UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM _______________ to______________
Commission file number: 0-16159
LECTEC CORPORATION
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(Exact name of small business issuer as specified in its charter)
Minnesota 41-1301878
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5610 Lincoln Drive, Edina, Minnesota 55436
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(Address of principal executive offices) (Zip Code)
(952) 933-2291
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed from last
report)
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 [X] No [ ]
Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of shares outstanding of the issuer's common stock as of May 12, 2006
was 4,148,998 shares.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
LECTEC CORPORATION
REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
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 or Plan of Operation............................. I-7
Item 3. Controls and Procedures............................................................... I-9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... II-1
Item 2. Unregistered Sales of Equity 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-1
Item 6. Exhibits.............................................................................. II-1
Signature Page........................................................................ II-2
FORWARD-LOOKING STATEMENTS
From time to time, in reports filed with the Securities and Exchange
Commission (including this Form 10-QSB), 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 Company's dependence on
royalty payments from Novartis Consumer Health, Inc. ("Novartis") and on key
personnel, the success or failure of any attempt by the Company to protect or
enforce its patents, the issuance of new accounting pronouncements, the
availability of opportunities for licensing agreements related to patents that
the Company holds, limitations on market expansion opportunities, and other
risks and uncertainties as described in the "Cautionary Statements" filed as
Exhibit 99.01 to Form 10-KSB for the year ended December 31, 2005.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL STATEMENTS AND NOTES TO CONDENSED FINANCIAL
STATEMENTS
LECTEC CORPORATION
CONDENSED BALANCE SHEETS
March 31, December 31,
2006 2005
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,430,446 $ 1,310,578
Royalty receivable 89,390 214,906
Prepaid expenses and other 55,095 66,735
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Total current assets 1,574,931 1,592,219
OTHER ASSETS:
Patent costs 83,912 90,651
Prepaid insurance - director and officer 131,815 141,955
------------ ------------
215,727 232,606
------------ ------------
$ 1,790,658 $ 1,824,825
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,448 $ 10,495
Accrued expenses 65,468 52,015
Discontinued operations 98,350 98,350
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Total current liabilities 178,266 160,860
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COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 15,000,000 shares authorized; 4,148,998 shares
issued and outstanding at March 31, 2006 and December 31, 2005 41,490 41,490
Additional contributed capital 11,847,536 11,847,536
Accumulated deficit (10,276,634) (10,225,061)
------------ ------------
1,612,392 1,663,965
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$ 1,790,658 $ 1,824,825
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
I-1
LECTEC CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2006 2005
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CONTINUING OPERATIONS:
Revenue - royalty and licensing income $ 92,277 $ 81,296
Operating expenses 143,850 459,607
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Loss from continuing operations (51,573) (378,311)
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DISCONTINUED OPERATIONS:
Loss from discontinued operations - (209,936)
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Net loss $ (51,573) $ (588,247)
============ ============
Weighted average common shares outstanding:
Basic and diluted 4,148,998 4,089,399
Loss per share:
Basic and diluted -
Continuing operations $ (0.01) $ (0.09)
Discontinued operations - (0.05)
------------ ------------
Total $ (0.01) $ (0.14)
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
I-2
LECTEC CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months ended March 31,
2006 2005
------------ ------------
Revised (1)
Cash flows from operating activities:
Net loss $ (51,573) $ (588,247)
Discontinued operations, net of tax - 209,936
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Loss from continuing operations, net of tax (51,573) (378,311)
Adjustments to reconcile net loss from continuing operations to net
cash provided by (used in) operating activities:
Compensation expense related to stock options - 53,200
Amortization 6,739 4,422
Changes in operating assets and liabilities of continuing operations:
Royalty receivable 125,516 (81,296)
Prepaid expenses and other 21,780 50,932
Accounts payable 3,953 29,086
Accrued expenses 13,453 (140,161)
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Net cash provided by (used in) operating activities from
continuing operations 119,868 (462,128)
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Cash flows from financing activities from continuing operations:
Payment of cash dividend - (246,824)
Proceeds from exercises of stock options - 6,447
Repayment of long-term obligations - (1,233)
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Net cash used in financing activities from
continuing operations - (241,610)
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Discontinued operations:
Used in operating activities - (131,616)
Provided by investing activities - 64,652
Provided by financing activities - 82,970
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Net cash provided by discontinued operations - 16,006
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Net increase (decrease) in cash and cash equivalents 119,868 (687,732)
Cash and cash equivalents - beginning of period 1,310,578 2,239,318
------------ ------------
Cash and cash equivalents - end of period $ 1,430,446 $ 1,551,586
============ ============
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(1) The Company revised the statement of cash flows for the quarter ended
March 31, 2005 to present cash flows from discontinued operations for each
of the operating, investing and financing activities. Previously, the
components were not broken out separately.
