NOVATEK INTERNATIONAL INC
10QSB, 1996-05-20
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK
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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-QSB

       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


  For the Quarter Ended March 31, 1996         Commission file number 0-22096



                           NOVATEK INTERNATIONAL, INC.
           ----------------------------------------------------------  
           (Exact name of the registrant as specified in its charter)



             Colorado                                  84-1074891
   ------------------------------        -------------------------------------
  (State or other jurisdiction of       (I.R.S. employer identification number)
  incorporation or organization)



  1401 Neptune Drive, Boynton Beach, Florida             33426
  ------------------------------------------           --------- 
   (Address of principal executive offices)            (Zip Code)


        Registrant's telephone number, including area code (407) 736-6659


Novatek  International,  Inc. (1) HAS FILED all reports  required to be filed by
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. 

As  of  May  6,  1996  there  were  outstanding  13,078,498  shares  of  Novatek
International, Inc. Common Stock -no par value.


Transitional Small Business Disclosure format:       Yes        No  X
                                                         ---        ---








<PAGE>



                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS


                                                                        PAGE

  Part I          FINANCIAL INFORMATION

  Item 1.   Financial Statements

            Consolidated Balance Sheets
            March 31, 1996 and December 31, 1995                          3

            Consolidated Statements of Operations
            Three Months Ended March 31, 1996 and 1995                    4

            Consolidated Statements of Cash Flows
            Three Months Ended March 31, 1996 and 1995                    5

            Notes to Consolidated Financial Statements                    6

  Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations.                          8


  Part II   OTHER INFORMATION

          Items 1 through 6                                              10

          Signatures                                                     11



























<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

      PART I     FINANCIAL INFORMATION

      ITEM 1     Financial Statements

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------   
                                                        March 31    December 31
                                                         1996          1995
ASSETS                                                 Unaudited      Audited
------                                                 ---------      -------
Current assets
  Cash                                               $    107,845  $     58,234
  Costs in excess of billings on
    uncompleted contracts                                 189,067       285,103
Current maturities of notes receivable                  1,064,450        64,450
Other current assets                                      518,139       419,800
                                                     ------------  ------------
    Total current assets                                1,879,501       827,587
Property and equipment, net                             1,043,684     1,055,920
Distribution license                                   52,124,835          --
Notes receivable, less current maturities               1,975,579       225,579
Other assets                                               80,885        66,201
                                                     ------------  ------------

                                                     $ 57,104,484  $  2,175,287
                                                     ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities
  Accounts payable and other current liabilities     $    319,985  $    164,627
  Billings and estimated losses in excess of
   costs on uncompleted contracts                         224,483        78,742
  Current maturities of long-term debt                  2,732,100         7,472
                                                     ------------  ------------
    Total current liabilities                           3,276,568       250,841
                                                     ------------  ------------
Long-term debt, less current maturities                   395,000       322,777
                                                     ------------  ------------
Convertible debenture payable                          36,000,000          --
                                                     ------------  ------------
Sales contracts to be acquired                        (36,000,000)         --
                                                     ------------  ------------
Shareholders' Equity (Deficit)
  Preferred stock, 10,000,000 shares authorized;
   5,000 shares designated series A 10%
   cumulative and convertible; $1,000 stated value      1,887,000     1,887,000
  Common stock, no par value;
    250,000,000 shares authorized                      68,733,561     6,228,185
  Additional paid-in capital                                1,076         1,076
  Accumulated (deficit)                                (9,688,721)   (6,514,592)
  Deferred consulting fees                             (7,500,000)         --
                                                     ------------  ------------
                                                       53,432,916     1,601,669
                                                     ------------  ------------
                                                     $ 57,104,484  $  2,175,287
                                                     ============  ============
           See accompanying notes to consolidated financial statements
                                        3



<PAGE>


                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------



                                         Three Months Ended  Three Months Ended
                                              March 31            March 31
                                                1996                1995
                                             Unaudited           Unaudited
                                             ---------           ---------
Revenue                                    $    37,775          $   639,312

Contract Costs                                 202,234              700,158
                                           -----------           ----------

