<PAGE>
FORM 10-Q SB
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-Q SB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended December 31, 1995
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 December 31, 1995 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 December 31, 1995 and June 30, 1995, the
results of operations for the three and six months ended December 31, 1995 and
1994, and the cash flows for the six months ended December 31, 1995 and 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET SALES. For the three months ended December 31, 1995, the Company reported a
5% net sales increase to $1,476,447 from $1,404,931 for the same period in the
prior year. Net sales for the six months ended December 31, 1995 were $2,949,880
Compared to $2,813,660 for the same period in 1994. For the six months ended
December 31, 1995 and 1994 the company recognized non-recurring royalty revenues
of $6,423 and $169,391 respectively. Accordingly, the Company's product sales
increased 11% for the six month period ended December 31, 1995 compared to the
same period in 1994.
The increase in revenues is due to improved sales of the R3 Copy Control
products, distribution products and the new Company's special (Ulti Vac) product
line, which more than offset decreases in royalty and manufacturing revenues.
Atrix has shipped $254,055 of the new R3 Copy Control product line compared to
$27,380 for the six month periods ending December 31, 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Product Line
Vacuums and Supplies $ 469,827 $ 369,896 $ 741,268 $ 739,152
ESD Equipment 60,734 60,479 128,363 119,399
Circuit Board Cases 6,648 4,532 25,891 13,904
Special Assemblies 46,234 152,016 90,923 333,855
---------- ---------- ---------- ----------
Total Manufacturing 583,443 586,923 986,445 1,206,310
Loose Tools 513,255 475,560 1,137,740 905,338
Tool Kits 86,111 99,441 180,336 188,483
Instrumentation 177,639 184,930 379,881 316,241
---------- ---------- ---------- ----------
Total Distribution 777,005 759,931 1,697,957 1,410,062
R3 Copy Control Products 115,974 18,741 254,055 27,380
Royalty Revenue 25 38,819 6,423 169,391
Other 0 517 0 517
---------- ---------- ---------- ----------
Total Revenue $1,476,447 $1,404,931 $2,944,880 $2,813,660
</TABLE>
Manufactured sales for the three months ended December 31, 1995 were $583,443 as
compared to $586,923 for the same period in 1994. For the six months ended
December 31, 1995 manufacturing sales were $986,445 as compared to $1,206,310
for the same period last year. The primary reason for the decrease is that the
Company recognized $242,932 in shipments of special assemblies in 1994 that were
non-reoccurring vacuums, ESD equipment, and circuit board cases in the quarter
ended December 31, 1995 which were offset in part by increased sales.
Form 10-Q SB December 31, 1995 Page 2
<PAGE>
On November 9, 1996 the company announced that it purchased the Ulti Vac/TM/
product line from Porous Media. The assets acquired include production
equipment, customer lists, and the Ulti Vac/TM/ trademark. The acquisition of
the Ulti Vac product line expands the Company's offering of toner vacuums to the
photocopier and laser printer industry. This positions the Company as one of the
leaders in the $25 million annual toner vacuum market. In addition it expands
the Company vacuum products into the markets of asbestos and Hepa filtration.
Distribution sales for the three months ended December 31, 1995 were $777,005 as
compared to $759,931 for the same period in 1994. For the six month period ended
December 31, 1995 sales increased by 20% to $1,697,957 from $1,410,062 for the
same period in the prior year. This increase is due to a wider acceptance of
their distribution products by one major customer and the addition of several
new customers. The reason for a lower growth rate in the second quarter can be
attributed to a seasonal slow down of year end orders from one major customer.
R3 Copy Control product sales for the three months ended December 31, 1995 were
$115,974 as compared to $18,741 for the same period in 1994. For the six months
ended December 31, 1995 the R3 Copy Control product sales increased by 827% to
$254,055 from $27,380 for the six month period in the prior year. The reason for
the increase is due to the acceptance of the R3 Copy Control product by the
Company's major OEM and the installation of R3 systems by several other
customers.
