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, 1997
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. [ ]
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, 1998:
$306,729,172.
Number of shares of Common Stock of Columbia Laboratories, Inc. issued
and outstanding as of February 28, 1998: 28,664,187.
<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
unique pharmaceutical products that treat female specific diseases and
conditions including menopause, fertility, contraception, sexually transmitted
diseases, premenstrual syndrome and dysmenorrhea. 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 has focused on women's health care because of the
significant number of women 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 6 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) SA ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia
UK"), Columbia Laboratories (Ireland) Limited ("Columbia Ireland") and Columbia
Research Laboratories, Inc. ("Columbia Research").
Except for historical information contained herein, the matters
discussed in this document are forward looking statements made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products and prices, and other factors discussed
elsewhere in this report.
PRODUCTS
CRINONE(R). The Company's first prescription drug is a sustained
release, vaginally delivered, natural progesterone product. Crinone utilizes the
Company's patented Bioadhesive Delivery System which enables the progesterone to
achieve a "First Uterine Pass Effect"(C). Crinone is the first product to
deliver progesterone directly to the uterus, thereby maximizing therapeutic
benefit and avoiding side effects seen with orally-delivered synthetic
progestins.
In May 1997, the Company received U.S. marketing approval for Crinone
from the U.S. Food and Drug Administration ("FDA") for use as a progesterone
supplementation or replacement as part of an Assisted
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Reproductive Technology (ART) treatment for infertile women with progesterone
deficiency. In July 1997, the Company received U.S. marketing approval for
Crinone from the FDA for the treatment of secondary amenorrhea (loss of
menstrual period).
Outside the U.S., Crinone has been approved for marketing for one or
more medical indications in the following countries: the United Kingdom,
Ireland, Finland, Argentina, Greece, Mexico, Colombia, Belgium, Italy, Germany
and France. The medical indications include the treatment of secondary
amenorrhea, progesterone supplementation or replacement as part of an ART
treatment for infertile women, the prevention of hyperplasia and endometrial
cancer in post-menopausal women receiving hormone replacement therapy ("HRT"),
the reduction of symptoms of premenstrual syndrome ("PMS"), menstrual
irregularities, dysmenorrhea and dysfunctional uterine bleeding.
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP will market
Crinone. Under the terms of the agreement, the Company has earned $17 million in
milestone payments to date and will continue to receive additional milestone
payments. The Company also supplies Crinone to AHP at a price equal to 30% of
AHP's net selling price.
ADVANTAGE 24(R). Advantage 24, the Company's 24 hour sustained release
contraceptive gel ("Product"), is sold in Canada by Roberts Pharmaceuticals.
Advantage 24 was marketed in the United States by Lake Consumer Products, Inc.
("Lake"), under an existing monograph for nonoxynol-9 spermicidal products. In
July 1997, the FDA alleged that the monograph did not permit a claim for 24-hour
effectiveness. Although, the Company believes that its claim for 24-hour
effectiveness is valid, it agreed with the FDA in February 1998 to market the
Product without a claim for 24-hour effectiveness. During the period in which
the Company was disputing the FDA allegations, the Company terminated its
license agreement with Lake. Advantage 24 sales in 1997 represented 3% of
consolidated net sales.
Among Advantage 24's benefits is that utilizes 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. In Europe, the Company intends to register Advantage 24 as an
over-the-counter drug.
Additionally, the United Nations Global Program on AIDS (formerly known
as the World Health Organization Global Program on AIDS) has completed a 600
women safety study on Advantage 24. Analysis of the data generated indicates
that Advantage 24, as used in the study, was free of any serious side effects.
In addition, Advantage 24 was shown to be safer than any other nonoxynol-9
product studied. Studies to determine the efficacy of Advantage 24 in preventing
the heterosexual transmission of HIV and other STD's have recently begun in a
National Institutes of Health sponsored study in Kenya. Additional U.N. studies
are underway in Thailand, India and the Ivory Coast.
REPLENS(R). Replens replenishes vaginal moisture on a sustained basis
and relieves the discomfort associated with vaginal dryness. Replens was the
first product utilizing the Bioadhesive Delivery System. Replens is marketed by
various pharmaceutical companies throughout the world.
OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin
PM(R), for the relief of occasional pain and sleeplessness associated with minor
muscle aches such as night leg cramps; Vaporizer in a bottle(R), a portable
cough suppressant for the temporary relief of a cough due to the common cold;
and Diasorb(R), a pediatric antidiarrheal product. These products do not utilize
the Bioadhesive Delivery System.
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RESEARCH AND DEVELOPMENT
The Company expended $9.1 million in 1997, $10.9 million in 1996 and
$7.8 million in 1995, on research and development activities. The 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.
SPC3 (SYNTHETIC POLYMERIC CONSTRUCTION #3). 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. In May 1996, this agreement was amended such that the
Company now has the right to obtain an exclusive license to the worldwide
rights. A phase I/II clinical trial in humans is now underway in the U.S. The
purpose of this trial is to determine the optimal dosage of SPC3 in late stage
seropositive patients. The options, which must be exercised upon the occurrence
of certain events, expire in December 1998. Upon exercise of the options, the
Company will be required to pay an additional $7 million. If the Company does
not exercise its options upon the occurrence of certain events, the Company's
rights to the options are terminated.
PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION
The Company purchased the patents underlying the Bioadhesive Delivery
System from Bio-Mimetics, Inc. ("Bio-Mimetics"). 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. 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."
During 1997, the Company was granted a United States patent covering
the technology used in its product Advantage 24, which potentiates the activity
of nonoxynol-9 against various organisms which can cause sexually transmitted
diseases, including AIDS, gonorrhea, chlamydia, trichomonal infections, syphilis
and genital herpes.
During 1996, the Company was granted United States patents covering
vaginal moisturization and the direct transport of progesterone to the uterus.
In addition, a patent covering the treatment of ischemia through the delivery of
Crinone was filed in the United States. The Company is continuing to develop the
core Bioadhesive Delivery System and has filed additional patent applications
covering tissue moisturization, vaginal moisturization and progesterone
delivery. 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.
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 filed "Replens", "Advantage 24" and "Crinone" as
trademarks in countries throughout the world. Applications for the registration
of trademarks do not ensure the ultimate registration of these marks. The
Company believes these marks will be registered. In addition, there can be no
assurance that such trademarks will afford the Company adequate protection or
that the Company will have the financial resources to enforce its rights under
such trademarks.
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
4
<PAGE>
be no assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.
5
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MANUFACTURING
Crinone, Advantage 24 and Replens are currently being manufactured and
packaged by third-party manufacturers in Europe utilizing the "form, fill and
seal" single step manufacturing process.
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
The Company currently markets three over-the-counter drugs: Advanced
Formula Legatrin PM, 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 cough
suppressant. 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, mass
merchandisers and chain drug stores. The Company utilizes approximately 20 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 consumer publications and
convention participation.
SALES
The following table 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, 1997.
1997 1996 1995
---- ---- ----
Crinone 68% -- --
Replens 10 12% 30%
Advantage 24 3 18 5
Legatrin PM/Legatrin 15 55 52
Other products 4 15 13
--- --- ---
100% 100% 100%
=== === ===
The Company anticipates the percentage of sales attributable to Legatrin PM and
the other products to decrease in future years as additional products utilizing
the Bioadhesive Delivery System are introduced. AHP accounted for approximately
68% of 1997 consolidated net sales and Warner-Lambert accounted for
approximately 5% and 21% of 1997 and 1995 consolidated net sales, respectively.
A retail customer accounted for approximately 5%, 18% and 16% of 1997, 1996 and
1995 consolidated net sales, respectively. Another customer accounted for
approximately 3%, 13% and 5% of 1997, 1996 and 1995 consolidated net sales,
respectively.
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COMPETITION
While the Company has entered into the strategic alliance agreements
for the marketing of its women's health care products, 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.
Crinone, although a natural progesterone product, competes in markets
with other progestins, both synthetic and natural, which may be delivered
orally, by injections or by suppositories. Some of the more successful orally
dosed products include Provera marketed by the Upjohn Company and Prempro and
Premphase marketed by AHP. 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(R)
and Gyne-Moisturin(R), 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(R)
competes 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.
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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 $15 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 January 31, 1998, the Company had 38 employees, 4 in management,
16 in research and development administration, 4 in manufacturing, 4 in
marketing, and 10 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."
ITEM 2. PROPERTIES
As of January 31, 1998, 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 August 1998 $ 95,000
Paris, France Research admin office 9,500 April 1999 330,000
Paris, France Business residence 2,000 June 2001 70,000
New York, NY Residential office 1,000 April 1998 44,000
Rockville Center, NY Research admin office 1,400 October 2000 35,000
</TABLE>
On January 16, 1998, the Company signed a lease for space to replace the current
space in Miami, FL when the lease expires in August 1998. The new lease is for
4,500 square feet in Aventura, FL at an annual rent of $107,520. The lease
begins on July 1, 1998 and ends on June 30, 2003.
ITEM 3. LEGAL PROCEEDINGS
Certain law suits have been filed against the Company. 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
None
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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.
HIGH LOW
FISCAL YEAR ENDED DECEMBER 31, 1996 ------ -----
- -----------------------------------
First Quarter $12.38 $7.14
Second Quarter 15.13 10.00
Third Quarter 14.50 9.88
Fourth Quarter 15.25 10.88
FISCAL YEAR ENDED DECEMBER 31, 1997
- -----------------------------------
First Quarter $17.13 $12.13
Second Quarter 19.50 10.25
Third Quarter 20.13 15.63
Fourth Quarter 18.88 12.25
At February 28, 1998, there were 447 shareholders of record of the
Company's Common Stock, although the Company estimates that there are
approximately 6,000 beneficial owners, 2 shareholders of record of the Company's
Series A Convertible Preferred Stock ("Series A Preferred Stock") and 3
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, 1997, dividends of $116,781 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, 1997 (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,
1997 1996 1995 1994 1993
-----------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: (000'S)
<S> <C> <C> <C> <C> <C>
Net sales $ 16,547 $ 5,646 $ 9,905 $ 8,769 $ 8,150
Net income ( loss) (1) 763 (13,079) (959) (12,994) (10,453)
Income (loss) per common share 0.03 (0.47) (0.04) (0.58) (0.49)
Weighted average number
of common shares outstanding 29,982 27,615 25,487 22,530 21,380
Balance Sheet Data: (000's)
Working capital (deficiency) $ 5,140 $ 720 ($ 1,968) ($ 3,858) $ 2,888
Total assets 15,002 9,980 7,687 6,808 13,870
Long-term debt -- -- -- 6,218 5,474
Stockholders' equity (deficit) 8,814 4,673 1,556 (6,192) 1,475
<FN>
- -------------
(1) 1997, 1996 and 1995 net income (loss) are net of approximately $7.0 million,
$2.0 million and $8.1 million, respectively, of license fee income.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Management's Discussion and Analysis of Financial Conditions and
Results of Operations contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. Additional information on factors that may affect
the business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission. All forward-looking
statements should be considered in light of these risks and uncertainties.