Gross Loss                                    (164,459)             (60,846)

General and Administrative Expenses            614,178              223,929
                                           -----------           ----------

Operating Loss                                (778,637)            (284,775)
                                           -----------           ----------

Nonoperating Income (Expense)
   Financing costs related to convertible
     notes                                  (2,376,440)                 --
   Other expense                               (19,052)             (81,940)
                                           -----------           ----------
                                           $(2,395,492)             (81,940)
                                           -----------           ----------

Net Loss                                   $(3,174,129)         $  (366,715)
                                           ===========           ==========

Loss Per Share                             $    (0. 96)         $     (0.27)
                                           ===========           ==========
Weighted Average Number of
   Shares Outstanding                        3,293,452            1,386,990
                                           ===========           ==========



           See accompanying notes to consolidated financial statements












                                        4



<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                           Three Months Ended 
                                                       ---------------------------    
                                                        March 31          March 31
                                                          1996              1995
                                                        Unaudited        Unaudited
                                                      ------------     ------------
<S>                                                   <C>              <C>  
Net cash (used in) operating activities               $   (313,662)    $   (573,268)
                                                       -----------      -----------
Cash Flows from Investing Activities
------------------------------------
Purchase of property and equipment                            --             (1,600)
Collections on notes receivable                            250,000             --
Proceeds from sale of investment in
  equity securities                                         27,234             --
Acquisition of subsidiary, net cash acquired                 4,691             --
Decrease in due from affiliates                                 11             --
Decrease in other assets                                    10,109             --
                                                       ------------    ------------
  Net cash provided by (used in) investing
    activities                                             292,045           (1,600)
                                                       ------------    ------------
Cash Flows from Financing Activities
------------------------------------
Decrease in outstanding checks in excess of
   bank balances                                              --            (39,676)
Proceeds from short and long-term debt                   1,665,000          626,653
Principal payments on short and long-term debt          (1,569,908)          (8,238)
Loan closing costs                                         (23,864)            --
                                                      ------------     ------------
  Net cash provided by financing activities                 71,228          578,739
                                                      ------------     ------------

  Net increase in cash                                      49,611            3,871

Cash, beginning of period                                   58,234           11,946
                                                      ------------     ------------

Cash, end of period                                   $    107,845     $     15,817
                                                      ============     ============
Supplemental Disclosure of Cash Flow Information
------------------------------------------------
Cash payments for interest                            $     11,587     $     28,305
                                                      ============     ============
Schedule of Noncash Investing and Financing Activities
------------------------------------------------------
Common stock issued as payment on
  long-term debt                                      $ 27,675,000    $        --
                                                      ============    ============
Common stock issued in advance for
  future consulting fees                              $  7,500,000    $        --
                                                      ============    ============
Acquisition of business
  Fair value of assets acquired                       $ 55,380,432    $        --
  Fair value of liabilities assumed                    (30,358,748)            --
  Common stock issued to purchase business             (25,026,375)            --
                                                      ------------    ------------ 
Net cash received                                     $     (4,691)   $        --
                                                      ============    ============                                         
</TABLE>
           See accompanying notes to consolidated financial statements

                                        5



<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.   Statement of Information Furnished

     The  accompanying  unaudited  financial  statements  have been  prepared in
     accordance with Form 10-QSB  instructions  and in the opinion of management
     contain all  adjustments  (consisting  of only normal  recurring  accruals)
     necessary to present  fairly the  financial  position as of March 31, 1996,
     the results of operations  for the three month periods ended March 31, 1996
     and 1995 and the cash flows for the three  month  periods  ended  March 31,
     1996 and 1995. These results have been determined on the basis of generally
     accepted  accounting  principles and practices  applied  consistently  with
     those used in the  preparation  of the company's 1995 Annual Report on Form
     10-KSB.  Operating  results for the quarter  ended March 31, 1996,  are not
     necessarily  indicative  of the results  that may be expected  for the year
     ending December 31, 1996.

