<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, 2000
[ ] 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)
(631) 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
----- -----
As of August 8, 2000, the Issuer had 5,746,720 shares of Common Stock,
$0.001 par value, outstanding.
Transitional Small Business Disclosure Format:
Yes No X
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<PAGE>
UNIVEC, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEET - June 30, 2000 3
STATEMENT OF OPERATIONS - Three months and six months ended
June 30, 2000 and 1999 4
STATEMENT OF CASH FLOWS - Six months ended
June 30, 2000 and 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 11
ITEM 2 CHANGES IN SECURITIES 11
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5 OTHER INFORMATION 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
UNIVEC, Inc. and Subsidiary
Consolidated Balance Sheet
June 30, 2000
----------------
ASSETS:
Current assets:
Cash and cash equivalents $ 35,871
Accounts receivable 371,833
Inventory 641,097
Other current assets 226,577
-----------
Total current assets 1,275,378
Fixed assets, net 1,616,650
Other assets 71,068
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Total assets $ 2,963,096
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 826,665
Current portion of capitalized lease obligations 178,938
Deferred payroll-officers 279,027
Loans payable-current 159,322
-----------
Total Current liabilities 1,443,952
Loans payable 274,510
Capitalized lease obligation 262,813
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Total Liabilities 1,981,275
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STOCKHOLDERS' EQUITY:
Preferred stock $.001 par value; 4,995,500 authorized;
issued and outstanding: none
Series A 8% Cumulative convertible preferred stock,
$.001 par value; authorized: 2,500 shares; issued
and outstanding: 2,072 shares (aggregate liquidation
value: $2,511,780) 2
Series B 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 402 shares (aggregate liquidation value:
$462,250) 1
Series C 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 250 shares (aggregate liquidation
value: $267,431) 1
Common stock $.001 par value; authorized: 25,000,000 shares;
issued and outstanding: 5,618,209 5,618
Additional paid-in capital 7,535,344
Accumulated deficit (6,559,145)
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Total stockholders' equity 981,821
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Total liabilities and stockholders' equity $ 2,963,096
============
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 651,332 $ 942,823 $ 1,490,741 $ 1,291,989
----------- ----------- ----------- -----------
Expenses:
Cost of product sales 526,850 811,034 1,277,593 1,118,771
Marketing 145,195 253,255 266,125 432,596
Product development 14,819 46,780 34,242 91,990
General and administrative 258,605 247,949 507,125 503,303
Interest expense, net 13,795 2,757 21,765 8,562
----------- ----------- ----------- -----------
Total operating expense 959,264 1,361,775 2,106,850 2,155,222
----------- ----------- ----------- -----------
Operating loss (307,932) (418,952) (616,109) (863,233)
Loss on sale of equipment (794,244)
----------- ----------- ----------- -----------
Net loss (307,932) (418,952) (1,410,353) (863,233)
Dividends attributable to preferred stock (50,028) (52,440) (101,872) (103,943)
Dividends attributable to preferred stock resulting
from discount from beneficial conversion feature (18,260)
----------- ----------- ----------- -----------
Loss attributable to common stockholders $ (357,960) $ (471,392) (1,512,225) (985,436)
=========== =========== =========== ===========
Share information:
Basic net loss per share $ (.07) $ (.13) $ (.31) $ (.27)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 5,236,260 3,735,638 4,912,339 3,631,110
=========== =========== =========== ===========
</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,
-----------------------------
2000 1999
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,410,353) $ (863,233)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss on sale of equipment 794,244
Depreciation, amortization, and other non-cash charges 185,893 216,309
Issuance of shares and options for services 15,000
Increase (decrease) in cash from:
Accounts receivable 223,751 (112,190)
Inventory (8,195) 363,480
Other current assets and other assets 63,505 10,997
Accounts payable and accrued expenses (191,006) (57,775)
Deferred payroll-officers 93,163
----------- -----------
Net cash used in operating activities (233,998) (442,412)
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (net of capital lease obligations
of $435,000 in 2000) (52,790) (19,331)
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Cash flows from financing activities:
Proceeds from sale of equipment (net of expenses
of $74,223) 360,777
Proceeds from sale of preferred stock, net of expenses 209,990
Proceeds from loans payable 338,755
Payment of loans payable (120,818)
Payments of capitalized lease obligations (46,940) (21,439)
Payments of deferred financing costs (41,250)
----------- -----------
Net cash provided by financing activities: 193,019 486,056
----------- -----------
Net increase in cash (93,769) 24,313
Cash, beginning of period 129,640 131,181
----------- -----------
Cash, end of period $ 35,871 $ 155,494
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNIVEC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
1. Nature of Operations:
Univec, Inc. (Company) produces, licenses and markets medical products,
primarily syringes, and resells medical devices on a global basis.
