<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 March 31, 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 May 10, 2000 the Issuer had 5,101,529 shares of Common Stock, $0.001
par value, outstanding.
Transitional Small Business Disclosure Format:
Yes No X
----- -----
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEET - March 31, 2000 3
STATEMENT OF OPERATIONS - Three months ended
March 31, 2000 and 1999 4
STATEMENT OF CASH FLOWS - Three months ended
March 31, 2000 and 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2 PLAN OF OPERATION 7
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 8
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
UNIVEC, Inc. and Subsidiary
Consolidated Balance Sheet
March 31, 2000
----------------
ASSETS:
Current assets:
Cash and cash equivalents $ 222,607
Accounts receivable 682,216
Inventory 535,822
Other current assets 99,899
-----------
Total current assets 1,540,544
Fixed assets, net 1,639,680
Other assets 86,067
-----------
Total assets $ 3,266,291
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 954,607
Current portion of capitalized lease obligations 186,910
Deferred payroll-officers 281,029
Loans payable-current 249,897
-----------
Total Current liabilities 1,672,443
Loans payable 279,386
Capitalized lease obligation 290,000
-----------
Total Liabilities 2,241,829
-----------
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: $2,470,340) 2
Series B 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 452 shares (aggregate liquidation value:
$506,787) 1
Series C 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 250 shares (aggregate liquidation
value: $264,306) 1
Common stock $.001 par value; authorized: 25,000,000 shares;
issued and outstanding: 5,081,529 5,081
Additional paid-in capital 7,270,590
Accumulated deficit (6,251,213)
-----------
Total stockholders' equity 1,024,462
-----------
Total liabilities and stockholders' equity $ 3,266,291
===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
Three months ended March 31,
------------------------------
2000 1999
----------- ----------
Revenues:
Product sales $ 839,409 $ 349,166
----------- ----------
Expenses:
Cost of product sales 750,743 307,737
Marketing 120,930 179,341
Product development 19,423 45,210
General and administrative 248,520 255,354
Interest expense, net 7,970 5,805
----------- ----------
Total operating expense 1,147,586 793,447
----------- ----------
Operating loss (308,177) (444,281)
Loss on sale of equipment (794,244)
----------- ----------
Net loss (1,102,421) (444,281)
Dividends attributable to preferred stock (51,845) (51,503)
Dividends attributable to preferred stock
resulting from discount from beneficial
conversion feature (18,260)
----------- ----------
Loss attributable to common stockholders $(1,154,266) $ (514,044)
=========== ==========
Share information:
Basic net loss per share $ (.25) $ (.15)
=========== ==========
Weighted average number of
common shares outstanding 4,588,417 3,525,422
=========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------
2000 1999
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,102,421) $ (444,281)
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 83,023 106,588
Increase (decrease) in cash from:
Accounts receivable (86,632) (78,113)
Inventory 97,080 130,751
Other current assets and other assets 2,684 9,238
Accounts payable and accrued expenses (106,355) (221,779)
Deferred payroll-officers 95,165
------------ ----------
Net cash used in operating activities (223,212) (497,596)
------------ ----------
Cash flows from investing activities:
Purchases of fixed assets (net of capital lease
obligations of $435,000 in 2000) (2,950) (11,783)
------------ ----------
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 315,000
Payment of loans payable (29,867)
Payments of capitalized lease obligations (11,781) (10,560)
------------ ----------
Net cash provided by financing activities: 319,129 514,430
------------ ----------
Net increase in cash 92,967 5,051
Cash, beginning of period 129,640 131,181
------------ ----------
Cash, end of period $ 222,607 $ 136,232
============ ==========
</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 months ended March 31, 2000 and 1999.
Dilutive net loss per share has not been presented because it was anti-dilutive.
4. Stockholders' Equity:
During March 2000, a total of 160 shares of Series B Preferred Stock were
converted to 372,610 shares of common stock at an average price of $.43, per
share.
5. Options:
In January 2000, an officer/director converted deferred payroll of $50,000
into 416,666 shares of common stock at $.12, per share, and resold 250,000 of
such shares to a director for $30,000.
In February 2000, the Company issued options to purchase an aggregate of
3,430,000 shares of common stock, exercisable through February 2003, at $.59,
per share, to officers and directors and 55,941 options to purchase common stock
exercisable through February 2003, at $.59, per share, to a consultant.
In February and April/May 2000, a vendor exercised its options to purchase
10,000 and 20,000, respectively, shares of common stock at $.15, per share, in
exchange for a reduction in a loan payable to the vendor.
<PAGE>
6. Sale and Leaseback:
On March 15, 2000, the Company sold equipment for an aggregate sales price
of $360,777, net of expenses of $74,223, and leased back the equipment. The
lease requires equal monthly payments of $12,083 for three years. In addition,
the Company granted a warrant to purchase 30,000 shares of common stock
exercisable at $.391, per share, through March 15, 2003.
