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, 1999.
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 |X| No __
The number of shares of the registrant's common stock, $.001 par value,
outstanding on October 27, 1999 was 20,834,262.
-------------------------------
<PAGE>2
THERMOGENESIS CORP.
INDEX
Page Number
Part I Financial Information
Item 1. Financial Statements (Unaudited):
Balance Sheets at September 30, 1999
and June 30, 1999 ...................................................3
Statements of Operations
for the Three Months ended September 30, 1999 and 1998 ..............5
Statements of Cash Flows for
the Three Months Ended September 30, 1999 and 1998 ..................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 1. Legal proceedings ....................................................11
Item 2. Changes in Securities ................................................11
Item 3. Default Upon Senior Securities .......................................11
Item 4. Submission of Matters to a Vote of Security Holders ..................11
Item 5. Other Information ....................................................12
Item 6. Exhibits and Reports on Form 8-K .....................................12
Signatures ...................................................................13
<PAGE>3
PART I FINANCIAL INFORMATION
THERMOGENESIS CORP.
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------ -----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 967,000 $ 2,327,000
Accounts receivable, net of allowance for doubtful
accounts of $95,000 ($95,000 at June 30, 1999) 1,030,000 1,204,000
Inventory 2,704,000 2,717,000
Other current assets 213,000 222,000
----------- -----------
Total current assets 4,914,000 6,470,000
Equipment, at cost less accumulated depreciation
of $1,352,000 ($1,216,000 at June 30, 1999) 1,411,000 1,457,000
Prepaid royalties, net of accumulated amortization
of $513,000 ($499,000 at June 30, 1999) 42,000 55,000
Other assets 60,000 151,000
----------- -----------
$ 6,427,000 $ 8,133,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>4
THERMOGENESIS CORP.
Balance Sheets (continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------ -----
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 909,000 $639,000
Accrued payroll and related expenses 203,000 236,000
Accrued liabilities 331,000 539,000
------------ -----------
Total current liabilities 1,443,000 1,414,000
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, $.001 par value, 1,200,000 shares
authorized; 844,000 issued and outstanding (884,000 at June
30, 1999) 1,000 1,000
Preferred stock, $.001 par value;
800,000 shares authorized; no shares
issued and outstanding --- ---
Common stock, $.001 par value;
50,000,000 shares authorized; 20,814,262
issued and outstanding
(20,597,532 at June 30, 1999) 21,000 21,000
Paid in capital in excess of par 37,459,000 37,442,000
Accumulated deficit (32,497,000) (30,745,000)
============ ============
Total shareholders' equity 4,984,000 6,719,000
============ ============
$ 6,427,000 $ 8,133,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>5
THERMOGENESIS CORP.
Statements of Operations
(Unaudited)
Three Months Ended September 30,
1999 1998
---- ----
Net revenues $ 980,000 $ 1,099,000
Cost of revenues 1,235,000 1,279,000
=========== ===========
Gross loss (255,000) (180,000)
=========== ===========
Expenses:
General and administrative 503,000 712,000
Selling and marketing 561,000 397,000
Research and development 428,000 515,000
Issuance of stock options for services 15,000 11,000
Interest 5,000 8,000
=========== ===========
Total expenses 1,512,000 1,643,000
Interest income 15,000 19,000
=========== ===========
Net loss ($1,752,000) ($1,804,000)
=========== ===========
Per share data:
Basic and diluted net loss per share ($0.08) ($0.10)
=========== ===========
Shares used in computing per share data 20,804,942 18,925,669
=========== ===========
See accompanying notes.
<PAGE>6
THERMOGENESIS CORP.
Statements of Cash Flows
Three Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Cash flows from operating activities: 1999 1998
---- ----
<S> <C> <C>
Net loss ($1,752,000) ($1,804,000)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 150,000 136,000
Amortization of stock and options issued for services 22,000 11,000
Net change in operating assets and liabilities:
Accounts receivable 174,000 150,000
Inventory 13,000 40,000
Other current assets 3,000 (32,000)
Other assets 91,000 5,000
Accounts payable 270,000 (46,000)
Accrued payroll and related expenses (33,000) 7,000
Accrued liabilities (208,000) (24,000)
----------- -----------
Net cash used in operating activities (1,270,000) (1,557,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures (90,000) (25,000)
----------- -----------
Net cash used in investing activities (90,000) (25,000)
=========== ===========
Net decrease in cash and cash equivalents (1,360,000) (1,582,000)
Cash and cash equivalents at beginning of period 2,327,000 1,975,000
=========== ===========
Cash and cash equivalents at end of period $ 967,000 $ 393,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>7
THERMOGENESIS CORP.
Notes to Financial Statements
September 30, 1999
(Unaudited)
1. Interim Reporting
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
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 revenues. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
June 30, 2000.
