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, 1998
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: (973) 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 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 - 38,928,698 shares as of November 1, 1998
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets- September 30, 1998 and December 31, 1997
Condensed statements of operations- Three months and nine months ended
September 30, 1998 and 1997
Condensed statements of cash flows- Nine months ended September 30,
1998 and 1997
Notes to condensed financial statements- September 30, 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED BALANCE SHEETS
Sept. 30 Dec. 31
1998 1997
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 3,343,554 $ 2,126,327
Prepaid expenses and other current assets ................ 650,644 834,245
------------ ------------
Total current assets ................................ 3,994,198 2,960,572
Property, plant and equipment-net
of accumulated depreciation and amortization ............. 8,427,456 9,298,445
Patents and other assets ..................................... 1,733,655 1,432,883
------------ ------------
$ 14,155,309 $ 13,691,900
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 1,386,293 $ 1,041,529
Accrued expenses ......................................... 912,455 999,212
Notes payable - stockholders ............................. 385,000 610,000
------------ ------------
Total current liabilities .................................. 2,683,748 2,650,741
Note payable - stockholders .................................. 655,000 655,000
5% convertible debentures (Note B) ........................... 4,000,000 --
9.5% convertible debentures .................................. 502,694 502,694
10% convertible debentures ................................... -- 450,000
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 60,000,000 shares, issued
38,935,988 shares in 1998 and 38,517,722 shares in 1997 389,360 385,177
Additional paid-in capital ............................... 63,972,600 63,499,439
Accumulated deficit ...................................... (58,047,062) (54,450,120)
Less: Treasury stock, at cost, 7,290 shares .............. (1,031) (1,031)
------------ ------------
Total stockholders' equity .......................... 6,313,867 9,433,465
------------ ------------
$ 14,155,309 $ 13,691,900
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Licensing and other revenue ......... $ 3,008,795 $ 3,000,346 $ 5,020,652 $ 3,001,830
------------ ------------ ------------ ------------
Operating expenses:
Research and development ........ 2,384,413 2,585,444 6,791,085 6,988,975
Settlement of contractual right . -- -- -- 1,669,063
General and administrative ...... 494,585 519,940 1,552,113 1,514,537
------------ ------------ ------------ ------------
2,878,998 3,105,384 8,343,198 10,172,575
------------ ------------ ------------ ------------
Operating income (loss) ............. 129,797 (105,038) (3,322,546) (7,170,745)
------------ ------------ ------------ ------------
Other income (expense):
Interest/other income ............ 37,290 67,394 81,384 154,801
Interest expense ................. (103,692) (59,643) (211,970) (190,943)
------------ ------------ ------------ ------------
(66,402) 7,751 (130,586) (36,142)
------------ ------------ ------------ ------------
Income (loss) before
extraordinary item ............... 63,395 (97,287) (3,453,132) (7,206,887)
Extraordinary item-loss
on extinguishment of debt (Note D) (143,810) -- (143,810) --
------------ ------------ ------------ ------------
Net loss ............................ $ (80,415) $ (97,287) $ (3,596,942) $ (7,206,887)
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(continued)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings per share:
Basic:
Income (loss) before
extraordinary item ........... $ -- $ -- $ (.09) $ (.19)
Extraordinary item ............. -- -- -- --
------------ ------------ ------------ ------------
Net loss ....................... $ -- $ -- $ (.09) $ (.19)
============ ============ ============ ============
Diluted:
Income (loss) before
extraordinary item ........... $ -- $ -- $ (.09) $ (.19)
Extraordinary item ............. -- -- -- --
------------ ------------ ------------ ------------
Net loss ....................... $ -- $ -- $ (.09) $ (.19)
============ ============ ============ ============
Weighted average number of shares
outstanding ........................ 38,647,682 37,934,674 38,562,591 37,041,158
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
-------------------------------
1998 1997
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<S> <C> <C>
Net cash used for operating activities ............................... $(2,085,805) $(4,246,738)
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Investing activities:
Purchase of equipment and furniture .............................. (261,927) (343,143)
Increase in patents and other assets ............................. (122,474) (92,224)
Construction of leasehold improvements ........................... (5,284) (18,298)
----------- -----------
(389,685) (453,665)
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Financing activities:
Issuance of debt, net of related expenses ........................ 3,751,919 --
Sales of stock, net of related expenses .......................... -- 2,936,895
Exercise of stock options and warrants ........................... 47,969 1,471,260
Redemption of convertible debentures ............................. (107,171) --
----------- -----------
3,692,717 4,408,155
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Net increase (decrease) in cash and cash equivalents ................. 1,217,227 (292,248)
Cash and cash equivalents at beginning of year ....................... 2,126,327 4,491,386
----------- -----------
Cash and cash equivalents at end of period ........................... $ 3,343,554 $ 4,199,138
=========== ===========
Supplemental cash flow information:
Conversion of convertible debentures and
accrued interest, net of related offering expenses
into common stock ................................................. $ 204,375 $ 1,181,136
Conversion of notes payable - stockholders into common stock ......... $ 225,000 $ 200,000
Interest paid ........................................................ $ 43,455 $ 48,415
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 nine month
period ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. 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, 1997.