     Certain information and footnote disclosures normally included in financial
     statements  presented in  accordance  with  generally  accepted  accounting
     principles  have  been  condensed  or  omitted.  It is  suggested  that the
     accompanying financial statements be read in conjunction with the financial
     statements  and notes thereto  included in the  Company's  Annual Report on
     Form 10-KSB for fiscal year ended December 31, 1995.

2.   Acquisition of Business

     On March 5, 1996, a merger was effected between Novatek International, Inc.
     ("Company"),  its wholly-owned  subsidiary Novatek International  Holdings,
     Inc.,  ("Holdings"),  Medical Products,  Inc. ("MPI") and its shareholders,
     The Celentano Limited Partnership and Pickeral Cove Trust  ("Shareholder").
     MPI held an exclusive license to market and distribute  Medical  diagnostic
     devices in South  America  and the  Bahamas.  The  distribution  license is
     valued in excess of $50,000,000.  As a result of this merger,  the business
     of MPI will be conducted by Holdings as a  wholly-owned  subsidiary  of the
     Company.  To purchase MPI the Company issued 2,002,638 shares of its common
     stock to The Celentano  Limited  Partnership  and  2,002,637  shares of its
     common stock to Pickeral Cove Trust in exchange for all of the  outstanding
     shares (7,500 shares of common stock) of MPI. The Company  issued to Joseph
     Roberts & Co., Inc. 1,000,000 shares of its common stock for its assistance
     in arranging the merger.  The Company also issued  3,453,125  shares of its
     common  stock,  $125,000  in short  term notes and paid  $1,300,000  to New
     England Diagnostics Corporation ("NED") and MPI previously paid $950,000 to
     NED  which  resulted  in  payment  in  full  of the  balance  due  NED of a
     promissory  note in the original face amount of $30,000,000  owing from MPI
     to NED.
     NED subsequently sold its shares in the Company.

3.   Current Maturities of Long-term Debt

     In connection with the merger, the Company issued convertible notes payable
     in the amount of $2,354,000  convertible into the Company's common stock at
     $2.50 per share.  These notes were converted  subsequent to March 31, 1996.
     The  financing   costs  related  to  convertible   notes  included  in  the
     Consolidated  Statement of Operations  contains  $2,354,000 of  incremental
     interest  expense  attributable  to the issuance of the  convertible  notes
     payable.
                                      6



<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

4.   Convertible Debenture Payable

     The Company issued a $36,000,000  face amount,  9%  convertible  debenture,
     convertible  into 7,200,000 shares of the Company's common stock, to NED as
     consideration for NED acquiring for the Company certain sales contracts for
     products  for  which  the  Company  holds a  license  to  distribute.  This
     debenture has been placed in escrow  pending the  performance by NED of its
     obligation to acquire these certain sales contracts.  Interest on debenture
     begins at the time the related sales contracts are delivered.

5.   Deferred Consulting Fees

     The Company issued 1,000,000 shares of its common stock and paid a $250,000
     retainer to four  consultants  who are to obtain  sales  contracts  for the
     Company and further the Company's  interests in Honduras,  Costa Rica,  and
     Colombia.  The $250,000 retainer is included in Administrative  and General
     Expenses in the Consolidated Statement of Operations.  The stock portion of
     the  compensation  is being  held in escrow  and will be earned  based on a
     percentage  of the  Company's  gross  revenue  produced by sales  contracts
     obtained by the consultants, calculated annually.

6.   Pro Forma Data

     Pro forma data for the current interim period and the corresponding interim
     period for the preceding fiscal year for the acquisition outlined in Note 2
     has not been presented since MPI was not formed until November 3, 1995.

7.   Sale of License Agreement

     During January 1996, the Company  completed the sale of a license agreement
     to  distribute  medical  diagnostic  devices in the  Bahamas.  The  Company
     recognized $3,000,000 of revenue on this transaction with a related cost of
     $3,000,000  which  represents the value  allocated to the Bahamian  license
     upon the acquisition of MPI.

