<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File No.
June 30, 1995 0-16124
VIPONT ROYALTY INCOME FUND, LTD.
(Exact name of registrant as specified in its charter)
Colorado 84-10710523
- --------------------------- ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
2579 Midpoint Drive
Fort Collins, Colorado 80525
- ------------------------ ----------------------
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone No., including Area Code: (970) 482-5868
Limited Partnership Interests
(Title of Class)
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
------ -------
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: NOT APPLICABLE.
<PAGE> 2
VIPONT ROYALTY INCOME FUND, LTD.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ --- $ ---
------------------- -----------------
TOTAL $ --- $ ---
=================== =================
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable - general partner $ 148,424 $ 131,900
------------------- -----------------
Total current liabilities 148,424 131,900
------------------- -----------------
PARTNERS' EQUITY (DEFICIT)
General partner 102,465 102,465
Limited partners (5,175 units
authorized, issued and outstanding) 8,901,000 8,901,000
Accumulated deficit (9,151,889) (9,135,365)
------------------- -----------------
Total partners' deficit (148,424) (131,900)
------------------- -----------------
TOTAL $ --- $ ---
=================== ==================
</TABLE>
See notes to financial statements.
2
<PAGE> 3
VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
1995 AND 1994 (Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
EXPENSES
General and administrative expenses $ 10,204 $ 6,606
--------- -----------
NET LOSS $(10,204) $ (6,606)
======== ===========
NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (1.95) $ (1.26)
======== ===========
</TABLE>
3
<PAGE> 4
VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
EXPENSES
General and administrative expenses $ 16,524 $ 18,147
--------- -----------
NET LOSS $ (16,524) $ (18,147)
========= ===========
NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (3.16) $ (3.47)
========= ===========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner 1% Partners 99% Total
---------- ------------ ----------
<S> <C> <C> <C>
BALANCE, December 31, 1994 $ 11,113 $ (143,013) $ (131,900)
Net Loss (165) (16,359) (16,524)
-------- ---------- ----------
BALANCE, June 30, 1995 $ 10,948 $ (159,372) $ (148,424)
======== ========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (16,524) $ (18,147)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in operating assets and liabilities:
Accounts payable - general partner 16,524 18,147
--------- ---------
Cash used in operating activities --- ---
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS --- ---
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD --- ---
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ --- $ ---
========= =========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
VIPONT ROYALTY INCOME FUND, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements of Vipont Royalty Income
Fund, Ltd. (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
These financial statements should be read in conjunction with the audited
financial statements and footnotes thereto for the year ended December 31,
1994, filed with the Securities and Exchange Commission in the Partnership's
Annual Report on Form 10-K.
NOTE 2. RELATED PARTY TRANSACTIONS
A Special Meeting of the limited partners of the Partnership was held on
October 14, 1992, to consider a proposal (the "Proposal") to authorize Atrix
Laboratories, Inc., the general partner of the Partnership (the "General
Partner"), to amend various documents between the Partnership and the General
Partner to permit the General Partner to share in certain royalties and
proceeds from the sale of rights related to a Perio Product. The Proposal was
approved by the limited partners at the Special Meeting held on October 14,
1992.
Prior to the amendment of the Partnership Documents, the General Partner
was not entitled to participate in royalties from the sale of the Perio
Product-Sanguinarine, other than from its General Partner's Interest in the
Partnership. As a result of the approval of the Proposal, and in consideration
for its funding of clarifying studies, the Phase III clinical studies and a New
Drug Application ("NDA") filing, if any, Atrix Laboratories, Inc., as General
Partner of the Partnership, is entitled to participate in royalties and
proceeds from the sale of rights related to a Perio Product containing
sanguinarine. Further, the Partnership will not be required to pay any of the
future costs for the development of a Perio Product containing sanguinarine, a
Perio Product containing doxycycline, or a Perio Product without an active
agent, or for filing for regulatory approval, including an NDA for the same.
The Proposal as approved, allows the General Partner to share in royalties
or proceeds from the sale of rights related to the Perio Product-Sanguinarine
and the Partnership to share in royalties or proceeds from the sale of rights
related to the Perio Product with or without an active agent, on a percentage
basis representing the ratio of the total costs, including but not limited to
all costs for testing, development and securing regulatory approval, if ever,
of the Perio Product with or without an active agent to the amount that each
party has contributed. In determining the Partnership's contribution, the
General Partner will credit the Partnership with $10,350,000, the gross amount
raised in the Partnership's initial public offering of Units.
7
<PAGE> 8
VIPONT ROYALTY INCOME FUND, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
The Partnership has ongoing general and administrative expenses related to
its status as a public partnership; for example, annual reports on Form 10-K
and quarterly reports on Form 10-Q. Further, the Partnership is required to
prepare tax returns and provide certain communications to the limited partners.
