<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to ______
Commission file number: 0-27840
CELL ROBOTICS INTERNATIONAL, INC.
-------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1153295
- ------------------------------- --------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
2715 Broadbent Parkway N.E., Albuquerque, New Mexico 87107
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 343-1131
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ x ] No [
]
As of March 31, 1999, 7,784,591 shares of Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1999 (unaudited) and
December 31, 1998 (audited)
Consolidated Statement of Operations for the Three Months ended
March 31, 1999 and March 31, 1998 (unaudited)
Consolidated Statement of Cash Flows for the Three months ended
March 31, 1999 and March 31, 1998 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements contained in this
report have been prepared by Cell Robotics International, Inc. ("Cell" or the
"Company") and, in the opinion of management, reflect all material adjustments
which are necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods presented. Such
adjustments consisted only of normal recurring items. Certain information and
footnote disclosure made in the Company's last annual report on Form 10-KSB
have been condensed or omitted for the interim statements. These statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 1998. The results of the interim periods are not necessarily
indicative of results which may be expected for any other interim period or
for the full year.
Forward-Looking Statements
- --------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of the Company. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of As of
3-31-99 12-31-98
------------ ------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 732,633 $ 1,375,575
Accounts receivable, net of allowance for
doubtful accounts of $1,841 in 1999 and
1998 357,609 246,573
Inventory 574,038 526,249
Other 147,567 123,271
------------ ------------
Total current assets 1,811,847 2,271,668
Property and equipment, net 404,593 272,894
Other assets, net 26,662 38,490
------------ ------------
Total assets $ 2,243,102 $ 2,583,052
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 382,964 $ 327,686
Payroll related liabilities 112,066 144,188
Royalties payable 46,660 33,510
Other current liabilities 3,143 27,945
------------ ------------
Total current liabilities 544,833 533,329
------------ ------------
Stockholders' equity:
Preferred stock, $.04 par value. Authorized
2,500,000 shares, no shares and 465,533
shares issued and outstanding at March 31,
1999 and December 31, 1998, respectively 0 18,622
Common stock, $.004 par value. Authorized
12,500,000 shares, 7,784,591 and 5,739,248
shares issued and outstanding at March 31,
1999 and December 31, 1998, respectively 31,138 22,957
Additional paid-in capital 18,512,369 17,916,565
Accumulated deficit (16,845,238) (15,908,421)
------------ ------------
Total stockholders' equity 1,698,269 2,049,723
------------ ------------
$ 2,243,102 $ 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
March 31, 1999 March 31, 1998
------------ ------------
<S> <C> <C>
Product sales $ 497,009 $ 414,275
Research and development grants 19,147 41,819
------------ ------------
Total revenues 516,156 456,094
------------ ------------
Product cost of goods sold (337,900) (222,439)
SBIR direct expenses (19,147) (41,819)0
------------ ------------
Total cost of goods sold (357,047) (264,258)
------------ ------------
Gross profit 159,109 191,836
------------ ------------
Operating expenses:
General and administrative 334,290 209,081
Marketing & Sales 136,402 153,896
Research and development 121,032 142,430
------------ ------------
Total operating expenses 591,724 505,407
------------ ------------
Loss from operations (432,615) (313,571)
------------ ------------
Other income (deductions):
Interest income 10,395 18,927
Interest expense (49) (68)
------------ ------------
Total other income 10,346 18,859
------------ ------------
Net loss (422,269) (294,712)
------------ ------------
Preferred stock dividends (514,548) (0)
------------ ------------
Net loss applicable to common shareholders $ (936,817) (294,712)
============ ============
Weighted average common shares
outstanding, basic and diluted 6,681,998 5,125,414
============ ============
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.14) $ (0.06)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
UNAUDITED
Three Months Ended
March 31, 1999 March 31, 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (422,269) $ (294,712)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 28,163 31,767
Amortization of options issued for services 7,279 46,621
Options issued for services 70,815 0
Increase in accounts receivable (111,036) (253,930)
Decrease (increase) in inventory (47,789) 51,020
Increase in other current assets (31,575) (33,815)
Increase (decrease) in current liabilities 11,504 (126,031)
------------ ------------
Net cash used in operating activities (494,908) (579,062)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (148,034) (6,678)
------------ ------------
Net cash used by investing activities (148,034) (6,678)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of units, net of offering
costs 0 3,054,068
Repayment of short term loan 0 (500,000)
------------ ------------
Net cash provided by financing activities 0 2,554,068
------------ ------------
Net increase (decrease) in cash and cash
equivalents: (642,942) 1,968,328
Cash and cash equivalents:
Beginning of period 1,375,575 623,572
------------ ------------
End of period $ 732,633 $ 2,591,900
============ ============
Supplemental information:
Exchange of Units for common stock --
increase to accumulated deficit $ 0 $ 237,500
Issuance of preferred dividend $ 514,548 $ 0
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Notes to Unaudited Consolidated Financial Statements
March 31, 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), 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.
