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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: June 30, 2007
Commission File Number: 333-82900
ThermoGenesis Corp.
(Exact name of registrant as specified in its charter)
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Delaware
(State of incorporation)
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94-3018487
(I.R.S. Employer Identification No.) |
2711 Citrus Road
Rancho Cordova, California 95742
(Address of principal executive offices) (Zip Code)
(916) 858-5100
(Registrants telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. o Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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. þ Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K,
is not contained herein, and will not be contained, to the best of the registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment of this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer, or a non-accelerated filer
(as defined in Rule 12b-2 of the Act).
o
Large accelerated filer þ Accelerated filer o Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). o Yes þ No
The aggregate market value of the common stock held by non-affiliates as of December 31, 2006 (the
last trading day of the second quarter) was $238,087,000, based on the closing sale price on such
day.
As of August 29, 2007, 55,701,175 shares of the registrants Common Stock were outstanding.
Documents incorporated by reference: Portions of the registrants proxy statement for its 2007
Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
PART I
ITEM 1. BUSINESS
(A) Overview of Business
We are principally a leading supplier of innovative products that process, store and administer
therapeutic doses of stem cells for treatment of disease and injury. Our products harvest stem
cells, wound healing proteins or growth factors from the blood, or tissue, of a single donor and
are administered to that donor or a matched patient. Our devices and disposables are intended for
use by physicians, researchers, hospitals and blood banks in four distinct markets: private cord
blood banking, public cord blood banking, wound care and the emerging stem cell therapy market
using adult cells. We also have legacy products that are marketed and sold to blood banks and
hospitals, as well as products related to thrombin and fibrin sealants that are directed to wound
care markets.
For private and public cord blood banks, the initial configuration of our products automate the
isolation, capture, and preservation of stem cells residing in the blood of the placenta and
umbilical cord, or cord blood, after a baby is born. These stem cells are being used today to
treat over 60 blood related malignancies, such as leukemia and lymphoma.
In the emerging stem cell therapy arena, we are expanding our product offering to automate the
isolation, capture, and delivery of stem cells residing in bone marrow. These stem cells are
currently used in clinical trials and experimental treatment for a number of serious diseases with
significant patient populations including heart disease, diabetes, and peripheral artery disease.
For each stem cell therapy performed, the isolation, capture, and delivery of the target cells for
treatment is a prerequisite. We believe our existing technology and leadership position in
automated stem cell processing will drive significant future growth for the Company. In addition,
we are currently exploring the applicability of our technologies in the veterinary market to both
generate near term revenues and to develop pre-clinical proof of efficacy and safety in animal
models for specific disease and injury conditions.
The number of animal research and clinical trials using adult stem cells is expanding dramatically.
There are 26 established stem cell centers in the U.S. and they are anchored to leading academic
medical centers including Harvard, Stanford, UCLA, and Johns Hopkins. Funding for research,
clinical trials, and development of approved therapies is increasing. The bulk of these trials are
focused on diseases with high patient populations. As of July 2007, the U.S. National Institutes
of Health reported there are six trials for diabetes (21 million U.S. patients); 61 trials for
myocardial ischemia (nine million U.S. patients); four trials for peripheral artery disease (eight
million patients); 32 myocardial infarction trials (eight million patients); and ten trials for
chronic heart failure (five million U.S. patients).
Based upon early clinical results, there is accumulating evidence supporting the belief that many
of these trials will result in approved cell therapies with broad application in disease states and
tissue regeneration procedures affecting significant patient populations, leading to a revolution
in therapeutics. Although understanding the true potential of cell therapies and their ultimate
impact on the practice of medicine remains a longer term prospect, we believe there are significant
commercial opportunities in the market today for technologies supporting stem cell research and
early cell based treatments.
Background
Historically, our focus was on our core ultra-rapid freezing technology, applied principally to
freezers for blood and blood components and plasma thawers, which are our legacy products. Through
our research programs we developed more advanced product platforms directed at stem cell therapies
and wound care. Our stem cell products have been the principal drivers of our revenue growth over
the past several years,
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and our legacy products have become an increasingly smaller component of revenue and are no longer
strategically relevant to our growth. With respect to wound care products, our CryoSeal System
recently received FDA approval in conjunction with liver resectioning surgery, but we have not been
able to meaningfully penetrate markets with that product, and revenues have lagged expectations. We
are targeting to increase our market penetration for this product in Europe and in other areas of
the world including Brazil, Korea, Mexico, Russia and Taiwan where our distributors may now
register the CryoSeal System following our recently received FDA approval We believe that there is
a market for our 100% autologous CryoSeal System due to its safety advantages over conventional,
non-autologous fibrin sealants that carry the risk of contamination by blood-borne pathogens from
other donors, and that this market may extend beyond the typical wound care applications to include
use of the technology in the delivery of stem cells for cell therapeutics. Therefore, we are
evaluating alternatives for commercialization of our CryoSeal System. Nevertheless, we believe our
short term revenue growth will result from our current focus on new and existing markets for stem
cell products.
Our products are described below:
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The BioArchive System is an automated cryogenic system used in stem cell therapy to
cryopreserve and archive cord blood stem cells for future transplant. We have sold more
than 150 BioArchive Systems to date to private and public cord blood banks and stem cell
research institutes in more than 25 countries. |
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The AXP(TM) AutoXpress Platform, or AXP, Platform is our newly developed semi-automated
system and disposable to isolate and capture stem cells. We initiated sales efforts in
fiscal 2006. |
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The CryoSeal (R) Fibrin Sealant (FS), System is an automated system used to prepare an
autologous hemostatic surgical sealant from a patients own blood or from a single donor in
approximately one hour. We received FDA clearance to market the CryoSeal FS System in
liver resection surgeries in July 2007. |
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The Thrombin Processing Device (TM), or TPD, is used to isolate activated thrombin from
the patients blood or plasma in less than 30 minutes. Thrombin is used as a topical
hemostatic agent for minor bleeding sites, to treat pseudo aneurysms and to release growth
factors from platelets. |
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The ultra-rapid plasma Freezer and the ultra-rapid plasma Thawer. The Freezer optimizes
plasma freezing through unique liquid heat transfer and uniform freezing technologies that
can freeze units of blood plasma in approximately 30 minutes. The Thawer is used for rapid
(<12 minutes) homogeneous thawing of frozen red blood cells or fresh frozen plasma
before their transfusion so that emergency transfusions can be quickly administrated. We
are currently evaluating continuation of the ThermoLine (TM), or divestiture, consistent
with our strategic direction. |
Stem Cells
Stem cells have the remarkable potential to develop into many different cell types in the body.
They serve as a repair system for the body and they can theoretically divide without limit to
replenish other cells as long as the person is alive. When a stem cell divides, each new cell has
the potential to either remain a stem cell or become another type of cell with a more specialized
function, such as a muscle cell, a red blood cell, or a brain cell.
There are two main types of stem cells: embryonic and adult stem cells. Embryonic stem cells are
primitive cells derived from a 5-day pre implantation embryo that have the potential to become a
wide variety of specialized cell types. Adult stem cells are cells found in human tissue that can
renew
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themselves, and can differentiate to yield the major specialized cell types of that tissue. Adult
stem cells are thought to reside in a specific area of each tissue where they may remain quiescent
(non-dividing) for many years until they are activated by disease or tissue injury. The tissues
reported to contain stem cells include umbilical cord blood, bone marrow, brain, peripheral blood,
adipose, blood vessels, skeletal muscle, skin, and liver.
Stem Cell Therapy
Stem cell therapies are treatments in which stem cells are inducted to differentiate into the
specific cell type required to repair damaged or destroyed cells or tissues.
Since the first successful cord blood transplant performed in 1988, awareness of the potential
therapeutic value of cord blood stem cells has increased and collection and storage has grown
rapidly. These cord blood stem cells are harvested at no risk or pain to the donor and can be
preserved in a cord blood bank for clinical use with a matched patient on short notice. Their use
also results in a lower incidence of post-transplant immune complications than transplants with
adult bone marrow stem cells.
Stem cell therapy is used to:
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Replace bone marrow damaged by high-dose chemotherapy or radiation therapy used to treat
patients with a variety of cancers such as leukemia and lymphoma; and |
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Provide genetically healthy and functioning bone marrow to treat patients with more than
60 life threatening genetic diseases such as sickle cell anemia and immunodeficiency; and |
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Regenerate and repair tissue including the treatment of myocardial infarction, peripheral
limb ischemia and non-union bone fractures. |
With approximately four million births per year in the United States alone, cord blood represents a
large, natural resource for use in the treatment of malignant and genetic diseases in which
sourcing does not involve donor risk. Also, we believe the number of bone marrow harvests will
continue to grow as the therapeutic efficacy of this new therapy is proven.
We believe the number of cord blood units stored will continue to grow, due in part to the
following factors:
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Increased awareness about the availability and benefits of preserving cord blood stem
cells; |
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Improved technology to harvest the stem cells in a sterile environment and maintain
their viability for many years; |
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Clinical evidence that cell dose and cell viability are critical to a successful transplant; and |
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Increased government funding. |
OUR SOLUTIONS
Stem Cell Therapy
Our BioArchive System and AXP Platform and disposables are designed to ensure that the stem cells
are successfully isolated, captured and preserved to keep them fully viable at time of transplant,
which may be months or years after production. The BioArchive System, which can store up to 3,626
units of cord blood stem cells, is the only fully automated system that integrates controlled rate
freezing, quarantine
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and long term cryogenic storage. The robotic storage and retrieval of these stem cell units
improves cell viability, provides precise inventory management and minimizes the possibility of
human error.
Our newest stem cell therapy offering is the AXP Platform, which automates the isolation and
capture of stem cells from cord blood into a fixed 20 ml volume. It includes a compact battery
powered device and a proprietary sterile disposable bag set. The AXP Platform replaces the current
clinical process, which involves more than a dozen manual steps. The AXP Platform provides cord
blood banks with a reproducible and good manufacturing practices (GMP) compliant solution to more
successfully isolate and capture stem cells with lower labor costs and reduced risk of
contamination.
The AXP Platform isolates and captures the stem cells. The BioArchive System cryo-preserves and
stores the stem cells. Both offerings are used by public and private cord blood banks; however,
the use of one is not dependant on the use of the other. We have customers who purchase both
offerings, while others have purchased one or the other.
Wound Care
Our CryoSeal FS System and the TPD offerings currently address the surgical wound care market. The
CryoSeal FS System manufactures fibrin sealant in a closed and sterile disposable from a single
unit of the patients own plasma or from a single donor in about an hour. On July 30, 2007, we
announced that the Food and Drug Administration has granted clearance for the Company to market the
CryoSeal FS System as an adjunct to hemostasis in liver resection surgery. We received the CE Mark
for this offering in fiscal 2001, enabling us to market it commercially in Europe.
The TPD is incorporated in the CryoSeal FS System but can be sold as a stand alone product. It is
a disposable device that isolates and captures activated autologous thrombin from approximately 11
ml of the patients blood or plasma. Thrombin is used as a topical hemostatic agent for minor
bleeding sites, to treat pseudo aneurysms and to release growth factors from platelets. We
received the CE Mark for our TPD and began selling the product in Europe through our distributors
in August 2005. The TPD standalone product would require a separate PMA before sale in the United
States.
We are currently assessing how best to maximize the potential value of our CryoSeal FS System and
TPD product offerings in both wound care applications and as a potential delivery medium for cell
based therapeutics.
(B) CLINICAL SUMMARY STATUS
Other than initial filing of applications, completion of patient enrollment and written agency
notifications regarding the applications, the Company does not comment on the day-to-day details of
ongoing clinical activities.
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We have signed a collaborative research agreement with the Stem Cell program at UC
Davis to develop stem cell therapies using the BioArchive, AXP and CryoSeal products. The
focus of this program will be investigating cell populations and fibrin gel carriers
isolated from bone marrow and cord blood using our blood processing systems, initially
looking at stem cell treatments for critical limb ischemia and dermal wounds. The animal
trials began in fiscal 2008 and could lead to future human clinical trials. |
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The Company initiated an FDA Device Master File for the AXP in October 2005 and began
preparing the 510(k) application upon receipt of the October 24, 2006 notification from
the FDA of their intention to start regulating cord blood processing systems and
containers. This 510(k) submission requests market clearance for the AXP Platform for
processing cord blood stem cells |
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and claims substantial equivalence to other devices used for this purpose. The 510(k)
submission covers the complete AXP Platform including the AXP hardware device, docking
station, disposable bag processing set, and XpressTRAK software that assists with quality
assurance and compliance with current good manufacturing practices (cGMP) and current good
tissue practices (cGTP). This submission is supported by studies at the New York Blood
Centers National Cord Blood Program, which showed that the AXP can harvest 98% of the
mononuclear cell (MNC) population (which contain all the stem cells) from cord blood
consistently and efficiently. |
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In July 2007, the Company obtained FDA clearance to market the CryoSeal FS System in
liver resection surgeries. The PMA submission was based on clinical results from a Phase
III trial evaluating the safety and efficacy of CryoSeal FS as an adjunct to hemostasis in
liver resection surgery against a control, Instat, a collagen absorbable hemostat. The
multi-center randomized and blinded clinical trial of 150 cancer patients showed that
CryoSeal FS demonstrated superiority to the Instat control by causing statistically
significant quicker time to hemostasis versus the control group (p-value=<0.001). |
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Sanquin in Gronigen, Netherlands is financing and managing a clinical trial for the use
of CryoSeal FS as an adjunct to hemostatis in patients undergoing coronary artery bypass
grafts (CABG). Sanguin is responsible for ensuring the quality, safety and availability of
all blood and blood products in the Netherlands. This organization is one of the most
prominent European organizations in transfusion medicine. The study consists of 80 patients
(40 control and 40 treated) and enrollment is expected to be completed by September 2007.
This study is important for the Company as it represents the effort to build a business
model based upon centralized processing of allogeneic plasma which removes the logistics
associated with collecting and processing autologous plasma. Allogeneic plasma is
routinely outdated and discarded by blood centers. Therefore, the conversion of this
allogeneic plasma into fibrin sealant product represents an economic opportunity for blood
centers. The study is also important as Sanquin is recognized as being a technology leader
in transfusion medicine and its assessment of the product performance will be influential
in the use of the CryoSeal in other countries and regions. |
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Ottawa Civic Hospital is conducting a randomized trial to evaluate hemostasis in
surgical procedures for ear, nose and throat using the CryoSeal FS System. The study
involves 100 patients and is on-going. Dr. Gail Rock and her colleagues at the University
of Ottawa published a paper on their in vitro characterization of the CS-1 in a peer
reviewed journal entitled Preparation and Characterization of Human Thrombin for Use in
Fibrin Glue (Transfusion Medicine 17:187-191, 2007) |
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Giessen University Hospital in Germany is conducting a blinded, randomized trial to
study the reduction of blood loss in Total Knee Replacement Surgery when using CryoSeal
autologous fibrin sealant. The study involves 40 patients, treated with CryoSeal FS and 40
control patients. This study is a follow-up to the pilot clinical study that was conducted
in Giessen, where patients treated with CryoSeal FS had 50% less blood loss than the
control patients. |
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(C) Competition
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The competition for the BioArchive System is limited to manufacturers of individual
cryogenic components, such as dewars, controlled rate freezers and conventional systems,
such as Taylor Wharton and MVE. |
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For our AXP Platform we believe the Sepax system from BioSafe is the Companys primary
semi-automated competitor. The AXP also competes with manual methods. |
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The Company anticipates greater demand for the BioArchive System and AXP Platform and
compatible disposables as cell therapy companies work to develop blood cell therapy
products that are individually prepared for the end patient and provide the manufacturer
with greater logistical flexibility. This could lead to other competitors emerging to
provide various products which deliver one or more of the needed enabling technologies
for the future growth of the cell therapy industry. |
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Tissue Sealants CryoSeal System
The Company is aware of six companies which have developed or are developing tissue
sealants: Baxter, ZBL Behring, Vivolution, Omrix Pharmaceuticals (distributed by Johnson
& Johnson in the U.S.), Cryolife and Orthovida. To date, Baxter (Tisseel, Floseal and
CoSeal), Omrix/J&J (Evicel), Cryolife (BioGlue) and Orthovida (Vitagel) have received
FDA approval to market their products in the U.S. |
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Our principal competitor is Baxter, which markets Tiseel/Tissucol in the U.S., Europe,
South America, Japan and other countries in Asia. ZBL Behring markets Beriplast in
Europe and Japan, although it is not available in the U.S. |
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Thrombin TPD
In Europe, Medtronic and Biomet offer a means to produce autologous thrombin. Although
available, these products are not ideal due to poor stability time. Therefore,
Medtronic and Biomet provide the ThermoGenesis TPD with their platelet kit. |
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Sorin also markets the Activat device, which uses technology similar to the TPD. |
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In the U.S. the only competition for the TPD is King Pharmas JMI bovine thrombin. Two
companies have thrombin products under FDA review, Omrix and Zymogenetics. |
(D) Research and Development
The Company is now principally focused on the development of new products that support the stem
cell therapy market. The future research and development (R&D) activities of the Company will be
devoted to the development and launch of additional new products, line extensions, or significant
upgrades to existing products. Research and Development expense reflects the cost of these
activities, as well as the costs to obtain regulatory approvals of new products and processes and
to maintain the highest quality standards with respect to existing products. The Companys R&D
expenses were $4,108,000 or 25% of net revenues in 2007; $4,157,000 or 35% of net revenues in 2006
and $5,673,000 or 56% of net revenues in 2005. See Managements Discussion and Analysis of
Financial Condition and Results of Operations.
