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The problem packers is they have refused to audit. They have never updated or commented on any JV's.
Benz posted..."The joint venture entity called "Strat Nafta Ufa" (SNU), has acquired two reservoirs totaling approximately 300,000 metric tons, which has high crude oil content an official market value of approximately $80 per metric ton or close to $24 million in total value."
He continued..."SNU's total reserves now amount to approximately 750,000 metric tons, with an approximate value of $60 million." He is attributing this as an "asset".
Taking your comment first "Because face value it seems incompetent....oh lets say about $60 million worth of a misstatement." You are having us assume SNU is now ALL Strats ($60 million worth of misstatement). I guess I missed that release where SPRL was now sole partner. Benz has just pointed out that it was a "joint venture" with approximate value of $60mm. I would have to say it is "incompetent" on your part to assign $60 million of total approx value in a "JV" to just one partner!
The actual release continues that there are SEVERAL entities...
"The joint venture continues negotiations with several entities to establish a new joint venture for investment in processing equipment and should complete the agreements and financing within several weeks."
Forget the fact that "several weeks" have passed and so have several months but for ANY shareholder to consider any of this a "verifiable" asset is extremely naive at best! They have provided no guidance on what their portion of the deal involves and what their participation is. Read the release...they are simply stating what they believe the overall market to be for sludge. They NEVER once attribute those numbers in any fashion to SPRL directly.
Hopefully I have clarified my statements and will in turn be willing to listen to your response.
Brent...with all due respect, there is no "freedom of speech" here. My posts here are censored.
"Has Sam or this stock hurt you?"
This stock has hurt virtually EVERY shareholder as we are all at losses unless you have free shares.
"Are you a shareholder?"
Yes I am for almost 2 years
"If you are it may be time to jump off this ship"
I have stated MANY times that Dec. 31st is the date I'll jump if nothing comes of SPRL.
"Maybe your here for your entertainment not sure."
Nothing funny about any of this!
"a company with a man (Sam) with integrity...
His track record speaks for itself..."
Sam entered SPRL into a dealwith Nutmeg that was a toxic equity line of credit. I said back then that it would be the death of SPRL BUT I was assured by several posters that the deal never went through. The company never PUBLICLY stated anything to that effect but I listened to a few that had "contact" with Sam. The track record here is abysmal on Sam's part. Integrity? LOL..Sam entered SPRL into the Nutmeg deal knowing that the key man at Nutmeg had been disbarred as an attorney for committing fraud!
" am not concerned and I see these prices as opportunity, you see them as the sky is falling."
After we have slid well over 90% Brent who's outlook is more justified?
"oh I see benz was nice enough to give you verifiable and easy to find info in a previous post"
No Brent...this info is NOT verifiable and you know it. You believe it but you don't KNOW it. Is the Nutmeg deal dead or alive? Folks "believe" that it never went thru but they don't KNOW. There is no audit for a reason Brent. The company has never commented on ANY the previously announced JV's for a reason Brent.
" No disrespect intented"
None taken and likewise I intend none towards you.
"The dictionary equivalent of the word insanity is doing the same thing over and over again expecting different results."
You have just BEAUTIFULLY described SPRL!!! Saying the same thing over and over again expecting different results.
The same things have been said over and over here and still we all expect different results don't we?
I don't expect my post to remain here long but I have not disrespected any one here and still have yet to find out why .015 is a good buy. People here don't talk in factually based ways. I am simply looking for ANYTHING tangible that suggests this company is doing anything other than stringing us along. Forgive me for holding my management accountable. I never knew it was a crime.
"greenbull is the worst, both here and on ragingbull."
That's a FACT!
Yep.
It looks like I'm not the only one that can't reach the company. There are several of us trying but this is typical...
"By: kongoya
15 Sep 2006, 10:45 AM EDT
Msg. 23475 of 23477
Jump to msg. #
cant reach the office
I've been calling both offices this week. The NY office has a person who answers. Asked that person for IR. Gave me the name Joseph Frasko. "Can I speak to Mr Frasko?". Well he's in a meeting, please call back. Next day same thing, but they say I can reach him in Canada. Canada voicemail does not have him listed in the dial by name. Back to NY, asked the woman how many people in the office. 50 she says. Start asking about daily operations and she sends me to voice mail. Called again next day asking for Frasko. Direct to voicemail. Hung up and called right back and asked where is Frasko? She's getting upset and sends me to their black hole voicemail system. Hung up called right back, she saw my caller ID, and answered and hung up.
