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 March 31, 1999 Commission File Number 0-109659
-------------- --------------------------------
CITA BIOMEDICAL, INC.
------------------------------------------------------
(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
----------------------------------------------------
(Registrant's telephone number, including area code)
(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 _________ No ____X____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.01 par value 7,766,662
- ----------------------------- ----------------------------
Class Number of shares outstanding
at October 20, 1999
- -------------------------------------------------------------------------------
This document is comprised of 10 pages.
<PAGE>
FORM 10-QSB
1ST QUARTER
CITA BIOMEDICAL, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements*
Page
----
Condensed consolidated balance sheet - March 31, 1999 (Unaudited).........3
Condensed consolidated statements of operations - three months
ended March 31, 1999 and 1998 and for the period August 12, 1998
through March 31, 1999 (Unaudited) .....................................4
Condensed consolidated statements of cash flows - three months
ended March 31, 1999 and 1998 and for the period August 12, 1998
through March 31, 1999 (Unaudited) .....................................5
Notes to condensed consolidated financial statements (Unaudited) .........6
Item 2. Management's discussion and analysis .............................8
PART II - OTHER INFORMATION...................................................9
Item 1. Legal Preceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures...............................................................10
* The accompanying condensed consolidated financial statements are not covered
by an Independent Certified Public Accountant's report.
2
<PAGE>
Part I. Item 1. Financial information
CITA BIOMEDICAL, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheet
March 31, 1999
Assets
Cash.........................................................$ 28,692
Other current assets......................................... 30,250
Total Current Assets 58,942
Property and Equipment, net.................................. 34,343
Intangible Assets, net....................................... 1,014,081
Deposits..................................................... 12,996
----------
$1,120,362
==========
Liabilities and Shareholders' Equity
Accounts payable and accrued expenses........................$ 365,556
Working capital advances payable............................. 145,744
Due to related party......................................... 69,700
----------
Total Current Liabilities 581,000
----------
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................. (406,152)
----------
Total Shareholders' Equity 539,362
----------
$1,120,362
==========
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
CITA BIOMEDICAL, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months ended
March 31, August 12, 1998
------------------------------- Through
1999 1998 March 31, 1999
--------- --------- ----------------
<S> <C> <C> <C>
Revenues..................................................$ 185,099 $ - $ 357,733
Operating Expenses
Cost of revenues........................................ 89,440 - 166,249
General and administrative.............................. 235,484 12,000 524,020
Depreciation and amortization........................... 29,942 - 74,162
--------- --------- ----------
Total operating expenses 354,866 12,000 764,431
--------- --------- ----------
Operating Loss (169,767) (12,000) (406,698)
Non-operating Income (Expense)
Interest expense........................................ - (3,395) -
Interest income......................................... 225 - 546
--------- --------- ----------
Net loss before income taxes (169,542) (15,395) (406,152)
Income taxes.............................................. - - -
--------- --------- ----------
Net Loss $(169,542) $ (15,395) $ (406,152)
========= ========= ==========
Net loss per common share:
Basic and diluted.......................................$ (0.02) $ (0.06)
========= =========
Shares used for computing net loss per share:
Basic and diluted.......................................7,766,662 266,662
========= =========
</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>
<CAPTION>
For the three months ended
March 31, August 12, 1998
------------------------------- Through
1999 1998 March 31, 1999
--------- --------- ----------------
<S> <C> <C> <C>
NET CASH (USED IN)
OPERATING ACTIVITIES $(129,726) $ - $ (165,818)
INVESTING ACTIVITIES
Purchase of CITA Americas, Inc., cash received............ - - 47,066
--------- --- ----------
NET CASH PROVIDED BY
INVESTING ACTIVITIES - 47,066
--------- --- ----------
FINANCING ACTIVITIES
Proceeds from working capital advances.................... 147,444 - 147,444
--------- --- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 147,444 - 147,444
--------- --- ----------