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(E) Description of Device Manufacturing
The Company is currently manufacturing or assembling all major instruments and equipment sold by
the Company, as well as manufacturing a limited number of its disposable products. The
manufacturing site is compliant to the FDAs Quality System Regulations (QSR) and the European
ISO 13485. The Company believes that vendors used by the Company are capable of producing
sufficient quantities of all required components.
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Instrument Manufacturing- The Company manufactures the BioArchive device, CryoSeal System, AXP
devices and accessories, Ultra Rapid Plasma Freezers and Ultra Rapid Plasma Thawers at its
Rancho Cordova, CA facility. The Company assembles the hardware from multiple subassemblies
supplied by a wide base of skilled suppliers. However, the Company manufactures certain
sub-assemblies, e.g., the BioArchive robotic, barcode-reading periscope, at the Rancho Cordova
facility. All parts and subassemblies are procured from pre-approved and qualified suppliers.
Trained ThermoGenesis employees inspect incoming parts and sub-assemble products and perform
final QC release based on performance criteria. |
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Disposables Manufacturing- The Company utilizes qualified and pre-approved contract
manufacturers with FDA registered facilities that we believe have the technical capability and
production capacity to manufacture our CryoSeal, BioArchive and AXP disposables. During fiscal
2007 we experienced quality issues with our initial AXP disposables vendor which we are in the
process of attempting to resolve. As announced in July 2007, we signed a supply agreement with
a second source for AXP disposables. We manufacture two disposables in house, TPD Reagent and
BioArchive Overwrap Bags. Both are currently being sourced for contract manufacturing. |
The majority of the materials used to produce the Companys products are readily available from a
variety of sources. Based upon current information from manufacturers, the Company does not
anticipate any shortage of supply. In the event that it becomes necessary for us to obtain raw
materials from an alternative supplier, we would first be required to qualify the quality systems
and product of that alternative supplier. Safety stocks are used where there might be risk in
qualifying a second supplier in a timely manner.
We, as well as any contract manufacturers of our products, are subject to inspections by the FDA
and other regulatory agencies for compliance with applicable GMPs, codified in the QSRs which
include requirements relating to manufacturing conditions, extensive testing, control documentation
and other quality assurance procedures. Our facilities have undergone ISO 13485:2003 and Medical
Device Directives (MDD) inspections, and obtained approval to CE Mark our products. UL approval
has also been obtained for our CryoSeal, BioArchive and AXP products. In addition, FDA and State
Food and Drug inspections have been conducted to support the CryoSeal PMA submission. Failure to
obtain or maintain necessary regulatory approval to market our products would have a material
adverse impact on our business. See Factors Affecting Operating Results.
(F) Government Regulation
The product development, pre-clinical and clinical testing, manufacturing, labeling, distribution,
sales, marketing, advertising and promotion of the Companys research, investigational, and medical
devices are subject to extensive government regulation in the United States, and also in other
countries. These national agencies and other federal, state and local entities regulate, among
other things, development activities and the testing (in vitro and in clinical trials),
manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and
promotion of our products.
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The extent of the process required by the FDA before a medical device may be marketed in the United
States depends on the classification of device. If the medical device is a Class III, such as the
CryoSeal FS System, the process includes the following:
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Extensive pre-clinical laboratory and animal testing; |
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Submission and approval of an investigational device exemption (IDE) application; |
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Human clinical trials to establish the safety and efficacy of the medical device for the intended indication; and |
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Submission and approval of a PMA to the FDA. |
Pre-clinical tests include laboratory evaluation of product chemistry/biochemistry and animal
studies to assess the potential safety of the product. Safety testing includes tests such as
biocompatibility, package integrity and stability. Pre-clinical tests must be performed by
laboratories that comply with the FDAs Good Laboratory Practices regulations. The results of the
pre-clinical tests are submitted to the FDA as part of an IDE application and are reviewed by the
FDA before human clinical trials can begin. Human clinical trials begin when IDE approval is
granted.
Clinical trials involve the application of the medical device or biologic produced by the medical
device to patients by a qualified medical investigator according to an approved protocol and
approval from an Institutional Review Board (IRB). Clinical trials are conducted in accordance
with FDA regulations and an approved protocol that detail the objectives of the study, the
parameters to be used to monitor participant safety and efficacy or other criteria to be evaluated.
Each protocol is submitted to the FDA as part of the IDE. Each clinical study is conducted under
the approval of an IRB. The IRB considers, among other things, ethical factors, the potential
risks to subjects participating in the trial and the possible liability of the institution. The
IRB also approves the consent form signed by the trial participants.
Medical device clinical trials are typically conducted as a phase III clinical trial. A safety
pilot trial may be performed prior to initiating the phase III clinical trial to determine the
safety of the product for specific targeted indications to determine dosage tolerance, optimal
dosage and means of application and to identify possible adverse effects and safety risks. The
FDA, the clinical trial sponsor, the investigators or the IRB may suspend clinical trials at any
time if any one of them believes that study participants are being exposed to an unacceptable
health risk.
The results of product development, pre-clinical studies and clinical studies are submitted to the
FDA as a PMA for approval of the marketing and commercial shipment of the medical device in the
United States. The FDA may deny a PMA if applicable regulatory criteria are not satisfied or may
require additional clinical testing. Even if the appropriate data is submitted, the FDA may
ultimately decide the PMA does not satisfy the criteria for approval. Product approvals, once
obtained, may be withdrawn if compliance with regulatory standards is not maintained or if safety
concerns arise after the product reaches the market. The FDA may require post-marketing testing
and surveillance programs to monitor the effect of the medical devices that have been
commercialized and has the power to prevent or limit future marketing of the product based on the
results of such programs.
Each domestic manufacturing establishment in California must be registered with the FDA and the
California State Food and Drug Branch. Domestic manufacturing establishments are subject to
biennial inspections by the FDA and annual inspections by the State of California for compliance
with the QSRs. We are also subject to U.S. federal, state, and local regulations regarding
workplace safety, environmental
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protection and hazardous materials and controlled substance regulations, among others. The Company
has a California Environmental Protection Agency Identification number for the disposal of
biohazardous waste from its R&D biological lab.
Some of our products which have a lower potential safety risk to the intended user or patient, and
which have similar, competitive products previously cleared by the FDA for the same intended use,
may utilize a simpler and shorter regulatory path called a Premarket Notification or a 510(k)
application to gain commercial access to the marketplace. This regulatory process requires that the
Company demonstrate substantial equivalence to a product which was on the market prior to May 29,
1976, or which has been found substantially equivalent after that date.
Some of our products that have minimal risk to the intended user and do not involve direct patient
interaction may be deemed by the FDA as being exempt from FDA review. These products still require
compliance with QSRs.
Failure to comply with applicable FDA requirements can result in fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of production, distribution,
sales and marketing, or refusal of the FDA to grant approval of a PMA or clearance of a 510(k).
Actions by the FDA might also include withdrawal of marketing clearances and criminal prosecution.
Such actions could have a material adverse effect on the Companys business, financial condition,
and results of operation.
(G) Patents and Proprietary Rights
The Company believes that patent protection is important for products and potential segments of its
current and proposed business. In the United States, the Company currently holds twenty two (22)
patents, and has four (4) patents pending to protect the designs of products which the Company
intends to market. There can be no assurance, however, as to the breadth or degree of protection
afforded to the Company or the competitive advantage derived by the Company from current patents
and future patents, if any. Although the Company believes that its patents and the Companys
existing and proposed products do not infringe upon patents of other parties, it is possible that
the Companys existing patent rights may be challenged and found invalid or found to violate
proprietary rights of others. In the event any of the Companys products are challenged as
infringing, the Company would be required to modify the design of its product, obtain a license or
litigate the issue. There is no assurance that the Company would be able to finance costly patent
litigation, or that it would be able to obtain licenses or modify its products in a timely manner.
Failure to defend a patent infringement action or to obtain a license or implementation of
modifications would have a material adverse effect on the Companys continued operations.
While patents have been issued or are pending, the Company realizes (a) that the Company will
benefit from patents issued only if it is able to market its products in sufficient quantities of
which there is no assurance; (b) that substitutes for these patented items, if not already in
existence, may be developed; (c) that the granting of a patent is not a determination of the
validity of a patent, such validity can be attacked in litigation or the Company or owner of the
patent may be forced to institute legal proceedings to enforce validity; and (d) that the costs of
such litigation, if any, could be substantial and could adversely affect the Company.
(H) Licenses and Distribution Rights
On August 22, 2006, The Company announced that GE Healthcare (GEHC) and Cord Blood Registry (CBR),
the worlds largest family cord blood bank, signed a multi-year contract to supply CBR with the
Companys AXP Platform and disposables. In conjunction with this agreement, the Company signed a
Product Development and Supply Assurance Agreement with CBR which assures the supply of AXP
10
products for a 15-year period. This agreement also initiates the development of an advanced cord
blood stem cell container.
In July 2006, the Company entered into a Product Development and Supply Agreement with Biomet.
Under the development phase of this agreement, Biomet will pay the Company $1.1 million in
milestone payments to develop a fibrinogen concentration kit containing the Companys CryoSeal II
kit. The Company will grant intellectual property license rights to Biomet and its affiliates to
manufacture, use and sell the product for use in surgical hemostats, graft delivery systems and
surgeries. The Company has the right of first offer to manufacture the product; and if the Company
does not manufacture the product, Biomet will pay a royalty. The agreement has a term of 5 years.
On November 7, 2005, the Company entered into an OEM Supply Agreement (the Agreement) with
Medtronic. Under the terms of the Agreement, the Company will provide a TPD to work with
Medtronics Magellan Product (the OEM Product) and sell and supply the OEM Product to Medtronic
for use and sale in conjunction with the Medtronic Magellan Product throughout the world. The
Agreement has a term of five years. Medtronics Magellan Product is used for the production of
platelet gel. Medtronic previously used bovine thrombin in conjunction with the Magellan device.
On October 13, 2005, the Company entered into an International Distribution Agreement (the GEHC
Agreement) with Amersham Biosciences AB, a GE Healthcare company headquartered in Sweden (GEHC).
Under the Agreement, GEHC becomes the exclusive worldwide distributor of and service provider for
the Companys AXP Platform and BioArchive System. The Company will receive from GEHC fees for
these rights granted under the Agreement. Amounts received for these rights will be recognized as
revenue on the straight-line method over the initial 5-year term of the contract. GEHC will
purchase products from the Company to distribute and service. In addition, GEHC and the Company
agreed to collaborate on certain future improvements to these product lines. The Agreement has an
initial expiration date of December 31, 2010, but will be automatically renewed for additional two
year periods unless terminated by one of the parties 12 months prior to the end of the then current
term. In addition, the agreement provides for earlier termination if GEHC does not meet certain
defined performance criteria. There are currently performance issues related to the agreement, and
the parties have been discussing the relationship which we believe can be aligned to enhance our
mutual benefits, as our technology is both complimentary and critical to the delivery of cells
utilized in other GEHC products, and we believe synergies may be achieved through further
alignment. These discussions may result in modification of the agreement.
In July 2005, the Company entered into a non-exclusive, five-year distribution agreement with
Biomet to supply Biomet with the Companys existing CE marked TPD for sale in Europe for all
applications and worldwide for spinal applications in order to allow them to immediately begin
marketing their platelet gel product. Previously, Biomet had been selling bovine thrombin with
their platelet gel product.
On March 29, 2005, the Company entered into a Supply Agreement with Cell Factors Technologies,
Inc., an Indiana corporation and an affiliate of Biomet, Inc. (CFT). Under the agreement, the
Company will manufacture a thrombin disposable and reagent for the Clotalyst System. Clotalyst is
CFTs autologous clotting factor device and blood processing disposables. The Company assumes the
role of manufacturer for CFT of the Clotalyst device and blood processing disposables for a term of
five years. The agreement requires CFT, upon FDA clearance, to purchase a minimum quantity of
20,000 devices. CFT has paid a one time advance fee for engineering and development of the
product. The agreement was amended in March of 2007 to change its structure from a supply
agreement to a license agreement. After Biomet purchases 2,500 products over the course of five
subsequent calendar quarters, the Company will grant intellectual property license rights to Biomet
to manufacture, use and sell the product, excluding the reagent. The Company will receive royalty
payments on sales of the disposables and remain the
11
manufacturer of the reagent. The term of the agreement has been amended to continue for the life
of the Clotalyst Reagent patents, approximately June 2019.
On March 28, 2005, the Company entered into a five-year Distribution and License Agreement with
Asahi Kasei Medical Co., Ltd. (Asahi). Under the agreement, the Company granted Asahi exclusive
rights to sell the CryoSeal System in Japan. This agreement replaces the parties prior
Distribution and Manufacturing License Agreement for the CryoSeal System. The agreement also
granted Asahi the right to manufacture the processing disposables and thrombin reagent for
production of thrombin (Thrombin Activation Device) in Japan. Asahi paid a non-refundable fee
upon signing the agreement. Asahi will have the non-exclusive right to manufacture and sell the
Thrombin Activation Device (TAD) Stand Alone in Japan. Asahi has a right of first refusal to
expand the territory to include South Korea, North Korea, Taiwan, the Philippines, Thailand,
Singapore, India and Malaysia.
In January 2002, the Company entered into a five year OEM supply agreement with Interpore Cross
International (ICI) for a modified version of the TAD for spinal surgery applications. In
accordance with the agreement, ICI paid the Company $300,000 for worldwide license and distribution
rights and development fees.
In March 1997, the Company and New York Blood Center (NYBC), as licensors, entered into a license
agreement with Pall Medical, a subsidiary of Pall Corporation, as Licensees through which Pall
Medical became the exclusive worldwide manufacturer (excluding Japan) for a system of sterile,
disposable containers developed by the Company and NYBC for the processing of hematopoietic stem
cells sourced from placental cord blood (PCB). The system is designed to simplify and streamline
the harvesting of stem cell rich blood from detached placental cords and the manual concentration,
cryopreservation (freezing) and transfusion of the PCB stem cells while maintaining the highest
stem cell population and viability from each PCB donation. In May of 1999, the Company and Pall
Medical amended the original agreement, and the Company regained the rights to distribute the bag
sets outside North America & Europe under the Companys name, and in May of 2000, the Company
negotiated rights to directly co-market the bag sets in Europe in exchange for an additional
royalty fee, while continuing to utilize Pall Europes distribution centers.
(I) Employees
As of June 30, 2007, the Company had 83 employees, 20 of whom were engaged in research and new
product development, regulatory affairs, clinical and scientific affairs, 30 in manufacturing and
quality control, 16 in sales, marketing and customer service and 17 in finance and administration.
The Company also utilizes temporary employees throughout the year to address business needs and
significant fluctuations in orders and product manufacturing. None of our employees are
represented by a collective bargaining agreement, nor have we experienced any work stoppage.
FINANCIAL INFORMATION ON FOREIGN SALES AND OPERATIONS
For fiscal year 2007, foreign sales were $8,172,000 or 49% of net revenues. For fiscal year 2006,
foreign sales were $7,416,000 or 62% of net revenues. For fiscal year 2005, foreign sales were
$6,810,000 or 67% of net revenues. During fiscal 2004, the Company entered into a contract with
Kawasumi Laboratories Inc. (KLI) whereby KLI would manufacture certain disposables for the
CryoSeal product line. The manufacturing facility and company headquarters are located in Asia.
WHERE YOU CAN FIND MORE INFORMATION
The Company is required to file annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and other information with the Securities and Exchange Commission
(SEC). The public can obtain copies of these materials by visiting the SECs Public Reference
Room at 100 F Street, NE, Room 1580, Washington, DC 20549, by calling the SEC at 1-202-551-8090, or
by accessing the
12
SECs website at www.sec.gov. In addition, as soon as reasonably practicable after these materials
are filed with or furnished to the SEC, the Company will make copies available to the public free
of charge through its website, www.thermogenesis.com. The information on the Companys website is
not incorporated into, and is not part of, this annual report.
ITEM 1A. RISK FACTORS
An investment in ThermoGenesis common stock is subject to risks inherent to our business. The
material risks and uncertainties that management believes affect us are described below. Before
making an investment decision, you should carefully consider the risks and uncertainties described
below together with all of the other information included or incorporated by reference in this
report. The risks and uncertainties described below are not the only ones facing ThermoGenesis.
Additional risks and uncertainties that management is not aware of or focused on or that management
currently deems immaterial may also impair ThermoGenesis business operations. This report is
qualified in its entirety by these risk factors.
If any of the following risks actually occur, our financial condition and results of operations
could be materially and adversely affected. If this were to happen, the value of our common stock
could decline significantly, and you could lose all or part of your investment.
Risks Related to Our Business
Our New Products Are at Initial Market Introduction, and We Are Not Sure the Market Will Accept
Them. The market acceptance of our new products will depend upon the medical community and
third-party payers accepting the products as clinically useful, reliable, accurate, and cost
effective compared to existing and future products or procedures. Market acceptance will also
depend on our ability to adequately train technicians on how to use the CryoSeal System, the AXP
Platform and the BioArchive System. Even if our new product systems are clinically adopted, the
use may not be recommended by the medical profession or hospitals unless acceptable reimbursement
from health care and third party payers is available. Failure of these new products to achieve
significant market share could have material adverse effects on our long term business, financial
condition, and results of operation.