NOTE B - DEBT FINANCING
In June 1998, the Company completed a private placement of $4 million of 5%
Convertible Debentures (the "5% Debentures"). The Company received net proceeds
of approximately $3.75 million as a result of this placement. The 5% Debentures
mature December 31, 2001. Interest on the 5% Debentures is payable in cash or,
at the option of the Company, in Common Stock. Beginning January 1, 1999, the 5%
Debentures are convertible into (i) Common Stock at a conversion price (the
"Conversion Price") equal to the lower of (a) 110% of the average of the closing
bid prices of the Common Stock on the Nasdaq Stock Market during the fourth
quarter of 1998 (the "Cap Price") and (b) the average of the four lowest closing
bid prices of the Common Stock during the 18 trading days prior to the date of
conversion (the "Market Price") and (ii) warrants, expiring five years from the
date of issuance, to purchase a number of shares of Common Stock equal to 4% of
the number of shares issuable upon conversion at an exercise price equal to 125%
of the Conversion Price. Up to 15% of the original principal amount of the 5%
Debentures may be converted per month on a non-cumulative basis; provided,
however, that if the Market Price is greater than or equal to 120% of the Cap
Price on the last conversion date in any month, then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in consideration of (i) an amount equal to
the principal amount thereof plus a premium of 12% per year from the date of
issuance and (ii) warrants, expiring five years from the date of issuance, to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been issuable upon conversion of the Debenture at an exercise
price equal to 135% of the Conversion Price at the time of redemption. In no
event will the Company issue more than an aggregate of 3,852,500 shares of
Common Stock (the "Share Limit") upon conversion of all of the 5% Debentures,
upon exercise of all warrants issued upon conversion or redemption, and as
payment of interest on the 5% Debentures. If conversion of any 5% Debentures or
exercise of any warrants would require the issuance of shares in excess of the
Share Limit, the Company will, as the case may be, redeem such debentures at a
price equal to 120% of the principal amount thereof or pay in cash the
difference between the market price and exercise price of the number of shares
that would have been issuable upon exercise of such warrants but for the Share
Limit.
<PAGE>
NOTE C - CONVERSION OF NOTES PAYABLE TO STOCKHOLDERS INTO COMMON STOCK
In 1995, executive officers of the Company, Warren Levy, Ronald Levy and Jay
Levy, and another member of the Levy family loaned to the Company an aggregate
of $1,905,000. A total of $440,000 of these loans was repaid in 1996. On May 2,
1997, an aggregate of $200,000 in principal amount of these loans was converted
into 57,200 shares of Common Stock at a conversion price of $3.4965 per share.
The closing price of the Common Stock on May 1, 1997, as reported by the Nasdaq
Stock Market, was $3.21875 per share. On August 6, 1998, an aggregate of
$225,000 in principal amount of these loans was converted into 163,635 shares of
Common Stock at a conversion price of $1.375 per share. The closing price of the
Common Stock on August 5, 1998, as reported by the Nasdaq Stock Market, was
$1.31 per share.
NOTE D - CONVERTIBLE DEBENTURES
During September 1998, $178,515 of principal amount of the Company's 10%
Convertible Debentures due March 4, 1999, plus $44,060 of accrued interest, was
converted into 214,131 shares of Common Stock. Due to restrictions on the total
number of shares which could be issued upon conversion of the Debentures, the
Company redeemed an additional $271,485 of principal, and in connection
therewith paid to the holder $68,899 of accrued interest and $143,810 in
redemption premiums, for an aggregate payment of $484,194. The premium of
$143,810 was recorded as an extraordinary loss in September 1998.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Revenue for the three months and nine months ended September 30, 1998 consisted
primarily of milestone payments of $3 million and $5 million, respectively, from
Warner-Lambert Company, under a July 1997 licensing agreement, as the result of
the achievement of various benchmarks in the development of an oral calcitonin
product for treating osteoporosis. Revenue for the three months and nine months
ended September 30, 1997 consisted primarily of a $3 million license fee from
Warner-Lambert, under the aforementioned agreement.
