<PAGE> 1
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 September 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number: 0-27840
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CELL ROBOTICS INTERNATIONAL, INC.
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(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
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(Address of principal executive offices) (Zip Code)
Issuer'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 November 10, 2000, 9,965,644 shares of Common Stock of the Issuer were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE> 2
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2000
(unaudited) and December 31, 1999 4
Consolidated Statements of Operations for the Three Months
ended September 30, 2000 and September 30, 1999
(unaudited) 5
Consolidated Statements of Operations for the Nine Months
ended September 30, 2000 and September 30, 1999
(unaudited) 6
Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 2000 and September 30, 1999
(unaudited) 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements contained in
this report have been prepared by Cell Robotics International, Inc. (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
disclosures 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, 1999. 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 report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The words "believe,"
"expect," "anticipate," and other similar expressions generally identify
forward-looking statements. 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, changes in regulations, the
adequacy of our capital resources to fund future operations, anticipated
development of our products, and anticipated sources of future revenue, the
risks discussed herein and from time to time in the Company's other reports to
the Securities and Exchange Commission ("SEC"), including the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999, 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
SEC.
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CELL ROBOTICS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,003,068 $ 358,379
Accounts receivable, net of allowance for
doubtful accounts of $1,841 and $23,841
in 2000 and 1999, respectively 266,144 206,278
Inventory 1,073,362 897,971
Other 72,919 36,543
------------ ------------
Total current assets 3,415,493 1,499,171
Property and equipment, net 479,119 485,556
Other assets, net 25,316 28,939
------------ ------------
Total assets $ 3,919,928 $ 2,013,666
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 265,301 $ 684,403
Note payable 250,000 --
Payroll related liabilities 176,078 116,617
Royalties and commissions payable 66,882 67,519
Other current liabilities 517,648 40,294
------------ ------------
Total current liabilities 1,275,909 908,833
------------ ------------
Note payable -- 250,000
Total liabilities 1,275,909 1,158,833
------------ ------------
Stockholders' equity:
Preferred stock, $.04 par value. Authorized
2,500,000 shares, zero shares issued
and outstanding at September 30, 2000
and December 31, 1999 0 0
Common stock, $.004 par value. Authorized
50,000,000 shares, 9,965,644 and 8,244,121 shares
issued and outstanding at September 30, 2000
and December 31, 1999, respectively 39,863 32,976
Additional paid-in capital 25,026,032 19,154,908
Accumulated deficit (22,421,876) (18,333,051)
------------ ------------
Total stockholders' equity 2,644,019 854,833
------------ ------------
$ 3,919,928 $ 2,013,666
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE> 5
CELL ROBOTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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<S> <C> <C>
Product sales $ 272,633 $ 205,744
Research and development grants 10,029 58,732
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Total revenues 282,662 264,476
----------- -----------
Product cost of goods sold (724,410) (185,785)
SBIR direct expenses (10,029) (56,938)
----------- -----------
Total cost of goods sold (734,439) (242,723)
----------- -----------
Gross profit (loss) (451,777) 21,753
----------- -----------
Operating expenses:
General and administrative 255,699 202,664
Marketing and sales 386,092 150,944
Research and development 264,677 129,843
----------- -----------
Total operating expenses 906,468 483,451
----------- -----------
Loss from operations (1,358,245) (461,698)
----------- -----------
Other income (expense):
Other income 24,585 6,968
Interest expense (1,223,467) (519)
----------- -----------
Total other income (expense) (1,198,882) 6,449
----------- -----------
Net loss $(2,557,127) $ (455,249)
=========== ===========
Weighted average common shares
outstanding, basic and diluted 9,610,079 8,202,785
=========== ===========
Net loss per common share, basic and diluted $ (0.27) $ (0.06)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE> 6
CELL ROBOTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
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<S> <C> <C>
Product sales $ 749,055 $ 1,271,293
Research and development grants 17,323 109,964
----------- -----------
Total revenues 766,378 1,381,257
----------- -----------