Our Inability to Protect Our Patents, Trademarks, and Other Proprietary Rights could Adversely
Impact Our Competitive Position. We believe that our patents, trademarks, and other proprietary
rights are important to our success and our competitive position. Accordingly, we devote
substantial resources to the establishment and protection of our patents, trademarks, and
proprietary rights. We currently hold patents for products, and have patents pending for
additional products that we market or intend to market. However, our actions to establish and
protect our patents, trademarks, and other proprietary rights may be inadequate to prevent
imitation of our products by others or to prevent others from claiming violations of their
trademarks and proprietary rights by us. If our products are challenged as infringing upon patents
of other parties, we will be required to modify the design of the product, obtain a license, or
litigate the issues, all of which may have an adverse business effect on us.
Failure to Protect Our Trade Secrets May Assist Our Competitors. We use various methods, including
confidentiality agreements with employees, vendors, and customers, to protect our trade secrets and
proprietary know-how for our products. However, such methods may not provide complete protection
and there can be no assurance that others will not obtain our know-how, or independently develop
the same or similar technology. We prepare and file for patent protection on aspects of our
technology which we think will be integrated into final products early in design phases, thereby
attempting to mitigate the potential risks.
We Have a Limited Marketing and Sales Force for the Wound Care Products Which May Delay Our Goal of
Increased Sales Levels. We currently sell the CryoSeal FS System and TPD disposable through our
13
foreign distribution network. We have also only recently received FDA approval to market the
CryoSeal FS System for liver resection surgery, which market has become more limited since we
initiated our clinical trials, due in part to newer technologies and surgical procedures. A US
market launch would require significant expenditures for a dedicated sales force, and there are no
assurances that such efforts would be fruitful. Although we have entered into distribution
agreements for foreign sales, and we continue to seek strategic partners for the technology, there
are no assurances that the distributors will produce significant sales of the systems.
Our Lack of Production Experience May Delay Producing Our New Products. We have manufactured our
Blood Plasma Thawers, Freezers and BioArchive Systems for a number of years. We do not have
significant experience in manufacturing the CryoSeal System, the AXP Platform or in the manufacture
of disposables. There can be no assurance that our current resources and manufacturing facility
could handle a significant increase in orders for either the BioArchive System or the CryoSeal
System. If we are unable to meet demand for sales of the new systems, we would need to contract
with third-party manufacturers for the backlog, and no assurances can be made that such third-party
manufacturers can be retained, or retained on terms favorable to us and our pricing of the
equipment. Inability to have products manufactured by third parties at a competitive price will
erode anticipated margins for such products, and negatively impact our profitability.
Dependence on Suppliers for Disposable Products and Custom Components May Impact the Production
Schedule. The Company obtains certain disposable products and custom components from a limited
number of suppliers. If the supplier raises the price or discontinues production, the Company may
have to find another qualified supplier to provide the item. In the event that it becomes necessary
for us to find another supplier, we would first be required to qualify the quality assurance
systems and product quality of that alternative supplier. Any operational issues with, or transfer
between qualified suppliers may impact the production schedule, therefore delaying revenues, and
may cause the price of disposables or key components to increase.
Quality Problems with our Products or Processes could Harm our Reputation for Producing High
Quality Products and Decrease our Future Revenues. Quality is extremely important to us and our
customers due to the consequences of product failure. Our quality certifications and product
performance during evaluations and validations are critical to the marketing success of our
products. If we fail to meet our customers quality standards our reputation could be damaged, we
could lose current and potential customers and our revenues could decline as a result.
All of our Operations are Conducted at a Single Location. Any Disruption at our Facility could
Delay Revenues or Increase our Expenses. All of our operations are conducted at a single location
although we do contract our manufacturing of certain disposables and components. We take
precautions to safeguard our facility, including insurance, health and safety protocols, and
off-site storage of computer data. However, a natural disaster, such as a fire, flood or
earthquake, could cause substantial delays in our operations, damage or destroy our manufacturing
equipment or inventory, and cause us to incur additional expenses. The insurance we maintain
against fires, floods, and other natural disasters may not be adequate to cover our losses in any
particular case.
We are Heavily Reliant on a Single Distributor to Market and Sell our Cell Therapy Products.
GEHC is the exclusive distributor of the AXP Platform and primary distributor of the BioArchive
System. We have limited control over their sales and marketing efforts for these products. Since
our revenues are generated primarily from cell therapy products, a delay or failure by our
distributor to successfully market these products may decrease our revenues and competitive
advantage. In addition, if our distributor were to only meet the contractual minimum annual unit
sales requirements our ability to grow revenues for these products would be severely impacted.
Further, GEHC is a large, diverse organization, and our
14
products are directed at niche vertical markets, requiring alignment of interests to
maintain a solid working relationship. There are no assurances that we can maximize this
relationship in a mutually beneficial manner.
Financial and Market Risks
We Have Incurred Net Losses since Our Inception and Expect Losses to Continue. Except for net
income of $11,246 for fiscal 1994, we have not been profitable since our inception. For the fiscal
year ended June 30, 2007, we had a net loss of $6,776,000, and an accumulated deficit at June 30,
2007, of $80,628,000. We will continue to incur significant costs as we continue our efforts to
develop and market our current products and related applications. Although we are executing on our
business plan to develop and market launch new products, continuing losses may impair our ability
to fully meet our objectives for new product sales.
Failure to Keep Our Key Personnel May Adversely Affect Our Operations. Failure to retain skilled
personnel could hinder our operations. We have appointed a new Chief Executive Officer and are
transitioning our prior Chief Executive Officer to a continuing role as Chief Technology Architect
within the Company. Our future success partially depends upon the continued services of key
technical and senior management personnel. Our future success also depends on our continuing
ability to attract, retain and motivate highly qualified managerial and technical personnel. The
inability to retain or attract qualified personnel could have a significant negative effect upon
our efforts and thereby materially harm our business and financial condition. We have entered into
employment agreements with each member of our senior management.
Product Liability and Uninsured Risks May Adversely Affect the Continuing Operations. We may be
liable if any of our products cause injury, illness, or death. We also may be required to recall
certain of our products should they become damaged or if they are defective. We are not aware of
any material product liability claim against us. Further, we maintain a general liability policy
that includes product liability coverage of $1,000,000 per occurrence and $2,000,000 per year in
the aggregate. However, a product liability claim against us could have a material adverse effect
on our business or financial condition.
A Significant Portion of our Revenue is to Customers in Foreign Countries. We may Lose Revenues,
Market Share, and Profits due to Exchange Rate Fluctuations and Other Factors related to our
Foreign Business. In the year ended June 30, 2007, sales to customers in foreign countries
comprised approximately 49% of our revenues. Our foreign business is subject to economic,
political and regulatory uncertainties and risks that are unique to each area of the world.
Fluctuations in exchange rates may also affect the prices that our foreign customers are willing to
pay, and may put us at a price disadvantage compared to other competitors. Potentially volatile
shifts in exchange rates may negatively affect our financial condition and operations.
The Preparation of our Financial Statements in Accordance with U.S. Generally Accepted Accounting
Principles Requires Us to Make Estimates, Judgments, and Assumptions that may Ultimately Prove to
be Incorrect. The accounting estimates and judgments that management must make in the ordinary
course of business affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the periods presented.
If the underlying estimates are ultimately proven to be incorrect, subsequent adjustments could
have a material adverse effect on our operating results for the period or periods in which the
change is identified. Additionally, subsequent adjustments could require us to restate our
financial statements. Restating financial statements could result in a material decline in the
price of our stock.
15
Risks Related to Our Industry
Our Business is Heavily Regulated, Resulting in Increased Costs of Operations and Delays in Product
Sales. Most of our products require FDA approval to sell in the U.S. and will require clearance
from comparable agencies to sell our products in foreign countries. These clearances may limit the
U.S. or foreign market in which our products may be sold or circumscribe applications for U.S. or
foreign markets in which our products may be sold. Although the majority of our products related
to freezing blood components are currently exempt from the requirement to file a 510(k) or PMA,
that situation may change in the future as the FDA moves to regulate cell therapy products being
processed by the BioArchive System and/or AXP Platform. In anticipation of possible future
regulation by the FDA, the Company has filed, and is maintaining, a Master File on the BioArchive
System and the AXP Platform. However, currently the BioArchive, AXP and the ThermoLine products are
being marketed and sold worldwide. Further, our products must be manufactured under principals of
our quality system for continued CE Marking that allows our products to be marketed and sold in
Europe, which are similar to the quality system regulations of both the FDA and California
Department of Health. Failure to comply with those quality system requirements and regulations may
subject the Company to delays in production while it corrects any deficiency found by either the
FDA, the State of California or the Companys Notifying European Body during any audit of our
quality system. If we are found to be out of compliance, we could receive warning letters or even
be temporarily shut down in manufacturing while the non-conformances are rectified.
Competition in Our Industry is Intense and Will Likely Involve Companies with Greater Resources
than We Have. We hope to develop a competitive advantage in the medical applications of our
products, but there are many competitors that are substantially larger and who possess greater
financial resources and personnel than we have. Our current principal market is cord blood banks.
The CryoSeal System may face competition from major plasma fractionators that currently sell fibrin
glue sourced from pooled plasma outside the U.S. With regard to the BioArchive System and AXP
Platform, numerous larger and better-financed medical device manufacturers may choose to enter this
market as it develops.
Influence By the Government and Insurance Companies May Adversely Impact Sales of Our Products.
Our business may be materially affected by continuing efforts by government, third party payers
such as Medicare, Medicaid, and private health insurance plans, to reduce the costs of healthcare.
For example, in certain foreign markets the pricing and profit margins of certain healthcare
products are subject to government controls. In addition, increasing emphasis on managed care in
the U.S. will continue to place pressure on the pricing of healthcare products. As a result,
continuing efforts to contain healthcare costs may result in reduced sales or price reductions for
our products. To date, we are not aware of any direct impact on our pricing or product sales due
to such efforts by governments to contain healthcare costs, and we do not anticipate any immediate
impact in the near future.
We are Dependent on our Suppliers and Manufacturers to Meet Existing Regulations. Certain of our
suppliers and manufacturers are subject to heavy government regulations, including FDA approval in
the operation of their facilities, products and manufacturing processes. Any adverse action by the
FDA against our suppliers or manufacturers could delay supply or manufacture of component products
required to be integrated or sold with our products. There are no assurances we will be successful
in locating an alternative supplier or manufacturer to meet product shipment or launch deadlines.
As a result, our sales, contractual commitments and financial forecasts may be significantly
affected by any such delays.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
16
ITEM 2. PROPERTIES
The Company leases a facility with approximately 28,000 square feet of space located in Rancho
Cordova, California. Approximately 50% of the facility is devoted to warehouse space and
manufacturing of products, including 500 square feet for a clean room. The other 50% is comprised
of office space, a biologics lab and a R&D lab. The lease expires in September 2008.
In April 2007, the Company leased an additional facility with approximately 14,000 square feet.
The two facilities are located in the same commercial complex. Approximately 30% of the facility
is devoted to warehouse space. The other 70% is comprised of office space. The lease expires in
March 2012.
At fiscal year end, the Company did not own or lease any other facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company and its property are not a party to any pending legal proceedings. In the
normal course of operations, the Company may have disagreements or disputes with employees, vendors
or customers. These disputes are seen by the Companys management as a normal part of business,
and there are no pending actions currently or no threatened actions that management believes would
have a significant material impact on the Companys financial position, results of operations or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to security holders during the fourth quarter of its last
fiscal year ended June 30, 2007.
17
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Companys common stock, $0.001 par value, is traded on the NASDAQ SmallCap Market under the
symbol KOOL. The following table sets forth the range of high and low bid prices for the Companys
common stock for the past two fiscal years as reported by NASDAQ. The ranges listed represent
actual transactions, without adjustment for retail markups, markdowns or commissions, as reported
by NASDAQ.
|
|
|
|
|
|
|
|
|
Fiscal 2007 |
|
High |
|
Low |
|
First Quarter (Sep. 30) |
|
$ |
4.55 |
|
|
$ |
3.41 |
|
Second Quarter (Dec. 31) |
|
$ |
5.01 |
|
|
$ |
3.59 |
|
Third Quarter (Mar. 31) |
|
$ |
4.38 |
|
|
$ |
2.69 |
|
Fourth Quarter (June 30) |
|
$ |
3.60 |
|
|
$ |
2.42 |
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 |
|
High |
|
Low |
|
First Quarter (Sep. 30) |
|
$ |
5.74 |
|
|
$ |
4.42 |
|
Second Quarter (Dec. 31) |
|
$ |
5.34 |
|
|
$ |
4.05 |
|
Third Quarter (Mar. 31) |
|
$ |
5.02 |
|
|
$ |
3.70 |
|
Fourth Quarter (June 30) |
|
$ |
4.88 |
|
|
$ |
3.82 |
|
The Company has not paid cash dividends on its common stock and does not intend to pay a cash
dividend in the foreseeable future. There were approximately 383 stockholders of record on June
30, 2007 (not including street name holders).
The following graph compares the performance of the Companys common stock during the period June
30, 2002 to June 30, 2007, with the NASDAQ Stock Market Index and the Companys peer group of
NASDAQ stocks:
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
ThermoGenesis Corp., The NASDAQ Composite Index
And A Peer Group
* $100
invested on 6/30/02 in stock or index-including reinvestment of
dividends.
Fiscal
year ending June 30.
18
ITEM 6. SELECTED FINANCIAL DATA
ThermoGenesis Corp.
Five-Year Review of Selected Financial Data
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, |
|
Summary of Operations |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
Net revenues |
|
$ |
16,751 |
|
|
$ |
12,048 |
|
|
$ |
10,177 |
|
|
$ |
11,646 |
|
|
$ |
10,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
(11,554 |
) |
|
|
(7,705 |
) |
|
|
(7,089 |
) |
|
|
(7,844 |
) |
|
|
(7,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
5,197 |
|
|
|
4,343 |
|
|
|
3,088 |
|
|
|
3,802 |
|
|
|
2,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administration |
|
|
(9,630 |
) |
|
|
(7,156 |
) |
|
|
(5,837 |
) |
|
|
(5,174 |
) |
|
|
(5,014 |
) |
Research and development |
|
|
(4,108 |
) |
|
|
(4,157 |
) |
|
|
(5,673 |
) |
|
|
(3,472 |
) |
|
|
(2,937 |
) |
Interest and other income, net |
|
|
1,765 |
|
|
|
828 |
|
|
|
202 |
|
|
|
67 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,776 |
) |
|
$ |
(6,142 |
) |
|
$ |
(8,220 |
) |
|
$ |
(4,777 |
) |
|
$ |
(5,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share |
|
$ |
(0.12 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
Cash, cash equivalents
and short
term investments |
|
$ |
33,379 |
|
|
$ |
38,999 |
|
|
$ |
9,568 |
|
|
$ |
16,612 |
|
|
$ |
6,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
|
$ |
37,759 |
|
|
$ |
42,342 |
|
|
$ |
13,085 |
|
|
$ |
19,798 |
|
|
$ |
10,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
43,790 |
|
|
$ |
47,603 |
|
|
$ |
17,466 |
|
|
$ |
24,114 |
|
|
$ |
12,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
5,978 |
|
|
$ |
5,631 |
|
|
$ |
3,435 |
|
|
$ |
3,146 |
|
|
$ |
2,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
$ |
37,812 |
|
|
$ |
41,972 |
|
|
$ |
14,031 |
|
|
$ |
20,968 |
|
|
$ |
10,574 |
|
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THIS SECTION AND OTHER PARTS OF THIS REPORT ON FORM 10-K WHICH ARE
NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS AND ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES. THE COMPANYS ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE PROJECTED RESULTS
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT AFFECT ACTUAL RESULTS INCLUDE, BUT
ARE NOT LIMITED TO, THOSE DISCUSSED IN ITEM 1 BUSINESS UNDER THE SUBSECTION ENTITLED FACTORS
AFFECTING OPERATING RESULTS, AND OTHER FACTORS IDENTIFIED FROM TIME TO TIME IN THE COMPANYS
REPORTS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION.
The following discussion should be read in conjunction with the Companys financial statements
contained in this report.
19
(a) Overview
We are principally a leading supplier of innovative products that process, store and administer
therapeutic doses of adult stem cells for treatment of disease and injury. These stem cells
typically originate from the blood or tissue of the patients placenta or living donor. The Stem
Cell therapy market is a broad, rapidly growing field of medicine that involves the collection,
purification, manipulation and administration of stem cells, to treat malignant or genetic blood
diseases, tailored to individual patients. This methodology of personalized treatment is
considerably different than practices with generic conventional pharmaceutical drugs.
Pharmaceutical drugs are produced in large quantities and are effective on most patients with
similar underlying medical conditions. Additionally, these drugs typically consist of inert
materials that can be stored in medicine cabinets at room temperature. In contrast, personalized
cell therapies are manufactured one at a time, are intended for a single patient and require
extremely low storage temperatures (-196°C in some cases) in order to preserve the cells, blood
proteins or growth factors.
Historically, our focus was on our core ultra-rapid freezing technology, applied principally to
freezers for blood and blood components and plasma thawers, which are our legacy products. Through
our research programs we developed more advanced product platforms directed at stem cell therapies
and wound care. Our stem cell products have been the principal drivers of our revenue growth over
the past few years, and our legacy products have become an increasingly smaller component of
revenue and are no longer strategically relevant to our growth.
Our Products
The BioArchive System, an automated cryogenic device, is used by cord blood stem cell banks in more
than 25 countries for cryopreserving and archiving cord blood stem cell units for transplant. GEHC
is the global distribution partner for the BioArchive System. The BioArchive System has initially
been configured to automate the cryopreservation and archiving in liquid nitrogen of units of stem
cells sourced from umbilical cord blood.
