e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
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þ |
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 |
for the quarterly period ended March 31, 2008.
or
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o |
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 |
for the transition from to .
Commission File Number: 333-82900
ThermoGenesis Corp.
(Exact name of registrant as specified in its charter)
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Delaware
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94-3018487 |
(State of incorporation)
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(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)
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 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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o Large accelerated filer
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þ Accelerated filer
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o Non-accelerated filer
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o Smaller reporting company |
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(Do not check if a smaller reporting company) |
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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
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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Class
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Outstanding at May 2, 2008 |
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Common stock, $.001 par value
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56,206,175 |
ThermoGenesis Corp.
INDEX
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PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ThermoGenesis Corp.
Condensed Consolidated Balance Sheets (Unaudited)
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March 31, |
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June 30, |
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(in thousands, except share and per share amounts) |
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2008 |
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2007 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
11,152 |
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$ |
5,730 |
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Short-term investments |
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17,891 |
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27,649 |
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Accounts receivable, net of allowance for
doubtful accounts of $29 ($50 at June 30, 2007) |
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3,565 |
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3,226 |
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Inventories |
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4,662 |
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5,046 |
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Other current assets |
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243 |
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415 |
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Total current assets |
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37,513 |
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42,066 |
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Equipment at cost less accumulated depreciation of $2,900
($2,605 at June 30, 2007) |
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1,635 |
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1,602 |
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Other assets |
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73 |
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122 |
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$ |
39,221 |
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$ |
43,790 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
2,476 |
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$ |
2,074 |
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Accrued payroll and related expenses |
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404 |
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525 |
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Deferred revenue |
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721 |
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761 |
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Other current liabilities |
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1,467 |
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947 |
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Total current liabilities |
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5,068 |
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4,307 |
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Deferred revenue |
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1,142 |
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1,647 |
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Long-term portion of capital lease obligations |
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12 |
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24 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock, $0.001 par value; 2,000,000 shares authorized;
none outstanding |
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Common stock, $0.001 par value; 80,000,000 shares
authorized; 55,701,175 issued and outstanding
(55,500,524 at June 30, 2007) |
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56 |
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56 |
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Paid in capital in excess of par |
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120,268 |
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118,384 |
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Accumulated deficit |
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(87,325 |
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(80,628 |
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Total stockholders equity |
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32,999 |
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37,812 |
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$ |
39,221 |
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$ |
43,790 |
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See
accompanying notes to consolidated financial statements.
Page 3
ThermoGenesis Corp.
Condensed Consolidated Statements of Operations (Unaudited)
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Three Months Ended |
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Nine Months Ended |
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(in thousands, except share and per share |
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March 31, |
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March 31, |
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amounts) |
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2008 |
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2007 |
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2008 |
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2007 |
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Product and other revenues |
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$ |
5,476 |
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$ |
4,791 |
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$ |
14,067 |
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$ |
11,891 |
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Milestone payments and license fees |
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169 |
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419 |
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697 |
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1,340 |
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Net revenues |
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5,645 |
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5,210 |
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14,764 |
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13,231 |
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Cost of product and other revenues |
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4,144 |
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3,346 |
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10,052 |
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8,741 |
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Cost of milestone payments and license
fees |
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92 |
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92 |
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217 |
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Cost of revenues |
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4,144 |
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3,438 |
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10,144 |
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8,958 |
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Gross profit |
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1,501 |
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1,772 |
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4,620 |
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4,273 |
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Expenses: |
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Selling, general and administrative |
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2,550 |
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2,201 |
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7,327 |
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6,813 |
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Research and development |
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1,902 |
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1,034 |
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5,015 |
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2,969 |
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Total operating expenses |
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4,452 |
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3,235 |
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12,342 |
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9,782 |
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Interest and other income, net |
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271 |
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426 |
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1,025 |
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1,346 |
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Net loss |
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($2,680 |
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($1,037 |
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($6,697 |
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($4,163 |
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Per share data: |
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Basic and diluted net loss per common
share |
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($0.05 |
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($0.02 |
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($0.12 |
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($0.08 |
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Shares used in computing per share data |
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55,701,175 |
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55,266,175 |
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55,687,286 |
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55,103,539 |
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See
accompanying notes to consolidated financial statements.
