UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 Commission File Number 0-109659 -------------- -------- CITA BIOMEDICAL, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) COLORADO 93-0962072 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 9025 Wilshire Blvd. Suite 301, Beverly Hills, CA 90211 ------------------------------------------------ ----- (Address of principal executive offices) (Zip code) (310) 550-4965 -------------- (Registrant's telephone number, including area code) ------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____X_____ No _________ State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 27,658,534 ---------------------------- ---------- Class Number of shares outstanding at March 31, 2001 PART I. Item 1. FINANCIAL INFORMATION CITA BIOMEDICAL, INC. Condensed Consolidated Balance sheet (Unaudited) March 31, 2001 Assets Current assets: Cash......................................................... $ 315,388 Employee advances............................................ 4,500 Prepaid expenses............................................. 14,354 ----------- Total current assets 334,242 Property and equipment, net....................................... 789,288 Intangible assets, net............................................ 807,903 Deposits.......................................................... 35,739 ----------- $ 1,967,172 Liabilities and Shareholder's Deficit Current liabilities: Accounts payable and accrued liabilities..................... $ 1,388,884 Line of credit............................................... 74,475 Short-term loans............................................. 350,804 Advances payable to officer (Note B)......................... 179,101 ------------ Total current liabilities 1,993,264 ------------ Shareholder's deficit (Note E): Preferred stock.............................................. 896,444 Common stock................................................. 276,586 Additional paid-in capital................................... 6,417,051 Stock options................................................ 183,770 Deferred compensation........................................ (137,979) Accumulated deficit.......................................... (7,661,964) ------------ Total shareholder's deficit (26,092) ------------ $ 1,967,172 ============ See accompanying notes to consolidated financial statements 2 CITA BIOMEDICAL, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, ------------------------------ 2001 2000 ------------ ------------ Revenues, net .................................................... $ 57,453 $ 96,099 ------------ ------------ Operating expenses: Cost of revenues ........................................... 38,325 46,297 General and administrative ................................. 570,183 219,845 Depreciation and amortization .............................. 109,828 30,212 ------------ ------------ Total operating expenses 718,336 296,354 ------------ ------------ Loss from operations (660,883) (200,255) ------------ ------------ Interest expense ................................................. (1,703) -- Interest income .................................................. 7,146 67 ------------ ------------ Loss before income taxes (655,440) (200,188) Provision for income taxes (Note C) .............................. -- -- ------------ ------------ Net loss $ (655,440) $ (200,188) ============ ============ Basic and diluted loss per common share .......................... $ (0.03) $ (0.03) ============ ============ Basic and diluted weighted average Common Shares outstanding .................................. 25,915,578 7,766,662 ============ ============ See accompanying notes to consolidated financial statements 3 CITA BIOMEDICAL, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, -------------------- 2001 2000 ---- ---- Net cash used in operating activities $(471,534) $(181,102) --------- --------- Cash flows from investing activities: Payments for web site development ............................... (18,162) -- Equipment purchases ............................................. (1,207) (3,126) --------- --------- Net cash used in investing activities (19,369) (3,126) --------- --------- Cash flows from financing activities: Proceeds from sale of common stock .............................. 372,406 -- Repayment of officer's advances (Note B) ........................ (39,000) -- Proceeds from working capital advances .......................... -- 189,938 --------- --------- Net cash provided by financing activities 333,406 189,938 --------- --------- Net change in cash .................................................... (157,497) 5,710 Cash, beginning of period ............................................. 472,885 -- --------- --------- Cash, end of period $ 315,388 $ 5,710 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest...................................................... $ - $ - ========= ========= Income taxes.................................................... $ - $ - ========= ========= See accompanying notes to consolidated financial statements 4 CITA BIOMEDICAL, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Note A: Basis of presentation The condensed consolidated financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its annual 10-KSB report dated December 31, 2000 and should be read in conjunction with the notes thereto. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim period presented have been made. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the year. Interim financial data presented herein are unaudited. The Company emerged from the development stage during the year ended December 31, 2000. Note B: Related party transactions During the three months ended March 31, 2001, the Company repaid an officer $39,000 related to working capital previously advanced to the Company. As of March 31, 2001, the remaining balance owed to the officer totaled $179,101, which is included in the accompanying condensed consolidated balance sheet as advances payable to officer. Note C: Income taxes The Company records its income taxes in accordance with Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes". Any deferred income tax asset due to net operating losses is fully allowed for as there is no assurance that the Company will have future net income to utilize the operating losses. Note D: Computer software development costs and amortization During the three months ended March 31, 2001, the Company capitalized $18,162 of external costs incurred to develop internal-use computer software for an Internet web site. The capitalized web site costs are amortized over an estimated life of three years commencing on the date the software is ready for its intended use. The Company commenced amortizing its web site development costs on January 1, 2001. Amortization expense totaled $67,852 for the three months ended March 31, 2001. 5 Note E: Shareholders' Equity During the three months ended March 31, 2001, the Company sold 3,485,913 shares of its $.01 par value common stock for $372,406 ($.11 per share). Following is a schedule of changes in shareholders' equity for the three months ended March 31, 2001. Preferred Stock Common Stock Additional --------------- ------------ Paid-in Stock Deferred Accumulated Shares Amount Shares Par Value Capital Options Compensation Deficit Total ------ ------ ------ --------- ------- ------- ------------ ------- ----- Balance January 1, 2001.. 1,000 896,444 24,172,621 $241,727 $6,079,504 $183,770 $(137,979) $(7,006,524) $256,942 Sale of common stock ($.11 per - - 3,485,913 34,859 337,547 - - - 372,406 share)........ Net loss for the three months ended March 31, 2001 - - - - - - - (655,440) (655,440) ------ -------- ----------- --------- ----------- --------- ----------- ----------- --------- Balance March 31, 2001 1,000 $896,444 27,658,534 $276,586 $6,417,051 $183,770 $ (137,979) $(7,661,964) $(26,092) ====== ======== =========== ========= =========== ========= =========== ============ ========= PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES At March 31, 2001 the Company had cash of $315,388. During the three months ended March 31, 2001, the Company repaid an officer $39,000 related to working capital previously advanced to the Company. The Company anticipates financing its operations from net cash flow from operations and third party financing. The Company intends to explore all options available to it with respect to such potential financing. RESULTS OF OPERATIONS Revenue The Company's revenues for the three months ended March 31, 2001 were $57,453 compared to $96,099 for the three months ended March 31, 2000. Essentially all of this revenue was derived from procedures performed by licensees of CITA Americas, Inc. The decrease in revenues was primarily due to fewer patients being treated while the Company continues its efforts to rebuild following the termination of a number of physician license agreements during the year 2000, while the Company's patent covering the UROD(R) process remained pending. The patent was issued on August 15, 2000 and assigned to the Company in November. The Company's management believes that the issuance of the UROD patent puts the Company in a position of strength with regard to earlier patent recipients with inferior claims and will assist the Company in its efforts to add new licensee facilities and medical professionals. 6 Cost of Revenue The Company's cost of revenues for the three months ended March 31, 2001 was $38,325 compared to $46,297 for the three months ended March 31, 2000. This resulted in a gross profit of $19,128 for the three months ended March 31, 2001, or a gross profit margin of approximately 33 percent. The gross profit for the three months ended March 31, 2000 was $49,802, or a gross profit margin of approximately 52%. Other Operating Expenses General and administrative expenses for the three months ended March 31, 2001 were $570,183 compared to $219,845 for the three months ended March 31, 2000. The increase of $350,644 was primarily due to the Company's expanding employee base following resolution of the patent issue and legal and accounting expenses in connection with the dispute with Aviation Industries, Corporation, and the restructuring of the Company, generally, during the three months ended March 31, 2001. The Company incurred depreciation and amortization expenses of $109,828 for the three months ended March 31, 2001 as compared to $30,212 for the three months ended March 31, 2000. This increase is due primarily to the fact that the Company commenced amortizing its web site development costs on January 1, 2001. The sum of the above resulted in a net loss of $660,883 for the three months ended March 31, 2001 as compared to a net loss of $200,188 for the three months ended March 31, 2000. PART II - OTHER INFORMATION Items 1 Through 5 - No response required. Item 6 - Exhibits and reports on Form 8-K. (a) No exhibits provided. (b) The Company filed no reports on Form 8-K during the three months ended March 31, 2001. 7 SIGNATURES The financial information furnished herein has not been audited by an independent accountant; however, in the opinion of management, all adjustments (only consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the three months ended March 31, 2000 and 1999 have been included. Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CITA Biomedical, Inc. (Registrant) DATE: May 18, 2001 BY:/s/Joseph Dunn ------------------------------------ Joseph Dunn President, Chief Executive Officer and Chief Financial Officer 8