<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1997
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.
---------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2985132
-------- ----------
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
330 NEVADA STREET, NEWTON, MASSACHUSETTS 02160
----------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 928-0820
--------------
(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 April 16, 1997 there were 16,041,318 shares of Common Stock
outstanding.
Page 1 of 15
The Exhibit Index is located on Page 14.
<PAGE>
MATRITECH, INC.
INDEX
PART I FINANCIAL INFORMATION
Page
----
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1996
and March 31, 1997 3
Statements of Operations for the
three-month periods ended March 31, 1996
and 1997 5
Statements of Cash Flows for the
three-month periods ended March 31, 1996
and 1997 6
Notes to Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 9
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
Page 2 of 15
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MATRITECH, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $6,770,336 $5,797,136
Accounts receivable 814,544 359,421
Inventories 343,058 410,627
Prepaid expenses 123,401 127,353
------------ ------------
Total current assets 8,051,339 6,694,537
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Laboratory equipment 949,508 964,584
Office equipment 186,228 191,341
Laboratory furniture 55,772 55,772
Leasehold improvements 45,871 45,871
------------ ------------
1,237,379 1,257,568
Less-Accumulated depreciation
and amortization 701,769 733,065
------------ ------------
535,610 524,503
------------ ------------
OTHER ASSETS, net 82,912 78,244
------------ ------------
$8,669,861 $7,297,284
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 3 of 15
<PAGE>
MATRITECH, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 422,559 362,000
Accrued expenses 463,318 644,144
------------- -------------
Total current liabilities 885,877 1,006,144
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par
value -
Authorized - 4,000,000
shares Issued and
outstanding - none - -
Common stock, $.01 par value -
Authorized -- 40,000,000 shares
Issued and outstanding --
16,032,734 shares at
December 31, 1996, and
16,041,318 shares at
March 31, 1997 160,327 160,413
Additional paid-in capital 33,764,062 33,793,731
Accumulated deficit (26,140,405) (27,663,004)
------------- -------------
Total stockholders' equity 7,783,984 6,291,140
------------- -------------
$ 8,669,861 $ 7,297,284
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 4 of 15
<PAGE>
MATRITECH, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
REVENUES:
Collaborative research
and development, license
fees and product sales $ 225,175 $ 178,693
Interest and other income 83,783 153,593
----------- -----------
308,958 332,286
----------- -----------
EXPENSES:
Research and development 896,391 933,141
Selling, general and
administrative 935,166 805,970
----------- -----------
1,831,557 1,739,111
----------- -----------
Net Loss $(1,522,599) $(1,406,825)
=========== ===========
NET LOSS PER SHARE $(.09) $(.09)
=========== ===========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 16,041,146 15,665,045
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 5 of 15
<PAGE>
MATRITECH, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (1,522,599) $(1,406,825)
Adjustments to reconcile net loss
to net cash used in operating
activities -
Depreciation and amortization 35,964 29,839
Changes in assets and
liabilities -
Accounts receivable 455,123 1,491
Inventories (67,569) (43,722)
Prepaid expenses (3,952) (1,621)
Accounts payable (60,559) 99,862
Accrued expenses 180,826 95,824
Deferred revenue ---- (34,900)
----------- ------------
Net cash used in
operating activities (982,766) (1,260,052)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment (20,189) (67,405)
----------- ------------
Net cash used in
investing activities (20,189) (67,405)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
options and warrants 29,755 1,298,232
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 6 of 15
<PAGE>
MATRITECH, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
Payments on note payable - $ (4,427)
----------- -----------
Net cash provided by
financing activities 29,755 1,293,805
----------- -----------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (973,200) (33,652)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 6,770,336 11,009,310
----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 5,797,136 $10,975,658
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 7 of 15
<PAGE>
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Operations and Basis of Presentation
- ---------------------------------------
Matritech, Inc. ("Matritech" or the "Company") was incorporated on
October 29, 1987 to develop, produce and distribute products for the diagnosis
and potential treatment of cancer based on its proprietary nuclear matrix
protein technology. This technology was licensed to the Company by the
Massachusetts Institute of Technology ("MIT").
The Company is devoting substantially all of its efforts toward product
research and development, raising capital and marketing existing products and
products under development. The Company is subject to risks common to companies
in similar stages of development, including dependence on key individuals,
competition from substitute products and larger companies, the uncertainty of
developing commercially usable products and the need to obtain adequate
additional financing necessary to fund the development of its future products.
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") and include, in the opinion of management, all
adjustments, consisting of normal, recurring adjustments, necessary for a fair
presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The results for the interim periods
presented are not necessarily indicative of results to be expected for any
future period. It is suggested that these condensed financial statements be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996 filed with the SEC (File No. 1-12128).
2. Cash Equivalents
- -------------------
Cash equivalents are short-term, highly liquid investments with original
maturities of less than three months. The Company's cash equivalents primarily
consisted of auction market equity securities, money market funds and repurchase
agreements at December 31, 1996 and March 31, 1997. The Company classifies its
investments in accordance with Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS No.
115).
3. Net Loss Per Share
- ---------------------
Net loss per common share is based on the weighted average number of
common shares outstanding. Common stock equivalents have not been included for
any loss period as the amounts would be antidilutive. In March 1997, SFAS No.
128 Earnings Per Share was issued which established new standards for
calculating and presenting earnings per share. The Company will adopt this new
standard in its 1997 financial statements.
Page 8 of 15
<PAGE>
MATRITECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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. For the period from inception
to March 31, 1997, the Company incurred a cumulative net loss of approximately
$28 million.
The Company sells its NMP22 Test Kit through its own direct sales force
in the United States and through distributors outside the United States. The
Company entered into agreements with several new distributors in Europe and the
Far East in the second half of 1996. The Company's 1996 product revenue
included initial stocking orders of the NMP22 Test Kit from such new
distributors. Consequently, quarterly product revenue may fluctuate from
quarter to quarter based on distributors' inventory of NMP22 Test Kits. See
"Factors that may Affect Future Results - Fluctuating Operating Results."
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED
------------------------------------------------------------------
MARCH 31, 1996
--------------
Collaborative research and development revenue, license fees and product
sales increased to $225,000 for the quarter ended March 31, 1997 from $179,000
for the quarter ended March 31, 1996. Revenue from product sales increased to
$165,000 for the quarter ended March 31, 1997 as compared to $132,000 in the
first quarter of 1996 due to worldwide sales of the Company's NMP22(R) Test Kit
for bladder cancer which was approved for sale in the United States by the U.S.
Food and Drug Administration ("FDA") in July 1996. The Company recorded $60,000
in milestone revenue relating to a funded development agreement with Bayer
Corporation ("Bayer") during the first quarter of 1997 compared to $47,000 in
SBIR funding for its cancer therapy development project during the first quarter
of 1996.
Interest and other income was $84,000 for the quarter ended March 31,
1997 and $153,000 for the quarter ended March 31, 1996. The decrease was due to
significantly lower cash balances available for investment in 1997 as compared
to 1996 resulting from financings during the third and fourth quarters of 1995
to fund the Company's operations.
Research and development expenses decreased slightly to $896,000 for the
quarter ended March 31, 1997 from $933,000 for the quarter ended March 31, 1996.
The decrease is primarily related to the suspension of the Company's cancer
therapy feasibility study and costs associated with that project.
Selling, general and administrative expenses increased 16% to $935,000
for the quarter ended March 31, 1997 from $806,000 for the quarter ended March
31, 1996. The increase was primarily related to increased selling expenses from
the establishment of a U.S. sales force and the costs associated with their
recruitment, payroll and travel in their respective territories in conjunction
with sales activities for the NMP22 (R) Test Kit.
The Company incurred a net loss of $1,523,000 for the quarter ended March
31, 1997, as compared to a net loss of $1,407,000 for the quarter ended March
31, 1996. The increased loss was primarily the result of increased selling
expenses for the NMP22(R) Test Kit and a decrease in interest income.
Page 9 of 15
<PAGE>
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. During the year ended December 31, 1996,
the Company received net proceeds of approximately $1,514,000 from the exercise
of common stock options and warrants. In June 1995, the Company signed a product
development and marketing option agreement with Bayer and received a $150,000
initial payment. In the year ended December 31, 1996 and quarter ended March 31,
1997 the Company recorded $120,000 and $60,000 respectively in milestone revenue
under this agreement. At March 31, 1997 the Company had cash and cash
equivalents of $5,797,000 and working capital of $5,688,000.
The Company's operating activities used cash of approximately $1,260,000
and $983,000 for the three-month periods ended March 31, 1996 and 1997,
respectively, primarily to fund the Company's operating loss.
The Company's investing activities used cash of approximately $67,000 and
$20,000 in the three-month periods ended March 31, 1996 and 1997, respectively,
for the purchase of computer systems, office and laboratory equipment and
leasehold improvements.
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 provided cash of approximately $30,000 in the three-month period
ended March 31, 1997, primarily from the exercise of common stock options.
Capital expenditures totaled approximately $20,000 during the three
months ended March 31, 1997, which amount was expended primarily for the
purchase of computer systems, office and laboratory equipment.
The Company expects to incur continued research and development expenses
and other costs, including costs related to clinical studies to commercialize
additional products based upon its NMP technology. The Company expects that
such costs will increase in the fiscal year ending December 31, 1997 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 to conduct clinical trials; obtain regulatory
approvals, and manufacture and market certain of the Company's products.
The Company is currently seeking 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 1997. The foregoing forward-looking
statement is subject to uncertainties and there can be no assurance that the
Company's needs may not change. See "Factors that may Affect Future Results-
Access to Capital." 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, or that in the long term, the Company will
be able to generate sufficient revenue to achieve and maintain profitability.
Page 10 of 15
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future financial and operational results are subject to a
numer 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 for at least the next two 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.
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 timing and size of orders from the Company's
customers and distributors; the timing of payments from corporate partners and
research grants; regulatory approvals and the introduction of new products by
the Company; 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.
Access to Capital. The Company is currently seeking to raise additional
capital and will consider from time to time various financing alternatives
including equity or debt financings and corporate partnering arrangements.
There can be no assurance, however, that this funding will be available on terms
acceptable to the Company, if at all. If additional financing is not available,
the Company may be required to curtail expenses or take other steps that
adversely affect the Company's future performance.
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.
The Company's success in markets outside the United States is dependent on the
performance of independent distributors over which the Company has limited
control.
Near-Term Dependence Upon NMP22. The Company anticipates that in the
near-term it will be substantially dependent on the success of the NMP22 Test
Kit, which was approved for sale in the U.S. by the FDA in July 1996 and expects
to generate substantially all of its near-term product sales from the sale of
NMP22 Test Kits. The Company would experience a material adverse effect on its
business, financial condition and results of operations if the NMP22 Test Kit
does not achieve wide market acceptance. The remainder of the Company's
products are in clinical trials or in development and there can be no assurance
that it will be successful with such clinical trials and product development.
Page 11 of 15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
--------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
Page 12 of 15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATRITECH, INC.
Date: May 9, 1997 By: /s/ Stephen D. Chubb
_______________________
Stephen D. Chubb
Chairman and Chief
Executive Officer
(principal executive
and financial officer)
Date: May 9, 1997 By: /s/ Leslie R. Teso
________________________
Leslie R. Teso
Vice President, Finance,
Secretary and Treasurer
(principal accounting officer)
Page 13 of 15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
27 Financial Data Schedule. 15
Page 14 of 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,797
<SECURITIES> 0
<RECEIVABLES> 359
<ALLOWANCES> 0
<INVENTORY> 411
<CURRENT-ASSETS> 6,695
<PP&E> 1,258
<DEPRECIATION> 733
<TOTAL-ASSETS> 7,297
<CURRENT-LIABILITIES> 1,006
<BONDS> 0
0
0
<COMMON> 160
<OTHER-SE> 33,794
<TOTAL-LIABILITY-AND-EQUITY> 7,297
<SALES> 225
<TOTAL-REVENUES> 309
<CGS> 0
<TOTAL-COSTS> 1,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,523)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,523)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