Page 4
ThermoGenesis Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended March 31, 2008 and 2007
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(in thousands) |
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2008 |
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2007 |
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Cash flows from operating activities: |
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Net loss |
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($6,697 |
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($4,163 |
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Adjustments to reconcile net loss to net cash used
in operating activities: |
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Depreciation and amortization |
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402 |
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347 |
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Stock based compensation expense |
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1,618 |
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614 |
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Accretion of discount on short-term investments |
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(782 |
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(969 |
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Loss on sale of equipment |
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9 |
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Net change in operating assets and liabilities: |
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Accounts receivable, net |
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(339 |
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(335 |
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Inventories |
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245 |
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(1,911 |
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Other current assets |
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172 |
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83 |
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Other assets |
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49 |
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(16 |
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Accounts payable |
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402 |
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215 |
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Accrued payroll and related expenses |
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(121 |
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(93 |
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Deferred revenue |
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(545 |
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(102 |
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Other current liabilities |
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522 |
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320 |
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Net cash used in operating activities |
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(5,074 |
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(6,001 |
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Cash flows from investing activities: |
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Capital expenditures |
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(296 |
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(328 |
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Purchase of investments |
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(27,460 |
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(37,743 |
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Maturities of investments |
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38,000 |
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49,000 |
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Net cash provided by investing activities |
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10,244 |
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10,929 |
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Cash flows from financing activities: |
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Payments on capital lease obligations |
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(14 |
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(13 |
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Exercise of stock options and warrants |
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266 |
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1,140 |
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Net cash provided by financing activities |
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252 |
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1,127 |
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Net increase in cash and cash equivalents |
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5,422 |
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6,055 |
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Cash and cash equivalents at beginning of period |
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5,730 |
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3,527 |
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Cash and cash equivalents at end of period |
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$ |
11,152 |
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9,582 |
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Supplemental non-cash flow information: |
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Transfer of inventory to equipment |
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$ |
157 |
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$ |
124 |
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Transfer of equipment to inventory |
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$ |
18 |
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$ |
56 |
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See
accompanying notes to consolidated financial statements
Page 5
ThermoGenesis Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
Organization and Basis of Presentation
In February 2008, the Company announced the formation of a wholly-owned subsidiary, Vantus
Veterinary Stem Cell Laboratories (Vantus). Vantus involves a formal relationship with the Center
for Equine Health and Stem Cell Regenerative Medicine Group at the University of California, Davis,
School of Veterinary Medicine. Its initial focus will be the banking (harvesting, processing and
preservation) of equine stem cells for use in treatment of orthopedic injuries in the performance
equine market. The accompanying unaudited condensed consolidated
financial statements of ThermoGenesis Corp. (ThermoGenesis or
Company) include the accounts of the parent company, ThermoGenesis,
and its wholly-owned subsidiary, Vantus. All significant intercompany
balances and transactions have been eliminated in consolidation.
Interim Reporting
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete
financial statements. 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. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the nine
month period ended March 31, 2008 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2008. These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the Annual Report on
Form 10-K for the fiscal year ended June 30, 2007.
The
balance sheet at June 30, 2007, has been derived from the
audited financial statements at that
date but does not include all the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
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. 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.
Page 6
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 research and development 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.
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.
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 and common stock restricted awards that
were not included in diluted net loss per common share were 3,427,770 and 2,766,349 as of March 31,
2008 and 2007.
Page 7
Recent Accounting Pronouncements
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. In
February 2008, the FASB issued FASB Staff Position (FSP) SFAS No. 157-2 Effective Date of FASB
Statement No. 157 (FSP 157-2) which delays the effective date of SFAS 157 for all non-financial
assets and non-financial liabilities, except those that are recognized or disclosed at fair value
in the financial statement on a recurring basis (at least annually). FSP 157-2 partially defers
the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of FSP 157-2.The Company is currently
evaluating the impact of the provisions of SFAS No. 157 on its
consolidated 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 of the provisions of SFAS
No. 159 on its consolidated financial statements.
In December 2007, the FASB ratified EITF Issue No. 07-1, Accounting for Collaborative
Arrangements (EITF 07-1). EITF 07-1 defines collaborative arrangements and establishes reporting
requirements for transactions between participants in a collaborative arrangement and between
participants in the arrangement and third parties. EITF 07-1 also establishes the appropriate
income statement presentation and classification for joint operating activities and payments
between participants, as well as the sufficiency of the disclosures related to these arrangements.
