<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 June 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 August 2, 1999 , the Issuer had 3,744,209 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
June 30, 1999
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ASSETS:
Current assets:
Cash and cash equivalents $ 155,494
Accounts receivable 254,984
Inventory 725,857
Other current assets 100,928
-----------
Total current assets 1,237,263
Fixed assets, net 2,519,477
Other assets 66,978
-----------
Total assets $ 3,823,718
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses 1,098,098
Current portion of capitalized lease obligation 46,916
Loans payable (including $136,000 to a shareholder/officer) 292,377
-----------
Total Current liabilities 1,437,391
Loan payable 46,378
Capitalized lease obligation 25,645
------------
Total Liabilites 1,509,414
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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: $2,346,020) 2
Series B 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares, issued and
outstanding: 630 shares (aggregate liquidation value
$661,938) 1
Series C 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares, issued and
outstanding: 250 shares (aggregate liquidation
value $254,688) 1
Common stock $.001 par value; authorized: 25,000,000 shares;
issued and outstanding: 3,744,209 3,745
Additional paid-in capital 7,163,638
Accumulated deficit (4,853,083)
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Total stockholders' equity 2,314,304
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Total liabilities and stockholders' equity $ 3,823,718
===========
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,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 942,823 $ 915,025 $ 1,291,989 $ 1,278,023
----------- ----------- ----------- -----------
Expenses:
Cost of product sales 811,034 626,112 1,118,771 954,358
Marketing 253,255 126,144 432,596 271,266
Product development 46,780 56,314 91,990 175,782
General and administrative 247,949 267,220 503,303 582,723
Interest expense, net 2,757 9,270 8,562 5,247
----------- ----------- ----------- -----------
Total expenses, net 1,361,775 1,085,060 2,155,222 1,989,376
----------- ----------- ----------- -----------
Net loss (418,952) (170,035) (863,233) (711,353)
Dividends attributable preferred stock (52,440) (41,440) (103,943) (82,880)
Dividend attributable preferred stock resulting
from discount for beneficial conversion (18,260)
----------- ----------- ----------- -----------
Loss attributable to common stockholders $ (471,392) $ (211,475) $ (985,436) $ (794,233)
=========== =========== =========== ==========
Share information
Basic and diluted earnings per share
Net loss per share $ (.13) $ (.07) $ (.27) $ (.27)
=========== =========== =========== ==========
Weighted average common stock outstanding 3,735,638 2,981,769 3,631,110 2,981,769
=========== =========== =========== ==========
</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,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (863,233) $ (711,353)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization, and other non-cash charges 216,309 81,802
Changes in assets and liabilities:
Accounts receivable (112,190) (128,365)
Inventory 363,480 (138,847)
Other current assets 10,997 22,100
Accounts payable and accrued expenses (57,775) 409,449
---------- ---------
Net cash used in operating activities (442,412) (465,214)
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Cash flows from investing activities:
Purchase of fixed assets (19,331) (432,838)
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Cash flows from financing activities:
Proceeds from sale of preferred stock, net of expenses 209,990
Proceeds from loans payable 338,755
Payments of capitalized lease obligation (21,439)
Payments of deferred financing costs (41,250)
----------- ----------
Net cash provided by financing activities: 486,056 0
----------- ----------
Net decrease in cash and cash equivalents 24,313 (898,052)
Cash and cash equivalents, beginning of year 131,181 1,209,481
----------- ----------
Cash and cash equivalents, end of year $ 155,494 $ 311,429
=========== ==========
Supplemental disclosures:
Cash paid during the year for:
Interest $ 2,757 $ 3,321
Income taxes $ 4,598 $ 7,802
</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 six months
ended June 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 months ended June 30, 1999 and for the six months
ended June 30, 1999.
3. Sales:
As of June 30, 1999, unfilled sales on an existing contract through December
31, 1999, were approximately $2,700,000. In July, 1999, the Company entered into
a sales agreement for approximately $1,300,000 for delivery before December 31,
1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended June 30, 1999 and 1998
Product Sales. Product sales for the three months ended June 30, 1999
increased by approximately $27,798 as compared to product sales for the three
months ended June 30, 1998. 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 in its Portuguese contract
manufacturer.
Under agreements with customers to supply 41,000,000 syringes, as of June 30,
1999, approximately $2,700,000 were not shipped. In July, 1999, the Company was
awarded a contract with a Japanese trading company to supply 14,000,000 syringes
for sales of approximately $1,300,000. All are anticipated to be shipped by
December 31, 1999.
Cost of Product Sales. Cost of product sales for the 1999 three-month period
increased by $184,922 as compared to cost of product sales for the 1998
three-month period. Gross profit was approximately 14% for the 1999 three-month
period as compared to 32% for the 1998 period. This decrease was attributable to
an under-estimation of certain product costs due to late billings from the
Portuguese manufacturer and the under-utilization of the Long Island facility.
Marketing. Marketing expense for the 1999 three-month period increased by
$127,111 as compared to the 1998 three-month period. This increase resulted from
an increase in freight costs and additional marketing efforts which resulted in
a new sales contract.
Product Development. Product development expenses for the 1999 three-month
period decreased by $9,534 as compared to the 1998 three-month period. This
decrease is due primarily to the management's decision in 1998 to utilize its
resources in the development of its production facility and in 1999 to utilize
its resources for marketing.
