<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 March 31, 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.
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(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
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(Address of Principal Executive Offices)
(516) 294-1000
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(Issuer's Telephone Number, Including Area Code)
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 past 90 days.
Yes X No
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As of May 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
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
Univec, Inc. and Subsidiary
Consolidated Condensed Balance Sheet
<TABLE>
<CAPTION>
March 31,
1997
ASSETS: (Unaudited)
Current assets:
<S> <C>
Cash and cash equivalents $ 97,148
Accounts receivable 201,490
Inventory 331,187
Prepaid expenses and other current assets 62,948
-----------
Total current assets 692,773
Fixed assets, net 817,641
Patent rights, net 68,000
Debt financing costs, net 313,317
-----------
Total assets $ 1,891,731
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Bridge notes payable 1,000,000
Accounts payable 669,830
Accrued expenses 185,483
Notes payable 125,000
Loan payable 44,250
Patent acquisition liability 20,000
-----------
Total current liabilities 2,044,563
Unearned income in connection with supply and licensing agreements 1,683,788
Notes payable to officers 31,635
Notes payable to stockholders 116,373
Due to affiliates 855
-----------
Total liabilities 3,877,214
Stockholders' deficiency:
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
at December 31, 1996 2
Common stock $.001 par value; 25,000,000 shares authorized; issued
and outstanding 1,082,287 shares 1,082
Additional paid-in capital 3,109,416
Accumulated deficit (4,934,653)
Less deferred offering costs (161,330)
-----------
Total stockholders' deficiency (1,985,483)
-----------
Total liabilities and stockholders' deficiency $ 1,891,731
===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Condensed Statements of Operations (Unaudited)
Three months ended
March 31,
1997 1996
------------------------------
Sales $ 343,597 $ 282,000
Cost of sales 148,855 223,931
----------- -----------
Gross profit 194,742 58,069
Expenses:
Marketing 58,478 22,297
Product development 41,645 12,802
General and administrative 264,938 185,526
Interest 491,196 48,956
Royalties 20,000 30,000
----------- -----------
Total expenses 876,257 299,581
----------- -----------
Net loss $ (681,515) $ (241,512)
=========== ===========
Net loss per share $ (.63) $ (.23)
=========== ===========
Weighted average common stock outstanding 1,082,287 1,059,001
=========== ===========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(681,515) $(241,512)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation, amortization and other non cash charges 502,852 4,944
Changes in assets and liabilities:
Accounts receivable (51,857) (218,674)
Inventory (91,816)
Prepaid expenses and other current assets (11,486)
Accounts payable and accrued expenses 132,380 252,803
--------- ---------
Net cash used in operating activities (201,442) (202,439)
--------- ---------
Cash flows from investing activities:
Purchase of fixed assets (39,634) (59,941)
Payment on note for acquisition of patent (10,000)
--------- ---------
Net cash used in investing activities (39,634) (69,941)
--------- ---------
Cash flows from financing activities:
Proceeds from loan 44,250
Payment of notes (54,000)
Proceeds from issuance of notes 250,000
Advances from affiliates/stockholders 1,858 16,788
Deferred offering costs (68,830)
Restricted funds 32,500
--------- ---------
Net cash provided by financing activities 9,778 212,788
--------- ---------
Net increase (decrease) in cash (231,298) 59,592
Cash at beginning of period 328,446 79,978
--------- ---------
Cash at end of period $ 97,148 $ 20,386
========= =========
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
Conversion of indebtedness to Series A Preferred Stock for $650,000 in
1997.
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Condensed Financial Statements
1. General:
The unaudited, consolidated condensed 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. Results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of the results for a full year.
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.
Simultaneous with the Offering, the Company repaid the outstanding bridge
note payable of $1,000,000 and charged the remaining debt financing costs
of $313,317 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.
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 October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123, which becomes effective in
fiscal 1997, allows companies to measure compensation cost in connection
with employee stock compensation plans using a fair value based method or
to continue to use an intrinsic value based method, which generally does
not result in compensation cost. The Company has adopted the disclosure
only provisions of the statement.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
UNIVEC, Inc.
1st Quarter 1997 10-QSB
June 5, 1997
General
UNIVEC has incurred net losses for each period since its inception. The
Company expects operating losses to continue until such time, if ever, as the
Company can sell significant units of its locking clip syringes, and it can
manufacture syringes at costs sufficiently lower than selling prices so that
gross profits cover overhead expenses. As of March 31, 1997, sales of its 1cc
locking clip syringes are not deemed material and should not be regarded as a
material indicator of the Company's future performance nor as an indication of
acceptance of the Company's 1cc locking clip syringes in the world marketplace.
To meet the demand for safety locking syringes until greater quantities of the
Company's 1cc become available, the Company has sold in the first quarter of
1997 and continues to sell in the second quarter of 1997 safety locking syringes
of an alternative design to the World Health Organization ("WHO"), one of the
relief agencies that the Company is targeting for its initial sales.
Results of Operations
Fiscal Quarters Ended March 31, 1997 and 1996
Sales. Sales for the three months ended March 31, 1997 (the "1997
interim period") increased by approximately $61,000 as compared to the three
months ended March 31, 1996 (the "1996 interim period") as result of increased
resales of disposable medical devices, which did not utilize the Company's
locking clip. During the 1997 interim period, the Company sold approximately
2,950,000 difficult to reuse syringes assembled by INSERPOR, most of which were
of an alternative design to the Company's locking clip syringe, and it sold
lancets manufactured by Sherwood to one distributor, which resold the lancets to
retailers in Canada and the United States. For the 1997 interim period, sales of
difficult to reuse syringes generated approximately 84% of the Company's
revenue. During the 1996 interim period, the Company had no sales of its locking
clip syringes, but it sold lancets manufactured by Sherwood and syringes
manufactured by INSERPOR, which did not utilize the Company's locking clip.
