<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 QUARTERLY PERIOD ENDED MARCH 31, 1996.
Commission File Number
0-19659
DNX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-2877973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
575 Route 28, Raritan, New Jersey 08869
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (908) 722-7900
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 issuer's
classes of common stock as of the latest practicable date.
<TABLE>
<S> <C>
Common Stock $0.01 par value 8,619,592
Outstanding at May 1, 1996
</TABLE>
<PAGE> 2
DNX CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations -
for the three months ended March 31, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity -
for the three months ended March 31, 1996 5
Consolidated Statements of Cash Flows -
for the three months ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 14
PART II. OTHER INFORMATION 15
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DNX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
Assets March 31, 1996 December 31, 1995
------- -------------- -----------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 15,469 20,042
Short-term investments 5,385 1,001
Trade accounts receivable, net 6,456 7,662
Prepaid expenses and other current assets 1,328 1,351
---------- ---------
Total current assets 28,638 30,056
Property, plant and equipment, net 16,156 16,935
Intangible assets, net 996 1,035
Other assets 46 44
Restricted cash 750 777
---------- ---------
$ 46,586 48,847
========== =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities
Short-term borrowings 777 1,399
Current portion of long-term debt 607 744
Accounts payable 1,883 2,100
Accrued expenses 2,735 2,992
Deferred revenue 2,782 3,456
---------- ---------
Total current liabilities 8,784 10,691
Long-term debt, excluding current portion 7,764 7,830
Deferred income taxes 1,954 2,045
Other liabilities 943 948
---------- ---------
Total liabilities 19,445 21,514
---------- ---------
Stockholders' equity
Serial preferred stock, $.01 par value, 5,000,000
shares authorized; no shares issued and outstanding -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; issued and outstanding 8,619,548 in 1996
and 8,606,194 in 1995 86 86
Additional paid-in capital 57,021 57,000
Translation adjustment 864 1,095
Accumulated deficit (30,830) (30,848)
---------- ---------
Total stockholders' equity 27,141 27,333
---------- ---------
Commitments and contingencies
$ 46,586 48,847
========== =========
</TABLE>
3
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DNX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995
(in thousands expect per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---- ----
<S> <C> <C>
Revenues:
Commercial services $ 7,001 6,637
License fees and other contracts 119 330
-------- --------
7,120 6,967
-------- --------
Operating expenses:
Cost of commercial services 5,556 5,351
Research and development 104 285
General, administrative and marketing 1,532 1,470
-------- --------
7,192 7,106
-------- --------
Loss from operations (72) (139)
-------- -------
Other income (expense):
Interest income 313 97
Interest expense (178) (217)
Other 84 222
-------- -------
219 102
-------- -------
Income (loss) before equity in net loss of Nextran and
income taxes 147 (37)
Equity in net loss of Nextran - 1,301
Provision for income taxes 129 69
-------- --------
Net income (loss) $ 18 (1,407)
======== ========
Earnings (loss) per common and common
equivalent share $ 0.00 (0.16)
======== ======
Shares used in computing per share amounts 9,142 8,788
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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DNX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1996
(in thousands except shares)
(unaudited)
<TABLE>
<CAPTION>
Additional Total
Common paid-in Translation Accumulated stockholders'
stock capital adjustment deficit equity
----- ------- ---------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 86 57,000 1,095 (30,848) 27,333
Issuance of 10,059 shares
of common stock upon
exercise of stock options -- 6 -- -- 6
Issuance of 3,295 shares
of common stock pursuant
to 401(k) plan -- 15 -- -- 15
Translation adjustment -- -- (231) -- (231)
Net income -- -- -- 18 18
------- ------ ----- ------- ------
Balance, March 31, 1996 $ 86 57,021 864 (30,830) 27,141
======= ====== ===== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
DNX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 18 (1,407)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Non-cash items:
Depreciation and amortization 616 697
Deferred income tax expense (benefit) 18 (32)
Gain on disposal of property, plant and equipment - (1)
Amortization of premium on short term investments 25 14
Noncash charges 15 29
Equity in net loss of Nextran - 1,301
Change in operating assets and liabilities:
Decrease in accounts receivable 1,006 862
Increase in prepaid expenses and other current assets (91) (36)
(Increase) decrease in other assets (2) 72
Increase (decrease) in accounts payable (112) 85
Decrease in accrued expenses (189) (393)
Decrease in deferred revenue (608) (973)
Increase in other liabilities 14 22
------ -------
Net cash provided by operating activities 710 240
------ -------
Cash flows from investing activities:
(Increase) decrease in restricted cash 27 (18)
Purchase of property, plant and equipment (131) (340)
Proceeds from disposal of property, plant and equipment - 4
Purchases of intangibles assets (1) (17)
Purchases of short-term investments (5,409) (2,055)
Proceeds from maturities of short-term investments 1,000 -
------ -------
Net cash used in investing activities (4,514) (2,426)
------ -------
Cash flows from financing activities:
Principal payments on short-term borrowings (590) -
Principal payments on long-term debt (201) (192)
Proceeds from stock options exercised 6 -
------ -------
Net cash used in financing activities (785) (192)
------ -------
Effect of exchange rate changes on cash 16 (41)
------ ------
Decrease in cash and cash equivalents (4,573) (2,419)
Cash and cash equivalents, beginning of period 20,042 4,404
------ -------
Cash and cash equivalents, end of period $ 15,469 1,985
====== =======
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 181 $ 215
Income taxes 7 10
------ -------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
DNX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996
(unaudited)
Note 1. Statement of Accounting Presentation
In the opinion of DNX Corporation and Subsidiaries (as defined below)
(the "Company"), the accompanying unaudited consolidated financial statements
include all significant adjustments (consisting only of normal recurring
accruals) necessary to fairly state the Company's consolidated financial
position as of March 31, 1996, and the consolidated results of operations and
cash flows for the three month periods ended March 31, 1996 and 1995. The
consolidated financial statements have been prepared in accordance with the
requirements for Form 10-Q and, therefore, do not include all disclosures of
financial information required by generally accepted accounting principles.
The accompanying consolidated financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The information set
forth in the accompanying consolidated balance sheet as of December 31, 1995
has been derived from the audited consolidated balance sheet included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Interim results are not necessarily indicative of the results for the
full year.
Note 2. Earnings (Loss) Per Share
Earnings (loss) per common and common equivalent share is computed
based upon the weighted average number of common shares outstanding during the
periods, plus when their effect is dilutive, common stock equivalents
consisting of certain shares subject to stock options and warrants, and gives
effect to certain adjustments as prescribed by Securities and Exchange
Commission Staff Accounting Bulletin 83. Primary and fully-diluted earnings
(loss) per share are the same.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL SUMMARY
The Company is a contract research organization (CRO) whose principal
activities consist of preclinical drug development services conducted through
its two wholly-owned subsidiaries, Pharmakon Research International, Inc.
(Pharmakon) and DNX Biotherapeutics, Inc. (DNX Biotherapeutics), currently
doing business as DNX Transgenics (DNX Transgenics, together with Pharmakon,
the Subsidiaries). Pharmakon is a CRO providing preclinical drug development
and safety assessment services, including in vitro and in vivo toxicological,
pharmacological and pharmacokinetics testing services, to the pharmaceutical,
biotechnology, chemical and other industries through its United States
operations and its European subsidiary, Pharmakon Europe. A primary component
of Pharmakon's preclinical drug development services consists of specialty
services such as general and safety pharmacology, continuous infusion
techniques, immunology and immunotoxicology. DNX Transgenics is a specialty
CRO using its proprietary transgenic animal technology by providing drug
development services to the pharmaceutical, biotechnology and medical
communities via the development of laboratory animal models that more closely
mimic human biological processes than do conventional laboratory animal models
for use in in vivo testing for drug discovery and development and in biomedical
research.
The Company also grants sublicenses of its proprietary Pronuclear DNA
Microinjection technology, the process widely used in the pharmaceutical and
biotechnology industries to develop transgenic animals. These sublicenses
entitle the Company to receive revenues consisting of fees and, in certain
cases, royalties. Additionally, although the Company has sold its partnership
interest in Nextran, in the event that Nextran develops and commercializes
hemoglobin blood substitutes using technologies licensed to Nextran by the
Company, the Company will receive royalty income.
Pharmakon accounted for more than 95% of the Company's revenues for
the years ended December 31, 1995 and 1994 and the three months ended March 31,
1996. Since the majority of Pharmakon Europe's revenues, which accounted for
approximately 69% of the Company's revenues for the year ended December 31,
1995 and 70% of the Company's revenues for the three months ended March 31,
1996, are denominated in French Francs, fluctuations in the exchange rate
between the French Franc and the U.S. dollar have an effect on the Company's
operating results.
FORMATION AND SALE OF NEXTRAN
On August 29, 1994, DNX Biotherapeutics entered into a Joint Venture
Agreement (the Joint Venture Agreement) with Baxter Transplant Holdings
(Holdings), a wholly-owned subsidiary of Baxter Healthcare Corporation
(Baxter), which is a subsidiary of Baxter International, Inc., to form Nextran,
a Delaware general partnership, in which DNX Biotherapeutics had a 30%
partnership interest and Holdings has a 70% partnership interest. Pursuant to
the terms of the Purchase Agreement dated September 22, 1995, as
8
<PAGE> 9
amended, DNX Biotherapeutics consummated the sale of its 30% partnership
interest in Nextran to Transplant Acquisition Inc. ("Acquisition"), a
wholly-owned subsidiary Baxter, for a cash purchase price of $18 million. See
Note 6 of the Notes to Consolidated Financial Statements contained in the
Company's Form 10-K Annual Report for the fiscal year ended December 31, 1995.
RESULTS OF OPERATIONS
REVENUES
Revenues were $7,120,000 for the three months ended March 31, 1996
versus $6,967,000 for the same period in 1995. The increase in revenues was
primarily due to an increase in business activity in preclinical drug
development services in both the European and U.S. marketplaces. Additionally,
revenue for the three months ended March 31, 1995 included approximately
$200,000 of revenue, classified as license fees and other contracts, primarily
from a government contract that was terminated in 1995. During fiscal 1995,
revenues were negatively impacted primarily as a result of reduced research and
development activity requiring preclinical development services relating to (i)
government price control pressures on pharmaceutical companies, (ii) increased
consolidation in the pharmaceutical industry causing delays in decisions that
effected preclinical drug development efforts and (iii) a difficult financial
environment (from 1993 through mid-1995) for biotechnology companies requiring
those companies to allocate cash resources to existing drug candidates rather
than developing new candidates which would require preclinical services. As
evidenced by the increased revenue in the first quarter of 1996 versus the
previous three quarters in 1995 and although the Company has been notified that
an existing services agreement with a significant customer will be discontinued
in the second half of 1996, the Company continues to believe that such decline
in activity in 1995 described above will be short-term and not indicative of
the long-term environment. However, there can be no assurance that such
short-term factors will continue to improve or that revenues will continue to
increase for the remainder of 1996.
OPERATING EXPENSES
Cost of commercial services was $5,556,000 or 79% of commercial
service revenues for the three months ended March 31, 1996 and $5,351,000 or
81% of commercial service revenues for the same period in 1995. The increase
in these costs for the three months ended March 31, 1996 versus the same period
in 1995 was primarily due to (i) increased business activity, which resulted in
an increase in variable costs such as materials and supplies, and (ii) an
increase in commercial service activity associated with DNX Transgenics. The
decrease in these costs as a percent of revenues is due to the leveraging of a
base cost structure of management and scientific personnel, equipment and
facilities which supported a higher level of business in the first three months
of 1996 than experienced during the same period in 1995.
Research and development expenses decreased 64% to $104,000 for the
three month period ended March 31, 1996 from $285,000 for the same period in
1995. The decrease in expenses was primarily the result of the shift in the
strategic focus of DNX
9
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Transgenics from the internal development of transgenic animal models to
providing specialty drug development services.
General, administrative and marketing expenses were $1,532,000 for the
three months ended March 31, 1996 versus $1,470,000 for the same period 1995.
The increase in expenses was primarily the result of increased marketing and
business development expenses.
OTHER INCOME (EXPENSE)
Other income (expense) amounted to $219,000 for the three months ended
March 31, 1996 versus $102,000 for the same period last year. The increase in
other income for 1996 as compared to 1995 is primarily the result of (i) the
increase in cash available for investment and (ii) the decrease in interest
expense as a result of the decrease in the prime rate. See "Liquidity and
Capital Requirements - Debt." Additionally, in the first quarter of 1995, the
Company transferred its lease obligation on the former Plainsboro pilot plant
facility to a third party and sold certain equipment associated with this
facility to the same party for a total of $600,000 to be paid in monthly
installments through September 1996. Other income for the three months ended
March 31, 1996 and 1995 includes income of $75,000 and $202,000, respectively,
associated with the transactions for this facility.
EQUITY IN NET LOSS OF NEXTRAN
As a result of the sale of its partnership interest in Nextran in September
1995, the Company no longer records a share of Nextran's financial results of
operations in its consolidated financial statements. Prior to September 30,
1995, as a result of its minority equity ownership in Nextran, the Company
recorded its share of Nextran's financial results in its consolidated financial
statements based on the equity method of accounting. For the three months ended
March 31, 1995, the Company's share of Nextran's loss amounted to $1,301,000.
TAXES
The Company's Pharmakon Europe subsidiary is subject to foreign income
taxes under French tax laws on the profits generated in France. The French
corporate income tax rate is expected to be approximately 37% in 1996. For the
three months ended March 31, 1996 and 1995, the Company recorded income tax
expense of $129,000 and $69,000, respectively, due to operating results
generated by Pharmakon Europe.
The impact from United States federal and state income taxes is
currently not significant due to the Company's available net operating loss
carryforwards. At December 31, 1995, the Company had available net operating
loss carryforwards of approximately $20,318,000 for United States federal and
state income tax purposes. Such loss carry forwards expire through 2009 and
2001, respectively. The Company also has research and development tax credit
carryforwards of approximately $2,982,000 for federal income tax reporting
purposes which are available to reduce federal income taxes, if any, through
2010. The Company has alternative minimum tax credit carryforwards of
approximately
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<PAGE> 11
$200,000 for federal income tax purposes which are available to reduce federal
income taxes, if any. These tax credits have an unlimited carryforward period.
LIQUIDITY AND CAPITAL REQUIREMENTS
CASH RESERVES
The Company finances its operations and activities by relying on (i)
its operating activities for its working capital requirements, (ii) its cash
reserves and (iii) its available lines of credit. As of March 31, 1996, the
Company had cash reserves (consisting of cash and cash equivalents, short-term
investments and restricted cash) of $21,604,000. The Company invests its
excess cash in a diversified portfolio of high-grade money market funds, United
States Government-backed securities and commercial paper and corporate
obligations. While the Company generated $710,000 from operating activities
during the first three months of 1996, the Company's cash reserves decreased by
$216,000 primarily due to repayment of short-term borrowings and payments on
long- term debt.
DEBT
In December 1992, Pharmakon acquired Pharmakon Europe through a stock
purchase. Included in the purchase price were promissory notes having an
aggregate principal amount of $7.0 million (the "Pharmakon Notes"). The
remaining unpaid principal balance as of March 31, 1996 of $5,000,000 will be
paid in December 1997. The payment of the Pharmakon Notes is secured by a
pledge of the capital stock of Pharmakon Europe, a pledge of certain assets of
Pharmakon, a guarantee by the Company and a security interest in fees and
royalties payable to the Company under sublicenses of its proprietary DNA
Microinjection Technology. The Pharmakon Notes require prepayments in
specified amounts upon the Company selling any of its shares of common stock of
Pharmakon. The promissory notes contain various covenants, the most
restrictive of which prohibit the payment of dividends by Pharmakon to the
Company and the sale of any Pharmakon Europe assets that are not made in the
ordinary course of business.
In connection with the construction of its new U.S. facility,
Pharmakon secured (i) a $1.5 million 15-year mortgage with a bank and (ii) a
$1.2 million 15-year mortgage from a Pennsylvania agency, which required cash
collateral of $450,000. These two loans are also secured by mortgages on the
property acquired. The cash collateral on the mortgage loan with the
Pennsylvania agency is classified as restricted cash as of March 31, 1996. If
the Company achieves certain financial covenants, this $450,000 of cash
collateral will be released. Additionally, the favorable interest rate on the
mortgage with the Pennsylvania agency is subject to change upon review by the
agency of certain future conditions.
In March 1993, DNX Biotherapeutics obtained a $3.0 million debt
financing facility from a bank in the form of an equipment line of credit which
is guaranteed by the Company. In connection with the curtailment of the blood
substitute program in 1993, DNX Biotherapeutics discontinued borrowings under
this line of credit and is paying the principal balance of $353,000 outstanding
on March 31, 1996 in monthly installments through January 1997. The loan is
secured by a security interest in the equipment
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acquired and the payments due to the Company under the installment sale of
certain equipment associated with the transfer of the lease obligation on the
former Plainsboro pilot plant facility. In connection with the formation of
Nextran, the Company entered into a services/lease agreement whereby Nextran
leases 49% of the equipment subject to this loan and makes monthly payments to
the Company equal to Nextran's proportionate share of the monthly payment due
under this loan based on the equipment.
In May 1994, Pharmakon obtained a $500,000 equipment loan from a
Pennsylvania agency secured by certain of the equipment required in connection
with the expansion of Pharmakon's United States operations. The loan is
payable in equal monthly installments through June 2001. As of March 31, 1996,
$288,000 of the proceeds from this equipment loan remains in escrow pending the
purchase of specified equipment and is classified as restricted cash. The
funding period for this loan ended on December 31, 1995. These remaining
proceeds were returned to the Pennsylvania agency in April 1996.
Pharmakon Europe has lines of credit and overdraft privileges with
French banks in the aggregate amount of 10.5 million French Francs ($2.1
million at the exchange rates in effect March 31, 1996). At December 31, 1995,
there were short-term borrowings outstanding under these facilities in the
amount of 6.9 million French Francs which, as of March 31, 1996, has been
reduced to 3.9 million French Francs ($777,000 at the exchange rate in effect
on March 31, 1996).
CAPITAL REQUIREMENTS
The Company believes that with its current financial resources it has
the ability to meet its working capital requirements on an ongoing basis for
the foreseeable future. The Company anticipates that its future capital
requirements may include investment for expansion of its operating
infrastructure to meet anticipated increased demand for preclinical drug
development services from the pharmaceutical and biotechnology industries. In
addition, a $5,000,000 payment on the principal balance of the Pharmakon Notes
will be due in December 1997. Additionally, the Company from time to time is
engaged in discussions regarding strategic acquisitions of other organizations
providing various drug development services and may finance such acquisition
with its existing cash resources or by additional public or private debt or
equity financings or through the issuance of stock. In the event the Company
pursues any such acquisition which requires financing, there can be no
assurance that such financing will be available to the Company or if available,
that it will be available on acceptable terms. Also, there can be no assurance
that the Company will consummate such a transaction or obtain any such
financing, or if consummated, that such financing arrangements will satisfy a
material portion of the Company's capital needs.
As a former general partner of Nextran, the Company remains obligated
with respect to certain environmental representations and warranties which
expire on August 29, 1997. Such representations and warranties are also
limited by certain financial indemnification provisions.
The Company's working capital and other capital requirements will
depend on numerous factors, including among others: success in increasing the
Company's revenues
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and managing its operating subsidiaries, Pharmakon and DNX Transgenics; success
in licensing the Company's DNA Microinjection technology; the exchange rate
between the United States dollar and the French Franc in the event funds from
the Company's Pharmakon Europe operation are needed to meet capital
requirements of the Company's U.S. operations; the level of Company resources
devoted to marketing and administration; technological advances; and the status
of competitors.
EXCHANGE RATE FLUCTUATIONS
The Company's consolidated financial statements are denominated in
U.S. dollars and, accordingly, changes in the exchange rate between the French
Franc and the U.S. dollar will affect the translation of Pharmakon Europe's
revenues and operating results into U.S. dollars for purposes of reporting the
Company's consolidated financial results, and also affect the U.S. dollar
amounts actually received by the Company from such subsidiary. Based on the
assumption that Pharmakon Europe continues to represent a significant portion
of the business of the Company, the depreciation of the U.S. dollar against the
French Franc would have a favorable impact on the Company's revenues and an
unfavorable impact on the Company's operating expenses due to the effect of
such currency translation on Pharmakon Europe's operating results; however, the
appreciation of the U.S. dollar against the French Franc would have an
unfavorable impact on the Company's revenues and a favorable impact on the
Company's operating expenses. The Company does not currently hedge its
currency translation exposure.
Contracts between Pharmakon Europe and its clients are generally
denominated in French Francs. Because substantially all of Pharmakon Europe's
expenses, such as salaries, services, materials and supplies, are paid in
French Francs, its expenses are not materially affected by fluctuations in
exchange rates. However, given that the majority of Pharmakon Europe's clients
and competitors are located outside of France, exchange rate fluctuations may
materially impact contract prices and therefore may materially impact the
results of operations of Pharmakon Europe and the Company.
The results of operations of Pharmakon Europe denominated in French
Francs have been translated from French Francs into U.S. dollars using the
following exchange rates:
<TABLE>
<CAPTION>
French Franc U.S. dollar per
Period per U.S. dollar French Franc
------ --------------- ------------
<S> <C> <C>
1st quarter 1995 5.1602 .1938
2nd quarter 1995 4.9161 .2034
3rd quarter 1995 4.9393 .2025
4th quarter 1995 4.9232 .2031
1st quarter 1996 5.0384 .1985
</TABLE>
The rates in the above table represent an average exchange rate calculated
using rates quoted in The Wall Street Journal.
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ACCUMULATED DEFICIT
Since its inception in 1988 until the formation and subsequent sale of
its partnership interest in Nextran in 1995, the Company has expended
substantial funds for research and development and capital expenditures. A
significant portion of such expenditures were made to support DNX
Biotherapeutics' organ transplantation and blood substitute research and
development programs, which programs were transferred to the Nextran
partnership. Historically, these programs have accounted for a substantial
portion of the Company's accumulated deficit.
NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the FASB issued Statement 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 presents companies with the
alternative of retaining the current accounting for stock-based compensation or
adopting a new accounting method based on the estimated fair value of equity
instruments granted during the year. Companies that do not adopt the fair
value based method of accounting will be required to adopt the disclosure
provisions of SFAS 123 for the year ending December 31, 1996. The Company
expects to continue applying its current accounting principles and upon
adoption in 1996 will present the required footnote disclosures.
INFLATION
The Company believes that inflation has not had a material impact on
its results of operations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11.1 Statement Re: computation of earning (loss) per
share.
27 Financial Data Schedule
b. Reports on Form 8-K
None.
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DNX CORPORATION
SIGNATURES
The financial information furnished herein has not been audited.
However in the opinion of management, all significant adjustments necessary for
a fair presentation for the three month periods ended March 31, 1996 and 1995,
have been included.
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.
<TABLE>
<S> <C> <C>
Date: May 9, 1996 DNX CORPORATION
/s/ John G. Cooper
-------------------------------------------
John G. Cooper
Vice President, Chief Financial Officer
and Treasurer
(Duly Authorized Officer and Chief
Accounting Officer)
</TABLE>
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Exhibit 11.1
DNX CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE
Three months ended March 31, 1996 and 1995
(in thousands expect per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---- ----
<S> <C> <C>
Net income (loss) $ 18 (1,407)
------- -------
Weighted average shares:
Common stock 8,614 8,456
Warrants and options* 213 332
Common stock equivalents 315 -
------ -------
Total weighted average shares 9,142 8,788
------ -------
Earnings (loss) per common and common equivalent share $ 0.00 (0.16)
======= =======
</TABLE>
* Although the effect of inclusion of stock options and warrants is
anti-dilutive, such securities have been reflected in weighted average shares
from the beginning of the earliest period presented in accordance with Staff
Accounting Bulletin (Topic 4-D).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
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