<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 September 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 November 9, 2000, the Issuer had 6,255,746 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 - September 30, 2000 3
STATEMENT OF OPERATIONS - Three months and nine months
ended September 30, 2000 and 1999 4
STATEMENT OF CASH FLOWS - Nine months ended
September 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 12
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1: Consolidated Financial Information
UNIVEC, Inc. and Subsidiary
Consolidated Balance Sheet
September 30, 2000
------------------
ASSETS:
Current assets:
Cash $ 57,064
Accounts receivable 351,905
Inventory 619,621
Equipment for sale 76,833
Other current assets 160,298
-----------
Total current assets 1,265,721
Fixed assets, net 1,510,057
Other assets 56,067
-----------
Total assets $ 2,831,845
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 932,006
Current portion of capitalized lease obligations 173,846
Deferred payroll-officers 279,027
Loans payable-current 183,327
Deposit payable 160,000
-----------
Total current liabilities 1,728,206
Loans payable 238,852
Capitalized lease obligation 228,435
-----------
Total liabilities 2,195,493
-----------
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: $2,553,220) 2
Series B 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 227 shares (aggregate liquidation value:
$291,429) 1
Series C 5% cumulative convertible preferred stock,
$.001 par value; authorized: 1,000 shares; issued and
outstanding: 250 shares (aggregate liquidation
value: $270,556) 1
Common stock $.001 par value; authorized: 75,000,000
shares; issued and outstanding: 6,245,746 6,245
Additional paid-in capital 7,575,967
Accumulated deficit (6,945,864)
------------
Total stockholders' equity 636,352
------------
Total liabilities and stockholders' equity $ 2,831,845
============
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVEC, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months Nine months ended
ended September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 647,204 $ 471,731 $ 2,137,945 $ 1,763,720
----------- ----------- ----------- -----------
Expenses:
Cost of product sales 551,014 423,360 1,828,607 1,542,131
Marketing 161,546 118,015 427,671 550,611
Product development 18,618 15,086 52,860 107,076
General and administrative 283,728 303,433 790,853 806,736
Interest expense, net 19,017 60,290 40,782 68,852
----------- ----------- ----------- -----------
Total operating expense 1,033,923 920,184 3,140,773 3,075,406
----------- ----------- ----------- -----------
Operating loss (386,719) (448,453) (1,002,828) (1,311,686)
Loss on sale of equipment (794,244)
----------- ----------- ----------- -----------
Net loss (386,719) (448,453) (1,797,072) (1,311,686)
Dividends attributable to
preferred stock (48,744) (52,440) (150,617) (156,383)
Dividends attributable to
preferred stock resulting
from discount from
beneficial conversion
feature (18,260)
----------- ----------- ----------- -----------
Loss attributable to
common stockholders $ (435,463) $ (500,893) $(1,947,689) $(1,486,329)
=========== =========== =========== ===========
Share information:
Basic net loss per share $ (.07) $ (.13) $ (.37) $ (.40)
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 5,855,114 3,788,653 5,228,891 3,707,482
=========== =========== =========== ===========
</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,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,797,072) $(1,311,686)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of equipment 794,244
Depreciation and amortization 265,063 332,983
Issuance of shares and options for services 15,000
Increase (decrease) in cash from:
Accounts receivable 243,679 (279,561)
Inventory 13,281 216,119
Equipment for sale (76,833)
Other current assets and other assets 166,535 (15,622)
Accounts payable and accrued expenses (85,665) 469,159
Deferred payroll-officers 93,163
Deposit payable 160,000
----------- -----------
Net cash used in operating activities (208,605) (588,608)
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (net of capital
lease obligations of $435,000 in 2000) (10,367) (46,910)
----------- -----------
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 343,805
Payment of loans payable (127,971)
Payments of capitalized lease obligations (86,410) (32,649)
----------- -----------
Net cash provided by financing activities: 146,396 521,146
----------- -----------
Net decrease in cash (72,576) (114,372)
Cash, beginning of period 129,640 131,181
----------- -----------
Cash, end of period $ 57,064 $ 16,809
=========== ===========
</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, markets, and licenses technology of
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 nine months ended September 30, 2000
and 1999. Dilutive net loss per share has not been presented because it was
anti-dilutive.
