<PAGE>
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended September 30, 1996.
or
[_] 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: 0-18880
ATRIX INTERNATIONAL, INC.
-------------------------
(Exact Name of registrant as specified in its charter)
Minnesota 41-1591075
--------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14301 Ewing Avenue South, Burnsville, MN 55306
- ---------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(612) 894-6154
(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 September 30, 1996 the following securities of the registrant were
outstanding: 5,653,644 shares of Common Stock, $.01 per value per share.
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
This report includes the financial position of Atrix International, Inc.,
("Atrix" or the "Company") as of September 30, 1996 and June 30, 1996, the
results of operations for the three months ended September 30, 1996 and 1995,
and the cash flows for the three months ended September 30, 1996 and 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET SALES. Sales for the first quarter ended September 30, 1996 totaled
$1,431,168 compared with $1,468,433 for the same period a year ago. However,
last years first quarter results included a nonrecurring R3 inventory stocking
shipment of approximately $100,000. Exclusive of that order, sales for the
quarter increased 4.6% over the previous year. Overall, distribution sales were
lower than last years, but were nearly offset by increases in sales of the
Company's new special (Omega Vacuum) product line.
The following table shows the Company's revenues for the quarter by product
line, total manufactured products and total distributed products.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
----------------------
<S> <C> <C>
Product Line
Vacuums and Supplies $ 396,556 $ 260,496
ESD Equipment 70,922 67,630
Circuit Board Cases 2,351 30,188
Special Assemblies 48,551 44,689
---------- ----------
Total Manufacturing 518,380 403,003
Loose Tools 530,924 624,484
Tool Kits 103,977 94,225
Instrumentation 151,878 202,242
---------- ----------
Total Distribution 786,779 920,951
R3 Copy Control Products 116,009 138,081
Royalty Revenue 0 6,398
MM1 10,000 0
---------- ----------
Total Revenue $1,431,168 $1,468,433
</TABLE>
Manufacturing sales for the three months ended September 30, 1996 were $518,380
as compared to $403,003 for the same period in 1995. The primary reason for the
increase was revenues of $83,379 from shipments of the Porous Media Ulti Vac
line acquired in November 1995.
Distribution sales for the three months ended September 30, 1996 were $786,779
as compared to $920,951 for the same period in 1995. This decrease is due to a
reduction in sales of both loose tools and instrumentation devices.
R3 Copy Control product sales for the three months ended September 30, 1996 were
$116,009 as compared to $138,081 for the same period in 1995. The reason for the
decrease is that last years first
-2-
<PAGE>
quarter included a nonrecurring R3 inventory stocking shipment of approximately
$100,000 that was not replicated this year. Without that shipment, last years R3
sales would have totaled $38,081.
Looking forward, the Company believes that revenues from manufactured vacuum
products, and the R3 Copy Control system will improve. The release of the new
Omega Vacuum in June of 1996, received a very positive response from
distributors and customers at the Business and Technology Show in Las Vegas.
Atrix experienced a 21% increase in new incoming orders during the first quarter
of fiscal 1997, compared to the same period a year ago. The Company's sales
force has grown over 20% from last year, and a national sales manager with over
a decade of sales experience in the copy machine industry joined Atrix in June
of 1996.
The Company also announced a new product introduction at it's annual shareholder
meeting on October 22, 1996. The M1 system is a new remote metering and
monitoring system for the injection molding industry. It is being developed as a
retro fit system permitting injection molding plants to install the units on
existing molding machines for complete plant monitoring, metering, reporting and
scheduling capabilities. The Company plans to begin field testing the product in
December, 1996. The Company believes that M1's competitive pricing, will provide
a platform for Atrix to expand into the $40 million annual plastics market.
With the new product introductions, lower operating expenses, the increase in
sales personnel and the acceptance of the Porous Media products, the Company
believes that sales will increase and profits could double in fiscal 1997 from
fiscal 1996. The Company notes that the above and other forward looking
statements are subject to change based on various important factors including
but not limited to economic downturns, competitive actions, disruption in
shipments, loss of major customer (s) or other unforeseen actions.
GROSS PROFIT
The gross profit margin as a percentage of sales was 31.0% and 30.0% for the
three month periods ended September 30, 1996, and 1995, respectively. The
increase in gross profit margin is due mainly to a shift in product mix from
distribution products which carry a gross margin of approximately 27% to the
higher margin vacuums which carry a gross margin of approximately 39%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
September 30, 1996 and 1995 increased to $406,650 from $389,333 or $17,317.
Total selling expenses for the quarter ended September 30, 1996 were $143,568 as
compared to $147,253 for the same period in 1995. The primary reason for the
decrease of $3,685 is due to sales, salaries and commissions running less than
last year as the Company filled open sales positions.
Total general and administrative expenses for the quarter ended September 30,
1996 were $262,082 compared to $242,080 for the same period in 1995. The
increase of $20,002 can be attributed to primarily higher salary, pension, and
benefits expenses, which were offset in part by lower research and development
expenses as development of the R3 Copy Control product was completed.