Not good. There is noone at these offices.
What makes us think they are "close" now? I understand Sam talks to some shareholders and not others but this has been the case for a year and a half. I guess what I'm saying....why is it all OK now and this time it's different. Do we have anything other than "gut" feelings to hang our hats on?
What leads us to believe they are "moving forward"?
Just frustrated and looking for actual results.
Great attitude Profit Chaser! Hopefully things will work out.
I think what you say has some degree of merit in theory (big picture) but the company is ABSOLUTELY concerned about the shareprice on any/every given day. If they are not concerned...they shouldn't be in charge. I am not of the opinion that SPRL is CURRENTLY adequately funded to participate in any JV/Deals/acqusitions. They won't say and don't update or audit.
SPRL at .02 is suffering from twice the dilution than it would at a measley .04!!!
The liklihood of any company/bank/institution funding a publicly traded company with .02 stock is highly unlikely to begin with. What "asset" would back it? I've heard the Nutmeg deal never went thru and I argued over a year ago that it was the WORST thing that would ever happen to SPRL if they did go thru with it. It was a toxic line of credit and my suspicion (because we have heard nothing of any subsequent "financing arrangements") is that it DID go into effect and SPRL is now suffering the effects. I explained how these "arrangements" work and how they ultimately will result in the death of a company when the Nutmeg deal was announced way back when. I will explain it again if you like but the results I predicted have absolutely come to pass! Hopefully the Nutmeg deal never went thru which begs the question...where has the money come from to operate and participate in these JV/Deals and what's left?
They DO NOT want to ask for cash at .02 so intentional or not the statement "the daily PPS means nothing to them" is horribly incorrect. I'm not saying this to be combative but it's the truth.
Thanks preacher.
It would be nice to know if this company actually exists. I have never had an e-mail answered or even returned and several posters on Raging Bull are claiming there is no answer when they try to contact the company.
It seems "Shadow" and "Randy" have a buddy at Raging Bull that has the clout to kick posters off of Raging Bull so they managed to have me TOS'd (for SPAM of all things! LOL). They don't allow any questions to be asked which raises questions in and of itself so maybe any of the posters here can comment on the company's lack of accessability.
In the interest of being fair, I will add that simply stating that all of the insiders have sold, without actual proof is just as irresponsible as any of the "I heard this/I'm hearing that", "Sam says this/Sam say that" factless pump BS!!
Unfortunately, the only "facts" anyone actually and truly gets is what's reported in P.R.s from SPRL. Even those haven't been factually accurate given the Nutmeg deal and 60-90 days to drilling reports.
Selective dissemination of information by any company is unethical....period. I guess when the next deal is done some of us shareholders will find out after others?
Certainly (if I understand the post) our management isn't sitting around reading chat boards identifying just exactly who they'll speak with or address. Why would management ask advice of chat board participants anyway?
Yes brent, I have my opinions on where the shares came from and not surprisingly our opinions differ. We also have varying opinions on what constitutes "Due Diligence". We know from several long standing shareholders that communication with SPRL is next to impossible. It's unfortunate if not unethical that our management is selective with whom they communicate. Not being a fully reporting company or providing access to audited numbers puts one in a position of having to trust what they "hear". Hearing second hand info is in no way "Due Diligence". Spending time with a balance sheet and income statement is. I'm sorry to report that you have not had this luxury nor have any of us. You not wanting to "waste your time sharing DD" is fine. My opinion is your "DD" has proven to be unreliable thus far and probably not worth sharing anyway. I'm not saying that to offend...just as a matter of fact. My "DD" was taken directly from company statements in the public domain and my working knowledge of the O/G industry. My "DD" has proven to be wrong along with yours. When you say "do your own "DD" you say that as if there is access to company info that you are privy to and others have been denied. This may be the case but we don't call that "Due Diligence"...we call it insider trading. When the company reports no financial activity and fails to respond to direct inquiries from shareholders the legitimate process of "DD" is effectively stopped dead in it's tracks. I managed to uncover quite a bit about the Nutmeg deal. I posted a year ago that it was a toxic equity LOC and would be the worst mistake SPRL would ever make. I heard the deal was abandoned (hopoefully because Sam found out Randy G. was disbarred for fraud) but SPRL never publicly stated that. Was it or was it not? We don't know for sure because there is no public statement...just secondhand "hearsay". This again, is not "DD". Maybe you're getting my point brent. I'm not picking a fight and have absolutely nothing against you as a person. Being told to do "DD" however has run it's course. Waiting for Shadow and Randy to tell me great things are about to happen is not DD. If assisting fellow shareholders gain access to company info that is factual in it's content, accurate and timely...you should not feel like it's a waste of time. If considering what someone else is telling you is "DD" it's probably best you keep it to yourself. It's not proved too reliable thus far.
