SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _______________ to______________
Commission file number: 0-16159
LECTEC CORPORATION
-------------------
(Exact name of Registrant as specified in its charter)
Minnesota 41-1301878
- --------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10701 Red Circle Drive, Minnetonka, Minnesota 55343
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (952) 933-2291
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) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock as of May 14,
2001 was 3,915,676 shares.
LECTEC CORPORATION
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements and Notes to Condensed Financial
Statements (unaudited) .......................................... I-1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... I-7
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...... I-10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................... II-1
Item 2. Changes in Securities and Use of Proceeds........................ II-1
Item 3. Defaults Upon Senior Securities.................................. II-1
Item 4. Submission of Matters to a Vote of Security Holders.............. II-1
Item 5. Other Information ............................................... II-2
Item 6. Exhibits and Reports on Form 8-K ................................ II-2
Signature Page .................................................. II-3
Exhibit Index ................................................... II-4
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL STATEMENTS AND NOTES TO CONDENSED
FINANCIAL STATEMENTS
LECTEC CORPORATION
CONDENSED BALANCE SHEETS
March 31 June 30,
2001 2000
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 48,384 $ 100,171
Trade receivables and other, net of allowances of $590,239
and $369,531 at March 31, 2001 and June 30, 2000 2,385,244 2,645,710
Inventories
Raw materials 1,572,035 1,649,544
Work-in-process 33,824 23,201
Finished goods 625,144 574,941
------------ ------------
2,231,003 2,247,686
Prepaid expenses and other 366,209 242,543
------------ ------------
Total current assets 5,030,840 5,236,110
PROPERTY, PLANT AND EQUIPMENT - AT COST, NET 2,382,119 3,039,088
OTHER ASSETS
Patents and trademarks, less accumulated amortization of $1,344,875
and $1,293,871 at March 31, 2001 and June 30, 2000 269,219 199,351
------------ ------------
$ 7,682,178 $ 8,474,549
============ ============
See accompanying notes to the condensed financial statements.
I-1
LECTEC CORPORATION
CONDENSED BALANCE SHEETS - CONTINUED
March 31, June 30,
2001 2000
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 435,667 $ 837,542
Current maturities of long-term obligations 22,471 22,562
Accounts payable 2,372,113 1,910,551
Accrued expenses 1,044,315 792,894
Customer deposits 75,000 160,000
------------ ------------
Total current liabilities 3,949,566 3,723,549
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 834,639 31,184
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: 15,000,000 shares authorized;
3,915,676 shares and 3,904,465 shares issued
and outstanding at March 31, 2001 and June 30, 2000 39,157 39,045
Additional paid-in capital 11,332,829 11,316,260
Accumulated other comprehensive income -- 4,845
Accumulated deficit (8,474,013) (6,640,334)
------------ ------------
2,897,973 4,719,816
------------ ------------
$ 7,682,178 $ 8,474,549
============ ============
See accompanying notes to the condensed financial statements.
I-2
LECTEC CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net sales $ 4,171,778 $ 3,934,825 $ 12,417,156 $ 10,243,282
Cost of goods sold 2,735,137 2,423,164 7,987,711 6,729,326
------------ ------------ ------------ ------------
Gross profit 1,436,641 1,511,661 4,429,445 3,513,956
Operating expenses
Sales and marketing 1,109,867 1,240,070 3,404,438 2,838,770
General and administrative 708,984 643,948 2,168,891 1,891,821
Research and development 219,236 264,896 660,759 844,860
------------ ------------ ------------ ------------
2,038,087 2,148,914 6,234,088 5,575,451
------------ ------------ ------------ ------------
Loss from operations (601,446) (637,253) (1,804,643) (2,061,495)
Other income (expenses)
Interest expense (44,932) (6,732) (117,850) (8,808)
Gain on sale of assets 103,624 -- 103,624 --
Other, net (1,027) 657 (14,810) 28,526
------------ ------------ ------------ ------------
Loss before income taxes (543,781) (643,328) (1,833,679) (2,041,777)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (543,781) $ (643,328) $ (1,833,679) $ (2,041,777)
============ ============ ============ ============
Net loss per share - basic and diluted $ (0.14) $ (0.17) $ (0.47) $ (0.53)
============ ============ ============ ============
Weighted average shares outstanding - basic and diluted 3,915,676 3,890,494 3,909,457 3,882,746
============ ============ ============ ============
See accompanying notes to the condensed financial statements.
