<PAGE>
As filed with the Securities and Exchange Commission on October 18, 1999.
Registration No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
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CELL ROBOTICS INTERNATIONAL, INC.
(Name of small business issuer in its Charter)
Colorado 5049-05 84-1153295
- ------------------ ------------- --------------------
(State or other juris- (Primary Standard Industrial (IRS Employer
diction or incorpora- Classification Code Number) Identification No.)
tion or organization)
2715 Broadbent Parkway N.E., Albuquerque, New Mexico 87107
(505) 343-1131 (tel) (505) 344-8112 (fax)
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(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Ronald K. Lohrding, Ph.D., President and CEO
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
(505) 343-1131 (tel) (505) 344-8112 (fax)
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(Name, address, including zip code, and telephone number
of agent for service of process)
Copies to:
Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street, Boulder, Colorado 80302
(303) 449-2100 (tel) (303) 449-1045 (fax)
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of
the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registra-
Registered Registered Share (1) Price (1) tion Fee
- ------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common Stock,
$.002 par value 481,250(2) $2.08(3) $1,001,000 $278.28
Common Stock
Purchase Warrants 148,750 $1.05(4) $156,188 $43.42
TOTAL $1,157,188 $321.70
</TABLE>
- ----------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 148,750 shares of common stock that may be acquired upon
exercise of Warrants held by the Selling Securityholders and 332,500
shares of common stock which have been issued directly to the Selling
Securityholders.
(3) Calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the average of the bid and asked prices of the common stock on
October 14, 1999, as quoted on the OTC Electronics Bulletin Board.
(4) Calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the average of the bid and asked prices of the warrant on
October 14, 1999, as quoted on the OTC Electronics Bulletin Board.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Cross-Reference Index
Item No. and Heading
In Form SB-2 Location
Registration Statement in Prospectus
---------------------- -------------
1. Forepart of the Registration Forepart of RegistrationStatement
and Outside Front Cover Statement and Outside Front Cover
Page of Prospectus Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Pages
of Prospectus Cover Pages of Prospectus
3. Summary and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds; Risk Factors
5. Determination of Offering Price *
6. Selling Securityholders Selling Securityholders
7. Plan of Distribution Plan of Distribution
8. Legal Proceedings Legal Proceedings
9. Directors, Executive Officers, Management
Promoters and Controlling Persons
10. Security Ownership of Certain Security Ownership of
Beneficial Owners and Management Management and Principal
Stockholders
11. Description of Securities Description of Securities
12. Interest of Named Experts and Legal Matters; Experts
Counsel
13. Disclosure of SEC Position on Management - Indemnification and
Indemnification for Securities Act Limitation on Liability of
Liabilities Directors
14. Organization Within Last Five Years *
15. Description of Business Prospectus Summary; Risk Factors;
Business
16. Management's Discussion and Management's Discussion and
Analysis or Plan of Operation Analysis of Financial Condition
and Results of Operations;
Financial Statements; Business
17. Description of Property Business
18. Certain Relationships and Related Certain Transactions
Transactions
19. Market for Common Equity and Market for Common Stock
Related Stockholder Matters
20. Executive Compensation Management - Executive
Compensation
21. Financial Statements Financial Statements
22. Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure
* Omitted from Prospectus because Item is inapplicable or answer is in the
negative
<PAGE>
<PAGE>
PROSPECTUS
CELL ROBOTICS INTERNATIONAL, INC.
481,250 Shares Common Stock
148,750 Common Stock Warrants
- ---------------------------------------------------------------------------
This is an offering of shares of the common stock of Cell Robotics
International, Inc. which may be issued upon the exercise of warrants to
purchase our common stock and shares of common stock and warrants being
offered by persons who were issued shares of our common stock and warrants in
a private offering. These persons are referred to in this Prospectus as
"Selling Securityholders." Selling Securityholders holding warrants may sell
the warrants or may sell the common stock covered by this Prospectus when they
have exercised their warrants to purchase common stock. See the sections
entitled "Selling Securityholders" and "Description of Securities."
Selling Securityholders may sell shares and warrants covered by this
Prospectus at prices relating to prevailing market prices or at negotiable
prices. Our common stock and warrants are currently traded over-the-counter
and traded on the OTC Electronic Bulletin Board under the symbols "CRII" and
"CRIIW," respectively. On October 14, 1999, the last reported bid and asked
prices of our common stock were $2.03125 and $2.125, respectively, and the
reported bid and asked prices for our warrants were $1.00 and $1.09375,
respectively.
We will not receive any proceeds from the resale of the common stock or
warrants. If the Selling Securityholders exercise their warrants, we will
receive the exercise price and use the proceeds for working capital. For
information regarding fees and expenses we may pay in connection with the
registration of the common stock covered by this Prospectus, see the section
entitled "Selling Securityholders."
Investing in our common stock involves a high
degree of risk. You should read the "Risk
Factors" beginning on Page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The Date of This Prospectus is October __, 1999.
- ----------------------------------------------------------------------------
<PAGE>
<PAGE>
Prospectus Summary
This summary highlights important information about our business and about the
offerings. Because it is a summary, it does not contain all the information
you should consider before investing in our securities. Please read the
entire prospectus.
About our Company
Please note that throughout this Prospectus the words "we," "our" or "us"
refers to Cell Robotics International, Inc. and not to any of the Selling
Securityholders.
We have developed and are involved in the manufacture and sale of four
sophisticated medical laser products for scientific, clinical and personal
uses. Our principal clinical and consumer product is a laser finger
perforator, called the Lasette(-Registered Mark-) that is used by diabetics to
test their blood for glucose levels. We sell the Lasette(-Registered Mark-)
through an exclusive distribution agreement with Chronimed, Inc.
("Chronimed"), a leading supplier of medical products in the United States.
Our executive offices are located at 2715 Broadbent Parkway, N.E., Suites A-E,
Albuquerque, New Mexico 87107. Our telephone number is (505) 343-1131.
About the Offering
This is an offering of shares of our common stock and warrants by persons who
were issued shares of our common stock and warrants to purchase shares of our
common stock. We are also registering the common stock which may be issued
upon exercise of the warrants.
We refer to these persons as "Selling Securityholders" in this Prospectus.
Selling Securityholders who were issued warrants may sell the warrants or may
sell the shares of common stock covered by this Prospectus when they have
exercised their warrants to purchase common stock. We are registering the
common stock covered by this Prospectus in order to fulfill the obligations we
have under agreements with the Selling Securityholders.
<PAGE>
<PAGE>
<TABLE>
Summary Financial Data
<CAPTION>
Statement of Operations Year Ended December 31, Six Months Ended June 30,
------------------------ -----------------------
1997 1998 1998 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total Revenues $ 1,037,723 $1,429,001 $ 327,618 $ 600,624
Operating expenses 2,795,491 2,269,263 637,789 584,930
Net loss (2,472,892) (1,783,346) (526,958) (429,207)
Net loss applicable to
common stockholders (2,472,892) (1,783,346) (526,958) (429,207)
Basic and diluted loss
per share (0.48) (0.39) (0.10) (0.06)
Shares used in computing
basic and diluted loss
per share 5,100,032 5,278,347 5,089,147 7,803,264
At December 31, 1998 At June 30, 1999
-------------------- ----------------
Balance Sheet Data
Working capital $ 1,738,339 $ 955,409
Total assets 2,583,052 2,199,738
Shareholders' equity 2,049,723 1,419,062
</TABLE>
<PAGE>
<PAGE>
RISK FACTORS
An investment in our securities is speculative and involves a high degree of
risk. Please carefully consider the following risk factors, as well as the
possibility of the loss of your entire investment, before deciding to invest
in our securities.
We have a History of Operating Losses
In the last two years, we have suffered operating losses. In the fiscal
year ended December 31, 1998, we lost $2,057,573 and in the fiscal year ended
December 31, 1997, we lost $2,472,892. In addition, for the six months ended
June 30, 1999 and 1998, we reported losses of $429,207 and $526,958,
respectively. We cannot be sure that we will have profitable operations in
the future.
Our Medical Laser Products are New and Untested in the Market
Our medical laser products, principally the Lasette(-Registered Mark-),
have only recently obtained the necessary governmental approvals to permit us
to begin sales. We cannot be sure that there exists a viable demand for this
product which would permit us to operate profitably in the future. In
addition, we know that others are working on the development of similar
products which may have superior features to the Lasette(-Registered Mark-).
We will Require Additional Capital
We cannot be sure that we will have enough capital to finance our
business strategy. We will continue to require substantial additional funds
for operating expenses, capital expenditures and product inventory. The
timing and amount of this spending is difficult to predict accurately and will
depend upon many factors. At this time, we have no commitments for any
additional financing and we cannot be assured that any commitments can be
obtained on terms acceptable to us, or at all. We may seek additional funds
through public offerings or private placements of our equity securities.
These public offerings or private placements may not require the prior
approval of our shareholders. If we raise additional funds by issuing equity
or debt securities, further dilution to our shareholders could occur. Also,
we may grant registration rights to investors purchasing our securities. Debt
financing, if we can obtain it, may involve pledging some or all of our
assets. If adequate funds are not available, we may be required to delay,
scale back or eliminate one or more of our development programs or to enter
into arrangements that would require us to relinquish certain rights that we
would not otherwise want to relinquish.
We have Limited Working Capital
Because of our history of operating losses, we have limited working
capital and, as a result, we suffer from some financial uncertainty.
We are Dependent upon our Employees
We rely on key employees whose absence could adversely affect our ability
to successfully complete our business strategy. Our future success will
depend in large part on our ability to attract, motivate and retain highly
qualified employees. The loss of the services of any of our key personnel
could have a material adverse effect upon our operations and marketing
efforts. While we have written employment agreements with our President,
Ronald K. Lohrding, H. Travis Lee, Vice President of Sales and Marketing, and
Craig T. Rogers, Vice President of Investor Relations, Secretary, Treasurer
and Director, we cannot be sure that they will continue to serve the Company.
We have Only Limited Protection of our Technology
We rely primarily upon a combination of patent, trade secret, copyright
and trademark laws, confidentiality procedures and other intellectual property
protection methods to protect our technology. Our laser based medical devices
currently have little patent protection and our scientific research
instruments have only limited patent protection. As a result, we do not enjoy
much protection from intellectual property laws.
We may become Involved in Future Patent Litigation
We have already been involved in patent litigation brought by a
competitor which has been resolved to our satisfaction. However, we could be
sued in the future by one or more additional competitors, in which event we
will have to spend our limited capital in defense of our products rather than
in developing, manufacturing and marketing our products.
Our Business is Highly Competitive
We face significant competition from many companies, both public and
private, that are involved in the development, manufacture and sale of
products that have the same applications as our products. All of these
companies have substantially greater financial, research and development,
manufacturing and marketing experience and resources than we have and
represent substantial long term competition for us. We may not be able to
successfully compete against these competitors. In addition, our industry
requires extensive research efforts in order to stay current with rapid
technological changes and avoid product obsolescence. These efforts require
substantial resources which we have been unable to obtain through profitable
operations.
Our Products are Subject to Governmental Requirements
All of our medical and scientific devices are subject to governmental
regulation. The cost of complying with these regulations is significant, and
our failure to meet or comply with existing or future regulations could have a
material adverse effect upon our operations.
We have no Firm Contracts with our Suppliers
Aside from our OEM agreement for manufacturing of the Professional
Lasette(-Registered Mark-) and an annual supply contract with NTEC, we have no
other written contracts with any of our suppliers or manufacturers or
commitments from any of our suppliers or manufacturers to continue to sell us
their products. As a result, there is a risk that any of our suppliers or
manufacturers may discontinue selling their products to us for any reason.
Although we believe that we can establish alternative sources for most of our
components, any delay in locating or establishing new relationships with other
sources could result in product shortages and back orders for the product with
resulting loss of revenues.
Our International Sales Pose Additional Risks
During 1998, our international sales represented approximately 35% of
our total revenues. International sales have special risks associated with
the economic or political instability of the countries in which we do
business, uncertainties with respect to foreign laws and regulation and risks
of currency fluctuations.
We have the Risk of Warranty Claims on our Products
Our products are very complex and, given their use in the scientific and
medical fields, pose the risk that any defect may result in warranty claims or
product liability claims. These product liability or warranty claims could
represent substantial liabilities in the future.
We may not be able to Manage our Growth if we are Successful
If we are successful and are able to grow profitably, that growth could
create certain additional risks. Growth can place additional burden on our
management resources and financial controls. In addition, it will require us
to continue to implement and refine our operating, financial and information
management systems and to train, motivate and manage our employees. Our
ability to attract and retain qualified people will have a significant effect
on our ability to establish and maintain our position in the market, and our
failure to do so could have a material adverse effect on our results of
operations.
The Public Trading Market for our Common Stock is Illiquid and Highly Sporadic
While there is a limited and sporadic public trading market for our
common stock in the over-the-counter market, we cannot be sure that the market
will improve in the future. As a result, the investors in our stock may not
be able to liquidate their investment without considerable delay, if at all.
If a more active market does develop, the price of our stock may be highly
volatile. The over-the-counter markets for securities such as ours
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as
new product developments and trends in our industry and the investment markets
generally, as well as economic conditions and quarterly variations in our
results of operations, may also adversely affect the market price of our
common stock.
Future Sales of our Common Stock Could Adversely Affect the Market
Future sales of our common stock into the market may depress the market
price of our common stock. We have issued common stock, options and warrants
to purchase our common stock and preferred stock which was converted into our
common stock. Sales of these shares of our common stock or the market's
perception that these sales could occur may cause the market price of our
common stock to fall. These sales also might make it more difficult for us to
sell equity or equity related securities in the future at a time and price
that we deem appropriate or to use equity as consideration for future
acquisitions.
Future Issuances of our Common Stock Could Dilute Current Shareholders
We have the authority to issue up to 12,500,000 shares of common stock
and to issue options and warrants to purchase shares of our common stock
without stockholder approval. These future issuances could be at values
substantially below the price paid for our common stock by our current
shareholders. In addition, we could issue large blocks of our common stock to
fend off unwanted tender offers or hostile takeovers without further
stockholder approval.
Future Sales of Preferred Stock Could also Adversely Affect the Market for our
Common Stock
We have the authority to issue up to 2,500,000 shares of preferred stock
without shareholder approval. The issuance of preferred stock by our Board of
Directors could adversely affect the rights of the holders of our common
stock. An issuance of preferred stock could result in a class of outstanding
securities that would have preferences with respect to voting rights and
dividends and in liquidation over the common stock and could, upon conversion
or otherwise, have all of the rights of our common stock. Our Board of
Directors' authority to issue preferred stock could discourage potential
takeover attempts or could delay or prevent a change in control through
merger, tender offer, proxy contest or otherwise by making these attempts more
difficult or costly to achieve.
We may Incur Expenses as a Result of the Year 2000 Problem
The Year 2000 problem exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as "99" for "1999." Any of our computer programs that have
date sensitive software may recognize a date using "00" as the year "1900"
rather than the year "2000." This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, our temporary inability to process transactions, send invoices or
engage in similar normal business activities. We have implemented a program
to identify and address potential Year 2000 problems which is scheduled to be
completed by November 1999. As a result of this program, we have upgraded
some of our existing hardware and software and in some cases converted to new
software. We believe these activities have mitigated potential Year 2000
problems that might affect our computer networks and other systems. Although
we have contacted our suppliers, vendors and customers regarding Year 2000
issues, we have not yet fully determined the extent to which we are vulnerable
to the failure of these third parties to remediate their own Year 2000
problems. In view of the foregoing, there can be no assurance that the Year
2000 problems will not have a material adverse effect upon our business,
financial condition or results of operations.
<PAGE>
<PAGE>
CERTAIN MARKET INFORMATION
Price Range of our Common Stock and Warrants
Our common stock and warrants are traded over-the-counter and quoted on
the Bulletin Board on a limited and sporadic basis under the symbols "CRII"
and "CRIIW," respectively. The reported high and low bid and asked prices for
the common stock and warrants are shown below for the period through September
30, 1999. The prices presented are bid and asked prices which represent prices
between broker-dealers and do not include retail mark-ups and mark-downs or
any commission to the broker-dealer. The prices do not necessarily reflect
actual transactions.
<TABLE>
Common Stock
------------
<CAPTION>
Bid Ask
--- ---
<S> <C> <C>
1998
First Quarter $2.250 $ 2.500
Second Quarter $1.375 $ 1.500
Third Quarter $1.063 $ 1.094
Fourth Quarter $2.469 $ 2.563
1999
First Quarter $1.906 $ 2.000
Second Quarter $1.938 $ 2.063
Third Quarter $1.875 $ 1.938
</TABLE>
The bid and ask prices of the common stock on October 14, 1999 were
$2.03125 and $2.125, respectively, as quoted on the Bulletin Board. As of
October 14, 1999, there were approximately 176 stockholders of record of the
common stock.
<TABLE>
Warrants
--------
<CAPTION>
Bid Ask
--- ---
<S> <C> <C>
1998
First Quarter $ 0.56250 $ 0.93750
Second Quarter $ 0.50000 $ 0.87500
Third Quarter $ 0.18750 $ 0.50000
Fourth Quarter $ 1.06250 $ 1.12500
1999
First Quarter $ 0.81250 $ 0.93750
Second Quarter $ 0.81250 $ 1.06250
Third Quarter $ 0.87500 $ 0.96875
</TABLE>
The bid and ask prices of the Warrants on October 14, 1999 were $1.00 and
$1.09375, respectively, as quoted on the Bulletin Board. As of October 14,
1999, there were approximately five stockholders of record of the Warrants.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
We have set forth below certain selected financial data. This financial
data was derived from the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus and is qualified by reference to such
Consolidated Financial Statements and the Notes thereto. The financial data
for the six months ended June 30, 1998 and 1999 are derived from our unaudited
consolidated financial statements. In our opinion, the consolidated financial
statements for these periods include all adjustments necessary to present
fairly the financial information for such periods.
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
---------------------- ---------------------
1997 1998 1998 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Statements of Operations
Data
Revenues $1,037,723 $1,429,001 $ 327,618 $ 600,624
Cost of Goods Sold (758,205) (1,027,538) (243,336) (449,472)
Gross Profit 279,518 401,463 84,282 151,152
Operating Expenses 2,795,491 2,269,263 637,789 584,930
Operating Loss (2,515,973) (1,867,800) (553,507) (433,778)
Other Income (Expenses) 43,081 84,454 26,549 4,571
Net Income (Loss) (2,472,892) (1,783,346) (526,958) (429,207)
Net (Loss) Per Share (0.48) (0.39) (0.10) (0.06)
Average Common Shares
Outstanding 5,100,032 5,278,347 5,089,147 7,803,264
December 31, 1998 June 30, 1999
----------------- -------------
Balance Sheet Data
Total Assets $ 2,583,052 $ 2,199,738
Working Capital 1,738,339 955,409
Total Liabilities 533,329 780,676
Accumulated Deficit (15,908,421) (17,275,177)
Stockholders' Equity 2,049,723 1,419,062
</TABLE>
<PAGE>
<PAGE>
MANAGEMENT'S 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
Prospectus.
Liquidity and Capital Resources -- June 30, 1999 compared to December 31, 1998
In February 1998, we sold 460,000 Units in a registered offering to the
public. Each Unit consisted of one share of Series A Convertible Preferred
Stock, convertible into four common shares, and two common stock purchase
warrants each exercisable to acquire one share of common stock at an exercise
price of $2.40 per share. Each Unit was sold at a price to the public of $8.25
resulting in gross proceeds of $3,795,000. The Unit price of $8.25 per Unit
was based on the public trading price of the four shares of common stock
issuable upon conversion of the preferred stock, which, on the effective date
of the Registration Statement, was $1.938 per share, or $7.75, with each
warrant being valued at $0.25 per warrant, resulting in the Unit price of
$8.25. The value of each warrant was determined by the underwriter and was
based on the difference between the public trading price of four shares of
common stock on the Friday preceding the effective date of the Registration
Statement, which was $7.75, resulting in a warrant value of $0.25 each. After
consideration of the Underwriter's commission and discount and other offering
costs, net proceeds to the Company were approximately $3.0 million.
