<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20459
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
<TABLE>
<S> <C>
For the quarterly period ended March 26, 2000 Commission file number 0-18170
-------------- -------
</TABLE>
CRYOMEDICAL SCIENCES, INC.
--------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-3076866
-------- ----------
(State of Incorporation) (IRS Employer I.D. Number)
</TABLE>
1300 Piccard Drive
Suite L-105
Rockville, Maryland 20850
-------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (301) 417-7070
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
33,854,302 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001
per share, were outstanding as of April 30, 2000.
<PAGE> 2
CRYOMEDICAL SCIENCES, INC.
FORM 10-QSB
QUARTER ENDED MARCH 26, 2000
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 26, 2000
(unaudited) and December 26, 1999 3
Consolidated Statements of Operations for the
thirteen weeks ended March 26, 2000 and March 28,
1999 (unaudited) 4
Consolidated Statements of Cash Flows for the
thirteen weeks ended March 26, 2000 and March 28,
1999 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 7-8
Part II. Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
2
<PAGE> 3
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 26, December 26,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets
Cash and cash equivalents $ 29,281 $ 7,952
Receivables, net allowance for doubtful accounts 215,375 246,436
of $11,437 and $11,927, respectively
Inventories 905,543 952,298
Prepaid expenses and other current assets 188,922 79,372
--------------- -----------------
Total current assets 1,339,121 1,286,058
Fixed assets, net accumulated depreciation 434,929 494,452
of $2,651,597 and $2,592,074, respectively
Intangible assets, net 363,443 370,277
Other assets 33,107 8,328
--------------- -----------------
Total assets $ 2,170,600 $ 2,159,115
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable $ 357,483 $ 648,578
Accrued expenses 456,587 484,473
Short-term credit facility 120,000 120,000
Unearned revenues 21,871 19,608
Extended warranties - current portion 9,949 9,949
Capital leases - current portion 28,651 36,657
--------------- -----------------
Total current liabilities 994,541 1,319,265
--------------- -----------------
Extended warranties, net of current portion 1,659 4,146
Capital leases, net of current portion 8,154 9,908
Notes payable 500,000 -
Deferred rent 1,851 7,399
--------------- -----------------
Total liabilities 1,506,205 1,340,718
--------------- -----------------
Stockholders' equity
Preferred stock, $.001 par value per share,
9,378,800 authorized; 384 shares issued and outstanding - -
Common stock, par value $.001 per share,
50,000,000 shares authorized; 33,854,302
issued and outstanding 33,854 33,854
Additional paid-in capital 31,313,343 31,313,343
Accumulated deficit (30,682,802) (30,528,800)
--------------- -----------------
Total stockholders' equity 664,395 818,397
--------------- -----------------
Total liabilities and stockholders' equity $ 2,170,600 $ 2,159,115
=============== =================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen weeks ended
March 26, March 28,
------------------------------------------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Revenues $ 399,157 $ 390,830
Cost of sales 133,426 300,144
---------------------- ---------------------
Gross profit 265,731 90,686
Expenses
Research and development 186,625 56,169
Sales and marketing 35,435 67,916
General and administrative 192,679 271,744
---------------------- ---------------------
Total expenses 414,739 395,829
---------------------- ---------------------
Operating loss (149,008) (305,143)
Interest income, net of interest expense (4,994) (7,676)
---------------------- ---------------------
Net loss $ (154,002) $ (312,819)
====================== =====================
Net loss per common share $ (0.00) $ (0.01)
====================== =====================
Weighted average number
of common shares outstanding 33,854,302 33,454,302
====================== =====================
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Thirteen weeks ended
March 26, March 28,
--------------- ---------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (154,002) $ (312,819)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 59,523 72,112
Amortization 6,834 -
Provision for bad debt 3,919 30,605
Write off of accounts receivable (4,409) (219,444)
Changes in operating assets and liabilities:
Decrease in receivables 31,551 188,455
Decrease in inventories 46,755 90,229
Increase in prepaid and other current assets (109,550) (39,290)
Increase in other assets (24,779) -
Decrease in accounts payable (291,095) (227,228)
Decrease in accrued expenses (27,886) (10,852)
Increase (decrease) in unearned revenue 2,263 (22,489)
Decrease in warranty reserves - (5,400)
Decrease in extended warranties (2,487) (5,187)
Decrease in deferred rent (5,548) (2,768)
--------------- ---------------
Net cash used in operating activities (468,911) (464,076)
--------------- ---------------
Cash flows from investing activities:
Purchase of equipment - -
--------------- ---------------
Net cash used in investing activities - -
--------------- ---------------
Cash flows from financing activities:
Issuance of preferred stock - 400,000
Decrease in capital leases (9,760) (10,077)
Line of credit - (29,225)
Issuance of notes payable 500,000 -
--------------- ---------------
Net cash provided by financing activities 490,240 360,698
--------------- ---------------
Net decrease in cash and cash equivalents 21,329 (103,378)
Cash and cash equivalents at beginning of period 7,952 135,183
--------------- ---------------
Cash and cash equivalents at end of period $ 29,281 $ 31,805
=============== ===============
Supplemental Cash Flow Information:
Cash paid for interest $ 7,407 $ 8,742
=============== ===============
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. GENERAL
-------
Cryomedical Sciences, Inc. (the "Company") is engaged in the research,
development, marketing and manufacture of products for use in the field of
low-temperature medicine.
