UNITED STATES
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 six month period ended January 31, 2000
TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number 000-23399
FLEMINGTON PHARMACEUTICAL CORPORATION
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-2407152
------------------------------ --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
43 Emery Avenue
Flemington, New Jersey
----------------------------------------
(Address of Principal Executive Offices)
08822
---------
(Zip Code)
(908)782-3431
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
3,877,300 shares of common stock outstanding as of January 31, 2000.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes No X
--- ---
FLEMINGTON PHARMACEUTICAL CORPORATION
BALANCE SHEETS
January 31, July 31,
2000 1999
-------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 396,000 $ 864,000
Accounts receivable - trade, less
allowance for doubtful accounts
of $15,000 104,000 122,000
Prepaid expenses and other current
assets 41,000 58,000
-------- ---------
Total Current Assets 541,000 1,044,000
-------- ---------
FURNITURE, FIXTURES, AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 32,000 30,000
DEMAND NOTE RECEIVABLE, SHAREHOLDER 60,000 60,000
OTHER ASSETS 19,000 29,000
------- ---------
$ 652,000 $1,163,000
======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade $ 8,000 $ 48,000
Accrued expenses and other current
liabilities 58,000 78,000
--------- ----------
Total Current Liabilities 66,000 126,000
--------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized 1,000,000 shares, none
issued
Common stock, $.001 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 3,877,300
shares 4,000 4,000
Additional paid-in capital 4,268,000 4,268,000
Accumulated Deficit (3,686,000) (3,235,000)
---------- ---------
Total Stockholders' Equity 586,000 1,037,000
---------- ---------
$ 652,000 $1,163,000
========== =========
See accompanying notes to financial statements.
FLEMINGTON PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
------------------ -----------------
2000 1999 2000 1999
REVENUES:
Operating revenues $ 69,000 $ 147,000 $ 173,000 $ 276,000
Interest Income 8,000 20,000 25,000 48,000
------ ------- ------- -------
77,000 167,000 198,000 324,000
------ ------- ------- -------
COST AND EXPENSES:
Operating expenses 47,000 143,000 96,000 255,000
Product development 68,000 80,000 124,000 162,000
Selling, general and
administrative expenses 196,000 269,000 429,000 648,000
------- ------- ------- --------
311,000 492,000 649,000 1,065,000
-------- -------- -------- ---------
NET INCOME (LOSS) $(234,000) $(325,000) $(451,000) $ (741,000)
======== ======== ======== =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,877,300 3,877,300 3,877,300 3,877,300
========= ========= ========= =========
PER COMMON SHARE:
Net Income (loss) $(.06) $(.08) $(.12) $(.19)
========= ========= ========= =========
See accompanying notes to financial statements.
FLEMINGTON PHARMACEUTICAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Stockholders'
Common Stock Paid-in Accumulated Equity
Shares Par Value Capital Deficit (Deficiency)
------ --------- ---------- ----------- ------------
Balance, July 31, 1999 3,877,300 $ 4,000 $4,268,000 $(3,235,000) $1,037,000
Six months ended,
January 31, 2000 -
Net Loss - - - (451,000) (451,000)
--------- ------ --------- ---------- ---------
Balance, Jan. 31, 2000 3,877,300 $ 4,000 $4,268,000 $(3,686,000) $ 586,000
========= ======= ========= ========== =========
See accompanying notes to financial statements.
FLEMINGTON PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
January 31,
----------------------
2000 1999
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) $(451,000) $ (741,000)
Adjustments to reconcile net income
(loss) to net cash
Flows from operating activities:
Provisions for losses on accounts
receivable - (20,000)
Options Issued for Services 10,000 9,000
Depreciation & Amortization 6,000 10,000
Changes in operating assets and
liabilities:
Accounts receivable 18,000 (2,000)
Prepaid expenses and other current
assets 17,000 (11,000)
Costs and estimated earnings in
excess of billings on uncompleted
contracts - (39,000)
Accounts payable - trade (40,000) 46,000
Billings in excess of costs and
estimated earnings on uncompleted
contracts - 55,000
Accrued expenses and other current
liabilities (20,000) (3,000)
-------- --------
Net cash flows from operating activities (460,000) (696,000)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (8,000) (2,000)
-------- --------
NET CHANGE IN CASH (468,000) (698,000)
CASH, BEGINNING OF PERIOD 864,000 2,141,000
-------- ---------
CASH, END OF PERIOD $ 396,000 $1,443,000
======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ - $ -
======== =========
Income taxes paid $ - $ -
======== =========
See accompanying notes to financial statements.
