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 March 31, 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
--------------------------
(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 XX No
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of May 11, 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 OR PLAN OF OPERATION...........5
PART II
ITEM 1. LEGAL PROCEEDINGS...................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................7
SIGNATURES...................................................................8
INDEX TO EXHIBITS............................................................9
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2
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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 March 31, 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-4 and are incorporated herein by
this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
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NOVAMED, INC.
Index to Consolidated Financial Statements
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Page
Consolidated balance sheet at March 31, 2000 (unaudited) F-1
Consolidated statement of operations for three months
ended March 31, 2000 and 1999 (unaudited) F-2
Consolidated statement of cash flows for the three months
ended March 31, 2000 and 1999 (unaudited) F-3
Notes to consolidated financial statements F-4
4
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NOVAMED, INC.
Consolidated Balance Sheet
March 31, 2000 (Unaudited)
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<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 108,000
Receivables, net 172,000
Inventories 529,000
Prepaid expense 6,000
------------------
Current assets 815,000
Property and equipment, net 69,000
Other assets 21,000
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Total assets $ 905,000
==================
- ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 695,000
Related party payables 94,000
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Total current liabilities 789,000
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Commitments and contingencies -
Stockholders' equity:
Common stock, par value $.001 per share;
authorized 50,000,000 shares, issued and
outstanding 15,416,000 shares 15,000
Additional paid-in capital 5,269,000
Stock subscription receivable (407,000)
Cumulative translation adjustment (11,000)
Accumulated deficit (4,750,000)
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Total stockholders' equity 116,000
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Total liabilities and stockholders' equity $ 905,000
==================
</TABLE>
F-1
<PAGE>
NOVAMED, INC.
Consolidated Statement of Operations
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited)
------------------------------------------
2000 1999
------------------------------------------
<S> <C> <C>
Net sales $ 371,000 $ 434,000
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Costs and expenses:
Cost of sales 259,000 237,000
Selling, general and administrative 385,000 359,000
Research and development 12,000 49,000
------------------------------------------
656,000 645,000
------------------------------------------
Loss before income taxes (285,000) (211,000)
Provision for income taxes - -
------------------------------------------
Net loss $ (285,000$ $ (211,000)
===========================================
Loss per common share -
basic and diluted $ (.02) $ (.02)
==========================================
Weighted average common shares - basic and
diluted 15,200,000 13,446,000
==========================================
</TABLE>
F-2
<PAGE>
NOVAMED, INC.
Consolidated Statement of Cash Flows
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited)
-----------------------------------
2000 1999
-----------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (285,000 $ (211,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 8,000 1,000
(Increase) decrease in:
Receivables 60,000 33,000
Inventories 229,000 141,000
Prepaid expenses (6,000) 2,000
Other assets 38,000 (87,000)
Increase (decrease) in:
Cash overdraft (40,000) -
Accounts payable and accrued liabilities (125,000) 223,000
Related party payables 94,000 (108,000)
-----------------------------------
Net cash used in
operating activities (27,000) (6,000)
-----------------------------------
Cash flows from investing activities- - -
-----------------------------------
Cash flows from financing activities:
Collection of stock subscription receivable 33,000 -
Issuance of common stock 98,000 -
-----------------------------------
Net cash provided by
financing activities 131,000 -
-----------------------------------
Effect of exchange rate changes on cash (12,000) (30,000)
-----------------------------------
Net increase (decrease) in cash 92,000 (36,000)
Cash, beginning of period 16,000 130,000
-----------------------------------
Cash, end of period $ 108,000 $ 94,000
===================================
</TABLE>
F-3
<PAGE>
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 March 31, 2000 and the results of operations
and cash flows for the three months ended March 31, 2000 and 1999. The
results of operations and cash flows for the three months March 31, 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 March 31, 2000 and 1999, respectively.
F-4
<PAGE>
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 NOVAGOLDTM and the NOVASALINETM .
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 NOVAGOLDTM
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 NOVASALINETM breast implant product. The Company
has not obtained FDA approval to sell any of its products in the United States.
The NOVAGOLDTM 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 NOVAGOLDTM 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 $371,000 for the three months ended March 31, 2000, compared to
$434,000 for the comparable period in 1999, a decrease of 15% for the three
month period ended March 31, 2000. The decrease in net sales was the result of a
decrease in orders for the Company's products outside of Germany.
Cost of Sales
Cost of sales were $259,000 for the three months ended on March 31, 2000,
compared to $237,000 for the comparable period in 1999, an increase of 9% for
the three month period ended March 31, 2000. The increase in cost of sales was a
result of an increase in direct labor costs.
5
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Losses
The Company recorded net losses of $285,000 for the three months ended March 31,
2000, compared to $211,000 for the comparable period in 1999, an increase of 35%
for the three month period ended March 31, 2000 . The increase in losses was the
result of the decrease in net sales, the increase in cost of sales and the
increase in selling, general and administrative expenses 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 its revenue growth can be sustained in the future.
Expenses
Selling, general and administrative expenses were $385,000 for the three months
ended March 31, 2000 as compared to $359,000 for the comparable period in 1999,
an increase of 7% for the three month period ending March 31, 2000. The increase
in selling, general and administrative costs was the result of costs related to
efforts made to obtain government guaranteed funding 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 last quarter in 2000 when sales are anticipated
to increase over costs.
At March 31, 2000, the Company had current assets of $815,000 and total assets
of $905,000. At March 31, 2000 the Company had net working capital of $26,000.
Net cash flow used in operations were $27,000 for three months ended March 31,
2000 as compared to cash flows used in operations of $6,000 for the comparable
period in 1999. The increase in cash flows used in operations for the three
months ended March 31, 2000, was the result of a decrease in accounts payable
and an increase in the quarter to date loss.
Cash flow generated from financing activities was $131,000 for the three months
ended March 31, 2000 and $0 for the comparable period in 1999. The Company's
financing activities primarily consisted of private placements of its common
stock.
The Company has funded its cash needs from inception through March 31, 2000 with
a revenues from operations, a series of debt and equity transactions, including
several private placements and a convertible bond issuance. The Company expects
its cash needs to be primarily satisfied from sales of its products over the
next twelve months.
6
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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 9 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.
7
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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 12th day of May 2000.
NOVAMED, INC.
/s/ Ruairidh Campbell
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Ruairidh Campbell May 12 , 2000
President, Chief Executive Officer and Director
8
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
- ------- ---- ------------
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 10SB/A-1 filed on November 2, 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
10SB/A-1 filed on as exhibit 2(iv)).
MATERIAL CONTRACTS
------------------
No Material Contracts were entered into during the quarter ended March 31, 2000.
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S MARCH 31,
2000, QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001036478
<NAME> NovaMed, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 108,000
<SECURITIES> 0
<RECEIVABLES> 172,000
<ALLOWANCES> 0
<INVENTORY> 529,000
<CURRENT-ASSETS> 815,000
<PP&E> 92,000
<DEPRECIATION> 23,000
<TOTAL-ASSETS> 905,000
<CURRENT-LIABILITIES> 789,000
<BONDS> 0
0
0
<COMMON> 15,000
<OTHER-SE> 101,000
<TOTAL-LIABILITY-AND-EQUITY> 905,000
<SALES> 371,000
<TOTAL-REVENUES> 371,000
<CGS> 259,000
<TOTAL-COSTS> 656,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (285,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (285,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (285,000)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