The Company has capitalized the lease and recorded the lease obligations and
related assets at the lower of the present value of the net minimum lease
obligations or the fair value of the related assets.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Condensed Consolidated Results of Operations
Three months ended
March 31,
-----------------------------------------
2000 1999 change
----------- ------------ ----------
Net Sales $ 839,409 $ 349,166 140%
Cost of Sales 750,743 307,737 144%
----------- ---------
Gross Margin 88,666 41,429 114%
Marketing Expense 120,930 179,341 (33%)
Product Development 19,423 45,210 (57%)
General and
Administrative 248,520 255,354 (3%)
Interest Expense, Net 7,970 5,805 37%
----------- ---------
Operating Loss (308,177) (444,281) (31%)
Loss on Sale of Assets (794,244)
----------- ---------
Net Loss ($1,102,421) ($444,281)
============ =========
As illustrated in the table above, product sales for the three months ended
March 31, 2000 increased by $490,243 (140%) over the comparable three month
period ended March 31, 1999. This increase is the result of successfully
negotiating new contracts for product. Approximately 50% of the product sales
for the 2000 period are attributable to a contract with one customer to supply
5,000,000 syringes. 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.
<PAGE>
As of March 31, 2000, the Company had a balance of syringes of $815,541
remaining to be shipped under a contract during the remainder of 2000.
Gross margin for the three months ended March 31, 2000 decreased slightly to
11% from 12% in 1999, resulting primarily from an increase in the cost of
shipping 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 slightly higher cost of sales. The Company
anticipates continuing to obtain additional sources of production at a more
favorable cost, resulting in increased gross margins.
Marketing costs in 2000 decreased $58,411 over 1999, resulting from decreases
in printing and reproduction and inventory storage expenses, offset in part by
an increase in travel expenses. Marketing efforts involve travel necessary to
generate new sales contracts and servicing of existing contracts.
Product development expense for the period ended March 31, 2000 decreased by
$25,787 as compared to 1999, resulting primarily from decreases in costs for
patent legal and engineering consulting expenses. This decrease in product
development expense reflects management's current effort to reduce costs while
utilizing resources for marketing.
As a result of the June, 1999 licensing agreement of a sliding sheath syringe
designed to protect health care workers, Univec anticipates manufacturing and
marketing this syringe during 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 for the three month period in 2000 decreased
$6,834 as compared to 1999, resulting from reductions in securities maintenance
and insurance expenses, offset in part by an increase in professional fees. The
Company continues to implement cost reductions.
Interest expense, net increased by $2,165 during the three months ending
March 31, 2000 as compared to 1999, from interest on extended payments to two
vendors and additional interest incurred on existing loans. The recent sale and
leaseback transaction will increase interest in future periods.
Operating loss for the three months ending March 31, 2000, decreased by
$136,104 as compared to 1999, primarily from the substantial increase in sales
and decreases in marketing, product development, and general and administrative
expenses.
On March 15, 2000, the Company sold certain equipment and immediately leased
back the same equipment, resulting in a loss of $794,244 and net proceeds of
$360,777.
Net loss for the period ending March 31, 2000, increased by $658,140 over
1999, but before the loss on the sale of equipment, decreased by $136,104 over
1999.
Liquidity and Capital Resources
The Company's working capital deficit increased from $103,051 at December
31, 1999, to a deficit of $131,899 at March 31, 2000, primarily resulting from
the net loss, net of the proceeds of the sale and leaseback transaction.
<PAGE>
Net cash used in operating activities decreased by $274,384 primarily due to
a decrease in the loss from operations and a decrease in inventory and an
increase in deferred payroll-officers, offset by an increase in accounts
receivable and a decrease in accounts payable.
Net cash provided by financing activities decreased by $195,301 during the
three month period ending March 31, 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 quarter results which included receipt of the proceeds
from the sale of equipment, in combination with the continued development and
marketing of the sliding sheath syringe, and the 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 in the future,
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 reports.
<PAGE>
PART II
OTHER INFORMATION
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 March 31, 2000.
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 12, 2000 By: /s/ Alan Gold
----------------------------------
Alan Gold
Chief Executive Officer
Dated: May 12, 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 March 31, 2000, and the accompanying consolidated
statements of operations and cash flows for the three 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.
May 11, 2000 /s/ Most Horowitz & Company, LLP
-----------------------------
Most Horowitz & Company, LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and statement of operations found on pages 3 and 4 of the Company's Form
10-QSB for the quarter ended March 31, 2000 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 222,607
<SECURITIES> 0
<RECEIVABLES> 682,216
<ALLOWANCES> 0
<INVENTORY> 535,822
<CURRENT-ASSETS> 1,540,544
<PP&E> 2,025,783
<DEPRECIATION> (386,103)
<TOTAL-ASSETS> 3,266,291
<CURRENT-LIABILITIES> 1,672,443
<BONDS> 0
0
4
<COMMON> 5,081
<OTHER-SE> 1,019,377
<TOTAL-LIABILITY-AND-EQUITY> 3,266,291
<SALES> 839,409
<TOTAL-REVENUES> 839,409
<CGS> 750,743
<TOTAL-COSTS> 1,147,586
<OTHER-EXPENSES> 794,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,970
<INCOME-PRETAX> (1,102,421)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,102,421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,102,421)
<EPS-BASIC> (.25)
<EPS-DILUTED> 0
</TABLE>