"Boomer your smart enough to figure out who is doing this and that their agenda is not the companies. Anyone who does a bit of DD on this will find the connection" This would be a great time to post proof of what your "DD" turned up brent. Or was this just another case of what someone else told you?
BTW...if someone told you "shorters" put this news blitz out, I hope you smarter than that!!
P.S. I completely agree with your statement "The focus here should be on SPRL and not on each other like I see in previous posts. Emotions do not do anything for anyone's benefit."
Please remember and you know this...I never attacked any poster anywhere personally but defended myself when others attacked me. I have stayed the course trying unravel what is this SPRL mystery. I am a SPRL long and want sincerely to make money on my investment. There will be folks that may want to say "toldjaso toldjaso" and rub my nose in it but I'll never apologize for asking questions. We all win if SPRL turns out to be for real and I'll be happy for everyone
Good luck to both of us.
Brent...I can only take your word for it so I will. I have no way of independently verifying from where the compensation was paid. As is well documented...I have never gotten any response from the company on any matter I've voiced. After 7 unreturned e-mails I stopped trying. The messages I left for any warm body in Investor Relations (including Sam) were never returned. Anyway...who would "donate" these shares for coverage like this? Do we know who is paying this compensation?
Fair answer and I'll do my part to tone down the rhetoric with whatshisname.
BTW...bullz, You want me kicked off so bad because you cite that I am a "basher"? I am a SPRL long (probably with more shares than you) and have NEVER sold a share! Are you going to lie to everyone here and say the same? Why do you preach "big deals coming" "Sam's outta town signing new deals" "We'll be on the AMEX soon" "buy buy buy" while the stock goes down and raise hell when I simply ask questions about past deals that you and Shadow have pumped that have produced any results?
You get mad because I ask why Sam enters into a "financing arrangement" with Nutmeg whose controlling partner (Randall Gould) was disbarred from legal practice for FRAUD! Why are you afraid of questions Greenbullz? Why do you want me gone Greenbullz? Is it that I'm cutting in on your dance?
If asking questions is bashing....I'm guilty. If costing honest folks hard earned money by baseless pumping is O.K...then you win. I know between us whose done far more harm!
Kick me off if you want to bullz. I dare you to prove on one occassion where I have mislead, lied or falsified info. Can you say the same thing? Just because you personally don't like what I say/ask doesn't mean it's without merit. The fact of the matter is, you know absolutely nothing about SPRL and have demonstrated that on many occassions. I am polite and respectful of every poster until they turn into someone like you. Campaign to get me kicked off but in the end it's you that folks need to be VERY leery of....not me.
Again...post my lies, post my misleading statements. I'll wait patiently.
Maybe folks on this board have a little more working knowledge of SPRL than you. As a fellow shareholder, I think i have every right to find out. If this is like your little "private board" that's now shut down where posters can only reassure each other without asking questions...I'll leave anyway. It seems some here had problems with your little "Purple Gang" awhile back anyway.
Like I said...it's you that needs to be watched and maybe asking that I be kicked off furthers your cause?
How did you verify Walker? I'd like to think the company is not that stupid so that helps if you are correct.
Here's ANOTHER one! I don't see this as a good thing at all but it's just my opinion. Hopefully we don't find it's Strat coughing up the shares.