Cash and cash equivalents decreased from approximately $3.6 million at
December 31, 1996 to approximately $2.3 million at December 31, 1997. The
Company received approximately $3 million from the exercise of options and
warrants. This was offset by approximately $3.3 million of net cash used in
operations and approximately $1 million used to purchase property and equipment.
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP will market
Crinone. Under the terms of the agreement, as of January 31, 1998, the Company
has earned $17 million in milestone payments and will continue to receive
additional milestone payments. The Company also supplies Crinone to AHP at a
price equal to 30% of AHP's net selling price.
In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary
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<PAGE>
amenorrhea (loss of menstrual period). In November 1996, the Company submitted a
second NDA for clearance to market Crinone for use in Assisted Reproductive
Technologies ("ART") procedures, including in-vitro fertilization, ovum donation
and stimulated cycles. The FDA granted the ART filing a priority review. In
addition, in February 1997, the FDA approved the Company's Treatment Protocol
under its Investigational New Drug Application ("IND") for the use of Crinone in
assisted fertility procedures. As a result, through leads generated by the
Wyeth-Ayerst institutional sales force, the Company has begun distributing
Crinone to leading infertility clinics throughout the United States.
In May 1997, the Company received U.S. marketing approval for Crinone
from the FDA for use as a progesterone supplementation or replacement as part of
an Assisted Reproductive Technology (ART) treatment for infertile women with
progesterone deficiency. In July 1997, the Company received U.S. marketing
approval for Crinone from the FDA for the treatment of secondary amenorrhea
(loss of menstrual period).
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. In May 1996, this agreement
was amended such that the Company now has the right to obtain an exclusive
license to the worldwide rights. A phase I/II clinical trial in humans is now
underway in the U.S. The purpose of this trial is to determine the optimal
dosage of SPC3 in late stage seropositive patients. The options, which must be
exercised upon the occurrence of certain events, expire in December 1998. Upon
exercise of the options, the Company will be required to pay an additional $7
million. If the Company does not exercise its options upon the occurrence of
certain events, the Company's rights to the options are terminated.
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. Through December 31, 1997 the Company has paid approximately 1.2
million in royalty payments.
The Company believes that sales and liquidity will increase when
Crinone is fully marketed by Wyeth-Ayerst which will commence in the first
quarter of 1998.
As of December 31, 1997, the Company has outstanding exercisable
options and warrants that, if exercised, would result in approximately $18
million of additional capital. However, there can be no assurance that such
options or warrants will be exercised.
Significant expenditures anticipated by the Company in the near future
are concentrated on research and development related to new products. The
Company anticipates it will spend approximately $10.1 million on research and
development in 1998 and an additional $200,000 on production equipment at its
suppliers.
As of December 31, 1997, the Company had available net operating loss
carryforwards of approximately $45 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Accounting Standards No. 109,
as of December 31, 1997 and 1996, other assets in the accompanying consolidated
balance sheet include deferred tax assets of approximately $16 million and $18
million, respectively, (comprised primarily of a net operating loss
carryforward) which have been fully reserved as their ultimate realizability is
not assured.
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RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1997 VERSUS DECEMBER 31, 1996
VERSUS DECEMBER 31, 1995
Sales increased by 193% to $16.5 million in 1997 as compared to $5.6
million in 1996 because of the sales of Crinone which amounted to $11.2 million
in 1997. Crinone sales began in June 1997.
Sales decreased by 43% to $5.6 million in 1996 as compared to $9.9
million in 1995 because Warner-Lambert did not order any Replens during 1996,
combined with the fact that 1995 sales included the initial stocking orders of
Legatrin PM.
Gross profit as a percentage of sales was 59.9% in 1997 as compared to
37.7% in 1996 primarily as the result of the sales of Crinone which has a higher
gross profit percentage than the existing group of products. Gross profit as a
percentage of sales was 45.2% in 1995 as compared to 37.7% in 1996 primarily as
a result of a change in product mix sold. Specifically, 1995 sales includes
approximately $600,000 of revenue from a research agreement which agreement had
a higher gross profit than that earned on the sale of the Company's
pharmaceutical products. No similar revenues were recorded in 1996.
Selling and distribution expenses decreased slightly in 1997 to $2.9
million after having increased slightly in 1996 to $3.0 million from $2.9
million in 1995. The Company's strategic alliance partners are responsible for
all marketing and distribution costs of Crinone, Advantage 24 and Replens in
their territories. There can be no assurance that any of the companies with whom
the Company has entered into these agreements will aggressively or successfully
market the products. 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.
Research and development expenditures decreased in 1997 to $9.1 million
as compared to $10.9 million in 1996, as the number of Crinone studies
decreased. Research and development expenditures increased to 10.9 million in
1996 as compared to $7.8 million in 1995 primarily as a result of costs incurred
in connection with the pivotal studies required for filing the New Drug
Applications in the United States associated with Crinone.
License fees of $7.0 million in 1997, $2.0 million in 1996 and $8.1
million in 1996 primarily represent upfront and milestone payments received in
connection with the licensing agreement with AHP.
Interest income in 1997 decreased because of the lower average cash
balance. Interest income increased in 1996 as a result of interest earned on the
monies received in the private placement completed in March 1996.
Interest expense decreased in 1995 primarily as a result of the
repayment of debt in late 1994 and early 1995 through the issuance of Common
Stock.
As a result, net income for 1997 was $762,906 or $.03 per share as the
net loss for 1996 of $13,078,984 or $.47 per share as compared to the net loss
in 1995 of $959,472 or $.04 per share.
IMPACT OF THE YEAR 2000
The Company has assessed and continues to assess the impact of the year
2000 issue on its operations, including the development and implementation of
project plans and cost estimates required to make its information system
infrastructure Year 2000 compliant. Based on existing information, the Company
believes the anticipated spending necessary to become Year 2000 compliant will
not have a material effect on the financial position, cash flows or results of
operations of the Company, nor will the Year 2000 issues cause any material
adverse effect on the future business operations of the Company.
12
<PAGE>
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.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and directors of the Company as of February 28,
1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William J. Bologna 55 Chairman of the Board
Nicholas A. Buoniconti 57 Vice Chairman of the Board and Chief Operating Officer
Norman M. Meier 58 President, Chief Executive Officer and Director
David L. Weinberg 52 Vice President--Finance and Administration, Chief Fnancial Officer,
Secretary and Treasurer
Dominique de Ziegler, M.D. 50 Vice President--Pharmaceutical Development and
Director
Howard L. Levine, Pharm. D. 43 Vice President--Research and Development
Annick Blondeau, Ph.D. 52 Vice President--Regulatory Affairs
Jean Carvais, Ph.D. 70 Director
Irwin L. Kellner, Ph.D. 59 Director
Lila E. Nachtigall, M.D. 64 Director
Robert C. Strauss 56 Director
</TABLE>
14
<PAGE>
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, from 1980 to 1991, he was 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. 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 Fordham 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. and The Sports Authority.
NORMAN M. MEIER has been President, Chief Executive Officer and a
director of the Company since inception. 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.
DAVID L. WEINBERG has been Vice President--Finance and Administration,
Chief Financial Officer, Treasurer and Secretary of the Company from September
1997 to the present and previously from the inception of the Company to June
1991. From October 1991 until September 1997, Mr. Weinberg was employed by
Transmedia Network Inc., a company specializing in consumer savings programs,
where he served in various capacities including Vice President and Chief
Financial Officer. From February 1981 until August 1986, Mr. Weinberg worked for
Key Pharmaceuticals, Inc., a company engaged in the development, manufacturing,
marketing and sales of pharmaceuticals until its sale to Schering-Plough
Corporation. Mr. Weinberg served in various capacities including Vice President
- - Finance, Treasurer and Secretary. Mr. Weinberg received a B.B.A. in Accounting
from Hofstra University in 1968.
DOMINIQUE DE ZIEGLER, M.D. has been Vice President--Pharmaceutical
Development of the Company since January 1996 and a director since January 1998.
Dr. de Ziegler has been employed by the Company since 1992 as Director of
Research Development. In addition, from 1988 through 1991, Dr. de Ziegler was an
Associate Professor at the Department of Obstetrics and Gynecology, Hospital A.
Beclere in Clamart, France. In 1990, Dr. de Ziegler became a Diplomat of the
American Board of Obstetrics and Gynecology, Reproductive Endocrinology and
Infertility. Dr. de Ziegler is a member of the American Fertility Society, the
American Society for Reproductive Endocrinogolists, The American Endocrine
Society, the Society of Gynecologic Investigation and the Association Francaise
poour l'Etude de la Menopause. Dr. de Zeigler has also been a journal editor and
an "ad hoc" reviewer for Fertility Sterility, Human Reproduction, The Journal of
In Vitro Fertilization and Embryo Transfer, Contraception Fertilite Sexualite
and Reproduction Humaine et Hormone.
15
<PAGE>
HOWARD L. LEVINE, Pharm.D. has been Vice President-Research and
Development since September, 1997. Dr. Levine has been employed by the Company
since 1990. Prior to joining the Company, Dr. Levine was with the Medical
Department of Pfizer Labs. Dr. Levine has held faculty and clinical practice
positions at the University of Southern California, Long Island University and
Duquesne University. He has instructed both pharmacy and medical students in
clinical pharmacology, as well as providing numerous lectures for the continuing
education of practitioners. Dr. Levine received his B.S. in Pharmacy from Oregon
State University and Doctor of Pharmacy degree from the State University of New
York at Buffalo in 1980.
ANNICK BLONDEAU, Ph. D. has been Vice President--Regulatory Affairs
since June 1996. Dr. Blondeau has been employed by the Company since 1993 as
Director of Regulatory Affairs. From 1984 through 1993, Dr. Blondeau was
responsible for all of the international filings for Debat Centre R&D Garches, a
large French pharmaceutical company. Dr. Blondeau also worked at Pfizer as Head
of the Pharmacology Department. Dr. Blondeau received her doctorate in
pharmacology and physiology from the Faculte des Sciences de Potiers France in
1971.