Inventory
Inventory consisted of the following at:
September 30, 1999 June 30, 1999
------------------ -------------
Raw materials $1,389,000 $1,330,000
Work in process 267,000 363,000
Finished goods 1,048,000 1,024,000
---------- ----------
$2,704,000 $2,717,000
========== ==========
<PAGE>8
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 1999 and 1998
The Company designs and sells medical devices which utilize its proprietary
thermodynamic technology for the processing of biological substances including
the cryopreservation, thawing and harvesting of blood components. During fiscal
1988 through 1999, the Company has focused on refining product design of the
Thermoline(TM) (blood plasma freezers and thawers) products and developing two
new technology platforms (BioArchive and CryoSeal Systems) and derivative
products which utilize sterile disposable containers for processing blood
components. The BioArchive system was launched at the end of fiscal 1998.
Beginning in late 1993, and with accelerated research and development efforts
from 1996 to 1999 totaling approximately $10 million, the Company completed
development of the BioArchive and CryoSeal technology platforms. Each of the
platforms will give rise to multiple medical devices targeted at a number of
surgical, intravenous and external wound healing applications. Also, the Company
spent approximately an additional $1 million on improvements, additional
accessories and beta test site support for the new products launched to date. To
achieve completion of the development and add experienced executive talent to
launch the products and move the Company to new levels of growth and revenues,
considerable capital resources were used. The Company will most likely need to
seek additional short term capital to fully execute on its business plan pending
significant revenue recognition from the new products.
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
Revenues:
Net revenues for the three months ended September 30, 1999 were $980,000
compared to $1,099,000 for the three months ended September 30, 1998. The 11%
decrease is due to the delay of expected orders for the BioArchive System. Three
systems were sold in the first quarter of fiscal 1999, which accounted for over
30% of that quarter's sales. Since that time, the Company has sold an additional
six systems and generated a significant list of international target customers
who have requested quotations and who are awaiting funding approval, in most
instances. The Company anticipates that sales will result from the target
customers during this fiscal year. To somewhat offset the lack of BioArchive
sales for the quarter, the Company's freezer sales increased $80,000 or 44% over
the first quarter of fiscal 1999. Additionally, $121,000 of non refundable
licensing fees from the Japanese distributor of the BioArchive system is
included in net revenues for the three months ended September 30, 1999.
<PAGE>9
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 1999 and 1998 (Cont'd)
Results of Operations (Cont'd)
Cost of Revenues:
Cost of revenues as a percent of revenues was approximately 126% for the three
months ended September 30, 1999, as compared to 116% for the corresponding
fiscal 1999 period. The cost of sales percentage increase was primarily due to
the decrease in sales volume, the mix of products sold and the Company's
significant overhead costs associated with building and maintaining an
infrastructure that is required to meet FDA regulatory requirements and
standards for production of Class II medical devices. The Company has built up
the infrastructure in anticipation of the marketing launches of the two new
products.
General and Administrative Expenses:
General and administrative expenses for the three months ended September 30,
1999 decreased $209,000 or 29% from the corresponding fiscal 1999 period. This
decrease was due to the Company's cost reduction efforts which were initiated in
the prior fiscal year and also reflects a $100,000 severance accrual for a
departing executive in the quarter ended September 30, 1998.
Selling and Marketing Expenses:
Selling and marketing expenses for the three months ended September 30, 1999
increased $164,000 or 41% from the corresponding fiscal 1999 period. The
increase in sales and marketing resources were dedicated to the first quarter
market launch of the CryoSeal AHF system and increased sales effort to potential
international BioArchive customers. The Company expects the increased spending
on sales and marketing resources to continue, as its primary focus is to drive
revenue generated by the two new products.
Research and Development Expenses:
Research and development expenses for the three months ended September 30, 1999
decreased by $87,000 or 17% from the corresponding fiscal 1999 period. The
decrease is attributed to a full quarter's worth of the restructuring which
occurred during the first quarter of the prior year. Management expects the
research and development line item to increase slightly as the CryoSeal AFG pre
clinical trials are completed and the pivotal clinical trial is executed.
<PAGE>10
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 1999 and 1998 (Cont'd)
Results of Operations (Cont'd)
Liquidity and Capital Resources
Working capital decreased by $1,585,000. The decrease in cash was primarily due
to funding of the manufacturing infrastructure, marketing operations, the
management team required to market and produce the CryoSeal AHF and BioArchive
systems and to prepare for the CryoSeal AFG pre clinical trials.
The Company used $1,270,000 for operations for the three months ended September
30, 1999. This was primarily due to lower sales volume in relationship to fixed
manufacturing costs and added personnel to generate revenues. The report of
independent auditors on the Company's June 30, 1999 financial statements
includes an explanatory paragraph indicating there is substantial doubt about
the Company's ability to continue as a going concern. The Company believes that
it has developed a viable plan to address these issues and that its plan will
enable the Company to continue as a going concern through the end of fiscal year
2000. The plan includes the realization of revenues from the commercialization
of new products, the consummation of debt or equity financings and the reduction
of certain operating expenses as required. Additionally, the Company is
currently pursuing partnering relationships with large corporations in
connection with global distribution of either or both of the new product
platforms. The financial statements do not include any adjustments to reflect
the uncertainties related to the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the inability
of the Company to continue as a going concern. There is no assurance that the
Company will be able to achieve additional financing or reach a strategic
relationship, or that such events will be on terms favorable to the Company.
