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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1 to Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934: For the quarterly period ended March 31, 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: 1-12128
Matritech, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 04-2985132
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(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
330 Nevada Street, Newton, Massachusetts 02160
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(Address of principal executive offices) (Zip Code)
(617) 928-0820
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of [April 17, 1996] there were [15,927,146] shares of Common Stock
outstanding.
[The Exhibit Index is located on Page 14.]
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The undersigned registrant hereby amends and restates Item 2 of its Form
10-Q for the fiscal quarter ended March 31, 1996, so that as so amended and
restated said Item 2 shall read in its entirety as set forth on the pages
attached hereto.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was incorporated in 1987 to develop, manufacture and market
innovative cancer diagnostic products based on its proprietary NMP technology.
Matritech has been unprofitable since inception and expects to incur
significant operating losses for at least the next two years. The Company was
considered a development-stage company until the fourth quarter of 1995. For
the period from inception to March 31, 1996, the Company incurred a cumulative
net loss of approximately $22.4 million.
In 1995, the Company began to sell its NMP22 Test Kits in certain countries
in Europe through a distributor. The Company is currently awaiting FDA
approval to begin selling the NMP22 Test Kit in the United States. If approved
by the U.S. Food and Drug Administration, the Company will begin to sell and
distribute its NMP22 Test Kits throughout the United States.
Results of Operations
Three Months Ended March 31, 1996 Compared with Three Months Ended March 31,
1995
Collaborative research and development, license fees and product sales
increased to $179,000 for the quarter ended March 31, 1996 from $74,000 for
the quarter ended March 31, 1995. Revenue generated from collaborative
research and development and license fees in the quarter ended March 31, 1996
consisted of $47,000 in Small Business Innovation Research ("SBIR") funding
for the Company's drug screening assay project as compared to $34,000 in SBIR
funding for the Company's prostate cancer project in the first quarter of
1995. Revenue from product sales increased 230% to $132,000 for the quarter
ended March 31, 1996 as compared to $40,000 in the first quarter of 1995. This
increase was primarily due to expanded sales of the Company's NMP22 Test Kit
for bladder cancer and certain research products. Product sales in Europe for
the quarter ended March 31, 1996 were minimal due to a shift in the business
focus of the Company's former exclusive distributor in Europe. In June 1996,
the Company and its then exclusive distributor in Europe terminated their
distribution agreement for the NMP22 Test Kit. The Company has recently
reached agreements in principle with two new distributors to be the exclusive
distributors in Germany and Italy of Matritech-labeled NMP22 Test Kits in
those countries. The Company will continue to seek additional distributors in
Europe.
Interest and other income was $153,000 for the quarter ended March 31, 1996
and $53,000 for the quarter ended March 31, 1995. The increase of 189%
resulted from significantly higher cash balances available for investment
during the first quarter of 1996 as compared to 1995 resulting from financings
during the fourth quarter of 1995.
Research and development expenses increased 19% to $933,000 for the quarter
ended March 31, 1996 from $785,000 for the quarter ended March 31, 1995. The
increase was primarily related to the scale-up of product manufacturing for
the Company's NMP22 Test Kit for bladder cancer, for which the Company is
currently awaiting approval by the FDA.
Selling, general and administrative expenses increased 59% to $806,000 for
the quarter ended March 31, 1996 from $506,000 for the quarter ended March 31,
1995. Approximately half of the increase resulted primarily from increased
staffing in the sales and marketing department and the marketing programs
established to promote the Company's products worldwide. The balance of the
increase primarily related to increased salaries and professional fees and to
a lesser extent expenses incurred in the first quarter of 1996 in connection
with the Company's move from Cambridge to Newton, Massachusetts.
The Company incurred a net loss of $1,407,000 for the quarter ended March
31, 1996, as compared to a net loss of $1,164,000 for the quarter ended March
31, 1995. The increased loss was primarily the result of increased expenses in
product manufacturing, sales and marketing for the Company's NMP22 Test Kit
for bladder cancer.
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Liquidity and Capital Resources
Since its inception, the Company has financed its operations primarily
through private and public offerings of its securities and through funded
development and marketing agreements. In September 1995, the Company received
net proceeds of approximately $6,658,000 from the private sale of Common
Stock. In December 1995, the Company received net proceeds of approximately
$4,656,000 from the exercise of certain Common Stock warrants which the
Company had called for redemption. During the quarter ended March 31, 1996,
the Company received net proceeds of approximately $1,240,000 from the
exercise of Common Stock warrants. In June 1995, the Company signed a product
development and marketing option agreement with Bayer and received a $150,000
initial payment. Under this agreement, Matritech is eligible to receive
further milestone and option payments upon the completion of specific product
development milestones. In the year ended December 31, 1995, Matritech
received $60,000 in milestone payments under this agreement. At March 31,
1996, the Company had cash and cash equivalents of $10,976,000 and working
capital of $10,693,000.
The Company's operating activities used cash of approximately $1,119,000 and
$1,260,000 for the three-month periods ended March 31, 1995 and 1996,
respectively, primarily to fund the Company's operating loss.
The Company made purchases of approximately $17,000 and $67,000 in the
three-month periods ended March 31, 1995 and 1996, respectively, for computer
systems and laboratory equipment.
Financing activities provided cash of approximately $1,294,000 in the
three-month period ended March 31, 1996, primarily from the exercise of stock
options and warrants, net of payments of capital lease obligations. Financing
activities used cash of approximately $29,000 in the three-month period ended
March 31, 1995, primarily from payments of capital lease obligations and costs
relating to the sale of securities in December, 1994.
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Capital expenditures totaled approximately $67,000 during the three months
ended March 31, 1996, which consisted primarily of computer systems and
laboratory equipment. The Company currently estimates that it will acquire
approximately $270,000 of capital equipment during the remainder of the year
ending December 31, 1996, consisting primarily of computer systems, laboratory
equipment and office equipment.
The Company may from time to time consider obtaining additional long-term
funding for its operations from various sources including collaborative
arrangements and additional public or private financings. The Company
anticipates that its existing capital resources including working capital and
interest thereon, will satisfy its capital needs at least through September 30,
1997. The survival of the Company in the long term, however, is dependent on its
ability to generate revenue from sales of its products. There can be no
assurance that such additional funding will be available on terms acceptable to
the Company, if at all.
The Company expects to incur continued research and development expenses and
other costs, including costs related to clinical studies to commercialize
additional products based on its NMP technology. The Company expects that such
costs will increase in the fiscal year ending December 31, 1996 and will result
in continued losses from operations. The Company may require substantial
additional funds to complete new product development, conduct clinical trials
and manufacture and market its products.
The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research and development
programs, the magnitude of these programs, progress with clinical trials for its
diagnostic products, the time involved in obtaining regulatory approvals, the
costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the ability of the Company to establish
additional development and marketing arrangements to provide funding for
research and development and funding to conduct clinical trials, obtain
regulatory approvals, and manufacture and market certain of the Company's
products. Should the Company pursue potential therapeutic applications of its
technology beyond initial feasibility studies, substantial additional financing
would also be required.
Factors that may Affect Future Results.
The Company's future financial and operational results are subject to a
number of material risks and uncertainties that may affect such results or
conditions, including:
History of Operating Losses and Anticipated Future Losses. The Company has
incurred operating losses since its inception and expects to incur significant
operating losses over the next few years. The Company expects to improve
operating results in future periods, however, there can be no assurance that the
Company will achieve or maintain profitability or that its revenue growth can be
sustained in the future.
Uncertainties Associated with Future Performance. The Company's success in
the market for diagnostic products will depend, in part, on the Company's
ability to: successfully develop, test, produce and market its products; obtain
necessary governmental approvals in a timely manner; attract and maintain key
employees; and successfully respond to technological changes in its marketplace.
Access to Capital. The Company will consider from time to time various
financing alternatives and may seek to raise additional capital through equity
or debt financing or to enter into corporate partnering arrangements. There can
be no assurance, however, that this funding will be available on terms
acceptable to the Company, if at all.
Fluctuation in Operating Results. The Company's future operating results may
vary significantly from quarter to quarter or from year to year depending on a
number of factors including: the time of payments from corporate partners and
research grants; regulatory approvals and the introduction of new products by
the Company; the timing and size of orders from the Company's customers; and the
market acceptance of the Company's products. The Company's current planned
expense levels are based in part upon expectations as to future revenue.
Consequently, profits may vary significantly from quarter to quarter or year to
year based on the timing of revenue. Revenue or profits in any period will not
necessarily be indicative of results in subsequent periods.
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SIGNATURES
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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.
MATRITECH, INC.
Date: June 13, 1996 By: /s/ Stephen D. Chubb
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Stephen D. Chubb
Chairman and Chief Executive Officer
(principal executive and financial
officer)
Date: June 13, 1996 By: /s/ Leslie R. Teso
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Leslie R. Teso
Vice President, Finance, Secretary and
Treasurer (principal accounting
officer)