JEAN CARVAIS, Ph.D. has been a director of the Company since October
1996. Since 1984, Dr. Carvais has been an independent consultant in the
pharmaceutical industry. Prior to that time, Dr. Carvais was President of The
Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer.
As such, he was involved in the development of a line of anti-cancer drugs,
including Bleomycin and Adriamycin, as well as a new line of antibiotics and
quinolones. Following the acquisition of Roger Bellon, S.A., Dr. Carvais became
a member of Rhone-Poulenc's central research committee which directs the
company's worldwide research and development activities. Dr. Carvais is also a
director of Imclone Systems Incorporated.
IRWIN L. KELLNER, Ph.D. has been a director of the Company since May
1988. In September 1997, Dr. Kellner became the Augustus B. Weller Distinguished
Chair of Economics at Hofstra University. He has also been an independent
consultant since March 1997. From April 1996 through February 1997, Dr. Kellner
was the Chief Economist for Chase Manhattan's Regional Bank. From June 1980
through March 1996, Dr. Kellner was the Chief Economist for both Chemical Bank
and Manufacturers Hanover, Chase's predecessor organizations. He was employed by
the Bank since 1970. Dr. Kellner serves on several corporate boards, including
International Bioimmune Systems and Universal Heights. He also belongs to a
number of pro bono boards, including the North Shore Health System, the Don
Monti Memorial Research Foundation, the Epilepsy Foundation of Long Island, the
Barry Z. Levine School of Health Sciences, the Children's AIDS Network, the
Nassau County Council of the Boy Scouts of America, and the Greenwich Institute
for American Education. Among his awards is a Doctor of Humane Letters bestowed
by Hofstra University and a Doctor of Laws conferred by St. Joseph's College. He
has also received the Distinguished Leadership Award in Health Education from
the Barry Z. Levine School, and the Human Relations Award from the American
Jewish Committee.
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.
ROBERT C. STRAUSS has been a director of the Company since January
1997. In December 1997, Strauss accepted the position of President & Chief
Executive Officer of Noven Pharmaceuticals, Inc. Prior to joining Noven, Strauss
was President, Chief Executive Officer and Chairman of the Board of Cordis
Corporation. In the past he has held senior positions at Ivax Corporation,
Touche-Ross & Company and Food Fair, Inc. Mr. Strauss received undergraduate and
graduate degrees in physics and serves on the Board of Trustees for the
University of
16
<PAGE>
Miami. Mr. Strauss holds a position on the Board of Directors of several
companies including CardioGenesis Corporation, American Bankers Insurance Group
and the Florida High Tech and Industry Council. Mr. Strauss also devotes his
time to many civic duties, namely, the United Way of Miami-Dade County.
During 1997, all filings of Forms 3, 4 and 5 were made on a timely
basis.
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 four other executive officers,
other than the CEO, whose salary and bonus exceeded $100,000 for the most recent
fiscal year (collectively, the "Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS (1)
- --------------------------- ---- -------- -----------
<S> <C> <C> <C>
Norman M. Meier 1997 $301,000 250,000
President and Chief 1996 250,000 150,000
Executive Officer 1995 218,000 50,000
William J. Bologna 1997 294,000 250,000
Chairman of the Board 1996 250,000 150,000
1995 218,000 50,000
Nicholas A. Buoniconti 1997 237,000 400,000
Vice Chairman and 1996 200,000 --
Chief Operating Officer 1995 167,500 50,000
Dominique de Ziegler 1997 221,800 25,000
Vice President- 1996 203,500 15,000
Pharmaceutical 1995 203,500 25,000
Development
Annick Blondeau 1997 136,300 25,000
Vice President- 1996 128,400 40,000
Regulatory Affairs 1995 111,200 25,000
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS DURING 1997
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED IN 1997 ($/SH) DATE VALUE (1)
- ---- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Norman M. Meier 250,000 19% $14.88 2/3/2007 $1,546,425
William J. Bologna 250,000 19% 14.88 2/3/2007 1,546,425
Nicholas A. Buoniconti 250,000 19% 15.00 2/28/2007 1,583,275
150,000 12% 11.88 4/15/2007 369,735
Dominique de Ziegler 25,000 2% 14.88 2/3/2007 154,652
Annick Blondeau 25,000 2% 14.88 2/3/2007 154,652
<FN>
- ------------------
(1) 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 equal to the fair market value of the
underlying stock on the date of grant, (ii) an option term of three
years, (iii) an interest rate of 6% that represents the interest rate
on a U.S. Treasury security with a maturity date corresponding to that
of the expected option term, (iv) volatility of 60% 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>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES DURING 1997 AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE DECEMBER 31, 1997 DECEMBER 31, 1997
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Meier - $ - 550,000 370,000 $ 6,962,100 $1,787,800
William J. Bologna - - 550,000 370,000 6,870,000 1,419,400
Nicholas A. Buoniconti - - 960,000 400,000 12,451,700 1,468,000
Dominique de Ziegler - - 95,000 25,000 999,800 65,500
Annick Blondeau - - 80,000 25,000 648,050 65,500
</TABLE>
18
<PAGE>
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into five-year employment
agreements with each of William J. Bologna and Norman M. Meier, to serve as
Chairman and President of the Company, respectively. Pursuant to their
respective employment agreements, each such employee is entitled to a base
salary of $250,000. In addition, each such employee was granted options to
purchase 150,000 shares of the Company's Common Stock at an exercise price of
$7.25. 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. The employment agreements were amended effective September 15, 1997 to
increase the base salary to $400,000.
In April 1997, the Company entered into a four-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 $200,000. As additional compensation, Mr. Buoniconti
was granted an option to purchase 150,000 shares of the Company's Common Stock
at an exercise price of $11.88 per share, which option vests over four 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. The
employment agreement was amended effective September 15, 1997 to increase the
base salary to $300,000.
In July 1995, the Company entered into a three-year employment
agreement with Dominique de Ziegler, to serve as Director of Research
Development. Pursuant to this agreement, Dr. de Ziegler is paid an annual salary
of $203,500. As additional compensation, Dr. de Ziegler was granted options to
purchase 25,000 shares of the Company's Common Stock at an exercise prices of
$7.25 per share. Pursuant to the terms of such agreement, Dr. de Ziegler 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. For the calendar year 1997, Dr. de Ziegler's salary was increased to
$221,800.
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 of grant.
19
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1998, 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 (3) 1,655,800 5.6%
William J. Bologna (2) 2,738,632 9.3%
Nicholas A. Buoniconti (3) 1,327,500 4.4%
David L. Weinberg - *
Dominique de Ziegler (3) 120,000 *
Annick Blondeau (3) 105,000 *
Howard L. Levine 150,000 0.1%
Jean Carvais 11,000 *
Irwin L. Kellner (3) 113,500 *
Lila E. Nachtigall (3) 34,000 *
Robert C. Strauss 13,000 *
Officers and directors as a group (11 people) 6,268,432 19.5%
* 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 830,000 shares issuable upon
exercise of options, which are currently exercisable or which may be
acquired within 60 days. Includes 198,062 shares beneficially owned by
Mr. Bologna's spouse.
(3) Includes shares issuable upon exercise of options, which are currently
exercisable or which may be acquired within 60 days, to purchase
830,000 shares with respect to Mr. Meier, 1,247,500 shares with respect
to Mr. Buoniconti, 120,000 shares with respect to Dr. de Ziegler,
105,000 shares with respect to Dr. Blondeau, 150,000 shares with
respect to Dr. Levine, 11,000 shares with respect to Dr. Carvais,
74,000 shares with respect to Dr. Kellner, 34,000 shares with respect
to Dr. Nachtigall and 12,000 shares with respect to Mr. Strauss.
As of January 31, 1998, the Company knows of no persons other than
shown above who beneficially own or exercise voting or dispositive control over
5% or more of the Company's outstanding 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, were due on or before December 7, 1996. The
due dates of these notes have subsequently been extended through December 7,
1999. At December 31, 1997, the balances including interest are $112,526 and
$179,026, respectively.
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 Company (1)
10.1 -- Employment Agreement dated as of January 1, 1996, between the
Company and Norman M. Meier (7)
10.2 -- Employment Agreement dated as of January 1, 1996, between the
Company and William J. Bologna (7)
10.3 -- 1988 Stock Option Plan, as amended, of the Company5
10.4 -- 1996 Long-term Performance Plan (8)
10.5 -- License and Supply Agreement between Warner-Lambert Company
and the Company dated December 5, 1991 (4)
10.6 -- Asset Purchase, License and Option Agreement, dated November
22, 1989 (2)
10.7 -- Employment Agreement dated as of April 15, 1997, between the
Company and Nicholas A. Buoniconti
10.8 -- License and Supply Agreement for Crinone between Columbia
Laboratories, Inc. (Bermuda) Ltd. and American Home Products
dated as of May 21, 1995 (6)
10.9 -- Addendum to Employment Agreement dated as of September 1,
1997, between the Company and Norman M. Meier
10.10 -- Addendum to Employment Agreement dated as of September 1,
1997, between the Company and William J. Bologna
10.11 -- Addendum to Employment Agreement dated as of September 1,
1997, between the Company and Nicholas A. Buoniconti
21 -- Subsidiaries of the Company
(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.
(4) Incorporated by reference to the Registrant's Current Report
on Form 8-K, filed on January 2, 1992.
(5) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.
21
<PAGE>
(6) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (File No. 33-60123) declared effective
August 28, 1995.
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.
(8) Incorporated by reference to the Registrant's Proxy Statement
dated August 26, 1996.
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, 1997 and 1996 F-3
Consolidated Statements of Operations
for the Three Years Ended December 31, 1997 F-5
Consolidated Statements of Stockholders' Equity
for the Three Years Ended December 31, 1997 F-6
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1997 F-8
Notes to Consolidated Financial Statements F-11
F-1
<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,
199 7 and 1996, and the related consolidated statements of operations, stock
holders' equity and cash flows for each of the three years in the period ended
December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 13, 1998.