Looking forward, the Company believes that revenues from manufactured vacuum
products, distribution products and the R3 Copy Control system will improve. The
Company expects sales of manufactured vacuum products to improve due to the
addition of the Ulti Vac product line, as the Company introduces its existing
vacuum products to former Porous Media customers. The Company's ability to
increase sales of vacuum products could be adversely affected by the Company's
lack of experience in the asbestos and Hepa filtration markets, loss of major
customers, increased competition and other unforeseen events. The Company also
believes that sales of distribution products will improve, primarily from new
customers obtained through direct marketing efforts, although potential
increases in this area could be adversely affected by an economic down turn.
Finally, the Company expects sales of the R3 Copy Control system to continue to
grow due to increasing sales to the Company's major OEM customer, which
completed training of approximately 50 Account Representatives in January, 1996
and the installation of the system at additional customer sites. However,
increased ales of the R3 could be adversely affected by a loss or reduction in
purchases from the Company's major OEM customer, product offerings by
competitors or economic downturns.
The Company notes that the above 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 30.4% and 31.2% for the
three month periods ended December 31, 1995, and 1994, respectively. For the six
month period ended December 31, 1995 gross profit margins was 30.2% and 33.06%
as compared to one year ago. The decrease in gross profit margin is due to the
decline in royalty revenue. Royalty revenue for the six months ended
December 31, 1995 was $6,423 as compared to $169,391 for the same period in
1994. The lower amounts of royalty revenue reduces the gross margin as the
royalty revenue carries a margin of approximately 75%. The Company expects gross
margins to improve due to greater overhead absorption from sales of vacuums to
the asbestos market and new manufacturing process for vacuum filters that were
implemented in the quarter ended December 31, 1995.
From 10-Q SB December 31, 1995 Page 3
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
December 31, 1995 and 1994 decreased from $424,499 to $400,272 an improvement of
$24,227. The decrease is primarily due to patent legal expenses not being
incurred in the quarter ended December 31, 1995. The majority of the legal
expenses have been reported as the patent expired in April of 1995.
Total selling expenses for the quarter ending December 31, 1995 were $140,244 as
compared to $110,415 for the same period in 1994. The primary reason for the
increase in sales salaries and commissions of $12,546 is a reclassification of
sales administration expense of $5,876 that was recorded in G&A in fiscal 1995,
and catalog expenses of $21,951. The sales salaries and commissions increase is
due to additional sales personnel hired to enhance the inside sales from the
catalog that was produced in September/October 1995.
Total general and administrative expenses for the quarter ended December 31,
1995 were $260,028 compared to $314,084 for the same period in 1994. The
decrease of $54,056 can be attribute to; lower patent and litigation expenses of
$8,483, transfer of sales administration expense of $5,876 to the sales
department, lower R&D expense of $48,957 due to the completion of the R3's Copy
Control software, and lower NASDAQ/SEC relations of $13,823. This was partially
offset by increases of $23,000 for insurance, rent/utilities, employee benefits,
and office supplies.
Currently, selling, general and administrative expenses represent 27.1% and
30.2% of sales for the quarters ending December 31, 1995 and 1994. The Company
expects its selling, general and administrative expenses to remain at these
lower levels for the remainder of fiscal 1996.
NET INCOME
Net income for the quarter ended December 31, 1995 increased to $50,295 from
$8,109 for the quarter ended December 31, 1994. For the six months ended
December 31, 1995 net income increased by 82% to $100,453 from $55,068 for the
same period in the prior year. The increase can be attributed to increased R3
sales and lower expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and restricted cash at December 31, 1995 was $1,458,460
compared to $1,157,255 at June 30, 1995. Working capital increased to $1,561,099
at December 31, 1995 from $1,217,401 at June 30, 1995. The increases in the
Company's cash and working capital position were due primarily to operating
income and a private offering of common stock which was completed in September,
1995, and raised net proceeds of $323,750.
During the second quarter of fiscal 1996, the Company purchased the Ulti Vac(TM)
product line from Porous Media which was the primarily reason for the increase
in the Company's property and equipment. The purchase price will be paid in cash
over the next four to five years at approximately $25,000 quarterly.
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, 1996 with working capital and bank borrowings. The Company
expects to generate cash from operations for the remainder of fiscal 1996 by
continued increases in sales, gross margin improvement and controlled operating
expenses.
The Company maintains a line of credit with Riverside Bank. As of December 31,
1995, the borrowing base under the line of credit was the lesser of $1,250,000
or (b) the sum of (i) 85% of eligible accounts receivable and (ii) 50% of
eligible inventory. The Company is also required to maintain tangible net worth
of $1,100,000. 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.