2. Summary of Significant Accounting Policies:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
of the consolidated financial position, results of operations and cash flows for
the interim periods presented have been included. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements of Univec, Inc. together with Management's Discussion and Analysis
included in the Company's Form 10-KSB for the year ended December 31, 1999.
Interim results are not necessarily indicative of the results for a full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Net Loss Per Share:
Basic net loss per share was computed based on the weighted average number
of shares outstanding during the three and six months ended June 30, 2000 and
1999. Dilutive net loss per share has not been presented because it was
anti-dilutive.
4. Stockholders' Equity:
In June 2000, the board of directors authorized an increase in authorized
common stock of the Company to 100,000,000 shares, subject to ratification by
the Company's stockholders.
During June 2000, 50 shares of Series B Preferred Stock were converted into
125,000 shares of common stock at a price of $.40, per share. In July 2000, an
additional 50 shares of Series B Preferred Stock were converted into 118,511
shares of common stock at a price of $.42, per share.
In May and June 2000, the Company issued 381,680 shares of common stock to
four consultants for services and accounts payable valued at $245,790.
<PAGE>
5. Options:
In June 2000, the board of directors adopted an amendment to the Company's
stock option plan, providing for an additional 2,250,000 shares of common stock,
including 250,000 reserved for an Industrial and Scientific Advisory Committee
to be formed as necessitated by the Company, to be issued under the Plan. The
amendment is subject to ratification by the Company's stockholders.
In June 2000, the Company issued options to acquire an aggregate of 900,000
shares of common stock under the Plan, exercisable at $.675, per share, through
June 2005, to three directors in consideration of their guarantees of the lease
in the sale and leaseback transaction, valued at $15,000. These options are
subject to the stockholders' ratification of the amendment to the Company's
stock option plan.
In June 2000, the Company issued options to acquire an aggregate of 100,000
shares of common stock under the Plan to two officers, exercisable at $.675, per
share, through June 2005. These options are subject to the stockholders'
ratification of the amendment to the Company's stock option plan.
During the period April through July 2000, a vendor exercised its options
to purchase an aggregate of 40,000 shares of common stock at $.15, per share, in
exchange for reductions in a loan payable to the vendor.
6. Litigation:
In April 2000, the Company commenced a collection action against a former
consultant for the repayment of a loan of $35,000. The loan had been fully
reserved. The former consultant has contested the claim and filed a counterclaim
for unpaid consulting fees of $400,000, plus interest, costs and expenses. The
Company believes the counterclaim is without merit, is defending the matter and,
together with counsel, does not believe the outcome of this matter will have a
material effect on the Company.