F-2
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents, of which $1,658,954 is
interest bearing as of December 31, 1997 $ 2,256,590 $ 3,561,794
Accounts receivable, net of allowance
for doubtful accounts of $132,276
and $97,275 in 1997 and 1996, respectively 6,223,842 1,261,478
Inventories 2,252,675 943,143
Prepaid expenses 477,857 151,400
----------- -----------
Total current assets 11,210,964 5,917,815
----------- -----------
PROPERTY AND EQUIPMENT:
Leasehold improvements 155,939 172,524
Machinery and equipment 3,075,075 2,166,289
Furniture and fixtures 156,251 170,881
----------- -----------
3,387,265 2,509,694
Less-accumulated depreciation
and amortization 1,686,129 1,276,056
----------- -----------
1,701,136 1,233,638
----------- -----------
INTANGIBLE ASSETS, net 1,119,697 1,341,757
OTHER ASSETS 969,955 1,486,887
----------- -----------
$15,001,752 $ 9,980,097
=========== ===========
(Continued)
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,709,368 $ 2,891,502
Accrued expenses 1,319,400 1,212,940
Deferred revenue 1,042,638 1,093,524
------------ ------------
Total current liabilities 6,071,406 5,197,966
------------ ------------
OTHER LONG-TERM LIABILITIES 116,781 108,693
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares authorized
Series A Convertible Preferred Stock,
923 and 1,323 shares issued and
outstanding in 1997 and 1996, respectively
(liquidation preference of $92,300 at December 31, 1997) 9 13
Series B Convertible Preferred Stock,
1,630 shares issued and
outstanding in 1997 and 1996, respectively
(liquidation preference of $163,000 at December 31, 1997) 16 16
Common stock, $.01 par value; 40,000,000
shares authorized; 28,623,187 and 28,071,596
shares issued and outstanding in 1997 and 1996, respectively 286,231 280,716
Capital in excess of par value 92,588,038 89,254,885
Accumulated deficit (84,128,906) (84,891,812)
Cumulative translation adjustment 68,177 29,620
------------ ------------
Total stockholders' equity 8,813,565 4,673,438
------------ ------------
$ 15,001,752 $ 9,980,097
============ ============
</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, 1997
1997 1996 1995
------------ ------------ ------------
NET SALES $ 16,547,411 $ 5,646,031 $ 9,904,633
COST OF GOODS SOLD 6,630,820 3,517,163 5,430,458
------------ ------------ ------------
Gross profit 9,916,591 2,128,868 4,474,175
------------ ------------ ------------
OPERATING EXPENSES:
Selling and distribution 2,908,504 3,012,089 2,897,312
General and administrative 3,972,077 3,493,621 2,870,416
Research and development 9,135,573 10,942,065 7,812,488
------------ ------------ ------------
Total operating expenses 16,016,154 17,447,775 13,580,216
------------ ------------ ------------
Loss from operations (6,099,563) (15,318,907) (9,106,041)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
License fees 7,038,853 2,018,205 8,054,883
Interest income 70,664 359,224 135,799
Interest expense (24,186) (22,041) (178,952)
Other, net (137,862) (115,465) 134,479
------------ ------------ ------------
6,947,469 2,239,923 (8,146,269)
------------ ------------ ------------
Income (loss) before income taxes 847,906 (13,078,984) (959,472)
Provision for income taxes 85,000 -- --
------------ ------------ ------------
Net income (loss) $ 762,906 $(13,078,984) $ (959,472)
============ ============ ============
INCOME (LOSS) PER COMMON
SHARE - BASIC AND DILUTED $ 0.03 $ (0.47) $ (0.04)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 28,350,000 27,615,000 25,487,000
------------ ------------ ------------
DILUTED 29,982,000 27,615,000 25,487,000
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
SERIES A SERIES B
CONVERTIBLE PREFERRED CONVERTIBLE PREFERRED COMMON STOCK
STOCK STOCK
---------------------------- ---------------------------- ---------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995 1,515 $ 15 2,000 $ 20 23,778,897 $ 237,789
Issuance of common stock -- -- -- -- 112,611 1,127
Options exercised -- -- -- -- 161,000 1,610
Warrants exercised -- -- -- -- 227,118 2,271
Conversion of debt -- -- -- -- 1,695,232 16,952
Conversion of preferred stock (192) (2) (250) (2) 7,515 75
Accumulated dividends on
preferred stock -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 1,323 13 1,750 18 25,982,373 259,824
Issuance of common stock -- -- -- -- 1,358,000 13,580
Options exercised -- -- -- -- 253,374 2,534
Warrants exercised -- -- -- -- 475,382 4,754
Conversion of preferred stock -- -- (120) (2) 2,467 24
Accumulated dividends on
preferred stock -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, December 31,1996 1,323 $ 13 1,630 $ 16 $ 28,071,596 $ 280,716
CAPITAL IN CUMULATIVE
EXCESS OF ACCUMULATED TRANSLATION
PAR VALUE DEFICIT ADJUSTMENT TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995 $ 64,206,507 $(70,853,356) $ 216,647 $ (6,192,378)
Issuance of common stock 639,519 -- -- 640,646
Options exercised 757,828 -- -- 759,438
Warrants exercised 1,152,110 -- -- 1,154,381
Conversion of debt 6,322,457 -- -- 6,339,409
Conversion of preferred stock (71) -- -- --
Accumulated dividends on
preferred stock (11,336) -- -- (11,336)
Translation adjustment -- -- (174,255) (174,255)
Net loss -- (959,472) -- (959,472)
------------ ------------ ------------ ------------
BALANCE, December 31, 1995 73,067,014 (71,812,828) 42,392 1,556,433
Issuance of common stock 12,220,519 -- -- 12,234,099
Options exercised 1,651,872 -- -- 1,654,406
Warrants exercised 2,326,116 -- -- 2,330,870
Conversion of preferred stock (22) -- -- --
Accumulated dividends on
preferred stock (10,614) -- -- (10,614)
Translation adjustment -- -- (12,772) (12,772)
Net loss -- (13,078,984) -- (13,078,984)
------------ ------------ ------------ ------------
BALANCE, December 31,1996 $ 89,254,885 $(84,891,812) $ 29,620 $ 4,673,438
(Continued)
F-6
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(Continued)
SERIES A SERIES B
CONVERTIBLE PREFERRED CONVERTIBLE PREFERRED COMMON STOCK
STOCK STOCK
--------------------------- -------------------------- ---------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 1,323 $ 13 1,630 $ 16 28,071,596 $ 280,716
Options exercised -- -- -- -- 366,500 3,665
Warrants exercised -- -- -- -- 180,147 1,801
Conversion of preferred stock (400) (4) -- -- 4,944 49
Accumulated dividends on
preferred stock -- -- -- -- -- --
Fair market value of warrants
granted to non-employees -- -- -- -- -- --
Fair market value of options
granted to non-employees -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net income -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1997 923 $ 9 1,630 $ 16 28,623,187 $ 286,231
============ ============ ============ ============ ============ ============
CAPITAL IN CUMULATIVE
EXCESS OF ACCUMULATED TRANSLATION
PAR VALUE DEFICIT ADJUSTMENT TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997 $ 89,254,885 $(84,891,812) $ 29,620 $ 4,673,438
Options exercised 2,165,469 -- -- 2,165,469
Warrants exercised 860,095 -- -- 861,896
Conversion of preferred stock (45) -- -- --
Accumulated dividends on
preferred stock (8,088) -- -- (8,088)
Fair market value of warrants
granted to non-employees 269,264 -- -- 269,264
Fair market value of options
granted to non-employees 50,123 -- -- 50,123
Translation adjustment -- -- 38,557 38,557
Net income -- 762,906 -- 762,906
------------ ------------ ------------ ------------
BALANCE, December 31, 1997 $ 92,588,038 $(84,128,906) $ 68,177 $ 8,813,565
============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 762,906 $(13,078,984) $ (959,472)
Adjustments to reconcile net income (loss) to net
Cash used in operating activities-
Depreciation and amortization 913,945 848,469 520,066
Provision for (recovery of) doubtful accounts 35,001 (8,162) 7,067
Provision for (recovery of) returns and allowances -- (82,718) 37,445
Write-down of inventories -- 77,380 251,043
Issuance of warrants and options for consulting services 94,998 -- --
Write-off of property and equipment 3,411 -- --
Interest expense -- -- (19,035)
Changes in assets and liabilities-(Increase) decrease in:
Accounts receivable (4,818,322) (228,558) (429,570)
Inventories (1,309,531) (66,610) (87,713)
Prepaid expenses (72,065) (38,383) (54,454)
Other assets 59,080 (304,561) (74,615)
Increase (decrease) in:
Accounts payable 905,117 (491,797) 239,589
Accrued expenses 130,322 46,953 205,127
Deferred revenue (15,336) (8,902) (157,410)
------------ ------------ ------------
Net cash used in operating activities (3,310,474) (13,335,873) (521,932)
------------ ------------ ------------
(Continued)
F-8
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(Continued)
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $ (1,011,987) $ (750,763) $ (309,091)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable and long-term debt -- (156,751) (91,954)
Proceeds from issuance of common stock -- 12,234,099 78,146
Proceeds from exercise of options and warrants 3,027,365 3,985,276 1,913,819
------------ ------------ ------------
Net cash provided by financing activities 3,027,365 16,062,626 1,900,011
------------ ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (10,108) (43,148) (129,785)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,305,204) 1,932,842 939,203
CASH AND CASH EQUIVALENTS,
Beginning of year 3,561,794 1,628,952 689,749
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
End of year $ 2,256,590 $ 3,561,794 $ 1,628,952
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 20,825 $ 24,124 $ 107,132
------------ ------------ ------------
Taxes paid $ 54,076 -- --
============ ============ ============
</TABLE>
(Continued)
F-9
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(Continued)
SUPPLEMENTAL SCHEDULE OF NONCASH
OPERATING AND FINANCING ACTIVITIES:
During 1995, the Company repaid $6,339,409 of long-term debt and accrued
interest through the issuance of 1,695,232 shares of Common Stock. During 1995,
the Company issued 95,000 shares of Common Stock in payment of legal fees
aggregating $562,500.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-10
<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 unique
pharmaceutical products that treat female specific diseases and conditions
including menopause, fertility, contraception, sexually transmitted diseases,
premenstrual syndrome and dysmenorrhea. Columbia'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.
ACCOUNTING ESTIMATES-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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.
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:
DECEMBER 31,
---------------------------
1997 1996
---------- ---------
Finished goods $1,399,835 $ 448,770
Raw materials 852,840 494,373
---------- ---------
$2,252,675 $ 943,143
========== =========
PROPERTY AND EQUIPMENT-
Property and equipment are stated at cost less accumulated depreciation.
Leasehold improvements are amortized over the life of the respected lease.
Depreciation is computed on the straight-line basis over the estimated useful
lives of the respective assets, as follows:
YEARS
-----
Machinery and equipment 5 - 10
Furniture and fixtures 5
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.
Deposits on manufacturing equipment totaling approximately $600,00 and
$1,100,000 as of December 31, 1997 and 1996, respectively, are included in other
assets in the accompanying consolidated balance sheets.
