UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999 Commission File Number 0-109659
------------------ --------
CITA BIOMEDICAL, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 93-0962072
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9025 Wilshire Blvd. Suite 301, Beverly Hills, CA 90211
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip code)
(310) 550-4965
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.01 par value 7,766,662
- ----------------------------- -------------------------------
Class Number of shares outstanding at
October 20, 1999
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This document is comprised of 10 pages.
<PAGE>
FORM 10-QSB
3RD QUARTER
CITA BIOMEDICAL, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements*
Page
----
Condensed consolidated balance sheet -
September 30, 1999 (Unaudited)................................3
Condensed consolidated statements of operations -
three and nine months ended
September 30, 1999 and 1998
and for the period August 12, 1998
through September 30, 1999 (Unaudited) .......................4
Condensed consolidated statements of cash flows -
nine months ended September 30, 1999
and 1998 and for the period August 12, 1998
through September 30, 1999 (Unaudited) .......................5
Notes to condensed consolidated
financial statements (Unaudited) .............................6
Item 2. Management's discussion and analysis ...................8
PART II - OTHER INFORMATION..............................................9
Item 1. Legal Preceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures................................................10
* The accompanying condensed consolidated financial statements are not covered
by an Independent Certified Public Accountant's report.
2
<PAGE>
Part I. Item 1. Financial information
CITA BIOMEDICAL, INC.
-----------------------------
(A Development Stage Company)
Condensed Consolidated Balance Sheet
September 30, 1999
Assets
Cash.............................................................$ -
Other current assets............................................. -
----------
Total Current Assets -
Property and Equipment, net..........................................26,009
Intangible Assets, net..............................................962,531
Deposits.............................................................13,570
----------
$1,002,110
==========
Liabilities and Shareholders' Equity
Accounts payable and accrued expenses...............................360,042
Short term loans....................................................316,929
Due to related party................................................144,577
----------
Total Current Liabilities 821,548
----------
Preferred stock.....................................................896,444
Common stock.........................................................77,667
Additional paid in capital........................................3,772,475
Accumulated deficit..............................................(3,801,072)
Deficit accumulated during development stage.......................(764,952)
----------
Total Shareholders' Equity 180,562
----------
$1,002,110
==========
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
CITA BIOMEDICAL, INC.
-----------------------------
(A Development Stage Company)
Condensed Consolidated Statements of Operations
<TABLE>
August 12, 1998
For the three months ended For the nine months ended Through
September 30, September 30, September 30,
-------------------------- -------------------------- ---------------
1999 1998 1999 1998 1999
---------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $124,322 $ 60,950 $420,434 $ 60,950 $593,068
Operating Expenses
Cost of revenues.............................. 67,691 26,685 228,997 26,685 305,806
General and administrative.................... 203,582 61,855 630,491 87,395 919,027
Depreciation and amortization................. 35,112 12,984 89,826 12,984 134,046
Total operating expenses 306,385 101,524 949,314 127,064 1,358,879
Operating Loss (182,063) (40,574) (528,880) (66,114) (765,811)
Non-operating Income (Expense)
Interest expense.............................. - (2,781) - (7,550) -
Interest income............................... 133 - 538 - 859
Net loss before income taxes (181,930) (43,355) (528,342) (73,664) (764,952)
Income taxes.................................... - - - -
Net Loss $(181,930) $(43,355) $(528,342) $(73,664) $(764,952)
Net loss per common share:
Basic and diluted............................. $ (0.02) $ (0.02) $ (0.07) $ (0.07)
Shares used for computing net loss per share:
Basic and diluted............................. 7,766,662 2,766,662 7,766,662 1,099,995
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
CITA BIOMEDICAL, INC.
-----------------------------
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
<TABLE>
For the nine months ended August 12, 1998
September 30, Through
---------------------------- ------------------
1999 1998 September 30, 1999
--------- ------- ------------------
NET CASH (USED IN)
<S> <C> <C> <C>
OPERATING ACTIVITIES $(387,449) $ 5,619 $ (423,541)
INVESTING ACTIVITIES
Purchase of CITA Americas, Inc., cash received................... - - 47,066
--------- ------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES - - 47,066
--------- ------- ----------
FINANCING ACTIVITIES
Proceeds from working capital advances........................... 376,475 - 376,475
--------- ------- ----------
NET CASH (USED IN)
FINANCING ACTIVITIES 376,475 - 376,475
--------- ------- ----------
Net increase in cash............................................. (10,974) 5,619 -
Cash, beginning of period........................................ 10,974 - -
--------- ------- ----------
Cash, end of period.............................................. $ - $ 5,619 $ -
========= ======= ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest........................................... $ - $ - $ -
========= ======= ==========
Cash paid for income taxes....................................... $ - $ - $ -
========= ======= ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of CITA Americas, Inc. in exchange for
1,000 shares of preferred stock................................ $ - $ - $ 896,444
========= ======= ==========
Stock issued in satisfaction of note payable..................... $ - $ - $ 150,000
========= ======= ==========
</TABLE>
5
<PAGE>
CITA BIOMEDICAL, INC.