I-3
LECTEC CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended March 31,
-----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net loss $ (1,833,679) $ (2,041,777)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of assets (103,624) 0
Depreciation and amortization 493,004 707,237
Changes in operating assets and liabilities:
Trade and other receivables 260,466 (189,367)
Inventories 16,683 (351,013)
Prepaid expenses and other (145,695) (58,970)
Accounts payable 461,562 547,028
Accrued expenses and other 257,529 359,268
Customer deposits (85,000) --
------------ ------------
Net cash used in operating activities (678,754) (1,027,594)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (311,407) (326,215)
Investment in patents and trademarks (120,872) (71,539)
Net proceeds from sale of tape equipment 630,000 --
Other 11,076 --
------------ ------------
Net cash provided by (used in) investing activities 208,797 (397,754)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 16,681 26,815
Net borrowings (repayments) of line of credit (401,875) 412,418
Proceeds from long-term borrowing 820,000 --
Repayment of long-term obligations (16,636) --
------------ ------------
Net cash provided in financing activities 418,170 439,233
------------ ------------
Net decrease in cash and cash equivalents (51,787) (986,115)
Cash and cash equivalents at beginning of period 100,171 1,022,025
------------ ------------
Cash and cash equivalents at end of period $ 48,384 $ 35,910
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 116,530 $ 5,233
Income taxes 2,000 --
See accompanying notes to the condensed financial statements.
I-4
LECTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The accompanying condensed financial statements include the accounts of
LecTec Corporation (the "Company") as of and for the three and nine month
periods ended March 31, 2001 and 2000. The Company's condensed financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and should be read in conjunction with
its Annual Report on Form 10-K and its Annual Report to Shareholders for the
fiscal year ended June 30, 2000. The interim condensed financial statements are
unaudited and in the opinion of management, reflect all adjustments necessary
for a fair presentation of results for the periods presented. Results for
interim periods are not necessarily indicative of results for the year.
(2) NET LOSS PER SHARE
The Company's basic net loss per share amounts have been computed by
dividing net loss by the weighted average number of outstanding common shares.
The Company's diluted net loss per share amounts have been computed by dividing
net loss by the weighted average number of outstanding common shares and common
share equivalents, when dilutive. Options and warrants to purchase 1,037,570 and
976,705 shares of common stock with a weighted average exercise price of $5.26
and $5.83 were outstanding during the three months ended March 31, 2001 and
2000, but were excluded because they were antidilutive. Options and warrants to
purchase 1,012,246 and 1,054,530 shares of common stock with a weighted average
exercise price of $5.57 and $6.19 were outstanding during the nine months ended
March 31, 2001 and 2000, but were excluded because they were antidilutive.
(3) COMPREHENSIVE INCOME (LOSS)
For the quarter and nine months ended March 31, 2001 there were no
items which the Company is required to recognize as components of comprehensive
income (loss), therefore comprehensive income (loss) was the same as net loss.
(4) SEGMENTS
The Company operates its business in one reportable segment - the
manufacture and sale of products based on advanced skin interface technologies.
