UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended June 30, 2014 |
|
|
|
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from _________ to ____________. |
Commission File number 0-935
CYTOCORE, INC.
(Exact Name of Registrant as Specified
in Its Charter)
Delaware |
|
36-4296006 |
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
Incorporation or Organization) |
|
Identification No.) |
4203 SW 34th St.
Orlando, FL 32811
(Address of Principal Executive Offices)
(407) 996-9631
(Registrant’s Telephone Number,
Including Area Code)
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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. Yes x No o
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes x
No o (not required) o
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 the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rue 12b-2
of the Exchange Act. (Check one):
Large Accelerated Filer o Accelerated
Filer
Non-Accelerated Filer o Smaller
Reporting Company x
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of each
of the issuer’s classes of common equity, as of the latest practicable date:
common STOCK, $0.001
par value, AT AUGUST 18, 2014: 1,926,795,621
CYTOCORE,
Inc.
Quarterly
Report on Form 10-Q
Table
of contents
Part I. -- Financial
Information
CYTOCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share
amounts)
(Unaudited)
| |
June 30, | | |
December 31 | |
| |
2014 | | |
2013 | |
| |
| | |
* | |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash | |
$ | 314 | | |
$ | 75 | |
Accounts receivable, net of allowance for doubtful accounts | |
| 1,849 | | |
| 1,594 | |
Inventories | |
| 4,776 | | |
| 3,953 | |
Prepaid expenses and other current assets | |
| 226 | | |
| 487 | |
Total current assets | |
| 7,165 | | |
| 6,109 | |
Property and equipment, net | |
| 2,041 | | |
| 1,867 | |
Goodwill | |
| 12,461 | | |
| - | |
Other Assets | |
| 606 | | |
| 194 | |
Total assets | |
$ | 22,273 | | |
$ | 8,170 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Secured lines of credit and current portion of long-term debt | |
$ | 2,664 | | |
$ | 2,739 | |
Account payable and accrued expenses | |
| 4,090 | | |
| 1,236 | |
Advance – Related Parties | |
| 125 | | |
| - | |
Total current liabilities | |
| 6,879 | | |
| 3,975 | |
Long term debt, net of current portion | |
| 1,705 | | |
| 1,571 | |
Total Liabilities | |
| 8,584 | | |
| 5,546 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ Equity : | |
| | | |
| | |
Preferred stock, $0.001 par value; 10,000,000 shares authorized;
373,355 shares issued and outstanding as of June 30, 2014 (liquidation value of all classes of preferred stock $2,871 as of
June 30, 2014) | |
| 1,487 | | |
| - | |
Common stock, $0.001 par value; 2 billion shares authorized, 1,926,795,621 issued and issuable as of June 30, 2014 | |
| 1,927
| | |
| 1,469
| |
Additional paid-in capital | |
| 7,813 | | |
| (1,469 | ) |
Treasury Stock | |
| (327 | ) | |
| - | |
Accumulated other comprehensive income (loss) | |
| 283 | | |
| 287 | |
Retained Earnings | |
| 2,506 | | |
| 2,337 | |
Total stockholders’ equity | |
| 13,689 | | |
| 2,624 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 22,273 | | |
$ | 8,170 | |
*Derived from
audited information
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
CYTOCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share
amounts)
(Unaudited)
| |
Three Months Ended June 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net Sales | |
$ | 3,175 | | |
| 2,666 | |
Operating Expenses | |
| | | |
| | |
Cost of revenues | |
| 1,441 | | |
| 1,252 | |
Depreciation expense | |
| 39 | | |
| 46 | |
Research and development | |
| 246 | | |
| 285 | |
Selling, general and administrative | |
| 1,333 | | |
| 933 | |
| |
| | | |
| | |
Total cost and expenses | |
$ | 3,059 | | |
| 2,516 | |
Operating Income (Loss) | |
$ | 116 | | |
| 150 | |
| |
| | | |
| | |
Other Expenses | |
| | | |
| | |
Interest expense | |
| 75 | | |
| 67 | |
Non-operating expenses (income) | |
| 122 | | |
| (2 | ) |
| |
| | | |
| | |
Total other expenses | |
$ | 197 | | |
| 65 | |
Income (loss )from operations before income taxes | |
$ | (81 | ) | |
| 85 | |
| |
| | | |
| | |
Income taxes (benefit) | |
| (31 | ) | |
| (19 | ) |
Net Income (loss) | |
$ | (50 | ) | |
| 104 | |
Preferred dividend | |
| 36 | | |
| - | |
Net Income (loss) to common stockholders | |
| (86 | ) | |
| 104 | |
| |
| | | |
| | |
Statement of Comprehensive Income | |
| | | |
| | |
Net Income (loss) | |
| (50 | ) | |
| 104 | |
Other Comprehensive income (loss) | |
| | | |
| | |
Foreign currency translation adjustments | |
| (4 | ) | |
| 2 | |
Comprehensive income (loss) | |
| (54 | ) | |
| 106 | |
| |
| | | |
| | |
Pro Forma Earnings Per Share | |
| | | |
| | |
Net income (loss) to common stockholders | |
| (86 | ) | |
| 104 | |
Pro forma basic and diluted earnings per share | |
| - | | |
| - | |
Pro forma weighted average basic and diluted shares outstanding | |
| 1,634,948,381 | | |
| 1,468,750,000 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
CYTOCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share
amounts)
(Unaudited)
| |
Six Months Ended June 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net Sales | |
$ | 5,909 | | |
| 4,480 | |
Operating Expenses | |
| | | |
| | |
Cost of revenues | |
| 2,938 | | |
| 2,284 | |
Depreciation expense | |
| 78 | | |
| 92 | |
Research and development | |
| 445 | | |
| 469 | |
Selling, general and administrative | |
| 1,962 | | |
| 1,515 | |
| |
| | | |
| | |
Total cost and expenses | |
$ | 5,423 | | |
| 4,360 | |
Operating Income (Loss) | |
$ | 486 | | |
| 120 | |
| |
| | | |
| | |
Other Expenses | |
| | | |
| | |
Interest expense | |
| 150 | | |
| 130 | |
Non-operating expenses (income) | |
| 151 | | |
| 23 | |
| |
| | | |
| | |
Total other expenses | |
$ | 301 | | |
| 153 | |