The Company recently completed development of the AXP Platform, and initiated a Master File of the
product with the FDA. Marketing efforts began during the quarter ended March 31, 2006 and in
February 2007 the Company filed an application for 510k approval for the use of the AXP in the
processing of cord blood for cryopreservation. The AXP Platform is an innovative product which
semi-automates the isolation and concentration of stem cells from cord blood into a fixed 20 ml
volume in a functionally closed sterile environment. It includes a compact battery powered device
and a proprietary disposable bag set. The AXP Platform replaces the current clinical process which
is typically an 18-step manual method over a ninety (90) minute period with a semi-automated
process requiring only thirty (30) minutes. The manual process requires the introduction of
sedimentation agents or density gradient media into the cord blood and requires a clean room along
with trained technicians to accomplish. The AXP Platform completes its processing without these
agents or media with a higher cell recovery rate in a functionally closed bag set in thirty (30)
minutes. Included in the set is a 25 ml freezing bag which can be archived in the BioArchive
System.
The CryoSeal System produces a second-generation surgical sealant which harvests the two
interactive protein component solutions of a fibrin sealant: (1) the wound healing proteins of
fibrinogen, fibronectin, Factor VIII, von Willebrands Factor and Factor XIII and (2) the activating
enzyme, thrombin from the patients own blood. When combined at the bleeding wound site, the two
components form an adhesive gel that stops bleeding and bonds tissue. This advanced surgical
sealant may be manufactured in either hospitals or blood centers and competes with conventional
fibrin sealants, sourced from pools of plasma purchased from up to ten thousand individuals.
20
On July 30, 2007, the Company announced that it had received FDA clearance to market the CryoSeal
FS Systems autologous fibrin sealant, as an adjunct to hemostasis in liver resection surgery. In
Japan, our distributor, Asahi has completed enrollment in their pivotal clinical trial and filed
their PMA equivalent in March 2005 with approval expected during fiscal 2008. The Company has
received CE Mark approval for the system enabling its sale and use in Europe. However, we have not
been able to meaningfully penetrate the market with this product and revenues have lagged
expectations. Over the last several years while marketing the CryoSeal in numerous European
countries, we and our distributors have faced substantial country specific regulatory,
cost-reimbursement and product registration requirements that have negatively impacted our ability
to sell the product and grow revenues. Compliance with these requirements has been more
complicated than we anticipated, requiring far more time and the consumption of more of our
resources than we originally projected.
With a better appreciation today for the country specific expertise required to successfully market
the CryoSeal, we are assessing strategic alternatives beyond our own regulatory and marketing
capabilities to help us better navigate the regulatory and reimbursement pathways in each of our
markets throughout the world. We are targeting to increase our market penetration for this product
in Europe and in other areas of the world including Brazil, Korea, Mexico, Russia and Taiwan where
our distributors may now register the CryoSeal System following our recently received FDA approval.
We believe that there is a market for our 100% autologous CryoSeal System due to its safety
advantages over conventional, non-autologous fibrin sealants that carry the risk of contamination
by blood-borne pathogens from other donors, and that this market may extend beyond the typical
wound care applications to include use of the technology in the delivery of stem cells for cell
therapeutics. Therefore, we are evaluating alternatives for commercialization of our CryoSeal
System including new strategic partnering and licensing, distribution channel partners, and the
potential use of the technology in the delivery of stem cells.
The TPD, a product line extension of the CryoSeal platform, is a small stand alone disposable that
isolates and captures activated autologous thrombin from approximately 11 ml of patient blood
plasma. Thrombin is used as a topical hemostatic agent for minor bleeding sites, to treat
pseudoaneurysms and to release growth factors from platelets.
The Companys legacy is in its ThermoLine products for ultra rapid freezing and thawing of blood
components, which the Company distributes to blood banks and hospitals. We are currently
evaluating continuation of the ThermoLine, or divestiture, consistent with our strategic direction
emphasizing the cell therapy and surgical wound care market.
With respect to wound care products, our CryoSeal System recently received FDA approval in
conjunction with liver resectioning surgery, but we have not been able to meaningfully penetrate
markets with that product, and revenues have lagged expectations.
Critical Accounting Policies
The Companys discussion and analysis of its financial condition and results of operations are
based upon the Companys financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates, including those related to
stock-based compensation, bad debts, inventories, warranties, contingencies and litigation. The
Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
21
that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
The Company believes the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of its financial statements.
Stock-Based Compensation:
The Company accounts for stock-based employee compensation arrangements in accordance with the
provisions of Statement of Financial Accounting Standards No. 123(R), Shared-Based Payments (FAS
123(R)). Under FAS 123(R), compensation cost is calculated on the date of the grant using the Black
Scholes-Merton option-pricing formula. The compensation expense is then amortized over the vesting
period. The Company uses the Black-Scholes-Merton option-pricing formula in determining the fair
value of the Companys options at the grant date and applies judgment in estimating the key
assumptions that are critical to the model such as the expected term, volatility and forfeiture
rate of an option. The Companys estimate of these key assumptions is based on historical
information and judgment regarding market factors and trends. If actual results are not consistent
with the Companys assumptions and judgments used in estimating the key assumptions, the Company
may be required to record additional compensation or income tax expense, which could have a
material impact on the Companys financial position and results of operations.
Revenue Recognition:
The Company recognizes revenue including multiple element arrangements, in accordance with the
provisions of the Securities and Exchange Commissions (SEC) Staff Accounting Bulletin (SAB)
No. 104, Revenue Recognition and the Financial Accounting Standards Boards (FASB) Emerging
Issues Task Force (EITF) 00-21, Revenue Agreements with Multiple Deliverables. Revenues from the
sale of the Companys products are recognized when persuasive evidence of an arrangement exists,
delivery has occurred (or services have been rendered), the price is fixed or determinable, and
collectibility is reasonably assured. The Company generally ships products F.O.B. shipping point
at its office. There is no conditional evaluation on any product sold and recognized as revenue.
All foreign sales are denominated in U.S. dollars. Amounts billed in excess of revenue recognized
are recorded as deferred revenue on the balance sheet.
The Companys foreign sales are generally through distributors. There is no right of return
provided for distributors. For sales of products made to distributors, the Company considers a
number of factors in determining whether revenue is recognized upon transfer of title to the
distributor, or when payment is received. These factors include, but are not limited to, whether
the payment terms offered to the distributor are considered to be non-standard, the distributor
history of adhering to the terms of its contractual arrangements with the Company, the level of
inventories maintained by the distributor, whether the Company has a pattern of granting
concessions for the benefit of the distributor, and whether there are other conditions that may
indicate that the sale to the distributor is not substantive. The Company currently recognizes
revenue primarily on the sell-in method with its distributors.
Revenue arrangements with multiple elements are divided into separate units of accounting if
certain criteria are met, including whether the delivered item has value to the customer on a
stand-alone basis and whether there is objective and reliable evidence of the fair value of the
undelivered items. Revenue is recognized as specific elements indicated in sales contracts are
executed. If an element is essential to the functionality of an arrangement, the entire
arrangements revenue is deferred until that essential element is delivered. The fair value of
each undelivered element that is not essential to the functionality of the system is deferred until
performance or delivery occurs. The fair value of an undelivered element is based on vendor
specific objective evidence or third party evidence of fair value as appropriate. Costs associated
with inconsequential or perfunctory elements in multiple element arrangements are accrued at
22
the time of revenue recognition. The Company accounts for training and installation as a separate
element of a multiple element arrangement. The Company therefore recognizes the fair value of
training and installation services upon their completion when the Company is obligated to perform
such services.
Service revenue generated from contracts for providing maintenance of equipment is amortized over
the life of the agreement. All other service revenue is recognized at the time the service is
completed.
Milestone payments the Company receives under collaborative arrangements are recognized as revenue
upon achievement of the milestone events, which represent the culmination of the earnings process,
and when collectibility is reasonably assured. Milestone payments are triggered by the results of
the Companys development efforts. Accordingly, the milestone payments are substantially at risk
at the inception of the contract, and the amounts of the payments assigned thereto are commensurate
with the milestone achieved. Upon the achievement of a milestone event, which may include
acceptance by the counterparty, the Company has no future performance obligations related to that
milestone as the milestone payments received by the Company are nonrefundable. The direct costs,
primarily labor, of product development contracts are deferred until the development revenue is
recognized.
For licensing agreements pursuant to which the Company receives up-front licensing fees for
products or technologies that will be provided by the Company over the term of the arrangements,
the Company defers the up-front fees and recognizes the fees as revenue on a straight-line method
over the term of the respective license. For license agreements that require no continuing
performance on the Companys part, license fee revenue is recognized immediately upon grant of the
license.
Shipping and handling fees billed to customers are included in product and other revenues, while
the related costs are included in cost of product and other revenues.
Allowance for Doubtful Accounts:
The Company maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. If the financial condition of the Companys
customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required, which would be charged against earnings.
Warranty:
The Company provides for the estimated cost of product warranties at the time revenue is
recognized. While the Company engages in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of its component suppliers, the Companys
warranty obligation is affected by product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product failure rates, material usage or
service delivery costs differ from the Companys estimates, revisions to the estimated warranty
liability could have a material impact on the Companys financial position, cash flows or results
of operations.
Inventory Reserve:
The Company plans inventory procurement and production based on orders received, forecasted demand
and supplier requirements. The Company writes down its inventories for estimated obsolescence or
unmarketable inventories equal to the difference between the cost of inventories and its net
realizable value based upon estimates about future demand from our customers and distributors and
market conditions. Because some of the Companys products are highly dependent on government and
third-party funding, current customer use and validation, and completion of regulatory and field
trials, there is a risk that we will forecast incorrectly and purchase or produce excess
inventories. As a result, actual demand may differ from forecasts, and such a difference may have
a material adverse effect on future results of operations due to required write-offs of excess or
obsolete inventory. This inventory risk may
23
be further compounded for the CryoSeal family of products because they are at initial market
introduction and market acceptance will depend upon the customer accepting the products as
clinically useful, reliable, accurate and cost effective compared to existing and future products
and completion of required clinical or field acceptance trials.
(b) Results of Operations
The following is Managements discussion and analysis of certain significant factors which have
affected the Companys financial condition and results of operations during the periods included in
the accompanying financial statements.
Results of Operations for the Year Ended June 30, 2007 as Compared to the Year Ended June 30, 2006
Net Revenues:
Net revenues for the year ended June 30, 2007 were $16,751,000 compared to $12,048,000 for the year
ended June 30, 2006, an increase of $4,703,000 or 39%. Cell Therapy revenues were $12,375,000 for
the year ended June 30, 2007, compared to $9,017,000 for the corresponding fiscal 2006 period, an
increase of $3,358,000 or 37%. This increase in Cell Therapy revenues was primarily due to the
sale of AXP disposables, $2,557,000 for the year ended June 30, 2007, versus $118,000 for the year
ended June 30, 2006. The AXP product line was launched in fiscal 2006. Sales of Cell Therapy
spare parts were $930,000 for the year ended June 30, 2007, an increase of $583,000. Cell Therapy
revenues also increased due to the amortization of the distribution and license fees paid by GEHC
in accordance with the International Distribution Agreement.
The following represents the Companys cumulative BioArchive devices in the following geographies:
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
2007 |
|
2006 |
United States |
|
|
33 |
|
|
|
28 |
|
Asia |
|
|
56 |
|
|
|
49 |
|
Europe |
|
|
40 |
|
|
|
33 |
|
Rest of World |
|
|
26 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
155 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
|
Surgical Wound Care revenues were $2,134,000 for the year ended June 30, 2007, compared to
$1,021,000 for the year ended June 30, 2006. The increase is primarily due to $950,000 in
development milestone payments.
The following represents the Companys revenues for disposables by product line:
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
|
2007 |
|
|
2006 |
|
BioArchive |
|
$ |
3,290,000 |
|
|
$ |
3,002,000 |
|
AXP |
|
|
2,557,000 |
|
|
|
118,000 |
|
TPD |
|
|
493,000 |
|
|
|
329,000 |
|
CryoSeal |
|
|
365,000 |
|
|
|
386,000 |
|
|
|
|
|
|
|
|
|
|
$ |
6,705,000 |
|
|
$ |
3,835,000 |
|
|
|
|
|
|
|
|
Percentage of total
Company revenues |
|
|
40 |
% |
|
|
32 |
% |
|
|
|
|
|
|
|
24
Additionally, revenues from our legacy product line, the ThermoLine, increased $232,000 to
$2,123,000 for the year ended June 30, 2007.
Gross Profit:
The Companys gross profit was $5,197,000 or 31% of net revenues for the year ended June 30, 2007,
as compared to $4,343,000 or 36% for the year ended June 30, 2006. The decrease in gross profit
percentage is due to an additional $686,000 of product testing and destruction of lots as part of
quality assurance programs of the AXP bagset disposables. Additionally, higher warranty claims
contributed to $342,000 of additional cost of revenues. These items were partially offset by the
increase in revenues from milestone payments and license fees.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses were $9,630,000 for the year ended June 30, 2007,
compared to $7,156,000 for the year ended June 30, 2006, an increase of $2,474,000 or 35%. The
increase is primarily due to salaries and travel costs for additional sales and marketing
personnel. Also contributing to the increase were recruiting expenses for executive officers and
sales and marketing personnel. Significant progress was made during the year in staffing the
organization for future growth. Specifically, a new General Manager of Operations and a Vice
President of Sales and Marketing were hired. The Company also initiated searches for new board
members and a new CEO. The appointment by the Board of Directors of a new CEO and the transition
of the incumbent CEO to Chief Technology Architect was announced in July 2007.
Research and Development Expenses:
Research and development expenses for the year ended June 30, 2007 were $4,108,000 compared to
$4,157,000 for fiscal 2006, a decrease of $49,000 or 1%. R&D expenses have remained consistent as
the reduction in the costs associated with the design and development services for the AXP System,
$246,000, which was launched during fiscal 2006 and decrease in clinical trial costs related to the
completed CryoSeal FS human clinical trial, $551,000, have been offset by operating supplies for
research projects and recruiting costs and salaries for additional R&D personnel.
Management believes that product development and refinement are essential to maintaining the
Companys market position. Therefore, the Company considers these costs as continuing costs of
doing business. No assurances can be given that the products or markets recently developed or
under development will be successful.
Results of Operations for the Year Ended June 30, 2006 as Compared to the Year Ended June 30, 2005
Net Revenues:
Net revenues for the year ended June 30, 2006 were $12,048,000, compared to $10,177,000 for the year
ended June 30, 2005, an increase of $1,871,000 or 18%. Revenues generated by the Cell Therapy
product lines were $9,017,000 for the year ended June 30, 2006, compared to $7,269,000 for the
corresponding fiscal 2005 period, an increase of $1,748,000 or 24%. The AXP product line accounted
for $738,000 of the increase in Cell Therapy revenues for the year ended June 30, 2006, as compared
to zero for the prior year. Included in the Cell Therapy product line revenues noted was
$3,002,000 generated from the sales of BioArchive disposables for fiscal 2006, an increase of
$432,000 or 17% over fiscal 2005. A total of 21 BioArchives were sold during fiscal 2006, the same
as in the prior fiscal year. Revenues generated by the surgical wound care product line were
$1,021,000 for the year ended June 30, 2006, compared to $456,000 for the prior year. The increase
is primarily due to an increase in sales of TPD disposables to Biomet and other distributors and an
increase in sales of the CryoSeal processing disposable. Royalty and licensing revenues included
in the above product lines for the year ended June 30, 2006 was $762,000 compared to $234,000 for
fiscal 2005. The increase is primarily due to the amortization of the
25
distribution and license fees paid by GEHC in accordance with the International Distribution
Agreement. The revenue increases noted above were offset by a decrease in revenues of $430,000
from our legacy product line, the ThermoLine.
The following represents the Companys cumulative BioArchive devices in the following geographies:
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
2006 |
|
2005 |
United States |
|
|
28 |
|
|
|
24 |
|
Asia |
|
|
49 |
|
|
|
44 |
|
Europe |
|
|
33 |
|
|
|
26 |
|
Rest of World |
|
|
25 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
135 |
|
|
|
114 |
|
|
|
|
|
|
|
|
|
|
The following represents the Companys revenues for disposables by product line:
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
|
2006 |
|
|
2005 |
|
BioArchive |
|
$ |
3,002,000 |
|
|
$ |
2,570,000 |
|
CryoSeal |
|
|
386,000 |
|
|
|
200,000 |
|
TPD |
|
|
329,000 |
|
|
|
10,000 |
|
AXP |
|
|
118,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,835,000 |
|
|
$ |
2,780,000 |
|
|
|
|
|
|
|
|
Percentage of total
Company revenues |
|
|
32 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
Gross Profit:
Gross profit as a percent of revenues was 36% for the year ended June 30, 2006, as compared to 30%
for the year ended June 30, 2005. The improvement in gross profit is primarily due to the increase
of higher margin royalty and licensing revenue, a reduction in warranty costs and higher volumes in
our higher margin disposable products, primarily the TPD for the year ended June 30, 2006.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses were $7,156,000 for the year ended June 30, 2006,
compared to $5,837,000 for the year ended June 30, 2005, an increase of $1,319,000 or 23%. The
increase is primarily due to the Companys adoption of Statement 123(R) as of July 1, 2005, which
resulted in $868,000 of stock based compensation expense, an increase in commissions and incentive
compensation payouts of $207,000 and an increase in professional fees.
Research and Development Expenses:
Research and development expenses for the year ended June 30, 2006 were $4,157,000 compared to
$5,673,000 for fiscal 2005, a decrease of $1,516,000 or 27%. The decrease is primarily due to a
reduction of $777,000 in the costs associated with design and development services for the AXP
Platform, which was launched during fiscal 2006 and a decrease of $960,000 in clinical trial costs
related to the completed CryoSeal FS human clinical trial.
