UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-10352
COLUMBIA LABORATORIES, INC.
(Exact name of Company as specified in its charter)
DELAWARE 59-2758596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2665 SOUTH BAYSHORE DRIVE, PH II-B
MIAMI, FLORIDA 33133
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 860-1670
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
(Title of each class) (Name of exchange where registered)
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of Columbia Laboratories, Inc. Common Stock,
$.01 par value, held by non-affiliates, computed by reference to the price at
which the stock was sold as of February 28, 1995:
$94,422,458
Number of shares of Common Stock of Columbia Laboratories, Inc. issued and
outstanding as of February 28, 1995: 25,070,411
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF BUSINESS
Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop on
a worldwide basis a portfolio of women's prescription and over-the-counter
products, including those which help prevent sexually transmitted diseases.
Columbia's products primarily utilize the Company's patented bioadhesive
delivery technology, the Bioadhesive Delivery System.
Formulated products utilizing the Bioadhesive Delivery System consist
principally of a polymer, polycarbophil, and an active ingredient. The
Bioadhesive Delivery System is based upon the principle of bioadhesion, a
process by which the polymer adheres to epithelial surfaces and to mucin, a
naturally occurring secretion of the mucous membranes. The polymer remains
attached to epithelial surfaces and/or the mucin and is discharged upon normal
cell turnover or upon the detachment of the mucin from the mucous membranes, a
physiological process which, depending upon the area of the body, occurs every
12 to 72 hours. This extended period of attachment permits the Bioadhesive
Delivery System to be utilized in products when extended duration of
effectiveness is desirable or required.
The Company's initial efforts have applied the technology to women's
health care products that can be sold as cosmetics and over-the-counter drugs,
which do not require governmental or regulatory approval. The Company has
focused on women's health care because of the significant number of
women--particularly of post-menopausal age--whose health and hygiene needs have
not been met by available products and because the Company has found vaginal
delivery to be particularly effective. The Company intends to continue to
develop products that improve the delivery of previously approved drugs.
The Company is currently engaged solely in one business segment -- the
development and sale of pharmaceutical products and cosmetics. See footnote 7 to
the consolidated financial statements for information on foreign operations.
The Company's principal executive offices are located at 2665 South
Bayshore Drive, Miami, Florida 33133, and its telephone number is (305)
860-1670. The Company's subsidiaries, all of which are wholly-owned, are
Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories
(France) SARL ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia
UK"), Columbia Laboratories (Ireland) Limited ("Columbia Ireland") and Columbia
Research Laboratories, Inc. ("Columbia Research").
PRODUCTS
REPLENSregistermark. In November 1989, the Company introduced Replens, the
first product utilizing the Bioadhesive Delivery System, in the United States.
Replens replenishes vaginal moisture on a sustained basis and relieves the
discomfort associated with vaginal dryness. The Company introduced Replens in
England and Ireland in December 1990. The Company's original commercialization
strategy was to market Replens through its own sales force.
In 1991, in an attempt to gain mass marketing power and access to
worldwide markets quickly, the Company developed and executed an alternative
marketing strategy. The Company has entered into strategic alliance agreements
for the marketing and distribution of Replens with: (i) Warner-Lambert Company
under which Warner-Lambert Company markets Replens in the United States; (ii)
subsidiaries of Johnson and Johnson under which those subsidiaries market
Replens in Italy and will market Replens in
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Belgium; (iii) Roussel-UCLAF under which Roussel markets Replens in France,
certain French overseas territories and Greece; (iv) Sterling Drug Inc. under
which Sterling markets Replens in Japan, South America, Central America,
Australia, New Zealand, and other Pacific Rim nations; (v) Teva Pharmaceutical
under which Teva will market Replens in Israel; (vi) Logos Pharmaceuticals (Pty)
Limited under which Logos markets Replens in South Africa and the sixteen
countries of sub-Saharan Africa; (vii) LASA SA under which LASA SA markets
Replens in Spain; (viii) Unipath Ltd. under which Unipath markets Replens in the
United Kingdom; (ix) Roberts Pharmaceutical Corporation under which Roberts will
market Replens in Canada; (x) Vifor SA under which Vifor will market Replens in
Switzerland and Liechtenstein; (xi) Hermes H/F under which Hermes is currently
marketing Replens in Iceland and (xii) a Swedish pharmaceutical company that has
created a joint venture which markets Replens in Sweden and other Scandinavian
countries.
As a result of having marketed Replens in the United States and England,
which demonstrated the market for Replens, the Company has been able to
negotiate agreements with its strategic alliance partners pursuant to which the
Company manufactures Replens and in return receives as revenue approximately 24%
to 30% of its partners' selling price of the product. These companies are
responsible for all marketing and distribution costs of Replens in their
territories. The Company has been informed that its strategic alliance partners
expect to spend, in aggregate, over $20 million during 1995 marketing Replens
and Advantage 24; however, there can be no assurance that such amounts will be
spent or if spent will have a favorable impact on the Company's sales. Prior to
entering into these strategic alliance agreements, the Company lost money on
Replens as a result of the significant amounts the Company was required to spend
on product promotion. As part of these agreements, certain of the strategic
alliance partners have the right of first option or right of first refusal, in
the applicable countries, to license future gynecological products developed by
the Company.
In December 1992, the United Kingdom Medicines Control Agency ("MCA")
granted a General Sales License for Replens to be sold in the UK for the
symptomatic relief of vaginal dryness in postmenopausal women and, when used
regularly, for the reduction of pH to levels normally found in premenopausal
women. Replens had previously been sold in the UK under the cosmetic regulations
which restricted the claims that the Company could make for the product. The
Company believes that Replens is now the only non-hormonal product approved for
vaginal moisturization and reduction of pH in the UK. In the United States,
Replens is sold as a cosmetic.
In February 1994, the European Union recommended to its member
countries, based on consultation from each of the countries, that Replens be
approved as a drug. Currently, eleven of the twelve countries agree with the
European Union's recommendation and the Company believes that licenses from
these individual countries will be issued within the next several months.
While the strategic alliance agreements in the United States and abroad
have not produced desired unit sales as quickly as planned, the Company believes
it has established effective working relationships with its partners which the
Company believes form a solid foundation to build sales of Replens and the other
products in the development pipeline. In addition, upon granting of the European
multistate license, Replens should become a reimbursable product in certain
countries. The Company believes that sales of Replens in Europe should increase
once the licenses are granted. The Company's success to a great extent is
dependent on the marketing efforts of its strategic alliance partners, over
which the Company has limited ability to influence.
FEMINESSE. Feminesse, which also utilizes the Bioadhesive Delivery System,
helps eliminate vaginal odor on a sustained basis. Feminesse is currently sold
in the U.K. by Unipath.
ADVANTAGE 24registered. During 1993, Advantage 24, the Company's 24 hour
sustained release contraceptive gel, was qualified to be sold in the United
States, under the existing FDA monograph for nonoxynol-9 spermicidal products.
In September 1994, the Company entered into a license and distribution
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agreement with Lake Pharmaceutical, Inc. under which Lake markets Advantage 24
in the United States.
Among Advantage 24's benefits is its slow release characteristic which
permits the spermicide to be effective for up to 24 hours, in contrast with
conventional spermicides that must be applied at most two hours prior to
intercourse. The slow release feature is derived from the Company's Bioadhesive
Delivery System, which enables the nonoxynol-9 to adhere to the cervix. Broader
claims relating to prevention of sexually transmitted diseases (STD's) will be
requested upon completion, if successful, of clinical studies now underway. The
Company expects that within 12 months it will have sufficient data to apply for
regulatory approval on the broader claims. In Europe, the Company intends to
register Advantage 24 as an over-the-counter drug.
Additionally, the World Health Organization (WHO) has recently completed
an approximately 300 women safety study on Advantage 24. WHO's preliminary
analysis of the data generated indicates that Advantage 24, as used in the
study, was free of any serious side effects. A full analysis of the data is now
being performed. Based on the results of this study, the WHO has indicated an
interest in studying the efficacy of Advantage 24 in preventing the heterosexual
transmission of HIV and other STD's. The WHO is currently developing a protocol
with the Company.
CRINONEtrademark. Preliminary analysis of the clinical data on the Company's
first prescription drug utilizing the Bioadhesive Delivery System, Crinone, a
vaginal progesterone product, has confirmed that it can help protect against
uterine cancer in women receiving estrogen replacement therapy. The clinical
studies have also indicated that the Company's bioadhesive natural progesterone
is applicable to women who have difficulty in maintaining pregnancy, especially
the difficulties of those undergoing in-vitro fertilization procedures (IVF).
During 1994, the Company submitted registration files covering Crinone
to the U.K.'s Medical Control Agency and to certain other European regulatory
authorities for approval as a new drug. The Company anticipates that a New Drug
Application (NDA) will be filed in the United States upon successful completion
of two additional clinical studies.
During 1993, the Logos Replens Agreement was amended such that Logos
will also be the exclusive distributor of the Company's progesterone product in
South Africa and the sixteen countries of sub-Saharan Africa. As part of the
agreement, the Company received upfront licensing fees and expects to receive
ongoing revenue from manufacturing and product sales.
OTHER PRODUCTS. The Company also markets New Advanced Formula Legatrin
PMtrademark, for the relief of occasional pain and sleeplessness associated
with minor muscle aches such as night leg cramps; Vaporizer in a
Bottle registermark, a portable decongestant for relief of colds and hay fever
congestion; and Diasorb registermark, a pediatric antidiarrheal product. These
products do not utilize the Bioadhesive Delivery System.
RESEARCH AND DEVELOPMENT
The Company expended $9,376,047 in 1994, $5,290,912 in 1993 and
$3,129,026 in 1992, on research and development activities. The increase in
expenditures are primarily the result of costs associated with contracting for,
supervising and administering the clinical studies on the Company's Crinone and
Advantage 24 products. These studies are coordinated from the Company's New York
and Paris offices.
In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. The option cost $2 million,
of which $1.1 million was paid in December 1993 and the remaining $900,000 was
paid in February 1994.
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The potential product was recently granted a Clinical Trials Exemption (CTX) in
the United Kingdom and clinical trials in humans are now underway.
The option, which must be exercised upon the occurrence of certain
events, expires in December 1998. Upon exercise of the option, the Company will
be required to pay an additional $5 million. If the Company does not exercise
its option upon the occurrence of certain events, the Company's rights to the
option are terminated.