Product cost of goods sold (1,249,940) (941,073)
SBIR direct expenses (17,323) (108,170)
----------- -----------
Total cost of goods sold (1,267,263) (1,049,243)
----------- -----------
Gross profit (loss) (500,885) 332,014
----------- -----------
Operating expenses:
General and administrative 1,027,505 757,235
Marketing and sales 771,522 505,168
Research and development 578,244 397,701
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Total operating expenses 2,377,271 1,660,104
----------- -----------
Loss from operations (2,878,156) (1,328,090)
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Other income (expense):
Other income 43,951 22,024
Interest expense (1,254,620) (659)
----------- -----------
Total other income (expense) (1,210,669) 21,365
----------- -----------
Net loss (4,088,825) (1,306,725)
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Preferred stock dividends -- (515,280)
----------- -----------
Net loss applicable to common shareholders $(4,088,825) $(1,822,005)
=========== ===========
Weighted average common shares
outstanding, basic and diluted 9,057,133 7,568,249
=========== ===========
Net loss applicable to common shareholders
per common share, basic and diluted $ (0.45) $ (0.24)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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CELL ROBOTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,088,825) $(1,306,725)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 84,784 61,096
Beneficial conversion charge 1,200,000 --
Loss on sale of asset 35,000 --
Amortization of options issued for services -- 7,279
Options and warrants issued for services 261,802 76,909
Common stock issued for services 551,405 --
Increase in accounts receivable (59,866) (8,841)
Increase in inventory (175,391) (251,310)
Decrease (increase) in other current assets (36,376) 87,344
Increase in current liabilities 117,076 168,196
----------- -----------
Net cash used in operating activities (2,110,391) (1,166,052)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of asset 232,500 --
Purchase of fixed assets (342,224) (280,273)
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Net cash used in investing activities (109,724) (280,273)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,735,502 155,500
Proceeds from exercise of stock options 225,066 --
Proceeds from exercise of warrants 691,756 --
Proceeds from sale of units, net of offering costs -- 475,000
Proceeds from issuance of secured convertible
note, net of expenses 1,212,480 --
----------- -----------
Net cash provided by financing activities 3,864,804 630,500
----------- -----------
Net increase (decrease) in cash and cash equivalents: 1,644,689
(815,825)
Cash and cash equivalents:
Beginning of period 358,379 1,375,575
----------- -----------
End of period $ 2,003,068 $ 559,750
=========== ===========
SUPPLEMENTAL INFORMATION:
Accrued offering costs -- 25,000
Interest paid -- 659
Issuance of preferred dividend -- 515,280
Conversion of secured convertible note $ 1,200,000 $ --
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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CELL ROBOTICS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Presentation of Unaudited Consolidated Financial Statements
These unaudited consolidated financial statements have been prepared in
accordance with the rules of the SEC 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.
New accounting pronouncements:
In June 1999, Statement of Financial Accounting Standards ("SFAS") No.
137, Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Dare of FASB Statement No. 133, was issued. SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The provisions of this statement are now effective for financial statements for
fiscal years beginning after June 15, 2000, although early adoption is allowed.
We plan to adopt the provisions of SFAS No. 133 on January 1, 2001. We do not
expect the adoption of this standard to have a material effect on our results of
operations or financial position.
In March 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation: an Interpretation of APB Opinion No. 25. This interpretation
clarifies the application of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and was effective July 1, 2000. Our adoption of this interpretation
did not have a material effect on our results of operations or financial
position.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, Revenue Recognition in Financial Statements. This bulletin summarizes
certain of the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. In June 2000, the SEC
issued SAB No. 101B, which delayed the implementation date of SAB No. 101 until
the fourth fiscal quarter of fiscal years beginning after December 15, 1999,
although early adoption is allowed. We do not expect our adoption of the
provisions of this statement to have a material effect on our results of
operations or financial position.
2. Issuance of Equity Securities and Convertible Note
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 on the Preferred Stock of 183,211 shares
of the Company's Common Stock was accrued and subsequently paid on the Preferred
Stock for all Preferred shareholders of record on February 2, 1999.