INTANGIBLE ASSETS-
Intangible assets consist of the following:
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
Patents $ 2,600,000 $ 2,600,000
Trademarks 341,000 341,000
----------- -----------
2,941,000 2,941,000
Less accumulated amortization (1,821,303) (1,599,243)
----------- -----------
$ 1,119,697 $ 1,341,757
=========== ===========
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.
LONG-LIVED ASSETS-
Following the acquisition of any long-lived assets, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the long-lived asset may warrant revision or
that the remaining balance of the long-lived asset may not be recoverable. When
factors indicate that a long-lived asset may be impaired, the Company uses an
estimate of the underlying product's future cash flows, including amounts to be
received over the remaining life of the long-lived asset from license fees,
royalty income, and related deferred revenues, in measuring whether the
long-lived asset is recoverable. Unrecoverable amounts are charged to
operations.
INCOME TAXES-
As of December 31, 1997, the Company has U.S. tax net operating loss
carryforwards of approximately $45 million which expire through 2011. The
Company also has unused tax credits of approximately $949,000 which expire at
various dates through 2012. Utilization of net operating loss carryforwards may
be limited in any year due to limitations in the Internal Revenue Code.
Accordingly, the Company recorded an $85,000 alternative minimum tax provision
for U.S. Federal taxes in 1997.
As of December 31, 1997 and 1996, other assets in the accompanying consolidated
balance sheets include deferred tax assets of approximately $16 million and $18
million, respectively, (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 sales are recorded as revenue as sales are made by the strategic
alliance partners.
LICENSE FEES-
F-12
<PAGE>
License fees 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.
INCOME/LOSS PER SHARE-
Basic income per share is computed by dividing net income less preferred
dividends by the weighted average number of common stock outstanding during the
period. Diluted income per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period
assuming the exercise or conversion of all securities that are exercisable or
convertible into common stock. Basic 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 an original maturity of three months or less to be
cash equivalents.
STOCK-BASED COMPENSATION-
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". Under the provisions of SFAS No. 123, companies can
either measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion ("APB") No. 25. However, if the provisions
of APB No. 25 are continued, pro forma disclosure of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. For the three years ended December 31,
1997, the Company recognized compensation costs under the provisions of APB No.
25, and for the three years ended December 31, 1997, the Company has provided
the expanded disclosure required by SFAS No. 123 (see Note 3).
(2) STRATEGIC ALLIANCE AGREEMENTS:
In May 1995, the Company entered into a worldwide, except for South Africa,
license and supply agreement with American Home Products Corporation ("AHP")
under which the Wyeth-Ayerst Laboratories division of AHP will market Crinone.
Under the terms of the agreement, the Company earned $7 million, $2 million and
$8 million in milestone payments in 1997, 1996 and 1995, respectively and
expects to receive additional milestone payments in the future. The Company also
supplies Crinone to AHP at a price equal to 30% of AHP's net selling price.
The Company has also entered into strategic alliance agreements for the
marketing and distribution of Replens and Advantage 24 with various
pharmaceutical companies. Pursuant to these agreements, the Company has received
advance payments, of which $1,042,638 and $1,093,524, respectively, are
reflected as deferred revenue in the accompanying December 31, 1997 and 1996
consolidated balance sheets. 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.
F-13
<PAGE>
(3) STOCKHOLDERS' EQUITY:
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 Common Stock. As of
December 31, 1997 and 1996, dividends of $116,781 and $108,693, 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 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, 1997, the Company had warrants outstanding for the purchase
of 150,253 shares of Common Stock. Information on outstanding warrants is as
follows:
EXERCISE
PRICE
--------
$ 4.88 30,000
10.78 60,253
16.00 20,000
18.00 20,000
20.00 20,000
-------
150,253
=======
The 30,000 of $4.88 warrants and the 60,253 of $10.78 warrants were exercisable
on December 31, 1997.
STOCK OPTION PLAN-
All employees, officers, directors and consultants of the Company or any
subsidiary were eligible to participate in the Columbia Laboratories, Inc. 1988
Stock Option Plan, as amended (the "Plan"). Under the Plan, a total of 5,000,000
shares of Common Stock were authorized for issuance upon exercise of the
options. As of October 1996, no further options will be granted pursuant to this
Plan.
In October 1996, the Company adopted the 1996 Long-term Performance Plan
("Performance Plan") which provides for the grant of stock options, stock
appreciation rights and restricted stock to certain designated employees of the
Company, non-employee directors of the Company and certain other persons
performing significant services for the Company as designated by the
Compensation/Stock Option Committee of the Board of Directors. Pursuant to the
Performance Plan, an aggregate of 3,000,000 shares of Common Stock have been
reserved for issuance.
F-14
<PAGE>
A summary of the status of the Company's two stock option plans as of December
31, 1997 and 1996, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 3,591,272 $ 6.25 3,176,646 $ 5.37
Granted 1,332,500 14.72 699,000 10.41
Exercised (366,498) 5.92 (253,374) 6.53
Forfeited -- -- (31,000) 6.80
---------- ----------
Outstanding at end of year 4,557,274 8.92 3,591,272 6.25
========== ==========
Options exercisable at year end 2,984,774 2,808,772
---------- ----------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- -----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES AT DECEMBER 31, 1997 LIFE PRICE AT DECEMBER 31, 1997 PRICE
- --------------- -------------------- ----------- -------- -------------------- --------
<C> <C> <C> <C> <C> <C>
$ 4.38 1,850,000 6.74 $ 4.38 1,850,000 $ 4.38
$ 4.88-$ 7.25 541,250 6.59 6.38 541,250 6.38
$ 8.00-$ 12.13 919,500 8.07 10.45 486,000 10.31
$ 12.25-$16.03 1,119,524 8.72 14.74 107,524 13.33
$ 16.63-$18.63 127,000 9.71 17.64 -- --
--------- ---------
$ 4.38-$18.63 4,557,274 7.56 8.92 2,984,774 6.03
========= =========
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation cost been determined based on the fair value at
the grant dates for those awards consistent with the method of FASB Statement
123, the Company's net income or loss per share would have been decreased or
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------------- -------------- ------------
<S> <C> <C> <C>
Net income (loss) As reported $ 762,906 ($ 13,078,984) ($ 959,472)
Proforma (7,013,855) (16,648,154) ($ 2,284,148)
============= ============== =============
Income (loss) per share As reported $0.03 ($0.47) ($0.04)
Proforma ($0.25) ($0.60) ($0.09)
------------- -------------- -------------
</TABLE>
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 equal to the fair market value of the underlying stock on the dates of
F-15
<PAGE>
grant, (ii) an option term of three years, (iii) a risk free rate of 6% 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 55% for 1997 and
60% for 1996 and 1995 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.
(4) 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, 1997, 1996 and 1995 totaled $679,791, $736,372 and $365,995,
respectively. Future minimum lease payments as of December 31, 1997 are as
follows:
1998 $ 576,190
1999 274,707
2000 226,459
2001 164,840
2002 133,427
Thereafter 64,139
------------
$ 1,439,762
============
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 Common Stock
during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc. receives a
royalty equal to two percent of the net sales of products based on the
Bioadhesive Delivery System to an aggregate amount of $7,500,000. 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.
In May 1989, the Company signed an exclusive agreement to license the U.S. and
Canadian marketing rights for Diasorb(R), 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 remaining terms of the employment
agreements range from one to four years. Future base compensation to be paid
under these agreements as of December 31, 1997 are as follows:
1998 $ 1,210,900
1999 1,100,000
2000 1,100,000
2001 75,000
------------
$ 3,485,900
============
During 1993, the Company's stockholders 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
F-16
<PAGE>
designated employees of the Company. As a result of the Company's income in
1997, a provision for 5% of pretax income has been included in general and
administrative expenses.
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.
YEAR 2000-
The Company has assessed and continues to assess the impact of the year 2000
issue on its operations, including the development and implementation of project
plans and cost estimates required to make its information system infrastructure
Year 2000 compliant. Based on existing information, the Company believes the
anticipated spending necessary to become Year 2000 compliant will not have a
material effect on the financial position, cash flows or results of operations
of the Company, nor will the Year 2000 issues cause any material adverse effect
on the future business operations of the Company.
(5) 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 and which were due on or before December 7, 1997 have
subsequently been extended through December 7, 1999. Accordingly, as of December
31, 1997, the aggregate balance of $268,324 is included in other assets in the
accompanying 1997 consolidated balance sheet.
(6) 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 68% of 1997 consolidated net sales. Another customer accounted for
approximately 5% and 21% of 1997 and 1995 consolidated net sales, respectively.
A third customer accounted for approximately 5%, 18% and 16%, respectively, of
1997, 1996 and 1995 consolidated net sales. A fourth customer accounted for
approximately 3%, 13% and 5% of 1997, 1996 and 1995 consolidated net sales,
respectively. The following table shows selected information by geographic area:
INCOME
NET (LOSS) FROM IDENTIFIABLE
SALES OPERATIONS ASSETS
------------ ------------ ------------
As of and for the year
ended December 31, 1997-
United States $ 15,623,341 $ 4,984,325 $ 7,804,944
Europe 924,070 (11,083,888) 7,196,808
------------ ------------ ------------
$ 16,547,411 $ (6,099,563) $ 15,001,752
============ ============ ============
As of and for the year
ended December 31, 1996-
United States $ 4,434,410 $ (5,560,059) $ 5,370,215
Europe 1,211,621 (9,758,848) 4,609,882
------------ ------------ ------------
$ 5,646,031 $(15,318,907) $ 9,980,097
============ ============ ============
F-17
<PAGE>
As of and for the year
ended December 31, 1995-
United States $ 8,321,578 $(2,451,702) $ 2,989,278
Europe 1,583,055 (6,654,339) 4,697,392
----------- ----------- -----------
$ 9,904,633 $(9,106,041) $ 7,686,670
=========== =========== ===========
F-18
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE
PAGE
----
Report of Independent Certified Public Accountants S-2
Schedule II-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 13, 1998. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II 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 13, 1998.
