<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-27576
ULTRAFEM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 33-0435037
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
</TABLE>
------------------------
500 FIFTH AVENUE, SUITE 3620
NEW YORK, NEW YORK 10110
(Address of principal executive offices)
(Zip Code)
------------------------
212-575-5740
(Registrant's telephone number, including area code)
------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ / / No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At November 1, 1996, there were 5,891,548 shares of Common Stock, $.001 par
value, outstanding.
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<PAGE>
ULTRAFEM, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
---------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................................... 1
Balance Sheets as of September 30, 1996 and June 30, 1996................................ 2
Statements of Operations for the Three Months Ended September 30, 1996 and 1995.......... 3
Statements of Cash Flows for the Three Months Ended September 30, 1996 and 1995.......... 4
Notes to Financial Statements............................................................ 5-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 13
Item 2. Changes in Securities.................................................................... 13
Item 3. Defaults upon Senior Securities.......................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders...................................... 13
Item 5. Other Information........................................................................ 13
Item 6. Exhibits and Reports on Form 8-K......................................................... 13
Signatures ......................................................................................... 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
financial statements pursuant to the rules and regulations of the Securities and
Exchange Commission. It is suggested that the following financial statements be
read in conjunction with the year end financial statements and notes thereto
included in Amendment No. 2 to the Company's registration statement on Form S-1
(File No. 333-11995) filed on November 8, 1996.
The results of operations for the three month period ended September 30,
1996 are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
1
<PAGE>
ULTRAFEM, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
Current Assets:
Cash and cash equivalents....................................................... $ 16,663,098 $ 24,510,071
Accounts receivable............................................................. 157,806 --
Inventory....................................................................... 1,176,443 266,951
Prepaid marketing and other current assets...................................... 1,568,333 609,503
-------------- --------------
Total Current Assets.......................................................... 19,565,680 25,386,525
Property and equipment--net....................................................... 5,704,695 2,875,153
Other assets--net................................................................. 1,496,257 1,146,258
-------------- --------------
Total Assets.................................................................. $ 26,766,632 $ 29,407,936
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion--long-term debt................................................. $ 3,208,888 $ 3,442,013
Accounts payable................................................................ 1,710,811 893,548
Accrued interest................................................................ 762,541 724,932
Accrued salaries................................................................ 1,662,363 1,426,093
Other accrued liabilities....................................................... 1,848,967 937,406
-------------- --------------
Total Current Liabilities..................................................... 9,193,570 7,423,992
Long-term debt.................................................................... 700,000 700,000
-------------- --------------
Total Liabilities............................................................. 9,893,570 8,123,992
-------------- --------------
Stockholders' Equity:
Preferred stock, $.001 par value--authorized,
5,000,000 shares $8 cumulative Convertible Series A: issued and
outstanding 1,121.25 shares stated at liquidation preference of $112,125 at
June 30, 1996................................................................. -- 112,125
Common stock, $.001 par value--authorized
20,000,000 shares; outstanding 5,889,651 and 5,737,241 shares, respectively... 10,058 9,905
Additional paid-in capital...................................................... 43,366,219 42,207,697
Deficit......................................................................... (26,503,215) (21,045,783)
-------------- --------------
Total Stockholders' Equity.................................................... 16,873,062 21,283,944
-------------- --------------
Total Liabilities and Stockholders' Equity.................................... $ 26,766,632 $ 29,407,936
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
2
<PAGE>
ULTRAFEM, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net sales............................................................................. $ 192,540 $ --
------------ ------------
Costs and Expenses:
Cost of sales (exclusive of depreciation)........................................... 358,377 --
Marketing, sales and distribution................................................... 2,921,392 345,416
Research and development............................................................ 394,778 70,616
General and administrative.......................................................... 1,924,557 597,529
Depreciation and amortization....................................................... 213,355 78,182
------------ ------------
5,812,459 1,091,743
------------ ------------