8/28/06 9:52:24 AM
WallStreetGrapevine.com: "Stocks on the Rise- SPRL, EBOF, NSOL"
- - - - -
The reason I say it's not a good thing is that the company last week pumping the story cited the "chart". They suggested that the chart says a "breakout" for SPRL above .035. Charts are not reliable in any fashion nor should they ever be used as such for .025 stocks that trade $30,000 in total volume on a good day! It's a pretty sleazy/irresponsible/unethical way to entice new buyers. They take their compensation in shares and sell as it goes up. This is not the type "visibility" SPRL needs at all. Like i said...I hope it's some other 3rd party paying for it and not SPRL!
The shares are usually issued by the company. I don't know for sure personally who issued these. There have been a few of these "alerts" this week from various firms that are being compensated with SPRL stock. The negative is these firms don't share a long term vision with existing shareholders...they sell the shares in the open market to realize their compensation.
1,000,000 shares
For our full disclaimer goto: http://www.otcstockexchange.com/disclaimer.htm . OTCS has been compensated 1,000,000 shares on behalf of SPRL for dissemination of this opinion and other professional services.
I am too and I hope you're right.
Why?
abbam...to answer your question I just found, yes. I look forward to your answers.
Sorry it took me so long to find it.
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The terms "Cytomedix" and the "Company", as used in this quarterly report, refer to Cytomedix, Inc. The following discussion and analysis should be read in conjunction with the financial statements, including notes thereto, filed under Item 1 of this report and with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005, including the financial statements and notes thereto, and all other reports filed with the SEC. The Company's financial condition and results of operation are not intended to be indicative of future performance.
The reader is cautioned that this Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When the words "believes," "plans," "anticipates," "will likely result," "will continue," "projects," "expects," and similar expressions are used in this Form 10-Q, they are intended to identify "forward-looking statements," and such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Furthermore, the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of management and the Board.
These forward-looking statements speak only as of the date this report is filed. The Company does not intend to update the forward-looking statements contained in this report to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may occur as part of its ongoing periodic reports filed with the SEC.
Certain numbers in this section have been rounded for ease of analysis.
Overview of Business
Cytomedix is a biotechnology company that develops, produces, licenses, and distributes autologous cellular therapies (i.e., therapies using the patient's own body products), including Cytomedix's proprietary AutoloGel™ System (the "AutoloGel™ System") to produce the platelet rich plasma gel ("AutoloGel™") for the treatment of chronic, non-healing wounds. To create AutoloGel™, the patient's own platelets and other essential blood components, which together constitute the multiple growth factors necessary for the healing process, are separated through centrifugation and when combined with several reagents are formed into a gel that is topically applied to a wound (under the direction of a physician). Upon topical application, the Company believes that AutoloGel™ initiates a reaction that closely mimics the body's natural healing process.
Company sponsored studies indicate increased rates of healing for AutoloGelTM as compared to enhanced traditional treatments as well as competing treatments for the treatment of diabetic foot ulcers, the Company's initial focus within its target market.
Multiple growth factor therapies have not been widely used in the traditional commercial setting because such therapies have generally not been available or widely known by clinicians. Until a few years ago, the autologous process of securing multiple growth factors from a patient's blood products was, substantially, an exclusive treatment available through outpatient wound care centers affiliated with Curative Health Services ("Curative"). In January 2001, the Company purchased certain technology, assets and intellectual property rights associated with autologous multiple growth factor therapies from Curative and has since refined the product to a more marketable state.
--------------------------------------------------------------------------------
Market
Cytomedix's primary target market is the multi-billion dollar, chronic, non-healing wound market. Such wounds typically arise from one of three etiologies: diabetic foot ulcers, venous stasis ulcers, and pressure ulcers. The following table lists the prevalence of these wound types:
Breakdown of Chronic Wound Market
(number of wounds in millions)
Source: Growth Factors: Indications, Products, and Markets;
Kalorama Publications, Oct. 2003
U.S. Worldwide
Diabetic Foot Ulcers 1.5 6.0
Venous Stasis 0.9 4.0
Pressure Ulcers 2.1 8.0
Totals 4.5 18.0
This prevalence is linked directly to increased aging demographics, vascular diseases, venous insufficiency, and excessive pressure and diabetic neuropathy.
