<PAGE>
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 June 30, 1997
-------------------------
[ ] Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from ______________ to _________________
Commission file number 0-22413
UNIVEC, INC.
----------------------------------------------
(Name of Small Business Issuer in Its charter)
Delaware 11-3163455
- -------------------------------- --------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
999 Franklin Avenue, Garden City, New York 11530
------------------------------------------------
(Address of Principal Executive Offices)
(516) 294-1000
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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 past 90 days.
Yes X No
----- -----
As of July 31, 1997, the Issuer had 2,881,769 shares of Common Stock,
$0.001 par value, outstanding.
Transitional Small Business Disclosure Format:
Yes No X
----- -----
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
Univec, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30
1997
ASSETS: (Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 3,381,427
Accounts receivable 10,090
Inventory 406,788
Prepaid expenses and other current assets 53,003
-----------
Total current assets 3,851,308
Fixed assets, net 912,732
Patent rights, net
64,000
-----------
Total assets $ 4,828,040
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable 390,925
Accrued expenses 120,253
Loan payable 35,400
Patent acquisition liability 10,000
-----------
Total current liabilities 556,578
Unearned income in connection with supply and licensing agreements 1,683,788
Notes payable to officers 391
-----------
Total liabilities 2,240,757
Stockholders' equity:
Preferred stock $.001 par value; 4,997,500 shares authorized;
none issued and outstanding
Series A 8% Cumulative Convertible Preferred Stock, $.001 par value,
2,500 shares authorized; 1,919 shares issued and outstanding 2
Common stock $.001 par value; 25,000,000 shares authorized; issued
and outstanding 2,881,769 shares 2,882
Additional paid-in capital 4,878,376
Accumulated deficit (2,293,977)
-----------
Total stockholders' equity 2,587,283
-----------
Total liabilities and stockholders' equity $ 4,828,040
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
<S> <C> <C> <C>
Sales $ 174,880 $ 518,477 $ 282,000
Cost of sales 110,275 259,130 223,931
---------- ----------- -----------
Gross profit 64,605 259,347 58,069
Expenses:
Marketing 153,356 $ 25,408 211,834 47,705
Product development 107,012 13,512 148,657 26,314
General and administrative 294,653 136,055 559,591 321,581
Interest 310,375 53,512 801,571 102,468
Royalties 45,000 41,000 65,000 71,000
----------- ----------- ----------- -----------
Total expenses 910,396 269,487 1,786,653 569,068
----------- ----------- ----------- -----------
Net loss $ (845,791) $ (269,487) $(1,527,306) $ (510,999)
=========== =========== =========== ===========
Net loss per share $ (.76) $ (.25) $ (1.39) $ (.48)
=========== =========== =========== ===========
Weighted average common
stock outstanding 1,120,037 1,059,001 1,101,162 1,059,001
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,527,306) $ (510,999)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation, amortization and other non cash charges 852,003 8,944
Changes in assets and liabilities:
Accounts receivable 139,543 (161,742)
Inventory (167,417)
Prepaid expenses and other current assets (1,541)
Accounts payable and accrued expenses (114,236) 313,054
----------- -----------
Net cash used in operating activities (818,954) (350,743)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (166,558) (77,846)
Payment on note for acquisition of patent (10,000) (10,000)
----------- -----------
Net cash used in investing activities (176,558) (87,846)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings 35,400
Payment of notes (1,015,949)
Proceeds from issuance of notes 250,000
Proceeds from issuance of common stock, net 4,996,542
Advances from affiliates/stockholders, net 24,175
Book overdraft 30,380
Unearned income on supply and licensing agreements 54,056
Restricted funds 32,500
----------- -----------
Net cash provided by financing activities 4,048,493 358,611
----------- -----------
Net increase (decrease) in cash 3,052,981 (79,978)
Cash at beginning of period 328,446 79,978
----------- -----------
Cash at end of period $ 3,381,427 $ --
=========== ===========
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
Conversion of indebtedness to Series A Preferred Stock for $650,000.