On July 30, 1998, we signed a development and distribution agreement
with Chronimed, Inc. ("the Chronimed Agreement") for worldwide distribution of
our Lasette(-Registered Mark-) laser finger perforator for the blood sampling
for glucose testing market. The Chronimed Agreement includes a two-year,
multi-million dollar minimum purchase commitment by Chronimed, pursuant to
which Chronimed must purchase a minimum of 1,500 first generation Lasette(-
Registered Mark-) devices (Professional Lasette(-Registered Mark-)) during
year one, and a minimum of 5,000 second generation Lasette(-Registered Mark-)
devices (Personal Lasette(-Registered Mark-)) during year two, subject to
certain adjustments. The Chronimed Agreement also required Chronimed to make a
capital investment in the Company consisting of a staged purchase of $600,000
of our common stock, contingent upon achievement of certain milestones related
to the development by us of the Personal Lasette(-Registered Mark-) device.
Chronimed's capital investment will be used for the development of the
Personal Lasette(-Registered Mark-), a smaller Lasette(-Registered Mark-)
designed to meet the needs of the home blood sampling for glucose testing
market. The worldwide diabetic market is very large and continues to grow,
but there can be no assurance the Lasette(-Registered Mark-) product will
achieve market acceptance.
In accordance with the terms and conditions of the Chronimed Agreement,
Chronimed made its first equity investment in our Company on September 11,
1998. The $300,000 investment was made in the form of a stock purchase of
200,000 shares of our common stock. In March 1999, we shipped prototypes of
the Personal Lasette(-Registered Mark-) to Chronimed as part of the exclusive
distribution agreement. Chronimed was obligated to make an additional
$150,000 investment in our Company upon acceptance of the prototypes. This
transaction was completed on June 14, 1999. The final equity investment of
$150,000 could be made based on us meeting certain future conditions set forth
in the Chronimed Agreement.
In July 1999, we completed a private placement with four investors. We
sold 9.5 units, each unit consisting of 35,000 shares of common stock and
7,500 common stock purchase warrants each exercisable to acquire one share of
common stock at an exercise price of $2.40 per share. Each unit was sold at a
price of $50,000, resulting in gross proceeds of $475,000. After
consideration of the offering costs, net proceeds to us were approximately
$460,000.
Our current ratio at December 31, 1998, was 4.3:1, compared to a current
ratio of 2.2:1 on June 30, 1999. This decrease in liquidity is primarily due
to the use of capital raised from the Offering and Chronimed, Inc. stock
issuance to fund our ongoing operating expenses. Total assets decreased from
$2,583,052 at December 31, 1998 to $2,199,738 at June 30, 1999, a decrease of
$383,314, or 14.8%.
The decrease in our current assets of $535,583, or 23.6%, was driven by
the use of cash to fund our operating expenses. As a result, cash and cash
equivalents decreased $703,845, or 51.2%. Accounts receivable increased
$114,101, or 46.2% as a result of increased sales during the quarter ended
June 30, 1999. Due to increased sales during the six month period ended June
30, 1999, product inventories were increased $77,720, or 14.8%, in preparation
of future product deliveries. Other current assets decreased from $123,271 to
$99,812 a decrease of 19.0%, due primarily to previously recorded deposits
being recorded as capitalized tooling and equipment.
Property and equipment, net, increased $159,405, or 58.4%, due primarily
to deposits for and purchase of product tooling and molding, while other
assets decreased from $38,490 to $31,354, a decrease of $7,136 or 18.5%.
During the six month period ended June 30, 1999, our total liabilities
increased from $533,329 to $780,676, or 46.4%. This increase was primarily due
to accrued distributor commissions, and accounts and royalty payables. We did
not have any long term liabilities at June 30, 1999.
Our working capital decreased from $1,738,339 at December 31, 1998 to
$955,409 at June 30, 1999, a decrease of $782,930, due primarily to the use of
cash for continued operating expenses.
We expect that cash used in operating activities will continue at the
current level through the remainder of 1999. The timing of our future capital
requirements, however, cannot accurately be predicted. Our capital
requirements depend upon numerous factors, including, most notably, the market
acceptance of our new laser-based medical devices. If the market demand for
the new medical products is either greater or less than currently expected, we
may require additional capital. Additional financing may include, but is not
limited to, the sale of equity or debt securities. In addition, we are
currently in discussion with a financial institution regarding a commercial
line of credit. Until revenues from operations can be realized through future
product sales, we may not have other sources of capital available to satisfy
our cash requirements. If we are unable to obtain additional financing as
needed, we may be required to reduce the scope of our operations, which could
have a material adverse effect upon our business, financial condition and
results of operation. We anticipate that our current working capital,
potential increased future product sales, the final remaining equity
investment per the Chronimed Agreement, the July 1999 private placement, and a
supplemental equity line of credit or a debt financing will be sufficient to
meet our operational obligations through fiscal 1999.
Other than the foregoing, we know 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 our the liquidity and
capital resources.
Liquidity and Capital Resources - December 31, 1998 compared December 31, 1997
Cash used in operations for the years ended December 31, 1998 and 1997
were $1,935,800, and $2,253,941 respectively. The primary reason for the
decrease in cash used in operations during the year ended December 31, 1998,
as compared to the prior period, is the decrease in product development and
marketing expenses during that period.
Cash provided by financing activities for the years ended December 31,
1998 and 1997 were $2,852,504 and $1,185,539 respectively. These figures
reflect the equity financings discussed above.
Our liquidity and capital resources continued to decrease during the year
ended December 31, 1998, due primarily to our ongoing operating losses.
Our current ratio at December 31, 1998 was 4.3:1, compared to a current
ratio of 1.4:1 on December 31, 1997. This increase in liquidity is primarily
due to the proceeds from the secondary offering completed in February 1998.
Total assets increased from $1,979,847 at December 31, 1997 to $2,583,052 at
December 31, 1998, an increase of $603,205 or 30.5%.
The increase in our current assets of $802,118, or 54.6 %, was the result
of an increase in cash and cash equivalents which rose from $623,572 at
December 31, 1997, to $1,375,575 at December 31, 1998, an increase of $752,003
or 120.6%. This increase in cash and cash equivalents was primarily the result
of the secondary offering completed in February 1998. An increase in accounts
receivable of $22,717, from $223,856 at the end of 1997, to $246,573 at
December 31, 1998 was primarily due to increased sales during 1998, but also
reflects a more timely accounts receivable collection process. Inventory
decreased in the amount of $59,784 or 10.2%, due to the increased workstation
sales and laser-based medical devices.
At December 31, 1998, our total current liabilities decreased $501,641,
from $1,034,970 at December 31, 1997 to $533,329 at December 31, 1998.
Decreases in accounts payable of $275,467, or 45.7%, and royalties payable of
$159,640, or 82.7 %, were directly related to payment of accounts payable from
1997 with the proceeds of the offering and renegotiated royalty agreements.
As a result of the foregoing, our working capital increased from $434,580
at December 31, 1997 to $1,738,339 at December 31, 1998, an increase of
$1,303,759. This increase was due almost exclusively to our equity financings
discussed above.
Results of Operations -- Six months ended June 30, 1999 compared to the six
months ended June 30, 1998
Our total revenue increased $333,068, or 42.5% to $1,116,780 from
$783,712 for the six month periods ended June 30, 1999 and 1998, respectively.
Revenues from the sale of products during the six months ended June 30, 1999
were $1,065,549, as compared to $658,650 during the comparable period in 1998.
This represents an increase in sales of 61.8%. However, gross margin realized
on product sales during this period declined from 41.9% in 1998, to 29.1%
during 1999. This reduction is due primarily to an introductory low margin
associated with the laser-based medical devices introduced into our product
mix.
We also recognized $51,231 of revenue from Small Business Innovative
Research grants during the six months ended June 30, 1999.
Our loss from operations incurred during the six months ended June 30,
1999, was $866,393, as compared to an operating loss of $867,078 incurred
during the same period in 1998. Total operating expenses increased $33,457, or
2.9%, from $1,143,196 to $1,176,653. Research and development expenses
decreased $101,864 or 28.7% due primarily to new products moving through final
design into manufacturing. General and administrative expenses increased
$122,059, or 28.74%, reflecting an increase in legal, accounting, regulatory,
investor relations and insurance fees. Marketing and sales expenses increased
slightly by 3.7% or $13,262.
During the six months ended June 30, 1999 other income and expenses
decreased from a $45,408 net contribution to income during the period in 1998,
to a $14,917 net contribution to income during the period in 1999.
As a result of the foregoing, our net loss for the six months ended June
30, 1999 was $851,476, as compared to a net loss of $821,670 incurred during
the comparable period of 1998. Based on the foregoing, and after including the
payment of preferred stock dividends of $515,280, net loss applicable to the
common shareholders was $1,366,756 for the six months ended June 30, 1999.
During the comparable period in 1998, there were no preferred stock dividends
to increase the net loss applicable to common shareholders. On a per share
basis, this amounts to a $0.19 loss per weighted average outstanding share
during the first six months of 1999, compared to a $0.16 loss per weighted
average outstanding share during the first six months of 1998.
Other than the foregoing, we know 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 our results of operations.
Results of Operations - Year ended December 31, 1998 compared to the Year
ended December 31, 1997
During the year ended December 31, 1998 our operating activities were
limited to continuing efforts to complete the development of our laser-based
medical devices and marketing of the Lasette(-Registered Mark-). Product sales
for the period were generated from sales of our scientific research
instruments and our clinical laser-based medical products. Total revenues from
product sales and grant revenue increased 37.7% from $1,037,723 during the
1997 period to $1,429,001 during 1998. Research and development grant revenue
increased from $158,233 during 1997 to $179,298 during 1998, an increase of
13.3%. Our gross profit realized on revenues generated during fiscal 1998 was
$401,463, or 28.1% compared to a gross profit of $279,518, or 26.9%, realized
during fiscal 1997.
We believe that our increased product sales were driven by the
successful introduction and subsequent market acceptance of our scientific
research instruments and our new laser-based medical devices.
Operating expenses incurred during fiscal 1998 were $2,269,263, a
decrease of $526,228, or 18.8%, below fiscal 1997 operating expenses of
$2,795,491. This decrease was principally attributable to a reduction in
research and development expenses and marketing expenses associated with a new
product launch.
Research and development expenses decreased by $395,959, or 31.8%, due
primarily to a reduction in professional design and engineering consulting
fees required by our new medical products under development. Marketing and
sales related expenses incurred during fiscal 1998 were $609,288, a decrease
of $259,524, or 29.9%, below fiscal 1997 marketing and sales expenses of
$868,812. Expenses related to the marketing of our Lasette(-Registered Mark-)
line decreased as a result of the exclusive distribution agreement signed with
Chronimed, Inc.
General and administrative expenses increased, from $681,554 during the
year ended December 31, 1997 to $810,809 for the year ended December 31, 1998,
an increase of $129,255 or 19%. This increase was driven by our effort to
obtain ISO 9001 certification, increased product liability premiums and
enhanced investor relations activities.
During the fiscal period ended December 31, 1998, other income and
expenses increased from a $43,081 net contribution to income for the year
ended December 31, 1997 to a $84,454 net contribution to income. This increase
was due almost exclusively to interest earned on funds raised during a
secondary public offering completed in February 1998.
As a result of the foregoing, our net loss applicable to common
shareholders for the year ended December 31, 1998 decreased by $415,319, or
16.8%, from a net loss applicable to common shareholders of $2,472,892 for the
year ended December 31, 1997 to a net loss applicable to common shareholders
of $2,057,573 for the comparable period ended December 31, 1998. This resulted
in a net loss of $0.39 per share on 5,278,347 weighted average shares
outstanding for the year ended December 31, 1998 compared to a net loss of
$0.48 per share on 5,100,032 weighted average shares outstanding for the
comparable period ended December 31, 1997.
Year 2000 Issue
The Problem. The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year. As a
result, any of our computer programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which,
in turn, could result in system failures or miscalculations causing
disruptions in the operations of the Company and the operations of our
suppliers and customers.
Our State of Readiness. We have instituted a Year 2000 Project. As part
of the Company's Year 2000 Project, we have completed our evaluation of
current computer systems, software and embedded technologies. The evaluation
revealed that our network hardware and operating system, voice mail system, e-
mail system, and accounting and manufacturing software were major resources
that had Year 2000 compliance issues. These resources will need to be either
replaced or upgraded. Fortunately, the identified systems and/or programs are
"off-the-shelf" products with Year 2000 compliant versions now available.
Our network, network operating system, e-mail system and accounting and
manufacturing software have either been replaced or upgraded to Y2K compliant
versions. Our voice mail system is scheduled to be replaced during the fourth
quarter of 1999. Our PC's have had the current Y2K updates applied. Some
software and hardware companies are still finding issues so there may be
additional changes that will have to be made.
We have determined that there should be no Year 2000 Issues for the
products we have already sold, excluding issues associated with the Microsoft
Windows95(-Registered Mark-) operating system which is incorporated into the
Company's Workstation products. Customers who have purchased our Workstation
products with the Microsoft Windows95(-Registered Mark-) operating system are
being advised to apply the Y2K upgrade provided at no cost from Microsoft.
As part of our Year 2000 Project, we have also contacted its significant
suppliers, product distributors, and large customers to determine the extent
to which we are vulnerable to those third parties' failure to remediate their
Year 2000 compliance issues. To date, approximately ninety two percent (92%)
of the suppliers contacted have responded, and of those responding, sixty
seven percent (67%) have indicated that they have remediated their Year 2000
compliance issues. Of the distributors and large customers contacted,
approximately sixty one percent (61%) have responded and of those, eighty one
percent (81%) have indicated they are Year 2000 compliant. The Company will
continue to contact its significant suppliers, product distributors, and large
customers as part of its Year 2000 Project. However, there can be no guarantee
that the systems of other companies on which our business relies will be
timely converted or that failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on us and our operations.
The Costs to Address Our Year 2000 Issues. Expenditures in 1997 for the
Year 2000 Project amounted to less than $7,500. Expenditures in 1998 were
approximately $16,000. In 1999 we have spent approximately $7,500 for the Year
2000 Project. Management expects that completion of its Year 2000 Project may
result in additional expenditures of approximately $20,000.
The Risks Associated with Our Year 2000 Issues. Our failure to resolve
Year 2000 Issues on or before December 31, 1999 could result in system
failures or miscalculations causing disruptions in operations, including,
among other things, a temporary inability to process transactions, send
invoices, send and/or receive e-mail and voice mail, or engage in similar
normal business activities. Additionally, failure of third parties upon whom
our business relies to timely remediate their Year 2000 Issues could result in
disruptions in our supply of parts and materials, late, missed or unapplied
payments, temporary disruptions in order processing and other general problems
related to our daily operations. While we believe our Year 2000 Project will
adequately address our internal Year 2000 issues, and even though we have
received responses from a significant number of our suppliers, product
distributors, and customers, there can be no guarantee that the Year 2000
Issue will not have a material adverse effect on us and our operations.
Our Contingency Plan. As part of our Year 2000 Project, we plan to retain
the services of an outside consultant to verify and validate our Year 2000
compliance. Final Year 2000 verification and validation is scheduled to occur
by November 1999. We are also developing Year 2000 contingency plans. The
focus of these contingency plans will be to address the possibilities of third
party failures, their effect on us and our ability to build our products and
deliver services to our customers. While the contingency plans will address
issues under our control, an infrastructure problem outside of our control or
some combination of several of these problems could result in a delay in
product shipments, depending on the nature and severity of the problems.
<PAGE>
<PAGE>
BUSINESS
Overview
We are a medical products company striving to enhance the quality-of-life
through technology. In 1998, we introduced to market two new product lines,
achieved major regulatory breakthroughs with both the FDA and the European
Community, and greatly enhanced our marketing and sales base through the
execution of certain key distribution and manufacturer's representatives
agreements. Our product lines are as follows:
1. The Lasette(-Registered Mark-), a compact, lightweight, portable
skin perforator, has been designed to permit nearly painless sampling of
capillary blood in both clinical (Professional Lasette(-Registered Mark-)) and
home settings (Personal Lasette(-Registered Mark-)) for the purpose of
subsequent glucose or all other screening tests.
2. The In Vitro Fertilization (IVF) Workstation utilizes a microscope,
computer-controlled stages and a solid-state laser to perform laser assisted
hatching to enhance human assisted reproduction techniques (currently
undergoing clinical trials in the United States).
3. The Cell Robotics Workstation, a scientific research instrument,
uses laser light to transform a microscope from a viewing device into a tool
for physically manipulating and dissecting living cells in microspace.
History
Cell Robotics, Inc. ("CRI") was organized in 1988 under the laws of the
State of New Mexico to develop and commercialize optical trapping technology.
The simplest optical trapping structure embodies the discoveries in the Lucent
Patent as well as related technologies. In 1991, using funding provided by
Mitsui Engineering & Shipbuilding Co., Ltd. ("Mitsui"), a Japanese
corporation, CRI obtained a license covering the Lucent Patent and began
developing instruments using optical trapping technologies.
In February 1995, Intelligent Financial Corporation ("IFC"), the shares
of which were publicly traded, acquired 100% of the issued and outstanding
shares of common stock of CRI in a transaction treated as a reverse merger
(the Acquisition), and subsequently changed our name to
"Cell Robotics International, Inc."
Business Strategy
Our business strategy is to develop unique products using core technology
targeted at large markets in which we believe we can compete effectively. The
key components of this business strategy include:
DEVELOP UNIQUE TECHNOLOGY. Through our know-how and core technology, we
strive to stay ahead of our competition by always having the best product
within a given price range. We back this aggressive development strategy with
patents, licenses and collaboration where appropriate.
DEVELOP MARKET RECOGNITION. We plan to position our laser-based medical
devices as the preferred technological solution to clearly-defined medical
needs. We will further develop market recognition by using trademarked
product names that can be clearly recognized by customers, such as Lasette(-
Registered Mark-) and LaserTweezers(-Registered Mark-).
ESTABLISH EXCLUSIVE DISTRIBUTION CHANNELS. For high volume products such
as the Lasette(-Registered Mark-), we seek to enter into exclusive
distribution agreements with well-established distributors of medical products
to take advantage of existing distribution channels and name recognition. For
low-volume, high-valued products we use direct distribution as well as
arrangements with international distributors and manufacturer's
representatives.
RAPIDLY EXPAND CAPACITY TO ASSEMBLE PRODUCTS. We are rapidly expanding
our manufacturing capacity to assemble all of our new laser-based medical
devices. An OEM (Original Equipment Manufacturer) relationship with Big Sky
Laser Technologies, Inc. will remain in place for production of the
Professional Lasette(-Registered Mark-). All other products will be
manufactured by us in our Albuquerque facility.
Through the implementation of the foregoing, we hope to become a leader
in the development and sale of technologically unique medical devices that
respond to the rapidly increasing market demand for products that offer more
effective, safer and less painful solutions than conventional procedures.
Products
Lasette(-Registered Mark-)
DESCRIPTION. The Lasette(-Registered Mark-) is a compact, lightweight,
portable skin perforator that uses a laser to nearly painlessly pierce the
skin on a fingertip to permit the taking of capillary blood samples for the
purpose of subsequent glucose testing in the home-use market and all blood
screening in the clinical market. The current Professional Lasette(-Registered
Mark-) is approximately the size of a video cassette and consists of a
battery-driven primary perforator unit with a charger. The next generation
Lasette(-Registered Mark-), or Personal Lasette(-Registered Mark-), is
currently under design and development and, when completed, will be
approximately the size of a handheld cellular telephone and weigh 8 ounces.
