<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1998
[ ] 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 of (I.R.S. Employer
Incorporation or Organization (Identification No.)
999 Franklin Avenue, Garden City, New York,11530
(Address of Principal Executive Offices)
(516) 294-1000
(Issuers 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) has 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 30, 1998 , the Issuer had 2,981,769 shares of Common Stock,
$0.001 par value, outstanding.
Transitional Small Business Disclosure Format:
Yes __X__ No _____
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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, 1998
(Unaudited)
<S> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 113,514
Accounts receivable 279,738
Inventory 1,091,602
Other current assets 98,800
-----------
Total current assets 1,583,654
Fixed assets, net 1,888,700
Patent rights, net 52,000
-----------
Total assets $ 3,524,354
===========
LIABILITIES AND STOCKHOLDERS EQUITY:
Accounts payable 609,719
Accrued expenses 125,930
-----------
Total liabilities 735,649
Stockholders' equity:
Preferred stock $.001 par value; 4,997,500 authorized; none issued and outstanding
Series A 8% Cumulative Convertible Preferred Stock, $.001 par value, 2500 shares 2
authorized; 2,072 shares issued and outstanding
Common stock $.001 par value; 25,000,000 shares authorized; 2,981,769 shares 2,982
issued and outstanding
Additional paid-in capital 5,266,163
Accumulated deficit (2,480,442)
-----------
Total stockholders' equity 2,788,705
-----------
Total liabilities and stockholders' equity $ 3,524,354
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Condensed Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---- ----
Revenues:
<S> <C> <C>
Product sales $ 362,998 $ 343,597
Expenses:
Cost of product sales 328,246 148,855
Marketing 105,122 58,478
Product development 119,468 41,645
General and administrative 315,503 264,938
Royalties 40,000 20,000
Interest (income)/expense, net (4,023) 491,196
----------- -----------
Total expenses, net 904,316 1,025,112
----------- -----------
$ (541,318) $ (681,515)
Net loss =========== ===========
Share information
Basic earnings per share
Net loss per share $ (.18)
===========
Proforma net loss per share $ (.63)
===========
Weighted average common stock outstanding 2,981,769 1,082,287
=========== ===========
Diluted earnings per share
Net loss per share $ (.18)
===========
Proforma net loss per share $ (.63)
===========
Weighted average common stock outstanding 2,981,769 1,082,287
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (541,318) $(681,515)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization, and other non-cash charges 40,015 502,852
Changes in assets and liabilities:
Accounts receivable (279,738) (51,857)
Inventory (372,086) (91,816)
Other current assets (11,451) (11,486)
Accounts payable and accrued expenses 449,161 132,380
----------- ---------
Net cash used in operating activities (715,417) (201,442)
Cash flows from investing activities:
Purchase of fixed assets (380,550) (39,364)
Cash flows from financing activities:
Proceeds from loan 44,250
Advances from affiliates/stockholders 1,858
Deferred offering costs (68,830)
Restricted funds 32,500
----------- ---------
Net cash provided by financing activities 0 9,778
----------- ---------
Net cash decrease in cash (1,095,967) (231,298)
Cash at beginning of period 1,209,481 328,446
----------- ---------
Cash at end of period $ 113,514 $ 97,148
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNIVEC, Inc. and Subsidiary
Notes to Consolidated Condensed Financial Statements (Unaudited)
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 and Analysis contained in the
Company's form 10-KSB/A for the fiscal year ended December 31, 1997. The results
of operations for the three months ended March 31, 1998 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 1998.
2. Basic and Diluted Loss Per Share:
In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Earnings per share amounts for all periods have been
restated to conform to the SFAS No. 128 requirements.
Pro forma basic and diluted loss per share does not differ from
historical loss per share, as there is no effect from the Company converting
from an S corporation to a C corporation.
3. Stockholders' Equity:
On March 31, 1998, the Board of Directors declared a dividend of
$153,520 payable in-kind to stockholders of Series A 8% Cumulative Convertible
Preferred Stock of record as of December 31, 1997. As a result, the Company
authorized the issuance of 153 shares of Series A 8% Cumulative Convertible
Preferred Stock.
A summary of the changes in stockholders' equity for the three months
ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
Series A 8%
Cumulative Convertible Additional Total
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1997 1,919 $2 2,981,769 $2,982 $5,266,163 $(1,939,124) $3,330,023
Payment of
in-kind
dividend 153
Net loss (541,318) (541,318)
Balance,
March 31,
1998
----- ------- --------- ------ ---------- ----------- ----------
2,072 $2 2,981,769 $2,982 $5,266,163 $(2,480,442) $2,788,705
===== ======= ========= ====== ========== =========== ==========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended March 31, 1998 and 1997
Product Sales. Product sales for the three months ended March 31, 1998
(the "1998 three-month period") were approximately $363,000 and increased by
approximately $19,000 as compared to product sales for the three months ended
March 31, 1997 (the "1997 three-month period"). Product sales of the proprietary
1cc locking clip syringe, a difficult-to-reuse syringe, were approximately
$324,000 and increased by approximately $60,000 as compared to product sales of
a difficult-to-reuse syringe of an alternative design, which the Company
obtained and sold during the 1997 three-month period. Product sales of the
proprietary 1cc locking clip syringe have increased each quarter since UNIVEC
(the "Company") began sales of this safety hypodermic device in July 1997.
Cost of Product Sales. Cost of product sales for the 1998 three-month
period increased by approximately $179,000 as compared to cost of product sales
for the 1997 three-month period. The cost of product sales for the 1998
three-month period includes primarily the purchase of the Company's proprietary
1cc locking clip syringe from its Portuguese contract manufacturer and includes
also manufacturing expenses from its Mineola, New York production facility. The
cost of product sales for the 1997 three-month period includes primarily the
purchase of difficult-to-reuse syringes of an alternative design, which the
Company purchased at a discount.