Loss from operations.................................................................. 5,619,919 1,091,743
Interest income....................................................................... (285,345) (2,820)
Interest expense...................................................................... 122,858 168,160
------------ ------------
Net loss.............................................................................. $ 5,457,432 $ 1,257,083
------------ ------------
------------ ------------
Net loss per share.................................................................... $ .94 $ .49
------------ ------------
------------ ------------
Weighted average number of common shares
and equivalents outstanding......................................................... 5,827,622 2,502,626
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
3
<PAGE>
ULTRAFEM, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................ $ (5,457,432) $(1,257,083)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation.................................................................... 109,284 15,847
Amortization of debt issuance, consulting, licensing and patent costs........... 104,071 62,335
Non-cash officers compensation.................................................. 192,970 38,463
Non-employee stock based claim settlement....................................... 338,000 --
Loss on disposal of equipment................................................... 7,724 --
Changes in operating assets and liabilities..................................... (745,925) (185,745)
------------ -----------
Net Cash Used in Operating Activities......................................... (5,451,308) (1,326,183)
------------ -----------
Cash flows from investing activities:
Purchase of and deposits on property and equipment.................................. (2,946,550) --
------------ -----------
Net Cash Used in Investing Activities......................................... (2,946,550) --
------------ -----------
Cash flows from financing activities:
Proceeds from sale of convertible debentures........................................ -- 2,125,000
Proceeds from notes payable......................................................... -- 2,127,870
Proceeds from exercise of stock options and warrants................................ 654,010 --
Repayment of borrowings............................................................. (103,125) (614,155)
Debt issue costs.................................................................... -- (719,662)
------------ -----------
Net Cash Provided by Financing Activities..................................... 550,885 2,919,053
------------ -----------
Net (decrease) increase in cash....................................................... (7,846,973) 1,592,870
Cash and cash equivalents, beginning of period........................................ 24,510,071 73,390
------------ -----------
Cash and cash equivalents, end of period.............................................. $ 16,663,098 $ 1,666,260
------------ -----------
------------ -----------
Changes in operating assets and liabilities consist of:
(Increase) in accounts receivable................................................... $ (157,806) $ --
(Increase) in inventory............................................................. (909,492) --
(Increase) in prepaid marketing and other current assets............................ (1,034,290) (71,133)
(Increase) in other assets.......................................................... (454,070) (112,461)
Increase in accounts payable........................................................ 817,263 92,221
Increase (decrease) in accrued liabilities.......................................... 992,470 (94,372)
------------ -----------
$ (745,925) $ (185,745)
------------ -----------
------------ -----------
Supplementary information:
Cash paid during the year for:
Interest.......................................................................... $ 77,754 $ 250,415
------------ -----------
------------ -----------
Taxes............................................................................. $ -- $ --
------------ -----------
------------ -----------
Non-cash financing activities:
Conversion of notes payable to common stock......................................... $ 130,000 $ --
------------ -----------
------------ -----------
Issuance of below market value warrants in connection with the settlement of a
claim............................................................................. $ 338,000 $ --
------------ -----------
------------ -----------
Conversion of preferred stock to common stock....................................... $ 112,125 $ --
------------ -----------
------------ -----------
Conversion of secured notes and notes payable to convertible debentures............. $ -- $ 850,000
------------ -----------
------------ -----------
Conversion of secured notes to notes payable........................................ $ -- $ 850,000
------------ -----------
------------ -----------
</TABLE>
See notes to financial statements.
4
<PAGE>
ULTRAFEM, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
During August 1996, Ultrafem, Inc. (the "Company" or "Ultrafem") began
selling the Company's product, INSTEAD-TM-. Accordingly, the Company is no
longer considered a development stage enterprise as it was through June 30,
1996.
The balance sheet as at September 30, 1996, and the statements of operations
and cash flows for the three months ended September 30, 1996 and 1995 have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission, and, in the opinion of management, contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for all
periods presented. Certain reclassifications have been made to conform with the
current presentation.
MARKETING COSTS --Marketing costs are expensed the first time the
advertisement or promotion takes place.
REVENUE RECOGNITION --Revenue is recognized upon shipment of merchandise.
2. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which is effective for the
Company beginning July 1, 1996. The standard encourages, but does not require,
companies to recognize compensation expense of grants for stock, stock options
and other equity instruments to employees based on fair value accounting rules.
SFAS No. 123 requires companies that choose not to adopt the new fair value
accounting rules to disclose pro forma net income and earnings per share under
the new method. The Company will continue to apply APB opinion No. 25 to its
stock based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share in its annual financial
statements.
3. LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Loss per common and common equivalent share for the three months ended
September 30, 1996 and 1995 was computed using the weighted average number of
common shares outstanding during each period. The dilutive effect of outstanding
options, warrants and common stock equivalents for the three months ended
September 30, 1996 were not considered as their effect was antidilutive. The
weighted average number of common shares outstanding during the three months
ended September 30, 1995 includes incremental shares for the common stock,
warrants and other potentially dilutive securities issued and options granted to
purchase common stock which were issued within one year prior to the effective
date of the Company's initial public offering (the "Incremental Shares"). Such
incremental shares were determined utilizing the treasury stock method. The
effect of the assumed exercise of stock options which were issued in periods
prior to the one- year period previously mentioned are not included because
their effect is antidilutive.
5
<PAGE>
ULTRAFEM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ------------
<S> <C> <C>
Raw materials.................................................... $ 499,014 $ 258,919
Work-in-process.................................................. 40,985 --
Finished goods................................................... 636,444 8,032
------------- ------------
$ 1,176,443 $ 266,951
------------- ------------
------------- ------------
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ------------
<S> <C> <C>
Machinery and equipment.......................................... $ 1,516,896 $ 1,480,205
Office furniture and equipment................................... 138,551 105,096
Laboratory equipment............................................. 48,691 49,766
Leasehold improvements........................................... 472,521 439,172
Computer equipment............................................... 309,994 267,970
Construction in progress......................................... 3,583,278 804,068
------------- ------------
6,069,931 3,146,277
Less accumulated depreciation and amortization................... (365,236) (271,124)
------------- ------------
$ 5,704,695 $ 2,875,153
------------- ------------
------------- ------------
</TABLE>
6. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ------------
<S> <C> <C>
Patent and trademark costs....................................... $ 259,846 $ 222,493
Debt issuance costs.............................................. 971,490 971,490
Deferred second offering costs................................... 458,744 70,000
Consulting agreement............................................. 275,000 275,000
Licensing agreements............................................. 400,000 400,000
Security deposits................................................ 63,803 35,830
------------- ------------
2,428,883 1,974,813
Less accumulated amortization.................................... (932,626) (828,555)
------------- ------------
$ 1,496,257 $ 1,146,258
------------- ------------
------------- ------------
</TABLE>
6
<PAGE>
ULTRAFEM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- -------------
<S> <C> <C>
Unsecured convertible notes, due April, 1997 interest at 10% per
year.......................................................... $ 2,875,000 $ 2,875,000
Convertible debentures, due December, 1998 to October, 1999,
interest compounded annually at 10.5% per year................ 700,000 700,000
Unsecured notes to former officers, due September, 1996 to
December, 1996, interest at 6% or 10% per year................ 117,908 221,033
Unsecured notes to trade and other creditors, due October, 1996
to March 1997, interest at 10% per year....................... 63,548 63,548
Subordinated convertible debentures, due on demand or due
August, 1996 to November, 1996, interest at 10% per year...... 152,432 282,432
------------- -------------
3,908,888 4,142,013
Less current maturities......................................... (3,208,888) (3,442,013)
------------- -------------
$ 700,000 $ 700,000
------------- -------------
------------- -------------
</TABLE>
8. RELATED PARTY TRANSACTIONS
A director and officers of the Company were issued options to purchase
624,862 shares of the Company's common stock at $4.35 and $6 per share,
resulting in compensation expenses of approximately $3,348,000 which are
amortized over the remaining lives of their respective contracts. The expense
for the three months ended September 30, 1996 and 1995 was $192,970 and $38,463,
respectively. Accrued salaries as at September 30, 1996 and June 30, 1996
includes $1,604,841 and $1,411,871, respectively, of the compensation expense
discussed above.