The Professional Lasette(-Registered Mark-) was cleared for sale into the
clinical market in August 1997 and is a substitute for the stainless steel
lancet now used for capillary blood sampling. The Professional Lasette(-
Registered Mark-) has received FDA clearance for capillary blood sampling from
all individuals, including diabetics, in both clinical and home settings. The
FDA clearance for home-use of the Lasette(-Registered Mark-) for measuring
glucose levels was granted on December 7, 1998. This was a landmark FDA
approval because it was the first time any medical laser had been approved for
home use. Although the current Professional Lasette(-Registered Mark-) can now
be sold for home use, a smaller and less expensive Personal Lasette(-
Registered Mark-) is under development that more clearly focuses on the large
home-use market. Both the Personal and Professional Lasettes(-Registered Mark-
) require a disposable shield each time the laser is used.
MARKETS-CLINICAL. The Lasette(-Registered Mark-) is a product that
addresses the collection of capillary blood from fingertips, which according
to industry data is a procedure that is performed approximately one billion
times a year in homes, hospitals, clinics and doctors' offices. Capillary
blood sampling is performed in virtually all clinical settings, including
hospitals, dialysis clinics, blood banks, nursing facilities, home health
agencies and physicians' offices. Data indicates that in the United States
alone, there are 7,500 hospitals and 46,000 other clinical sites performing
routine daily capillary blood sampling. Currently the most commonly used
device for capillary blood sampling is the stainless steel lancet. In the
hospital setting, inadvertent transmission of disease from accidental lancet
sticks is a recognized problem. We believe that the Lasette(-Registered Mark-)
can substantially reduce the pain and trauma involved in this procedure and
the risk of inadvertent cross-contamination for both the clinician and the
patient.
MARKETS-HOME-USE. While we believe that the potential clinical market for
the Lasette(-Registered Mark-) is significant, a substantially greater
opportunity lies in the worldwide home-use market of persons afflicted with
diabetes. Diabetics throughout the world are required to take capillary blood
samples in order to monitor their blood sugar levels on average four times per
day. The recurring finger sticks become painful and annoying when performed on
a daily basis, causing many patients to test less frequently than prescribed
by their physicians. In the United States alone, the American Diabetes
Association (ADA) estimates that there are 10.3 million diabetics with
approximately 4.7 million diabetics that are required to test their blood
glucose multiple times per day. A one percent (1%) penetration rate of those
diabetics would be 47,000 units, and a ten percent (10%) penetration rate
would be 470,000 units. The world market is much larger. We cannot predict
what penetration rate the Lasette(-Registered Mark-) product line will
achieve.
MARKETING AND DISTRIBUTION. On July 30, 1998, we signed an exclusive
worldwide marketing and distribution agreement with Chronimed, Inc. The
agreement with Chronimed includes a two-year, multi-million dollar minimum
purchase commitment by Chronimed. The Chronimed agreement also requires
Chronimed to make a capital investment consisting of staged purchases of
$600,000 of our common stock, contingent upon achievement of certain
milestones related to the development of the second generation Personal
Lasette(-Registered Mark-) device. In accordance with the terms and conditions
of its agreement with us, Chronimed made its first equity investment on
September 11, 1998. The $300,000 investment was made in the form of a stock
purchase of 200,000 shares of our common stock. Chronimed's capital investment
is being used for the development of the second generation Lasette(-Registered
Mark-). A second tranche of Chronimed's investment in the amount of $150,000
for 100,000 shares of common stock was completed in April 1999. The worldwide
diabetic market is very large and continues to grow, but there can be no
assurance the Lasette(-Registered Mark-) product will achieve market
acceptance. A significant decrease in purchases by Chronimed, or the failure
of Chronimed to comply with the terms of their agreements with us, could have
a material adverse effect on our operations and future profitability.
MANUFACTURING. In August 1996, we established a strategic development and
production alliance with Big Sky Laser Technologies, Inc. ("BSLT"), an OEM
manufacturer and developer of laser-based medical devices based in Montana.
BSLT is a recognized laser OEM manufacturer that complies with FDA, ISO 9001
and other regulatory requirements. We are relying upon BSLT to manufacture
the first generation Professional Lasette(-Registered Mark-). To this end,
effective May 20, 1998, we entered into an OEM supplier agreement with Big
Sky. Under the terms of this agreement, Big Sky has the exclusive
manufacturing rights for the current model of the Professional Lasette(-
Registered Mark-) and we have exclusive distribution rights, subject to
certain minimum order requirements. Either party may terminate the agreement
on 90 days written notice in the event of a material breach that is not cured
within 30 days of receipt of notice. Otherwise, if not earlier terminated, the
agreement terminates five years after execution. The Personal Lasette(-
Registered Mark-) will be manufactured by us at our Albuquerque, New Mexico
facility. We have instituted the record keeping, quality control, and
production procedures needed to meet the requirements of the FDA MDQSR, ISO
9001, and EN 46001. The disposables for both the Personal and Professional
Lasettes(-TM-) will be manufactured by Chronimed.
COMPETITION. The Lasette(-Registered Mark-) represents a technological
alternative to the traditional stainless steel lancet for routine capillary
blood sampling. It eliminates the risk of cross-contamination and attendant
indirect costs, and has been designed to reduce the pain, fear and anxiety
associated with blood sampling. It also eliminates the cost and risk of lancet
waste disposal.
While each stainless steel lancet costs only pennies, we believe that by
eliminating the associated indirect costs of their use described above, the
Lasette(-Registered Mark-) can be successfully marketed by Chronimed at a
retail price of $2,000 per unit. We plan to introduce a second generation
Personal Lasette(-Registered Mark-) at a retail price of $1,000.
The only other commercialized approach to laser-based capillary blood
sampling that has come to our attention is a laser skin perforator developed
by Transmedica (formerly Venisect). We are aware from industry sources,
however, that the Transmedica laser is substantially larger than the Lasette(-
Registered Mark-) and more costly.
The development of new advanced technologies for determining and/or
controlling glucose levels in diabetic patients is a focus of many corporate
research and development efforts throughout the world. Several companies are
developing glucose testing products based on non-invasive technologies, using
skin patches and diode-pumped lasers. To our knowledge, none of these products
have received FDA clearance for sale in the United States. However, if these
products are cost effective, approved for sale and become commercially
available in the United States in the future, they could have a material
adverse effect on sales of the Lasette(-Registered Mark-) and, as a result, on
our business and financial condition.
REGULATORY STATUS. The following regulatory clearances were obtained for
the Lasette(-Registered Mark-):
<TABLE>
<CAPTION>
Date Clearance
- ---- ---------
<S> <C>
August 7, 1997 Clearance for testing glucose and hematocrit in healthy
adult patients in a clinical setting
October 28, 1997 Clearance for testing glucose and hematocrit in
diabetic adult patients in a clinical setting
May 15, 1998 CE Mark testing complete for Lasette(-Registered Mark-)
June 29, 1998 Clearance for testing glucose and hematocrit in all
juveniles patients in a clinical setting
September 12, 1998 ISO 9001 / EN 46001 / Medical Device Directive
Certification
September 24, 1998 Clearance for use of all glucose meters with the
Lasette(-Registered Mark-)
October 30, 1998 Variance for Personal Lasette(-Registered Mark-) design
December 7, 1998 Clearance for home-use of the Lasette(-Registered Mark-
) for glucose monitoring
December 16, 1998 FDA agrees with Personal Lasette(-Registered Mark-)
safety and efficacy
January 15, 1999 Clearance for all screening blood tests in a clinical
setting
March 5, 1999 Personal Lasette(-Registered Mark-) testing for CE
Mark is pending
September 27, 1999 ISO 9001 / EN 46001 passed recertification audit
</TABLE>
In Vitro Fertilization Workstation
DESCRIPTION. The IVF Workstation has three basic applications: first, to
measure, assess and store in computer memory the various properties of a human
egg to assess its suitability for fertilization; second, to mechanically
inject sperm into an egg with a third party micro-manipulator; and third, to
score the outer shell of a fertilized egg with a laser to facilitate
"hatching" and promote embryo development and successful pregnancy. In the
United States, FDA clearance is required for sale of the IVF Workstation.
Clinical trials are underway under an approved investigational device
exemption (IDE) from the FDA. In September 1998, our representatives met with
the FDA to discuss a reduction in the size of the clinical trial. In March
1999, the FDA approved our request for a smaller clinical trial. We expect
that the clinical trials could take a year or more to complete with no
assurance that, once completed, the product will ever receive FDA clearance
for sale in the United States. In May 1998, we received the CE Mark for this
product, allowing the IVF Workstation to be marketed and sold in the European
Community.
The IVF Workstation is a computer-controlled multi-functional workstation
that combines, for the first time, a technological solution to both the
functional and informational requirements of clinicians working in the IVF
environment. Utilizing a microscope, computer-controlled motorized stage,
video camera, sophisticated laser-based technology and data storage and
retrieval systems, the IVF Workstation permits standardized evaluation,
measurement and diagnosis of eggs and embryos, sperm injection and
laser-assisted embryo hatching in one integrated system. With its computer
hardware and software, the IVF Workstation also permits the detailed
cataloguing and documentation of each IVF procedure and the organization and
retrieval of data and other information. We offer the IVF Workstation in
various configurations.
In vitro fertilization is a rapidly-growing area of human fertility
treatment. However, success rates with current procedures vary significantly
from clinic to clinic. The IVF Workstation is designed to improve success
rates for clinics and IVF patients.
MARKETS. The market for the IVF Workstation consists of the more than
1,300 clinics worldwide that treat infertility, approximately 300 of which are
located in the United States. Worldwide these clinics conduct approximately
100,000 IVF treatment cycles a year. At an average cost of $5,000 per
treatment cycle, it is estimated that over $500 million is spent annually for
IVF procedures. It is believed that the IVF Workstation will substantially
increase success rates and reduce the time and cost required to successfully
complete a fertility treatment cycle, thereby increasing profits and revenue
to the clinician.
MARKETING AND DISTRIBUTION. The IVF Workstation received the CE Mark on
May 15, 1998. We hope that the improved success rate experienced by foreign
clinics will have the effect of stimulating interest in the product in
domestic markets.
Sales, service and installation of the IVF Workstation have been handled
directly by our staff and manufacturers representatives. However, on September
13, 1999, we signed a development and distribution agreement with Hamilton
Thorne Research to exclusively distribute, market and sell CRII's IVF
technology. Current distribution agreements covering Switzerland, Germany,
Denmark, Spain, Sweden, the United Kingdom, South Korea, and Brazil will be
transferred to Hamilton Thorne Research. Since November 1998, six systems have
been sold outside the United States.
MANUFACTURING. We manufacture the IVF Workstation at our Albuquerque,
New Mexico facility. We anticipate that we will be able to assemble and ship
sufficient units to satisfy demand for the product. We also instituted the
record keeping, quality control, and production procedures needed to meet the
requirements of the FDA MDQSR, ISO 9001, and EN 46001.
COMPETITION. We are not aware of any other product that combines all of
the features and performance specifications of the IVF Workstation. Fertilase,
a company in Switzerland, has introduced a product that provides laser-
assisted hatching, but which does not offer all of the features found in the
IVF Workstation. In addition, a German company, P.A.L.M., offers a system but
it is thought that they use a different wavelength of laser light for laser
assisted hatching.
REGULATORY STATUS. Sales in Europe and other international markets began
in November 1998 after we received the CE Mark for this product. The only
functional component of the IVF Workstation that requires FDA clearance is the
laser module used for laser-assisted hatching. Clinical trials of the IVF
Workstation have begun under an FDA-approved Investigational Device Exemption
(IDE). There can be no assurance when, if ever, we will obtain FDA clearance
for sales in the United States.
Scientific Research Instruments
APPLICATIONS OF THE RESEARCH INSTRUMENTS. Our microrobotic technology
allows scientists to manipulate objects in microspace, upgrading the
microscope from simply an instrument for observation to an interactive
micro-laboratory. The scientific research instruments are designed to enhance
the usefulness and importance of the conventional laboratory microscope as a
tool in medical, biological and genetic applications in the life sciences. The
technology can be used for cell separation, cell-cell interaction,
microdissection, and intercellular manipulation of living cells. We have
either demonstrated to ourselves that our products can be used for, or we are
aware of others using similar products in, cancer research and immunology,
neurobiology, assisted reproductive techniques and genome research.
DESCRIPTION. In 1996, We introduced the computer-controlled Cell Robotics
Workstations(-TM-) for optical trapping, micromanipulation and microsurgery.
These workstations are based on our core LaserTweezers(-Registered Mark-),
LaserScissors(-TM-), CellSelector(-TM-) and SmartStage(-Registered Mark-)
technologies. The functionality of the Cell Robotics Workstations(-TM-) has
been improved through the addition of computer control, providing more
powerful and user-friendly features such as interactive software with mouse or
keyboard control, unique motorized stage and motorized focus drive providing
motion in three directions. The Cell Robotics Workstation integrates our
scientific research instruments into a complete computer-controlled optical
trapping and ablation workstation.
MARKETS. Principal markets for our scientific research instruments are
colleges, universities, research laboratories, biotechnology and
pharmaceutical companies, and commercial laboratories currently conducting
biological research. Our marketing strategy is to identify key scientists who
are engaged in specific research applications for which our instruments are
particularly well-suited.
In the United States, the research market consists of approximately
108,000 research biologists working in 2,400 institutions. We specifically
target users of inverted microscopes, for which there were approximately
10,000 existing users in 1996 and approximately 1,000 new purchases made
annually in the United States and Canada. Worldwide, the installed base of
inverted microscopes was approximately 33,000 in 1996, with 3,000 additional
new sales annually.
MARKETING AND DISTRIBUTION. While we intend to focus our marketing
efforts on the distribution and sale of our laser-based medical devices, we
will continue to promote and market our scientific instruments through direct
sales, dealers, representatives and distribution arrangements. We have a
distribution agreement with MEIWA granting MEIWA exclusive distribution rights
for our scientific research instruments in Japan for a term of ten years
expiring in September 2005. We also expanded our domestic and international
distribution channels, and now distributors in 17 countries are starting to
sell the scientific research instruments.
MANUFACTURING. Our manufacturing approach for the Cell Robotics
Workstation(-TM-) attempts to minimize the capital outlay by outsourcing parts
to machine shops and circuit board companies, and completing all final
assembling and testing at our Albuquerque, New Mexico facility to ensure the
quality of the final products. We plan to continue to use this approach with
our new and current products. We began work on ISO compliance in January 1997
and received our ISO 9001 certification in September 1998.
COMPETITION. Competitors for the Cell Robotic Workstation(-TM-) include
P.A.L.M., a German company making both laser trapping and laser cutting
instruments, S&L Microtest, a German company making multi-trap and custom
trapping instruments, and Sigma Koki, a Japanese company. We believe that our
Cell Robotics Workstation(-TM-) offers more features at a better price than
any of these competitors.
REGULATORY STATUS. We received the CE Mark for our scientific research
instruments in September 1997. This product line does not currently require
other regulatory clearances.
Competition in General
The industry in which we compete with our laser-based medical devices is
characterized by rapidly evolving technology and intense competition. Many
companies of all sizes, including both large organizations as well as several
specialized laser-based medical device companies are engaged in activities
similar to that of ours. In addition, colleges, universities, governmental
agencies and other public and private research institutions will continue to
conduct research and to protect technologies that they have developed, some of
which will be directly competitive with us. All of our competitors have
substantially greater financial, research and development, human and other
resources than us.
We believe we have certain technological advantages in producing the
compact, low-cost laser design utilized in the Lasette(-Registered Mark-).
However, part of our cost advantage is dependent in part upon our ability to
maintain our relationship with the supplier of the crystals used in the
manufacture of our lasers. Alternative sources of supply for the crystals,
while available, would increase the production cost of our product and reduce
its competitive advantage.
The development of new advanced technologies for determining and/or
controlling glucose levels in diabetic patients is a focus of many corporate
research and development efforts throughout the world. Several companies are
developing glucose testing products based on non-invasive technologies, using
skin patches and diode-pumped lasers. To our knowledge, none of the products
have been successfully commercialized or received FDA clearance for sales in
the United States. However, if these products are approved for sale and become
commercially available in the United States in the future, they could have a
material adverse effect on sales of the Lasette(-Registered Mark-), and, as a
result, on our business and financial condition.
We believe that our success is highly dependent upon our ability to
obtain distribution agreements for the sale of our new laser-based medical
devices and create additional internal sales and marketing resources. Although
several distribution agreements are in place, there can be no assurance that
we can achieve these goals.
We believe that the principal factor affecting our competitive position
is the suitability of our instruments for, and performance in, a particular
application. Because of the highly specialized nature of our markets, such
traditional competitive factors as price, delivery, upgradability and support
are less significant. We face potential competition from a number of
established domestic and international companies, all of which have vastly
greater engineering, manufacturing, marketing and financial capabilities than
us. Our ability to compete successfully in existing and future markets will
depend on elements both within and outside our control, including, but not
limited to, our success in market penetration, protection of our products by
effective utilization of intellectual property laws, including full exercise
of our patent rights, improvements in product quality and reliability, ease of
use, price, diversity of product line, efficiency of production, the rate at
which customers incorporate our instruments into their products, product
introductions by our competitors and general domestic and international
economic conditions.
Intellectual Property
We rely primarily on the ability to rapidly develop new generations of
technology from our core technology and a combination of patent, trade secret,
copyright and trademark laws, confidentiality procedures and other
intellectual property protection methods to protect our proprietary
technology. Our laser-based medical devices currently have little protection
and our scientific research instruments have only limited patent protection.
Since there is little patent protection currently afforded our laser-based
medical laser devices, there can be no assurance that other patent holders or
other third parties will not claim infringement by us or our licensors with
respect to current and future technology. Because United States patent
applications are held and examined in secrecy, it is also possible that
presently pending United States patent applications will eventually issue with
claims that might be infringed by our products. There can be no assurance that
additional competitors, in the United States and in foreign countries, many of
which have substantially greater resources than us, and have made substantial
investments in competing technologies, will not apply for and obtain patents
that will prevent, limit or interfere with our ability to make and sell our
products. We are aware of several patents held by third parties that relate
to certain aspects of our products. There can be no assurance that these
patents would not be used as a basis to challenge our current or future
patents, to limit the scope of our patent rights or to limit our ability to
obtain additional or broader patent rights.
A United States patent concerning the use of a laser for blood sample
collection is held by a former employee of the Russian Academy of Science now
residing in San Diego (the "Tankovich Patent", US 5165418, issued 24 Nov. 92,
priority date 02 Mar. 92). Becton Dickinson Corporation, a leading producer of
blood collection products, had licensed this patent in December of 1995.
Becton Dickinson has participated with a San Diego laser technology company,
JMAR, in the reportedly now abandoned development of a product for laser skin
perforation. We have acquired a formal legal opinion, which finds the
Tankovitch Patent invalid and unenforceable due to public disclosure of the
laser perforation concept in the international scientific literature, as well
as public commercialization of primitive perforator products in the former
USSR, as early as October 1990. The Tankovitch Patent is the subject of formal
re-examination in the United States Patent and Trademark Office as the result
of a petition made by Transmedica in August 1996. No results of the
re-examination case have been published to date.