In July 1999, the Company sold 9.5 units to four investors in a private
placement of its securities. Each unit consisted of 35,000 shares of Common
Stock and 7,500 Common Stock purchase warrants. Each warrant is exercisable
through February 2, 2003 to purchase one share of Common Stock at a price of
$2.40
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<PAGE> 9
per share. In connection with this private placement, the Company granted 15,000
warrants to two placement agents. The Company granted an additional 15,000
warrants to one of these placement agents for other investment banking services,
which were unrelated to the private placement. These 30,000 warrants are
exercisable through February 2, 2003 to purchase one share of Common Stock at a
price of $2.40 per share.
In January 2000, the Company terminated its public and investor
relations agreement with RCG Capital Markets Group, Inc. effective January 1,
2000. In lieu of payment for three additional months of service retainer fees,
the Company granted options for an additional 25,000 shares of Common Stock at
an exercise price equal to $3.25, the closing price of the Company's Common
Stock on February 15, 2000. Due to early termination of this agreement, 50,000
unvested options were cancelled.
Additionally, in January 2000, the Company issued a total of 40,000
Common Stock purchase warrants to an investment research firm and its new public
relations firm. The Company was also committed under the terms of the agreement
with the new public relations firm to issue an additional 30,000 warrants if
representation continued beyond six months. The warrants are exercisable through
February 2, 2003 to purchase one share of Common Stock for a price of $2.40 per
share. Of the additional 30,000 warrants, 15,000 vested April 1, 2000, after
three months of service, and the remaining 15,000 vested on July 1, 2000, after
six months of service. The fair value of these performance-based options has
been measured upon vesting and charged to operations at such time.
In February 2000, the Company executed a secured convertible promissory
note from a member of the Company's Board of Directors, which was amended in
March 2000. The director advanced $250,000 on March 3, 2000; $250,000 on March
9, 2000; $200,000 on March 28, 2000; and the remaining $500,000 on April 26,
2000 under the note. The principal amount of $1,200,000 was paid in full with
and converted into 500,000 shares of Common Stock on August 30, 2000. An SB-2
registration statement registering the shares issuable upon conversion of the
promissory note was declared effective by the SEC on July 20, 2000. In
connection with the beneficial conversion of this note, the Company recorded a
non-cash charge of $1,200,000 in the quarter ended September 30, 2000.
In February 2000, an underwriter in a previous offering exercised a
portion of its Placement Agent's Warrants to purchase a total of 10.9825 units
at a price of $25,000 per unit. Each unit consists of 20,000 shares of Common
Stock and class A warrants exercisable for 10,000 shares of Common Stock. The
underwriter exercised the underlying class A warrants simultaneously with the
exercise of the Private Placement Warrants. Proceeds to the Company were
approximately $467,000.
In March 2000, a previous distributor of the Company exercised its
warrant to purchase 100,000 shares of Common Stock at a price of $2.25 per
share. Proceeds to the Company were approximately $225,000.
On May 26, 2000 the Company issued 500,000 shares of its Common Stock
for $2,000,000 in a private placement with Paulson Investment Company of
Portland, Oregon. A five percent placement fee was paid to Mark T. Waller of
BridgeWorks Capital, a current member of the Company's Board of Directors after
the close of the transaction.
In February, May and June 2000, the Company issued a total of 130,000
shares of its Common Stock to Pollet & Richardson as payment for legal services.
3. Notes Payable
In December 1999, the Company obtained a note payable for $250,000 from
a member of its Board
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<PAGE> 10
of Directors. The note bears interest at six percent. The balance as of January
15, 2001 is payable in six monthly installments beginning on that date.
See also Note 2 for discussion of the issuance and conversion of a $1.2
million secured convertible promissory note.
4. Earnings Per Share
Basic loss per share is computed on the basis of the weighted average
number of shares of Common Stock outstanding during the quarter. Diluted loss
per share, which is computed on the basis of the weighted average number of
shares of Common Stock and all potentially dilutive shares of Common Stock
outstanding during the quarter, is the same as basic loss per share for the
periods ended September 30, 2000 and 1999, as all potentially dilutive
securities were anti-dilutive.
