0000950170-95-000141.txt : 19950810 0000950170-95-000141.hdr.sgml : 19950810 ACCESSION NUMBER: 0000950170-95-000141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA LABORATORIES INC CENTRAL INDEX KEY: 0000821995 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 592758596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10352 FILM NUMBER: 95559999 BUSINESS ADDRESS: STREET 1: 2665 S BAYSHORE DR PH 11-B CITY: MIAMI STATE: FL ZIP: 33133 BUSINESS PHONE: 305-860-1670 MAIL ADDRESS: STREET 1: COLUMBIA LABORATORIES INC STREET 2: 2665 SOUTH BAYSHORE DRIVE CITY: MIAMI STATE: FL ZIP: 33133 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10 - Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ COMMISSION FILE NUMBER 1-10352 COLUMBIA LABORATORIES, INC. (Exact name of Company as specified in its charter) DELAWARE 59-2758596 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2665 SOUTH BAYSHORE DRIVE MIAMI, FLORIDA 33133 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code: (305) 860-1670 Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Number of shares of the Common Stock of Columbia Laboratories, Inc. issued and outstanding as of July 31, 1995: 25,679,354 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements The following unaudited, condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial information for the interim periods reported have been made. Results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results for the year ending December 31, 1995. 2 of 13
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 1995 1994 ----------- ------------ (Unaudited) ASSETS: Current assets- Cash and cash equivalents $ 6,038,642 $ 689,749 Accounts receivable, net 1,011,768 904,277 Inventories 1,253,400 1,117,243 Prepaid expenses 184,117 125,832 ----------- ----------- Total current assets 8,487,927 2,837,101 Property and equipment, net 805,494 915,623 Intangible assets, net 1,674,847 1,786,037 Other assets 1,292,356 1,268,803 ----------- ----------- $12,260,624 $ 6,807,564 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities- Current portion of long-term debt $ 156,751 $ - Accounts payable 3,560,662 3,707,966 Accrued expenses 761,586 1,059,960 Deferred revenue 1,335,445 1,540,549 Estimated liability for returns and allowances 389,545 387,075 ----------- ----------- Total current liabilities 6,203,989 6,695,550 ----------- ----------- Long-term debt, net of current portion - 6,217,649 Other long-term liabilities 92,563 86,743 Stockholders' equity- Preferred stock, $.01 par value; 1,000,000 shares authorized; Series A Convertible Preferred Stock, 1,365 and 1,515 shares issued and outstanding in 1995 and 1994, respectively 14 15 Series B Convertible Preferred Stock, 1,750 and 2,000 shares issued and outstanding in 1995 and 1994, respectively 18 20 Common stock, $.01 par value; 40,000,000 shares authorized; 25,648,354 and 23,778,897 shares issued and outstanding in 1995 and 1994, respectively 256,484 237,789 Capital in excess of par value 71,339,245 64,206,507 Accumulated deficit (65,645,261) (70,853,356) Cumulative translation adjustment 13,572 216,647 ----------- ----------- Total stockholders' equity (deficit) 5,964,072 (6,192,378) ----------- ----------- $12,260,624 $ 6,807,564 =========== ===========
See notes to condensed consolidated financial statements 3 of 13
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Six Months Ended Three Months Ended June 30, June 30, 1995 1994 1995 1994 -------- -------- -------- -------- NET SALES $6,083,866 $3,877,732 $2,878,500 $2,374,950 COST OF GOODS SOLD 3,197,014 2,029,088 1,565,201 1,325,359 ----------- ----------- ----------- ----------- Gross profit 2,886,852 1,848,644 1,313,299 1,049,591 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Selling and distribution 1,448,463 1,077,567 804,688 592,564 General and administrative 1,572,054 1,573,311 919,764 786,887 Research and development 2,725,085 4,087,422 1,295,573 1,549,681 ----------- ----------- ----------- ----------- Total operating expenses 5,745,602 6,738,300 3,020,025 2,929,132 ----------- ----------- ----------- ----------- Loss from operations (2,858,750) (4,889,656) (1,706,726) (1,879,541) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE): License fees, net 8,054,883 60,464 8,054,883 60,464 Interest income 40,205 37,144 34,418 16,209 Interest expense (140,750) (714,068) (69,181) (357,516) Other, net 112,507 (64,844) (72,520) (43,865) ----------- ----------- ----------- ----------- 8,066,845 (681,304) 7,947,600 (324,708) ----------- ----------- ----------- ----------- Net income (loss) $ 5,208,095 $(5,570,960) $ 6,240,874 $(2,204,249) =========== =========== =========== =========== NET INCOME (LOSS) PER COMMON SHARE $ .21 $ (.25) $ .25 $ (.10) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 25,123,000 22,199,000 25,313,000 22,232,000 =========== =========== =========== ===========
See notes to condensed consolidated financial statements 4 of 13