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 such 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 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.
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 for all preferred shareholders of
record on February 2, 1999.
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, which is computed on the basis of the weighted average number of common
shares and all potentially dilutive common shares outstanding during the
quarter, is the same as basic loss per share for the quarters ended March 31,
1999 and 1998, as all potentially dilutive securities were anti-dilutive.
Options to purchase 1,631,820 and 1,270,905 shares of common stock were
outstanding at March 31, 1999 and 1998, respectively. Warrants to purchase
1,662,576 and 345,000 shares of common stock were outstanding at March 31,
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 quarters ended March 31, 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.
5. Capital Resources
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 operation until the fourth quarter
of 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, increased product sales, the two
remaining equity investments per the Chronimed stock purchase agreement, and a
supplemental equity or line of credit financing will be sufficient to meet the
Company's operational obligations through fiscal 1999.
Operating Segments
<TABLE>
<CAPTION>
March 31, 1999
--------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $ 208,624 $ 288,385 $ - $ 497,009
Research and development
grants 19,147 - - 19,147
Profit (loss) from
operations 61,377 (163,306) (330,686) (432,615)
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998
--------------
Scientific Laser-Based
Research Medical
Instruments Devices Corporate Total
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $ 340,751 $ 73,524 $ - 414,703
Research and development
grants 41,819 - - 41,819
Profit (loss) from
operations 93,775 (213,470) (193,875) (313,571)
</TABLE>
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 report.
Liquidity and Capital Resources -- March 31, 1999 compared to December 31, 1998
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. See Note 2 of the
Notes to Unaudited Consolidated Financial Statements.
On July 30, 1998, the Company signed an agreement with Chronimed, Inc.
("the Chronimed Agreement") for worldwide distribution of its Lasette 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 devices ("Lasette I") during year one, and a
minimum of 5,000 second generation Lasette devices ("Lasette II" more fully
defined below) during year two, subject to certain adjustments. The Chronimed
Agreement also requires Chronimed to make a capital investment in the Company
consisting of a staged purchase of $600,000 of the Company's common stock,
contingent upon achievement of certain milestones related to the development,
by the Company, of the Lasette II device. Chronimed's capital investment will
be used for the development of the second generation Personal Lasette , a
smaller Lasette 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 product will
achieve market acceptance.
In accordance with the terms and conditions of the Chronimed Agreement,
Chronimed made its first equity investment in the Company on September 11,
1998. The $300,000 investment was made in the form of a stock purchase of
200,000 shares of the Company's common stock. 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. The
final equity investment of $150,000 could be made based on the Company meeting
certain future conditions set forth in the Chronimed Agreement.
The Company's current ratio at December 31, 1998, was 4.3:1, compared to
a current ratio of 3.3:1 on March 31, 1999. This decrease in liquidity is
primarily due to the use of capital raised from the Offering and Chronimed,
Inc. stock issuance to fund the Company's ongoing operating expenses. Total
assets decreased from $2,583,052 at December 31, 1998 to $2,243,102 at March
31, 1999, an decrease of $339,950, or 13.2%.
The decrease in the Company's current assets of $459,821, or 20.2%, was
driven by the use of cash to fund the Company's operating expenses. As a
result, cash and cash equivalents decreased $642,942, or 46.7%. Due to
increased sales during the three month period ended March 31, 1999, product
inventories were increased $47,789, or 9.1%, in preparation of future product
deliveries. Other current assets also increased from $123,271 to $147,567 an
increase of 19.7%, due primarily to vendor required deposits for specialized
inventory.
Property and equipment, net, increased $131,699, or 48.3%, due primarily
to deposits for and purchase of product tooling and molding, while other
assets decreased from $38,490 to $26,662, a decrease of $11,828 or 30.7%.
During the three month period ended March 31, 1999, the Company's total
liabilities increased from $533,329 to $544,833, or 2.2%. This increase was
primarily due to vendor and royalty expenses. The Company did not have any
long term liabilities at March 31, 1999.
The Company's working capital decreased from $1,738,339 at December 31,
1998 to $1,267,014 at March 31, 1999, a decrease of $471,325, due primarily to
the use of cash for continued operating expenses.
Cash used in operations for the three month periods ended March 31, 1999
and March 31, 1998 was $494,909 and $579,062, respectively. The primary
reason for the decrease in cash used in operations during this period, as
compared to the prior period, was an improvement in sales and accounts
receivable collection, offset by a slight increase in operating expenses and
inventory.
