SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 0-26927
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NOVAMED, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 77-0443643
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1403 East 900 South, Salt Lake City, Utah 84105
(Address of principal executive office) (Zip Code)
(801) 582 9609
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 XX No
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The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of May 31, 2002 was 869,858
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............5
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................7
SIGNATURES.....................................................................8
INDEX TO EXHIBITS..............................................................9
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2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to NovaMed, Inc., a Nevada
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended March 31, 2002, and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-4 and are incorporated herein by
this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
NOVAMED, INC.
Index to Consolidated Financial Statements
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Page
Consolidated balance sheet at March 31, 2002 (unaudited) F-1
Consolidated statement of operations for three months
ended March 31, 2002 and 2001 (unaudited) F-2
Consolidated statement of cash flows for the three months
ended March 31, 2002 and 2001 (unaudited) F-3
Notes to consolidated financial statements F-4
NOVAMED, INC.
Consolidated Balance Sheet
March 31, 2002 (Unaudited)
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Assets
Current assets:
Cash $ 19,982
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Current assets 19,982
Property and equipment, net 28,590
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Total assets $ 48,572
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Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 144,357
Accrued royalty payments 42,000
Accrued payroll taxes and related items 5,144
Notes payable 20,000
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Total current liabilities 211,501
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Stockholders' equity (deficit):
Common stock, par value $.001 per share; authorized 50,000,000
shares, issued and outstanding 869,858 shares 870
Additional paid-in capital 6,281,317
Accumulated deficit (6,445,116)
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Total stockholders' equity (deficit) (162,929)
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Total liabilities and stockholders' equity (deficit) $ 48,572
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F-1
NOVAMED, INC.
Consolidated Statement of Operations
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Cumulative
Amounts since
inception of
Three Months Ended Development
March 31, Stage
(Unaudited) (January 1, 2002)
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2002 2001
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Net sales $ - $ - $ -
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Costs and expenses:
Cost of sales/manufacturing 330 8,306 330
Selling, general and administrative 10,607 340,398 10,607
Research and development - - -
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10,937 348,704 10,937
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Loss before income taxes and extraordinary items (10,937) (348,704) (10,937)
Extraordinary items
Gain on settlement of accrued interest 6,761 - 6,761
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Loss before income taxes (4,176) (348,704) (4,176)
Provision for income taxes - - -
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Net loss $ (4,176) $ (348,704) $ (4,176)
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Loss per common share - basic and diluted $ 0.00 $ (0.40)
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Weighted average common shares - basic and 869,858 869,858
diluted
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F-2
NOVAMED, INC.
Consolidated Statement of Cash Flows
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Three Months Ended Cumulative
March 31, Amounts
(Unaudited) since inception
of Development
Stage
(January 1, 2002)
------------------------ -----------
2002 2001
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Cash flows from operating activities:
Net loss $ (4,176) $ (348,704) $ (4,176)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 4,481 - 4,481
Gain on settlement of accrued interest (6,761) - (6,761)
Stock issued for royalties and license fees - 262,500 -
(Increase) decrease in:
Receivables 15,000 - 15,000
Increase (decrease) in:
Accounts payable and accrued liabilities 1,404 (16,732) 1,404
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Net cash provided by (used in) operating activities 9,948 (102,936) 9,948
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Cash flows from investing activities: - - -
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Cash flows from financing activities:
Issuance of convertible debentures - 100,000 -
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Net cash provided by financing activities - 100,000 -
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Net increase (decrease) in cash 9,948 (2,936) 9,948
Cash, beginning of period 10,034 11,779 10,034
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Cash, end of period $ 19,982 $ 8,843 $ 19,982
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F-3
NOVAMED, INC.
Notes to Consolidated Financial Statements
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(1) The unaudited consolidated financial statements include the accounts of
NovaMed, Inc. and NovaMed Manufacturing, Inc. and include all adjustments
(consisting of normal recurring items) which are, in the opinion of
management, necessary to present fairly the financial position as of March
31, 2002, and the results of operations and cash flows for the three months
ended March 31, 2002 and 2001. The results of operations and cash flows for
the three months March 31, 2002 are not necessarily indicative of the
results to be expected for the entire year.
(2) Loss per share is based on the weighted average number of shares
outstanding at March 31, 2002 and 2001, respectively.
(3) On May 7, 2002, subsequent to the end of the period, Novamed effected a 1
for 50 reverse stock split. The number of shares issued and outstanding
before the split was 43,486,464 shares and after the split, taking into
account slight rounding differences, the number outstanding was 869,858
shares. Presented financial statements reflect retroactive adjustments for
the reverse split.
F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company is a medical device holding company that developed, manufactured,
and marketed hydrogel and saline filled breast implant products that were used
in primary augmentations, revisions, or reconstructive procedures.
The Company manufactured and marketed two different pre-filled single lumen
mammary prostheses (breast implants), the NOVAGOLDTM and the NOVASALINETM .
These products were designed to address the safety concerns associated with
silicone gel-filled implants, as voiced by the FDA's decision in April of 1992
which mandated that silicone gel implants would thereafter only be available
under controlled clinical studies. Both products were used for routine cosmetic
breast augmentation and for breast reconstruction following either subcutaneous
or modified radical mastectomy. The Company has realized no sales revenues since
October of 2000, due to the prohibition placed on the sale of the Company's
products and the default on the License Agreement related to the Company's use
of patented technology in its products.
