<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
Commission file No: 1-12836
PHARMA PATCH PUBLIC LIMITED COMPANY
(Exact Name of small business issuer as Specified in its Charter)
Ireland Not Applicable
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation) Identification No.)
15/16 Fitzwilliam Place, Dublin, Ireland
(Address of Principal Executive Office) (Zip Code)
011-353-1-662-5222
Issuer's Telephone Number, Including Area Code
Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past twelve months
(or for such shorter periods that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past
ninety days.
Yes X No
----- -----
The number of ordinary shares of Registrant outstanding as of August 31, 1996
was 16,942,175 shares.
<PAGE> 2
PHARMA PATCH PUBLIC LIMITED COMPANY
INDEX
PART 1 -- FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets -- February 29, 1996,
August 31, 1996, and August 31, 1995 . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Loss and Deficit -- Year
ended February 29, 1996, three months ended August 31, 1996 and
1995 and six months ended August 31, 1996 and August 31, 1995 . . . 4
Unaudited Consolidated Statements of Cash Flows -- Year Ended
February 29, 1996 and six months ended August 31, 1996 and
August 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Statement of Changes in Stockholders Equity --
Six months ended August 31, 1996 and August 31, 1995 . . . . . . . 6
Unaudited Notes to Financial Statements . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 12
PART 2 -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE> 3
PHARMA PATCH PLC
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
UNAUDITED
-----------------------
February 29 August 31
1996 1996 1995
$ $ $
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents 668,822 1,745,120 500,518
Accounts receivable 22,690 101,867 381,057
Due from Vista 251,500 - -
Investment in TCPI - available for sale at market price 16,805,320 4,753,766 -
Prepaid expenses and other assets 222,848 67,788
- -------------------------------------------------------------------------------------------------------
Total Current assets 17,748,332 6,823,601 949,363
- -------------------------------------------------------------------------------------------------------
Fixed assets - 1,086,239 749,489
Investments in affiliates - 3,651,804 -
Investments - held to maturity - 116,450 -
Long term receivables - 193,200 -
Goodwill net of amortization - 4,458,443 -
Promissory notes - - 741,250
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 17,748,332 16,329,737 2,440,102
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
Current
Accounts payable 683,269 1,213,003 647,295
Accrued expenses 773,553 1,395,272 625,715
Deferred tax liability 1,710,212 - -
Current portion of note payable - 96,591 -
Current portion of long term debt - 138,362 -
Current portion of obligation under lease - 67,588 -
- -------------------------------------------------------------------------------------------------------
Total current liabilities 3,167,034 2,910,816 1,273,010
- -------------------------------------------------------------------------------------------------------
Note Payable - net of current portion - 277,777 5,000,000
Long Term Debt - net of current portion - 471,228 -
Obligation under capital lease - net of current portion - 155,241 -
- -------------------------------------------------------------------------------------------------------
Total Liabilities 3,167,034 3,815,062 6,273,010
- -------------------------------------------------------------------------------------------------------
Minority Interest - 3,180,928 -
Shareholders' equity (deficiency)
Capital stock
Authorized - 52,046,576 Ordinary Shares
Issued and outstanding (16,942,175 at
August 31, 1996; 11,410,633 at
February 29, 1996 and 8,724,772 at
August 31, 1995)
Ordinary Shares, at par value 2,256,756 2,343,912 2,229,631
Premium in excess of par value 15,404,580 17,947,324 14,015,164
Cumulative translation adjustment (6,518) 229,429 -
Deficit (6,249,628) (7,574,785) (20,077,703)
Unrealized gain (loss) on securities for sale
(net of deferred taxes of $1,710,212 at
February 29, 1996) 3,176,108 (3,612,133) -
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 14,581,298 9,333,747 (3,832,908)
- -------------------------------------------------------------------------------------------------------
17,748,332 16,329,737 2,440,102
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
3
<PAGE> 4
PHARMA PATCH PLC
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------------------------- --------------------------
For the Year For the Three Months For the Six Months
Ended Ended Ended
February 29 August 31 August 31
- --------------------------------------------------------------------------------------------------------------------------
