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 June 30, 2001 Commission File Number 0-109659
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CITA BIOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
COLORADO 93-0962072
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9025 Wilshire Blvd. Suite 301, Beverly Hills, CA 90211
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(Address of principal executive offices) (Zip code)
(310) 550-4965
(Registrant's telephone number, including area code)
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(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 33,735,372
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Class Number of shares outstanding at June 30, 2001
PART I. Item 1. FINANCIAL INFORMATION
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CITA BIOMEDICAL, INC.
Condensed Consolidated Balance sheet
(Unaudited)
June 30, 2001
Assets
Current assets:
Cash............................................. $ 287,614
Employee advances................................ 4,500
Prepaid expenses................................. 26,441
-----------------------------
Total current assets 318,555
Property and equipment, net.......................... 698,660
Intangible assets, net............................... 763,213
Deposits............................................. 35,739
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$ 1,816,167
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Liabilities and Shareholder's Deficit
Current liabilities:
Accounts payable and accrued liabilities......... $ 1,399,837
Line of credit................................... 92,575
Short-term loans................................. 350,804
Advances payable to officer (Note B)............. 142,454
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Total current liabilities 1,985,669
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Shareholder's deficit (Note C):
Preferred stock.................................. 896,444
Common stock..................................... 337,353
Additional paid-in capital....................... 6,961,157
Stock options.................................... 183,770
Deferred compensation............................ (137,979)
Accumulated deficit.............................. (8,410,248)
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Total shareholder's deficit (169,503)
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$ 1,816,167
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CITA BIOMEDICAL, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2001 2000 2001 2000
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Sales and revenues, net $ 142,030 $ 144,384 $ 199,483 $ 212,891
Cost of sales and revenues (88,360) (102,643) (126,685) (142,475)
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Gross profit 53,670 41,741 72,798 70,416
Operating expenses:
General and administrative 728,399 223,359 1,298,582 390,516
Depreciation 109,828 30,212 219,656 60,626
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Total operating expenses 838,227 253,571 1,518,238 451,142
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Loss from operations (784,557) (211,830) (1,445,440) (380,726)
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Interest expense (1,627) - (3,330) -
Gain on accounts payable write off 32,233 - 32,233 -
Interest income 5,667 116 12,813 226
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Loss before income taxes (748,284) (211,714) (1,403,724) (380,500)
Provision for income taxes - - - -
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Net loss $ (748,284) $ (211,714) $(1,403,724) $(380,500)
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Basic and diluted loss per common share $(0.02) $ (0.03) $(0.05) $ (0.05)
=================================================================================
Basic and diluted weighted average 30,696,953 7,766,662 28,953,997 7,766,662
common shares outstanding
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See accompanying notes to consolidated financial statements
CITA BIOMEDICAL, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
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2001 2000
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Net cash used in operating activities $ (1,175,260) $ (304,796)
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Cash flows from investing activities:
Equipment purchases................ (4,219) (5,911)
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Net cash used in investing activities (4,219) (5,911)
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Cash flows from financing activities:
Proceeds from line of credit...... 92,575 -
Proceeds from sale of common stock 977,280 -
Repayment of officer's advances (Note
B)........................... (75,647) -
Proceeds from working capital
advances........................... - 321,093
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Net cash provided by financing activities 994,208 321,093
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Net change in cash................. (185,271) 10,386
Cash, beginning of period.......... 472,885 -
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Cash, end of period $ 287,614 $ 10,386
======================================================
Supplemental disclosure of cash flow information: Cash paid during the
period for:
Interest.......................... $ - $ -
======================================================
Income taxes...................... $ - $ -
======================================================
See accompanying notes to consolidated financial statements
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
Form 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 periods 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 six months ended June 30, 2001, the Company repaid an officer $75,647
related to working capital previously advanced to the Company. As of June 30,
2001, the remaining balance owed to the officer totaled $142,454, which is
included in the accompanying condensed consolidated balance sheet as advances
payable to officer.
Note C: Shareholders' Deficit
During the six months ended June 30, 2001, the Company sold 9,562,751 shares of
its $.01 par value common stock for $977,280. ($.10 per share).
Note D: Income Taxes
The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses during
the six months ended June 30, 2001 resulting in deferred tax asset, which was
fully allowed for; therefore, the net benefit and expense resulted in $0 in
income taxes.
