Indicate by check mark whether the Registrant (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) been subject to such filing requirements for the past 90 days. Yes £ No T
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes T No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.
The Registrants revenues for the fiscal year ended May 31, 2008 were zero. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of May 31, 2008: $34,867. As of May 31, 2008, the Registrant had 1,748,371 shares of common stock issued and outstanding.
ITEM 1. DESCRIPTION OF BUSINESS.
NVCN Corporation, a Delaware corporation (Registrant), was incorporated in the State of Delaware on April 20, 1981, with the name Cardio-Pace Medical, Inc. On November 24, 1987, the Registrants name was changed to Novacon Corporation, and on February 20, 2001, the name was changed to NVCN Corporation.
The Registrant was incorporated in 1981 with authorized capital of 15,000,000 common shares with a par value of $0.01. On February 14, 2001, the shareholders of the Registrant approved (and on June 20, 2002, the Registrant effected) a 1 for 12 reverse common stock split, a reduction of common stock par value from $0.01 to $0.001, an increase of authorized capital to 50,000,000 common shares and the board of directors to authorize preferred shares of which 10,000,000 were authorized at $0.01 per share. The accompanying financial statements reflect all share data based on the 1 for 12 reverse common stock split basis.
Business of the Registrant.
The Registrant was organized to develop, manufacture and market its proprietary Durapulse(tm) cardiac pacemaker and accessory products. Although the Registrant achieved sales of its pacemaker medical device and accessories products, it did not achieve profitability. The Registrant suspended manufacturing the cardiac pacemaker in 1990. During 1985, the Registrant entered into an agreement with Qinling Semiconductor to establish Qinming Medical, Inc., a Sino-American joint venture in Baoji, China, for the manufacture and distribution of cardiac pacemakers and accessory products, which are still manufactured and distributed in China. In 1992, the Registrant sold its 49% interest in the joint venture to Qinming.
Until August 2000, the Registrant designed, developed, manufactured and marketed low-cost, disposable elastomeric infusion pumps for pain management and was developing other applications for its elastomeric infusion pump technology. Substantially all of the Registrant's revenues since 1995 were derived from the sale of elastomeric infusion pumps that were designed to deliver small quantities of pain medication at a nominally constant flow rate. The Registrants elastomeric infusion pumps, marketed as the dib(tm) Drug Infusion Balloon Pump, were authorized by the U.S. Food and Drug Administration for sale in the United States for epidural, intravenous and percutaneous infusion of a wide range of medications, including narcotic and non-narcotic anesthetics, chemotherapy agents and antibiotics. The Registrant terminated its drug infusion pump business activity as of August 31, 2000.
The decision by the management of the Registrant to discontinue its medical products business was based on claims asserted against the Registrant in 1999, by I-Flow Corporation (I-Flow), which claimed in litigation against the Registrant that the Registrants products infringed proprietary rights claimed by I-Flow. The I-Flow litigation resulted in a final judgment being
entered against the Registrant on May 26, 2000, in the amount of $1,344,582. The judgment also enjoins the Registrant from further sales of infringing products.
In an attempt to settle the above judgment, the Registrant on September 25, 2000, entered into a letter of intent to acquire all the issued and outstanding shares of YourNet, Inc. (YourNet). In order to facilitate this transaction, the Registrant entered into a settlement with I-Flow that would have required the Registrant to issue 500,000 shares of post acquisition stock and pay $144,000 in cash. Neither the Your Net acquisition nor the I-Flow settlement was completed.
The Registrant currently has no operations. The Registrant continues to evaluate alternatives in order to improve the Registrants financial condition, including merger and acquisition opportunities. There is no assurance that the Registrant will be successful in obtaining such opportunities. If a merger or acquisition opportunity does arise, the Registrants value as a partner in a merger or other business combination will rest primarily upon the potential public market for the Registrants shares.
The Registrant owns no patents or trademarks, and has no employees.
ITEM 6. PLAN OF OPERATION.
The following discussion should be read in conjunction with the financial statements of the Registrant and notes thereto contained elsewhere in this report.
Twelve-Month Plan of Operation.
The Registrant intends to take advantage of any reasonable business proposal presented which management believes will provide the Registrant and its stockholders with a viable business opportunity. The board of directors will make the final approval in determining whether to complete any acquisition, and unless required by applicable law, the articles of incorporation or bylaws or by contract, stockholders' approval will not be sought.
