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, 2000.
Commission File Number: 0-16375
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THERMOGENESIS CORP.
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(Exact name of Registrant as specified in its charter)
Delaware 94-3018487
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(State of Incorporation) (I.R.S. Employer
Identification No.)
3146 Gold Camp Drive
Rancho Cordova, CA 95670
(916) 858-5100
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(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 16, 2000 was 26,522,199.
<PAGE>2
THERMOGENESIS CORP.
INDEX
Page Number
Part I Financial Information
Item 1. Financial Statements (Unaudited):
Balance Sheets at September 30, 2000 and June 30, 2000 ...............3
Statements of Operations for the Three Months
ended September 30, 2000 and 1999 ....................................5
Statements of Cash Flows for the Three Months
ended September 30, 2000 and 1999 ....................................6
Notes to Financial Statements ........................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .........................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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 ....................................................11
Item 6. Ehibits and Reports on Form 8-K ......................................11
Signatures ...................................................................12
<PAGE>3
PART I FINANCIAL INFORMATION
THERMOGENESIS CORP.
Balance Sheets
(Unaudited)
September 30, June 30,
ASSETS 2000 2000
------------ ----------
Current Assets:
Cash and cash equivalents $ 1,352,000 $ 810,000
Short term investments 210,000 1,740,000
Accounts receivable, net of allowance for doubtful
accounts of $84,000 ($84,000 at June 30, 2000) 668,000 627,000
Inventory 2,271,000 2,275,000
Other current assets 102,000 150,000
------------ ----------
Total current assets 4,603,000 5,602,000
Equipment, at cost less accumulated depreciation
of $1,632,000 ($1,506,000 at June 30, 2000) 1,036,000 1,080,000
Other assets 52,000 53,000
------------ ----------
$ 5,691,000 $6,735,000
============ ==========
See accompanying notes.
<PAGE>4
THERMOGENESIS CORP.
Balance Sheets (continued)
(Unaudited)
<TABLE>
<S> <C> <C>
September 30, June 30,
LIABILITIES AND SHAREHOLDER'S EQUITY 2000 2000
-------------- --------------
Current liabilities:
Accounts payable $ 568,000 $ 512,000
Accrued payroll and related expenses 213,000 132,000
Accrued liabilities 314,000 345,000
-------------- --------------
Total current liabilities 1,095,000 989,000
Long-term portion of capital lease obligations 54,000 54,000
Commitments and contingencies
Shareholders' equity:
Series B convertible preferred stock, $0.001 par value, 4,080
shares authorized; 1,727 issued and outstanding (4,040 at -- --
June 30, 2000)
Series A convertible preferred stock, $0.001 par value,
1,200,000 shares authorized; 158,000 issued and outstanding
(166,000 at June 30, 2000) -- --
Preferred stock, $0.001 par value; 795,920 shares authorized;
no shares issued and outstanding -- --
Common stock, $0.001 par value; 50,000,000 shares
authorized; 26,409,763 issued and outstanding
(24,804,056 at June 30, 2000) 27,000 26,000
Paid in capital in excess of par 43,277,000 43,005,000
Accumulated deficit (38,762,000) (37,339,000)
-------------- --------------
Total shareholders' equity 4,542,000 5,692,000
-------------- --------------
$ 5,691,000 $ 6,735,000
============== ==============
</TABLE>
See accompanying notes.
<PAGE>5
THERMOGENESIS CORP.
Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended September 30,
2000 1999
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Net revenues $ 801,000 $ 999,000
Cost of revenues 926,000 1,251,000
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Gross loss (125,000) (252,000)
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Expenses:
General and administrative 415,000 503,000
Selling and service 478,000 564,000
Research and development 435,000 443,000
Interest 3,000 5,000
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Total expenses 1,331,000 1,515,000
Interest income 33,000 15,000
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Net loss ($1,423,000) ($1,752,000)
============= ==============
Per share data:
Net loss ($1,423,000) ($1,752,000)
Preferred stock dividend 50,000 --
------------- ------------
Net loss to common stockholders ($1,473,000) ($1,752,000)
============= ==============
Basic and diluted net loss per share ($0.06) ($0.08)
============= ==============
Shares used in computing per share data 25,448,760 20,804,942
============= ==============
</TABLE>
See accompanying notes.