Strategy
The Company has developed a three-pronged strategy to leverage its intellectual property and capitalize on the market for its AutoloGel™ System:
†
Obtain broad reimbursement from third-party payers
†
Enforce rights under the Company's patents
†
Target the non-reimbursement sensitive market
Reimbursement and Clearance
The Company believes the full market potential of AutoloGel™ cannot be achieved without broad third-party reimbursement. Additionally, the Company believes a necessary predicate to securing this broad reimbursement is through obtaining a national reimbursement code from the Center for Medicare and Medicaid Services ("CMS"). While not an official precondition for a reimbursement code, the Company believes that securing Food and Drug Administration ("FDA") clearance of the AutoloGel™ System for specific clinical indications, such as for the treatment of non-healing diabetic foot ulcers, will be heavily weighed by CMS when making its decision.
In 2005, the Company completed its prospective, randomized, blinded, controlled clinical trial designed to prove the efficacy and safety of its AutoloGel™ System for the treatment of non-healing diabetic foot ulcers. The audited results yielded 40 patients who met the trial protocol. Analysis of the size of wounds in the study shows that 35 out of the 40 patients (i.e. 88%) had wounds that were less than or equal to 7 square centimeters in area and 2 cubic centimeters in volume. For these most common wound sizes in the study, the healing rate of the AutoloGel™ group was 81.3% and that for the control group was 42.1%. The difference of 39.2% between these groups is clearly statistically significant, with a p-value of 0.036. Within the full cohort of the 40 patients, 68.4% of the patients treated with AutoloGel™ healed with full wound closures and 42.9% patients treated in the control group achieved full wound closures. The difference of 25.5% between the healing rates of the AutoloGel™ group versus the control group is approaching statistical significance with a p-value of
0.125. The Company believes that the healing rates of AutoloGel™ at 81.3% for the most common wound sizes in the study and 68.4% for all wound sizes appear to be better than any other wound care products cleared by the FDA and covered by Medicare reimbursement with which the Company is familiar, although this comparison is not as reliable as a head to head study. The control group patients were not on placebo; rather, they were treated using a saline gel cleared by the FDA for wound treatment. If the control group patients healed at the originally anticipated rate of 20-30% for standard of care, the difference between the healing rates in the AutoloGel™ group versus the control group would have been even more strongly statistically significant.
--------------------------------------------------------------------------------
These data reflect the results of an independent audit of the data by a former FDA branch chief responsible for Bio-Research Monitoring. During the audit, Cytomedix discovered that some patients originally included in the trial had not met the inclusion criteria or were not provided treatment according to the study protocol. This audit was conducted at the request of Cytomedix when preliminary data were inconsistent with independent and Company retrospective studies.
Based on the favorable audited results of the trial, and other favorable data compiled by the Company, in late January 2006 Cytomedix submitted a pre-market 510(k) application to the FDA seeking clearance of its AutoloGel™ System for diabetic foot ulcers and other indications. While AutoloGel™ is regulated by FDA under the Medical Device Amendments of the Food, Drug and Cosmetic Act, the FDA Center for Biologics Evaluation and Research ("CBER") has the jurisdiction for reviewing such products. FDA assigned CBER as the primary center that reviewed and approved the Investigational Device Exemption ("IDE") under which this clinical trial was conducted. FDA clearance will depend heavily on comparison with similar predicate devices and the results of the clinical trial completed by the Company to prove the efficacy and safety of AutoloGel™ for the treatment of diabetic foot ulcers. The Company cannot predict whether clearance will be granted, but Cytomedix does believe that the high levels of safety and effectiveness indicated by the data from the clinical trial meet the level of "reasonable assurance of safety and effectiveness" and demonstrates substantial equivalence to the predicate devices.
The Company expects to incur only nominal expenses in 2006 related to the final stages of the trial. However, additional events and situations may emerge that could materially increase the costs or delay clearance. For example, the FDA may require the Company to gather more information which could require enrollment of additional patients and continuation of the trial.