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $5,208,095 $(5,570,960) Adjustments to reconcile net income (loss) to net cash used for operating activities- Depreciation and amortization 255,658 213,269 Provision for doubtful accounts 38,384 16,382 Provision for returns and allowances 13,092 335,844 Interest expense - 347,770 Changes in assets and liabilities- (Increase) decrease in: Accounts receivable (393,186) (51,074) Inventories (136,159) 337,453 Prepaid expenses 201,090 267,432 Other assets (18,418) 18,626 Increase (decrease) in: Accounts payable 40,352 1,634,050 Accrued expenses (203,383) (1,311,017) Deferred revenue 54,882 (231,304) Estimated liability for returns and allowances (10,622) - ---------- ----------- Net cash provided by (used for) operating activities 5,049,785 (3,993,529) ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (29,177) (140,765) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of notes payable and long-term debt (91,954) (37,527) Proceeds from issuance of common stock 78,147 - Proceeds from exercise of options and warrants 514,694 78,800 ---------- ----------- Net cash provided by financing activities 500,887 41,273 ---------- -----------
(Continued) 5 of 13
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1995 1994 ---------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (172,602) 115,564 ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,348,893 (3,977,457) CASH AND CASH EQUIVALENTS, beginning of period 689,749 5,280,829 ---------- ----------- CASH AND CASH EQUIVALENTS, end of period $6,038,642 $ 1,303,372 ========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid during the period $ 12,435 $ - ========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING AND FINANCING ACTIVITIES: During the six months ended June 30, 1995, the Company issued 1,695,232 shares of Common Stock in payment of long-term debt and accrued interest totaling $6,339,409. During the six months ended June 30, 1995, the Company issued 50,000 shares of Common Stock in payment of legal fees totaling $225,000. During the six months ended June 30, 1994, the Company issued 5,008 shares of Common Stock in payment of consulting fees totaling $27,000. As of June 30, 1995, dividends on the Series A Preferred Stock of $92,563 ($5,820 relating to the six months ended June 30, 1995) have been earned but have not been declared and are included in other long-term liabilities in the June 30, 1995 condensed consolidated balance sheet. See notes to condensed consolidated financial statements 6 of 13 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) SIGNIFICANT ACCOUNTING POLICIES: The accounting policies followed for quarterly financial reporting are the same as those disclosed in Note (1) of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. Certain prior year balances have been reclassified to conform with current year presentation. (2) ADJUSTMENT OF PRIOR YEARS' FINANCIAL STATEMENTS: In December 1993, the Company entered into an Option and License Agreement pursuant to which it was granted an option to obtain an exclusive license to the North and South American rights to a potential AIDS treatment. The option cost $2 million, which in accordance with SFAS No. 2, should have been expensed when acquired in 1993. As a result, the Company has restated net income (loss) for 1993, 1994 and 1995. The effect of the restatement is to increase 1993 net loss by $2 million or $(.09) per share and decrease 1994 net loss $400,000 or $.01 per share. The effect on the 1994 and 1995 per share quarterly amounts is immaterial. 7 of 13 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES In May 1995, the Company entered into an exclusive worldwide, except for South Africa, license and supply agreement with American Home Product Corporation (AHP) under which the Wyeth-Ayerst division of AHP will market Crinone/trademark/. Under the terms of the agreement, the Company received a $6 million upfront payment and will receive milestone payments and a significant percentage of sales. A $2 million milestone payment was received in June 1995, when Crinone was approved as a drug in the U.K. As a result, cash and cash equivalents increased from approximately $690,000 at December 31, 1994 to approximately $6 million at June 30, 1995. During 1995, the Company repaid $6,339,409 of long-term debt and accrued interest through the issuance of 1,695,232 shares of the Company's Common Stock. The Company is currently in discussions with several large pharmaceutical companies regarding the licensing of some of the Company's products. In addition, the Company is in discussions regarding potential product development agreements with certain of these companies, in which the cost of development would be borne by the strategic alliance partner. The Company expects to receive both upfront payments and ongoing royalties upon consummation of any such agreements. There can be no assurance that the Company will be able to enter into any such agreements or that any upfront payments or ongoing royalties will be received or, if received, will be sufficient to meet the Company's funding requirements. The Company's future cash flow requirements are substantially dependent upon the receipt of such upfront payments and on the marketing efforts of its strategic alliance partners. If such payments are not received, the Company will seek to raise additional capital, the success of which is not determinable. If the Company is unable to raise sufficient additional capital, the Company will explore the alternatives available to it at such time, including without limitation, delaying clinical studies or otherwise reducing its operating activities or seeking other ways to reduce its cash requirements. In December 1993, the Company entered into an Option and License Agreement with a French research group based in Marseille, France, pursuant to which it was granted an option to obtain an exclusive license to the North and South American rights to a potential AIDS treatment. The option cost $2 million, of