|
PART
I
|
|
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
Item
1: Consolidated Financial Information
|
|
|
|
|
|
Univec,
Inc. and Subsidiaries
|
|
|
Consolidated
Statement of Financial Position
(Unaudited)
|
|
|
September
30, 2007
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Cash
|
|
$
|
612
|
|
|
Accounts
receivable
|
|
|
14,404
|
|
|
Inventories
|
|
|
44,100
|
|
|
Other
current assets
|
|
|
1,200
|
|
|
Total
current assets
|
|
|
60,316
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
361,725
|
|
|
Other
assets
|
|
|
33,394
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
455,435
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
1,862,498
|
|
|
Accrued
payroll
|
|
|
1,937,091
|
|
|
Notes
and loans payable - current
|
|
|
890,438
|
|
|
Loans
payable - officers/directors
|
|
|
244,412
|
|
|
Due
to affiliated companies
|
|
|
126,427
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
5,057,722
|
|
|
|
|
|
|
|
|
Officers/directors
notes and loans payable - long-term
|
|
|
50,000
|
|
|
Notes
and loans payable - long-term
|
|
|
1,597,983
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
6,708,849
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
Preferred
stock $.001 par value; 3,743,500 shares
|
|
|
|
|
|
authorized;
none issued and outstanding
|
|
|
|
|
|
Series
D 5% cumulative convertible preferred stock,
|
|
|
|
|
|
$.001
par value; authorized: 1,250,000; issued and
|
|
|
|
|
|
outstanding:
208,333 shares (aggregate liquidation
|
|
|
|
|
|
value:
$580,468)
|
|
|
208
|
|
|
Series
E cumulative convertible preferred stock,
|
|
|
|
|
|
$.001
par value; authorized: 2,000 shares; issued and
|
|
|
|
|
|
outstanding:
312 shares (aggregate liquidation
|
|
|
|
|
|
value:
$373,829)
|
|
|
1
|
|
|
Common
stock $.001 par value; authorized: 500,000,000 shares;
|
|
|
63,289
|
|
|
issued:
63,288,804 and outstanding: 62,884,650 shares
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
11,601,878
|
|
|
Due
from shareholder
|
|
|
(150,000
|
)
|
|
Treasury
stock, 404,154 shares – at cost
|
|
|
(28,291
|
)
|
|
Accumulated
deficit
|
|
|
(17,738,651
|
)
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(6,250,270
|
)
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
455,435
|
|
|
|
|
|
|
|
See
notes
to the consolidated financial statements.
-3-
|
UNIVEC,
Inc. and Subsidiaries
|
|
Consolidated
Statement
of Operations
(Unaudited)
|
|
|
|
Three
months ended
September
30,
|
|
|
Nine
months ended
September
30
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,424
|
|
|
|
2,808
|
|
|
|
23,664
|
|
|
|
16,492
|
|
|
Cost
of revenues
|
|
|
7476
|
|
|
|
0
|
|
|
|
20,856
|
|
|
|
10,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
948
|
|
|
|
2,808
|
|
|
|
2,808
|
|
|
|
6,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and selling
|
|
|
|
|
|
|
(6,945
|
)
|
|
|
|
|
|
|
(19,337
|
)
|
|
Product development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,578
|
)
|
|
General and administrative
|
|
|
(43,208
|
)
|
|
|
(513,017
|
)
|
|
|
(142,336
|
)
|
|
|
(684,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
(43,208
|
)
|
|
|
(519,962
|
)
|
|
|
(142,336
|
)
|
|
|
(701,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(42,260
|
)
|
|
|
(517,154
|
)
|
|
|
(139,528
|
)
|
|
|
(694,923
|
)
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(29,423
|
)
|
|
|
(31,145
|
)
|
|
|
(88,269
|
)
|
|
|
(98,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expenses
|
|
|
(29,423
|
)
|
|
|
(31,145
|
)
|
|
|
(88,269
|
)
|
|
|
(98,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(71,683
|
)
|
|
|
(548,299
|
)
|
|
|
(227,797
|
)
|
|
|
(793,380
|
)
|
|
Dividends
attributable to preferred stock
|
|
|
(8,213
|
)
|
|
|
(8,213
|
)
|
|
|
(24,639
|
)
|
|
|
(24,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to common stockholders
|
|
|
(79,896
|
)
|
|
|
(556,512
|
)
|
|
|
(252,436
|
)
|
|
|
(818,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per common share
|
|
$
|
(0.001
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.004
|
)
|
|
$
|
(0.001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of common shares outstanding
|
|
|
63,288,804
|
|
|
|
61,883,764
|
|
|
|
63,288,804
|
|
|
|
59,831,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to the consolidated financial statements.
