U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997.
Commission File Number: 0-16375
__________________________
THERMOGENESIS CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3018487
(State of Incorporation) (I.R.S. Employer Identification No.)
3146 GOLD CAMP DRIVE
RANCHO CORDOVA, CA 95670
(916) 858-5100
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.001 Par Value Nasdaq SmallCap Market
Indicate by check mark 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 <checked-box> No __
The number of shares of the registrant's common stock, $.001 par value,
outstanding on November 12, 1997 was 15,970,919.
_______________________________
<PAGE>
THERMOGENESIS CORP.
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Balance Sheets at September 30, 1997
and June 30, 1997 ......................................... 3
Statements of Operations
for the Three Months ended September 30, 1997 and 1996 ... 5
Statements of Cash Flows for
the Three Months Ended September 30, 1997 and 1996 ....... 6
Notes to Financial Statements .............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ......................... 13
SIGNATURES ....................................................... 14
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<PAGE>
PART I FINANCIAL INFORMATION
THERMOGENESIS CORP.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
ASSETS 1997 1997
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,280,693 $3,510,861
Accounts receivable, net of allowance for doubtful
accounts of $97,913 ($97,913 at June 30, 1997) 1,057,835 2,067,990
Inventory 3,453,860 2,579,368
Other current assets 304,590 247,819
Total current assets 6,096,978 8,406,038
Equipment, at cost less accumulated depreciation
of $763,329 ($670,269 at June 30, 1997) 1,431,557 1,358,747
Prepaid royalties, net of accumulated amortization
of $402,048 ($388,185 at June 30, 1997) 152,452 166,315
Other assets 237,443 256,626
$7,918,430 $10,187,726
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THERMOGENESIS CORP.
BALANCE SHEETS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
LIABILITIES AND SHAREHOLDER'S EQUITY 1997 1997
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $1,485,375 $1,523,647
Accrued payroll and related expenses 317,866 274,008
Customer deposits 202,289 49,310
Current portion of capital lease obligations 144,336 151,836
Total current liabilities 2,149,866 1,998,801
Long-term capital lease obligations 136,975 164,283
Commitments --- ---
Shareholders' equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized; no shares
issued and outstanding
Common stock, $.001 par value;
50,000,000 shares authorized;
15,886,555 issued and outstanding
(15,865,305 at June 30, 1997) 15,887 15,866
Paid in capital in excess of par 19,266,380 19,197,526
Accumulated deficit (13,650,678) (11,188,750)
Total shareholders' equity 5,631,589 8,024,642
$7,918,430 $10,187,726
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THERMOGENESIS CORP.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
<S> <C> <C>
Net sales $711,100 $1,697,596
Cost of sales 1,095,057 973,965
Gross profit (loss) (383,957) 723,631
Expenses:
General and administrative 465,458 131,254
Selling and marketing 528,633 364,380
Research and development 1,081,815 568,735
Issuance of stock options for services 21,000 14,000
Interest 12,426 21,239
Total expenses 2,109,332 1,099,608
Interest income 31,361 8,093
Net loss ($2,461,928) ($367,884)
Net loss per share ($0.16) ($0.03)
Shares used in computing
net loss per share 15,872,388 12,997,000
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THERMOGENESIS CORP.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,461,928) ($367,884)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 106,923 76,631
Issuance of stock options for services 21,000 14,000
Net change in operating assets and liabilities:
Accounts receivable 1,010,155 (1,029,909)
Inventory (874,492) (332,269)
Other current assets (56,771) (129,489)
Other assets 19,183 1,828
Accounts payable and accrued liabilities (38,272) (14,545)
Accrued payroll and related expenses 43,858 34,485
Customer deposits 152,979 (1,377)
Net cash used in operating activities (2,077,365) (1,748,529)
Cash flows from investing activities:
Capital expenditures (165,870) (90,242)
Net cash used in investing activities (165,870) (90,242)
Cash flows from financing activities:
Principal payments on long-term lease obligations (34,808) (13,762)
Exercise of stock options and warrants 47,875 --
Issuance of common stock -- 1,003,146
Net cash provided by financing activities 13,067 989,384
Net decrease in cash and cash equivalents (2,230,168) (849,387)
Cash and cash equivalents at beginning of period 3,510,861 1,243,079
Cash and cash equivalents at end of period $1,280,693 $393,692
</TABLE>
See accompanying notes to financial statements
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<PAGE>
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. Interim Reporting
These Financial Statements should be read in conjunction with the Company's
Annual Report (Form 10-K) for the year ended June 30, 1997. All sales,
domestic and foreign, are made in U.S. dollars and therefore currency
fluctuations are believed to have no impact on the Company's net sales. In the
opinion of management, all adjustments (which consist only of normally
recurring adjustments) necessary for a fair presentation of the Financial
Statements have been made. The results of operations for the three months
ended September 30, 1997 are not necessarily indicative of the results expected
for the full year.
