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 August 31, 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 August 31, 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 THREE MONTHS ENDED
AUGUST 31, 1996 AND 1995
(UNAUDITED)
NOVACON CORPORATION
INDEX TO FINANCIAL STATEMENTS
For the Three Months Ended August 31, 1996 and 1995
(Unaudited)
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Selected Information 4
NOVACON CORPORATION
BALANCE SHEET
August 31, 1996
(unaudited)
Assets
Current Assets
Cash 9,148
Accounts Receivable 1,667
Inventories 93,186
Other Current Assets 1,250
Total Current Assets 103,552
Contract Receivable 181,265
Property & Equipment 10,634
Total Assets 297,151
Liabilities & Shareholders Equity
Current Laibilities
Notes Payable 114,647
Accounts Payable 32,532
Accrued Compensation
& Payroll Taxes 120,128
Total Current Liabilities 267,307
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
Accumulated Deficit (8,586,819)
Total Shareholders' Equity
(Deficit) 29,844
Total Liabilities & Shareholders'
Equity (Deficit) 297,151
NOVACON CORPORATION
STATEMENT OF OPERATIONS
For the Three Months Ended August 31, 1996 and 1995
(Unaudited)
1996 1995
Net Sales $ 6,993 12,250
Cost of goods sold 4,177 4,744
Gross Profit 2,816 7,506
General & admin expenses 46,636 36,550
Loss from operations (43,820) (29,044)
Miscellaneous Income 310 5,098
Extra item-income from
debt restructuring 0 6,298
Net income (loss) (43,511) (17,648)
Per share data:
Income (loss) per share: .00 .00
Income (loss) before
extra item .00 .00
Extraordinary item .00 .00
Net income (loss) per share .00 .00
Weighted average number of
shares outstanding 10,722,904 10,722,904
NOVACON CORPORATION
STATEMENT OF CASH FLOWS
For the Three Months Ended August 31, 1996 and 1995
(Unaudited)
1996 1995
Cash flows from operating activities:
Net Income (Loss) (43,511) (17,648)
Adjustments to reconcile net income to net
cash used in operating activities:
Extraordinary item 0 (6,298)
Depreciation
Increase (decrease) in assets: 0 1,486
Accounts receivable 13,481 (7,046)
Inventory (21,417) (20,016)
Other current assets (450) 1,143
Increase (decrease) in liabilities:
Accounts payable (1,562) (31,328)
Accrued liabilities 6,458 11,155
Net cash used in operations (3,490) (68,552)
Cash flows from investing activities:
Purchase of property & equipment (462) (2,806)
Payments received on contract receivable 37,735 75,000
Net cash provided by investing activities 37,273 72,194
Cash flows from financing activities:
Net issuance (repayment) of notes
payable-related parties (25,963) (3,175)
Net cash used in financing activities (25,963) (3,175)
Increase in cash (36,440) 467
Cash - beginning of period (45,588) 483
Cash - end of period 9,148 950
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.
NOVACON CORPORATION
SELECTED INFORMATION
For the Three Months Ended August 31, 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 three month
period ended August 31, 1996 and 1995. The results for the period ended
August 31, 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 $43,511 for the three months ended August 31, 1996, the
Company had a working capital deficit of $163,755 and a shareholders' equity
of $297,151. Sales during the quarter ended August 31, 1996 were $6,993.
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 months ended August 31, 1996 were $6,993, reflecting a
quarter-to-quarter decline in the U.S. introduction of the Company's new dibTM
Drug Infusion Balloon. Sales for the same period during 1995 were $12,250.
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. The
Company received FDA authorization to market a rate-adjustable version of
its dibTM Drug Infusion Balloon.
The net loss of $43,511 for the three months ended August 31, 1996 compares
to net income of $17,648 reported for the same period last year. Net income
during last year's same period was associated with sales revenue, as well as
extraordinary gains from certain debt restructuring and miscellaneous income.
The total gains amounted to $11,396 for the three months ended August 31,
1995.
Results of Operations - Costs & Expenses
Operating expenses for the three month period ended August 31, 1996, as
compared to the same period last year, increased $10,086 to $46,636. These
increases reflect sales and marketing expenses related to the U.S.
introduction of the dibTM Drug Infusion Balloon.
Cost of goods sold during the quarter ended August 31, 1996 were 60% of sales,
as compared to 39% of sales for the same period last year.
For the three period ended August 31, 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 August
31, 1996 the Company had a working capital deficit of $11,446.
During the three months ended August 31, 1996 the Company received a $37,735
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 August 31, 1996 the Company received no claims or
judgments relating to its operations.
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