<PAGE>6
THERMOGENESIS CORP.
Statements of Cash Flows
Three Months Ended September 30, 2000 and 1999
<TABLE>
<S> <C> <C>
Cash flows from operating activities: 2000 1999
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Net loss ($1,423,000) ($1,752,000)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 181,000 150,000
Amortization of stock and options issued for services -- 22,000
Net change in operating assets and liabilities:
Accounts receivable (41,000) 174,000
Inventory 4,000 13,000
Other current assets 48,000 3,000
Other assets (54,000) 91,000
Accounts payable 56,000 270,000
Accrued payroll and related expenses 81,000 (33,000)
Accrued liabilities (29,000) (208,000)
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Net cash used in operating activities (1,177,000) (1,270,000)
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Cash flows from investing activities:
Capital expenditures (82,000) (90,000)
Sales of short-term investments 1,530,000 --
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Net cash provided by (used in) investing activities 1,448,000 (90,000)
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Cash flows from financing activities:
Exercise of stock options and warrants 273,000 --
Payments on capital lease obligations (2,000) --
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Net cash provided by financing activities 271,000 --
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Net increase (decrease) in cash and cash equivalents 542,000 (1,360,000)
Cash and cash equivalents at beginning of period 810,000 2,327,000
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Cash and cash equivalents at end of period $ 1,352,000 $ 967,000
============= =============
</TABLE>
See accompanying notes.
<PAGE>7
THERMOGENESIS CORP.
Notes to Financial Statements
September 30, 2000
(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, 2000 are not
necessarily indicative of the results that may be expected for the year ended
June 30, 2001.
Summary of Significant Accounting Policies
On December 3, 1999, the SEC staff issued Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition." The Company is currently assessing the impact, if
any, that the SAB will have on its revenue recognition policy. The Company's
existing revenue recognition policy is to recognize revenue at the time the
customer takes title to the product, generally at the time of shipment. The
effect of the change, if any, must be recognized as a cumulative effect of a
change in accounting no later than the quarter ending June 30, 2001. At the
current time, it is not possible to determine the effect this change will have
on the results of operations of the Company.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133
("FAS 133"), Accounting for Derivative Instruments and Hedging Activities, as
amended, which became effective for the Company for the quarter ended September
30, 2000. Because of the Company's minimal use of derivatives, FAS 133 did not
have a significant impact on the financial position or results of operations of
the Company.
Inventory
Inventory consisted of the following at:
September 30,
2000 June 30, 2000
-------------- -------------
Raw materials $ 920,000 $1,051,000
Work in process 227,000 295,000
Finished goods 1,124,000 929,000
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$ 2,271,000 $ 2,275,000
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<PAGE>8
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 2000 and 1999
The Company designs, manufactures and distributes equipment to process
therapeutically valuable blood components including stem cells and surgical
sealants. Initially the Company developed medical devices for ultra rapid
freezing and thawing of blood components, which the Company manufactures and
distributes in their respective niche markets in blood banks and hospitals.
During fiscal 1988 through 2000, 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).
Beginning in late 1993, and with accelerated research and develoment efforts
from 1996 to 1999, the Company completed development of the BioArchive and
CryoSeal technology platforms, each of which will give rise to multiple medical
devices targeted at a number of different medical and surgical applications. 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 is currently seeking
strategic alliance partners with substantially greater financial and marketing
resources than the Company in order to maximize the commercial value of the
CryoSeal and BioArchive platform 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
Net Revenues:
Net revenues for the three months ended September 30, 2000 were $801,000
compared to $999,000 for the three months ended September 30, 1999. The decrease
is primarily due to the non refundable licensing fees of $121,000 received from
the distributor of the BioArchive system in Japan which was included in net
revenues for the three months ended September 30, 1999. BioArchive revenues
increased as one unit was sold during the first quarter of FY2001 versus none in
the first quarter of FY2000. Offsetting the increase in BioArchive revenues,
freezer sales were down from the prior year as orders for the Company's largest
freezers were not received until late in the quarter. As of September 30, 2000
the Company has a cancelable backlog of 10 MP2000 freezers which are expected to
ship by December 31, 2000.
