UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K/A
AMENDMENT NO. 2
[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 the writeoff of
other investment when acquired in 1993
Item 8. Consolidated Financial Statements and footnotes 1 and
7 to reflect the writeoff of other investment when
acquired in 1993
Footnote 1 to add disclosure regarding revenue
recognition policy for license fees
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 August 21, 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 (12,994) (10,453) (8,536) (14,548) (16,337)
Loss per common share (.58) (.49) (.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) $2,888 $(4,443) $ 1,542 $ (2,167)
Total assets 6,808 13,870 9,833 14,488 10,690
Long-term debt 6,218 5,474 58 1,692 123
Stockholders' equity (deficiency) (6,192) 1,475 (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>
<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 ASSETS 1,268,803 1,283,584
---------- -----------
$6,807,564 $13,870,051
========== ===========
</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 (70,853,356) (57,859,467)
Cumulative translation adjustment 216,647 186,210
------------ ------------
Total stockholders' equity (deficit) (6,192,378) 1,474,888
------------ ------------
$ 6,807,564 $ 13,870,051
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<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 8,976,047 5,290,912 3,129,026
Lease termination cost - 238,282 1,000,000
------------ ------------ -----------
Total operating expenses 13,812,263 11,591,559 12,203,931
------------ ------------ -----------
Loss from operations (10,582,623) (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)
Purchase of option - (2,000,000) -
Other, net (167,427) (152,689) 65,610
------------ ------------ -----------
(2,411,266) (1,933,835) (177,588)
------------ ------------ -----------
Net loss $(12,993,889) $(10,452,983) $(8,535,936)
============ ============ ===========
NET LOSS PER COMMON SHARE $ (.58) $ (.49) $ (.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.
F-5
<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 - - - - - - - (10,452,983) - (10,452,983)
----- ---- ------ ----- ---------- -------- ----------- ------------ --------- -----------
BALANCE,
December 31,
1993 1,915 19 7,750 77 22,155,906 221,559 58,926,490 (57,859,467) 186,210 1,474,888
</TABLE>
(Continued)
F-6
<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 $(57,859,467) $186,210 $ 1,474,888
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 - - - - - - - (12,993,889) - (12,993,889)
----- ---- ------ ----- ---------- -------- ----------- ------------ --------- ------------
BALANCE,
December 31,
1994 1,515 $ 15 2,000 $ 20 23,778,897 $237,789 $64,206,507 $(70,853,356) $216,647 $ (6,192,378)
===== ==== ====== ===== ========== ======== =========== ============ ========= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<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 $(12,993,889) $(10,452,983) $(8,535,936)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 440,496 496,984 568,669
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) 1,579,201 (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 (8,675,132) (10,391,336) (6,869,173)
----------- ------------ ------------
</TABLE>
(Continued)
F-8
<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)
Proceeds from sale of investment - 25,817 53,653
---------- ------------ ---------
Net cash used in investing activities (275,210) (92,206) (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)
F-9
<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.
Adjustment of Prior Years' Financial Statements-
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, which in accordance with SFAS No. 2, should have been expensed when
acquired in 1993. As a result, the Company has restated net income (loss) for
1993, 1994 and 1995.
The effect of the restatement is to increase 1993 net loss by $2 million or
$(.09) per share and decrease 1994 net loss $400,000 or $.01 per share. The
effect on the 1994 and 1995 per share quarterly amounts is immaterial.
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>
F-11
<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.
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.
License Fees-
License fees, net of related expenses, are recognized as other income when the
Company has no further obligations with respect to the payments and thus the
earnings process is complete.
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>
(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 (7,783,850) 3,654,405
---------- ------------ ----------
$8,769,064 $(10,582,623) $6,807,564
========== ============ ==========
As of and for the year
ended December 31, 1993-
United States $7,009,867 $(5,144,088) $10,306,454
Europe 1,140,360 (3,375,060) 3,563,597
---------- ----------- -----------
$8,150,227 $(8,519,148) $13,870,051
========== =========== ===========
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>
F-18
