<PAGE>
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 September 30, 1999
[ ] 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.)
22 Dubon Court, Farmingdale, New York 11735
(Address of Principal Executive Offices)
(516) 777-2000
(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
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As of November 11, 1999 the Issuer had 3,908,653 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 Balance Sheet
<TABLE>
<CAPTION>
September 30, 1999
------------------
<S> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 16,809
Accounts receivable 422,355
Inventory 873,218
Other current assets 96,282
----------
Total current assets 1,408,664
Fixed assets, net 2,472,850
Other assets 14,525
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Total assets $3,896,039
==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabiities:
Accounts payable and accrued expenses 1,625,032
Current portion of capitalized lease obligation 48,338
Loans payable (including $136,000 to a shareholder/officer) 292,235
----------
Total Current liabilities 1,965,605
Loan payable 51,570
Capitalized lease obligation 13,013
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Total Liabilites 2,030,188
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STOCKHOLDERS' EQUITY:
Preferred stock $.001 par value; 4,995,500 authorized;
none issued and outstanding
Series A 8% Cumulative Convertible Preferred Stock,
$.001 par value; authorized: 2,500 shares; issued
and outstanding: 2,072 shares (aggregate liquidation
value: $2,387,460) 2
Series B 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares, issued and
outstanding: 630 shares (aggregate liquidation value
$669,813) 1
Series C 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares, issued and
outstanding: 250 shares (aggregate liquidation
value $257,813) 1
Common stock $.001 par value; authorized: 25,000,000 shares;
issued and outstanding: 3,788,653 3,789
Additional paid-in capital 7,163,594
Accumulated deficit (5,301,536)
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Total stockholders' equity 1,865,851
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Total liabilities and stockholders' equity $3,896,039
==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30. September 30,
----------------------- ---------------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 471,731 $ 351,275 $ 1,763,720 $ 1,629,298
---------- ---------- ----------- -----------
Expenses:
Cost of product sales 423,360 346,192 1,542,131 1,300,550
Marketing 118,015 62,817 550,611 334,083
Product development 15,086 67,643 107,076 243,425
General and administrative 303,433 375,599 806,736 958,322
Interest expense & financing costs 60,290 (2,280) 68,852 2,967
---------- ---------- ----------- -----------
Total expenses, net 920,184 849,971 3,075,406 2,839,347
---------- ---------- ----------- -----------
Net loss (448,453) (498,696) (1,311,686) (1,210,049)
Dividends attributable preferred stock (52,440) (48,064) (156,383) (130,944)
Dividend attributable preferred stock resulting
from discount for beneficial conversion (215,134) (18,260) (215,134)
---------- ---------- ----------- -----------
Loss attributable to common stockholders $ (500,893) $ (761,894) $(1,486,329) $(1,556,127)
========== ========== =========== ===========
Share information
Basic and diluted earnings per share
Net loss per share $ (.13) $ (.25) $ (.40) $ (.52)
========== ========== =========== ===========
Weighted average common stock outstanding 3,788,653 3,032,639 3,707,482 2,985,725
========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,311,686) $(1,210,049)
Adjustments to reconcile net loss to net cash used
in operating activities:
Issuance of stock options to non-employees 85,061
Depreciation, amortization, and other non-cash charges 332,983 123,707
Changes in assets and liabilities:
Accounts receivable (279,561) (207,280)
Inventory 216,119 (355,971)
Other current assets (15,622) 41,042
Other assets (20,225)
Accounts payable and accrued expenses 469,159 561,885
----------- -----------
Net cash used in operating activities (588,608) (981,830)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (46,910) (461,339)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of preferred stock, net of expenses 209,990 624,751
Proceeds from loans payable 343,805
Payments of capitalized lease obligation (32,649)
----------- -----------
Net cash provided by financing activities: 521,146 624,751
----------- -----------
Net decrease in cash and cash equivalents (114,372) (818,418)
Cash and cash equivalents, beginning of year 131,181 1,209,481
----------- -----------
Cash and cash equivalents, end of year $ 16,809 $ 391,063
=========== ===========
Supplemental disclosures:
Cash paid during the year for:
Interest $ 7,175 $ 3,321
Income taxes $ 8,252 $ 14,576
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNIVEC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
1. General:
The unaudited consolidated financial statements included herein and
supplementary financial information included herein, if any, 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 consolidated
financial information for the interim periods reported have been made. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements of Univec, Inc. together with Management's
Discussion and Analysis contained in the Company's Form 10-KSB for the year
ended December 31, 1998. The results of operations for the three and nine months
ended September 30, 1999 are not necessarily indicative of the results for the
entire year ending December 31, 1999.