-4-
|
Univec,
Inc. and Subsidiaries
|
|
Consolidated
Statement of
Cash Flows
(Unaudited)
|
|
Nine
months ended September 30, 2007 and
2006
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(236,010
|
)
|
|
$
|
(793,380
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
used in operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
79,251
|
|
|
|
12,022
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
948
|
|
|
|
(10,529
|
)
|
|
Inventories
|
|
|
600
|
|
|
|
89,329
|
|
|
Other current assets and other assets
|
|
|
(1,259
|
)
|
|
|
6,000
|
|
|
Accounts payable and accrued expenses
|
|
|
147,096
|
|
|
|
213,848
|
|
|
Accrued payroll
|
|
|
|
|
|
|
32,241
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) operating activities
|
|
|
(0
|
)
|
|
|
(450,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
Increase in due from affiliated companies
|
|
|
3144
|
|
|
|
|
|
|
Increase in loans payable – officers/directors
|
|
|
|
|
|
|
6,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
0
|
|
|
|
519,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) in cash
|
|
|
(0
|
)
|
|
|
69,213
|
|
|
Cash,
beginning of period
|
|
|
264
|
|
|
|
991
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
612
|
|
|
$
|
70,204
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to the consolidated financial statements.
-5-
UNIVEC,
Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
(Un-audited)
1.
Nature of
Operations
Univec,
Inc. (Company) produces, licenses and markets medical products primarily safety
syringes and specialty pharmaceutical drugs. Physician and Pharmaceutical
Services, Inc. (PPSI), a subsidiary, provides pharmaceutical samples and group
purchasing services of pharmaceutical products. -----
2.
Summary of Significant Accounting Policies
Financial
Statements
The
accompanying un-audited consolidated financial statements have been prepared
in
accordance with accounting principles generally accepted in the United States
for interim financial statements and with the rules and regulations of the
Securities and Exchange Commission for Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements.
In
the opinion of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation of the consolidated
financial position, results of operations and cash flows for the interim periods
presented have been included. These consolidated financial statements should
be
read in conjunction with the consolidated financial statements of Univec, Inc.,
together with the Company’s Management’s Discussion and Analysis, included in
the Company’s Form 10-KSB for the year ended December 31, 2006. Interim results
are not necessarily indicative of the results for a full year.
Net
Loss
Per Share
Basic
net
loss per share was computed based on the weighted-average number of common
shares outstanding during the nine and three month periods ended September
30,
2007 and 2006. Dilutive net loss per share has not been presented because it
was
anti-dilutive.
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
New
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
-6-
3.
Common
Stock
During
the year ended December 31, 2006, the Company issued an aggregate of 5,810,078
shares of common stock to a stockholder in exchange for benefits not taken
of
$93,143.
4.
Financing Agreement
At
September 30, 2007 $1,270,800 of long-term loans payable were outstanding on
a
recently issued 6% Note Warrants Securities Purchase Agreement. This debt,
dated
July 31, 2006, is the private placement of a $2,000,000 6% Note Warrants
Securities Purchase Agreement. The Agreement allows the investor to purchase
10,000,000 common stock warrants for seven years at an exercise price of $0.02
each. The Note and Warrants were issued in reliance upon exemptions from
regulation pursuant to section 4(2) of the Securities Act of 1933 and Rule
506
of Regulation D promulgated thereto. Each of the Investors is an accredited
investor as defined in Rule 501 of Regulation D under the Securities Act of
1933.