EITF 07-1 is effective for fiscal years beginning after December 15, 2008. EITF 07-1 shall be
applied retrospectively to all prior periods presented for all collaborative arrangements existing
as of the effective date. The Company is currently assessing the potential impact, if any, the
adoption of EITF 07-1 may have on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS No. 141R) which
replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions,
but requires a number of changes, including changes in the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of in-process research
and development at fair value and requires the expensing of acquisition-related costs as incurred.
SFAS No. 141R is effective for business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after December 15, 2008.
Page 8
2. Investments
The following is a summary of held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
(in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities
of government sponsored
enterprises |
|
$ |
13,912 |
|
|
$ |
45 |
|
|
|
|
|
|
$ |
13,957 |
|
U.S. Treasury obligations |
|
|
3,979 |
|
|
|
|
|
|
$ |
7 |
|
|
|
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17,891 |
|
|
$ |
45 |
|
|
$ |
7 |
|
|
$ |
17,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 90 days |
|
$ |
13,912 |
|
|
|
|
|
|
|
|
|
|
$ |
13,957 |
|
Due in 91-365 days |
|
|
3,979 |
|
|
|
|
|
|
|
|
|
|
|
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,891 |
|
|
|
|
|
|
|
|
|
|
$ |
17,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
of government sponsored
enterprises |
|
$ |
27,649 |
|
|
$ |
2 |
|
|
$ |
10 |
|
|
$ |
27,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
March 31, 2008 |
|
|
|
|
|
|
|
|
U.S. Treasury obligations |
|
$ |
3,972 |
|
|
$ |
7 |
|
|
|
|
|
|
|
|
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.
3. Inventories
Inventories consisted of the following at:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2008 |
|
|
June 30, 2007 |
|
Raw materials |
|
$ |
1,754 |
|
|
$ |
1,791 |
|
Work in process |
|
|
1,691 |
|
|
|
1,166 |
|
Finished goods |
|
|
1,217 |
|
|
|
2,089 |
|
|
|
|
|
|
|
|
|
|
$ |
4,662 |
|
|
$ |
5,046 |
|
|
|
|
|
|
|
|
Page 9
4. Commitments and Contingencies
Warranty
The Company offers a one-year warranty for parts only on all of its non-disposable products. In
addition, the Companys one-year warranty for the BioArchive® System includes labor and
travel. The Company warrants disposable products through their expiration date. The Company
periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as
necessary.
Changes in the Companys product liability during the period are as follows:
|
|
|
|
|
(in thousands) |
|
|
|
|
July 1, 2007 balance |
|
$ |
302 |
|
Warranties issued during the period |
|
|
241 |
|
Settlements made during the period |
|
|
(312 |
) |
Changes in liability for pre-existing warranties during the period,
including expirations |
|
|
271 |
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
502 |
|
|
|
|
|
As a result of various quality issues experienced by high usage customers of the AXPTM
AutoXpress Platform (AXP) devices and docking stations, the Company made revisions to its
estimated warranty liability for the nine month period ended March 31, 2008. The Company recorded
a change in estimate, which increased the Companys cost of product and other revenues and net loss
(no net loss per share impact) by $271. The Company did not record any significant change in
estimate during the quarter and nine-month period ended March 31, 2007.
Import/Export Bonds
The Company imports and exports products and components as a routine part of its business, and must
comply with the rules and regulations of both the U.S. Food and Drug Administration (FDA) and the
US Department of Homeland Security Bureau of Customs and Border Protection (CBP). With products and
components that require FDA approval but prior to the receipt of such approval, the Company enters
the components into the United States under certain temporary import provisions and must provide
documentation of re-export of such product or its destruction within specified time periods. If
components or products have not been exported or destroyed within the period provided for by the
regulations, the Port Director may make a demand in writing under the bond for the payment of
defined damages. The Company has in the past used a continuous import bond in the face amount of
$50 for these activities, which would provide payment of any damages up to the face amount of the
bond. The Company was recently notified by CBP at the Port of San Francisco that it is in breach
of the temporary import agreement for components sold within the US to our strategic partners who
then export such components for use outside the United States. The matter is currently under
review. However, the Company may be exposed to damages up to a maximum of the face amount of our
continuous import bond for each year the non-compliant imports occurred, and the bond was in
effect. For the quarter ended December 31, 2007, the Company has recorded an estimated loss
contingency in the amount of $100, which is based on the face amounts of the bond described above.
