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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 April 30, 1996.
/ / 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 1-8366
POLYDEX PHARMACEUTICALS LIMITED
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(Exact Name of Registrant as specified in its charter)
BAHAMAS NONE
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
421 Comstock Road, Scarborough, Ontario, Canada M1L 2H5
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(Address of principal executive offices)
Registrant's telephone number, including area code (416) 755-2231
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 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Common Shares 28,052,182
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(Title of Class) (Outstanding at June 7, 1996)
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POLYDEX PHARMACEUTICALS LIMITED
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS
- - ------ (UNAUDITED)
CONSOLIDATED CONDENSED BALANCE SHEETS
April 30, 1996 and January 31, 1996..................................................2
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended April 30, 1996 and 1995...........................................4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Months Ended April 30, 1996 and 1995...........................................5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended April 30, 1996 and 1995...........................................6
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
- - ------ OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS...........................................................................7
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
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Signatures..........................................................................10
Exhibit Index.......................................................................11
Exhibit 27 - Financial Data Schedule
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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES
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Consolidated Condensed Balance Sheets (Unaudited)
(Expressed in United States dollars)
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April 30 January 31
1996 1996
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ASSETS
CURRENT ASSETS
Cash $ 702 $ 12,321
Trade accounts receivable, net of
allowance 852,830 727,135
Interest receivable 4,905 --
Inventories:
Finished goods 779,043 802,812
Work in process 50,210 98,281
Raw materials 519,566 506,862
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1,348,819 1,407,955
Prepaid expenses and other current
assets 69,735 64,394
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TOTAL CURRENT ASSETS ......... 2,276,991 2,211,805
Property, plant and equipment
(at cost)
Land and buildings 2,324,052 2,320,588
Machinery and equipment 4,754,494 4,689,083
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7,078,546 7,009,671
Less allowances for depreciation and
amortization (3,631,366) (3,506,611)
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3,447,180 3,503,060
OTHER ASSETS
Patents and animal drug 967,112 991,731
applications at cost, net of
accumulated amortization
Investment in Novatek International, 400,000 400,000
Inc.
Due from affiliated companies 838,911 838,911
Goodwill, net of accumulated 31,521 38,396
amortization
Other 78,842 81,087
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TOTAL ASSETS ..................... $ 8,040,557 $ 8,064,990
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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES
------------------------------------------------
Consolidated Condensed Balance Sheets (Unaudited)
(Expressed in United States dollars)
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April 30 January 31
1996 1996
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness $ 7,630 $ --
Accounts payable 1,128,835 1,307,588
Accrued liabilities 658,499 582,612
Current portion of long-term debt 87,000 78,097
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TOTAL CURRENT LIABILITIES $ 1,881,964 $ 1,968,297
Long-term debt 538,775 558,829
Due to shareholders 734,214 648,792
Due to affiliated companies 425,420 425,420
Minority interest 22,935 22,935
SHAREHOLDER'S EQUITY
Capital stock:
Authorized:
1,000,000 A preferred shares
of $0.01 each
8,994,000 B preferred shares
of $0.00167 each
40,000,000 common shares of
$0.00167 each
Issued and outstanding:
8,994,000 B preferred shares 15,010 15,010
28,052,182 common shares
(January 31, 1996 -
28,052,182) of which 82,400
are held in treasury 46,625 46,625
Contributed surplus 22,583,653 22,583,653
Deficit (17,693,402) (17,681,720)
Currency translation adjustments (514,637) (522,851)
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TOTAL SHAREHOLDERS' EQUITY 4,437,249 4,440,717
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TOTAL LIABILITIES & SHAREHOLDERS' $ 8,040,557 $ 8,064,990
EQUITY ============ ============
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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES
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Consolidated Statements of Operations (Unaudited)
(Expressed in United States dollars)
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Quarter ended Quarter ended
April 30 April 30
1996 1995
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Sales $ 2,246,960 $ 2,112,772
Cost of products sold, exclusive of
depreciation reported below 1,676,753 1,777,734
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570,207 335,038
Expenses:
Selling and promotion 27,774 62,235
General and administrative 316,743 250,044
Depreciation and amortization 143,211 121,619
Interest expense 39,169 25,255
Research and development 60,834 29,384
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587,731 488,537
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Loss from operations (17,524) (153,499)
Other income and expenses:
Interest and other 5,842 37,928
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Profit (loss) before the undernoted (11,682) (115,571)
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Provision for income taxes -- --
Minority interest in loss -- --
Profit(loss) for the period $ (11,682) $ (115,571)
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Per share information:
Profit (loss) per common share:
For the year $ (0.00) $ (0.00)
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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES
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Consolidated Statements of Shareholders' Equity (Unaudited)
(Expressed in United States dollars)
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<CAPTION>
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Quarter ended Quarter ended
April 30 April 30
1996 1995
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PREFERRED SHARES
Balance, beginning of period $ 15,010 $ 4,990
Private placement of preferred shares -- --
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Balance, end of period $ 15,010 $ 4,990
COMMON SHARES
Balance, beginning of period $ 46,625 $ 46,609
Private placement of common shares -- --
------------ ------------
Balance, end of period $ 46,625 $ 46,609
CONTRIBUTED SURPLUS
Balance, beginning of period $ 22,583,653 $ 22,573,669
Private placement of shares $ -- $ --
------------ ------------
Balance, end of period $ 22,583,653 $ 22,573,669
DEFICIT