The Company also plans to make the necessary submissions to CMS and any other public or private professional groups for evaluation of the data in connection with granting reimbursement codes and further strengthening the general clinical acceptance of this therapy. In order to facilitate the reimbursement process, the Company has already initiated a pharmaco-economic study to evaluate the cost effectiveness of its AutoloGel™ technology. Such studies are performed primarily in the drugs area but now increasingly in the medical device area to present scientific, demographic and economic information to justify to CMS and other payor organizations that a particular product and therapy is clinically safe and effective and cost effective with respect to its alternatives. Should the Company be successful in its efforts to obtain reimbursement, third-party payors, including CMS, would permit payment for the AutoloGel™ System for use in certain types of chronic wounds. If this is accomplished, AutoloGel™ could then be positioned as an approved alternative treatment for the estimated 4.5 million chronic wounds that are treated each year in the United States.
The Company is selling the treatment commercially, as the AutoloGel™ System, an autologous therapy performed under the physicians practice of medicine. This approach represents the practice currently prevalent in the platelet gel therapy industry, both in the treatment of chronic wounds as well as the use of platelet gel therapies in the operating room in fields such as orthopedic and cardiovascular surgery. However, without FDA approval, the Company's ability to make claims for the AutoloGel™ System regarding its use to treat or heal wounds is limited. The Company believes this is a significant barrier to broad clinical and market acceptance of the Company's product. It is also possible that at some point the FDA may require companies to conduct clinical trials on all specific clinical therapies and uses for which their products can be used, whether or not they make a specific labeled claim to that effect. It is also possible that FDA could require companies to stop marketing platelet gel therapies until FDA approval for specific wound healing claims is obtained.
Patents and Licensing
The Company has initiated a broad based patent and licensing strategy intended to (i) enforce the rights under the Company's patents in order to ensure that Cytomedix shareholders derive economic benefit from the Company's intellectual property, and (ii) assist the Company in establishing a dominant market position for the AutoloGel™ System within the market for autologous growth factor products used for the treatment of chronic wounds. In 2005, the Company identified and successfully pursued numerous competing companies, both small and large, that currently market products similar to AutoloGel™, that the Company believed were infringing or inducing infringement of its intellectual property rights. Settlements have been achieved and licenses have been granted to these companies resulting in a royalty stream for Cytomedix. The primary license agreements are listed below:
--------------------------------------------------------------------------------
Date of Date of Initial On-going Royalty
Licensee Agreement Expiration(4) Licensing Fee Percentage(2)
DePuy Spine, Inc.(1) 3/19/01 11/24/09 $ 750,000 6.5%
3/4/05
Medtronic, Inc. 5/1/05 11/24/09 $ 680,000 7.5% on disposables
1.5% on hardware
Harvest Technologies, Inc. 6/30/05 11/24/09 $ 500,000 7.5% on disposables
1.5% on hardware
Perfusion Partners, Inc. 6/26/05 11/24/09 $ 250,000 (3) 10%
COBE Cardiovascular, Inc. 10/7/05 11/24/09 $ 45,000 7.5% on disposables
1.5% on hardware
SafeBlood Technologies, Inc. 10/12/05 11/24/09 $ 50,000 (3) 8.0% to 9.0%
------
(1)
Cytomedix has two license agreements with DePuy Spine. The original license agreement was dated March 19, 2001, amended March 3, 2005, and provides for the license to the use of applications under Cytomedix patents in the fields of diagnostic and therapeutic spinal, neurosurgery and orthopedic surgery. The second license agreement is dated March 4, 2005 and applies to all fields not covered in the original license agreement as amended.
(2)
Certain minimum royalties may apply to certain agreements and other royalty percentages may apply to future products covered under selected license agreements.
(3)
Some of these amounts are payable over a period of time as defined in executed notes payable to Cytomedix.
(4)
These dates reflect the expiration of the license in the U.S., which coincides with the expiration of the Knighton Patent in the U.S. In some cases, the licensing agreements applicable to territories outside the U.S. extend to the expiration of the patents in the respective foreign countries.
Since Cytomedix's licensing activities are recent, it is premature to predict the resulting royalty streams from these licensing agreements.