The Lasette(-Registered Mark-) product was originally developed using the
multifaceted crystal resonator ("MCR") technology acquired from Tecnal
Products, as more fully described below. Subsequently, we have advanced the
laser design employed in this product and have sought, or are preparing to
seek, continuations of existing patents and/or new patents protecting those
designs. One result of this effort was the granting of a new patent from the
United States Patent and Trademark Office ("PTO"). This patent covers
proprietary aspects of both current and projected future models of the
Lasette(-Registered Mark-). Patents covering other aspects of the Lasette(-
Registered Mark-) are currently pending in the PTO and World Patent Office.
The IVF Workstation is not currently protected by any specific issued
patents; however, we have submitted an application to the PTO and World Patent
Office seeking protection for certain laser design aspects of the system. We
will also seek to protect certain data-processing aspects of the system.
The commercial success of our laser-based medical devices will depend, in
part, upon our ability to protect and defend our intellectual property rights
and the competitive advantages that those rights offer to its products. There
can be no assurance that we will be successful in these efforts.
Patents and Licenses
In 1991, we obtained a non-exclusive license covering the Lucent Patent
and, using funding provided by Mitsui, began developing instruments using
those technologies. In 1994, the license with Lucent was converted from
non-exclusive to exclusive. To reduce the minimum payments required under the
Lucent agreement, in 1998, that agreement was converted back to non-exclusive.
The LaserTweezers(-Registered Mark-) application of the Cell Robotics
Workstation was based upon an exclusive patent license from AT&T, now known as
Lucent Technologies, Inc. At least two European companies have developed and
are marketing products which we believe violate Lucent's patents. To date,
Lucent has elected not to pursue patent infringement claims against these
companies and their distributors, and under the terms of the original Lucent
license, we cannot compel Lucent to initiate any proceedings.
As a result of the foregoing, as of June 30, 1998, we and Lucent agreed
to amend the Lucent license. Specifically, the Lucent license was changed
from an exclusive to non-exclusive license with the royalty payments
increasing from five percent (5%) to seven percent (7%) of the value of each
product sold utilizing the patented technology. However, the minimum annual
royalties under the Lucent license will be reduced to a flat $35,000 per year
for the term of the Lucent license. Notwithstanding the foregoing amendments
to the Lucent license, there can be no assurance that we will be able to
increase sales of the Cell Robotics Workstation(-TM-) to a level that renders
the product economically viable.
TECNAL PATENTS. On January 10, 1996, we acquired from Tecnal Products,
Inc., a subsidiary of Lovelace Scientific Resources, Inc., one (1) United
States patent known as the Multifaceted Crystal Resonator patent, ("MCR
Patent"), which expires March 1, 2014, one (1) patent application pursuant to
which a patent was subsequently issued, which expires August 29, 2014, and one
foreign patent application and a strategic license. These acquisitions
comprised a package of technological assets covering two laser products: a
low-cost, high-power solid-state laser that eliminates many of the delicate
optical components required by conventional solid-state lasers, and a laser
perforator. The MCR Patent was originally developed under the license
agreement with NTEC of Russia. The advanced laser design of the MCR Patent and
other related technology developments can be used in a variety of laser-based
applications, including skin resurfacing (facial wrinkle removal), laser
dentistry, eye surgery and other medical and industrial procedures. While
these technologies were used in early versions of the Lasette(-Registered
Mark-) and the RevitaLase(-TM-), we have now developed our own technology for
these products.
We acquired the MCR Patent and other technological assets in
consideration of cash payments in the amount of approximately $15,000, the
issuance of an aggregate of 17,500 shares of common stock and the grant of 1%
royalty on future net revenue based upon the technology, with a lifetime
maximum royalty of $20,000. An ongoing obligation in the form of a 2% royalty
payable to NTEC on all Lasette(-Registered Mark-) sales for perforation know-
how also exists.
OTHER PATENTS. We have also been issued two (2) United States patents
related to our Cell Robotics Workstation(-TM-), but which we do not currently
use. These patents expire July 23, 2012. One patent covers three dimensional
mechanical staging and the other a specialized chamber for the LaserTweezers(-
Registered Mark-), neither of which is used in the Cell Robotics Workstation(-
TM-). In addition, we are in the process of preparing, and will be
submitting, applications for design patents associated with the IVF
Workstation. However, the IVF Workstation is not currently covered by any of
our existing patents.
Because of rapid technological developments in the industries in which we
compete and the broad and rapidly developing patent coverage, our patent
position is subject to various uncertainties and may involve complex legal and
factual issues. Consequently, although we hold certain patents, we are
licensed under other patents and are currently prosecuting additional patent
applications, there can be no assurance that patents will be issued from any
pending or future applications or that claims allowed by any existing or
future patents issued or licensed to us will not be challenged, invalidated or
circumvented, or that any rights granted thereunder will provide adequate
protection to us. Moreover, we may be required to participate in interference
proceedings to determine the priority of inventions, which could result in
substantial costs to us. Further, while we believe, based upon our research
and investigations, as well as those of our advisors, including patent
counsel, that none of our products infringe upon the domestic or foreign
patent rights, or other intellectual property rights, of third parties, there
can be no assurance that we will not be required to defend against future
infringement claims of third parties. Such additional litigation could
represent a substantial commitment of our limited capital resources, including
both funds and human resources, without any assurance that we will ultimately
prevail on the merits. As a result, the potential of such litigation could
represent a material adverse effect upon our future financial condition and
results of operations.
Other Intellectual Property
In addition to our patent rights, we rely upon certain proprietary
know-how in our product development and manufacturing process and have entered
into employee and third party nondisclosure agreements to protect our
proprietary technology. In addition, we have developed distinctive trademarks
for both our laser-based medical devices and our scientific research
instruments which we believe constitutes valuable intellectual property
rights. We have obtained federal registrations for LaserTweezers(-Registered
Mark-), SmartStage(-Registered Mark-) and Lasette(-Registered Mark-),
modules of our Cell Robotics Workstation(-TM-). We have not obtained federal
registrations for LaserScissors(-TM-), CellSelector(-TM-), RevitaLase(-TM-),
or IVF Workstation. While we intend to apply for these registrations, to date
we have made application only for LaserScissors(-TM-). However, there can be
no assurance that federal registrations for these trademarks will be issued
or, if issued, the degree of protection that they will afford. In the absence
of federal registration, we rely on common law rights for our trademarks.
Research and Development
Our success will depend in large part upon our ability to enhance
existing products and to continue developing new products incorporating the
latest improvements in laser technology. Accordingly, we are committed to
investing significant resources in research and development activities.
During the years ended December 31, 1998, and December 31, 1997, we spent
approximately $849,166 and $1,245,125, respectively, on internal research and
development programs. As of December 31, 1998, four of our scientists and
engineers were engaged primarily in research and development activities. The
majority of funds expended by us for our internal research and development
activities was derived from sales of capital stock and short-term borrowings
from our principal stockholder, Mitsui, and the sale of securities in 1995,
1996, 1997, 1998 and 1999. We do not have any research arrangements with
outside R&D firms and do not anticipate entering into development arrangements
with third parties in the foreseeable future. We do not currently perform any
research and development under contract to third parties except for Small
Business Innovative Research ("SBIR") grants from the federal government.
These include a Phase II grant from the National Cancer Institute (NCI) of the
National Institutes of Health (NIH). The award funds two years of development
of a proprietary laser instrument for semi-automated single cell sorting. The
total award over two years is approximately $727,000, of which approximately
$411,597 has been received to date. The receipt of this award should
facilitate our goal of developing a single cell analysis workstation which
could aid in the understanding of cancer cells and viruses. Proceeds from this
award will be used to expand the current capabilities of the Cell Robotics
Workstation and LaserTweezers(-Registered Mark-) technology.
While we are actively engaged in the development of potential future
products from our core technology, these products are essentially extensions
of the current product lines. There can be no assurance that any of these
programs will be continued or completed. Even if these products are
successful, we do not expect to introduce any resulting new products for at
least six months, and there can be no assurance that any such products will be
commercially successful.
Government Regulation-Product Approval Process
We are subject to a variety of government regulations pertaining to
various aspects of our marketing, sales and manufacturing processes. We have
been successful in obtaining many of the regulatory clearances that are
required to market and sell its products, however additional clearance for
broader markets will be required, of which there can be no assurance.
For research applications, our products are subject only to safety
regulations by the FDA. However, the European Community ("EC") has recently
required that the scientific research instruments receive the CE Mark before
they can be exported to the EC. We have received the CE Mark for the Cell
Robotics Workstation(-TM-) and all of its modules in September 1997. We have
also received the CE Mark for the Professional Lasette(-Registered Mark-) and
IVF Workstation.
In the United States, our medical instruments are subject to rigorous
regulation under federal and state statutes and regulations governing the
testing, manufacture, safety and efficacy, labeling, record keeping, approval,
advertising and promotion of our products. Product development and approval
within this regulatory framework may take many months and may involve the
expenditure of substantial resources. In addition to obtaining FDA clearances
for each product, each manufacturing establishment must be registered with,
and approved by the FDA and be certified to meet ISO 9001 and EN 46001
requirements.
The FDA has separate review processes for medical devices that must be
followed before such products can be commercially marketed in the United
States. There are two basic review procedures for medical devices in the
United States. Certain products may qualify for a Section 510(k) procedure,
under which the manufacturer gives the FDA a Pre-Market Notification ("510(k)
Notification") of the manufacturer's intention to commence marketing of the
product at least 90 days before the product will be introduced for clinical
use. We must then wait for the FDA to clear the device for marketing. Among
other things, the manufacturer must establish in the 510(k) Notification that
the product to be marketed is "substantially equivalent" to another
legally-marketed, previously existing product. If a device does not qualify
for the 510(k) procedure, the manufacturer must file a Pre-Market Approval
Application ("PMA"). The PMA requires more extensive pre-filing testing than
the 510(k) procedure and involves a significantly longer FDA review process.
As Class II devices, both RevitaLase(-TM-) and Lasette(-Registered Mark-)
were eligible to qualify under the Section 510(k) procedure. The RevitaLase
received FDA clearance within a few months without clinical trials. The
Lasette(-Registered Mark-), on the other hand, required approximately one year
to obtain our first FDA clearance, limited to clinical use with healthy
adults, due to the required extensive clinical trials. FDA clearance for use
of the Lasette(-Registered Mark-) for adult diabetics in clinical settings was
issued in October 1997, for use by juveniles in clinical settings was issued
in June 29, 1998, for home use for testing glucose on December 7, 1998 and for
all blood screening tests used in a clinical setting on January 15, 1999.
Thus we can now market the Lasette(-Registered Mark-) for essentially all
applications in the United States which require capillary blood for blood
screening. The IVF Workstation, as a Class III device insofar as
laser-assisted hatching is concerned, was not eligible for the Section 510(k)
procedure and requires complete Pre-Market Approval. The IVF Workstation was
granted an Investigational Device Exemption (IDE) and is in the process of
completing detailed clinical trials, which may take more than two years in
their entirety. However, while marketing in the United States must await FDA
clearance which is likely not to occur for at least one year, we have the
right to market the IVF Workstation in Europe and most foreign countries since
it is not deemed a medical device in these jurisdictions. Nevertheless, as an
electronic laser-based product, actual shipments of the IVF Workstation to the
EC require the CE Mark which we received in 1998.
For marketing outside of the United States, we or our prospective
licensees will be subject to foreign regulatory requirements governing
clinical trials and marketing approval for the products. The requirements
governing the conduct of clinical trials, product licensing, pricing, and
reimbursement vary widely from country to country. Although we have employees
experienced in the EC and other regulatory procedures, we do not currently
have any facilities or employees outside of the United States. In some cases
we rely on our strategic partners in foreign markets to satisfy the
regulatory requirements imposed by those jurisdictions.
Employees
At September 1, 1999, we had 16 full-time employees and three part-time
employees. Of the full-time employees, four were principally engaged in
product development, five in manufacturing, including quality control, two in
marketing and sales and the balance in administration and finance. None of our
employees are represented by a labor union or covered by a collective
bargaining agreement. We have experienced no work stoppages and believe that
our employee relations are good. We believe that our success will depend, in
part, on our continuing ability to attract and retain qualified technical,
marketing and management personnel.
Facilities
Our facilities are located in approximately 12,000 square feet in
Albuquerque, New Mexico. This facility contains our executive and
administrative offices, as well as our assembly, production, testing, storage
and inventory functions. The lease covering the facility requires monthly
payments of approximately $9,000, subject to a 3% annual increase, and has
been renegotiated to terminate in 2002. We believe that this facility is
adequate for its present and near-term requirements. Our equipment, fixtures
and other assets located in the facility are adequately insured against loss.
Legal Proceedings
We are not engaged in any legal proceedings.
<PAGE>
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The names, positions and ages of our Directors, executive officers and
key employees are as follows:
<TABLE>
<CAPTION>
Name Age Position(1)
- ---- --- ----------
<S> <C> <C>
Dr. Ronald K. Lohrding 58 President, Chief Executive Officer and
Chairman of the Board
Craig T. Rogers 37 Vice-President of Investor Relations,
Secretary, Treasurer and Director
Jean M. Scharf 37 Chief Financial Officer and Controller
H. Travis Lee 40 Vice-President of Sales and Marketing
Richard Zigweid 51 Vice-President Manufacturing
Michael Wolf 57 Vice-President Engineering
Connie Hoy 46 Regulatory Affairs and Quality Manager
Dr. Larry Keenan 52 Product Manager, CR Workstation
Dr. Jerome Conia 39 Product Manager, IVF Workstation(-TM-)
and Chief Scientist
David Costello 40 Product Manager, Professional Lasette(-
Registered Mark-)
Mark T. Waller (2) 49 Director
Dr. Raymond Radosevich (2) 61 Director
Dr. Debra Bryant (2) 48 Director
Ron E. Ainsworth (2) 47 Director
</TABLE>
- ----------------
(1) There exists no family relationship between any officer or director.
(2) Independent directors. We will maintain at least two (2) independent
directors on the board of directors.
DR. RONALD K. LOHRDING. Dr. Lohrding has served as our Chief Executive
Officer, President and Chairman of the Board since February 23, 1995. He co-
founded the wholly-owned subsidiary, Cell Robotics, Inc. ("CRI"), in 1988 and
has served as the Chairman, President and CEO since incorporation. He has
over 20 years of management experience. He received his Ph.D. in mathematical
statistics from Kansas State University in 1969. Dr. Lohrding worked at Los
Alamos National Laboratory (LANL) as an R&D manager and as a scientist from
1968 to 1988. He served as LANL's Assistant Director for Industrial and
International Initiatives, Deputy Associate Director for Environment and
Biosystems, as well as Program Director for Energy, Environment and
Technology, among other senior management positions. Concurrently, he has
been a general partner in seven successful real estate partnerships, two of
which are still currently active. Other than for us, Dr. Lohrding does not
currently serve as a director of any other reporting company.
CRAIG T. ROGERS. Mr. Rogers has served as our Secretary, Treasurer and
as a Director since 1995, and as Vice President for Investor Relations since
January 1997. From 1991 until 1995, he served as the Chief Executive Officer,
President and a Director of IFC. As a result of the acquisition by IFC of
Cell Robotics, Inc., Mr. Rogers resigned as the Chief Executive Officer and
President of IFC and, in February 1995, concurrently was appointed Chief
Financial Officer, Secretary and Treasurer of the Company. Mr. Rogers served
as Chief Financial Officer until January 8, 1997. Mr. Rogers served as Chief
Operating Officer of the Rockies Fund, Inc. from July 1993 to October 1, 1996.
The Rockies Fund Inc., a Colorado Springs, Colorado-based business development
company regulated under the Investment Company Act of 1940, makes investments
in and managerial assistance available to, certain eligible portfolio
companies. From April 1988 to June 1991, he also served as Chief Financial
Officer for DMA Computer Solutions, a general partnership operating four
Connecting Point franchise stores. Mr. Rogers received a Bachelor of Arts
Degree in Business/Economics from Colorado College in 1984. Other than for
us, Mr. Rogers does not currently serve as a director of any other reporting
company.
MARK WALLER. Mr. Waller has served as a Director since February 1995.
Since 1990, Mr. Waller has been President and founder of BridgeWorks Capital,
a sole proprietorship which arranges public and private financing for and
provides public relations services to client companies. Mr. Waller was
Interim President and Director of Totem Health Sciences, Inc., a Canadian
medical products and research company, from 1988 to 1990. Other than for us,
Mr. Waller does not currently serve as a director of any other reporting
company.
DR. RAYMOND RADOSEVICH. Dr. Radosevich was elected to the Board of CRI
in 1992. From 1985 to 1989, he was Dean of the Anderson School of Management
at the University of New Mexico. Dr. Radosevich recently retired from active
teaching. Prior to his retirement, he was a Professor of Management,
specializing in business strategy and the management of technology. In
addition, he taught a course in Technology Entrepreneurship and lectured on
the subject nationally and internationally. Dr. Radosevich earned his Ph.D.
from Carnegie-Mellon University, a B.S. in Mechanical Engineering and an M.S.
in Industrial Engineering from the University of Minnesota. Other than for
us, Dr. Radosevich does not currently serve as a director of any other
reporting company.
DR. DEBRA BRYANT. Dr. Bryant was elected to the Board in July 1997. She
is President, CEO and majority stockholder of Humagen Fertility Diagnostics,
Inc., which is the largest manufacturer of micropipets for the worldwide in
vitro fertilization market. In 1984, Dr. Bryant joined Humagen, Inc. as a
Senior Scientist. In 1991, Dr. Bryant purchased the fertility diagnostics
division of Humagen, Inc. and founded Humagen Fertility Diagnostics, Inc. Dr.
Bryant received her Ph.D. in Medical Microbiology from Bowman Gray School of
Medicine, Wake Forest University and completed a NIH postdoctoral fellowship
in molecular biology at the University of Virginia.
RON E. AINSWORTH. Mr. Ainsworth was elected to the board in April 1999
and is a Founder and Managing Partner of The Trenwith Group. Formed in 1981,
The Trenwith Group has been involved in over 300 corporate financing
transactions and in excess of $1 billion dollars in invested capital. Mr.
Ainsworth is also a Managing Director of Trenwith Securities, Inc., a
registered NASD Broker-Dealer. Mr. Ainsworth's duties with Trenwith
Securities, Inc. include management and development of the co-underwriting
programs, initial public offerings, follow-on equity offerings, and high yield
debt offerings. Mr. Ainsworth is also one of three managing partners of
Trenwith Holdings. Ltd, a partnership formed with Rockefeller Trust and
Rockvest Capital, with $100 million of committed capital. Trenwith Holdings
invests in LBOs, MBOs, Relap Mezzanine and Pre IPOs. Mr. Ainsworth's primary
responsibilities with the partnership include developing and investing in
middle market companies. Mr. Ainsworth currently holds equity investments in
25 operating companies and received his degree from the University of
Northridge.
The executive officers of the Company are elected annually at the first
meeting of our Board of Directors held after each annual meeting of
Shareholders. Each director is elected to serve for a term of one (1) year
until the next annual meeting of shareholders or until a successor is duly
elected and qualified. Each executive officer will hold office until his
successor is duly elected and qualified, until his resignation or until he
shall be removed in the manner provided by our ByLaws. There are no family
relationships among directors.
During the fiscal year ended December 31, 1998, outside Directors
received no cash compensation for their services as such, however they were
reimbursed their expenses associated with attendance at meetings or otherwise
incurred in connection with the discharge of their duties as Directors. No
officer receives any additional compensation for his services as a Director,
and we do not contribute to any retirement, pension, or profit sharing plans
covering our Directors. We do, however, maintain a group health insurance
plan and retirement plan for our employees, and those Directors who are also
employees are eligible to participate in each plan.
During fiscal 1998, we had standing Audit, Compensation and Nominating
Committees of the Board of Directors. The only member of the Audit Committee
was Mark Waller. During 1998, the Audit Committee held no formal meetings.
No member of the Audit Committee receives any additional compensation for his
service as a member of that Committee.
