<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24362
NuMED SURGICAL, INC.
(Exact name of small business issuer in its charter)
STATE OF NEVADA 34-1755390
--------------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6505 ROCKSIDE ROAD SUITE 425, INDEPENDENCE, OH 44131
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (216) 573-6522
Indicate by check mark whether the issuer (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 (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 X No
---- ----
The number of shares outstanding of the Issuer's common stock at $.001 par
value as of October 8, 1996, was 8,775,685.
Form 10-QSB
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NuMED SURGICAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS SEPTEMBER 30 MARCH 31
CURRENT ASSETS 1996 1996
-------------- ---------------- --------------
<S> <C> <C>
Cash and Cash Equivalents $8,904 $7,229
Accounts Receivable - Trade 34,018 43,687
Prepaid Expenses 19,127 300
Inventories 62,977 77,221
---------------- --------------
TOTAL CURRENT ASSETS 125,026 128,437
PROPERTY AND EQUIPMENT, NET 118 1,842
OTHER ASSETS
------------
Intangible Assets, net of accumulated amortization of
$114,371 and $129,815 respectively 49,630 65,074
Prototype Equipment, Net 1,176 1,689
---------------- --------------
TOTAL OTHER ASSETS 50,806 66,763
---------------- --------------
TOTAL ASSETS $175,950 $197,042
---------------- --------------
---------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
-------------------
Accounts Payables $55,708 $39,095
Accrued Expenses 5,070 27,344
Short Term Borrowings 64,544 41,544
---------------- --------------
TOTAL CURRENT LIABILITIES 125,322 107,983
---------------- --------------
STOCKHOLDERS' EQUITY
--------------------
Preferred Stock, Authorized 2,000,000, None Issued 0 0
Common Stock, $.001 Par Value, Authorized 48,000,000
Shares, 8,775,685 Issued and Outstanding 8,776 8,776
Paid in Capital 473,222 473,222
Accumulated Deficit (431,370) (392,939)
---------------- --------------
TOTAL STOCKHOLDERS' EQUITY 50,628 89,059
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $175,950 $197,042
---------------- --------------
---------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB
2
<PAGE>
NuMED SURGICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30
1996 1995
---------------- --------------
<S> <C> <C>
Sales $106,024 $66,239
Cost of Sales 67,607 35,771
---------------- --------------
GROSS PROFIT 38,417 30,468
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
Salary and Benefits 30,701 56,128
Professional Fees 3,839 20,551
Travel and Entertainment 2,638 3,449
Occupancy 3,111 6,242
Advertising and Marketing 7,473 5,280
Shareholder Relations 609 947
Director's Fees 0 2,000
Office Expense 4,804 (1,024)
Amortization and Depreciation 8,784 9,079
---------------- --------------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 61,959 102,652
---------------- --------------
OPERATING LOSS (23,542) (72,184)
OTHER INCOME (EXPENSES)
- -----------------------
Interest Income 1 0
Interest Expense (2,131) 106
---------------- --------------
TOTAL OTHER INCOME (EXPENSES) (2,130) 106
---------------- --------------
NET LOSS ($25,672) ($72,078)
---------------- --------------
---------------- --------------
PER SHARE:
Net Loss ($0.00) ($0.01)
---------------- --------------
---------------- --------------
Shares Used in Computing Per Share Information 8,775,685 8,775,685
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB
3
<PAGE>
NuMED SURGICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30
1996 1995
---------------- --------------
<S> <C> <C>
Sales $231,015 $174,584
Cost of Sales 141,379 81,007
---------------- --------------
GROSS PROFIT 89,636 93,577
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
Salary and Benefits 62,736 100,830
Professional Fees 9,141 34,558
Travel and Entertainment 4,510 5,240
Occupancy 5,464 8,690
Advertising and Marketing 12,893 7,951
Shareholder Relations 1,467 1,722
Director's Fees 0 4,500
Office Expense 10,741 3,105
Amortization and Depreciation 17,569 18,159
---------------- --------------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 124,521 184,755
---------------- --------------
OPERATING LOSS (34,885) (91,178)
OTHER INCOME (EXPENSES)
- -----------------------
Interest Income 3 471
Interest Expense (3,549) (169)
---------------- --------------
TOTAL OTHER INCOME (EXPENSES) (3,546) 302
---------------- --------------
NET LOSS ($38,431) ($90,876)
---------------- --------------
---------------- --------------
PER SHARE:
Net Loss ($0.00) ($0.01)
---------------- --------------
---------------- --------------
Shares Used in Computing Per Share Information 8,775,685 8,775,685