Income (loss )from operations before income taxes | |
$ | 185 | | |
| (33 | ) |
| |
| | | |
| | |
Income taxes (benefit) | |
| 16 | | |
| 8 | |
Net Income (loss) | |
$ | 169 | | |
| (41 | ) |
Preferred dividend | |
| 36 | | |
| - | |
Net Income (loss) to common stockholders | |
| 133 | | |
| (41 | ) |
| |
| | | |
| | |
Statement of Comprehensive Income | |
| | | |
| | |
Net Income (loss) | |
| 169 | | |
| (41 | ) |
Other Comprehensive income (loss) | |
| | | |
| | |
Foreign currency translation adjustments | |
| (4 | ) | |
| 2 | |
Comprehensive income (loss) | |
| 165 | | |
| (39 | ) |
| |
| | | |
| | |
Pro Forma Earnings Per Share | |
| | | |
| | |
Net income (loss) to common stockholders | |
| 133 | | |
| (41 | ) |
Pro forma basic and diluted earnings per share | |
| - | | |
| - | |
Pro forma weighted average basic and diluted shares outstanding | |
| 1,552,762,369 | | |
| 1,468,750,000 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
CYTOCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Dollars in thousands)
(Unaudited)
| |
Six Months Ended June 30, | |
| |
2014 | | |
2013 | |
Cash Flows from Operating Activities: | |
| | | |
| | |
Net Income (loss) | |
$ | 169 | | |
$ | (41 | ) |
Adjustments to reconcile net income (loss) to cash (used in) provided by operations | |
| | | |
| | |
Depreciation and amortization | |
| 78 | | |
| 92 | |
Non-cash Interest | |
| 2 | | |
| - | |
Changes in assets and liabilities: | |
| | | |
| | |
Accounts receivable and allowance for doubtful accounts | |
| (247 | ) | |
| (30 | ) |
Inventories | |
| (827 | ) | |
| (121 | ) |
Prepaid expenses and other current assets | |
| (78 | ) | |
| (144 | ) |
Accounts payable and accrued liabilities | |
| (279 | ) | |
| 146 | |
Net cash (used in) provided by operating activities | |
| (1,182 | ) | |
| (98 | ) |
| |
| | | |
| | |
Cash Flows from Investing activity: | |
| | | |
| | |
Purchase of Equipment | |
| (269 | ) | |
| (150 | ) |
Cash Acquired in Merger | |
| 1 | | |
| - | |
Proceeds from Related Party Advances | |
| 21 | | |
| - | |
Net cash provided from (used in) investing activities | |
| (247 | ) | |
| (150 | ) |
| |
| | | |
| | |
Cash Flows from Financing activities: | |
| | | |
| | |
Advances net of repayments on lines of credit | |
| 142 | | |
| 367 | |
Proceeds from Sale of Common Stock | |
| 1,724 | | |
| - | |
Term note repayments | |
| (104 | ) | |
| (102 | ) |
Net cash provided by (used by) financing activities | |
| 1,762 | | |
| 265 | |
| |
| | | |
| | |
Effect of exchange rates on cash and cash equivalents | |
| (94 | ) | |
| (64 | ) |
Net increase in cash and cash equivalents | |
| 239 | | |
| (47 | ) |
Cash and cash equivalents at beginning of year | |
| 75 | | |
| 65 | |
| |
| | | |
| | |
Cash and cash equivalents at end of the period | |
$ | 314 | | |
$ | 18 | |
| |
| | | |
| | |
Cash paid for income taxes | |
| 16 | | |
| 8 | |
Cash paid for interest | |
| 149 | | |
| 130 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
1. Organization and Summary of Significant Accounting Policies
CytoCore, Inc. is a
Delaware Corporation engaged in the business of cancer diagnosis and prevention, particularly within
histology (processing of tissue samples) and cytology (processing of cellular material). The Company is active in the development,
manufacture and marketing of a wide product range within the histology market.
These statements include
the accounts of CytoCore, Inc. (the “Company”, “we” and “us”) and its wholly owned subsidiaries,
which consists of Medite Enterprise, Inc., Medite GmbH, Burgdorf, Germany, Medite GmbH, Salzburg, Austria, Medite Lab Solutions
Inc. (formerly Medite Inc.), Orlando, USA, and CytoGlobe, GmbH, Burgdorf, Germany
In April 2014, in a
transaction more fully described in Footnote 2, the shareholders of the Company consummated a transaction in which 100% of the
issued and outstanding shares of Medite Enterprise, Inc. were acquired by CytoCore, Inc. in exchange for the issuance by CytoCore,
Inc. of 1,468,750,000 shares of its common stock to the shareholders of the Company. The result of this transaction was for the
Company and its wholly owned subsidiaries to become wholly owned subsidiaries of CytoCore, Inc., a US public company. In addition,
the shareholders of the Company became the majority owners of CytoCore, Inc., which resulted in the transaction being accounted
for as a reverse merger, in which the financial statements of Medite Enterprise, Inc. and its subsidiaries became those of CytoCore,
Inc.
The consolidated financial
statements for the periods ended June 30, 2014 and 2013 included herein are unaudited. Such consolidated financial statements reflect,
in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of
and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily
indicative of the results to be expected for the fiscal year ending December 31, 2014 or for any other period. Certain information
and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. The Company believes that the disclosures are adequate to make the interim information presented not misleading.
These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and the notes thereto included in in an 8-K/A filing dated June 17, 2014.
Consolidation, Basis of Presentation and Significant
Estimates
The accompanying consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions are eliminated.
In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported
amounts in the financial statements and disclosures of contingencies. Significant assumptions are required in the valuation of
the allowance for doubtful accounts and inventory overhead allocations. Significant assumptions also are required in the Company’s
estimation of warranty reserves. Changes in facts and circumstances may result in revised estimates and actual results may differ
from these estimates.