Note E: Shareholders' Deficit
Condensed Consolidated Shareholders' Deficit
(unaudited)
January 1, 2001 to June 30, 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) $256,942
Sale of common
stock ($.10 per
share)...... - - 9,562,751 95,627 881,652 - - - 977,279
Net loss for the six
months ended June 30,
2001....... - - - - - - - (1,403,724)(1,403,724)
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1,000 $896,444 33,735,372 $337,354 $6,961,156 $183,770 $(137,979) $(8,410,248) $(169,503)
Balance, June 30,
2001
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PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001 the Company had cash of $287,614. During the six
months ended June 30, 2001, the Company repaid an officer $75,647 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 net revenues for the three months ended June 30, 2001
were $142,030, or 241 percent of first quarter revenues, which totaled $57,453.
Net revenues for the six months ended June 30, 2001 were $199,483 compared to
$212,891 for the six months ended June 30, 2000. Essentially all of this revenue
was derived from procedures performed by physicians licensed to perform the
Company's patented UROD(R) process. The second quarter revenues represent a
substantial increase in the number of procedures performed between the first and
second quarters of 2001, and the Company's management believes that increase
constitutes a significant step in the Company's recovery following termination
of several physician license agreements during 2000. The Company expects
to see its revenues from UROD procedures continue to increase substantially on a
quarter-by-quarter basis, although not at the same rate experienced in the last
quarter.
Cost of Revenue
The Company's cost of revenues for the three months ended June 30, 2001
was $88,360, compared to $38,325 in the first quarter. The gross profit for the
second quarter was $53,670, for a gross profit margin of 38 percent. This
compares to a gross profit margin of 50 percent for the first quarter.
The cost of revenues for the six months ended June 30, 2001 was
$126,685 compared to $142,475 for the six months ended June 30, 2000. This
resulted in a gross profit of $72,798 for the six months ended June 30, 2001,
for a gross profit margin of approximately 36 percent. The gross profit for the
six months ended June 30, 2000 was $70,416, for a gross profit margin of
approximately 33 percent.
Other Operating Expenses
General and administrative expenses for the three months ended June 30,
2001 were $728,399, or 128% of general and administrative expenses during the
first quarter of 2001. The Company incurred additional expenses during the
second quarter relating to (1) legal fees to resolve several threatened
disputes, (2) increases in advertising and marketing expenditures targeting the
market for the Company's UROD procedure, and (3) installing a new accounting and
statistical information management software system. The Company does not expect
to incur increased expenses relating to any of these items during the remainder
of 2001.
General and administrative expenses during the six months ended June
30, 2001 totaled $1,298,582 compared to $390,516 for the six months ended June
30, 2000. In addition to the expenses described above, the Company incurred
significant expenses compared to the first half of 2000 due to its expanded
employee base during rebuilding efforts in late 2000 and early 2001. The Company
is in process of cutting overhead expenses and expects that general and
administrative expenditures will decrease in the second half of 2001.
The Company incurred depreciation and amortization expenses of $219,656
for the six months ended June 30, 2001 as compared to $60,626 for the six months
ended June 30, 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 $1,403,724 for the six
months ended June 30, 2001 as compared to a net loss of $380,500 for the six
months ended June 30, 2000.
FINANCIAL CONDITION
The Company has experienced losses since 1994. Although revenues have
increased signficantly during the three months ended June 30, 2001, expenses
continue to exceed revenues. Despite additional capital raised through the sale
of shares of the Company's Common Stock, the Company's financial statements show
a negative net worth at June 30, 2001. In the aggregate, these indicators raise
concerns about the Company's ability to continue as a going concern, although
management believes that cost cutting, revenue expansion and financing
activities in combination will enable the Company to continue and achieve a
positive cash flow from operations during the year 2002.
The Company is actively pursuing new operating centers and alliances
with other organizations in the addiction treatment field, which management
believes will provide positive working capital. There is no assurance that such
efforts will be fruitful, or that they will provide sufficient working capital.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. No response required.
Item 2. Sales of Securities. During the six months ended June 30, 2001, the
Company sold 9,562,751 shares of its Common Stock for an aggregate price of
$977,280.
The securities were offered and sold pursuant to Regulation S under Section 4(2)
of the Securities Act of 1933, as amended, to private individuals outside the
United States. No underwriter was engaged in connection with the offer or sale
of the securities.
Items 3 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 six months
ended June 30, 2001.
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 six months ended June 30, 2001 and 2000
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 17, 2001 BY:/s/Joseph Dunn
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Joseph Dunn
President, Chief Executive Officer
and Chief Financial Officer