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB
4
<PAGE>
NuMED SURGICAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------ PAID-IN ACCUMULATED
SHARES DOLLARS CAPITAL DEFICIT TOTAL
--------- ---------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT APRIL 1, 1994 5,175,685 5,176 183,674 (72,895) 115,955
Private Placement of Common Stock,
Net of Commissions and Fees 3,600,000 3,600 288,048 291,648
Net Loss (124,781) (124,781)
--------- ---------- --------------- ------------- -----------
BALANCE AT MARCH 31, 1995 8,775,685 8,776 471,722 (197,676) 282,822
--------- ---------- --------------- ------------- -----------
Write-off of Agent Fees 1,500 1,500
Net Loss (195,263) (195,263)
--------- ---------- --------------- ------------- -----------
BALANCE AT MARCH 31, 1996 8,775,685 8,776 473,222 (392,939) 89,059
--------- ---------- --------------- ------------- -----------
--------- ---------- --------------- ------------- -----------
Net Loss (38,431) (38,431)
--------- ---------- --------------- ------------- -----------
BALANCE AT SEPTEMBER 30, 1996 8,775,685 $8,776 $473,222 ($431,370) $50,628
--------- ---------- --------------- ------------- -----------
--------- ---------- --------------- ------------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB
5
<PAGE>
NuMED SURGICAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($38,432) ($90,876)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activies:
Depreciation and Amortization 17,569 18,159
(Decrease) Increase in Cash Due to Net Changes in
Operating Assets and Liabilities:
Accounts Receivable 9,669 (1,707)
Inventories 14,244 (19,889)
Prepaid Expenses and Other Assets (18,827) (5,489)
Accounts Payable 16,613 7,623
Accrued Expenses (22,274) (1,805)
---------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (21,438) (93,984)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment 113 (1,153)
---------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 113 (1,153)
---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Short-Term Borrowings 23,000 0
Payments on Short-Term Borrowings 0 (12,000)
---------------- --------------
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 23,000 (12,000)
---------------- --------------
Increase (Decrease) in Cash and Cash Equivalents 1,675 (107,137)
Cash and Cash Equivalents at Beginning of Period 7,229 123,289
---------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $8,904 $16,152
---------------- --------------
---------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB
6
<PAGE>
NuMED SURGICAL, INC.
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
SEPTEMBER 30, 1996
NOTE A - BASIS OF PREPARATION
GENERAL
The accompanying interim financial statements are unaudited, but reflect all
adjustments which are, in the opinion of the Company's management necessary
to present fairly the financial position as of September 30, 1996, and the
results of operations and cash flows for the six months ended September 30,
1995 and 1996. The results for the six months ended September 30, 1996, are
not necessarily indicative of results to be expected for the full year.
References should be made to the Company's Form 10-KSB for the year ended
March 31, 1996, for additional disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
The following is an analysis of the operations of NuMED Surgical for the
three and six months ended September 30, 1996 and 1995 and should be read in
conjunction with the Company's financial statements that appear elsewhere in
this report.
RESULTS OF OPERATIONS:
Net revenues for the three and six months ended September 30, 1996 were
$106,024 and $231,015 as compared to $66,239 and $174,584 for the same
periods one year ago. This represents an increase of $39,785 and $56,431 or
38% and 24% over the same periods one year ago. This increase was due mainly
to the introduction of two new products; Liftmate and Infinity Stirrups. The
Company expects this growth to continue despite the fact that pressure
remains on controling hospital and healthcare budgets.
The gross profit for the three and six months ended September 30, 1996, were
$38,417 and $89,636 or 36% and 39% of revenues as compared to $30,468 and
$93,577 or 46% and 54% the same periods one year ago. The decreases for the
three and six month periods in gross profit as a percentage of revenues was
due to a shift in product mix, penetration pricing strategy on the Infinity
Stirrup, additional discounting to obtain sales, and a price increase from a
major supplier. The price increase scheduled for fiscal first quarter 1997
was delayed due to market conditions. The price increase has been further
delayed.