1996 1996 1995 1996 1995
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Product development fees -- 786,075 -- 1,268,807 --
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES
Administration 1,798,524 1,257,476 360,457 2,129,002 537,582
Research and development -- -- -- -- --
Depreciation and amortization -- 134,331 -- 284,119 --
Foreign exchange loss (gain) -- (4,820) 11,743 (4,253) 15,607
Interest expense (income) 2,285 (685) (4,242) (3,579) (9,352)
- --------------------------------------------------------------------------------------------------------------------------
1,800,809 1,386,302 367,958 2,405,289 543,837
- --------------------------------------------------------------------------------------------------------------------------
Loss from operations (1,800,809) (600,227) (367,958) (1,136,482) (543,837)
- --------------------------------------------------------------------------------------------------------------------------
Loss on sale of investment -- -- -- 254,903 --
Equity investee loss -- 472,665 -- 480,133 --
Minority interest loss for period -- (477,927) -- (546,361) --
Other income (72,126) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (1,728,683) (594,965) (367,958) (1,325,157) (543,837)
- --------------------------------------------------------------------------------------------------------------------------
Discontinued Operations
Loss from discontinued operations (2,593,468) -- (491,095) -- (1,193,562)
Gain on sale of business segment 16,412,627 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Gain (loss) on discontinued operations 13,819,359 -- (491,095) -- (1,193,562)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) for the period 12,090,676 (594,965) (859,053) (1,325,157) (1,737,399)
- --------------------------------------------------------------------------------------------------------------------------
Deficit, beginning of period (18,340,304) (6,979,820) (19,218,650) (6,249,628) (18,340,304)
- --------------------------------------------------------------------------------------------------------------------------
Deficit, end of period (6,249,628) (7,574,785) (20,077,703) (7,574,785) (20,077,703)
- --------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) per Ordinary Share
Loss from continuing operations -- (.04) (.05) (.08) (.07)
Discontinued operations 0.70 na (.06) na (.16)
Net earnings (loss) 0.70 (.04) (.11) (.08) (.23)
- --------------------------------------------------------------------------------------------------------------------------
Number of Ordinary Shares outstanding
used for Earnings Per Share Purposes(1) 19,677,650 16,253,908 7,692,099 16,253,908 7,692,099
</TABLE>
- ---------------
(1) The modified treasury method was used for the year ended February 29, 1996
Earnings (Loss) Per Share calculation due to the dillutive effect of
outstanding warrants. The weighted average method was used for all other
periods.
See accompanying notes.
4
<PAGE> 5
PHARMA PATCH PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
UNAUDITED
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------------
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
FEBRUARY 29 AUGUST 31
---------------------------------------------------------
1996 1996 1995
$ $ $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) 12,090,676 (1,325,157) (1,737,399)
Add non-cash items
Depreciation and amortization 253,958 284,119 181,201
Write-down of fixed assets 9,900 -- --
Gain on sale of business (16,412,827) 219,635 --
Non-cash payments of expenses 1,842,478 215,735 --
Loss on sale OF investment -- 254,903 --
Minority interest loss for period (546,361)
Equity investee loss -- 480,133 --
Net change in non-cash working capital items 361,272 (933,994) 79,809
- ---------------------------------------------------------------------------------------------------------------------
(1,854,543) (1,566,722) (1,476,389)
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase OF fixed assets (50,658) (23,174) (30,312)
Advances to Vista (251,500) -- --
Net proceeds of sale of investment -- 2,928,696 --
Investment in Vista, net of cash acquired -- (710,188) --
Purchase of equity investments -- (75,000)
- ---------------------------------------------------------------------------------------------------------------------
(302,158) 2,120,334 (30,312)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of shares, net 2,186,778 701,894 1,368,474
Servicing of obligation under capital lease -- (41,715) --
Other -- 6,388 --
- ---------------------------------------------------------------------------------------------------------------------
2,186,778 666,567 1,368,474
- ---------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON
CASH AND CASH EQUIVALENTS -- (143,881)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents for the year 30,077 1,076,298 (138,227)
Cash and cash equivalents, beginning of year 638,745 668,822 638,745
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 668,822 1,745,120 500,518
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
5
<PAGE> 6
PHARMA PATCH PLC
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Six Month Periods Ended August 31, 1995 and 1996
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
UNREALIZED
GAIN (LOSS) TOTAL
PREMIUM IN CUMULATIVE ON SHAREHOLDER
EXCESS OF ACCUMULATED TRANSLATION EQUITY EQUITY
NUMBER OF PAR VALUE PAR VALUE DEFICIT ADJUSTMENT SECURITIES (DEFICIENCY)
SHARES $ $ $ $ $ $
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance on
February 28, 1995 5,740,253 2,183,643 11,448,439 (18,340,304) -- -- (4,708,222)
Issuance of Stock (Unaudited)
Payment of Professional Fees 300,389 4,712 324,110 -- -- -- 328,822
Payment of Accrued Salaries 174,167 2,525 171,642 -- -- -- 174,167
Private Placement 1,583,400 24,111 1,540,689 -- -- -- 1,564,800
Shares Issuance Costs -- -- (196,326) -- -- -- (196,326)
Officers and Directors 926,563 14,640 726,610 -- -- -- 741,250
Net (Loss) Aug. 31 1995
(Unaudited) -- -- -- (1,737,399) -- -- (1,737,399)
-------------------------------------------------------------------------------------------------
Balance on
August 31, 1995 (Unaudited) 8,724,772 2,229,631 14,015,164 (20,077,703) -- -- (3,832,908)
-------------------------------------------------------------------------------------------------
Balance on
February 29, 1996 11,410,633 2,256,756 15,404,580 (6,249,628) (6,518) 3,176,108 14,581,298
Issuance of Stock (Unaudited)
Payment of Professional Fees 431,542 6,584 213,051 -- -- -- 219,635
Shares issued to acquire
900,000 of Vista's
outstanding common
stock 4,500,000 71,100 2,178,900 -- -- -- 2,250,000
Private Placement 600,000 9,472 290,528 -- -- -- 300,000
Shares Issuance Costs -- -- (23,106) -- -- -- (23,106)
Unrealized gain (loss) on
capital issued by Vista
Technologies, Inc. (Unaudited) -- -- (116,629) -- -- -- (116,629)
Cumulative translation
adjustment related to
Vista (Unaudited) -- -- -- -- 235,947 -- 235,947
Unrealized gain (loss) on
equity securities for
the period (Unaudited) -- -- -- -- -- (6,788,241) (6,788,241)
Net loss Aug. 31 1996
(Unaudited) -- -- -- (1,325,157) -- -- (1,325,157)
-------------------------------------------------------------------------------------------------
Balance Aug. 31 1996 (Unaudited) 16,942,175 2,343,912 17,947,324 (7,574,785) 229,429 (3,612,133) 9,333,747
-------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
Unaudited
All information should be read in conjunction with the Management's Discussion
and Analysis of Financial Condition, Results of Operations and Financial
Statements and Notes to Financial Statements included in the Company's Annual
Report on Form 10KSB for the year ended February 29, 1996. Operating results
for the six month period ending August 31, 1996 are not necessarily indicative
of the results that may be obtained for the entire year.
1. ORGANIZATION
Pharma Patch Plc ("Pharma Patch") or ("the Company") is currently engaged,
through its only operating subsidiary Vista Technologies, Inc. ("Vista"), in
providing photorefractive keratectomy ("PRK") and other laser vision correction
("LVC") facilities and services to the health care industry. Pharma Patch was
incorporated under the laws of the Republic of Ireland in January, 1992. Prior
to July, 1993, Pharma Patch had no significant assets or operations.
On November 15, 1995, the Company sold substantially all of the operating assets
to Technical Chemicals and Products, Inc. (TCPI) for a gain of approximately
$16.4 million. These assets included eleven United States patents relating to
transdermal drug delivery and skin permeation technology, license rights to skin
penetration enhancers and electronically assisted drug delivery, proprietary
information and trade secrets related thereto, certain licensing and product
feasibility agreements entered into by the Company and one of its subsidiaries
fixed assets. In consideration for the purchased assets, TCPI issued an
aggregate of 786,214 shares of its common stock with a fair value of $11,919,000
at November 15, 1995 and satisfied the $5,000,000 promissory note previously
issued by the Company to Flora, Inc. (Flora). As a result of this transaction,
the Company owned 9.9% of TCPI's outstanding common shares.
On January 16, 1996, the Company entered into a supplemental agreement with TCPI
which amended certain provisions of the November 1995 asset purchase agreement.
TCPI filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission with respect to the sale of 1,800,000 TCPI common shares (Offering).