In April 2000, a former landlord commenced an action against the Company
for unpaid rent of $13,472, plus interest and costs. The Company denies the
allegation, is defending the matter and, together with counsel, does not believe
the outcome of this matter will have a material effect on the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
<TABLE>
<CAPTION>
Condensed Consolidated Results of Operations
Three months ended Six months ended
June 30, June 30,
----------------------------------- --------------------------------------
2000 1999 change 2000 1999 change
----------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 651,332 $ 942,823 (31%) $ 1,490,741 $ 1,291,989 15%
Cost of Sales 526,850 811,034 (35%) 1,277,593 1,118,771 14%
----------- ----------- -------- ----------- ----------- ------
Gross Margin 124,482 131,789 (6%) 213,148 173,218 23%
Marketing Expense 145,195 253,255 (43%) 266,125 432,596 (38%)
Product Development 14,819 46,780 (68%) 34,242 91,990 (63%)
General and
Administrative 258,605 247,949 4% 507,125 503,303 .8%
Interest Expense, Net 13,795 2,757 400% 21,765 8,562 154%
----------- ---------- ------- ----------- ----------- -----
Operating Loss (307,932) (418,952) (26%) (616,109) (863,233) (29%)
Loss on Sale of Assets (794,244)
----------- ----------- ------- --------- --------- ------
Net Loss ($ 307,932) ($ 418,952) (26%) ($1,410,353) ($ 863,233) 63%
=========== =========== ======= =========== =========== ======
</TABLE>
As illustrated in the table above, product sales for the six months ended
June 30, 2000 increased by $198,752 (15%) over the comparable six month period
ended June 30, 1999. This increase is the result of successfully negotiating new
contracts for product during the first half of 2000. Product sales for the three
months ended June 30, 2000 decreased by $291,491 (31%) as compared to the 1999
three month period. A contributor to this decrease was an order received in
early June 2000 for approximately $139,000 not included in product sales due to
an inability to ship the order until July 2000. 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 and Korean contract manufacturers. The Company has
increased its production capacity by contracting with a manufacturer located in
Korea to supply syringes for existing contracts.
As of June 30, 2000, the Company had a balance of syringes remaining to be
shipped under a contract during the remainder of 2000, of $511,000.
<PAGE>
As a result of the June 1999 licensing agreement and the FDA approval in
July 2000 of the sliding sheath syringe designed to protect health care workers,
Univec anticipates manufacturing and marketing this syringe during 2000. The FDA
also approved the two-piece syringe in June 2000. The introduction of these new
products is expected to increase sales and broaden the Company's customer base,
including a domestic market.
Gross margin for the three months ended June 30, 2000 increased to 19% from
14% in 1999, resulting primarily from the increased utilization of production
facilities in Portugal and Korea to fill sales orders. The gross margin for the
six months ended June 30, 2000 increased slightly to 14% from 13% in 1999. The
cost of goods sold for the six months ending June 30, 2000 increased by $158,822
(14%) due to increased freight costs relating to incoming inventory and
components. Gross margin on the sales of finished product purchased from the
Portuguese or Korean manufacturer is significantly higher than for products
produced at the Company's New York facility. Production capacity of the Long
Island, New York facility has not been fully utilized resulting in historically
higher cost of sales. The Company anticipates continuing to obtain additional
sources of production at more favorable costs, resulting in increased gross
margins.
Marketing costs in 2000 decreased $108,060 and $166,471 over the comparable
three and six month periods, respectively, ended June 30, 1999. The decreases
were primarily the result of decreases in inventory storage and freight out,
offset in part by an increase in travel and entertainment expenses. Effective
July 2000, the Company increased sales staff personnel to develop a domestic
market for both existing products and the new sliding sheath syringe and the
two-piece syringe. Marketing costs will also involve travel necessary to
generate new sales contracts.
Product development expense for the three and six month periods ended June
30, 2000 decreased by $31,961 and $57,748, respectively, over the comparable
periods for 1999. These decreases were the result of reduced expenditures in
costs for patent legal and engineering consulting expenses. This decrease in
product development expense reflects management's continuing effort to reduce
these costs in order to utilize more resources for marketing.
General and administrative costs for the three and six month period ended
June 30, 2000 increased $10,656 and $3,822, respectively, as compared to the
1999 periods. These increases are primarily the result of increases in
insurance, legal fees, and factoring expenses, offset in part by reductions in
securities maintenance and financial consulting expenses. The Company continues
to implement cost reductions.