The investigation of specific business opportunities and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and will require the Registrant to incur costs for payment of accountants, attorneys, and others. If a decision is made not to participate in or complete the acquisition of a specific business opportunity, the costs incurred in a related investigation will not be recoverable. Further, even if an agreement is reached for the participation in a specific business opportunity by way of investment or otherwise, the failure to consummate the particular transaction may result in the loss to the Registrant of all related costs incurred.
Currently, management is not able to determine the time or resources that will be necessary to locate and acquire or merge with a business prospect. There is no assurance that the Registrant will be able to acquire an interest in any such prospects, products or opportunities that may exist or that any activity of the Registrant, regardless of the completion of any transaction, will be profitable.
If and when the Registrant locates a business opportunity, management of the Registrant will give consideration to the dollar amount of that entity's profitable operations and the adequacy of its working capital in determining the terms and conditions under which the Registrant would consummate such an acquisition. Potential business opportunities, no matter which form they may take, will most likely result in substantial dilution for the Registrants shareholders due to the issuance of stock to acquire such an opportunity.
There were no capital expenditures during the fiscal year ended May 31, 2008.
Risk Factors Connected with Plan of Operation.
Limited Prior Operations, History of Operating Losses, and Accumulated Deficit May Affect Ability of Registrant to Survive.
The Registrant has had limited prior operations to date. Since the Registrants principal activities recently have been limited to seeking new business ventures, it has no recent record of any revenue-producing operations. Consequently, there is only a limited operating history upon which to base an assumption that the Registrant will be able to achieve its business plans. In addition, the Registrant has only limited assets. As a result, there can be no assurance that the Registrant will generate significant revenues in the future; and there can be no assurance that the Registrant will operate at a profitable level. Accordingly, the Registrants prospects must be considered in light of the risks, expenses and difficulties frequently encountered in connection with the establishment of a new business.
The Registrant has incurred net losses: $209,758 for the fiscal year ended May 31, 2008 and $165,109 for the fiscal year ended May 31, 2007. The Registrants current liabilities exceed its current assets by $2,451,378 as of May 31, 2008 and $2,241,620 as of May 31, 2007. At May 31, 2008, the Registrant had an accumulated deficit of $11,401,690. This raises substantial doubt about the Registrants ability to continue as a going concern.
As a result of the fixed nature of many of the Registrants expenses, the Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development and marketing of the Registrants products or any capital raising or revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on the Registrants business, operations and financial condition.
Need for Additional Financing May Affect Operations and Plan of Business.
The working capital requirements associated with any adopted plan of business of the Registrant may be significant. The Registrant anticipates, based on currently proposed assumptions relating to its operations (including with respect to costs and expenditures and projected cash flow from operations), that it must seek financing to continue its operations (an amount which is as yet to be determined). However, such financing, when needed, may not be available, or on terms acceptable to management. The ability of the Registrant to continue as a going concern is dependent on additional sources of capital and the success of the Registrants business plan. The Registrants independent accountant audit report included in this Form 10-KSB includes a substantial doubt paragraph regarding the Registrants ability to continue as a going concern.
If funding is insufficient at any time in the future, the Registrant may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on the companys financial condition,
which could require the company to:
curtail operations significantly;
sell significant assets;
seek arrangements with strategic partners or other parties that may require the company to relinquish significant rights to products, technologies or markets; or
explore other strategic alternatives including a merger or sale of the company.
To the extent that the Registrant raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Registrants operations. Regardless of whether the Registrants cash assets prove to be inadequate to meet the Registrants operational needs, the Registrant may seek to compensate providers of services by issuance of stock in lieu of cash, which will also result in dilution to existing shareholders.
Loss of Any of Current Management Could Have Adverse Impact on Business and Prospects for Registrant.
The Registrants success is dependent upon the hiring and retention of key personnel. None of the officers or directors has any employment or non-competition agreement with the Registrant. Therefore, there can be no assurance that these personnel will remain employed by the Registrant. Should any of these individuals cease to be affiliated with the Registrant for any reason before qualified replacements could be found, there could be material adverse effects on the Registrants business and prospects.
In addition, all decisions with respect to the management of the Registrant will be made exclusively by the officers and directors of the Registrant. Investors will only have rights associated with stockholders to make decisions which affect the Registrant. The success of the Registrant, to a large extent, will depend on the quality of the directors and officers of the Registrant. Accordingly, no person should invest in the shares unless he is willing to entrust all aspects of the management of the Registrant to the officers and directors.