The synthetic molecule, which could prove to be a breakthrough in the
treatment of AIDS, is a multibranched peptide, a type of protein, which acts to
prevent the AIDS virus from fusing with a healthy cell. Up to now, the only
treatments available for AIDS patients act by stopping the virus from
multiplying rapidly. The Marseille molecule, according to a recent paper
published in the Journal of France's Academy of Sciences, could prevent the
virus from attacking healthy cells in two ways: (i) in lymphocytes, the white
blood cells that are a key part of the body's immune system and (ii) in
macrophages, a type of white blood cell that is often a vehicle for transmitting
the virus to the brain.
PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION
The Company purchased the patents underlying the Bioadhesive Delivery System
from Bio-Mimetics, Inc. ("Bio-Mimetics"). The Company has the exclusive right to
the use of the Bioadhesive Delivery System subject to certain third party
licenses issued by Bio-Mimetics that have been assigned to the Company and
certain restrictions on the assignment of the patents. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."
The basic patent that covers the Bioadhesive Delivery System was issued
in the United States in 1986 and by the European Patent Office in 1992.
Corresponding patents have also been issued in Canada and Australia. A
corresponding application is currently pending in Japan. The Company is
continuing to develop the core Bioadhesive Delivery System and has filed patent
applications covering tissue moisturization, in general, as well as vaginal
moisturization. These applications are currently pending in the U.S. Patent and
Trademark Office, the European Patent Office, and elsewhere, worldwide. While
patent applications do not ensure the ultimate issuance of a patent, it is the
Company's belief that patents based on these applications will issue.
In addition to the basic patents discussed above, the Company has two
additional patents that cover ophthalmic treatment products. These two patents
also underlie an agreement to share technology with InSite Vision Incorporated
("Insite"). Under this agreement, the Company obtained from Insite the worldwide
rights to market ophthalmic veterinary products which utilize Insite's sustained
release gel technology. In addition, the Company obtained the right to market,
in all parts of the world except North America and portions of Asia, ophthalmic
over-the-counter drugs which utilize Insite's sustained release gel technology.
In exchange, Insite obtained from the Company the worldwide rights to market
prescription ophthalmic products which utilize the Company's Bioadhesive
Delivery System. In addition, InSite obtained the right to market, in North
America and portions of Asia, ophthalmic over-the-counter drugs which utilize
the Company's Bioadhesive Delivery System.
Because the Company operates on a worldwide basis, the Company seeks
worldwide patent protection for its technology and products. While having patent
protection cannot ensure that no competitors will emerge, this is a fundamental
step in protecting the technologies of the Company.
The Company has registered "Replens" as a trademark in the United
States, the United Kingdom and in 49 other countries. Applications are pending
in an additional six countries. Applications for the trademarks "Advantage 24"
and "Crinone" have recently been filed in over 50 countries. Applications for
the
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registration of trademarks do not ensure the ultimate registration of these
marks. The Company believes these marks will be registered.
The Company also relies on confidentiality and nondisclosure agreements.
There can be no assurance that other companies will not acquire information
which the Company considers to be proprietary. Moreover, there can be no
assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.
MANUFACTURING
During 1991, the Company introduced a new, more efficient and less
expensive manufacturing and packaging process for the production of Replens and
its future women's health care products. The process, called "form, fill and
seal," is a single step process whereby the redesigned applicator is created,
filled and sealed in one process. Replens is currently being manufactured and
packaged, utilizing the process developed by the Company, by third-party
manufacturers in Europe. In 1991, the Company placed orders for approximately
$2.7 million of manufacturing equipment. As of December 31, 1994 and 1993,
$945,000 of this equipment was completed and is included in machinery and
equipment in the accompanying consolidated balance sheet. Deposits on
manufacturing equipment totalling approximately $991,000 are included in other
assets in the December 31, 1994 and 1993 consolidated balance sheets. Due to
production delays, the Company does not expect to take delivery of this
equipment until 1995 or 1996.
Medical grade, cross-linked polycarbophil, the polymer used in the
Company's products utilizing the Bioadhesive Delivery System, is currently
available from only one supplier, B.F. Goodrich Company ("Goodrich"). The
Company believes that Goodrich will supply as much of the material as the
Company may require because the Company's products rank among the highest
value-added uses of the polymer. There can be no assurance that Goodrich will
continue to supply the product. In the event that Goodrich cannot or will not
supply enough of the product to satisfy the Company's needs, the Company will be
required to seek alternative sources of polycarbophil. There can be no assurance
that an alternative source of polycarbophil will be obtained.
All of the other raw materials used by the Company for its products
utilizing the Bioadhesive Delivery System are available from several sources.
OVER-THE-COUNTER DRUGS
GENERAL. The Company currently markets three over-the-counter drugs: New
Advanced Formula Legatrin PMtrademark, for the relief of occasional pain
and sleeplessness associated with minor muscle aches such as night leg
cramps; Diasorb, a pediatric antidiarrheal product; and Vaporizer in a Bottle,
a portable decongestant for relief of colds and hay fever congestion.
These over-the-counter drugs are manufactured by third-party manufacturers. All
of the raw materials used by the Company for its over-the-counter drugs are
available from several sources.
The over-the-counter drugs are sold to drug wholesalers and chain drug
stores. The Company utilizes 18 drug manufacturers' representative firms to make
calls on the Company's trade customers. The manufacturers' representatives
receive commissions based on sales made within their respective territories. The
Company supports the activities of the manufacturers' representatives by
advertising in medical and consumer publications, direct mailings and convention
participation.
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LEGATRIN. In February 1989, the Company acquired from Scholl, Inc., a
subsidiary of Schering-Plough Corporation, the North American rights to the
product Legatrin and the related trademark, for $300,000 and the assumption of
certain liabilities approximating $41,000. The FDA, in 1988, initiated a review
to determine whether drugs containing quinine sulfate for night leg cramps, an
ingredient in Legatrin, should remain on the market. The FDA issued a final
monograph, which became effective on February 22, 1995, restricting
manufacturer's from selling over-the-counter quinine sulfate based-products for
the relief of night leg cramps. As a result, the Company reformulated Legatrin,
and in February 1995 introduced New Advanced Formula Legatrin PM.
SALES
The following tables sets forth the percentage of the Company's
consolidated net sales by product, for each product accounting for 15% or more
of consolidated net sales in any of the three years ended December 31, 1994.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Replens 39% 42% 42%
Legatrin 49 48 47
Other products 12 10 11
---- ---- ----
100% 100% 100%
=== === ===
</TABLE>
The Company anticipates the percentage of sales attributable to Legatrin and the
other products to decrease in future years as additional products utilizing the
Bioadhesive Delivery System are introduced. Warner- Lambert accounted for
approximately 27%, 29% and 32% of 1994, 1993 and 1992 consolidated net sales,
respectively. Another customer accounted for approximately 14% and 11% of 1994
and 1993 consolidated net sales, respectively. As set forth above, the FDA
issued a final monograph, which became effective on February 22, 1995,
restricting manufacturer's from selling over-the-counter quinine sulfate
based-products for the relief of night leg cramps. As a result, the Company
reformulated Legatrin, and in February 1995 introduced New Advanced Formula
Legatrin PM.
COMPETITION
While the Company has entered into the strategic alliance agreements for
the marketing of Replens with large pharmaceutical companies, there can be no
assurance that the Company and its partners will have the ability to compete
successfully. The Company's success to a great extent is dependent on the
marketing efforts of its strategic alliance partners, over which the Company has
limited ability to influence. The markets which the Company and its strategic
alliance partners operate in or intend to enter are characterized by intense
competition. The Company and its partners compete against established
pharmaceutical and consumer product companies which market products addressing
similar needs. In addition, numerous companies are developing or, in the future,
may develop enhanced delivery systems and products competitive with the
Company's present and proposed products. Some of the Company's and its partners'
competitors possess greater financial, research and technical resources than the
Company or its partners. Moreover, these companies may possess greater marketing
capabilities than the Company or its partners, including the resources to
implement extensive advertising campaigns.
Although the Company is not aware of any product incorporating
rate-controlled technology with respect to vaginal lubrication, the Company
believes that Replens competes in the same markets as K-Y Jelly registermark
and Gyne-Moisturin registermark, vaginal lubricants marketed by Johnson &
Johnson Products, Inc. and Schering-Plough Corporation, respectively. The
Company also believes that Advantage 24, Legatrin PM and Diasorb compete
against numerous products in their respective categories and that Vaporizer
in a Bottle registermark competes
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against Vicks Vaporsteam, a product distributed by Richardson-Vicks, Inc.
GOVERNMENT REGULATION
The Company is subject to both the applicable regulatory provisions of
the FDA in the United States and the applicable regulatory agencies in those
foreign countries where its products are manufactured and/or distributed.
As in the United States, a number of foreign countries require
premarketing approval by health regulatory authorities. Requirements for
approval may differ from country to country and may involve different types of
testing. There can be substantial delays in obtaining required approvals from
regulatory authorities after applications are filed. Even after approvals are
obtained, further delays may be encountered before the products become
commercially available.
In the United States, manufacturers of pharmaceutical products are
subject to extensive regulation by various Federal and state governmental
entities relating to nearly every aspect of the development, manufacture and
commercialization of such products. The FDA, which is the principal regulatory
authority in the United States for such products, has the power to seize
adulterated or misbranded products and unapproved new drugs, to require their
recall from the market, to enjoin further manufacture or sale and to publicize
certain facts concerning a product. As a result of FDA regulations, pursuant to
which new pharmaceuticals are required to undergo extensive and rigorous
testing, obtaining premarket regulatory approval requires extensive time and
cash expenditures. The manufacturing of the Company's products which are either
manufactured and/or sold in the United States, is subject to current Good
Manufacturing Practices prescribed by the FDA. The labeling of over-the-counter
drugs in the United States, as well as advertising relating to such products,
are subject to the review of the Federal Trade Commission ("FTC") pursuant to
the general authority of the FTC to monitor and prevent unfair or deceptive
trade practices.
PRODUCT LIABILITY
The Company may be exposed to product liability claims by consumers.
Although the Company presently maintains product liability insurance coverage in
the amount of $10 million, there can be no assurance that such insurance will be
sufficient to cover all possible liabilities. In the event of a successful suit
against the Company, insufficiency of insurance coverage could have a materially
adverse effect on the Company.
EMPLOYEES
As of February 28, 1995, the Company had 22 employees, 5 in management,
4 in sales positions, 4 in research and development administration and 9 in
support functions. None of the Company's employees are represented by a labor
union. The Company believes that its relationship with its employees is
satisfactory.
The Company has employment agreements with certain employees, some of whom
are also stockholders of the Company. See "Executive Compensation--Employment
Agreements."