There have been no adjustments to the accrual for the quarter ended March 31, 2008. The estimated
loss contingency is included in Selling, General & Administrative expenses in the condensed
statements of operations.
5. Stockholders Equity
Stock Based Compensation (in thousands)
The Company recorded stock-based compensation of $497 and $1,618 for the three and nine months
ended March 31, 2008 and $32 and $614 for the three and nine months ended March 31, 2007.
Page 10
The following is a summary of option activity for the Companys stock option plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
(in thousands, except shares, |
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
share price and term) |
|
Shares |
|
|
Price |
|
|
Life |
|
|
Value |
|
|
|
|
|
|
Outstanding at June 30, 2007 |
|
|
2,470,917 |
|
|
$ |
2.89 |
|
|
|
2.6 |
|
|
$ |
1,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,003,000 |
|
|
$ |
2.31 |
|
|
|
|
|
|
|
|
|
Forfeited or Expired |
|
|
(399,996 |
) |
|
$ |
3.42 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(200,651 |
) |
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
2,873,270 |
|
|
$ |
2.73 |
|
|
|
2.4 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Expected to Vest at
March 31, 2008 |
|
|
2,689,713 |
|
|
$ |
2.73 |
|
|
|
2.4 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2008 |
|
|
1,684,137 |
|
|
$ |
2.71 |
|
|
|
1.8 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 25,000 options that
were in-the-money at March 31, 2008. During the nine months ended March 31, 2008 and 2007, the
aggregate intrinsic value of options exercised under the Companys stock option plans were $248 and
$96, respectively, determined as of the date of option exercise.
6. Income Taxes
Effective July 1, 2007, we adopted the provisions of Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), an interpretation of
FASB Statement No. 109 (SFAS 109). There was no impact on our financial statements upon adoption.
Because of our historical significant net operating losses, we have not been subject to income tax
since inception. The tax years 1993-2007 remain open to examination by the major taxing
jurisdictions to which we are subject. The Companys policy is to recognize interest and penalties
related to the underpayment of income taxes as a component of income tax expense. To date, there
have been no interest or penalties charged to the Company in relation to the underpayment of income
taxes. There were no unrecognized tax benefits during all the periods presented.
We maintain deferred tax assets that reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. These deferred tax assets include net operating loss carryforwards,
research credits and deferred revenue. The net deferred tax asset has been fully offset by a
valuation allowance because of our history of losses. Utilization of operating losses and credits
may be subject to annual limitation due to ownership change provisions of the Internal Revenue Code
of 1986 and similar state provisions. The annual limitation may result in the expiration of net
operating losses and credits before utilization.
7. Subsequent Event
In May 2008, the Company and GE Healthcare Bio-Sciences AB (GE) amended their international
distribution agreement, effective July 1, 2008. Under the terms of the amendment GE will no longer
sell the BioArchive system and related disposables, GE will remain the exclusive distributor for
the AXP product line for cord blood applications in North America, Europe and Asia (excluding
China) and there
Page 11
will be price increases for the AXP disposable bag sets sold to GE. The expiration date of the
original agreement remains December 31, 2010, and 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.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking Statements
This report contains forward-looking statements which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements
involve risks and uncertainties that could cause actual results to differ materially from the
forward-looking statements. When used in this report, the words anticipate, believe,
estimate, expect and similar expressions as they relate to the Company or its management are
intended to identify such forward-looking statements. The Companys actual results, performance or
achievements could differ materially from the results expressed in, or implied by these
forward-looking statements. The Company wishes to caution readers of the important factors, among
others, that in some cases have affected, and in the future could affect the Companys actual
results and could cause actual results for fiscal year 2008, and beyond, to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the Company. These
factors include without limitation, the ability to obtain capital and other financing in the
amounts and at the times needed to complete clinical trials and product marketing for new products,
market acceptance of new products, regulatory approval and time frames for such approval of new
products and new claims for existing products, realization of forecasted income and expenses,
initiatives by competitors, price pressures, the risks associated with initiating manufacturing for
new products, and the risk factors listed from time to time in the Companys SEC reports,
including, in particular, the factors and discussion in the Companys Form 10-K for its last fiscal
year.