Conversion of indebtedness to Common Stock for $245,390.
Conversion of officer note to Common Stock for $15,295.
Reclassification of S-corporation losses through April 24, 1997 to
additional paid-in capital of $3,486,467.
See accompanying notes to consolidated financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. General:
The unaudited consolidated financial statements included herein have
been prepared in accordance with the requirements of Regulation S-B and
supplementary financial information included herein, if any, and has
been prepared in accordance with Item 310(b) of Regulation S-B and,
therefore, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with
generally accepted accounting principles. In the opinion of management,
all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial information for the
interim periods reported have been made. The financial statements
should be read in conjunction with the financial statements and notes
thereto, together with Management's Discussion contained in the
Company's Registration Statement on Form SB-2 (SEC File No. 333-20187)
declared effective by the Securities and Exchange Commission on April
24, 1997 and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997. The results of operations for the three and six months
ended June 30, 1997 are not necessarily indicative of the results for
the entire fiscal year ending December 31, 1997.
2. Loss Per Share:
Loss per share has been computed by dividing net losses by the
weighted average number of common shares outstanding during the period.
3. Public Offering:
In May 1997, the Company sold, in its initial public offering of
securities (the "Offering"), 1,725,000 shares of common stock and
2,587,500 redeemable common stock purchase warrants, inclusive of the
over-allotment, at a price of $3.50 per share and $.10 per warrant,
respectively. Each warrant entitles the holder to purchase one share of
common stock at an exercise price of $4.50 per share through April 23,
2002. The warrants are redeemable by the Company at $.05 per warrant
upon 30 days prior written notice, if the closing bid price as reported
on Nasdaq, or the closing price, as reported on a national or regional
securities exchange, as applicable, of the shares of common stock for
20 consecutive trading days ending within three days of the notice of
redemption of the warrants has been at least $8.00 per share. Net
proceeds received were approximately $4,996,542.
Simultaneous with the Offering, the Company repaid the outstanding
bridge note payable of $1,000,000 and charged the debt financing costs
of $783,282 to interest expense.
<PAGE>
4. Stockholders' Equity:
In January and March 1997, the Company authorized the issuance of 650
shares of Series A 8% Cumulative Convertible Preferred Stock to certain
shareholders of common stock in exchange for amounts due of $650,000.
On May 2, 1997, an officer of the Company exercised the remaining 4,370
incentive stock options under the 1996 Stock Option Plan at $3.50 per
share. In May 1997, the Company authorized the issuance of 34, 397
shares of common stock at $3.50 per share to a certain shareholder of
common stock and 35,715 shares of common stock at $3.50 per share to a
certain lender in exchange for amounts due of $120,390 and $125,000,
respectively.
A summary of the changes in stockholders' equity for the six months
ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Series A Additional Deferred
Preferred Common Paid-in Accumulated Offering
Stock Stock Capital Deficit Costs Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 1 $ 1,082 $ 2,459,417 $(4,253,138) $ (92,500) $(1,885,138)
Conversion of indebtedness to
Series A Preferred Stock 1 649,999 650,000
Exercise of stock options 4 15,291 15,295
Conversion of indebtedness to
Common Stock 71 245,319 245,390
Issuance of Common Stock in
initial public offering 1,725 4,994,817 4,996,542
Payment of deferred offering costs 92,500 92,500
Reclassification of S-corporation
losses through April 24, 1997 (3,486,467) 3,486,467
Net loss (1,527,306) (1,527,306)
----------- ----------- ----------- ----------- ------------ -----------
Balance, June 30, 1997 $ 2 $ 2,882 $ 4,878,376 $(2,293,977) $ -- $ 2,587,283
=========== =========== =========== =========== ============ ===========
</TABLE>
5. Newly Issued Accounting Standards:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS No. 128"), which establishes standards for computing and
presenting earnings per share. SFAS No. 128 will be effective for
financial statements issued for periods ending after December 15, 1997.
