<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number
CPC OF AMERICA, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 11-3320709
State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1133 4TH STREET STE. 200, SARASOTA, FL 34236
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(Address of principal executive offices)
941 906-9546
-----------------------------
(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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As of September 30, 2000, the Company had 4,755,647 shares of its $.0005 par
value common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
<S> <C> <C>
Condensed Balance Sheet at September 30, 2000 (unaudited) 3
Condensed Statements of Operations for the Three Months Ended
September 30, 2000 and September 30, 1999 (unaudited) 4
Condensed Statements of Operations for the Nine Months Ended
September 30, 2000 and September 30, 1999 (unaudited) 5
Condensed Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and September 30, 1999 (unaudited) 6
Notes to Condensed Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis or Plan of Operation 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE>
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Comopany)
Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30, 2000
-----------------------------
ASSETS
Current assets:
<S> <C>
Cash and equivalents $ 286,238
Prepaid and other 18,934
-----------------------------
Total current assets 305,172
Patents and trademarks - net 252,435
Equipment, net 6,408
-----------------------------
$ 564,015
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,954
-----------------------------
Total current liabilities 49,954
-----------------------------
Shareholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized,
Series A, 8,824 shares issued and outstanding 9
Series B, 71,429 shares issued and outstanding 71
Common stock, $.0005 par value, 20,000,000 shares authorized,
4,755,647 shares issued and outstanding 2,380
Additional paid in capital - preferred 933,045
Additional paid in capital - common 3,924,185
Unamortized stock option costs (215,000)
Deficit accumulated during the development stage (4,130,629)
-----------------------------
Total shareholders' equity 514,061
-----------------------------
$ 564,015
=============================
</TABLE>
3
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
Three months ended September 30, (April 11, 1996) to
2000 1999 September 30, 2000
================== ================== ====================
<S> <C> <C> <C>
Costs and expenses:
Research and development $ 321,424 $ 186,522 $ 2,533,704
General and administrative 204,793 16,551 1,139,833
Depreciation and amortization 2,822 927 26,450
------------------ ------------------ --------------------
Operating loss (529,039) (204,000) (3,699,987)
------------------ ------------------ --------------------
Other income (expense):
Interest income 13,053 726 49,344
Interest expense (6,841) - (21,648)
------------------ ------------------ --------------------
6,212 726 27,696
------------------ ------------------ --------------------
Net loss $ (522,827) $ (203,274) $(3,672,291)
================== ================== ====================
Basic and diluted net loss per share $(0.11) $(0.05)
================== ==================
Basic and diluted weighted
average number of common
shares outstanding 4,731,083 3,933,891
================== ==================
</TABLE>
4
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
Nine months ended September 30, (April 11, 1996) to
2000 1999 September 30, 2000
============== ============= ====================
<S> <C> <C> <C>
Costs and expenses:
Research and development $ 666,517 $ 676,304 $ 2,533,704
General and administrative 520,150 86,906 1,139,833
Depreciation and amortization 4,299 2,780 26,450
-------------- ------------- --------------------
Operating loss (1,190,966) (765,990) (3,699,987)
-------------- ------------- --------------------
Other income (expense):
Interest income 20,138 4,169 49,344
Interest expense (14,649) (1) (21,648)
-------------- ------------- --------------------
5,489 4,168 27,696
-------------- ------------- --------------------
Net loss $(1,185,477) $ (761,822) $(3,672,291)
============== ============= ====================
Basic and diluted net loss per share $(0.26) $(0.18)
============== =============
Basic and diluted weighted
average number of common
shares outstanding 4,553,718 4,133,225
============== =============
</TABLE>
5
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
(April 11, 1996)
Nine months ended to September 30, September 30,
2000 1999 2000
============= ============= =============
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,185,477) $(761,822) $(3,672,291)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 4,299 2,780 26,450