4. Stockholders' Equity:
During July, August and September 2000, 50 , 50 and 75 shares of Series B
Preferred Stock were converted into 118,511, 175,438 and 228,588 shares of
common stock at prices of $.42, $.285 and $.328, per share, respectively.
During the quarter the Company agreed to issue 30,000 shares of common stock
to a consultant for services valued at $15,000.
In August 2000, the Company's stockholders ratified an amendment to the
Certificate of Incorporation of the Company to increase the authorized common
stock of the Company from 25,000,000 to 75,000,000 shares.
<PAGE>
In September 2000, the Company agreed to issue 15,000 shares of common stock
to a consultant to provide financial marketing services valued at $7,500.
In September 2000, the Company agreed to issue 30,000 shares of common stock
to an employee as additional compensation valued at $15,000.
5. Options:
In August 2000, the Company's stockholders adopted an amendment to the
Company's stock option plan, providing for an additional 2,250,000 shares of
common stock, including 250,000 shares reserved for an Industrial and Scientific
Advisory Committee to be formed as necessitated by the Company, to be issued
under the Plan.
During the period July through September 2000, a vendor exercised its option
to purchase an aggregate of 30,000 shares of common stock, at $.15, per share,
in exchange for reductions in a loan payable to the vendor. In November 2000,
the vendor exercised its options to purchase an additional 10,000 shares of
common stock at $.15, per share.
In August 2000, the Company issued 120,000 options to purchase common stock
to a consultant to provide marketing services valued at $2,500.
6. Litigation:
In August 2000, an action was commenced against the Company alleging patent
infringement in connection with the Company's locking syringe. The action seeks
a permanent injunction restraining the Company from infringing, damages, treble
damages, attorney fees, and costs of the action. Although the action is in its
early stage, the Company believes the claim 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.
7. Licensing Agreements:
On August 2, 2000, the Company entered into a license agreement providing
for the non-exclusive, worldwide use of certain of the Company's patents for the
manufacture, use and marketing of syringes for a twelve year period, providing
for royalties on production and certain minimum sales. The Company will also
sell the licensee certain equipment necessary to manufacture these syringes
under the license for approximately $1,500,000. As of September 30, 2000, the
Company has received a deposit of $160,000 on the sales price.
On August 16, 2000, the Company entered into a license agreement providing
for the non-exclusive, worldwide use of the Company's patents for the
manufacture, use and marketing of its auto-disable syringes through the period
any patents are still in effect, providing for royalties on sales. The Company
will also sell the licensee certain equipment to manufacture these syringes for
$644,000, payable substantially all upon acceptance of the equipment. The
Company has warranted the equipment for one year from acceptance and is required
to provide continuing technical assistance throughout the license and
manufacturing periods. As of September 30, 2000, the Company has received
letters of credit of $611,800 against the sales price.