2. Basic and Diluted Loss Per Share:
Loss per share was computed based on the weighted average number of shares
outstanding during the three and nine months ended September 30, 1999 and 1998.
3. Sales:
As of September 30, 1999, the Company had undelivered sales on existing
contracts of approximately $3,500,000, of which approximately $2,500,000 is
deliverable through the year 2000 and $1,000,000 through the year ending
December 31, 1999.
4. Stockholders' Equity:
On July 1, 1999, the Company issued 44,444 shares of its common stock, which
should have been issued on February 8, 1999, as fees in connection with the sale
of the Series C Preferred Stock. The shares were valued at $62,666, their value
as of February 8, 1999, and charged to additional paid-in capital.
5. Options:
In September and October, 1999, the Company issued or agreed to issue options
to purchase shares of common stock as follows:
Ten year options to purchase 250,000 shares, at $.15, per share, to a law
firm, and
Ten year options to purchase 250,000 shares, each, to two officers at $.15,
per share, under the 1996 Stock Option Plan
6. Subsequent Event:
On October 4, 1999, 18 shares of Series B Preferred Stock were converted to
120,000 shares of common stock, at $.15, per share.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Condensed Consolidated Results of Operations
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------=---------------------------- ---------------------------------------
1999 1998 %change 1999 1998 %change
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 471,731 $ 351,275 34% $ 1,763,720 $ 1,629,298 8%
Cost of Sales 423,360 346,192 22% 1,542,131 1,300,550 19%
--------- --------- --------- ---------
Gross Margin 48,371 5,083 852% 221,589 328,748 (33%)
Marketing Expense 118,015 62,817 88% 550,611 334,083 65%
Product Development 15,086 67,643 (78%) 107,076 243,425 (56%)
General and
Administrative 303,433 375,599 (19%) 806,736 958,322 (16%)
Interest Expense, Net (60,290) 2,280 2744% (68,852) (2,967) 2221%
-------- --------- --------- --------
Net Loss ($448,453) ($498,696) (10%) ($1,311,686) ($1,210,049) 8%
========= ========= =========== ===========
</TABLE>
As illustrated in the table above, product sales in the 1999 periods
increased by $120,456 and $134,422, respectively, over the comparable three
month and nine month periods ended September 30, 1998. These increases resulted
from an increased marketing effort which were effective in negotiating
substantial contracts for product. Product sales consisted primarily of the 1cc
locking clip syringe, a difficult-to-reuse syringe. All syringes were either
produced in the Company's own production facility in New York or by its
Portuguese contract manufacturer. The Company has increased its production
capacity during this quarter by contracting with a manufacturer located in Korea
to supply syringes for existing contracts.
Under two existing agreements with customers to supply 41,000,000 and
14,000,000 syringes, as of September 30, 1999, approximately $2,500,000 and
$1,000,000 were not shipped and are deliverable through the year 2000 and
December 31, 1999, respectively.
Gross margin for the three months ended September 30, 1999 has increased to
10%, as compared to 1% for the comparable 1998 period. This result was obtained
through an increase in sales and a increase in the utilization of a contract
manufacturer for production of syringes to fulfill contract demands. Gross
margin on finished product purchased from the Portuguese or Korean manufacturer
is significantly higher than at the Company's New York facility. Production in
the Long Island, New York facility has not been fully utilized resulting in
increased cost of sales for the three and nine months ended September 30, 1999,
as compared to the comparable 1998 periods. As the Company continues to increase
sources of production at a more favorable cost, gross margin should continue to
improve.
