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, 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 0-25406
TECHNICAL CHEMICALS AND PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0308922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3341 S.W. 15th Street, Pompano Beach, Florida 33069
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (954) 979-0400
Checkwhether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or 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___
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
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Class Outstanding As Of October 31, 1997
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Common Stock $ .001 par value 10,015,036
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Transitional Small Business Disclosure Format (check one):
YES NO x
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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TECHNICAL CHEMICALS AND PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 December 31, 1996*
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 790,094 $ 1,607,311
Accounts receivable, net of allowance
for doubtful accounts of $18,165 at
9/30/97 and 12/31/96 2,524,592 2,177,700
Investments available for sale 8,144,325 11,693,143
Inventory 1,668,797 1,039,390
Other 477,621 490,415
---------- ----------
Total current assets 13,605,429 17,007,959
---------- ----------
Property and equipment net of accumulated depreciation
of $964,917 at 9/30/97 and $565,777 at 12/31/96 2,800,928 2,708,481
Patents and trademarks, net of accumulated
amortization of $1,861,956 at 9/30/97 and $1,120,786 at 12/31/96 13,079,063 13,887,357
Goodwill, net of accumulated amortization
of $299,255 at 9/30/97 and $165,985 at 12/31/96 2,277,464 2,327,975
Other assets 3,419,249 1,594,268
---------- ----------
Total assets $ 35,182,133 $ 37,526,040
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,806,776 $ 1,458,101
Accrued expenses 613,125 201,667
--------- ----------
Total current liabilities 2,419,901 1,659,768
--------- ----------
Long-term debt 170,564 171,651
Shareholders' equity:
Common stock, $.001 par value, 25,000,000 shares
authorized; 10,015,036 and 9,938,634 shares issued
and outstanding at 9/30/97 and 12/31/96 10,015 9,939
Additional paid-in capital 39,806,785 39,608,217
Accumulated deficit (7,225,132) (3,923,535)
---------- ----------
Total shareholders' equity 32,591,668 35,694,621
---------- ----------
Total liabilities and shareholders' equity $ 35,182,133 $ 37,526,040
========== ==========
<FN>
*Note: The Balance Sheet at December 31, 1996 has been derived from the audited financial
-------
statements at that date.
See accompanying notes to the condensed consolidated financial statements.
</FN>
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TECHNICAL CHEMICALS AND PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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Revenue
Product sales $ 1,735,795 $ 1,654,321 $ 4,544,390 $ 4,301,959
Contract fees and services 100,000 270,000 310,000 910,000
--------- --------- --------- ---------
Total revenue 1,835,795 1,924,321 4,854,390 5,211,959
Returns and allowances (10,601) (56,640) (30,345) (129,585)
--------- --------- --------- ---------
Net revenue 1,825,194 1,867,681 4,824,045 5,082,374
--------- --------- --------- ---------
Cost of sales 1,033,800 954,735 2,608,022 2,601,484
--------- --------- --------- ---------
Gross profit 791,394 912,946 2,216,023 2,480,890
--------- --------- --------- ---------
Operating expenses:
Selling, general and
administrative 1,960,006 1,287,849 4,722,969 2,911,170
Research and development 797,835 411,131 1,947,012 1,387,901
Depreciation and amortization 426,895 396,100 1,274,190 1,129,355
--------- --------- --------- ---------
Loss from operations (2,393,342) (1,182,134) (5,728,148) (2,947,536)
Other income (expense):
Interest income 94,439 267,212 586,750 361,513
Interest expense (3,416) (2,329) (10,272) (205,109)
--------- --------- --------- ---------
Loss before income tax benefit (2,302,319) (917,251) (5,151,670) (2,791,132)
Income tax benefit 851,859 330,210 1,906,118 1,004,808
--------- --------- --------- ---------
Net loss $ (1,450,460) $ (587,041) $ (3,245,552) $ (1,786,324)
========= ========= ========= =========
Net loss per share $ (0.14) $ (0.06) $ (0.32) $ (0.20)
========= ========= ========= =========
Weighted average number of
Common shares outstanding 10,005,036 9,836,374 9,984,325 9,095,586
========== ========= ========= =========
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
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TECHNICAL CHEMICALS AND PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
<S> <C> <C>
1997 1996
OPERATING ACTIVITIES:
Net loss $ (3,245,552) $ (1,786,324)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,274,190 1,129,355
Deferred income taxes (1,906,118) (1,004,808)
Changes in operating assets and liabilities:
Accounts receivable (346,892) (949,529)
Inventory (629,407) (568,887)
Accounts payable and accrued expenses 760,133 441,308