Marketing. Marketing expense for the 1998 three-month period increased
by approximately $47,000 as compared to the 1997 three-month period. This
increase is due primarily to costs for promoting the use of difficult-to-reuse
syringes generally and the Company's proprietary 1cc locking clip syringe
specifically.
Product Development. Product development expenses for the 1998
three-month period increased by approximately $78,000 as compared to the 1997
three-month period. This increase is due primarily to the use of components and
labor for testing production of clips and clip-plunger subassemblies.
General and Administrative. General and administrative expenses for the
1998 three-month period increased by approximately $51,000 as compared to the
1997 three-month period. This increase is due primarily to the administrative
costs of being a public company. During the 1997 three-month period, the Company
was a private company.
Royalty Expense. Royalty expense for the 1998 three-month period
increased by $20,000 as compared to the 1997 three-month period. In the 1998
three-month period, the Company signed a license agreement for a pre-filled or
unit-dose syringe.
Interest (Income)/Expense, Net. The 1998 three-month period had
interest income of approximately ($4,000) as result of proceeds from the initial
public offering, which was closed in May 1997, being invested in
interest-bearing accounts. Alternatively, the 1997 three-month period had
interest expense of approximately $491,000 primarily as result of the
amortization of deferred financing costs of approximately $470,000 incurred in
connection with a bridge financing completed in the three months ended December
31, 1996.
<PAGE>
Net Loss. The net loss for the 1998 three-month period decreased by
approximately $140,000 as compared to the 1997 three-month period. This decrease
is due primarily to the amortization of deferred financing costs of
approximately $470,000 in the 1997 three-month period. Earnings before interest,
taxes, depreciation, amortization, and other non-cash charges or income
("EBITDA") for the 1997 three-month period were approximately ($154,000),
whereas EBITDA for the 1998 three-month period were approximately ($502,000) or
an increase of approximately ($348,000) over the 1997 three-month period, which
is due primarily to higher gross profits from product sales in the 1997
three-month period. The higher gross profits in the 1997 three-month period is
due primarily to the Company's purchase of discounted inventory.
Liquidity and Capital Resources
In the 1998 and 1997 three-month periods, the Company used cash in
operating activities. For both periods, net losses adjusted by depreciation,
amortization and other non-cash charges were the primary use of cash in
operating activities. In addition for both periods, investments in inventory in
anticipation of sales were a use of cash and were funded by increased accounts
payable.
The Company's investing activities have consisted primarily of
expenditures for production equipment at its contract manufacturer in Portugal
and its production facility in Mineola, New York. As of March 31, 1998, the
Company had outstanding purchase orders of approximately $180,000 to purchase
production equipment.
The Company is pursuing financing to provide additional working
capital, which could involve dilution to existing stockholders. However, there
can be no assurance as to when, if ever, the Company will be able to obtain
additional long term financing. Furthermore, there can be no assurance as to
whether any additional long term financing will be sufficient to sustain the
anticipated level of operations.
Except for the historical information contained herein, the matters
discussed in this report are forward-looking statements that involve risks and
uncertainties, including need for additional financing and other risks detailed
from time to time in the Company's Securities and Exchange Commission (SEC)
reports including its post-effective amendment on form S-3 to the Registration
Statement on Form SB-2 (File No. 333-20187) filed with the SEC on May 11, 1998.
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The Company commenced an initial public offering of its securities on
April 24, 1997 (the "Effective Date"), whereby it received net proceeds of
approximately $4,997,000 (the "Net Proceeds"). Since the Effective Date, the
Company has spent the following approximate amounts of the Net Proceeds towards
the purposes indicated:
Use of Net Proceeds through March 31, 1998
- -------------------------------------------------------
Equipment $1,167,581
Marketing, promotion and public relations 452,641
Product development 371,142
Payment of bridge notes 1,000,000
Management salaries 299,000
Working capital and general purposes 1,593,122
Temporary investments in interest-bearing bank accounts 113,514
Net Proceeds ----------
$4,997,000
==========
The expenditure by the Company of the Proceeds since the Effective Date for any
other items not listed above has not changed since the Company's last filed
periodic report (including Form S-R) and, pursuant to the Securities Act of
1933, as amended, and the rules and regulations promulgated thereby, the listing
of such expenditures is omitted from this report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.1 Financial Data Schedule
(b) The Company filed an 8-K report on April 24, 1998 reporting a
change of independent auditor from Coopers & Lybrand LLP to
Richard A. Eisner & Company, LLP.
<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: May 14, 1998 By: /s/ Joel Schoenfeld
----------------------------------
Joel Schoenfeld
Chairman of the Board
Chief Executive Officer
Dated: May 14, 1998 By: /s/ David Chabut
----------------------------------
David Chabut
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 113,514
<SECURITIES> 0
<RECEIVABLES> 279,738
<ALLOWANCES> 0
<INVENTORY> 1,091,602
<CURRENT-ASSETS> 1,583,654
<PP&E> 1,888,700
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,524,354
<CURRENT-LIABILITIES> 735,649
<BONDS> 0
0
2
<COMMON> 2,982
<OTHER-SE> 5,266,163
<TOTAL-LIABILITY-AND-EQUITY> 3,524,354
<SALES> 362,998
<TOTAL-REVENUES> 362,998
<CGS> 328,246
<TOTAL-COSTS> 328,246
<OTHER-EXPENSES> 580,093
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,023)
<INCOME-PRETAX> (541,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (541,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (541,318)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
