<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.
March 31, 1995 0-16124
VIPONT ROYALTY INCOME FUND, LTD.
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(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)
(970) 482-5868
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(Registrant's telephone number including area code)
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
--- ---
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIPONT ROYALTY INCOME FUND, LTD.
BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------------ ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ --- $ ---
------------------- -----------------
TOTAL $ --- $ ---
=================== =================
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable - general partner $ 138,220 $ 131,900
------------------- -----------------
Total current liabilities 138,220 131,900
------------------- -----------------
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 (9,141,685) (9,135,365)
------------------- -----------------
Total partners' deficit (138,220) (131,900)
------------------- -----------------
TOTAL $ --- $ ---
=================== =================
</TABLE>
See notes to financial statements.
2
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VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
EXPENSES
General and administrative expenses $ 6,320 $ 11,541
---------- ------------
NET LOSS $ (6,320) $ (11,541)
========== ============
NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (1.21) $ (2.21)
===============================
</TABLE>
See notes to financial statements.
3
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VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 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 (63) (6,257) (6,320)
---------- ----------- -----------
BALANCE, March 31, 1995 $ 11,050 $ (149,270) $ (138,220)
========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
VIPONT ROYALTY INCOME FUND, LTD.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,320) $ (11,541)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in operating assets and liabilities:
Accounts payable - general partner 6,320 11,541
------------- -------------
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.
5
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VIPONT ROYALTY INCOME FUND, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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
occurring accruals) considered necessary for a fair presentation have been
included. These financial statement should be read in conjunction with the
audited financial statements and notes 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 (the "Partnership Documents") to share in certain royalties and/or
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, will be entitled to participate in royalties and/or
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 a NDA for the same.
The Proposal as approved, allows the General Partner to share in
royalties and/or proceeds from the sale of rights related to the Perio
Product-Sanguinarine and the Partnership to share in royalties and/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.
6
<PAGE> 7
VIPONT ROYALTY INCOME FUND, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 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.
The Partnership is required to pay the General Partner $12,000
annually for management fees. The Partnership owed the General Partner
$138,000 at March 31, 1995 for fees and expenses incurred on behalf of the
Partnership.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1994
There were no research expenses in the three months ended March 31,
1995 and March 31, 1994. All funds for research were exhausted prior to the
current period.
General and administrative expenses decreased to $6,320 for the three
months ended March 31, 1995, from $11,541 during the three months ended March
31, 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 was related to lower expenditures for accounting and legal fees in
the current year as fewer administrative activities were required.
Net loss for the three months ended March 31, 1995, was $6,320
compared with $11,541 for the three months ended March 31, 1994. The net loss
was the result of the Partnership's normal administration expenses related to
being a public partnership. The decrease was related to lower expenditures for
accounting and legal fees in the current period as fewer administrative
activities were required.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 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. The
Partnership and the General Partner will share the royalties and/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 fiscal 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
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 during the period covered by
this report.
9
<PAGE> 10
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
May 9, 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 John E. Urheim May 9, 1995
- - ----------------------- Vice Chairman and
Chief Executive Officer
of the General Partner
/s/ Kimberly A. Marks Kimberly A. Marks May 9, 1995
- - ---------------------- Corporate Controller,
Assistant Secretary, and
Assistant Treasurer
of the General Partner
</TABLE>
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page
- - ----------- ------------------- ----
<S> <C> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
PARTNERSHIP'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 138,220
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (138,220)
<TOTAL-LIABILITY-AND-EQUITY> (138,220)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,320)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,320)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,320)
<EPS-PRIMARY> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