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ITEM 2. PROPERTIES
As of February 28, 1995, the Company leases the following properties:
<TABLE>
<CAPTION>
Annual
Location Use Square feet Expiration Rent
-------- --- ----------- ---------- ----
<S> <C> <C> <C> <C>
Miami, FL Corporate office 3,900 September 1998 $85,000
Paris, France Research admin office 2,000 January 1996 100,000
Paris, France Business residence 1,870 September 1995 50,000
New York, NY Residential office 1,000 April 1996 39,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
In April 1992, the Company filed an action against Bank Piquet
("Piquet"), and certain other defendants (all of whom except Piquet have
defaulted), for a declaratory judgement ("Action"), in the United States
District Court for the Southern District of Florida ("Court"), relating to the
ownership and rights to exercise certain warrants to purchase shares of the
Company's Common Stock ("Warrants"). The Action was commenced by the Company
when it determined that Piquet, the purported holder of the Warrants, was not
the registered owner in accordance with the procedures for transfer set forth in
the warrant agreement, and Piquet's ownership claims were from an entity
different from the entity to whom the Warrants were issued. Thereafter, Piquet
filed a counterclaim claiming $600,000 in damages as a result of the Company's
denying Piquet the right to exercise the Warrants. The Company filed the Action
in order to avoid being exposed to duplicate claims to the right to exercise the
Warrants, and the attendant liability thereto. The Company believes that the
counterclaim is without merit and continues to vigorously administer the Action.
In September 1994, two related actions (the "Related Actions") were filed
in the United States District Court for the Southern District of Florida
("Court"), alleging that the Company owes fees and/or commissions in the amount
of approximately $1,150,000. The Related Actions were both filed by the same law
firm on the same date. In the first of the Related Actions, the plaintiff, Ian
J. ffrench, alleges he is owed fees or commissions of $900,000 for investment
banking services allegedly provided by him to the Company. The Company has
answered each of these claims denying the allegations contained therein and
intends to vigorously defend this Action. In the second of the Related Actions,
the plaintiff, Leman Trust Company, alleges the Company owes it approximately
$250,000 as a result of the Company failing to grant certain warrants to
purchase shares of the Company's Common Stock as a part of a certain loan
transaction consummated in 1991. The Company believes that the loan was fully
repaid in 1991 and all of the written requirements of the loan transaction were
complied with. The Company has answered each of these claims denying the
allegations contained therein and intends to vigorously defend this Action.
Certain other law suits have been filed against the Company with respect
to product liability. In the opinion of management and counsel, none of these
lawsuits are material and they are all adequately reserved for or covered by
insurance or, if not so covered, are without any or have little merit or involve
such amounts that if disposed of unfavorably would not have a material adverse
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's $.01 par value Common Stock ("Common Stock") trades on the
American Stock Exchange under the symbol COB. The following table sets forth the
high and low sales prices of the Common Stock on the American Stock Exchange, as
reported on the Composite Tape.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1993
First Quarter $6.00 $4.25
Second Quarter 5.88 4.50
Third Quarter 5.88 3.56
Fourth Quarter 6.88 4.88
Fiscal Year Ended December 31, 1994
First Quarter $6.75 $4.25
Second Quarter 6.00 4.25
Third Quarter 4.94 4.00
Fourth Quarter 5.38 4.00
</TABLE>
At February 28, 1995, there were 755 shareholders of record of the
Company's Common Stock, although the Company estimates that there are
approximately 6,000 beneficial owners, 5 shareholders of record of the Company's
Series A Convertible Preferred Stock ("Series A Preferred Stock") and 5
shareholders of record of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock").
The Series A Preferred Stock pays cumulative dividends at a rate of 8%
per annum payable quarterly. As of December 31, 1994, dividends of $86,743 have
been earned but have not been declared and are included in other long-term
liabilities in the accompanying consolidated balance sheet. Upon conversion of
any shares of Series A Preferred Stock, the Company is obligated to issue
additional shares of Common Stock having a market value equal to accrued but
unpaid dividends on the Series A Preferred Stock at the time of conversion.
The Company has never paid a cash dividend on its Common Stock and does
not anticipate the payment of cash dividends in the foreseeable future. The
Company intends to retain any earnings for use in the development and expansion
of its business.
Applicable provisions of the Delaware General Corporation Law may affect
the ability of the Company to declare and pay dividends on its Common Stock as
well as on its Preferred Stock. In particular, pursuant to the Delaware General
Corporation Law, a company may pay dividends out of its surplus, as defined, or
out of its net profits, for the fiscal year in which the dividend is declared
and/or the preceding year. Surplus is defined in the Delaware General
Corporation Law to be the excess of net assets of the company over capital.
Capital is defined to be the aggregate par value of shares issued.
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ITEM 6. SELECTED FINANCIAL DATA
The following consolidated selected financial data of the Company for the
five years ended December 31, 1994 (not covered by the auditors' report), should
be read in conjunction with the consolidated financial statements and related
notes thereto. See "Item 8. Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
For the Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(amounts in thousands except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $8,769 $ 8,150 $ 9,173 $ 10,675 $ 12,139
Net loss (13,394) (8,453) (8,536) (14,548) (16,337)
Loss per common share (.59) (.40) (.51) (1.17) (1.62)
Weighted average number
of common shares outstanding 22,530 21,380 16,880 12,856 10,788
BALANCE SHEET DATA:
Working capital (deficiency) (3,858) $ 3,584 $(4,443) $ 1,542 $ (2,167)
Total assets 8,408 17,609 9,833 14,488 10,690
Long-term debt 6,218 7,212 58 1,692 123
Stockholders' equity (deficiency) (4,592) 3,475 (6,991) (720) (3,952)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from approximately $5.3 million at
December 31, 1993 to approximately $690,000 at December 31, 1994, primarily as a
result of approximately $7.8 million used for operating activities and $900,000
used to pay the remaining cost of an option the Company acquired in December
1993 to obtain an exclusive license to the North and South American rights to a
potential AIDS treatment; offset by approximately $4.2 million received from the
exercise of options and warrants and the issuance of Common Stock. The loss for
the year ending December 31, 1994, was approximately $13.4 million, resulting in
stockholders' deficit of approximately $4.6 million as of December 31, 1994.
During 1993, the Company issued $7.25 million of unsecured 10% notes
payable due on June 30, 1996 ("1993 Notes"). Pursuant to the terms of the 1993
Notes, if the Company or any of its subsidiaries receives upfront license fees
for the marketing and distribution of the Company's prescription progesterone
product, the Company will use one-third of the net proceeds of such upfront fees
to make "pro-rata" prepayments of the notes payable. In January 1994, a
prepayment totaling $37,527 was made. In connection with the 1993 Notes, the
Company issued warrants to purchase 1,212,500 shares of the Company's Common
Stock at an exercise price of $4.00 per share, which was less than the market
value of the Company's Common Stock on the date of grant. The difference,
aggregating $1,912,500, is being recorded as additional interest expense over
the term of the 1993 Notes. The warrants are exercisable through June 30, 1998.
During 1994, the exercise price of certain of the warrants was reduced
from $4.00 per share to $3.50 per share, conditioned on the immediate exercise
of the warrants. As additional consideration for the immediate exercise of the
warrants, the holders were granted the right at any time to convert the
outstanding
-11-
<PAGE>
principal amount of the 1993 debt and accrued interest thereon, into shares of
Common Stock at an exchange rate equal to a 25% discount to the then current
market price, based on the average closing price of the Common Stock for the
fifteen days prior to the conversion date, but in no event at a price less than
$3.50 per share. As consideration for the repricing of the warrants, the note
holders waived their right to receive one-third of the net proceeds of any
upfront licensing fees. As a result, warrants to purchase 1,050,000 shares of
Common Stock were exercised resulting in net proceeds of $3,675,000 to the
Company.
As part of this agreement, senior management invested $600,000 in the
Company; $500,000 of which was received in 1994 and the remainder of which was
received in January 1995.
During 1994, the Company repaid $1,027,985 of long-term debt and accrued
interest through the issuance of 293,710 shares of the Company's Common Stock.
In addition, during 1995, the Company repaid an additional $4,787,069 of
long-term debt and accrued interest through the issuance of 1,273,905 shares of
the Company's Common Stock. As a result of the exercise of the warrants and the
repayment of the debt, during 1994, prepaid interest aggregating $1,738,635 has
been recorded as additional interest expense.
Based on the current cash flow, the Company expects to need additional
funds to continue and complete research and development, conduct pre-clinical
and clinical trials and apply for regulatory approval. The Company is currently
in discussions with several large pharmaceutical companies regarding the
licensing of some of the Company's products. In addition, the Company is in
discussions regarding potential product development agreements with certain of
these companies, in which the cost of development would be borne by the
strategic alliance partner. The Company expects to receive both upfront payments
and ongoing royalties upon consummation of any such agreements.
There can be no assurance that the Company will be able to enter into
any such agreements or that any upfront payments or ongoing royalties will be
received or, if received, will be sufficient to meet the Company's funding
requirements. The Company's future cash flow requirements are substantially
dependent upon the receipt of such upfront payments and on the marketing efforts
of its strategic alliance partners. If such payments are not received, the
Company will seek to raise additional capital, the success of which is not
determinable. If the Company is unable to raise sufficient additional capital,
the Company will explore the alternatives available to it at such time,
including without limitation, delaying clinical studies or otherwise reducing
its operating activities or seeking other ways to reduce its cash requirements.
In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. The option cost $2 million,
of which $1.1 million was paid in December 1993 and the remaining $900,000 was
paid in February 1994. The potential product was recently granted a Clinical
Trials Exemption (CTX) in the United Kingdom (UK) and clinical trials in humans
are now underway.
The option, which must be exercised upon the occurrence of certain
events, expires in December 1998. Upon exercise of the option, the Company will
be required to pay an additional $5 million. If the Company does not exercise
its option upon the occurrence of certain events, the Company's rights to the
option are terminated.
The FDA, in 1988, initiated a review to determine whether drugs
containing quinine sulfate for night leg cramps, an ingredient in Legatrin,
should remain on the market. The FDA issued a final monograph, which became
effective on February 22, 1995, restricting manufacturer's from selling
over-the-counter quinine sulfate based-products for the relief of night leg
cramps.
As a result, the Company reformulated Legatrin, and recently introduced
New Advanced Formula Legatrin PM. Legatrin PM provides relief of occasional pain
and sleeplessness associated with minor muscle
-12-
<PAGE>
aches such as leg cramps. Sales of Legatrin and gross profit derived from sales
of Legatrin approximated $4 million and $3 million, respectively, for each of
the three years ended December 31, 1994. There can be no assurance as to what
future sales of Legatrin PM will be.
In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met.
As of December 31, 1994, the Company has outstanding exercisable options
and warrants that, if exercised, would result in approximately $13 million of
additional capital. However, there can be no assurance that such options or
warrants will be exercised.
