FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________ to_____________
For Quarter Ended___________ Commission file number 0-16005
Unigene Laboratories, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2328609
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Little Falls Road, Fairfield, New Jersey 07004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)882-0860
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.01 Par
Value--20,999,149 shares as of May 1, 1995
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets-March 31, 1995 and
December 31, 1994
Condensed statements of operations-Three months ended
March 31, 1995 and 1994
Condensed statements of cash flows-
Three months ended March 31, 1995 and 1994
Notes to condensed financial statements-
March 31, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
UNIGENE LABORATORIES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
-------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................ $ 15,753 $ 592,011
Prepaid expenses and other
current assets ........................ 600,179 394,553
------------ ------------
Total current assets ................ 615,932 986,564
Property, plant and equipment-net
of accumulated depreciation and
amortization ............................. 12,247,407 12,221,504
Patents and other assets .................... 1,014,509 1,003,276
------------ ------------
$ 13,877,848 $ 14,211,344
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................... $ 2,540,617 $ 2,399,663
Accrued expenses ......................... 176,968 494,091
Note payable ............................. 1,000,000 --
Notes payable - stockholders ............. 300,000 --
------------ ------------
Total current liabilities .......... 4,017,585 2,893,754
Note payable - stockholders .............. 650,000 --
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 31,000,000 shares, issued
and outstanding 20,999,149 shares in
1995 and 20,918,399 shares in 1994 .... 209,991 209,184
Additional paid-in capital ............... 35,478,721 35,399,473
Accumulated deficit ...................... (26,477,418) (24,290,036)
Less: Treasury stock, at cost,
7,290 shares .......................... (1,031) (1,031)
------------ ------------
Total stockholders' equity .......... 9,210,263 11,317,590
------------ ------------
$ 13,877,848 $ 14,211,344
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Sales and
other revenue ................. $ 5,142 $ 1,032
------------ ------------
Operating expenses:
Research and
development ................ 1,698,763 1,014,941
General and
administrative ............. 479,846 316,194
------------ ------------
2,178,609 1,331,135
------------ ------------
Operating loss ................ (2,173,467) (1,330,103)
------------ ------------
Other income (expense):
Interest income ............... 2,758 101,470
Interest expense .............. (16,673) --
------------ ------------
(13,915) 101,470
------------ ------------
Net loss ......................... $ (2,187,382) $ (1,228,633)
============ ============
Net loss per share ............... $ (.10) $ (.06)
============ ============
Weighted average number
of shares outstanding ........... 20,984,945 19,620,859
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash from operations ......................... $ (2,211,307) $ (531,806)
------------ ------------
Investing activities:
Maturity of marketable securities ......... -- 1,000,000
Purchase of marketable securities ......... -- (1,091,750)
Construction of leasehold improvements .... (282,972) (1,780,797)
Purchase of equipment and furniture ....... (98,731) (645,315)
Increase in patents and other assets ...... (13,303) (189,758)
------------ ------------
(395,006) (2,707,620)
------------ ------------
Financing activities:
Issuance of short-term debt ............... 1,300,000 --
Issuance of long-term debt ................ 650,000 --
Exercise of stock options ................. 132,922 --
Other ..................................... (52,867) --
------------ ------------
2,030,055 --
------------ ------------
Net decrease in cash and
cash equivalents ........................... (576,258) (3,239,426)
Cash and cash equivalents at
beginning of year ......................... 592,011 8,218,420
------------ ------------
Cash and cash equivalents at
end of period ............................. $ 15,753 $ 4,978,994
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. 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 considered necessary
for a fair presentation have been included. Operating results for the three
month period ended March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For further
information, please refer to the Company's financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
NOTE B - DEBT FINANCING
Note payable at March 31, 1995 in the amount of $1,000,000 is to an unrelated
third party. This note, bearing interest at the rate of prime plus 1% was due
and payable on June 30, 1995, but was paid off in May 1995. This note was
collateralized by a major part of the company assets.
Notes payable to stockholders, totaling $950,000 at March 31, 1995, consist of
notes to Warren P. Levy, Ronald S. Levy and Jay Levy, officers and directors of
the Company, and a member of their family. These notes bear interest at the
Merrill Lynch Margin Loan Rate and have subordinated security interests in the
Company's Fairfield and Boonton assets. The notes are due and payable on
February 10, 1997. A total of $300,000 of these notes is expected to be paid
during 1995 and are classified as short-term. The balance of $650,000 is
classified as long-term.
In April 1995, Warren P. Levy, Ronald S. Levy and Jay Levy loaned an additional
$280,000 to the Company, with the same subordinated security interest. In May
1995, the Company borrowed $2,000,000 from an unrelated third party, secured by
all of the Company's assets. This loan is due and payable July 7, 1995 with an
interest rate of 13% per annum. $1,000,000 from this loan was used to pay off
other short-term debt.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Current operating revenues are from hormone and enzyme sales which were $5,000
and $1,000 for the three months ended March 31, 1995 and 1994, respectively.
