<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
Quarterly report under Section 13 or 15 (d) of the
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Securities Exchange Act Of 1934
For quarterly period ended __________________________________
X Transition report under Section 13 or 15 (d) of the
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Exchange Act of 1934
For the transition period from September 1, 1996 to December 31, 1996
----------------- -----------------
Commission file number 000-21326
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Anika Therapeutics, Inc.
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(Exact Name of Small Business Issuer 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)
(617) 932-6616
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(Issuer's Telephone Number)
Anika Research, Inc., Fiscal year ended August 31
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 and 15 (d) of the Exchange Act during the past 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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State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
On February 12, 1997, 4,993,539 shares of common stock, par value
$0.01 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes No X
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<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ANIKA RESEARCH, INC.
<TABLE>
Balance Sheets as of, December 31, 1996 August 31, 1996
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,704,665 $3,651,023
Accounts receivable 539,004 631,916
Inventories 2,481,646 2,514,280
Prepaid expenses 375,302 502,207
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Total current assets 6,100,617 7,299,426
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Property and equipment 3,865,330 4,745,923
Less accumulated depreciation 3,046,286 3,465,175
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Net property and equipment 819,044 1,280,748
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Total Assets $6,919,661 $8,580,174
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $550,314 $645,484
Accrued expenses 1,055,234 595,832
Deferred revenue 200,000 200,000
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Total current liabilities 1,805,548 1,441,316
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Other long-term liabilities 142,775 200,000
Redeemable convertible preferred stock;
$.01 par value: authorized 750,000
shares; issued and outstanding 126,259
shares, respectively; liquidation and
redemption value of $20.00 per share plus
accrued dividends 2,602,527 2,523,483
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 4,930,719
shares and 4,840,726 shares, respectively 49,307 48,407
Additional paid-in capital 11,693,070 11,551,685
Unearned stock option compensation - (468,750)
Accumulated deficit (9,373,566) (6,715,967)
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Total stockholders' equity 2,368,811 4,415,375
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Total Liabilities and Stockholders $6,919,661 $8,580,174
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA RESEARCH INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Four months ended
December 31,
1996 1995
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<S> <C> <C>
Net sales $1,212,041 $1,191,215
Cost of sales 1,308,625 1,263,249
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Gross loss (96,584) (72,034)
Operating expenses:
Research and development 1,310,330 456,315
Selling, general and administrative 1,308,583 384,215
Interest income (57,898) (5,303)
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Total operating expenses 2,561,015 835,227
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Loss before income taxes (2,657,599) (907,261)
Income taxes - -
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Net loss ($2,657,599) ($907,261)
===============================================================================
Loss per share ($0.54) ($0.28)
Primary and fully diluted shares outstanding 4,905,382 3,294,312
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA RESEACH, INC.
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Four months ended,
Dec. 31, 1996 Dec. 31, 1995
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<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,657,599) ($907,261)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 129,827 112,178
Writeoff of leaseholds at New Boston St. 375,925 -
Amortization of unearned stock compensa 468,750 -
Common stock issued to 401(k) plan 27,444 26,817
Changes in operating assets and liabilities:
Accounts receivable 92,912 (318,752)
Inventories 32,634 59,870
Prepaid expenses 126,907 87,768
Accounts payable and accrued expe 364,230 118,454
Other long-term liabilities (57,225) -
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Net cash used for operating activities (1,096,195) (820,926)
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Cash flows used for investing activities:
Additions to property and equipment (44,048) (256,391)
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Net cash used for investing activities (44,048) (256,391)
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Cash flows provided by financing activities:
Expenses from issuance of preferred stock - (4,710)
Proceeds from exercise of stock options 193,885 -
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Net cash provided by (used for) financing
activities 193,885 (4,710)
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Decrease in cash and cash equivalents (946,358) (1,082,027)
Cash and cash equivalents at beginning of period 3,651,023 2,824,663
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Cash and cash equivalents at end of period $2,704,665 $1,742,636
===================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (Continued)
Anika Research, Inc.
