<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ___________________ to ____________________
Commission file number 0-27840
CELL ROBOTICS INTERNATIONAL, INC.
-------------------------------------
(Exact Name of small business issuer as Specified in its Charter)
Colorado 84-1153295
- --------------------------------- --------------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
2715 Broadbent Parkway N.E., Albuquerque, New Mexico 87107
--------------------------------------------------------------------------
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (505) 343-1131
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 [X]
As of April 30, 1998, ________________________ shares of Common Stock of the
Registrant were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1998 (unaudited) and
December 31, 1997 (audited).
Consolidated Statement of Operations for the Three Months Ended
March 31, 1998 and March 31, 1997 (unaudited).
Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 1998 and March 31, 1997 (unaudited).
Notes to Unaudited Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The interim unaudited consolidated financial statements have been
prepared by Cell Robotics International, Inc. ("Cell" or the "Company") and,
in the opinion of management, reflect all material adjustments which are
necessary to a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. Such adjustments
consisted only of normal recurring items. Certain information and footnote
disclosure made in the Company's last annual report on Form 10-KSB have been
condensed or omitted for the interim statements. These statements should be
read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-KSB for the year ended December 31, 1997. The
results of the interim periods are not necessarily indicative of results which
may be expected for any other interim period or for the full years.
Forward-Looking Statements
- --------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of the Company. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
<TABLE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Balance Sheets
<CAPTION>
As of As of
3-31-98 12-31-97
------------- -------------
(UNAUDITED)
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 2,591,900 $ 623,572
Accounts receivable, net of allowance
for doubtful accounts of $1,841 477,786 223,856
Inventory 535,013 586,033
Other 69,904 36,089
------------- -------------
Total current assets 3,674,603 1,469,550
Property and equipment, net 179,710 194,654
Deferred offering costs 0 248,372
Other assets, net 57,126 67,271
------------- -------------
$ 3,911,439 $ 1,979,847
============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 290,215 $ 603,153
Payroll related liabilities 127,850 149,726
Royalties payable 183,278 193,150
Other current liabilities 84,242 88,941
------------- -------------
Total current liabilities 685,585 1,034,970
Short-term loan refinanced subsequent
to balance sheet date 0 500,000
------------- -------------
Total liabilities 685,585 1,534,970
------------- -------------
Stockholders equity:
Preferred stock, $.04 par value.
Authorized 2,500,000 shares,
538,788 and no shares issued
and outstanding at
March 31, 1998 and
December 31, 1997, respectively 21,551 0
Common stock, $.004 par value.
Authorized 12,500,000 shares,
5,045,414 and 5,245,414 shares
issued and outstanding at
March 31, 1998 and
December 31, 1997, respectively 20,182 20,982
Additional paid in capital 17,329,681 14,037,243
Accumulated deficit (14,145,560) (13,613,348)
------------- -------------
Total stockholders' equity 3,225,854 444,877
------------- -------------
$ 3,911,439 $ 1,979,847
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Operations
<CAPTION>
UNAUDITED
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Product Sales $ 414,275 $ 256,518
Research and development grants 41,819 0
------------- -------------
Total revenues 456,094 256,518
Product cost of goods sold (222,439) (172,450)
SBIR direct expenses (41,819) 0
------------- -------------
Total cost of goods sold (264,258) (172,450)
------------- -------------
Gross profit 191,836 84,068
------------- -------------
Operating expenses:
General and administrative 209,081 182,766
Marketing and sales 153,896 165,007
Research and development 142,430 246,452
------------- -------------
Total operating expenses 505,407 594,225
------------- -------------
Loss from operations $ (313,571) $ (510,157)
Other income (deductions):
Interest income 18,927 15,954
Interest expense (68) (436)
Other 0 7,200
------------- -------------
Total other income 18,859 22,718
------------- -------------
Net Loss $ (294,712) $ (487,439)
============= =============
Net Loss per common share, basic and diluted (0.06) (0.10)
Weighted average common shares outstanding,
basic and diluted 5,125,414 5,004,747
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
<CAPTION>
UNAUDITED
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities:
- -------------------------------------
Net loss $ (294,712) $ (487,439)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 31,767 32,473
Options issued for services 46,621 0
Increase in accounts receivable (253,930) (196,188)
Decrease in inventory 51,020 71,040
Increase in other current assets (33,815) (41,425)
Increase (decrease) in current
liabilities (126,013) 580
------------- -------------
Net cash used by operating activities (579,062) (620,959)
------------- -------------
Cash Flows From Investing Activities:
- -------------------------------------
Purchase of fixed assets (6,678) (5,248)
------------- -------------
Net cash used by investing activities (6,678) (5,248)
------------- -------------
Cash Flows From Financing Activities:
- -------------------------------------
Proceeds from sale of Units,
net of offering costs 3,054,068 0
Proceeds from issuance of common stock 0 17,500
Repayment of short-term loan (500,000) 0
------------- -------------
Net cash provided by financing
activities 2,554,068 17,500
------------- -------------
Net Increase (Decrease) In Cash and
Cash Equivalents: 1,968,328 (608,707)
- -----------------------------------
Cash and cash equivalents:
Beginning of period 623,572 1,724,671
End of period $ 2,591,900 $ 1,115,964
============= =============
Supplemental Information:
- -------------------------
Exchange of Units for common stock -
increase in accumulated deficit 237,500 0
Interest paid 68 436
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. Presentation of Unaudited Consolidated Financial Statements
-----------------------------------------------------------
These unaudited consolidated financial statements have been prepared in
accordance with the rules of the Securities and Exchange Commission and,
therefore, do not include all information and footnotes otherwise necessary
for a fair presentation of financial position, results of operations and cash
flows, in conformity with generally accepted accounting principles. However,
the information furnished, in the opinion of management, reflects all
adjustments necessary to present fairly the financial position, results of
operations and cash flows on a consistent basis. The results of operations
are not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole.