8.   Subsequent Events

     On April 11,  1996,  the Company  entered into a five year  agreement  with
     Importadora  Y  Expertadora  Accmed,  Ltd.,  a twelve  year old Medical and
     Pharmaceutical  company, based in Santiago,  Chile, to supply the Quix (tm)
     Rapid Cholera Strip Test. The agreement  calls for the guaranteed  purchase
     of  $5,000,000  of Quix (tm) Rapid  Cholera  Strip  Tests per year for five
     years totaling $25,000,000.








                                        7





<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
OVERVIEW
--------
Since  inception,  the  Company  has not been  able to  generate  cash flow from
operations  to cover  expenses  without  advances  from  affiliates  and private
placements  of  securities.  This casts  significant  doubt  upon the  Company's
ability to continue as a going concern with its past business methodology.  As a
result,  the Company  executed  an  agreement  and plan of merger  with  Medical
Products,  Inc.  (See  Note 2 to the  consolidated  financial  statements).  The
Company has also reviewed its existing construction and manufacturing  contracts
and  determined  to down size its  domestic  operations  and focus  primarily on
offshore  contracts that management  believed will yield profits.  Consequently,
the Company negotiated  termination of its lease on 1340 Neptune Drive and moved
into 1401 Neptune  Drive,  which it owns.  As a result of the merger,  which was
consummated  on March 5, 1996,  the Company has formed a division  for its light
gauge  steel and  concrete  constructions  projects in the  Commonwealth  of the
Bahamas.

The company is focusing  its  resources  on  developing  sales of rapid  medical
diagnostic  devices for which the Company  acquired  rights to South America and
the Bahamas. These test devices include test kits for HIV, cholera, diabetes, as
well as nine other viruses.  In addition to having sold a $3,000,000 license for
the Bahamas,  the Company has executed a five year contract valued at $5,000,000
per year with Chile for  Cholera  test  kits.  The  Company is also  acting as a
co-broker in an agreement to ship HIV test devices to Mexico. The first shipment
of these devices was made on May 14, 1996.

In April 1996,  the Company  negotiated and reached an agreement in principle to
acquire the exclusive  license to market and distribute  the medical  diagnostic
devices in Canada, Mexico, and Central America.

RESULTS OF OPERATIONS
---------------------
Revenue  for the first  quarter  decreased  from  $639,312 in 1995 to $37,775 in
1996.  This  dramatic  decrease  in  revenues  is due to the down  sizing of the
Company's construction  operations and also due to the completed contract method
of accounting,  for which revenues  related to various Bimini contracts will not
be recognized until the second and future quarters.

During  January 1996, the Company  completed the sale of a license  agreement to
distribute  medical  diagnostic  devices in the Bahamas.  The Company recognized
$3,000,000  of revenue on this  transaction  with a related  cost of  $3,000,000
which   represents  the  value  allocated  to  the  Bahamian  license  upon  the
acquisition of MPI.

Management   believes  that   revenues  in  the  second   quarter  will  improve
significantly  as a result of completed  contracts  related to the  construction
division and revenues generated from the initial shipments of medical diagnostic
devices.

General and  administrative  expenses,  after being  adjusted for  approximately
$105,000  for  expenses  directly  related to the  merger and for  approximately
$250,000 in  consulting  fees (see Note 5), at $259,178 for the first quarter of
1996 are just  slightly  higher  than the  $223,929  incurred  during  the first
quarter of 1995.

The Company incurred nonoperating expenses of $2,395,492 during the three months
ended March 31, 1996, due to financing  costs  attributable  to the  convertible
notes (See Note 3 to the Consolidated Financial Statements).
                                        8


<PAGE>


                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES


Liquidity and Capital Resources
-------------------------------
The Company's net cash used in operating  activities  was $313,662 for the three
months ended March 31, 1996,  compared to net cash used in operating  activities
of $573,268  during the  comparative  prior year period.  The primary reason for
this  decrease  in net cash used in  operating  activities  was an  increase  in
certain liabilities during 1996.

Net cash provided by investing  activities  during 1996 was $292,045 compared to
net cash used in investing  activities of $1,600 during 1995.  During 1996,  the
Company collected $250,000 on a note receivable.