Each of the Company's major product lines has similar economic characteristics,
technology, manufacturing processes, and regulatory environments. Customers and
distribution and marketing strategies vary within major product lines as well as
overlap between major product lines. The Company's executive decision makers
evaluate sales performance based on the total sales of each major product line
and profitability on a total company basis, due to shared infrastructures, to
make operating and strategic decisions. Net sales by major product line were as
follows:
Three months ended Nine months ended
March 31, March 31,
-------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Therapeutic consumer products $ 2,260,761 $ 1,420,812 $ 7,246,976 $ 3,203,546
Conductive products 1,939,017 1,988,864 5,042,744 5,493,225
Medical tape products (28,000) 525,149 127,436 1,546,511
----------- ----------- ----------- -----------
$ 4,171,778 $ 3,934,825 $12,417,156 $10,243,282
=========== =========== =========== ===========
I-5
(5) NOTE PAYABLE TO BANK
In November 1999, the Company entered into a secured line of credit
with a maximum borrowing of $2,000,000. In September 2000, the line of credit
was increased to allow borrowing of up to $2,800,000. The credit agreement
expires in November 2001 and includes interest computed at the prime rate plus
three percentage points (effective rate of 11% at March 31, 2001). The line of
credit is secured by the Company's receivables, inventory and equipment. The
credit agreement contains certain restrictive covenants which require the
Company to maintain, among other things, specified levels of net worth and not
to exceed specified cumulative losses. The Company was in compliance with all
covenants as of March 31, 2001.
(6) LONG-TERM OBLIGATION
In December 2000, the Company entered into a mortgage agreement with
gross proceeds of $820,000. The principal balance of the mortgage is due in
December 2002. Monthly payments of interest are computed at the prime rate plus
five percentage points (effective rate of 13% at March 31, 2001). The mortgage
is secured by the Company's real property.
(7) DISPOSITION OF ASSETS
In March 2001, the Company sold its medical tape manufacturing
equipment and other related assets. Net proceeds from the sale were $630,000
consisting of the purchase price of $700,000 less transaction costs of $70,000.
The Company realized a gain on the sale of $103,624. The sale of the medical
tape equipment finalized the Company's plan to exit the medical tape business
which was adopted at the end of fiscal year 2000. Adoption of this plan
originally resulted in a charge of $645,000 during fiscal year 2000 related to
the write-down of the medical tape equipment to its estimated fair market value
at June 30, 2000.
(8) AGREEMENT TO SELL ASSETS
In November 2000, the Company entered into an agreement to sell the
Company's diagnostic electrode and electrically conductive adhesive hydrogel
business assets which are used to produce the Company's conductive products.
Under the agreement, the Company received $7,250,000 in cash upon closing of the
transaction, subject to adjustment for changes in the net assets at the time of
closing. The agreement was approved by the shareholders of the Company at its
Annual Meeting of Shareholders on April 17, 2001. The closing occurred on April
30, 2001. The Company will recognize a gain of approximately $4,400,000 in the
fourth quarter of fiscal year 2001 related to this transaction.
(9) INCOME TAXES
The provision for income taxes for the three months and nine months
ended March 31, 2001, has been offset principally by a valuation allowance for
deferred taxes.
I-6
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUARTERS AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000
RESULTS OF OPERATIONS
Net sales for the third quarter of fiscal 2001 were $4,171,778 compared
to net sales of $3,934,825 for the third quarter of fiscal 2000, an increase of
6.0%. The increase was primarily the result of increased therapeutic consumer
product sales which more than offset decreased medical tape sales. Therapeutic
consumer product sales increased by 59.1% from $1,420,812 to $2,260,761 while
conductive product sales decreased by 2.5% from $1,988,864 to $1,939,017 and
medical tape product sales decreased by 105.3% from $525,149 to ($28,000). The
therapeutic consumer product sales increase was primarily the result of sales of
the new Triaminic(R) vapor product to Novartis Consumer Health, Inc. The Company
expects conductive product sales to decrease in the remainder of fiscal 2001 due
to the sale of assets used to produce the conductive products. As part of this
asset sale, the Company entered into a Manufacturing and Supply Agreement with
the buyer. Under the terms of this Agreement the Company will continue to
produce conductive products for the buyer for a period of up to nine months. For
the first six months of the Agreement the Company will sell the conductive
products to the buyer at cost. During the last three months of the Agreement the
Company will sell the products to the buyer at cost plus ten percent. Under the
Agreement, sales of conductive products, at decreased levels, will potentially
continue through January 2002. The decrease in medical tape product sales was
due to the exit of the medical tape business.