Cost of Sales. Cost of sales for the 1997 interim period decreased by
approximately $75,000 as compared to the 1996 interim period as result of the
Company's ability to buy excess inventory at a discount from INSERPOR. The cost
of sales for the 1997 interim period includes primarily the purchase of
difficult to reuse syringes, which were of an alternative design to the
Company's locking clip syringe, from INSERPOR. The cost of sales for the 1996
interim period includes primarily the purchase of lancets from Sherwood.
1
<PAGE>
UNIVEC, Inc.
1st Quarter 1997 10-QSB
June 5, 1997
Marketing. Marketing expense for the 1997 interim period increased by
approximately $36,000 as compared to the 1996 interim period. This increase is
due primarily to expenditures for travel to offices of relief agencies in
Europe. The Company is targeting relief agencies such as WHO and UNICEF, which
have offices in Europe, for its initial sales.
Product Development. Product development expenses for the 1997 interim
period increased by approximately $29,000 as compared to the 1996 interim
period. This increase is due primarily to expenditures for research and
development for a 3cc locking clip syringe and other safety hypodermic devices.
General and Administrative. General and administrative expenses for the
1997 interim period increased by approximately $79,000 as compared to the 1996
interim 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.
Interest Expense. Interest expense for the 1997 interim period
increased by approximately $442,000 as compared to the 1996 interim period. This
increase is due to the amortization of deferred financing costs, which resulted
in a non cash charge of approximately $470,000. Excluding this non cash charge,
interest expense for the 1997 interim period would have decreased by
approximately $28,000 as compared to the 1996 interim period as result of the
conversion of amounts due affiliates and certain stockholders into Series A
Preferred Stock in December 1996.
Royalty Expense. Royalty expense for the 1997 interim period decreased
by $10,000 as compared to the 1996 interim period. This decrease is due to the
Company not electing to continue a licensing agreement.
Net Loss. The net loss for the 1997 interim period increased by
approximately $440,000 as compared to the 1996 interim period. This increase is
due primarily to the amortization of deferred financing costs of approximately
$470,000. Excluding this non cash charge, the net loss for the 1997 interim
period would have decreased by approximately $30,000 as compared to the 1996
interim period as result of higher gross profits offset by higher overhead
expenses. Until the effective date (April 24, 1997) of the Company's initial
public offering ("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 interim periods, the Company's overhead expenses
have exceeded gross profits from resales of hypodermic devices. For both
2
<PAGE>
UNIVEC, Inc.
1st Quarter 1997 10-QSB
June 5, 1997
periods, accounts payable, accrued expenses and other short term liabilities
were significant sources of funding. In addition for the 1996 interim period,
the Company received $250,000 for an asset-backed note, guaranteed by certain
stockholders, which was repaid in July 1996.
During May 1997, the Company closed its initial public offering,
including the exercise of the over-allotment option by the underwriter, and
raised net proceeds of approximately $4.8 million dollars; simultaneously, the
Company repaid principal of $1 million and accrued interest of approximately
$31,000 to holders of bridge notes. The Company expects that the net proceeds of
the Offering will be sufficient to satisfy its anticipated cash requirements
until April 1998.
The Company expects to incur additional operating losses and negative
cash flows at least through 1997. These losses will continue until such time as
the Company builds up sufficient sales and margins to offset expenses, which
include continuing product and machine development for new syringe products. The
timing and amounts of these negative cash flows will depend on many factors,
some of which are beyond the Company's control, such as the progress of the
Company's product development projects, improvements to existing manufacturing
processes, and sales of Company products at prices sufficient to cover expenses.
Except for the historical information herein, the matters discussed in
this report are forward-looking statements that involve risks and uncertainties,
including market acceptance of the Company's 1cc locking clip syringes, the
timely development and acceptance of new products, the development of an
effective sales and marketing organization, improvements to existing products
and manufacturing processes, delays and interruptions to production, the impact
of competitive products and pricing, and the 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: June 8, 1997 By: /s/ Joel Schoenfeld
-------------------
Joel Schoenfeld
Chairman of the Board and
Chief Financial Officer
Date: June 8, 1997 By: /s/ David Chabut
-----------------
David Chabut
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 97,148
<SECURITIES> 0
<RECEIVABLES> 201,490
<ALLOWANCES> 0
<INVENTORY> 331,187
<CURRENT-ASSETS> 692,773
<PP&E> 817,641
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,891,731
<CURRENT-LIABILITIES> 2,044,563
<BONDS> 0
0
2
<COMMON> 1,082
<OTHER-SE> 3,109,416
<TOTAL-LIABILITY-AND-EQUITY> 1,891,731
<SALES> 343,597
<TOTAL-REVENUES> 343,597
<CGS> 148,855
<TOTAL-COSTS> 148,855
<OTHER-EXPENSES> 876,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 491,196
<INCOME-PRETAX> (681,515)
<INCOME-TAX> 0
<INCOME-CONTINUING> (681,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (681,515)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