Research and development, the Company's largest expense, decreased 8% from
$2,585,000 to $2,384,000 and 3% from $6,989,000 to $6,791,000 for the three
months and nine months ended September 30, 1998, respectively, as compared to
the same periods in 1997. The decreases were primarily attributable to decreased
expenditures for production supplies, laboratory supplies and regulatory
expenses, partially offset by increased personnel expenditures.
In February 1997, the Company issued an aggregate of 490,000 shares of its
Common Stock to the holders of the Company's 9.5% Senior Secured Convertible
Debentures (the "Debentures") in consideration for the cancellation of an
obligation of the Company to pay to the holders a fee equal to 2% of the sum of
the market value as of December 31, 1998 of all of the Company's outstanding
shares of Common Stock plus the principal amount of all outstanding debt of the
Company, less its cash on deposit, up to a maximum fee of $3,000,000. The
expense associated with this transaction was valued at $1,669,063, based on a
closing price of the Common Stock of $3.40625 on February 7, 1997.
<PAGE>
General and administrative expenses decreased 5% from $520,000 to $495,000 and
increased 2% from $1,515,000 to $1,552,000 for the three months and nine months
ended September 30, 1998, respectively, as compared to the same periods in 1997.
The three month decrease was primarily due to reduced legal fees, partially
offset by higher public relations expenses. The nine month increase was
primarily due to higher public relations and travel expenses, partially offset
by reduced legal fees.
Interest and other income decreased $30,000 and $73,000 for the three months and
nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997, due to reduced funds available for investment in 1998.
Interest expense increased $44,000 and $21,000 for the three months and nine
months ended September 30, 1998, respectively, as compared to the same periods
in 1997. The increases were due to the $4 million private placement in June
1998, partially offset by a reduction in other outstanding debt from the prior
year as a result of partial conversions in 1997 and 1998 of the Company's
convertible debentures and notes payable to stockholders into Common Stock.
Extraordinary item, loss on extinguishment of debt, was $144,000 for both the
three month and nine month periods ended September 30, 1998. The loss was due to
redemption at a premium of a portion of the Company's 10% Convertible Debentures
in September 1998. See Note D to Condensed Financial Statements.
As a result of decreased operating expenses, offset by a loss on extinguishment
of debt, net loss decreased $17,000 or 17% for the three months ended September
30, 1998, as compared to the corresponding period in 1997. As a result of
increased revenue, as well as decreased operating expenses, net loss decreased
$3,610,000 or 50% for the nine months ended September 30, 1998, as compared to
the corresponding period in 1997.
As of December 31, 1997, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$53,300,000, expiring from 1998 through 2012, which are available to reduce
future earnings that would otherwise be subject to federal income taxes. For the
nine months ending September 30, 1998, the Company accumulated additional losses
of approximately $3,600,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $50,000 and $2,014,000,
respectively, which are available to reduce the amount of future federal income
taxes. These credits expire from 1998 through 2012.
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, 1998, under FASB 109, the
Company had deferred tax assets of approximately $23,400,000, subject to a
valuation allowance of $23,400,000. The deferred tax assets were generated
primarily as a result of the Company's net operating losses and available tax
credits. For the nine-month period ended September 30, 1998, the Company's
deferred tax assets and valuation allowances each increased by approximately
$1,470,000.
<PAGE>
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share" on
December 31, 1997. SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS") and supersedes APB Opinion No. 15, "Earnings Per
Share". It also requires presentation of both basic and diluted EPS for net
income on the face of the income statement and a separate reconciliation of both
EPS amounts. Basic EPS is computed using the weighted average number of common
shares outstanding during the period being reported on. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock at the beginning of
the period being reported on. The adoption of SFAS 128 has had no effect on the
Company's reported per share results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has constructed a cGMP peptide production facility in Boonton, New
Jersey 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, have
totaled approximately $12 million. The improvements and equipment were primarily
financed from the remainder of the $17 million of proceeds received as a result
of the exercise by the warrant holders of the Company's Class A Warrants in 1991
and the proceeds of $2.2 million from the sale of stock in 1994. There are
currently no material commitments outstanding for capital expenditures relating
to either the Boonton facility or the Company's research and administrative
facility in Fairfield, New Jersey.