Research and development, the Company's largest expense, increased 67% from
$1,015,000 to $1,699,000 for the three months ended March 31, 1995 as compared
to the same period in 1994. The increase was related to the Company's
manufacturing facility and its development program for the calcitonin pill,
including depreciation charges, expenditures for preproduction salaries,
regulatory consulting fees, as well as the sponsorship of collaborative research
programs.
General and administrative expenses increased 52% from $316,000 to $480,000, for
the three months ended March 31, 1995, as compared to the same period in 1994.
The increase was primarily due to legal and other expenses associated with the
Company's financing activities.
Interest income decreased $99,000 or 97% for the three months ended March 31,
1995, as compared to the same period in 1994. The decrease was due to a
reduction in total monies available to be invested.
As a result of increased operating expenses and decreased interest income, net
loss increased $959,000 or 78% for the three months ended March 31, 1995, from
the corresponding period in 1994.
As of December 31, 1994, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$24,000,000, expiring from 1996 through 2009, which are available to reduce
future earnings which would otherwise be subject to federal income taxes. For
the three months ending March 31, 1995, the Company had additional losses of
approximately $2,000,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $69,000 and $1,346,000,
respectively, which are available to reduce the amount of future federal income
taxes. These credits expire from 1996 through 2009.
The Company follows Statement of Financial Accounting Standards No. 109 (FASB
109), "Accounting for Income Taxes". Given the Company's past history of
incurring operating losses, any deferred tax assets that are recognizable under
FASB 109 have been fully reserved. As of January 1, 1995, under FASB 109, the
Company had deferred tax assets of approximately $11,100,000, subject to a
valuation allowance of $11,100,000. The deferred tax assets were generated
primarily as a result of the Company's net operating losses and tax credits
generated. For the three month period ended March 31, 1995, the Company's
deferred tax assets and valuation allowances each increased by approximately
$900,000.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, the Company completed construction of its peptide production
facility in Boonton, New Jersey. The facility was constructed in a shell
building that is being leased under a ten year net lease which began in February
1994. The Company has two ten year renewal options as well as an option to
purchase the facility. The total cost of leasehold improvements and process
equipment for this facility, including current validation costs, is
approximately $11 million. The Company is undertaking steps to secure the
validation of the facility by the U.S. Food and Drug Administration to allow
Unigene to provide its calcitonin for human use. The Company, at March 31, 1995,
had cash and cash equivalents of $16,000, a decrease of $576,000 from December
31, 1994.
In February and March 1995, Warren P. Levy, Ronald S. Levy and Jay Levy,
officers and directors of the Company, and a member of their family loaned a
total of $950,000 to the Company secured by liens on the Fairfield plant and
equipment. In March 1995, the Company borrowed $1,000,000 from an unrelated
third party on a short-term basis secured by most of the assets of the Company,
subject to obligations to release part of the security under certain
circumstances. In connection with that loan, the members of the Levy family
agreed to subordinate their security interests in the Fairfield plant and
equipment to the secured lender and received a subordinated security interest on
the equipment at the Boonton plant. In April 1995, Warren P. Levy, Ronald S.
Levy and Jay Levy loaned an additional $280,000 to the Company, with the same
subordinated security interest. In May 1995, the Company borrowed $2,000,000
from an unrelated third party. This loan is due and payable July 7, 1995 with an
interest rate of 13% per annum. $1,000,000 from this loan was used to pay off
other short-term debt.
The Company's ability to generate additional cash from operations depends
primarily upon signing research or licensing agreements, achieving defined
benchmarks in such agreements, completion of plant validation, receiving
regulatory approval for its products, and marketing hormones and enzyme
products. The Company currently has no income-producing research or license
agreements in effect.
The Company requires additional working capital to continue its operations. The
Company is seeking additional financing, but there is no assurance that
sufficient funds will be obtained. The Company requires additional financing
during the second quarter of 1995 to ensure continued operations.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none.
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K dated March 15, 1995
with respect to the Company's debt financings totaling $1,950,000.
<PAGE>
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.
UNIGENE LABORATORIES, INC.
--------------------------
(Registrant)
May 10, 1995 /s/ Warren P. Levy
------------------------------------
Warren P. Levy, President
(Chief Executive Officer)
May 10, 1995 /s/ Jay Levy
-------------------------------------
Jay Levy, Treasurer
(Chief Financial Officer and
Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,753
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 615,932
<PP&E> 15,985,514
<DEPRECIATION> 3,738,107
<TOTAL-ASSETS> 13,877,848
<CURRENT-LIABILITIES> 4,017,585
<BONDS> 650,000
<COMMON> 209,991
0
0
<OTHER-SE> 9,000,272
<TOTAL-LIABILITY-AND-EQUITY> 13,877,848
<SALES> 5,142
<TOTAL-REVENUES> 5,142
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,178,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,673
<INCOME-PRETAX> (2,187,382)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,187,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,187,382)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