The Consolidated Balance Sheet as of March 26, 2000, the Consolidated
Statements of Operations for the thirteen-week periods ended March 26,
2000 and March 28, 1999, and the Consolidated Statements of Cash Flows for
the thirteen-week periods ended March 26, 2000 and March 28, 1999, 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 26, 2000, and for the period 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 year ended December 26,
1999 included in the Company's Annual Report on Form 10-KSB for the year
ended December 26, 1999.
The results of operations for the thirteen-week period ended March 26,
2000 is not necessarily indicative of the operating results anticipated
for the full year.
B. NET LOSS PER SHARE
------------------
Net loss per share is based on the weighted average number of common
shares outstanding during the thirteen week periods ended March 26, 2000
and March 28, 1999. No effect has been given to unexercised stock options
or warrants because the effect would be anti-dilutive.
C. INVENTORIES
-----------
<TABLE>
<CAPTION>
Inventories consist of the following: March 26, 2000 December 26, 1999
-------------- -----------------
<S> <C> <C>
Raw materials and purchased parts $ 603,219 $ 653,529
Work in process 8,117 22,604
Finished goods 294,207 276,165
------- -------
905,543 952,298
</TABLE>
D. NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In June 1997, Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" was issued, which is effective for fiscal years beginning
after December 15, 1997. The Company is complying with all requirements, but has
no items of comprehensive income.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's business activities focus primarily on the manufacturing and
marketing related to its cryosurgical systems. The CMS AccuProbe(R) System Model
450 was cleared by the FDA in April 1991, the CMS AccuProbe(R) System Models 530
and 550 were cleared in December 1995, the CMS AccuProbe(R) 600 series was
cleared in March 1997, the Cryo-lite(R) series was cleared in July 1997, and the
Blizzard Series was cleared in June 1998. The Company plans to continue to
market these systems in the various fields for which they received clearance
from the FDA. The Company received clearance in November 1997 to expand its
indications for use (labeling) for the AccuProbe(R) system family. In September
1998 the Company received FDA clearance for its AccuProbe(R) 800 series. At the
American Urological Association meeting held in Atlanta, Georgia in May of this
year the Company introduced the AccuProbe(R) 800 series.
The Company is presently in the process of seeking funds for its wholly owned
subsidiary BioLife Solutions, Inc. ("BioLife") for the purpose of
commercializing its Hypothermosol(R) series of preservation solutions. There can
be no assurance that such funding will be obtained.
RESULTS OF OPERATIONS
Revenues for the thirteen-week period ended March 26, 2000 totaled $399,157,
compared to $390,830, for the comparable period of the prior year, representing
an increase of 2%. The increase in revenues reflects an increase in the number
of CMS AccuProbes(R) and accessories sold.
Gross profit for all products for the thirteen-week period ended March 26, 2000
totaled $265,731, or 67% of revenues, compared to gross profits of $90,682, or
23% of revenues, for the comparable period of the prior year. Gross profit as a
percent of revenues increased compared to the prior year period due to changes
in the mix of product and service sales and a decrease in the overhead charged
to costs of goods sold based on a reduction in staff and related expenses.
Research and development expenses for the thirteen-week period ended March 26,
2000 totaled $186,625, compared to $56,169 for the comparable period of the
prior year, representing an increase of 232% from the prior year period.
Research and development expenses increased due to an increase in resources used
in development projects.
Sales and marketing expenses for the thirteen-week period ended March 26, 2000
totaled $35,435, compared to $67,916 for the comparable period of the prior
year, representing a decrease of 48%, from the prior year period. Sales and
marketing expenses over the comparable period of the previous year decreased due
to reduced commissions and a reduction in travel and related expenses.
General and administrative expenses for the thirteen-week period ended March 26,
2000 totaled $192,679 compared to $271,744, for the comparable period of the
prior year, representing a decrease of 29%, from the prior year period. General
and administrative expenses decreased due to general cut backs in discretionary
expenses.