Net sales for the first nine months of fiscal 2001 were $12,417,156
compared to net sales of $10,243,282 for the first nine months of fiscal 2000,
an increase of 21.2%. The increase was primarily the result of increased
therapeutic consumer product sales which more than offset decreased conductive
and medical tape sales. Therapeutic consumer product sales increased by 126.2%
from $3,203,546 to $7,246,976 while conductive product sales decreased by 8.2%
from $5,493,225 to $5,042,744 and medical tape product sales decreased by 91.8%
from $1,546,511 to $127,436. The therapeutic consumer product sales increase was
primarily the result of sales of the new vapor product to Novartis Consumer
Health, Inc as well as sales of the new acne product to Johnson & Johnson
Consumer Products Worldwide. The decrease in conductive product sales was
primarily the result of softening customer demand associated with the announced
sale of the conductive business. The decrease in medical tape product sales was
due to the exit of the medical tape business.
Gross profit for the third quarter of fiscal 2001 was $1,436,641,
compared to $1,511,611 for the third quarter of fiscal 2000, a decrease of 5.0%.
Gross profit as a percent of net sales for the third quarter of fiscal 2001 was
34.4% compared to 38.4% for the third quarter of fiscal 2000. The decrease in
gross profit for the quarter resulted primarily from increased sales to a
consumer contract therapeutic customer, higher labor costs associated with
overtime, and higher purchased raw material costs. This decrease was partially
offset by an increase in gross profit related to increased sales volume and the
favorable impact of a change in the sales mix toward LecTec branded therapeutic
consumer products.
Gross profit for the first nine months of fiscal 2001 was $4,429,445
compared to $3,513,956 for the first nine months of fiscal 2000, an increase of
26.1%. Gross profit as a percent of net sales for the first nine months of
fiscal 2001 was 35.7% compared to 34.3% for the first nine months of fiscal
2000. The increase in gross profit for the nine months resulted primarily from
an increase in gross profit related to increased sales volume and the favorable
impact of a change in the sales mix toward higher-margin therapeutic consumer
products. These items more than offset a decrease in gross profit related to the
costs associated with resolving a packaging issue that occurred in the current
nine months, as well as, a decrease in gross profit related to labor costs
associated with higher production volumes and increased overtime related to
production of therapeutic patch products. The packaging issue resulted when one
of the Company's vendors supplied packaging material that did not meet required
specifications. The
I-7
Company is currently obtaining packaging material that does meet required
specifications from the same vendor.
Sales and marketing expenses were $1,109,867 and $1,240,070 during the
third quarters of fiscal 2001 and 2000, and as a percentage of net sales, were
26.6% and 31.5% respectively. The decrease in sales and marketing expenses for
the quarter was primarily due to a decrease of $196,000 in media advertising
expenses related to the absence of a TV ad campaign for TheraPatch vapor
products that was run in the second quarter of fiscal 2001 rather than in the
third quarter as in fiscal 2000, and a decrease of $145,000 in retail slotting
fees which more than offset an increase of $132,000 in cooperative advertising.
Sales and marketing expenses were $3,404,438 and $2,838,770 during the
first nine months of fiscal 2001 and 2000, and as a percentage of net sales,
were 27.4% and 27.7% respectively. The increase in sales and marketing expenses
for the first nine months was primarily due to an increase of $484,000 in media
advertising expenses related to ad campaigns.
General and administrative expenses were $708,984 and $643,948 during
the third quarters of fiscal 2001 and 2000, and as a percentage of net sales,
were 17.0% and 16.4% respectively. The increase in general and administrative
expenses for the quarter was primarily due to an increase in travel and lodging
expense of $39,000.
General and administrative expenses were $2,168,891 and $1,891,821,
during the first nine months of fiscal 2001 and 2000, and as a percentage of net
sales, were 17.5% and 18.5% respectively. The increase in general and
administrative expenses for the nine months was primarily due to increased
consulting expense of $83,000, increased accrued corporate bonus expense of
$97,000, and increased employment fees of $69,000.
Research and development expenses for the third quarters of fiscal 2001
and 2000 were $219,236 and $264,896, and as a percentage of net sales, were 5.3%
and 6.7% respectively. The decrease in research and development expenses for the
quarter was primarily due to a decrease in test run expense of $24,000
Research and development expenses were $660,759 and $844,860 during the
first nine months of fiscal 2001 and 2000, and as a percentage of net sales,
were 5.3% and 8.2% respectively. The decrease in research and development
expenses for the nine months was primarily due to a decrease in test run expense
of $64,000, and a decrease in contract labor expense of $53,000.