Notes to Financial Statements
------------------------------
This Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The
Company's actual results could differ materially from those
set forth in the forward-looking statements. Certain factors
that might cause such a difference are discussed throughout
this form 10-QSB and are discussed in the section entitled
"Certain Factors Affecting Future Operating Results" of this
Form 10-QSB.
(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 (1), an HA-based
viscoelastic used in ophthalmic surgery for Chiron Vision, a
subsidiary of Chiron Corporation. Anika also manufactures
HYVISC , an HA-based product used to treat equine osteo-
arthritis, for Boehringer Ingelheim Animal Health, Inc. in the
United States and ORTHOVISC , an HA-based product for use in
osteoarthritis and temporomandibular joint dysfunction, for
Biomeks in Turkey.
(2) Basis of Presentation
---------------------
The accompanying financial statements for the four month
transition period ended December 31, 1996 and the comparable
period for 1995 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 December 31, 1996
and the results of operations and the cash flows for the four
month transition period ended December 31, 1996 and 1995.
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 10-KSB for the
year ended August 31, 1996. The four months ended December
31, 1996 comprise the four month ("transition period")
resulting from a recent change in the Company's year end from
August 31 to December 31. On January 1, 1997 the Company
1) AMVISC is a registered trademark of Chiron Vision
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began reporting on a calendar quarter and calendar year basis.
Certain reclassifications were made to the 1995 period
financial statements to conform to the transition period 1996
presentation.
(3) Earnings Per Share
------------------
Earnings per share is computed based on the weighted average
number of common shares outstanding, adjusted, when dilutive,
for the number of shares issuable upon the conversion of
Series A Redeemable Convertible Preferred Stock and the
assumed exercise of stock options and warrants after the
assumed repurchase of shares with the related proceeds.
(4) Other Long-Term Liabilities
---------------------------
Other long-term liabilities consist of the following:
Dec 31, 1996 Aug 31, 1996
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Advance rent payment $142,775 $200,000
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(5) Common Stock
------------
In March, 1996 the Company completed a financing involving the
private placement of 1,455,000 shares of newly issued Common
Stock to institutional and private accredited investors.
Total gross proceeds were $3,968,700 and net proceeds to the
Company after fees and expenses were $3,541,585. In addition,
the Company granted certain registration rights and filed a
registration statement with the Securities and Exchange
Commission that was declared effective by the Securities and
Exchange Commission on May 23, 1996. The proceeds from the
private placement were used to repay a $1,000,000 debt
obligation and for general working capital purposes.
In connection with the private placement of newly issued
Common Stock in March, 1996, the Company issued warrants to
the placement agent for 146,664 shares of Common Stock
exercisable at $4.00 per share and warrants for 57,036 shares
of Common Stock exercisable at $3.00 per share.
(6) Subsequent Event
----------------
On January 8, 1997, the Company's shareholders approved a
change in the name of the Company from Anika Research, Inc. to
Anika Therapeutics, Inc.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis or Plan of
Operations
Results of Operations
---------------------
Net sales of hyaluronic acid products for the four month
transition period ended December 31, 1996 totalled $1,212,000,
an increase of $21,000 over the $1,191,000 recorded in net
sales for the comparable four month period of the prior year.
Anika's gross loss as a percentage of net sales was 7.9% for
the four months ended December 31, 1996, a decrease of 1.9%
from the 6.0% recorded over the same period in 1995. The
decrease for the transition period is primarily attributable
to an unfavorable mix of HA products.
Research and development expenses for the four month
transition period ended December 31, 1996 increased by
$854,000 to $1,310,000 from $456,000 for the same period last
year. The increase in spending for the four month transition
period ended December 31, 1996 is primarily attributable to
$600,000 in expenses from the clinical trial for the
ORTHOVISC product and the amortization of $375,000 of
unearned stock option compensation.
Selling, general and administrative expenses for the four
month transition period ended December 31, 1996 increased by
$925,000 to $1,309,000 from $384,000 for the same period last
year. The increase for the four months ended December 31,
1996 is primarily attributable to additional marketing and
administrative staff, a $544,000 write-off of leasehold
improvements and lease expenses resulting from closing one of
the Company's facilities, and $200,000 in severance costs
associated with the departure of the Company's former
president.