Overview
We are principally a leading supplier of innovative products that process, cryopreserve, 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 from donated cord blood or the bone marrow of
the patient to be treated. 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 must be used immediately or, if stored, require precision freezing and extremely low
storage temperatures (-196°C in some cases) in order to preserve the viability of the cells.
In February 2008, the Company formed a wholly-owned subsidiary, Vantus Veterinary Stem Cell
Laboratories (Vantus). Vantus involves a formal collaboration with the Center for Equine Health and
Stem Cell Regenerative Medicine Group at the University of California, Davis, School of Veterinary
Medicine. Its initial focus will be the banking (harvesting, processing and
preservation) of equine stem
cells for use in treatment of orthopedic injuries in the performance equine market.
In May
2008, the Company and GE Healthcare Bio-Sciences AB (GE) amended
their international distribution agreement, effective July 1, 2008.
Under the terms of the amendment GE will no longer sell the BioArchive
system and related disposables, GE will remain the exclusive
distributor for the AXP product line for cord blood applications in
North America, Europe and Asia (excluding China) and there will be
price increases for the AXP disposable bag sets sold to GE. The
expiration date of the original agreement remains 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.
Historically, our focus has been 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.
Page 12
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. GE
Healthcare is the global distribution partner for the BioArchive
System through June 30, 2008. 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 AXP is an innovative product which 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 has been commercially
available since March 2006, marketed under a Master File with the FDA. In October 2007, the
Company received 510k clearance from the FDA for the use of the AXP in the processing of cord blood
for cryopreservation. 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. In February 2008, the
Company initiated a voluntary recall of certain lots of the AXP disposable bag sets as some lots of
the bag sets were distributed prior to the performance of pyrogen testing. This recall was not a
result of any customer complaints or reports of patient safety
issues. The Company has tested approximately 50% of the recalled bag
set lots, all having passed with no exceptions. The Company expects
to have completed testing of the remaining available lots in the
near future.
The Company is developing an extension of the AXP, the MarrowXpressä Platform. This is a
proprietary, automated device and companion sterile blood processing disposable for isolating stem
cells from bone marrow in a closed system at or near the point of care. The initial focus will be
in the use of bone marrow stem cells in the treatment of critical limb ischemia and myocardial
ischemia. We are in the process of preparing a 510k submission and CE Mark application. The
Company plans to sell the MarrowXpress directly to global customers.
The CryoSeal FS System (CryoSeal) 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.
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 Kasei Medical Co., Ltd. (Asahi) has completed enrollment in their
pivotal clinical trial and filed their Premarket Application (PMA) approval equivalent in March
2005 with approval expected during fiscal 2009. 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.
Page 13
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 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 Thrombin Processing Device (TPD), a product line extension of the CryoSeal System, 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 our divestiture options for the ThermoLine consistent with our strategic direction
emphasizing the cell therapy and surgical wound care market.
The following is Managements discussion and analysis of certain significant factors which have
affected the Companys financial condition and results of operations during the period included in
the accompanying consolidated financial statements.
Critical Accounting Policies
Managements discussion and analysis of its financial condition and results of operations are based
upon the Companys consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation
of these consolidated 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 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 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 consolidated financial statements.
Revenue Recognition:
The Company recognizes revenue including multiple element arrangements, in accordance with the
provisions of the 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
Page 14
price is fixed or determinable, and collectibility is reasonably assured. The Company generally
ships products F.O.B. shipping point. 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 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 research and development 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.
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
Page 15
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 expense, which could have a material impact on
the Companys financial position and results of operations.
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 inventory.
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 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.
Results of Operations for the Three Months Ended March 31, 2008 as Compared to the Three Months
Ended March 31, 2007
Net Revenues:
Revenues for the three months ended March 31, 2008 were $5,645,000 compared to $5,210,000 for the
three months ended March 31, 2007, an increase of $435,000 or 8%. This is primarily due to an
increase in shipments in the AXP product line, both devices and disposables, which contributed to
an increase in revenues of approximately $500,000. The increase in shipments is due to higher
levels of production from our subcontract manufacturers for fulfillment against outstanding
customer backlog.