Revenue Recognition
The Company derives its revenue primarily
from the sale of medical products and supplies for the diagnosis and prevention of cancer. Product revenue is recognized when all
four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products
has occurred; (3) the selling price of the product is fixed or determinable; and (4) collectability is reasonably assured.
The Company generates the majority of its revenue from the sale of inventory. The Company recognizes revenue when title and risk
of loss transfer to the customer and all other revenue recognition criteria have been met. For a small subset of sales in Germany,
the Company and its customers agree in the sales contract that risk of loss and title transfer upon the Company packing the items
for shipment and notifying the Customer that their items are ready for pickup. The Company records such sales at time of completed
packaging and segregation of the items from general inventory and notification has been confirmed by the customer.
Cash and Cash Equivalents
The Company considers all cash on deposit
and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents.
Accounts Receivable
The Company generates accounts receivable
from the sale of its products. The Company provides for a reserve against receivables for estimated losses that may result from
a customer's inability or unwillingness to pay. The allowance for doubtful accounts is estimated primarily based upon historical
write-off percentages, known problem accounts, and current economic conditions. Accounts are written off against the allowance
for doubtful accounts when the Company determines that amounts are not collectable. Recoveries of previously written-off accounts
are recorded when collected.
Inventories
Inventories are stated at the lower of
cost or market. Market, which represents selling price less cost to sell, considers general market and economic conditions, periodic
reviews of current profitability and product warranty costs. Work in process and supplies of consumables are reviewed to determine
if inventory quantities are in excess of forecasted usage or if they have become obsolete.
Property and Equipment
Property and equipment are stated at cost,
less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the
estimated useful lives of the assets as follows:
Buildings |
33 yrs |
Machinery and equipment |
3-10yrs |
Office furniture and equipment |
2-10 yrs |
Vehicles |
5 yrs |
Computer equipment |
3-5 yrs |
Normal maintenance
and repairs for equipment are charged to expense as incurred, while significant improvements are capitalized.
Research and Development
All research and development costs are
expensed as incurred. Research and development costs consist of engineering, product development, testing, developing and validating
the manufacturing process, and regulatory related costs.
Pro Forma Financial
Information
As discussed in Note 1, in April 2014,
the Company was acquired by CytoCore, Inc., a US public company. Upon closing of the Merger, the financial statements Medite Enterprise,
Inc. became those of CytoCore, Inc. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Number 1B.2 "Pro
Forma Financial Statements and Earnings per Share" ("SAB 1B.2"), pro forma earnings per share information on the
face of the statement of operations has been presented which reflects the impact of the Company's change in capital structure as
if it had occurred at the commencement of operations on January 1, 2013.
2. Reverse Merger
In January 2014, the Company and the owners
of Medite Enterprise, Inc. entered into an agreement to merge with CytoCore, Inc.. The merger required as a pre-requisite that
among other items CytoCore settle certain outstanding payroll amounts in stock and that CytoCore complete a private placement with
gross proceeds of a minimum of $2 million, which was later amended to $1.5 million. On April 3, 2014 CytoCore issued 69,723,439
shares of its common stock in satisfaction of approximately $1.61 million in outstanding accrued payroll and on April 4, 2014 also
closed on a private placement in which it received gross proceeds of $1.529 million and issued 95,587,500 shares of its common
stock. The merger closed on April 4, 2014 with the owners of Medite Enterprise, Inc. receiving 1,468,750,000 shares of the Company’s
common stock plus an additional 31,250,000 shares issuable if certain conditions are met, in exchange for 100% of the issued and
outstanding stock of Medite Enterprise, Inc.
Because the owners of Medite Enterprise, Inc. received approximately
81.1% of the then issued and outstanding stock of the Company, the merger has been treated as a reverse acquisition, in which for
accounting purposes Medite Enterprise, Inc. acquired CytoCore, Inc. The table below shows the management’s best estimate
of the purchase price paid for the reverse acquisition of CytoCore by Medite Enterprise, Inc. :
| |
In thousands | |
Net assets acquired | |
| | |
Cash | |
$ | 1 | |
Accounts receivable | |
| 8 | |
Goodwill | |
| 12,461 | |
| |
$ | 12,470 | |
| |
| | |
Liabilities assumed | |
| | |
Accounts payable & accrued expenses | |
$ | 2,908 | |
Related party advances | |
| 102 | |
Loans payable | |
| 21 | |
| |
$ | 3,031 | |
| |
| | |
Net identifiable assets/consideration paid | |
$ | 9,439 | |
The amounts included
in the table above are management’s estimates. Because of the issues regarding the liquidity and trading of the stock of
the Company, the Company has used an internal valuation for the consideration and assets acquired. The Company expects to obtain
professional valuations prior to year end and that the amounts show above will be subject to change upon the Company obtaining
those valuations. The most significant estimates subject to change above are the consideration paid, the amount of intangible assets
for the possible value attributable to the technology and patents, in process research and development, net deferred tax assets
(see discussion below), accounts payable and accrued expenses and finally goodwill.
The transaction entered
into by CytoCore, Inc. to satisfy outstanding officer loans in 2013 and the merger consideration paid to the owners of Medite Enterprise,
Inc. has resulted in a “change of control” as defined in Section 382 of the internal revenue code as of April 2014.
The effect of this change in control is that the past net operating losses of CytoCore, Inc. which amounted to approximately $72
million will be limited as defined in Section 382 of the internal revenue code. The Company is required under Section 382 to perform
a valuation that will determine the amount of net operating losses from each loss year that may be taken in each year on a go-forward
basis. Because the Company has yet to perform or obtain this valuation, the amount and timing of the availability of its loss carryforwards
from CytoCore, Inc. are unknown at this time. Upon determination of this amount, a significant deferred tax asset may be recorded
which will effect the final net assets acquired above. The Company expects to obtain this valuation prior to year end.
3. Inventories
The following is a summary of the components
of inventories (in thousands):
| |
June 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
Raw materials | |
$ | 2,260 | | |
$ | 1,748 | |
Work in progress | |
| 115 | | |
| 137 | |
Finished Goods | |
| 2,401 | | |
| 2,068 | |
| |
| | | |
| | |
| |
$ | 4,776 | | |
$ | 3,953 | |
No amounts were reserved
for scrap or obsolete inventory as of June 30, 2014 and December 31, 2013, respectively.