Liquidity and Capital Resources
-------------------------------
In March, 1996 the Company completed a financing involving the
private placement of 1,455,000 shares of newly issued Common
Stock to institutional and private accredited investors.
Total gross proceeds were approximately $4 million and net
proceeds to the Company after fees and expenses were
approximately $3,542,000. In connection with the private
placement, the Company issued to the placement agent 57,036
warrants to purchase Common Stock exercisable at $3.00 per
share and 146,664 warrants to purchase 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 the securities which was declared effective by the
Securities and Exchange Commission in May 1996. The proceeds
from the private placement were used to repay the $1,000,000
<PAGE>
debt obligation and for general working capital purposes. On
May 17, 1995, the Company raised through a private placement
$2,235,642, 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 $2,705,000 at December
31, 1996 will fund calendar 1997 operating expenses including
the cost of the ORTHOVISC 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. On January 1, 1997, the Company commenced
supplying AMVISC to Chiron Vision under a new five year
supply contract that has selling prices that are substantially
higher than the prior contract. Revenues from the AMVISC
supply contract will provide the Company with improved gross
margins.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The
Company's actual results could differ materially from those
set forth in the forward-looking statements. Certain factors
that might cause such a difference include, among other
factors noted herein, the following:
Need for Additional Funds; Liquidity. Anika currently expects
that its cash on hand will fund calendar 1997 operating
expenses including the cost of the ORTHOVISC clinical trial.
However, higher than anticipated costs and expenses may result
in insufficient cash on hand which could create a need for
additional financing. The ability of Anika to obtain
financing is dependent on the status of Anika's future
business prospects as well as conditions prevailing in the
relevant capital markets. No assurance can be given that any
additional financing will be made available to Anika or will
be available on acceptable terms should such a need arise.
<PAGE>
Competition. Anika competes with many companies, including
large pharmaceutical companies, specialized medical products
companies, academic institutions, governmental agencies and
other research organizations which may be involved in
research, development and commercialization of HA products.
Successful commercialization of a particular HA product will
depend in large part upon the ability of Anika to complete
clinical studies and obtain FDA marketing and foreign
regulatory approvals prior to its competitors.
History of Losses; Uncertainty of Future Profitability. Anika
has incurred operating losses since its inception in May 1993
and has accumulated net losses of $9,474,000 as of December
31, 1996. The continued development of Anika's products will
require the commitment of substantial resources to conduct
research, preclinical and clinical development programs, and
to establish sales and marketing capabilities. Anika has
incurred substantial and increasing operating losses through
December 31, 1996. The time required by Anika to reach
sustained profitability is highly uncertain, and Anika must
among other things, successfully complete development of
certain of its products, obtain regulatory approvals and
establish sales and marketing capabilities for certain of its
products. There can be no assurance that Anika will be able
to achieve profitability on a sustained basis.
Comprehensive Government Regulation; No Assurance of FDA
Approval. Anika's research, development, manufacturing
activities and the future marketing of products by Anika are
subject to regulation for safety and efficacy by numerous
governmental authorities in the United States and other
countries. These regulations can be costly, regulatory
approvals may take many years, and they can be subject to
change and unanticipated delays. Anika cannot predict what
impact, if any, such changes might have on its business.
There can be no assurance that approvals of Anika's products,
processes or facilities will be granted or that Anika will
obtain the financing needed to develop certain products. Any
failure to obtain, or delay in obtaining, such approvals could
adversely affect the ability of Anika to market its products.
In addition, requirements relating to the conduct of clinical
trials, product licensing, pricing and reimbursement vary
widely from country to country. Anika or the FDA may suspend
clinical trials at any time upon a determination that the
subjects or patients are being exposed to an unacceptable
adverse health risk ascribable to Anika's products. If
clinical studies are suspended, Anika may be unable to
continue the development of the investigational products
affected.