Interest expense, net increased by $11,038 and $13,203 during the three and
six months ending June 30, 2000, as compared to the 1999 periods, as a result of
extended payments to two vendors and additional interest incurred on existing
loans. The recent sale and leaseback transaction will continue to increase
interest in future periods.
Operating loss for the three and six months ending June 30, 2000, decreased
by $111,020 and $247,124, respectively, as compared to 1999, primarily from the
substantial decreases in marketing and product development expenses.
Net loss for the six month period ending June 30, 2000, increased by
$547,120 over the comparable 1999 period, primarily as a result of the loss of
$794,244 on the sale and leaseback of equipment during the first quarter of
2000, partially offset by the decrease in operating loss.
Liquidity and Capital Resources
The Company's working capital deficit increased from $103,051 at December
31, 1999, to a deficit of $168,574 at June 30, 2000, primarily resulting from
the decrease in operating loss, offset by the proceeds of the sale and leaseback
transaction.
<PAGE>
Net cash used in operating activities decreased by $208,414 ended June 30,
2000, primarily due to a decrease in the loss from operations in 2000, as
compared to 1999.
Net cash provided by financing activities decreased by $293,037 during the
six month period ending June 30, 2000 resulting from the net proceeds from the
sale of the equipment in 2000 being less than the proceeds of both the sale of
Series C Preferred Stock and loans payable in 1999.
Based on the first half results which included receipt of the proceeds from
the sale of equipment, the FDA approvals and increased marketing of the sliding
sheath syringe, together with anticipated increased sales of the locking clip
syringe, the Company anticipates a positive cash flow for the year ended
December 31, 2000.
The Company is continuing to 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 has been 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 the Company's ability to market its sliding sheath
syringe in the United States domestic market, the Company's ability to realize
lower production costs through the use of contract manufacturers and the
Company's need for additional financing and other risks detailed from time to
time in the Company's Securities and Exchange Commission reports.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In April 2000, the Company commenced a collection action against a former
consultant for the repayment of a loan of $35,000. The loan has been fully
reserved. The former consultant has contested the claim and filed a counterclaim
in the Circuit Court of the 15th Judicial Circuit, Palm Beach, Florida, General
Jurisdiction Division, for unpaid consulting fees of $400,000, plus interest,
costs and expenses. The Company believes the counterclaim is without merit, is
defending the matter and, together with counsel, does not believe the outcome of
this matter will have a material effect on the Company.
In April 2000, a former landlord commenced an action against the Company in
the District Court of the County of Nassau, Fourth District, Hicksville Part,
for unpaid rent of $13,472, plus interest and costs. The Company denies the
allegation, is defending the matter and, together with counsel, does not believe
the outcome of this matter will have a material effect on the Company.
Item 2. Changes in Securities
In June 2000, the board of directors authorized an increase in the
authorized common stock of the Company to 100,000,000 shares, subject to
ratification by the Company's stockholders.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15 Letter on unaudited financial information
Exhibit 27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three
months ending June 30, 2000.
<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 9, 2000 By: /s/ Alan Gold
----------------------------------
Alan Gold
Chief Executive Officer
Dated: August 9, 2000 By: /s/ Marla Manowitz
----------------------------------
Marla Manowitz
Chief Financial Officer
<PAGE>
Board of Directors
Univec, Inc.
Farmingdale, NY
INDEPENDENT ACCOUNTANTS' REPORT
We have reviewed the accompanying consolidated balance sheet of Univec,
Inc. and Subsidiary as of June 30, 2000, and the accompanying consolidated
statements of operations and cash flows for the three months and six months then
ended. These interim financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the interim financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
August 9, 2000 /s/ Most Horowitz & Company, LLP
-----------------------------
Most Horowitz & Company, LLP