The Company, at September 30, 1998, had cash and cash equivalents of $3,344,000,
an increase of $1,217,000 from December 31, 1997.
The Company's ability to generate cash from operations will depend primarily
upon signing research or licensing agreements, achieving defined benchmarks in
such agreements, receiving regulatory approval for its licensed products, and
the commercial sale of these products.
In July 1997, the Company entered into an agreement under which it granted to
the Parke-Davis division of Warner-Lambert Company a worldwide license to use
the Company's oral calcitonin technology. Upon execution of the agreement, the
Company received $6 million in payments from Warner-Lambert, consisting of a $3
million licensing fee and a $3 million equity investment by Warner-Lambert
(695,066 shares of Common Stock were purchased at a price of approximately $4.32
per share). Under the terms of the license agreement, the Company is eligible to
receive up to an additional $48.5 million in milestone payments during the
course of the development program if specified milestones are achieved. The
first of these milestones was achieved in February 1998, resulting in a payment
to the Company of $2 million and other milestones were achieved in August and
September 1998 resulting in a payment of $3 million in September 1998. An
additional $10.5 million would be received if certain other milestones are
achieved prior to the commencement of Phase I clinical studies in the U.S.
Early-stage milestones primarily relate to the product's performance
characteristics, while the latter-stage milestones are primarily related to
regulatory activities and approvals. If the product is successfully
commercialized, the Company also would receive revenue from royalties on product
sales by Warner-Lambert and its affiliates and from the sale of raw material to
Warner-Lambert. The Company has retained the right to license the use of its
technologies for injectable and nasal formulations of calcitonin on a worldwide
basis. The Company is actively seeking other licensing and/or supply agreements
with pharmaceutical companies for injectable and nasal forms of calcitonin.
However, there is no assurance that any additional revenue-generating agreements
will be signed.
<PAGE>
In June 1998, the Company completed a private placement of $4 million of 5%
Convertible Debentures. The Company received net proceeds of approximately $3.75
million as a result of this placement. These debentures mature December 31,
2001. Interest on the 5% Debentures is payable in cash or, at the option of the
Company, in Common Stock. Beginning January 1, 1999, the 5% Debentures are
convertible into (i) Common Stock at a conversion price (the "Conversion Price")
equal to the lower of (a) 110% of the average of the closing bid prices of the
Common Stock on the Nasdaq Stock Market during the fourth quarter of 1998 (the
"Cap Price") and (b) the average of the four lowest closing bid prices of the
Common Stock during the 18 trading days prior to the date of conversion (the
"Market Price") and (ii) warrants, expiring five years from the date of
issuance, to purchase a number of shares of Common Stock equal to 4% of the
number of shares issuable upon conversion at an exercise price equal to 125% of
the Conversion Price. Up to 15% of the original principal amount of the 5%
Debentures may be converted per month on a non-cumulative basis; provided,
however, that if the Market Price is greater than or equal to 120% of the Cap
Price on the last conversion date in any month, then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in consideration of (i) an amount equal to
the principal amount thereof plus a premium of 12% per year from the date of
issuance and (ii) warrants, expiring five years from the date of issuance, to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been issuable upon conversion of the Debenture at an exercise
price equal to 135% of the Conversion Price at the time of redemption. In no
event will the Company issue more than an aggregate of 3,852,500 shares of
Common Stock (the "Share Limit") upon conversion of all of the 5% Debentures,
upon exercise of all warrants issued upon conversion or redemption, and as
payment of interest on the 5% Debentures. If conversion of any 5% Debentures or
exercise of any warrants would require the issuance of shares in excess of the
Share Limit, the Company will, as the case may be, redeem such debentures at a
price equal to 120% of the principal amount thereof or pay in cash the
difference between the market price and exercise price of the number of shares
that would have been issuable upon exercise of such warrants but for the Share
Limit.
