<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
<TABLE>
<S> <C>
For The Quarterly Period Ended March 31, 1996 Commission File Number 0-18170
-------------- -------
</TABLE>
CRYOMEDICAL SCIENCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-3076866
-------- ----------
(State of Incorporation) (IRS Employer I.D. Number)
</TABLE>
1300 Piccard Drive
Suite 102
Rockville, Maryland 20850
--------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (301) 417-7070
--------------
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
------ -----
25,747,373 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001
per share, were outstanding as of April 16, 1996.
<PAGE> 2
CRYOMEDICAL SCIENCES, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 1996 and
June 30, 1995 3
Consolidated Statements of
Operations for the Three Months
and Nine Months ended March 31,
1996 and 1995. 4
Consolidated Statements of
Cash Flows for the Nine
Months ended March 31,
1996 and 1995. 5
Notes to Consolidated Condensed
Financial Statements 6-9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10-13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
-------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,265,757 $ 1,117,383
Short-term investments 100,310 100,310
Receivables - net allowance for doubtful accounts of $78,209 2,489,039 3,178,032
Inventories 2,094,045 2,628,532
Prepaid expenses and other 314,930 297,984
------------- ------------
Total current assets 6,264,081 7,322,241
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - less accumulated
depreciation and amortization of $1,333,432 and $1,010,209 794,964 1,061,935
OTHER ASSETS 18,726 18,727
------------- ------------
$ 7,077,771 $ 8,402,903
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,022,476 $ 2,096,696
Accrued settlement of stockholder class action suit - 100,000
Accrued vacation 152,473 177,831
Customer deposits 63,997 50,000
Warranty reserves 144,800 248,000
Extended warranties - current 742,200 842,738
Current portion of capital lease obligations and notes payable 21,833 31,083
------------- ------------
Total current liabilities 2,147,779 3,546,348
EXTENDED WARRANTIES 351,200 848,286
DEFERRED RENT 20,744 3,690
CAPITAL LEASE OBLIGATIONS AND NOTES PAYABLE,
net of current portion 5,089 22,654
------------- ------------
Total liabilities 2,524,812 4,420,978
------------- ------------
COMMITMENTS AND CONTINGENCIES:
9% SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
Par value $.001, liquidation value $.50 per share;
authorized, 621,000 shares; issued and outstanding, none - -
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001;
authorized, 9,379,000 shares; issued and outstanding, none - -
Common Stock, par value $.001; authorized,
50,000,000 shares; issued and outstanding,
25,747,373 and 24,845,631 shares 25,747 24,846
Additional paid-in capital 28,236,620 26,248,915
Accumulated deficit (23,666,531) (22,250,365)
Notes receivable from officers, including accrued interest (42,877) (41,471)
------------- ------------
Total stockholders' equity 4,552,959 3,981,925
------------- ------------
$ 7,077,771 $ 8,402,903
============= ============
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------------ -----------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SALES & OTHER REVENUES $ 2,026,593 $ 3,025,520 $ 5,708,743 $ 10,921,890
COST OF SALES 1,014,103 1,222,422 2,653,779 5,042,619
------------ ------------ ------------ ------------
GROSS PROFIT 1,012,490 1,803,098 3,054,964 5,879,271
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Research and development 313,027 682,383 1,018,932 2,288,630
Sales and marketing 592,954 1,003,525 1,859,390 2,812,246
General and administrative 522,974 766,080 1,600,884 2,229,250
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,428,955 2,451,988 4,479,206 7,330,126
------------ ------------ ------------ ------------
OPERATING LOSS (416,465) (648,890) (1,424,242) (1,450,855)
INTEREST INCOME, net of
interest expense 3,797 3,571 8,077 32,759
------------ ------------ ------------ ------------
NET LOSS $ (412,668) $ (645,319) $ (1,416,165) $ (1,418,096)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 25,040,724 24,833,633 24,918,938 24,659,112
============ ============ ============ ============
NET LOSS PER SHARE $ ( 0.02) $ (0.03) $ (0.06) $ (0.06)
============ ============ ============ ============
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,416,165) $ (1,418,096)
------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities:
(Decrease) increase in warranty reserves (103,200) 36,200
Depreciation and amortization 323,223 314,031
Changes in assets and liabilities:
Decrease (increase) in receivables 688,993 (458,643)
Decrease (increase) in inventories 534,487 (329,681)
Increase in prepaid expenses
and other assets (16,946) (81,522)
(Decrease) increase in accounts payable,
accrued expenses, and deferred rent (1,209,339) 439,781
Increase (decrease) in customer deposits 13,997 (10,000)
(Decrease) increase in extended warranties ( 597,624) 298,650
------------ ------------
Total Adjustments ( 366,409) 208,816
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,782,574) (1,209,280)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments - (100,310)
Maturities of short-term investments - 97,424
Purchase of equipment (56,252) (304,686)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES (56,252) (307,572)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes receivable from officers (1,406) (1,406)
Increase of notes payable - 31,409
Common stock issued for cash 1,910,000 110,692
Issuance of shares for employee stock purchase plan 34,506 -
Exercise of employee stock option 44,100 -
Exercise of IPO Unit Purchase Options & underlying warrants - 429,990
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,987,200 570,685
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 148,374 (946,167)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,117,383 2,426,467
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,265,757 $ 1,480,300
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (expense) $ 12,102 $ 12,453
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
A. GENERAL
Cryomedical Sciences, Inc. ("CMS") and its wholly owned subsidiary Cryo
Instruments, Inc. ("CII"), collectively referred to as the "Company," is
engaged in the research, development, manufacturing and marketing of
products for use in the field of hypothermic (low- temperature) medicine.
