SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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
MIAMI, FLORIDA 33133
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 860-1670
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___
Number of shares of the Common Stock of Columbia
Laboratories, Inc. issued and outstanding as of July 31, 1995:
25,679,354
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited, condensed consolidated financial
statements of the Company have been prepared in accordance with
the instructions to Form 10-Q and, therefore, omit or condense
certain footnotes and other information normally included in
financial statements prepared in accordance with generally
accepted accounting principles. In the opinion of management,
all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial information
for the interim periods reported have been made. Results of
operations for the six months ended June 30, 1995 are not
necessarily indicative of the results for the year ending
December 31, 1995.
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets-
Cash and cash equivalents $ 6,038,642 $ 689,749
Accounts receivable, net 1,011,768 904,277
Inventories 1,253,400 1,117,243
Prepaid expenses 184,117 125,832
----------- -----------
Total current assets 8,487,927 2,837,101
Property and equipment, net 805,494 915,623
Intangible assets, net 1,674,847 1,786,037
Other assets 1,292,356 1,268,803
----------- -----------
$12,260,624 $ 6,807,564
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities-
Current portion of long-term
debt $ 156,751 $ -
Accounts payable 3,560,662 3,707,966
Accrued expenses 761,586 1,059,960
Deferred revenue 1,335,445 1,540,549
Estimated liability for returns
and allowances 389,545 387,075
----------- -----------
Total current liabilities 6,203,989 6,695,550
----------- -----------
Long-term debt, net of current
portion - 6,217,649
Other long-term liabilities 92,563 86,743
Stockholders' equity-
Preferred stock, $.01 par value;
1,000,000 shares authorized;
Series A Convertible Preferred
Stock, 1,365 and 1,515 shares
issued and outstanding in 1995
and 1994, respectively 14 15
Series B Convertible Preferred
Stock, 1,750 and 2,000 shares
issued and outstanding in 1995
and 1994, respectively 18 20
Common stock, $.01 par value;
40,000,000 shares authorized;
25,648,354 and 23,778,897 shares
issued and outstanding in 1995
and 1994, respectively 256,484 237,789
Capital in excess of par value 71,339,245 64,206,507
Accumulated deficit (65,645,261) (70,853,356)
Cumulative translation
adjustment 13,572 216,647
----------- -----------
Total stockholders' equity
(deficit) 5,964,072 (6,192,378)
----------- -----------
$12,260,624 $ 6,807,564
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $6,083,866 $3,877,732 $2,878,500 $2,374,950
COST OF GOODS SOLD 3,197,014 2,029,088 1,565,201 1,325,359
----------- ----------- ----------- -----------
Gross profit 2,886,852 1,848,644 1,313,299 1,049,591
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling and distribution 1,448,463 1,077,567 804,688 592,564
General and administrative 1,572,054 1,573,311 919,764 786,887
Research and development 2,725,085 4,087,422 1,295,573 1,549,681
----------- ----------- ----------- -----------
Total operating expenses 5,745,602 6,738,300 3,020,025 2,929,132
----------- ----------- ----------- -----------
Loss from operations (2,858,750) (4,889,656) (1,706,726) (1,879,541)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
License fees, net 8,054,883 60,464 8,054,883 60,464
Interest income 40,205 37,144 34,418 16,209
Interest expense (140,750) (714,068) (69,181) (357,516)
Other, net 112,507 (64,844) (72,520) (43,865)
----------- ----------- ----------- -----------
8,066,845 (681,304) 7,947,600 (324,708)
----------- ----------- ----------- -----------
Net income (loss) $ 5,208,095 $(5,570,960) $ 6,240,874 $(2,204,249)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE $ .21 $ (.25) $ .25 $ (.10)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 25,123,000 22,199,000 25,313,000 22,232,000
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $5,208,095 $(5,570,960)
Adjustments to reconcile net income (loss) to net
cash used for operating activities-
Depreciation and amortization 255,658 213,269
Provision for doubtful accounts 38,384 16,382
Provision for returns and allowances 13,092 335,844
Interest expense - 347,770
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable (393,186) (51,074)
Inventories (136,159) 337,453
Prepaid expenses 201,090 267,432
Other assets (18,418) 18,626
Increase (decrease) in:
Accounts payable 40,352 1,634,050
Accrued expenses (203,383) (1,311,017)
Deferred revenue 54,882 (231,304)
Estimated liability for returns
and allowances (10,622) -
---------- -----------
Net cash provided by (used for) operating
activities 5,049,785 (3,993,529)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (29,177) (140,765)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable and
long-term debt (91,954) (37,527)
Proceeds from issuance of common stock 78,147 -
Proceeds from exercise of options and warrants 514,694 78,800
---------- -----------
Net cash provided by financing activities 500,887 41,273
---------- -----------
</TABLE>
(Continued)
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<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1995 1994
---------- -----------
<S> <C> <C>
EFFECT OF EXCHANGE RATE CHANGES ON CASH (172,602) 115,564
---------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,348,893 (3,977,457)
CASH AND CASH EQUIVALENTS,
beginning of period 689,749 5,280,829
---------- -----------
CASH AND CASH EQUIVALENTS,
end of period $6,038,642 $ 1,303,372
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 12,435 $ -
========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING AND FINANCING ACTIVITIES:
During the six months ended June 30, 1995, the Company
issued 1,695,232 shares of Common Stock in payment of long-term
debt and accrued interest totaling $6,339,409.
During the six months ended June 30, 1995, the Company
issued 50,000 shares of Common Stock in payment of legal fees
totaling $225,000. During the six months ended June 30, 1994, the
Company issued 5,008 shares of Common Stock in payment of
consulting fees totaling $27,000.