Pursuant to the terms of the supplemental agreement, the Company executed a
lock-up letter with the representative of the TCPI Underwriters providing that
it would not sell or otherwise dispose of any of its shares of common stock for
a period to expire 180 days following the closing date of the Offering (April
30, 1996) without their prior consent. As consideration for the execution of
the lock-up agreement, TCPI (i) terminated an existing lock-up agreement
covering TCPI common stock owned by the Company, executed in connection with the
asset purchase agreement; (ii) effective as of closing date of the Offering,
terminated the voting trust agreements, shareholders' agreement and irrevocable
proxy, executed in connection with the asset purchase agreement which, among
other things, limited the Company's ability to vote or dispose of its shares of
common stock; (iii) allowed the Company to offer for sale 100,000 shares of this
common stock in the Offering (plus
7
<PAGE> 8
up to an additional 110,000 if the Underwriters over-allotment option was
exercised); (iv) effective as of the closing date of the Offering, issue to
the Company a two-year warrant to purchase 100,000 shares of common stock at an
exercise price equal to the per share Offering price; and (v) file a
Registration Statement on Form S-3 to register all of the remaining shares of
common stock owned by the Company after the Offering. On April 30, 1996, TCPI
completed the offering whereby Pharma Patch sold 210,000 of its TCPI stock for
net proceeds of approximately $2.9 million.
On March 21, 1996, the Company completed the acquisition of 61.3% of the voting
interest of Vista. Vista provides photo refractive keratectomy and other
laser vision correction facilities and services to the health care industry.
The Company acquired its position in Vista by executing a stock purchase
agreement for 200,000 newly issued shares of Vista common stock for a cash
price of $500,000. The Company and Vista executed an additional agreement under
which Vista provided 2,060,000 newly issued shares of its common stock to the
Company plus 500,000 Vista Class C common stock purchase warrants. In exchange,
Vista received a $750,000 interest-free note due six months after the
transaction date and 200,000 restricted shares of TCPI common stock previously
held by the Company with a fair value on the date of the transaction of
$3,550,000 (original cost basis to the Company of $3,032,000). The Company
repaid the $750,000 note in full during the first quarter of fiscal 1997. The
Company also received an option to acquire 250,000 Vista shares at $2.50 per
share. In a separate transaction, the Company agreed to provide 4,500,000 newly
issued Ordinary Shares in exchange for a total of 900,000 shares of Vista's
outstanding common stock owned by three shareholders. A summary of the
consideration for both components of the Vista transaction include the
following:
<TABLE>
<S> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500,000
Note payable . . . . . . . . . . . . . . . . . . . . . . . . 750,000
TCPI investment (200,000 shares) . . . . . . . . . . . . . . 3,032,000
----------
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . 4,282,000
Pharma Patch plc common stock (4,500,000 shares) . . . . . . 2,250,000
----------
$6,532,000
</TABLE>
The cost in excess of net assets acquired of approximately $4.5 million was
calculated utilizing the original carrying value of the TCPI investment ($15.16
per share), The Company is currently amortizing such cost in excess of net
assets acquired over a 15 year period (final allocation of purchase price not
yet complete).
Since March 21, 1996, Pharma Patch's interest in Vista has been diluted by the
issuance of Vista stock to Vista's Regional affiliates. As August 31, 1996,
Pharma Patch owns 44.6% of the issued and outstanding shares of Vista.
8
<PAGE> 9
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the consolidated results of
operations and financial position for the interim periods presented. The
consolidated financial statements have been prepared in accordance with the
requirements for Form 10-Q and, therefore, do not include all disclosures of
financial information required by generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the
Company's February 29, 1996 consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K and the Management,
Discussion and Analysis included herewith.
The results of operations for the interim period ended August 31, 1996 are not
necessarily indicative of the operating results for the full year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Pharma Patch and
its wholly-owned subsidiaries. The Company owned 44.6% (see Minority Interest
note) of Vista's issued and outstanding common shares on August 31, 1996, and
Vista's accounts are also included in the consolidated financial statements
(since the acquisition at the end of March 1996). All significant intercompany
balances and transactions have been eliminated on consolidation. Investments
in subsidiaries represent Vista's investments in companies in which Vista's
ownership will range from 20 to 50 percent. Such investments are accounted for
using the equity method.
FIXED ASSETS
Fixed Assets are recorded at acquisition cost. The Company provides
depreciation and amortization at rates which are expected to charge operations
with the cost of the assets over their estimated useful lives ranging from 3 to
10 years.
Fixed assets consist of the following at August 31, 1996:
<TABLE>
<S> <C>
Eximer laser and other technical equipment . . . . . . . . . . . . 1,896,394
Other furniture and equipment . . . . . . . . . . . . . . . . . . 90,560
Less accumulated depreciation and amortization . . . . . . . . . . (900,715)
---------
1,086,239
---------
</TABLE>
REVENUE RECOGNITION
Revenues are recognized when photorefractive keratectomy related facility
and service fees are earned. Product development fees in the prior year are
included in discontinued operations and represent charges to third parties for
research and development work performed by the Company and are recorded in the
period the fees are earned.