Marketing costs in 1999 increased $55,198 and $216,528 over the comparable
three month and nine month periods, respectively, ended September 30, 1998. The
increases were the results of efforts to obtain additional contracts for product
sales.
Product development expenses in 1999 decreased 78% and 56% over the
comparable three and nine month periods, respectively, ended September 30, 1998.
These decreases were due primarily to the management's decision to utilize its
<PAGE>
resources in the development of its production facility in 1998, and in 1999, to
utilize its resources for marketing.
As a result of the June, 1999 licensing agreement, Univec will be ready to
manufacture and market a sliding sheath designed to protect health care workers
in early 2000. The introduction of this new product is expected to increase
sales and broaden the Company's customer base to include a domestic market.
General and administrative costs in 1999 decreased by $72,166 and $151,586
for the comparable three month and nine month periods, respectively, ended
September 30, 1998. These decreases were due primarily to a reduction in
administrative personnel offset in part by an increase in professional fees and
securities maintenance expense. The Company continues to implement cost
reductions.
Net interest expense increased by $62,570 and $65,885, respectively, for the
1999 periods as compared to the three and nine month periods ended September 30,
1998. Interest expense for the three and nine month periods ended September 30,
1999, primarily reflect payments of $2,066 and $5,100, respectively, of interest
on the capital lease obligation which was not in effect during fiscal year 1998.
Approximately $49,000, which is 82% and 72%, respectively, of the three and nine
month periods ended September 30, 1999, represent costs associated with seeking
debt financing arrangements. Although financing has not yet been secured, Univec
is continuing to investigate various opportunities.
The net loss for the three months ended September 30, 1999, decreased by 10%
as compared to the 1998 three month period. This decrease is primarily the
result of a substantial increase in sales offset in part by an accompanying low
increase in cost of goods and a 19% reduction in general and administrative
expenses. The 8% increase in net loss for the nine month period ended September
30, 1999, is reflective of an overall lower increase in product sales for that
period. The increase in marketing expenses and the decrease in product
development cost for both the three and nine month periods ended September 30,
1999 basically offset any impact on net loss.
Liquidity and Capital Resources
The Company's working capital declined from $190,792 at December 31, 1998,
to a deficit of $556,941 at September 30, 1999, primarily resulting from the net
loss.
Net cash used in operating activities decreased by $393,222 from $981,830
primarily due to a increase in accounts payable and accrued expenses and a
decrease in inventory, offset by an increase in accounts receivable. Net cash
from financing decreased by 17% resulting from the net proceeds of the sale of
Series B Preferred Stock in 1998. With the marketing and sale of the new sliding
sheath and increased production of the locking clip syringe, the Company
anticipates that operating activities will generate a positive cash flow in
early 2000.
The Company is pursuing debt financing to provide additional working capital and
in the future will seek additional equity financing which will dilute existing
shareholders. As a result of the delisting of the Company's common stock from
the Nasdaq SmallCap Market, the Company's abiilty to raise equity financing may
be hampered.
Forward Looking Statements
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.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.1 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three
months ending September 30, 1999.
<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: November 15, 1999 By: /s/ Joel Schoenfeld
----------------------------------
Joel Schoenfeld
Chief Executive Officer
Dated: November 15, 1999 By: /s/ Marla Manowitz
----------------------------------
Marla Manowitz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 16,809
<SECURITIES> 0
<RECEIVABLES> 422,355
<ALLOWANCES> 0
<INVENTORY> 873,218
<CURRENT-ASSETS> 1,408,664
<PP&E> 2,472,850
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,896,039
<CURRENT-LIABILITIES> 1,965,605
<BONDS> 0
0
4
<COMMON> 3,789
<OTHER-SE> 7,163,594
<TOTAL-LIABILITY-AND-EQUITY> 3,896,039
<SALES> 1,763,720
<TOTAL-REVENUES> 1,763,720
<CGS> 1,542,131
<TOTAL-COSTS> 3,075,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,852
<INCOME-PRETAX> (1,311,686)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,311,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,311,686)
<EPS-BASIC> (.40)
<EPS-DILUTED> (.40)
</TABLE>
