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 September 30, 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.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2328609
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Little Falls Road, Fairfield, New Jersey 07004
- -------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)882-0860
------------
- --------------------------------------------------------------------------------
(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 [ ]
<PAGE>
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--23,092,149 shares as of November 1, 1995
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets-September 30, 1995 and
December 31, 1994
Condensed statements of operations-Three months ended
September 30, 1995 and 1994; Nine months ended
September 30, 1995 and 1994
Condensed statements of cash flows-
Nine months ended September 30, 1995 and 1994
Notes to condensed financial statements-
September 30, 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>
September 30 December 31
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................. $ 14,880 $ 592,011
Prepaid expenses and other
current assets ......................... 505,657 394,553
------------- -------------
Total current assets ................. 520,537 986,564
Property, plant and equipment-net
of accumulated depreciation and
amortization .............................. 11,673,454 12,221,504
Patents and other assets ..................... 1,089,278 1,003,276
------------- -------------
$ 13,283,269 $ 14,211,344
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................... $ 2,670,555 $ 2,399,663
Accrued expenses .......................... 557,416 494,091
Note payable .............................. 2,000,000 --
------------- -------------
Total current liabilities ........... 5,227,971 2,893,754
Notes payable - stockholders ................. 1,755,000 --
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 48,000,000 shares, issued
and outstanding 23,092,149 shares in
1995 and 20,918,399 shares in 1994 ..... 230,921 209,184
Additional paid-in capital ................ 37,482,992 35,399,473
Accumulated deficit ....................... (31,412,584) (24,290,036)
Less: Treasury stock, at cost,
7,290 shares ........................... (1,031) (1,031)
------------- -------------
Total stockholders' equity ........... 6,300,298 11,317,590
------------- -------------
$ 13,283,269 $ 14,211,344
============= =============
See notes to condensed financial statements.
</TABLE>
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------- -------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract and
sales revenue ........ $ 468 $ 2,402 $ 6,074 $ 256,464
------------ ------------ ------------ ------------
Operating expenses:
Research and
development ....... 1,771,791 1,136,308 5,214,464 3,131,255
General and
administrative .... 574,134 422,058 1,669,403 1,101,789
------------ ------------ ------------ ------------
2,345,925 1,558,366 6,883,867 4,233,044
------------ ------------ ------------ ------------
Operating loss ...... (2,345,457) (1,555,964) (6,877,793) (3,976,580)
------------ ------------ ------------ ------------
Other income (expense):
Interest/other income 10,463 36,441 13,983 215,983
Interest expense .... (164,735) -- (258,738) --
------------ ------------ ------------ ------------
(154,272) 36,441 (244,755) 215,983
------------ ------------ ------------ ------------
Net loss ................ $ (2,499,729) $ (1,519,523) $ (7,122,548) $ (3,760,597)
============ ============ ============ ============
Net loss per share ...... $ (.12) $ (.08) $ (.34) $ (.19)
============ ============ ============ ============
Weighted average number
of shares outstanding .. 21,507,522 19,731,659 21,164,060 19,663,005
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash used for operations ..................... $ (5,818,375) $ (2,050,576)
------------ ------------
Investing activities:
Maturity of marketable securities ......... -- 2,500,000
Construction of leasehold improvements .... (379,834) (5,472,736)
Purchase of equipment and furniture ....... (146,616) (2,260,580)
Increase in patents
and other assets ....................... (92,562) (753,420)
------------ ------------
(619,012) (5,986,736)
------------ ------------
Financing activities:
Sales of stock,
net of related expenses ........... 1,954,334 --
Issuance of debt .................... 4,755,000 --
Repayment of debt ................... (1,000,000) --
Exercise of stock options ........... 150,922 152,738
------------ ------------
5,860,256 152,738
------------ ------------
Net increase (decrease) in cash and
cash equivalents .......................... (577,131) (7,884,574)
Cash and cash equivalents at
beginning of year ......................... 592,011 8,218,420
------------ ------------
Cash and cash equivalents at
end of period ............................. $ 14,880 $ 333,846
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 and nine month periods ended September 30, 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 September 30, 1995 in the amount of $2,000,000 is to an
unrelated third party, secured by all of the Company's assets. This loan was
originally due and payable July 7, 1995 with an interest rate of 13% per annum
however, it was formally extended to September 8, 1995 with an interest rate of
24.5% per annum. No further formal extension has been obtained, although the
Company is now negotiating with a third party lender and the creditor for full
payment to the creditor. 1,000,000 from this loan was used to pay off other
short-term debt.