Total general and administrative expenses as a percentage of revenues for the
three and six months ended September 30, 1996 decreased to 58% and 54% as
compared to 155% and 106% for the same periods one year ago. This is a
decrease of $40,693 and $60,234 or 66% and 48% for the same periods one year
ago. Expenditures for salaries and benefits for the three and six months
ended September 30, 1996 were $30,701 and $62,736 as compared to $56,128 and
$100,830 for the same periods one year ago. This represents a decrease of
$25,427 and $38,094 or 83% and 61% as
Form 10-QSB
7
<PAGE>
compared to the same periods one year ago. This decrease was primarily due
to the change in the Company's corporate management structure. Professional
fees for the three and six months ended September 30, 1996 were $3,839 and
$9,141 as compared to $20,551 and $34,558 for the same periods one year ago.
This decrease is due to the cancellation of the management services contract
for management, corporate funding, finance, accounting services and
marketing.
The operating loss decreased approximately 161% or $56,293 from ($91,178) to
($34,885). This decrease was primarily due to the change in the Company's
corporate management structure and the cancelation of the management services
contract and overall tighter controls on spending. As a result of the
foregoing, the Company had a net loss of $38,430 for the six months ended
September 30, 1996, as compared to a net loss of $90,876 for the six months
ended September 30, 1995.
The Company is working on its plan to increase sales on its two newly
introduced products by developing strategic alliances with key players in the
market, obtaining national contracts, and by being added to state bid lists.
The Company will continue to develop plans to distribute the products through
direct sales, through original equipment manufacturers, through dealers and
catalog sales. Major manufacturer representative organizations have been
contracted for national distribution coverage. A major amount of resources
will be devoted to these products due to the immediate potential and a very
positive customer response.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and cash equivalents increased to $8,904 at September 30,
1996 from $7,229 at March 31, 1996, which is a net increase of $1,675
resulting mostly from short term borrowings. The Company financed operations
using net proceeds raised in a private offering of common stock in mid 1994
and the line of credit. At September 30, 1996, the Company had $64,544
outstanding on its line of credit. The Company continues to experience
negative cash flow from operating losses and the relatively long collection
cycle for its receivables, resulting from sales subject to customer
evaluation and acceptance. It is anticipated that the Company will begin to
experience postive cash flows.
If the Company is unable to fund its new product line, it may have to sell or
lease certain tangible and intangible assets. Additionally, NuMED Surgical
will have to cease product development and acquisition programs and devote
funding to current operations until cash reserves are sufficient to continue
product development and acquisition programs.
If NuMED Surgical is not able to introduce the newly acquired products as
planned or delays occur in production, it may be necessary to obtain
additional bank financing, seek a joint venture, and/or issue additional
stock in order to finance the commercialization of the two product lines.
Over the long term it is anticipated that NuMED Surgical will fund operations
through profits, if any, derived from acquired businesses, sales of
internally developed products and sales from currently distributed products.
There can be no assurance that the Company will achieve profitability, and
additional funding through the sale of debt or equity securities may be
necessary. While the Company believes that a ready market exists for its
products, there are other companies that sell similar products, some of which
are more adequately funded.
Form 10-QSB
8
<PAGE>
PART II: OTHER INFORMATION
ITEM 1-5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits: None.
b. Reports on Form 8-K: None.
Form 10-QSB
9
<PAGE>
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.
DATE: OCTOBER 8, 1996 /s/ Michael J. Diroff
----------------------------------
Michael J. Diroff
President, Chief Accounting Officer
and Director
Form 10-QSB
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,904
<SECURITIES> 0
<RECEIVABLES> 34,018
<ALLOWANCES> 0
<INVENTORY> 62,977
<CURRENT-ASSETS> 125,026
<PP&E> 118
<DEPRECIATION> 0
<TOTAL-ASSETS> 175,950
<CURRENT-LIABILITIES> 125,322
<BONDS> 0
0
0
<COMMON> 8,776
<OTHER-SE> 50,628
<TOTAL-LIABILITY-AND-EQUITY> 175,950
<SALES> 231,015
<TOTAL-REVENUES> 231,015
<CGS> 141,379
<TOTAL-COSTS> 141,379
<OTHER-EXPENSES> 124,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3549
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (38,431)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,431)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
