<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, 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 (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, 1998, the Issuer had 2,981,769 shares of Common Stock,
$0.001 par value, outstanding.
Transitional Small Business Disclosure Format:
Yes x No
----- -----
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
Univec, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30
1998
ASSETS: (Unaudited)
-----------
<S> <C>
Current assets:
Cash and cash equivalents $ 311,429
Accounts receivable 128,365
Inventory 858,363
Prepaid expenses and other current assets 65,249
-----------
Total current assets 1,363,406
Fixed assets, net 1,903,202
Patent rights, net 48,000
-----------
Total assets $ 3,314,608
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable 546,345
Accrued expenses 149,593
-----------
Total liabilities 695,938
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; 2,072 shares issued and outstanding 2
Common stock $.001 par value; 25,000,000 shares authorized; issued
and outstanding 2,981,769 shares 2,982
Additional paid-in capital 5,266,163
Accumulated deficit (2,650,477)
-----------
Total stockholders' equity 2,618,670
-----------
Total liabilities and stockholders' equity $ 3,314,608
===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
Revenues:
<S> <C> <C> <C> <C>
Product sales $ 915,025 174,880 $ 1,278,023 $ 518,477
Expenses:
Cost of sales 626,112 110,275 954,358 259,130
Marketing 100,319 153,356 205,441 211,834
Product development 56,314 107,012 175,782 148,657
General and administrative 267,220 294,653 582,723 559,591
Royalties 25,825 45,000 65,825 65,000
Interest (income)/expense, net 9,270 310,375 5,247 801,571
----------- ----------- ----------- -----------
Total expenses, net 1,085,060 1,020,671 1,989,376 2,045,783
----------- ----------- ----------- -----------
Net loss $ (170,035) $ (845,791) $ (711,353) $(1,527,306)
=========== =========== =========== ===========
Share information
Basic earnings per share
Net loss per share $ (.06) $ (.24)
=========== ===========
Proforma net loss per share $ (.76) $ (1.39)
=========== ===========
Weighted average common
stock outstanding 2,981,769 1,120,037 2,981,769 1,101,162
=========== =========== =========== ===========
Diluted earnings per share
Net loss per share $ (.06) $ (.24)
=========== ===========
Proforma net loss per share $ (.76) $ (1.39)
=========== ===========
Weighted average common
stock outstanding 2,981,769 1,120,037 2,981,769 1,101,162
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Univec, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (711,353) $(1,527,306)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation, amortization and other non cash charges 81,802 852,003
Changes in assets and liabilities:
Accounts receivable (128,365) 139,543
Inventory (138,847) (167,417)
Prepaid expenses and other current assets 22,100 (1,541)
Accounts payable and accrued expenses 409,449 (114,236)
----------- -----------
Net cash used in operating activities (465,214) (818,954)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (432,838) (166,558)
Payment on note for acquisition of patent (10,000)
----------- -----------
Net cash used in investing activities (432,838) (176,558)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings 35,400
Payment of notes (1,015,949)
Proceeds from issuance of common stock, net 4,996,542
Restricted funds 32,500
----------- -----------
Net cash provided by financing activities 0 4,048,493
----------- -----------
Net increase (decrease) in cash (898,052) 3,052,981
Cash at beginning of period 1,209,481 328,446
----------- -----------
Cash at end of period $ 311,429 $ 3,381,427
=========== ===========
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
Dividend of $153,250 payable in kind by issuance of 153 shares of
Series A 8% Cumulative Convertible Preferred Stock on March 31, 1998.
See accompanying notes to consolidated financial statements.
3
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated 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
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 and the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998. The results of operations for the three and six
months ended June 30, 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 are required to be restated to conform to the SFAS No.128
requirements. However, no restatement is required because basic and
diluted loss per share for prior and current periods are the same.