Page 16
The following represents the Companys cumulative BioArchive devices sold into the following
geographies through the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
2008 |
|
2007 |
United States |
|
|
41 |
|
|
|
31 |
|
Asia |
|
|
57 |
|
|
|
54 |
|
Europe |
|
|
45 |
|
|
|
40 |
|
Rest of World |
|
|
29 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
172 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
The following represents the Companys revenues for disposables by product line for the three
months ended:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
AXP |
|
$ |
1,786,000 |
|
|
$ |
1,413,000 |
|
BioArchive |
|
|
1,044,000 |
|
|
|
861,000 |
|
CryoSeal |
|
|
166,000 |
|
|
|
42,000 |
|
TPD |
|
|
52,000 |
|
|
|
126,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3,048,000 |
|
|
$ |
2,442,000 |
|
|
|
|
|
|
|
|
Percentage of total
Company revenues |
|
|
54 |
% |
|
|
47 |
% |
|
|
|
|
|
|
|
Gross Profit:
The
Companys gross profit was $1,501,000 or 27% of net revenues for the three months ended March
31, 2008, as compared to $1,772,000 or 34% for the corresponding fiscal 2007 period. The decrease
in gross margin is primarily due to $386,000 in costs incurred by the Company as a result of the
voluntary recall of AXP disposable bag sets. The incremental costs
were for testing, materials
and the destruction of bag sets which were not considered resalable.
No bag set lots have failed the
requisite testing performed on the recalled inventory.
Selling, General and Administrative Expenses:
Selling,
general and administrative expenses were $2,550,000 for the three months ended March 31,
2008, compared to $2,201,000 for the comparable fiscal 2007 period,
an increase of $349,000 or 16%.
The increase is due to higher legal fees, $300,000, associated with the GE Healthcare distribution agreement
negotiations and for consultation during the voluntary recall effort. In addition, website development, product brochures and other start-up activities
for Vantus drove higher marketing expenses.
Research and Development Expenses:
Included in this line item are Engineering, Regulatory Affairs, Scientific and Clinical Affairs.
Research and development expenses for the three months ended March 31, 2008, were $1,902,000
compared to $1,034,000 for the corresponding fiscal 2007 period, an increase of $868,000 or 84%.
The increase is primarily due to stock compensation and salaries and benefits of approximately
$600,000 related to the Chief Technology Architect, a position filled by the Companys former
Chief Executive Officer as of August 1, 2007 as part of the succession plan. Also, expenses
associated with the Vantus subsidiary, which was formed in February 2008, contributed approximately
$300,000 to the overall increase in research and development expenses.
Page 17
Results of Operations for the Nine Months Ended March 31, 2008 as Compared to the Nine Months Ended
March 31, 2007
Net Revenues:
Revenues for the nine months ended March 31, 2008 were $14,764,000, compared to $13,231,000 for the
nine months ended March 31, 2007, an increase of $1,533,000 or 12%. The increase is primarily due
to revenues from AXP disposables which increased $1,900,000 due to higher sales volume. This was
offset by a decrease in development milestone payments and license fees of approximately $640,000.
The following represents the Companys revenues for disposables by product line for the nine months
ended:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
BioArchive |
|
$ |
2,627,000 |
|
|
$ |
2,598,000 |
|
AXP |
|
|
3,888,000 |
|
|
|
2,003,000 |
|
CryoSeal |
|
|
746,000 |
|
|
|
297,000 |
|
TPD |
|
|
256,000 |
|
|
|
338,000 |
|
|
|
|
|
|
|
|
|
|
$ |
7,517,000 |
|
|
$ |
5,236,000 |
|
|
|
|
|
|
|
|
Percentage of total
Company revenues |
|
|
51 |
% |
|
|
40 |
% |
|
|
|
|
|
|
|
Gross Profit:
The
Companys gross profit was $4,620,000 or 31% of net revenues for the nine months ended March
31, 2008, as compared to $4,273,000 or 32% for the corresponding fiscal 2007 period. The gross
margin for the nine months ended March 31, 2008 was impacted by the costs associated with the
voluntary recall as discussed above, offset by improvements to warranty expense for the BioArchive
and CryoSeal devices.