Amortization of stock option cost 65,000 - 65,000
Contribution of officer's salary - - 80,000
Issuance of common stock for services - - 38,200
Other - net - - 38,876
Other assets 167,211 (38,537) 34,835
Accounts payable (17,863) 4,946 50,440
Accrued expenses (50,000) 6,107 223,000
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Net cash used by operating activities (1,016,830) (786,526) (3,115,490)
------------- ------------- -------------
Cash flows from investing activities:
Acquisition of subsidiaries - - (128,999)
Purchase of patent (14,795) - (14,795)
Capital expenditures - - (15,420)
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Net cash used by investing activities (14,795) - (159,214)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from notes to shareholders - - 73,000
Proceeds from note receivable from shareholder - - 150
Payments on note payable to shareholder - - (3,000)
Exercise of options and warrants 587,902 314,959 1,276,872
Issuance of preferred stock 625,000 559,000 1,299,000
Issuance of common stock - - 915,200
Repurchase of common stock - - (280)
------------- ------------- -------------
Net cash provided by financing activities 1,212,902 873,959 3,560,942
------------- ------------- -------------
Net increase in cash 181,277 87,433 286,238
Cash, beginning of period 104,961 49,864 -
------------- ------------- -------------
Cash, end of period $ 286,238 $ 137,297 $ 286,238
============= ============= =============
</TABLE>
6
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
(April 11, 1996) to
Nine months ended September 30, to September 30,
2000 1999 2000
=============== =============== ===================
<S> <C> <C> <C>
Non-cash investing and financing activities:
Issuance of common stock for note receivable $ - $ - $ 150
Debt to equity conversion $ - $ - $ 77,000
Acquisition of minority interest $ - $18,000 $ 33,250
Sale of Tercero - elimination of goodwill $ - $ - $(40,000)
Preferred dividends paid through issuance
of common stock $ 25,725 $ - $ 25,725
Acquisition of Med Enclosures for note payable $250,000 $ - $ 250,000
Settlement of lawsuit through issuance
of common stock $200,000 $ - $ 200,000
Acquisition of patent through issuance
of common stock $235,210 $ - $ 235,210
</TABLE>
7
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
Notes to Unaudited Condensed Financial Statements
September 30, 2000
1. Organization and summary of significant accounting policies
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Organization
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CPC of America, Inc., a Nevada corporation ("CPC" or the "Company"), was
formed on April 11, 1996 to manufacture and distribute external
counterpulsation medical devices and to develop or acquire controlling
interests in various niche cardiology diagnostic, therapeutic and disposal
products. The Company is classified as a development stage company because
its principal activities involve obtaining capital and rights to certain
technology, and conducting research and development activities.
Principles of consolidation
---------------------------
The accompanying consolidated financial statements include the amounts of the
Company and its majority-owned subsidiaries, CPCA 2000, Inc. and HeartMed,
LLC and its 73.3% owned subsidiary, Med Enclosure, LLC. All significant
intercompany transactions and balances have been eliminated in consolidation.
Interim periods
---------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not
include all of the information required by generally accepted accounting
principles for complete financial statements. In the opinion of the
Company's management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of results for any future period. These statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Form 10-KSB for the year ended
December 31, 1999.
2. Shareholders' equity
--------------------
a. Series A Preferred Stock
During the quarter ended March 31, 2000, 70,469 shares of Series A Preferred
Stock were converted into 127,447 shares of Common Stock at $4.70 per share.
8
<PAGE>
2. Shareholders' equity (continued)
--------------------------------
b. Series B Preferred Stock
During the quarter ended June 30, 2000, 71,429 shares of Series B Preferred
Stock were sold for net proceeds of $625,000.
c. Common Stock
In 2000, the Company issued 174,292 shares of common stock upon the exercise
of options for net proceeds of $202,902 and 220,000 shares of common stock
upon the exercise of outstanding warrants for net proceeds of $385,000.
During the quarter ended June 30, 2000, the Company issued 47,042 common
shares valued at $235,210 and paid $14,790 cash to Gene Myers Enterprises
(GME) for the purchase of a patent held by GME.