The Consolidated Balance Sheet as of March 31, 1996, the Consolidated
Statements of Operations for the three and nine month periods ended March
31, 1996 and 1995, and the Consolidated Statements of Cash Flows for the
nine-month periods ended March 31, 1996 and 1995, have been prepared
without audit. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations, and cash
flows at March 31, 1996, and for all periods then ended, have been
recorded. All adjustments recorded were of a normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto for the fiscal year ended June
30, 1995 included in the Company's Annual Report on Form 10-K for the
year ended June 30, 1995.
The results of operations for the periods ended March 31, 1996 are not
necessarily indicative of the operating results anticipated for the
fiscal year ending June 30, 1996.
B. NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common
shares outstanding during the three months and nine months ended March
31, 1996 and 1995. No effect has been given to unexercised stock options
or warrants because the effect would be antidilutive.
6
<PAGE> 7
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
(continued)
C. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Raw materials and purchased parts $ 1,261,559 $ 1,296,445
Work in process 455,742 628,302
Finished goods 368,985 789,090
Consignment inventory 236,770 53,706
------------ ------------
2,323,056 2,767,543
Less reserves (229,011) (139,011)
------------ ------------
$ 2,094,045 $ 2,628,532
============ ============
</TABLE>
D. CONTINGENCIES
In April 1994, present or former stockholders of the Company filed several
suits against the Company, its President and CEO and two other directors
in the United States District Court for the District of Maryland. The
suits were subsequently consolidated under Case No. AW- 94-873, and a
consolidated amended complaint was filed. The plaintiffs sought to have
the consolidated action designated as a class action on behalf of all
persons who purchased the Company's stock between September 13, 1991 and
April 4, 1994. The plaintiffs claimed that, during that period, the
defendants inflated the market price of the Company's stock in violation
of the federal securities laws and the common law. On April 26, 1995, the
Court dismissed a major portion of the action against the Company and
dismissed the plaintiffs' claims against the individual defendants in
their entirety. In September 1995, the parties reached an agreement to
settle the case. The settlement was approved by the Court on February 15,
1996. Currently, the deadline for submitting claims is June 25, 1996.
Pursuant to the agreement, a class consisting of all persons who purchased
the Company's stock between September 13, 1991 and April 4, 1994 has been
certified solely for settlement purposes. The agreement provides that, in
return for a general release of all claims which members of the class may
have against the Company and its past and present officers, directors,
employees and other agents, the Company will pay $100,000 in cash (which
payment has already been paid) and will issue shares of common stock of the
Company with a market value of $350,000, based on the average closing price
on the ten trading days prior to district court approval of the
settlement. On February 15, 1996, the district court determined that
175,549 shares of the Company's common stock (at an average price per
share of $1.99375),
7
<PAGE> 8
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
(continued)
D. CONTINGENCIES (continued)
representing $350,000 was due the stockholders. The Company accrued the
entire $450,000 settlement cost of the stockholder class action suit as of
June 30, 1995. The $350,000 of common stock to be issued was recorded as
additional paid in capital at June 30, 1995. The plaintiffs' counsel
intend to apply to the Court for an award of fees equal to approximately
one third of the gross amount of the settlement proceeds, as well as for
reimbursement of the out of pocket expenses they incurred during the
course of litigation. Subsequent to the approval of the settlement by the
Court, the settlement proceeds, minus any amounts paid to the plaintiffs'
counsel and the costs of administering the settlement, including the costs
of notice to the class, will be distributed to those members of the class
who submit timely claims, in proportion to the investment losses they have
suffered on shares they purchased during the class period. Members of the
class who did not wish to participate in the settlement were permitted to
opt out of the class if they gave written notice postmarked no later than
February 1, 1996. To date, the Company has received such notices from
persons who purchased approximately 430,000 shares of the Company's stock
during the class period. The Company has settled the litigation solely to
avoid the expenses that would be involved in defending the suit between
now and its conclusion. Those expenses were expected to exceed the amount
of the cash consideration being paid in the settlement. The defendants
have admitted no liability and continue to believe that the suits were
without merit.