The accompanying notes are an integral part of these condensed financial
statements.
I-3
LECTEC CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(UNAUDITED)
(1) GENERAL
The accompanying condensed financial statements include the accounts of
LecTec Corporation (the "Company") as of March 31, 2006 and December 31, 2005
and for the three month periods ended March 31, 2006 and 2005. 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 the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2005. 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 full year.
(2) BUSINESS SUMMARY AND CRITICAL ACCOUNTING POLICIES
BUSINESS SUMMARY
The Company is an intellectual property licensing and holding company. The
Company receives royalties and licensing fees from licensing agreements
pertaining to the Company's patents. The Company has one licensing agreement
("Novartis Agreement" or "Agreement") with Novartis, which pays royalties to the
Company from time to time (usually quarterly), based upon a percentage of
Novartis net sales of licensed products. Previously, the Company was a contract
manufacturer of hydrogel topical patches which were sold to major pharmaceutical
customers until the Company ceased its manufacturing operations in December
2004. See the discussion under "Novartis Licensing and Supply Agreement" in Note
5 of Notes to Condensed Financial Statements for a description of the agreement
with Novartis.
CRITICAL ACCOUNTING POLICIES
Some of the Company's most critical accounting policies include:
Revenue Recognition. Royalty and licensing income is recognized when
earned under the terms of the agreements with customers and collection is
reasonably assured.
Patent Costs. The carrying value of patent costs is reviewed periodically
or when factors indicating impairment are present. Any impairment loss is
measured as the amount by which the carrying value of the assets exceeds the
fair value of the assets. The Company believes no impairment exists at March 31,
2006.
Royalty Receivable (Continuing Operations). The Company grants credit to
its only customer, Novartis, in the normal course of business and under the
terms contained in the Agreement. Pursuant to the Agreement, Novartis pays
royalty income within the terms defined in the Agreement. At March 31, 2006,
the Company had an outstanding royalty receivable with Novartis of $89,390.
Management believes, based upon past experience, that all amounts outstanding
are fully collectible.
Accounting for Discontinued Operations. The Company exited from
manufacturing operations of topical patches and sold off all of its
manufacturing assets related to the production of patches to its only remaining
customer, Novartis, as of December 31, 2004. The assets related to the Company's
manufacturing operations have been classified as discontinued operations due to
the sale of the manufacturing assets by December 31, 2004. The operations and
cash flows of the contract manufacturing operations has been eliminated from the
ongoing operations as a result of the sale transaction. The Company does not
have any significant involvement in the operations of the previously sold
manufacturing operations. It is therefore management's position that the
conditions for reporting the Company's balance sheets, statements of operations,
and cash flows under the requirements of Statement of Financial Accounting
Standard ("SFAS") No. 144 as discontinued operations are appropriate.
The Company used reasonable judgment combined with quantitative analysis
in determining the amounts of assets, liabilities, revenues and expenses that
are allocated between continuing operations and discontinued operations.
I-4
Stock-Based Compensation. In January 2005, the Company extended the
exercise period for options held by two former executive officers of the Company
and one former employee by two years from the date of their respective
termination dates (but not longer than the options normal expiration date, if
earlier). There were 222,667 options with a weighted average exercise price of
$0.83 per share subject to this modification to the exercise period. Normally
these options would have expired 90 days from the employee's termination date.
Because of this modification to the exercise period of these options for these
former employees, the Company recorded compensation expense of $99,957 for the
first quarter ended March 31, 2005.
Prior to January 31, 2006, the Company utilized the intrinsic value method
of accounting for stock based employee compensation plans. All options granted
had an exercise price equal to the market value of the underlying common stock
on the date of grant, and no compensation cost related to stock option grants
was reflected in the net loss for the three months ended March 31, 2006 and 2005
Had the Company applied the fair value recognition provisions of Statement
of Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock Based
Compensation", the March 31, 2005 net loss and net loss per common share would
not be materially different.
In December 2004, the Financial Accounting Standards Board issued SFAS No.