A director and stockholder of the Company is the Chairman of the Executive
Committee of an advertising agency used by the Company which was paid
approximately $1,758,000 and $60,000 during the three months ended September 30,
1996 and 1995, respectively. In addition, approximately $1,529,000 and $560,000
owed to such agency are included in accrued liabilities and accounts payable at
September 30, 1996 and June 30, 1996, respectively.
A director and stockholder of the Company is a Partner of the law firm
retained by the Company. The total amount of fees paid by the Company to such
law firm was approximately $222,000 and $157,000 for the three months ended
September 30, 1996 and 1995, respectively. In addition, approximately $179,000
and $95,000 owed to the law firm is included in accrued liabilities and accounts
payable at September 30, 1996 and June 30, 1996, respectively.
The Company entered into a Research Agreement with ReProtect, LLC, formed by
scientists (including a current director) who previously conducted research for
the Company under an expired Research Agreement, to conduct research for the
Company. Research and development expenditures pursuant to the above agreement
amounted to approximately $250,000 for the three months ended September 30,
1996. Included in prepaid marketing and other current assets at September 30,
1996 and June 30, 1996 is $83,300 of prepaid research and development
expenditures paid to ReProtect.
7
<PAGE>
ULTRAFEM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (SFAS 109), provides for the recognition of deferred assets
subject to a valuation allowance. At September 30, 1996, the Company established
a valuation allowance equal to the full amount of the tax effect of the net
operating loss and research and development credit carryforward.
The Tax Reform Act of 1986 provided for a limitation on the use of net
operating loss carryforwards, following certain ownership changes. The Company
completed an initial public offering ("IPO") of Common Stock which is likely to
trigger an ownership change of greater than 50%. In addition, as a result of
transactions in the Company's stock during 1993 through 1994, a change of
ownership of greater than 50%, as defined, also may have occurred. Under such
circumstances, the potential benefits from utilization of tax carryforward may
be substantially limited or reduced on an annual basis.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Ultrafem is a women's health care company dedicated to providing women with
a broader range of options to protect their reproductive health. The Company's
business strategy is to develop, manufacture and market proprietary products
based on its patented SoftCup-Registered Trademark- Technology directed at high
potential, underserved segments of the women's health care market.
The Company's activities during the quarter ended September 30, 1996 were
focused on the launch of INSTEAD-TM-, which commenced in August 1996. The lead
market for the initial rollout is in the Pacific Northwest, a region which the
Company estimates represents approximately 8% of U.S. households and includes
the major markets of San Francisco, Seattle and Portland.
During the quarter ended September 30, 1996, the Company initiated marketing
and advertising activities to support the launch of INSTEAD-TM- directed toward
the consumer, professional target audiences and the retail trade. These
activities included multimedia advertising comprised of television, print,
internet, sampling and coupon mailings. These activities were centered on
generating trial and awareness of INSTEAD-TM-.
Manufacturing activities to support the launch of INSTEAD-TM- progressed
during the quarter ended September 30, 1996. Equipment for a second
thermoforming manufacturing line was operational by September 30, 1996.
In addition to INSTEAD-TM- launch activities, research and development
activities on new products continued. The BufferGel Technology ("BufferGel")
developed by the Company's research and development partner, ReProtect, LLC, was
selected by HIVNET for funding of clinical trials to test its use for the
prevention of AIDS and other sexually transmitted diseases (STDs). The Phase I
clinical trials are currently scheduled to begin in December 1996.
9
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
NET SALES
Net sales for the three months ended September 30, 1996 were $192,540
resulting from the shipment of INSTEAD-TM-. The Company was a development stage
company for the three months ended September 30, 1995 and generated no sales.
COST OF SALES (EXCLUSIVE OF DEPRECIATION)
Cost of sales during the three months ended September 30, 1996 were
$358,377. The Company was a development stage company during the three months
ended September 30, 1995 and incurred no cost of sales. The cost of sales for
the three months ended September 30, 1996 was attributable to start-up and
manufacturing costs associated with the production of INSTEAD-TM- to support
related sales. The Company has not reached a level of production adequate to
absorb the Company's manufacturing costs on a cost efficient basis.