Material expenditures anticipated by the Company in the near future are
concentrated on production commitments related to Replens and research and
development related to new products. The Company has committed to spend an
aggregate of approximately $850,000 on additional molding capacity at its
suppliers during 1995 and 1996.
As of December 31, 1994, the Company had available net operating loss
carryforwards of approximately $40 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Standards No. 109, as of
December 31, 1994, other assets in the accompanying consolidated balance sheet
includes a deferred tax asset of approximately $14 million (consisting primarily
of a net operating loss carryforward) which has been fully reserved as its
ultimate realizability is not assured.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1994 VERSUS DECEMBER 31, 1993
VERSUS DECEMBER 31, 1992
Sales and gross margin have remained relatively constant during the last
three years. While the strategic alliance agreements in the United States and
abroad have not produced desired unit sales as quickly as planned, the Company
believes it has established effective working relationships with its partners
which the Company believes form a solid foundation to build sales of Replens and
the other products in the development pipeline. In addition, upon granting of
the European multistate license, Replens should become a reimbursable product in
certain countries. The Company believes that sales of Replens in Europe should
increase once the licenses are granted. The Company's success is dependent to a
great extent on the marketing efforts of its strategic alliance partners, which
the Company has limited ability to influence.
Selling and distribution expenses continue to decrease as a result of
the strategic alliance agreements whereby the Company's partners are responsible
for all marketing and distribution costs of Replens and Advantage 24 in their
territories. The Company has been informed that the strategic alliance partners
expect to spend in excess of $20 million during 1995 marketing Replens and
Advantage 24; however, there can be no assurance that such amounts will be
spent, or if spent, will have a favorable impact on the Company's sales.
General and administrative expenses have also decreased significantly as
a result of cost control programs implemented by the Company.
Research and development expenditures have increased as a result of costs
associated with
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<PAGE>
performing clinical studies on the Company's current and future products.
Lease termination cost represents expenses incurred in relocating the
Company's corporate headquarters to a smaller premise and in closing the
Company's laboratory facility in Madison, Wisconsin. Of the total, $1.2 million
was paid through the issuance of 239,238 shares of the Company's Common Stock.
The increase in interest expense is primarily the result of the interest
on the 1993 Notes and the Warrants.
In August 1990, Columbia sold a 25% equity interest in Columbia UK, to a
group of European Investors for a purchase price of (pound sterling)1.8
million. In connection therewith, the Company committed to provide the European
Investors a compound annual internal rate of return of 50% on their investment.
In January 1993, the Company repurchased the European Investors interest in
Columbia UK through the payment of $2.5 million in cash and the issuance of
867,579 shares of the Company's Common Stock. As a result of this transaction,
the Company has no further obligations to the European Investors.
As a result, the net loss for 1994 was $13,393,889 or $.59 per share as
compared to net losses in 1993 of $8,452,983 or $.40 per common share and
$8,535,936 or $.51 per share in 1992.
IMPACT OF INFLATION
Sales revenues, manufacturing costs, selling and distribution expenses,
general and administrative expenses and research and development costs tend to
reflect the general inflationary trends.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company are annexed to this report on
pages F-1 through F-18. An index to the financial statements appears on page
F-1. The financial statement schedules are also annexed to this report on pages
S-1 through S-3. An index to the financial statement schedules appears on page
S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-14-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and directors of the Company as of February 28,
1995 are as follows:
Name Age Position
---- --- --------
William J. Bologna 52 Chairman of the Board
Nicholas A. Buoniconti 54 Vice Chairman of the Board and Chief Operating
Officer
Norman M. Meier 55 President, Chief Executive Officer and Director
Margaret J. Roell 35 Vice President--Finance and Administration, Chief
Financial Officer, Secretary and Treasurer
Irwin L. Kellner 56 Director
John E. A. Kidd 50 Director
Lila E. Nachtigall, M.D. 61 Director
WILLIAM J. BOLOGNA has been a director of the Company since inception
and was elected Chairman of the Company's Board of Directors in January 1992.
From December 1988 to January 1992, Mr. Bologna served as Vice Chairman of the
Company's Board of Directors. In addition, since 1980, he has been Chairman of
Bologna & Hackett ("B&H"), an advertising agency specializing in pharmaceutical
products which has in the past performed services for various international
pharmaceutical companies. B&H ceased operations in May 1991 and has remained
inactive since that date; however, B&H has not yet been dissolved. Prior to
1980, Mr. Bologna was employed by William Douglas McAdams, Inc., a company
engaged in the marketing of pharmaceuticals, in a variety of positions,
including Senior Vice President. In 1965, Mr. Bologna received his B.S. in
Pharmacy from Fordham University. He received an MBA in Finance from Columbia
University in 1971.
NICHOLAS A. BUONICONTI has been a director of the Company since June
1991 and was elected Vice Chairman and Chief Operating Officer of the Company in
April 1992. Mr. Buoniconti, an attorney, is a member of the Massachusetts and
Florida Bar. From January 1990 to April 1992, he was a member of the law firm of
Nicholas A. Buoniconti, P.A. He held the position of President and Chief
Operating Officer of UST, a Fortune 500 company, from May 1987 to December 1989.
From 1985 to 1987, Mr. Buoniconti served as President and Chief Operating
Officer of U.S. Tobacco (which changed its name to UST), as well as serving on
the Board of Directors from 1978 to 1989. He has served as a member of the Board
of Directors of the Miami Project to Cure Paralysis, and is heavily involved in
the fund-raising efforts for the Project through the Marc Buoniconti Fund, named
for his son. Mr. Buoniconti is a former All-Pro linebacker for the Miami
Dolphins. Since 1978, he has co-hosted "Inside the NFL" on the Home Box Office
cable network. Mr. Buoniconti is also a director of American Bankers Insurance
Co, Nine West Corporation and Simmons Outdoor Corporation.
NORMAN M. MEIER has been President, Chief Executive Officer and a
director of the Company since inception. In addition, since 1980, Mr. Meier has
been an officer and director of B&H. B&H ceased operations in May 1991 and has
remained inactive since that date; however, B&H has not yet been
-15-
<PAGE>
dissolved. From 1971 to 1977, Mr. Meier was Vice President of Sales and
Marketing for Key Pharmaceuticals, Inc., a company which had been engaged in the
marketing and sales of pharmaceuticals until its sale to Schering-Plough
Corporation in June 1986. From 1977 until June 1986, Mr. Meier served as a
consultant to Key Pharmaceuticals, Inc. In 1960, Mr. Meier received his B.S. in
Pharmacy from Columbia University. He received his M.S. in Pharmacy
Administration from Long Island University in 1964. Mr. Meier is also a
director of Universal Heights, Inc.
MARGARET J. ROELL has been Vice President--Finance and Administration, Chief
Financial Officer, Treasurer and Secretary of the Company since June 1991. Ms.
Roell was employed by Arthur Andersen & Co., independent public accountants,
from 1981 to 1991 and was an audit manager with Arthur Andersen & Co. from 1986
to 1991.
IRWIN L. KELLNER has been a director of the Company since May 1988. Dr.
Kellner is the chief economist of Chemical Banking, formed by the merger of
Chemical Bank with Manufacturers Hanover Trust Company ("MHT"). Dr. Kellner has
been employed by MHT since 1970. From 1980 to 1991, Dr. Kellner was the Chief
Economist of MHT. Dr. Kellner, a past president of the Forecasters Club of New
York and the New York Association of Business Economists, holds membership, and
has held a variety of posts, in several professional associations, including the
American Economic Association, American Statistical Association and the National
Association of Business Economists. Dr. Kellner is also a governor of the Money
Marketeers. His other board memberships include the Juvenile Diabetes
Foundation, the Children's AIDS Network, North Shore University Hospital, the
Don Monti Memorial Research Foundation and Touro College's Barry Z. Levine
School of Health Sciences.
JOHN E. A. KIDD has been a director of the Company since April 1988 and
served as Chairman of the Board of Directors of the Company from December 1988
to December 1991. From July 1988 to 1990, Mr. Kidd was a director of Care Plus,
Inc., a publicly owned health care company traded over-the-counter. For
approximately the past five years, Mr. Kidd has been an Executive Director of a
number of public companies located in the United Kingdom, in which an investment
company controlled by his family had been a major investor.
LILA E. NACHTIGALL, M.D. has been a director of the Company since November
1992. Dr. Nachtigall has been employed by the New York University School of
Medicine since 1961. Dr. Nachtigall is currently a Professor of Obstetrics and
Gynecology. In addition, Dr. Nachtigall is the Clinic Coordinator of GYN-
Endocrine Clinic at Bellevue Hospital and Co-director of the GYN-Endocrine
Program and Director of Women's Wellness Division at New York University Medical
Center.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors receive no
compensation for serving on the Board, except for the receipt of stock options
and the reimbursement of reasonable expenses incurred in attending meetings.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. The Board of Directors has two standing committees, the
Audit Committee and the Compensation/Stock Option Committee.
ITEM 11. EXECUTIVE COMPENSATION
The tables, graph and descriptive information set forth below are
intended to comply with the Securities and Exchange Commission compensation
disclosure requirements applicable to, among other reports and filings, annual
reports on Form 10-Ks. This information is being furnished with respect to the
Company's Chief Executive officer ("CEO") and its three other executive
officers, other than the CEO, whose salary and bonus exceeded $100,000 for the
most recent fiscal year (collectively, the "Executive Officers").
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities
Underlying
Name and Principal Position Year Salary Bonus (1) Options (3)
- --------------------------- ---- ------ --------- -----------
<S> <C> <C> <C> <C>
Norman M. Meier 1994 $ 180,000 $ - 470,000
President and Chief 1993 180,000 - 200,000
Executive Officer 1992 180,000 45,100 -
William J. Bologna 1994 180,000 - 470,000
Chairman of the Board 1993 180,000 - 200,000
1992 180,000 45,100 -
Nicholas A. Buoniconti 1994 135,000 - 910,000
Vice Chairman and 1993 135,000 - 200,000
Chief Operating Officer 1992 95,625(2) - 675,000
Margaret J. Roell 1994 120,000 - -
Vice President - 1993 120,000 - 20,000
Finance & Administration 1992 120,000 - 50,000
Chief Financial Officer
<FN>
(1) These amounts are accrued as of year end and paid during the following
year.
(2) Mr. Buoniconti was hired as of April 15, 1992.
(3) The options granted in 1993 and 1992 to Messrs. Meier, Bologna and
Buoniconti, were cancelled in 1994. See Ten Year Option Repricings Chart on
the following page.
