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 November 30, 1996 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 November 30, 1996 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 SIX MONTHS ENDED
November 30, 1996 AND 1995
(UNAUDITED)
NOVACON CORPORATION
INDEX TO FINANCIAL STATEMENTS
For the Six Months Ended November 30, 1996 and 1995
(Unaudited)
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Selected Information 4
NOVACON CORPORATION
BALANCE SHEET
November 30, 1996
(unaudited)
Assets
Current Assets
Cash 705
Accounts Receivable 17,469
Inventories 80,738
Other Current Assets 1,500
Total Current Assets 100,412
Contract Receivable 181,265
Property & Equipment 10,634
Total Assets 292,311
Liabilities &
Shareholders Equity
Current Liabilities
Notes Payable 114,647
Accounts Payable 37,111
Accrued Compensation &
Payroll Taxes 129,187
Total Current Liabilities 280,945
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)
Total Shareholders'
Equity (Deficit) 11,366
Total Liabilities &
Shareholders' Equity (Deficit) 292,311
NOVACON CORPORATION
STATEMENT OF OPERATIONS
For the Three Months Ended November 30, 1996 and 1995
(Unaudited)
For the Three For the Six
Months Ended Months Ended
1996 1995 1996 1995
Net Sales $ 24,684 31,520 31,677 39,231
Cost of goods sold 13,762 14,031 17,939 19,485
Gross Profit 10,922 17,489 13,738 19,746
General & admin expenses 31,018 55,809 77,654 106,249
Loss from operations (20,096) (37,320) (63,916) (86,503)
Miscellaneous Income 1,617 350 1,927 5,457
Extra item-income
from debt restructuring 0 17,981 0 24,279
Net income (loss) (18,478) (19,987) (61,989) (56,766)
Per share data:
Income (loss) per share: 0.00 0.00 0.00 0.00
Income (loss) before
extra item
Extraordinary item
Net income (loss)
per share 0.00 0.00 0.00 0.00
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 Six Months Ended November 30, 1996 and 1995
(Unaudited)
1996 1995
Cash flows from operating activities:
Net Income (Loss) (61,989) (56,766)
Adjustments to reconcile net income to net
cash used in operating activities:
Extraordinary item 0 (24,279)
Depreciation
Increase (decrease) in assets: 0 1,074
Accounts receivable (2,320) 54,971
Inventory (9,419) (51,756)
Other current assets 0 (1,790)
Increase (decrease) in liabilities:
Accounts payable 2,076 (29,451)
Accrued liabilities 16,458 40,002
Net cash used in operations (55,194) (11,229)
Cash flows from investing activities:
Purchase of property & equipment (462) (2,381)
Payments received on contract receivable 37,735 0
Net cash provided by investing activities 37,273 (2,381)
Cash flows from financing activities:
Net issuance (repayment) of notes
payable-related parties (25,963) 10,000
Net cash provided by financing activities (25,963) 10,000
Increase in cash (44,883) (137)
Cash - beginning of period (45,588) 767
Cash - end of period 705 630
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 November 30, 1996 and 1995
(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 six month
period ended November 30, 1996 and 1995. The results for the period ended
November 30, 1996 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 $61,989 for the six months ended November 30, 1996, the
Company had a working capital deficit of $28,224 and a shareholders' equity
of $11,366. Sales during the quarter ended November 30, 1996 were $24,684.
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 six month periods ended November 30, 1996 were
$24,684 and $31,520, respectively, reflecting the continued U.S. introduction
of the Company's new dibTM Drug Infusion Balloon. Sales for the same periods
during 1995 were $31,520 and $39,231, 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 losses of $18,478 and $61,989, respectively, for the three month and
six month periods ended November 30, 1996 compares to net losses of $19,987
and $56,766, respectively, for the same periods last year. For the six months
ended November 30, 1996 and 1995, miscellaneous income and extraordinary gains
related to debt restructuring totalled $1,927 and $29,736, respectively.
Results of Operations - Costs & Expenses
Operating expenses for the six month period ended November 30, 1996, as
compared to the same period last year, decreased $28,595 to $77,654. These
decreases reflect a marketing and distribution reassessment related to the
U.S. introduction of the dibTM Drug Infusion Balloon.
Cost of goods sold during the three and six month periods ended November 30,
1996 were 56% and 57% of sales, respectively, as compared to 45% and 50%
sales for the same periods last year.
For the three period ended November 30, 1996, 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
November 30, 1996 the Company had a working capital deficit of $28,224.
During the three months ended November 30, 1996 the Company received no
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 had total
borrowings from an officer/director in the amount of $60,000.
Legal Proceedings
During the quarter ended November 30, 1996 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-