On or about October 19, 1995, the Company was served with a complaint
alleging gender bias which had been filed by a female former employee who
claims that she was discriminated against with respect to her salary and
also with respect to the decision to terminate her employment as part of a
reduction in work force. The suit was filed in the Circuit Court for
Montgomery County, Maryland and subsequently removed to the United States
District Court for the District of Maryland. The claims are asserted
under both Title VII of the Civil Rights Act of 1964 and the Equal Pay
Act. The Company denied all allegations of discrimination and vigorously
defended the case. The suit has been dismissed with prejudice, and the
Plaintiff is not entitled to, and will not receive, any payment from the
Company.
E. TRANSACTIONS AFFECTING COMMON STOCK
On January 3, 1996, the Company issued 7,527 shares of common stock, in
connection with the Employee Stock Purchase Plan.
8
<PAGE> 9
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
(continued)
E. TRANSACTIONS AFFECTING COMMON STOCK (continued)
On February 15, 1996, the Company issued 175,549 shares of the Company's
common stock in connection with the final settlement of the shareholder
suit.
On March 19, 1996, the Company issued 684,914 shares of the Company's
common stock at an average price of $1.38 per share in connection with the
January 17, 1996 sale of convertible preferred stock to foreign investors,
for which the Company received $1,910,000 of net proceeds.
F. SUBSEQUENT EVENTS
On April 8, 1996, the Company issued an additional 618,308 shares of
Common Stock at an average price of $1.61 per share in connection with the
January 17, 1996 sale of convertible preferred stock to foreign investors.
As of April 19, 1996 approximately 30,000 preferred shares have not been
converted for issuance as common stock.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in the research, development, manufacture and
marketing of products for use in the field of hypothermic (low-temperature)
medicine. The Company has developed a cryosurgical system, called the CMS
AccuProbe(R) System (the "AccuProbe"), which is a sophisticated cryosurgical
device designed to freeze and destroy unwanted (diseased) tissue. The initial
clinical focus of physicians with respect to the AccuProbe has been in the
fields of urology and general surgery, primarily to destroy tissue which cannot
be removed surgically or in which typical surgery offers extensive adverse side
effects. The Company plans to further test and market its AccuProbe in certain
of the various fields for which the original 400 series device received
clearance from the FDA in April 1991 and the 500 series received FDA clearance
in December 1995. The CMS AccuProbe is cleared for marketing in the fields of
dermatology, general surgery, neurosurgery, thoracic surgery, ENT, gynecology,
oncology, proctology and urology.
RESULTS OF OPERATIONS
Sales and other operating revenues for the three and nine months ended
March 31, 1996 totaled $2,026,593 and $5,708,743, respectively, compared to
$3,025,520 and $10,921,890, respectively, for the comparable periods of the
prior fiscal year representing decreases of 33% and 48% respectively. The
Company's operating revenues in the three months ended March 31, 1996 included
sales of 7 CMS AccuProbe Systems, disposable probes and other accessories.
Sales for the three months ended March 31, 1995 included 9 AccuProbe Systems,
in addition to disposable probes and other accessory products. Operating
revenues for the nine months ended March 31, 1996 included sales of 16
AccuProbe Systems, disposable probes and other accessories compared to sales of
33 systems, disposable probes and other accessories in the comparable period of
the prior fiscal year. The Company believes revenues in the three and nine
months periods ended March 31, 1996 reflect a decline in the number of
AccuProbe Systems sold due primarily to lack of formal Medicare reimbursement
for urologic cryosurgery. Sales in each quarter are also subject to
substantial variation, depending upon the success of marketing efforts and
timing of orders. The Company hopes that the separate FDA clearances of the
CMS Urethral Warmer in October 1995 and the AccuProbe 500 series in December
1995 will restore system, disposable probe and other accessory revenue to
previous levels, although there can be no assurance of increased revenue from
these sources. Through March 31, 1996, the Company has sold a total of 138
AccuProbe Systems since the product was introduced in June 1992.