Management does not anticipate that the Company will incur any material costs to
be "Year 2000" compliant. The Company has completed an assessment of its
internal systems and products and determined that substantially all of the
Company's systems and products operate using third party software that is
compliant, or operate using Company product software which is Year 2000
compliant. The Company has formed a task force to identify and address potential
year 2000 issues with significant vendors, customers and other third parties. To
date, no significant issues have been identified. During the first quarter, a
third party subcontractor to the FDA examined the Company's Y2K preparedness and
noted no areas of significant concern.
At September 30, 1999, the Company has no significant outstanding capital
commitments.
<PAGE>11
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
In December 1998, the Company was served with a civil action entitled
Metropolitan Creditors Service of Sacramento vs. THERMOGENESIS CORPORATION,
Sacramento Superior Court No. 98-AS-05815. The action allegedly arises from the
Company's vendor relationship with On-Time Manufacturing, Inc., and relates to
several invoices totaling approximately $90,000 in the aggregate which On-Time
Manufacturing, Inc. claimed were owing, and which were allegedly assigned to
Metropolitan Creditors Service of Sacramento. The Company disputes the claims
and filed an answer to the complaint in December 1998. In August 1999,
Metropolitan Creditors Service of Sacramento sought to amend the Complaint to
include additional claims for breach of contract, seeking compensatory and
consequential damages in excess of $1 million. The Company proceeded to
arbitration on the claims, including the breach of contract claims, and the
arbitrator issued an award of $2,625 to Metropolitan Creditors Association on
one invoice not encompassed by the contract, and ruled in the Company's favor on
all other claims. Metropolitan Creditors Service of Sacramento rejected the
arbitrator's award and elected to proceed to trial in Superior Court. The
Company will vigorously defend the action as baseless, and seek recovery of
attorney's fees and costs in defending the action.
Item 2. Changes in Securities.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company called a Special Meeting of Stockholders during the first quarter of
the current fiscal year. The Company submitted 3 proposals to the Stockholders.
Proposal 1 sought approval of an amendment to the Certificate of Incorporation
eliminating the repurchase rights of the Series A Convertible Preferred Stock.
Proposal 2 sought approval of an amendment to the Certificate of Incorporation
allowing the Board to effect a one-for two share consolidation; and Proposal 3
sought approval of an amendment to the Certificate of Incorporation allowing the
Board to effect a one-for-four share consolidation. Proposal 1 was passed by the
Shareholders on July 30, 1999. Proposals 2 and 3 were passed by the Shareholders
on August 13, 1999. The Board has not acted on Proposals 2 and 3, and there is
no current intention to effect either of those proposals. American Securities
Transfer & Trust, Inc. reports the following totals for all the proposals voted
on:
Proposal #1 Amendment to Eliminate Repurchase Rights for Series A Preferred
Stock
For Against Abstain
13,125,873 256,695 68,858
Proposal #2 Amendment to Certificate of Incorporation to Effect 1:2 Stock
Consolidation
For Against Abstain
13,637,138 1,258,032 62,161
<PAGE>12
Proposal #3 Amendment to Certificate of Incorporation to Effect 1:4 Stock
Consolidation
For Against Abstain
13,575,829 1,316,991 64,511
All proposals submitted to stockholders for approval were passed, and the Board
of Directors was granted discretion with respect to the appropriate timing for
the announcement of the stock consolidation. The Board of Directors is not
currently contemplating effecting either stock consolidation.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K.
None.
<PAGE>13
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 10, 1999 s/Philip H. Coelho
Philip H. Coelho, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
s/Renee M. Ruecker
Renee M. Ruecker, V.P. Finance
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 10-Q for
the period ended September 30, 1999, for ThermoGenesis Corporation and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 967,000
<SECURITIES> 0
<RECEIVABLES> 1,125,000
<ALLOWANCES> 95,000
<INVENTORY> 2,704,000
<CURRENT-ASSETS> 213,000
<PP&E> 2,763,000
<DEPRECIATION> 1,352,000
<TOTAL-ASSETS> 6,427,000
<CURRENT-LIABILITIES> 1,443,000
<BONDS> 0
0
1,000
<COMMON> 21,000
<OTHER-SE> 4,962,000
<TOTAL-LIABILITY-AND-EQUITY> 6,427,000
<SALES> 980,000
<TOTAL-REVENUES> 995,000
<CGS> 1,235,000
<TOTAL-COSTS> 1,235,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,556
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (1,752,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,752,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,752,000)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
