<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 Quarterly period ended May 31, 1996
----------------------------------------------
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 000-21326
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Anika Research, Inc.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3145961
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(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
236 West Cummings Park, Woburn, Massachusetts 01801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 932-6616
----------------------------
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 and 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 last 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On July 2, 1996, 4,833,996 shares of common stock, par value $0.01 per share,
were outstanding.
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ANIKA RESEARCH, INC.
<TABLE>
<CAPTION>
Balance Sheets as of, May 31, 1996 August 31, 1995
- --------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $4,030,301 $2,824,663
Accounts receivable 590,091 190,976
Inventories 2,867,734 3,292,416
Prepaid expenses 367,174 318,960
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Total current assets 7,855,300 6,627,015
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Property and equipment 4,666,083 4,332,171
Less accumulated depreciation 3,171,135 2,912,966
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Net property and equipment 1,494,948 1,419,205
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Total Assets $9,350,248 $8,046,220
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $445,777 $353,444
Accrued expenses 1,200,529 301,507
Current portion of long-term debt - 1,000,000
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Total current liabilities 1,646,306 1,654,951
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Other long-term liabilities - 520,757
Redeemable convertible preferred stock; $.01 par 2,463,875 2,326,171
value: authorized 750,000 shares; 120,970 shares
issued and outstanding; liquidation and redemption
value of $20.00 per share plus accrued dividends
Stockholders' equity:
Undesignated preferred stock, $.01 par value: authorized
1,250,000 shares; no shares issued and outstanding - -
Common stock, $.01 par value: authorized 15,000,000
shares; issued and outstanding 4,800,813 shares and
3,291,475 shares, respectively 48,008 32,915
Additional paid-in capital 11,532,772 7,378,514
Unearned stock option compensation (539,062) -
Accumulated deficit (5,801,651) (3,867,088)
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Total stockholders' equity 5,240,067 3,544,341
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Total Liabilities and Stockholders Equity $9,350,248 $8,046,220
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA RESEARCH INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $1,460,612 $930,384 $3,342,671 $2,535,943
Cost of sales 1,292,467 865,026 3,304,802 2,030,880
- ----------------------------------------------------------------------------------------
Gross profit 168,145 65,358 37,869 505,063
Operating expenses:
Research and development 465,238 311,260 1,157,430 944,914
Selling, general and administrative 306,785 205,403 878,280 658,886
Interest expense(income), net (52,619) 837 (63,278) (11,766)
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Total operating expenses 719,404 517,500 1,972,432 1,592,034
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Loss before income taxes (551,259) (452,142) (1,934,563) (1,086,971)
Income taxes - - - -
- ----------------------------------------------------------------------------------------
Net loss ($551,259) ($452,142) ($1,934,563) ($1,086,971)
========================================================================================
Loss per share ($ .12) ($ .14) ($ .51) ($ .34)
----- ----- ----- -----
Average weighted shares outstanding 4,785,786 3,219,450 3,791,514 3,211,292
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA RESEACH, INC.
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine months ended,
May 31, 1996 May 31, 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,934,563) ($1,086,971)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 258,168 264,217
Earned stock compensation expense 93,750 --
Common stock issued to 401(k) plan 58,632 49,488
Changes in operating assets and liabilities:
Accounts receivable (399,115) (348,656)
Inventories 424,682 (266,824)
Prepaid expenses (48,214) (181,361)
Accounts payable 92,333 1,125
Accrued expenses 899,022 126,236
Other long-term liabilities (520,757) --
- ------------------------------------------------------------------------------------------------
Net cash used for operating activities (1,076,062) (1,442,746)
- ------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Additions to property and equipment (333,912) (103,688)
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Net cash used for investing activities (333,912) (103,688)
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Cash flows provided by financing activities:
Proceeds from issuance of redeemable convertible preferred,
net of issuance costs (27,293) 2,294,413
Payments of loan (1,000,000) --
Proceeds from issuance of common stock 3,642,905 1,680
- ------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,615,612 2,296,093
- ------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 1,205,638 749,659
Cash and cash equivalents at beginning of period 2,824,663 2,583,894
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $4,030,301 $3,333,553
================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (Continued)
ANIKA RESEARCH, INC.
Notes to Financial Statements
-----------------------------
(1) Nature of Business
------------------
Anika Research, Inc. ("Anika" or the "Company") develops and manufactures
hyaluronic acid ("HA") products for use in surgical and therapeutic medical
applications. Hyaluronic acid is a naturally occurring biopolymer found in
the body that coats, protects, and lubricates soft tissues.