-7-
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations.
|
Results
of Operations
For
the Three and Nine Month periods
Ended September 30, 2007 compared to the Three and Nine Month periods Ended
September 30, 2006
Condensed
Consolidated Results of Operations
|
|
|
Three
months ended
September
30,
|
|
|
Nine
months ended
September
30
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,424
|
|
|
|
2,808
|
|
|
|
333
|
%
|
|
|
23,664
|
|
|
|
16,492
|
|
|
|
43
|
%
|
|
Cost
of revenues
|
|
|
7476
|
|
|
|
0
|
|
|
|
100
|
%
|
|
|
20,856
|
|
|
|
10,263
|
|
|
|
103
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
948
|
|
|
|
2,808
|
|
|
|
(66
|
)%
|
|
|
2,808
|
|
|
|
6,229
|
|
|
|
(46
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
and selling
|
|
|
0
|
|
|
|
(6,945
|
)
|
|
(%)
|
|
|
|
|
|
|
|
(19,337
|
)
|
|
(%)
|
|
|
Product
development
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,578
|
)
|
|
|
|
|
|
General
and administrative
|
|
|
(43,208
|
)
|
|
|
(513,017
|
)
|
|
|
(91.5
|
)%
|
|
|
(142,336
|
)
|
|
|
(684,393
|
)
|
|
|
(79
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
(43,208
|
)
|
|
|
(519,962
|
)
|
|
|
(91.6
|
)%
|
|
|
(142,336
|
)
|
|
|
(701,152
|
)
|
|
|
(79
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(29,423
|
)
|
|
|
(31,145
|
)
|
|
|
(5
|
)%
|
|
|
(88,269
|
)
|
|
|
(98,457
|
)
|
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(71,683
|
)
|
|
|
(548,299
|
)
|
|
|
(86.9
|
)%
|
|
|
(227,797
|
)
|
|
|
(793,380
|
)
|
|
|
(71
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-8-
As
illustrated in the table above, overall revenues for the three month period
ended September 30, 2007 increased by $5,616 (333%) as compared to the
comparable period ended September 30, 2006. Revenues for the nine month period
ended September 30, 2007 increased by $7,172 (43%) as compared to the nine
month
period ended September 30, 2006. Product sales alone accounted for all of these
increases. Sales within Univec, Inc. comprised all of the total sales for the
three and nine month periods ended September 30, 2007. PPSI has experienced
a
complete reduction in sales to its principal Group Purchasing Organization
(GPO)
customer. This sales depletion will continue to have a detrimental effect on
Company operations for the impending future period. The Company management
has
decided to concentrate resources on the distribution sector having direct
control of product purchases and distribution that management feels will have
greater gross margin opportunity although gross revenue will not be maintained.
Management feels that this model will allow a direct relationship with the
end
purchaser and not be dependent on an intermediary.
The
Company will endeavor to replace minimal revenues by placing increased product
sales in the direct marketplace and by expanding its higher gross profit
atypical product sales.
The
Company will focus on the marketing, production, development and distribution
of
its pharmaceutical and proprietary products and licensing of the
technology.
Physician
and Pharmaceutical Services, Inc. (PPSI) is physician sample and starter script
provider as well as a Group Purchasing Organization (GPO) and formulary
management company. Group purchasing allows companies to get better prices
by
combining purchasing power. It is also important that the products being
purchased are appropriate for the drug formulary that is approved.
Gross margin
for the three and nine month periods ended September 30, 2007 decreased to
$948
from $2,808, and decreased to $2,808 from $6,229, respectively, as compared
to
the comparable periods ended September 30, 2006. The minimal gross margin
is primarily due to the lower gross margin contribution from lower sales
volume of our pharmaceutical drugs and syringes. We anticipate gross margin
levels to remain at these decreased levels due to the GPO’s principal customer’s
commercial activity decline.