INVENTORIES
Inventories are stated at the lower of cost (First-In, First-Out) or market and
consist approximately of the following:
SEPTEMBER 30, 1997 JUNE 30, 1997
Raw materials $ 2,544,071 $ 1,574,388
Work in process 460,327 525,067
Finished goods 449,462 479,913
Total $ 3,453,860 $ 2,579,368
Included in the September 30, 1997 inventory is $1,009,678 in raw materials and
work in process to manufacture the BioArchive System and CryoSeal System.
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<PAGE>
THERMOGENESIS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The Company designs and sells products and devices which utilize its
proprietary thermodynamic technology for the processing of biological
substances including the cryopreservation, thawing, and harvesting of blood
components ("Proprietary Technology"). Historically, the Company's primary
revenues have been from sales of its FDA Class I blood plasma freezers and
thawers ("Core Line Products") to hospitals, blood banks and blood transfusion
centers in 32 countries. The Company has under development five new FDA Class
II blood and/or tissue processing systems ("Pipe Line Products"), each
consisting of a thermodynamic device designed to process blood and/or tissues
through use of proprietary, sterile, disposable processing containers and
applicators.
During the fiscal years 1988 through 1994, the Company focused its research and
development efforts on refining Core Line Products. Since July 1994, the
Company has aggressively sought new applications for its Proprietary
Technology, which culminated in five FDA Class II products, two of which the
Company expects to market launch in fiscal 1998. The new FDA Class II products
are indicative of the Company's efforts to develop systems and processes for
therapeutic use in larger markets; products which by their inherent nature
require consumable disposable components for the processing of blood and/or
tissue.
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the period included in the accompanying financial statements.
RESULTS OF OPERATIONS
SALES AND REVENUES:
Net sales decreased for the three months ended September 30, 1997 by
approximately 58% from the respective fiscal 1997 quarter. The decrease in the
1998 fiscal quarter was due to slow demand for the Company's core line products
and delays in the introduction of the Company's new FDA Class II medical
devices. The Cose by IND/IDE sites in November 1997. Production has begun on
the CryoSeal disposable surgical applicators which have received FDA clearance
for sale. Production has also begun on the CryoSeal CS-1 device and CP-1
processing container as the Company expects FDA clearance for sale in the near
future.
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<PAGE>
THERMOGENESIS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (CONT'D)
RESULTS OF OPERATIONS (CONT'D)
COST OF SALES:
Cost of sales as a percent of sales was approximately 154% for the three months
ended September 30, 1997, as compared to 57% for the corresponding fiscal 1997
period. Cost of sales increased as a percentage of revenues as a result of four
factors: 1) Labor costs for the start-up production of the CryoSeal System and
the BioArchive System; 2) The expensing of CryoSeal Systems and disposables
utilized in clinical tests in the United States; 3) Production labor diverted
to the upgrading of the manufacturing facility; and 4) Further, significant
overhead costs incurred in building and maintaining an infrastructure that is
required to meet FDA regulatory requirements and standards for production of
Class II medical devices. Those costs include: quality control, production
control, production management, equipment, facilities and support personnel.
The Company believes that the increases in overhead expenses are consistent
with the needs to manufacture the two new pipeline products within the FDA
guidelines.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses for the three months ended September 30,
1997 increased by 255% from the corresponding fiscal 1997 period. This
increase was due to expansion of facilities, personnel and additions to
management, including the addition of a human resources department, and a
business development department, that are required for the Company to
manufacture and market Class II medical devices.