Earlier application is not permitted. Management has determined that
the effects of this change on the Company's financial statements will
not be material.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which requires that changes in comprehensive
income be shown in a financial statement that is displayed with the
same prominence as other financial statements. SFAS No. 130 becomes
effective in fiscal 1998. Management has not yet evaluated the effects
of this change on the Company's financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Three Months Ended June 30, 1997 and 1996
Sales. Sales for the three months ended June 30, 1997 (the "1997
three-month period") increased by approximately $175,000 as compared to the
three months ended June 30, 1996 (the "1996 three-month period") as a result of
increased resales of disposable medical devices. In order to fill demand for
difficult to reuse syringes during the 1997 three-month period, the Company
obtained and sold an inventory of difficult to reuse syringes of an alternative
design. At this time, production of the Company's 1cc locking clip syringes is
sufficient to meet current demand. Management believes that production of the
Company's 1cc locking clip syringe will continue to increase and will be able
to meet a growing demand for the Company's locking clip design. There were no
revenues for the 1996 three-month period.
Cost of Sales. Cost of sales for the 1997 three-month period increased
by approximately $110,000 as compared to the 1996 three-month period. The cost
of sales for the 1997 three-month period includes primarily the purchase of
difficult to reuse syringes of an alternative design to the Company's 1cc
locking clip syringe. There were no cost of sales for the 1996 three-month
period.
Marketing. Marketing expense for the 1997 three-month period increased
by approximately $128,000 as compared to the 1996 three-month period. This
increase is due primarily to expenditures associated with promoting the
Company's safety locking syringes to target markets, and it is consistent with
the budgeted amount for marketing in the use of proceeds section of the
Company's Prospectus. For the 1996 three-month period, the Company spent
nominally on marketing activities because of management's decision to spend
money on fixed assets for production rather than this activity.
Product Development. Product development expenses for the 1997
three-month period increased by approximately $94,000 as compared to the 1996
three-month period. This increase is due primarily to expenditures for research
and development for safety hypodermic devices other than the Company's 1cc
locking clip syringe, and it is consistent with the budgeted amount for product
development in the use of proceeds section of the Company's Prospectus. For the
1996 three-month period, the Company spent nominally on product development
because of management's decision to spend money on fixed assets for production
rather than this activity.
General and Administrative. General and administrative expenses for the
1997 three-month period increased by approximately $159,000 as compared to the
1996 three-month period. This increase is due primarily to increased: (a)
<PAGE>
non-cash charges for depreciation and (b) cash charges for property, casualty
and general liability insurance and salaries for two officers, and it is
consistent with the budgeted amount for general corporate purposes and
management salaries in the use of proceeds section of the Company's Prospectus.
Interest Expense. Interest expense for the 1997 three-month period
increased by approximately $257,000 as compared to the 1996 three-month period.
This increase is due to the write-off of deferred financing costs as a result of
the repayment of the bridge notes, which resulted in a non cash charge of
approximately $313,000.
Royalty Expense. Royalty expense for the 1997 three-month period
increased by $4,000 as compared to the 1996 three-month period. This increase is
due primarily to a higher minimum exclusive royalty pursuant to a licensing
agreement.
Net Loss. The net loss for the 1997 three-month period increased by
approximately $576,000 as compared to the 1996 three-month period. This increase
is due primarily to the write-off of deferred financing costs of approximately
$313,000. Excluding this non cash charge, the net loss for the 1997 three-month
period would have increased by approximately $263,000 as compared to the 1996
three-month period as a result of higher overhead expenses, which were offset by
higher gross profits, and it is consistent with the use of proceeds section of
the Company's Prospectus. Until April 24, 1997, the date of commencement of the
Offering, the Company was taxed as a S Corporation. As a result of the Offering,
the Company will be taxed as a C Corporation.