Potential Conflicts of Interest May Affect Ability of Officers and Directors to Make Decisions in the Best Interests of Registrant.
The officers and directors have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors, and each will continue to do so notwithstanding the fact that management time may be necessary to the business of the Registrant. As a result, certain conflicts of interest may exist between the Registrant and its officers and/or directors which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of corporate opportunities which cannot be resolved through arms length negotiations. All of the potential conflicts of interest will be resolved only through exercise by the directors of such judgment as is consistent with their fiduciary duties to the Registrant. It is the intention of management, so as to minimize any potential conflicts of interest, to present first to the board of directors to the Registrant, any proposed investments for its evaluation.
Limitations on Liability, and Indemnification, of Directors and Officers May Result in Expenditures by Registrant.
The Registrants Amended and Restated Certificate of Incorporation contain provisions to eliminate, to the fullest extent permitted by the Delaware General Corporation Law, as in effect from time to time, the personal liability of directors of the Registrant for monetary damages arising from a breach of their fiduciary duties as directors. The Amended and Restated Certificate of Incorporation and the Amended and Restated By-Laws of the Registrant include provisions to the effect that the Registrant may, to the maximum extent permitted from time to time under applicable law, indemnify any director, officer, or employee to the extent that such indemnification and advancement of expense is permitted under such law, as it may from time to time be in effect. Any limitation on the liability of any director, or indemnification of directors, officer, or employees, could result in substantial expenditures being made by the Registrant in covering any liability of such persons or in indemnifying them.
Absence of Cash Dividends May Affect Investment Value of Registrants Stock.
The board of directors does not anticipate paying cash dividends on the common stock for the foreseeable future and intends to retain any future earnings to finance the growth of the Registrants business. Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements and the general operating and financial conditions of the Registrant as well as legal limitations on the payment of dividends out of paid-in capital.
Non-Cumulative Voting May Affect Ability of Some Shareholders to Influence Mangement of Registrant.
Holders of the shares of common stock of the Registrant are not entitled to accumulate their votes for the election of directors or otherwise. Accordingly, the holders of a majority of the shares present at a meeting of shareholders will be able to elect all of the directors of the Registrant, and the minority shareholders will not be able to elect a representative to the Registrants board of directors.
(h) No Assurance of Continued Public Trading Market and Risk of Low Priced Securities May Affect Market Value of Registrants Stock.
There has been only a limited public market for the common stock of the Registrant. The common stock of the Registrant is currently quoted on the Pink Sheets LLC. As a result, an
investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of the Registrants securities. In addition, the common stock is subject to the low-priced security or so called penny stock rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the U.S. Securities and Exchange Commission (SEC), any equity security that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing low-priced or penny stocks sometimes limit the ability of broker-dealers to sell the Registrants common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.
Failure to Maintain Market Makers May Affect Value of Registrants Stock.
If the Registrant is unable to maintain a National Association of Securities Dealers, Inc. member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Registrant will be able to maintain such market makers.
Sale of Shares Eligible For Future Sale Could Adversely Affect the Market Price.
All of the 327,259 (post-split) shares of common stock that are currently held, directly or indirectly, by significant shareholders of the Registrant (other than management), as shown in the chart under Part III, Item 11 of this Form 10-KSB, have been issued in reliance on the private placement exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person, or persons whose shares are aggregated, who has beneficially owned shares acquired in a non-public transaction for at least one year, including persons who may be deemed affiliates of the Registrant, as defined, would be entitled to sell within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of common stock, provided that current public information is then available. If a substantial number of the shares owned by these shareholders were sold under Rule 144 or a registered offering, the market price of the common stock could be adversely affected.
Critical Accounting Policies.
The SEC has issued Financial Reporting Release No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies (FRR 60), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important
to the portrayal of a companys financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Registrants most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Registrant uses in applying these most critical accounting policies have a significant impact on the results the company reports in its financial statements.
The preparation of these financial statements requires the Registrant to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Registrant evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Registrant bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Forward Looking Statements.
The foregoing plan of operation contains forward looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. The words believe, expect, anticipate, intends, forecast, project, and similar expressions identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements as to the Registrants estimates as to the adequacy of its capital resources, its need and ability to obtain additional financing, its operating losses and negative cash flow, and its critical accounting policies. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above. These forward-looking statements speak only as of the date hereof. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.