</FN>
</TABLE>
OPTION GRANTS DURING 1994
<TABLE>
<CAPTION>
Number of % of Total
Securities Options Grant
Underlying Granted to Exercise Date
Options Employees Price Expiration Present
Name Granted (1) in 1994 ($/Sh) Date Value (2)
- ---- ----------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Norman M. Meier 470,000 24% $4.375 9/28/2004 $1,640,300
William J. Bologna 470,000 24% 4.375 9/28/2004 1,640,300
Nicholas A. Buoniconti 910,000 47% 4.375 9/28/2004 3,175,900
Margaret J. Roell - - - - -
<FN>
(1) These options were granted in connection with Messrs. Meier, Bologna and
Buoniconti each investing $200,000 into the Company. In connection
therewith, options to purchase 450,000, 450,000 and 910,000 shares of
Common Stock previously granted to Messrs. Meier, Bologna and Buoniconti,
respectively, were cancelled.
(2) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
value of the options reflected in the above table include the following:
(i) an exercise price of $4.375, equal to the fair market value of the
underlying stock on the date of grant, (ii) an option term of ten years,
(iii) an interest rate of 7.46% that represents the interest rate on a
U.S. Treasury security with a maturity date corresponding to that of the
option term, (iv) volatility of 65.104% calculated using daily stock
prices for the one-year period prior to the grant date and (v) no
annualized dividends paid with respect to a share of Common Stock at the
date of grant. The ultimate values of the options will depend on the
future price of the Company's Common Stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize
upon exercise of an option will depend on the excess of the market value
of the Company's Common Stock over the exercise price on the date the
option is exercised.
</FN>
</TABLE>
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<PAGE>
AGGREGATED OPTION EXERCISES DURING 1994 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares Acquired Value December 31, 1994 December 31, 1994
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Meier - $ - - 470,000 $ - 256,250
William J. Bologna - - - 470,000 - 256,250
Nicholas A. Buoniconti - - - 910,000 - 568,750
Margaret J. Roell - - 75,000 45,000 3,125 3,125
</TABLE>
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock at Price At Option Term
Options Time of Time of Remaining at
Repriced or Repricing or Repricing or New Date of
Amended Amendment Amendment Exercise Repricing or
Name Date (#) ($) ($) Price ($) Amendment
- ---- -------- ----------- --------------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Meier 9/28/94 100,000 $4.375 $4.50 $4.375 6.5 years
9/28/94 200,000 4.375 5.50 4.375 9 years
9/28/94 120,000 4.375 13.25 4.375 3 months
9/28/94 29,244 4.375 14.58 4.375 3 months
William J. Bologna 9/28/94 100,000 4.375 4.50 4.375 6.5 years
9/28/94 200,000 4.375 5.50 4.375 9 years
9/28/94 120,000 4.375 13.25 4.375 3 months
9/28/94 29,244 4.375 14.58 4.375 3 months
Nicholas A. Buoniconti 9/28/94 400,000 4.375 4.875 4.375 7.5 years
9/28/94 200,000 4.375 5.500 4.375 9 years
9/28/94 25,000 4.375 5.750 4.375 7 years
9/28/94 10,000 4.375 8.000 4.375 7 years
9/28/94 250,000 4.375 8.000 4.375 7.5 years
9/28/94 25,000 4.375 9.000 4.375 7 years
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1990, the Company entered into five-year employment agreements
with each of John E.A. Kidd, William J. Bologna and Norman M. Meier, to serve as
Chairman, Vice-Chairman and President of the Company, respectively. Pursuant to
their respective employment agreements, each such employee is entitled to a base
salary of $180,000 per year and a bonus equal to one-half of 1% of the Company's
net revenues. Net revenues are defined to be gross sales less discounts,
allowances and returns. In addition, each such employee was granted options to
purchase 150,000 shares of the Company's Common Stock at an exercise price of
$13.25 with respect to Mr. Kidd and $14.58 with respect to each of Messrs. Meier
and Bologna. Pursuant to the terms of such agreements, each employee has agreed
to dedicate his services on a substantially full-time basis and has agreed for
the term of his agreement and for two years thereafter not to compete with the
Company. As of December 31, 1991, contemporaneously with his resignation as
Chairman of the Board, Mr. Kidd's contract was amended such that he will receive
a salary of $1,000 per year for performing certain investor relations tasks for
the Company. In June 1993, Messrs. Bologna and Meier 's employment agreements
were amended such that effective January 1, 1993, the provisions pursuant
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<PAGE>
to which they would have received an aggregate bonus equal to one percent of
sales in 1993 and 1994 were cancelled. If the Company would have had pre-tax
earnings during 1994, Messrs. Bologna and Meier would have been eligible to
participate in the incentive compensation plan approved by the shareholders
at the 1993 annual meeting of the Company.
In April 1992, the Company entered into a five-year employment agreement
with Nicholas A. Buoniconti, to serve as Vice Chairman and Chief Operating
Officer of the Company. Pursuant to this agreement, Mr. Buoniconti is paid an
annual salary of $135,000. As additional compensation, Mr. Buoniconti was
granted options to purchase 250,000 and 400,000 shares of the Company's Common
Stock at exercise prices of $8.00 and $4.88 per share, respectively, which
options vest over five years. Pursuant to the terms of such agreement, Mr.
Buoniconti agreed to dedicate his services on a substantially full-time basis
and has agreed for the term of his agreement and for two years thereafter not to
compete with the Company.
In June 1991, the Company entered into a two-year employment agreement
with Margaret J. Roell, its Vice-President -- Finance and Administration, Chief
Financial Officer, Secretary and Treasurer, with provision for extension of the
agreement for an additional two years. Pursuant to this agreement, Ms. Roell is
paid an annual salary of $120,000. As additional compensation, Ms. Roell was
granted options to purchase 50,000 shares of the Company's Common Stock at an
exercise price of $5.75. One half of such options became exercisable in June
1992 with the remainder exercisable beginning in June 1993. In June 1993, Ms.
Roell's contract was renewed under the same terms for an additional two years.
The exercise price of all of the options granted pursuant to the
aforementioned employment agreements are based on the closing price of the
Company's Common Stock on the American Stock Exchange on the day prior to grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1995, directors and named executive officers,
individually and as a group, beneficially owned Common Stock as follows:
Name of Shares, Nature of Interest
Beneficial Owner and Percentage of Equity Securities(1)
---------------- --------------------------------------
Norman M. Meier 825,800 3.3%
William J. Bologna (2) 1,938,632 7.7%
Nicholas A. Buoniconti 80,000 *
Irwin L. Kellner (3) 89,500 *
John E. A. Kidd (3) 334,748 1.3%
Lila E. Nachtigall (3) 45,000 *
Margaret J. Roell (3) 75,200 *
Officers and directors as a group (7 people) 3,388,880 13.2%
* Represents less than 1 percent.
(1) Includes shares issuable upon exercise of both options and
warrants which are currently exercisable or which may be acquired
within 60 days and shares issuable upon conversion of the Series
A and Series B Preferred Stock (12.36 for the Series A Preferred
Stock and 20.57 for the Series B Preferred Stock).
(2) Includes 20,570 shares issuable upon conversion of 1,000 shares
of Series B Preferred Stock. Includes 98,062 shares beneficially
owned by Mr. Bologna's spouse.
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<PAGE>
(3) Includes shares issuable upon exercise of options, which are currently
exercisable or which may be acquired within 60 days, to purchase 50,000
shares with respect to Dr. Kellner, 284,748 shares with respect to Mr.
Kidd, 45,000 shares with respect to Dr. Nachtigall and 75,000 shares with
respect to Ms. Roell.
As of February 28, 1995, the following table sets forth information
regarding the number and percentage of Common Stock held by all persons who are
known by the Company to beneficially own or exercise voting or dispositive
control over 5% or more of the Company's outstanding Common Stock:
Number of Shares
Name and Address Beneficially Owned Percent of Class
---------------- ------------------- ----------------
Dominion Capital, Inc./
Dominion Resources, Inc. (1)
901 East Byrd Street, 17th Floor
Richmond, VA 23219 1,292,123 5.1%
(1) Based on information included on Schedule 13D dated January 10, 1995.
Includes warrants to purchase 150,000 shares of the Company's Common
Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1993, the Company loaned Messrs. Meier and Bologna, $80,000 and
$110,350, respectively. The notes, which bear interest at 10% per annum and are
unsecured but with full recourse, are due on or before December 7, 1996.
-20-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Indexes to financial statements and financial statement schedules appear
on F-1 and S-1, respectively.
Exhibits
3.1 -- Restated Certificate of Incorporation of the Company, as amended2/
3.2 -- By-laws of Company1/
10.1 -- Employment Agreement dated as of January 1, 1990, between the Company
and Norman M. Meier2/
10.2 -- Employment Agreement dated as of January 1, 1990, between the Company
and William J. Bologna2/
10.3 -- 1988 Stock Option Plan, as amended, of the Company7/
10.4 -- Joint Venture Agreement for Replens-Sweden dated June 20, 1990,
between Columbia Ireland, Sovro KB and Columbia Linc Sweden AB3/
10.5 -- Licensing and Distribution Agreement dated January 15, 1991, between
the Company and Janssen Pharmaceutica, N.V.4/
10.6 -- License Agreement dated March 20, 1991, between the Company and
Sterling Drug, Inc.3/
10.7 -- Agreement for Replens-Italy dated as of February 19, 1991,
between Janssen Farmaceutica S.p.A and Columbia Laboratories (Ireland)
Limited4/
10.8 -- Distribution Agreement between Columbia Laboratories (Ireland) Limited
and Roussel UCLAF4/
10.9 -- Joint Venture Agreement for Replens-Spain dated as of July 23, 1991,
between the Company and Sterling Drug Inc.4/
10.10 -- License Agreement for Replens-Pac Rim dated as of July 23, 1991,
between the Company and Sterling Drug Inc.4/
10.11 -- License and Supply Agreement between Warner-Lambert Company and the
Company dated December 5, 19915/
10.12 -- Distributorship Agreement for Replens-Japan dated as of December 28,
1992, between the Company and Sterling-Winthrop Inc.7/
10.13 -- Asset Purchase, License and Option Agreement, dated
November 22, 19892/
10.14 -- Employment Agreement dated as of April 15, 1992, between the
Company and Nicholas A. Buoniconti6/
21 -- Subsidiaries of the Company
23 -- Consent of Independent Certified Public Accountants
1/ Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (File No. 33-22062-A) declared effective on July 28, 1988.
2/ Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (File No. 33-31962) declared effective on May 14, 1990.
3/ Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.
-21-
<PAGE>
4/ Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the three months ended June 30, 1991.
5/ Incorporated by reference to the Registrant's Current Report on
Form 8-K, filed on January 2, 1992.