It is estimated that the cost of preparing, filing, and mailing the various
reports, including an annual audit, will be approximately $30,000 for the year
ending December 31, 1995. The General Partner has agreed to advance funds to
the Partnership to pay these expenses for the year ending December 31, 1995,
pursuant to Article 4 of the Partnership's Amended and Restated Agreement of
Limited Partnership. Such advances will only be due and payable, if ever,
from the Partnership's share of royalties and proceeds from the sale of rights
to the Perio Product.
The Partnership is required to pay the General Partner $12,000 annually for
management fees. The Partnership owed the General Partner $148,000 at June 30,
1995 for fees and expenses incurred on behalf of the Partnership.
8
<PAGE> 9
VIPONT ROYALTY INCOME FUND, LTD.
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1994
General and administrative expenses increased to $10,204 for the three
months ended June 30, 1995, from $6,606 during the three months ended June 30,
1994. These expenses included the General Partner's management fee of $1,000
per month and out-of-pocket administrative expenses of the Partnership
including accounting and legal fees associated with being a public partnership.
Net loss for the three months ended June 30, 1995, was $10,204 compared
with $6,606 for the three months ended June 30, 1994. The net loss is the
result of the Partnership's normal administration expenses related to being a
public partnership. The increase is related to higher expenditures for
accounting and legal fees in the current period as more administrative
activities were completed.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1994
General and administrative expenses decreased to $16,524 for the six months
ended June 30, 1995, from $18,147 during the six months ended June 30, 1994.
These expenses included the General Partner's management fee of $1,000 per
month and out-of-pocket administrative expenses of the Partnership including
accounting and legal fees associated with being a public partnership. The
decrease is related to fewer expenditures for accounting and legal fees in the
current period as fewer administrative activities were necessary.
Net loss for the six months ended June 30, 1995, was $16,524 compared with
$18,147 for the six months ended June 30, 1994. The net loss is the result of
the Partnership's normal administration expenses related to being a public
partnership.
9
<PAGE> 10
VIPONT ROYALTY INCOME FUND, LTD.
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Partnership had no cash or short-term investments.
The funding provided to the General Partner by the Partnership to develop and
test the Perio Product-Sanguinarine was exhausted prior to September 30, 1991.
The Partnership Documents were amended at a Special Meeting held on October 14,
1992, to allow the Partnership and the General Partner to share in royalties or
proceeds from the sale of rights related to the Perio Product. The Partnership
and the General Partner will share the royalties or proceeds related to the
Perio Product on a percentage basis, representing the ratio of the total costs,
including but not limited to all costs for testing, development, and securing
regulatory approval, if ever. Therefore, the Partnership is not required to
repay the General Partner funds previously advanced.
However, the Partnership has ongoing general and administrative expenses
related to its status as a public partnership; for example, annual reports on
Form 10-K and quarterly reports on Form 10-Q. Further, the Partnership is
required to prepare tax returns and provide certain communications to the
limited partners. It is estimated that the cost of preparing, filing, and
mailing the various reports, including an annual audit, will be approximately
$30,000 for the year ending December 31, 1995. The General Partner has agreed
to advance funds to the Partnership to pay these expenses for the year ending
December 31, 1995, pursuant to Article 4 of the Partnership's Amended and
Restated Agreement of Limited Partnership. Such advances will only be due and
payable, if ever, from the Partnership's share of royalties and/or proceeds
from the sale of rights to the Perio Product.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the period covered by this
report.
10
<PAGE> 11
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.
VIPONT ROYALTY INCOME FUND, LTD.
(Registrant)
By: ATRIX LABORATORIES, INC.
Its General Partner
August 1, 1995 By: /s/ John E. Urheim
-----------------------------------
Mr. John E. Urheim, Vice Chairman of the
Board of Directors and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ John E. Urheim Vice Chairman of the Board August 1, 1995
- ----------------------------------- of Directors and Chief
John E. Urheim Executive Officer of the
General Partner
/s/ Kimberly A. Marks Corporate Controller, August 1, 1995
- ----------------------------------- Assistant Secretary, and
Kimberly A. Marks Assistant Treasurer of the
General Partner
</TABLE>
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page
- ----------- ------------------- ----
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information from the Form 10-Q for the
six months ended June 30, 1995 and is qualified in its entirety to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 148,424
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (148,424)
<TOTAL-LIABILITY-AND-EQUITY> (148,424)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,204)
<EPS-PRIMARY> (3.16)
<EPS-DILUTED> (3.16)
</TABLE>