The Company expects that cash used in operating activities will continue
at the current level through the remainder of 1999. The timing of the
Company's future capital requirements, however, cannot accurately be
predicted. The Company's capital requirements depend upon numerous factors,
including, most notably, the market acceptance of its new laser-based medical
devices. If capital requirements vary materially from those currently
planned, the Company may require additional financing, including, but not
limited to, the sale of equity or debt securities. The Company is currently
reviewing a proposed term sheet for additional equity financing; however,
there can be no assurance that this commitment can be obtained. Any additional
equity financing may be dilutive to the Company's existing stockholders and
debt financing, if available, may involve pledging some or all of the
Company's assets and may contain restrictive covenants with respect to raising
future capital and other financial and operational matters. The Company is
currently in discussion with a local financial institution regarding a
commercial line of credit. At this time, the Company does not have available
other sources of capital to satisfy its cash requirements until revenues from
operations can be realized through future product sales. If the Company is
unable to obtain additional financing as needed, the Company may be required
to reduce the scope of its operations, which could have a material adverse
effect upon the Company's business, financial condition and results of
operation. The Company anticipates that its current working capital, increased
product sales, the two remaining equity investments per the Chronimed
Agreement and a supplemental equity, line of credit or a small debt financing
will be sufficient to meet the Company's operational obligations through
fiscal 1999.
Other than the foregoing, management knows of no other trend, or other
demands, commitments, events or uncertainties that will result in, or that are
reasonably likely to result in, a material impact on the liquidity and capital
resources of the Company.
Results of Operations - Three months ended March 31, 1999 compared to the
three months ended March 31, 1998
The Company's total revenue increased $60,062, or 13.2% to $516,156 from
$456,094 for the three month periods ended March 31, 1999 and 1998,
respectively. Revenues from the sale of products during the three months
ended March 31, 1999, were $497,009, as compared to $414,275 during the
comparable period in 1998. This represents an increase in sales of 20.0%.
However, gross margin realized on product sales during this period declined
from 46.3% in 1998, to 32.0% during 1999.
The Company also recognized $19,147 of revenue from "Small Business
Innovative Research" (SBIR) grants during the three months ended March 31,
1999. These SBIR grants have been issued by the National Institutes of Health
(NIH), an agency of the U.S. Department of Health and Human Services. The
highly competitive grants provide financial assistance for approved tasks of
high-risk research that can lead to future products for small businesses.
Normally, awards do not exceed $750,000 for a period ordinarily not to exceed
two years. The Company's current Phase II grant is scheduled to expire on
September 30, 1999. Additional Phase II grant applications will be submitted
to continue research efforts initiated under previously awarded Phase I
grants.
The Company's loss from operations incurred during the three months ended
March 31, 1999, was $432,615, as compared to an operating loss of $313,571
incurred during the same period in 1998. Total operating expenses increased
$86,317, or 17.1%, from $505,407 to $591,724. Research and development type
expenses decreased $21,398 or 15.0%. General and administrative expenses
increased $125,210, or 59.9%, reflecting an increase in legal, accounting,
investor relations and insurance fees. Marketing and sales expenses decreased
11.4%, or $17,494, primarily due to a negotiated distribution agreements which
has decreased out-of-pocket expenses associated with international travel and
advertising.
During the three months ended March 31, 1999 other income and expenses
decreased from a $18,859 net contribution to income during the period in 1998,
to a $10,346 net contribution to income during the period in 1999.
As a result of the foregoing, the Company's net loss for the three months
ended March 31, 1999 was $422,269, as compared to a net loss of $294,712
incurred during the comparable period of 1998. Based on the foregoing, and
after including the payment of preferred stock dividends of $514,548, net loss
applicable to the common shareholders was $936,817 for the three months ended
March 31, 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 $0.14 loss per weighted average
outstanding share during the first three months of 1999, compared to a $0.06
loss per weighted average outstanding share during the first three months of
1998. See Note 2 of Notes to Unaudited Consolidated Financial Statements for
a discussion of conversion of Preferred Stock in the first quarter of 1999.
Other than the foregoing, management knows of no trends, or other
demands, commitments, events or uncertainties that will result in, or are
reasonably likely to result in, a material impact on the Company's results of
operations.
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 the Company's 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 its
suppliers and customers.
THE COMPANY'S STATE OF READINESS. The Company has instituted a Year 2000
Project. As part of the Company's Year 2000 Project, the Company has completed
its initial evaluation of current computer systems, software and embedded
technologies. The evaluation revealed that the Company's network hardware and
operating system, voice mail system, e-mail system, and accounting and
manufacturing software are the major resources that do have 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.