Net increase in cash...................................... 17,718 - 28,692
Cash, beginning of period................................. 10,974 - -
--------- --- ----------
Cash, end of period.......................................$ 28,692 $ - $ 28,692
========= === ==========
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>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
CITA BIOMEDICAL, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
CITA CITA Pro forma
Biomedical Americas Adjustments Consolidated
---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues..........................................$ - $ 84,700 $ 84,700
Operating expenses................................ (12,000) (119,195) (2,585) (133,780)
(Loss) income from operations..................... (12,000) (34,495) (46,495)
Interest expense.................................. (3,395) - (3,395)
Interest income................................... - - -
Net (loss) income................................. (15,395) (34,495) (49,890)
Net (loss) income per share - basic and diluted...$ (0.06) $(172.48) $ (0.19)
Basic and diluted shares outstanding.............. 266,662 200 266,662
</TABLE>
Pro forma adjustments
The adjustment of $2,585 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 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)
March 31, 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 three months ended March 31, 1999 an officer and director of the
Company advance the Company $1,700 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 March 31, 1999, the Company had cash of $28,692. For the three months ended
the Company received $145,744 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 $1,700 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 months ended March 31, 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 $12,000 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 three months ended March 31, 1999 were $185,099
compared to no revenue for the same period in 1998. Essentially all of this
revenue was derived from procedures performed by CITA Americas, Inc. Those same
revenue for the three months ended March 31, 1999 increased over pro forma
revenues for the same period by $100,399. The increase was due to an increase in
number of patients treated and that CITA America's began operations midway into
the three months ended March 31, 1998.
Cost of Revenue
The Company's cost of revenues for the three months ended March 31, 1999 was
$89,440, compared to none for the same period in 1998. This resulted in a gross
profit of $95,659 for the three months ended March 31, 1999, or a gross profit
margin of 51.7 percent. Those same cost of revenues for the three months ended
March 31, 1999 increased over pro forma cost of revenues for the same period in
1998 by $48,500, resulting in a increase in gross profit of $47,159 for the
three months ended March 31, 1999 as compared to pro forma gross profit for the
three months ended March 31, 1998.
Other Operating Expenses
General and administrative expenses for the three months ended March 31, 1999
were $235,484 compared to $12,000 for the same period in 1998. The increase of
$223,484 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 $166,348. 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 $29,942 for the
three months ended March 31, 1999 as compared to none for the same period in
1998.
The sum of the above resulted in a net loss of $169,542 for the three months
ended March 31, 1999 as compared to a net loss of $15,395 for the three months
ended March 31, 1998 and a pro form net loss of $49,890 for the three months
ended March 31, 1998.
8
<PAGE>
Part I. Item 2. Management's Discussion and Analysis, continued
CITA BIOMEDICAL, INC.
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 March 31, 1999, the Company had past due trade payables
totaling approximately $300,000. 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 three months
ended March 31, 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 months ended March 31, 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: October 20, 1999 BY:/s/ Joseph Dunn
---------------- --------------------------------------
Joseph Dunn
President, Chief Executive Officer and
Chief Financial Officer
DATE: October 20, 1999 BY:/s/ Michael C. Hinton
---------------- --------------------------------------
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 MARCH 31, 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> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 28,692
<SECURITIES> 0
<RECEIVABLES> 30,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,942
<PP&E> 52,400
<DEPRECIATION> 18,057
<TOTAL-ASSETS> 1,120,362
<CURRENT-LIABILITIES> 581,000
<BONDS> 0
0
896,444
<COMMON> 77,667
<OTHER-SE> (434,749)
<TOTAL-LIABILITY-AND-EQUITY> 1,120,362
<SALES> 0
<TOTAL-REVENUES> 185,099
<CGS> 89,440
<TOTAL-COSTS> 354,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (169,542)
<INCOME-TAX> 0
<INCOME-CONTINUING> (169,542)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169,542)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