During fiscal 1998, the Compensation Committee consisted of Dr. Raymond
Radosevich, Dr. Debra Bryant and Mark Waller. During 1998, the Compensation
Committee held no formal meetings. No member of the Compensation Committee
receives any additional compensation for his service as a member of that
Committee.
During fiscal 1998, the Nominating Committee consisted of Ronald K.
Lohrding, Ph.D. and Craig Rogers. During 1998, the Nominating Committee held
no formal meetings. No member of the Nominating Committee receives any
additional compensation for his services as a member of that Committee.
During fiscal 1998 three (3) meetings of our Board of Directors were
held, which meetings were attended by all members of the Board of Directors.
Significant Employees
JEAN M. SCHARF. Ms. Scharf was appointed Chief Financial Officer and
Controller in August 1997. From April 1995 to August 1997, she served as the
Controller for TPL, Inc., a $7 million defense and private sector contractor.
From April 1984 to September 1994, she was employed by Applied Technology
Associates and with SAIC. She has also owned her own financial software
consulting business since 1994. She has a B.A. degree in business with an
accounting specialty from the University of New Mexico and is currently
working on an M.B.A. degree.
H. TRAVIS LEE. Mr. Lee was appointed Vice-President of Sales and
Marketing in January 1997. During 1996, Mr. Lee was responsible for
International Marketing and Business Development at LaserScope Surgical
Systems, San Jose, CA, a $70 million manufacturer of surgical laser systems.
From February 1994 to September 1996, he was Vice President for Marketing at
Heraeus Surgical Inc., a $30 million manufacturer of surgical lasers and other
medical products. He held senior management, marketing and sales positions
with Medasonics, Inc. and Xintec Corporation from 1991 to 1994. Mr. Lee
received his B.S. degree from San Jose State University in Graphic Design.
RICHARD ZIGWEID. Mr. Zigweid, Vice President of Manufacturing, joined us
in August 1996. Mr. Zigweid was Manufacturing Manager at Olympus America from
May 1994 to August 1996. He served as engineering manager at Bausch & Lomb and
as engineering manager and manufacturing engineer at Baxter Healthcare from
December 1988 to February 1994. He received his B.S. degree from the
University of Wyoming in Mechanical Engineering.
MICHAEL WOLF. Mr. Wolf, Vice President of Engineering, joined us in June
1991, and has been principally responsible for designing the Company's
flagship products. He served as Senior Engineer at Amtech Systems Corp. and
spent 24 years at LANL in various technical positions beginning in 1967. He
has authored over 30 technical papers, holds 13 United States patents, and has
been the lead designer on four projects that were awarded the R&D 100 Award,
signifying one of the 100 most significant technological advances of the year.
CONNIE HOY. Ms. Hoy, Regulatory Affairs and Quality Assurance Manager,
joined us in January 1997. She served as Compliance Officer for Tissue
Technologies, Inc., a skin resurfacing laser manufacturer and wholly-owned
subsidiary of Palomar Medical Technologies, Inc. during 1995 and 1996, where
she achieved FDA Medical Device Quality System compliance, European market
permission, and ISO 9000 registration for Tissue Technologies' skin
resurfacing laser systems. From 1986 to 1995, Ms. Hoy was responsible for
regulatory affairs at the "O" Company, a dental implant company. Ms. Hoy
received her B.A. degree from the University of New Mexico.
DR. LARRY KEENAN. Dr. Keenan, Product Manager, Cell Robotics
Workstation(-TM-) joined us in January 1993 and has been Product Manager for
the Cell Robotics Workstation(-TM-) since July, 1997. Dr. Keenan was the
Regional Sales Manager of BioRad for the confocal microscope product line of
BioRad from 1991 through 1992. He received his Ph.D. in Biological Sciences at
the University of California at Irvine and was an Associate Research Scientist
in Neurobiology at Yale University.
DR. JEROME CONIA. Dr. Conia joined us in May 1992 as a Scientist and has
been the In Vitro Fertilization Workstation Product Manager since May 1996 and
Chief Scientist since November 1998. He has authored several scientific papers
on optical trapping and scissoring and is the principal investigator on
several SBIR grants. He received his M.S. in Embryology, Cellular Biology, and
Physiology from the University of Paris, and his Ph.D. in Specialty Life
Science from the University of Orsay, Paris, France. He also was a
post-doctoral fellow in the Genetics Group at the LANL from March 1989 until
May 1992.
DAVID COSTELLO. Mr. Costello, Product Manager of the Professional
Lasette(-Registered Mark-), joined us in August 1996. From February 1994 to
September 1995, he was founder and Executive Vice-President of Tecnal
Products, Inc. From May 1992 to February 1994, he was Technology Development
Program Manager at Lovelace Scientific Resources. His qualifications include
five patents in medical optics, experience in regulatory development of new
clinical products, and a M.S. degree in Biomedical Engineering from Texas A&M
University.
Technical Advisory Board
We have voluntarily formed a Technical Advisory Board (the "Advisory
Board ") whose members are chosen by the Board of Directors based upon their
individual technical and scientific expertise in areas related to our
business. In consideration of their services as members of the Advisory
Board, each member has been granted non-qualified stock options exercisable to
purchase 6,000 shares of common stock at exercise prices ranging from $1.75
per share to $2.50 per share. Members of the Advisory Board receive no other
compensation for their services, which consist of approximately one day per
year devoted to our business. The following persons currently serve as
members of the Advisory Board:
Dr. Michael Berns is President, Beckman Laser Institute and Professor of
Cell Biology at the University of California.
Dr. Steven Chu is a winner of the 1997 Nobel Prize in Physics and a
Professor of Physics at Stanford University.
Dr. Steven Block is Associate Professor of Molecular Biology at Princeton
University.
Dr. Paul Jackson is a Molecular and Plant Biologist at a national
laboratory.
Dr. Wilfried Feichtinger is at the Institute for Fertility in Vienna,
Austria and was the recent chairman of the IXth World Congress on In vitro
Fertilization and Assisted Reproduction.
Dr. Charles Bracker is the G. B. Cummins Distinguished Professor,
Department of Botany and Plant Pathology, Purdue University.
Dr. Robert Stevenson is a biotech consultant in marketing and
acquisitions.
Dr. Otis Peterson is a laser expert and an inventor of the Alexandrite
Laser.
Director Compensation
During the fiscal year ended December 31, 1998, outside Directors did not
receive any cash compensation or other remuneration for their services.
However, they were reimbursed their expenses associated with attendance at
meetings or otherwise incurred in connection with the discharge of their
duties as our Directors.
Directors who are also executive officers receive no additional
compensation for their services as our Directors.
Executive Compensation
The following table and discussions summarizes all compensation earned by
or paid to our Chief Executive Officer ("CEO") and the other most highly
compensated executive officers for all services rendered in all capacities to
us and our subsidiaries for each of our last three fiscal years. However, no
disclosure has been made for any executive officer, other than the CEO, whose
total annual salary and bonus is less than $100,000.
<PAGE>
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- --------------------- -------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
- --------------- ------- -------- ----- --------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald K. Lohrding, 1998 $123,125 $-0- $3,843 -0- -0- -0- -0-
President 1997 $123,000 $-0- $3,840 -0- -0- -0- -0-
1996 $115,000 $-0- $3,623 -0- 25,000 -0- -0-
H. Travis Lee,(1) 1998 $109,579 $-0- $3,570 -0- -0- -0- -0-
Vice President 1997 $109,500 $-0- $3,570 -0- 74,174 -0- -0-
Marketing and Sales
- ------------------------------
</TABLE>
(1) Mr. Lee's employment with the Company began in January, 1997.
<PAGE>
<PAGE>
Employment Agreements
We have entered into written Employment Agreements, having terms of five
(5) years each, with Dr. Lohrding and Craig T. Rogers, the Company's Vice
President of Investor Relations. The Employment Agreement with Dr. Lohrding
provides for Dr. Lohrding to serve the Company as its Chairman, President and
CEO, on a full-time basis, for a minimum base salary of $100,000 per year.
During fiscal 1998, Dr. Lohrding was paid a base salary of $123,125. The
Employment Agreement with Mr. Rogers originally provided for his serving as
Chief Financial Officer, Secretary and Treasurer, on a part-time basis, for a
minimum base salary of $27,000 per year. Effective January 8, 1997, Mr.
Rogers resigned as Chief Financial Officer; however, he remains as our Vice
President of Investor Relations, Secretary and Treasurer on a part-time basis.
Mr. Rogers was paid a base salary of $41,042 during fiscal 1998. We also have
a written employment agreement with Mr. H. Travis Lee, Vice President of
Marketing and Sales. Under Mr. Lee's agreement, he receives a base salary of
$109,500 per year; provided, however, that either we or Mr. Lee may terminate
the employment relationship upon 45 days' prior written notice in the event a
change in control occurs. In such instance, we are obligated to pay Mr. Lee
his then prevailing total annual compensation in 12 monthly installments.
During fiscal 1992, we adopted a Stock Incentive Plan (the "Plan").
Pursuant to the Plan, stock options granted to eligible participants may take
the form of Incentive Stock Options ("ISO's") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or options which do not
qualify as ISO's (Non-Qualified Stock Options or "NQSO's"). As required by
Section 422 of the Code, the aggregate fair market value of our common stock
with respect to ISO's granted to an employee exercisable for the first time in
any calendar year may not exceed $100,000. The foregoing limitation does not
apply to NQSO's. The exercise price of an ISO may not be less than 100% of
the fair market value of the shares of our common stock on the date of grant.
The exercise price of an NQSO may be set by the administrator. An option is
not transferable, except by will or the laws of descent and distribution. If
the employment of an optionee terminates for any reason (other than for cause,
or by reason of death, disability, or retirement), the optionee may exercise
his options within a ninety (90) day period following such termination to the
extent he was entitled to exercise such options at the date of termination.
Either the Board of Directors (provided that a majority of directors are
"disinterested") can administer the Plan, or the Board of Directors may
designate a committee comprised of directors meeting certain requirements to
administer the Plan. The Administrator will decide when and to whom to make
grants, the number of shares to be covered by the grants, the vesting
schedule, the type of award and the terms and provisions relating to the
exercise of the awards. An aggregate of 1,500,000 shares of our common stock
is reserved for issuance under the Plan.
At December 31, 1998, the Company had granted a total of 1,031,820
Incentive Stock Options under the Plan consisting of 680,850 Incentive Stock
Options exercisable at prices ranging from $1.375 per share to $1.875 per
share, and 350,970 Non-Qualified Stock Options ("NQSO's"), which NQSO's have
been issued to members of the Advisory Board and other Company advisors, and
to certain members of the Board of Directors, and are exercisable at prices
ranging from $1.75 per share to $3.563 per share. All options have been
issued with exercise prices at or above market value on the date of issuance.
The following tables set forth certain information concerning the
granting and exercise of incentive stock options during the last completed
fiscal year by each of the named executive officers and the fiscal year-end
value of unexercised options on an aggregated basis:
<TABLE>
TABLE 2
Option/SAR Grants for Last
Fiscal Year - Individual Grants
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- ---------------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Ronald K. Lohrding -0- -0- -0- -0-
H. Travis Lee -0- -0- -0- -0-
- ---------------------
</TABLE>
<PAGE>
<TABLE>
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
----------------------------------------------------
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
Shares Acquired Value Realized Exercisable Exercisable/
Name on Exercise (#) ($) (Unexercisable) Unexercisable
- ---------------- --------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
Ronald K. Lohrding -0- -0- 308,333/ $146,016/
316,667 $198,359
H. Travis Lee -0- -0- 24,725/ $28,582/
49,449 $57,163
- ------------------------------
</TABLE>
<PAGE>
<PAGE>
(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market
value of the common stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying
the options at fiscal year end and the exercise price of the options.
The closing bid price of our common stock at fiscal year end 1998 was
$2.531.
Indemnification and Limitation on Liability of Directors
Our Articles of Incorporation provide that we shall indemnify, to the
fullest extent permitted by Colorado law, any of our directors, officers,
employees or agents who are made, or threatened to be made, a party to a
proceeding by reason of the former or present official position of the person,
which indemnity extends to any judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding if
certain standards are met. At present, there is no pending litigation or
proceeding involving any of our directors, officers, employees or agents where
indemnification will be required or permitted. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that, in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Our Articles of Incorporation limit the liability of our directors to the
fullest extent permitted by the Colorado Business Corporation Act.
Specifically, our directors will not be personally liable for monetary damages
for breach of fiduciary duty as directors, except for (i) any breach of the
duty of loyalty to us or our stockholders, (ii) acts or omissions not in good
faith or that involved intentional misconduct or a knowing violation of law,
(iii) dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions, (iv) violations
of certain laws, or (v) any transaction from which the director derives an
improper personal benefit. Liability under federal securities law is not
limited by the Articles.
<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transaction with President and CEO
In February 1998, we sold in a public offering units consisting of one share
of Series A Convertible Preferred Stock, each convertible into four common
shares, and two common stock purchase warrants. Each unit was sold at a price
to the public of $8.25. In conjunction with this offering, we granted a stock
option to our President and CEO, Ronald K. Lohrding, Ph.D., pursuant to which
the Company granted to Dr. Lohrding non-qualified stock options exercisable to
purchase, in the aggregate, 450,000 shares of our common stock at an exercise
price equal to 25% of the unit offering price, or $2.0625 per share. 150,000
of Dr. Lohrding's options vested and became exercisable on the closing of the
public offering. The balance of Dr. Lohrding's options will vest on November
30, 2002, subject to the following early vesting criteria:
1. 150,000 options will vest and become exercisable thirty days after the
end of any quarter in which we report pre-tax income of at least
$50,000; and
2. 150,000 options will vest and become exercisable upon reporting our
first fiscal year with net income of at least $500,000.
The foregoing option is exercisable by Dr. Lohrding to purchase shares of
the Company's common stock at an exercise price of $2.0625 per share for a
period of 36 months from each respective vesting date, but in no event later
than February 2, 2003 (the "Expiration Date").
Any transactions between us and our officers, directors, principal
stockholders, or other affiliates have been, and will be, on terms no less
favorable to us than could be obtained from unaffiliated third parties on an
arms-length basis and will be approved by a majority of our independent,
disinterested directors.
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the stock
ownership of each person known by us to be the beneficial owner of five (5%)
percent or more of our common stock, all Directors individually and all
Directors and Officers as a group. Each person has sole voting and investment
power with respect to the shares shown, except as noted.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of
Title of Beneficial Beneficial Percent
Class Owner Ownership Class(1)
- ----- ---------------- ---------- --------
<S> <C> <C> <C>
Common Ronald K. Lohrding(2) 616,667 7.60%
Stock c/o Cell Robotics, Inc.
2715 Broadbent Parkway, NE
Albuquerque, NM 87107
" Craig T. Rogers(3) 133,767 1.71%
4465 Northpark Drive
Colorado Springs, CO 80907
" Mark Waller, Director(4) 215,000 2.70%
1820 North Shore Road
Lake Oswego, OR 97304
" Dr. Raymond Radosevich(5) 21,000 .27%
c/o Cell Robotics, Inc.
2715 Broadbent Parkway, NE
Albuquerque, NM 87107
" Dr. Debra Bryant(6) 12,500 .11%
c/o Cell Robotics, Inc.
2715 Broadbent Parkway, NE
Albuquerque, NM 87107
" Ron E. Ainsworth (7) 0 0%
c/o Cell Robotics, Inc.
2715 Broadbent Parkway, NE
Albuquerque, NM 87107
" Mitsui Engineering &(8) 409,406 5.26%
Shipbuilding Company, Ltd.
405 Park Avenue, Suite 501
New York, NY 10022
" All Officers and Directors 1,178,814 13.77%
as a Group (9 persons)
</TABLE>
- --------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them within sixty (60) days of the date of
this Prospectus are treated as outstanding when determining the percent
of the class owned by such individual and when determining the percent
owned by the group.
(2) Includes Incentive Stock Options exercisable to purchase 150,000 shares
of common stock at an exercise price of $1.75 per share, and Incentive
Stock Options exercisable to purchase 25,000 shares of common stock at
an exercise price of $1.875 per share, issued under our 1992 Stock
Incentive Plan. Also includes Non-Qualified Stock Options exercisable
to purchase 150,000 shares of common stock at an exercise price of
$2.0625 per share, issued to Dr. Lohrding as part of our registered
public offering of securities which was declared effective by the
Commission in February, 1998 (the "Public Offering"). Does not include
Lohrding Options exercisable to purchase 300,000 shares of our common
stock issued to Dr. Lohrding in anticipation of the Public Offering
which are subject to future vesting.
(3) Mr. Rogers exercises the sole voting and investment power with respect
to 67,100 shares of common stock. Also includes 10,000 shares of common
stock owned of record by Leslie Rogers, Mr. Roger's wife. Also includes
Incentive Stock Options exercisable to purchase 56,667 shares of common
stock at an exercise price of $1.375 per share issued under our 1992
Stock Incentive Plan.
(4) Represents Non-Qualified Stock Options exercisable to purchase, in the
aggregate, 200,000 shares of common stock at $1.75 per share, and Non-
Qualified Stock Options exercisable to purchase 15,000 shares of common
stock at an exercise price of $2.81 per share. Does not include Non-
Qualified Stock Options exercisable to purchase 5,000 shares of common
stock which are subject to future vesting.
(5) Reflects Non-Qualified Stock Options exercisable to purchase 6,000
shares of common stock at an exercise price of $1.75 per share, and Non-
Qualified Stock Options exercisable to purchase 15,000 shares of common
stock at an exercise price of $2.81 per share. Does not include Non-
Qualified Stock Options exercisable to purchase 5,000 shares of common
stock which are subject to future vesting.
(6) Includes Non-Qualified Stock Options exercisable to purchase 7,500
shares of common stock at an exercise price of $3.563 per share. Does
not include Non-Qualified Stock Options exercisable to purchase 7,500
shares of common stock which are subject to future vesting.
(7) Does not include Non-Qualified Stock Options exercisable to purchase
20,000 shares of common stock which are subject to future vesting.
(8) Mitsui Engineering & Shipbuilding Company, Ltd., a Japanese corporation
("Mitsui"), is the record owner and exercises the sole power to vote and
invest 409,406 shares of our common stock.
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file at
the Commission's Public Reference Rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the Public Reference Rooms. You can also obtain copies
of our Commission filings by going to the Commission's website at
http://www.sec.gov.
We have filed with the Commission a Registration Statement on Form SB-2 to
register the shares of our common stock and common stock warrants to be sold by
the Selling Securityholders and issued pursuant to the exercise of the
warrants. This Prospectus is part of that Registration Statement and, as
permitted by the Commission's rules, does not contain all of the information
set forth in the Registration Statement. For further information about us or
our common stock, you may refer to the Registration Statement and to the
exhibits filed as part of the Registration Statement. You can review a copy
of the Registration Statement and its exhibits at the public reference rooms
maintained by the Commission and on the Commission's website as described
above.
FORWARD-LOOKING STATEMENTS
This Prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of our
industry, statements about our future business plans and strategies, and most
other statements that are not historical in nature. In this prospectus,
forward-looking statements are generally identified by the words "anticipate,"
"plan," "believe," "expect," "estimate," and the like. Although we believe
that any forward-looking statements we make in this prospectus are reasonable,
because forward-looking statements involve future risks and uncertainties,
there are factors that could cause actual results to differ materially from
those expressed or implied. For example, a few of the uncertainties that could
affect the accuracy of forward-looking statements, besides the specific factors
identified above in the Risk Factors section of this prospectus, include:
* changes in general economic and business conditions affecting our
industry;
* changes in our business strategies; and
* the level of demand for our products.