Other 92,844 (218,327)
--------- ---------
Net cash used in operating activities (4,000,802) (2,957,212)
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment (492,197) (724,303)
Investments in patents and trademarks (15,635) --
Proceeds from sale of investments 3,492,773 --
Purchase of investment securities -- (12,835,725)
--------- ----------
Net cash provided (used) by investing activities 2,984,941 (13,560,028)
--------- ----------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- 21,510,732
Proceeds from stock options exercised 198,644 --
Payments on notes payable -- (5,188,888)
Payments on notes payable to related parties -- (75,336)
--------- ----------
Net cash provided by financing activities 198,644 16,246,508
--------- ----------
Net decrease in cash and cash equivalents (817,217) (270,732)
Cash and cash equivalents at begining of period 1,607,311 666,486
--------- ----------
Cash and cash equivalents at end of period $ 790,094 $ 395,754
========= ==========
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
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<PAGE>
TECHNICAL CHEMICALS AND PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements (the
"Financial Statements") of Technical Chemicals and Products, Inc. and
Subsidiaries (the "Company" or "TCPI") are unaudited, and in the opinion of
management, include all normal and recurring adjustments which are necessary for
a fair presentation. Accordingly, the Financial Statements should be read in
conjunction with more complete disclosures contained in the Company's audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. The results of operations for
interim periods are not necessarily indicative of the results of operations for
the entire year.
RECLASSIFICATIONS
Certain amounts in the 1996 condensed consolidated financial statements
have been reclassified to conform to the current period's presentation.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes". Deferred income tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
INVENTORIES
Inventories, consisting of raw materials and finished goods, are valued at
the lower of cost (computed on the first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The cost
of maintenance and repairs are charged to operations as incurred. Significant
renewals and betterments are capitalized or depreciated over their estimated
useful lives.
INTANGIBLE ASSETS
Purchased patents and trademarks are amortized using the straight-line
method over a composite life of 15 years based on the shorter of their legal
life or estimated useful life of the individual patents and trademarks, which
range from 11 to 17 years. Goodwill is amortized using the straight-line method
over 15 years. The realizability of patents, trademarks and goodwill is
evaluated periodically as events or circumstances indicate a possible inability
to recover their carrying amount. At this time, the Company believes that no
significant impairment of these intangible assets has occurred and that no
reduction of the estimated useful lives is warranted.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the information incorporated
by reference herein, includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and is subject to the safe-harbor created by
such sections. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. See Item 2 "Management's
Discussion And Analysis of Financial Condition And Results Of Operations" for
further information relating to forward-looking statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STRATEGIC DIRECTION
The Company is in the midst of completing a transition. TCPI was formerly a
developmental company that manufactured and sold a narrow range of medical
diagnostic products and specialty chemicals on an OEM basis. TCPI is now
approaching its goal of being a manufacturer and marketer of a wide range of
internally-developed medical diagnostic products. Distribution of these products
is achieved through OEM relationships with major U.S. and international
pharmaceutical companies, and through a U.S. and foreign independent broker
network for sales of its private-label products and HealthCheckTM brand to drug
stores, supermarket chains and retailers. Year to date, TCPI, its Pharmetrix
Division and Health-Mark Diagnostics subsidiary have engaged in the following
activities:
- - TD Glucose Monitoring System
TCPI continues to commit significant resources to the development and
commercialization of its innovative non-invasive transdermal glucose monitoring
system. Development of the TD Glucose Monitoring System has been completed and
the clinical trial process is beginning. During this stage, TCPI will conduct
registration studies to obtain required blood glucose correlation data and, upon
completion, will deliver TD Glucose transdermal patches and meter/emulators to
the clinical trial sites. The Company anticipates completing these activities
during the first quarter of 1998 as well as making a 510(k) submission to the
U.S. Food and Drug Administration for expedited review.