Included in sales and other operating revenues are ultrasound systems
produced by third party manufacturers and sold in conjunction with certain
AccuProbe Systems as a convenience to the customer. There was no ultrasound
revenue for the three and nine months ended March 31, 1996, compared to $59,900
and $732,188 respectively for the comparable periods of the prior fiscal year.
10
<PAGE> 11
Gross Profits for all products for the three months ended March 31, 1996
totaled $1,012,490, or 50% of sales, compared to gross profits of $1,803,098,
or 60% of sales, for the three months ended March 31, 1995. For the nine
months ended March 31, 1996 gross profits totaled $3,054,964, or 54% of sales,
compared to gross profits of $5,879,271, or 54% of sales, for the comparable
period of the prior fiscal year. The gross profit margin decreased in the most
recent period due to discounts associated with the placement of 400 series
AccuProbe Systems and the mix of sales involving Series 400 and 500 AccuProbe
Systems.
Research and development expenses for the three months ended March 31,
1996 totaled $313,027, a decrease of 54% compared to $682,383 for the
comparable period of the prior fiscal year. Research and development expenses
for the nine months ended March 31, 1996 totaled $1,018,932, a decrease of 55%
compared to $2,288,630 in the comparable period of the prior fiscal year.
Research and development expenses decreased during the three and nine months
ended March 31, 1996 due to a reduction in staffing and a temporary reduction
of research grants related to the development of the Company's hypothermic
solutions, reflecting cost reduction measures effected by the Company.
Sales and marketing expenses for the three months ended March 31, 1996
totaled $592,954, a decrease of 41% compared to $1,003,525 for the comparable
period of the prior fiscal year. Sales and marketing expenses for the nine
months ended March 31, 1996 totaled $1,859,390, a decrease of 34% compared to
$2,812,246 in the comparable period of the prior fiscal year. Sales and
marketing expenses decreased during these periods due to a reduction in
staffing, reduced marketing activity and reduced consulting fees.
General and administrative expenses for three months ended March 31, 1996
totaled $522,975, a decrease of 32% compared to $766,080 for the comparable
period of the prior fiscal year. General and administrative expenses for the
nine months ended March 31, 1996 totaled $1,600,885, a decrease of 28% compared
to $2,229,250 for the comparable period of the prior fiscal year. General and
administrative expenses decreased in the more recent periods due to a reduction
in staffing and reduced professional fees.
As a result of the foregoing reductions in operating expenses which were
offset by decreased gross profits from sales, the Company sustained net losses
of $412,668 and $1,416,165, respectively, for the three and nine months ended
March 31, 1996 compared to net losses of $645,319 and $1,418,096, respectively,
in the comparable periods of the prior fiscal year.
Sales of the AccuProbe are affected by the level of reimbursement by
public and private insurers in connection with procedures in which the
AccuProbe is utilized. The availability of consistent, uniform insurance
reimbursement guidelines for hospitals and physicians is an important factor
often considered by potential customers when making a decision regarding the
purchase of any new medical device, including the AccuProbe System.
Reimbursement of hospitals and urologists by public and private insurers such
11
<PAGE> 12
as Medicare and Blue Cross and Blue Shield is a necessary part of gaining
general acceptance for use of the AccuProbe for urological cryosurgery.
Currently Medicare considers urological cryosurgical procedures to be
investigational and excludes such procedures from reimbursement, although
Medicare carriers may pay for such procedures if the carriers decide that the
use of the AccuProbe is appropriate for the patients involved. No national
payment guidelines for such surgery have yet been established by either
Medicare's Health Care Financing Administration ("HCFA") or by the National
Blue Cross and Blue Shield Association. Therefore, insurer's reimbursement
decisions are made on an insurer-by-insurer or case-by-case basis. While
payments received by customers vary significantly by region and insurer,
widespread formal reimbursement acceptance has yet to be achieved. When
insurance coverage is not available, patients may either elect to pay for
treatment themselves or undergo traditional therapies which are covered by
their insurers. The Company cannot predict if or when national coverage
guidelines for Medicare, Blue Cross and Blue Shield or any other insurance
carriers will be instituted for this form of surgery. The Company believes the
uncertainty and added efforts required for the Company's customers to secure
payment is impacting sales growth and utilization of AccuProbe Systems to some
degree and, if so, may continue to do so unless and until formal national
coverage guidelines are established.