6/ Incorporated by reference to the Registrant's Post-Effective
Amendment No. 4 to the Registration Statement on Form S-1 (File
No. 33-35723) declared effective on May 28, 1992.
7/ Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.
REPORTS ON FORM 8-K
None.
-22-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets
As of December 31, 1994 and 1993 F-3
Consolidated Statements of Operations
for the Three Years Ended December 31, 1994 F-5
Consolidated Statements of Stockholders' Equity (Deficit)
for the Three Years Ended December 31, 1994 F-6
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1994 F-8
Notes to Consolidated Financial Statements F-11
-23-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of Columbia
Laboratories, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Laboratories, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 24, 1995.
-24-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 689,749 $ 5,280,829
Accounts receivable, net of allowance
for doubtful accounts of $98,370 and
$110,015 in 1994 and 1993, respectively 904,277 1,361,604
Inventories 1,117,243 2,874,208
Prepaid expenses 125,832 914,189
------------ ------------
Total current assets 2,837,101 10,430,830
------------ ------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 15,162 13,045
Machinery and equipment 1,394,788 1,123,847
Furniture and fixtures 70,597 65,499
------------ ------------
1,480,547 1,202,391
Less - Accumulated depreciation
and amortization 564,924 359,231
------------ ------------
915,623 843,160
------------ ------------
INTANGIBLE ASSETS, net 1,786,037 2,007,937
OTHER INVESTMENT, net 1,600,000 2,000,000
OTHER ASSETS 1,268,803 2,326,759
------------ ------------
$ 8,407,564 $ 17,608,686
============ ============
</TABLE>
(Continued)
-25-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ - $ 37,527
Accounts payable 3,707,966 1,748,704
Accrued expenses 1,059,960 2,421,261
Deferred revenue 1,540,549 2,328,542
Estimated liability for returns
and allowances 387,075 311,147
------------ ------------
Total current liabilities 6,695,550 6,847,181
------------ ------------
LONG-TERM DEBT, net of current portion 6,217,649 7,212,473
OTHER LONG-TERM LIABILITIES 86,743 74,144
COMMITMENTS AND CONTINGENCIES (Notes 1 and 5)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value;
1,000,000 shares authorized;
Series A Convertible Preferred Stock,
1,515 and 1,915 shares issued and
outstanding in 1994 and 1993, respectively
(liquidation preference of $151,500 at
December 31, 1994) 15 19
Series B Convertible Preferred Stock,
2,000 and 7,750 shares issued and outstanding
in 1994 and 1993, respectively (liquidation
preference of $200,000 at December 31, 1994) 20 77
Common stock, $.01 par value; 40,000,000 shares
authorized; 23,778,897 and 22,155,906 shares
issued and outstanding in 1994 and 1993,
respectively 237,789 221,559
Capital in excess of par value 64,206,507 58,926,490
Accumulated deficit (69,253,356) (55,859,467)
Cumulative translation adjustment 216,647 186,210
------------ ------------
Total stockholders' equity (deficit) (4,592,378) 3,474,888
------------ ------------
$ 8,407,564 $ 17,608,686
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
-26-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
NET SALES $ 8,769,064 $ 8,150,227 $ 9,173,042
COST OF GOODS SOLD 5,539,424 5,077,816 5,327,459
------------ ----------- -----------
Gross profit 3,229,640 3,072,411 3,845,583
------------ ----------- -----------
OPERATING EXPENSES:
Selling and distribution 2,036,353 2,571,164 3,373,259
General and administrative 2,799,863 3,491,201 4,701,646
Research and development 9,376,047 5,290,912 3,129,026
Lease termination cost - 238,282 1,000,000
------------ ----------- -----------
Total operating expenses 14,212,263 11,591,559 12,203,931
------------ ----------- -----------
Loss from operations (10,982,623) (8,519,148) (8,358,348)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
License fees, net 174,741 561,297 2,776,043
Interest income 61,030 89,540 114,801
Interest expense (2,479,610) (431,983) (548,924)
Guaranteed return to minority
shareholders of subsidiary - - (2,585,118)
Other, net (167,427) (152,689) 65,610
------------ ----------- -----------
(2,411,266) 66,165 (177,588)
------------ ----------- -----------
Net loss $(13,393,889) $(8,452,983) $(8,535,936)
============ =========== ===========
NET LOSS PER COMMON SHARE $ (.59) $ (.40) $ (.51)
============ =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 22,530,000 21,380,000 16,880,000
============ =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-27-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock
--------------- ---------------- --------------------
Number Number Number Capital in Cumulative
of of of Excess of Accumulated Translation
Shares Amount Shares Amount Shares Amount Par Value Deficit Adjustment Total
------ ------ ------ ------ ------ ------ --------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1,
1992 3,165 $ 32 22,750 $ 227 16,392,281 $163,923 $38,369,579 $(38,870,548) $(383,298) $ (720,085)
Common stock
issued in
payment for
services
rendered - - - - 15,000 150 119,850 - - 120,000
Options
exercised - - - - 561,432 5,614 1,015,322 - - 1,020,936
Warrants
exercised - - - - 123,898 1,239 126,145 - - 127,384
Conversion of
preferred
stock (975) (10) (10,000) (100) 212,051 2,120 (2,010) - - -
Accumulated
dividends on
preferred
stock - - - - - - (19,826) - - (19,826)
Payment of
accumulated
dividends - - - - 757 8 6,336 - - 6,344
Translation
adjustment - - - - - - - - 1,010,097 1,010,097
Net loss - - - - - - - (8,535,936) - (8,535,936)
----- ---- ------ ----- ---------- -------- ----------- ------------ --------- ----------
BALANCE,
December 31,
1992 2,190 22 12,750 127 17,305,419 173,054 39,615,396 (47,406,484) 626,799 (6,991,086)
Issuance of
common stock - - - - 3,992,002 39,920 16,644,494 - - 16,684,414
Options
exercised - - - - 531,568 5,316 474,689 - - 480,005
Warrants
exercised - - - - 220,668 2,207 296,727 - - 298,934
Issuance of
warrants - - - - - - 1,912,500 - - 1,912,500
Conversion of
preferred
stock (275) (3) (5,000) (50) 106,249 1,062 (1,009) - - -
Accumulated
dividends on
preferred
stock - - - - - - (16,307) - - (16,307)
Translation
adjustment - - - - - - - - (440,589) (440,589)
Net loss - - - - - - - (8,452,983) - (8,452,983)
----- ---- ------ ----- ---------- -------- ----------- ------------ --------- ----------
BALANCE,
December 31,
1993 1,915 19 7,750 77 22,155,906 221,559 58,926,490 (55,859,467) 186,210 3,474,888
</TABLE>
(Continued)
-28-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(Continued)
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock
--------------- ---------------- --------------------
Number Number Number Capital in Cumulative
of of of Excess of Accumulated Translation
Shares Amount Shares Amount Shares Amount Par Value Deficit Adjustment Total
------ ------ ------ ------ ------ ------ --------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1,
1994 1,915 $ 19 7,750 $ 77 22,155,906 $221,559 $58,926,490 $(55,859,467) $186,210 $3,474,888
Issuance of
common stock - - - - 126,061 1,261 525,739 - - 527,000
Options
exercised - - - - 20,000 200 28,600 - - 28,800
Warrants
exercised - - - - 1,060,000 10,600 3,714,400 - - 3,725,000
Conversion
of debt - - - - 293,710 2,937 1,025,048 - - 1,027,985
Conversion of
preferred
stock (400) (4) (5,750) (57) 123,220 1,232 (1,171) - - -
Accumulated
dividends on
preferred
stock - - - - - - (12,599) - - (12,599)
Translation
adjustment - - - - - - - - 30,437 30,437
Net loss - - - - - - - (13,393,889) - (13,393,889)
----- ---- ------ ----- ---------- -------- ----------- ------------ --------- ----------
BALANCE,
December 31,
1994 1,515 $ 15 2,000 $ 20 23,778,897 $237,789 $64,206,507 $(69,253,356) $216,647 $(4,592,378)
===== ==== ====== ===== ========== ======== =========== ============ ========= ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-29-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(13,393,889) $(8,452,983) $(8,535,936)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 840,496 496,984 568,669
Provision for (recovery of) doubtful
accounts (3,030) 4,734 (113,977)
Provision for returns and allowances 168,215 233,969 532,073
Lease termination cost - 112,007 1,000,000
Write-down of property and equipment - 216,133 11,815
Write-down of inventories 888,277 451,460 -
Guaranteed return to minority
shareholders of subsidiary - - 2,585,118
Interest expense 1,738,635 173,865 -
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable 43,773 (469,726) (197,360)
Inventories 868,688 (31,914) (3,053,773)
Prepaid expenses 78,365 (87,374) 393,302
Other assets 20,548 (510,804) 96,127
Increase (decrease) in:
Accounts payable 2,071,080 (1,617,947) 1,703,535
Accrued expenses (616,010) 679,201 (1,428,550)
Deferred revenue (387,993) (144,738) 128,244
Estimated liability for returns
and allowances (92,287) (344,203) (558,460)
----------- ----------- -----------
Net cash used for operating activities (7,775,132) (9,291,336) (6,869,173)
----------- ----------- ------------
</TABLE>
(Continued)
-30-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(Continued)
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $ (275,210) $ (118,023) $(423,613)
Purchase of other investment (900,000) (1,100,000) -
Proceeds from sale of investment - 25,817 53,653
---------- ----------- ---------
Net cash used in investing activities (1,175,210) (1,192,206) (369,960)
---------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 7,250,000 -
Repayments of notes payable and long-term debt (37,527) (192,024) (28,519)
Repayment of amounts owed to minority
shareholders of a subsidiary - (2,500,000) -
Proceeds from issuance of common stock 500,000 9,448,813 -
Proceeds from exercise of options and warrants 3,753,800 778,939 1,148,320
---------- ----------- ---------
Net cash provided by financing activities 4,216,273 14,785,728 1,119,801
EFFECT OF EXCHANGE RATE CHANGES ON CASH 142,989 (62,143) 19,592
---------- ----------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,591,080) 4,240,043 (6,099,740)
CASH AND CASH EQUIVALENTS,
beginning of year 5,280,829 1,040,786 7,140,526
---------- ----------- ---------
CASH AND CASH EQUIVALENTS,
end of year $ 689,749 $ 5,280,829 $ 1,040,786
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 573,338 $ 29,857 $ 147,231
=========== =========== ===========
</TABLE>
(Continued)
-31-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(Continued)
SUPPLEMENTAL SCHEDULE OF NONCASH
OPERATING AND FINANCING ACTIVITIES:
During 1994, the Company repaid $1,027,985 of long-term debt and accrued
interest through the issuance of 293,710 shares of the Company's Common Stock.