<PAGE>
Dependence on Patents and Proprietary Technology. Anika has
a policy of seeking patent protection for patentable aspects
of its proprietary technology. However, no assurance can be
given that any application filings or issued patents will
provide Anika with a competitive advantage or will not be
successfully challenged by third parties. Other entities have
filed patent applications for or have been issued patents
concerning various aspects of HA-related products or
processes. There can be no assurance that the products or
processes developed by Anika will not infringe the patent
rights of others in the future.
Anika also relies upon trade secrets and proprietary know-how.
However, there can be no assurance that confidentiality
agreements, which Anika employees generally sign, will be
effective in protecting trade secrets or that third parties
will not independently develop substantially equivalent or
better technology.
Dependence Upon Marketing Partners. Anika does not plan to
directly market and sell its products to customers.
Therefore, Anika's success will be dependent upon the efforts
of its marketing partners and the terms and conditions of
Anika's relationships with such marketing partners. In
addition, Anika will need to obtain the assistance of
additional marketing partners for new products which are
brought to market and existing products brought to new
markets, and there can be no assurance that such additional
partners will be available or that such partners will agree to
market Anika's products on acceptable terms.
Exposure to Product Liability Claims. The testing, marketing
and sale of human health care products entail an inherent risk
of allegations of product liability, and there can be no
assurance that substantial product liability claims will not
be asserted against Anika. Although Anika has not incurred
any material product liability to date and coverage under its
$1,000,000 insurance policy may be adequate to cover such
claims should they arise, there can be no assurance that
material claims will not arise in the future or that Anika's
insurance will be adequate to cover all situations.
Dependence upon Key Personnel. The future success of Anika is
highly dependent on the members of its management and
scientific staff, the loss of one or more of whom could have
a material adverse effect on Anika. Anika faces significant
competition for highly skilled scientific, management and
marketing personnel from other companies, research and
academic institutions, government entities and other
organizations. There can be no assurance that Anika will be
successfully in hiring or retaining the personnel it requires
and failure to do so could materially and adversely affect
Anika's prospects.
<PAGE>
Part II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit No. Description
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11 Computation of loss per share.
27.1 Financial Data Schedule.
(b) The Company filed a report on Form 8-K on December 13,
1996 notifying the SEC of the appointment of Edward Ross,
Jr. to the previously vacant position of vice president
of sales and marketing.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ANIKA THERAPEUTICS, INC.
DATE: February 13, 1997 BY: /s/ J. Melville Engle
-------------------------
J. Melville Engle
Chief Executive Officer
DATE: February 13, 1997 BY: /s/ Sean F. Moran
-------------------------
Sean F. Moran
Chief Financial Officer
<PAGE>
EXHIBIT 11
Anika Research, Inc.
Computation of Primary and Fully Diluted Earnings per Share
<TABLE>
<CAPTION>
For the four months ended
December 31,
1996 1995
-----------------------------
<S> <C> <C>
PRIMARY AND FULLY DILUTED:
Net loss: ($2,657,599) ($907,261)
Weighted average number of common
shares outstanding 4,905,382 3,294,312
Dilutive effect of outstanding stock
options, warrants and redeemable
convertible preferred stock - -
-----------------------------
Weighted average number of common
shares as adjusted 4,905,382 3,294,312
-----------------------------
Primary and fully diluted loss per share ($0.54) ($0.28)
=============================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> SEP-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,704,665
<SECURITIES> 0
<RECEIVABLES> 539,004
<ALLOWANCES> 0
<INVENTORY> 2,481,646
<CURRENT-ASSETS> 6,100,617
<PP&E> 3,865,330
<DEPRECIATION> 3,046,286
<TOTAL-ASSETS> 6,919,661
<CURRENT-LIABILITIES> 1,805,548
<BONDS> 0
2,602,527
0
<COMMON> 49,307
<OTHER-SE> 2,319,504
<TOTAL-LIABILITY-AND-EQUITY> 6,919,661
<SALES> 1,212,041
<TOTAL-REVENUES> 1,212,041
<CGS> 1,308,625
<TOTAL-COSTS> 1,308,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,715,497)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,715,497)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,657,599)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