123(R), "Share-Based Payment," which requires that compensation cost relating to
share-based payment transactions (including the cost of all employee stock
options) be recognized in the financial statements. That cost is measured based
on the estimated fair value of the equity or liability instruments issued. SFAS
No. 123(R) covers a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. SFAS No. 123(R) replaces
SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees". The Company was required to apply SFAS No. 123(R) effective
January 1, 2006. Thus, the Company's financial statements will reflect the cost
for (a) all share-based compensation arrangements granted after December 31,
2005 and for any such arrangements that are modified, cancelled, or repurchased
after that date, and (b) the portion of previous share-based awards for which
the requisite service had not been rendered as of that date, based on the grant
date estimated fair value.
All of the Company's options were fully vested as of December 31, 2005 and
there were no new grants, or modifications to existing grants, during the three
months ended March 31, 2006. Therefore, the adoption of SFAS No, 123(R) had no
impact on the Company's financial statements.
(3) NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding. Diluted net loss per
common share is computed by dividing net loss by the weighted average number of
common shares outstanding and common share equivalents related to stock options
and warrants when dilutive. Common stock options and warrants to purchase
471,250 and 632,750 shares of common stock with a weighted average exercise
price of $2.02 and $2.00 were outstanding as of March 31, 2006 and 2005,
respectively. Because the Company had a loss from continuing operations during
the three months ended March 31, 2006 and 2005, those shares were excluded from
the net loss per share computations because they were antidilutive.
(4) INCOME TAXES
The provision for income tax benefits for the three months ended March 31,
2006 and 2005, was offset principally by a valuation allowance for deferred
taxes. No federal or state income tax benefit was provided for the three months
ended March 31, 2006 and 2005,as the realization of such benefits is not
reasonably assured.
(5) NOVARTIS LICENSING AND SUPPLY AGREEMENT
On July 19, 2004, the Company entered into the Novartis Agreement,
effective as of January 1, 2004. The Agreement replaced the Company's prior
licensing and supply agreement with Novartis dated May 8, 2002. The Agreement
required the Company to manufacture, sell and deliver to Novartis vapor patches
for sale to the pediatric
I-5
market in the United States, Canada and Mexico. In order to provide the Company
with working capital funds necessary to enable it to manufacture and deliver
vapor patches to Novartis in accordance with the Agreement, Novartis advanced up
to $2,000,000 for use by the Company to pay current accounts payable and
expenses incurred exclusively for the manufacture and delivery of vapor patches.
In consideration of any advanced funds, the Company executed and delivered to
Novartis a promissory note of $2,000,000 and a security agreement. Under the
security agreement, the Company pledged substantially all of its assets. The
note was repaid by the Company by the delivery to Novartis of vapor patches
under the Agreement. All amounts owed were repaid as of December 31, 2004. Under
the Agreement, Novartis had the option until March 31, 2005, to extend the use
of vapor patches to the adult cough/cold category in the United States, Canada
and Mexico at no additional cost and under the same terms and conditions as set
forth in the Agreement. On March 31, 2005, Novartis notified the Company of its
intention to enter the adult market pursuant to the Agreement.
Under the Agreement, the Company granted Novartis an exclusive license
(the "License") to all of the intellectual property of the Company to the extent
that it is used or useful in the production of the vapor patches being supplied
under the Agreement for a fee of $1,065,000, which was paid to the Company by
Novartis as follows: (1) release of $250,000 in promissory note debt as of the
date of the Agreement, (2) payment of $407,500 in cash in July 2004, and (3)
payment of $407,500 in cash in September 2004. The License began on July 19,
2004, and will continue for the duration of any patents included in the licensed
intellectual property and, with respect to all other elements of the licensed
intellectual property, for the maximum duration permitted under applicable law
(14 years). Upon the expiration of the patents included in the licensed
intellectual property, Novartis will have a non-revocable, perpetual, fully
paid-up license to the intellectual property used or useful in the production of
vapor patches for the pediatric market and the adult cough/cold market.
Commencing on January 1, 2005, Novartis was required by the Agreement to pay
royalties, at an agreed upon percentage, to the Company, based upon the net
semi-annual or quarterly sales of vapor patches by Novartis for each year the
License is in effect.
The supply portion of the Agreement continued in effect until February 5,
2005, except that the provisions relating to the License will continue in effect
until the conclusion of the term of the License. The Company may not assign or
otherwise transfer the Agreement (other than to an affiliate) without the prior
written consent of Novartis, except that the Company may assign the Agreement in
connection with the transfer or sale of all or substantially all of its assets
or business or its merger or consolidation with another company, so long as (1)
such acquirer or successor in interest agrees in writing to be bound by all
conditions of the Agreement, and (2) the Company gives Novartis written notice
of any such assignment and 15 days to object. Novartis may object to an
assignment only if such acquirer or successor is a direct competitor of
Novartis.