During the quarter ended March 31, 2000, in settlement of its lawsuit with
Carepoint Networks, Inc., the Company paid $50,000 cash and issued 33,333
common shares valued at the market price of $6.00 per share.
d. Stock Options
During the first six months ended June 30, 2000, the Company granted to two
of its consultants options to purchase up to 75,000 and 100,000,
respectively, shares of its common stock at exercise prices of $5.75 and
$5.00 per share, vesting as services are provided over the following two
years. The options were valued using the Black-Scholes model and recorded on
the balance sheet as unamortized stock option cost to be expensed as the
services are provided.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation
General
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To date, the Company's activities have included the market analysis and
development of its counterpulsation units, acquisition of Med Enclosures, LLC,
and the raising of development and working capital. The Company has developed
and prepared for market the CPCA 2000 and the CPCA 2000M, a mobile version of
the Company's stand-alone counterpulsation unit. Both units have been submitted
for approval from the federal Food and Drug Administration ("FDA"). The Company
has also acquired the patents to the puncture closure internal device and
technique known as MedClose. The Company intends to submit MedClose for FDA
approval in the third quarter of 2001 following pre-clinical and clinical trials
and to commence commercial operations of the product in the second quarter of
2002. The Company has financed its activities to date through the sale of its
securities. The Company intends to commence revenue producing operations in the
second quarter of 2001, subject to FDA approval of its counterpulsation units.
In the first quarter of 2000, the Company commenced a private placement
offering of shares of its Series B Preferred Stock, $.001 par value per share
("Series B Preferred Stock"). In the private placement, the Company is offering
up to 228,571 shares of Series B Preferred Stock at a price of $8.75 per share
for the gross offering amount of $2,000,000. The Series B Preferred Stock is
convertible into shares of Common Stock and holders thereof are entitled to an
annual dividend of 5%, payable in either cash or shares of Common Stock. The
Series B Preferred Stock is being offered pursuant to Rule 506 under the Act
solely to "accredited investors" as that term is defined in Rule 501 under the
Act. As of the date of this report, 71,429 shares of Series B Preferred Stock
for the net proceeds of $625,000 have been sold.
In addition to its working capital on hand as of the date of this report,
the Company believes that it will require, at least, an additional $4,000,000 to
fund the FDA approval process for MedClose. The Company expects to fund its
MedClose research and development requirements over the next 12 months from its
private placement of shares of Series B preferred Stock as well as from the
exercise of outstanding warrants and options. The Company expects to obtain the
capital to fund the FDA approval process for MedClose from either the sale of
its equity securities or from the sale of interests in Med Enclosures.
There can be no assurance, however, that the Company will be able to obtain
sufficient additional capital, either through the present private placement of
Series B Preferred Stock, from other outside investors, the exercise of warrants
and options or otherwise, in order to fund the Company's working capital
requirements in a timely manner or to fund the FDA approval process for
MedClose. The report of the Company's independent accountants for the fiscal
year ended December 31, 1999 states that due to the absence of operating
revenues and the Company's limited capital resources, there is doubt about the
Company's ability to continue as a going concern.
10
<PAGE>
Forward Looking Statements
--------------------------
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties including, but no limited to, the Company's ability to
complete preclinical and clinical studies for its products and the difficulty of
predicting regulatory approvals, technological innovations of competitors,
changes in health-care regulations, litigation claims, product acceptance,
unexpected changes in government regulations, the Company's present financial
condition, the availability of additional capital as and when required;
technological changes; increased competition; and general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, or projected. The Company cautions potential
investors not to place undue reliance on any such forward-looking statements all
of which speak only as of the date made.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Inapplicable.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
Inapplicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None.
12
<PAGE>
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.
CPC of America, Inc.
(Registrant)
Dated: November 14, 2000 By: /s/ ROD A. SHIPMAN
-------------------------------------
Rod A. Shipman,
President and Chief Executive Officer
13