In June 1997, the Company announced the involvement of SmithKline Beecham
in becoming its worldwide marketing partner for this important product. The
companies entered into an exclusive agreement that grants SmithKline Beecham a
six month period to further evaluate the TD Glucose Monitoring System
technology, conduct due diligence, perform market studies and negotiate a
definitive licensing agreement. Terms of the contract included an up-front
payment to TCPI as well as the mutual exchange of technical and marketing
information related to this product. These negotiations are ongoing and TCPI
remains optimistic it can obtain favorable terms for a definitive licensing
agreement with SmithKline Beecham. However, in the event such terms are unable
to be reached, TCPI is prepared to move forward with several other potential
marketing partners.
- - HealthCheck
In October and August 1997, the Company further expanded the national
roll-out of its HealthCheck products by: a) adding major drug chains such as
CVS, Phar-Mor, Snyder, Kinney, Harco Genovese and Longs drug stores as well as
various independent pharmacies; (b) establishing programs with major wholesale
drug distributors, including McKesson Corp., AmeriSource, Bindley Western,
Neuman Distributors and KinRay; c) adding the Kroger and Thriftway supermarket
chains to the roster of outlets carrying the brand; and d) continuing to process
numerous re-orders.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STRATEGIC DIRECTION (continued)
In late September 1997, TCPI kicked-off a six-week national radio
advertising campaign to introduce consumers to the HealthCheck brand. During
this campaign, a total of 300 radio commercials aired on such top-rated
nationally syndicated programs as the Rush Limbaugh Show, Dr. Dean Edell Show,
Dr. Laura Schlessinger Show, Gary Burbank Show, Michael Reagan Show, Bob Grant
Show, Dr. Joyce Browne Show, Country Heartlines and One-On-One Sports. These
commercials were expected to reach approximately 175 million adults age 35 and
older.
In March 1997, Eckerd placed its initial order for HealthCheck test kits
and in May 1997, Walgreens placed its initial order for products. In addition,
discount retailer Meijer, Inc. placed its initial order for HealthCheck
products.
During the first quarter of 1997, the Company launched its HealthCheck
brand of over- the-counter diagnostic products. The line consists of 14 accurate
and easy to use at-home products for cholesterol, diabetes, urinary tract
infection, pregnancy, ovulation, skin cancer and deteriorating vision, as well
as a series of health journals specifically designed for women, men, seniors,
children and pregnant women.
- - Other Products
Development of the Company's HDL (good) cholesterol visually-read test is
expected to begin clinical trials in the fourth quarter of 1997 or first quarter
of 1998. The Company's meter-read cholesterol monitoring system for Total and
HDL cholesterol (intended for the professional marketplace and capable of
delivering clinical laboratory accuracy) also is expected to begin clinical
trials in the fourth quarter of 1997 or first quarter of 1998.
The Company is in various stages of completing the development of, and
completing the FDA and foreign clearance processes for products including
infectious disease detection, drugs of abuse screening, cancer screening and
other medical diagnostic testing.
In January 1997, the Company entered into a multi-phase agreement with
Taiho Pharmaceutical Co., Ltd. to develop a rapid, one-step whole blood antigen
diagnostic test to monitor the effectiveness of Taiho's new anti-cancer drug.