(6) DISCONTINUED OPERATIONS
There were no assets of discontinued operations at March 31, 2006 or
December 31, 2005. However, the Company has immaterial fully depreciated assets
on hand that may be sold from time to time. Liabilities of discontinued
operations at March 31, 2006 and December 31, 2005, consisted of a $98,350
reserve for sales returns and credits related to previous sales to customers of
products that the Company produced before the Company ceased its manufacturing
operations. Included in the loss from discontinued operations for the three
months ended March 31, 2005 was a $64,622 gain on the sale of fully depreciated
property and equipment related to discontinued operations.
I-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
In July 2004, management determined that the Company would wind down and
cease its contract manufacturing operations by December 31, 2004. Because of
this, the past and future financial results related to contract manufacturing
have been treated as discontinued operations for financial reporting purposes.
Continuing operations consist of operations related to the surviving
intellectual property licensing and holding company. The Company accounts for
its discontinued operations under the provisions of SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". Accordingly, results of
operations and the related charges for discontinued operations have been
classified as "Loss from discontinued operations" in the accompanying Condensed
Statements of Operations. Assets and liabilities of the discontinued operations
have been classified and reflected on the accompanying Balance Sheets as
"Discontinued operations".
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
RESULTS OF CONTINUING OPERATIONS
The Company recorded royalty income of $92,277 during the first quarter
ended March 31, 2006, compared to royalty income of $81,296 for the same quarter
of 2005. The 13.5% improvement in royalty income for the quarter ended March 31,
2006 over the comparable quarter of 2005 is attributable to increased sales by
Novartis of licensed products under the Novartis Agreement.
The Company recorded a net loss from continuing operations of $(51,573),
or $(0.01) per basic and diluted share, for the first quarter of 2006 compared
to a net loss from continuing operations of $(378,311), or $(0.09) per basic and
diluted share, for the first quarter of 2005. The decrease in net loss from
continuing operations for the first quarter of 2006 compared to the same quarter
of 2005, was primarily due to a reduction in general operating expenses
including rent, insurance, labor, utilities and administrative costs, in
conjunction with an increase in royalty income over the comparable quarter of
2005, from the Novartis Agreement.
RESULTS OF DISCONTINUED OPERATIONS
There was no loss from discontinued operations for the quarter ended March
31, 2006, compared to a loss from discontinued operations of $(209,936) or
$(0.05) per basic and diluted share for the same period in 2005. There were no
sales from discontinued operations for the first quarter of 2006 or 2005. The
loss from discontinued operations for the first quarter of 2005 was attributable
to the wind down of manufacturing operations that is discussed in Note 5 of
Notes to Condensed Financial Statements.
NET RESULTS OF OPERATIONS
The net loss for the three months ended March 31, 2006 was $(51,573), or
$(0.01) per basic and diluted share, compared to a net loss of $(588,247), or
$(0.14) per basic and diluted share for the three months ended March 31, 2005.
The overall improvement in results of operations for the quarter ended March 31,
2006 over the same period in the prior year is primarily due to the reasons
stated above.
INCOME TAXES
The provision for income tax benefits for the first quarter of 2006 and
2005 was offset principally by a valuation allowance for deferred taxes. No
federal or state income tax benefit was provided for the first quarter of 2006
and 2005, as the realization of such benefits is not reasonably assured.
EFFECT OF INFLATION
Inflation has not had a significant impact on the Company's operations or
cash flow.
I-7
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $119,868 during the first three
months of 2006 to $1,430,446 at March 31, 2006, from cash and cash equivalents
of $1,310,578 at December 31, 2005. The increase in cash and cash equivalents
during the first three months of 2006 from the end of 2005, was due to cash
generated from continuing operations, primarily related to cash received under
the Novartis Agreement, coupled with a general reduction in operating expenses
related to continuing operations.
During the first three months of 2006, the Company collected $217,793 in
royalty income under the Novartis Agreement, compared to royalty income
collected of $176,283 during the comparable quarter of 2005, which was related
to fourth quarter sales by Novartis of products covered under the Agreement for
2005 and 2004, respectively. There were no material commitments for capital
expenditures at March 31, 2006.
The Company had working capital of $1,396,665 and a current ratio of 8.83%
at March 31, 2006 compared to working capital of $1,431,359 and a current ratio
of 9.90% at December 31, 2005. The decrease in working capital of $34,694 during
the first three months of 2006 was primarily due to the net loss of the Company
during the first quarter ended March 31, 2006.
Shareholders' equity decreased to $1,612,392 at March 31, 2006 from
$1,663,965 at December 31, 2005, due to the net loss for the three months ended
March 31, 2006.
