<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-27354
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Global Pharmaceutical Corporation
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(Name of small business issuer in its charter)
Delaware 65-0403311
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Castor & Kensington Aves., Philadelphia, PA 19124-5694
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (215) 289-2220
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Not Applicable
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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 or 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 _____
As of April 15, 1996, the number of shares outstanding of each of the
issuer's classes of common equity was 4,286,871 shares of common stock ($0.01
par value).
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
BALANCE SHEET
(dollars in thousands, except per share data)
March 31, December 31,
1996 1995
----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents........................ $ 9,706 $ 9,518
Due from related party........................... -- 2
Interest Receivable ............................. 41 --
Prepaid expenses................................. 125 28
------- --------
Total current assets........................ 9,872 9,548
Property, plant and equipment, net.................... 2,441 2,105
Intangible assets .................................... 1,177 1,177
Deferred financing costs, net......................... 24 25
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$13,514 $ 12,855
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................. $ 179 $ 459
Accrued expenses................................. 568 810
Current portion of long-term debt................ 182 182
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Total current liabilities................... 929 1,451
Long-term debt........................................ 1,186 1,280
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$ 2,115 $ 2,731
======= ========
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000
authorized, none issued......................... -- --
Common stock, $.01 par value, 10,000,000 authorized
and 4,286,871 and 4,039,392 shares issued and
outstanding, respectively ...................... 43 40
Additional paid-in capital....................... 19,407 17,575
Deficit accumulated during the development stage. (8,051) (7,491)
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Total stockholders' equity ................. 11,399 10,124
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$13,514 $12,855
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The accompanying notes are an integral part of these financial statements.
2
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GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF OPERATIONS
(dollars in thousands, except share and per share data)
April 20, 1993
Three months ended March 31, (inception) to
---------------------------- March 31,
1996 1995 1996
---- ---- ---------------
General and administrative $ 833 $ 305 $ 6,841
Debt conversion expense -- -- 47
Loss on sale of common stock
and warrants -- -- 938
Sale of marketable
securities -- -- 50
Interest (income) expense (116) 43 332
Other income 157 -- 157
---------- ----------- --------
Net profit (loss) $ (560) $ (348) $(8,051)
========== =========== ========
Net loss per share $ (.13) $ (.16)
========== ===========
Weighted average
common shares outstanding 4,218,882 2,229,781
========== ===========
The accompanying notes are an integral part of these financial statements.
3
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GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(dollars and shares in thousands)
<TABLE>
<CAPTION>
Deficit
Common stock accumulated Total
----------------- Additional during the stockholders'
Number of Par paid-in development equity
shares value capital stage (deficit)
------ ----- ------- ----- ---------
<S> <C> <C> <C> <C> <C>
Issuance of common stock and common stock warrants:
Inception (April 20, 1993) and stock and
warrants issued for purchase of Richlyn
facility (August 18, 1993)..................... 1,217 $ 12 $ 42 -- $ 54
September 30, 1993 private placement.............. 177 2 498 -- 500
December 15, 1993 sale of stock and warrants...... 356 4 996 -- 1,000
Stock issued for services rendered................ 27 -- 75 -- 75
Warrants issued for services rendered............. -- -- 3 -- 3
Exercise of warrants.............................. 71 -- 250 -- 250
Net loss............................................... -- -- -- (1,040) (1,040)
------- ------ ------- ------- -------
Balances at December 31, 1993 ....................... 1,848 18 1,864 (1,040) 842
Common stock:
September 1, 1994 private placement............. 84 1 479 -- 480
Stock issued for services rendered.............. 10 -- 50 -- 50
Net loss............................................. -- -- -- (1,988) (1,988)
------- ------ ------- ------- ------
Balances at December 31, 1994........................ 1,942 19 2,393 (3,028) (616)
Issuance of common stock:
Conversion of stockholder loans ................ 297 4 2,473 -- 2,477
Stock and warrants issued to Merck KA........... 150 1 299 -- 300
Sale of stock to Merck KA....................... -- -- 938 -- 938
Initial public offering ........................ 1,650 16 11,472 -- 11,488
Net loss ............................................ -- -- -- (4,463) (4,463)
------- ------ ------- ------ ------
Balances at December 31, 1995........................ 4,039 40 17,575 (7,491) 10,124
------- ------ ------- ------- ------
Issuance of common stock ............................ 247 3 1,832 -- 1,835
Net loss ............................................ -- -- -- (560) (560)
------- ----- ------- ------- -------
Balances at March 31, 1996........................... $ 4,286 $ 43 $19,407 $(8,051) $11,399
======= ===== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
April 20,
Three months ended 1993
March 31, (inception)
------------------ to December 31,
1996 1995 1995
---- ---- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $ (560)$ (348)$ (8,051)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization......................... 53 48 425
Expenses paid through issuance of common stock and
warrants ........................................... -- -- 128
Sale of common stock and warrants .................... -- -- 938
Loss on debt conversion............................... -- -- 47
Loss on sale of marketable securities................. -- -- 50
Change in assets and liabilities:
Decrease due from/to related party............... 2 -- --
(Increase) decrease in prepaid expenses and (137) 24 (161)
other assets...................................
Decrease in note receivable from stockholders.... -- -- 264
Increase (decrease) in accounts payable and
accrued expenses ............................... (522) 375 109
------------ ----------- ------------
Net cash used for operating activities....... (1,164) 75 (6,251)
------------- ----------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (389) (69) (1,864)
Purchases and sales of marketable securities.............. -- -- (50)
------------- ------------ -----------
Net cash used for investing activities....... (389) (69) (1,914)
------------- ------------ -----------
Cash flows from financing activities:
Long-term debt:
Borrowings............................................ -- -- 1,596
Payments.............................................. (94) -- (276)
Payment of financing costs............................ -- -- (30)
Long-term debt, related party:
Borrowings ........................................... -- -- 2,755
Payments.............................................. -- -- (1,777)
Issuance of common stock and warrants:
September 30, 1993 private placement.................. -- -- 500
December 15, 1993 sale of stock and warrants ......... -- -- 1,000
September 1, 1994 private placement................... -- -- 480
November 8, 1995 stock and warrants issued to
Merck KA .......................................... -- -- 300
December 19, 1995 initial public offering ............ -- -- 11,488
January 29, 1996 sale of common stock ................ 1,835 -- 1,835
------------ ------------ ------------
Net cash provided by financing activities.... 1,741 -- 17,871
------------ ------------ ------------
Net increase in cash and cash equivalents...................... 188 6 9,706
Cash and cash equivalents, beginning of period................. 9,518 1 --
------------ ------------ ------------
Cash and cash equivalents, end of period....................... $ 9,706 $ 7 $ 9,706
============-============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 14 $ 43 $ 371
============-============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Three Months Ended
March 31, 1996 and March 31, 1995
Note 1: 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. Certain information and 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; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest annual report on Form 10-KSB.
The results of operations for the three months ended March 31, 1996, are not
necessarily indicative of the results of operations expected for the year ending
December 31, 1996.
In the opinion of management, the information contained in this report
reflects all adjustments necessary, which are of a normal recurring nature, to
present fairly the results for the interim periods presented.
Note 2: On January 29, 1996, the underwriter, Keane Securities Co.,
Inc. exercised the over-allotment option and the Company sold 247,500 shares of
common stock for net proceeds of $1,835,000.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company has generated no revenues to date and, from inception until
March 31, 1996, the Company accumulated a deficit of $8,051,000.
Since its inception, the Company has devoted substantially all of its
efforts to improving and renovating its manufacturing plant, equipment and
certain related assets (the "Facility"), establishing policies and procedures to
bring the Facility into compliance with Current Good Manufacturing Practices,
and obtaining all government approvals necessary to begin operating the
Facility. The Facility is not currently operating; however, the Company believes
6
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it will receive necessary approvals in order to begin selling one or more
generic products in 1996, although there can be no assurance such approvals will
be obtained. Accordingly, the Company is considered a development stage company
as defined in Financial Accounting Standards No. 7.
The Company's net loss for the first quarter ended March 31, 1996 was
$560,000 as compared to $348,000 in the same period in 1995.
General and administrative expenses were $833,000 in the first quarter
ended March 31, 1996 as compared to $305,000 during the same period in 1995 due
primarily to increased payroll costs, professional and consulting fees,
utilities, repairs, renovation and insurance expenses.
Interest income (net of interest expense of $12,000) was $116,000 for
the quarter ended March 31, 1996, as compared to interest expense of $43,000
during the quarter ended March 31, 1995, primarily as result of the investment
of the initial public offering ("IPO") proceeds into highly rated money market
funds, U.S. Government securities, treasury bills and short-term commercial
paper.
Other income of $157,000 generated during the first quarter ended March
31, 1996 was due primarily to a renegotiation of previously accrued legal
expenses.
Liquidity and Capital Resources
Following the completion of the IPO on December 19, 1995, the
underwriter exercised the over-allotment option on January 29, 1996 and the
Company sold 247,500 shares of Common Stock for net proceeds to the Company of
$1,835,000.
During the second quarter of 1996, the Company intends to file a loan
application for $1,000,000 with Pennsylvania Industrial Development Authority at
3.75% annually which proceeds will be used for certain capital projects planned
for the balance of 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None Applicable.
Item 2. Changes in securities: None Applicable
Item 3. Defaults Upon Senior Securities: None Applicable
Item 4. Submission of Matters to a Vote of Security Holders: None Applicable
Item 5. Other Information: None Applicable
Item 6. Exhibits and Reports on Form 8-K:
7
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(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ MAX L. MENDELSOHN
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President and Chief Executive Officer (Principal Executive
Officer)
By: /s/ CORNEL C. SPIEGLER
---------------------------------------
Chief Financial Officer, (Principal Financial
Vice President--Administration and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET (UNAUDITED) AND THE CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,706
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,872
<PP&E> 2,861
<DEPRECIATION> 420
<TOTAL-ASSETS> 13,514
<CURRENT-LIABILITIES> 929
<BONDS> 0
43
0
<COMMON> 0
<OTHER-SE> 11,356
<TOTAL-LIABILITY-AND-EQUITY> 13,514
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (116)
<INCOME-PRETAX> (560)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (560)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