The Company's ongoing patent enforcement strategy is being conducted on a full contingency basis by the law firms Fitch, Even, Tabin & Flannery and Robert F. Coleman and Associates, both based in Chicago, Illinois.
The Company expects to incur "Cost of royalties" (consisting of royalty expense and contingent legal fees) in the range of 30-50% of on-going royalty revenues relating to these and future settlements.
The Company intends to press forward aggressively in other instances of infringement with aggressive legal and business actions to defend its intellectual property and, where possible, arrive at equitable settlements with infringers. The Company believes there remain several companies with substantial current or future revenues associated with products and services that infringe its patents, and will continue to pursue such companies for royalties or other damages.
Non-Reimbursement Sensitive Market
The Company is also working to broadly penetrate the segment of the national market that is not reimbursement sensitive. This includes capitated environments such as skilled nursing facilities, long-term care facilities, long-term acute care facilities, nursing homes, hospices, and home health as well as government agencies, (e.g. the Veterans Administration) and universities.
In October 2005, the Company entered into a distributor agreement with National Wound Therapies, LLC ("NWT") whereby NWT was granted an exclusive license to sell gel therapy-related wound care products in more than 1,750 facilities owned or operated by members and affiliates of NWT. Cytomedix will be the exclusive provider of such products to NWT. Under the terms of the agreement, NWT is required to reach minimum order quantities totaling
--------------------------------------------------------------------------------
$5.8 million over four years. Cytomedix has the right to terminate the agreement if these minimum order quantities are not met.
Results of Operations
Summary
Increased revenues driven by additional licensing agreements and a reduction in operating expenses driven by the completion of the Company's clinical trial contributed to a 43% reduction in net loss to common stockholders. Additionally, the Company achieved a key operational milestone with its submission to the FDA of a 510(k) application for marketing clearance for AutoloGel™ for specific indications.
Revenues
Revenues rose $214,000 (79%) to $486,000 comparing the three months ended March 31, 2006 to the same period last year. Revenues are normally generated from two sources: the sale of disposable kits and reagents and royalties received from licensing activities.
The increase in revenue is attributable to increased royalties of $300,000 from five new licensing agreements entered into during 2005. This increase was partially offset by an $86,000 decrease in AutoloGel™ kit sales. AutoloGel™ kit sales decreased due to reduced sales to two large nursing homes and one government agency, as well as difficulty qualifying patients for commercial insurance reimbursement.
Since Cytomedix's licensing activities are recent, it is premature to predict the future royalty streams from these licensing agreements. However, the Company believes there remain several companies with substantial current or future revenues associated with products and services that infringe its patents and will continue to pursue such companies for royalties or other damages.
Gross Profit
Gross profit rose $105,000 (90%) to $222,000 comparing the three months ended March 31, 2006 to the same period last year. For the same periods, gross margins rose to 46% from 43%.
The increase in gross profit is primarily attributable to the licensing agreements entered into after March 31, 2005 which carry a greater gross margin than previously existing licensing agreements. This increase in gross profit was partially offset by a decrease in gross profit from AutoloGel™ kit sales.
The DePuy royalties, inclusive of the amortization of deferred revenue associated with the initial deposit of $750,000, generates a gross margin of approximately 20%. The Company expects gross margins generated from all other licensing agreements to be in the range of 50-70%.