Six Months Ended June 30, 1997 and 1996
Sales. Sales for the six months ended June 30, 1997 (the "1997
six-month period") increased by approximately $236,000 as compared to the six
months ended June 30, 1996 (the "1996 six-month period") as a result of
increased resales of disposable medical devices. In order to fill demand for
difficult to reuse syringes during the 1997 six-month period, the Company
obtained and sold an inventory of difficult to reuse syringes of an alternative
design. At this time, production of the Company's 1cc locking clip syringes is
sufficient to meet current demand. Management believes that production of the
Company's 1cc locking clip syringe will continue to increase and will be able
to meet a growing demand for the Company's locking clip design. Some of the
revenues for the 1997 six-month period were attributable to resales of lancets.
Revenues for the 1996 six-month period were derived entirely from resales of
lancets and traditional disposable syringes.
<PAGE>
Cost of Sales. Cost of sales for the 1997 six-month period increased by
approximately $35,000 as compared to the 1996 six-month period. The cost of
sales for the 1997 six-month period includes primarily the purchase of difficult
to reuse syringes of an alternative design to the Company's 1cc locking clip
syringe. The cost of sales for the 1996 six-month period includes primarily the
purchase of lancets.
Marketing. Marketing expense for the 1997 six-month period increased by
approximately $164,000 as compared to the 1996 six-month period. This increase
is due primarily to expenditures associated with promoting the Company's safety
locking syringes to target markets, and it is consistent with the budgeted
amount for marketing in the use of proceeds section of the Company's Prospectus.
For the 1996 six-month period, the Company spent nominally on marketing because
of management's decision to spend money on fixed assets for production rather
than this activity.
Product Development. Product development expenses for the 1997
six-month period increased by approximately $122,000 as compared to the 1996
six-month period. This increase is due primarily to expenditures for research
and development for safety hypodermic devices other than the Company's 1cc
locking clip syringe, and it is consistent with the budgeted amount for product
development in the use of proceeds section of the Company's Prospectus. For the
1996 six-month period, the Company spent nominally on product development
because of management's decision to spend money on fixed assets for production
rather than this activity.
General and Administrative. General and administrative expenses for the
1997 six-month period increased by approximately $238,000 as compared to the
1996 six-month period. This increase is due primarily to increased: (a) non-cash
charges for depreciation and (b) cash charges for property, casualty and general
liability insurance and salaries for two officers, and it is consistent with the
budgeted amount for general corporate purposes and management salaries in the
use of proceeds section of the Company's Prospectus.
Interest Expense. Interest expense for the 1997 six-month period
increased by approximately $699,000 as compared to the 1996 six-month period.
This increase is due to the write-off of deferred financing costs as a result of
the repayment of the bridge notes, which resulted in a non cash charge of
approximately $783,000. Excluding this non cash charge, interest expense for the
1997 six-month period would have decreased by approximately $84,000 as compared
to the 1996 six-month period as a result of the conversion of amounts due
affiliates and certain stockholders into Series A Preferred Stock in December
1996.
<PAGE>
Royalty Expense. Royalty expense for the 1997 six-month period
decreased by $6,000 as compared to the 1996 six-month period. This decrease is
due primarily to the Company not electing to continue a licensing agreement.
Net Loss. The net loss for the 1997 six-month period increased by
approximately $1,016,000 as compared to the 1996 six-month period. This increase
is due primarily to the write-off of deferred financing costs of approximately
$783,000. Excluding this non cash charge, the net loss for the 1997 six-month
period would have increased by approximately $233,000 as compared to the 1996
six-month period as a result of higher overhead expenses, which were offset by
higher gross profits, and it is consistent with the use of proceeds section of
the Company's Prospectus. Until April 24, 1997, the date of the Offering, the
Company was taxed as a S Corporation. As a result of the Offering, the Company
will be taxed as a C Corporation.
Liquidity and Capital Resources
In the 1997 and 1996 six-month periods, the Company used cash from
operating activities. Net losses in each of these periods greatly affected net
cash from operations. For the 1997 six-month period, increased inventory and
decreased accounts payable and accrued expenses were significant uses of cash in
addition to the net loss adjusted for non-cash charges. For the 1996 six-month
period, increased accounts receivable was a significant use of cash in addition
to the net loss adjusted for non-cash charges.
During May 1997, the Company received net proceeds of approximately
$5,000,000 from the sale of 1,725,000 shares of Common Stock and 2,587,500
common stock purchase warrants in its initial public offering. The Company used
approximately $1,031,000 of such net proceeds to pay the principal amount
($1,000,000) and accrued interest (approximately $31,000) on its bridge notes.
The Company's investing activities have consisted primarily of
expenditures for production equipment. Commencing in May 1997, the Company
placed orders to purchase assembly machines, presses and tools (approximately
$600,000) to increase its capacity to produce safety locking syringes.
The Company has commenced production of its 1cc locking clip syringe at
a contract manufacturer in Portugal. The Company is relocating production of
clip-plunger assemblies from Harmac Medical Products in Buffalo, NY to a
manufacturer on Long Island, NY, located near the Company's executive offices.
The Long Island facility has been in operation for over twenty-five years and
<PAGE>
has a pool of tool and die makers, who have built, operated, and maintained
precision assembly machinery for several well-known consumer package and medical
device companies. Under terms of a non-binding letter of intent, the Long Island
facility would develop, own, and operate on an exclusive basis for UNIVEC its
own machinery for the production of clip-plunger assemblies used for production
of the Company's locking clip syringes. Management anticipates that additional
machinery will be purchased from other manufacturers to augment clip-plunger
assembly. The Portuguese facility is producing currently clip-plunger assemblies
and will continue to produce clip-plunger assemblies after production commences
at the Long Island facility. There can be no assurance that the Long Island
facility will enter into a legally binding agreement with the Company for the
production of clip-assemblies, or that the Long Island facility will produce
clip-plunger assemblies in sufficient quantities to satisfy the Company's
requirements.
The Company is completing plans to construct an approximately 25,000
square foot assembly facility in Ghent, NY and intends to finance construction
of the facility with the proceeds from the sale of industrial development
revenue bonds to be issued by Columbia County, NY in an aggregate principal
amount of up to $4,500,000. Although the Company has engaged the services of an
investment firm in connection with the bond financing, there can be no assurance
that the Company can negotiate acceptable terms for this bond financing or as to
when, if ever, the bond financing will be completed.
Except for the historical information herein, matters discussed in this
report are forward-looking statements that involve risks and uncertainties,
including continuing losses, limited operating history, ability to manage
growth, product acceptance, interruptions to production, competition, and other
risks detailed from time to time in the Company's SEC reports and its Prospectus
dated April 24, 1997 (as supplemented by the Prospectus Supplement dated April
29, 1997) forming a part of its Registration Statement on Form SB-2 (File No.
333-20187), as amended, which was declared effective by the Commission on April
24, 1997.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.1 Financial Data Schedule
(b) Not Applicable
<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.
UNIVEC, INC.
Dated: August 14, 1997 By: /s/ Joel Schoenfeld
-------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1997 By: /s/ David Chabut
-----------------
David Chabut
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,381,427
<SECURITIES> 0
<RECEIVABLES> 10,090
<ALLOWANCES> 0
<INVENTORY> 406,788
<CURRENT-ASSETS> 3,851,308
<PP&E> 912,732
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,828,040
<CURRENT-LIABILITIES> 556,578
<BONDS> 0
0
2
<COMMON> 2,882
<OTHER-SE> 4,878,376
<TOTAL-LIABILITY-AND-EQUITY> 4,828,040
<SALES> 518,477
<TOTAL-REVENUES> 518,477
<CGS> 259,130
<TOTAL-COSTS> 259,130
<OTHER-EXPENSES> 1,786,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 801,571
<INCOME-PRETAX> (1,527,306)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,527,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,527,306)
<EPS-PRIMARY> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