Marketing
and selling costs for the three and nine month periods ended September 30,
2007
decreased by $6,945 and $19,337 , respectively as compared to the
comparable periods ended September 30, 2006. This decrease is primarily due
to
reorganization.
There
were very minimal product development expenses incurred for three and nine
month
periods ended September 30, 2007 as compared to the comparable periods ended
September 30, 2006. These decreases were the result of negligible expenditures
for patent legal costs and product testing expense.
General
and administrative expenses for the three month period ended September 30,
2007
decreased $469,809 (91.6%) as compared to the three month period ended September
30, 2006. This decrease is due reorganization and decrease in insurance, legal
and professional fees, financial funding commissions and securities maintenance
expenses. During the nine month period ended September30,
2007 as compared to the comparable period ended September 30, 2006 general
and
administrative expenses decreased $542,057 (79.2%) primarily as a result of
the
reorganization and decreases in payroll, insurance, rent and professional fees
expenses.
-9-
Interest
expense for the three and nine month periods ended September 30, 2007 decreased
by $1,722 (5.5%) and $10,188 (10.3%), respectively, as compared to the similar
periods ended September 30, 2006, primarily as a result of changes in the
structure of the debt outstanding during 2007.
Net
loss
for the three month period ended September 30, 2007 decreased by $476,616 (33%)
as compared to the three month period ended September 30, 2006 primarily due
to
the reorganization and related decrease expenses, as discussed above, in general
and administrative expenses. The $565,583 reduction in general and
administrative expenses during the nine month period ended September 30, 2007
as
compared to the comparable period ended September 30, 2006 are due to the
reorganization, decrease in legal and professional fees, financial funding
commissions and securities maintenance expenses.
Liquidity
and Capital Resources
The
working capital deficit of $4,895,422 at December 31, 2006, was increased to
a
deficit of $5,123,219 (4.5%) at September 30, 2007 primarily because of the
$227,797 net loss incurred during the nine months ended September 30,
2007.
Operating
activities used $ 450,422 less net cash during the nine month period
ended September 30, 2007 as compared to the comparable period in 2006, primarily
due to the decreased net loss incurred which was offset in part by reduced
increases in accounts payable, accrued expenses and accrued
payroll.
There
was
no cash provided by / (used in) investing activities during the nine months
ended September 30, 2007.
As
a
result of these actions, Univec’s management anticipates that operations will
generate a negative cash flow during our fiscal year.
The
relatively low trading price and volume of our common shares hampers our ability
to raise equity capital. There is no assurance that any such equity financing
will be available to the Company or on terms we deem favorable. Management
will
continue its efforts to obtain debt and/or equity financing.
Significant
Estimates
Univec’s
business plan upon acquiring PPSI was to fully utilize its distribution
capabilities to increase sales and profitability. A shortage of cash flow has
slowed the effectiveness of the plan. Management has reviewed the carrying
amount of goodwill and fixed assets and recognized appropriate write-offs during
the periods prior to the quarter ended September 30, 2007, considering their
fair value based on anticipated future undiscounted cash flows and appraisals
of
the equipment
We
have
also reviewed the carrying value of both our accounts receivable and inventory.
Based on both our anticipated future undiscounted cash flows and recent
financings, no additional impairment is required to be
recognized.
New
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
-10-
Off-Balance
Sheet Arrangements
We
do not
have off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).
-11-
Item
3.
Controls
and
Procedures
Evaluation
of Disclosure Controls and Procedures
Under
the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2007.
Based
on this evaluation, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures are effective
to ensure that information required to be disclosed by us in the reports we
file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and that our disclosure and controls are designed
to ensure that information required to be disclosed by us in the reports that
we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Changes
in Internal Controls
There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the fiscal quarter ended September 30, 2007
that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
-12-