The Company believes its existing cash and cash equivalents will be
sufficient to fund continuing operations through 2006. However, cash and cash
equivalents may not be sufficient to fund continuing operations beyond 2006. The
Company's working capital requirements are dependent upon adequate levels of
royalty and licensing income to fund continuing operations. Royalty income is
uncertain because it is subject to factors that the Company cannot control. Such
factors include, but are not limited to, seasonality of the product, marketing
efforts by Novartis, markets Novartis enters the product into, and other factors
which can cause fluctuations in the amount of royalty income the Company earns.
There can be no assurance because of these uncertainties that future royalty
income will be sufficient to fund continuing operations. The royalty income of
$92,277 recorded during the first quarter ended March 31, 2006 was based upon
information provided by Novartis. There can be no assurance that this result
will be indicative of results for the full year. Furthermore, future royalties
and licensing income the Company anticipates earning is dependent on the success
of the product in the marketplace by Novartis and other firms or individuals
with whom the Company may enter into licensing agreements. Additionally, the
Company does not presently have any other financing resources in place from
which it can borrow or obtain additional working capital.
CRITICAL ACCOUNTING POLICIES
Management believes that the Company has not adopted any critical
accounting policies which, if changed, would result in a material change in
financial estimates, financial condition, results of operation or cash flows for
the three months ended March 31, 2006 and 2005. The critical accounting policies
appear in Note 2 of Notes to Consolidated Financial Statements in this Form
10-QSB.
I-8
ITEM 3 - CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
have evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based upon this
evaluation, the principal executive officer and principal financial officer have
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective.
During the three months ended March 31, 2006, there were no changes in the
Company's internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
I-9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
On May 9, 2006, the Company entered into a sublease agreement (the
"Sublease Agreement") with The Furniture Source (the "Sublessee")
relating to approximately 7,000 square feet in the Company's building in
Edina, Minnesota (the "Subleased Space"). Pursuant to the Sublease
Agreement, the Company agreed to sublet the Subleased Space to the
Sublessee for storage purposes from May 15, 2006 through April 30, 2008
for a monthly fee of $3,000. In addition, the Sublessee paid the Company a
refundable security deposit of $4,500. If the Sublessee stays in the
Subleased Space beyond April 30, 2008, then the monthly rent will increase
to $4,500 per month and all other terms of the Sublease Agreement will
remain the same. Under the terms of the Sublease Agreement, the Sublessee
may not assign its interest in the Sublease Agreement. A copy of the
Sublease Agreement is attached as Exhibit 10.01 to this Form 10-QSB.
ITEM 6 - EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------------------
3.01 Articles of Incorporation of LecTec Corporation, as amended
(Incorporated herein by reference to the Company's Form S-1
Registration Statement (file number 33-9774C) filed on October
31, 1986 and amended on December 12, 1986).
3.02 Bylaws of LecTec Corporation (Incorporated herein by reference
to the Company's Form S-1 Registration Statement (file number
33-9774C) filed on October 31, 1986 and amended on December
12, 1986).
10.01 Sub-Lease Agreement By and Between LecTec Corporation and The
Furniture Source executed on May 10, 2006, filed herewith.
31.01 Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.02 Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.01 Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
99.01 Cautionary Statements (Incorporated herein by reference to
Exhibit 99.01 to the Company's Report on Form 10-KSB for the
fiscal year ended December 31, 2005).
II-1
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.
LECTEC CORPORATION
Date May 12, 2006 By /s/ Alan C. Hymes, M.D.
---------------------------
Alan C. Hymes, M.D.
Chief Executive Officer & Director
(principal financial officer and duly
authorized officer)
II-2
EXHIBIT INDEX
Exhibit No. Description
- ----------- -------------------------------------------------------------
3.01 Articles of Incorporation of LecTec Corporation, as amended
(Incorporated herein by reference to the Company's Form S-1
Registration Statement (file number 33-9774C) filed on October
31, 1986 and amended on December 12, 1986).
3.02 Bylaws of LecTec Corporation (Incorporated herein by reference
to the Company's Form S-1 Registration Statement (file number
33-9774C) filed on October 31, 1986 and amended on December
12, 1986).
10.01 Sub-Lease Agreement By and Between LecTec Corporation and The
Furniture Source executed on May 10, 2006, filed herewith.
31.01 Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.02 Certification of Principle Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.01 Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
99.01 Cautionary Statements (Incorporated herein by reference to
Exhibit 99.01 to the Company's Report on Form 10-KSB for the
fiscal year ended December 31, 2005).