodied in Cytomedix's
patents outside the defined field of use. In consideration of these rights,
DePuy paid to Cytomedix a one-time up front license fee of $750,000 and agreed
to pay running royalties of 6.5% on all relevant sales as defined under the
terms of the agreement for the life of the patents, which is, on average,
approximately nine years. Under the terms of Cytomedix's royalty agreement with
Curative, Cytomedix must pay Curative 92.3% of the royalties Cytomedix collects
from DePuy. The license also provides for certain minimum annual royalties,
beginning in fiscal 2001. Cytomedix retains the right to practice under its
patents and to grant licenses to other parties to the technology embodied in its
patents outside the defined field of use.
NOTE 5 - CONVERTIBLE DEBT - PREPETITION
The 10% Notes issued to Curative and the Lenders matured on April 15, 2001.
Cytomedix did not make payments on the 10% Notes on the maturity date; however,
on April 20, 2001, Cytomedix entered into a Consent, Waiver, Payoff and Exchange
Agreement with Curative and the Lenders providing for the partial pay-off of the
10% Notes and the extension of the maturity date of the notes until April 15,
2002. Under the terms of this agreement, Cytomedix paid to Curative and the
Lenders a total of $1,325,000 from the proceeds of an offering of 12%
convertible secured promissory notes, maturing April 15, 2005 (the "12% Notes")
reducing the outstanding amount of the 10% Notes. Curative also elected to
convert $168,019 principal amount of its 10% Note into 342,500 shares of
Cytomedix's common stock. Two of the Lenders converted an aggregate of $350,000
of their 10% Notes into 637,501 shares of our common stock.
16
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 5 - CONVERTIBLE DEBT - PREPETITION (CONTINUED)
A group of third-party investors then purchased the remaining $708,000 of the
outstanding 10% Notes from Curative and the Lenders, and agreed to subordinate
their 10% Notes to Cytomedix's newly issued 12% Notes. This same group of
investors also loaned Cytomedix an additional $312,000 by increasing the
outstanding principal amount of the 10% Notes. As consideration for
subordinating the 10% Notes and for increasing the principal amount of the 10%
Notes, Cytomedix issued to these third-party investors warrants representing the
right to purchase an aggregate of 364,140 shares of its common stock on the same
terms and conditions as the warrants issued to the original holders of the 10%
Notes. Cytomedix recorded the fair value of the warrants, amounting to
$105,643, as a discount on the 10% Notes. The debt discount relating to the fair
value of the warrants was being amortized as interest expense through April 15,
2002. However, the debt was adjusted to its Allowed Claim Amount of $2,301,552
of principal plus accrued interest, included in liabilities subject to
compromise and the unamortized discount was recorded as a reorganization item.
In June 2001, Cytomedix completed a private placement of 12% Notes maturing
April 15, 2005, for an aggregate amount of $2,235,000. Cytomedix used
$1,325,000 of the net proceeds to pay down the 10% Notes as described above.
Cytomedix agreed to register with the SEC the shares of common stock underlying
the 12% Notes. The terms of the 12% Notes stated that the unpaid principal
balance of the 12% Notes and accrued interest thereon could be converted at the
option of the holder from and after April 15, 2002, into common stock of
Cytomedix at a conversion price equal to seventy-five percent (75%) of the
average of the three lowest intraday sale prices during the twenty (20) trading
days immediately preceding the date of conversion, but in no event less than
$2.00 per share and not more than $5.00 per share. As of the issuance date we
recorded a beneficial conversion amount of $632,893, which was being amortized
through April 15, 2005. However, the debt was adjusted to its allowed claim
amount of $2,235,000 of principal included in liabilities subject to compromise
and the remaining discount was recorded as a reorganization item along with the
unamortized loan cost.
In June 2001, we obtained additional financing and issued another 10% Note with
a principal balance of $150,000. On July 5, 2001, $50,000 of this note was
converted into 166,667 shares of our common stock.
NOTE 6 - DISCONTINUED OPERATIONS - IMPAIRMENT CHARGE
As of June 30, 2001, the Company had failed to make the required payments to
secured creditors on schedule and failed to raise additional capital to finance
operations. Management was forced to terminate all employees except a skeleton
staff of three employees.
CLOSING OF OPERATIONS RELATED TO PROCUREN
Following the Procuren Acquisition, management was forced, based on the poor
performance of the acquired Procuren faciliities, to formulate a plan to shut
down facilities that were not economically viable. Accordingly, Cytomedix
accrued the costs it expected to incur in the process of closing facilities,
disposing of the physical assets, terminating the related employees and paying
the applicable facility and equipment leases. Those estimated costs, which
total $2,218,399, were recorded as a component of the cost of the Procuren
Acquisition and would not be charged to operations. Any adjustment to that
estimate that occured subsequent to one year from the date it was determined to
close the facilities and dispose of the related assets would be charged to
operations in that period.
17
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 6 - DISCONTINUED OPERATIONS - IMPAIRMENT CHARGE (CONTINUED)
During each month of the first half of 2001, Curative's purchase orders for the
Procuren product continuously declined. Because under the terms of the supply
agreement, Cytomedix was required to sell the Procuren product to Curative at
fixed prices, Cytomedix incurred significant losses as a result of this decline
in sales. Consequently, Cytomedix gave notice to Curative and Cytomedix's
employees of its decision to close all of its Procuren production facilities.
During the second quarter of 2001, it became evident that all Cytomedix
operations had to be closed and all employees other than essential management
had to be terminated, resulting in discontinued operations accounting treatment.
As a result of the adoption of the plan to discontinue the Procuren operations,
the Company's financial statement presentation has changed. In accordance with
APB 30, the results of the Procuren operations have been reported separately as
discontinued operations for all periods presented. In accordance with Paragraph
18 of APB 30, the net assets and liabilities (current and noncurrent) of the
discontinued segment have also been segregated for all periods presented.
Included in the loss from discontinued operations was the impairment charge
noted below plus the charge for abandonment of various assets.
Net sales, loss before taxes, and net loss applicable to the Procuren operations
were as follows:
Nine Months
Ended
September 30,
2001
-----------------
Net sales $ 1,881,706
=================
Loss before taxes $ (9,400,979)
Tax benefit -
-----------------
Loss on discontinued operations, net of tax $ (9,400,979)
=================
Cytomedix also assumed several non-cancelable operating leases for the rental of
certain office space relating to Procuren operations processing facilities and
equipment leases at such locations expiring in various years through 2004.
Minimum lease commitments for periods after the expected closure date of the
facilities have been accrued in conjunction with other incremental costs to exit
the operations related to Procuren.
IMPAIRMENT
The events described above triggered an impairment review of long-lived assets
related to the Procuren operations under Financial Accounting Standard No. 121
("FAS 121"). This Statement requires that the carrying amount of long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the Company estimated the future cash flows expected
to result from the use of the assets. The sum of the expected future cash flows
(undiscounted and without interest charges) was less than the carrying amount of
the asset and an impairment loss was recognized resulting in a noncash
impairment loss of approximately $3,153,798. The estimated fair value was based
on anticipated future cash flows discounted at a rate commensurate with the risk
involved. This amount is included in the total loss from discontinued
operations.
18
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 7 - OTHER OPTIONS AND WARRANTS GRANTED
During the nine months ended September 30, 2001, we issued warrants to Curative
and the Lenders representing the right to purchase 600,846 and 750,000 shares of
common stock, respectively. We also issued warrants to the purchasers of the
10% Notes representing the right to purchase 375,000 shares of common stock, in
consideration for the additional financing received and subordination of the 10%
Notes.
Cytomedix entered into a common stock purchase agreement as of April 20, 2001,
with Fusion Capital Fund II, LLC ("Fusion"), pursuant to which Fusion agreed to
purchase on each trading day during the term of the agreement $26,250 of our
common stock up to an aggregate of $14.7 million. The $14.7 million was to be
purchased over a 28-month period, which could have been extended an additional
six months at the Company's discretion. The purchase price of the shares was
equal to a price based upon the future market price of our common stock without
any fixed discount to the market price. As consideration for Fusion's purchase
commitments, Cytomedix issued to Fusion a warrant representing the right to
purchase 1,189,320 shares of Cytomedix common stock, which was valued at
$119,024 by an independent valuation and recorded as investor services expense.
The warrant has an exercise price of $1.00 per share and remains exercisable for
five years. Pursuant to the cashless terms under the warrant, Fusion exercised
this warrant and was issued 748,722 shares of common stock.
NOTE 8 - CAPITAL STOCK ACTIVITY
In January 2001, Bennett Medical, LLC ("BMI") exercised warrants to purchase
150,000 shares of the Company's common stock at an exercise price of $.02 per
share, for an aggregate price of $3,000.
In May and June 2001, Fusion Capital exercised warrants to purchase 657,424 and
91,298 shares, respectively, of the Company's common stock.
In June 2001, Curative exercised its warrant pursuant to the cashless terms and
was issued 200,000 shares of common stock.
In June and July 2001, several of the noteholders elected to convert their 10%
Notes into common stock; 1) Curative converted a total of $168,019 into 342,500
shares, 2) one of the Lenders converted $150,000 into 266,667 shares and 3)
another Lender converted $200,000 into 370,834 shares.
In June 2001, we received $29,000 of proceeds, which was recorded as additional
paid-in capital, from the sale of 29,000 shares of a shareholder.