The Company's network and network operating system has been replaced. The
e-mail system and accounting and manufacturing software has been installed and
implementation has begun. The Company's voice mail system is scheduled to be
replaced during the fourth quarter of 1999. All other relevant programs,
including Microsoft Windows95(-Registered Mark-) operating system, are
scheduled for upgrade by the end of June 1999.
The Company has determined that there should be no Year 2000 Issues for
the products it has 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 the
Company's Workstation products will be notified about Microsoft Windows95(-
Registered Mark-) and problems will be addressed as incurred.
As part of the Company's Year 2000 Project, the Company has also
contacted its significant suppliers, product distributors, and large customers
to determine the extent to which the Company is vulnerable to those third
parties' failure to remediate their Year 2000 compliance issues. To date,
approximately seventy two percent (72%) of the suppliers contacted have
responded, and of those responding, fifty four percent (54%) have indicated
that they have remediated their Year 2000 compliance issues. Of the
distributors and large customers contacted, approximately thirty three percent
(33%) have responded and of those, eighty percent (80%) 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 the Company's business relies will be timely converted or
that failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company and its operations.
THE COSTS TO ADDRESS THE COMPANY'S 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 the Company has spent approximately $2,000
for the Year 2000 Project. Management expects that completion of its Year 2000
Project may result in additional expenditures of approximately $23,000.
THE RISKS ASSOCIATED WITH THE COMPANY'S YEAR 2000 ISSUES. The Company's
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 the Company's business relies to timely remediate their Year
2000 Issues could result in disruptions in the Company's supply of parts and
materials, late, missed or unapplied payments, temporary disruptions in order
processing and other general problems related to the Company's daily
operations. While the Company believes its Year 2000 Project will adequately
address the Company's internal Year 2000 issues, until the Company receives
responses from a more significant number of the Company's suppliers, product
distributors, and customers, the overall risks associated with the Year 2000
Issue remain difficult to accurately describe and quantify, and there can be
no guarantee that the Year 2000 Issue will not have a material adverse effect
on the Company and its operations.
THE COMPANY'S CONTINGENCY PLAN. The Company has not, to date, developed
and implemented a Year 2000 contingency plan. It is the Company's goal to have
the major Year 2000 Issues resolved by the end of the second quarter of fiscal
1999. As part of the Company's Year 2000 Project, the Company plans to retain
the services of an outside consultant to verify and validate the Company's
Year 2000 compliance. Final Year 2000 verification and validation is scheduled
to occur by the end of September 1999. The Company will develop and implement
a contingency plan at that time should it appear the Company's Year 2000
Project has not been satisfactorily completed and/or successful.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998, in October 1997, Transmedica, Inc. (formerly
"Venisect") commenced a patent infringement action (the "Venisect Litigation")
in which it claimed the Lasette(-TM-) infringed the United States patent
underlying Transmedica's competitive skin perforator. In March, 1998, the
United States District Court for the Eastern District of Arkansas (the
"Court") subsequently dismissed the Venisect Litigation, without prejudice,
due to lack of personal jurisdiction and improper venue. This ruling was
appealed by Transmedica in the United States Court of Appeals for the Federal
Circuit in Washington, D.C. However, on December 1, 1998, Transmedica withdrew
their appeal. The Court's ruling and Transmedica's withdrawal of their appeal
of this ruling does not prevent Transmedica from re-filing in a proper
jurisdiction at a later date. The Company has investigated the Transmedica
patent with its advisors, and believes that no basis for any infringement
claim exists. Accordingly, while there can be no assurance regarding any
future litigation, the Company does not believe that any future Transmedica
litigation will have a material adverse effect upon the Company's business,
results of operations or financial condition.
Item 2. Change in Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CELL ROBOTICS INTERNATIONAL, INC.
Dated: May 14, 1999 By: /s/ Ronald K. Lohrding
-------------- -------------------------------
Ronald K. Lohrding, President & CEO
Dated: May 14, 1999 By: /s/ Jean M. Scharf
-------------- -------------------------------
Jean M. Scharf, Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 4 AND 5 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 732,633
<SECURITIES> 0
<RECEIVABLES> 359,450
<ALLOWANCES> (1,841)
<INVENTORY> 574,038
<CURRENT-ASSETS> 1,811,847
<PP&E> 1,068,176
<DEPRECIATION> (663,583)
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<CURRENT-LIABILITIES> 544,833
<BONDS> 0
0
0
<COMMON> 31,138
<OTHER-SE> 1,667,131
<TOTAL-LIABILITY-AND-EQUITY> 2,243,102
<SALES> 497,009
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