Balance, beginning of period $(17,681,720) $(16,516,186)
Net loss for the period (11,682) (115,571)
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Balance, end of period $(17,693,402) $(16,631,757)
CURRENCY TRANSLATION ADJUSTMENTS
Balance, beginning of period $ (522,851) $ (463,689)
Currency translation adjustment for the
period 8,214 43,458
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Balance, end of period $ (514,637) $ (420,231)
</TABLE>
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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES
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Consolidated Statements of Cash Flows (Unaudited)
(Expressed in United States dollars)
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Quarter ended Quarter ended
April 30 April 30
1996 1995
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Cash provided by (used in):
OPERATING ACTIVITIES
Profit (loss) for the period $ (11,682) $ (115,571)
Add (deduct) items not affecting cash:
Depreciation and amortization 143,211 121,619
Change in non-cash operating working
capital (179,671) (255,047)
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(38,142) (248,999)
INVESTING ACTIVITIES
Additions to property, plant and
equipment (38,426) (23,348)
Additions to patents (1,100) --
Additions to validation costs -- 1,426
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(39,526) (21,922)
FINANCING ACTIVITIES
Increase in (repayment of) loan payable -- 134,511
Repayment of long-term debt (11,151) (8,100)
Increase in (repayment of) due to
shareholders 85,422 --
Decrease (increase) in due from
shareholders -- 13,857
Decrease (increase) in due from -- (51,978)
affiliated companies
Increase (decrease) in bank indebtedness 7,630 65,254
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81,901 153,544
Effect of exchange rate changes on cash (15,852) 7,404
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Increase (decrease) in cash position (11,619) (109,973)
Cash position, beginning of period 12,321 135,195
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Cash position, end of period $ 702 $ 25,222
============ ============
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
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(a) AND (b) LIQUIDITY AND CAPITAL RESOURCES
The Registrant in the first quarter generated a negative cash flow from
operations of $38,142 compared to last year's first quarter negative cash flow
from operations of $248,999. This improvement is primarily due to the
significantly improved results at both Dextran Products Limited (Dextran) and
Veterinary Laboratories Inc. (Vet Labs). Dextran realized an increase in net
profit of $99,747 over the first quarter last year, while Vet Labs' first
quarter loss was reduced by $79,450 compared to last year. The remainder of the
improvement in cash flow is primarily attributable to the reduction in
inventory levels at both operating companies.
Accounts receivable increased from $727,135 to $852,830 during the first quarter
this year as a result of improved sales by Dextran.
Positive operational cash flows are anticipated in the future, but should the
need for further cash infusions arise, the Registrant believes that continued
loans and/or capital contributions from principal shareholders will meet these
requirements.
(c) RESULTS OF OPERATIONS
During the fiscal quarter ended April 30, 1996, the Registrant's pre-tax income
from operations prior to other income, research and development, interest
charges and depreciation amounted to $225,690, as compared to a similarly
calculated pre-tax income of $22,759 for the same period last year. This
improvement in results is primarily due to a large increase in sales and
profitability at Dextran and a significant reduction in losses at Vet Labs, as
described below.
Sales volume increased from $2,112,772 in the first quarter last year to
$2,246,960 this quarter. This 6% increase in sales is completely attributable to
the increases at Dextran. Dextran enjoyed a sales increase of 38% over the first
quarter last year.
Gross margins improved from 16% in the first quarter of last year to 25% for the
same period this year due to higher profit margins experienced by both Dextran
and Vet Labs. Dextran's gross margin increased from 31% to 37% in the first
quarter compared to the same period last year, while the gross margin at Vet
Labs increased from 6% to 13%.
The decrease in selling and promotion expenses relative to first quarter last
year is due in part to terminating the services of an external promotion firm.
This function is now performed internally.
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General and administration expenses have increased relative to first quarter
last year due to several factors. A new position, technical director, was
created in third quarter last year to oversee the operations of Vet Labs, which
resulted in an increase in salaries. Dextran also experienced general increases
due to purchasing their plant, which increased insurance costs. Dextran also
experienced increases in export insurance due in part to increased foreign
sales.
Interest expense has increased from first quarter last year due to Dextran's
purchase of their plant and the related mortgage payable and the increase in the
shareholder loan accounts.
Research and development expenses have increased strictly due to the funding of
the cystic fibrosis project being conducted at University of British Columbia.
Comments on the Registrant's assets and liabilities have already been made in
the above section on Liquidity and Capital Resources.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normally recurring accruals) considered necessary for a fair presentation
have been included.
Operating results for the first quarter ended April 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended January 31,
1997. For further information, refer to the consolidated statements and
footnotes thereto included in the Registrant's annual report on Form 10-K for
the year ended January 31, 1996.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-k
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
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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.
Date: June 14, 1996
POLYDEX PHARMACEUTICALS LIMITED
(Registrant)
By /s/ George Usher
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George Usher, President
(Chief Operating Officer)
By /s/ Sharon Wardlaw
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Sharon Wardlaw, Treasurer
(Chief Financial Officer)
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EXHIBIT INDEX
Description
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Financial Data Schedule
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM POLYDEX
PHARMACEUTICALS LIMITED AND SUBSIDIARIES AT APRIL 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 702
<SECURITIES> 0
<RECEIVABLES> 880,307
<ALLOWANCES> 27,477
<INVENTORY> 1,348,819
<CURRENT-ASSETS> 2,276,991
<PP&E> 7,078,546
<DEPRECIATION> 3,631,366
<TOTAL-ASSETS> 8,040,557
<CURRENT-LIABILITIES> 1,881,964
<BONDS> 538,775
<COMMON> 46,625
0
15,010
<OTHER-SE> 22,583,653
<TOTAL-LIABILITY-AND-EQUITY> 8,040,557
<SALES> 2,246,960
<TOTAL-REVENUES> 2,246,960
<CGS> 1,676,753
<TOTAL-COSTS> 1,676,753
<OTHER-EXPENSES> 587,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,169
<INCOME-PRETAX> (11,682)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,682)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,682)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