In July 2001, 182,501 shares of common stock were issued to two holders of 10%
Notes for conversion of $54,750 of their 10% Notes, and 30,000 shares of common
stock were issued to a investment banker for financing services.
19
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 9 - NON-CASH TRANSACTIONS
Non-cash transactions for the nine months ended September 30, 2001 include:
Warrants issued in connection with debt $ 105,000
Beneficial conversion feature of debt 694,382
Accrued dividends on 5% cumulative preferred stock 47,396
Debt issued to seller in connection with purchase 1,682,571
Loan cost deducted from proceeds of debt 501,300
Conversion of debt 518,002
Repayment of short-term debt through long-term debt 1,325,000
NOTE 10 - LOSS PER SHARE
As of September 30, 2000 and 2001, Cytomedix had issued and issuable warrants
and options to acquire 4,467,490 and 6,666,532 shares of common stock of
Cytomedix, respectively, with exercise prices ranging from $.02 to $10.00 per
share. These options and warrants were not included in the calculation of
weighted average common stock outstanding as of September 30, 2000 and 2001
because the effect would have been anti-dilutive to the presentation of loss per
share.
NOTE 11 - LIABILITIES SUBJECT TO COMPROMISE
A summary of the two categories of claims not subject to compromise as of
September 30, 2001 is as follows:
Employee claims $ 114,989
Tax claims 17,993
-------------
$ 132,982
=============
A summary of the principal categories of claims classified as liabilities
subject to compromise at September 30, 2001 are as follows:
12% secured debt $ 2,235,000
10% secured debt 2,526,167
Note payable and accrued interest - related party 102,821
Accrued expenses - related party 99,825
Accounts payable and accrued expenses 1,640,699
Accrued employee claims 679,367
Series A Preferred Stock and accrued dividends 1,766,780
----------------
Total Liabilities Subject to Compromise $ 9,050,659
================
Approximately $2,235,000 of liabilities subject to compromise would have been
classified as current liabilities if the Company had not filed bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code.
20
CYTOMEDIX, INC.
(A DEVELOPMENT STAGE ENTITY)
(DEBTOR-IN-POSSESSION)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 12 - NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations," and
SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets." SFAS No.
141 eliminated the use of the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001 and is effective for any
business combination accounted for by the purchase method completed after June
30, 2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with SFAS No. 142. Effective for fiscal years
beginning after December 15, 2001, other intangible assets will continue to be
amortized over their useful lives. The provisions of SFAS 141 and 142 will be
adopted by the Company effective for accounting periods subsequent to January 1,
2002. The adoption of SFAS 141 and 142 is not expected to have any impact on the
results of operations or financial position of the Company.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in
August 2001. This statement is effective for fiscal years beginning after
December 15, 2003. This new statement is not expected to have any impact on the
results of operations or financial position of the Company.
In December 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" that is applicable to the Company's fiscal
2002 financial statements. The FASB's new rules on asset impairment supersede
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and provide a single accounting model
for the disposition of long-lived assets. The Company will adopt the provisions
of SFAS No. 144 effective for accounting periods subsequent to January 1, 2002.
This new statement is not expected to have any impact on the results of
operations or financial position of the Company.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections."
For most companies, SFAS No. 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under SFAS
No. 4. Extraordinary treatment will be required for certain extinguishments as
provided in Accounting Principles Board Opinion No. 30. SFAS No. 145 also
amends SFAS No. 13 to require certain modifications to capital leases be treated
as a sale-leaseback and modifies the accounting for sub-leases when the original
lessee remains a secondary obligor (or guarantor). SFAS No. 145 is effective for
transactions occurring after May 15, 2002, and is not expected to have a
material impact on the results of operations or financial position of the
Company.
FASB Statement 146, "Accounting for Costs Associated with Exit or Disposal
Activities," addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The principal
difference between Statement 146 and Issue 94-3 relates to Statement 146's
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. Statement 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under Issue 94-3, a liability for an exit cost as generally defined in
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
A fundamental conclusion reached by the FASB in this Statement is that an
entity's commitment to a plan, by itself, does not create an obligation that
meets the definition of a liability. Therefore, this Statement eliminates the
definition and requirements for recognition of exit costs in Issue 94-3. This
Statement also establishes that fair value is the objective for initial
measurement of the liability. The provisions of this statement are effective for
exit or disposal activities that are initiated after December 31, 2002, and is
not expected to have a material impact on the results of operations or financial
position of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS 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 in
conjunction with our audited financial statements and related notes thereto and
management's discussion and analysis for the year ended December 31, 2000,
included in our annual report filed on Form 10-KSB for such period. This
discussion and analysis pertains to the Company's financial position on
September 30, 2001. You must consider this report in conjunction with all
reports filed with the Securities and Exchange Commission ("SEC") after
September 30, 2001, and with the Subsequent Events section at the end of our
discussion. We are in the process of filing all missed periodic reports with
the SEC.
The terms "Cytomedix," the "Company," "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
SEC, 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, 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 this report is
filed. 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 SEC.
NATURE OF BUSINESS
Cytomedix is a biotechnology company whose business model is premised upon
developing, producing, licensing autologous cellular therapies (i.e., therapies
using the patient's own body products) for the treatment of chronic non-healing
wounds using our propriety platelet gel and related product therapies. To
create the proprietary platelet gel product, the patient's own platelets and
other essential blood components for the healing process are separated through
centrifugation and formed into a gel (the "AutoloGel") that is topically applied
to a wound under the direction of a physician.
Our proprietary wound care product line is based on its branded product,
AutoloGel, generically known as autologous platelet gel. This product contains
autologous multiple growth factors, platelet membranes, fibrin matrix structure,
and acts as a bioactive sealant.
Autologous refers to the use of the patient's own body products. Our
autologous process extracts the patient's own platelets and other blood
components that are essential in the healing process, and through a patented
process, forms a gel containing these autologous products that can be applied
topically to a wound. By definition, a chronic cutaneous ulcer is defined as a
wound that has failed to proceed through an orderly and timely series of events
to produce a durable structural, functional, and cosmetic closure. Many patients
have wounds often lasting for months or even years. The three most common types
are diabetic foot ulcers, venous stasis ulcers and pressure ulcers, formerly
known as decubitus ulcers. While our intellectual property covers the use of
platelet gel across both the acute and chronic wound areas, our management team
believes the chronic wound market affords the most opportunity for success.
22
The process to develop AutoloGel results in a therapeutic gel prepared
under the direction of a physician and applied to chronic wounds to accelerate
healing. This process begins by harvesting a quantity of platelets and plasma
from the patient using a standard blood draw medical procedure. After
separating the platelets from the red blood cells, the platelets and plasma are
mixed with a series of proprietary ingredients, and the solution is agitated to
form a gel. The physician applies the gel into the wound bed and covers the
area with an occlusive dressing. AutoloGel mimics the natural healing process
by maintaining a moist wound environment and delivering a variety of growth
factors into the wound bed with the gel while also providing a cellular matrix
on which new tissue can grow. Growth factors are cellular proteins that act as
signals to cells to regulate both the growth and movement of cells.
The entire process to produce the gel, including the platelet harvesting,
takes approximately five to fifteen minutes and is done at the point of care by
nurse practioners, assistants, or physical therapists under the direction of a
physician. The patient's own blood is used as the source of the platelets,
eliminating the risk of infection that would be present if donor platelets were
used. Because the platelets can be collected at any time and the gel is applied
immediately after preparation, there are no issues with shelf life or
transportation of the product. As all the components used in the process are
approved by the U.S. Food and Drug Administration ("FDA"), it does not require
any FDA pre-marketing approvals.
AutoloGel is physician directed and does not require training of the
patient to apply the gel or to change dressings. In addition, since the
healthcare provider applies it, the use of AutoloGel aids in assuring the
continued assessment of the wound by the healthcare provider as healing
proceeds.
Our present procedure for producing AutoloGel begins with about four to
five small tubes of the blood being drawn from a patient from a standard
blood-draw procedure. Platelet rich plasma from the drawn blood is then
separated through standard centrifugation using a small tabletop size
centrifuge. The separated platelet rich plasma is then mixed with pre-measured
quantities of an activating compound to produce a solution that, when agitated,
congeals into AutoloGel. The AutoloGel is then applied topically to the wound
bed and covered with an occlusive dressing.
We are currently marketing AutoloGel into the chronic wound care market
through the sale of disposable kits that provide single treatment for wound
application. The end-user purchases kits at a fixed price, which will vary
depending on the customer's size, supply needs, term of contract, and related
factors.
RESULTS OF OPERATIONS FOR PERIOD ENDING SEPTEMBER 30, 2001
These results of operations and the notes to the financial statements
pertain solely to the period ending September 30, 2001. These results must be
considered in conjunction with the Subsequent Events section of Item 2.
We are a development stage company as defined in Statement of Financial
Accounting Standards No. 7 and had only limited operations through September 30,
2001. 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,
AuTolo-Gel and related disposable treatment packs and proprietary system. We
generated minimal revenues from inception through September 30, 2001.
OVERVIEW
In January 2001, we acquired certain technology and other assets of
Curative Health Services, Inc. and CHS Services, Inc., (collectively,
"Curative") including the intellectual property rights related to the
development and production of platelet-derived growth factors (the "Procuren
Acquisition"). The Procuren Acquisition included assets relating to the
production of Curative's proprietary wound treatment agent, Procuren. With the
technology and other assets we have acquired from Curative, we intended to
develop or license others to develop other products associated with this
intellectual property. However, we sustained recurring loss from the Procuren
Acquisition and have shut down the entire Procuren operation (see below under
Results of Operation).