The Company expects to receive milestone payments from Taiho over the next 12-18
months as each phase of development is completed and retains exclusive
manufacturing rights to the product.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STRATEGIC DIRECTION (continued)
- - Other Products (continued)
In March 1997, TCPI announced an exclusive marketing agreement with
Boehringer Mannheim to distribute more than $50 million of the Company's new
diagnostic products for infectious diseases, drugs of abuse and cancer screens
throughout South and Central America, Mexico and certain Caribbean nations over
the next 10 years. These products are presently in the registration process in
various countries. However, the acquisition of Boehringer Mannheim's parent
company by LaRoche Holding AG of Basel, Switzerland has served to defer the
ordering and shipment of these products into 1998.
- - U.S. Broker Network
TCPI established an independent network of brokers for selling the
Company's private label and HealthCheck brands throughout the United States.
- - Research and Development
- Pharmetrix
The Company is continuing development of several transdermal drug delivery
products at its Menlo Park, California based Pharmetrix Division and is actively
working on the commercialization of several products by completing the
development, and planning for manufacturing, marketing and distribution. In
addition, Pharmetrix has been asked to prepare feasibility studies on behalf of
several clients to evaluate the applicability of its transdermal drug delivery
technology with various compounds.
In July 1997, the Company announced continued progress in strengthening of
its Pharmetrix Division with the addition of Frank Kochinke, Ph.D. as Vice
President of Research. The Company continues with plans to commercialize various
transdermal products currently in its development portfolio. Dr. Kochinke has
numerous accomplishments from his 20 years of industrial and academic experience
in transdermal drug delivery and membrane permeation technology. He has more
than 25 scientific publications to his credit and holds seven U.S. patents
related to transdermal drug delivery systems and manufacturing, with two
additional patents applications pending.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STRATEGIC DIRECTION (continued)
- Manufacturing Scale-up
- Over the past nine months, the Company's facilities located in
Florida have been expanded to accommodate full-scale manufacturing
of medical diagnostic products. This expansion has included:
- acquisition of major production equipment for manufacturing of
the products
- re-tooling and refurbishing of equipment to significantly
increase its capacity
- purchase and installation of custom high-speed packaging
equipment
- expansion of sales and marketing, production and warehouse
facilities to accommodate the in-house manufacturing program
- additions to the Florida research and development facilities
and professional staff to increase product development
capabilities -- including the addition of Jeffrey Bolts, Ph.D.
as Director of Quality Assurance
KEY ADDITION TO THE BOARD OF DIRECTORS
On October 15, 1997, Stephen J. Dresnick, MD, FACEP, joined the Company's
Board of Directors. He is the Vice Chairman of FPA Medical Management, Inc.
(Nasdaq: FPAM) which is expected to have revenues in excess of $1 billion in
1997. Dr. Dresnick has more than 25 years of experience in the medical sector
and executive management and brings to the TCPI Board well-established
relationships with the scientific and financial communities. Prior to a merger
with FPA Medical Management in 1996, he was President and Chief Executive
Officer of Sterling Healthcare Group, a publicly-held hospital emergency
department contract management and primary care physician practice management
company, which he founded in 1987.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND
Technical Chemicals and Products, Inc. is a designer, developer,
manufacturer and marketer of a wide-range of medical diagnostic products for use
at home, in physician offices, and other locations. TCPI is also involved in the
research and development of its TD Glucose Monitoring System -- an innovative
non-invasive glucose testing system for diabetics. In addition, through its
Pharmetrix Division located in Menlo Park, California, the Company is also
focused on the research and development and commercialization of transdermal and
dermal drug delivery systems and skin permeation enhancers. TCPI is also a
manufacturer of high purity specialty biochemicals.
TCPI's roots date back more than 29 years during which time the Company or
its founder have developed over 330 FDA cleared medical diagnostic and drug
products (including those related to the Company's patented membrane-based
technology) and manufactured OEM products for leading drug and diagnostic
companies. The Company holds 19 US and 27 foreign patents, and has four pending
patent applications in the US and 38 foreign patent applications pending.