-----------------------------
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
Note A: Basis of presentation
The condensed consolidated financial statements presented herein have been
prepared by the Company in accordance with the accounting policies in its annual
10-KSB report dated December 31, 1998 and should be read in conjunction with the
notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
Note B: CITA Americas, Inc.
The following unaudited pro forma condensed consolidated statement of operations
gives effect to the acquisition of CITA Americas, Inc. as if it had occurred at
the beginning of the period presented. The unaudited pro forma condensed
consolidated statement of operations are not necessarily indicative of results
of operations had the acquisition occurred at the beginning of the periods
presented nor of results to be expected in the future.
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended September 30, 1998 (Unaudited)
CITA CITA Pro forma
Biomedical Americas Adjustments Consolidated
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues.................................... $ 60,950 $424,203 (61,258) $ 423,895
Operating expenses.......................... (127,064) (573,047) 121,488 (578,623)
(Loss) income from operations............... (66,114) (148,844) 60,230 (154,728)
Interest expense............................ (7,550) - (7,550)
Interest income............................. - 424 (191) 234
Net (loss) income........................... (73,664) (148,419) 60,039 (162,044)
Net (loss) income per share -
basic and diluted......................... $ (0.07) $(742.10) $ (0.15)
Basic and diluted shares outstanding........ 1,099,995 200 1,099,995
</TABLE>
Pro forma adjustments
The adjustments include the operations of Cita Americas for the period of August
12, 1998 to September 30, 1998, which are included in both the Cita Biomedical
and Cita Americas. Also included is an adjustment of $7,324 which is the
additional pro forma amortization of the excess of the purchase price of
$103,400. The unaudited pro forma condensed consolidated financial information
does not show any adjustments for a change in the income tax benefit as the
total pro forma consolidated benefit for income taxes would be offset by any
valuation allowance due to any deferred tax asset derived from net operating
losses. The valuation allowance offsets the net deferred tax asset for which
there is no assurance of recovery.
6
<PAGE>
CITA BIOMEDICAL, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
Note C: Related party transactions
CITA Americas, Inc. was formed by Aviation Industries, Inc. ("Aviation") in
March of 1998. Aviation acquired from CITA Americas, Inc., a Delaware
corporation ("CITA-Delaware"), certain rights, copyrights, trademarks and
pending patent rights related to the addiction treatment method known as UROD.
Aviation valued the transaction at approximately $1,057,500. When CITA Americas
was formed, Aviation transferred the rights obtained from CITA-Delaware to the
newly-formed CITA Americas, Inc. From time to time Aviation would advance monies
to CITA Americas for working capital purposes. Amounts due to Aviation for these
advances total $68,000 and is included in the accompanying condensed
consolidated financial statements as due to related party. Aviation is the
holder of the Company's outstanding convertible preferred stock.
During the nine months ended September 30, 1999 an officer and director of the
Company advanced the Company approximately $76,577 for working capital purposes.
The amount due to the officer is included in the accompanying condensed
consolidated financial statements as due to related party.
Note D: Income taxes
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Any deferred income
tax asset due to net operating losses is fully allowed for as there is no
assurance that the Company will have future net income to utilize the operating
losses.
7
<PAGE>
Part I. Item 2. Management's Discussion and Analysis
CITA BIOMEDICAL, INC.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had cash of $-0-. For the nine months ended
September 30, 1999 the Company received approximately $316,929 from an unrelated
third party as working capital loans. The Company anticipates converting the
loans to convertible preferred stock. Further, the President of the Company
advanced the Company $76,577 as short-term working capital advances. The Company
anticipates financing its operations from net cash flow from operations and
third party financing transactions. The Company intends to explore all options
available to it with respect to such potential financing.
RESULTS OF OPERATIONS
No operations were conducted during the three or six months ended June 30, 1998.