In conjunction with the Procuren Acquisition, we began to formulate a plan to
shut down facilities that were not economically viable. During each month of
23
the first half of 2001, Curative's purchase orders for the Procuren product
continuously declined. Under the terms of the supply agreement, we were required
to sell the Procuren product to Curative at fixed prices; consequently, we
incurred significant losses as a result of this decline in sales. Significant
losses continued, and,during the second quarter 2001, it became evident that not
only the Procuren facilities but all of our operations needed to be closed.
Management had focused its resources on the Procuren Acquisition, thus the
AutoloGel operations had diminished.
As a result of our adoption of the plan to discontinue the Procuren
operations, our financial statement presentation has changed. In accordance
with APB 30, the results of the Procuren operations have been reported
separately as discontinued operations for all periods presented. In accordance
with Paragraph 18 of APB 30, the net assets and liabilities (current and
noncurrent) of this discontinued segment have also been segregated for all
periods presented. Included in the loss from discontinued operations was the
impairment charge noted below plus the charge for abandonment of various assets.
The events described above triggered an impairment review of our long-lived
assets related to the Procuren operations under Financial Accounting Standard
No. 121 ("FAS 121"). FAS 121 requires that the carrying amount of long-lived
assets and certain identifiable intangibles to be held and used by us be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. We recognized an
impairment loss of approximately $3,153,798. This amount is included in the
total loss from discontinued operations.
As of June 30, 2001, we had curtailed our operations substantially and had
terminated the majority of our workforce, other than a skeleton staff of three
employees. On August 7, 2001 (the "Petition Date"), the Company filed bankruptcy
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court of the Northern District of Illinois, Eastern Division (the
"Court") (Case No. 01-27610). After the Petition Date, we were authorized to
continue to conduct our business as debtor and debtor-in-possession. As a
debtor-in-possession, we were authorized to operate our business but could not
engage in transactions outside the ordinary course of business without the
approval of the Court.
While the Chapter 11 filings constituted a default under our various
financing arrangements, Section 362 of the Bankruptcy Code imposes an automatic
stay that generally precludes creditors and other interested parties from taking
any remedial action in response to such resulting default without prior
Bankruptcy Court approval. In addition, under the Bankruptcy Code, we had the
power to assume or reject executory contracts, including lease obligations.
Parties affected by these rejections were able to file claims with the Court in
accordance with the reorganization process. We actively engaged in this process
and reviewed all claims and executory contracts, reaching final decisions with
respect to assuming or rejecting the contracts and paying claims.
No trustee or creditors' committee was appointed in this case. The
management at the time of the Petition Date moved to retain a business broker
that would market our assets, including our intellectual property assets, with a
view towards conducting an auction of our assets. A group of shareholders
objected to this contemplated disposition of our assets and sought to remove our
then-existing board of directors by soliciting support from other shareholders.
This group of shareholders who sought to solicit support for the removal of
management (the "Solicitors") included the following persons: David Alexander,
Bart Barnwell, BDR Consulting, Inc. (Jimmy D. Swink, Jr., President), Robert
Burkett, David Crews, Sidney Dabbs, Dennis Hendren, Robert McHenry, Richard
O'Brien, Lewis Pollack and Charles Worden. The Solicitors reported on a
Schedule 13D/A filed with the SEC that they organized for the purpose of holding
their shares in order to be recognized as "Debtor" under Bankruptcy Rule 9001(5)
by the Court. The Solicitors also reported that they beneficially owned an
aggregate of 2,651,887 shares of common stock which was reported to be 21.0 % of
the Company's common stock outstanding at that time. According to the 13D/A,
the Solicitors orally agreed to hold and vote their shares together and to
solicit support in order to be named the "Debtor" under Bankruptcy Rule 9001(5)
on behalf of Cytomedix, Inc.
The Solicitors successfully obtained consents from other shareholders which
held sufficient shares that, when combined with the Solicitors' shares,
constituted a majority of the shares outstanding at that time. The consents,
24
dated September 27, 2001, represented a vote for and approval of the following
actions: (a) the recall and removal of each of the current members of the board
of directors of the Company; and (b) the election and appointment of the
following individuals as new directors of the Company to serve until their
successors are duly elected and qualified: Messrs. Robert Burkett, David Crews,
and Charles Worden. The consents also contemplated that the newly-constituted
board of directors (the "Board") would consider the following actions: (a)
whether to cause the termination of employment of all of current members of the
Company's management and the appointment of new management by the
newly-constituted board of directors; (b) whether to cause the Company to obtain
debtor-in-possession financing on such terms and conditions as the
newly-constituted board of directors may approve as in best interest of the
Company, its creditors and shareholders; and (c) whether to cause the retention
by the Company of Mr. Kent Smith, Dr. Robin Geller and Mr. John Connally III as
consultants to the Company.
The consents also authorized the Board of the Company to take any actions
reasonably necessary to effectuate the reorganization of the Company as a going
concern or, in the event that the Board determined that a liquidation of the
Company is in the best interest of the Company's stockholders and creditors, any
actions reasonably necessary for such liquidation.
The Company received the consents from the shareholders and determined that
the consents had been executed by shareholders holding a majority of the
Company's outstanding common stock on such date. The consent solicitation
became effective on September 28, 2001. Former management objected to the
validity of the consent solicitation by filing a formal objection with the
Court. On October 15, 2001, however, former management withdrew its objections
to the consent solicitation and announced in a pleading filed with the Court
that they had tendered their resignations "as of the date the consent
solicitation became effective." These events were reported on a Form 8-K filed
with the SEC on October 17, 2001.
Upon former management's withdrawal of its objections, the Company
delivered prompt notice of those actions authorized pursuant to the consent
solicitation to the shareholders who did not consent in writing but who, if such
action had been taken at a shareholders' meeting, would have been entitled to
notice of the meeting. These notices were mailed to shareholders on October 17,
2001.
The Board then appointed Mr. Kent T. Smith as Chief Executive Officer. Mr.
Smith had served as our Vice President of Sales and Marketing from April 2000
until being laid off in late June 2001. The Board also approved the hiring of
Jimmy D. Swink, Jr., as Reorganization Manager for us. Mr. Swink has been a
contract consultant with us since our inception, is the collateral agent for the
holders of outstanding 10% Notes and is a holder of a substantial amount of our
equity.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
As noted above, we filed for bankruptcy on August 7, 2001. This event had
a direct impact on all of our revenues and expenses described below.
Our revenues, cost of sales and gross margin for the nine months ended
September 30, 2001 decreased as compared to the same period in 2000. During 2001
our management focused resources on the Procuren Acquisition described above and
the AutoloGel operations diminished.
Our losses of $9,400,979 from discontinued operations and disposal of
discontinued operations relates to the Procuren shutdown as described above.
Our compensation expense (excluding discontinued operations) for the nine
months ended September 30, 2001 was approximately $1,114,682 as compared to
$5,267,464 for the same period in 2000. The decrease in the compensation
expense in 2001 compared to 2000 was primarily due to $4,249,566 of non-cash
amortization expense of deferred compensation generated from the granting of
options to the executives during the same period in 2000.
Our consulting expenses (excluding discontinued operations) for the nine
months ended September 30, 2001 were approximately $1,225,864 as compared to
$7,834,335 for the same period in 2000. The decrease in the consulting expenses
in 2001 compared to 2000 was primarily due to the costs incurred from the
issuance of stock and options to acquire our common stock, which amounted to
$7,508,000 of non-cash costs in addition to the cash costs of $326,335 in the
nine months ended September 30, 2000. These expenses were mainly related to
services provided to us in the areas of marketing, investor relations and
management placement.
26
During the nine-month period ended September 30, 2001, we incurred
professional fees (excluding discontinued operations) of approximately
$1,221,591 as compared to $1,091,603 for the same period in 2000. The increase
in the professional fees in 2001 compared to 2000 was primarily due to an
increase in legal and accounting fees incurred in connection with registrations
statements being filed with the SEC.
Our general and administrative expenses (excluding discontinued operations)
for the nine months ended September 30, 2001, were $1,555,212 compared to
$927,604 for the same period in 2000. 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 resulting from the
hiring of additional management and moving into new corporate headquarters.
Our interest expense for the 2001 period was $5,489,430, as compared to
$9,141 for the 2000 period. The increase in interest expense in the 2001 period
was primarily due to the non-cash amortization of debt discount on the Procuren
acquisition debt and interest on the debt used to purchase the Procuren
operations.
During the nine months period ended September 30, 2001, we incurred
reorganization expenses of $815,373 related to the write off of the unamortized
debt discount and loan cost. This was a result of adjusting the carrying amount
of the debt to the allowed claim amount.
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
As noted above, we filed for bankruptcy on August 7, 2001. This event had
a direct impact on all of our revenues and expenses described below.
Our revenues, cost of sales and gross profit for the three months ended
September 30, 2001 decreased as compared to the same period in 2000. During 2001
our management focused resources on the Procuren acquisition described above and
the AutoloGel operations diminished.
Our losses of $4,902,665 from discontinued operations and disposal of
discontinued operations relates to the Procuren shutdown as described above.
Our compensation expense for the three months ended September 30, 2001 was
approximately $134,760 as compared to $2,421,999 for the same period in 2000.