Notes payable to stockholders, totaling $1,755,000 at September 30, 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 (approximately 9% at September
30, 1995) and are secured by security interests in the Company's Fairfield plant
and Boonton equipment. Notes for $1,105,000 are payable on demand. A note for
$650,000 is due on February 10, 1997.
NOTE C - STOCK SALE
From July 1 through September 30, 1995, the Company sold in private placements
approximately 2 million shares of its common stock at a price of $1 per share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 $11.7 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 September 30,
1995, had cash and cash equivalents of $15,000, a decrease of $577,000 from
December 31, 1994.
From February through September 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 $1,755,000 to the Company. During October 1995, they loaned an
additional $150,000 to the Company. A total of $1,850,000 of these loans is
secured by liens on the Fairfield plant and equipment. In March 1995, the
Company borrowed $1,000,000 from an unrelated third party. This note was paid
off in May 1995. In May 1995, the Company borrowed $2,000,000 from an unrelated
third party on a short-term basis secured by all of the assets of the Company.
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. This loan was originally due and payable July 7, 1995 with an
interest rate of 13% per annum however, it was formally extended to September 8,
1995 with an interest rate of 24.5% per annum. No further formal extension has
been obtained, although the Company is now negotiating with a third party lender
and the creditor for full payment to the creditor. $1,000,000 from this loan was
used to pay off the $1,000,000 short-term debt. From July 1 through September
30, 1995, the Company sold in private placements approximately 2 million shares
of its common stock at a price of $1 per share.
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 has signed one joint venture agreement. However, the
Company has not yet received any revenue from this agreement, and there is no
assurance that any revenues will be received.
The Company requires additional cash 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 cash during the remainder of
the fourth quarter of 1995 to continue operations.
OPERATING RESULTS
Current operating revenues are from hormone and enzyme sales which were $6,000
for the nine months ended September 30, 1995. Operating revenues for 1994
include a final payment from a prior research agreement in the amount of
$250,000.
Research and development, the Company's largest expense, increased 56% from
$1,136,000 to $1,772,000 and 67% from $3,131,000 to $5,214,000 for the three
months and nine months ended September 30, 1995, respectively, as compared to
the same periods in 1994. The increases were related to the Company's
manufacturing facility including depreciation charges and expenditures for
preproduction salaries, its development program for the calcitonin pill,
regulatory consulting fees, as well as the sponsorship of collaborative research
programs.
General and administrative expenses increased 36% from $422,000 to $574,000, and
51% from $1,102,000 to $1,669,000 for the three months and nine months ended
September 30, 1995, respectively, as compared to the same periods in 1994. The
increases were primarily due to legal and other expenses associated with the
Company's financing activities.
Interest and other income decreased $26,000 or 71% and $202,000 or 94% for the
three months and nine months ended September 30, 1995, respectively, as compared
to the same periods in 1994. The decreases were due to a reduction in total
monies available to be invested.
Interest expense was $165,000 and $259,000 for the three months and nine months
ended September 30, 1995, respectively. Interest is payable on notes totaling
$3,755,000 as of September 30, 1995. There were no notes outstanding during
1994.
As a result of increased operating expenses and interest expense as well as
decreased operating revenues and interest income, net loss increased $980,000
and $3,362,000 for the three months and nine months ended September 30, 1995,
respectively, from the corresponding periods 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 nine months ending September 30, 1995, the Company had additional losses of
approximately $7,000,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $69,000 and $1,339,000,
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 nine month period ended September 30, 1995, the Company's
deferred tax assets and valuation allowances each increased by approximately
$2,800,000.
<PAGE>
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 July 13, 1995 with
respect to the extension of the Company's short-term debt financing in
the amount of $2,000,000.
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)
/s/ Warren P. Levy
November 10, 1995 -----------------------------
Warren P. Levy, President
(Chief Executive Officer)
/s/ Jay Levy
November 10, 1995 -----------------------------
Jay Levy, Treasurer
(Chief Financial Officer and
Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 14,880
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 520,537
<PP&E> 16,130,261
<DEPRECIATION> 4,456,807
<TOTAL-ASSETS> 13,283,269
<CURRENT-LIABILITIES> 5,227,971
<BONDS> 1,755,000
<COMMON> 230,921
0
0
<OTHER-SE> 6,069,377
<TOTAL-LIABILITY-AND-EQUITY> 13,283,269
<SALES> 6,074
<TOTAL-REVENUES> 6,074
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,883,867
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258,738
<INCOME-PRETAX> (7,122,548)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,122,548)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,122,548)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