Management believes that product development and refinement is essential to maintaining the
Companys market position. Therefore, the Company considers these costs as continuing costs of
doing business. No assurances can be given that the products or markets recently developed or
under development will be successful.
26
(c) Liquidity and Capital Resources
At June 30, 2007, the Company had a cash and short-term investments balance of $33,379,000 and
working capital of $37,759,000. This compares to a cash and short-term investments balance of
$38,999,000 and working capital of $42,342,000 at June 30, 2006. The cash was used to fund
operations and other cash needs of the Company. In addition to product revenues, the Company has
primarily financed operations through the private and public placement of equity securities and has
raised approximately $108 million, net of expenses, through common and preferred stock financings
and option and warrant exercises.
Net cash used in operating activities for the year ended June 30, 2007 was $7,762,000, primarily
due to the net loss of $6,776,000, offset by depreciation and stock based compensation expense of
$549,000 and $1,074,000, respectively. Inventories utilized $2,309,000 of cash as a result of
increasing the Companys inventories, primarily in BioArchive and AXP devices, to support our
anticipated revenue growth. Investing activities generated $8,459,000 of cash primarily due to
short-term investments maturing. Financing activities generated $1,506,000 of cash primarily due
to the exercise of options and warrants.
We believe that our currently available cash, cash equivalents and short-term investments, and cash
generated from operations will be sufficient to satisfy our operating and working capital
requirements for at least the next twelve months. However, if we experience significant growth in
the future, we may be required to raise additional cash through the issuance of new debt or
additional equity.
The Company generally does not require extensive capital equipment to produce or sell its current
products. In fiscal 2005, the Company spent $232,000, primarily for computers, website development
and additional costs associated with the Enterprise Resource Planning (ERP) System prior to the
implementation on November 1, 2004. In fiscal 2006, the Company spent $565,000 for software,
computers and laboratory equipment. In fiscal 2007, the Company spent $621,000 primarily for
office furniture for the new leased facility, manufacturing equipment for the AXP product line and
laboratory equipment.
The Company has a contract with an OEM vendor to purchase 190,000 units or $8.7 million of
inventory through fiscal 2009. As of June 30, 2007, the Company had purchased 14,485 units or
$653,000 of inventory under the contract. The parties are not currently operating under the terms
of the contract, but continue to work together on an invoice basis. The contract may be modified
in the future.
During the
fiscal year ended June 30, 2007, revenues from one significant
customer, GEHC, totaled
$7,502,000 or 45% of net revenues. During the fiscal year ended June 30, 2006, revenues from three
significant customers totaled $6,386,000 or 53% of net revenues. During the fiscal year ended June
30, 2005, revenues from two significant customers totaled $2,374,000 or 23% of net revenues.
At June 30, 2007, the Company had two customers that individually accounted for 30% and 14% of
accounts receivable. At June 30, 2006, the Company had three customers that individually accounted
for 47%, 14% and 12% of accounts receivable.
The Company manages the concentration of credit risk with these customers through a variety of
methods including, letters of credit with financial institutions, pre-shipment deposits, credit
reference checks and credit limits. Although management believes that these customers are sound
and creditworthy, a severe adverse impact on their business operations could have a corresponding
material effect on their ability to pay timely and therefore on our net revenues, cash flows and
financial condition.
The
Companys cancelable backlog at June 30, 2007 was $2,246,000.
Off Balance Sheet Arrangements:
As of June 30, 2007, the Company had no off-balance sheet arrangements.
27
Contractual Obligations:
As of June 30, 2007, the Company had the following contractual obligations and commercial
commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations |
|
Payments Due by Period |
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
After 5 |
|
|
Total |
|
1 year |
|
1-3 years |
|
4-5 years |
|
years |
Capital Lease Obligations |
|
$ |
41,000 |
|
|
$ |
16,000 |
|
|
$ |
21,000 |
|
|
$ |
4,000 |
|
|
|
|
|
Operating Leases |
|
|
1,438,000 |
|
|
|
594,000 |
|
|
|
485,000 |
|
|
|
359,000 |
|
|
|
|
|
Inventory Purchase
Commitments |
|
|
69,000 |
|
|
|
69,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Cash
Obligations |
|
$ |
1,548,000 |
|
|
$ |
679,000 |
|
|
$ |
506,000 |
|
|
$ |
363,000 |
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All sales, domestic and foreign, are made in U.S. dollars and therefore currency fluctuations are
believed to have no impact on the Companys net revenues. The Company has no material long-term
investments or debt, other than a note payable, and therefore is not subject to interest rate risk.
Management does not believe that inflation has had or will have a significant impact on the
Companys results of operations. The Company is not exposed to any market risk involving
activities in derivative financial instruments, other financial instruments or derivative commodity
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
|
|
|
Page |
|
|
Number |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
34 |
|
28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of ThermoGenesis Corp.
We have audited the accompanying balance sheets of ThermoGenesis Corp. as of June 30, 2007 and
2006, and the related statements of operations, stockholders equity, and cash flows for each of
the three years in the period ended June 30, 2007. Our audits also included the financial
statement schedule listed in the Index at Item 15.(a)(2). These financial statements and schedule
are the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of ThermoGenesis Corp. at June 30, 2007 and 2006, and the results
of its operations and its cash flows for each of the three years in the period ended June 30, 2007,
in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.
As
discussed in Note 1 to the Notes to Financial Statements, effective
July 1, 2005, the Company adopted Statement of Financial
Standards No. 123 (revised 2004), Share-Based Payment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of ThermoGenesis Corp.s internal control over financial
reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated September 10, 2007 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Sacramento, California
September 10, 2007
29
ThermoGenesis Corp.
Balance Sheets
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
5,730 |
|
|
$ |
3,527 |
|
Short-term investments |
|
|
27,649 |
|
|
|
35,472 |
|
Accounts receivable, net of allowance for
doubtful accounts of $50 ($17 at June 30, 2006) |
|
|
3,226 |
|
|
|
3,773 |
|
Inventories, net |
|
|
5,046 |
|
|
|
2,792 |
|
Other current assets |
|
|
415 |
|
|
|
462 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
42,066 |
|
|
|
46,026 |
|
Equipment at cost less accumulated depreciation of $2,605
($3,024 at June 30, 2006) |
|
|
1,602 |
|
|
|
1,489 |
|
Other assets |
|
|
122 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
$ |
43,790 |
|
|
$ |
47,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,074 |
|
|
$ |
1,931 |
|
Accrued payroll and related expenses |
|
|
525 |
|
|
|
417 |
|
Deferred revenue |
|
|
761 |
|
|
|
718 |
|
Other current liabilities |
|
|
947 |
|
|
|
618 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
4,307 |
|
|
|
3,684 |
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
1,647 |
|
|
|
1,921 |
|
Long-term portion of capital lease obligations and note
payable |
|
|
24 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Footnote 6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 2,000,000 shares
authorized;
Series A convertible preferred stock, 1,077,540
shares issued, none outstanding at June 30, 2007 or 2006 |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 80,000,000 shares
authorized; 55,500,524 issued and outstanding
(54,882,952 at June 30, 2006) |
|
|
56 |
|
|
|
55 |
|
Paid in capital in excess of par |
|
|
118,384 |
|
|
|
115,769 |
|
Accumulated deficit |
|
|
(80,628 |
) |
|
|
(73,852 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
37,812 |
|
|
|
41,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,790 |
|
|
$ |
47,603 |
|
|
|
|
|
|
|
|
See accompanying notes.
30
ThermoGenesis Corp.
Statements of Operations
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
ended June 30 |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Product and other revenues |
|
$ |
15,093 |
|
|
$ |
11,488 |
|
|
$ |
10,097 |
|
Milestone payments and license fees |
|
|
1,658 |
|
|
|
560 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
16,751 |
|
|
|
12,048 |
|
|
|
10,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and other revenues |
|
|
11,294 |
|
|
|
7,705 |
|
|
|
7,089 |
|
Cost of milestone payments and license
fees |
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs of revenues |
|
|
11,554 |
|
|
|
7,705 |
|
|
|
7,089 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
5,197 |
|
|
|
4,343 |
|
|
|
3,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
9,630 |
|
|
|
7,156 |
|
|
|
5,837 |
|
Research and development |
|
|
4,108 |
|
|
|
4,157 |
|
|
|
5,673 |
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
13,738 |
|
|
|
11,313 |
|
|
|
11,510 |
|
|
|
|
|
|
|
|
|
|
|
Loss before interest and other income, net |
|
|
(8,541 |
) |
|
|
(6,970 |
) |
|
|
(8,422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income, net |
|
|
1,765 |
|
|
|
828 |
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,776 |
) |
|
$ |
(6,142 |
) |
|
$ |
(8,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
|
$ |
(0.12 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing per share data |
|
|
55,169,977 |
|
|
|
49,583,823 |
|
|
|
45,427,047 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
31
ThermoGenesis Corp.
Statements of Stockholders Equity
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
Paid in |
|
Deferred |
|
|
|
|
|
Total |
|
|
|
|
|
|
stock |
|
capital in |
|
stock |
|
Accumulated |
|
stockholders |
|
|
Shares |
|
Amount |
|
excess of par |
|
compensation |
|
deficit |
|
equity |
Balance at June 30, 2004 |
|
|
44,711,871 |
|
|
$ |
45 |
|
|
$ |
80,413 |
|
|
|
|
|
|
$ |
(59,490 |
) |
|
$ |
20,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for
exercise of options and warrants |
|
|
501,393 |
|
|
|
|
|
|
|
1,136 |
|
|
|
|
|
|
|
|
|
|
|
1,136 |
|
Issuance of common shares
for services |
|
|
16,973 |
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
61 |
|
Deferred compensation related to
common stock restricted awards |
|
|
|
|
|
|
|
|
|
|
121 |
|
|
$ |
(121 |
) |
|
|
|
|
|
|
|
|
Amortization of deferred stock
compensation |
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
64 |
|
|
|
|
|
|
|
46 |
|
Issuance of common
shares upon conversion of Series
A preferred stock |
|
|
630,000 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options for services |
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,220 |
) |
|
|
(8,220 |
) |
|
|
|
|
Balance at June 30, 2005 |
|
|
45,860,237 |
|
|
|
46 |
|
|
|
81,752 |
|
|
|
(57 |
) |
|
|
(67,710 |
) |
|
|
14,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
shares in public offering |
|
|
8,800,000 |
|
|
|
9 |
|
|
|
32,329 |
|
|
|
|
|
|
|
|
|
|
|
32,338 |
|
Issuance of shares for
exercise of options and warrants |
|
|
197,793 |
|
|
|
|
|
|
|
586 |
|
|
|
|
|
|
|
|
|
|
|
586 |
|
Issuance of common shares to a
consultant for services |
|
|
10,500 |
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
46 |
|
Issuance of common shares and
compensation related to common
stock restricted awards |
|
|
14,422 |
|
|
|
|
|
|
|
(16 |
) |
|
|
57 |
|
|
|
|
|
|
|
41 |
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
1,072 |
|
|
|
|
|
|
|
|
|
|
|
1,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,142 |
) |
|
|
(6,142 |
) |
|
|
|
|
Balance at June 30, 2006 |
|
|
54,882,952 |
|
|
|
55 |
|
|
|
115,769 |
|
|
|
|
|
|
|
(73,852 |
) |
|
|
41,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for
exercise of options and warrants |
|
|
601,349 |
|
|
|
1 |
|
|
|
1,521 |
|
|
|
|
|
|
|
|
|
|
|
1,522 |
|
Issuance of common shares and
compensation related to common
stock restricted awards |
|
|
16,223 |
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
1,074 |
|
|
|
|
|
|
|
|
|
|
|
1,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,776 |
) |
|
|
(6,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
|
55,500,524 |
|
|
$ |
56 |
|
|
$ |
118,384 |
|
|
|
|
|
|
$ |
(80,628 |
) |
|
$ |
37,812 |
|
|
|
|
See accompanying notes.
32
ThermoGenesis Corp.
Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended June 30 |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,776 |
) |
|
$ |
(6,142 |
) |
|
$ |
(8,220 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
549 |
|
|
|
398 |
|
|
|
367 |
|
Stock based compensation expense |
|
|
1,074 |
|
|
|
1,113 |
|
|
|
86 |
|
Accretion of discount on short-term
investments |
|
|
(1,257 |
) |
|
|
(280 |
) |
|
|
|
|
Issuance of common shares for services |
|
|
20 |
|
|
|
46 |
|
|
|
61 |
|
Loss on sale/retirement of equipment |
|
|
31 |
|
|
|
|
|
|
|
7 |
|
Net changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
547 |
|
|
|
(856 |
) |
|
|
190 |
|
Inventories |
|
|
(2,309 |
) |
|
|
336 |
|
|
|
(970 |
) |
Other current assets |
|
|
47 |
|
|
|
87 |
|
|
|
357 |
|
Other assets |
|
|
(34 |
) |
|
|
|
|
|
|
(1 |
) |
Accounts payable |
|
|
143 |
|
|
|
140 |
|
|
|
82 |
|
Accrued payroll and related expenses |
|
|
108 |
|
|
|
74 |
|
|
|
56 |
|
Deferred revenue |
|
|
(231 |
) |
|
|
2,123 |
|
|
|
222 |
|
Other current liabilities |
|
|
326 |
|
|
|
(37 |
) |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(7,762 |
) |
|
|
(2,998 |
) |
|
|
(7,931 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of short-term investments |
|
|
(51,420 |
) |
|
|
(35,192 |
) |
|
|
|
|
Maturities of investments |
|
|
60,500 |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(621 |
) |
|
|
(565 |
) |
|
|
(232 |
) |
Proceeds from sale of equipment |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing
activities |
|
|
8,459 |
|
|
|
(35,757 |
) |
|
|
(211 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
439 |
|
|
|
96 |
|
|
|
374 |
|
Exercise of warrants |
|
|
1,083 |
|
|
|
490 |
|
|
|
762 |
|
Payments on capital lease obligations and note
payable |
|
|
(16 |
) |
|
|
(210 |
) |
|
|
(38 |
) |
Issuance of common stock |
|
|
|
|
|
|
32,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
1,506 |
|
|
|
32,714 |
|
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
2,203 |
|
|
|
(6,041 |
) |
|
|
(7,044 |
) |
Cash and cash equivalents at beginning of year |
|
|
3,527 |
|
|
|
9,568 |
|
|
|
16,612 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
5,730 |
|
|
$ |
3,527 |
|
|
$ |
9,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash financing and investing
information: |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment acquired by note payable/capital lease |
|
$ |
17 |
|
|
$ |
106 |
|
|
$ |
41 |
|
|
|
|
|
|
|
|
|
|
|
Transfer of inventories to equipment |
|
$ |
124 |
|
|
$ |
94 |
|
|
$ |
160 |
|
|
|
|
|
|
|
|
|
|
|
Insurance premium financed by note payable |
|
|
|
|
|
|
|
|
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
Transfer of equipment to inventories |
|
$ |
69 |
|
|
$ |
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
33
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Organization and Business
The Company was incorporated in Delaware in July 1986. The Company designs, manufactures and
markets automated and semi-automated devices and single-use processing disposables that enable
hospitals and blood banks to manufacture a therapeutic dose of stem cells, wound healing proteins
or growth factors from a single unit of cord blood or the patients own blood in less than one
hour. Initially, the Company developed medical devices for ultra rapid freezing and thawing of
blood components, which the Company manufactures and distributes to blood banks and hospitals.
Use of Estimates
Preparation of financial statements in conformity with U.S. generally accepted accounting
principles generally accepted in the United States and pursuant to the rules and regulations of the
Securities and Exchange Commission (the SEC) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could materially differ from those estimates.
Revenue Recognition
The Company recognizes revenue including multiple element arrangements, in accordance with the
provisions of the Securities and Exchange Commissions (SEC) Staff Accounting Bulletin (SAB)
No. 104, Revenue Recognition and the Financial Accounting Standards Boards (FASB) Emerging
Issues Task Force (EITF) 00-21, Revenue Agreements with Multiple Deliverables. Revenues from the
sale of the Companys products are recognized when persuasive evidence of an arrangement exists,
delivery has occurred (or services have been rendered), the price is fixed or determinable, and
collectibility is reasonably assured. The Company generally ships products F.O.B. shipping point
at its office. There is no conditional evaluation on any product sold and recognized as revenue.
All foreign sales are denominated in U.S. dollars. Amounts billed in excess of revenue recognized
are recorded as deferred revenue on the balance sheet.
The Companys foreign sales are generally through distributors. There is no right of return
provided for distributors. For sales of products made to distributors, the Company considers a
number of factors in determining whether revenue is recognized upon transfer of title to the
distributor, or when payment is received. These factors include, but are not limited to, whether
the payment terms offered to the distributor are considered to be non-standard, the distributor
history of adhering to the terms of its contractual arrangements with the Company, the level of
inventories maintained by the distributor, whether the Company has a pattern of granting
concessions for the benefit of the distributor, and whether there are other conditions that may
indicate that the sale to the distributor is not substantive. The Company currently recognizes
revenue primarily on the sell-in method with its distributors.