Operating Expenses
Operating expenses fell $545,000 (27%) to $1,465,000 comparing the three months ended March 31, 2006 to the same period last year. The Company relies heavily on the use of equity-based compensation to various employees, consultants and other parties that provide services to the Company. Due to the magnitude of this non-cash expense, the following exhibit highlights the impact of this equity-based compensation on the Company's operating expenses. The exhibit below presents the Company's operating expenses in accordance with generally accepted accounting principles ("GAAP") and presents the amount of equity-based compensation expense included in the respective line items and then reflects the operating expenses without the equity-based compensation, which is not in accordance with GAAP ("NON-GAAP"). The following exhibits are presented to provide an additional tool to evaluate the Company's operating expenditures between years:
--------------------------------------------------------------------------------
Operating Expense Information Not in Conformity with Generally Accepted
Accounting Principles
Three Months Ended March 31, 2006
Non-GAAP
Operating
Expenses
Net Without
GAAP Equity Based Equity Based
Account As Reported Compensation Compensation
Salaries and wages $ 868,106 $ (326,812 ) $ 541,294
Consulting expenses 21,282 (5,006 ) 16,276
Consulting expenses - related party 15,000 - 15,000
Professional fees 87,939 - 87,939
Royalty expenses - related party 18,750 - 18,750
Clinical trial related expenses 57,862 - 57,862
General and administrative expenses 395,714 (109,110 ) 286,604
Total operating expenses $ 1,464,653 $ (440,928 ) $ 1,023,725
Three Months Ended March 31, 2005
Non-GAAP
Operating
Expenses
Net Without
GAAP Equity Based Equity Based
Account As Reported Compensation Compensation
Salaries and wages $ 667,043 $ (327,420 ) $ 339,623
Consulting expenses 70,545 - 70,545
Consulting expenses - related party 84,480 (57,480 ) 27,000
Professional fees 282,825 - 282,825
Royalty expenses - related party 18,750 - 18,750
Clinical trial related expenses 523,915 - 523,915
General and administrative expenses 362,086 (25,249 ) 336,837
Total operating expenses $ 2,009,644 $ (410,149 ) $ 1,599,495
Salaries and Wages
Salaries and wages rose $201,000 (30%) to $868,000 comparing the three months ended March 31, 2006 to the same period last year. The increase was primarily due to the addition of three employees and an increased bonus accrual ($45,000).
Consulting and Related Party Consulting Expenses
Consulting and related party consulting expenses fell $119,000 (77%) to $36,000 comparing the three months ended March 31, 2006 to the same period last year. The decrease was primarily due to a $52,000 decrease in non-cash equity-based compensation and the overall reduction in the number of outside consultants.
Professional Fees
Professional fees fell $195,000 (69%) to $88,000 comparing the three months ended March 31, 2006 to the same period last year. Professional fees consist primarily of legal and accounting services.
The decrease was due to decreases in patent litigation related expenditures ($74,000) due to the successful completion of several patent infringement actions in 2005, as well as decreases in auditing/accounting fees ($40,000), and decreases in fees to securities and general counsel attorneys ($81,000) due primarily to reduced activity related to the Company's listing on the American Stock Exchange.
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Clinical Trial Related Expenses
Clinical trial related expenses fell $466,000 (89%) to $58,000 comparing the three months ended March 31, 2006 to the same period last year. The Company completed the active phase of the trial in 2005 and in the first quarter of 2006 incurred only expenses associated with the close out of the trial. The Company does not expect to incur significant future expenditures related to this trial unless additional patient enrollment is requested by the FDA under their review of the Company's 510(k) application.
General and Administrative Expenses
General and administrative expenses rose $34,000 (9%) to $396,000 comparing the three months ended March 31, 2006 to the same period last year. The increase was primarily due to an increase in non-cash equity-based compensation for the service providers and the board of directors ($84,000), partially offset by decreased travel related costs and American Stock Exchange filing fees.
Other Income/Expenses
Other income of $28,000 was generated during the three months ended March 31, 2006 compared to other expense of $204,000 during the same period last year.
The improvement was primarily attributable to a one time charge ($228,000) in 2005 recorded for the issuance of 65,000 shares of the Company's Common stock in return for a full settlement and release of all claims from a lawsuit brought against the Company relating to its emergence from bankruptcy.
Modified EBITDA Information Not in Conformity with Generally Accepted Accounting Principles
Throughout this report, the Company has presented income statement items in conformity with GAAP, except where otherwise noted. Given the magnitude of non-cash expenses, the Company utilizes a modified EBITDA (earnings before income taxes, depreciation and amortization and other non-cash items) to evaluate and monitor the results of operations. Although EBITDA is a non-GAAP financial measure, the Company believes that this information will allow for an additional clarification of the Company's performance and provides the readers of the Company's financial statements an additional tool to evaluate the comparative performance of the Company. Following is a reconciliation of the comparative net (loss) to Common shareholders to modified EBITDA utilized by the Company for the three months ended March 31, 2006 and 2005: