SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 14 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 28, 1997 Commission File Number 0-13187
NOVACON CORPORATION
(exact name of Registrant as specified in its charter)
Delaware 13-3074570
(state of incorporation) (IRS Employer ID Number)
5451 Hilltop Avenue
Lake Elmo, MN 55042
(address of principal executive offices)
(612) 704-9160
(Registrant's telephone number, including area code)
The number of shares outstanding of the Registrant's Common Stock, par value
$.0l, as of February 28, 1997 was 10,722,904 shares.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed b), Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
NOVACON CORPORATION
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
February 28, 1997 AND 1996
(UNAUDITED)
NOVACON CORPORATION
INDEX TO FINANCIAL STATEMENTS
For the Nine Months Ended February 28, 1997 and 1996
(Unaudited)
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Selected Information 4
NOVACON CORPORATION
BALANCE SHEET
February 28, 1997
(unaudited)
Assets
Current Assets
Cash 21,152
Accounts Receivable 11,499
Inventories 75,838
Other Current Assets 2,250
Total Current Assets 110,739
Contract Receivable 31,265
Property & Equipment 10,634
Total Assets 152,638
Liabilities & Shareholders Equity
Current Laibilities
Accounts Payable 36,603
Accrued Compensation & Payroll Taxes 91,759
Total Current Liabilities 128,362
Long-Term Liabilities
Notes Payable 47,200
Total Long-Term Liabilities 47,200
Total Liabilities 175,563
Shareholders' Equity (Deficit)
Common Shares $.01 par value;
15,000,000 shares authorized;
10,722,904 shares issued,
and outstanding 107,229
Paid-in Capital 8,509,434
Retained Earnings (8,543,309)
Net Income (96,278)
Total Shareholders'
Equity (Deficit) (22,924)
Total Liabilities &
Shareholders' Equity (Deficit) 152,638
NOVACON CORPORATION
STATEMENT OF OPERATIONS
For the Nine Months Ended February 28, 1997 and 1996
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
1997 1996 1997 1996
Net Sales $ 10,116 40,932 41,793 71,358
Cost of goods sold 10,016 18,196 27,955 33,156
Gross Profit 100 22,736 13,838 38,202
General & admin expenses 34,390 43,527 112,044 141,412
Loss from operations (34,290) (20,791) (98,206) (103,210)
Miscellaneous Income 0 0 1,927 5,457
Extra item-income from
debt restructuring 0 10,866 0 40,605
Net income (loss) (34,290) (9,925) (96,279) (57,148)
Per share data:
Income (loss) per share: 0 0 (.01) (.01)
Income (loss) before
extra item 0 0 0 0
Extraordinary item 0 0 0 0
Net income (loss) per share 0.00 0.00 (0.01) (0.01)
Weighted average number
of shares outstanding 10,722,904 10,722,904 10,722,904 10,722,904
NOVACON CORPORATION
STATEMENT OF CASH FLOWS
For the Nine Months Ended February 28, 1997 and 1996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net Income (Loss) (96,279) (57,148)
Adjustments to reconcile net income to net
cash used in operating activities:
Extraordinary item 0 (36,145)
Depreciation
Increase (decrease) in assets: 0 1,620
Accounts receivable 3,650 (7,672)
Inventory (4,518) (2,392)
Other current assets 0 0
Increase (decrease) in liabilities:
Accounts payable (439) (24,867)
Accrued liabilities (18,963) 50,194
Total Adjustments (20,270) (19,262)
Net cash used in operations (116,549) (76,410)
Cash flows from investing activities:
Purchase of property & equipment (462) (3,062)
Payments received on contract receivable 187,735 85,000
Net cash provided by investing activities 187,273 81,893
Cash flows from financing activities:
Net issuance (repayment) of notes
payable-related parties (93,410) 15,000
Net cash provided by financing activities (93,410) 15,000
Increase in cash (22,686) 20,528
Cash - beginning of period (45,588) 483
Cash - end of period 21,152 21,001
Supplemental disclosure of non-cash investing and financing activities:
During fiscal year 1996: The Company extinguished $36,145 of accounts
payable resulting in extraordinary income of $36,145. During fiscal year
1995: The Company retired $264,311 of notes payable, $104,287 of accrued
interest, $33,557 of accounts payable through the issuance of 923,774
shares of common stock valued at $46,190, resulting in extraordinary income
of $355, 965.
- -3-
NOVACON CORPORATION
SELECTED INFORMATION
For the Six Months Ended February 28, 1997 and 1996
(Unaudited)
Note 1: Significant Accounting Policies
Nature of Organization:
Novacon Corporation is commencing activity in the manufacture and
distribution of disposable balloon pumps designed for both epidural and
intravenous drug infusions for acute and chronic pain management, chemotherapy
and other drug regimens. The Company has an exclusive U.S. manufacturing and
marketing agreement with the Japanese developer of the proprietary technology
employed in the design of these medical devices.
Basis of Presentation:
These financial statements reflect all adjustments which, in the opinion of
management, are necessary for a fair presentation of the Company's financial
position, the results of operations and its cash flows for the three month
period ended February 28, 1997 and 1996. The results for the period ended
February 28, 1997 are not necessarily indicative of the results that may be
expected for the year ending May 31, 1997. This report should be read in
conjunction with the financial statements and notes contained in the Company's
Annual Report for the year ended May 31, 1996.
Net Income per Share:
The net income per share was computed on the weighted average number of shares
outstanding during the year without taking into effect outstanding options as
their effect would be anti-dilutive.
Financial Condition:
As a result of a net loss of $95,229 for the fiscal year ended May 31, 1996
and a net loss of $96,279 for the nine months ended February 28, 1997, the
Company had a working capital deficit of $17,623 and a shareholders' deficit
of $22,924. Sales during the quarter ended February 28, 1997 were $10,116.
Contingencies:
The Company has been self-insured for product liability risks since March,
1986. The Company has not incurred any product liability claims since its
inception.
Note 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Net
Sales for the three month and nine month periods ended February 28, 1997 were
$10,116 and $41,793, respectively, reflecting the continued U.S. clinical
evaluation of the Company's dibTM Drug Infusion Balloon. Sales for the same
periods during 1996 were $40,932 and $71,358, respectively. The Company is
engaged in the development of an independent distributor network in the
United States marketplace. Approximately 50% of the U.S. market was under
distribution coverage at the end of this quarter.
- -4-
The net loss of $34,290 and $96,279, respectively, for the three month and
nine month periods ended February 28, 1997 compares to net losses of $9,925
and $57,148, respectively, for the same periods last year. Net income during
these periods was associated with sales revenue, as well as extraordinary
gains from certain debt restructuring. The total gains amounted to $1,927
and $46,062 for the nine month periods ended February 28, 1997 and 1996,
respectively.
Results of Operations - Costs & Expenses
Operating expenses for the three month and nine month periods ended
February 28, 1997 were $34,390 and $112,044, respectively, as compared to the
same periods last year of $20,791 and $103,210, respectively.
Cost of goods sold during the three month and nine month periods ended February
28, 1997 were 99% and 67% of sales, respectively, as compared to 44% and 46%
of sales, respectively, for the same periods last year.
For the nine period ended February 28, 1997, the Company did not incur any
expenses for research and development. Any future modification to the current
dibTM design may result in expenditures for research and development.
Liquidity and Capital Resources
The Company's cash position improved marginally during fiscal 1996. The
Company had a working capital surplus of $78,553 as of May 31, 1996, compared
to a working capital deficit on May 31, 1995 of $99,916. However, at
February 28, 1997 the Company had a working capital deficit of $17,623.
During the three months ended February 30, 1997 the Company received a
$150,000 payment from Qinming Medical, Inc., pursuant to an agreement for the
sale of the Company's 49% interest in this Chinese joint venture. See note 3,
Contract Receivable, in the Financial Statements of the Company's Form 10-KSB
for the year ended May 31, 1996. During this period the Company also paid
down total borrowings from an officer/director in the amount of $60,000.
Legal Proceedings
The Company renewed its exclusive U.S. marketing and manufacturing agreement
with DIB International Company, Ltd., Tokyo, Japan, effective January 1, 1997
for a period of three years.During the quarter ended February 28, 1997 the
Company received no claims or judgments relating to its operations.
- -5-
Signature
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.
NOVACON CORPORATION
Dated: April 4, 2000
David P. Lang
Chairman & President
- -6-