In January 1993, the Company completed a private placement of 2.5
million shares of its Common Stock, raising net proceeds of approximately $9.5
million. In addition, the Company repaid the amount owed to the minority
shareholders of a subsidiary through the payment of $2.5 million in cash and the
issuance of 867,579 shares of the Company's Common Stock. The Company also
repaid $1.6 million of long-term debt through the payment of $100,000 in cash
and the issuance of 375,000 shares of the Company's Common Stock.
During 1993, the Company issued 239,238 shares of Common Stock in
payment of lease termination costs which totaled $1.2 million. In addition,
during 1994 and 1993, the Company issued 5,008 and 10,300 shares of Common
Stock, respectively, in payment of consulting fees, which totaled $27,000 and
$54,000, respectively.
The accompanying notes to consolidated financial
statements are an integral part of these statements.
-32-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization-
Columbia Laboratories, Inc. (the "Company") was incorporated as a Delaware
corporation in December 1986. The Company's objective is to develop on a
worldwide basis a portfolio of women's prescription and over-the-counter
products, including those which help prevent sexually transmitted diseases. The
Company's products primarily utilize the Company's patented bioadhesive delivery
technology.
Principles of Consolidation-
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
Foreign Currency-
The assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars at current exchange rates and revenue and expense items are
translated at average rates of exchange prevailing during the period. Resulting
translation adjustments are accumulated as a separate component of stockholders'
equity (deficit).
Inventories-
Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor and manufacturing
overhead. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
------------ ---------
<S> <C> <C>
Finished goods $ 260,666 $ 236,241
Raw materials 856,577 2,637,967
----------- ----------
$1,117,243 $2,874,208
========== ==========
</TABLE>
Property and Equipment-
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the respective assets, as follows:
<TABLE>
<CAPTION>
Years
------
<S> <C>
Machinery and equipment 5 - 10
Furniture and fixtures 5
</TABLE>
-33-
<PAGE>
Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs which do not extend the life of the assets are expensed.
Upon sale or disposition of property and equipment, the cost and related
accumulated depreciation are eliminated from the accounts and any resultant gain
or loss is credited or charged to income.
Intangible Assets-
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
----------- ----------
<S> <C> <C>
Patents $2,600,000 $2,600,000
Trademarks 341,000 341,000
---------- ----------
2,941,000 2,941,000
Less accumulated amortization (1,154,963) (933,063)
---------- ----------
$1,786,037 $2,007,937
========== ==========
</TABLE>
Patents are being amortized on a straight-line basis over their remaining lives
(through 2003). Trademarks are being amortized on a straight-line basis over ten
years.
Other Investment-
In December 1993, the Company entered into an Option and License Agreement
pursuant to which it was granted an option to obtain an exclusive license to the
North and South American rights to a potential AIDS treatment. The option cost
$2 million, of which $1.1 million was paid in December 1993 and the remaining
$900,000 was paid in February 1994 and was included in accounts payable in the
accompanying December 31, 1993 consolidated balance sheet.
The option, which must be exercised upon the occurrence of certain events,
expires in December 1998. Upon exercise of the option, the Company will be
required to pay an additional $5 million. If the Company does not exercise its
option upon the occurrence of these events, the Company's right to the option is
terminated. The cost of the option is being amortized on a straight-line basis
over five years.
Income Taxes-
As of December 31, 1994, the Company has U.S. tax net operating loss
carryforwards of approximately $40 million which expire through 2009. The
Company also has unused tax credits of approximately $738,000 which expire at
various dates through 2004. Utilization of net operating loss carryforwards may
be limited in any year due to limitations in the Internal Revenue Code.
In February 1992, the Financial Accounting Standards Board issued a new standard
on accounting for income taxes ("SFAS No. 109"). The Company adopted the new
accounting and disclosure rules as of January 1, 1993. Implementation of SFAS
No. 109 had no effect on the Company's reported financial position and net loss.
As of December 31, 1994 and 1993, other assets in the accompanying consolidated
balance sheets include deferred tax assets of approximately $14 million
(comprised primarily of a net operating loss carryforward) which have been fully
reserved for as their ultimate realizability is not assured.
Revenue Recognition-
Revenue and the related cost of goods sold are recognized at the time a sale is
effected or services are provided.
-34-
<PAGE>
Research and Development Costs-
Company sponsored research and development costs related to future products are
expensed as incurred. Costs related to research and development contracts are
charged to cost of sales upon recognition of the related revenue.
Lease Termination Cost-
Lease termination cost represents expenses incurred in relocating the Company's
corporate headquarters to a smaller premises and in closing the Company's
laboratory facility in Madison, Wisconsin. Of this amount, $1.2 million was paid
through the issuance of 239,238 shares of the Company's $.01 par value Common
Stock ("Common Stock").
Loss Per Share-
Loss per share is computed by dividing the net loss plus preferred dividends by
the weighted average number of shares of common stock outstanding during the
period. Shares to be issued upon the exercise of the outstanding options and
warrants or the conversion of the preferred stock are not included in the
computation of loss per share as their effect is antidilutive.
Statements of Cash Flows-
For purposes of the statements of cash flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.
(2) STRATEGIC ALLIANCE AGREEMENTS:
The Company has entered into strategic alliance agreements for the marketing and
distribution of Replens with: (i) Warner-Lambert Company under which
Warner-Lambert Company markets Replens in the United States; (ii) subsidiaries
of Johnson and Johnson under which those subsidiaries market Replens in Italy
and will market Replens in Belgium; (iii) Roussel-UCLAF under which Roussel
markets Replens in France, certain French overseas territories and Greece; (iv)
Sterling Drug Inc. under which Sterling markets Replens in Japan, South America,
Central America, Australia, New Zealand, and other Pacific Rim nations; (v) Teva
Pharmaceutical under which Teva will market Replens in Israel; (vi) Logos
Pharmaceuticals (Pty) Limited under which Logos markets Replens in South Africa
and the sixteen countries of sub-Saharan Africa; (vii) LASA SA under which LASA
SA markets Replens in Spain; (viii) Unipath Ltd. under which Unipath markets
Replens and Feminessetrademark in the United Kingdom; (ix) Roberts
Pharmaceutical Corporation under which Roberts will market Replens in Canada;
(x) Vifor SA under which Vifor will market Replens in Switzerland and
Liechtenstein; (xi) Hermes H/F under which Hermes is currently marketing
Replens in Iceland and (xii) a Swedish pharmaceutical company that has created
a joint venture which markets Replens in Sweden and other Scandinavian
countries. Pursuant to these agreements, the Company has received advance
payments, of which $1,540,549 and $2,328,542, respectively, are reflected as
deferred revenue in the accompanying December 31, 1994 and 1993 consolidated
balance sheets, respectively. These advance payments will be recognized as
products are shipped to the applicable strategic alliance partners or as sales
are made by the strategic alliance partners.
During 1993, the Logos agreement was amended such that Logos will also be the
exclusive distributor of the Company's progesterone product in South Africa and
the sixteen countries of sub-Saharan Africa. As part of the agreement, the
Company received upfront licensing fees as well as ongoing revenue from
manufacturing and product sales.
In September 1994, the Company entered into a license and distribution agreement
with Lake Pharmaceutical, Inc. under which Lake markets Advantage 24 in the
United States.
-35-
<PAGE>
(3) LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------------ ----------
<S> <C> <C>
10% notes payable $6,217,649 $7,250,000
Less - Payments
due within one year - (37,527)
----------- ----------
$6,217,649 $7,212,473
=========== ==========
</TABLE>
During 1993, the Company issued $7.25 million of unsecured 10% notes payable due
on June 30, 1996 ("1993 Notes"). Pursuant to the terms of the 1993 Notes, if the
Company or any of its subsidiaries receives upfront license fees for the
marketing and distribution of the Company's prescription progesterone product,
the Company will use one-third of the net proceeds of such upfront fees to make
"pro-rata" prepayments of the notes payable. In January 1994, a prepayment
totaling $37,527 was made. In connection with the 1993 Notes, the Company issued
warrants to purchase 1,212,500 shares of the Company's Common Stock at an
exercise price of $4.00 per share, which was less than the market value of the
Company's Common Stock on the date of grant. The difference, aggregating
$1,912,500, is being recorded as additional interest expense over the term of
the 1993 Notes. As of December 31, 1993, $695,460, representing the current
portion of the prepaid interest, is included in prepaid expenses and $1,043,175,
representing the long-term portion of the prepaid interest, is included in other
assets in the accompanying consolidated balance sheet. The warrants are
exercisable during the period from July 1, 1994 through June 30, 1998.
During 1994, the exercise price of certain of the warrants was reduced from
$4.00 per share to $3.50 per share, conditioned on the immediate exercise of the
warrants. As additional consideration for the immediate exercise of the
warrants, the holders were granted the right at any time to convert the
outstanding principal amount of the 1993 debt and accrued interest thereon, into
shares of Common Stock at an exchange rate equal to a 25% discount to the then
current market price, based on the average closing price of the Common Stock for
the fifteen days prior to the conversion date, but in no event at a price less
than $3.50 per share. As consideration for the repricing of the warrants, the
note holders waived their right to receive one-third of the net proceeds of any
upfront licensing fees. As a result, warrants to purchase 1,050,000 shares of
Common Stock were exercised resulting in net proceeds of $3,675,000 to the
Company.
During 1994, the Company repaid $1,027,985 of long-term debt and accrued
interest through the issuance of 293,710 shares of the Company's Common Stock.
In addition, during 1995, the Company repaid an additional $4,787,069 of
long-term debt and accrued interest through the issuance of 1,273,905 shares of
the Company's Common Stock. As a result of the exercise of the warrants and the
repayment of the debt, during 1994, prepaid interest aggregating $1,738,635 has
been recorded as additional interest expense.
-36-
<PAGE>
(4) STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock-
In November 1989, the Company completed a private placement of 151,000 shares of
Series A Convertible Preferred Stock ("Series A Preferred Stock"). The Series A
Preferred Stock pays cumulative dividends at a rate of 8% per annum payable
quarterly and each share is convertible into 12.36 shares of the Company's
Common Stock. As of December 31, 1994 and 1993, dividends of $86,743 and
$74,144, respectively, have been earned but have not been declared and are
included in other long-term liabilities in the accompanying consolidated balance
sheets.
In August 1991, the Company completed a private placement of 150,000 shares of
Series B Convertible Preferred Stock ("Series B Preferred Stock"). Each share of
Series B Preferred Stock is convertible into 20.57 shares of the Company's
Common Stock.
