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, 1996
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 [ ]
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--24,554,093 shares as of May 1, 1996
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets-March 31, 1996 and
December 31, 1995
Condensed statements of operations-Three months ended
March 31, 1996 and 1995
Condensed statements of cash flows-
Three months ended March 31, 1996 and 1995
Notes to condensed financial statements-
March 31, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED BALANCE SHEETS
March 31 December 31
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................... $ 5,709,073 $ 258,627
Accounts receivable ......................... 300,000 --
Prepaid expenses and other
current assets ........................... 522,352 434,159
------------ ------------
Total current assets ................... 6,531,425 692,786
Property, plant and equipment-net
of accumulated depreciation and
amortization ................................ 11,167,920 11,513,019
Patents and other assets ....................... 1,162,094 1,125,828
Unamortized debt issue costs ................... 943,000 --
------------ ------------
$ 19,804,439 $ 13,331,633
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 1,894,022 $ 2,859,264
Accrued expenses ............................ 626,354 644,663
Notes payable - stockholders ................ 1,250,000 1,250,000
------------ ------------
Total current liabilities ............. 3,770,376 4,753,927
Note payable - stockholders ................. 655,000 655,000
Note payable - other ........................ -- 3,300,000
9.5% convertible debentures ................. 3,300,000 --
10% convertible debentures .................. 9,080,000 --
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 48,000,000 shares, issued
and outstanding 24,206,261 shares in
1996 and 23,813,171 shares in 1995 ....... 242,063 238,132
Additional paid-in capital .................. 38,430,633 38,110,512
Accumulated deficit ......................... (35,672,602) (33,724,907)
Less: Treasury stock, at cost,
7,290 shares ............................. (1,031) (1,031)
------------ ------------
Total stockholders' equity ............. 2,999,063 4,622,706
------------ ------------
$ 19,804,439 $ 13,331,633
============ ============
See notes to condensed financial statements.
</TABLE>
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Licensing and
other revenue ..................... $ 305,181 $ 5,142
------------ ------------
Operating expenses:
Research and
development .................... 1,765,446 1,698,763
General and
administrative ................. 391,180 479,846
------------ ------------
2,156,626 2,178,609
------------ ------------
Operating loss .................... (1,851,445) (2,173,467)
------------ ------------
Other income (expense):
Interest/other income ............. 78,338 2,758
Interest expense .................. (174,589) (16,673)
------------ ------------
(96,251) (13,915)
------------ ------------
Net loss ............................. $ (1,947,696) $ (2,187,382)
============ ============
Net loss per share ................... $ (.08) $ (.10)
============ ============
Weighted average number
of shares outstanding ............... 23,850,944 20,984,945
============ ============
See notes to condensed financial statements.
</TABLE>
<PAGE>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash from operations ............................. $(2,955,029) $(2,211,307)
----------- -----------
Investing activities:
Construction of leasehold improvements ........ -- (282,972)
Purchase of equipment and furniture ........... (16,901) (98,731)
Increase in patents and other assets .......... (38,676) (13,303)
----------- -----------
(55,577) (395,006)
----------- -----------
Financing activities:
Sales of stock, net of related expenses ....... 300,440 --
Proceeds from issuance of convertible
debentures, net of related expenses .... 8,137,000 --
Proceeds from issuance of notes
payable ................................ -- 1,950,000
Exercise of stock options ..................... 23,612 132,922
Other ......................................... -- (52,867)
----------- -----------
8,461,052 2,030,055
----------- -----------
Net increase (decrease) in cash and
cash equivalents ............................... 5,450,446 (576,258)
Cash and cash equivalents at
beginning of year ............................. 258,627 592,011
----------- -----------
Cash and cash equivalents at
end of period ................................. $ 5,709,073 $ 15,753
=========== ===========
Supplemental cash flow information:
Exchange of note payable for
9.5% convertible debentures ................... $ 3,300,000
===========
See notes to condensed financial statements.
</TABLE>
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996
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, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. 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, 1995.
NOTE B - DEBT FINANCING
In March 1996 the Company completed a private placement of $9.08 million of 10%
Convertible Debentures. The Company received net proceeds of approximately $8.1
million as a result of this placement. These debentures mature March 4, 1999.
The debentures are convertible into common stock for up to one-third of the
principal amount on or after each of April 27, 1996, May 27, 1996 and June 26,
1996. The debentures are convertible at the lower of $2.00 per share or 85% of
the average market price per share of the Company's common stock during the ten
days preceding the date of conversion. As of May 7, 1996, $833,000 of principal
amount of these debentures, plus accrued interest, has been converted into
approximately 423,000 shares of common stock.