4.
Property and Equipment
The following is a summary of the components
of property and equipment as of (in thousands):
| |
June 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
Land | |
$ | 244 | | |
$ | 244 | |
Buildings | |
| 1,352 | | |
| 1,352 | |
Machinery and equipment | |
| 501 | | |
| 407 | |
Office furniture and equipment | |
| 240 | | |
| 240 | |
Vehicles | |
| 39 | | |
| 39 | |
Computer equipment | |
| 86 | | |
| 86 | |
Construction in progress | |
| 544 | | |
| 386 | |
Less: Accumulated depreciation | |
| (965 | ) | |
| (887 | ) |
| |
$ | 2,041 | | |
$ | 1,867 | |
Depreciation expense amounted to approximately
$78,000 and $92,000 for the six months ended June 30, 2014 and 2013, respectively and is included in the cost of revenues line
item on the statement of operations.
5. Debt and Line of Credit
Our outstanding note payable indebtedness
was as follows as of (in thousands):
| |
June 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
Hannoversech Volksbank Credit line #1 | |
$ | 486 | | |
$ | 759 | |
Hannoversech Volksbank Credit line #2 | |
| 1,693 | | |
| 1,333 | |
Hannoversech Volksbank Credit line #3 | |
| 499 | | |
| 444 | |
Hannoversech Volksbank term loan #1 | |
| 175 | | |
| 211 | |
Hannoversech Volksbank term loan #2 | |
| 109 | | |
| 138 | |
Hannoversech Volksbank term loan #3 | |
| 354 | | |
| 393 | |
Participation rights | |
| 1,032 | | |
| 1,032 | |
Ventana Medical Systems | |
| 21 | | |
| - | |
| |
$ | 4,369 | | |
$ | 4,310 | |
In July 2006, Medite GmbH, Burgdorf, entered
into a line of credit agreement with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority of 400,000
euros, which was amended in 2012 to increase the maximum borrowing to 600,000 euros with a variable interest rate of 8% per annum
as of December 31, 2013. The line of credit has no stated maturity date but may be cancelled by the bank upon notice to the Company.
The line of credit is collateralized by the accounts receivable and inventory of Medite GmbH, Burgdorf and is guaranteed by the
shareholders of the Company.
In July 2006, Medite GmbH, Burgdorf, entered
into a secondary line of credit agreement with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority
of 480,000 euros, which was later amended to increase the maximum borrowing to 1 million euros with a variable interest rate of
approximately 3.98% as of December 31, 2013. The line of credit has no stated maturity date but may be cancelled by the bank upon
notice to the Company. The line of credit is guaranteed by the shareholders of the Company and a mortgage on the property of the
Company. In addition, the shareholders have named the bank as beneficiary on a term life insurance policy on each shareholder in
the amount of 500,000 euros.
In June 2012, CytoGlobe, GmbH, Burgdorf,
entered into a line of credit agreement with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority of
400,000 euros. The credit line is split into two tranches for interest rate purposes, with the first 200,000 euro tranche at a
variable rate of approximately 4% per annum at December 31, 2013 and the second 200,000 euro tranche at 8% per annum. The line
of credit has no stated maturity date but may be cancelled by the bank upon notice to the Company. The line of credit is collateralized
by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and is guaranteed by the shareholders of the Company.
In December 2006, Medite GmbH, Burgdorf,
entered into a 500,000 euro term loan agreement with Hannoversche Volksbank with an interest rate of 3.4% per annum. The term loan
has a maturity of September 2016 and requires semi-annual principal payments of approximately 27,780 euros each. The term loan
is guaranteed by the stockholders of the Company and also a mortgage on the property of the Company.
In June 2006, Medite GmbH, Burgdorf, entered
into a 400,000 euro term loan with Hannoversche Volksbank with an interest rate of 3.6 per annum. The term loan has a maturity
of June 2016, requires 18 semi-annual principal repayments of approximately 22,220 euro each. The term loan is guaranteed by the
stockolders of the Company and also has subordinated assignments of all of the receivables and inventories of Medite GmbH, Burgdorf
and also has a subordinated pledge of stockholder term life insurance policies.
In November 2008, Medite GmbH, Burgdorf,
entered into a 400,000 euro term loan with Hannoversche Volksbank with a variable interest rate of approximately 4.7% per annum
as of December 31, 2013. The term loan has a maturity of December 31, 2018, and requires quarterly principal repayments of 13,890
euro each. The term loan is guaranteed by the stockholders of the Company and also includes a partial subordinated pledge of the
receivables and inventory of Medite GmbH, Burgdorf.
In March 2009, the Company entered into
a participation rights agreement in the form of a debenture which a mezzanine lender agreed to advance the Company up to 1.5 million
euros in two tranches of 750,000 euros each. The first tranche was paid to the Company at closing with the second tranche being
conditioned on Medite GmbH, Burgdorf and its subsidiaries hitting certain performance targets. Those targets were not met and the
second tranche was never disbursed. The debenture pays interest at the rate of 12.15% per annum and matures in 2016.
The Company owes Ventana Systems approximately
$21,000 under a 2001 promissory note in the original principal amount of approximately $62,000. The note matured in 2003 and has
been in default since that time. The Company is currently in negotiations with the parent of Ventana Systems, who also are the
holders of 100% of the outstanding shares of Series D preferred stock to convert the note and Series D into common stock of the
Company. The Company expects to close on this transaction in the third quarter of 2014.
As of June 30, 2014, an officer had advanced
the Company approximately $125,000. During the three months ended June 30, 2014, approximately $1,700 of interest expense, a non-cash
charge, was imputed on these advances.
6. Common Stock
In May and June of 2014, the Company issued
12,187,500 shares as part of a follow private placement to the original April 2014 private placement as part of the Medite Enterprise
transaction (see Note 2) and raised gross proceeds of $195,000.
During the second quarter of 2014, the Company
issued 3,589,214 shares of its common stock to one of its vendors in satisfaction of a $36,000 liability to the vendor.