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 six months
ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
Series A 8%
Cumulative
Convertible Additional Total
Preferred Stock Common Stock Paid-in Accumulated Stockholder's
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 (711,353) 711,353
----- -- -------- ------ ---------- ----------- ----------
Balance, June 30,1998 2,072 $2 2,981,769 $2,982 $5,266,163 $(2,650,477) $2,618,670
====== == ========= ====== ========== ============ ==========
</TABLE>
4
<PAGE>
4. Subsequent Event
On July 27, 1998, UNIVEC,Inc. ("Company") entered into a Securities Purchase
Agreement ("Securities Purchase Agreement") to sell 750 shares of its Series B
5% Convertible Preferred Stock ("Preferred Shares"), and Common Stock Purchase
Warrants exercisable to purchase 112,500 shares of the Company's Common Stock
("Warrants") to an institutional investor. The aggregate purchase price under
the Securities Purchase Agreement was $750,000. Each Preferred Share has a
stated value of $1,000 and is convertible into the number of shares of Common
Stock having such value, calculated on the basis of the lesser of (i) $1.925 per
share and (ii) an amount equal to 80-85% of a price related to the market price
for the common stock during the twenty trading day period preceding the
conversion date as provided in the certificate designating the terms and
conditions of the Preferred Shares. The Warrants carry an exercise price of
$2.15 per share of Common Stock,expiring August 1, 2001. In addition, the
Company paid a finder's fee of 9.5% of the purchase price or an aggregate of
$71,250 in connection with the closing. The closing under the Securities
Purchase Agreement occurred Concurrently with the execution of the Securities
Purchase Agreement. Under the terms of the Securities Purchase Agreement, the
Conpany is obligated, within 30 days of the Closing of the sale under the
Securities Purchase Agreement, to prepare and file a Registration Statement on
Form S-3 with respect to a continuous resale offering of the Shares by the
various purchases.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Three Months Ended June 30, 1998 and 1997
Sales. Sales for the three months ended June 30, 1998 (the "1998
three-month period") increased by approximately $740,000 as compared to the
three months ended June 30, 1997 (the "1997 three-month period") as a result
of increased sales of its disposable medical devices, all of which were either
produced in the Company's own production facility in the United States or in
its Portuguese contract manufacturer. At this time, production of the
Company's 1cc locking clip syringes is insufficient 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. Product sales of the proprietary 1cc locking
clip syringe have increased each quarter since UNIVEC ("Company") began sales
of this safety hypodermic device in July 1997.
Cost of Sales. Cost of sales for the 1998 three-month period
increased by approximately $516,000 as compared to the 1997 three-month
period, primarily due to increased sales.
Marketing. Marketing expense for the 1998 three-month period
decreased by approximately $53,000 as compared to the 1997 three-month period.
This decrease is due primarily to lower expenditures associated with promoting
the Company's safety locking syringes to target markets, offset in part by
increased expenses incurred for marketing consultants.
Product Development. Product development expenses for the 1998
three-month period decreased by approximately $51,000 as compared to the 1997
three-month period. This decrease is due primarily to management's decision to
utilize its resources primarily in the development of its own production
facility rather than on product development itself.
General and Administrative. General and administrative expenses for
the 1998 three-month period decreased by approximately $27,000 as compared to
the 1997 three-month period. This decrease is due primarily to decreased
charges for insurance offset in part by securities maintenance expenses due to
the Company being publicly-held throughout the entire current period.
Royalty Expense. Royalty expense for the 1998 three-month period
decreased by approximately $19,000 as compared to the 1997 three-month period.
This decrease is due primarily to the timing of minimum payments applicable to
licensing agreements.
Interest Expense. Interest expense for the 1998 three-month period
decreased by approximately $301,000 as compared to the 1997 three-month
period. This decrease is primarily due to the write-off in the 1997
three-month period 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 for the 1997 three-month period.
Net Loss. The net loss for the 1998 three-month period decreased by
approximately $676,000 as compared to the 1997 three-month period. This
decrease is due principally to the write-off of deferred financing costs of
approximately $313,000, increased gross profit of approximately $224,000 and
generally lower expenses.