Form 10-Q SB December 31, 1995 Page 4
<PAGE>
Over the six months ending December 31, 1995 the Company used $90,900 from the
line of credit for the production and distribution of the direct marketing
catalog, and reducing accounts payable to take advantage of vendor discounts. As
of June 30, 1995 the line of credit balance was $812,653 compared to $903,553 at
December 31, 1995.
Form 10-Q SB December 31, 1995 Page 5
<PAGE>
ATRIX INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1995 1995
------------- ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash $ 1,208,460 $ 757,255
Restricted Cash 250,000 400,000
Accounts receivable less allowance for doubtful accounts
($18,000 and $17,000, respectively) 833,792 746,490
Inventories 832,769 851,671
Prepaid Expenses 95,834 33,978
----------- -----------
Total Current Assets 3,220,855 2,789,394
-----------
Property and equipment, net 519,959 299,832
Intangible assets, net 83,703 14,424
Capitalized software development costs, net 242,605 276,465
----------- -----------
TOTAL ASSETS $ 4,067,122 $ 3,380,115
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 593,614 $ 661,640
Notes payable - bank 903,553 812,653
Current maturities of long-term debt 90,241 5,742
Accrued liabilities 72,348 91,958
----------- -----------
Total current liabilities 1,659,756 1,571,993
Notes payable - long term 183,146 8,106
----------- -----------
Shareholders' Equity:
Preferred stock, $.01 par value
3,000,000 shares authorized,
no shares issued
Common stock, $0.01 par value,
50,000,000 shares authorized, 5,653,644
and 5,201,978 respectively shares
issued and outstanding 56,536 52,019
Capital in excess of par value 3,276,970 2,957,736
Accumulated deficit (1,109,286) (1,209,739)
----------- -----------
Total shareholders' equity 2,224,220 1,800,016
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,067,122 $ 3,380,115
=========== ===========
See accompanying notes to financial statements.
</TABLE>
Form 10-Q SB December 31, 1995 Page 6
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Product Revenue $1,476,422 $1,366,112 $2,938,457 $2,644,269
Royalty Revenue 25 38,819 6,423 169,391
---------- ---------- ---------- ----------
Net Revenue 1,476,447 1,404,931 2,944,880 2,813,660
Cost of Sales 1,027,971 966,340 2,056,980 1,883,247
---------- ---------- ---------- ----------
Gross Profit 448,476 438,591 887,900 930,413
Selling, general and
administrative expenses 400,272 424,499 789,605 860,528
---------- ---------- ---------- ----------
Income from operations 48,204 14,092 98,295 69,885
Other Income/expense, net 1,990 1,990
Interest Income/expense, net 101 (4,733) (1,214) (12,717)
---------- ---------- ---------- ----------
Net Income before
income taxes 50,295 9,359 99,071 57,168
Income tax expense/benefit 0 (1,250) 1,382 (2,100)
---------- ---------- ---------- ----------
Net Income $ 50,295 $ 8,109 $ 100,453 $ 55,068
Net income per share $0.01 $0.00 $0.02 $0.01
Weighted average number
of common stock equivalents 5,653,644 5,201,978 5,430,266 5,201,978
</TABLE>
See accompanying notes to financial statements.
Form 10-Q SB December 31, 1995 Page 7
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended December 31,
Cash Flows from operating activities: 1995 1994
----------- ----------
<S> <C> <C>
Net income $ 100,453 $ 55,068
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Depreciation and amortization 100,822 191,372
Change in current assets and liabilities:
Accounts receivable (87,303) 287,146
Inventories 18,902 (24,449)
Prepaid expenses (61,856) (40,042)
Accounts payable (68,026) 66,097
Accrued liabilities (19,610) (68,213)
---------- ---------
Net cash provided (used) by operating activities (16,618) 466,979
---------- ---------
Cash flow from investing activities:
Purchase of equipment, leasehold
Improvements and other assets, net (16,516) (90,394)
Acquisition net of liabilities assumed (50,000)
Capitalized software development costs 0 (152,684)
Additions intangible assets (14,850) 0
---------- ---------
Net cash used by investing activities (81,366) (243,078)
---------- ---------
Cash flow from financing activities:
Proceeds (repayments) from notes payable - bank net 90,900 34,000
Repayments of notes payable - Porous Media (14,434) 0
Repayment of notes payable - shareholders 0 (65,015)
Restricted cash 150,000
Repayments of capital lease obligations (1,027) (2,695)
Proceeds from exercise of common stock warrants 323,750 0
---------- ---------
Net cash (used) provided by financing activities 549,189 (33,710)
---------- ---------
Net increase (decrease) in cash
and cash equivalents 451,205 190,191
Cash - beginning of the period 757,255 317,678
---------- ---------
Cash - end of the period $1,208,460 $ 507,869
========== =========
</TABLE>
See accompanying notes to financial statements.
Form 10-Q SB December 31, 1995 Page 8
<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, 1995, have been prepared in accordance with
instructions to Form 10-Q SB 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, 1995 filed with the
Securities and Exchange Commission.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments generally with
original maturities of three months or less at the time of purchase which are
readily convertible to cash.
RESTRICTED CASH
Restricted cash is comprised of a 90-day certificate of deposit. Pursuant to the
line of credit agreement discussed in Note 5 below, the Company is restricted
from using the cash to the extent amounts are outstanding on the line of credit.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined on
the weighted average method. Inventories are evaluated on a quarterly basis to
identify obsolete, slow-moving and non-saleable items. The Company establishes a
reserve to reduce the inventory to net realizable value when necessary.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization, which
includes the amortization of assets recorded under capital leases, are computed
using the straight-line method over the estimated useful lives of five to seven
years or the initial lease terms. When assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts,
with any resulting gain or loss reflected in income for the period. Expenditures
for replacements and betterments are capitalized, while
Form 10-Q SB December 31, 1995 Page 9
<PAGE>
maintenance and repairs are charged against income as incurred. Accumulated
depreciation was $1,274,512 and $1,208,123 at December 31, 1995 and June 30,
1995, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense when incurred. These costs
were approximately $42,157 and $1,358 for the three months ended December 31,
1995 and 1994, respectively. See the capitalized software development costs
section for additional discussion on development activities.
INTANGIBLE ASSETS
Intangible assets were recorded with the patent regarding R3 Copy Control
management (patent pending) and the purchase of the Ulti Vac(TM) product line
from Porous Media. The intangibles are primarily made up of customer lists,
manufacturing documentation, training, Ulti Vac trademark and goodwill. The
Company is amortizing the intangible assets on a straight-line basis over 7 to
15 years. Accumulated amortization was $571 at December 31, 1995.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company develops software and firmware that is an integral part of a product
expected to be sold in future years. Software development costs are capitalized
only upon the establishment of technological feasibility for the related
product. Capitalized costs consist mainly of salaries and programming fees
related to the development of software and firmware. The Company commences
amortization when the related product is available for general release to
customers. The Company assesses the realizability of the capitalized software
development costs on a quarterly basis by comparing the amount of capitalized
software costs with the expected future gross revenues of the related product.
The annual amortization for these capitalized costs reflects the greater of the
proportion of the current year's product revenues to total expected product
revenues or a straight-line basis over their estimated useful life of six years.
Accumulated amortization was $270,516 and $236,655 at December 31, 1995 and
June 30, 1995, respectively.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of the product.
NET INCOME PER SHARE
Net income per share computations are based on the weighted average number of
common shares equivalents outstanding during the period.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting
Board Statement 109, "Accounting for Income Taxes," which uses an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future consequences of events that have been
recognized in the Company's financial statements or tax returns.
Form 10-Q SB December 31, 1995 Page 10
<PAGE>
NOTE 3. INVENTORIES
Inventories are comprised of the following at:
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1995
--------------------------------------
<S> <C> <C>
Raw Materials $303,491 $196,624
Finished goods 529,278 655,047
-------- --------
Total $832,769 $851,671
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, are comprised of the following at:
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1995
--------------------------------------
<S> <C> <C>
Tooling and molds $ 846,509 $ 836,805
Office Furniture and
fixtures 439,955 434,034
Manufacturing equipment 374,540 103,649
Leasehold improvements 79,443 79,443
Warehouse equipment 54,024 54,024
----------- -----------
Total 1,794,471 1,507,955
Accumulated depreciation (1,274,512) (1,208,123)
----------- -----------
Net $ 519,959 $ 299,832
</TABLE>
The primary increase in property and equipment is due to the purchase of the
Ulti Vac(TM) product line equipment.
NOTE 5. NOTES PAYABLE
BANK
The Company maintains a line of credit with Riverside Bank. As of December 31,
1995, the borrowing base under the line of credit was the lesser of $1,250,000
or (b) the sum of (i) 85% of eligible accounts receivable and (ii) 50% of
eligible inventory. The Company is also required to maintain tangible net worth
of $1,100,000. 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.
POROUS MEDIA
The Company has a three year note payable and a deferred sales royalty payable
to Porous Media for the purchase of the Ulti Vac(TM) product line.
Form 10-Q SB December 31, 1995 Page 11
<PAGE>
NOTE 6. 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.
NOTE 7. INCOME TAXES
The Company has available net operating loss and tax credit carryforwards for
income tax purposes of approximately $1,620,000 and $83,688, respectively, on
June 30, 1995. 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 December 31, 1995 and June
30, 1995 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, 1995 December 31, 1995
---------------------------------
<S> <C> <C>
Loss Carryforwards $ 647,756 $ 583,287
Research & Development
Credits 83,688 83,688
Inventory 28,473 26,610
Bad Debts 6,722 7,057
Fixed Assets 91,200 98,860
Amortization (100,586) (114,990)
Other 4,658 4,658
--------- ---------
761,911 689,170
Less: Valuation Allowance (761,911) (689,170)
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
NOTE 8. RETIREMENT SAVINGS PLAN
The Company maintains a defined contribution plan which qualifies under the
Internal Revenue Code Section 401(K). Substantially all full time employees are
eligible to participate under the plan. Company contributions are discretionary.
Form 10-Q SB December 31, 1995 Page 12
<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: February 12, 1995 --------------------------------------
Steven D. Riedel
Chief Executive Officer
(Principal Executive, Financial Officer)
--------------------------------------
Denice J. Bloomer
Vice President/Controller (Principal
Accounting Officer)
Form 10-Q SB December 31, 1995 Page 13
<PAGE>
ATRIX INTERNATIONAL, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-QSB
For the Quarter Ended December 31, 1995
Item No. Item Method of Filing
- -------- ---- ----------------
10.1 Letter Agreement amending
Loan Agreement dated
April 25, 1995 between the
Company and Riverside Bank,
as amended October 25, 1995.......... Amendment filed herewith.
<PAGE>
[LETTERHEAD RIVERSIDE BANK]
February 13, 1996
Steven D. Riedel, President
Atrix International, Inc.
14301 Ewing Avenue South
Burnsville, MN 55337
Dear Mr. Riedel:
As you have requested, here are the changes in the terms of the lending
arrangement between Atrix International, Inc. and Riverside Bank from the
April 25, 1995 documents to the October 25, 1995 documents.
The maturity date of the Note was extended to October 25, 1996.
The amount of the Note was increased from $1,000,000 to $1,250,000.
Advances on eligible accounts was decreased from 85% to 75%.
Eligible inventory was limited to $350,000 and is now limited to 50%
of the outstanding loan balance.
Cash collateral was decreased from $418,000 to $250,000
All other terms and conditions of the April 25, 1995 agreements between Atrix
International, Inc. and Riverside Bank remain the same.
Sincerely,
/s/ Michael T. Zenk
Michael T. Zenk
Senior Vice President
[LETTERHEAD RIVERSIDE BANK]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
10-Q pages and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,458,460
<INVESTMENTS-AT-VALUE> 1,458,460
<RECEIVABLES> 833,792
<ASSETS-OTHER> 928,603
<OTHER-ITEMS-ASSETS> 846,267
<TOTAL-ASSETS> 4,067,122
<PAYABLE-FOR-SECURITIES> 0
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<TOTAL-LIABILITIES> 1,842,902
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56,536
<SHARES-COMMON-STOCK> 5,653,644
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<ACCUMULATED-NII-CURRENT> 100,453
<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 4,067,122
<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> 400,272
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<REALIZED-GAINS-CURRENT> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 16,476
<GROSS-EXPENSE> 416,748
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