The decrease in the compensation expense in 2001 compared to 2000 was primarily
due to $1,981,234 of non-cash amortization expense of deferred compensation
generated from the granting of options to the new executives and our employment
of additional personnel in the first half of 2000.
Our consulting expenses for the three months ended September 30, 2001 were
approximately $137,152, as compared to $1,802,937 for the same period in 2000.
The decrease in the consulting expenses in 2001 compared to 2000 was primarily
due to us winding down operations as we entered Chapter 11.
Our general and administrative expenses for the three months ended
September 30, 2001, were $525,528, as compared to $435,169 for the same period
in 2000. The slight 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 early in the third quarter 2001.
Our interest expense for the 2001 period was $252,245, as compared to
$3,107 for the 2000 period. The increase in interest expense in the 2001 period
was attributable to the increase in the debt used to purchase and re-finance the
Procuren operations.
During the three months period ended September 30, 2001, we incurred
reorganization expenses of $815,373 related to the write off of the unamortized
debt discount and loan cost. This was a result of adjusting the carrying amount
of the debt to the allowed claim amount.
26
LIQUIDITY AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 2001
On August 7, 2001, the Company filed bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code because if its lack of liquidity and demanding cash needs.
We were authorized by the Court to conduct our business as debtor-in-possession,
but we could not engage in transactions outside the ordinary course of business
without prior court approval.
As of the quarter ended September 30, 2001, the Company had not generated
positive cash flow from operations. At September 30, 2001, we had cash and cash
equivalents of approximately $76,947. Working capital at September 30, 2001 was
a deficit of approximately $9,919 after reclassifying approximately $5,323,000
to long-term liabilities as a result of the Chapter 11 filing. Filing for
bankruptcy constituted a default under our various financing arrangements.
SUBSEQUENT EVENTS
Because this report is filed late and subsequent events have occurred since
the end of the time period covered by this report, this report must be read in
light of the following material events occurring subsequent to September 30,
2001. These events are discussed below and many have been previously reported
in Forms 8-K filed with the SEC after September 30, 2001.
The Court allowed us to obtain approximately $800,000 in
debtor-in-possession financing (DIP Financing). This money provided us with
working capital and funding to pay post-petition bills. We continue to pay
post-petition bills in the ordinary course of business.
In connection with the Company's First Amended Plan of Reorganization with
All Technical Amendments (the "Plan"), we initiated a private offering to
accredited investors only (as said term is defined by Rule 501(a) of Regulation
D) pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated thereunder. The aggregate proceeds of that offering
total $3,214,252. For each $1.00 invested in the private offering, investors
received one share of common stock, 1/4th of a Class A Warrant (exercisable for
2 years at $1.00 per share) and 3/20ths of a Class B Warrant (exercisable for 3
years at $1.50 per share).
On July 11, 2002, upon completion of the Company's raising the minimum
aggregate amount of $2,800,000 in the private offering, the Company's Plan was
deemed effective and we emerged from bankruptcy. The Plan in its entirety was
filed as an exhibit to a Form 8-K filed with the SEC on June 28, 2002. Under
the Plan, all of the Company's securities or other instruments or documentation
representing a claim against or an equity interest in the Company were canceled
and of no further force or effect. Holders of certain claims or securities were
entitled to receive new securities from the Company in exchange for their claims
or equity interests in the Company prior to bankruptcy.
Under the Plan, holders of old common stock receive one share of new common
stock for every five (5) shares of old common stock. The reverse split of our
common stock occurred on July 26, 2002. On such date, our common stock began
trading under a new symbol - CYME. The reverse split is not reflected in the
accompanying financial statements.
The new common stock succeeded to the registered status of the old common
stock under Rule 12g-3 as explained in 3S and 5S Rule 12g-3 in the Division of
Corporation Finance: Manual of Publicly Available Telephone Interpretations -
March 1999 Supplement.
In conjunction with the Plan, we executed new corporate documents and filed
them with the Delaware Secretary of State as required. These new corporate
documents include the Restated Certificate of Incorporation, the Amended and
Restated Certificate of Designation and the Restated By-Laws.
27
Under the Plan, the only remaining members of the Board as of July 11, 2002
(the Plan's effective date) were Messrs. Robert Burkett and David Crews. On
August 19, 2002, our Board appointed Mr. Steve Holden as the third member of the
Board.
In October 2001, our principal executive offices were relocated from Three
Parkway North, Suite 200, Deerfield, Illinois 60015 to Edens Tower Plaza, 790
Frontage Road, Northfield, Illinois 60093. In August 2002, we moved our
corporate headquarters from Northfield, Illinois to 1523 S. Bowman, Suite A,
Little Rock, Arkansas 72211. Our telephone number at the Arkansas location is
(501) 219-2111.
During bankruptcy, we began developing a new business model that would
enable us to provide a simpler, lower cost method of wound care. This new
distribution plan includes the sale of single use, licensed disposable kits to
qualifying physicians and wound care centers. We have directly and indirectly
entered into license agreements that have enabled us to introduce our treatment
capabilities for testing in nationally recognized wound care treatment centers
and long-term nursing home facilities. We are implementing a new business plan
and strategy, and our failure to successfully implement its business plan would
adversely affect our business, prospects, operating results and financial
condition.
If we do not have sufficient working capital and are unable to generate
revenues or raise additional funds, the following may occur: delaying the
implementation of our new business plan or significantly reducing the scope of
the business plan; delaying some of our development and clinical testing;
delaying our plans to initiate government regulatory and reimbursement approval
processes for our wound treatment technologies; and postponing the hiring of new
personnel. The occurrence of any or all of these events could have a material
adverse effect on the Company.
The Company's success is also impacted by factors outside of the Company's
control. Our therapies are subject to governmental regulation by numerous
governmental authorities, including the United States Food and Drug
Administration. Changes in regulation or failure to obtain required approvals
would have a material adverse impact on the Company. Because AutoloGel is
provided to healthcare providers, many of these providers in turn seek
reimbursement from third party payors such as Medicare, Medicaid and other
private insurers. Presently, neither Medicaid nor Medicare provides
reimbursement for AutoloGel treatment. Healthcare providers' inability to
obtain third-party reimbursement for the treatment could have an adverse effect
on the Company's success.
Although Cytomedix is currently a publicly held company, there can be no
assurance as to whether an active trading market for our common stock will be
developed or maintained. Some shareholders may not want shares in a company
recently in bankruptcy and may sell their shares. The prices for Cytomedix
common stock may be influenced by many factors, including the depth and
liquidity of the market for the shares, our results of operations, investors'
view of the new business plan, changes in economic conditions in this industry
and general economic conditions.
SUMMARY OF THE FIRST AMENDED PLAN OF REORGANIZATION WITH ALL TECHNICAL
AMENDMENTS
Shortly after removal of prior management, new management focused on the
formulation of a plan of reorganization that would enable us to reorganize and
emerge quickly from Chapter 11 in order to preserve our value as a going
concern. Our limited available funds mandated that we move swiftly to
reorganize.
We engaged in negotiations with several interested parties in the case,
including holders of the 12% convertible secured promissory notes (the "12%
Notes") and 10% convertible secured promissory notes (the "10% Notes"), Charles
Worden, Curative Health Services, Inc., and others. Concurrently, we had
discussions with prospective new investors about the terms of an investment in
the Company to fund our reorganization. Among the myriad factors considered in
these various discussions and negotiations were our business plan and projected
financial results, the amounts and nature of claims asserted, the time, expense,
and risks involved in failing to obtain consensus on a plan of reorganization,
the adverse impact of a prolonged case, and the alternatives to reorganization.
The Plan reflects understandings reached with certain noteholders,
prospective new investors, and Charles Worden regarding the terms to be
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incorporated in a plan of reorganization. We developed the Plan in a manner
that we believe most fairly treats all classes, taking into consideration the
relative rights and negotiating positions of new investors and various competing
claimants and equity interest holders.
On March 21, 2002, we filed our initial plan of reorganization with the
accompanying disclosure statement and filed a motion to approve the adequacy of
the disclosure statement. On April 23, 2002, the Court approved the disclosure
statement and related notices, established voting procedures and set the
confirmation hearing date for June 6, 2002. We then amended the plan of
reorganization, and on April 24, 2002, we filed our First Amended Plan of
Reorganization with the accompanying disclosure statement. After such date, we
made certain technical amendments to the Plan. On June 14, 2002, finding that
the required Impaired (defined below) classes had voted to accept the First
Amended Plan of Reorganization, the Court confirmed the Company's First Amended
Plan of Reorganization with Technical Amendments. On June 27, 2002, the Court
approved other technical amendments to the Plan and the Company's First Amended
Plan of Reorganization with All Technical Amendments (the "Plan"). The Court's
confirmation of the Plan was reported on an 8-K filed with the SEC on June 28,
2002. Both the confirmation order and the Plan were attached as exhibits to
that report.
Although the Court entered the confirmation order on June 14, 2002, the
Plan and confirmation order did not become effective until we raised the minimum
aggregate amount ($2.8 million) through the private offering of shares of common
stock with warrants. The private offering was initiated in conjunction with the
Plan and pursuant to Rule 506 of Regulation D, promulgated under 4(2) of the
Securities Act of 1933. On July 11, 2002, the Company had raised the minimum
aggregate amount from private accredited investors and such amount was released
from the escrow account to the Company; said date serves as the "Effective Date"
of the confirmation order and the Plan.