Options to purchase 1,660,242 and 1,645,320 shares of Common Stock were
outstanding at September 30, 2000 and 1999, respectively. Warrants to purchase
1,503,826 and 1,911,326 shares of Common Stock were outstanding at September 30,
2000 and 1999, respectively. These were not included in the computation of
diluted loss per share as the exercise of the options would have been
anti-dilutive because of the net losses incurred in the periods ended September
30, 2000 and 1999.
5. Operating Segments
We have 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, medical product distributors and directly to
customers. The products produced for fertility clinics and associated technology
was sold by the Company in May 2000 for $100,000 cash and 12% royalty payments
on future net sales.
We evaluate segment performance based on profit or loss from operations
prior to the consideration of unallocated corporate general and administration
costs. At this time we do not have intersegment sales or transfers.
Our 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.
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<PAGE> 11
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $ 424,773 324,282 -- 749,055
Research and development
grants 17,323 -- -- 17,323
Profit (loss) from operations 1,679 (1,378,702) (1,501,133) (2,878,156)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
------------------------------------------------------------------
SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $ 677,987 593,306 -- 1,271,293
Research and development
grants 109,964 -- -- 109,964
Profit (loss) from operations 52,850 (640,260) (740,680) (1,328,090)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 2000
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SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from customers $ 207,303 65,330 -- 272,633
Research and development
grants 10,029 -- -- 10,029
Profit (loss) from operations 86,606 (699,015) (745,836) (1,358,245)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1999
---------------------------------------------------------------
SCIENTIFIC LASER-BASED
RESEARCH MEDICAL
INSTRUMENTS DEVICES CORPORATE TOTAL
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from customers $ 121,742 84,002 -- 205,744
Research and development
grants 58,732 -- -- 58,732
Loss from operations (34,195) (228,732) (198,771) (461,698)
</TABLE>
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<PAGE> 12
6. Capital Resources
Since inception, the Company has incurred operating losses and other
equity charges, which have resulted in an accumulated deficit of $22,329,054.
During the nine-month period ended September 30, 2000, the Company's operations
used net cash of $2,110,391.
The Company's ability to improve cash flow and ultimately achieve
profitability will depend on its ability to significantly increase sales. The
Company is primarily focusing its efforts on 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 products
are broader than those of the scientific instrumentation market, and, as such,
offer a greater opportunity of significantly increased sales. In addition, the
Company is pursuing development and marketing partners for several of its
medical products. If the Company is able to obtain and develop these
partnerships for the laser-based medical devices, the Company believes they 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 any earlier than
fiscal 2001. As a result, the Company's working capital surplus is expected to
erode over the next 12 months. Nevertheless, the Company expects that its
present working capital surplus and increased sales will be sufficient to cover
its expected operational deficits through 2000. To ensure sufficient working
capital exists for 2001 the Company may be required to seek additional financing
through the sale of equity or debt securities.
7. Legal Matters
Big Sky Laser Technologies, Inc. ("BSLT"), an original equipment
manufacturer and developer of laser-based medical devices, has filed a lawsuit
alleging that the Company is in breach of contract, has committed fraud and
misrepresentation and is in violation of the Racketeer Influenced and Corrupt
Organizations Act. The total damages claimed by BSLT approximate $8,200,000. The
Company disagrees with these allegations and will vigorously defend the lawsuit.
The Company has received extensions of time to answer or otherwise respond to
the complaint in court while the Company and BSLT, through their respective
attorneys, attempt to negotiate an amicable resolution to the various disputes.
The Company anticipates making various payments to BSLT in connection with any
settlement and has accrued $400,000 as of September 30, 2000 to cover its
estimated costs of settling this lawsuit.
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<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 - SEPTEMBER 30, 2000 COMPARED TO
DECEMBER 31, 1999
The Company's working capital increased to $2,139,584 at September 30,
2000 from $590,338 at December 31, 1999. The Company's current ratio increased
to 2.7:1 at September 30, 2000 compared with 1.7:1 at December 31, 1999. Total
assets also increased from $2,013,666 at December 31, 1999 to $3,919,928 at
September 30, 2000. This increase in liquidity and total assets is primarily due
to the $2 million private placement that the Company completed in May 2000 and
advances under a $1.2 million secured convertible note issued in March 2000. The
note converted into 500,000 shares of Common Stock in August 2000.
