<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15 (d) of the
- ------- Securities Exchange Act of 1934
For quarterly period ended June 30, 1997
----------------------------------------
Transition report under Section 13 or 15 (d) of the
Exchange Act
For the transition period from to
------------- ------------------
Commission file number 000-21326
--------------------------------------------
Anika Therapeutics, Inc.
- ------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-3145961
- ------------------------------- --------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
236 West Cummings Park, Woburn, Massachusetts 01801
- -------------------------------------------------------------------
(Address of Principal Executive Offices)
(617) 932-6616
- -------------------------------------------------------------------
(Issuer's Telephone Number, Including area code)
(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
----- -----
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
On August 11, 1997, 5,085,751 shares of common stock, par value
$0.01 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes No X
----- -----
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ANIKA THERAPEUTICS, INC.
<TABLE>
<CAPTION>
Balance Sheets (Unaudited) as of, June 30, 1997 December 31, 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,945,852 $2,704,665
Accounts receivable 1,186,687 539,004
Inventories 2,407,225 2,481,646
Prepaid expenses 599,352 375,302
- -----------------------------------------------------------------------------
Total current assets 7,139,116 6,100,617
- -----------------------------------------------------------------------------
Property and equipment 3,881,740 3,865,330
Less accumulated depreciation 3,204,750 3,046,286
- -----------------------------------------------------------------------------
Net property and equipment 676,990 819,044
- -----------------------------------------------------------------------------
Loan receivable due from officer 75,000 -
Total Assets $7,891,106 $6,919,661
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $528,699 $550,314
Accrued expenses 976,878 1,055,234
Deferred revenue 300,000 200,000
- -----------------------------------------------------------------------------
Total current liabilities 1,805,577 1,805,548
- -----------------------------------------------------------------------------
Other long-term liabilities 123,887 142,775
Redeemable convertible preferred stock; $.01
par value: authorized 750,000 shares; issued
and outstanding 130,211 shares and 126,259,
respectively; liquidation and redemption
value of $20.00 per share plus accrued
dividends 2,723,865 2,602,527
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
5,072,952 shares and 4,930,719 shares,
respectively 50,730 49,307
Additional paid-in capital 12,007,200 11,693,070
Accumulated deficit (8,820,153) (9,373,566)
Total stockholders' equity 3,237,777 2,368,811
- ----------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $7,891,106 $6,919,661
=============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $2,450,073 $1,501,627 $4,377,423 $2,538,424
Cost of sales 1,187,798 1,278,004 2,207,211 2,435,051
- ------------------------------------------------------------------------------------------
Gross profit 1,262,275 223,623 2,170,212 103,373
Operating expenses:
Research and development 509,142 500,211 832,257 844,392
Selling, general and administrative 435,999 366,624 830,420 638,005
Interest income, net (29,418) (65,140) (59,802) (75,293)
- ------------------------------------------------------------------------------------------
Total operating expenses 915,723 801,695 1,602,875 1,407,104
- ------------------------------------------------------------------------------------------
Income (loss) before income
taxes 346,552 (578,072) 567,337 (1,303,731)
Income taxes 9,508 13,924
- ------------------------------------------------------------------------------------------
Net income (loss) $337,044 ($578,072) $553,413 ($1,303,731)
==========================================================================================
Primary earnings (loss) per share $0.05 ($0.12) $0.09 ($0.30)
Primary shares outstanding 6,335,924 4,799,662 6,200,583 4,293,452
Fully diluted earnings (loss) per share $0.04 ($0.12) $0.07 ($0.30)
Fully diluted shares outstanding 7,806,161 4,799,662 7,774,724 4,293,452
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANIKA THERAPEUTICS, INC.
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended,
June 30,
1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $553,413 ($1,303,731)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 158,464 175,604
Amortization of unearned stock compensation 117,188
Common stock issued to 401(k) plan and Board of
Directors 134,327 41,130
Changes in operating assets and liabilities:
Accounts receivable (647,683) (16,178)
Loan receivable due from officer (75,000)
Inventories 74,421 121,502
Prepaid expenses (224,050) (191,985)
Accounts payable and accrued expenses 30 1,099,482
Other long-term liabilities (18,888) (520,757)
- -------------------------------------------------------------------------------------------
Net cash used for operating activities (44,966) (477,745)
- -------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Additions to property and equipment (16,410) (88,659)
- -------------------------------------------------------------------------------------------
Net cash used for investing activities (16,410) (88,659)
- -------------------------------------------------------------------------------------------
Cash flows provided by financing activities:
Payments on debt (800,000)
Expenses from issuance of preferred stock (22,583)
Proceeds from issuance of common stock 3,541,585
Proceeds from exercise of stock options 302,563 152,750
- -------------------------------------------------------------------------------------------
Net cash provided by financing activities 302,563 2,871,752
- -------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 241,187 2,305,348
Cash and cash equivalents at beginning of period 2,704,665 1,742,637
- -------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $2,945,852 $4,047,985
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (Continued)
Anika Therapeutics, 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 Therapeutics, 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.
ORTHOVISC is sold in Canada, Holland and Turkey.
(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 June 30, 1997, the results of operations for the
three and six months ended June 30, 1997 and 1996 and the cash
flows for six months ended June 30, 1997 and 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 10-KSB for the
year ended August 31, 1996. The results of operations for the
three and six months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
1) AMVISC is a registered trademark of Chiron Vision
<PAGE>
On January 1, 1997 the Company began reporting on a calendar
quarter and calendar year basis.
(3) Earnings Per Share
------------------
Earnings per share (E.P.S.) 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.
In February 1997, the Financial Accounting Standards Board
(FASB)issued Statement of Financial Accounting Standards No.
128, Earnings per Share (Statement 128). Statement 128 will
be required to be adopted by Anika for the year ended December
31, 1997. Statement 128 was issued to simplify the
computation of E.P.S. and to make the U.S. standard compatible
with the E.P.S. standards of other countries. It will replace
the presentation of Primary E.P.S. with a presentation of
Basic E.P.S. and replace Fully Diluted E.P.S. with Diluted
E.P.S. It also requires dual presentation of Basic E.P.S. and
Diluted E.P.S. on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the Basic
E.P.S. computation to the numerator and denominator of the
Diluted E.P.S. computation.
Basic E.P.S., unlike Primary E.P.S., excludes all dilution
while Diluted E.P.S., like Fully Diluted E.P.S., reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity.
If Statement 128 was adopted for the quarter ended June 30,
1997, primary earnings per share would have been $.07 per
share for the three months ended June 30, 1997 and $.11 per
share for the six months ended June 30, 1997 and there would
have been no impact on fully diluted E.P.S.
(4) Loan Receivable due from Officer
--------------------------------
Loan receivable consists of a loan to an officer. The entire
balance is due at the earlier of the end of five years or at
the termination of employment. Interest accrues at an annual
rate of 6% and is payable monthly over the term of the loan.
<PAGE>
(5) Redeemable Convertible Preferred Stock
--------------------------------------
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. For the period May 1,
1996 to April 30, 1997, Anika issued 3,952 additional shares
of Series A stock to the preferred shareholders as a dividend
payment. The total recorded value of the dividend payment was
$227,266.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis or Plan of
Operations
Results of Operations
---------------------
Net sales for the second quarter ended June 30, 1997 totalled
$2,450,000, an increase of $948,000 over the $1,502,000 in net
sales for the second quarter of the prior year. For the six
months ended June 30, 1997 net sales totalled $4,377,000, an
increase of $1,839,000, or 72%, over the $2,538,000 recorded
in net sales for the prior year. A majority of the increase
in sales was primarily attributable to an increase in AMVISC
unit selling prices to Chiron Vision.
Anika's gross profit as a percentage of net sales was 51.5%
for the second quarter of 1997, an increase from the 14.9%
gross profit recorded for the same period last year. For the
six months ended June 30, 1997, Anika's gross profit as a
percentage of net sales was 49.6%, compared to a gross profit
as a percentage of net sales of 4.1% recorded over the same
period in 1996. The increase for the three and six months
ended is primarily attributable to the new five-year supply
contract with Chiron that became effective on January 1, 1997
which has higher unit selling prices than the prior agreement.
Research and development expenses for the second quarter ended
June 30, 1997 increased by $9,000 to $509,000 from $500,000
for the same period last year. For the six months ended June
30, 1997 research and development expenses decreased by
$12,000 to $832,000 from $844,000 for the same period last
year.
Selling, general and administrative expenses for the second
quarter ended June 30, 1997 increased by $69,000 to $436,000
from $367,000 for the same period last year. For the six
months ended June 30, 1997, selling, general and
administrative expenses increased by $192,000 to $830,000 from
$638,000 for the same period last year. The increase for the
three and six months ended June 30, 1997 is primarily
attributable to additional marketing and administrative staff,
and increased selling and marketing costs associated with the
international commercialization of ORTHOVISC.
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 $4.00 per
share and 146,664 warrants to purchase Common Stock
exercisable at $3.00 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 a $1,000,000
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 anticipates that its cash on hand of $2,946,000 at June
30, 1997 will fund operating expenses for the balance of 1997.
Although Anika recorded a profit of $553,000 for the six
months ended June 30, 1997, there is no assurance that
profitability will continue for future quarters. In addition,
Anika may require substantial additional funds if further
clinical testing of ORTHOVISC is required and clinical studies
for other products are initiated. 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.
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 anticipates that
its cash on hand will fund operating expenses for the balance
of 1997. However, Anika may require substantial additional
funds if further clinical testing of ORTHOVISC is required and
clinical studies for other products are initiated. 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.
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.
Presently Anika has accumulated deficit of $8,820,000 as of
June 30, 1997. 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 incurred substantial and increasing operating losses
through December 31, 1996 and although Anika has achieved
profitability for the six months ending June 30, 1997, 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.
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
successful 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
11 Computation of earnings per share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K: None
<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: August 13,1997 BY: /s/ J. Melville Engle
--------------------------
J. Melville Engle
Chief Executive Officer
DATE: August 13, 1997 BY: /s/ Sean F. Moran
----------------------
Sean F. Moran
Chief Financial Officer
<PAGE>
[DESCRIPTION] COMPUTATION OF PRIMARY AND FULLY DILUTED EPS
<PAGE>
EXHIBIT 11
Anika Therapeutics, Inc.
Computation of Primary and Fully Diluted Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY :
- ---------
Net income (loss): $337,044 ($578,072) $553,413 ($1,303,731)
Weighted average number of common
shares outstanding 5,052,426 4,799,662 5,020,989 4,293,452
Dilutive effect of :
Outstanding stock options 797,689 - 721,575 -
Warrants for redeemable convertible
preferred stock 396,941 - 379,038 -
Warrants for common stock 88,868 - 78,981 -
-----------------------------------------------
Weighted average number of common
shares as adjusted 6,335,924 4,799,662 6,200,583 4,293,452
-----------------------------------------------
Primary earnings (loss) per share $0.05 ($0.12) $0.09 ($0.30)
===============================================
FULLY DILUTED:
- --------------
Net income (loss): $337,044 ($578,072) $553,413 ($1,303,731)
Weighted average number of common
shares outstanding 5,052,426 4,799,662 5,020,989 4,293,452
Dilutive effect of :
Redeemable convertible preferred stock 1,266,542 - 1,266,542 -
Outstanding stock options 946,905 - 946,905 -
Warrants for redeemable convertible
preferred stock 432,036 - 432,036 -
Warrants for common stock 108,252 - 108,252 -
-----------------------------------------------
Weighted average number of common
shares as adjusted 7,806,161 4,799,662 7,774,724 4,293,452
-----------------------------------------------
Fully diluted earnings(loss) per share $0.04 ($0.12) $0.07 ($0.30)
===============================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,945,852
<SECURITIES> 0
<RECEIVABLES> 1,186,687
<ALLOWANCES> 0
<INVENTORY> 2,407,225
<CURRENT-ASSETS> 7,139,116
<PP&E> 3,881,740
<DEPRECIATION> 3,204,750
<TOTAL-ASSETS> 7,891,106
<CURRENT-LIABILITIES> 1,805,577
<BONDS> 0
2,723,865
0
<COMMON> 50,730
<OTHER-SE> 3,187,047
<TOTAL-LIABILITY-AND-EQUITY> 7,891,106
<SALES> 4,377,423
<TOTAL-REVENUES> 4,377,423
<CGS> 2,207,211
<TOTAL-COSTS> 2,207,211
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 567,337
<INCOME-TAX> 13,924
<INCOME-CONTINUING> 553,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 553,413
<EPS-PRIMARY> .09
<EPS-DILUTED> .07
</TABLE>