TCPI manufactures and markets more than 47 patented membrane-based
diagnostic tests in the United States and internationally, 26 of which have
received 510(k) clearance from the FDA. The Company's products include tests and
screens for pregnancy, ovulation timing, cholesterol levels, blood glucose
levels, infectious diseases, drugs of abuse and certain types of cancer. In
addition, the Company has over 20 other diagnostic and transdermal drug delivery
products in various stages of development and governmental approval. TCPI
markets its products in the OEM marketplace, under its proprietary HealthCheck
and PDQ brand names, and distributes approximately 53 private label products to
leading drug, discount and supermarket chains.
In order to support anticipated growth and new product development, the
company expects to incur significantly increased operating expenses and capital
expenditures in the future and, as such, the Company believes that its results
of operations in prior periods may not be indicative of results in future
periods. The Company expects to incur significant expenses in 1997 and 1998,
primarily as a result of: (i) the increased research and development associated
with its non-invasive transdermal glucose monitoring system (the "TD Glucose
System") and various transdermal drug delivery products and skin permeation
enhancers; (ii) the expansion of direct distribution of medical diagnostic
products related to the national roll-out of the Company's HealthCheckTM brand
and its private label business; (iii) the introduction of the Company's
cholesterol monitoring system which can be used by physicians, laboratories and
patients at home (the "One Step CholestoChek System"); and (iv) the hiring of
additional personnel and other costs associated with expansion of the Company's
manufacturing facilities. In addition, the Company anticipates expenditures in
1997 as a result of the purchase of additional production equipment.
For a complete description of the Company's products and business, see Part
I, Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Due to the timing of the FDA clearance process and the expenses incurred in
the manufacturing scale-up for the Company's products, the Company's results of
operations vary from quarter to quarter.
Net Revenue. Product sales for the three months ended September 30, 1997
increased by approximately 5% as a result of the successful launch and ongoing
national roll-out of the Company's HealthCheck line of over-the-counter products
as well as continued sales growth of private-label family planning products.
Product sales for the nine month period increased by $242,000, or approximately
6%, over the same period last year largely due to the contribution of
HealthCheck sales. The gain in product sales for the three and nine month period
was offset by a decline in contract fees and services from the Pharmetrix
Division.
Net revenue for the three and nine months ended September 30, 1997, was
$1.8 million and $4.8 million, respectively, and represented a slight decline of
approximately 2% and 5% over the same respective periods a year earlier. This
decline reflects the decrease in contract fees and services.
During the third quarter, the Company's operations continued to reflect the
manufacturing scale-up and build-up of inventory for ongoing roll-out of
HealthCheck products as well as scale-up of manufacturing for the more than 20
new diagnostic testing products for infectious diseases, drugs of abuse and
certain types of cancer which are planned for distribution worldwide.
Gross Profit. In the third quarter, gross profit as a percent of product
sales remained relatively constant at approximately 38% while increasing to
about 42% for the nine month period. Overall, gross profit as a percent of total
net sales decreased over the comparable three and nine month periods of the
prior year as a result of lower contract fees and services.
Selling, General & Administrative. Selling, general & administrative
expenses increased $673,000 for the quarter and $1.8 million for the nine month
period as compared to the same periods last year due to: (a) the planned hiring
of additional operating personnel for the scale-up of in-house manufacturing,
(b) continued investment in sales and marketing efforts through the hiring of
additional personnel and initial consumer advertising campaign for the
HealthCheck line of products, and (c) an increase in expenses related to
facility expansion.
Research and Development. The Company continues to commit resources to its
R&D efforts to develop and commercialize new diagnostic and transdermal drug
delivery products, including its HealthCheck line of products. Research and
development expenses increased by $386,000 in the third quarter and by $560,000
for the nine months primarily as a result of ongoing development of the
Company's non-invasive glucose monitoring system, new diagnostic products, and
transdermal drug delivery systems being developed at the Company's Pharmetrix
Division.