Accounts receivable and inventory increased $59,866, or 29%, and
$175,391, or 20%, respectively, as of September 30, 2000 when compared with
December 31, 1999. This was a result of increased sales during the quarter ended
September 30, 2000 when compared with the quarter ended December 31, 1999.
As of September 30, 2000, the Company's total liabilities were
$1,275,909 compared to $1,158,833 at December 31, 1999. This increase was
primarily due to an accrual for the Company's potential settlement of the
dispute with BSLT that was established during the period ended September 30,
2000.
The Company expects cash used in operating activities will increase
throughout the remainder of 2000 as a more aggressive sales and marketing
campaign is launched and as full-scale production of the Lasette is implemented.
To date, the Company has funded its operations primarily from the sale of equity
securities and short term borrowings as it has not generated sufficient cash
from its operations. The Company anticipates that its existing current working
capital and future product sales will be sufficient to allow the Company to meet
operational obligations through fiscal 2000. Cash from revenues must increase
significantly for the Company to fund operations after fiscal 2000 without
additional financing. The timing of the Company's capital requirements after
fiscal 2000, however, cannot accurately be predicted. The Company's capital
requirements depend upon numerous factors, most notably, the market acceptance
of its laser-based medical devices. Until significant revenues from operations
can be realized through future product sales, the Company will need to fund its
growth through additional debt or equity financings. Borrowing money may involve
pledging some or all of the Company's assets. Raising additional funds by
issuing Common Stock or other types of equity securities would further dilute
the Company's existing shareholders. The Company cannot make any assurances that
the required additional funds will be available on acceptable terms, if at all.
If the Company is unable to obtain additional financing as needed, the Company
may be required to reduce the scope of its operations and reduce costs, which
could have a material adverse effect upon the Company's business, financial
condition and results of operation.
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<PAGE> 14
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1999
Sales for the three-month period ended September 30, 2000 increased
$18,186 or 7% to $282,662 from $264,476 in the three-month period ended
September 30, 1999. The increase in sales resulted from the Company's scientific
research instruments products. The sales of scientific instrumentation products
increased $85,561 during the quarter ended September 30, 2000 to $207,303 from
$121,742 when compared to the same quarter of the prior year. The Company's
sales of laser-based medical products decreased $18,672 from $84,002 during the
quarter ended September 30, 1999 to $65,330 for the quarter ended September 30,
2000. The reason for the decrease is due to the May 2000 sale by the Company of
its in vitro fertilization technology. All sales of laser-based medical products
in the third quarter of 1999 were attributable to this technology.
Sales of the Company's laser-based medical products for the diabetic
market increased $45,958 or 100% in the quarter ended September 30, 2000 when
compared with no sales in the same period in the prior year. This increase was
achieved because earlier this year the Company made a strategic decision to
focus its efforts in developing and marketing these types of products. The sale
of the in vitro fertilization technology noted above also was made because of
the Company's decision to pursue the development and sale of products for the
diabetic market.
The Company's gross margin decreased from 11% for the quarter ended
September 30, 1999 to a negative gross margin of 166% for the quarter ended
September 30, 2000. The decrease is primarily due to an accrual of $400,000 that
the Company estimates it will make to BSLT in connection with the settlement of
the lawsuit discussed in Note 7 of the notes to the unaudited consolidated
financial statements included in this report. Additionally the Company accrued
approximately $64,000 in cost of sales to pay the cost associated with a design
improvement in one of the main components of the laser-based medical products.
As a result of the modification, certain parts in stock had to be reworked. The
cost of this rework was charged to cost of sales in the quarter ended September
30, 2000. Additionally, the negative gross margin is due to a lack of
efficiencies in the production of our laser-based medical products marketed to
the general public. The Company expects its margins to return to a profitable
level as sales increase and the Company's manufacturing process becomes more
efficient; however, there are several risk factors that need to be considered,
such as the Company's ability to effectively market the products and
significantly increase sales and the ability of the Company to achieve economies
of scale and efficiently manufacture the products. The Company is working to
achieve sales and manufacturing efficiencies, but no assurances can be given
that the Company will succeed in these areas.