In light of the significant uncertainties inherent in the forward-looking
statements made in this Prospectus, particularly in view of our early stage of
operations, the inclusion of this information should not be regarded as a
representation by us or any other person that we will achieve our objectives
and plans.
NO SAFE HARBOR
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by certain existing public companies, does
not apply to our offerings.
SELLING SECURITYHOLDERS
The Selling Securityholders are offering to sell 332,500 shares of our
common stock and 148,750 warrants covered by this Prospectus. None of the
Selling Securityholders has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates, except as noted.
Of the securities being offered, all 332,500 shares of our common stock
and 71,250 of the warrants were sold to the Selling Securityholders in our
recently completed private offering. We issued the balance of the warrants as
compensation for services.
The following table lists the Selling Securityholders eligible to sell
shares of common stock and warrants under this Prospectus, the number of shares
beneficially owned by each Selling Securityholder prior to this Offering, and
the maximum number of shares and warrants each Selling Securityholder may sell
under this Prospectus. We will not receive any of the proceeds from the sale
of our common stock or warrants by the Selling Securityholders. The number of
shares and warrants owned by each Selling Securityholder after the Offering
will depend upon the number of shares and warrants actually sold by each
Selling Securityholder.
<TABLE>
<CAPTION>
Number of Maximum Maximum Number of
Shares Number of Number of Shares
Beneficially Shares to be Warrants Beneficially
Owned Prior Sold in to be Owned after
to Offering(1) Offering Sold Offering Percent
------------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Paulson Investment
Company, Inc.(2) 1,035,405 210,000 75,000 750,405 11.8%
Paul Bardacke (3) 100,000 70,000 30,000 -0- 0%
Thomas Pennello 42,500 35,000 7,500 -0- 0%
Scott Weber (4) 23,750 17,500 6,250 -0- 0%
GL Investment Group,
Inc. (5) 20,000 -0- 20,000 -0- 0%
Jean Ellen Canavan
(6) 2,000 -0- 10,000 2,000 nil
</TABLE>
- ----------------
(1) The number of shares indicated includes shares acquired directly from us
by the Selling Securityholders as well as shares which are issuable upon
the exercise of warrants held by the Selling Securityholders.
(2) Paulson Investment Company, Inc. is an investment banking firm that has
served as our underwriter in both of our public offerings. They have also
served as a placement agent in our private placements. For their services
as our underwriter and placement agent, we have paid to Paulson Investment
Company, Inc. various fees as well as issued to them our securities
including shares of common stock, preferred stock and warrants. Prior to
the recently completed private offering, Paulson Investment Company, Inc.
owned 165,405 shares of our common stock and warrants exercisable to
purchase an additional 585,000 shares of our common stock. It purchased
three units in the private offering, consisting of 210,000 shares of
common stock and 40,000 warrants. Of the warrants being offered, 30,000
warrants were issued to Paulson Investment Company, Inc. for services in
connection with the Company's recently completed private offering.
(3) Mr. Bardacke is an attorney who has provided services for which we have
issued to him an additional 15,000 warrants.
(4) Mr. Weber is an investment banker and broker/dealer who served as one of
our placement agents in our private placement for which we issued to him
2,500 warrants.
(5) GL Investments Group, Inc. served as one of our placement agents in our
private placement for which it received 5,000 warrants and, in addition,
it has provided for us various investment banking services for which we
have issued to it an additional 15,000 warrants.
(6) Ms. Canavan served as a placement agent in our private offering for which
she received 10,000 warrants.
We will pay all expenses to register the shares, except that the Selling
Securityholders will pay any underwriting and brokerage discounts, fees and
commissions, specified attorneys' fees and other expenses to the extent
applicable to them.
We have agreed to indemnify the Selling Securityholders and certain
affiliated parties against specified liabilities, including liabilities under
the Securities Act, as amended, in connection with this Offering. The Selling
Securityholders have agreed to indemnify us and our directors and officers, as
well as any persons controlling our Company, against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification for
liabilities under the Securities Act may be permitted to our directors or
officers, or persons controlling our Company, we have been advised that in the
opinion of the SEC this kind of indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
USE OF PROCEEDS
We will not receive any proceeds when Selling Securityholders sell shares
of common stock or warrants under this Prospectus. We have received proceeds
from the sale of the common stock and warrants and may receive proceeds from
the exercise of the warrants.
If we receive proceeds from the exercise of warrants, it will be used for
general working capital purposes.
PLAN OF DISTRIBUTION
This Prospectus covers the sale of shares of common stock pursuant to the
exercise of outstanding warrants held by the Selling Securityholders as well as
the resale by those Selling Securityholders of those warrants and additional
shares of our common stock which they have already purchased from us.
Selling Securityholders may sell their shares of common stock and warrants
either directly or through a broker-dealer or other agent at prices related to
prevailing market prices or negotiated prices, in one or more of the following
kinds of transactions:
* Transactions in the over-the-counter market;
* Transactions on a stock exchange that lists our common stock, or
transactions negotiated between Selling Securityholders and
purchasers, or otherwise.
Broker-dealers or agents may purchase shares directly from a Selling
Securityholder or sell shares and warrants to someone else on behalf of a
Selling Securityholder. Broker-dealers may charge commissions to both Selling
Securityholders selling common stock and warrants, and purchasers buying shares
and warrants sold by a Selling Securityholder. If a broker buys shares
directly from a Selling Securityholder, the broker may resell the shares and
warrants through another broker, and the other broker may receive compensation
from the Selling Securityholder for the resale.
To the extent required by laws, regulations or agreements we have made, we
will use our best efforts to file a Prospectus supplement during the time the
Selling Securityholders are offering or selling shares covered by this
Prospectus in order to add or correct important information about the plan of
distribution for the shares.
In addition to any other applicable laws or regulations, Selling
Securityholders must comply with regulations relating to distributions by
Selling Securityholders, including Regulation M under the Securities Exchange
Act of 1934, as amended.
Some states may require that registration, exemption from registration or
notification requirements be met before Selling Shareholders may sell their
common stock and warrants. Some states may also require Selling
Securityholders to sell their common stock only through broker-dealers.
DESCRIPTION OF SECURITIES
We are authorized to issue up to 12,500,000 shares of $.004 par value
common stock and up to 2,500,000 shares of $.04 par value preferred stock. As
of September 30, 1999, 7,888,591 shares of common stock and no shares of
preferred stock were issued and outstanding.
Common Stock
Each holder of our common stock is entitled to one vote for each share
held of record. There is no right to cumulative votes for the election of
directors. The shares of common stock are not entitled to pre-emptive rights
and are not subject to redemption or assessment. Each share of common stock is
entitled to share ratably in distributions to shareholders and to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. Upon liquidation, dissolution or winding up
of the Company, the holders of common stock are entitled to receive, pro rata,
our assets which are legally available for distribution to shareholders. The
issued and outstanding shares of common stock are validly issued, fully paid
and non-assessable.
Preferred Stock
We are authorized to issue up to 2,500,000 shares of $.04 par value
preferred stock. The preferred stock of the corporation can be issued in one
or more series as may be determined from time to time by our Board of Directors
without further stockholder approval. In establishing a series, our Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of shares
in such series, and the preferences, rights and restrictions thereof. All
shares of any one series shall be alike in every particular. All series shall
be alike except that there may be variation as to the following: (1) the rate
of distribution, (2) the price at and the terms and conditions on which shares
shall be redeemed, (3) the amount payable upon shares for distributions of any
kind, (4) sinking fund provisions for the redemption of shares, (5) the terms
and conditions on which shares may be converted if the shares of any series are
issued with the privilege of conversion, and (6) voting rights except as
limited by law.
Although we currently do not have any plans to designate a series of
preferred stock, there can be no assurance that we will not do so in the
future. As a result, we could authorize the issuance of a series of preferred
stock which would grant to holders preferred rights to our assets upon
liquidation, the right to receive dividend coupons before dividends would be
declared to common stockholders, and the right to the redemption to such
shares, together with a premium, prior to the redemption of common stock.
Common stockholders have no redemption rights. In addition, our Board could
issue large blocks of voting stock to fend against unwanted tender offers or
hostile takeovers without further shareholder approval.
Warrants
We have issued in the past four different sets or classes of warrants,
each of which is exercisable by the owner to purchase our securities. The
following is a summary of those different classes of warrants:
PLACEMENT AGENT'S WARRANTS. In connection with a private offering that we
did in 1995, we issued to Paulson Investment Company, Inc. warrants to purchase
11.5 private units at a price of $25,000 per unit. Each unit is comprised of
20,000 shares of our common stock and 10,000 Class A Warrants. Warrants to
purchase 6.8 units expire on August 30, 2000 and warrants exercisable to
purchase the remaining 4.7 units expire on September 18, 2000.
REPRESENTATIVE'S WARRANT. In connection with the offering that we
completed in 1998, we issued to Paulson Investment Company, Inc. which served
as our underwriter, another warrant to purchase 40,000 public units at a price
of $9.90 per unit. Each public unit now consists of four shares of our common
stock and two Public Warrants described below. The representative's warrant
expires on February 2, 2003.
CLASS A WARRANTS. In connection with our private placement in 1995, we
issued to investors in that offering Class A Warrants each exercisable to
purchase a share of our common stock at a price of $1.75 per share. The Class
A Warrants expire on December 31, 2000. In 1998, we exercised our right to
call for redemption all of the outstanding Class A Warrants because we had
registered the exercise of those warrants with the Commission and our public
trading price had been more than $3.50 per share for at least ten consecutive
trading days. As a result of a redemption call, a vast majority of the persons
holding the Class A Warrants exercised the warrants and those warrants that
were not exercised were redeemed by the Company. We currently have no Class A
Warrants outstanding; however, we may issue up to 115,000 additional Class A
Warrants in the event Paulson Investment Company, Inc. exercises its Placement
Agent's Warrant described above.
PUBLIC WARRANTS. In connection with the offering in 1998, we issued
1,157,576 public warrants, each exercisable to purchase a share of our common
stock at $2.40 per share. The public warrants expire on February 2, 2003. We
have the right to call the public warrants for redemption in the event our
public stock price equals or exceeds $4.80 per share for at least ten
consecutive trading days and we have in effect a current registration statement
covering the exercise of the warrants. In such event, holders of the public
warrant will have a 30 day notice period in which to exercise the warrants, and
any warrants not exercised will be redeemed by us at a redemption price of $.25
per warrant. The warrants covered by this Prospectus which are owned by the
Selling Securityholders are the same class of warrants as the public warrants.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Corporate Stock
Transfer, Inc., Denver, Colorado.
Reports to Shareholders
We intend to furnish annual reports to shareholders which will include
audited financial statements reported on by our certified public accountants.
In addition, we may issue unaudited quarterly or other interim reports to
shareholders as we deem appropriate. We will comply with the periodic
reporting requirements imposed by the Securities Exchange Act of 1934.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Neuman & Drennen, LLC of Boulder, Colorado. Clifford L.
Neuman, a partner in the firm of Neuman & Drennen, LLC, is the beneficial owner
of 12,150 shares of the Company's common stock.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997,
and for each of the years in the two year period ended December 31, 1998, have
been included herein in reliance on the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of that firm as experts in auditing and accounting.
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
This index relates to the consolidated financial statements set forth in
this Prospectus of Cell Robotics International, Inc.
Independent Auditors' Report of KPMG LLP F-2
Audited Consolidated Financial Statements for
Fiscal Year Ended December 31, 1998 and 1997
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Unaudited Consolidated Financial Statements for
Periods Ending June 30, 1999 and December 31, 1998
Consolidated Balance Sheets F-18
Consolidated Statements of Operations for the Three
Months ended June 30, 1999 and June 30, 1998 F-19
Consolidated Statements of Operations for the Six
Months ended June 30, 1999 and June 30, 1998 F-20
Consolidated Statements of Cash Flows F-21
Notes to Consolidated Financial Statements F-22
<PAGE>
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Cell Robotics International, Inc.
We have audited the accompanying consolidated balance sheets of Cell Robotics
International, Inc. and subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cell Robotics
International, Inc. and subsidiary as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Albuquerque, New Mexico
March 24, 1999
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,375,575 $ 623,572
Accounts receivable, net of allowance
for doubtful accounts of $1,841 in 1998
and 1997 246,573 223,856
Inventory 526,249 586,033
Other 123,271 36,089
------------ -----------
Total current assets 2,271,668 1,469,550
Property and equipment, net (note 3) 272,894 194,654
Deferred offering costs (note 9) 0 248,372
Other assets, net (note 4) 38,490 67,271
------------ -----------
Total assets $ 2,583,052 $ 1,979,847
============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 327,686 $ 603,153
Payroll related liabilities 144,188 149,726
Royalties payable 33,510 193,150
Other current liabilities 27,945 88,941
------------ -----------
Total current liabilities 533,329 1,034,970
Short-term loan refinanced subsequent to
balance sheet date (note 9) 0 500,000
------------ -----------
Total liabilities 533,329 1,534,970
------------ -----------
Stockholders' equity (notes 5 and 9):
Preferred stock, $.04 par value. Authorized
2,500,000 shares, 465,533 and zero shares
issued and outstanding at December 31,
1998 and 1997, respectively 18,622 0
Common stock, $.004 par value.
Authorized 12,500,000 shares, 5,739,248
and 5,245,414 shares issued and
outstanding at December 31, 1998
and 1997, respectively 22,957 20,982
Additional paid-in capital 17,916,565 14,037,243
Accumulated deficit (15,908,421) (13,613,348)
------------ -----------
Total stockholders' equity 2,049,723 444,877
------------ -----------
Commitments (notes 6 and8) $ 2,583,052 $ 1,979,847
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Product sales $ 1,249,703 $ 879,490
Research and development grants 179,298 158,233
------------ ------------
Total revenues 1,429,001 1,037,723
------------ ------------
Product cost of goods sold (848,240) (599,153)
SBIR direct expenses (179,298) (159,052)
------------ ------------
Total cost of goods sold (1,027,538) (758,205)
------------ ------------
Gross profit 401,463 279,518
------------ ------------
Operating expenses:
General and administrative 810,809 681,554
Marketing & Sales 609,288 868,812
Research and development 849,166 1,245,125
------------ ------------
Total operating expenses 2,269,263 2,795,491
Loss from operations (1,867,800) (2,515,973)
------------ ------------
Other income (deductions):
Interest income 85,429 32,004
Interest expense (975) (723)
Other 0 11,800
------------ ------------
Total other income 84,454 43,081
------------ ------------
Net loss (1,783,346) (2,472,892)
------------ ------------
Preferred stock dividends (274,227) 0
------------ ------------
Net loss applicable to common shareholders $ (2,057,573) $ (2,472,892)
============ ============
Weighted average common shares
outstanding, basic and diluted 5,278,347 5,100,032
============ ============
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.39) $ (0.48)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- ------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ --------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996 - $ - 5,003,414 $ 20,014 $13,327,672 $(11,140,456)
Issuance of shares at $3.25,
Less costs of offering - - 200,000 800 629,700 -
Exercise of stock options - - 42,000 168 79,871 -
Net loss for 1997 - - - - - (2,472,892)
-------- ------- -------- ------- ---------- -----------
Balance at December 31,
1997 - - 5,245,414 20,982 14,037,243 (13,613,348)
Issuance of units at $8.25,
less costs of offering 460,000 18,400 - - 3,009,104 -
Exchange of outstanding
common shares for units 78,788 3,152 (200,000) (800) 235,148 (237,500)
Options issued for services - - - - 60,688 -
Conversion of series A
preferred stock (73,255) (2,930) 293,020 1,172 1,758 -
Stock dividend paid on
series A preferred stock - - 200,614 803 273,424 (274,227)
Issuance of shares at $1.50 - - 200,000 800 299,200 -
Net loss for 1998 - (1,783,346)
--------- -------- --------- -------- ------------ ------------
Balance at December 31,
1998 465,533 $ 18,622 5,739,248 $ 22,957 $17,916,565 $(15,908,421)
======== ========= ========== ========= ============ =============
</TABLE>
See accompanying notes to consolidated financial
statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,783,346) $(2,472,892)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 115,242 119,914
Amortization of options issued
for service 53,409 0
Increase in accounts receivable (22,717) (154,011)
Decrease(increase) in inventory 59,784 (177,860)
Increase in other current assets (79,903) (16,968)
Increase (decrease) in accounts
payable and payroll related
liabilities (57,633) 239,751
Increase (decrease) in other current
liabilities and royalties payable (220,636) 208,125
----------- -----------
Net cash used in operating activities (1,935,800) (2,253,941)
------------ -----------
Cash flows from investing activities -
purchase of property and equipment (164,701) (32,697)
------------ -----------
Cash flows from financing activities:
Proceeds from sale of units, net of
offering costs 3,052,504 0
Proceeds from (repayment of) loans (500,000) 500,000
Proceeds from issuance of common stock 300,000 730,039
Costs of offering common stock 0 (19,500)
Deferred offering costs 0 (25,000)
------------ ----------
Net cash provided by financing
activities 2,852,504 1,185,539
------------ ----------
Net increase (decrease) in cash and
cash equivalents: 752,003 (1,101,099)
Cash and cash equivalents:
Beginning of year 623,572 1,724,671
------------ ----------
End of year $1,375,575 $ 623,572
============= ===========
Supplemental information:
Stock options issued in exchange
for services $ 60,688 $ 0
============= ===========
Exchange of common stock for units $ 237,500 $ 0
============= ===========
Stock dividends on Series A
Preferred Stock $ 274,227 $ 0
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) Business and Activities
The Company has developed and is manufacturing and marketing a series of
laser-based medical devices with applications in the blood sample and glucose
collection and in vitro fertilization markets. Currently, the Company also
develops, produces and markets a line of advanced scientific instruments which
increase the usefulness and importance of the conventional laboratory
microscope. The Company markets its scientific instruments in both domestic and
international markets. In 1998, approximately 61 percent of the Company's
product sales were in the United States, with Germany, Asia, Australia, and
Canada being the Company's principal international markets. The Company's
customers consist primarily of research institutes, universities, fertility
clinics, and distributors.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of Cell
Robotics International, Inc. and its wholly owned subsidiary (the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(b) Financial Statement Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all short-term investments with original maturities of three months or less to
be cash equivalents.
(d) Inventory
Inventory is recorded at the lower of cost, determined by the first-
in, first-out method, or market. Inventory at December 31 consists of the
following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Finished goods $ 3,003 $40,452
Parts and components 394,215 443,424
Sub-assemblies 129,031 102,157
--------- ---------
$526,249 $586,033
========= =========
</TABLE>
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
on a straight-line basis over the estimated useful lives of the assets, which
range from five to seven years. Leasehold improvements are amortized over the
life of the lease.
(f) Earnings Per Share
Basic loss per share is computed on the basis of the weighted average
number of common shares outstanding during the year. Diluted loss per share
which is computed on the basis of the weighted average number of common shares
and all potentially dilutive common shares outstanding during the year, is the
same as basic loss per share for 1998 and 1997, as all potentially dilutive
securities were anti-dilutive.
Options to purchase 1,631,820 and 1,000,905 shares of common stock
were outstanding at December 31, 1998 and 1997, respectively. Additionally,
warrants to purchase 1,662,576 and 345,000 shares of common stock were
outstanding at December 31, 1998 and 1997, respectively. These were not
included in the computation of diluted earnings per share as the exercise of
these options and warrants would have been anti-dilutive because of the net
losses incurred in 1998 and 1997.
(g) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, royalties payable, accrued liabilities and short-
term loan in the consolidated financial statements approximate fair value
because of the short-term maturity of these instruments.
(h) Income Taxes
The Company follows the asset and liability method for accounting for
income taxes whereby deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities.
(i) Revenue
The Company recognizes revenue on sales of its products when the
products are shipped from the plant and ownership is transferred to the
customer.
