SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ________ to ________ .
Commission file number: 0-26927
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NOVAMED, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 77-0443643
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
623 Hoover Street, Minneapolis, Minnesota 55413
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(Address of principal executive office) (Zip Code)
(612)378-1437
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(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of August 7, 2000 was 15,531,464.
1
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TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS.....................................................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................6
SIGNATURES.....................................................................7
INDEX TO EXHIBITS..............................................................8
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to NovaMed, Inc., a Nevada
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended June 30, 2000 and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-5 and are incorporated herein by
this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
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NOVAMED, INC.
Index to Consolidated Financial Statements
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Page
Consolidated balance sheet at June 30, 2000 (unaudited)......................F-2
Consolidated statement of operations for three months
and six months ended June 30, 2000 and 1999 (unaudited)......................F-3
Consolidated statement of cash flows for the six months
ended June 30, 2000 and 1999 (unaudited).....................................F-4
Notes to consolidated financial statements...................................F-5
F-1
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NOVAMED, INC.
Consolidated Balance Sheet
June 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 18,000
Receivables, net 278,000
Inventories 443,000
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Current assets 739,000
Property and equipment, net 64,000
Other assets 22,000
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$ 825,000
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Liabilities and Stockholders' Deficit
Current liabilities:
Cash Overdraft $ 27,000
Accounts payable and accrued liabilities 623,000
Related party payables 127,000
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Total current liabilities 777,000
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Commitments and contingencies -
Stockholders' equity:
Common stock, par value $.001 per share;
authorized 50,000,000 shares, issued and
outstanding 15,531,464 shares 16,000
Additional paid-in capital 5,334,000
Stock subscription receivable (418,000)
Cumulative translation adjustment 60,000
Accumulated deficit (4,944,000)
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Total stockholders' equity 48,000
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$ 825,000
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</TABLE>
See Notes to Consolidated Financial Statements
F-2
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NOVAMED, INC.
Consolidated Statement of Operations
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net sales $ 375,000 $ 552,000 $ 745,000 $ 986,000
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Costs and expenses:
Cost of sales 111,000 454,000 370,000 691,000
Selling, general and administrative 413,000 289,000 798,000 648,000
Research and development 44,000 156,000 56,000 204,000
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568,000 899,000 1,224,000 1,543,000
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Operating loss (193,000) (347,000) (479,000) (557,000)
Other income - 100,000 - 100,000
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Loss before income taxes (193,000) (247,000) (479,000) (457,000)
Income taxes - - - -
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Net loss $ (193,000) $ (247,000) $ (479,000) $ (457,000)
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Loss per common shares -
basic and diluted $ (.01) $ (.02) $ (.03) $ (.03)
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Weighted average shares basic and
diluted 15,479,000 13,579,000 15,341,000 13,513,000
================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-3
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NOVAMED, INC.
Consolidated Statement of Cash Flows
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<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Unaudited)
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2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (479,000 $ (457,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation 13,000 2,000
Stock issued for services 20,000 220,000
Stock based compensation - 128,000
Royalty expense 21,000 -
(Increase) decrease in:
Receivables (46,000) (41,000)
Inventories 315,000 183,000
Prepaid expenses - (25,000)
Other 37,000 -
Increase (decrease) in:
Cash Overdraft (13,000)
Accounts payable and accrued liabilities (197,000) (50,000)
Related party payable 127,000 (16,000)
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Net cash provided by (used in)
operating activities (202,000) 44,000
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Cash flows from investing activities-
- -
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Cash flows from financing activities:
Issuance of common stock 145,000 55,000
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Effect of exchange rate changes on cash 59,000 (10,000)
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Net increase (decrease) in cash 2,000 89,000
Cash, beginning of period 16,000 130,000
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Cash, end of period $ 18,000 $ 219,000
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</TABLE>
See Notes to Consolidated Financial Statements
F-4
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NOVAMED, INC.
Notes to Consolidated Financial Statements
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(1) The unaudited consolidated financial statements include the accounts of
NovaMed, Inc. and include all adjustments (consisting of normal recurring
items) which are, in the opinion of management, necessary to present fairly
the financial position as of June 30, 2000 and the results of operations
for the six months and three months ended June 30, 2000 and 1999 and cash
flows for the six months ended June 30, 2000 and 1999. The results of
operations and cash flows for the six months and three months ended June
30, 2000 are not necessarily indicative of the results to be expected for
the entire year.
(2) Loss per share is based on the weighted average number of shares
outstanding at June 30, 2000 and 1999, respectively.
(3) During the six months ended June 30, 2000, NovaMed decreased stock
subscription receivable and recognized $21,000 in royalty expense, due to a
stockholder paying the royalty expense on behalf of NovaMed.
F-5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statement
This Quarterly Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to continue its expansion strategy,
changes in costs of raw materials, labor, and employee benefits, as well as
general market conditions, competition and pricing. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this Quarterly Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
General
As used herein the term Company refers to NovaMed, Inc., its subsidiaries and
predecessors, unless the context indicates otherwise. The Company is a medical
device holding company that develops, manufactures, and markets hydrogel and
saline filled breast implant products that are used in primary augmentations,
revisions, or reconstructive procedures.