SUMMARY OF CLASSIFICATION AND TREATMENT OF ALLOWED CLAIMS AND EQUITY INTERESTS
UNDER THE PLAN
Under the Plan, allowed claims against and equity interests in the Company
are divided into classes according to their relative seniority and other
criteria. A "Claim" is any claim against the Debtor, whether or not asserted,
as defined in section 101(5) of the Bankruptcy Code. An "Equity Interest" in
the Company is defined as any ownership interest evidenced by any share
certificate or other instrument, whether or not transferable or denominated
"stock" (including, without limitation, interests denominated as common stock or
preferred stock), or similar security, and any warrant or right (other than a
right to convert) to purchase or subscribe to any such ownership interest. The
term "Allowed" as used in this report means that the Claim or Equity Interest
has been approved by final order of the Court or authorized by the Plan.
Section 1122 of the Bankruptcy Code requires that a plan of reorganization
classify Claims and Equity Interests. The classes of Claims and Equity
Interests, the treatment of those classes under the Plan, and the securities and
other property to be distributed under the Plan are described below. The
Bankruptcy Code also provides that, except for certain Claims classified for
administrative convenience, a plan of reorganization may place a Claim or Equity
Interest in a particular class only if such Claim or Equity Interest is
substantially similar to the other Claims of such class. The Plan separates
the classified Claims and Equity Interests into the following classes:
"Class 1A Claims" Secured Claims under the 12% Notes
"Class 1B Secured Claims" Secured Claims under the 10% Notes
"Class 1C Claims" Secured Claims of Charles Worden, Sr.
"Class 1D Claims" Secured Claims Under the Curative Royalty Agreement
"Class 2 Claims" Priority Employee Claims
"Class 3 Claims" General Unsecured Claims
"Class 4A Claims" Existing Series A Preferred Stock
"Class 4B Claims" Existing Series B Preferred Stock
"Class 5 Claims" Existing Common Stock
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"Class 6 Claims" Existing Stock Options
"Class 7 Claims" Other Equity Interests
Securities outstanding prior to the effective date of the Plan (the
"Effective Date") are identified as "Existing." Securities issued upon or after
the Effective Date are identified as "New."
UNCLASSIFIED CLAIMS:
The Plan also provides treatment for certain unclassified Claims
represented by Administrative Claims, Postpetition Senior Secured Notes, and
certain Priority Tax Claims. Administrative Claims, Priority Tax Claims, and
Secured Tax Claims have not been classified and are excluded from classification
in accordance with Bankruptcy Code section 1123(a)(1). The treatment under the
Plan of these unclassified Claims is set forth below.
Administrative Claims represent Claims for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code,
including, but not limited to, Postpetition Senior Secured Notes (representing
the Debtor-In-Possession Financing), the actual and necessary costs and expenses
incurred after the Petition Date of preserving the estate and operating the
business of the Cytomedix (including wages, salaries, or commissions for
services rendered after the Petition Date), Professional Claims, and all fees
and charges assessed against the estate under chapter 123 of title 28, United
States Code. These are collectively referred to as Allowed Administrative
Claims.
The Plan provides that each holder of an Allowed Administrative Claim that
has not been satisfied during the reorganization case will receive, on account
of and in full satisfaction of such Allowed Administrative Claim, cash equal to
the Allowed amount of such Claim on the latest of (i) the Effective Date, (ii)
if disputed (or in the case of a Professional Claim not yet Allowed), upon entry
of a final order of the Court allowing such Claim, and (iii) the date on which
the Allowed Administrative Claim becomes due and payable in the ordinary course.
In lieu of receiving cash on account of its Allowed Administrative Claim,
if we so agree in our sole and absolute discretion, each holder of an Allowed
Administrative Claim may elect to exchange its Allowed Administrative Claim for
shares of New Common Stock at the administrative rate of $1.00 per share (a
Claimholder receives one share of New Common Stock in exchange for each $1.00 of
Allowed Claim, the "Administrative Rate").
Allowed Tax Claims are unclassified if they are "Allowed Priority Tax
Claims" (defined as a Claim entitled to priority under Bankruptcy Code section
507(a)(8)) or "Allowed Secured Tax Claims" (defined as a Claim of any taxing
authority that is a Secured Claim). Based on our review of filed proofs of
claim, we estimate total Allowed Priority Tax Claims at $17,993 as of September
30, 2001. This figure primarily represents Claims for unpaid withholding or
sales taxes.
The Plan provides that each holder of an Allowed Tax Claim will receive
deferred cash payments over a period not exceeding six years from the date of
assessment of such Allowed Tax Claim, in an aggregate amount equal to the amount
of such Allowed Tax Claim, plus interest from August 30, 2002, on the unpaid
portion thereof, without penalty of any kind, at a rate of four percent (4%) per
annum. The payment of each such Allowed Tax Claim will be made in equal
semi-annual installments, with the first installment due on the latest of (i)
the first business day following the end of the first full fiscal quarter
following the Effective Date, (ii) the first business day following the end of
the first full fiscal quarter following the date on which an order allowing such
Allowed Tax Claim becomes a final order, and (iii) such other time or times as
may be agreed with the holder of such Allowed Tax Claim. Each installment will
include simple interest on the unpaid balance of the Allowed Tax Claim, without
penalty of any kind. In exchange for the treatment provided herein, all liens
securing an Allowed Secured Tax Claim are deemed discharged and released as of
the Effective Date.
30
CLASS 1A - HOLDERS OF 12% NOTES:
Class 1A is comprised of the Allowed Secured Claims of the holders of the
12% Notes. Allowed Class 1A Claims as of September 30, 2001 are approximately
$2,235,000. A minimum of 25% of each holder's Allowed Class 1A Claim (and, at
the election of such holder, up to 50% of its Allowed Class 1A Claim) is
converted into shares of New Common Stock at the Administrative Rate. All
remaining Allowed Class 1A Claims not converted to shares of New Common Stock at
the Administrative Rate are converted to New Series A Convertible Preferred
Stock at a rate of one share of New Series A Convertible Preferred Stock for
each one dollar of said remaining Allowed Class 1A Claim.
The Restated Certificate of Designation provides that the Company is
prohibited, so long as any shares of New Series A Convertible Preferred Stock
are outstanding, from granting any security interest, lien, or encumbrance on
any of the Company's intellectual property assets.
CLASS 1B - HOLDERS OF 10% NOTES:
Class 1B is comprised of the Allowed Secured Claims of the holders of the
10% Notes. Allowed Class 1B Claims as of September 30, 2001 are approximately
$2,526,167. A minimum of 25% of each holder's Allowed Class 1B Claim (and, at
the election of such holder, up to 50% of its Allowed Class 1B Claim) is
converted into shares of New Common Stock at the Administrative Rate. All
remaining Allowed Class 1B Claims not converted to shares of New Common Stock at
the Administrative Rate are converted to New Series B Convertible Preferred
Stock at a rate of one share of New Series B Convertible Preferred Stock for
each one dollar of said remaining Allowed Class 1B Claim.
The Restated Certificate of Designation provides that the Company is, so
long as any New Series B Convertible Preferred Stock are outstanding, from
granting any security interest, lien, or encumbrance on any of the Company's
intellectual property assets.
CLASS 1C - SECURED CLAIMS OF WORDEN:
Class 1C is comprised of the Allowed Secured Claims of Charles Worden Sr.
which total approximately $102,822 as of September 30, 2001. This estimate
includes projected accrued interest on the principal balance of $72,100 notes
payable and reimbursement claims of $22,125. Each holder of an Allowed Class 1C
Claim receives New Common Stock at the Administrative Rate in full and complete
satisfaction of such holder's Allowed Class 1C Claim.
CLASS 1D - SECURED CLAIMS UNDER THE CURATIVE ROYALTY AGREEMENT:
Class 1D is comprised of the Allowed Secured Claims under the royalty
agreement entered into as of December 26, 2000, between Curative and the
Company, as amended by a first amendment thereto dated as of April 20, 2001
(collectively, the "Curative Royalty Agreement" ). The total Allowed Class 1D
Secured Claims are $30,842 based on payments on the DePuy Royalty received
through the period ending September 30, 2001, that have not been distributed to
the holders of Class 1D Secured Claims.
The Plan provides that each holder of an Allowed Class 1D Secured Claim
receives cash on the Effective Date in an amount equal to the Allowed amount of
its Class 1D Secured Claim. The Plan also provides that, from and after the
Effective Date, all rights under the Curative Royalty Agreement continue in full
force and effect, and the legal, equitable, and contractual rights arising
thereunder are unaltered (including the retention of all prepetition liens
granted under the Curative Royalty Agreement); provided, however, that following
the Effective Date, distributions to Waverly Holdings, LLC, an Arkansas Limited
Liability Corporation ("Waverly") of its proportionate share of royalties
payable under the Curative Royalty Agreement may be made directly to Waverly
instead of to Curative.
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CLASS 2 - ALLOWED PRIORITY UNSECURED CLAIMS OF EMPLOYEES:
Class 2 is comprised of the Allowed Claims of employees against Cytomedix
that are specified as having priority in Bankruptcy Code sections 507(a)(3) or
507(a)(4), not to exceed $4,650 per employee. Such Claims include certain
Claims against the Company by its employees for unpaid prepetition wages,
salaries, or commissions. We estimate total Allowed Class 2 Claims as of
September 30, 2001, are approximately $114,989.