MARKETING, SALES AND DISTRIBUTION
Marketing, sales and distribution expense increased 745.8% to $2,921,392 for
the three months ended September 30, 1996 from $345,416 for the three months
ended September 30, 1995. This increase was principally attributable to certain
expenses incurred in connection with the launch of INSTEAD-TM- during the three
months ended September 30, 1996 for marketing and advertising for television,
print, internet, sampling and coupon mailings to generate consumer trial and
awareness of INSTEAD-TM-.
RESEARCH AND DEVELOPMENT
Research and development expense increased 459.0% to $394,778 for the three
months ended September 30, 1996 from $70,616 for the three months ended
September 30, 1995. The increase was primarily attributable to payments to
ReProtect under the terms of the Company's research and development agreement.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased 222.1% to $1,924,557 for the
three months ended September 30, 1996 from $597,529 for the three months ended
September 30, 1995. This increase was primarily due to non-cash charges
resulting from the issuance of options and warrants to purchase Common Stock at
prices below fair market value to officers and a director of the Company and in
connection with the settlement of a claim. This increase was also due, to a
lesser extent, to increases in legal fees, increases in salaries attributable to
administrative support staff, and increases in financial public relations
expense.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased 172.9% to $213,355 for the
three months ended September 30, 1996 from $78,182 for the three months ended
September 30, 1995. This increase was attributable to the increase in the
depreciation of property and equipment and the increase in the amortization of
deferred debt issuance costs.
INTEREST INCOME
Interest income was $285,345 and $2,820 for the three months ended September
30, 1996 and 1995, respectively. The increase for the three months ended
September 30, 1996 compared to the three months
10
<PAGE>
ended September 30, 1995 was attributable to the money received by the Company
during February 1996 from its IPO, which was invested in cash equivalents during
the three months ended September 30, 1996.
INTEREST EXPENSE
Interest expense was $122,858 and $168,160 for the three months ended
September 30, 1996 and 1995, respectively. The decrease of 26.9% for the three
months ended September 30, 1996 compared to the three months ended September 30,
1995 was attributable to the repayment of debt by the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for funds has increased from period to period as it has
incurred expenses for, among other things, research and development activities,
engineering and design of fully automated manufacturing systems, clinical
testing, meeting domestic and international regulatory requirements,
applications for domestic and international patent protection, applications for
domestic trademark protection and market research. Since its inception, the
Company funded these needs through private placements of its equity and debt
securities. The Company received net proceeds in excess of approximately
$12,300,000 through private sales of these securities from inception through
September 30, 1996.
In February 1996, the Company received proceeds of $34,085,611, net of
related expenses of $5,014,389, in connection with the sale of 3,910,000 shares
of Common Stock in the IPO. At September 30, 1996 the Company had $16,663,098 in
cash and cash equivalents. From June 30, 1996 to September 30, 1996, the
Company's cash position decreased by $7,846,973, principally reflecting
$5,451,308 used in operating activities, $2,946,550 used for purchase of
property and equipment, and $103,125 for the repayment of debt offset in part by
$654,010 in proceeds from the exercise of stock options and warrants.
The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the staged market introduction of
INSTEAD-TM-, the Company's research and development activities, the level of
resources that the Company devotes to the developmental, clinical, regulatory
and marketing aspects of its products and the extent to which strategic
alliances with multi-national pharmaceutical or consumer product companies are
formed. At September 30, 1996, the Company had commitments in the amount of
approximately $6,955,000, of which $3,635,000 was unpaid, for the purchase of
manufacturing equipment and improvements to the manufacturing facility to
support start-up production and improvements to the new New York office space.
Included in accounts payable and accrued liabilities at September 30, 1996 was
approximately $249,000 of these unpaid commitments. In addition, in February
1996 the Company and ReProtect entered into a License, Research and Product
Development Agreement under which the Company is obligated to pay ReProtect a
minimum of $1 million per year for research and development. In addition, the
Company will also continue to incur additional research and development
expenses; these expenses may include amounts expended on prototype development,
prototype manufacturing, laboratory and human clinical studies, as well as
market research.