which $1.1 million was paid in December 1993 and the remaining $900,000 was paid in February 1994. The potential product was recently granted a Clinical Trials Exemption (CTX) in the United Kingdom (UK) and clinical trials in humans are now underway. The option, which must be exercised upon the occurrence of certain events, expires in December 1998. Upon exercise of the option, the Company will be required to pay an additional $5 million. If the Company does not exercise its option upon the occurrence of certain events, the Company's rights to the option are terminated. The FDA, in 1988, initiated a review to determine whether drugs containing quinine sulfate for night leg cramps, an ingredient in Legatrin, should remain on the market. The FDA issued a final monograph, which became effective on February 22, 1995, restricting manufacturer's from selling over-the-counter quinine sulfate based-products for the relief of night leg cramps. 8 of 13 As a result, the Company recently introduced New Advanced Formula Legatrin PM. Legatrin PM/trademark/, which does not contain quinine sulfate, provides relief of occasional pain and sleeplessness associated with minor muscle aches such as leg cramps; however, it is not known at this time whether consumers will find Legatrin PM as effective as Legatrin. Sales of Legatrin and gross profit derived from sales of Legatrin approximated $4 million and $3 million, respectively, for each of the three years ended December 31, 1994. Sales of Legatrin represented approximately 49%, 48% and 47% of the Company's net sales in 1994, 1993 and 1992, respectively. There can be no assurance as to what future sales of Legatrin PM will be. In connection with the 1989 purchase of the assets of Bio- Mimetics, Inc., which assets consisted of the patents underlying the Company's Bioadhesive Delivery System, other patent applications and related technology, the Company pays Bio- Mimetics, Inc. a royalty equal to two percent of the net sales of products based on the Bioadhesive Delivery System, to an aggregate of $7.5 million. The Company is required to prepay a portion of the remaining royalty obligation, in cash or stock at the option of the Company, if certain conditions are met. As of June 30, 1995, the Company has outstanding exercisable options and warrants that, if exercised, would result in approximately $11 million of additional capital. However, there can be no assurance that such options or warrants will be exercised. Material expenditures anticipated by the Company in the near future are concentrated on production commitments related to Replens and research and development related to new products. The Company has committed to spend an aggregate of approximately $850,000 on additional molding capacity at its suppliers during 1995 and 1996. As of December 31, 1994, the Company had available net operating loss carryforwards of approximately $40 million to offset its future U.S. taxable income. In accordance with Statement of Financial Standards No. 109, as of December 31, 1994, other assets in the accompanying consolidated balance sheet includes a deferred tax asset of approximately $14 million (consisting primarily of a net operating loss carryforward) which has been fully reserved as its ultimate realizability is not assured. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1995 VERSUS SIX MONTHS ENDED JUNE 30, 1994 Sales have increased in 1995 as compared to 1994 primarily as a result of Advantage 24/trademark/ now being available on drug store shelves throughout the U.S., renewed sales activity from the Company's OTC segment, including the introduction of Legatrin PM, as well as revenue from a research agreement which began in late 1994. While the strategic alliance agreements in the United States and abroad have not produced desired unit sales as quickly as planned, the Company believes it has established effective working relationships with its partners which the Company believes form a solid foundation to build sales of Replens and the other products in the development pipeline. In addition, upon granting of the European multistate license, Replens should become a reimbursable product in certain countries. The Company believes that sales of Replens in Europe should increase significantly once the licenses are granted. The Company's success to a great extent is dependent on the marketing efforts of its strategic alliance partners, over which the Company has limited ability to influence. Selling and distribution expenses increased as a result of costs associated with the introduction of Legatrin PM. Research and development expenditures have decreased as a result of the completion of a majority of the clinical studies related to Crinone and Advantage 24. 9 of 13 License fees, net includes $8 million received as upfront and milestone payments in connection with the licensing agreement with AHP. The decrease in interest expense is primarily the result of repayment of a portion of the 1993 Notes. As a result, the net income for 1995 was $5,208,095 or $.21 per share as compared to a net loss in 1994 of $(5,570,960) or $(.25) per common share. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995 VERSUS THREE MONTHS ENDED JUNE 30, 1994 Sales have increased in 1995 as compared to 1994 primarily as a result of Advantage 24/trademark/ now being available on drug store shelves throughout the U.S., renewed sales activity from the Company's OTC segment, including the introduction of Legatrin PM, as well as revenue from a research agreement which began in late 1994. While the strategic alliance agreements in the United States and abroad have not produced desired unit sales as quickly as planned, the Company believes it has established effective working relationships with its partners which the Company believes form a solid foundation to build sales of Replens and the other products in the development pipeline. In addition, upon granting of the European multistate license, Replens should become a reimbursable product in certain countries. The Company believes that sales of Replens in Europe should increase significantly once the licenses are granted. The Company's success to a great extent is dependent on the marketing efforts of its strategic alliance partners, over which the Company has limited ability to influence. Selling and distribution expenses increased as a result of costs associated with the introduction of Legatrin PM. Research and development expenditures have decreased as a result of the completion of a majority of the clinical studies related to Crinone and Advantage 24. License fees, net includes $8 million received as upfront and milestone payments in connection with the licensing agreement with AHP. The decrease in interest expense is primarily the result of repayment of a portion of the 1993 Notes. As a result, the net income for 1995 was $6,240,874 or $.25 per share as compared to a net loss in 1994 of $(2,204,249) or $(.10) per common share. 10 of 13 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings In April 1992, the Company filed an action against Bank Piquet ("Piquet"), and certain other defendants (all of whom except Piquet have defaulted), for a declaratory judgement ("Action"), in the United States District Court for the Southern District of Florida ("Court"), relating to the ownership and rights to exercise certain warrants to purchase shares of the Company's Common Stock ("Warrants"). The Action was commenced by the Company when it determined that Piquet, the purported holder of the Warrants, was not the registered owner in accordance with the procedures for transfer set forth in the warrant agreement, and Piquet's ownership claims were from an entity different from the entity to whom the Warrants were issued. Thereafter, Piquet filed a counterclaim claiming $600,000 in damages as a result of the Company's denying Piquet the right to exercise the Warrants. The Company filed the Action in order to avoid being exposed to duplicate claims to the right to exercise the Warrants, and the attendant liability thereto. This Action was settled as of May 13, 1995. In connection therewith, the Company issued Piguet a warrant to purchase 300,000 shares of Common Stock at $5.31 per share, exercisable through May 13, 1998. In September 1994, two related actions (the "Related Actions") were filed in the United States District Court for the Southern District of Florida ("Court"), alleging that the Company owes fees and/or commissions in the amount of approximately $1,150,000. The Related Actions were both filed by the same law firm on the same date. In the first of the Related Actions, the plaintiff, Ian J. ffrench, alleges he is owed fees or commissions of $900,000 for investment banking services allegedly provided by him to the Company. The Company has answered each of these claims denying the allegations contained therein and intends to vigorously defend this Action. In the second of the Related Actions, the plaintiff, Leman Trust Company, alleges the Company owes it approximately $250,000 as a result of the Company failing to grant certain warrants to purchase shares of the Company's Common Stock as a part of a certain loan transaction consummated in 1991. The Company believes that the loan was fully repaid in 1991 and all of the written requirements of the loan transaction were complied with. The Company has answered each of these claims denying the allegations contained therein. The Related Actions were settled on May 31, 1995, through the payment of $51,000 to Mr. ffrench. Certain claims and complaints have been filed or are pending against the Company with respect to various matters. In the opinion of management and counsel, all such matters are adequately reserved for or covered by insurance or, if not so covered, are without any or have little merit or involve such amounts that if disposed of unfavorably would not have a material adverse effect on the Company. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities As of August 7, 1995, dividends on the Series A Preferred Stock of $93,849 have been earned but have not been declared. 11 of 13 Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of stockholders of the Company was held on July 20, 1995 for the purpose of electing six directors and ratifying the appointment of Arthur Andersen LLP as independent public accountants for the Company. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K None. 12 of 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COLUMBIA LABORATORIES, INC. /S/ MARGARET J. ROELL ---------------------------------- MARGARET J. ROELL, Vice President- Finance and Administration, Chief Financial Officer DATE: August 7, 1995 13 of 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-1995 JUN-30-1995 6,038,642 0 1,148,522 136,754 1,253,400 8,487,927 1,518,128 712,634 12,260,624 6,203,989 0 256,484 0 32 5,707,556 12,260,624 6,083,866 6,083,866 3,197,014 3,197,014 5,745,602 38,384 140,750 5,208,095 0 5,208,095 0 0 0 5,208,095 .21 .21