Claims in Class 2 are unimpaired under the Plan ("Unimpaired" and
"Impaired" as defined by 1124 of the Bankruptcy Code). Each holder of an
Allowed Class 2 Claim will receive cash on the Effective Date equal to the
amount of said holder's Allowed Class 2 Claim. In lieu of receiving cash for
its Allowed Class 2 Claim, if we so agree in our sole and absolute discretion,
each holder of an Allowed Class 2 Claim (or its successors or assigns) may elect
in writing to exchange its Allowed Class 2 Claim for shares of New Common Stock
at such rate as we determine in our sole and absolute discretion.
The New Common Stock to be issued as a result of said conversion will be
distributed in twelve equal monthly installments commencing on August 30, 2002,
(the "Initial Distribution Date" or the last business day of the first full
month following the Effective Date) and continuing on each of the succeeding
eleven monthly anniversaries following the Initial Distribution Date. To
receive shares of New Common Stock, the recipient must affirmatively covenant to
the Short-Selling Bar Representation (which requires the recipient of the New
common stock to refrain from engaging in short sales for a period of five years
following the Effective Date).
CLASS 3 - ALLOWED GENERAL UNSECURED CLAIMS:
Class 3 is comprised of the Allowed General Unsecured Claims of Cytomedix
that are not cured, paid, released, or waived pursuant to the Plan, assumed by
the Company pursuant to the Plan or agreements incorporated in the Plan, or
classified in any other class of Claims. Class 3 Claims include, without
limitation, (i) Claims for goods sold and services rendered, (ii) Claims for
monies lent, (iii) Claims based upon guarantees of performance or payment of the
obligations or duties of any person, (iv) Claims for contribution,
reimbursement, or indemnity (excluding Claims for indemnification rights), (v)
Claims for fines, penalties, or assessments, (vi) Claims for tort liability,
(vii) Claims arising from the rejection of executory contracts and unexpired
leases, and (viii) Claims arising for environmental or bio-hazardous remediation
at locations that are not included in the assets vesting in the Company on the
Effective Date. Holders of Class 3 Claims may receive exchange consideration
under either Option 3A or 3B.
Under Option 3A, the Company pays to holders of Allowed Class 3 Claims a
sum of cash equal to twelve percent of such Allowed Class 3 Claim according to
the following distribution schedule: one-third shall be paid on the Initial
Distribution Date; one-third on the sixth month anniversary of the Initial
Distribution Date; and one-third on the first anniversary of the Initial
Distribution Date.
Under Option 3B, the holders of Allowed Class 3 Claims receive one share of
New Common Stock for each five dollars of Allowed Class 3 Claims, with the New
Common Stock to be distributed in twelve equal monthly installments commencing
on the Initial Distribution Date and continuing on each of the succeeding eleven
monthly anniversaries. To receive shares of New Common Stock, the recipient must
affirmatively covenant to the Short-Selling Bar Representation. Holders of
Allowed Class 3 Claims aggregating less than $1,000.00 are treated under Option
3A in respect of such Claims and may not elect treatment of such Claims under
Option 3B.
CLASS 4 - ALLOWED PREFERRED STOCK INTERESTS:
Class 4A is comprised of all Allowed Equity Interests represented by the
1,625,000 shares of Existing Series A Preferred Stock issued and outstanding
prior to the Effective Date. Prior to bankruptcy, the Existing Series A
Preferred Stock had a liquidation preference, in the event of the Company's
liquidation, dissolution, or winding up, of $1.00 per share in all assets
remaining after payment of liabilities. Additionally, we were required to redeem
the Existing Series A Preferred Stock on the earlier of the seventh anniversary
of the date of issuance of the securities or the end of the fiscal quarter at
which the Company had gross revenues for four consecutive fiscal quarters of not
less than $50 million.
32
The Plan provides, at such time, if at all, that the Company attains
aggregate gross revenues for four consecutive fiscal quarters of not less than
$10 million (the "Series A Precondition"), holders of Allowed Class 4A Equity
Interests will receive one share of New Common Stock for every five (5) shares
of Existing Series A Preferred Stock held as of the Effective Date.
The New Common Stock to be issued hereunder will be distributed in twelve
equal monthly installments commencing on the ninetieth (90th) day following
satisfaction of the Series A Precondition and continuing on each of the
succeeding eleven monthly anniversaries that follow said initial distribution.
Class 4B is comprised of all Allowed Equity Interests represented by the
Existing Series B Preferred Stock issued and outstanding prior to the Effective
Date. There are approximately 5,115,000 shares of Existing Series B Preferred
Stock issued and outstanding. Prior to bankruptcy, the Existing Series B
Preferred Stock had a liquidation preference, in the event of the Company's
liquidation, dissolution, or winding up, of $0.0001 per share in all assets
remaining after payment of liabilities and of the liquidation preference of the
Existing Series A Preferred Stock.
The Plan provides for Allowed Class 4B Equity Interests to be redeemed in
cash by the Company at the stipulated liquidation preference of $0.0001 per
share, or $511.50 in the aggregate.
CLASS 5 - EXISTING COMMON STOCK:
Class 5 is comprised of all Allowed Equity Interests represented by the
Company's Existing Common Stock issued and outstanding as of the Effective Date.
Holders of Allowed Class 5 Existing Common Stock receive one share of New Common
Stock for every five shares of Existing Common Stock. As a result of this
exchange, holders of Allowed Class 5 Equity Interests receive approximately
2,530,120 shares of New Common Stock in exchange for the estimated 12,650,598
shares of Existing Common Stock outstanding on the Petition Date.
We notified the shareholders holding shares of Existing Common Stock that
their certificates representing the Existing Common Stock had been canceled. We
directed those shareholders to exchange their old certificates for new
certificates representing the accurate number of shares of New Common Stock
after giving effect to the one-for-five reverse split. The new cusip number for
the shares of New Common Stock is 23283B 20 4.
The reverse split occurred after close of business on Thursday, July 25,
2002. Beginning on July 26, 2002, after giving effect to the reverse split, the
New Common Stock began trading under the new stock symbol CYME.
CLASS 6 - EXISTING STOCK OPTIONS:
Class 6 is comprised of all Allowed Equity Interests represented by the
Existing Stock Options. Cytomedix had over six (6) million options or warrants
representing contractual rights of persons prior to the Effective Date to
purchase or acquire Existing Common Stock. Holders of Allowed Class 6 Existing
Stock Options do not receive or retain any property or distributions for such
Allowed Claims or Allowed Equity Interests.
CLASS 7 - OTHER EQUITY INTERESTS, INCLUDING SECTION 510(B) CLAIMS:
Class 7 is comprised of all other Allowed Claims or Equity Interests in
Cytomedix, including Allowed Section 510(b) Claims, any Allowed Claims arising
from the rejection of agreements granting Existing Stock Options (to the extent,
if any, that they constitute executory contracts), and any Claims based upon
indemnification rights. We are not aware of any filed or scheduled Class 7
Claims and estimate these Claims at zero.
Class 7 is Impaired under the Plan. Holders of Class 7 Claims and Equity
Interests, if any, do not receive or retain any property or distributions on
account of such Allowed Claims or Allowed Equity Interests.
ASSUMPTION AND REJECTION OF EXECUTORY CONTRACTS:
In addition, under the Bankruptcy Code we could assume or reject executory
contracts, including lease obligations. Parties affected by these rejections
could file claims with the Court in accordance with the reorganization process.
33
We actively engaged in this process and reviewed all claims and executory
contracts, reaching final decisions with respect to assuming or rejecting the
contracts. These decisions were included in the Plan, filed as an exhibit to
the Form 8-K filed with the SEC on June 28, 2002.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 2001, the Company was not a party to any pending legal
Proceeding, other than the Company's voluntary petition for relief under
Chapter 11 filed on August 7, 2001.
However, after July 11, 2002, the Company commenced the following
litigation in the District Court for the Northern District of Illinois, Eastern
Division: (i) Cytomedix, Inc. v. LB Hyperbarics, Inc., et al., Case No. 02 C
4774; (ii) Cytomedix, Inc. v. Perfusion Partners & Associates, Inc., Case No. 02
C 4776; (iii) Cytomedix, Inc. v. James Gandy, et al., Case No. 02 C 4779; (iv)
Cytomedix, Inc. v. Little Rock Foot Clinic, P.A., et al., Case No. 02 C 4782;
(v) Cytomedix, Inc. v. Autologuous Blood Technology, L.L.C., et al., Case No. 02
C 4863; and (vi) Cytomedix, Inc. v. Safeblood Technologies, Inc., et al., Case
No. 02 C 4773. In each of these cases, the Company has asserted that the
Defendants have infringed the Company's patents and engaged in unfair
competition. In the Gandy and Little Rock proceedings, breaches of contract are
also asserted. In all these actions the Company seeks unspecified damages and
injunctive relief. The cases are generally in the early stages involving
motions to dismiss by the defendants in each case, and responses by the Company.
Thus far, the Company has successfully defended against a motion to dismiss in
the LB Hyperbarics case. Briefing on the motions to dismiss in all the other
pending cases (except the Gandy adversary, where a responsive pleading has not
yet been filed) is proceeding and rulings on these pending motions are expected
by year end 2002.