The Company manufactures and markets two different pre-filled single lumen
mammary prostheses (breast implants), the NOVAGOLD(TM) and the NOVASALINE(TM) .
These products are designed to address the safety concerns associated with
silicone gel-filled implants, as voiced by the FDA's decision in April of 1992
which mandated that silicone gel implants would thereafter only be available
under controlled clinical studies. Both products are used for routine cosmetic
breast augmentation and for breast reconstruction following either subcutaneous
or modified radical mastectomy. The Company's flagship product is the
NOVAGOLD(TM) breast implant, which utilizes a unique water based filling
material that is designed to be biocompatible and therefore safe for human use.
The Company has further developed an inflatable NOVASALINE(TM) breast implant
product. The Company has not obtained FDA approval to sell any of its products
in the United States.
The NOVAGOLD(TM) product has been submitted to the FDA for review and approval
under the Investigational Device Exemption ("IDE")/Pre-Market Approval ("PMA")
process. The IDE includes the clinical protocol, a risk assessment, and a
strategic plan as to how risks are minimized and handled in the event of device
failure. Upon FDA acceptance of the IDE and the collection of sufficient
clinical data from controlled clinical trials, a PMA summary will be submitted
to the FDA. The FDA reviews the PMA and grants or withholds approval. If
approved, the NOVAGOLD(TM) may be sold freely in the United States. The Company
anticipates that the product could be cleared for full market release in the
U.S. by 2004. There is no guarantee the Company will obtain approval by 2004 or
may never be able to obtain FDA approval
Results of Operations
Net sales were $375,000 for the three months ended June 30, 2000, compared to
$552,000 for the comparable period in 1999, a decrease of 32% for the three
month period ended June 30, 2000. The decrease in net sales was due to the drop
in the number of orders for the Company's products outside of Germany by foreign
distributors uncertain as to their status as sellers of the Company's products.
4
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Cost of Sales
Cost of sales were $111,000 for the three months ended on June 30, 2000,
compared to $454,000 for the comparable period in 1999, a decrease of 76% for
the three month period ended June 30, 2000. The decrease in cost of sales was a
result of a reduction in manufacturing activities due to the decrease in sales
and rise in product inventory levels as compared to the corresponding period.
Losses
The Company recorded net losses of $193,000 for the three months ended June 30,
2000, compared to $247,000 for the comparable period in 1999, a decrease of 22%
for the three month period ended June 30, 2000 . The decrease in losses was the
result of limited research and development expenditures and a decrease in the
cost of sales for the period.
The Company expects to continue to incur losses at least through fiscal 2000 and
there can be no assurance that the Company will achieve or maintain
profitability or that revenue growth can be sustained in the future.
Expenses
Selling, general and administrative expenses were $413,000 for the three months
ended June 30, 2000 as compared to $289,000 for the comparable period in 1999,
an increase of 30% for the three month period ending June 30, 2000. The increase
in selling, general and administrative costs was the result of costs related to
new marketing efforts to increase sales in Germany.
Capital Resources and Liquidity
Historically, the Company has expended significant resources on research and
development which includes regulatory compliance expenses and marketing. The
trend is likely to continue into the near future as new products seek
introduction in the United States and new expenses are incurred in marketing the
Company's products outside of North America. Therefore, the Company does not
expect a change from using cash in operating activities to providing cash from
operating activities until the second quarter in 2001 when sales are anticipated
to increase over costs.
At June 30, 2000, the Company had current assets of $739,000 and total assets of
$825,000. At June 30, 2000 the Company had negative net working capital of
$38,000.
Net cash flow used in operations were $202,000 for six months ended June 30,
2000 as compared to cash flows provided from operations of $44,000 for the
comparable period in 1999. The increase in cash flows used in operations for the
six months ended June 30, 2000, resulted in a decrease in accounts payable and
accrued liabilities.
Cash flow generated from financing activities was $145,000 for the six months
ended June 30, 2000 and $ 55,000 for the comparable period in 1999. The cash
flow was generated from the exercise of common stock options.
The Company has funded its cash needs from inception through June 30, 2000 with
a revenues from operations, a series of debt and equity transactions, including
several private placements and a loan. The Company expects to fund its cash
needs in this varied manner over the next twelve months until such time as
product sales exceed our expenses.
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PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page 8 of this Form 10-QSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the quarter.
6
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 11th day of August 2000.
NOVAMED, INC.
/s/ Ruairidh Campbell August 11 , 2000
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Ruairidh Campbell
President, Chief Executive
Officer and Director
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INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
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3(i) * Articles of Incorporation of the Company formerly known as
Conceptual Technologies, Inc., a Nevada corporation dated
November 26, 1996. (Incorporated herein by reference to the
Company's Form 10-SB filed on August 4, 1999 as exhibit
2(i)).
3(ii) * By-laws of the Company adopted on November 12,
1996.(Incorporated herein by reference to the Company's Form
10-SB filed on August 4, 1999 as exhibit 2(iv)).
27 9 Financial Data Schedule "CE"
MATERIAL CONTRACTS
No Material Contracts were entered into during the quarter ended June 30, 2000.
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