<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,
------------------------------ -----------------------------------
2000 1999 change 2000 1999 change
--------- ---------- ------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 647,204 $471,731 37% $2,137,945 $1,763,720 21%
Cost of Sales 551,014 423,360 30% 1,828,607 1,542,131 19%
--------- ---------- ----------- -----------
Gross Margin 96,190 48,371 99% 309,338 221,589 40%
Marketing Expense 161,546 118,015 37% 427,671 550,611 (22%)
Product Development 18,618 15,086 23% 52,860 107,076 (51%)
General and
Administrative 283,728 303,433 (6%) 790,853 806,736 (2%)
Interest Expense, Net 19,017 60,290 (68%) 40,782 68,852 (41%)
--------- ---------- ----------- -----------
Operating Loss (386,719) (448,453) (14%) (1,002,828) (1,311,686) (24%)
Loss on Sale of Assets (794,244)
--------- ---------- ----------- -----------
Net Loss ($386,719) ($448,453) (14%) ($1,797,072) ($1,311,686) 37%
========= ========= ========== ===========
</TABLE>
As illustrated in the table above, product sales for the three and nine
months ended September 30, 2000 increased by $175,473 (37%) and $374,225 (21%)
over the comparable three and nine month periods ended September 30, 1999. This
increase is the result of successfully negotiating new contracts for product
during 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 September 30, 2000, the Company had a balance of syringes remaining
to be shipped under a contract during the remainder of 2000, of approximately
$335,000 and other in-house sales orders for approximately $260,000 were shipped
in October 2000.
<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 the fourth
quarter of 2000. The FDA also approved the Company's 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.
In August 2000, the Company entered into two license agreements granting the
non-exclusive, worldwide license to manufacture and market the Company's
auto-disable syringe. The Company will also sell to the licensees certain
equipment necessary for production for an aggregate sales price of approximately
$2,144,000. Upon completion of the sales transactions, the Company will
recognize revenue on the sales of equipment, receive royalties from the
production and sales of the product by the licensees and have the right to
purchase products from the licensees, all of which is anticipated to occur in
the first quarter of 2001.
Gross margin for the three months ended September 30, 2000 increased to 15%
from 10% in the comparable 1999 period. This increase is primarily the result of
increased utilization of production facilities in Portugal and Korea to fill
sales orders, and a decrease in depreciation expense, offset in part by an
increase in freight-in and insurance. The gross margin for the nine months ended
September 30, 2000 increased slightly to 14% from 13% in the comparable 1999
period. The cost of goods sold for the three months ending September 30, 2000
increased by $127,654 (30%) in correlation with the 37% increase in sales for
the period. This increase was also due to increased freight-in costs and
insurance costs, offset in part by a decrease in depreciation expense. 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 for the three months ended September 30, 2000 increased
$43,531 (37%) over the comparable three month period for 1999. 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. The decrease in marketing costs of $122,940 (22%) for the nine
month period ended September 30, 2000 as compared to the nine month period ended
September 30, 1999, was primarily the result of decreases in inventory storage
and freight out, offset in part by an increase in wages for selling personnel
and travel and entertainment expenses.
Product development expense for the three month period ended September 30,
2000 increased by $3,532 (23%) over the comparable period for 1999, primarily as
a result of increased legal patent fees. Product development expense for the
nine months ended September 30, 2000 decreased by $54,216 (51%) over the
comparable 1999 period. This decrease was the result of reductions in patent
legal expense and engineering consulting expenses.
General and administrative costs for the three and nine month period ended
September 30, 2000 decreased $19,705 (6%) and $15,883 (2%), respectively, as
compared to the 1999 periods. These decreases are primarily the result of
decreases in securities maintenance and directors and officers insurance
expense, offset in part by an increase in professional fees. This decrease in
general and administrative costs reflects management's continuing effort to
reduce costs.
Interest expense, net decreased by $41,273 and $28,070 during the three and
nine months ending September 30, 2000, respectively, as compared to the 1999
periods. These decreases are the result of less financing fees in 2000.
<PAGE>
Operating loss for the three and nine months ending September 30, 2000,
decreased by $61,734 and $308,858, respectively, as compared to 1999. The
decrease for the three month period is primarily the result of the increase in
sales combined with the decrease in interest expense, offset in part by the
increase in cost of goods sold. The decrease in operating loss for the nine
month period is due primarily to the substantial decreases in marketing and
product development expenses.
Net loss for the nine month period ending September 30, 2000, increased by
$485,386 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 $462,485 at September 30, 2000, primarily resulting from
decreases in accounts receivable and cash.