In September 2002, the Company filed with the Bankruptcy Court for the
Northern District of Illinois, Eastern Division, an adversary proceeding
captioned Cytomedix, Inc. v. Keith Bennett, et al., Adv. No. 02 A 01292. In
this action, the Company objects to Bennett's $1.1 million claim asserted as a
Class 3 general unsecured claim under Option 3A (under which Bennett would
receive a 12% cash recovery on his Allowed Claim, if any) in the Company's
bankruptcy case. In addition, the Company asserts affirmative claims of patent
infringement, breach of contract, and unfair competition. Management intends to
vigorously pursue the litigation. The Company has successfully defended against
Bennett's motions to dismiss or, alternatively, to compel arbitration or
transfer venue of the case to a federal court in Arkansas.
Although the Company has not yet been served with the complaint, it has
come to our attention that on October 23, 2002, Harvest Technologies Corp.
initiated an action against the Company in the Federal District Court for the
District of Massachusetts, Case No. 02-12077. Plaintiff seeks a declaratory
judgment that its activities do not constitute the infringement of any patent
rights claimed by the Company, and it seeks damages for alleged false
advertising, unfair competition, intentional interference with contractual
rights or a prospective business relationship and unfair and deceptive trade
acts or practices as defined by Massachusetts' law. The claim for damages is
unliquidated. The Company vigorously disputes the allegations, and intends to
bring counterclaims against Harvest for patent infringement and unfair
competition. However, an unfavorable resolution of, settlement, or defense
costs related to this lawsuit could have a material adverse effect on our
business, results of operations or financial condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
General Information
Between June 30, 2001 and September 30, 2001, we did not issue any
additional shares of stock.
34
As of September 30, 2001, we had issued and issuable warrants to acquire
4,467,490 shares of common stock and issued and issuable options to acquire
6,666,532 shares of common stock (but see Updating Information below). The
exercise prices on these warrants and options ranged from $.02 to $10.00 per
share.
On May 25, 2001, we filed a registration statement (SB-2/A) covering the
securities underlying the warrants and the convertible notes.
Issuance of 12% convertible secured promissory notes.
As reported above in more detail, the Company did not make payments on its
outstanding 10% Notes on the April 15, 2001 maturity date. Instead, the Company
entered into a Consent, Waiver, Payoff and Exchange Agreement with Curative and
each of the three other Lenders providing for the partial pay-off of the notes
and the extension of the maturity date until April 15, 2002.
To fund this partial payoff of the 10% Notes, we issued 12% Notes, maturing
April 23, 2005. We issued the 12% Notes in reliance on the exemptions provided
in Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
promulgated thereunder. On April 23, 2001, we completed this private offering
of 12% Notes to a group of 53 accredited investors, as that term is defined by
Rule 501(a) of Regulation D. We issued 12% Notes with an aggregate principal
balance of $1,807,500; the aggregate net proceeds of this issuance (after
deducting placement fees of $144,600 paid to Crews and Associates of Little
Rock, Arkansas, professional fees and escrow fees of $54,300 and interest escrow
of $216,900) was $1,391,700, of which we used $1,325,000 to pay down the 10%
Notes described above. The remaining amount was used as working capital for the
Company.
Interest on the principal amounts of the 12% Notes accrued at a rate of 12%
per annum from the original date of issuance of the 12% Notes with interest
payable monthly. Each holder of a 12% Note could convert all or any part of the
principal amount of the note, including any accrued interest, into shares of the
Company's common stock at a conversion price equal to a price per share equal to
75% of the average of the three lowest intraday sale prices as reported by
Bloomberg Financial Markets (or an equivalent, reliable reporting service
mutually acceptable to a majority of the holders of the notes and the Company)
during the 20 trading days immediately preceding the date on which the 12% Note
was surrendered for conversion. This conversion price could not be less than
$2.00 per share and not more than $5.00 per share.
Issuance of shares upon conversion of the 10% convertible secured promissory
notes.
In June and July 2001, three of the holders of the original four 10% Notes
(Curative and two of the Lenders) elected to convert part of their debt into
shares of common stock. Curative converted a total of $168,019 of its 10% Note
into 342,500 shares of common stock. One of the Lenders converted $150,000 of
its 10% Note into 266,667 shares of common stock, and another Lender converted
$200,000 of its 10% Note into 370,834 shares of common stock.
Issuance of additional 10% convertible secured promissory notes and warrants to
purchase shares of common stock to those holders.
In June 2001, a group of third-party investors purchased the remaining
outstanding 10% Notes from Curative and the Lenders and agreed to subordinate
the 10% Notes to the 12% Notes. This same group of investors also loaned the
Company an additional $312,000 by increasing the outstanding principal amount of
the 10% Notes. The entire additional amount was used as working capital for the
Company.
As consideration for subordinating the 10% Notes and providing additional
financing, the Company issued to these third-party investors warrants
representing the right to purchase an aggregate of 364,289 shares of our common
stock on the same terms and conditions as the warrants issued to the original
noteholders (exercisable for 10 years at $0.50 or an average of the three lowest
intraday prices during the last twenty trading days per share).
35
Warrants issued to Fusion Capital Fund II, LLC and the exercise of those
warrants into shares of common stock.
On April 20, 2001, we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC ("Fusion"), pursuant to which Fusion agreed to
purchase on each trading day during the term of the agreement $26,250 of the
Company's common stock, up to an aggregate of $14,700,000. As consideration for
Fusion's purchase commitments, we issued to Fusion a warrant representing the
right to purchase 1,189,320 shares of common stock at $1.00 per share,
exercisable for five years.
In May 2001, Fusion exercised a portion of this warrant to purchase 657,424
shares of the Company's common stock, and then in June 2001, Fusion exercised
the remainder of the warrant and purchased an additional 91,298 shares of the
Company's common stock. Fusion exercised this warrant on a cashless basis and
was issued a total of 748,722 shares of common stock.
Exercise of warrant by Curative.
In June 2001, Curative exercised its warrant pursuant to its cashless terms
and was issued 200,000 shares of the Company's common stock.
Updating Information
Under the Plan, the 12% Notes and the 10% Notes are canceled on our books
and of no further force or effect. Holders of the 12% Notes are entitled to
exchange their 12% Notes for a combination of shares of our common stock and
Series A Convertible Preferred Stock. Each 12% Note holder receives one share
of either common stock or Series A Convertible Preferred Stock for every $1.00
owed under the 12% Note. Holders of the 10% Notes are entitled to exchange
their 10% Notes for a combination of shares of our common stock and Series B
Convertible Preferred Stock. Each 10% Note holder receives one share of either
common stock or Series B Convertible Preferred Stock for every $1.00 owed under
the 10% Note. Noteholders are entitled to be paid up to 50% of their claims in
our common stock.
Under the Plan, all outstanding warrants are canceled on our books and of
no further force or effect. Holders of warrants do not receive any exchange
consideration under the Plan.
The Plan includes a one-for-five reverse split of our outstanding common
stock. Therefore, all holders of our common stock are entitled to receive one
share of the new common stock for every five shares of common stock owned.
See Management's Discussion & Analysis for more detailed information.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The 10% Notes issued to Curative and the Lenders matured on April 15, 2001.
We did not make payments on the 10% Notes on the maturity date; however, on
April 20, 2001, we entered into a Consent, Waiver, Payoff and Exchange Agreement
with Curative and the Lenders providing for the partial pay-off of the notes and
the extension of the maturity date of the notes until April 15, 2002.
At September 30, 2001, the Company had failed to make monthly interest
payments on the 10% Notes and was in default owing interest in arrears in the
total amount of $32,363.
Our filing for bankruptcy constituted a default under both the 12% Notes
and 10% Notes. However, under the Plan, both the 12% Notes and the 10% Notes
have been cancelled and are of no further force or effect. See Updating
Information under Item 2 and Management's Discussion & Analysis for more
detailed information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the interim
period covered by this report.
36
However, subsequently in September and October 2001, a group of
shareholders objected to management's plan to market for sale the Company's
assets and solicited support from other shareholders to remove our then-existing
board of directors. Pursuant to this solicitation, shareholders representing a
majority of our voting shares submitted written consents for the removal of the
then-existing directors and the election of new directors: Messrs. Robert
Burkett, David Crews and Charles Worden. These new directors were recognized by
the Court on October 16, 2001.
See Management's Discussion & Analysis for more detailed information.
It should also be noted that the entry of the Court's order confirming the
Plan constituted an order of the Court authorizing the Company to take certain
corporate actions without the need for any further action by the Court or any of
the officers, directors, or shareholders of the Company. Pursuant to this
order, the Company was authorized and did take all actions necessary and
appropriate to execute and adopt the following: the Restated Certificate of
Incorporation, the Restated Bylaws, the Amended and Restated Certificate of
Designation, and the Long-Term Incentive Plan. The Court's confirmation of the
Plan also authorized the Company, among other things, to select our initial
directors and officers and to remove any directors or officers of the Company.
The Plan included the removal of Mr. Charles Worden from the Board. As
authorized, the Board subsequently appointed Mr. Steve Holden as the third
member of the Board.
ITEM 5. OTHER INFORMATION.
Prior to the date this 10-QSB was due, the Company filed for bankruptcy.