The net cash provided by financing  activities  during 1996 was $71,228 compared
to net cash  provided by financing  activities  during 1995 of $578,739.  During
1996, the Company received  $1,665,000 of proceeds from short and long term debt
while  making  principal  payments  on short and long  term debt of  $1,569,908.
During 1995, the Company received proceeds from long term debt of $626,653.

Without positive cash flow from operations,  the Company experiences the typical
problems of obtaining debt and equity capital funding.  Management believes that
the merger with Medical  Products,  Inc.,  through the profits  derived from the
sale of the medical  diagnostic  devices,  will provide  sufficient cash flow to
meet the Company's operating needs during 1996. Additionally, the Company has an
understanding with a Bahamian developer to produce townhomes. The developer will
advance funds necessary to complete this project for the next three years.




























                                        9




<PAGE>
                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES


  PART II       OTHER INFORMATION

  Item 1.    Legal Proceedings:  None

  Item 2.    Changes in Securities:  None

  Item 3.    Defaults Upon Senior Securities:  None

  Item 4.    Submission of Matters to a Vote of Securities Holders:  None

  Item 5.    Other Information:

            The Company is  contemplating  filing a Form S-1 Registration
            Statement to register certain restricted shares of its common
            stock,   including   shares   of  common   stock   underlying
            outstanding warrants.

  Item 6.   Exhibits and Reports on Form 8-K:
            (a)  Exhibit: Exhibit 27 Financial Data Schedule* 
                          * Electronic filing only   
            (b)  Reports on Form 8-K.
                 (1) On  January  3,  1996,  the  Company  filed Form 8-K
                 regarding an Agreement and Plan of Merger.

                 (2) On March 19,  1996,  the  Company  filed Form 8-K
                 regarding its March 5, 1996, merger.

                 (3) On April 2, 1996,  the Company filed Form 8-KA which
                 amended  Form 8-K dated March 19,  1996,  to provide the
                 following required financial statements relating to such
                 acquisition:

                 (i)  Financial statements of business acquired:

                      Independent Auditor's Report on the Financial Statements.

                      Balance Sheet as of December 31, 1995.

                      Statement of Operations for the period from November 3,
                      1995, (Date of  Incorporation) through December 31, 1995.

                      Statement  of  Stockholder's  deficit  for the period
                      from  November  3,  1995,  (Date  of   Incorporation)
                      through December 31, 1995.

                      Notes to Financial Statements.

                 (ii) Pro Forma financial information:

                      Unaudited Pro Forma Balance Sheet as of December 31, 1995.

                      Unaudited Pro Forma condensed  Consolidated Statement of
                      Operations for the year ended December 31, 1995.

                                       10



<PAGE>

                  NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES



                                   SIGNATURES
                                   ----------


     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned hereunto duly authorized.
        
 Dated:  May 20, 1996

                                                 Novatek International, Inc.
                                                 (Registrant)

                                                 By:/s/Frank J.Cooney
                                                    ---------------------------
                                                    Frank J. Cooney, President
                                                    Chief Executive Officer


































                                       11

<TABLE> <S> <C>


        

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NOVATEK INTERNATIONAL INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO 
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S>                             <C>

<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               MAR-31-1996
<CASH>                                             108                                  
<SECURITIES>                                         0
<RECEIVABLES>                                    3,113
<ALLOWANCES>                                         0
<INVENTORY>                                        122
<CURRENT-ASSETS>                                 1,880
<PP&E>                                           1,401
<DEPRECIATION>                                     357
<TOTAL-ASSETS>                                  57,104
<CURRENT-LIABILITIES>                            3,277
<BONDS>                                          2,999
<COMMON>                                        68,734
                                0
                                      1,887
<OTHER-SE>                                     (17,188)
<TOTAL-LIABILITY-AND-EQUITY>                    57,104
<SALES>                                             38
<TOTAL-REVENUES>                                    38
<CGS>                                              202
<TOTAL-COSTS>                                      816
<OTHER-EXPENSES>                                    19
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               2,376  
<INCOME-PRETAX>                                 (3,174) 
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                             (3,174)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    (3,174)
<EPS-PRIMARY>                                     (.96)
<EPS-DILUTED>                                     (.96)

        

</TABLE>



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