34
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
Revenue Recognition (Continued)
Revenue arrangements with multiple elements are divided into separate units of accounting if
certain criteria are met, including whether the delivered item has value to the customer on a
stand-alone basis and whether there is objective and reliable evidence of the fair value of the
undelivered items. Revenue is recognized as specific elements indicated in sales contracts are
executed. If an element is essential to the functionality of an arrangement, the entire
arrangements revenue is deferred until that essential element is delivered. The fair value of
each undelivered element that is not essential to the functionality of the system is deferred until
performance or delivery occurs. The fair value of an undelivered element is based on vendor
specific objective evidence or third party evidence of fair value as appropriate. Costs associated
with inconsequential or perfunctory elements in multiple element arrangements are accrued at the
time of revenue recognition. The Company accounts for training and installation as a separate
element of a multiple element arrangement. The Company therefore recognizes the fair value of
training and installation services upon their completion when the Company is obligated to perform
such services.
Service revenue generated from contracts for providing maintenance of equipment is amortized over
the life of the agreement. All other service revenue is recognized at the time the service is
completed.
Milestone payments the Company receives under collaborative arrangements are recognized as revenue
upon achievement of the milestone events, which represent the culmination of the earnings process,
and when collectibility is reasonably assured. Milestone payments are triggered by the results of
the Companys development efforts. Accordingly, the milestone payments are substantially at risk
at the inception of the contract, and the amounts of the payments assigned thereto are commensurate
with the milestone achieved. Upon the achievement of a milestone event, which may include
acceptance by the counterparty, the Company has no future performance obligations related to that
milestone as the milestone payments received by the Company are nonrefundable. The direct costs,
primarily labor, of product development contracts are deferred until the development revenue is
recognized.
For licensing agreements pursuant to which the Company receives up-front licensing fees for
products or technologies that will be provided by the Company over the term of the arrangements,
the Company defers the up-front fees and recognizes the fees as revenue on a straight-line method
over the term of the respective license. For license agreements that require no continuing
performance on the Companys part, license fee revenue is recognized immediately upon grant of the
license.
Shipping and handling fees billed to customers are included in product and other revenues, while
the related costs are included in cost of product and other revenues.
35
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
Cash, Cash Equivalents and Short Term Investments
The Company considers all highly liquid investments with a maturity of three months or less at the
time of purchase to be cash equivalents. Short term investments are comprised of marketable debt
securities which are classified as held-to-maturity and have maturities greater than 90 days, but
not exceeding one year.
Management determines the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at acquisition cost, adjusted for amortization of
premiums and accretion of discounts to maturity computed under the effective interest method. Such
amortization and accretion is included in interest income. The cost of securities sold is based on
the specific identification method.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities, approximate fair value due to their short duration. The fair value of short term
investments is disclosed in Note 2.
Accounts Receivable and Allowance for Doubtful Accounts
The Companys receivables are recorded when billed and represent claims against third parties that
will be settled in cash. The carrying value of the Companys receivables, net of the allowance for
doubtful accounts represents their estimated net realizable value. The Company estimates its
allowance for doubtful accounts based on historical collection trends, age of outstanding
receivables and existing economic conditions. If events or changes in circumstances indicate that
a specific receivable balance may be impaired, further consideration is given to the collectibility
of those balances and the allowance is adjusted accordingly. A customers receivable balance is
considered past-due based on its contractual terms. Past-due receivable balances are written-off
when the Companys internal collection efforts have been unsuccessful in collecting the amount due.
Inventories
Inventories are stated at the lower of cost or market and include the cost of material, labor and
manufacturing overhead. Cost is determined on the first-in, first-out basis.
Suppliers
The Company obtains certain custom components from a limited number of suppliers. If the supplier
raises the price of the component or discontinues production, the Companys gross margin may be
negatively impacted or the Company will have to find another qualified supplier to provide the
component. In the event that it becomes necessary for us to find another supplier, we would first
be required to qualify the quality assurance systems and product of that alternative supplier. Any
transfer between qualified suppliers may impact the production schedule, therefore delaying
revenues, and may cause the price of the key components to increase.
36
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
Equipment
Equipment is recorded at cost. Repairs and maintenance costs are expensed as incurred.
Depreciation for office, computer, machinery and equipment is computed under the straight-line
method over the estimated useful lives. Leasehold improvements are depreciated under the straight
line method over their estimated useful lives or the remaining lease period, whichever is shorter.
Warranty
The Company provides for the estimated cost of product warranties at the time revenue is
recognized. While the Company engages in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of its component suppliers, the Companys
warranty obligation is affected by product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product failure rates, material usage or
service delivery costs differ from the Companys estimates, revisions to the estimated warranty
liability could have a material impact on the Companys financial position, cash flows or results
of operations.
Stock Based Compensation
The Company has four stock-based compensation plans, which are described more fully in Note 7.
Prior to July 1, 2005, the Company accounted for those plans under the recognition and measurement
provisions of Accounting Principals Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations, as permitted by Financial Accounting Standards Board
(FASB) Statement No. 123, Accounting for Stock-Based Compensation. No stock-based employee
compensation cost was recognized for employee options granted in the Statement of Operations for
the years ended June 30, 2005, as all such options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of grant. Effective July 1,
2005, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R),
Share-Based Payment, using the modified-prospective-transition method. Under that transition
method, compensation cost recognized in fiscal years 2006 and 2007 includes: (a) compensation cost
for all share-based payments granted prior to, but not yet vested as of July 1, 2005, based on the
grant date fair value estimated in accordance with the original provisions of Statement 123, net of
estimated forfeitures, and (b) compensation cost for all share-based payments granted subsequent to
July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of
Statement 123(R). Results for prior periods have not been restated. As a result, a non-cash
charge of $778 and $1,039 was charged to compensation expense for the years ended June 30, 2007 and
2006, respectively.
Valuation and amortization method The Company estimates the fair value of stock options granted
using the Black-Scholes-Merton option-pricing formula. This fair value is then amortized on a
straight-line basis over the requisite service periods of the awards, which is generally the
vesting period.
37
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
Stock Based Compensation (Continued)
Expected Term For options which the Company has limited available data, the expected term of the
option is based on the simplified method as allowed by SAB 107. This simplified method averages an
awards vesting term and its contractual term. For all other options, the Companys expected term
represents the period that the Companys stock-based awards are expected to be outstanding and was
determined based on historical experience of similar awards, giving consideration to the
contractual terms of the stock-based awards, vesting schedules and expectations of future employee
behavior.
Expected Volatility The Company uses the trading history of its common stock in determining an
estimated volatility factor when using the Black-Scholes-Merton option-pricing formula to determine
the fair value of options granted.
Expected Dividend The Company has not declared dividends. Therefore, the Company uses a zero
value for the expected dividend value factor when using the Black-Scholes-Merton option-pricing
formula to determine the fair value of options granted.
Risk-Free Interest Rate The Company bases the risk-free interest rate used in the
Black-Scholes-Merton valuation method on the implied yield currently available on U.S. Treasury
zero-coupon issues with the same or substantially equivalent remaining term.
Estimated Forfeitures When estimating forfeitures, the Company considers voluntary and
involuntary termination behavior as well as analysis of actual option forfeitures.
The following table illustrates the effect on net loss per share if the Company had applied the
fair value recognition provisions of Statement 123 to options granted under the Companys stock
option plans. For purposes of this pro forma disclosure, the value of the options is estimated
using a Black-Scholes-Merton option-pricing formula and amortized to expense over the options
vesting periods.
|
|
|
|
|
|
|
2005 |
|
Net loss, as reported |
|
$ |
(8,220 |
) |
Add: stock-based employee
compensation expense
included in reported net loss,
net of related tax effects |
|
|
107 |
|
Deduct: total stock-based
employee compensation
expense determined
under fair value method for
all awards, net of related tax
effects |
|
|
(1,084 |
) |
|
|
|
|
Pro forma net loss |
|
$ |
(9,197 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
|
|
|
As reported |
|
$ |
(0.18 |
) |
Pro forma |
|
$ |
(0.20 |
) |
38
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
Stock Based Compensation (Continued)
The fair value of the Companys stock options granted to employees for the years ended June 30,
2007, 2006 and 2005 was estimated using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Average expected
life (years) |
|
|
3.5 |
|
|
|
3.8 |
|
|
|
6.2 |
|
Risk-free interest rate |
|
|
4.7 |
% |
|
|
4.6 |
% |
|
|
3.8 |
% |
Expected volatility |
|
|
54 |
% |
|
|
62 |
% |
|
|
85 |
% |
Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
The weighted average grant date fair value of options granted during the years ended June 30, 2007,
2006 and 2005 was $1.66, $2.22 and $2.83, respectively.
Credit Risk
The Company manufactures and sells thermodynamic devices principally to the blood component
processing industry and performs ongoing evaluations of the credit worthiness of its customers.
The Company believes that adequate provisions for uncollectible accounts have been made in the
accompanying financial statements.
Segment Reporting
The Company operates in a single segment providing medical devices and disposables to hospitals and
blood banks throughout the world which utilize the equipment to process blood components.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax
assets and liabilities are determined based on differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and laws that are
scheduled to be in effect when the differences are expected to reverse. The Company used the
flow-through method to account for income tax credits.
Net Loss per Share
Net loss per share is computed by dividing the net loss to common stockholders by the weighted
average number of common shares outstanding. The calculation of the basic and diluted earnings per
share is the same for all periods presented, as the effect of the potential common stock
equivalents is anti-dilutive due to the Companys net loss position for all periods presented.
Anti-dilutive securities, which consist of stock options, warrants and common stock restricted
awards, that were not included in diluted net loss per common share, were 2,995,417, 2,963,410 and
3,017,115 as of June 30, 2007, 2006 and 2005, respectively.
Reclassifications
Certain amounts in the prior years financial statements have been reclassified to conform with the
2007 presentation.
39
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued)
New Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting
Changes and Error Corrections. The Statement applies to all voluntary changes in accounting
principle, and changes the requirements for accounting for and reporting of a change in accounting
principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. SFAS No. 154 was adopted on July 1, 2006 and did
not have a material impact on the Companys financial statements.
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. (FIN)
48, Accounting for Uncertainty in Income Taxes. FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in a companys financial statements in accordance with FASB
No. 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. This interpretation also provides
guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition of uncertain tax positions. The interpretation is effective for fiscal
years beginning after December 15, 2006. The Company is currently evaluating the impact that FIN
No. 48 will have on its financial statements.
In September 2006, the SEC issued SAB No. 108, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108) to provide
guidance on the consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. Under SAB No. 108, companies
should evaluate a misstatement based on its impact on the current year income statement, as well as
the cumulative effect of correcting such misstatements that existed in prior years existing in the
current years ending balance sheet. SAB No. 108 will become effective for the Company in its
fiscal year ending June 30, 2007. The Company does not anticipate the adoption of SAB No. 108 will
have a material impact on its financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 157,
Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework
for measuring fair value under GAAP and expands disclosure about fair value measurements. SFAS No.
157 applies under other accounting standards that require or permit fair value measurements.
Accordingly, SFAS No. 157 does not require any new fair value measurement. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007. The
Company is currently evaluating the impact of the provisions of SFAS No. 157 on its financial
statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). SFAS No. 159 allows entities to voluntarily choose to
measure many financial assets and financial liabilities at fair value. SFAS No. 159 is effective
for financial statements issued for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the impact, if any, the adoption of SFAS No. 159 will have on its financial
statements.
40
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
2. Short-term Investments
The following is a summary of held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities of
government sponsored
enterprises |
|
$ |
27,649 |
|
|
$ |
2 |
|
|
$ |
10 |
|
|
$ |
27,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 90 days |
|
$ |
12,902 |
|
|
|
|
|
|
|
|
|
|
$ |
12,903 |
|
Due in 91-365 days |
|
|
14,747 |
|
|
|
|
|
|
|
|
|
|
|
14,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,649 |
|
|
|
|
|
|
|
|
|
|
$ |
27,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities of
government sponsored
enterprises |
|
$ |
19,799 |
|
|
|
|
|
|
$ |
36 |
|
|
$ |
19,763 |
|
U.S. government and agency
securities |
|
|
15,673 |
|
|
|
|
|
|
|
2 |
|
|
|
15,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
35,472 |
|
|
|
|
|
|
$ |
38 |
|
|
$ |
35,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate amount of unrealized losses and fair value of short term investments, which are not
deemed to be other-than-temporarily impaired and less than twelve months are:
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Loss |
|
June 30, 2007 |
|
|
|
|
|
|
|
|
Mortgage-backed
securities |
|
$ |
13,823 |
|
|
$ |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
|
|
|
|
|
|
|
Mortgage-backed
securities |
|
$ |
19,763 |
|
|
$ |
36 |
|
U.S. government and
agency securities |
|
|
7,851 |
|
|
|
2 |
|
|
|
|
|
|
|
|
Total |
|
$ |
27,614 |
|
|
$ |
38 |
|
|
|
|
|
|
|
|
Management has concluded that the unrealized losses on these investments are temporary, as the
duration of the decline in the value of the investments has been short; the extent of the decline,
both in dollars and percentage of cost is not considered significant; and the Company has the
ability and intent to hold the investments until at least substantially all of the cost of the
investments is recovered.
41
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
3. Inventories
Inventories consisted of the following at June 30:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Raw materials |
|
$ |
2,380 |
|
|
$ |
1,563 |
|
Work in process |
|
|
1,334 |
|
|
|
1,433 |
|
Finished goods |
|
|
2,247 |
|
|
|
570 |
|
Reserve |
|
|
(915 |
) |
|
|
(774 |
) |
|
|
|
|
|
|
|
|
|
$ |
5,046 |
|
|
$ |
2,792 |
|
|
|
|
|
|
|
|
Included in the Companys inventory reserve at June 30, 2007 and 2006 was $638 and $459,
respectively, related to CryoSeal FS System products which is based on inventory levels in excess
of forecasted demand for the product. The remainder of the reserve relates to the BioArchive
System and ThermoLine inventory which have been identified as slow-moving or potentially obsolete.
4. Equipment
Equipment consisted of the following at June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
Estimated Useful Life |
Machinery and equipment |
|
$ |
2,140 |
|
|
$ |
2,511 |
|
|
5-10 years or lease term |
Computer and software |
|
|
1,196 |
|
|
|
1,298 |
|
|
2-5 years |
Office equipment |
|
|
654 |
|
|
|
505 |
|
|
5-10 years |
Leasehold improvements |
|
|
217 |
|
|
|
199 |
|
|
5 years or lease term |
|
|
|
|
|
|
|
|
|
|
|
|
4,207 |
|
|
|
4,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and
amortization |
|
|
(2,605 |
) |
|
|
(3,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,602 |
|
|
$ |
1,489 |
|
|
|
|
|
|
|
|
|
|
|
|
5. Other Current Liabilities
Other current liabilities consisted of the following at June 30:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Accrued warranty reserves |
|
$ |
302 |
|
|
$ |
74 |
|
Accrued professional fees |
|
|
361 |
|
|
|
213 |
|
Other prepayments |
|
|
129 |
|
|
|
124 |
|
Deferred rent |
|
|
54 |
|
|
|
74 |
|
Accrued commissions |
|
|
34 |
|
|
|
67 |
|
Other accrued liabilities |
|
|
67 |
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
$ |
947 |
|
|
$ |
618 |
|
|
|
|
|
|
|
|
42
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
6. Commitments and Contingencies
Operating Leases
The Company leases its facilities pursuant to two operating leases, which contain scheduled rent
increases. One facility lease expires in 2009, is non-cancelable and includes an option to renew
for a five year term. The other facility lease expires in 2012, is cancelable after 36 months and
does not have an option to renew. The Company recognizes rent expense on a straight-line basis
over the terms of the respective facility lease. The annual future minimum lease payments for the
non-cancelable operating leases are as follows:
|
|
|
|
|
2008 |
|
$ |
594 |
|
2009 |
|
|
291 |
|
2010 |
|
|
194 |
|
2011 |
|
|
202 |
|
2012 |
|
|
157 |
|
Thereafter |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,438 |
|
|
|
|
|
Rent expense was $552, $462 and $458 for the years ended June 30, 2007, 2006 and 2005,
respectively.
Capital Leases
The Company leases certain equipment under capital leases. The following amounts are included in
assets as equipment under these capital leases as of June 30:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Cost |
|
$ |
58 |
|
|
$ |
42 |
|
Less: accumulated amortization |
|
|
23 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets under capital leases |
|
$ |
35 |
|
|
$ |
32 |
|
|
|
|
|
|
|
|
The future minimum lease payments under capital leases are as follows:
|
|
|
|
|
Year ending June 30: |
|
|
|
|
|
2008 |
|
$ |
16 |
|
2009 |
|
|
16 |
|
2010 |
|
|
5 |
|
2011 |
|
|
4 |
|
|
|
|
|
Total minimum lease payments |
|
|
41 |
|
Less: amount representing interest |
|
|
3 |
|
|
|
|
|
Present value of minimum lease payments |
|
|
38 |
|
Less: current portion |
|
|
14 |
|
|
|
|
|
Long term portion |
|
$ |
24 |
|
|
|
|
|
43
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
6. Commitments and Contingencies (Continued)
Note Payable
The Company entered into a note payable with a financial institution to purchase a vehicle for
field service personnel in January 2003 for $36. The note bears interest at 9.90%, requires
monthly payments of principal and interest of $1 and matures on January 5, 2008. The Company
prepaid the note in full in fiscal 2007.
Contingencies
In the normal course of operations, the Company may have disagreements or disputes with customers,
employees or vendors. These disputes are seen by the Companys management as a normal part of
business, and there are no pending actions currently or no threatened actions that management
believes would have a significant material impact on the Companys financial position, results of
operations or cash flow.
Warranty
The Company offers a one-year warranty for parts only on all of its products. In addition, the
Companys one-year warranty for the BioArchive device includes labor and travel. The Company
periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as
necessary.