During the second quarter of 2014, the Company
issued 4,877,111 shares of its common stock to former directors and consultants in satisfaction of certain liabilities owed them
for their services in the amount of $82,000.
7. Preferred Stock
A summary of the Company’s preferred
stock is as follows:
| |
June 30, | |
| |
2014 | |
| |
Shares Issued & | |
Offering | |
Outstanding | |
| |
| |
Series A convertible | |
| 47,250 | |
Series B convertible, 10% cumulative dividend | |
| 93,750 | |
Series C convertible, 10% cumulative dividend | |
| 38,333 | |
Series D convertible, 10% cumulative dividend | |
| 175,000 | |
Series E convertible, 10% cumulative dividend | |
| 19,022 | |
Total Preferred Stock | |
| 373,355 | |
As of June 30, 2014,
the Company had cumulative preferred undeclared and unpaid dividends. In accordance with the Financial Accounting Standard Board’s
Accounting Standards Codification 260-10-45-11, “Earnings per Share”, these dividends were added to the net
loss in the net loss per share calculation.
Summary of Preferred
Stock Terms
Series A Convertible Preferred Stock |
Liquidation Value: |
$4.50 per share, $212,625 |
Conversion Price: |
$103.034 per share |
Conversion Rate: |
0.04367—Liquidation Value divided by Conversion Price ($4.50/$103.034) |
Voting Rights: |
None |
Dividends: |
None |
Conversion Period: |
Any time |
|
|
Series B Convertible Preferred Stock |
Liquidation Value: |
$4.00 per share, $375,000 |
Conversion Price: |
$10.00 per share |
Conversion Rate: |
0.40—Liquidation Value divided by Conversion Price ($4.00/$10.00) |
Voting Rights: |
None |
Dividends: |
10%—Quarterly—Commencing March 31, 2001 |
Conversion Period: |
Any time |
Cumulative and undeclared dividends in arrears at June 30, 2014 were $501,000 |
|
|
Series C Convertible Preferred Stock |
Liquidation Value: |
$3.00 per share, $115,000 |
Conversion Price: |
$6.00 per share |
Conversion Rate: |
0.50—Liquidation Value divided by Conversion Price ($3.00/$6.00) |
Voting Rights: |
None |
Dividends: |
10%—Quarterly—Commencing March 31, 2002 |
Conversion Period: |
Any time |
Cumulative and undeclared dividends in arrears at June 30, 2014 were $146,000 |
Series D Convertible Preferred Stock |
Liquidation Value: |
$10.00 per share, $1,750,000 |
Conversion Price: |
$10.00 per share |
Conversion Rate: |
1.00—Liquidation Value divided by Conversion Price ($10.00/$10.00) |
Voting Rights: |
None |
Dividends: |
10%—Quarterly—Commencing April 30, 2002 |
Conversion Period: |
Any time |
Cumulative and undeclared dividends in arrears at June 30, 2014 were $630,000 |
|
|
Series E Convertible Preferred Stock |
Liquidation Value: |
$22.00 per share, $418,488 |
Conversion Price: |
$8.00 per share |
Conversion Rate: |
2.75—Liquidation Value divided by Conversion Price ($22.00/$8.00) |
Voting Rights: |
Equal in all respects to holders of common shares |
Dividends: |
10%—Quarterly—Commencing May 31, 2002 |
Conversion Period: |
Any time |
Cumulative and undeclared dividends in arrears at June 30, 2014 were $537,000 |
8. Commitments and Contingencies
The Company currently leases warehouse
space in Germany under a month to month operating lease with a monthly rental fee of 4,000 euro. The Company currently has 12 vehicles
it leases for delivery and other purposes with expirations ranging from April 2014 through August 2015. In July 2013, the Company
entered into a lease agreement for administrative office and warehouse space. The lease has a term of 5 years and requires minimum
monthly rental payments starting at $2,277 per month increasing to $2,563 per month in year 5. No amounts were recorded for deferred
rent for the rent escalation clauses as they were immaterial in 2014 and 2013. In total the leases require minimum monthly rental
payments of approximately 5,100 euros.
The Company is currently in the process
of obtaining default judgments against a number of customers who have defaulted on repayment on their outstanding invoices and
the purchaser of a former subsidiary for non-payment. The total amount currently awaiting default judgments is approximately 428,000
euros. While the Company believes that it may recover substantially all of the amounts outstanding through the enforcement of the
judgments, it currently has included reserves for 100% of the amounts owed as of March 31, 2014 and December 31, 2013 due to the
difficulty of enforcement of any judgments obtained, especially across international borders.
9. Segment Information
The Company operates in one operating segment.
However, the Company has assets and operations in the United States and Germany. The following tables show the breakdown of our
operations and assets by Country (in thousands):
| |
United States | | |
Germany | |
| |
June 30, 2014 | | |
June 30, 2014 | |
| |
| | | |
| | |
Total Assets | |
$ | 17,110 | | |
$ | 5,163 | |
Property & equipment, net | |
$ | 23 | | |
| 2,018 | |
Goodwill | |
$ | 12,461 | | |
| - | |
| |
United States | | |
Germany | |
| |
Six Month Ended | | |
Six Months Ended | |
| |
June 30,
2014 | | |
June 30,
2013 | | |
June 30,
2014 | | |
June 30,
2013 | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 808 | | |
$ | 166 | | |
$ | 5,101 | | |
| 4,314 | |
Net income (loss) | |
| (51 | ) | |
| (78 | ) | |
$ | 220 | | |
| 37 | |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution Regarding Forward-Looking Statements
This report contains “forward-looking
statements” – that is, statements related to future, not past, events. In this context, forward-looking statements
often address our expected future business and financial performance and financial condition, and often contain words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “see,”
or “will.” These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking
statements include: our ability to raise capital; our ability to retain key employees; our ability to engage third party distributors
to sell our products; economic conditions; technological advances in the medical field; demand and market acceptance risks for
new and existing products, technologies, and healthcare services; the impact of competitive products and pricing; U.S. and international
regulatory, trade, and tax policies; product development risks, including technological difficulties; ability to enforce patents;
and foreseeable and unforeseeable foreign regulatory and commercialization factors, our ability to develop new products and respond
to technological changes in the markets in which we compete, our ability to obtain government approvals of our products, our ability
to market our products, changes in third-party reimbursement procedures, and such other factors that may be identified from time
to time in our Securities and Exchange Commission ("SEC") filings and other public announcements including those set
forth under the caption “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December
31, 2013. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly
qualified in their entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements,
as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements.
