<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, 1997
[ ] 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
Global Pharmaceutical Corporation
------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (215) 289-2220
Not Applicable
----------------------------------------------------------------
(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 21, 1997, 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).
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
BALANCE SHEET
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------ ------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 2,351 $ 4,044
Prepaid expenses and other.................................... 66 49
Inventory..................................................... 141 --
----------- -----------
Total current assets..................................... 2,558 4,093
Property, plant and equipment, net................................. 4,295 4,135
Intangible assets ................................................. 1,177 1,177
Deferred financing costs, net...................................... 38 35
----------- -----------
Total assets............................................. $ 8,068 $ 9,440
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................. $ 90 $ 90
Accounts payable.............................................. 183 383
Accrued expenses.............................................. 327 419
----------- -----------
Total current liabilities................................ 600 892
Long-term debt..................................................... 1,167 1,197
----------- -----------
1,767 2,089
----------- -----------
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 shares issued and outstanding.................... 43 43
Additional paid-in capital.................................... 19,407 19,407
Deficit accumulated during the development stage.............. (13,149) (12,099)
----------- -----------
Total stockholders' equity .............................. 6,301 7,351
----------- -----------
Total liabilities and stockholders' equity............... $ 8,068 $ 9,440
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
April 20, 1993
Three months ended March 31, (inception) to
---------------------------- March 31,
1997 1996 1997
------ ------ ----------------
<S> <C> <C> <C>
General and administrative $ 1,199 $ 833 $ 12,347
Debt conversion expense -- -- 47
Loss on sale of common stock
and warrants -- -- 938
Loss on sale of marketable
securities -- -- 50
Interest expense 13 12 482
Interest income (42) (128) (417)
Other income (120) (157) (298)
----------- ----------- -----------
Net loss $ (1,050) $ (560) $ (13,149)
=========== =========== ===========
Net loss per share $ (.24) $ (.13)
=========== ===========
Weighted average
common shares outstanding 4,286,871 4,218,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
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
Issuance of 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 KGaA............... 150 1 299 -- 300
Sale of stock to Merck KGaA........................... -- -- 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 for over-allotment exercise
on January 29, 1996....................................... 248 3 1,832 -- 1,835
Net loss................................................... -- -- -- (4,608) (4,608)
-------- -------- -------- -------- --------
Balances at December 31, 1996.............................. 4,287 43 19,407 (12,099) 7,351
Net loss................................................... -- -- -- (1,050) (1,050)
-------- -------- -------- -------- --------
Balances at March 31, 1997................................. 4,287 $ 43 $19,407 $(13,149) $ 6,301
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
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 March 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $ (1,050) $ (560) $ (13,149)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization......................... 90 53 743
Expenses paid through issuance of common stock and
warrants ............................................ -- -- 128
Loss on 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) in prepaid expenses and other assets.. (20) (137) (65)
(Increase) in inventory......................... (141) -- (141)
Decrease in note receivable from stockholders.... -- -- 264
(Decrease) in accounts payable and accrued
expenses ...................................... (293) (522) (129)
----------- ---------- ----------
Net cash used for operating activities....... (1,414) (1,164) (11,314)
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (249) (389) (4,035)
Sales (purchases) of marketable securities................ -- -- (50)
----------- ---------- ----------
Net cash used for investing activities....... (249) (389) (4,085)
----------- ---------- ----------
Cash flows from financing activities:
Long-term debt:
Borrowings............................................ -- -- 1,596
Payments.............................................. (30) (94) (387)
Payment of financing costs............................ -- -- (40)
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.... (30) 1,741 17,750
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........... (1,693) 188 2,351
Cash and cash equivalents, beginning of period................. 4,044 9,518 --
----------- ---------- ----------
Cash and cash equivalents, end of period....................... $ 2,351 $ 9,706 $ 2,351
=========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 13 $ 14 $ 410
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Three Months Ended
March 31, 1997 and March 31, 1996
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, 1997, are not
necessarily indicative of the results of operations expected for the year ending
December 31, 1997.
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.
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, 1997, the Company accumulated a deficit of $13,149,000.
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
it will receive necessary approvals in order to begin selling one or more
generic products in 1997, although there can be no assurance such approvals will
be obtained in 1997, or at all. Accordingly, the Company is considered a
development stage company as defined in Financial Accounting Standards No. 7.
In February 1997, Food and Drug Administration ("FDA") approved
independent consultants recertified the manufacturing facility for final FDA
site review. On May 7, 1997 the Company announced that it has discussed with
senior officials of the FDA's Philadelphia District Office the most recent
inspection conducted by the FDA, in connection with the Company's continuing
efforts to obtain FDA
6
<PAGE>
certification of its plant manufacturing area and processes. In addition, the
Company has discussed with FDA a number of procedural and other initiatives it
has undertaken to better assure compliance with FDA regulatory requirements. The
FDA has advised the Company that an inspection to verify the effectiveness of
these initiatives is necessary to its determination that the Company complies
with applicable regulatory requirements. This inspection is scheduled for
mid-May 1997.
The Company's net loss for the three months ended March 31, 1997 was
$1,050,000 as compared to $560,000 in the same period in 1996.
General and administrative expenses were $1,199,000 in the quarter
ended March 31, 1997, as compared to $833,000 during the same period in 1996 due
primarily to increased payroll costs resulting from hiring of personnel
necessary to support the Company's infrastructure and anticipated FDA
certification.
Interest income was $42,000 for the quarter ended March 31, 1997, as
compared to interest income of $128,000 during the quarter ended March 31, 1996,
due to a decrease in short term investments.
Other income of $120,000 generated during the quarter ended March 31,
1997 was due primarily to an amount received from a supplier for a claim filed
by the Company in 1996 relating to unacceptable materials purchased from the
supplier.
Liquidity and Capital Resources
On December 19, 1995, the Company completed its initial public offering
("IPO") of common stocks, in which 1,650,000 shares of common stock were sold by
the Company for net proceeds of $11,488,000. An additional 247,500 shares of
common stock were sold to the underwriter of the IPO in January 1996, upon the
exercise of the underwriters' over-allotment option for net proceeds to the
Company of $1,835,000.
In June 1996, the Company received approval for a $1,000,000 loan with
PIDA at 3.75% annually fixed for 15 years, the proceeds of which must be used
for certain capital projects.
In August 1996, the Company received approval for a $350,000 loan from
the Delaware River Port Authority at 5.00% annually fixed for 10 years, the
proceeds of which must be used for certain capital projects.
The Company has expended, and will continue to expend funds to purchase
production and laboratory equipment and to develop its manufacturing, sales and
marketing, and product development capabilities. The Company will require
additional funds in 1997 for these purposes and to continue as a development
stage company. Additional funds are expected to be raised through subsequent
equity or debt financings, collaborative arrangements with corporate partners,
or through other sources. The Company's failure to obtain sufficient financing,
to obtain necessary FDA and government approvals, or to produce and sell
7
<PAGE>
sufficient quantities of its products, would adversely affect its cash flows and
operating and development plans.
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:
(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
----------------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ CORNEL C. SPIEGLER
----------------------------------------------
Chief Financial Officer,
Vice President--Administration
(Principal Financial and Accounting Officer)
8
<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, 1997 (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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,351
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 141
<CURRENT-ASSETS> 2,558
<PP&E> 5,033
<DEPRECIATION> 738
<TOTAL-ASSETS> 8,068
<CURRENT-LIABILITIES> 600
<BONDS> 0
0
0
<COMMON> 43
<OTHER-SE> 6,258
<TOTAL-LIABILITY-AND-EQUITY> 8,068
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,199
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> (1,050)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,050)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