Changes in the Companys product liability which is included in accrued liabilities during the
period are as follows:
|
|
|
|
|
|
|
|
|
|
|
For years ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
Beginning balance |
|
$ |
74 |
|
|
$ |
103 |
|
Warranties issued during the period |
|
|
214 |
|
|
|
128 |
|
Settlements made during the period |
|
|
(253 |
) |
|
|
(82 |
) |
Changes in liability for pre-existing
warranties during the period, including
expirations |
|
|
267 |
|
|
|
(75 |
) |
|
|
|
|
|
|
|
Ending balance |
|
$ |
302 |
|
|
$ |
74 |
|
|
|
|
|
|
|
|
7. Stockholders Equity
Common Stock
On February 3, 2006, the Company completed a public offering of 8,800,000 shares of its common
stock, which included the over allotment option completed in March 2006, at $4.00 per share. Net
proceeds after expenses from the offering were approximately $32,338.
As of June 30, 2007, the Company had 5,995,781 shares of common stock reserved for future issuance.
44
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
7. Stockholders Equity (Continued)
Warrants
In conjunction with a private placement on March 28, 2003, the Company issued three year warrants
representing the right to acquire an additional 11,976 shares of the Companys common stock at
$2.39 per share. The warrants were fully vested upon issuance and expired in March 2006.
In conjunction with a private placement on March 26, 2002, five year warrants were issued,
representing the right to acquire an additional 723,362 shares of common stock at $3.07 per share.
The warrants vested immediately and expired in March 2007.
In conjunction with a private placement on April 27, 2001, five-year warrants were issued,
representing the right to acquire an additional 788,809 shares of common stock, at an exercise
price of $2.88 per share. The warrants were fully vested upon issuance and expired in April 2006.
In conjunction with a debt financing in December 2000, five-year warrants were issued, representing
the right to acquire 415,000 shares of common stock for an exercise price of $1.625. The warrants
were fully vested upon issuance and expired in December 2005.
In conjunction with a private placement in December 1999 and January 2000, five year warrants were
issued, representing the right to acquire 484,562 shares of common stock at an exercise price of
$2.72628. The warrants expired in December 2004 and January 2005.
A summary of warrant activity for the three years ended June 30, 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Exercise Price |
|
|
|
Shares |
|
|
Per Share |
|
Balance at June 30, 2004 |
|
|
951,195 |
|
|
$ |
2.84 |
|
|
Warrants granted |
|
|
|
|
|
|
|
|
Warrants canceled |
|
|
|
|
|
|
|
|
Warrants exercised |
|
|
(307,246 |
) |
|
$ |
2.50 |
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at June 30, 2005 |
|
|
643,949 |
|
|
$ |
3.00 |
|
|
|
|
|
|
|
|
|
|
Warrants granted |
|
|
|
|
|
|
|
|
Warrants canceled |
|
|
(83,699 |
) |
|
$ |
2.81 |
|
Warrants exercised |
|
|
(166,888 |
) |
|
$ |
2.94 |
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at June 30, 2006 |
|
|
393,362 |
|
|
$ |
3.07 |
|
|
|
|
|
|
|
|
|
|
Warrants granted |
|
|
|
|
|
|
|
|
Warrants canceled |
|
|
(40,862 |
) |
|
$ |
3.07 |
|
Warrants exercised |
|
|
(352,500 |
) |
|
$ |
3.07 |
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
7. Stockholders Equity (Continued)
Stock Options
The Amended 1994 Stock Option Plan (1994 Plan) permits the grant of stock or options to
employees, directors and consultants. A total of 1,450,000 shares were approved by the
stockholders for issuance under the 1994 Plan. Options are granted at prices that are equal to
100% of the fair market value on the date of grant, and expire over a term not to exceed ten years.
Options generally vest ratably over a five-year period, unless otherwise determined by the Board
of Directors. The 1994 Plan, but not the options granted, expired in October 2004.
The Amended 1998 Stock Option Plan (1998 Plan) permits the grant of stock or options to
employees, directors and consultants. A total of 3,798,000 shares were approved by the
stockholders for issuance under the 1998 Plan. Options are granted at prices that are equal to
100% of the fair market value on the date of grant, and expire over a term not to exceed ten years.
Options generally vest ratably over three to five years, unless otherwise determined by the Board
of Directors.
The 2002 Independent Directors Equity Incentive Plan (2002 Plan) permits the grant of stock or
options to independent directors. A total of 350,000 shares were approved by the stockholders for
issuance under the 2002 Plan. Options are granted at prices which are equal to 100% of the fair
market value on the date of grant, and expire over a term not to exceed ten years. Options
generally vest immediately, unless otherwise determined by the Board of Directors.
The 2006 Equity Incentive Plan (2006 Plan) permits the grant of options, restricted stock, stock
bonuses and stock appreciation rights to employees, directors and consultants. Under the 2006
Plan, the number of shares of common stock equal to 6% of the number of outstanding shares of the
Company are authorized to be issued. The number of shares available to grant for awards adjusts at
the beginning of each fiscal year if additional shares of common stock were issued in the preceding
fiscal year. As of June 30, 2007 there were 3,292,977 shares approved under the Plan for issuance.
Stock Compensation Expense
At June 30, 2007, the total compensation cost related to unvested stock-based awards granted to
employees under the Companys stock option plans but not yet recognized was $786, net of estimated
forfeitures of $75. This cost will be amortized on a straight-line basis over a weighted-average
period of approximately two years and will be adjusted for subsequent changes in estimated
forfeitures. The total fair value of options vested during the years ended June 30, 2007, 2006 and
2005 was $789, $955 and $905.
46
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
7. Stockholders Equity (Continued)
Stock Compensation Expense (Continued)
The Company issues new shares of common stock upon exercise of stock options. The following is a
summary of option activity for the Companys stock option plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
|
|
Number of |
|
Exercise |
|
Contractual |
|
Intrinsic |
|
|
Shares |
|
Price |
|
Life |
|
Value |
Outstanding at June 30, 2006 |
|
|
2,539,321 |
|
|
$ |
2.72 |
|
|
|
3.3 |
|
|
$ |
3,737 |
|
|
Granted |
|
|
351,326 |
|
|
$ |
3.83 |
|
|
|
|
|
|
|
|
|
Forfeited or Expired |
|
|
(170,881 |
) |
|
$ |
3.86 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(248,849 |
) |
|
$ |
1.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007 |
|
|
2,470,917 |
|
|
$ |
2.89 |
|
|
|
2.6 |
|
|
$ |
1,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Expected to Vest at June
30, 2007 |
|
|
2,424,746 |
|
|
$ |
2.87 |
|
|
|
2.6 |
|
|
$ |
1,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007 |
|
|
1,929,769 |
|
|
$ |
2.58 |
|
|
|
2.4 |
|
|
$ |
1,046 |
|
The aggregate intrinsic value is calculated as the difference between the exercise price of the
underlying awards and the quoted price of the Companys common stock for the 1,333,651 options that
were in-the-money at June 30, 2007. During the years ended June 30, 2007, 2006 and 2005, the
aggregate intrinsic value of options exercised under the Companys stock option plans were $278,
$46 and $701, respectively, determined as of the date of option exercise.
The following table summarizes information about stock options outstanding at June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
|
|
|
|
|
|
Range of |
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Weighted- |
|
Exercise |
|
Number |
|
|
Remaining |
|
|
Exercise |
|
|
Number |
|
|
Average |
|
Prices |
|
Outstanding |
|
|
Contractual Life |
|
|
Price |
|
|
Exercisable |
|
|
Exercise Price |
|
$1.125 - $1.60 |
|
|
205,651 |
|
|
0.2 |
|
|
$ |
1.25 |
|
|
|
205,651 |
|
|
$ |
1.25 |
|
$1.81 - $2.12 |
|
|
1,128,000 |
|
|
2.0 |
|
|
$ |
2.11 |
|
|
|
1,128,000 |
|
|
$ |
2.11 |
|
$2.88 - $4.30 |
|
|
964,766 |
|
|
3.5 |
|
|
$ |
3.79 |
|
|
|
488,285 |
|
|
$ |
3.69 |
|
$4.42 - $5.88 |
|
|
172,500 |
|
|
3.5 |
|
|
$ |
4.95 |
|
|
|
107,833 |
|
|
$ |
5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,470,917 |
|
|
2.6 |
|
|
$ |
2.89 |
|
|
|
1,929,769 |
|
|
$ |
2.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
7. Stockholders Equity (Continued)
Common Stock Restricted Awards
On April 26, 2007, the Companys Chief Executive Officer (incumbent CEO) was granted 500,000
shares of restricted common stock with three year vesting. The grant has a value of $1,700 based
on the fair market value of the Companys stock on the grant date. The vesting is subject to
acceleration upon certain conditions: (1) entry into the Employment Agreement for a term of three
years, (2) Companys engagement of a new Chief Executive Officer (new CEO) and confirmation by
the Board of Directors and (3) development and Board approval of a transition plan for the new CEO
and transition of the incumbent CEO to the position of Chief Technology Architect. However, in
accordance with the 2006 Plan, performance based stock option awards must have a minimum vesting
period of at least one year. The Company considers it probable that the performance condition will
be met within one year of the grant date; therefore, the compensation expense of $1,700 is being
amortized over one year of which $283 has been included in selling, general and administration
expense in the accompanying statement of operations in fiscal 2007.
During fiscal 2007, the Companys Compensation Committee granted 10,000 shares of restricted common
stock to an officer, one half vesting immediately and one half on the first anniversary of the
grant date. The shares had a fair market value of $3.40 per share on the date of grant.
On August 9, 2004, the Companys Compensation Committee approved the grant of 50,914 shares of
restricted common stock to selected members of management and key employees, excluding its
executive officers, which had a fair market value of $3.58 per share on the date of grant. These
common stock restricted awards vest in three equal installments, on the date of grant and the first
and second anniversary of the grant date. The Company recorded deferred stock compensation of $182
based on the closing market price of the Companys common stock on the date of grant. One third
vested immediately on the grant date and the remaining value will be amortized on a straight-line
basis over the remaining two year service period. In accordance with FAS 123(R), on July 1, 2005
the Company reversed the deferred stock compensation balance of $57 against additional
paid-in-capital.
The following is a summary of restricted stock activity during the year ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
Outstanding at June 30, 2006 |
|
|
11,000 |
|
|
$ |
40 |
|
|
Granted |
|
|
510,000 |
|
|
|
1,734 |
|
Vested |
|
|
(16,000 |
) |
|
|
(57 |
) |
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007 |
|
|
505,000 |
|
|
$ |
1,717 |
|
|
|
|
48
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
7. Stockholders Equity (Continued)
Series A Convertible Preferred Stock
In January 1999, the Company completed a private placement of 1,077,540 shares of Series A
Convertible Preferred Stock (Series A), raising $6,227, net of commissions and direct expenses.
Commissions of 7% of the gross proceeds and warrants to purchase 200,000 shares of common stock at
$1.70 per share were issued to the placement agent. The significant features of the Series A are
as follows:
Conversion Rights Holders of the Series A have the right to convert the Series A at the
option of the holder, at any time, into shares of common stock of the Company at the
conversion rate of one preferred share for five shares of common stock. The conversion rate
is subject to adjustment for changes in the companys capital structure, which would
otherwise have a dilutive effect on the conversion rate. As of June 30, 2005, all shares of
Series A have been converted, 126,000 were converted during the year ended June 30, 2005.
On December 21, 2004, the Company issued a Notice of Automatic Conversion to the remaining
Series A Preferred stockholders. Effective 20 days from receipt of the notice, each of the
remaining shares of Series A Preferred Stock was converted into 5 shares of the Companys
common stock. The Series A Certificate of Designation states that each share of Series A
Preferred Stock shall, at the option of the Company, be automatically
converted to five shares of the Companys common stock if the shares of common stock trade at or above $5 per
share for 30 consecutive trading days. As of December 21, 2004, the Companys common stock
traded at or above $5 per share for 30 consecutive trading days. In January 2005, there
were 110,000 shares of Series A Preferred Stock outstanding, which were converted into
550,000 shares of common stock.
Voting Rights the holders of shares of Series A are entitled to voting rights equal to the
number of shares of common stock to be issued upon conversion of the Series A.
Liquidation Preferences In the event of liquidation or dissolution of the Company, the
Series A stockholders are entitled to priority over common stockholders with respect to
distribution of Company assets or payments to stockholders. The liquidation preference is
equal to $6.25 per share compounded annually at 8% per share per year.
8. Major Customers and Foreign Sales
At June 30, 2007, the Company had two customers that individually accounted for 30% and 14% of
accounts receivable. At June 30, 2006, the Company had three customers that individually accounted
for 47%, 14% and 12% of accounts receivable.
During the fiscal year ended June 30, 2007, revenues from one significant customer totaled $7,502
or 45% of net revenues. During the fiscal year ended June 30, 2006, revenues from three
significant customers totaled $6,386 or 53% of net revenues. During the fiscal year ended June 30,
2005, revenues from two significant customers totaled $2,374 or 23% of net revenues.
49
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
8. |
|
Major Customers and Foreign Sales (Continued) |
If the relationship between the Company and these customers were altered, it could have a material
impact on the Companys financial position, cash flows or results of operations.
The
following is a summary of product revenues as a percentage of total
net revenues for the Company's principal product lines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
BioArchive |
|
|
48% |
|
|
|
61% |
|
|
|
66% |
|
AXP |
|
|
19% |
|
|
|
6% |
|
|
|
0% |
|
Thermoline |
|
|
13% |
|
|
|
16% |
|
|
|
21% |
|
CryoSeal |
|
|
7% |
|
|
|
7% |
|
|
|
4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had sales to customers as follows for the years ended June
30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Europe |
|
$ |
4,625 |
|
|
$ |
3,046 |
|
|
$ |
1,708 |
|
United States |
|
|
8,579 |
|
|
|
4,632 |
|
|
|
3,367 |
|
Asia |
|
|
2,588 |
|
|
|
2,703 |
|
|
|
3,016 |
|
South America |
|
|
802 |
|
|
|
1,394 |
|
|
|
1,394 |
|
Other |
|
|
157 |
|
|
|
273 |
|
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,751 |
|
|
$ |
12,048 |
|
|
$ |
10,177 |
|
|
|
|
|
|
|
|
|
|
|
9. Income Taxes
The reconciliation of federal income tax attributable to operations computed at the federal
statutory tax rate of 34% to income tax expense is as follows for the years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Statutory federal income tax benefit |
|
$ |
(2,304 |
) |
|
$ |
(2,088 |
) |
|
$ |
(2,795 |
) |
Net operating loss with no tax benefit |
|
|
2,304 |
|
|
|
2,088 |
|
|
|
2,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total federal income tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2007, the Company had net operating loss carryforwards for federal and state income tax
purposes of approximately $66,364 and $31,472 respectively, that are available to offset future
income. The federal and state loss carryforwards expire in various years between 2008 and 2027,
and 2013 and 2017, respectively.
At June 30, 2007, the Company has research and experimentation credit carryforwards of
approximately $867 for federal tax purposes that expire in various years between 2008 and 2027, and
$822 for state income tax purposes that do not have an expiration date.
50
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
9. |
|
Income Taxes (Continued) |
Significant components of the Companys deferred tax assets and liabilities for federal and state
income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carry-forwards |
|
$ |
24,300 |
|
|
$ |
22,708 |
|
Income tax credits |
|
|
1,428 |
|
|
|
1,085 |
|
Deferred revenue |
|
|
962 |
|
|
|
1,055 |
|
Capitalized research costs |
|
|
380 |
|
|
|
486 |
|
Other |
|
|
1,659 |
|
|
|
1,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes |
|
|
28,729 |
|
|
|
26,345 |
|
Valuation allowance |
|
|
(28,729 |
) |
|
|
(26,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred taxes |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
The valuation allowance increased by approximately $2,384, $2,707 and $2,560 in 2007, 2006 and
2005, respectively. As of June 30, 2007, the Company has a benefit of approximately $1,758 related
to stock option deductions, which will be credited to paid-in capital when realized, of which
$1,624 is included in the valuation allowance.
Because of the change of ownership provisions of the Tax Reform Act of 1986, a portion of the
Companys federal net operating loss and credit carryovers may be subject to an annual limitation
regarding their utilization against taxable income in future periods.
10. |
|
Employee Retirement Plan |
The Company sponsors an Employee Retirement Plan, generally available to all employees, in
accordance with Section 401(k) of the Internal Revenue Code. Employees may elect to contribute up
to the Internal Revenue Service annual contribution limit. Under this Plan, at the discretion of
the Board of Directors, the Company may match a portion of the employees contributions. No
Company contributions have been made to the Plan as of June 30, 2007.