Overview of CytoCore, Inc.
CytoCore, Inc. (the “Company”,
“we” or “us”) is a high-tech company specializing in the engineering, manufacturing and marketing of premium
medical devices and consumables for detection, risk assessment and diagnosis of cancer and related diseases.
We have developed an integrated family
of cost-effective products for the detection, diagnosis and treatment of cancer under the trade name of CytoCore Solutions®.
Currently, we have one Cytocore Solutions product for sale – our SoftPap collector. Cytocore Solutions is developing, and
plans to sell an integrated family of cost-effective products for the detection, diagnosis and treatment of cancer. Cytocore Solutions’
products are intended to address sample collection, specimen preparation, specimen evaluation (including detection/screening and
diagnosis), and patient treatment and monitoring within vertical markets related to specific cancers. Current CytoCore Solutions’
products are focused upon cervical cancer. We plan to expand our focus to include other gynecological cancers as well as bladder,
lung and breast cancers, among others. Within each of these markets, we anticipate that the CytoCore Solutions products will be
sold as individual value-added drop-in replacements for existing products and as integrated systems that improve the efficiency
and effectiveness of clinical and laboratory operations.
The science of medical diagnostics has
advanced significantly during the past decade. Much of this advance has come as a result of new knowledge of the human genome and
related proteins, which form the foundation of cell biology and the functioning of the human body. Our goal is to utilize this
research as a base to develop screening and diagnostic testing products for cancer and cancer-related diseases. We believe that
the success of these products will improve patient care through more accurate test performance, wider product availability and
more cost-effective service delivery. We have developed the SoftPAP®, a sample collection device approved by the U.S. Food
and Drug Administration, and have developed other collection devices. We are focusing on the development and testing of assay markers
and stains for use with imaging system to screen for various cancers.
On April 3, 2014, we acquired 100% of the
issued and outstanding capital stock of Medite Enterprise, Inc. and its wholly owned subsidiaries (“MEDITE”). MEDITE
specializes in the development, manufacture and distribution of medical laboratory automation equipment and supplies for pathology,
histology and cytology. MEDITE’s focus is on the development of medical devices for the detection, risk assessment and diagnosis
of cancer and related diseases.
MEDITE was founded in 1978. Since 2006,
MEDITE’s strategic focus has centered on the development of new devices and consumable products from major R&D investments
financed mainly internally from profits and traditional bank financing. The marketing of products is focused on the three major
international markets of North America, Europe and China. It has direct sales structures in the United States and Germany and distributors
in more than 70 countries around the world. Uses of the devices and consumables include histology and cytology laboratories which
are part of a single hospital or a group of hospitals and independent laboratories run individually or as part of a larger group.
The structure varies depending on the individual country. For example, the United States has many privately owned and managed health
care institutions many of which use group purchase organizations. In some countries purchase of equipment in the health care industry
is made by public tender.
MEDITE’s current revenue is generated
primarily in Europe. With new distribution contracts in the US and China, we expect that these two markets to increasingly contribute
more sales.
Due to the wide diversification of countries
we are selling to along with the diversification of devices and consumables, both in histology and cytology, provides some level
of stability and changes in regulations effecting one country, region or product line will not influence our overall business dramatically.
The focus of our current R&D is to
develop devices for histology and cytology labs which offer a higher level of automation and standardization. Together with our
Chinese joint venture partner, we are also working on the digitalization of slides. We have filed several patent applications in
connection with this technology. On the consumable side, we are focusing in two directions. One direction is the replacement of
popular competitive consumable products with better and cheaper alternatives. The second direction is the development of new revolutionary
solutions for popular cancer types such as cervical and breast cancer. We believe that the markers that we have developed for detecting
these type of cancers will be more effective than existing solutions in detecting earlier signs before the cancer has developed.
Cancer is a major threat for mankind and the recently published
“World Cancer Report 2014” by the World Health Organization, states that the number of cases will increase by about
57% to 22 million cases in the next two decades. At the same time cancer deaths will rise from 8.2 million to 13 million per year.
We believe that our current products and products under development will help to diagnose cancer earlier and make treatments more
efficient to save human lives. The current focus is in the histology (using tissue) and cytology (using cells) segments. For anatomic
pathology labs, we are a one stop supplier with all the necessary equipment and consumables. In the cytology segment we are both
providing liquid based cytology products from cell collection to cell processing for cervical and other types of cancer screening.
Outlook
Following the acquisition of MEDITE, our goal is to both grow
the MEDITE business and guide the development of CytoCore Solutions technology into marketable products and generate synergies
between both these complimentary product lines to increase competitiveness. We believe that the turnaround of the CytoCore product
line should be possible within a year. We are also working on reducing expenses of research work, including relocating the laboratory
form downtown Chicago to a more economical location outside the city.
The recent launch of new products, the positive impact from
several new initiatives, and some recently executed distribution contracts in the United States, Europe and China are the underlying
factors of growth and profitability.
Results and Operations
The following discussion and analysis should
be read in conjunction with our unaudited consolidated financial statements presented in Part I, Item 1 of this Quarterly Report
and the notes thereto, and our audited consolidated financial statements and notes thereto, as well as our Management’s Discussion
and Analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on April 14, 2014.
The results of the Company for the three and six months ended
June 30, 2014 include the results of Medite Enterprise, Inc. for the entire three and six months periods and the results of CytoCore,
Inc. for the period from April 4, 2014 through June 30, 2014. The results of the Company for the comparable three and six month
periods ended June 30, 2013 include only the results of Medite Enterprise, Inc.
Three Months Ended June 30, 2014
as compared to the Three Months Ended June 30, 2013
Revenue
Revenue for the three months ended June 30, 2014 was $3.175
million vs. $2.666 million for the three months ended June 30, 2013. This is a 19% increase from the previous year and was primarily
due to newly launched cytology products along with new distribution contracts.