Selling, General and Administrative Expenses:
Selling,
general and administrative expenses were $7,327,000 for the nine months ended March 31,
2008, compared to $6,813,000 for the comparable fiscal 2007 period,
an increase of $514,000 or 8%.
The increase is due to increased salaries and benefits for personnel
and legal costs, $386,000, related to the
discussions with GE Healthcare regarding the distribution agreement
and consultation during the voluntary recall effort.
Research and Development Expenses:
Included in this line item are Engineering, Regulatory Affairs, Scientific and Clinical Affairs.
Research and development expenses for the nine months ended March 31, 2008, were $5,015,000
compared to $2,969,000 for the corresponding fiscal 2007 period, an increase of $2,046,000 or 69%.
The increase is primarily due to stock compensation, salaries and benefits of approximately
$1,500,000 related to the Chief Technology Architect, a position filled by the Companys former
Chief Executive Officer as of August 1, 2007 as part of the succession plan. Also, expenses
associated with the Vantus subsidiary of $300,000 and payments made to UC Davis of $130,000 in
connection with an agreement to develop stem cell treatments contributed to the overall increase in
research and development expenses.
Liquidity and Capital Resources
At March 31, 2008, the Company had cash, cash equivalents and short-term investments of $29,043,000
and working capital of $32,445,000. This compares to cash, cash equivalents and short-term
investments of $33,379,000 and working capital of $37,759,000 at June 30, 2007. The cash was used
to fund
Page 18
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 $108,000,000, net of expenses, through common and preferred stock financings
and option and warrant exercises.
At March 31, 2008 the Company has $13,912,000 of short-term investments in mortgage-backed
securities of government sponsored enterprises, specifically discounted notes issued by the Federal
Home Loan Bank and the Federal National Mortgage Association. These securities are high-grade and
all mature prior to the Companys year end of June 30, 2008. Due to the high credit quality and
the maturity dates of these securities, the Company does not believe they will have a material
negative impact on our financial condition.
Net cash
used in operating activities for the nine months ended March 31,
2008 was $5,074,000,
primarily due to the net loss of $6,697,000 which included the accretion of discount on short-term
investments of $782,000, offset by depreciation and stock based compensation expense of $402,000
and $1,618,000, respectively. Deferred revenue utilized $545,000 of cash as a result of the
amortization of previously received license fees.
We believe that our currently available cash, cash equivalents and short-term investments, 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.
Off-Balance Sheet Arrangements
As of March 31, 2008, the Company has no off-balance sheet arrangements.
Backlog
The Companys cancelable backlog at March 31, 2008 was $4,319,000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All sales, domestic and foreign, are made in U.S. dollars and therefore material fluctuations in
foreign currency rates are believed to have no impact on the Companys net revenues. The Company
has no long-term investments or long-term debt, other than a capital lease, 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 4. 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 and operation of the Companys
disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e) and 15d-15(e)) as of
the end of our fiscal quarter pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the
Companys Chief Executive Officer along with the Companys Chief Financial Officer concluded that
the Companys disclosure controls and procedures are effective.
There were no changes in the Companys internal controls over financial reporting that occurred
during the three months ended March 31, 2008 that have materially affected, or are reasonably
likely to materially affect, its internal controls over financial reporting. The Company believes
that a control
Page 19
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.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of operations, the Company may have disagreements or disputes
with distributors, vendors or employees. 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 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended June 30, 2007, which could materially affect
our business, financial condition or future results. There have been no material
changes from those risk factors. The risks described in our Annual Report on Form
10-K are not the only risks facing our Company. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition and/or operating
results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits:
|
31.1 |
|
Certification by the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification by the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32 |
|
Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
Page 20
ThermoGenesis Corp.
Signatures
Pursuant to the requirements 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.
(Registrant)
|
|
Dated: May 7, 2008 |
/s/ William R. Osgood
|
|
|
William R. Osgood |
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
Dated: May 7, 2008 |
/s/ Matthew T. Plavan
|
|
|
Matthew T. Plavan
Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer) |
|
|
Page 21
Exhibit Index
|
31.1 |
|
Certification by the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification by the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32 |
|
Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |