<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934.
For the quarterly period ended September 30, 1998
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: 0-12128
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 02460
----------------------------------------------
(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 November 10, 1998 there were 18,626,602 shares of Common Stock
outstanding.
The Exhibit Index is located on Page 17.
Page 1 of 17
<PAGE>
MATRITECH, INC.
INDEX
PART I FINANCIAL INFORMATION
Page
----
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997
and September 30, 1998 3
Statements of Operations for the three and nine-month
periods ended September 30, 1997 and 1998 5
Statements of Cash Flows for the nine-month periods
ended September 30, 1997 and 1998 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 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
Page 2 of 17
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
MATRITECH, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 11,067,414 $ 5,619,386
Accounts receivable 101,941 232,629
Inventories 487,360 338,652
Prepaid expenses 127,156 76,777
------------ -------------
Total current assets 11,783,871 6,267,444
------------ -------------
PROPERTY AND EQUIPMENT, at cost:
Laboratory equipment 1,370,929 1,418,133
Office equipment 203,214 212,698
Laboratory furniture 62,739 62,739
Leasehold improvements 56,981 56,981
------------ -------------
1,693,863 1,750,551
Less-Accumulated depreciation
and amortization 872,706 1,017,683
------------ -------------
821,157 732,868
------------ -------------
OTHER ASSETS 86,745 68,452
------------ -------------
$ 12,691,773 $ 7,068,764
============ =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 3 of 17
<PAGE>
MATRITECH, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of note payable $ 60,733 $ 66,303
Accounts payable 378,700 204,488
Accrued expenses 354,904 632,734
------------ -------------
Total current liabilities 794,337 903,525
------------ -------------
NOTE PAYABLE, LESS CURRENT MATURITIES 208,762 158,314
------------ -------------
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 -- 18,566,737
shares at December 31, 1997, and
18,626,602 shares at
September 30, 1998 185,667 186,266
Additional paid-in capital 45,118,499 45,364,731
Accumulated deficit (33,615,492) (39,544,072)
------------ -------------
Total stockholders' equity 11,688,674 6,006,925
------------ -------------
$ 12,691,773 $ 7,068,764
============ =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 4 of 17
<PAGE>
MATRITECH, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Product sales and collaborative
research and development
revenue $ 170,839 $ 277,601 $ 547,417 $ 811,104
Interest and other income 194,796 80,545 381,549 355,022
----------- ----------- ----------- -----------
365,635 358,146 928,966 1,166,126
----------- ----------- ----------- -----------
EXPENSES:
Research and
development 1,117,452 980,273 2,979,721 3,134,836
Selling, general and
administrative 1,372,915 1,190,566 3,683,759 3,967,432
----------- ----------- ----------- -----------
2,490,367 2,170,839 6,663,480 7,102,268
----------- ----------- ----------- -----------
Net Loss $(2,124,732) $(1,812,693) $(5,734,514) $(5,936,142)
=========== =========== =========== ===========
BASIC/DILUTED LOSS PER SHARE $ (.11) $ (.10) $ (.33) $ (.32)
=========== =========== =========== ===========
BASIC/DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 18,541,678 18,620,439 17,160,888 18,612,724
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 5 of 17
<PAGE>
MATRITECH, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,734,514) $ (5,936,142)
Adjustments to reconcile net loss to net
cash used in operating activities -
Depreciation and amortization 93,817 171,038
Operating expense related to
issuance of common stock warrant 225,000 150,000
Changes in assets and liabilities -
Accounts receivable 501,817 (130,688)
Inventories (93,776) 148,708
Prepaid expenses 30,826 50,379
Accounts payable (7,776) (174,212)
Accrued expenses 418,961 277,830
------------ ------------
Net cash used in operating
activities (4,565,645) (5,443,087)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (355,664) (56,688)
------------ ------------
Net cash used in
investing activities (355,664) (56,688)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and
exercise of common stock options 11,029,779 96,625
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 6 of 17
<PAGE>
MATRITECH, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1998
---- ----
<S> <C> <C>
Payments on note payable -- $ (44,878)
------------ ------------
Net cash provided by
financing activities 11,029,779 51,747
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,108,470 (5,448,028)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 6,770,336 11,067,414
------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 12,878,806 $ 5,619,386
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ -- $ 22,032
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 7 of 17
<PAGE>
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Operations and Basis of Presentation
- ---------------------------------------
Matritech, Inc. ( 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 ("NMP")
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 products. 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 development of commercially usable products and the
need to obtain adequate additional financing necessary to fund its operations
and to develop 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, 1997 filed with the SEC (File No. 0-12128).