Costs of Revenues
Cost of revenues were $1.441 million for the three months ended
June 30, 2014 vs. $1.252 million for the three months ended June 30, 2013. We were able to improve our cost of revenues as a percentage of sales by approximately
1.7% in the three months ended June 30, 2014 vs 2013 primarily to an increasing share of new products with better margins.
Research and Development
Research and development costs for the three months ended June
30, 2014 were $0.246 million vs. $0.285 million for the three months ended June 30, 2013. The decrease was due primarily to a timing
issue. Research and Development expenses are expected to increase in future periods, but at a slower rate than the growth of sales
which should increase overall profitability. Investment in R&D will continue to be an important part of our strategy.
Selling, General and Administrative
Selling, general and administrative expenses increased $0.4
million to $1.333 million in the three months ended June 30, 2014 from $0.933 million for the three months ended June 30, 2013.
The majority of these costs consist of selling expenses along with administrative expenses which slightly increased over the previous
year. Included in the June 30, 2014 amounts are approximately $0.175 million in legacy CytoCore, Inc. selling general and administrative
costs.
Operating Income
Based on higher revenues we were able to increase
the operating profitability of Medite Enterprise, Inc. by 127% to $0.341 million from $0.150 million in the three months
ended June 30, 2013. Total operating income of $0.116 million was reduced by the $0.225 million operating loss for CytoCore,
Inc. during the period after the acquisition. Since completing the acquisition, we substantially reduced the ongoing cost
structure of CytoCore, Inc. by approximately 50%. Since completing the acquisition, we will continue to review the costs
incurred in all of our operations with a view to rationalizing our cost structure whenever possible.
Interest Expenses
Interest expenses increased slightly to $0.075 million in the
three months ended June 30, 2014 vs. $0.067 million for the three months ended June 30, 2013 due to the increased use of lines
of credit to finance working capital.
Six Months Ended June 30th, 2014 as compared
to Six Month Ended June 30th, 2013
Revenue
Revenue for the first six months of 2014 is $5.909 million of
which $0.001 million came from CytoCore sales and the $5.908 million balance from Medite Enterprise, Inc. This is a 32% increase
from the $4.480 million for the six months ended June 30, 2013, which was due primarily to newly launched cytology products and
new distribution contracts. As discussed in the Outlook statement, the first half of the year is usually contributes about 40%
of annual revenues.
Costs of Revenues
Costs of revenues were $2.938 million for the six months
ended June 30, 2013 vs. $2.284 million for the six months ended June 30, 2013. As a result, we were able to increase the cost
of revenues as a percentage of sales by 1% compared to the previous year due to an increasing share of new products with a
better margin.
Research and Development
Research and development costs for the six months ended June
30, 2014 of $0.445 million as compared to $0.469 million for the six months ended June 30, 2013. As a percentage to revenue research
and development was reduced to 7.5% compared to 10.5% in the previous year. Research and development expenses are expected to increase
at a slower rate than the growth of sales which increases the overall margin. Investment in research and development will continue
to be an important part of our strategy.
Selling, General and Administrative
Selling, general and administrative expenses increased to $1.962
million for the six months ended June 30, 2014 vs. $1.515 million for the six months ended June 30, 2013. The majority of these
costs consisted of selling expenses of $1.357 million and administrative expenses of $0.605 million which is the same as the previous
year. Of the $0.45 million increase in selling, general and administrative expenses in 2014 vs 2013, approximately $0.175 million
is from the legacy CytoCore operations.
Operating Income
Based on higher revenues, we were able to increase the overall
operating profitability by 305% to $0.486 million. Medite Enterprise, Inc. contributed an operating profit of $0.711 million which
was reduced by the $0.225 million operating loss for CytoCore. During the period after the acquisition, we substantially reduced
the ongoing cost structure of CytoCore, Inc. by approximately 50%. We will continue to review the costs incurred in all of our
operations rationalizing our cost structure whenever possible. We expect increased revenues in the second half of the year, which
should lead to increased profitability.
Interest Expenses
The interest expenses increased slightly to $0.15 million due
to the continuous use of lines of credit to finance working capital.
Liquidity and Capital Resources
During the quarter ended June 30, 2014 we raised approximately
$1.724 million in private offerings of 107,775,000 shares of our common stock to accredited investors. We closed on the first $1.529
million upon consummation of the merger with Medite Enterprise, Inc. and closed on the remaining $0.195 million throughout the
second quarter. We used a portion of these funds to satisfy certain legacy liabilities of CytoCore of approximately $0.3 million
and the remainder was invested into our working capital and property, plant and equipment to fund our growth.
Our business requires a substantial investment in working capital
primarily inventory and accounts receivable. In the six months ended June 30, 2014, we invested approximately $0.827 million to
increase our available inventory for cytology products and another $0.250 for receivables. In addition, we invested approximately
$0.269 million in new property, plant and equipment in order to meet our customer needs.
At the time of our acquisition of MEDITE, CytoCore had accounts
payable and accrued expenses of approximately $2.9 million. Of that amount, it was agreed that approximately $0.9 million was
subject to a payment agreement that required we obtain significant equity financing before we would be obligated to pay the
amounts due. In addition, the amount above includes approximately $0.7 million owed to our current CFO for prior year wages
dating back to 2009 which we are still negotiating with him regarding form and timing of payment.
We expect that we will continue to seek additional equity and
possibly debt financing in order to meet our expected growth targets. No assurance can be given that any form of additional financing
will be available on terms acceptable to the Company, that adequate financing will be obtained by the Company, in order to meet
its needs, or that such financing would not be dilutive to existing shareholders.
Off-Balance Sheet Arrangements
As of June 30, 2014, we did not have any relationships with
unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As
such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such
relationships.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our chief
executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, the
“Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our chief executive
and chief financial officers have concluded that our disclosure controls and procedures were not effective to provide
reasonable assurance that the information we are required to disclose in the reports filed or submitted by us under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and accumulated and communicated to our management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
In April 2014, the
Company consummated a merger with Medite Enterprise Inc. Our financial reporting now involves those individuals from Medite Enterprise,
Inc. and the reporting associated with the merged companies. John Glass’s employment as controller for CytoCore, Inc. was
terminated in April 2014 and Robert McCullough Jr. is now the Chief Financial Officer of the Company. As a condition of the merger,
the prior owners of Medite Enterprise, Inc. are now the Chief Operating Officer and Chief Executive Officer of the Company.