(j) Research and Development
Research and development costs related to both present and future
products are expensed as incurred. Research and development costs consist
primarily of salaries, materials and supplies.
(k) Warranties
The Company warrants their products against defects in materials and
workmanship for one year. The warranty reserve is reviewed periodically and
adjusted based upon the Company's historical warranty costs and its estimate of
future costs.
(l) Stock Option Plan
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of
the underlying stock exceeds the exercise price. SFAS No. 123, "Accounting for
Stock Based Compensation," permits entities to recognize as an expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995
and future years as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
(m) Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income." The Company adopted the provisions
of SFAS No. 130 during 1998. The Company had no items of other comprehensive
income during 1998 and 1997.
(n) Reclassification
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
(3) Property and Equipment
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Furniture and fixtures $ 9,279 $ 8,028
Computers 344,059 320,572
Equipment 517,843 378,691
Leasehold improvements 48,961 48,150
--------- ---------
920,142 755,441
Accumulated depreciation (647,248) (560,787)
--------- ---------
Net property and equipment $272,894 $194,654
========= =========
</TABLE>
(4) Other Assets
Other assets consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Software development costs $ 59,019 $59,019
Patents 48,246 48,246
Noncompete agreements 8,116 8,116
--------- ---------
115,381 115,381
Accumulated amortization (76,891) (48,110)
--------- ---------
Net other assets $ 38,490 $67,271
========= =========
</TABLE>
During 1998 and 1997, the Company recorded $21,247 and $17,706
respectively, of software development costs amortization as cost of goods sold.
(5) Stock Options and Warrants
(a) Stock Options
The Company has adopted a Stock Incentive Plan (the Plan) pursuant to
which the Company's Board of Directors may grant to eligible participants
options in the form of Incentive Stock Options (ISO's) under Section 422 of the
Internal Revenue Code of 1986, as amended, or options which do not qualify as
ISO's (Non-Qualified Stock Options or NQSO's). An aggregate of 1,500,000 shares
of the Company's common stock is reserved for issuance under the Plan.
Generally, stock options granted under the Plan have five-year terms and become
fully exercisable after three or four years from the date of grant. Following
is a summary of activity in the Company's options for employees, directors,
outside consultants, and technical advisors:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1998 1997
--------------------------------------
Weighted- Weighted-
average average
exercise exercise
price Number price Number
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year $2.03 1,000,905 $1.91 885,826
Issued 2.11 745,000 2.59 175,174
Exercised - - 1.91 (42,000)
Forfeited 2.50 (75,000) 2.22 (18,095)
Expired 1.78 (39,085) - -
Repriced 2.16 (500,850) - -
Repriced 1.38 500,850 - -
Outstanding at end of year $1.81 1,631,820 $2.03 1,000,905
Exercisable at end of year $1.72 994,595 $1.83 696,856
</TABLE>
The following summarizes certain information regarding outstanding stock
options at December 31, 1998:
<TABLE>
<CAPTION>
Total Exercisable
------------------------------- ---------------------
Weighted-
Weighted- average Weighted-
average remaining average
Exercise exercise contractual exercise
price Number price life (years) price Number
---------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.000 35,000 $ 1.60 4.7 $ 1.00 35,000
1.375 505,850 1.375 3.2 1.375 321,958
1.750 433,970 1.750 3.1 1.750 428,970
1.875 25,000 1.875 3.0 1.875 16,667
2.000 40,000 2.000 4.7 2.000 -
2.063 450,000 2.063 4.5 2.063 150,000
2.500 75,000 2.500 4.7 2.500 -
2.810 46,000 2.810 2.3 2.810 32,250
3.563 21,000 3.563 2.8 3.563 9,750
Total 1,631,820 $ 1.81 3.6 $ 1.720 994,595
</TABLE>
During 1998, the Company granted 675,000 options outside of the Plan,
for the purchase of the Company's common stock to an officer and providers of
investment relations services for the Company. Such options are included in the
above table. Of the options, 450,000 options were issued to an officer, of
which 150,000 options vested in 1998 upon the closing of the offering described
in Note 9, and the remaining 300,000 options vest on November 30, 2002,
provided, however, (i) 150,000 options will vest and become exercisable thirty
days after any quarter in which the Company reports pre-tax income of at least
$50,000; and (ii) 150,000 options will 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. The remaining
options of 225,000 were issued to providers of investment relation services, of
which 75,000 options had been forfeited by December 31, 1998. The remaining
150,000 options vest upon the occurrence of certain events and performance of
measure being achieved, and the fair value of these performance based options
will be measured upon vesting and be charged to operations at such time.
At December 31, 1998, there were 416,180 additional shares available
for grant under the Plan. The fair value of stock options granted and modified
during 1998 and 1997 was $403,428 and $257,594, respectively, on the date of
grant or amendment using the Black Scholes option-pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Expected dividend yield 0.0% 0.0%
Risk-free interest rate 4.767% 6.5%
Expected life of option 4 years 4 years
Expected volatility 75.2% 75.2%
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation cost has been recognized for its employee
stock options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the date of grant for
its employee stock options under SFAS No. 123, the Company's net loss would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Reported net loss applicable
to common shareholders $(2,057,573) $(2,472,892)
Pro forma net loss applicable
to common shareholders (2,461,001) (2,671,309)
Pro forma net loss per share
applicable to common
shareholders - basic and
diluted $ (.47) $ (.52)
============ ============
</TABLE>
(b) Warrants
The Company has a Placement Agent's Warrant outstanding that was
granted to an underwriter. The Placement Agent's Warrant is exercisable through
September 30, 2000 to acquire up to 11.5 private units at a price of $25,000
per unit. Each unit consists of 20,000 shares of the Company's common stock.
The Placement Agent's Warrant also includes 115,000 Class A Common Stock
Purchase Warrants exercisable through December 31, 2000 to purchase115,000
shares of common stock for a price of $1.75 per share.
The Company also has a Representative's Warrant outstanding that was
granted to the same underwriter. The Representative's Warrant is exercisable
through February 2, 2002 to purchase 160,000 shares of common stock at a price
of $2.35 per share. The Representative's Warrant also includes 80,000 Common
Stock Purchase Warrants exercisable through February 2, 2003 to purchase 80,000
shares of common stock for a price of $2.40 per share.
Finally, in conjunction with the Offering completed in February 1998,
and the exchange of common shares for Units in February 1998, the Company has
an additional 1,077,576 warrants outstanding exercisable through February 2,
2003 to purchase 1,077,576 shares of common stock for a price of $2.40 per
share.
The board of directors and stockholders have approved an Employee
Stock Purchase Plan (ESPP). As of December 31, 1998 and 1997, no shares of
common stock have been issued under the ESPP and there have been no
subscriptions of employees to participate in the ESPP.
(6) Royalty Agreements
The Company is party to several royalty agreements under which it must
make payments to the original holders of patents on components used in its
products. Such royalties, equal to 1 to 2 percent of the net sales of the
products containing patented components, are generally due upon sale of the
products.
Additionally, one royalty agreement requires a royalty payment equal to 7
percent of revenue generated from sales of the Company's products and pertains
to the Company's worldwide, non-exclusive license agreement which continues
until March 31, 2016. Beginning with the year 1999, the minimum royalty payable
each year is $35,000 payable as follows: $17,500 sixty days after the end of
each semiannual period ending June 30th and December 31st.
(7) Income Taxes
No provision for federal or state income tax expense has been recorded due
to the Company's losses. The Company has net operating loss carryforwards and
temporary differences that give rise to the following deferred tax assets and
liabilities:
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry- forwards $4,825,000 $4,118,000
Inventory capitalization 97,000 197,000
Vacation and sick leave payable 30,000 28,000
Allowance for doubtful accounts - 625
Depreciation 18,000 -
Accrued expenses 48,000 -
------------ ------------
5,018,000 4,343,625
Less valuation allowance (4,986,000) (4,318,625)
------------ ------------
Net deferred tax asset $ 32,000 25,000
============ ============
Deferred tax liabilities:
Amortization $ 32,000 8,000
Depreciation - 17,000
------------ ------------
Net deferred income taxes $ - -
============ ============
</TABLE>
The net deferred taxes have been fully offset by a valuation allowance
since the Company cannot currently conclude that it is more likely than not
that the benefits will be realized. The net operating loss carryforward for
income tax purposes of approximately $14,000,000 expires beginning in 2006
through 2018. Ownership changes resulting from the Company's reorganization in
1995 will limit the use of this net operating loss under applicable Internal
Revenue Service regulations.
(8) Commitments
The Company is obligated under a noncancellable operating lease for
building facilities which is subject to 3 percent annual increases and expires
on November 30, 2002. Rent expense for 1998 and 1997 was $105,987 and $106,893,
respectively. Minimum annual lease commitments for all building facilities at
December 31, 1998 are: $99,129 for 1999; $102,162 for 2000; $105,195 for 2001;
and $98,977 for 2002.
(9) Equity Transactions
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 each exercisable to acquire one share of common stock at an
exercise price of $2.40 per share (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. The Unit Price of $8.25 per Unit was based on the
public trading price of the four shares of Common Stock issuable upon
conversion of the Preferred Stock, which, on the effective date of the
Registration Statement, was $1.938 per share, or $7.75, with each Warrant being
valued at $0.25 per Warrant, resulting in the Unit price of $8.25. The value of
each Warrant was determined by the underwriter and was based on the difference
between the public trading price of four shares of Common Stock on the Friday
preceding the effective date of the Registration Statement, which was $7.75,
resulting in a Warrant value of $0.25 each. 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 was convertible at any time at the option of the
holder. The Preferred Stock converted automatically upon the earlier of
February 2001 or the date upon which the sum of the closing bid prices of the
Preferred Stock and the Warrants included in the Units had been at least
$12.375 for ten consecutive trading dates (See Note 11) The Preferred Stock had
a liquidation preference of $8.25 per share and was 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 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.
In September 1998, the Company sold 200,000 shares of common stock for
$300,000 to Chronimed, Inc. This investment by Chronimed was made as part of
the exclusive distribution agreement entered into by the companies in August
1998. In March 1999, the Company shipped prototypes of the Personal Lasette to
Chronimed. As part of the exclusive distribution agreement, Chronimed is
obligated to make an additional $150,000 investment in the Company upon
acceptance of the prototypes. An additional equity investment of $150,000 could
be made based on the Company meeting certain future conditions.
(10) Capital Resources
Since inception, the Company has incurred operating losses and other
equity charges which have resulted in an accumulated deficit of $15,908,421 and
operations using net cash of $1,935,800 in 1998.
The Company's ability to improve cash flow and ultimately achieve
profitability will depend on its ability to significantly increase sales.
Accordingly, the Company is manufacturing and marketing a series of laser-based
medical devices which leverage the Company's existing base of patented
technology. The Company believes the markets for these new products are broader
than that of the scientific instrumentation market and, as such, offer a
greater opportunity to significantly increased sales. In addition, the Company
is pursuing development and marketing partners for several of its new medical
products. These partnerships will enhance the Company's ability to rapidly
ramp-up its marketing and distribution strategy, and possibly offset the
products' development costs.
Although the Company has begun manufacturing and marketing its laser-based
medical devices and continues to market its scientific instrument line, it does
not anticipate achieving profitable operations during fiscal 1999. As a result,
the Company's working capital surplus is expected to erode over the next twelve
months. Nevertheless, the Company expects that its present working capital
surplus, increased sales, and the proceeds from the Chronimed stock purchase
and commitment will be sufficient to cover its expected operational deficits
through 1999.
(11) Subsequent Events
In January 1999, the Preferred Stock automatically converted when the sum
of the closing bid prices of the Preferred Stock and two Warrants, which were
included in the Units sold in February 1998, reached $12.375 for ten
consecutive trading dates.
As a result of the automatic conversion of the Preferred Stock in January,
an additional 25,000 options exercisable at $2.00 vested. These options were
issued by the Company during 1998 to obtain an investor relations services
contract. In connection with this service contract, in March 1999, an
additional 15,000 options exercisable at $2.00 vested as a result of continued
representation beyond the initial six month contract term.
Finally, in March 1999, the Company shipped prototypes of the Personal
Lasette to Chronimed. On delivery Chronimed will make an additional $150,000
equity investment in the Company, which will represent the second of three
equity investments that Chronimed could make in the Company as part of the
exclusive distribution agreement entered into by the companies in August 1998.
(12) Operating segments
The Company has two operating segments: scientific research instruments
and laser-based medical devices. The scientific research instruments segment
produces research instruments for sale to universities, research institutes,
and distributors. The laser-based medical devices segment produces medical
devices for sale to fertility clinics and to distributors.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates segment
performance based on profit or loss from operations prior to the consideration
of unallocated corporate general and administration costs. The Company does
not have intersegment sales or transfers.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business utilizes different technologies and marketing strategies.
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $895,993 353,710 - 1,249,703
Research and develop-
ment grants 179,298 - - 179,298
Profit (loss) from
operations 226,921 (1,311,430) (783,291) (1,867,800)
Segment assets 465,564 307,258 1,804,230 2,583,052
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from customers 879,490 - - 879,490
Research and develop-
ment grants 158,233 - - 158,233
Loss from operations (124,376)(1,713,075) (678,522) (2,515,973)
Segment assets 223,856 - 1,755,991 1,979,847
</TABLE>
Segment assets for scientific research instruments and laser-based medical
devices represent accounts receivable and inventory. The remaining assets are
not allocated among the segments, as there is no practical method to allocate
those assets between the segments.
The Company has no foreign operations. However, total export sales,
primarily to Germany, Asia, Australia, and Canada were $490, 892 and $410,483
for the years ended December 31, 1998 and 1997, respectively. Export sales are
attributed to the country where the product is shipped. Sales revenue to
individual customers, each of which accounted for 10 percent or more of total
sales, are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Customer A, a related party - 112,000
Customer B - 114,623
Customer C - 125,941
Customer D - 93,100
Customer E, a related party 234,800 -
Customer F 195,518 -
</TABLE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of As of
6-30-99 12-31-98
(UNAUDITED)
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 671,730 $ 1,375,575
Accounts receivable, net of allowance
for doubtful accounts of $1,841
in 1999 and 1998 360,574 246,573
Inventory 603,969 526,249
Other 99,812 123,271
------------ ------------
Total current assets 1,736,085 2,271,668
Property and equipment, net 432,299 272,894
Other assets, net 31,354 38,490
------------ ------------
Total assets $ 2,199,738 $ 2,583,052
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 474,572 $ 327,686
Payroll related liabilities 147,496 144,188
Royalties payable 67,431 33,510
Other current liabilities 91,177 27,945
Total current liabilities 780,676 533,329
------------ ------------
Stockholders' equity:
Preferred stock, $.04 par value.
Authorized 2,500,000 shares, zero
shares and 465,533 shares issued
and outstanding at June 30, 1999
and December 31, 1998, respectively 0 18,622
Common stock, $.004 par value.
Authorized 12,500,000 shares,
7,884,591 and 5,739,248 shares
issued and outstanding at June 30,
1999 and December 31, 1998,
respectively 31,538 22,957
Additional paid-in capital 18,662,701 17,916,565
Accumulated deficit (17,275,177) (15,908,421)
------------ ------------
Total stockholders' equity 1,419,062 2,049,723
------------ ------------
$ 2,199,738 $ 2,583,052
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
UNAUDITED
Three Months Ended
--------------------------
June 30, 1999 June 30, 1998
------------ ------------
<S> <C> <C>
Product sales $ 568,540 $ 244,375
Research and development grants 32,084 83,243
Total revenues 600,624 327,618
------------ ------------
Product cost of goods sold (417,388) (160,093)
SBIR direct expenses (32,084) (83,243)
------------ ------------
Total cost of goods sold (449,472) (243,336)
------------ ------------
Gross profit 151,152 84,282
------------ ------------
Operating expenses:
General and administrative 217,376 216,951
Marketing & Sales 234,938 201,090
Research and development 132,616 219,748
------------ ------------
Total operating expenses 584,930 637,789
------------ ------------
Loss from operations (433,778) (553,507)
------------ ------------
Other income (deductions):
Interest income 4,662 26,889
Interest expense (91) (340)
------------ ------------
Total other income 4,571 26,549
------------ ------------
Net loss (429,207) (526,958)
Preferred stock dividends (0) (0)
------------ ------------
Net loss applicable to
common shareholders $(429,207) $ (526,958)
============ ============
Weighted average common shares
outstanding, basic and diluted 7,803,264 5,089,147
============ ============
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.06) $ (0.10)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
UNAUDITED
Six Months Ended
---------------------------
June 30, 1999 June 30, 1998
------------ ------------
<S> <C> <C>
Product sales $ 1,065,549 $ 658,650
Research and development grants 51,231 125,062
------------ ------------
Total revenues 1,116,780 783,712
------------ ------------
Product cost of goods sold (755,289) (382,532)
SBIR direct expenses (51,231) (125,062)
------------ ------------
Total cost of goods sold (806,520) (507,594)
------------ ------------
Gross profit 310,260 276,118
------------ ------------
Operating expenses:
General and administrative 551,665 429,606
Marketing & Sales 371,340 358,078
Research and development 253,648 355,512
------------ ------------
Total operating expenses 1,176,653 1,143,196
------------ ------------
Loss from operations (866,393) (867,078)
------------ ------------
Other income (deductions):
Interest income 15,057 45,816
Interest expense (140) (408)
------------ ------------
Total other income 14,917 45,408
------------ ------------
Net loss (851,476) (821,670)
------------ ------------
Preferred stock dividends (515,280) (0)
Net loss applicable to
common shareholders $(1,366,756) $ (821,670)
============ ============
Weighted average common shares
outstanding, basic and diluted 7,245,733 5,192,434
============ ============
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.19) $ (0.16)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
UNAUDITED
Six Months Ended
---------------------------
June 30, 1999 June 30, 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (851,476) $ (821,670)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 41,275 62,866
Amortization of options issued for
services 7,279 31,081
Options issued for services 70,815 0
Increase in accounts receivable (114,001) (119,430)
Decrease (increase) in inventory (77,720) 24,767
Decrease (increase) in other current
assets 16,180 (31,562)
Increase (decrease) in current
liabilities 247,347 (190,727)
------------ ------------
Net cash used in operating
activities (660,301) (1,044,675)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (193,544) (35,653)
------------ ------------
Net cash used in investing activities (193,544) (35,653)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common
stock 150,000 0
Proceeds from sale of units, net of
offering costs 0 3,052,504
Repayment of short term loan 0 (500,000)
------------ ------------
Net cash provided by financing
activities 150,000 2,552,504
------------ ------------
Net increase (decrease) in cash and
cash equivalents: (703,845) 1,472,176
Cash and cash equivalents:
Beginning of period 1,375,575 623,572
End of period $ 671,730 $ 2,095,748
============ ============
Supplemental information:
Exchange of Units for common stock --
increase to accumulated deficit 0 237,500
Options issued for services to be
rendered 0 46,621
Issuance of preferred dividend $ 515,280 $ 0
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Notes to Unaudited Consolidated Financial Statements
June 30, 1999
(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 Company's financial position,
results of operations and cash flows. 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) in a
registered offering to the public. Each Unit consisted of one share of Series
A Convertible Preferred Stock (the "Preferred Stock"), convertible into four
common shares, and two common stock purchase warrants each exercisable to
acquire one share of common stock at an exercise price of $2.40 per share (the
"Warrants"). Each Unit was sold at a price to the public of $8.25 resulting in
gross proceeds of $3,795,000. The Unit Price of $8.25 per Unit was based on the
public trading price of the four shares of Common Stock issuable upon
conversion of the Preferred Stock, which, on the effective date of the
Registration Statement, was $1.938 per share, or $7.75, with each Warrant being
valued at $0.25 per Warrant, resulting in the Unit price of $8.25. The value of
each Warrant was determined by the underwriter and was based on the difference
between the public trading price of four shares of Common Stock on the Friday
preceding the effective date of the Registration Statement, which was $7.75,
resulting in a Warrant value of $0.25 each. After consideration of the
Underwriter's commission and discount and other offering costs, net proceeds to
the Company were approximately $3.0 million.