The Company did not file any periodic reports during bankruptcy. We did,
however, file our monthly operating reports required by the Court under the
cover of Forms 8-K and reported other current events under Forms 8-K. The
Company plans to file all missed reports for past periods and all reports which
become due. Because this report is filed late and subsequent events have
occurred since the end of the time period covered by this report, this report
must be read in conjunction with Management's Discussion and Analysis and in
conjunction with the Forms 8-K filed with the SEC after September 30, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Exhibits listed in the accompanying Exhibit Index are filed as part of
this report.
On the Form 8-K filed July 6, 2001, we reported the June 29 reductions in
personnel. We reported that we closed down all of the Procuren processing
centers, accelerating the earlier plan to terminate such operations during July.
We also reported that we would continue with minimal staff and continue to
explore strategic alternatives.
On the Form 8-K filed August 8, 2001, we reported our filing of a voluntary
petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in the
United States Bankruptcy Court of the Northern District of Illinois, Eastern
Division (Case No. 01- 27610) on August 7, 2001. We reported that, pursuant to
the bankruptcy filing, we remained in possession of our assets and properties
and that our business and affairs would continue to be managed by the Company's
directors and officers, subject in each case to the supervision of the Court.
Subsequent to September 30, 2001, we have reported other material events on
Forms 8-K filed with the SEC as follows:
October 17, 2001 Results of Consent Solicitation; Removal and Election
of New Directors
December 10, 2001 September 2001 Monthly Operating Report
February 22, 2002 August 2001 Monthly Operating Report
February 22, 2002 Amended September 2001 Monthly Operating Report
February 22, 2002 October 2001 Monthly Operating Report
February 22, 2002 November 2001 Monthly Operating Report
February 22, 2002 December 2001 Monthly Operating Report
February 22, 2002 January 2002 Monthly Operating Report
April 8, 2002 Filing of Plan of Reorganization
April 12, 2002 February 2002 Monthly Operating Report
April 12, 2002 March 2002 Monthly Operating Report
37
May 21, 2002 Filing of First Amended Plan of Reorganization
June 7, 2002 April 2002 Monthly Operating Report
June 28, 2002 Filing and Confirmation of First Amended Plan of
Reorganization with All Technical Amendments
July 16, 2002 Effective Date of Plan and Removal of Director under the
Plan
July 25, 2002 Reverse Split of Common Stock and Trading under New Symbol
August 21, 2002 Engagement of New Independent Accountant
August 26, 2002 Dismissal of Independent Accountant
October 3, 2002 May 2002 Monthly Operating Report
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Cytomedix, Inc.
/s/Kent T. Smith
- -----------------------------
Kent T. Smith
Chief Executive Officer
Date: November 11, 2002
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kent T. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Cytomedix, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
Date: November 11, 2002
/s/Kent T. Smith
Kent T. Smith
Chief Executive Officer
38
EXHIBIT LIST
2.1 Amended and Restated Asset Purchase Agreement, effective as of October
12, 2000 and executed as of December 26, 2000, by and among Cytomedix, Inc., CHS
Services, Inc. and Curative Health Services, Inc. (Previously filed on January
17, 2001, on Form 8-K, File No. 000-28443).
2.2 First Amended Plan of Reorganization with All Technical Amendments
(Previously filed on June 28, 2002, on Form 8-K, File No. 000-28443).
3.1 Restated Certificate of Incorporation of Cytomedix, Inc. (Previously
filed on November 7, 2002, on Form 10-QSB for quarter ended June 30, 2001, File
No. 000-28443).
3.2 Restated Bylaws of Cytomedix, Inc. (Previously filed on November 7,
2002, on Form 10-QSB for quarter ended June 30, 2001, File No. 000-28443).
4.1 Convertible Secured Promissory Note issued to Curative Health Services,
Inc., dated as of December 26, 2000 (Previously filed on January 17, 2001, on
Form 8-K, File No. 000-28443).
4.2 Convertible Secured Promissory Note issued to TSENVI, LLC, dated as of
December 26, 2000 (Previously filed on January 17, 2001, on Form 8-K, File No.
000-28443).
4.3 Convertible Secured Promissory Note issued to Bel-Cap Delaware, LLC,
dated as of December 26, 2000 (Previously filed on January 17, 2001, on Form
8-K, File No. 000-28443).
4.4 Convertible Secured Promissory Note issued to Bristol Investment Fund,
LLC, dated as of December 26, 2000 (Previously filed on January 17, 2001, on
Form 8-K, File No. 000-28443).
4.5 Warrant issued to Curative Health Services, Inc., dated as of December
26, 2000 (Previously filed on January 17, 2001, on Form 8-K, File No.
000-28443).
4.6 Warrant issued to TSENVI, LLC, dated as of December 26, 2000 (Previously
filed on January 17, 2001, on Form 8-K, File No. 000-28443).
4.7 Warrant issued to Bel-Cap Delaware, LLC, dated as of December 26, 2000
(Previously filed on January 17, 2001 on Form 8-K, Registration No. 000-28443).
4.8 Warrant issued to Bristol Investment Fund, LLC, dated December 26, 2000.
(Previously filed on January 17, 2001, on Form 8-K, Registration No. 000-28443).
4.9 Warrant issued to FAC Enterprises, Inc., dated as of December 26, 2000
(Previously filed on February 16, 2001, on Form SB-2, File No. 333-55818).
4.10 Warrant issued to Smoke Rise Investments, LLC dated as of February 13,
2001. (Previously filed on February 16, 2001, on Form SB-2, File No. 333-55818).
4.11 Warrant issued to The Kriegsman Group, dated as of December 26, 2000
(Previously filed on February 16, 2001, on Form SB-2, File No. 333-55818).
4.12 Amended and Restated Certificate of Designation of the Relative Rights
and Preferences of Series A Preferred, Series B Preferred and Common Stock of
Cytomedix, Inc. (Previously filed on November 7, 2002, on Form 10-QSB for
quarter ended June 30, 2001, File No. 000-28443).
10.1 Royalty Agreement, dated as of December 26, 2000, by and between
Cytomedix, Inc. and Curative Health Services, Inc. (Previously filed on January
17, 2001, on Form 8-K, File No. 000-28443).
39
10.2 Supply Agreement, dated as of December 26, 2000, by and between
Cytomedix, Inc. and Curative Health Services, Inc. (Previously filed on January
17, 2001, on Form 8-K, File No. 000-28443).
10.3 Securities Purchase Agreement, dated as of December 26, 2000, by and
among Cytomedix, Inc., TSENVI, LLC, Bel-Cap Delaware, LLC, Bristol Investment
Fund, Ltd. and Curative Health Services, Inc. (Previously filed on January 17,
2001, on Form 8-K, File No. 000-28443).
10.4 Registration Rights Agreement, dated as of December 26, 2000, by and
among Cytomedix, Inc., TSENVI, LLC, Bel-Cap Investments, Ltd., Bristol
Investment Fund, LLC and Curative Health Services, Inc. (Previously filed on
January 17, 2001, on Form 8-K, File No. 000-28443). 21
10.5 Security Agreement, dated as of December 26, 2000, by and among
Cytomedix, Inc., TSENVI, LLC, Bel-Cap Investments, Ltd., Bristol Investment
Fund, LLC and Curative Health Services, Inc. (Previously filed on January 17,
2001, on Form 8-K, File No. 000-28443).
10.6 Assignment and Assumption Agreement, dated as of December 26, 2000, by
and between Cytomedix, Inc. and Curative Health Services, Inc. (Previously filed
on January 17, 2001, on Form 8-K, File No. 000-28443).
10.7 Form of Lease Assignment and Assumption Agreement, dated as of December
26, 2000, by and between Cytomedix, Inc. and Curative Health Services, Inc.
(Previously filed on January 17, 2001, on Form 8-K, File No. 000-28443).
10.8 Assignment of Marks, dated as of December 26, 2000, by and among
Cytomedix, Inc., Curative Health Services, Inc. (formerly known as Curative
Technologies, Inc. and Curatech, Inc.) and CHS Services, Inc. (Previously filed
on January 17, 2001, on Form 8-K, Registration No. 000-28443).
10.9 Assignment of Patents, dated as of December 26, 2000, by and among
Cytomedix, Inc., Curative Health Services, Inc. (formerly known as Curative
Technologies, Inc. and Curatech, Inc.) and CHS Services, Inc. (Previously filed
on January 17, 2001, on Form 8-K, Registration No. 000-28443).
10.10 Assignment of Copyrights, dated as of December 26, 2000, by and among
Cytomedix, Inc., Curative Health Services, Inc. and CHS Services, Inc.
(Previously filed on January 17, 2001, on Form 8-K, Registration No. 000-28443).
10.11 License Agreement dated March 21, 2001, by and between Cytomedix, Inc.
and DePuy AcroMed, Inc. (Previously filed on April 16, 2001, on Form 10-KSB,
File No. 000-28443).
10.12 Consent, Waiver, Payoff and Exchange Agreement dated April 20, 2001,
by and among Cytomedix, Inc., Curative Health Services, Inc., Bel-Cap Delaware,
LLC, Bristol Investment Fund, Ltd. and TSENVI, LLC (Previously filed on April
27, 2001, on Form 8-K, File No. 000-28443).
22.1 Notice of Shareholders to Cytomedix, Inc. dated October 17, 2001.
99.1 Certificate of Chief Executive Officer of Cytomedix, Inc., pursuant to
18 U.S.C. 1350.
99.2 Cytomedix, Inc. Long-Term Incentive Plan (Previously filed on November
7, 2002, on Form 10-QSB for quarter ended June 30, 2001, File No. 000-28443).
40