<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, 1996 0-18231
ATRIX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1043826
(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
(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
--- ---
As of May 10, 1996, there were 10,742,784 issued and
outstanding shares of the Registrant's $.001 par value common stock.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATRIX LABORATORIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
---- ----
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 925,487 $ 173,695
Marketable securities, available-for-sale, at fair value 10,996,847 8,842,783
Accounts receivable 190,665 113,246
Interest receivable 112,303 68,237
Prepaid expenses and deposits 572,751 249,903
Inventory 202,264 256,513
--------- ---------
Total current assets 13,000,317 9,704,377
--------- ---------
PROPERTY AND EQUIPMENT:
Equipment, furniture and fixtures 1,847,164 1,956,697
Leasehold improvements 506,190 539,447
--------- ---------
Total 2,353,354 2,496,144
Accumulated depreciation and amortization (1,133,864) (1,241,286)
--------- ---------
Property and equipment, net 1,219,490 1,254,858
--------- ---------
OTHER ASSETS:
Intangible assets, net of accumulated amortization of 674,116 768,024
$52,240 and $56,149
TOTAL $ 14,893,923 $ 11,727,259
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 1,862,850 $ 1,313,285
Accrued salaries and payroll taxes 72,199 70,216
Other accrued liabilities 152,108 139,973
Deferred revenue -- 5,003
--------- ---------
Total current liabilities 2,087,157 1,528,477
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred Stock $.001 par value; authorized 5,000,000
shares, none issued or outstanding
Common stock $.001 par value; authorized 25,000,000 8,433 8,485
shares; 8,433,296 and 8,484,567 shares issued and
outstanding
Additional paid-in capital 43,889,473 44,193,300
Unrealized holding loss on securities, available-for-sale (35,176) (196,948)
Accumulated deficit (31,055,964) (33,806,055)
----------- -----------
Total shareholders' equity 12,806,766 10,198,782
---------- ----------
TOTAL $ 14,893,923 $ 11,727,259
============ ============
</TABLE>
See notes to financial statements
2
<PAGE> 3
ATRIX LABORATORIES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
REVENUE: 1995 1996
---- ----
<S> <C> <C>
Sales $ -- $ 59,040
Contract revenue 62,250 120,008
Interest income 262,808 149,921
Gain on sale of marketable securities -- 23,953
----------- -----------
Total revenue 325,058 352,922
----------- -----------
EXPENSES:
Cost of goods sold -- 40,670
Research and development
-ATRIDOX(TM)product 1,118,675 1,369,478
-Other 862,789 1,103,904
Administrative and marketing 278,538 588,961
----------- -----------
Total expenses 2,260,002 3,103,013
----------- -----------
NET LOSS $(1,934,944) $(2,750,091)
=========== ===========
NET LOSS PER COMMON SHARE $ (0.25) $ (0.33)
=========== ===========
WEIGHTED AVERAGE SHARES 7,812,430 8,462,433
OUTSTANDING
=========== ===========
</TABLE>
See notes to financial statements
3
<PAGE> 4
ATRIX LABORATORIES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Stock Paid-in Holding Accumulated Shareholders'
------------
Shares Amount Capital Loss Deficit Equity
------ ------ ------- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 8,433,296 $ 8,433 $ 43,889,473 $ (35,176) $(31,055,964) $ 12,806,766
Exercise of stock options 51,271 52 303,827 -- -- 303,879
Unrealized holding loss -- -- -- (161,772) -- (161,772)
Net loss for the period -- -- -- -- (2,750,091) (2,750,091)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, March 31, 1996 8,484,567 $ 8,485 $ 44,193,300 $ (196,948) $(33,806,055) $ 10,198,782
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements
4
<PAGE> 5
ATRIX LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,934,944) $(2,750,091)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 80,500 108,717
Amortization of patents 3,304 3,909
Amortization of bond premiums 17,243 25,573
Gain on sale of marketable securities -- (23,953)
Net changes in current assets and liabilities:
Accounts receivable 83,558 77,419
Prepaid expenses and deposits (433,109) 322,848
Inventory -- (54,249)
Interest receivable (92,319) 44,066
Accounts payable - trade 237,069 (549,565)
Accrued salaries and payroll taxes 366 (1,983)
Other accrued liabilities (9,236) (12,135)
Deferred revenue 18,750 5,003
----------- -----------
Net cash used in operating activities (2,028,818) (2,804,441)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, furniture and fixtures (57,753) (110,828)
Acquisition of leasehold improvements (17,577) (33,257)
Investments in intangible assets (16,273) (40,205)
Proceeds from sale of marketable securities available-for-sale -- 2,050,342
Investment in marketable securities (53,915) (59,670)
----------- -----------
Net cash (used in) provided by investing activities (145,518) 1,806,382
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and exercise of stock
options 358,575 303,879
Deferred registration costs -- (57,612)
----------- -----------
Net cash provided by financing activities 358,575 246,267
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,815,761) (751,792)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,880,275 925,487
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 64,514 $ 173,695
=========== ===========
</TABLE>
See notes to financial statements
5
<PAGE> 6
ATRIX LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements of Atrix
Laboratories, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the
opinion of management, all adjustments considered necessary (which consist only
of normal recurring accruals) for a fair presentation have been included. These
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the year ended December 31, 1995, filed with
the Securities and Exchange Commission in the Company's Annual Report Form 10-K.
NOTE 2. SUBSEQUENT EVENTS
On May 8, 1996, the Company completed the sale of 2,250,000
shares of common stock for $11.625 per share, which provided the Company with
net proceeds of approximately $24,587,000. The Company intends to use the net
proceeds of the offering to fund further research of its products, commercialize
its dental products in the United States and Europe, expand its manufacturing
capabilities, and for working capital and general corporate purposes.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1995
Sales recorded during the three months ended March 31, 1996,
represents revenue from sales of the ATRISORB(R) GTR Barrier. The Company had no
product sales during 1995.