Operating expenses for the thirteen-week period ended March 26, 2000 totaled
$414,739 compared to $395,829 for the comparable period of the prior year,
representing a increase of 5%,
7
<PAGE> 8
from the prior year period. The Company sustained net losses of $154,002 for the
thirteen-week period ended March 26, 2000, compared to a net losses of $312,819,
for the comparable period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At March 26, 2000, the Company had cash and cash equivalents totaling $29,281
and working capital of $344,580, as compared to $7,952 and ($33,207),
respectively, at December 26, 1999. The increase in the Company's cash and
working capital positions from December 26, 1999 was due primarily to the
receipt by the Company, on February 25, 2000, of $500,000 from the sale of
promissory notes to two individuals, each note being in the amount of $250,000
and bearing interest at the rate of 10% per annum. The notes are due and payable
three years from the date of issuance and, in the event they are outstanding at
the time of an equity financing which equals or exceeds $2,500,000 ($500,000
under certain circumstances), together with accrued and unpaid interest,
automatically convert into equity securities of the Company on the same terms
and conditions provided for in such equity financing.
Capital expenditures for equipment totaled $0 in the thirteen-week period ended
March 26, 2000, compared to $0 in the comparable period of the prior year. The
Company does not expect to spend more than $500,000 in total for equipment in
the year ending December 31, 2000.
The Company believes that sales for the remainder of the 2000 fiscal year may be
greater than the level experienced in the comparable prior year periods due to
the favorable reimbursement environment created by HCFA's new coverage policy
for cryosurgery of the prostate. However, the level of increased sales, if any,
will depend in part on the Company's ability to implement manufacturing and
testing protocols for its products, increase sales and marketing efforts, and
reestablish its education and retraining programs.
FORWARD LOOKING INFORMATION
This Report contains certain forward-looking information statements made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements, including statements
regarding Medicare reimbursement, the Company's liquidity and capital resources,
and its ability to continue its operations in the absence of additional
financing, are based on current expectations that involve numerous risks and
uncertainties. Actual results could differ materially from those anticipated in
such forward-looking statements as a result of various known and unknown factors
including, without limitation, future economic, competitive, regulatory and
market conditions, future business decisions, the receipt of financing, market
acceptance of the Company's products, and those factors discussed in this
Report. Words such as "believes," "anticipates," expects," "intends," "may," and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying such statements. The Company undertakes
no obligation to revise any of these forward-looking statements.
8
<PAGE> 9
CRYOMEDICAL SCIENCES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 6, 2000, Endocare, Inc. filed a suit against the Company in
the United States District Court, Central District of California, alleging that
the Company is infringing United States Letters Patent No. 5,647,868 (the "868
patent"), entitled "Cryosurgical Integrated Control and Monitoring System and
Method," owned by Endocare, Inc. as assignee, in that the Company is
manufacturing, using and selling and offering for sale products embodying the
patented invention. The complaint among other things, seeks to enjoin the
Company from infringing the 868 patent and to recover lost profits, compensatory
damages, treble damage for willful infringement, and costs and attorneys fees.
The Company has filed an answer to the complaint denying the critical
allegations therein and counterclaiming for a declaratory judgement of
invalidity, unenforceability, and noninfringement of the 868 patent, on the
basis of prior art and the fact that the patent applicant, or those acting on
his behalf, failed to exercise the duty of candor and to meet the duty of
disclosure that is required of those seeking a patent, damages, and reasonable
attorneys fees and costs because Endocare's actions make this an exceptional
case.
Item 2. Changes in Securities and Use of Proceeds
On February 25, 2000, the Company received $500,000 from the sale of
promissory notes to two individuals, each note being in the amount of $250,000
and bearing interest at the rate of 10% per annum. The notes are due and payable
three years from the date of issuance and, in the event they are outstanding at
the time of an equity financing which equals or exceeds $2,500,000 ($500,000
under certain circumstances), together with accrued and unpaid interest,
automatically convert into equity securities of the Company on the same terms
and conditions provided for in such equity offering. The sales were exempt from
registration under the Securities Act pursuant to Rule 506 of Regulation D.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K, None
9
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Cryomedical Sciences, Inc.
--------------------------
(Registrant)
Date: May 9, 2000 /s/Richard J. Reinhart, Ph.D.
-----------------------------
Richard J. Reinhart, Ph.D
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-26-2000
<CASH> 29,281
<SECURITIES> 0
<RECEIVABLES> 226,812
<ALLOWANCES> 11,437
<INVENTORY> 905,543
<CURRENT-ASSETS> 1,339,121
<PP&E> 3,086,526
<DEPRECIATION> 2,651,597
<TOTAL-ASSETS> 2,170,600
<CURRENT-LIABILITIES> 994,541
<BONDS> 0
0
0
<COMMON> 33,854
<OTHER-SE> 630,541
<TOTAL-LIABILITY-AND-EQUITY> 2,170,600
<SALES> 220,690
<TOTAL-REVENUES> 399,157
<CGS> 70,510
<TOTAL-COSTS> 62,916
<OTHER-EXPENSES> 414,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,994)
<INCOME-PRETAX> (154,002)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,002)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