In view of the operating losses suffered by the Company and the level of the
Company's current liquid resources (see "Liquidity and Capital Resources"
below), in May and October 1995 the Company undertook certain actions to reduce
expense levels. Such actions include staff reductions, salary reductions and
other cost control measures. Such other cost control measures include a
reduction in the amount of leased office space, reductions in the levels of
research grants to outside facilities and reductions in other overhead
expenses. The goal of these cost reduction measures is to reduce operating
expenses to a level whereby the Company can achieve operating profits and a
positive cash flow from operations, for which there can be no assurance of
achieving.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash, cash equivalents, and short-term
investments totaling $1,366,067 and working capital of $4,116,302, as compared
to $1,217,693 and $3,775,893, respectively, at June 30, 1995. The Company's
cash and working capital positions increased from June 30, 1995 due primarily
to the $1,910,000 in net proceeds the Company received on January 17, 1996 in
connection with a convertible preferred stock sale to several foreign
investors. The proceeds from this offering have offset the net loss of
$1,416,165 sustained by the Company for the nine months ended March 31, 1996,
and have supplemented working capital and financed the introduction of the
Company's new AccuProbe 500 series.
Capital expenditures for leasehold improvements, furniture and equipment
totaled $56,252 in the nine months ended March 31, 1996, compared to $304,606
in the comparable period of the prior fiscal year. The Company does not expect
to spend more than $100,000 in total for additional equipment and furniture in
the year ending June 30, 1996. The Company does not expect significant capital
expenditures for the
12
<PAGE> 13
fiscal year ending June 30, 1997, unless revenues increase significantly from
current levels.
The Company expects to incur substantial expenditures over the remainder
of fiscal 1996 and in fiscal 1997 related to research, development,
manufacturing and testing of its products and for sales and marketing efforts
and other operating expenses. The Company's management believes that its
current cash and working capital position will be sufficient to fund the
operations of the Company for the next 12 months dependent, in part, on the
level of sales revenues achieved, the level of sales and marketing activity
engaged in by the Company, and the amounts of research funded by the Company.
However, the Company may pursue various forms of short term financing in
addition to the recently completed equity financing. Except for the sale of
its products, the Company has no other major sources of liquidity and has no
commitments with regard to obtaining any additional funds.
13
<PAGE> 14
CRYOMEDICAL SCIENCES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On or about October 19, 1995, the Company was served with a
complaint alleging gender bias which had been filed by a female
former employee who claims that she was discriminated against
with respect to her salary and also with respect to the decision
to terminate her employment as part of a reduction in work force.
The suit was filed in the Circuit Court for Montgomery County,
Maryland and subsequently removed to the United States District
Court for the District of Maryland. The claims are asserted
under both Title VII of the Civil Rights Act of 1964 and the
Equal Pay Act. The Company denied all allegations of
discrimination and vigorously defended the case. The suit has
been dismissed with prejudice, and the Plaintiff is not entitled
to, and will not receive, any payment from the Company.
Item 5. Other Information
On May 7, 1996, the Company announced the resignation of its
President and Chief Executive Officer, J. J. Finkelstein. The
resignation of the positions were of mutual consent between the
Board of Directors and Mr. Finkelstein. The Company expects to
name a successor shortly. During the interim period, John Baust,
Ph.D., Senior Vice President, will be the Acting Chief Operating
Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed one report on Form 8-K dated
January 16, 1996. Item: Announcement of convertible
preferred stock sale to several foreign investors.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cryomedical Sciences, Inc.
----------------------------------------
(Registrant)
Date: May 14, 1996 /s/John G. Baust
----------------------------------------
John G. Baust, Ph.D.
Acting Chief Operating Officer
and Senior Vice President
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,265,757
<SECURITIES> 100,310
<RECEIVABLES> 2,567,248
<ALLOWANCES> (78,209)
<INVENTORY> 2,049,045
<CURRENT-ASSETS> 6,264,081
<PP&E> 2,128,396
<DEPRECIATION> 1,333,432
<TOTAL-ASSETS> 7,077,771
<CURRENT-LIABILITIES> 2,524,812
<BONDS> 0
0
0
<COMMON> 25,747
<OTHER-SE> 4,527,212
<TOTAL-LIABILITY-AND-EQUITY> 7,077,771
<SALES> 4,906,518
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<NET-INCOME> (1,416,165)
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</TABLE>