As of June 30, 1995, dividends on the Series A Preferred
Stock of $92,563 ($5,820 relating to the six months ended June
30, 1995) have been earned but have not been declared and are
included in other long-term liabilities in the June 30, 1995
condensed consolidated balance sheet.
See notes to condensed consolidated financial statements
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<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed for quarterly financial
reporting are the same as those disclosed in Note (1) of the
Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994. Certain prior year balances have been
reclassified to conform with current year presentation.
(2) 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.
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<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In May 1995, the Company entered into an exclusive
worldwide, except for South Africa, license and supply agreement
with American Home Product Corporation (AHP) under which the
Wyeth-Ayerst division of AHP will market Crinone/trademark/. Under the
terms of the agreement, the Company received a $6 million upfront
payment and will receive milestone payments and a significant
percentage of sales. A $2 million milestone payment was received
in June 1995, when Crinone was approved as a drug in the U.K.
As a result, cash and cash equivalents increased from approximately
$690,000 at December 31, 1994 to approximately $6 million at June 30, 1995.
During 1995, the Company repaid $6,339,409 of long-term
debt and accrued interest through the issuance of 1,695,232
shares of the Company's Common Stock.
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.
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<PAGE>
As a result, the Company recently introduced New Advanced
Formula Legatrin PM. Legatrin PM/trademark/, which does not contain quinine
sulfate, provides relief of occasional pain and sleeplessness
associated with minor muscle aches such as leg cramps; however,
it is not known at this time whether consumers will find Legatrin
PM as effective as Legatrin. 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. Sales of Legatrin represented approximately 49%, 48%
and 47% of the Company's net sales in 1994, 1993 and 1992,
respectively. 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 June 30, 1995, the Company has outstanding
exercisable options and warrants that, if exercised, would result
in approximately $11 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 - SIX MONTHS ENDED JUNE 30, 1995 VERSUS SIX
MONTHS ENDED JUNE 30, 1994
Sales have increased in 1995 as compared to 1994 primarily
as a result of Advantage 24/trademark/ now being available on drug store
shelves throughout the U.S., renewed sales activity from the
Company's OTC segment, including the introduction of Legatrin PM,
as well as revenue from a research agreement which began in late
1994. 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
significantly 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.
Selling and distribution expenses increased as a result of
costs associated with the introduction of Legatrin PM.
Research and development expenditures have decreased as a
result of the completion of a majority of the clinical studies
related to Crinone and Advantage 24.
9 of 13
<PAGE>
License fees, net includes $8 million received as upfront
and milestone payments in connection with the licensing agreement
with AHP.
The decrease in interest expense is primarily the result of
repayment of a portion of the 1993 Notes.
As a result, the net income for 1995 was $5,208,095 or $.21
per share as compared to a net loss in 1994 of $(5,570,960) or
$(.25) per common share.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995 VERSUS
THREE MONTHS ENDED JUNE 30, 1994
Sales have increased in 1995 as compared to 1994 primarily
as a result of Advantage 24/trademark/ now being available on drug store
shelves throughout the U.S., renewed sales activity from the
Company's OTC segment, including the introduction of Legatrin PM,
as well as revenue from a research agreement which began in late
1994. 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
significantly 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.
Selling and distribution expenses increased as a result of
costs associated with the introduction of Legatrin PM.
Research and development expenditures have decreased as a
result of the completion of a majority of the clinical studies
related to Crinone and Advantage 24.
License fees, net includes $8 million received as upfront
and milestone payments in connection with the licensing agreement
with AHP.
The decrease in interest expense is primarily the result of
repayment of a portion of the 1993 Notes.
As a result, the net income for 1995 was $6,240,874 or $.25
per share as compared to a net loss in 1994 of $(2,204,249) or
$(.10) per common share.
10 of 13
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. 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. This Action was settled as of May 13, 1995. In
connection therewith, the Company issued Piguet a warrant
to purchase 300,000 shares of Common Stock at $5.31 per
share, exercisable through May 13, 1998.
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. The Related Actions were
settled on May 31, 1995, through the payment of $51,000 to
Mr. ffrench.
Certain 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.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
As of August 7, 1995, dividends on the Series A
Preferred Stock of $93,849 have been earned but have
not been declared.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was
held on July 20, 1995 for the purpose of electing six
directors and ratifying the appointment of Arthur
Andersen LLP as independent public accountants for the
Company.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
/S/ MARGARET J. ROELL
----------------------------------
MARGARET J. ROELL, Vice President-
Finance and Administration,
Chief Financial Officer
DATE: August 7, 1995
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,038,642
<SECURITIES> 0
<RECEIVABLES> 1,148,522
<ALLOWANCES> 136,754
<INVENTORY> 1,253,400
<CURRENT-ASSETS> 8,487,927
<PP&E> 1,518,128
<DEPRECIATION> 712,634
<TOTAL-ASSETS> 12,260,624
<CURRENT-LIABILITIES> 6,203,989
<BONDS> 0
<COMMON> 256,484
0
32
<OTHER-SE> 5,707,556
<TOTAL-LIABILITY-AND-EQUITY> 12,260,624
<SALES> 6,083,866
<TOTAL-REVENUES> 6,083,866
<CGS> 3,197,014
<TOTAL-COSTS> 3,197,014
<OTHER-EXPENSES> 5,745,602
<LOSS-PROVISION> 38,384
<INTEREST-EXPENSE> 140,750
<INCOME-PRETAX> 5,208,095
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,208,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,208,095
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
