UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K/A
AMENDMENT NO. 1
[X] AMENDMENT TO 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
[ ] AMENDMENT TO 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:
$94,422,450
Number of shares of Common Stock of Columbia Laboratories, Inc. issued and
outstanding as of February 28, 1995: 25,070,411
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the fiscal year
ended December 31, 1994 on Form 10-K as set forth in the pages attached hereto:
Item 6. Selected Financial Data to reflect reclassification
of prepaid interest to debt discount in the 1993
consolidated balance sheet
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations to change prepaid
expense to debt discount in the second paragraph on
page 12
Item 8. Consolidated Balance Sheets and footnote 3 to reflect
reclassification of prepaid interest to debt discount
in the 1993 consolidated balance sheet
Footnote 1 to add disclosure regarding determination
of realizability of intangible assets and to expand
revenue recognition policy
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
Date July 17, 1995 By Margaret J. Roell
------------- -----------------
Margaret J. Roell
Vice President-Finance
and Administration, Chief
Financial Officer
Secretary and Treasurer
<PAGE>
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) $3,040 $(4,443) $ 1,542 $ (2,167)
Total assets 8,408 15,870 9,833 14,488 10,690
Long-term debt 6,218 5,474 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, debt discount 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 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
-12-
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
ASSETS
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 125,832 218,729
---------- -----------
Total current assets 2,837,101 9,735,370
---------- -----------
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 1,283,584
---------- -----------
$8,407,564 $15,870,051
========== ===========
</TABLE>
(Continued)
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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
and debt discount 6,217,649 5,473,838
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 $ 15,870,051
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<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-
<TABLE>
<CAPTION>
Intangible assets consist of the following:
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.
Following the acquisition of any intangible assets, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the intangible may warrant revision or that
the remaining balance of the intangible asset may not be recoverable. When
factors indicate that a trademark or patent may be impaired, the Company uses an
estimate of the underlying product's undiscounted net income, including amounts
to be received over the remaining life of the intangible from license fees,
royalty income, and related deferred revenues, in measuring whether the
intangible is recoverable. Unrecoverable amounts are charged to operations.
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
F-12
<PAGE>
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-
Sales are recorded as products are shipped and services are rendered. Royalties
and additional monies owed to the Company based on the strategic alliance
partners selling prices are recorded as revenue as sales are made by the
strategic alliance partners.
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 Feminesse(TM) 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
F-13
<PAGE>
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.
(3) LONG-TERM DEBT:
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31,
-------------------------------------
1994 1993
---------- ----------
<S> <C> <C>
10% notes payable $6,217,649 $7,250,000
Less-Debt discount - (1,738,635)
Less - Payments
due within one year - (37,527)
---------- ----------
$6,217,649 $5,473,838
========== ==========
</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, $1,738,635 is reflected as debt
discount 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, debt discount aggregating $1,738,635 has
been recorded as additional interest expense.
F-14