FLEMINGTON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
The financial statements presented herein are unaudited. In the opinion of
management, all adjustments, which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented, have been made in the interim
statements. Results of operations for interim periods are not necessarily
indicative of the operating results for a full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. The financial statements in this report should be read
in conjunction with the financial statements and notes thereto included in the
Form 10-KSB of Flemington Pharmaceutical Corporation (the "Company"), for the
year ended July 31, 1999.
Note 2 - On December 23, 1998, a former shareholder filed a lawsuit
against the Company, its president and its chairman. The lawsuit alleges
violations of the federal securities laws, and purports to seek damages on
behalf of a class of shareholders who purchased the Company's common stock
during a period from Nov. 19, 1997 to Dec. 29, 1997. The Company believes
the lawsuit is without merit and intends to defend against it vigorously.
See Part II. OTHER INFORMATION, Item 1. Legal Proceedings.
FLEMINGTON PHARMACEUTICAL CORPORATION
Part I, Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Flemington Pharmaceutical Corporation, a New Jersey corporation (the
"Company"), is engaged in development of novel application drug delivery
systems for presently marketed prescription and over-the-counter ("OTC")
drugs. Since its inception in 1982, the Company has been a consultant to the
pharmaceutical industry, focusing on product development activities of various
European pharmaceutical companies, and since 1992 has used it consulting
revenues to fund its own product development activities.
Since its inception, substantially all of the Company's revenues have been
derived from consulting activities, primarily in connection with product
development for various pharmaceutical companies. The Company has had a
history of recurring losses from operation through July 31, 1995, and also
for the years ended July 31, 1997 ["Fiscal 1997"], 1998 ["Fiscal 1998"], and
1999 ["Fiscal 1999"], giving rise to an accumulated deficit at January 31,
2000 of approximately $3,686,000. Although substantially all of the Company's
revenues to date have been derived from its consulting business, the future
growth and profitability of the Company will be principally dependent upon
its ability to successfully develop its products and to enter into license
agreements with drug companies who will market and distribute the final
products. The Company's revenues from consulting declined during Fiscal 1997,
Fiscal 1998 and Fiscal 1999. Revenues from consulting may continue to decline
in the future as the Company shifts its emphasis away from product development
consulting for its clients and towards development of its own products.
For the reasons stated above, the Company anticipates that it will incur
substantial operating expenses in connection with the joint development,
testing and approval of its proposed delivery systems, and expects these
expenses will result in continuing and significant operating losses until
such time, if ever, that the Company is able to achieve adequate sales levels.
In view of the Company's very limited resources, its anticipated expenses and
the competitive environment in which the Company operates, there can be no
assurance that its operations will be sustained for the duration of the
current fiscal year.
RESULTS OF OPERATIONS
THE SIX MONTHS ENDED JANUARY 2000 [the "2000 Period"] AND JANUARY 1999 [the
"1999 Period"]
Revenues for the 2000 Period decreased approximately $103,000 or 37% to
$173,000 from $276,000 for the 1999 Period. The revenue decrease for the 2000
period was primarily attributable to the lack of consulting engagements and
clinical studies.
Total costs and expenses for the 2000 Period decreased approximately $416,000
or 39% to $649,000 from $1,065,000 for the 1999 Period. This decrease includes
an approximate $178,000 decrease in legal and professional fees, an approximate
$44,000 decrease in clinical studies costs, an approximate $41,000 decrease in
travel expenses, an approximate $35,000 decrease in outside consulting fees,
an approximate $27,000 decrease in product development costs, an approximate
$15,000 decrease in public company expenses, an approximate $14,000 decrease
in payroll and payroll taxes and an approximate $12,000 decrease in employee
relocation expenses.
The resulting net loss for the 2000 Period was $451,000 compared to a net loss
of $741,000 for the 1999 Period.
THE THREE MONTHS ENDED JANUARY 2000 [the "2000 Period"] AND JANUARY 1999 [the
"1999 Period"]
Revenues for the 2000 Period decreased approximately $78,000 or 53% to $69,000
from $147,000 for the 1999 Period.
Total costs and expenses for the 2000 Period decreased approximately $181,000
or 37% to $311,000 from $492,000 for the 1999 Period. This decrease includes
an approximate $64,000 decrease in legal and professional fees, an approximate
$44,000 decrease in clinical studies costs, an approximate $22,000 decrease
in travel expenses, an approximate $15,000 decrease in outside consulting fees
and an approximate $9,000 decrease in business franchise taxes.
The resulting net loss for the 2000 Period was $234,000 compared to a net loss
of $325,000 for the 1999 Period.