51
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
11. |
|
Unaudited Quarterly Financial Data |
The following tables provide quarterly data for fiscal years ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second |
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
Quarter |
|
|
Third Quarter |
|
|
Fourth Quarter |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
September 30, |
|
|
December 31, |
|
|
March 31, |
|
|
June 30, |
|
|
|
2006 |
|
|
2006 |
|
|
2007 |
|
|
2007 |
|
|
|
|
Net revenues |
|
$ |
4,305 |
|
|
$ |
3,716 |
|
|
$ |
5,210 |
|
|
$ |
3,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
$ |
1,712 |
|
|
$ |
789 |
|
|
$ |
1,772 |
|
|
$ |
924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,096 |
) |
|
$ |
(2,030 |
) |
|
$ |
(1,037 |
) |
|
$ |
(2,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share |
|
$ |
(0.02 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing per
share data |
|
|
54,903,767 |
|
|
|
55,140,675 |
|
|
|
55,266,175 |
|
|
|
55,369,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter |
|
|
Second Quarter |
|
|
Third Quarter |
|
|
Fourth Quarter |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
September 30, |
|
|
December 31, |
|
|
March 31, |
|
|
June 30, |
|
|
|
2005 |
|
|
2005 |
|
|
2006 |
|
|
2006 |
|
|
|
|
Net revenues |
|
$ |
2,116 |
|
|
$ |
3,127 |
|
|
$ |
3,248 |
|
|
$ |
3,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
$ |
587 |
|
|
$ |
1,122 |
|
|
$ |
1,316 |
|
|
$ |
1,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,016 |
) |
|
$ |
(1,752 |
) |
|
$ |
(892 |
) |
|
$ |
(1,482 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share |
|
$ |
(0.04 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing per
share data |
|
|
45,917,502 |
|
|
|
45,965,859 |
|
|
|
51,584,192 |
|
|
|
54,867,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
THERMOGENESIS CORP.
NOTES TO FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share amounts)
|
|
|
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE |
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Principal Executive Officer along with the Companys
Principal Financial Officer, of the effectiveness of the design of the Companys disclosure
controls and procedures (as defined by Exchange Act Rule 13a-15(e) and 15a-15(e)) as of the end of
the Companys fiscal year pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the
Companys Principal Executive officer along with the Companys Principal Financial Officer
concluded that the Companys disclosure controls and procedures are effective in ensuring that
information required to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commissions rules and forms.
53
Managements Report on Internal Control over Financial Reporting
The Companys management is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under
the supervision and with the participation of the Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the
effectiveness of its internal control over financial reporting based on criteria established in the
framework in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, the Companys management
concluded that its internal control over financial reporting was effective as of June 30, 2007.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. All internal control
systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
The Companys independent registered public accounting firm has issued an attestation report on
the effectiveness of the Companys internal control over financial
reporting as of June 30, 2007, which appears on the following page of this Annual Report on Form
10-K.
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of ThermoGenesis Corp.
We have audited ThermoGenesis Corps internal control over financial reporting as of June 30,
2007, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). ThermoGenesis
Corps management is responsible for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Managements Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, ThermoGenesis Corp. maintained, in all material respects, effective internal
control over financial reporting as of June 30, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the balance sheets of ThermoGenesis Corp. as of June 30, 2007 and
2006 and the related statements of operations, stockholders equity, and cash flows for each of the
three years in the period ended June 30, 2007 of ThermoGenesis Corp. Our audits also included the
financial statement schedule listed in the Index of Item 15.(a)(2). Our report dated September 10,
2007 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Sacramento, California
September 10, 2007
55
Changes in Internal Control over Financial Reporting
There were no changes in the Companys internal controls over financial reporting that occurred
during the fiscal quarter ended June 30, 2007, that have materially affected, or are reasonably
likely to materially affect its internal controls over financial reporting. The Company believes
that a control system, no matter how well designed and operated, cannot provide absolute assurance
that the objectives of the control system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within any company have
been detected.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item will be included in and is hereby incorporated by reference
from our Proxy Statement for the 2007 Annual Meeting of Stockholders. We have adopted a Code of
Ethics applicable to all employees including our CEO and CFO. A copy of the Code of Ethics is
available at www.thermogenesis.com.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in and is hereby incorporated by reference
from our Proxy Statement for the 2007 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be included in and is hereby incorporated by reference
from our Proxy Statement for the 2007 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be included in and is hereby incorporated by reference
from our Proxy Statement for the 2007 Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be included in and is hereby incorporated by reference
from our Proxy Statement for the 2007 Annual Meeting of Stockholders.
56
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as a part of this report on Form 10-K.
|
|
|
|
|
|
|
Page Number |
|
(a) (1) Financial Statements
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm |
|
|
29 |
|
|
|
|
|
|
Balance Sheets at June 30, 2007 and 2006 |
|
|
30 |
|
|
|
|
|
|
Statements of Operations for the years ended
June 30, 2007, 2006 and 2005 |
|
|
31 |
|
|
|
|
|
|
Statements of Stockholders Equity for the years
ended June 30, 2007, 2006 and 2005 |
|
|
32 |
|
|
|
|
|
|
Statements of Cash Flows for the years ended
June 30, 2007, 2006 and 2005 |
|
|
33 |
|
|
|
|
|
|
Notes to Financial Statements |
|
|
34 |
|
|
|
|
|
|
(a) (2) Financial Statement Schedules |
|
|
|
|
|
|
|
|
|
Schedule II, Valuation and Qualifying Accounts |
|
|
61 |
|
All other financial statement schedules have been omitted because they are not required or
not applicable.
(b) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index on the next
page, which are incorporated herein by this
reference.
57
|
|
|
|
Exhibit
Description
|
3.1
|
|
(a) |
Amended and Restated Certificate of Incorporation (1) |
|
|
|
|
|
|
(b) |
Revised Bylaws (2) |
|
|
|
|
10.1
|
|
(a) |
Executive Development and Distribution Agreement between ThermoGenesis Corp. and Daido
Hoxan Inc. (3) |
|
|
|
|
|
|
(b) |
License Agreement with Pall/Medsep Corporation (4) |
|
|
|
|
|
|
(c) |
Securities Purchase Agreement dated March 10, 2004 (form) (5) |
|
|
|
|
|
|
(d) |
Amended 2002 Independent Directors Equity Incentive Plan (6) |
|
|
|
|
|
|
(e) |
Distribution and License Agreement with Asahi Kasei Medical Co., Ltd. (7) |
|
|
|
|
|
|
(f) |
Supply Agreement with Cell Factors Technology, Inc. (8) |
|
|
|
|
|
|
(g) |
Employment Agreement for Matthew Plavan (9) |
|
|
|
|
|
|
(h) |
International Distribution Agreement with Amersham Biosciences AB (10) |
|
|
|
|
|
|
(i) |
OEM Supply Agreement with Medtronic, Inc. (11) |
|
|
|
|
|
|
(j) |
Employment Agreement with Dennis Marr (12) |
|
|
|
|
|
|
(k) |
Employment Agreement with John Chapman (13) |
|
|
|
|
|
|
(l) |
Product Development and Supply Agreement with Biomet Biologics (14) |
|
|
|
|
|
|
(m) |
First Amendment License Agreement (Clotalyst) (15) |
|
|
|
|
|
|
(n) |
Employment Agreement with Phil Coelho (16) |
|
|
|
|
14
|
|
Amended and Restated Code of Ethics (17) |
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
|
|
|
|
31.1
|
|
Rule 13(a) 14(a)/15(d) 14(a) Certification (Principal Executive Officer) |
|
|
|
|
31.2
|
|
Rule 13(a) 14(a)/15(d) 14(a) Certification (Principal Financial Officer) |
|
|
|
|
32
|
|
Section 1350 Certifications |
|
|
|
|
Footnotes to Exhibit Index |
|
|
|
|
(1)
|
|
Incorporated by reference to ThermoGenesis proxy statement for the Special Meeting hold on
December 5, 2005. |
|
|
|
|
(2)
|
|
Incorporated by reference to Form 10-KSB for the year ended June 30, 1994. |
|
|
|
|
(3)
|
|
Incorporated by reference to Form 8-K dated June 9, 1995. |
|
|
|
|
(4)
|
|
Incorporated by reference to Form 8-K dated April 14, 1997. |
|
|
|
|
(5)
|
|
Incorporated by reference to Form 8-K dated March 10, 2004. |
|
|
|
|
(6)
|
|
Incorporated by reference to Form 8-K dated December 15, 2004. |
|
|
|
|
(7)
|
|
Incorporated by reference to Form 8-K dated March 28, 2005. |
|
|
|
|
(8)
|
|
Incorporated by reference to Form 8-K dated March 29, 2005. |
|
|
|
|
(9)
|
|
Incorporated by reference to Form 8-K dated May 5, 2005. |
|
|
|
|
(10)
|
|
Incorporated by reference to Form 8-K dated October 13, 2005. |
|
|
|
|
(11)
|
|
Incorporated by reference to Form 8-K dated November 4, 2005. |
|
|
|
|
(12)
|
|
Incorporated by reference to Form 8-K dated January 17, 2006. |
|
|
|
|
(13)
|
|
Incorporated by reference to Form 10-K for the year ended June 30, 2006. |
|
|
|
|
(14)
|
|
Incorporated by reference to Form 8-K dated August 3, 2006. |
|
|
|
|
(15)
|
|
Incorporated by reference to Form 10-K for quarter ended March 31, 2007. |
|
|
|
|
(16)
|
|
Incorporated by reference to Form 8-K dated April 30, 2007. |
|
|
|
|
(17)
|
|
Incorporated by reference to ThermoGenesis proxy statement for the Annual Meeting held on
October 28, 2005. |
58
GLOSSARY OF CERTAIN TECHNICAL TERMS
510(k): Formal notification to FDA to obtain clearance to market the medical device. The device
must be substantially equivalent to devices manufactured prior to 1976, or which have been found
substantially equivalent after that date.
ADULT STEM CELLS: All non-embryonic stem cells.
AUTOLOGOUS: Autogenous; related to self; originating within an organism itself, as obtaining blood
from the patient for use in the same patient.
CRYOPRECIPITATE: Any precipitate (substance that is separated out of a solution of plasma) that
results from cooling, as cryoglobulin or antihemophilic factor. When used in the context of the
CryoSeal FS System, cryoprecipitate means a fibrinogen-rich cryoprecipitate.
CRYOPRESERVATION: Maintaining the life of excised tissue or organs by freezing and storing at very
low temperatures.
CRYOSEAL: System for harvesting fibrinogen-rich cryoprecipitate from a donors blood plasma, a
blood component that is currently licensed by the FDA for the treatment of clotting protein
deficient patients.
DERMAL: Skin.
DEWAR: Container that keeps its contents at a constant and generally low temperature by means of
two external walls between which a vacuum is maintained.
FIBRINOGEN: A blood protein that is converted to fibrin in the clotting of blood.
HEMOSTATIC: (1) Checking the flow of blood; (2) an agent that stops the flow of blood.
ISCHEMIA: Deficient supply of blood to a body part.
REGENERATIVE MEDICINE: The process of creating living, functional tissues to repair or replace
tissue or organ function lost due to age, disease, damage, or congenital defects.
STEM CELLS: Undifferentiated, primitive cells in the bone marrow with the ability both to multiply
and to differentiate into specific blood cells.
THERMOLINE PRODUCTS: (1) Device for the ultra-rapid freezing of human blood plasma; (2) Portable
device for the ultra-rapid freezing of human blood plasma; (3) Device for the rapid thawing of
frozen plasma for hospital patient care.
THROMBIN: Generated in blood clotting that acts on fibrinogen to produce fibrin.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
|
|
|
|
ThermoGenesis Corp. |
|
|
|
|
|
|
|
Date: September 11, 2007
|
|
|
By: |
/s/ WILLIAM R. OSGOOD |
|
|
|
|
|
|
|
|
|
|
|
William R. Osgood, Ph.D.,
Chief Executive Officer & Director |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
By:
|
|
/s/ WILLIAM R. OSGOOD
William R. Osgood, Ph.D., Chief Executive Officer & Director
(Principal Executive Officer) |
|
Date: September 11, 2007 |
|
|
|
|
|
By:
|
|
/s/ MATTHEW T. PLAVAN
Matthew T. Plavan, Chief Financial
Officer (Principal Financial and Accounting Officer) |
|
Dated: September 11, 2007 |
|
|
|
|
|
By:
|
|
/s/ PHILIP H. COELHO
Philip H. Coelho, Chief Technology
Architect and Chairman of the Board |
|
Dated: September 11, 2007 |
|
|
|
|
|
By:
|
|
/s/ HUBERT HUCKEL
Hubert Huckel, M.D., Director
|
|
Dated: September 11, 2007 |
|
|
|
|
|
By:
|
|
/s/ PATRICK MCENANY
Patrick McEnany, Director
|
|
Dated: September 11, 2007 |
|
|
|
|
|
By:
|
|
/s/ WOODROW A. MYERS
Woodrow Myers, M.D., Director
|
|
Dated: September 11, 2007 |
60
SCHEDULE II
THERMOGENESIS CORP.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
Charged to |
|
Charged to |
|
|
|
|
|
Balance at |
|
|
beginning of |
|
cost and |
|
other |
|
|
|
end of |
Description |
|
period |
|
expenses |
|
accounts |
|
Deductions |
|
period |
For the year ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts: |
|
$ |
17 |
|
|
$ |
50 |
|
|
|
|
|
|
$ |
17 |
|
|
$ |
50 |
|
Reserve for slow moving,
obsolete or unusable inventory: |
|
$ |
774 |
|
|
$ |
200 |
|
|
|
|
|
|
$ |
59 |
|
|
$ |
915 |
|
For the year ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts: |
|
$ |
41 |
|
|
|
|
|
|
|
|
|
|
$ |
24 |
|
|
$ |
17 |
|
Reserve for
slow moving, obsolete or unusable
inventory: |
|
$ |
632 |
|
|
$ |
212 |
|
|
|
|
|
|
$ |
70 |
|
|
$ |
774 |
|
For the year ended June 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts: |
|
$ |
61 |
|
|
$ |
9 |
|
|
|
|
|
|
$ |
29 |
|
|
$ |
41 |
|
Reserve for slow moving,
obsolete or unusable inventory: |
|
$ |
502 |
|
|
$ |
169 |
|
|
|
|
|
|
$ |
39 |
|
|
$ |
632 |
|
61
Exhibit
Index
|
|
|
|
Exhibit
Description
|
3.1
|
|
(a) |
Amended and Restated Certificate of Incorporation (1) |
|
|
|
|
|
|
(b) |
Revised Bylaws (2) |
|
|
|
|
10.1
|
|
(a) |
Executive Development and Distribution Agreement between ThermoGenesis Corp. and Daido
Hoxan Inc. (3) |
|
|
|
|
|
|
(b) |
License Agreement with Pall/Medsep Corporation (4) |
|
|
|
|
|
|
(c) |
Securities Purchase Agreement dated March 10, 2004 (form) (5) |
|
|
|
|
|
|
(d) |
Amended 2002 Independent Directors Equity Incentive Plan (6) |
|
|
|
|
|
|
(e) |
Distribution and License Agreement with Asahi Kasei Medical Co., Ltd. (7) |
|
|
|
|
|
|
(f) |
Supply Agreement with Cell Factors Technology, Inc. (8) |
|
|
|
|
|
|
(g) |
Employment Agreement for Matthew Plavan (9) |
|
|
|
|
|
|
(h) |
International Distribution Agreement with Amersham Biosciences AB (10) |
|
|
|
|
|
|
(i) |
OEM Supply Agreement with Medtronic, Inc. (11) |
|
|
|
|
|
|
(j) |
Employment Agreement with Dennis Marr (12) |
|
|
|
|
|
|
(k) |
Employment Agreement with John Chapman (13) |
|
|
|
|
|
|
(l) |
Product Development and Supply Agreement with Biomet Biologics (14) |
|
|
|
|
|
|
(m) |
First Amendment License Agreement (Clotalyst) (15) |
|
|
|
|
|
|
(n) |
Employment Agreement with Phil Coelho (16) |
|
|
|
|
14
|
|
Amended and Restated Code of Ethics (17) |
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
|
|
|
|
31.1
|
|
Rule 13(a) 14(a)/15(d) 14(a) Certification (Principal Executive Officer) |
|
|
|
|
31.2
|
|
Rule 13(a) 14(a)/15(d) 14(a) Certification (Principal Financial Officer) |
|
|
|
|
32
|
|
Section 1350 Certifications |
|
|
|
|
Footnotes to Exhibit Index |
|
|
|
|
(1)
|
|
Incorporated by reference to ThermoGenesis proxy statement for the Special Meeting hold on
December 5, 2005. |
|
|
|
|
(2)
|
|
Incorporated by reference to Form 10-KSB for the year ended June 30, 1994. |
|
|
|
|
(3)
|
|
Incorporated by reference to Form 8-K dated June 9, 1995. |
|
|
|
|
(4)
|
|
Incorporated by reference to Form 8-K dated April 14, 1997. |
|
|
|
|
(5)
|
|
Incorporated by reference to Form 8-K dated March 10, 2004. |
|
|
|
|
(6)
|
|
Incorporated by reference to Form 8-K dated December 15, 2004. |
|
|
|
|
(7)
|
|
Incorporated by reference to Form 8-K dated March 28, 2005. |
|
|
|
|
(8)
|
|
Incorporated by reference to Form 8-K dated March 29, 2005. |
|
|
|
|
(9)
|
|
Incorporated by reference to Form 8-K dated May 5, 2005. |
|
|
|
|
(10)
|
|
Incorporated by reference to Form 8-K dated October 13, 2005. |
|
|
|
|
(11)
|
|
Incorporated by reference to Form 8-K dated November 4, 2005. |
|
|
|
|
(12)
|
|
Incorporated by reference to Form 8-K dated January 17, 2006. |
|
|
|
|
(13)
|
|
Incorporated by reference to Form 10-K for the year ended June 30, 2006. |
|
|
|
|
(14)
|
|
Incorporated by reference to Form 8-K dated August 3, 2006. |
|
|
|
|
(15)
|
|
Incorporated by reference to Form 10-K for quarter ended March 31, 2007. |
|
|
|
|
(16)
|
|
Incorporated by reference to Form 8-K dated April 30, 2007. |
|
|
|
|
(17)
|
|
Incorporated by reference to ThermoGenesis proxy statement for the Annual Meeting held on
October 28, 2005. |