<PAGE>9
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 2000 and 1999 (Cont'd)
Results of Operations (Cont'd)
Cost of Revenues:
Cost of revenues as a percent of revenues was approximately 116% for the three
months ended September 30, 2000, as compared to 126% for the corresponding
fiscal 2000 period. The decrease in cost of revenues is primarily due to lower
overhead as a result of better inventory management and cost control measures.
However, cost of revenues is higher than net revenues due to the costs required
to maintain a manufacturing structure that is compliant with the FDA's Quality
System Requirements.
General and Administrative Expenses:
General and administrative expenses for the three months ended September 30,
2000 decreased $88,000 or 17% from the corresponding fiscal 2000 period. This
decrease is primarily the result of personnel reductions which occurred during
the prior fiscal year and the Company has elected not to replace the vacant
positions.
Selling and Service Expenses:
Selling and service expenses for the three months ended September 30, 2000 were
$478,000, a decrease of $86,000 or 15% from the corresponding fiscal 2000
period. The decrease in selling and service expenses is due to personnel and
other cost reductions implemented in the third quarter of FY2000 as the Company
focused on bringing the selling and service expenses more in line with the
actual revenues produced while still funding activities to drive revenue and
ensure customer satisfaction.
Research and Development Expenses:
Research and development expenses for the three months ended September 30, 2000
decreased by $8,000 or 2% from the corresponding fiscal 2000 period. Research
and development expenses remained consistent as the personnel and other cost
reductions implemented in the prior year were offset by the costs of the
CryoSeal Fibrin Sealant pre clinical trials which should be completed by
December 31, 2001.
<PAGE>10
THERMOGENESIS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ended September 30, 2000 and 1999 (Cont'd)
Results of Operations (Cont'd)
Liquidity and Capital Resources
Working capital decreased by $1,105,000. The decrease in cash and short term
investments was primarily due to funding of the manufacturing infrastructure,
operating expenses, and the costs associated with the CryoSeal Fibrin Sealant
pre clinical trials.
The Company used $1,177,000 for operations for the three months ended September
30, 2000. This was primarily due to lower sales volume in relationship to fixed
manufacturing costs, operating expenses and research and development costs for
the testing required to obtain the CE mark on CryoSeal CP-2 disposable and the
pre clinical trials. The report of independent auditors on the Company's June
30, 2000 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 2001. 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.
The Company made the transition to the calendar year 2000 without "Year 2000"
interruptions. The Company did not incur any material costs to be "Year 2000"
compliant.
At September 30, 2000, the Company has no significant outstanding capital
commitments.
Backlog
The Company's cancelable backlog at September 30, 2000 was $954,000. Purchase
orders from two customers for ten MP2000 freezers, including installation and
other services totaled $719,000. The remainder of the backlog is composed of
orders from a variety of customers for other ThermoLine products, disposables
and BioArchive disposables.
Quantitative and Qualitative Disclosures About Market Risk
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. The
Company has no long-term debt or investments and therefore is not subject to
interest rate risk.
<PAGE>11
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
Cryo-Cell International, Inc., filed a complaint against the Company
in the U.S. District Court for the Southern District of New York,
styled Cryo-Cell International, Inc. v. THERMOGENESIS CORP., Case No.
00 Civ. 8155, alleging patent infringement by the Company related to
the Company's BioArchive System. Although the Company has its own
patents and intends to defend the action, the complaint has not been
served and the Company has no obligation to respond at this time.
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.
<PAGE>12
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, 2000
/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)