Contract revenue represents revenue the Company received from
grants and from unaffiliated third parties for performing contract research and
development activities utilizing the ATRIGEL(R) system, and was approximately
$120,000 for the three months ended March 31, 1996, compared to approximately
$62,000 for the three months ended March 31, 1995, representing a 94% increase.
Interest income for the three months ended March 31, 1996, was
approximately $150,000 compared to approximately $263,000 for the three months
ended March 31, 1995, representing a 43% decrease. Interest income decreased due
to a reduction in principal investments as a result of the funds being used in
general operations. The majority of the funds were invested in U.S. government
bond funds, long-term U.S. government and government agency investments. The
remaining cash and cash equivalents were invested in interest bearing accounts
to fund the Company's short-term operations.
A gain on sale of marketable securities of approximately
$24,000 was realized for the three months ended March 31, 1996, whereas no gain
was realized for the comparable period in 1995. The proceeds from the sale of
marketable securities were used to fund operations.
Cost of goods sold recorded for the three months ended March
31, 1996 was associated with the launch of the Company's first dental product,
the ATRISORB(R) GTR Barrier. There were sales to certain European countries in
March 1996.
Research and development expenses - ATRIDOX(TM) product for
the three months ended March 31, 1996, were approximately $1,369,000 compared to
approximately $1,119,000 for the three months ended March 31, 1995, representing
a 22% increase. This increase is a result of the continuation of two Phase III
clinical trials for the ATRIDOX(TM) product which began in January 1995.
Other research and development expenses, which included
activities for the ATRISORB(R) Barrier and other research activities for the
three months ended March 31, 1996, were approximately $1,104,000 compared to
approximately $863,000 for the three months ended March 31, 1995, representing a
28% increase. The increase was primarily a result of hiring
7
<PAGE> 8
additional personnel in the Manufacturing and QA/QC departments; and increased
quality assurance and quality control efforts.
Administrative expenses increased to approximately $589,000
for the three months ended March 31, 1996, from approximately $279,000 for the
three months ended March 31, 1995, representing a 111% increase. The primary
reasons for this increase were expenses related to the initiation of marketing
and sales efforts for the ATRISORB(R) GTR Barrier product and increased
general operating costs.
The Company recorded a net loss of approximately $2,750,000
for the three months ended March 31, 1996, compared to a net loss of
approximately $1,935,000 for the three months ended March 31, 1995, representing
a 42% increase. The increase in net loss was primarily the result of the
initiation of marketing and sales efforts for the Company's ATRISORB(R) Barrier
product, the hiring of appropriate staff, greater quality assurance and
quality control efforts, and increased expenses relating to clinical studies for
the Company's ATRIGEL(R) drug delivery system.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash and cash
equivalents of approximately $174,000, marketable securities,
available-for-sale, at fair value of approximately $8,843,000 and other current
assets of approximately $687,000, for total current assets of approximately
$9,704,000. Current liabilities totaled approximately $1,528,000, which resulted
in working capital of approximately $8,176,000.
During the three months ended March 31, 1996, the Company used
net cash in operating activities of approximately $2,804,000. This was primarily
a result of the net loss for the period of approximately $2,750,000, adjusted
for certain non-cash expenses, and changes in other operating assets and
liabilities as set forth in the statement of cash flows.
Net cash provided by investing activities was approximately
$1,806,000 during the three months ended March 31, 1996, primarily as a result
of the proceeds from sales of marketable securities. This was reduced by cash
used for the acquisition of capital equipment and leasehold improvements,
investments in intangible assets, and investments in marketable securities.
Net cash provided from financing activities was approximately
$246,000. The increase was a result of the exercise of stock options by certain
directors and employees, reduced by cash used for expenses related to the
registration of common stock. See "Note 2 to Financial Statements."
The Company's long-term capital expenditure requirements will
depend on numerous factors, including the progress of the Company's research and
development programs, the time required to file and process regulatory approval
applications, the development of the Company's
8
<PAGE> 9
commercial manufacturing facilities, the ability of the Company to obtain
additional licensing arrangements, and the demand for the Company's products, if
and when approved. The Company expended approximately $144,000 for property,
equipment and leasehold improvements, and approximately $40,000 for patent
development in the three month period ending March 31, 1996.
9
<PAGE> 10
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 ended
March 31, 1996.
<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.
ATRIX LABORATORIES, INC.
(Registrant)
May 13, 1996 By: /s/ John E. Urheim
------------------
John E. Urheim
Vice Chairman of the Board of Directors and Chief
Executive Officer
May 13, 1996 By: /s/ Kimberly A. Marks
---------------------
Kimberly A. Marks
Corporate Controller, Assistant Secretary, and
Assistant Treasurer
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
- ------ ------------------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 173695
<SECURITIES> 8842783
<RECEIVABLES> 181483
<ALLOWANCES> 0
<INVENTORY> 256513
<CURRENT-ASSETS> 9704377
<PP&E> 2496144
<DEPRECIATION> 1241286
<TOTAL-ASSETS> 11727259
<CURRENT-LIABILITIES> 1528477
<BONDS> 0
0
0
<COMMON> 8485
<OTHER-SE> 10190297
<TOTAL-LIABILITY-AND-EQUITY> 11727259
<SALES> 59040
<TOTAL-REVENUES> 352922
<CGS> 40670
<TOTAL-COSTS> 40670
<OTHER-EXPENSES> 3062343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2750091)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2750091)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2750091)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