Net cash used in operating activities decreased by $380,003 for the nine
months ended September 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 $374,750 during the
nine month period ending September 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 performance for the three quarters of 2000 which included
receipt of the proceeds from the sale of equipment, the FDA approvals, increased
marketing of the sliding sheath syringe, and the patent license agreements,
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 ability to raise
equity financing has been hampered.
The Company has actively pursued legislative changes both in the United
States and worldwide for the use of safety syringes. Recently the United States
has enacted The Needlestick Safety and Prevention Act which requires the use of
safer devices to protect health care workers from sharp injuries.
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 August 2000, an action was commenced in the U.S. District Court, Southern
District of New York by BMD Technology, LLC, against the Company alleging patent
infringement in connection with the Company's locking syringe. The action seeks
a permanent injunction restraining the Company from infringing the plaintiff's
patent, damages, treble damages, attorney fees, and costs of the action.
Although the action is in its early stage, the Company believes the claim 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.
There has been no further activity on the litigation matters commenced in
April 2000.
Item 2. Changes in Securities
In August 2000, the Company's shareholders ratified an amendment to the
Certificate of Incorporation of the Company to increase the authorized common
stock of the Company from 25,000,000 shares to 75,000,000 shares.
The Company agreed to issue 45,000 shares of its common stock to consultants
in reliance upon the exemption afforded by Section 4(2) of the Securities Act of
1933. The Company did not employ any form of general solicitation or advertising
and the purchasers were sophisticated individuals capable of evaluating the
merits and risks of the purchase of the shares.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Univec, Inc. for the year ending
December 31, 1999, was held on August 24, 2000, to consider and vote upon (i) a
proposal to elect Joel Schoenfeld, Dr. Alan H. Gold, John Frank, Richard Mintz,
Marla Manowitz, and Dr. Andrew Rosenberg as directors, (ii) a proposal to
approve the adoption of the Company's 2000 Stock Option Plan, (iii) a proposal
to approve an amendment to the Certificate of Incorporation of the Company to
increase the authorized common stock of the Company from 25,000,000 shares to
75,000,000 shares and (iv) to ratify the appointment of Most Horowitz & Co.,
LLP, as the Company's auditors for the years ending December 31, 1998, 1999 and
2000. The number of votes cast for and against each of the foregoing proposals,
the number of abstentions and the number of broker non-votes where applicable
are set forth below.
(i) Proposals to Elect Directors:
For Withhold Authority
Joel Schoenfeld 3,597,390 49,007
Alan H. Gold, M.D. 3,597,490 48,907
John Frank 3,597,490 48,907
Marla Manowitz 3,597,490 48,907
Richard Mintz 3,597,490 48,907
Andrew Rosenberg, M.D. 3,597,490 48,907
(ii) Proposal to Approve the Adoption of the Company's 2000 Stock Option Plan:
For Against Abstain Broker Non-votes
1,139,464 165,084 18,474 2,323,375
<PAGE>
(iii) Proposal to Amend the Certificate of Incorporation to increase the
authorized Common Stock of the Company from 25,000,000 shares to 75,000,000
shares:
For Against Abstain
3,479,809 151,088 13,500
(iv) Proposal to Ratify the Selection of Most Horowitz & Company, LLP as
the Company's Auditors.
For Against Abstain
3,568,647 39,275 38,475
Broker Non-votes represent shares for which brokers are prohibited from
exercising discretionary authority on behalf of beneficial owners who have not
provided voting instructions. Broker Non-votes are not included in the vote
totals, but are counted for determining the presence of a quorum.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3 Certificate of Incorporation as amended
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 September 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: November 9, 2000 By: /s/ Alan Gold
----------------------------------
Alan Gold
Chief Executive Officer
Dated: November 9, 2000 By: /s/ Marla Manowitz
----------------------------------
Marla Manowitz
Chief Financial Officer