Selling, general and administrative expenses represented 28.4% and 26.5% of
sales for the quarters ending September 30, 1996 and 1995 respectively. The
Company expects its selling, general and administrative expenses to be lower as
a percentage of sales for the remainder of fiscal 1997.
NET INCOME
-3-
<PAGE>
Net income for the quarter ended September 30, 1996 decreased to $39,703 from
$50,158 for the quarter ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, restricted cash and marketable securities at September 30,
1996 was $1,373,378 compared to $1,485,163 at June 30, 1996. Working capital
increased to $1,685,136 at September 30, 1996 from $1,648,615 at June 30, 1996.
The decrease in the Company's cash, and increase in working capital position,
were due primarily to reducing accounts payable to lower than normal levels.
The Company maintains a line of credit with Riverside Bank. As of September 30,
1996, the borrowing base under the line of credit was the lesser of $1,250,000
or (b) the sum of (i) 75% of eligible accounts receivable and (ii) 50% of
eligible inventory. The Company is also required to maintain tangible net worth
of $1,500,000. The line of credit is secured by the Company's assets and by a
$250,000 certificate of deposit. The interest rate is at prime. The Company is
required to pay accrued interest on a monthly basis. As of September 30, 1996,
the outstanding balance on the line of credit was $921,299 and the remaining
borrowing availability was $60,745.
The Company's plan of operations currently does not call for raising additional
capital. The Company plans to finance its operations for the remainder of fiscal
year ending June 30, 1997 with working capital and bank borrowings. The Company
expects to generate cash from operations for the remainder of fiscal 1997 by
continued increases in sales, gross margin improvement and controlled operating
expenses.
-4-
<PAGE>
ATRIX INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS September 30, 1996 June 30, 1996
------------------ -------------
Current Assets: (unaudited)
<S> <C> <C>
Cash $ 526,317 $ 541,515
Restricted cash 250,000 250,000
Marketable securities, at cost 597,061 693,648
Accounts receivable less allowance for doubtful accounts
($17,000 and $17,000, respectively) 811,112 757,650
Inventories 901,041 994,858
Prepaid Expenses 72,785 76,489
----------- -----------
Total Current Assets 3,158,316 3,314,160
----------- -----------
Property and equipment, net 472,152 492,096
Intangible assets, net 80,058 82,345
Capitalized software development costs, net 218,500 207,358
----------- -----------
TOTAL ASSETS $ 3,929,026 $ 4,095,959
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 446,277 $ 595,388
Notes payable - bank 921,299 941,299
Current maturities of long-term debt 68,894 76,553
Accrued liabilities 36,710 52,305
----------- -----------
Total current liabilities 1,473,180 1,665,545
Notes payable - long term 148,336 162,607
----------- -----------
Shareholders' Equity:
Preferred stock, $.01 par value
3,000,000 shares authorized,
no shares issued
Common stock, $.01 par value,
50,000,000 shares authorized, 5,653,644
and 5,201,978 respectively shares
issued and outstanding 56,536 56,536
Capital in excess of par value 3,276,969 3,276,969
Accumulated deficit (1,025,995) (1,065,698)
----------- -----------
Total shareholders' equity 2,307,510 2,267,807
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,929,026 $ 4,095,959
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
Product Revenue $1,431,168 $1,462,035
Royalty Revenue 0 6,398
---------- ----------
Net Revenue 1,431,168 1,468,433
Cost of Sales 987,952 1,029,009
---------- ----------
Gross Profit 443,216 439,424
Selling, general and
administrative expenses 406,650 389,333
---------- ----------
Income from operations 36,566 50,091
Other Income/expense, net 0
Interest Income(expense) net 3,137 (1,315)
Net Income before
income taxes 39,703 48,776
Income tax expense/benefit 1,382
---------- ----------
Net Income $ 39,703 $ 50,158
========== ==========
Net income per share $.01 $.01
Weighted average number
of common stock equivalents 5,653,644 5,206,888
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
Cash Flows from operating activities: 1996 1995
---- ----
<S> <C> <C>
Net income $ 39,703 $ 50,158
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Depreciation and amortization 63,823 48,796
Change in current assets and liabilities:
Accounts receivable (55,373) (130,559)
Inventories 95,727 23,971
Prepaid expenses 3,705 (76,668)
Accounts payable (149,110) (126,819)
Accrued liabilities (42,247) (17,290)
--------- ---------
Net cash provided (used) by operating activities (43,772) (228,411)
Cash flow from investing activities:
Purchase of equipment, leasehold
improvements and other assets, net (17,289) (12,834)
Acquisition net of liabilities assumed 0
Capitalized software development costs (35,445) 0
(Purchases) sales of marketable securities, net 96,587 (17,120)
Additions intangible assets (380)
--------- ---------
Net cash provided (used) by investing activities 43,853 (30,334)
Cash flow from financing activities:
Proceeds (repayments) from notes payable - bank net 182,500
Repayments of notes payable - Porous Media (14,272) 0
Restricted cash 0
Repayments of capital lease obligations (1,007) (1,366)
Proceeds from exercise of common stock warrants 308,750
--------- ---------
Net cash (used) provided by financing activities (15,279) 489,884
Net increase (decrease) in cash
and cash equivalents (15,198) 231,139
Cash - beginning of the period 541,515 72,412
--------- ---------
Cash - end of the period $ 526,317 $ 303,551
========= =========
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE>
ATRIX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. CORPORATE ORGANIZATION
Atrix International, Inc. (the Company) designs and manufactures toner vacuums,
vacuum filters and circuit board transport cases. The Company also designs the
hardware and software for R3 Remote Metering and Copy Control products. In
addition, Atrix distributes tools, meters, electrostatic discharge (ESD) and
static control products and assembles tool kits for the telecommunication,
office machine and computer industries.