From December 1994 to August 12, 1998, the Company has been an inactive shell
company. Any expenses incurred during that period have been related to legal,
accounting and stock transfer agent fees in order to provide stock transfer
services to current shareholders and to comply with reporting as required by the
Securities Exchange Act of 1934. The Company also incurred $34,000 in
compensation expense to its officers. In light of the fact that the Company was
essentially inactive through August 12, 1998, period-to-period comparisons of
financial results are not meaningful. Nevertheless, the following information is
provided.
Revenue
The Company's revenues for the nine months ended September 30, 1999 were
$420,434, compared to $60,950 for the nine months ended September 30, 1998.
Essentially all of this revenue was derived from procedures performed by CITA
Americas, Inc. Those same revenue for the nine months ended September 30, 1999
decreased from pro forma revenues for the same period in 1998 by $3,461. The
decrease was due to the fact that the company reduced activity at one of its
locations.
Cost of Revenue
The Company's cost of revenues for the nine months ended September 30, 1999 was
$228,997, compared to $26,685 for the nine months ended September 30, 1998. This
resulted in a gross profit of $191,437 for the nine months ended September 30,
1999, or a gross profit margin of 45.5 percent. Those same cost of revenues for
the nine months ended September 30, 1999 increased over pro forma cost of
revenues for the same period in 1998 by $39,362, resulting in a decrease in
gross profit of $42,823 for the nine months ended September 30, 1999 as compared
to pro forma gross profit for the nine months ended September 30, 1998.
8
<PAGE>
Part I. Item 2. Management's Discussion and Analysis, continued
CITA BIOMEDICAL, INC.
Other Operating Expenses
General and administrative expenses for the nine months ended September 30, 1999
were $630,491 compared to $87,395 for the nine months ended September 30,
1998.The increase of $543,096 was primarily due to the Company's acquisition of
CITA America's. However, when comparing those same general and administrative
expenses to pro forma general and administrative expenses for the same period in
1998, there was an increase of $476,565. This increase was primarily due to CITA
America's starting up operations in February of 1998 and an increase in
marketing and salary expenses in 1999.
The Company incurred depreciation and amortization expenses of $89,826 for the
nine months ended September 30, 1999 as compared to
$12,984 for the nine months ended September 30, 1998.
The sum of the above resulted in a net loss of $528,342 for the nine months
ended September 30, 1999 as compared to a net loss of $73,664 for the nine
months ended September 30, 1998 and a pro forma net loss of $162,044 for the
nine months ended September 30, 1998.
FINANCIAL CONDITION
The Company has experienced losses since 1994 as a result of efforts to find a
suitable merger or acquisition candidate. Since its acquisition of CITA
Americas, Inc., and the commencing of operations, the Company has continued to
incur operating losses, and negligible cash flow from operations. Due to
liquidity problems, the Company has been unable to make timely payments to
certain creditors. As of September 30, 1999, the Company had past due trade
payables totaling approximately $275,000. In the aggregate, these indicators
raise substantial doubt about the Company's ability to continue as a going
concern.
Deferred payments have been negotiated with certain creditors and the Company is
actively pursuing new operating centers which management believes will provide
positive working capital. There is no assurance that new centers will be
obtained, or if acquired, that they will provide sufficient working capital.
PART II - OTHER INFORMATION
Items 1 Through 5 - No response required.
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits
27* Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the nine months ended
September 30, 1999.
9
<PAGE>
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the three and nine months ended June 30, 1999
and 1998 have been included.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITA BIOMEDICAL, INC.
(Registrant)
DATE: November 12, 1999 BY:
----------------- --------------------------------------
Joseph Dunn
President, Chief Executive Officer and
Chief Financial Officer
DATE: Nobember 12, 1999 BY:
----------------- --------------------------------------
Michael C. Hinton
Secretary and Director
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CITA BIOMEDICAL, INC. UNAUDITED BALANCE
SHEET AS OF SEPTEMBER 30, 1999 AND THE RELATED STATEMENT OF
INCOME FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000700890
<NAME> CITA BIOMEDICAL, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,400
<DEPRECIATION> 26,391
<TOTAL-ASSETS> 1,002,113
<CURRENT-LIABILITIES> 821,548
<BONDS> 0
0
896,444
<COMMON> 77,667
<OTHER-SE> (793,546)
<TOTAL-LIABILITY-AND-EQUITY> 1,002,113
<SALES> 0
<TOTAL-REVENUES> 420,434
<CGS> 228,997
<TOTAL-COSTS> 949,314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (528,880)
<INCOME-TAX> 0
<INCOME-CONTINUING> (528,880)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (528,880)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