Interest Income/Interest Expense. Interest income for the third quarter was
approximately $142,000 and $629,000 for the nine month period which reflects the
income generated from proceeds of the Company's secondary public offering
completed in April 1996. This income, however, was partially offset by
unrealized losses. Significantly lower interest expense for the nine month
period reflects the payoff of a promissory note related to the Pharmetrix
acquisition.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Net Loss. The Company incurred a third quarter net loss of $1.45 million as
compared to a net loss of $587,000 in the same quarter of the prior year, and
had a net loss of $3.2 million for the nine months of 1997 as compared to a net
loss of $1.8 million in the nine months of 1996. This was primarily due to the
manufacturing scale-up of various products and the continued investment in
people, marketing and facility expansion.
FINANCIAL CONDITION
The Company had cash and investments of approximately $9 million at
September 30, 1997. Working capital at the end of the third quarter was more
than $11 million. The Company expects to continue to draw upon its working
capital to purchase production equipment, develop and manufacture the TD Glucose
System, engage in research and development related to transdermal drug delivery,
develop new diagnostic products, conduct clinical trials and continued
investment in personnel and facility expansion.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its existing cash balances and investment
balances will be sufficient to fund the Company's cash requirements for at least
the next twenty-four months. This estimate is based on certain assumptions,
including assumptions concerning reasonable growth and revenues, and there can
be no assurance that such assumptions will prove to be accurate or that
unbudgeted costs will not be incurred. The Company's future working capital and
capital expenditure requirements may vary materially from those now planned
depending on numerous factors, including additional manufacturing scale-up for
the Company's current and future products, possible future acquisitions, the
focus and direction of the Company's research and development programs,
competitive and technological advances, future relationships with corporate
marketing partners, the FDA regulatory process and the Company's marketing and
distribution strategy. If the Company's growth exceeds its plans, additional
working capital may be needed. The Company is also exploring opportunities to
secure additional manufacturing capabilities for its TD Glucose Monitoring
System as well as other future products, and such action may require additional
capital.
Statements regarding future products, future prospects, business plans and
strategies, future revenues and revenue sources, future liquidity and capital
resources, health care market directions, future acceptance of the Company's
products, possible growth in markets for at-home diagnostic testing, as well as
other statements contained in this report that address activities, events or
developments that the Company expects, believes or anticipates will or may occur
in the future, and similar statements are forward looking statements. These
statements are based upon assumptions and analyses made by the Company in light
of current conditions, future developments and other factors the Company
believes are appropriate in the circumstances, or information obtained from
third parties and are subject to a number of assumptions, risks and
uncertainties. Readers are cautioned that forward-looking statements are not
guarantees of future performance and that actual results might differ materially
from those suggested or projected in the forward-looking statements. Some of the
factors that may cause actual future events to differ from those predicted or
assumed include: future advances in technologies and medicine; the uncertainties
of health care reform; risks related to the early stage of the Company's
existence and its products' development; the Company's ability to execute on its
business plans; the Company's dependence on outside parties such as its key
customers and alliance partners; competition from major pharmaceutical, medical
and diagnostic companies; risks and expense of government regulation and affects
of changes in regulation; the limited experience of the Company in manufacturing
and marketing products; uncertainties connected with product liability exposure
and insurance; risks associated with growth and expansion; risks associated with
obtaining patents and other protections on intellectual property; acceptance of
the Company's new products in the professional and over-the-counter
marketplaces; uncertainties in availability of expansion capital and other risks
associated with capital markets.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Exhibit Description
Number
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3.1 * Articles of Incorporation of the Company, as amended.
3.2 * By-laws of the Company.
3.3 **** Amended and Restated Articles of Incorporation of the Company.
3.4 **** Amended and Restated Bylaws of the Company.
4.1 **** See Exhibits 3.3 and 3.4 for provisions of the Amended and Restated Articles of Incorporation and
the Amended and Restated Bylaws of the Company defining the rights of holders of Common Stock
of the Company .
4.2 ** Form of Common Stock Certificate of the Company.
10.1 **** Employment Agreement between Jack L. Aronowitz and the Company dated December 31, 1992, as amended.