SALES AND MARKETING EXPENSES:
Selling and marketing expenses for the three months ended September 30, 1997
increased by 45% over the corresponding fiscal 1997 period. The increase was
primarily due to an increase in salaries of executives and support personnel to
plan and implement the market introduction of the N{2} BioArchive System and
the CryoSeal System.
RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenses for the three months ended September 30, 1997
increased by 90% over the corresponding fiscal 1997 period. A significant
portion of the increase was due to accelerated research and development of
three programs: (i) BioArchive System: a computerized human blood plasma sample
storage and retrieval system, (ii) N{2} BioArchive System: a computerized
liquid nand (iii) CryoSeal System: a system that harvests cryoprecipitated AHF
from a donor's blood plasma for use as an intravenous treatment for hemophilia
and as an autologous surgical tissue sealant and hemostatic agent. Also
expensed was the cost of the CryoSeal devices and surgical disposables utilized
in the clinical surgery trials underway in Milan, Italy. Management believes
that research and development is essential to maintaining the Company's market
position and therefore, considers such costs a continuing cost of doing
business.
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<PAGE>
THERMOGENESIS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (Cont'd)
RESULTS OF OPERATIONS (CONT'D)
ISSUANCE OF STOCK OPTIONS FOR SERVICES:
During the period ended September 30, 1997, the Company recorded $21,000 of
consulting expense for issuance of stock options issued to two key advisors
related to the CryoSeal System development and market. The options are
exercisable at the fair market value as determined by the closing bid price for
the Company's common stock as quoted by the Nasdaq SmallCap market on the date
of grant. While the $21,000 is a non-monetary transaction, the Company has
recorded the estimated fair value of the options under generally accepted
accounting principles.
LIQUIDITY AND CAPITAL RESOURCES
During the three month period ended September 30, 1997, the Company had
consumed cash resources for operating activities. These resources were
primarily used to fund increases in inventory, and the net loss resulting from
marketing activities and product development. The increase in inventory was
primarily due to the purchase of materials for production of the BioArchive and
CryoSeal Systems.
Working capital decreased by $2,460,125. The decrease in cash was primarily due
to funding of accelerated research and development, marketing operations and
manufacturing infrastructure required to prepare for the product launch of the
new pipeline products -- CryoSeal and BioArchive.
The Company used $2,077,365 for operations for the three months ended September
30, 1997. This was due to increased research and development, lower sales
volume in relationship to manufacturing fixed costs and added personnel in
anticipation of new products production. The Company expects, based upon its
current business plan, its existing cash equivalents and/or future investment
capital will be adequate to satisfy its immediate current working capital
needs, and the Company is pursuing bank lines of credit, and debt or equity
financing to provide for working capital for the next twelve months during
product launch. No assurances can be made, however, that debt or equity
financing will be available to fully execute the Company's business plan, or
that it will be available on terms favorable to the Company.
At September 30, 1997, the Company has no significant outstanding capital
commitments.
BACKLOG
The Company's cancelable backlog at June 30, 1997 was $360,000, and was
$1,069,000 at September 30, 1997. The backlog at September 30, 1997 included
$802,000 in orders for the BioArchive System and $225,000 in orders for the
CryoSeal System. The Company increased facilities and personnel for the
production of the two new products, and does not anticipate any problems
meeting the orders.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K.
None.
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<PAGE>
THERMOGENESIS CORP.
Signatures
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
THERMOGENESIS CORP.
(Registrant)
Dated November 13, 1997
s/ Philip H. Coelho, Chief Executive Officer
(Principal Financial Officer, Principal
Accounting Officer, and Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,280,693
<SECURITIES> 0
<RECEIVABLES> 1,155,748
<ALLOWANCES> 97,913
<INVENTORY> 3,453,860
<CURRENT-ASSETS> 6,096,978
<PP&E> 2,194,886
<DEPRECIATION> 763,329
<TOTAL-ASSETS> 7,918,430
<CURRENT-LIABILITIES> 2,149,866
<BONDS> 0
0
0
<COMMON> 15,887
<OTHER-SE> 5,615,702
<TOTAL-LIABILITY-AND-EQUITY> 7,918,430
<SALES> 711,100
<TOTAL-REVENUES> 742,461
<CGS> 1,095,057
<TOTAL-COSTS> 1,095,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,862
<INTEREST-EXPENSE> 12,426
<INCOME-PRETAX> (2,461,928)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,461,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,461,928)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