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 preferred stocks, money market accounts and
repurchase agreements at December 31, 1997 and September 30, 1998. 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. Inventories
- ----------------
Inventories are stated at the lower of cost or market and consist of the
following:
December 31, September 30,
1997 1998
------------ -------------
(Audited) (Unaudited)
Raw materials $ 305,241 $ 235,375
Work-in-process 6,634 10,479
Finished goods 175,485 92,798
------------ -------------
$ 487,360 $ 338,652
============ =============
4. Net Loss per Common Share
- -----------------------------
In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings per Share, which established new standards for calculating and
presenting earnings per share. Basic net loss per common share was computed by
dividing net loss by the weighted average number of common shares outstanding
during the year. Diluted loss per share is the same as basic loss per share as
the effects of potential common stock are antidilutive. This accounting change
had no effect on the Company's historical net loss per common share.
Page 8 of 17
<PAGE>
5. Subsequent Event
- -------------------
On November 10, 1998 the Company amended its Development and Supply
Agreement with Yamanouchi Pharmaceutical, Co., Ltd. resulting in the termination
of development, supply and marketing rights. In addition, Matritech reacquired
all rights under the agreement in exchange for a two-percent royalty on future
product sales covered by this agreement, sold in Japan, not to exceed
$2,000,000.
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 several years. For the period from
inception to September 30, 1998, the Company incurred a cumulative net loss of
approximately $40 million.
In the United States, the Company sells its NMP22(R) Bladder Cancer Test
Kit through its own direct sales force, and in March 1998 entered into a
distribution agreement with Curtin Matheson Scientific, a division of Fisher
Scientific Company, L.L.C. ("CMS") granting CMS the right, co-exclusive with
Matritech, to distribute the NMP22 Bladder Cancer Test Kit to hospitals and
commercial laboratories within the United States. Outside the United States,
the Company sells the NMP22 Bladder Cancer Test Kit through distributors.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
- ----------------------------------------------------------------------
SEPTEMBER 30, 1997
- ------------------
Revenue from product sales increased to $278,000 for the quarter ended
September 30, 1998 as compared to $171,000 for the third quarter of 1997
primarily due to increased sales of the NMP22(R) Bladder Cancer Test Kit in the
United States and Europe.
Interest and other income was $81,000 for the quarter ended September 30,
1998 and $195,000 for the quarter ended September 30, 1997. The decrease was
due to lower average cash balances available for investment in the third quarter
of 1998 as compared to the third quarter of 1997.
Research and development expenses decreased to $980,000 for the quarter
ended September 30, 1998 from $1,117,000 for the quarter ended September 30,
1997. The decrease is primarily due to a reduction in product development
reagents and supplies of $69,000 and a reduction in legal expenses associated
with patents of $64,000.
Selling, general and administrative expenses decreased to $1,191,000 for
the quarter ended September 30, 1998 from $1,373,000 for the quarter ended
September 30, 1997. The decrease was primarily related to decreased spending on
marketing consultants and studies and decreased expenses related to a certain
warrant issued to a public relations consultant.
The Company incurred a net loss of $1,813,000 for the quarter ended
September 30, 1998, as compared to a net loss of $2,125,000 for the quarter
ended September 30, 1997. The decrease in net loss was due to decreases in
research and development expenses and selling, general, and administrative
expenses.
Page 9 of 17
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
- --------------------------------------------------------------------
SEPTEMBER 30, 1997
- ------------------
Product sales and collaborative research and development revenue
increased to $811,000 for the nine months ended September 30, 1998 from $547,000
for the nine months ended September 30, 1997. Revenue from product sales
increased to $739,000 for the nine months ended September 30, 1998 as compared
to $487,000 for the nine months ended September 30, 1997 due primarily to
increased sales of the NMP22(R) Bladder Cancer Test Kits in the United States
and Europe. During the nine months ended September 30, 1997, the Company
recorded $60,000 in milestone revenue related to a funded development agreement
with Bayer Corporation ("Bayer") which was terminated in March 1998 and during
the first three quarters of 1998, the Company recorded $72,000 in SBIR funding
for the Company's NuMA tumor marker project.
Interest and other income was $355,000 for the nine months ended
September 30, 1998 and $382,000 for the nine months ended September 30, 1997.
The decrease was due to lower average cash balances available for investment in
the nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997.
Research and development expenses increased to $3,135,000 for the nine
months ended September 30, 1998 from $2,980,000 for the nine months ended
September 30, 1997. The increase is primarily related to increased staffing of
clinical affairs personnel to manage the Company's colon cancer FDA submission
and the NMP22 screening trial and related site management costs.
Selling, general and administrative expenses increased to $3,967,000 for
the nine months ended September 30, 1998 from $3,684,000 for the nine months
ended September 30, 1997. The increase was primarily due to increased
advertising agency fees, marketing and sales personnel costs in both the U. S.
and Europe, and professional fees for investor and media relations. In April
1997, the Company issued a warrant to a public relations consultant. The
Company expensed the value of the warrant, $500,000, ratably over the one-year
term of its agreement with such consultant. The Company expensed $225,000 and
$150,000 of the value of this warrant during the nine months ended September 30,
1997 and 1998, respectively.