2. Issuance of Equity Securities
-----------------------------
In February 1998, the Company sold 460,000 Units (including the
Underwriter's "Over-Allotment Option," which consisted of 60,000 Units), each
Unit consisting of one share of Series A Convertible Preferred Stock (the
"Preferred Stock"), convertible into four Common Shares, and two common stock
purchase warrants (the "Warrants"), in a registered offering to the public.
Each Unit was sold at a price to the public of $8.25 resulting in gross
proceeds of $3,795,000. After consideration of the Underwriter's commission
and discount and other offering costs, net proceeds to the Company were
approximately $3.0 million. The Company utilized $500,000 to repay a short-
term loan concurrent with the offering. Accordingly, such short-term loan has
been reclassified from current liabilities at December 31, 1997.
The Preferred Stock is convertible at any time at the option of the
holder. The Preferred Stock converts automatically upon the earlier of
February 2001 or the sum of the closing bid prices of the Preferred Stock and
the Warrants included in the Units has been at least $12.375 for ten
consecutive trading dates. The Preferred Stock has a liquidation preference
of $8.25 per share and is entitled to a semiannual dividend of four-tenths of
one share of Common Stock for each share of Preferred Stock.
Each Warrant entitles the holder thereof to purchase at any time prior to
February 2003, one share of Common Stock at a price of $2.40 per share. The
Warrants may be redeemed by the Company for a redemption price of $0.25 per
Warrant under certain conditions.
In connection with the offering, the Company issued options to purchase,
in the aggregate, 450,000 shares of the Company's Common Stock at an exercise
price of $2.0625 per share to the Chief Executive Officer of the Company. The
options are subject to vesting. Specifically, 150,000 options vested and
became exercisable on the closing of the offering and the balance will vest on
November 30, 2002; provided, however, (i) 150,000 options will vest and become
exercisable thirty days after the end of any quarter in which the Company
reports pre-tax income of at least $50,000; and (ii) 150,000 options shall
vest and become exercisable upon the Company reporting its first fiscal year
with net income of at least $500,000. The options are exercisable for a
period of 36 months from each respective vesting date, but in no event later
than December 31, 2002. Additionally, the Company granted the Underwriters' a
five-year warrant that entitles the Underwriters to purchase up to 40,000
Units at an exercise price of $9.90 per Unit.
In connection with the offering, the Company entered into a multi-year
employment agreement with the chief executive officer of the Company.
Finally, in February 1998, the Company allowed a principal shareholder
who acquired 200,000 shares of Common Stock in August 1997 for $650,000 to
exchange such shares for 78,788 Units. In connection herewith, a charge to
accumulated deficit of $237,500 was recognized.
Earnings Per Share
- ------------------
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
in 1997. SFAS No. 128 establishes new standards for computing and presenting
earnings per share ("EPS"). Specifically, SFAS No. 128 replaces presentation
of primary EPS with a presentation of basic EPS, requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities
with complex capital structures, and requires a reconciliation of the
numerator and denominator of basic and diluted EPS computations to the
financial statements. Upon adoption, SFAS No. 128 requires restatement of
prior period EPS information presented. As such, the EPS information for the
quarter ended March 31, 1997 has been restated. Adoption of SFAS No. 128 did
not have a material effect on the Company's consolidated financial statements.