Upon liquidation of the Company, the holders of the Series A and Series B
Preferred Stock are entitled to $100 per share. In addition, the holders of
Series A Preferred Stock are entitled to accumulated unpaid dividends. The
Series A Preferred Stock shares are redeemable for cash, at the option of the
Company, at specified redemption prices. The Series B Preferred Stock will be
automatically converted into Common Stock upon the occurrence of certain events.
Holders of the Series A and Series B Preferred Stock are entitled to one vote
for each share of common stock into which the preferred stock is convertible.
Warrants-
As of December 31, 1994 and 1993, the Company had warrants outstanding for the
purchase of 780,000 and 2,316,500 shares of Common Stock, respectively.
Information on outstanding warrants is as follows:
<TABLE>
<CAPTION>
December 31,
Exercise -------------------------
Price 1994 1993
---------- --------- ---------
<S> <C> <C>
$4.00 162,500 1,212,500
4.375 150,000 -
4.81 75,000 75,000
4.875 57,500 -
5.00 14,000 398,000
5.25 7,000 7,000
5.31 - 300,000
5.46 125,000 125,000
5.625 7,000 7,000
5.875 7,000 7,000
7.13 - 10,000
8.875 175,000 175,000
------- ---------
780,000 2,316,500
======= =========
</TABLE>
All of the warrants, except the $4.875 warrants, were exercisable on December
31, 1994.
-37-
<PAGE>
Stock Option Plan-
All employees, officers, directors and consultants of the Company or any
subsidiary are eligible to participate in the Columbia Laboratories, Inc. 1988
Stock Option Plan (the "Plan"). Under the Plan, as amended, a total of 5,000,000
shares of Common Stock have been authorized for issuance upon exercise of the
options. Information on options are as follows:
<TABLE>
<CAPTION>
Number
of shares Price per share
--------- ---------------
<S> <C> <C>
Outstanding, January 1, 1993 2,979,068 $ .25 - 16.03
Granted 1,003,572 5.38 - 5.63
Exercised (531,568) .25 - 2.72
Cancelled (110,500) 4.88 - 13.25
---------
Outstanding, December 31, 1993 3,340,572 1.44 - 16.03
Granted 1,925,000 4.38 - 6.13
Exercised (20,000) 1.44
Cancelled (1,995,252) 4.34 - 14.58
----------
Outstanding, December 31, 1994 3,250,320 1.44 - 16.03
========= ============
Options exercisable:
December 31, 1993 1,625,500 $ 1.44 - 16.03
========= ==============
December 31, 1994 1,074,320 $ 1.44 - 16.03
========= ==============
</TABLE>
(5) COMMITMENTS AND CONTINGENCIES:
Leases-
The Company leases office space, apartments and office equipment under
noncancelable operating leases. Lease expense for each of the three years ended
December 31, 1994, 1993 and 1992 totaled $461,489, $308,625 and $842,512,
respectively. Future minimum lease payments as of December 31, 1994 are as
follows:
1995 $351,902
1996 200,171
1997 105,830
1998 73,258
1999 2,850
--------
$734,011
========
Royalties-
In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which consisted
of the patents underlying the Company's Bioadhesive Delivery System, other
patent applications and related technology, for $2,600,000, in the form of 9%
convertible debentures which were converted into 500,000 shares of the Company's
Common Stock during 1991, and $100,000 in cash. The Company also agreed to pay
Bio- Mimetics, Inc. a royalty equal to one percent of the net sales of products
based on the Bioadhesive Delivery System to an aggregate amount of $7,500,000.
In settlement of certain claims made by Bio-Mimetics, Inc. and the Company, the
royalty was increased to two percent effective July 1, 1992. In addition,
beginning in March 1995, the Company agreed to prepay a portion of the remaining
royalty obligation if certain conditions are met. The Company may not assign the
patents underlying the Bioadhesive Delivery System without the prior written
consent of Bio-Mimetics, Inc. until the aggregate royalties have been paid.
Until September 1993, Joseph Robinson, Ph.D., the developer of the Bioadhesive
Delivery System and a 50% owner of Bio-Mimetics, Inc., was the Vice
President-Pharmaceutical Development of the Company. The
-38-
<PAGE>
assets and revenues of Bio-Mimetics, Inc. prior to acquisition were not
significant to the financial statements of the Company.
In May 1989, the Company signed an exclusive agreement to license the U.S. and
Canadian marketing rights for Diasorb, a unique pediatric antidiarrheal product
formerly marketed by Schering-Plough Corporation. Under the terms of the
agreement, the Company is obligated to pay a royalty equal to 5% of the net
sales of Diasorb.
Employment Agreements-
The Company has employment agreements with certain employees, some of whom are
also stockholders of the Company. The terms of the employment agreements range
from one to five years. Future base compensation to be paid under these
agreements as of December 31, 1994 are as follows:
1995 $388,958
1996 147,083
1997 39,375
--------
$575,416
========
During 1993, the Company's shareholders approved an Incentive Compensation Plan
covering all employees pursuant to which an aggregate of 5% of pretax earnings
of the Company for any year will be awarded to designated employees of the
Company. As a result of the net loss, no amounts were awarded for 1994.
Manufacturing Equipment-
In 1991, the Company placed orders for approximately $2,700,000 of manufacturing
equipment. As of December 31, 1994 and 1993, $945,000 of this equipment was
completed and is included in machinery and equipment in the accompanying
consolidated balance sheets. Deposits on manufacturing equipment totalling
approximately $991,000 as of December 31, 1994 and 1993, are included in other
assets in the accompanying consolidated balance sheets.
Legal Proceedings-
Various claims and complaints have been filed or are pending against the Company
with respect to various matters. In the opinion of management and counsel, all
such matters are adequately reserved for or covered by insurance or, if not so
covered, are without any or have little merit or involve such amounts that if
disposed of unfavorably would not have a material adverse effect on the Company.
(6) OTHER RELATED-PARTY TRANSACTION:
During 1993, the Company loaned two individuals who are officers, directors and
stockholders of the Company an aggregate of $190,350. These notes, which bear
interest at 10% per annum, are due on or before December 7, 1996. The notes and
the related accrued interest, aggregating $211,219 and $192,184, respectively,
are included in other assets in the accompanying December 31, 1994 and 1993
consolidated balance sheets.
-39-
<PAGE>
(7) SEGMENT INFORMATION:
The Company and its subsidiaries are engaged in one line of business, the
development and sale of pharmaceutical products and cosmetics. One customer
accounted for approximately 27%, 29% and 32% of 1994, 1993 and 1992 consolidated
net sales, respectively. Another customer accounted for approximately 14% and
11%, respectively, of 1994 and 1993 consolidated net sales. The following table
shows selected information by geographic area:
<TABLE>
<CAPTION>
Net Loss from Identifiable
Sales Operations Assets
---------- ------------ -----------
<S> <C> <C> <C>
As of and for the year
ended December 31, 1994-
United States $7,681,985 $ (2,798,773) $3,153,159
Europe 1,087,079 (8,183,850) 5,254,405
---------- ------------ ----------
$8,769,064 $(10,982,623) $8,407,564
========== ============ ==========
As of and for the year
ended December 31, 1993-
United States $7,009,867 $(5,144,088) $12,045,089
Europe 1,140,360 (3,375,060) 5,563,597
---------- ----------- -----------
$8,150,227 $(8,519,148) $17,608,686
========== =========== ===========
As of and for the year
ended December 31, 1992-
United States $8,235,564 $(6,251,978) $ 4,783,501
Europe 937,478 (2,106,370) 5,049,653
--------- ----------- -----------
$9,173,042 $(8,358,348) $ 9,833,154
========== =========== ===========
</TABLE>
-40-
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
----
Report of Independent Certified Public Accountants S-2
Schedule VIII-Valuation and Qualifying Accounts and Reserves S-3
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Columbia Laboratories, Inc. and subsidiaries included in
this Form 10-K and have issued our report thereon dated February 24, 1995. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule VIII is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 24, 1995.
S-2
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Charged to
Balance at (credited to) Balance
beginning costs and at end
Description of period expenses Deductions of period
- ----------------------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful
accounts $110,015 $ 3,030 $(14,675) $ 98,370
======== ========= ======== ========
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful
accounts $106,624 $ 4,734 $ (1,343) $110,015
======== ========= ======== ========
YEAR ENDED DECEMBER 31, 1992:
Allowance for doubtful
accounts $297,352 $(113,977) $(76,751) $106,624
======== ========= ======== ========
</TABLE>
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
Date: March 24, 1995 By:/s/ NORMAN M. MEIER
-------------- -------------------
Norman M. Meier, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/s/ NORMAN M. MEIER President, Chief Executive March 24, 1995
- ------------------- Officer, Director
Norman M. Meier (Principal Executive Officer)
/s/ WILLIAM J. BOLOGNA Chairman of the Board of Directors March 24, 1995
- -------------------------
William J. Bologna
/s/ NICHOLAS A. BUONICONTI Vice Chairman of the Board of March 24, 1995
- -------------------------- Directors
Nicholas A. Buoniconti
/s/ MARGARET J. ROELL Vice President-Finance and March 24, 1995
- -------------------- Administration, Chief Financial
Margaret J. Roell Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
/s/ IRWIN L. KELLNER Director March 24, 1995
- --------------------
Irwin L. Kellner
/s/ JOHN E. A. KIDD Director March 24, 1995
- --------------------
John E. A. Kidd
Director March , 1995
- ----------------------
Lila E. Nachtigall
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Columbia Laboratories (Bermuda) Ltd.
Columbia Laboratories (France) SARL
Columbia Laboratories (UK) Limited
Columbia Laboratories (Ireland) Limited
Columbia Research Laboratories
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statements File Nos. 33-42323 and 33- 57176.
ARTHUR ANDERSEN LLP
Miami, Florida,
March 24, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 689,749
<SECURITIES> 0
<RECEIVABLES> 1,002,647
<ALLOWANCES> 98,370
<INVENTORY> 1,117,243
<CURRENT-ASSETS> 2,837,101
<PP&E> 1,480,547
<DEPRECIATION> 564,924
<TOTAL-ASSETS> 8,407,564
<CURRENT-LIABILITIES> 6,695,550
<BONDS> 6,217,649
<COMMON> 237,789
0
35
<OTHER-SE> (4,830,202)
<TOTAL-LIABILITY-AND-EQUITY> 8,407,564
<SALES> 8,769,064
<TOTAL-REVENUES> 8,769,064
<CGS> 5,539,424
<TOTAL-COSTS> 5,539,424
<OTHER-EXPENSES> 14,212,263
<LOSS-PROVISION> 3,030
<INTEREST-EXPENSE> 2,479,610
<INCOME-PRETAX> (13,393,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,393,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,393,889)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>