On November 9, 1995 the Company purchased the Ulti Vac(TM) product line from
Porous Media. The assets acquired by the Company include production equipment,
customer lists and Ulti Vac trademark. This expands the Company's offering of
toner vacuum products to the photocopier and laser printer industries. In
addition, the product acquisition includes filtration products for the asbestos
and Hepa markets.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements, which are unaudited except for the
balance sheet as of June 30, 1996, have been prepared in accordance with
instructions to Form 10-QSB and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have been
included. These financial statements should be read in conjunction with the
financial statements and accompanying notes included in the Company's Annual
Report on Form 10-KSB, for the year ended June 30, 1996 filed with the
Securities and Exchange Commission.
NOTE 3. INVENTORIES
Inventories are comprised of the following at:
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
---------------------------------------
<S> <C> <C>
Raw Materials $428,023 $448,291
Finished goods 473,018 546,567
-------- --------
Total $901,041 $994,858
</TABLE>
NOTE 4. SALE OF COMMON STOCK
On September 30, 1995, the Company completed a private sale of 451,666 shares of
Common Stock. The private offering was made to a limited number of shareholders
of the Company that held warrants to purchase shares of Common Stock. The
Company received net proceeds of $323,750 from the private offering. The purpose
of the offering was to increase the Company's capital and surplus in order to
comply with NASDAQ Small Cap Market rules that require that the Company maintain
capital and surplus of $2 million.
-8-
<PAGE>
NOTE 5. INCOME TAXES
The Company has available net operating loss and tax credit carryforwards for
income tax purposes of approximately $1,287,807 and $83,688, respectively, on
June 30, 1996. These carryforwards expire in the years ending June 30, 2003
through 2008. Utilization of the net operating loss and tax credit carryforwards
are subject to certain limitations under Section 382 of the Internal Revenue
Code. A valuation allowance exists for the entire net tax benefit associated
with all carryforwards and temporary differences at September 30, 1996 and June
30, 1996 as their realization is not presently assured.
INVENTORY OF DEFERRED ITEMS AND NOL CARRYFORWARD
The composition of the net deferred tax are as follows:
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1996
----------------------------------
<S> <C> <C>
Loss Carryforwards $ 564,060 $ 546,670
Research & Development
Credits 83,688 83,688
Inventory 17,163 17,163
Bad Debts 7,045 7,045
Fixed Assets 73,557 77,387
Amortization (133,050) (144,653)
Other 0 0
--------- ---------
612,463 587,300
Less: Valuation Allowance (612,463) (587,300)
$ 0 $ 0
========= =========
</TABLE>
-9-
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATRIX INTERNATIONAL, INC.
Date: November 11, 1996 /s/ Steven D. Riedel
-----------------------------------------
Steven D. Riedel
Chief Executive Officer
(Principal Executive and Financial Officer)
/s/ Dean L. Gerber
-----------------------------------------
Dean L. Gerber
Controller (Principal Accounting Officer)
-10-
<PAGE>
ATRIX INTERNATIONAL, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
ITEM NO. ITEM METHOD OF FILING
- -------- ---- ----------------
27 Financial data schedule Filed herewith
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 776,317
<SECURITIES> 597,061
<RECEIVABLES> 811,112<F1>
<ALLOWANCES> 0
<INVENTORY> 901,041
<CURRENT-ASSETS> 3,158,316
<PP&E> 472,152<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,929,026
<CURRENT-LIABILITIES> 1,473,180
<BONDS> 0
<COMMON> 56,536
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,929,026
<SALES> 1,431,168
<TOTAL-REVENUES> 1,431,168
<CGS> 987,952
<TOTAL-COSTS> 987,952
<OTHER-EXPENSES> 406,650
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,137)<F3>
<INCOME-PRETAX> 39,703
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,703
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<FN>
<F1> NET OF ALLOWANCE FOR UNCOLLECTIBLES
<F2> NET OF ACCUMULATED DEPRECIATION
<F3> INTEREST EXPENSE IS NET WITH INTEREST INCOME
</FN>
</TABLE>