Part II. Other Information
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter
ended June 30, 2014, the Company sold 107,775,000 shares of restricted, unregistered common stock to qualified investors for $1,724,400
or $0.016 per share.
During the quarter
ended June 30, 2014, the Company issued 3,589,214 shares to MarketShare, Inc. in satisfaction of a payable to MarketShare, Inc.
in the amount of $36,000.
During the quarter
ended June 30, 2014, the Company issued 4,877,111 to former consultants in satisfaction of accrued fees to those individuals in
the amount of $82,000.
We issued the foregoing
securities in reliance on the safe harbor and exemptions from registration provided by Section 4(a)(2) of the Securities Act
of 1933, as amended, for sales to a limited number of accredited investors, employees, service providers, or creditors with whom
we had prior relationships, without engaging in any general solicitation, and without payment of underwriter discounts or commissions
to any person.
Item 3. Defaults
upon Senior Securities
As of June 30, 2014,
we failed to make the required principal and interest payments, constituting events of default, on the $21,000 Ventana Medical
Systems, Inc.(“Ventana”) promissory note. The note requires the holder to notify us in writing of a declaration of
default at which time a cure period, as specified in the note, would commence. There is no guarantee that we will be able to cure
any event of default if, or when, the holder provides the required written notice. The Company is currently in negotiations with
the parent of Ventana to exchange all of the issued and outstanding shares of Series D preferred stock and cumulative preferred
dividend, which are held by Ventana, and to convert the entire outstanding principal balance and accrued interest into shares of
the Company’s common stock. The Company expects to complete the exchange and conversion in the third quarter of 2014.
Item 6. Exhibits
Exhibit |
|
Number |
Description |
|
|
31.1 |
Section 302 certification by the principal executive officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002. |
|
|
31.2 |
Section 302 certification by the chief financial officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002. |
|
|
32.1 |
Section 906 certification by the principal executive pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
32.2 |
Section 906 certification by the chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
101.INS |
XBRL Instance |
|
|
101.SCH |
XBRL Taxonomy Extension Schema |
|
|
101.CAL |
XBRL Taxonomy Extension Calculation |
|
|
101.DEF |
XBRL Taxonomy Extension Definition |
|
|
101.LAB |
XBRL Taxonomy Extension Labels |
|
|
101.PRE |
XBRL Taxonomy Extension Presentation |
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.
|
CytoCore, Inc. |
|
|
Date: August 19, 2014 |
/s/ Michaela Ott |
|
|
Michaela Ott |
|
|
Chief Executive Officer |
|
|
|
|
|
|
Date: August 19, 2014 |
/s/ Robert F. McCullough, Jr. |
|
|
Robert F. McCullough, Jr. |
|
|
Chief Financial Officer |
EXHIBIT INDEX
Exhibit |
|
Number |
Description |
|
|
31.1 |
Section 302 certification by the principal executive officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002. |
|
|
31.2 |
Section 302 certification by the chief financial officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002. |
|
|
32.1 |
Section 906 certification by the principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
32.2 |
Section 906 certification by the chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
101.INS |
XBRL Instance |
|
|
101.SCH |
XBRL Taxonomy Extension Schema |
|
|
101.CAL |
XBRL Taxonomy Extension Calculation |
|
|
101.DEF |
XBRL Taxonomy Extension Definition |
|
|
101.LAB |
XBRL Taxonomy Extension Labels |
|
|
101.PRE |
XBRL Taxonomy Extension Presentation |
Exhibit 31.1
CERTIFICATION
I, Michaela Ott, certify that:
| (1) | I have reviewed this quarterly report on Form 10-Q of CytoCore, Inc.; |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| (4) | I am responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being
prepared; |
| b. | Designed such internal controls over financial reporting, or caused such internal controls over
financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| (5) | I have disclosed, based on my most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
|
|
|
|
|
|
/s/ Michaela Ott |
|
|
Michaela Ott |
|
|
Chief Executive Officer |
|
|
Dated: August 19, 2014 |
Exhibit 31.2
CERTIFICATION
I, Robert F. McCullough Jr., certify that:
| (1) | I have reviewed this quarterly report on Form 10-Q of CytoCore, Inc.; |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| (4) | I am responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being
prepared; |
| b. | Designed such internal controls over financial reporting, or caused such internal controls over
financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| (5) | I have disclosed, based on my most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
|
|
|
|
|
|
/s/ Robert F. McCullough Jr. |
|
|
Robert F. McCullough Jr. |
|
|
Chief Financial Officer |
|
|
Dated: August 19, 2014 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection
with the Quarterly Report of Cytocore, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2014,
filed with the Securities and Exchange Commission (the “Report”), I, Michaela Ott, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to my knowledge:
1. The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the
Report fairly presents, in all material respects, the financial condition as of the dates presented and the results of operations
of the Company for the periods presented.
|
|
|
|
|
|
/s/ Michaela Ott |
|
|
Michaela Ott |
|
|
Chief Executive Officer |
|
|
Dated: August 19, 2014 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection
with the Quarterly Report of Cytocore, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2014,
filed with the Securities and Exchange Commission (the “Report”), I, Robert McCullough, Jr., Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
that, to my knowledge:
1. The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the
Report fairly presents, in all material respects, the financial condition as of the dates presented and the results of operations
of the Company for the periods presented.
|
|
|
|
|
|
/s/ Robert F. McCullough, Jr. |
|
|
Robert F. McCullough, Jr. |
|
|
Chief Financial Officer |
|
|
Dated: August 19, 2014 |
Himalaya Technologies (PK) (USOTC:HMLA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Himalaya Technologies (PK) (USOTC:HMLA)
Historical Stock Chart
From Sep 2023 to Sep 2024