<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 June 30, 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 June 30, 1999, 7,884,591 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 Sheets at June 30, 1999 (unaudited) and
December 31, 1998 (audited)
Consolidated Statements of Operations for the Three Months ended
June 30, 1999 and June 30, 1998 (unaudited)
Consolidated Statements of Operations for the Six Months ended June
30, 1999 and June 30, 1998 (unaudited)
Consolidated Statements of Cash Flows for the Six Months ended June
30, 1999 and June 30, 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
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 development
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 development
grants 125,062 - - 125,062
Profit (loss) from
operations 88,950 (547,456) (408,572) (867,078)
</TABLE>
<TABLE>
<CAPTION>
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 development
grants 32,084 - - 32,084
Profit (loss) from
operations 34,295 (212,050) (256,023) (433,778)
</TABLE>
<TABLE>
<CAPTION>
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 development
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.
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 -- June 30, 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), in a
registered offering to the public (the "Offering"). 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. 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(-
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 devices ("Lasette
I") during year one, and a minimum of 5,000 second generation Lasette devices
("Lasette II" more fully described 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 Lasette
II, 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 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 set forth in the Chronimed Agreement.
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.
The Company's 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 the Company's 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 the Company's current assets of $535,583, or 23.6%, was
driven by the use of cash to fund the Company's 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, the Company's 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. The Company did not have any long term liabilities at June 30, 1999.
The Company's 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.
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 the market demand for the new medical products is either greater
or less than currently expected, the Company may require additional capital.
Additional financing may include, but is not limited to, the sale of equity or
debt securities. In addition, the Company is currently in discussion with a
financial institution regarding a commercial line of credit. Until revenues
from operations can be realized through future product sales, the Company may
not have other sources of capital available to satisfy its cash requirements.
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, 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 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 June 30, 1999 compared to the three
months ended June 30, 1998
- ------------------------------------------------------------------------
The Company's total revenue increased $273,006, or 83.3% to $600,624 from
$327,618 for the three month period ended June 30, 1999 and 1998,
respectively. Revenues from the sale of products during the three months
ended June 30, 1999, were $568,540, as compared to $244,375 during the
comparable period in 1998. This represents an increase in product sales of
132.7%. However, gross margin realized on product sales during this period
declined from 34.5% in 1998, to 26.6% during 1999. This reduction is due
primarily to the fact that the Company's margin associated with the laser-
based medical devices introduced into the Company's product mix is lower than
the Company's margin on its scientific research instruments.
The Company also recognized $32,084 of revenue from "Small Business
Innovative Research" (SBIR) grants during the three months ended June 30,
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. 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
June 30, 1999, was $433,778, as compared to an operating loss of $553,507
incurred during the same period in 1998. Total operating expenses decreased
$52,859, or 8.3%, from $637,789 to $584,930. Research and development expenses
decreased $87,132 or 39.7% due primarily to new products moving through final
design into manufacturing. General and administrative expenses slightly
increased by 0.2%. Marketing and sales expenses increased 16.8%, or $33,848
due to increased promotion and travel expenses associated with the scientific
research instrument segment.
During the three months ended June 30, 1999 other income and expenses
decreased from a $26,549 net contribution to income during the period in 1998,
to a $4,571 net contribution to income during the period in 1999.
As a result of the foregoing, the Company's net loss applicable to the
common shareholders for the three months ended June 30, 1999 was $429,207, as
compared to a net loss of $526,958 incurred during the comparable period of
1998. On a per share basis, this amounts to a $0.06 loss per weighted average
outstanding share during the three month period ended June 30, 1999, compared
to a $0.10 loss per weighted average outstanding share during the same period
of 1998.
Other than the foregoing, management knows of no trends, or other
demands, commitments, events or uncertainties that will result in, or are
reasonably likely to result in, a material impact on the Company's results of
operations.
Results of Operations -- Six months ended June 30, 1999 compared to the six
months ended June 30, 1998
- --------------------------------------------------------------------------
The Company's 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 the Company's product mix.
The Company also recognized $51,231 of revenue from "Small Business
Innovative Research" (SBIR) grants during the six months ended June 30, 1999.
The Company's 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, the Company's 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. 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 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 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.
The Company's network, network operating system, e-mail system and
accounting and manufacturing software have either been replaced or upgraded to
Y2K compliant versions. The Company's voice mail system is scheduled to be
replaced during the fourth quarter of 1999. The company 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.
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 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 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 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 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 $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 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, even though the Company has
received responses from a significant number of the Company's suppliers,
product distributors, and customers, 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. 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, excluding the voice-mail system that is not scheduled to be replaced
until fourth quarter. The Company is 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 the Company and the
Company's ability to build its products and deliver services to its customers.
While the contingency plans will address issues under the Company's control,
an infrastructure problem outside of its 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>
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(-Registered Mark-) 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>
<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: 8/13/99 By: /s/ Ronald K. Lohrding
------- ------------------------------
Ronald K. Lohrding, President & CEO
Dated: 8/13/99 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 CONDSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 671,730
<SECURITIES> 0
<RECEIVABLES> 362,415
<ALLOWANCES> 1,841
<INVENTORY> 603,969
<CURRENT-ASSETS> 1,736,085
<PP&E> 466,438
<DEPRECIATION> 34,139
<TOTAL-ASSETS> 2,199,738
<CURRENT-LIABILITIES> 780,676
<BONDS> 0
0
0
<COMMON> 31,538
<OTHER-SE> 1,419,062
<TOTAL-LIABILITY-AND-EQUITY> 2,199,738
<SALES> 1,065,549
<TOTAL-REVENUES> 1,116,780
<CGS> 755,289
<TOTAL-COSTS> 806,520
<OTHER-EXPENSES> 1,176,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> (851,476)
<INCOME-TAX> 0
<INCOME-CONTINUING> (851,476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (851,476)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