The Company incurred a net loss of $5,936,000 for the nine months ended
September 30, 1998, as compared to a net loss of $5,735,000 for the nine months
ended September 30, 1997. The increased net loss was primarily the result of
increased marketing expenses for the NMP22 Bladder Cancer Test Kit, professional
fees, and to a lesser extent, increased clinical affairs costs associated with
the colon cancer project.
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. At December 31, 1997 and September 30,
1998, the Company had cash and cash equivalents of $11,067,000 and $5,619,000
respectively, and working capital of $10,990,000 and $5,364,000, respectively.
The Company's primary cash infusion in 1997 was from the private sale of common
stock, which totaled $10,915,000.
The Company's operating activities used cash of approximately $4,566,000
and $5,443,000 for the nine-month periods ended September 30, 1997 and 1998,
respectively, primarily to fund the Company's operating loss.
Page 10 of 17
<PAGE>
The Company's investing activities used cash of approximately $356,000
and $57,000 in the nine-month periods ended September 30, 1997 and 1998,
respectively, for the purchase of computer systems and office and laboratory
equipment. The Company currently estimates that it will acquire less than
$10,000 of capital equipment during the remainder of fiscal 1998.
Financing activities provided cash of approximately $11,030,000 in the
nine-month period ended September 30, 1997, from the private sale of common
stock and the exercise of common stock options. Financing activities provided
cash of approximately $52,000 in the nine-month period ended September 30, 1998,
primarily from the exercise of stock options net of equipment loan payments.
In August 1997, the Company entered into an equipment line of credit with
Phoenix Leasing, Incorporated under which it could borrow up to $1,200,000 for
equipment purchases. The equipment line of credit has since expired and was
converted into a term note on October 20, 1997 totaling $286,000. The term note
is payable over 48 months and is secured by the underlying equipment. The term
note bears interest at 11.75% and has an outstanding balance of $224,600 on
September 30, 1998.
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 will require
substantial additional funds to fund operations, 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 its research and development programs; progress with
clinical trials for its diagnostic products; the magnitude of product sales;
the time involved in obtaining regulatory approvals; the costs involved in
filing, prosecuting and enforcing patent claims; competing technological and
market developments; and the ability of the Company to establish additional
product 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 has implemented certain cost-reduction measures to conserve
capital resources. Such measures include changing the Company's public
relations firm and deferring the hiring of non-essential personnel. The Company
believes that such measures will not materially detract from its marketing and
sales effort for its FDA-approved product for bladder cancer nor materially
affect its existing programs relating to colon, cervical, breast, or prostate
cancer product development.
The Company is also actively seeking additional long-term funding from
public and private sources including strategic collaborations and
partnerships. There can be no assurance, however, that capital will be
available on terms acceptable to the Company, if at all. If the Company uses
equity to finance its capital needs, such a financing could result in
significant dilution to existing stockholders.
As of September 30, 1998, the Company had $5,600,000 in cash and cash
equivalents. The Company believes that the cash in its Treasury and cash flow
from anticipated operating activities may not be sufficient to meet its ongoing
obligations beyond mid-1999. If the Company successfully implements its current
cost-reduction measures, but is unable to obtain additional financing sufficient
to meet its operating needs, the Company would be required to significantly
reduce the scope of operations after the second quarter of 1999. If the Company
is unable to obtain additional funds from increased product sales or completion
of an equity, debt, or strategic financing, the Company has further contingency
plans for additional cost reductions which could enable it to continue limited
operations through the end of 1999.
Page 11 of 17
<PAGE>
The Company has reviewed all of its information systems to assess what
steps, if any, are required to achieve full Year 2000 compliance. The Company
relies upon microprocessor-based personal computers and commercially available
applications software. These technologies have been put into service recently,
and its review indicates that certain of the Company's systems are currently
Year 2000 compliant. The Company has begun to address the small number of
systems that are not yet Year 2000 compliant, and expects to achieve full
compliance by the end of 1999. The Company does not anticipate that it will
incur material expenses to make its computer software and operating systems Year
2000 compliant. The Company is currently discussing Year 2000 readiness with its
material supply and service vendors. To date, those suppliers and service
vendors that have been contacted have indicated that their hardware or software
is or will be Year 2000 compliant in time frames that meet the Company's
requirements. The Company intends to continue to assess its exposure to Year
2000 noncompliance on the part of any of its material vendors and there can be
no assurance that their systems will be Year 2000 compliant. In the event that
certain material suppliers or service vendors indicate that they will not
successfully address their Year 2000 problems in a timely fashion and that such
failure may have a material adverse effect on the Company, management may
elect to suspend such business relationships until such time that such vendors
become fully compliant. The Company is currently formulating contingency plans
to address problems that may arise in the event either the Company or its
material suppliers and vendors fail to address their Year 2000 problems in a
timely fashion. The Company presently believes that the Year 2000 issue will not
pose significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results or operations or materially adversely affect the
Company's relationships with customers, suppliers or others. Additionally, there
can be no assurance that the Year 2000 issues of third parties will not have a
material adverse impact on the Company's systems or results of operations.