Options to purchase 1,270,905 and 980,000 shares of common stock were
outstanding at March 31, 1998 and 1997, respectively. Preferred Stock
convertible into 2,155,152 shares of common stock and warrants to purchase
1,077,576 shares of common stock were outstanding at March 31, 1998. These
were not included in the computation of diluted loss per share as the exercise
of these options would have been anti-dilutive because of the net losses
incurred in the quarters ended March 31, 1998 and 1997.
4. Contingency
-----------
In October 1997, a competitor filed a civil suit against the Company
claiming that one of the Company's medical devices, the Lasette -TM-,
infringes a U.S. patent, underlying its competitive laser skin perforator.
The Company and its patent counsel have conducted a comprehensive
investigation of the basis of the claims underlying such litigation, and
believe that the Lasette -TM- does not infringe upon such competitor's U.S.
patent or any of its related foreign patents. In March, 1998, the Court
granted the Company's Motion to Dismiss for lack of personal jurisdiction.
The competitor has recently filed a notice that it will appeal that decision.
The Company intends to vigorously defend any future claims asserted in such
litigation. Accordingly, while there can be no assurance of the ultimate
outcome of the litigation, the Company does not believe the claims will have a
material adverse impact on the Company's business, results of operations or
financial condition.
5. Reclassification
----------------
Certain 1997 amounts have been reclassified to conform with the 1998
presentation. <PAGE>
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF CELL ROBOTICS INTERNATIONAL, INC.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
Liquidity and Capital Resources - March 31, 1998 Compared to December 31, 1997
- -------------------------------------------------------------------------
In February 1998, the Company sold 460,000 Units (including the
Underwriter's "Over-Allotment Option," which consisted of 60,000 Units), each
Unit consisting of one share of Series A Convertible Preferred Stock (the
"Preferred Stock"), convertible into four Common Shares, and two common stock
purchase warrants (the "Warrants"), in a registered offering to the public
(the "Offering"). Each Unit was sold at a price to the public of $8.25
resulting in gross proceeds of $3,795,000. After consideration of the
Underwriter's commission and discount and other offering costs, net proceeds
to the Company were approximately $3.0 million. (See Note 2 of the Notes to
Unaudited Consolidated Financial Statements)
Primarily as a result of the foregoing, the Company's liquidity and
capital resources were enhanced during the three month period ended March 31,
1998.
The Company's current ratio at December 31, 1997, was 1.4:1, compared to
a current ratio of 5.4:1 on March 31, 1998. This increase in liquidity is
primarily due to capital raised from the Offering. Total assets increased
from $1,979,847 at December 31, 1997 to $3,911,439 at March 31, 1998, an
increase of $1,931,592, or 97.6%.
The increase in the Company's current assets of $2,205,053, or 150%, was
driven by net offering proceeds of approximately $3.0 million. Cash and cash
equivalents therefore increased $1,968,328, or 315.7%. Accounts receivable
increased $253,930, or 113.4%, resulting from increased sales during the
quarter. Also resulting from the quarter's increased sales was a decrease in
inventory of $51,020, or 8.7%. Other current assets also increased, from
$36,089 to $69,904, an increase of 93.7%.
Property and equipment, net, decreased $14,944, or 7.7%, as a result of
depreciation, slightly offset by new fixed asset purchases of $6,678. Other
assets decreased slightly from $67,271 to $57,126, or 15.1%.
During the three month period ended March 31, 1998, the Company's total
liabilities decreased from $1,534,970 to $685,585, or 55.3%. This reduction
was accomplished by applying net offering proceeds against outstanding vendor
payables and repaying a $500,000 short-term note concurrent with the Offering.
The Company did not have any long term liabilities at December 31, 1997 or
March 31, 1998.
The Company's working capital increased from $434,580 at December 31,
1997 to $2,989,018 at March 31, 1998, an increase of $2,554,438, due almost
exclusively to the completion of the Offering.
Cash used in operations for the quarters ended March 31, 1998 and 1997
were $579,062 and $620,959, respectively. The primary reason for the decrease
in cash used in operations during the quarter ended March 31, 1998, as
compared to the prior period, is the increase in gross profit and the decrease
in operating expenses.
The Company expects that its cash used in operating activities will
continue to level off in 1998. The timing of the Company's future capital
requirements, however, cannot accurately be predicted. The Company's capital
requirements depend upon numerous factors, including, most notably, the market
acceptance of its new laser-based medical devices. If capital requirements
vary materially from those currently planned, the Company may require
additional financing, including but not limited to, the sale of equity or debt
securities. The Company has no commitments for any additional financing and
there can be no assurance that such commitments can be obtained. Any
additional equity financing may be dilutive to the Company's existing
stockholders and debt financing, if available, may involve pledging some or
all of the Company's assets and may contain restrictive covenants with respect
to raising future capital and other financial and operational matters. If the
Company is unable to obtain additional financing as needed, the Company may be
required to reduce the scope of its operations, which could have a material
adverse effect upon the Company's business, financial condition and results of
operation. The Company believes that the net proceeds from the Offering will
be sufficient to meet the Company's working capital requirements for at least
the next 12 months, although there can be no assurance in this regard.