10.2 **** Amended and Restated 1992 Incentive Stock Option Plan.
10.3 **** Cancellation and Exclusive License Agreement between Jack Aronowitz and the Company dated January
31, 1996.
10.6 * Lease-Pompano Beach, Florida.
10.6.1 **** Business Lease Extension-Pompano Beach, Florida.
10.6.2 **** Main Lease-Menlo Park, California; Sublease-Menlo Park.
10.6.3 **** Assignment and Assumption of Sublease and Landlord's Consent Thereto between Menlo Business Park,
Patrician Associates, Inc., Flora, Inc., Pharma Patch PLC and Technical Chemicals and Products,
Inc. dated November 15, 1995.
10.7 * Health-Mark Diagnostics, Inc. Shareholders Agreement dated March 7, 1994.
10.9 * Letter Agreement with John Faro (for stock options) dated August 12, 1994.
10.10 ** Warrant Agreement between the Company and Jack L. Aronowitz.
10.11 **** Supplemental Agreement by and between Pharma Patch Public Limited Company and PP Holdings, Inc.
dated January 16, 1996.
10.12 **** Stock Option Agreement with John Pippert.
10.13 * Agreement between Company and Equity Communications dated January 6, 1995.
10.14 **** Letter Agreement between the Company and Redstone Securities, Inc. dated January 15, 1996.
10.15 **** Letter Agreement between the Company and Ira Weingarten dated January 15, 1996.
10.16 **** Letter Agreement with Flora, Inc. dated February 5, 1996.
10.17 ***** Employment Agreement between the Company and Martin Gurkin dated January, 1996.
10.18 ***** Stock Option Agreement with Martin Gurkin dated November, 1996.
27 Filed Financial Data Schedule (EDGAR Filing)
Herewith
99.1 * Licenses, Permits and Approvals-Federal.
99.2 * Licenses, Permits and Approvals-State.
99.3 * Licenses, Permits and Approvals-County.
99.4 * FDA Product List.
99.5 * United States Patents.
99.7 ***** Pharmetrix Division of TCPI Patents.
99.8 ***** Pharmetrix Division of TCPI Licenses, Permits and Approvals.
99.6 * Canadian Patents.
* Incorporated by reference to exhibit of the same number in Registration Statement on Form
SB-2 filed on October 28, 1994 (No. 33-85756).
** Incorporated by reference to exhibit of the same number in Amendment No. 4 to the Registration
Statement on Form S-1 filed April 23, 1996 (No. 333-1272).
*** Incorporated by reference to exhibit of the same number in Amendment No. 1 to
Registration Statement on Form SB-2 filed on January 13, 1995 (No. 33-85756).
**** Incorporated by reference to exhibit of same number filed in the Company's Registration Statement
on Form S-1 on February 12, 1996 (No. 333-1272).
<FN>
(b) Reports On Form 8-K
No reports on Form 8-K were filed during the quarter for which this report is being filed.
</FN>
</TABLE>
<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.
TECHNICAL CHEMICALS AND PRODUCTS, INC.
Date: November 13, 1997 By: /SIGNED/
Stuart R. Streger
Vice President and
Chief Financial Officer
(Duly authorized officer and
principal accounting officer)
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index to Exhibits
Number
<S> <C> <C>
3.1 * Articles of Incorporation of the Company, as amended.
3.2 * By-laws of the Company.
3.3 **** Amended and Restated Articles of Incorporation of the Company.
3.4 **** Amended and Restated Bylaws of the Company.
4.1 **** See Exhibits 3.3 and 3.4 for provisions of the Amended and Restated Articles of Incorporation and the
Amended and Restated Bylaws of the Company defining the rights of holders of Common Stock of the
Company.
4.2 ** Form of Common Stock Certificate of the Company.
10.1 **** Employment Agreement between Jack L. Aronowitz and the Company dated December 31, 1992, as amended.
10.2 **** Amended and Restated 1992 Incentive Stock Option Plan.