Since the Company was not able to generate any revenues in 2001 it is now
considering the viability of continuing in the business of developing,
manufacturing and marketing breast implant products. While considering the
viability of its breast implant business, management is also considering other
business opportunities either through merger or acquisition that might create
value for our shareholders.
Results of Operations
Net sales were $0 for the three months ended March 31, 2002, compared to $0 for
the comparable period in 2001. The lack of sales was due to having no
significant operations.
Cost of Sales
Cost of sales were $330 for the three months ended on March 31, 2002, compared
to $8,036 for the comparable period in 2001, a decrease of 95% for the three
month period ended March 31, 2001. The decrease in cost of sales was a result of
no significant operations in the period.
Losses
The Company recorded net losses of $4,176 for the three months ended March 31,
2002, compared to $348,704 for the comparable period in 2001, an decrease of 99%
for the three month period ended March 31, 2001. The decrease was the result of
no significant operations coupled with a lack of expenses relating to the
elimination of the German subsidiary and buyout of the license fees and
royalties relating to that subsidiary.
The Company expects to continue to incur losses at least through fiscal 2002 and
there can be no assurance that the Company will achieve or maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
Selling, general and administrative expenses were $10,607 for the three months
ended March 31, 2002 as compared to $340,398 for the comparable period in 2001,
a decrease of 97% from the three month period ending March 31, 2001. The
decrease in selling, general and administrative costs was the result of no
significant operations and the lack of costs that were associated with the
operation of the Company's former German subsidiary.
5
Capital Expenditures
The Company expended no amounts on capital expenditures for the quarterly period
ending March 31, 2002.
Capital Resources and Liquidity
The Company had current assets of $19,982 and total assets of $48,572 as of the
quarterly period ending March 31, 2002. These assets consist of cash on hand of
$19,982 and equipment, net of depreciation, of $25,590. Stockholders' deficit in
the Company was $162,929 at March 31, 2002.
Cash flow provided by operating activities was $9,948 for the three months
ending March 31, 2002 compared to cash flow used in operating activities of
$102,936 for three months ended March 31, 2001. The increase in cash flows from
operations for the three months ended March 31, 2002, was the result of a
significant drop in losses, mentioned above, coupled with the receipt of
receivables and a lack of royalty payments.
The Company has a working capital deficit of $191,519 on March 31, 2002. The
Company's plan for liquidity resources include delaying payments on accounts
payable and debts by renegotiated terms, obtaining equity or debt financing and
selling assets of the Company. Management can provide no assurance that these
efforts will be successful. The Company believes that its owners, affiliates and
consultants will provide sufficient additional capital to continue operations
through debt or equity financing, though the Company can provide no assurance
that this assumption can be realized if necessary.
The Company has no intention of conducting any research or development until
such time as resolution is reached in connection with the viability of its
breast implant business or another business opportunity is acquired through
merger or acquisition.
The Company currently has no employees and does not believe that employees will
be added until such time as funding is obtained for its breast implant business
or another business opportunity is pursued.
The Company's auditors have expressed an opinion as to the Company's ability to
continue as a going concern on their report dated April 10, 2002, for the period
ended December 31, 2001, as a result of accumulated deficits. The Company's
ability to continue as a going concern is subject to the ability of the Company
to obtain a profit and /or obtaining the necessary funding from outside sources.
Management's plan to address the Company's ability to continue as a going
concern, includes: (1) obtaining funding from private placement sources; (2)
obtaining additional funding from the sale of the Company's securities; (3)
establishing revenues from a suitable business opportunity; (4) obtaining loans
and grants from various financial institutions where possible. Although
management believes that it will be able to obtain the necessary funding to
allow the Company to remain a going concern through the methods discussed above,
there can be no assurances that such methods will prove successful.
6
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 8 of this Form 10-QSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed the following report on Form 8-K
during the period ended March 31, 2002.
1. The Company reported on March 1, 2002 on Form 8-K that it had
entered into a Stock Sale Agreement ("Agreement") for the sale of
450,000 shares of Cryogenic Laboratories Incorporated to Mr. John
Olson, in exchange for $25,000 and Mr. Olson's assumption of
liabilities, including principal and interest amounting to over
$200,000 in the form of debentures. On February 27, 2002, the
Company acknowledged the receipt of the $25,000 and the written
agreement of the debenture holders to the assignment of all
liabilities attached thereto.
7
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, this 6th day of June 2002.
NOVAMED, INC.
/s/ Ruairidh Campbell
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Ruairidh Campbell June 6, 2002
President, Chief Executive Officer and Director
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INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company formerly
known as Conceptual Technologies, Inc., a
Nevada corporation dated November 26, 1996.
(Incorporated herein by reference to the Company's
Form 10SB/A-1 filed on November 2, 1999 as exhibit
2(i)).
3(ii) * By-laws of the Company adopted on November 12,
1996.(Incorporated herein by reference to the
Company's Form 10SB/A-1 filed on as exhibit
2(iv)).
9