LIQUIDITY AND CAPITAL RESOURCES
In November 1997, the Company successfully closed an offering of its securities
["Public Offering" or "Offering"]. The offering provided for the sale of
675,000 units, each unit consisting of one share of common stock, par value
$.01 per share and one redeemable Class A common stock purchase warrant with
an exercise price of $5.80 per share, subject to adjustment. As part of the
offering, the underwriter exercised part of its over allotment option to
purchase an additional 5,000 units. As a result of the offering, the Company
received proceeds, net of offering costs and underwriting discounts, of
approximately $3,013,000.
Net cash used in operating activities approximated $460,000 for the 2000
Period compared to net cash used in operating activities of approximately
$696,000 for the 1999 Period. Net cash used in operating activities for the
2000 period was primarily attributable to the net loss of $451,000. For the
2000 Period, $8,000 was used for investing activities. Therefore, notwith-
standing a $451,000 net loss and a $741,000 net loss for the 2000 and 1999
Periods, respectively, total cash flow for the 2000 period decreased
approximately $17,000 as compared to $43,000 increase for the 1999 period.
Although there can be no assurance, the Company believes that the proceeds
from the Public Offering together with revenues from operations will be
sufficient to satisfy its cash requirements for at least the next three (3)
months. No assurance can be given that future unforeseen events will not
adversely affect the Company's ability to implement its expansion plan,
requiring it to seek additional financing, which may not be available on
terms acceptable to the Company, if at all.
Inflation
The Company does not believe that inflation has had a material effect on its
results of operations during the past three fiscal years. There can be no
assurance that the Company's business will not be affected by inflation in
the future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 23, 1998, a complaint was filed against the Company in United
States District Court for the District of New Jersey by Richard F. Biborosch,
individually and as class representative. Defendants in the lawsuit include
the Company, John J. Moroney, Harry A. Dugger, III, Ph.D. and Monroe Parker
Securities, Inc. and two of its principals (collectively, "Monroe Parker").
The complaint alleges certain securities law violations against the Company
relative to Monroe Parker's role as underwriter for the Company's initial
public offering and the Company's alleged failure to properly disclose certain
information relating to Monroe Parker. Relief sought by the plaintiff includes
certification of the action as a class action, damages, rescission and costs.
The Company has retained special litigation counsel to assist in defense of
the claim and believes the allegations contained in the Complaint are without
merit. On March 25, 1999, the Company filed a motion to dismiss the complaint
for failure to state a cause of action. In October, 1999, the United States
District Court granted the Company's motion in part and denied it in part.
In November, 1999, the Court entered a Scheduling Order setting forth a pre-
trial Discovery schedule for the forthcoming months. Such discovery is
presently ongoing. The Company intends to defend the action vigorously.
Item 2. Changes in Securities
N/A
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submissions of Matters to a Vote of Security Holders
N/A
Item 5. Other Information
N/A
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 11. Statement re: computation of earnings per share for
the six months ended January 31, 2000
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLEMINGTON PHARMACEUTICAL CORPORATION
By: /s/ Harry A. Dugger, III
------------------------------------------
Harry A. Dugger, III, President
(Principal Executive and Financial Officer)
Date: March 3, 2000
-------------
By: /s/ John J. Moroney
--------------------------------------
John J. Moroney, Chairman of the Board
Date: March 3, 2000
-------------
EXHIBIT 11
FLEMINGTON PHARMACEUTICAL CORPORATION
EARNINGS PER SHARE COMPUTATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
SIX MONTHS ENDED
JANUARY 31, 2000
----------------
BASIC
Weighted average shares outstanding 3,877,300
Dilutive effect of stock performance plans (1) --
---------
Total 3,877,300
---------
Net Income (loss) (451)
---------
Earnings (loss) per share (.12)
---------
SIX MONTHS ENDED
JANUARY 31, 1999
----------------
BASIC
Weighted average shares outstanding 3,877,300
Dilutive effect of stock performance plans (1) --
---------
Total 3,877,300
Net Income (loss) (741)
---------
Earnings (loss) per share ( .19)
---------
(1) No potential shares from stock performance plans have been presented,
as their effect would be anti-dilutive
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 396,000
<SECURITIES> 0
<RECEIVABLES> 119,000
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 541,000
<PP&E> 32,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 652,000
<CURRENT-LIABILITIES> 66,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 582,000
<TOTAL-LIABILITY-AND-EQUITY> 652,000
<SALES> 173,000
<TOTAL-REVENUES> 198,000
<CGS> 0
<TOTAL-COSTS> 649,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (451,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (451,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (451,000)
<EPS-BASIC> (.12)
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