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development expenditures included in discontinued operations are
charged to expense as incurred.
9
<PAGE> 10
FOREIGN CURRENCY TRANSLATION
Assets and liabilities stated in functional currencies other than the U.S.
dollar are translated at the year-end exchange rate and revenues and expenses
at the average rate of exchange for the year. Foreign exchange gains and
losses from transactions in currencies other than the applicable functional
currency are reflected in income during the year. Gains or losses arising on
the translation of financial statements give rise to a cumulative translation
adjustment which is included as a component of shareholders' deficiency.
As a result of the Company's transaction and consolidation of Vista's financial
statements at August 31, 1996, a balance of $229,429 relating to foreign
currency adjustment at quarter end exists. This amount arises from Vista's
European subsidiaries.
GOODWILL
Goodwill on the Company's Consolidated Balance Sheet represents the excess
purchase price paid for Vista. Goodwill at August 31, 1996 is as follows:
<TABLE>
<S> <C>
Goodwill . . . . . . . . . . . . . . . . . . . . . 4,585,828
Less: Accumulated amortization . . . . . . . . . . (127,385)
---------
4,458,443
---------
</TABLE>
MINORITY INTEREST
On March 21, 1996, the Company acquired 61.3% on the issued and outstanding
common stock on Vista. In May 1996, Vista issued 1,450,000 shares of its
common stock to acquire interests in three developmental stage companies
involved in providing PRK and other LVC facilities and services to the health
care industry.
10
<PAGE> 11
In June 1996, Vista sold 100,000 common shares for cash proceeds. In July 1996,
Vista issued 520,000 to acquire 520,000 Series A preferred shares of five
regional affiliates. Pharma Patch exercised its right to acquire 200,000 Vista
shares in July 1996. The shares issued by Vista, adjusted for the shares
acquired by Pharma Patch, reduced the Company's ownership in Vista from 61.3% to
44.6% at August 31, 1996. The results of Vista have been included in the
consolidated financial statements of the Company as the Company continues to
have control of Vista through its Board of Directors representation as well as
the active roles the Company's officers have over the day-to-day operations of
Vista.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
INVESTMENT SECURITIES AVAILABLE FOR SALE
Equity securities that are purchased which might be sold in order to support
the Company's investment strategies and liquidity needs are classified as
investment securities available for sale and are carried at fair market value.
Unrealized holding gains and losses are excluded from earnings and reported as
a net amount in a separate component of stockholders equity. At August 31,
1996 Investment Securities available for sale consist of 576,214 shares of
common stock in TCPI.
PRO FORMA RESULTS
The following unaudited consolidated pro forma financial information represents
the results of operations of the Company and Vista as if the acquisition has
occurred as of March 1, 1996 and March 1, 1995. The unaudited consolidated
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and Vista constituted a single entity
during such periods nor does it represent a basis for assessing future
performance.
<TABLE>
<CAPTION>
For the For the
six months six months
ended August 31, 1996 ended August 31, 1995
<S> <C> <C>
Revenue from continuing
operations . . . . . . . . . . 1,510,173 933,328
Loss from continuing operations. (1,804,611) (3,588,139)
Earnings Per Share . . . . . . . (.11) (.56)
</TABLE>
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
GENERAL
The operations of the Company for the six months ended August 31, 1996 consisted
primarily of providing photorefractive keratectomy and other laser vision
correction facilities to the healthcare industry through its subsidiary Vista
since the acquisition in March 1996. The operations of the Company for fiscal
1996 consisted primarily of the research and development of drug delivery
technologies through the Company's wholly owned subsidiary PP Holdings, Inc. On
November 15, 1995 the Company sold substantially all of its assets to TCPI for
786,214 shares of TCPI common stock. Operating results related to this business
have been treated as discontinued operations in the consolidated financial
statements. Accordingly, the financial statements for fiscal 1996 include a loss
from the discontinued operations of approximately $2,600,000 and a gain on the
sale of approximately $16,400,000. The consolidated financial statements have
been prepared in accordance with US GAAP. Additionally, the Company completed
the balance of a Private Placement financing in April 1996 contributing net
proceeds of approximately $276,000 during the six month period ended August 31,
1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1996
Revenues of $786,075 for the three months ended August 31, 1996 were generated
from photo refractive keratectomy and other laser vision correction facility and
service fees earned by the European operations of Vista. The Company did not
generate any similar revenue for the comparable prior year period.