S-2
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
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, 1997:
Allowance for doubtful accounts $ 97,275 $ 35,001 $-- $132,276
======== ======== ===== ========
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts $105,437 $ (8,162) $-- $ 97,275
======== ======== ===== ========
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts $ 98,370 $ 7,067 $-- $105,437
======== ======== ===== ========
</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 3, 1998 By: /s/ DAVID L. WEINBERG
-----------------------------
David L. Weinberg, Vice 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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ NORMAN M. MEIER President, Chief Executive March 3, 1998
- -------------------------- Officer, Director
Norman M. Meier (Principal Executive Officer)
/s/ WILLIAM J. BOLOGNA Chairman of the Board of Directors March 3, 1998
- --------------------------
William J. Bologna
/s/ NICHOLAS A. BUONICONTI Vice Chairman of the Board of Directors March 3, 1998
- --------------------------
Nicholas A. Buoniconti
/s/ DAVID L. WEINBERG Vice President-Finance and March 3, 1998
- --------------------------
David L. Weinberg Administration, Chief Financial
Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
/s/ DOMINIQUE DE ZIEGLER Vice President - Pharmaceutical March 3, 1998
- -------------------------- Development and Director
Dominique de Ziegler
/s/ JEAN CARVAIS Director March 3, 1998
- --------------------------
Jean Carvais
/s/ IRWIN L. KELLNER Director March 3, 1998
- --------------------------
Irwin L. Kellner
/s/ LILA E. NACHTIGALL Director March 3, 1998
- --------------------------
Lila E. Nachtigall
/s/ ROBERT C. STRAUSS Director March 3, 1998
- --------------------------
Robert C. Strauss
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBERS
- -------
10.7 -- Employment Agreement dated as of April 15, 1997 between the
Company and Nicholas A. Buoniconti
10.9 -- Amendment of Employment Agreement dated as of September 1, 1997
between the Company and Norman M. Meier
10.10 -- Amendment of Employment Agreement dated as of September 1, 1997
between the Company and William J. Bologna
10.11 -- Amendment of Employment Agreement dated as of September 1, 1997
between the Company and Nicholas A. Buoniconti
21 -- Susidiaries of the Company
27 -- Financial Data Schedule
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This agreement ("Agreement") is effective as of the 15th day of April,
1997, between Columbia Laboratories Inc. ("Columbia") a corporation organized
and existing under and by virtue of the laws of the State of Delaware, having
its principal place of business at 2665 South Bayshore Drive, Miami, Florida
33133 (hereinafter referred to as the "Company"), and Nicholas A. Buoniconti,
who resides at 225 Arvida Parkway, Miami, Florida 33156 (hereinafter referred to
as "Employee").
WITNESETH:
WHEREAS, the Company is and will be engaged in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products; and
WHEREAS, the employee, by reason of his knowledge, skill and ability is
uniquely qualified to aid the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products; and
WHEREAS, the Company is desirous of employing the Employee to provide
assistance to the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products and
the Employee is desirous of being employed by the Company to assist it in the
development, testing, registration, manufacturing, licensing, marketing, and
selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this Agreement
so that the rights, duties, benefits and obligations of each in respect of the
employment of the Employee for and by the Company will be fully set forth under
the terms and conditions stated herein upon the execution hereof; and
WHEREAS, the Compensation and Stock Option Committee of the Board of
Directors of the Company have approved the employment of the Employee upon the
terms and conditions set forth herein by a resolution issued by it, and have
authorized the execution and delivery of this Agreement.
NOW, therefore, in consideration of the mutual promises contained
herein, the payment of Ten ($10.00) dollars by each party to the other, the
receipt of which is hereby duly acknowledged, and for other good and valuable
consideration, the Company and Employee agree as follows
1. EMPLOYMENT
The Company hereby employs the Employee in an executive capacity,
specifically as "Vice Chairman and as the Company's "Chief Operating Officer."
The Employee hereby accepts such employment and agrees to perform the services
and duties specified herein.
2. TERM
(a) The term of this Agreement ("Term") shall be for a period of
Four (4) years from the date hereof, unless sooner terminated in accordance with
the terms and conditions set forth herein.
2
<PAGE>
(b) Upon the mutual agreement of the Employee and the Company, the
Term may be extended for an additional period of years, either upon the terms
and conditions set forth herein, or upon any other terms and conditions as may
be mutually agreed in writing between the Employee and the Company. The
foregoing notwithstanding, this Agreement shall terminate as provided for in
Article 2(a), and there shall not be any automatic renewal or other similar
extension of the Term
3. DISABILITY
If, during the Term, the Employee shall become unable to perform his
duties as provided for herein by reason of illness or injury, for a consecutive
period of Three Hundred Sixty Five (365) days, the Company may, on Thirty (30)
days written notice to the Employee, terminate the officership held by Employee.
In the event of such termination, then Employee shall remain an employee of the
Company and receive Seventy (70%) percent of his compensation and all of his
fringe benefits as is set forth below in this Agreement at paragraphs "6" and
"8" respectively
4. TERMINATION FOR CAUSE
This Agreement may be immediately terminated by the Company for
"cause" at any time, upon written notice to the Employee, after which all
obligations of the Company to the Employee shall thereupon cease. For the
purposes of this Agreement, the term "cause" when used with reference to the
termination of this Agreement, shall mean only any or all of the following:
3
<PAGE>
(a) Employee's absence from his employment, for any reason other
than sickness or injury, at substantially all times during a period of Ninety
(90) consecutive days;
(b) Failure on the part of the Employee to (i) follow material
instructions or policy of the Board of Directors given or adopted in good faith,
or (ii) carry out an agreed policy or course of action as determined by (a) the
Board of Directors or (b) a committee of the Board of Directors, any or all of
which is or may be to the detriment of the Company; o
(c) Willful misconduct or gross negligence of the Employee in
connection with the performance of his duties.
5. DUTIES
(a) The Employee shall perform the following duties in connection
with his employment, all of which shall be subject to the paramount directions
of the Board of Directors:
(i) To serve as "Vice -Chairman" and to be the "Chief Operating
Officer" of the Company; and
(ii) To assist the Company in its business affairs and
scientific dealings relating to the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products, as
well as in the Company's dealings with other companies, its regulatory affairs,
banking and other financial institutions and other groups and institutions; and
(iii) To undertake such specific assignments, consistent with
his office and position, as may be given to him from time to time by the Board
of Directors; and
4
<PAGE>
(iv) To continue to serve as a director of the Company, and then
as, if and when so re-elected to continue to serve as a director of the Company,
and also if so elected, to serve as a director of any subsidiary or affiliate of
the Company.
(b) Employee shall devote his best efforts and skills to the affairs
of the Company, and to the performance of the duties set forth in this Article
5, on a substantially full-time basis. The Employee shall not participate in any
outside business activity that will either (i) interfere with, or (ii) be a
conflict of interest with the performance of the Employee's duties, activities
and employment pursuant to this Agreement. The foregoing notwithstanding, the
Employee has disclosed to the Company his other outside business interests
("Outside Business Interests") which are listed on Schedule "1" hereto and the
Company with this full knowledge has consented to the Employee's continuance
thereof. Moreover, the Company agrees to permit the Employee to involve himself
in other similar Outside Business Interests, on condition that they similarly be
disclosed and are added to Schedule "1" prior to their being commenced. The
Employee may also invest his assets and devote such reasonable time as is
necessary to do so, so as to manage, protect and support the profitability of
those invested assets.
5
<PAGE>
6. COMPENSATION
(a) BASE SALARY
The Employee shall receive for the discharge of his duties and
activities on behalf of the Company as provided for herein, an annual salary
("Base Salary") of Two Hundred Thousand ($200,000.00) dollars, which shall be
paid by the Company to the Employee in equal and regular installments not less
frequently than monthly, in accordance with the Company's policy for payment of
executive salaries.
(a) BONUS
The Employee shall receive those benefits accorded to
executive employees pursuant to the Company's Incentive Compensation Plan now in
effect, or from any subsequent similar plan as shall be made available to senior
executives of the Company.
(b) COMPENSATION OPTIONS
The Employee may receive compensation options to purchase $.01
par value per share common stock of the Company ("Common"), together with those
compensation options granted to other senior management, if it is determined to
be warranted by the Board of Directors.
7. OPTIONS
The Employee from time to time shall be granted as additional
compensation stock options ("Options's") to purchase shares of the Company's
Common ("Grant"). The Grant of the Options's shall be made pursuant to the
Company's 1988 Stock Option Plan, as may be
6
<PAGE>
amended from time to time ("Plan"). The Company shall enter into an option
agreement for the issuance of the Options's, which option agreement shall be
subject to the terms and conditions contained in the Plan. Notwithstanding the
foregoing, the Employee on the signing of this Agreement shall be Granted
150,000 Options's ("Signing Options"). All Options's received by Employee will
be exercisable at a price equal to the fair market value of the Company's Common
on the date of the Grant. The Signing Options shall be issued as of the date of
the execution of this Agreement, vest in the Employee on the first anniversary
hereof and be exercisable only to the extent of Twenty Five percent of the
150,000 Signing Options per annum, beginning on the first anniversary of the
execution of this Agreement, and then on each of the next Three successive
annual anniversaries of this Agreement. Any Signing Options not exercised in
their earliest eligible year shall be exercisable at any time thereafter until
the Tenth (10th) anniversary of the issuance of the Signing Options, at which
time any unexercised Signing Option shall expire.
8. FRINGE BENEFITS
In addition to the Base Compensation set forth in Article 6 above,
the Employee shall be entitled to receive the following benefits:
(a) Any benefits under group hospitalization, health, dental care or
sick leave plan, life or other insurance or death benefit plan, travel or
accident insurance, or contingent compensation plan, or any other present or
future plan, including any qualified retirement plan, for which any executives
are or shall become
7
<PAGE>
eligible. In the event the Employee is not eligible for health benefits as
described above, by reason of age, location or otherwise the Employee shall be
provided equivalent benefits determined at the election of the Company. The
Employee shall be eligible to receive the foregoing benefits during the five (5)
years period following the termination of his employment under this Agreement;
and
(b) An annual vacation of either or a combination of (i) up to Four
(4) consecutive weeks or (ii) up to any Thirty (30) days ("Vacation Period"), at
such time or times as shall be approved by the Company, and which approval shall
not be unreasonably refused. Full compensation shall be paid during any Vacation
Period. Any portion of any Vacation Period not used within any year shall be
accrued and will accumulate, and may be used by the Employee at any time during
his employment in accordance with the provisions of this Article 8. In the event
that the Employee has not used all of his accrued and accumulated vacation time
at the termination of his employment, then the employee may then elect to have
his accrued and accumulated Vacation Period time converted to annual Base
Salary, pro rata, at the then prevailing Base Salary, regardless of when the
unused vacation time accrued; and
(c) The Employee may incur and shall be reimbursed for reasonable
expenses which are related to the Company's business, including expenses for
entertainment, travel and similar items ("Approved Reimbursable Expenses"). All
such reimbursement of Approved Reimbursable Expenses shall be made within Thirty
(30) days of receipt by the Company from the Employee of an itemized account and
8
<PAGE>
if necessary proper substantiation of Approved Reimbursable Expenses. In order
to facilitate the payment of the Approved Reimbursable Expenses, the Company
shall furnish the Employee with Company acquired credit cards as may be
available to all other executive officers of the Company; and
(d) The Employee shall be given a private office with secretarial
help and any and all reasonable facilities and services so as to be suitable
with his position as Vice-Chairman and Chief Operating Officer, and so as to
assist in the performance of his duties and activities.