Interest expense increased in the third quarter of fiscal 2001 to
$44,932 from $6,732 in the third quarter of fiscal 2000. Interest expense
increased in the first nine months of fiscal 2001 to $117,850 from $8,808 in the
first nine months of fiscal 2000. Both of the fiscal 2001 increases resulted
primarily from interest expense associated with increased borrowings under the
line of credit and interest expense associated with the mortgage. During the
third quarter of fiscal 2001 the Company recorded a gain on sale of assets of
$103,624 related to the sale of the medical tape manufacturing equipment.
The Company recorded a loss before income taxes of $543,781 in the
third quarter of fiscal 2001 compared to a loss before income taxes of $643,328
for the third quarter of fiscal 2000. The Company recorded a loss before income
taxes of $1,833,679 in the first nine months of fiscal 2001 compared to a loss
before income taxes of $2,041,777 for the first nine months of fiscal 2000. The
decrease in loss for the current year third quarter was primarily the result of
the gain on the sale of the medical tape manufacturing equipment. The decrease
in loss for the first nine months was primarily the result of increased gross
profit that resulted from increased sales volume, the gain on the sale of the
medical tape manufacturing equipment, and the exit from the medical tape
business. The increased gross profit more than offset an increase in operating
expenses related to advertising expenses associated with retail sales of the
Company's TheraPatch products.
The provision for income taxes in the third quarter and first nine
months of fiscal 2001 and 2000 has been offset principally by a valuation
allowance for deferred taxes.
I-8
Inflation has not had a significant impact on the Company's operations
or cash flow.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $51,787 to $48,384 during the
first nine months of fiscal 2001. Accounts receivable decreased by $260,466 to
$2,385,244 during the first nine months of fiscal 2001. The higher accounts
receivable balance at June 30, 2000 was primarily due to significant initial
sales, with extended terms, to a TheraPatch customer in the fourth quarter of
fiscal 2000. Inventories decreased by $16,683 to $2,231,003. Accounts payable of
$2,372,113 at March 31, 2001 increased by $461,562 during the first nine months
primarily due to increased payables related to increased manufacturing
production and increased advertising expenses related to the TheraPatch product
line. Capital spending for manufacturing equipment and plant improvements
totaled $311,356 during the first nine months of fiscal 2001. The Company
entered into a purchase commitment for production machinery in the amount of
$154,482 during the first nine months of fiscal 2001. This purchase commitment
will be fulfilled sometime in the first quarter of fiscal year 2002.
The Company had working capital of $1,081,274 and a current ratio of
1.3 at March 31, 2001 compared to working capital of $1,512,561 and a current
ratio of 1.4 at June 30, 2000.
The Company finalized a $2,000,000 asset-based line of credit in
November, 1999. In September 2000, the line of credit was increased to allow
borrowing of up to $2,800,000. Borrowings outstanding on the line of credit were
$435,667 as of March 31, 2001. The Company was in compliance with all covenants
as of March 31, 2001.
In December 2000, the Company entered into a mortgage agreement with
gross proceeds of $820,000.
Management believes that existing cash and cash equivalents,
internally-generated cash flow, the existing secured line of credit including
the line of credit increase, the mortgage loan, and the sale of the Company's
diagnostic electrode and electrically conductive adhesive hydrogel business
assets will be sufficient to support anticipated operating and capital spending
requirements through fiscal year 2002 and contribute to the funding of
longer-term growth and expansion of the business. Maintaining adequate levels of
working capital depends in part upon the success of the Company's products in
the marketplace, the relative profitability of those products and the Company's
ability to control operating expenses. Funding of the Company's operations in
future periods may require additional investments in the Company in the form of
equity or debt. There can be no assurance that the Company will achieve desired
levels of sales or profitability, or that future capital infusions will be
available.