The foregoing discussion includes forward-looking statements that are
subject to risks and uncertainties and actual results may differ materially from
those currently anticipated depending on a variety of factors including those
discussed below. See "Factors that may Affect Future Results." 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, in the long
term, the Company will be able to generate sufficient revenue to achieve and
maintain profitability.
Page 12 of 17
<PAGE>
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:
Risks Related to Insufficient Capital to Fund Operations. As of
September 30, 1998, the Company had $5,600,000 in cash and cash equivalents. The
cash on hand and cash flow from anticipated operating activities may not be
sufficient to meet the Company's ongoing obligations beyond mid-1999. If the
Company successfully implements its current cost-reduction measures, but is
unable to obtain additional financing sufficient to meet its operating needs,
the Company would be required to significantly reduce the scope of its
operations after the second quarter of 1999. Such reduction in scope of its
operations would have a material adverse affect on the Company's results of
operations and financial condition.
Access to Capital. The Company is currently seeking to raise additional
capital and will consider various financing alternatives, including equity or
debt financings and corporate partnering arrangements. There can be no
assurance, however, that this capital will be available on terms acceptable to
the Company, if at all. If additional financing is not available, the Company
may be required to further curtail expenses or take other steps that adversely
affect the Company's future performance.
Risk of Delisting from the Nasdaq National Market. The Company's Common
Stock is currently listed on the Nasdaq National Market ("NNM"). For continued
listing of the Company's Common Stock on the NNM, it must, among other things,
maintain at least $4 million in net tangible assets and a minimum bid price of
$1.00. If the Company's net tangible assets fall below $4 million, or the
Company's Common Stock trades at a price of less than $1.00 for 30 consecutive
business days or more, it may result in the delisting of the Company's
securities from NNM, and trading, if any, of the Company's securities would
thereafter be conducted in a non-Nasdaq over-the-counter market. If the
Company's securities are delisted, an investor could find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities. In addition, if the Company's securities were delisted,
they may be subject to a rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors. For transactions covered by this
rule, the broker-dealer must make a special suitability determination for the
purchaser and must have received the purchaser's written consent to the
transaction prior to sale. Consequently, delisting, if it occurred, may affect
the ability of broker-dealers to sell the Company's securities and the ability
of the stockholders to sell their securities.
History of Operating Losses and Anticipated Future Losses. The Company
has incurred operating losses since its inception and does not expect to be
profitable within the next several years. While the Company expects to improve
operating results in future periods, there can be no assurance that the Company
will achieve or maintain profitability or that its revenue will grow 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; 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
about 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.
Page 13 of 17
<PAGE>
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(R)
Bladder Cancer Test Kit, which was approved for sale in the U.S. by the FDA in
1996 and approved for sale in Japan in 1998, and expects to generate
substantially all of its near-term product sales from the sale of NMP22 Bladder
Cancer Test Kits. The Company would experience a material adverse effect on its
business, financial condition and results of operations if the NMP22 Bladder
Cancer Test Kit does not achieve wide market acceptance. The remainder of the
Company's products are awaiting FDA approval or are in development and there can
be no assurance that it will obtain such regulatory approvals and complete
product development.
Page 14 of 17
<PAGE>
PART II. - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-----------------
The Company has retained Robert W. Morgan to serve as Interim Chief
Financial Officer. Mr. Morgan has been at the Company since October
21, 1998 and will assume this new title as of November 13, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
--------
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
Page 15 of 17
<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: November 13, 1998 By: /s/ Stephen D. Chubb
---------------------------
Stephen D. Chubb
Chairman and Chief
Executive Officer
(principal executive
and financial officer)
Page 16 of 17
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
Page 17 of 17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE QUARTER ENDED SEPT. 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,619
<SECURITIES> 0
<RECEIVABLES> 233
<ALLOWANCES> 0
<INVENTORY> 339
<CURRENT-ASSETS> 6,267
<PP&E> 1,751
<DEPRECIATION> 1,018
<TOTAL-ASSETS> 7,069
<CURRENT-LIABILITIES> 904
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 5,821
<TOTAL-LIABILITY-AND-EQUITY> 7,069
<SALES> 811
<TOTAL-REVENUES> 1,166
<CGS> 0
<TOTAL-COSTS> 7,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,936)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,936)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