(e) The Employee shall be given an automobile allowance or
automobile lease plan to the extent of $7,500.00 per annum, paid in Twelve equal
monthly installments, to be used to defray acquisition expense for a luxury
automobile, and insurance and maintenance expenses for the automobile.
9. DISCLOSURE OF INFORMATION AND NON-COMPETITION
(a) The Employee recognizes and acknowledges that during the course
of his employment he will have access to certain confidential information of the
Company and that such information constitutes valuable, special and unique
property of the Company. During the term of this Agreement and following
termination of his employment hereunder, the Employee will not disclose
information, including any trade secrets or confidential information of the
Company obtained during the course of his employment with the Company, except
such information as may have become part of the public domain through no fault
of the Employee, which public domain determination shall only
9
<PAGE>
be made by the Company in a written acknowledgement made at the request of the
Employee, before the Employee may be free to disclose any such claimed public
domain information.
(b) During the term of this Agreement, and for Two (2) years
thereafter, the Employee will not, directly or indirectly, engage in any
business enterprise or activity competitive with the business of the Company
either as an employee, consultant, partner, shareholder, or in any other
capacity. For the purposes of this covenant not to compete, a competing business
enterprise will be deemed competitive only if such business enterprise (i)
conducts research, develops and/or tests products (the "Development") similar to
the products the Company then has under Development, or (ii) offers for sale in
any market in which the Company has significant sales, one or more products for
which the major claimed usage or usages overlap materially with the product or
products of the Company in existence at the time of termination of Employee's
employment. Further, the Employee agrees that he will not either during or
within Two (2) years subsequent to the termination of his employment, disturb,
entice, hire or in any other manner attempt to persuade any employee, dealer,
supplier or customer of the Company to discontinue its business relationship
with the Company.
(c) The Employer and the Company acknowledge that it would be very
difficult or impossible to measure the damages resulting from a breach of this
Article 9, and that any such breach would cause immediate and irreparable harm.
Therefore, in consequence of the foregoing, the Employee hereby agrees that any
breach or threatened
10
<PAGE>
breach by him of any provision of this Article 9 shall entitle the Company, in
addition to any other legal remedies available to it, to obtain from any Court
of competent jurisdiction a temporary and permanent injunction in order to
enjoin such breach or threatened breach, without the necessity on the part of
the Company, in any application for such injunctive relief to show immediate and
irreparable harm, which would be a requirement of such an application absent
this covenant waiving those requirements. The Employee also covenants that the
service of any papers to commence any legal proceedings including proceedings to
obtain injunctive relief, may be done by utilizing Federal Express in lieu of
any other form of personal delivery of the process or orders of the Court and
upon doing so the service and notice provisions for the commencement of legal
proceedings shall be satisfied.
10. DEATH DURING EMPLOYMENT
If the Employee dies during the term of his employment, the Company
shall pay to his estate compensation which would otherwise be payable to the
Employee for the shorter of (i) Three (3) years from the date of his death, or
(ii) through to the termination date of this Agreement. Said sums shall be paid
in accordance with written directions given by the Employee to the Company, or
lacking any such directions then to the surviving spouse of the Employee, or if
there is no surviving spouse, then to his surviving children in equal shares, or
if there are none, then to his estate.
11
<PAGE>
11. PATENTS AND PROPRIETARY RIGHTS
During the Term of employment all work product emanating directly
and/or indirectly from the Employees duties and activities effected on behalf of
the Company ("Work Product"), shall be exclusively owned by the Company. In the
event that any such Work Product is the subject of an application for patent,
copyright, trade mark or similar proprietary protection ("Application"), then
regardless of the name of the person or entity submitting the Application, the
Employee hereby acknowledges the Company's exclusive rights in and to the
Application for proprietary protection. In the event that the Application
results in the issuance of the requested proprietary protection, e.g. a patent,
then the Employee hereby acknowledges the Company's exclusive ownership therein,
and the employee will execute any documents necessary to give effect and
implement this ownership, including but not limited to an assignment of the
Application and/or the issued proprietary protection.
12. NOTICES
Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and actually delivered, or if sent either by
Federal Express, or postage prepaid, by certified mail, return receipt
requested, with a copy by ordinary mail, to the addresses below:
As to Company: 2665 South Bayshore Drive
Miami, Florida 33133
As to Employee: 225 Arvida Parkway
Miami, Florida 33156
12
<PAGE>
or to such other address as either party shall designate by written notice to
the other.
13. ASSIGNMENT
The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company. The Employee acknowledges that the services to be rendered by him
are unique and personal, and accordingly, he may not assign any of his rights,
duties, obligations or benefits under this Agreement.
14. ENTIRE AGREEMENT
This Agreement contains the entire agreement and understanding of
the Company and the Employee with respect to the subject matter hereof, and
shall incorporate, merge and supersede all prior agreements and understandings
had between the Company and the Employee, either oral or written, if any. No
modification, change or amendment to this Agreement, shall be binding upon the
Company or the Employee unless the same is in writing, and signed by the party
against whom enforcement of the modification, change or amendment is sought to
be enforced.
15. MISCELLANEOUS
(a) This Agreement and the implementation of it shall be subject to
and governed by the laws of the State of Florida, and any legal proceedings
relating to (i) the interpretation or enforcement of any of the provisions of
this Agreement, or (ii) any dispute relating to the employment relationship
created by the
13
<PAGE>
Agreement, shall only be brought in the Circuit Court of the State of Florida,
in and for the County of Dade.
(b) The Article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or the interpretation of this
Agreement.
(c) The failure of any provision of this Agreement shall in no
manner affect the right to enforce the remainder of this Agreement, and the
waiver by either The Company or the Employee of any breach of any provision of
this Agreement shall not be construed to be a waiver by the Company or the
Employee of any succeeding breach of such provision or a waiver by such party of
any breach of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
to be effective as of the date first written above.
SIGNED BY EMPLOYEE ON APRIL 18, 1997
Employee:
Witness:
/s/ NORMAN M. MEIER
- -------------------
Norman M. Meier /s/ NICHOLAS A. BUONICONTI
--------------------------
Nicholas A. Buoniconti
SIGNED BY COMPANY ON APRIL 18, 1997
Company:
COLUMBIA LABORATORIES, INC.
Witness:
/s/ MARGARET J. ROELL
- ---------------------
Margaret J. Roell /s/ William J. Bologna
----------------------
By: William J. Bologna
Chairman of the Board
14
<PAGE>
SCHEDULE 1
OUTSIDE BUSINESS INTERESTS
As of execution date:
1. Participant in the Home Box Office National Football League seasonal
show.
2. Director of the Miami Project;
3. Member of the board of directors of The Sports Authority;
4. Member of the board of directors of American Bankers Insurance
Group;
5. Member of the board of directors of DeLuca Foods, Inc.
Columbia Laboratories, Inc.
/s/ WILLIAM J. BOLOGNA
- ----------------------
By: William J. Bologna
Chairman of the Board
/s/ NICHOLAS A. BUONICONTI
- --------------------------
Nicholas A. Buoniconti
ADDENDUM FOR POST EXECUTION OUTSIDE ACTIVITIES:
15
Date:April 18, 1998
EXHIBIT 10.9
ADDENDUM TO EMPLOYMENT AGREEMENT
This addendum ("Addendum") dated as of the 1st day of September, 1997,
between Columbia Laboratories Inc. ("Columbia") a corporation organized and
existing under and by virtue of the laws of the State of Delaware, having its
principal place of business at 2665 South Bayshore Drive, Miami, Florida 33133
(hereinafter referred to as the "Company"), and Norman M. Meier, who resides at
934 S. South Lake Drive, Hollywood, Florida 33019 (hereinafter referred to as
"Employee").
WITNESETH:
WHEREAS, the Company is and will be engaged in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products; and
WHEREAS, the employee, by reason of his knowledge, skill and ability is
uniquely qualified to aid the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products; and
WHEREAS, the Company is desirous of continuing the employment of the
Employee to provide assistance to the Company in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products and the Employee is desirous of continuing his employment with the
Company to assist it in the development, testing, registration, manufacturing,
licensing, marketing, and selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this Addendum to
the Employee's employment agreement (the "Agreement") so that the rights,
duties, benefits and obligations of each in respect of the employment of the
Employee for and by the Company will be fully set forth under the terms and
conditions stated both in the Agreement and herein upon the execution hereof;
and
WHEREAS, the terms of the Employee's Agreement shall only be modified
by the specific terms and conditions set forth herein, which shall modify and
supersede any similar provisions in the Employee's employment agreement, if any,
and any inconsistency between this Addendum and the Employee's Agreement shall
be resolved by the provisions hereinafter set forth.
NOW, therefore, in consideration of the mutual promises contained
herein, the payment of Ten ($10.00) dollars by each party to the other, the
receipt of which is hereby duly acknowledged, and for other good and valuable
consideration, the Company and Employee further agree as follows:
1. The Employee retroactive to and effective as of September 1, 1997,
shall receive for the discharge of his duties and activities on behalf of the
Company as provided for herein, an annual salary ("Base Salary") of Four Hundred
Thousand and No/00 ($400,000.00) dollars, which shall be paid by the Company to
the Employee in equal and regular installments not less frequently than monthly,
in accordance with the Company's policy for payment of executive salaries.
2
<PAGE>
2. NOTICES
Any notice required or permitted to be given under this addendum and
the Employee's employment agreement shall be sufficient if in writing and
actually delivered, or if sent either by Federal Express, or postage prepaid, by
certified mail, return receipt requested, with a copy by ordinary mail, to the
addresses below:
As to Company: 2665 South Bayshore Drive
Miami, Florida 33133
As to Employee: 2934 S. South Lake Drive
Hollywood, Florida 33019
or to such other address as either party shall designate by written notice to
the other.
3. ENTIRE ADDENDUM
This Addendum contains the entire agreement and understanding of the
Company and the Employee with respect to the subject matter hereof, and shall
incorporate, merge and supersede all prior agreements and understandings had
between the Company and the Employee, either oral or written, if any. No
modification, change or amendment to this addendum, shall be binding upon the
Company or the Employee unless the same is in writing, and signed by the party
against whom enforcement of the modification, change or amendment is sought to
be enforced
4. MISCELLANEOUS
(a) This Addendum and the implementation of it shall be subject to
and governed by the laws of the State of Florida, and any legal proceedings
relating to (i) the interpretation or
3
<PAGE>
enforcement of any of the provisions of this Addendum, or (ii) any dispute
relating to the employment relationship created by the addendum, shall only be
brought in the Circuit Court of the State of Florida, in and for the County of
Dade.