Operating expenses increased $423,017 from $483,451 for the quarter
ended September 30, 1999 to $906,468 for the quarter ended September 30, 2000.
The increase is primarily due to a significant increase in marketing and selling
expenses as the Company launched an aggressive campaign to sell its laser-based
medical products.
Interest income increased in the quarter ended September 30, 2000 over
the amount in the quarter ended September 30, 1999 due to additional cash
investments primarily as a result of the $2 million private placement that was
completed in May 2000 and proceeds from the issuance of the $1.2 million
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<PAGE> 15
convertible note in March 2000. Interest expense increased because of a required
beneficial conversion charge to interest expense associated with the conversion
of the Company's $1.2 million convertible note in August 2000 into 500,000
shares of the Common Stock. In accordance with accounting rules, the Company was
required to include a non-cash charge to interest expense when the $1.2 million
convertible note was converted to the Company's Common Stock.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Sales for the nine-month period ended September 30, 2000 decreased
$614,879 or 45% to $766,378 from $1,381,257 in the comparable period of 1999.
The decrease is due to the Company's change in emphasis from its scientific
instrumentation products and its laser-based medical products marketed to the
professional medical community to its laser-based medical products marketed to
the general public. Sales of scientific instrumentation products and laser-based
medical products marketed to the professional medical community decreased
$253,214 and $380,725, respectively, in the nine-month period ended September
30, 2000 when compared with the nine-month period ended September 30, 1999. The
sales decline in scientific instrumentation products is due to fewer resources
being allocated to achieve sales of those products. The Company's distributor of
the laser-based medical products marketed to the professional medical community
only purchased $10,182 of these products from the Company during the nine-month
period ended September 30, 2000 as compared with $263,396 in the same period of
the prior year. Also, as noted above, in May 2000, the Company sold its in vitro
fertilization technology. This resulted in a decline of revenues in the
nine-month period ended September 30, 2000 of approximately $112,000 when
compared with the same period of the prior year.
Sales of laser-based medical products marketed to the general public
increased $205,124 or 100% in the nine-month period ended September 30, 2000
when compared with no sales in the same period in the prior year. As previously
mentioned, the Company has made a strategic decision to focus its efforts to
develop and market these types of products.
The Company's gross margin decreased from 26% for the period ended
September 30, 1999 to a negative gross margin of 67% for the nine-month period
ended September 30, 2000. The reason for the decrease is explained above.
Operating expenses increased $717,167 from $1,660,104 for the period
ended September 30, 1999 to $2,377,271 for the period ended September 30, 2000.
The increase is primarily due to legal fees incurred in the second quarter for
the issuance of registration statements to the SEC and as noted above to a
significant increase in marketing and selling expenses as the Company launched
an aggressive campaign to sell its laser-based medical products. The cost of
legal fees incurred was paid by issuing Common Stock of the Company rather than
by expending working capital resources.
Interest income increased in the period ended September 30, 2000 over
the amount in the period ended September 30, 1999 due to additional cash
investments primarily as a result of the $2 million private placement that was
completed in May 2000 and proceeds from the issuance of the $1.2 million
convertible note in March 2000. Interest expense increased because of a required
beneficial conversion charge to interest expense associated with the conversion
of the Company's $1.2 million convertible note in August 2000 into 500,000
shares of the Common Stock. In accordance with accounting rules, the
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<PAGE> 16
Company was required to include a non-cash charge to interest expense when the
$1.2 million convertible note was converted to the Company's Common Stock.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company hereby incorporates by reference the information set forth
in Part I of this report under note 7 of the Notes to Unaudited Consolidated
Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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.
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<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CELL ROBOTICS INTERNATIONAL, INC.
Dated: November 14, 2000 By: /s/ Ronald K. Lohrding
----------------- -------------------------------------
Ronald K. Lohrding, President, Chief
Executive Officer and Chairman of the
Board of Directors
Dated: November 14, 2000 By: /s/ Paul C. Johnson
----------------- -------------------------------------
Paul C. Johnson, Chief Financial
Officer and Secretary
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