In June, 1999, Univec entered into a licensing agreement to develop,
manufacture, and sell a sliding sheath to protect the health care worker, in
exchange for 10,000 shares of common stock, the cost of which has been
capitalized. The Company will be required to pay royalties upon sale of the
licensed products and is required to pay the licensor an advance royalty of
$15,000.
General and Administrative. General and administrative expenses for the 1999
three-month period decreased by $19,271 as compared to the 1998 three-month
period. This decrease is due primarily to a reduction in salaries, offset in
part by an increase in professional fees and securities maintenance expenses.
The Company continues to implement cost reductions.
Interest Expense, Net. Interest expense decreased for the 1999 three month
period by $6,513 as compared to the 1998 three-month period.
<PAGE>
Net Loss. The net loss for the 1999 three-month period increased by $248,917
as compared to the 1998 three-month period. This increase primarily is due to
additional product costs and to greater marketing and selling expenses.
Six Months Ended June 30, 1999 and 1998
Product Sales. Product sales for the six months ended June 30, 1999
increased $13,966 as compared to product sales for the six months ended June 30,
1998. All syringes were either produced in the Company's own production facility
in New York or in its Portuguese contract manufacturer.
Under agreements with customers to supply 41,000,000 syringes, as of June
30, 1999, approximately $2,700,000 were not shipped. In July, 1999, the Company
was awarded a contract with a Japanese trading company to supply 14,000,000
syringes for sales of approximately $1,300,000. All are anticipated to be
shipped by December 31, 1999.
Cost of Product Sales. Cost of product sales for the 1999 six-month period
increased by $164,413. Gross profit was approximately 13% for the 1999 six-month
period as compared to 25% for the 1998 six-month period. This decrease was
attributable to an under-estimation of certain product costs due to late
billings from the Portuguese manufacturer and the under-utilization of the Long
Island facility.
Marketing. Marketing expense for the 1999 six-month period increased
by $161,330 as compared to the 1998 six-month period due to additional
marketing efforts, which resulted in new sales.
Product Development. Product development expenses for the 1999 six-month
period decreased by $83,792 as compared to the 1998 six-month period. This
decrease is due primarily to the management's decision in 1998 to utilize its
resources in the development of its production facility and in 1999 to utilize
its resources for marketing.
In June, 1999, Univec entered into a licensing agreement to develop,
manufacture, and sell a sliding sheath to protect the health care worker in
exchange for 10,000 shares of common stock, the cost of which has been
capitalized. The Company will be required to pay royalties upon sale of the
licensed products and is required to pay the licensor an advance royalty of
$15,000.
General and Administrative. General and administrative expenses for the
six-month period ending June 30, 1999 decreased by $79,420 as compared to the
six-month period ending June 30, 1998. This decrease is due primarily to a
reduction in management personnel, offset in part by an increase in professional
fees and security maintenance expenses. The Company continues to implement cost
reductions.
Interest expense. Interest expense for the 1999 six-month period increased
by $3,315 as compared to the 1998 six-month period. This difference is due
principally to the expenses related to a capital lease obligation.
Net Loss. The net loss for the 1999 six-month period increased by $151,880
as compared to the 1998 six-month period. This increase is due primarily to the
additional product costs and greater marketing and selling costs.
Liquidity and Capital Resources
Net cash used in operating activities increased by $18,448 primarily due to
a decrease in accounts payable and accrued expenses and increase in accounts
receivable partially offset by decreases in inventory. Net cash from financing
activities increased in 1999 by approximately $527,306, primarily from net
proceeds from the sale of Series C Preferred Stock and loans from a stockholder
and others. A previous commitment letter from a finance company for a line of
credit expired on August 8, 1999. The Company is pursuing debt financing to
provide additional working capital and will, in the future, seek 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.
In addition, working capital decreased significantly from June, 1998 to
June, 1999 primarily resulting from the depletion of funds generated by the
Company's initial public offering.
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 filed an 8-K report on July 2, 1999 reporting
Univec's delisting from the Nasdaq Small Cap Market.
<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 13, 1999 By: /s/ Joel Schoenfeld
----------------------------------
Joel Schoenfeld
Chief Executive Officer
Dated: August 13, 1999 By: /s/ Marla Manowitz
----------------------------------
Marla Manowitz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 155,494
<SECURITIES> 0
<RECEIVABLES> 254,984
<ALLOWANCES> 0
<INVENTORY> 725,857
<CURRENT-ASSETS> 1,237,263
<PP&E> 2,519,477
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,823,718
<CURRENT-LIABILITIES> 1,437,391
<BONDS> 0
0
4
<COMMON> 3,745
<OTHER-SE> 7,163,638
<TOTAL-LIABILITY-AND-EQUITY> 3,823,718
<SALES> 1,291,989
<TOTAL-REVENUES> 1,291,989
<CGS> 1,118,771
<TOTAL-COSTS> 2,155,222
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,562
<INCOME-PRETAX> (985,436)
<INCOME-TAX> 0
<INCOME-CONTINUING> (985,436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (985,436)
<EPS-BASIC> (.27)
<EPS-DILUTED> (.27)
</TABLE>