Anika currently manufactures AMVISC(R)/(1)/, an HA-based viscoelastic used
in ophthalmic surgery for Chiron Vision, a subsidiary of Chiron
Corporation. Anika also manufactures HYVISC(R), an HA-based product used
to treat equine osteo-arthritis, for Boehringer Ingelheim Animal Health,
Inc.
(2) Basis of Presentation
---------------------
The accompanying financial statements have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, these financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position of the
Company as of May 31, 1996, the results of operations for the three and
nine months ended May 31, 1996 and the cash flows for the three and nine
months ended May 31, 1996.
The accompanying financial statements and related notes should be read in
conjunction with the Company's annual financial statements filed with the
Annual Report on Form 10K for the year ended August 31, 1995. The results
of operations for the three and nine months ended May 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
(3) Long-Term Debt
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31, 1996 Aug 31, 1995
------------ ------------
<S> <C> <C>
$1,000,000 revolving line
of credit due to MedChem.
Interest accrues at MedChem's
short term borrowing rate.
Amounts borrowed under line were
repaid in full on March 1, 1996 0 $1,000,000
Less current installments 0 1,000,000
------------ ------------
Long term debt excluding
current installments $ 0 $ 0
============ ============
</TABLE>
1) AMVISC is a registered trademark of Chiron Vision
<PAGE>
(4) Other Long-Term Liabilities
---------------------------
Other long-term liabilities consist of the reserve established for
potential losses on the AMVISC manufacturing contract. The balance in the
reserve was $420,757 at May 31, 1996 and has been reclassed to current
liabilities as an accrued expense since the current AMVISC(R) manufacturing
contract expires on December 31, 1996.
(5) Common Stock
------------
In the first week of March, 1996 the Company completed a financing
involving the private placement to institutional and private accredited
investors of 1,455,000 shares of newly issued Common Stock. Total gross
proceeds were approximately $4 million and net proceeds to the Company
after fees and expenses were approximately $3.6 million. In addition, the
Company granted certain registration rights and filed a registration
statement with the Securities and Exchange Commission registering these
securities. A portion of the proceeds from the private placement were used
to repay the $1,000,000 debt due to MedChem (See Note 3).
The Company issued 57,000 warrants for Common Stock exercisable at $3.00
per share and 147,000 warrants for Common Stock exercisable at $4.00 per
share to the placement agent in connection with the private placement of
newly issued common stock.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
---------------------
Net sales of hyaluronic acid products for the third quarter ended May 31,
1996 totalled $1,461,000, an increase of $531,000 over the $930,000
recorded in net sales for the third quarter of the prior year. For the
nine months ended May 31, 1996, net sales of hyaluronic acid products
totalled $3,343,000, an increase of $807,000 over the $2,536,000
recorded in net sales for the prior year. The increase in sales for the
nine months ended May 31,1996 are primarily attributable to an increase in
AMVISC(R) sales.
Anika's gross profit as a percentage of net sales was 11.5% for the third
quarter of 1996, an increase of 4.5% from the 7% gross profit recorded
over the same quarter in 1995. The increase for the quarter is
attributable to higher manufacturing volume. For the nine months ended May
31, 1996, Anika's gross profit as a percentage of net sales was 1.1%, a
decrease of 18.8% over the 19.9% gross profit recorded for the first nine
months of fiscal 1995. The decrease in the gross profit for the nine
months ended May 31, 1996 is primarily attributable to an unfavorable mix
of product sales in 1996 versus 1995 and higher manufacturing cost for 1996
versus 1995.
Research and development expenses for the third quarter ended May 31, 1996
increased by $154,000 to $465,000 from $311,000 for the same period last
fiscal year. For the nine months ended May 31, 1996, research and
development expenses increased by $212,000 to $1,157,000 from $945,000 in
the prior year. The increase in spending for the three and nine months
ended May 31, 1996 is attributable to an increase in spending on the
ORTHOVISC(R) clinical trial.
Selling, general and administrative expenses for the third quarter ended
May 31, 1996 increased by $102,000 to $307,000 from $205,000 for the same
period last fiscal year. For the nine months ended May 31, 1996, selling,
general and administrative expenses increased by $219,000 to $878,000 from
$659,000 in the prior year. The increase for the three and nine months
ended May 31, 1996 is attributable to selling and marketing costs
associated with the registration and international marketing of ORTHOVISC,
and additional administrative staff.