10.3 **** Cancellation and Exclusive License Agreement between Jack Aronowitz and the Company
dated January 31, 1996.
10.6 * Lease-Pompano Beach, Florida.
10.6.1 **** Business Lease Extension-Pompano Beach, Florida.
10.6.2 **** Main Lease-Menlo Park, California; Sublease-Menlo Park.
10.6.3 **** Assignment and Assumption of Sublease and Landlord's Consent Thereto between Menlo Business Park,
Patrician Associates, Inc., Flora, Inc., Pharma Patch PLC and Technical Chemicals and Products, Inc.
dated November 15, 1995.
10.7 * Health-Mark Diagnostics, Inc. Shareholders Agreement dated March 7, 1994.
10.9 * Letter Agreement with John Faro (for stock options) dated August 12, 1994.
10.10 ** Warrant Agreement between the Company and Jack L. Aronowitz.
10.11 **** Supplemental Agreement by and between Pharma Patch Public Limited Company and PP Holdings, Inc. dated
January 16, 1996.
10.12 **** Stock Option Agreement with John Pippert.
10.13 * Agreement between Company and Equity Communications dated January 6, 1995.
10.14 **** Letter Agreement between the Company and Redstone Securities, Inc. dated January 15, 1996.
10.15 **** Letter Agreement between the Company and Ira Weingarten dated January 15, 1996.
10.16 **** Letter Agreement with Flora, Inc. dated February 5, 1996.
10.17 ***** Employment Agreement between the Company and Martin Gurkin dated January, 1996.
10.18 ***** Stock Option Agreement with Martin Gurkin dated November, 1996.
27 Filed Financial Data Schedule (EDGAR Filing)
Herewith
99.1 * Licenses, Permits and Approvals-Federal.
99.2 * Licenses, Permits and Approvals-State.
99.3 * Licenses, Permits and Approvals-County.
99.4 * FDA Product List.
99.5 * United States Patents.
99.7 ***** Pharmetrix Division of TCPI Patents.
99.8 ***** Pharmetrix Division of TCPI Licenses, Permits and Approvals.
99.6 * Canadian Patents.
* Incorporated by reference to exhibit of the same number in Registration Statement on Form SB-2
filed on October 28, 1994 (No. 33-85756).
** Incorporated by reference to exhibit of the same number in Amendment No. 4 to the
Registration Statement on Form S-1 filed April 23, 1996 (No. 333-1272).
*** Incorporated by reference to exhibit of the same number in Amendment No. 1 to Registration Statement
on Form SB-2 filed on January 13, 1995 (No. 33-85756).
**** Incorporated by reference to exhibit of same number filed in the Company's Registration Statement on
Form S-1 on February 12, 1996 (No. 333-1272).
***** Incorporated by reference to exhibit of the same number filed in Amendment No. 2 to the Company's
Registration Statement on Form S-1 on March 20, 1996.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(The Company's Quarterly Report on Form 10-Q for the Period Ending
September 30, 1997)
</LEGEND>
<CIK> 0000924921
<NAME> STU STREGER
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 790,094
<SECURITIES> 8,144,325
<RECEIVABLES> 2,542,757
<ALLOWANCES> 18,165
<INVENTORY> 1,668,797
<CURRENT-ASSETS> 13,605,429
<PP&E> 3,765,845
<DEPRECIATION> 964,917
<TOTAL-ASSETS> 35,182,133
<CURRENT-LIABILITIES> 2,419,901
<BONDS> 170,564
0
0
<COMMON> 10,015
<OTHER-SE> 32,581,653
<TOTAL-LIABILITY-AND-EQUITY> 35,182,133
<SALES> 4,824,045
<TOTAL-REVENUES> 4,854,390
<CGS> 2,608,022
<TOTAL-COSTS> 2,608,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,272
<INCOME-PRETAX> (5,151,670)
<INCOME-TAX> (1,906,118)
<INCOME-CONTINUING> (3,245,552)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,245,552)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