The Company's stockholders' equity decreased by $4,410,882 from June 30,
1996 to September 30, 1996 reflecting a net loss by the Company for the three
months ended September 30, 1996 of $5,457,432, offset in part by proceeds from
the exercise of stock options and warrants, issuance of below market value stock
warrants in connection with the settlement of a claim and conversion of
convertible debt into Common Stock of $1,046,550.
The Company has filed a registration statement with the Securities and
Exchange Commission for the sale of 2.0 million shares of the Company's Common
Stock. Net proceeds are estimated to be approximately $36.4 million
(approximately $41.8 million if the underwriters over-allotment option is
exercised in full) after deducting underwriting discounts and estimated offering
expenses payable by the Company, based upon an assumed offering price of $20.00
per share.
11
<PAGE>
The Company intends to use approximately $3,430,812 of the net proceeds of
the Offering to repay certain outstanding indebtedness and to use the balance of
such net proceeds to provide continued support for the launch of INSTEAD-TM- in
the initial market and to support expansion into additional geography, including
increased marketing spending and the advanced purchase of manufacturing
equipment, for increased investment in research and development of medical and
health care products and for general corporate purposes.
The Company believes that the level of financial resources available to it
is an important factor in its ability to achieve the marketing and distribution
of INSTEAD-TM- and in its ability to develop and eventually bring medical
products to market. The Company believes that the financial resources available
to it, together with the net proceeds from the Offering, will satisfy the
Company's working capital needs for at least twelve months. However, the Company
may require additional financing if unforeseen risks are encountered. If the
Company is unable to raise additional capital or arrange satisfactory working
capital or additional equity financing, the Company may be unable to complete
the distribution of INSTEAD-TM- into the full United States market. Additional
financings may require the issuance of new equity securities, and there can be
no assurance that the Company will be able to obtain working capital or
additional financing at a favorable rate, if at all.
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes forward-looking statements that may or may not
materialize. Additional information on factors that could potentially affect the
Company's financial results may be found in the Company's filings with the
Securities and Exchange Commission. These factors include the need for
additional financing for unforeseen risks, the uncertainty of consumer
acceptance and competitive response.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- ---------------------------
<C> <S>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on 8-K.
On October 30, 1996, the Company issued a press release and filed Form
8-K.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRAFEM, INC.
By: /s/ JOHN W. ANDERSEN
-----------------------------------------
John W. Andersen,
PRESIDENT; CHIEF EXECUTIVE OFFICER;
DIRECTOR AND CHAIRMAN OF THE BOARD OF
DIRECTORS
By: /s/ DORI M. REAP
-----------------------------------------
Dori M. Reap,
SENIOR VICE PRESIDENT OF FINANCE
AND ADMINISTRATION AND CHIEF FINANCIAL
OFFICER
Dated: November 13, 1996
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ULTRAFEM, INC. FINANCIAL STATEMENTS AT SEPTEMBER 30, 1996 AND THE THREE
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 16,663,098
<SECURITIES> 0
<RECEIVABLES> 157,806
<ALLOWANCES> 0
<INVENTORY> 1,176,443
<CURRENT-ASSETS> 19,565,680
<PP&E> 6,069,931
<DEPRECIATION> 365,236
<TOTAL-ASSETS> 26,766,632
<CURRENT-LIABILITIES> 9,193,570
<BONDS> 0
0
0
<COMMON> 10,058
<OTHER-SE> 16,863,004
<TOTAL-LIABILITY-AND-EQUITY> 26,766,632
<SALES> 192,540
<TOTAL-REVENUES> 192,540
<CGS> 358,377
<TOTAL-COSTS> 5,812,459
<OTHER-EXPENSES> (285,345)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,858
<INCOME-PRETAX> (5,457,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,457,432)
<EPS-PRIMARY> (.94)
<EPS-DILUTED> 0
</TABLE>