Other than the foregoing, management knows of no other trend, or other
demands, commitments, events or uncertainties that will result in, or that are
reasonably likely to result in, a material impact on the liquidity and capital
resources of the Company.
Results of Operations - Three Months Ended March 31, 1998 Compared to the
Three Months Ended March 31, 1997
- --------------------------------------------------------------------------
Revenues from the sale of products during the three months ended March
31, 1998, were $414,275, as compared to $256,518 during the comparable period
in 1997. This represents an increase of 61.5%. The Company also recognized
$41,819 of revenue from research and development grants during the three
months ended March 31, 1998. The gross margin realized on product sales
during this period also improved from 32.8% in the 1997, to 46.3% during the
1998.
The Company's loss from operations incurred during the three months ended
March 31, 1998, was $313,571, as compared to an operating loss of $510,157
incurred during the same period in 1997. Total operating expenses decreased
$88,818, or 14.9%, from $594,225 to $505,407. A reduction of $104,022, or
42.2%, in research and development expenses accounted for the majority of this
decrease. General and administrative expenses increased $26,315, or 14.4%,
reflecting an increase in legal, regulatory and clinical trial fees, while
marketing and sales activities were slightly curtailed during the period.
During the three months ended March 31, other income and expenses
slightly decreased from a $22,718 net contribution to income during the period
in 1997, to a $18,859 net contribution to income during the period in 1998.
As a result of the foregoing, the Company's net loss for the three months
ended March 31, 1998 was $294,712, as compared to a net loss of $487,439
incurred during the comparable period of 1997. On a per share basis, this
amounts to a $0.06 loss per weighted average outstanding share during the
first quarter 1998, compared to a $0.10 loss per weighted average outstanding
share during the first quarter of 1997. Primarily as a result of the exercise
of stock options in the later part of 1997 and 200,000 shares of common stock
outstanding prior to an exchange of such shares in February 1998, for 78,788
Units, the weighted average common shares outstanding increased from 5,004,747
for the quarter ended March 31, 1997 to 5,125,414 for the quarter ended March
31, 1998.
Other than the foregoing, management knows of no trends, or other
demands, commitments, events or uncertainties that will result in, or are
reasonably likely to result in, a material impact on the Company's results of
operations.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
As disclosed in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997, in October 1997, a civil action was
brought by Venisect, Inc. ("Venisect") against the Company in the United
States District Court of the Eastern District of Arkansas, Case No. LR-C-97-
877 (the "Venisect Litigation") in which Venisect claims that the Company's
Lasette -TM- product infringes a U.S. patent, underlying its competitive laser
skin perforator. The Company and its advisors, including patent counsel, have
conducted a comprehensive investigation of the basis of the claims underlying
the Venisect Litigation and believe that the Lasette -TM- does not infringe
upon the Venisect U.S. patent or any of its related foreign patents. In March
1998, the Court granted the Company's Motion to Dismiss for lack of
jurisdiction. Venisect has recently filed a notice that it will appeal that
decision.
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
--------------------------------
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
None
<PAGE>
<PAGE>
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.
CELL ROBOTICS INTERNATIONAL, INC.
Dated: May 8, 1998 By: /s/ Ronald K. Lohrding
------------ ----------------------------------------
Ronald K. Lohrding, President
Dated: May 8, 1998 By: /s/ Jean M. Scharf
------------ ----------------------------------------
Jean M. Scharf, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 4 AND 5 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,591,900
<SECURITIES> 0
<RECEIVABLES> 479,627
<ALLOWANCES> 1,841
<INVENTORY> 535,013
<CURRENT-ASSETS> 3,674,603
<PP&E> 762,119
<DEPRECIATION> 582,409
<TOTAL-ASSETS> 3,911,439
<CURRENT-LIABILITIES> 685,585
<BONDS> 0
0
21,551
<COMMON> 20,182
<OTHER-SE> 3,184,121
<TOTAL-LIABILITY-AND-EQUITY> 3,911,439
<SALES> 414,275
<TOTAL-REVENUES> 456,094
<CGS> 222,439
<TOTAL-COSTS> 264,258
<OTHER-EXPENSES> 505,407
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> (294,712)
<INCOME-TAX> 0
<INCOME-CONTINUING> (294,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (294,712)
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