The Company's operating cash requirements are approximately $10 million per
year. In addition, the Company has scheduled principal and interest obligations
over the next several years on its outstanding 5% convertible debentures due
December 2001, on its 9.5% convertible debentures due November 1998, and on
other indebtedness. However, because of the current below-market conversion
prices of the 9.5% debentures, $2,797,300 in principal amount of such debentures
has been, and the Company expects that a substantial portion of the remaining
$502,700 in principal amount of debentures will be, converted into Common Stock,
thereby decreasing the amount of cash required for principal and interest
payments thereon. Interest payments on the 5% Debentures may, at the Company's
discretion, be made in cash or stock.
After receipt of net proceeds of $3.75 million from the aforementioned 5%
Debenture financing in June 1998, as well as the $3 million in milestone
payments received from Warner-Lambert in September 1998, management believes
that the Company currently has sufficient financial resources to sustain its
operations at the current level into the first quarter of 1999. While the
Company expects to achieve additional milestones under the Warner-Lambert
agreement, which will result in further payments, the timing of such payments is
uncertain and the Company may have to rely on outside sources for financing to
sustain the Company's operations after that time. However, there is no assurance
as to the terms on which such additional funds would be available or that in
such circumstances sufficient funds could be obtained.
<PAGE>
Satisfying the Company's long-term liquidity requirements will require the
successful commercialization of the product licensed to Warner-Lambert or one of
its other calcitonin products. In addition, the commercialization of an oral
calcitonin product will require the Company to incur additional capital
expenditures, including expenditures to expand or upgrade the Company's
manufacturing operations to satisfy its supply obligations under the
Warner-Lambert license agreement. However, neither the cost or timing of such
capital expenditures are determinable at this time.
YEAR 2000
The Company has established a Year 2000 taskforce that will review all of the
Company's internal computer systems for Year 2000 compliance, including
workstations, its accounting system, and control systems for equipment in the
Company's manufacturing and laboratory facilities. The Company expects that the
taskforce will commence its compliance review in November 1998 and that the
review will be completed during the first quarter of 1999. After the review is
completed, the taskforce will determine how to address any remediation
necessary. The Company intends to repair or replace any noncompliant systems in
a timely manner so that the business of the Company will not be interrupted.
Because most of the principal hardware and software used by the Company
(including its accounting system and most of the equipment control systems) were
acquired by the Company within the last several years, the Company expects that
most of its systems will be Year 2000 compliant. However, until the taskforce
completes its review, the Company will not be able to assess the level of
compliance or make an accurate estimate of the costs of any remediation.
The Company has no material relationships with third party suppliers and its
obligations to its sole material customer, Warner-Lambert, would not be
significantly affected by Year 2000 noncompliance on the part of Warner-Lambert.
However, the loss of the electricity supply to the Company's laboratory,
production and administrative facilities would cause a shut down of those
facilities which, depending on the duration of the shut down, may have a
material adverse impact on the Company's business. In addition, the loss of
telecommunications services and banking services would, as is the case with all
businesses, adversely affect the Company.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or activities of the Company, or industry results, to be materially different
from any future results, performance or activities expressed or implied by such
forward-looking statements. Such factors include: general economic and business
conditions, the financial condition of the Company, competition, the Company's
dependence on other companies to commercialize, manufacture and sell products
using the Company's technologies, the uncertainty of results of preclinical and
clinical testing, the risk of product liability and liability for human clinical
trials, the Company's dependence on patents and other proprietary rights,
dependence on key management officials, the availability and cost of capital,
the availability of qualified personnel, changes in, or the failure to comply
with, governmental regulations, the failure to obtain regulatory approvals of
the Company's products and other factors discussed in the Company's various
filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) Recent Sales of Unregistered Securities.
On August 6, 1998, the Company issued 163,635 shares of Common Stock upon the
conversion of $225,000 in principal amount of loans made by officers of the
Company. All of such shares were issued by the Company without registration in
reliance on an exemption under Section 4 (2) of the Securities Act.
In the third quarter of 1998, the Company issued 214,131 shares of Common Stock
upon the conversion of $222,575 in principal amount of and accrued interest on
the Company's 10% Convertible Debentures due March 4, 1999. All of such shares
were issued by the Company without registration in reliance on an exemption
under Section 3(a) (9) of the Securities Act.
(d) Not applicable.
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
September 30, 1998.
<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
November 13, 1998 -----------------------
Warren P. Levy, President
(Chief Executive Officer)
/s/ Jay Levy
November 13, 1998 -----------------------
Jay Levy, Treasurer
(Chief Financial Officer and
Chief Accounting Officer)
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