FORWARD-LOOKING STATEMENTS
From time to time, in reports filed with the Securities and Exchange
Commission (including this Form 10-Q), in press releases, and in other
communications to shareholders or the investment community, the Company may
provide forward-looking statements concerning possible or anticipated future
results of operations or business developments which are typically preceded by
the words "believes", "expects", "anticipates", "intends", "will", "may",
"should" or similar expressions. Such forward-looking statements are subject to
risks and uncertainties which could cause results or developments to differ
materially from those indicated in the forward-looking statements. Such risks
and uncertainties include, but are not limited to, the buying patterns of major
customers; competitive forces including new products or pricing pressures; costs
associated with and acceptance of the Company's TheraPatch brand strategy;
impact of interruptions to production; dependence on key personnel; need for
regulatory approvals; changes in governmental regulatory requirements or
accounting pronouncements; ability to satisfy funding requirements for operating
needs, expansion or capital expenditures; and the matters discussed on our
"Cautionary Statements" filed as Exhibit 99.1 to form 10-Q for the quarter ended
December 31, 2000.
I-9
PART I - FINANCIAL INFORMATION
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no history of, and does not anticipate in the future,
investing in derivative financial instruments, derivative commodity instruments
or other such financial instruments. Transactions with international customers
are entered into in U.S. dollars with the exception of TheraPatch sales to
Canadian customers, precluding the need for foreign currency hedges. These
Canadian sales have not been material.
I-10
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Regular Annual Meeting of Shareholders of the Company was held
on April 17, 2001. The following matters were voted on by
Shareholders:
1. Approval of the sale of certain assets used in the Company's
conductive products division pursuant to the Asset Purchase
Agreement dated November 17, 2000, among the Company, The
Ludlow Company LP and Sherwood Services AG.
2. The election of six directors to serve on the Board of
Directors for a term of one year and until their successors
are duly elected and qualified.
3. The ratification of the appointment of Grant Thornton LLP as
the Company's independent auditor for the Company's current
fiscal year.
The results of the voting on these matters were as follows:
1. Approval of the sale of certain assets used in the Company's
conductive products division pursuant to the Asset Purchase
Agreement dated November 17, 2000, among the Company, The
Ludlow Company LP and Sherwood Services AG:
For Against Abstain Non-Vote Total
--------- ------- ------- -------- ------
2,353,375 33,173 9,564 1,191,852 3,587,964
2. Board of Directors:
Withhold
For Authority Total
--- --------- -----
Lee M. Berlin 3,537,564 50,400 3,587,964
Alan C. Hymes, M.D. 3,537,564 50,400 3,587,964
Bert J. McKasy 3,537,564 50,400 3,587,964
Marilyn K. Speedie, Ph.D. 3,537,564 50,400 3,587,964
Donald C. Wegmiller 3,537,564 50,400 3,587,964
Rodney A. Young 3,533,611 54,353 3,587,964
II-1
3. Appointment of Grant Thornton LLP as independent auditor for
the Company:
For Against Abstain Non-Vote Total
--------- ------- ------- -------- ------
3,525,689 20,340 41,935 - 3,587,964
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Item No. Item Method of Filing
-------- ----------------- ----------------
10.1 Asset Purchase Agreement dated
March 13, 2001 by and among The
National Medical Products Co. Ltd.
and LecTec Corporation. Filed herewith
(b) REPORTS ON FORM 8-K
On March 21, 2001 the Company filed a report on Form 8-K in
connection with the signing of an Asset Purchase Agreement
dated March 13, 2001 by and among The National Medical
Products Co. Ltd. and LecTec Corporation.
II-2
SIGNATURES
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.
LECTEC CORPORATION
Date May 15, 2001 /s/ Rodney A. Young
------------ ------------------------------------
Rodney A. Young, Chief Executive
Officer & President
Date May 15, 2001 /s/ Douglas J. Nesbit
------------ --------------------------------------
Douglas J. Nesbit, Chief Financial
Officer & Secretary
(Principal Financial Officer)
II-3
EXHIBIT INDEX
Exhibits
- --------
10.1 Asset Purchase Agreement dated March 13, 2001 by and among The
National Medical Products Co. Ltd., and LecTec Corporation.
II-4