Also in March 1996, secured indebtedness of $3,300,000 was exchanged for 9.5%
Senior Secured Convertible Debentures in the principal amount of $3,300,000.
These debentures mature November 15, 1998, are secured by substantially all of
the Company's assets, and are convertible into shares of the Company's common
stock at a conversion rate of $1.15 per share, subject to certain reset
provisions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Operating revenues for the first quarter of 1996 include $300,000 from the
Company's joint venture in China. Other operating revenues are from hormone and
enzyme sales which were $5,000 for the three months ended March 31, 1996 and
1995.
Research and development, the Company's largest expense, increased 4% from
$1,699,000 to $1,765,000 for the three months ended March 31, 1996 as compared
to the same period in 1995. The increase was related to the Company's clinical
trials, as well as to the sponsorship of collaborative research programs.
General and administrative expenses decreased 19% from $480,000 to $391,000, for
the three months ended March 31, 1996, as compared to the same period in 1995.
The decrease was primarily due to a reduction in expenses related to the
Company's financing activities.
<PAGE>
Interest and other income increased $76,000 for the three months ended March 31,
1996, as compared to the same period in 1995. The increase was due to gains on
settlement of debt as well as to increased interest income due to the Company's
financings which provided additional funds to be invested.
Interest expense increased $158,000 for the three months ended March 31, 1996,
as compared to the same period in 1995. This was due to the increased borrowing
by the Company in 1996.
As a result of increased operating and other revenue, as well as decreased
operating expenses, partially offset by increased interest expense, net loss
decreased $240,000 or 11% for the three months ended March 31, 1996, from the
corresponding period in 1995.
As of December 31, 1995, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$34,000,000, expiring from 1996 through 2010, which are available to reduce
future earnings which would otherwise be subject to federal income taxes. For
the three months ending March 31, 1996, the Company had additional losses of
approximately $1,900,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $69,000 and $1,594,000,
respectively, which are available to reduce the amount of future federal income
taxes. These credits expire from 1996 through 2010.
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, 1996, under FASB 109, the
Company had deferred tax assets of approximately $15,100,000, subject to a
valuation allowance of $15,100,000. 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, 1996, the Company's
deferred tax assets and valuation allowances each increased by approximately
$800,000.
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 validation costs associated with the
facility's construction, is approximately $11.9 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.
In March 1996 the Company completed a private placement of $9.08 million of 10%
Convertible Debentures. The Company received net proceeds of approximately $8.1
million as a result of this placement. These debentures mature March 4, 1999.
The debentures are convertible into common stock for up to one-third of the
principal amount on or after each of April 27, 1996, May 27, 1996 and June 26,
1996. The debentures are convertible at the lower of $2.00 per share or 85% of
the average market price per share of the Company's common stock during the ten
days preceding the date of conversion. The Placement Agent in connection with
the issuance of the debentures received a five-year warrant to purchase 454,000
shares of the Company's common stock at $2.10 per share.
<PAGE>
Also in March 1996, secured indebtedness of $3,300,000 was exchanged for 9.5%
Senior Secured Convertible Debentures in the principal amount of $3,300,000.
These debentures mature November 15, 1998, are secured by substantially all of
the Company's assets, and are convertible into shares of the Company's common
stock at a conversion rate of $1.15 per share, subject to certain reset
provisions.
The Company, at March 31, 1996, had cash and cash equivalents of $5,709,000, an
increase of $5,450,000 from December 31, 1995.
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 one joint venture agreement in effect, which
contributed $300,000 to 1996 revenues. However, there can be no assurance that
any additional revenues will be recognized under this agreement.
The Company requires additional working capital to continue its operations.
Management believes that the Company has sufficient cash through at least the
third quarter of 1996. The Company requires additional funds through financing
or licensing agreements to ensure continued operations. There is no assurance
that sufficient funds will be obtained.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1996.
<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)
/s/ Warren P. Levy
May 10, 1996 -----------------------------
Warren P. Levy, President
(Chief Executive Officer)
/s/ Jay Levy
May 10, 1996 -----------------------------
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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,709,073
<SECURITIES> 0
<RECEIVABLES> 300,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,531,425
<PP&E> 16,348,843
<DEPRECIATION> 5,180,923
<TOTAL-ASSETS> 19,804,439
<CURRENT-LIABILITIES> 3,770,376
<BONDS> 14,285,000
0
0
<COMMON> 242,063
<OTHER-SE> 2,757,000
<TOTAL-LIABILITY-AND-EQUITY> 19,804,439
<SALES> 5,181
<TOTAL-REVENUES> 305,181
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,156,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174,589
<INCOME-PRETAX> (1,947,696)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,947,696)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,947,696)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
