CTTC and CALMARE / Scrambler Therapy: The Devil's Details

Money Drain

i don't have it in me to elaborate -- and lord knows, i should not have to, if you've been following my one-person campaign against CTTC, the patent monger and soul-sucking corporate face of CALMARE / "Scrambler Therapy" -- snake oil salesman to people desperate for relief of their CRPS pain (and countless other types of neuropathic pain).

but, while finally deciding to peer over my pirate's eye bandage to see if my stocks had bottomed out since last friday (they're not doing well, darn it all), i did my usual check on under-the-counter-over-the-barrel penny stock CTTC, and found it at its usual sky-rocketing 0.16 with no shares having exchanged hands as of 3 pm.  still, knowing that there are "entrepreneurs" out there dicking around with it, day-trading on minuscule changes - a cent here, a cent there - that amount to twenty and thirty percent gains, it makes me nauseous that it's still trading at all.

out of habit, i looked to see if there was any "news" driving this cruel company's latest blandness, and lo! there was a bit of something.

they say the devil is in the details.  there is one glaring detail that caught part of one of my errant eyes!

CTTC filed another Form 10-Q on august 13th and in the meandering nonsense most would overlook in their brief historical rundown of their desiccated cardiac function, it is worth noting that the "inventor" of CALMARE therapy, Giussepe Marineo, is no longer referred to as an engineer, a doctor, a holder of a doctorate, or even as a professor - as in times past. "in times past" meaning times as recent as a month ago.

Sales of our Calmare device continue to be the major source of revenue for the Company. The Company initially acquired the exclusive, worldwide rights to the Scrambler Therapy� technology in 2007. The Company's 2007 agreement with Giuseppe Marineo ("Marineo"), the inventor of Scrambler Therapy technology, and Delta Research and Development ("Delta"), authorized CTTC to manufacture and sell worldwide the device developed from the patented Scrambler Therapy technology;

that's a pretty huge fall from grace.  no more prefixes or suffixes for poor marineo.  and many, many
questions as to previous claims and accolades about the man.

as for their raw financial news, it does cheer me.  i managed a smile on my bandaged face -- and just to drive home more about the misery of CRPS, as that's my job in life (ar ar ar!), my skin peels off with the tape holding the bandages down, and i've now several raw craters on my CRPS-afflicted face.  yes, i know, and i say it along with you -- who the hell knew it could impact the face?  and such a lovely face it once was, too.

really.

kind of cute, even.

anyway -- feast your eyes on this financial wizardry:

We incurred a net loss of $677,000 or $0.04 per basic and diluted share for the three months ended June 30, 2013, compared to a net loss of $942,000 or $0.06 per basic and diluted share for the three months ended June 30, 2012. As explained in detail below, the net loss reflects an increase of $28,000 in gross revenue, an increase of $73,000 in gross profit from product sales and a decrease in other expenses of $238,000.

oh, what the heck.  i am so weird that i enjoy meetings;  i watch school board meetings of my former school district employer;  i keep robert's rules of order at bedside for a rip-roaring good read when bored.  get ready to laugh/cry at the remaining financial assessments:

Revenue and Gross Profit from Sales
Revenue from product sales: In the three months ended June 30, 2013, we recorded $136,000 in revenue from the sale and shipment of 2 Calmare� pain therapy medical devices, with a cost of product sales of $46,000. In the three months ended June 30, 2012, we recorded $63,000 in revenue from the sale and shipment of one Calmare� pain therapy medical devices; with a cost of product sales of $45,000.
Other Revenue
Retained royalties for the three months ended June 30, 2013 were $4,000, which was $48,000 or 92% less than the $52,000 of retained royalties reported in the three months ended June 30, 2012. The 2012 amount included the receipt of a $40,000 royalty payment received for 2011 which was greater than our original estimates.
Other income for the three months ended June 30, 2013, was $10,000, including payments for training and the sale of supplies such as electrodes and cables for use with our Calmare� devices ($2,000) and rental income ($8,000) from customers who were renting Calmare� pain therapy medical devices from us. In the three months ended June 30, 2012, other income was $8,000, including payments for the sale of supplies such as electrodes and cables for use with our Calmare� devices ($5,000) and rental income ($3,000) from customers who were renting Calmare� pain therapy medical devices from us.
Expenses
Total expenses were $781,000 in the three months ended June 30, 2013, compared to $1,019,000 in the three months ended June 30, 2012, a decrease of $238,000 or 23%.
Selling expenses were $36,000 in three months ended June 30, 2013, compared to $94,000 in the three months ended June 30, 2012. The decrease of $58,000 reflects an increase of $16,000 in commission expenses due to the sale of an additional Calmare� device in 2013, which was offset by a decrease of $9,000 in domestic patent legal expenses as well as a decrease of $14,000 in foreign patent legal expenses related to the joint venture with XION Corporation to develop the melanocortin technologies combined with a decrease of $51,000 in patent and translation fees related to working with the inventor of the Calmare� device resulting from the transfer of the contractual obligation to pay patent costs back to the inventor.
Personnel and consulting expenses were $279,000 in the three months ended June 30, 2013, as compared to $502,000 in the three months ended June 30, 2012, a decrease of $223,000 or 44%. Personnel related expenses were $218,000 in the three months ended June 30, 2013, as compared to $146,000 in the three months ended June 30, 2012, an increase of $72,000 primarily due to the addition of a new CEO in November 2012, as well as the expense during the three months ended June 30, 2013 ($17,000) related to the granting of 1,000,000 options to our CEO during the three months ended March 31, 2013. No options were granted to employees in 2012. The increased personnel related expenses were offset by reductions in consulting fees ($295,000), primarily due to the termination of services related to obtaining private insurance and Medicare reimbursement approval for our Calmare medical device ($178,000) as well as the termination of the contract for the Managing Director for International Business Development ($77,000); in addition, the management services fees for our former contracted CEO ($30,000) were discontinued when the employee CEO was hired in November 2012.
General and administrative expenses were $413,000 in the three months ended June 30, 2013, a decrease of $11,000 from $424,000 in the three months ended June 30, 2012
The change reflects increases in travel expenses ($26,000) due primarily to the increased travel of the new CEO during the quarter, offset by reductions due to the departure of one nurse trainer in the three months ended June 30, 2012; increases in directors fees and expenses, including liability insurance ($8,000); increased investor and public relations expenses ($3,000); increased investment banking expenses ($3,000); increased corporate legal expenses ($3,000); increased audit and tax services fees ($6,000) both related to the timing of activities; increased marketing expenses ($7,000) and increases in postage and delivery supply expenses ($5,000). These increases were offset by reductions in legal fees associated with litigation ($38,000); rent and associated expenses due to closing the North Carolina office during 2012 ($7,000); proxy and annual meeting expenses, due to reductions in the contracted services ($8,000); financing charges ($7,000); miscellaneous expenses, banking fees, miscellaneous taxes and other fees ($4,000); depreciation expense ($1,000); and a decrease in bad debt expense due to expenses related to a former employee which were incurred in the three months ended June 30, 2012 and did not recur in 2013 ($7,000).
Interest expense was $44,000 in the three months ended June 30, 2013, compared to $13,000 in the three months ended June 30, 2012, an increase of $31,000 due to an increase in the use of debt financing.
Unrealized loss on derivative instrument of $9,000 in three months ended June 30, 2013 as compared to the $14,000 gain recorded in the three months ended June 30, 2012, reflects the difference in the portion of the Class C Preferred stock which is based on changes in the price of the Company's common shares at the end of each period (see Note 12 for details).

just slipping in under the radar is this coy little come-hither:  "At June 30, 2013, we had outstanding debt in the form of promissory notes totaling $2,630,000."  it's at this point that the 10-Q confronts the failure of its first bail out attempt:  the "Factoring Agreement with Versant Funding, LLC," according to which "Versant agreed to advance 75% of the face value to the Company, and to submit a percentage of the remainder to the Company upon collection on the account."

if you were wondering what the "news" was for this 10-Q SEC filing, i guess this is it.  Versant having seen them as crap, they've now turned to this arrangement:  "During the fourth quarter of 2012, the Company ended its Factoring Agreement with Versant and entered into a new Factoring Agreement with LSQ Funding. The Factoring Agreement with LSQ Funding provides for an 85% advance of factored accounts, lower fees, a faster payout of both advances and balances due, and the possibility of over-advances."

there is even a jovial mention of judicious use of the company's NOLs.  an NOL is something from RomneyWorld, but certainly not reflective of any corporate sense of entitlement, oh, no!

'Net Operating Loss - NOL'
A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period.
The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when they earn money, they also deserve some form of tax relief when they lose money.

remember that corporations are people, too.  CTTC finds itself, corporately, in something akin to the position of many red, white, and blue-hearted americans:  "At June 30, 2013, the Company's balance sheet showed cash of $24,000."

at the tail end of this sad document, probably submitted on pieced-together panels of toilet tissue to save the big bucks, CTTC pretty much announces that it probably won't make it into 2014 -- unless the miraculous therapy catches hold in some new demographic as yet to be snoockered. 

to those who continue to want giussepe marineo and CALMARE to be a valid technology, let me simply leave you with the final stage directions in this sad Everyman Medieval Play that has been performed in various chiropractors' offices and, for a still unfathomable reason, embraced by obstetricians and gynecologists... for these are the closing words of the SEC filing from tuesday:

In January 2011, the Company entered into a two-year lease effective February 1, 2011 for additional office space for the sales and training staff in Charlotte, NC. Obligations under this lease averaged $27,000 per year for the two-year term. The Company closed that office in July 2012 and closed out the lease, agreeing to forfeit the security deposit and pay the landlord a fee of $15,000 of which $9,000 remains unpaid at June 30, 2013.

please, lord, let this bilking of people in horrid pain finally cease. i picture CTTC now as a host of half-packed cardboard boxes on a utilitarian indoor-outdoor carpet with torn threads and an occasional dividing line of duct tape... in a room with flickering fluorescent lights and a dead cockroach or two in the corners.  the landlord glances in about once a week, sighs, and counts the days until he can file suit.

© 2013 L. Ryan