6
<PAGE>
Six Months Ended June 30, 1998 and 1997
Sales. Sales for the six months ended June 30, 1998 (the "1998
six-month period") increased by approximately $760,000 as compared to the six
months ended June 30, 1997 (the "1997 six-month period") as a result of
increased sales of disposable medical devices, all of which were either
produced in the Company's own production facility in the United States or in
its Portuguese contract manufacturer. At this time, production capacity of the
Company's 1cc locking clip syringes is insufficient to meet current demand.
Management believes that production capacity 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.
Cost of Sales. Cost of sales for the 1998 six-month period increased
by approximately $695,000 as compared to the 1997 six-month period, principally
due to increased sales.
Marketing. Marketing expense for the 1998 six-month period decreased
by approximately $6,000 as compared to the 1997 six-month period. This
decrease is due primarily to lower expenditures associated with promoting the
Company's safety locking syringes to target markets, offset by increased
expenses incurred for marketing consultants.
Product Development. Product development expenses for the 1998
six-month period increased by approximately $27,000 as compared to the 1997
six-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 six-month period increased by approximately $23,000 as compared to
the 1997 six-month period. This increase is due primarily to increased
securities maintenance expenses due to the Company being publicly-held
throughout the entire current period.
Royalty Expense. Royalty expense for both six-month periods were
approximately the same.
Interest Expense. Interest expense for the 1998 six-month period
decreased by approximately $796,000 as compared to the 1997 six-month period.
This decrease is principally due to the amortization and write-off of deferred
financing costs as a result of the repayment of the bridge notes, which resulted
in non cash charges of approximately $783,000 during the 1997 six-month period.
Net Loss. The net loss for the 1998 six-month period decreased by
approximately $816,000 as compared to the 1997 six-month period. This decrease
is due primarily to the write-off of deferred financing costs of approximately
$783,000, increased gross profit of approximately $64,000 offset in part by
somewhat higher expenses.
7
<PAGE>
Liquidity and Capital Resources
In the 1998 and 1997 six-month periods, the Company used cash from
operating activities, primarily due to net losses in each of these periods.
For the 1998 six-month period, increased accounts payable used to fund
increased inventory and accounts receivable, as a result of increased sales,
served to reduce the amount of cash used from operating activities. 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.
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 June 30, 1998 the
Company had outstanding purchase orders of approximately $110,000 to purchase
production equipment.
In July, 1998 the Company received net proceeds of approximately
$650,000 through the sale of 750 shares of its Series B 5% Convertible Preferred
Stock (see Subsequent Event of the Notes to Financial Statements). Management
believes that the proceeds of this sale plus its cash and accounts receivable
balances will be sufficient to fund its anticipated level of operations. The
Company is currently pursuing additional financing to provide additional working
capital, which could involve dilution to existing stockholders.
Except for the historical information herein, matters discussed
in this report are forward-looking statements that involve risks and
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission (SEC) reports.
8
<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
9
<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, 1998 By: /s/ Joel Schoenfeld
-------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1998 By: /s/ Martin Jacobson
-----------------
Martin Jacobson
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 311,429
<SECURITIES> 0
<RECEIVABLES> 128,365
<ALLOWANCES> 0
<INVENTORY> 858,365
<CURRENT-ASSETS> 1,363,406
<PP&E> 1,903,202
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,314,608
<CURRENT-LIABILITIES> 695,938
<BONDS> 0
0
2
<COMMON> 2,982
<OTHER-SE> 5,266,163
<TOTAL-LIABILITY-AND-EQUITY> 3,314,608
<SALES> 1,278,023
<TOTAL-REVENUES> 1,278,023
<CGS> 954,358
<TOTAL-COSTS> 954,358
<OTHER-EXPENSES> 1,989,376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,247
<INCOME-PRETAX> (711,353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (711,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (711,353)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