<PAGE>
Liquidity and Capital Resources
-------------------------------
In the first week of March, 1996 the Company completed a financing
involving the private placement to institutional and private accredited
investors of 1,455,000 shares of newly issued Common Stock. Total gross
proceeds were approximately $4 million and net proceeds to the Company
after fees and expenses were approximately $3.6 million. In connection
with the private placement, the Company issued to the placement agent
57,000 warrants for Common Stock exercisable at $3.00 per share and 147,000
warrants for Common Stock exercisable at $4.00 per share. In addition, the
Company granted certain registration rights and filed a registration
statement with the Securities and Exchange Commission registering these
securities which were declared effective by the Securities and Exchange
Commission in May 1996. A portion of the proceeds from the private
placement were used to repay the $1,000,000 debt due to MedChem (See Note
3) and the remaining proceeds are being used for general working capital
purposes.
On May 18, 1995, the Company raised through a private placement $2,235,643,
net of offering costs, from the issuance of 120,970 shares of Series A
Redeemable Convertible Preferred Stock ("Series A stock") at a selling
price of $20.00 per share. Each share of the Series A stock is entitled to
receive an annual dividend on May 1 of each year, at a rate of $1.80 per
share, payable in additional shares of Series A stock, with the number of
dividend shares determined by the price of Anika's underlying common stock.
The Company may elect to pay the dividend in cash if certain financial
covenants are met. During each consecutive ninety day period in which the
average quarterly price of Anika's common stock remains above $6.00 per
share, no dividend will accrue.
Anika believes that its cash on hand of $4,030,000 at May 31, 1996 will
fund operating expenses through calendar 1997 and the cost of the
ORTHOVISC(R) clinical trial. However, there can be no assurance that the
cash on hand will be sufficient for this period of time if actual costs and
expenses are higher than anticipated. Commencing January 1, 1997, the
Company will be supplying AMVISC(R) to Chiron Vision under a new five year
supply contract that has selling prices that are substantially higher than
the current contract. Revenues from the AMVISC(R) supply contract should
provide the Company with improved gross margins.
<PAGE>
Part II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit No. Description
----------- -----------
11 Computation of loss per share
(b) The Company filed a report on Form 8-K on April 25, 1996
notifying the SEC of change in year end from August 31 to
December 31.
<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.
ANIKA RESEARCH, INC.
DATE: July 15, 1996 BY:
-------------------------------
Robert S. DuFresne
President
DATE: July 15, 1996 BY:
-------------------------------
Sean F. Moran
Chief Financial Officer
<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.
ANIKA RESEARCH, INC.
DATE: July 15, 1996 BY: /s/ Robert S. DuFresne
------------------------------
Robert S. DuFresne
President
DATE: July 15, 1996 BY: /s/ Sean F. Moran
------------------------------
Sean F. Moran
Chief Financial Officer
<PAGE>
EXHIBIT 11
Anika Research, Inc.
Computation of Primary and Fully Diluted Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31,
1996 1995 1996 1995
PRIMARY AND FULLY DILUTED: --------------------- -------------------------
- --------------------------
<S> <C> <C> <C> <C>
Net loss: ($551,259) ($452,142) ($1,934,563) ($1,086,971)
Weighted average number of common
shares outstanding 4,785,786 3,219,450 3,791,514 3,211,292
Dilutive effect of outstanding stock
options and warrancts 0 0 0 0
Weighted average number of common
shares as adjusted 4,785,786 3,219,450 3,791,514 3,211,292
--------------------- -------------------------
Primary and fully diluted earnings per share ($0.12) ($0.14) ($0.51) ($0.34)
===================== =========================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 4,030,301
<SECURITIES> 0
<RECEIVABLES> 590,901
<ALLOWANCES> 0
<INVENTORY> 2,867,734
<CURRENT-ASSETS> 7,855,300
<PP&E> 4,666,083
<DEPRECIATION> 3,171,135
<TOTAL-ASSETS> 9,350,248
<CURRENT-LIABILITIES> 1,646,306
<BONDS> 0
2,463,875
0
<COMMON> 48,008
<OTHER-SE> 5,192,059
<TOTAL-LIABILITY-AND-EQUITY> 9,350,248
<SALES> 3,342,671
<TOTAL-REVENUES> 3,342,671
<CGS> 3,304,802
<TOTAL-COSTS> 3,304,802
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,934,563)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,934,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,934,563)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