(b) The Article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or the interpretation of this
Addendum.
(c) The failure of any provision of this Addendum shall in no manner
affect the right to enforce the remainder of this Addendum, and the waiver by
either The Company or the Employee of any breach of any provision of this
addendum shall not be construed to be a waiver by the Company or the Employee of
any succeeding breach of such provision or a waiver by such party of any breach
of any other provision of this Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on
September 29, 1997.
Employee:
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/NORMAN M. MEIER
------------------
NORMAN MEIER
Company:
COLUMBIA LABORATORIES, INC.
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/ William J. Bologna
----------------------
By: WILLIAM J. BOLOGNA
Chairman of the Board
4
EXHIBIT 10.10
ADDENDUM TO EMPLOYMENT AGREEMENT
This addendum ("Addendum") dated as of the 1st day of September, 1997,
between Columbia Laboratories Inc. ("Columbia") a corporation organized and
existing under and by virtue of the laws of the State of Delaware, having its
principal place of business at 2665 South Bayshore Drive, Miami, Florida 33133
(hereinafter referred to as the "Company"), and William J. Bologna, who
maintains a residence at 22 Place du General Catroux, Paris, 75017 (hereinafter
referred to as "Employee").
WITNESETH:
WHEREAS, the Company is and will be engaged in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products; and
WHEREAS, the employee, by reason of his knowledge, skill and ability is
uniquely qualified to aid the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products; and
WHEREAS, the Company is desirous of continuing the employment of the
Employee to provide assistance to the Company in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products and the Employee is desirous of continuing his employment with the
Company to assist it in the development, testing, registration, manufacturing,
licensing, marketing, and selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this Addendum to
the Employee's employment agreement (the "Agreement") so that the rights,
duties, benefits and obligations of each in respect of the employment of the
Employee for and by the Company will be fully set forth under the terms and
conditions stated both in the Agreement and herein upon the execution hereof;
and
WHEREAS, the terms of the Employee's Agreement shall only be modified
by the specific terms and conditions set forth herein, which shall modify and
supersede any similar provisions in the Employee's employment agreement, if any,
and any inconsistency between this Addendum and the Employee's Agreement shall
be resolved by the provisions hereinafter set forth.
NOW, therefore, in consideration of the mutual promises contained
herein, the payment of Ten ($10.00) dollars by each party to the other, the
receipt of which is hereby duly acknowledged, and for other good and valuable
consideration, the Company and Employee further agree as follows:
1. The Employee retroactive to and effective as of September 1, 1997,
shall receive for the discharge of his duties and activities on behalf of the
Company as provided for herein, an annual salary ("Base Salary") of Four Hundred
Thousand and No/00 ($400,000.00) dollars, which shall be paid by the Company to
the Employee in equal and regular installments not less frequently than monthly,
in accordance with the Company's policy for payment of executive salaries.
2
<PAGE>
2. NOTICES
Any notice required or permitted to be given under this addendum
and the Employee's employment agreement shall be sufficient if in writing and
actually delivered, or if sent either by Federal Express, or postage prepaid, by
certified mail, return receipt requested, with a copy by ordinary mail, to the
addresses below:
As to Company: 2665 South Bayshore Drive
Miami, Florida 33133
As to Employee: 22 Place du General Catroux
Paris, 75017 France
or to such other address as either party shall designate by written notice to
the other.
3. ENTIRE ADDENDUM
This Addendum contains the entire agreement and understanding of the
Company and the Employee with respect to the subject matter hereof, and shall
incorporate, merge and supersede all prior agreements and understandings had
between the Company and the Employee, either oral or written, if any. No
modification, change or amendment to this addendum, shall be binding upon the
Company or the Employee unless the same is in writing, and signed by the party
against whom enforcement of the modification, change or amendment is sought to
be enforced.
4. MISCELLANEOUS
(a) This Addendum and the implementation of it shall be subject to
and governed by the laws of the State of Florida, and any legal proceedings
relating to (i) the interpretation or
3
<PAGE>
enforcement of any of the provisions of this Addendum, or (ii) any dispute
relating to the employment relationship created by the addendum, shall only be
brought in the Circuit Court of the State of Florida, in and for the County of
Dade.
(b) The Article headings contained herein are for reference
purposes only and shall not in any way affect the meaning or the interpretation
of this Addendum.
(c) The failure of any provision of this Addendum shall in no
manner affect the right to enforce the remainder of this Addendum, and the
waiver by either The Company or the Employee of any breach of any provision of
this addendum shall not be construed to be a waiver by the Company or the
Employee of any succeeding breach of such provision or a waiver by such party of
any breach of any other provision of this Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum
on September 29, 1997.
Employee:
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/ William J. Bologna
----------------------
WILLIAM J. BOLOGNA
Company:
COLUMBIA LABORATORIES, INC.
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/ NORMAN M. MEIER
-----------------------
By: NORMAN M. MEIER
President
4
EXHIBIT 10.11
ADDENDUM TO EMPLOYMENT AGREEMENT
This addendum ("Addendum") dated as of the 1st day of September, 1997,
between Columbia Laboratories Inc. ("Columbia") a corporation organized and
existing under and by virtue of the laws of the State of Delaware, having its
principal place of business at 2665 South Bayshore Drive, Miami, Florida 33133
(hereinafter referred to as the "Company"), and Nicholas A. Buoniconti, who
resides at______________, Florida 33131 (hereinafter referred to as "Employee").
WITNESETH:
WHEREAS, the Company is and will be engaged in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products; and
WHEREAS, the employee, by reason of his knowledge, skill and ability is
uniquely qualified to aid the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products; and
WHEREAS, the Company is desirous of continuing the employment of the
Employee to provide assistance to the Company in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products and the Employee is desirous of continuing his employment with the
Company to assist it in the development, testing, registration, manufacturing,
licensing, marketing, and selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this Addendum to
the Employee's employment agreement (the "Agreement") so that the rights,
duties, benefits and obligations of each in respect of the employment of the
Employee for and by the Company will be fully set forth under the terms and
conditions stated both in the Agreement and herein upon the execution hereof;
and
WHEREAS, the terms of the Employee's Agreement shall only be modified
by the specific terms and conditions set forth herein, which shall modify and
supersede any similar provisions in the Employee's employment agreement, if any,
and any inconsistency between this Addendum and the Employee's Agreement shall
be resolved by the provisions hereinafter set forth.
NOW, therefore, in consideration of the mutual promises contained
herein, the payment of Ten ($10.00) dollars by each party to the other, the
receipt of which is hereby duly acknowledged, and for other good and valuable
consideration, the Company and Employee further agree as follows:
1. The Employee retroactive to and effective as of September 1, 1997,
shall receive for the discharge of his duties and activities on behalf of the
Company as provided for herein, an annual salary ("Base Salary") of Two Hundred
Eighty Thousand and No/00 ($280,000.00) dollars, which shall be paid by the
Company to the Employee in equal and regular installments not less frequently
than monthly, in accordance with the Company's policy for payment of executive
salaries.
2
<PAGE>
2. NOTICES
Any notice required or permitted to be given under this addendum
and the Employee's employment agreement shall be sufficient if in writing and
actually delivered, or if sent either by Federal Express, or postage prepaid, by
certified mail, return receipt requested, with a copy by ordinary mail, to the
addresses below:
As to Company: 2665 South Bayshore Drive
Miami, Florida 33133
As to Employee: 445 Grand Bay Drive, Apt 803
Miami, Florida 33131
or to such other address as either party shall designate by written notice to
the other.
3. ENTIRE ADDENDUM
This Addendum contains the entire agreement and understanding of the
Company and the Employee with respect to the subject matter hereof, and shall
incorporate, merge and supersede all prior agreements and understandings had
between the Company and the Employee, either oral or written, if any. No
modification, change or amendment to this addendum, shall be binding upon the
Company or the Employee unless the same is in writing, and signed by the party
against whom enforcement of the modification, change or amendment is sought to
be enforced
4. MISCELLANEOUS
(a) This Addendum and the implementation of it shall be subject to
and governed by the laws of the State of Florida, and any legal proceedings
relating to (i) the interpretation or
3
<PAGE>
enforcement of any of the provisions of this Addendum, or (ii) any dispute
relating to the employment relationship created by the addendum, shall only be
brought in the Circuit Court of the State of Florida, in and for the County of
Dade.
(b) The Article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or the interpretation of this
Addendum.
(c) The failure of any provision of this Addendum shall in no manner
affect the right to enforce the remainder of this Addendum, and the waiver by
either The Company or the Employee of any breach of any provision of this
addendum shall not be construed to be a waiver by the Company or the Employee of
any succeeding breach of such provision or a waiver by such party of any breach
of any other provision of this Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on
September 29, 1997.
Employee:
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/ NICHOLAS A. BUONICONTI
--------------------------
NICHOLAS A. BUONICONTI
Company:
COLUMBIA LABORATORIES, INC.
Witness:
/s/ DAVID L. WEINBERG
- ---------------------
David L. Weinberg /s/ WILLIAM J. BOLOGNA
--------------------------
By: WILLIAM J. BOLOGNA
Chairman of the Board
4
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Columbia Laboratories (Bermuda) Ltd.
Columbia Laboratories (France) SA
Columbia Laboratories (UK) Limited
Columbia Laboratories (Ireland) Limited
Columbia Research Laboratories, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,256,590
<SECURITIES> 0
<RECEIVABLES> 6,356,118
<ALLOWANCES> 132,276
<INVENTORY> 2,252,675
<CURRENT-ASSETS> 11,210,964
<PP&E> 3,387,265
<DEPRECIATION> 1,686,129
<TOTAL-ASSETS> 15,001,752
<CURRENT-LIABILITIES> 6,071,406
<BONDS> 0
0
25
<COMMON> 286,231
<OTHER-SE> 8,527,309
<TOTAL-LIABILITY-AND-EQUITY> 15,001,752
<SALES> 16,547,411
<TOTAL-REVENUES> 16,547,411
<CGS> 6,630,820
<TOTAL-COSTS> 6,630,820
<OTHER-EXPENSES> 16,016,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,186
<INCOME-PRETAX> 847,906
<INCOME-TAX> 85,000
<INCOME-CONTINUING> 762,906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 762,906
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