Expenses for the three month period ended August 31, 1996 totalled $1,386,302.
The increase of $1,018,344 from the three months ended August 31, 1995 is
primarily attributable to the inclusion of Vista operations in the Company's
second quarter financial statements. Total expenses of $1,386,302 consist
primarily of salaries, equipment (excimer lasers) and facility leases related
to the laser vision correction operations and depreciation and amortization.
Vista recorded equity investor losses of $472,665 for the three months ended
August 31, 1996 relating to its ownership of the losses generated by its
regional affiliates.
Pharma Patch reduced its loss for the three month period ended August 31, 1996
by $477,927 to reflect the minority interest in Vista that it does not own.
Pharma Patch's loss from discontinued operations for the three month period
ended August 31, 1995 was $491,095.
12
<PAGE> 13
SIX MONTHS ENDED AUGUST 31, 1996
Revenues for the six months ended August 31, 1996 of $1,268,807 versus nil for
the six months ended August 31, 1995 were generated from photo refractive
keratectomy and other laser vision correction facility and service fees earned
by European operations of the Company's subsidiary Vista.
Expenses for the six months ended August 31, 1996 and 1995 were $2,405,289 and
$543,837 respectively. The six month period over period increase of $1,861,452
is primarily attributable to the inclusion of Vista operations since March 21,
1996 when the Company acquired its interest in Vista.
During the six months period ended August 31, 1996, the Company sold 210,000
shares of Technical Chemicals and Products, Inc. resulting in a loss on
sale of investment of $254,903.
Vista recorded equity investee losses of $480,133 during the six months ended
August 31, 1996 relating to its regional affiliates.
The minority interest ownership of Vista for the six months ended August 31,
1996 resulted in minority interest loss for the period of $546,361.
Pharma Patch recorded a loss from discontinued operations of $1,193,562 for the
six months ended August 31, 1996. Pharma Patch sold all its assets related to
drug delivery technologies to TCPI in November 1995 and accordingly, reports
results related to its drug delivery operations as discontinued operations.
The net loss for the six month periods ending August 31, 1996 and 1995 were
$1,325,157 and $1,737,399 or $0.08 and $0.23 per share respectively.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has relied upon private and public equity
financing and internally generated cash flows to finance its operations.
The increase in cash of $1,076,298 from February 29, 1996 to August 31, 1996
represents the net proceeds from the issuance of shares for net cash proceeds of
$701,894 and the net proceeds from the sale of 210,000 TCPI shares of $2,928,696
offset primarily by the net cash component of the purchase price paid to Vista
($998,500) less cash held by Vista at the time of purchase ($288,312) for a net
effect of $710,188, the purchase of fixed assets of $23,174 and other on going
working capital requirements. The Company has 576,214 shares of TCPI for which
the lock up agreement expires October 23, 1996, at which time the shares can be
sold. As of October 21, 1996 the TCPI shares had a market value of $8.375 per
share.
The net loss for the six month period ended August 31, 1996 included
depreciation and amortization and a net change in non-cash working capital of
$284,119 and $933,994 respectively.
The Company has had limited operating revenues and has an accumulated deficit of
$7,574,785. The Company expects to continue to incur operating losses until
such time, if ever, it generates sufficient revenues. There is no assurance
that the Company will ever operate profitably.
13
<PAGE> 14
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits
Financial Data Schedule
B. Reports on Form 8-K
None
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PHARMA PATCH PUBLIC LIMITED COMPANY
Registrant
Date: October 22, 1996 By: /s/ MURRAY D. WATSON
--------------------
/s/ Murray D. Watson
Chairman & Chief Executive Officer
15
<PAGE> 16
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
Ex. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 1,745,120
<SECURITIES> 4,753,766
<RECEIVABLES> 101,857
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,823,601
<PP&E> 1,086,239
<DEPRECIATION> 98,835
<TOTAL-ASSETS> 16,329,737
<CURRENT-LIABILITIES> 2,910,816
<BONDS> 904,246
0
0
<COMMON> 2,343,912
<OTHER-SE> 6,989,835
<TOTAL-LIABILITY-AND-EQUITY> 16,329,737
<SALES> 0
<TOTAL-REVENUES> 1,268,807
<CGS> 0
<TOTAL-COSTS> 2,405,289
<OTHER-EXPENSES> 189,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,325,157)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,325,157)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