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 February 1998, the Company allowed a principal shareholder who acquired
200,000 shares of Common Stock in August 1997 for $600,000 to exchange these
shares for 78,788 Units. In connection therewith, a charge to accumulated
deficit of $237,500 was recognized.
In September 1998, the Company sold 200,000 shares of Common Stock for
$300,000 to Chronimed, Inc. This investment was made as part of the exclusive
distribution agreement entered into by the companies and Chronimed in August
1998 (the "Chronimed Agreement"). In March 1999, the Company shipped
prototypes of the Personal Lasette to Chronimed. Pursuant to the terms of the
Chronimed Agreement, Chronimed was obligated to make an additional $150,000
investment in the Company upon acceptance of the prototypes. This transaction
was completed on June 14, 1999. The final equity investment of $150,000 could
be made based on the Company meeting certain future conditions.
In January 1999, the Company's Preferred Stock automatically converted
into shares of Common Stock, when the sum of closing bid prices of the
Preferred Stock and two Warrants was at least $12.375 for ten consecutive days.
Due to the automatic conversion, a final dividend in the form of 183,211 shares
of the Company's Common Stock was accrued and subsequently paid with the
issuance of shares of Common Stock to all preferred shareholders of record on
February 2, 1999.
In July 1999, the Company completed a private placement with four
investors. The Company sold 9.5 units, each unit consisting of 35,000 shares of
common stock and 7,500 common stock purchase warrants each exercisable to
acquire one share of common stock at an exercise price of $2.40 per share. Each
unit was sold at a price of $50,000, resulting in gross proceeds of $475,000.
After consideration of the offering costs, net proceeds to the Company were
approximately $460,000.
(3) Earnings Per Share
Basic loss per share is computed on the basis of the weighted average
number of common shares outstanding during the quarter. Diluted loss per
share, is the same as basic loss per share for the periods ended June 30, 1999
and 1998, as all potentially dilutive securities were anti-dilutive.
Options to purchase 1,270,320 and 1,172,820 shares of common stock were
outstanding at June 30, 1999 and 1998, respectively. Warrants to purchase
1,762,576 shares of common stock were outstanding at both June 30, 1999 and
1998. These were not included in the computation of diluted earnings per share
as the exercise of the options would have been anti-dilutive because of the net
losses incurred in the periods ended June 30, 1999 and 1998.
(4) Operating segments
The Company has two operating segments: scientific research instruments
and laser-based medical devices. The scientific research instruments segment
produces research instruments for sale to universities, research institutes,
and distributors. The laser-based medical devices segment produces medical
devices for sale to fertility clinics and to distributors.
The Company evaluates segment performance based on profit or loss from
operations prior to the consideration of unallocated corporate general and
administration costs. The Company does not have intersegment sales or
transfers.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business utilizes different technologies and marketing strategies.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
----------------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues from customers $556,244 509,305 - 1,065,549
Research and develop-
ment grants 51,231 - - 51,231
Profit (loss) from
operations 86,764 (411,490) (541,667) (866,393)
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
----------------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues from customers $578,726 79,924 - 658,650
Research and develop-
ment grants 125,062 - - 125,062
Profit (loss) from
operations 88,950 (547,456) (408,572) (867,078)
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1999
----------------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues from customers $347,620 220,920 - 568,540
Research and develop-
ment grants 32,084 - - 32,084
Profit (loss) from
operations 34,295 (212,050) (256,023) (433,778)
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1998
----------------------------------------------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues from customers $237,975 6,400 - 244,375
Research and develop-
ment grants 83,243 - - 83,243
Profit (loss) from
operations 32,349 (383,205) (202,651) (553,507)
</TABLE>
(5) Capital Resources
Although the Company has begun manufacturing and marketing its laser-based
medical devices and continues to see market growth in its scientific instrument
line, it does not anticipate achieving profitable operation until some time in
2000. As a result, the Company's working capital surplus is expected to erode
over the next twelve months. Nevertheless, the Company expects that its
present working capital, potential increased future product sales, the
remaining equity investment per the Chronimed Agreement, the July 1999 private
placement, and a possible supplemental equity, line of credit or debt financing
will be sufficient to meet the Company's operational obligations through fiscal
1999.
<PAGE>
<PAGE>
- ----------------------------------------------------------------------------
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. This Prospectus is not an offer to sell common
stock and is not soliciting an offer to buy common stock in any state where the
offer or sale is not permitted.
Cell Robotics International, Inc.
481,250 Shares of Common Stock
148,750 Warrants
October ___, 1999
- ----------------------------------------------------------------------------
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur
in his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. Definitions. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan. A director is considered to be serving an employee
benefit plan at the corporation's request if his or her duties to the
corporation also impose duties on, or otherwise involve services by,
the director to the plan or to participants in or beneficiaries of
the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.
(5) "Official capacity" means, when used with respect to a director,
the office of director in a corporation and, when used with respect
to a person other than a director as contemplated in section 7-109-
107, the office in a corporation held by the officer or the
employment, fiduciary, or agency relationship undertaken by the
employee, fiduciary, or agent on behalf of the corporation.
"Official capacity" does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred in
the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed to be in the interests
of the participants in or beneficiaries of the plan is conduct that
satisfies the requirement of subparagraph (II) of paragraph (b) of
subsection (1) of this section. A director's conduct with respect to
an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the
requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(5) Indemnification permitted under this section in connection with
a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors. Unless limited
by its articles of incorporation, a corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the
person is or was a director, against reasonable expenses incurred by
him or her in connection with the proceeding.
7-109-104. Advance of expenses to directors.
(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or she has
met the standard of conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that he or she did
not meet the standard of conduct; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under
this article.
(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to
financial ability to make repayment.
(3) Determinations and authorizations of payments under this section
shall be made in the manner specified in section 7-109-106.
7-109-105. Court-ordered indemnification of directors.
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonable
entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of
conduct set forth in section 7-109-102 (1) or was adjudged liable in
the circumstances described in section 7-109-102 (4), the court may
order such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section 7-
109-102 (4) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain court-
ordered indemnification.
7-109-106. Determination and authorization of indemnification of
directors.
(1) A corporation may not indemnify a director under section 7-109-
102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct
set forth in section 7-109-102. A corporation shall not advance
expenses to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and undertaking
required by section 7-109-104 (1) (a) and (1) (b) are received and
the determination required by section 7-109-104 (1) (c) has been
made.
(2) The determinations required by subsection (1) of this section
shall be made:
(a) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for
the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section,
or, even if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee
so directs, the determination required to be made by subsection (1)
of this section shall be made:
(a) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in paragraph
(a) or (b) of subsection (2) of this section or, if a quorum of the
full board cannot be obtained and a committee cannot be established,
by independent legal counsel selected by a majority vote of the full
board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall
be made in the same manner as the determination that indemnification
or advance of expenses is permissible; except that, if the
determination that indemnification or advance of expenses is
permissible is made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the body
that selected such counsel.
7-109-107. Indemnification of officers, employees, fiduciaries, and
agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the same
extent as to a director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a
greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board
of directors or shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while a
director, officer, employee, fiduciary, or agent of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by
the board of directors, whether such insurance company is formed
under the laws of this state or any other jurisdiction of the United
States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock
ownership or otherwise.
7-109-109. Limitation of indemnification of directors.
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles
of incorporation or bylaws, in a resolution of its shareholders or
board of directors, or in a contract, except an insurance policy, or
otherwise, is valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If the article of
incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.
7-109-110. Notice to shareholder of indemnification of director. If
a corporation indemnifies or advances expenses to a director under
this article in connection with a proceeding by or in the right of
the corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or
before the time the first shareholder signs a writing consenting to
such action.
* * *
Article XIII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 1. A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent
that such exemption from liability or limitation thereof is
not permitted under the Colorado Corporation Code as the same
exists or may hereafter be amended.
Section 2. Any repeal or modification of the foregoing Section 1 by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing
at the time of such repeal or modification.
Article XII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 2. Indemnification of Officers, Directors and Others.
(a) All officers and directors of the Corporation shall be
entitled to indemnification to the maximum extent permitted by
law or by public policy.
(b) Any mandate for indemnification, whether by statute or
order of Court, is to be expressly subject to the
Corporation's reasonable capability of paying.
(c) No person will be entitled to be reimbursed for
expenses incurred in connection with a Court proceeding to
obtain Court ordered indemnification unless such person first
made reasonable application to the Corporation and the
Corporation either unreasonably denied such application or
through no fault of the applicant was unable to consider such
application within a reasonable time.
(d) A director who is or was made a party to a proceeding
because he is or was an officer, employee, or agent of the
Corporation is entitled to the same rights as if he were or
had been made a party because he was a director.
(e) To the maximum extent permitted by law or by public
policy, directors of this Corporation are to have no personal
liability for monetary damages for breach of fiduciary duty as
a director.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne by
the Company, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee $ 322
Printing Expenses 1,500
Accounting Fees and Expenses 7,500
Legal Fees and Expenses 15,000
Blue Sky Fees and Expenses 2,500
Registrar and Transfer Agent Fee 500
Miscellaneous 2,678
--------
Total $30,000
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
1. On September 11, 1998, we sold to one investor 200,000
shares of our common stock at a price of $1.50 per share,
for gross proceeds of $300,000. The investor qualified as
an "accredited investor" within the meaning of Rule 501(a)
of Regulation D under the Securities Act. The securities,
which were taken for investment and were subject to
appropriate transfer restrictions, were issued without
registration under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act.
2. In June, 1999, we sold an additional 100,000 shares of
common stock at a price of $1.50 per share, for gross
proceeds of $150,000. The investor was an "accredited
investor" within the meaning of Rule 501(a) of Regulation D
under the Securities Act. The securities, which were taken
for investment and were subject to appropriate transfer
restrictions, were issued without registration under the
Securities Act, in reliance upon the exemption provided in
Section 4(2) of the Securities Act.
3. In July, 1999, we sold to four investors a total of 9.5
units, each unit consisting of 35,000 shares of our common
stock and 7,500 warrants. Each unit was sold at a price of
$50,000, resulting in gross proceeds of $475,000. The
investors were persons who qualified as "accredited
investors" within the meaning of Rule 501(a) of Regulation
D under the Securities Act. The securities, which were
taken for investment and were subject to appropriate
transfer restrictions, were issued without registration
under the Securities Act in reliance upon the exemption
provided in Section 4(2) of the Securities Act and Rule 506
of Regulation D thereunder.
4. In July, 1999, in connection with our sale to four
investors of 9.5 units, we issued 62,500 warrants to four
persons for services rendered in connection with the
offering. The services were valued at $.40625 per warrant.
The persons receiving the warrants were all qualified
investors in terms of their investment sophistication or
"accredited investors" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities,
which were taken for investment and were subject to
appropriate transfer restrictions, were issued without
registration under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act
and Rule 506 of Regulation D thereunder.
5. In August, 1999, we issued to one person 15,000 warrants in
consideration of services rendered. We valued the services
at $.40625 per warrant. The warrants were issued to one
person who qualified as an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities
Act. The securities, which were taken for investment and
were subject to appropriate transfer restrictions, were
issued without registration under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
Item 27. Exhibits.
a. The following Exhibits are filed as part of this
Registration Statement pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
- ---------- -----
** 3.2 Amended and Restated Bylaws
*** 3.3(a) Amended and Restated Articles of Incorporation
** 3.3(b) Amended and Restated Articles of Incorporation dated May 23,
1995
** 4.1 Specimen Certificate of Common Stock
*****4.2 Representatives' Common Stock Purchase Warrant
**** 4.3 Warrant Agreement
**** 4.3.1 Warrant Agreement (revised)
*****4.4 Lohrding Option Agreement
*****4.5 Certificate of Designation of Rights and Preferences of
Series A Convertible Preferred Stock
*****4.6 Specimen Certificate of Series A Preferred Stock
*****4.7 Specimen Unit Certificate
*****4.8 Specimen Common Stock Purchase Warrant Certificate
* 10.1 Agreement and Plan of Reorganization between and among Cell
Robotics, Inc., Intelligent Financial Corporation, MiCel,
Inc., BridgeWorks Investors I, L.L.C., and Ronald K.
Lohrding
* 10.2 Employment Agreement of Ronald K. Lohrding
* 10.3 Employment Agreement of Craig T. Rogers
**** 10.4 Employment Agreement of Travis Lee
* 10.5 Financing and Capital Contribution Agreement between and
among Cell Robotics, Inc., Intelligent Financial
Corporation, MiCel, Inc., and BridgeWorks Investors I,
L.L.C.
* 10.6 Irrevocable Appointment of Voting Rights by Dr. Lohrding to
MiCel, Inc.
* 10.7 Stock Pooling and Voting Agreement
** 10.8 Royalty Agreement dated September 11, 1995 between the
Registrant, Cell Robotics, Inc., and Mitsui Engineering &
Shipbuilding Co., Ltd.
** 10.9 Agreement of Contribution and Mutual Comprehensive Release
dated September 11, 1995 between the Company, Cell Robotics,
Inc. and Mitsui Engineering & Shipbuilding Co., Ltd.
** 10.10 Distribution Agreement dated April 6, 1995, between Carl
Zeiss, Inc. and the Registrant
** 10.11 Distribution Agreement dated December 15, 1994, between
MiCel, Inc. and the Registrant
** 10.12 Revised License Agreement dated January 5, 1996 between the
Registrant and the Regents of the University of California
** 10.13 Purchase Agreement with Tecnal Products, Inc.
** 10.14 License Agreement with NTEC
*** 10.15 License Agreement dated May 13, 1996, between the Registrant
and GEM Edwards, Inc.
*****10.16 Termination Agreement and Release between the Registrant and
GEM Edwards, Inc.
****
*** 10.17 Employment Agreement of Dr. Ronald K. Lohrding dated
February 2, 1998
****
** 10.18 Patent License Agreement between American Telephone and
Telegraph Company and Cell Robotics, Inc.
****
** 10.19 Amendment to AT&T License Agreement
****
** 10.20 Manufacturing Agreement between Big Sky Laser Technologies,
Inc. and Cell Robotics International, Inc. dated May 20,
1998.
** 21.0 Subsidiaries
23.1 Consent of Neuman & Drennen, LLC
23.2 Consent of KPMG LLP
- ---------------------
* Incorporated by reference from the Registrant's Current Report on Form 8-K
dated February 23, 1995, as filed with the Commission on March 10, 1995.
** Incorporated by reference from the Registrant's Pre-Effective Amendment
No. 1 to Registration Statement on Form SB-2, which was declared effective
by the Commission on February 14, 1996.
*** Incorporated by reference from the Registrant's Post-Effective Amendment
No. 1 to Registration Statement on Form SB-2, filed with the Commission on
July 15, 1996.
**** Incorporated by reference from the Company's Annual Report on Form 10-KSB,
for the fiscal year ended December 31, 1996, as filed with the Commission
on April 15, 1997.
***
** Incorporated by reference from the Company's Pre-Effective Amendment No. 2
to Registration Statement on Form SB-2 which was declared effective by the
Commission on February 2, 1998, SEC File No. 333-40895.
****
** Incorporated by reference from the Company's Pre-Effective Amendment No. 2
to Registration Statement on Form S-3, SEC File No. 333-55951, as filed
with the Commission on November 18, 1998
****
*** Incorporated by reference from the Company's Annual Report on Form 10-
KSB/A-1, for the fiscal year ended December 31, 1997, as filed with the
Commission on September 8, 1998
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement;
(iii) Include any additional or changed material information on
the plan of distribution.
2. That, for determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred and paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized. In the City of Albuquerque, State of New Mexico, on the 18th of
October, 1999.
CELL ROBOTICS INTERNATIONAL, INC.,
a Colorado corporation
By:/s/ Ronald K. Lohrding
---------------------------------
Ronald K. Lohrding, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with Cell Robotics International, Inc. and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Ronald K. Lohrding President, CEO, Director 10/18/99
- ------------------------------
Ronald K. Lohrding
/s/ Jean M. Scharf Chief Financial Officer, 10/18/99
- ------------------------------ Controller
Jean M. Scharf
/s/ Craig T. Rogers Secretary, Director 10/18/99
- ------------------------------ Vice President of
Craig T. Rogers Investor Relations
/s/ Mark Waller Director 10/18/99
- ------------------------------
Mark Waller
/s/ Raymond Radosevich Director 10/18/99
- ------------------------------
Raymond Radosevich
/s/ Debra Bryant Director 10/18/99
- ------------------------------
Debra Bryant
/s/ Ron E. Ainsworth Director 10/18/99
- ------------------------------
Ron E. Ainsworth
<PAGE>
NEUMAN & DRENNEN, LLC
Attorneys at Law
TEMPLE-BOWRON HOUSE
1507 PINE STREET
BOULDER, COLORADO 80302
Telephone: (303) 449-2100
Facsimile: (303) 449-1045
October 18, 1999
Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to Cell Robotics International, Inc. (the
"Company") in connection with Registration Statement on Form SB-2 (the
"Registration Statement") to be filed with the United Stated Securities and
Exchange Commission, Washington, D.C., pursuant to the Securities Act of 1933,
as amended, covering the registration of an aggregate of 481,250 shares of
Common Stock, $.004 par value ("Common Stock") and 148,750 Common Stock
warrants. In connection with such representation of the Company, we have
examined such corporate records, and have made such inquiry of government
officials and Company officials and have made such examination of the law as
we deemed appropriate in connection with delivering this opinion.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws of
the State of Colorado and is validly existing as a corporation in good
standing under the laws of that state.
2. The Company's authorized capital consists of twelve million five hundred
thousand (12,500,000) shares of Common Stock having a par value of $0.004
each and two million five hundred thousand (2,500,000) shares of
Preferred Stock having a par value of $.04 each.
3. The 481,250 shares of the Company's Common Stock being registered for
sale and offered to the public by the Company as more fully described in
the Registration Statement are lawfully and validly issued, fully paid
and non-assessable securities of the Company.
4. The 148,750 shares of the Company's Warrants being registered for sale
and offered to the public by the Selling Shareholders as more fully
described in the Registration Statement, are duly and validly authorized,
legally issued, fully paid and non-assessable.
Sincerely,
Clifford L. Neuman
CLN:gg
<PAGE>
NEUMAN & DRENNEN, LLC
Attorneys at Law
TEMPLE-BOWRON HOUSE
1507 PINE STREET
BOULDER, COLORADO 80302
Telephone: (303) 449-2100
Facsimile: (303) 449-1045
October 18, 1999
Cell Robotics International, Inc.
2715 Broadbent Parkway, N.E.
Albuquerque, New Mexico 87107
Re: S.E.C. Registration Statement on Form SB-2
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Registration Statement to be filed
with the United Stated Securities and Exchange Commission, Washington, D.C.,
pursuant to the Securities Act of 1933, as amended, by Cell Robotics
International, Inc., a Colorado corporation, (the "Company") in connection
with the offering of up to 481,250 shares of its Common Stock, $.004 par
value, and up to 148,750 Common Stock Warrants, as proposed and more fully
described in such Registration Statement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
Clifford L. Neuman
CLN:gg
<PAGE>
KPMG LLP
6565 Americas Parkway, N.E.
Suite 700
Albuquerque, New Mexico 87190
telephone: (505) 884-3939
facsimile: (505) 884-8348
The Board of Directors
Cell Robotics International, Inc.
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
Albuquerque, New Mexico
October 13, 1999
