Item
1.
Description of Business.
UNIVEC,
Inc. ("UNIVEC" or "the Company") is an integrated licensing, manufacturing,
and
marketing company dedicated to providing safer health products to patients
and
caregivers worldwide. Univec also assists pharmaceutical companies in
marketing, fulfillment, and tracking drug samples. Univec produces auto-disable
and safety syringes. The Company is a Delaware corporation incorporated on
October 7, 1996, and the successor by merger to UNIVEC, Inc., a New York
corporation, incorporated on August 18, 1992.
On
December 31, 2001 Univec, Inc., acquired Physician and Pharmaceutical
Services, Inc., (PPSI) a company engaged in group purchasing (GPO) and
promoting Pharmaceutical company prescription samples to physicians for
their patients. PPSI reduces the cost in the prescription-sampling channel
by
providing efficient fulfillment and tracking of prescription usage. PPSI's
national network of pharmacies fills the sample prescription on a discounted
fee
and the Company's mail service fulfillment complements additional needs.
PPSI's
approach conforms to regulations requiring increased accountability and
elimination of diversion of prescription samples, consequently reducing
the exposure of physicians and pharmaceutical companies to potential liabilities
and non-compliance penalties. PPSI’s group purchasing programs provide for
reduces prices on prescription drugs and other products through leveraged
purchasing and closed system market share. Univec also is a distributor of
a
highly
r
egulated
pharmaceutical drug, methadone and other prescription drug
products.
Univec
during late 2004 established the company as a distributor of specialty and
highly regulated pharmaceutical products. The company intends to expand the
product line to take further advantage of its group purchasing and closed
systems purchasing.
Univec
extended its product line to include a highly regulated pharmaceutical
(methadone) and other pharmaceutical products. The company will continue
to sell
it products through large United States based wholesalers as well as direct
in
large bulk to the larger customers of the company. The company’s group purchase
programs and closed market purchasing positions the company’s product line
well.
In
1997,
Univec commenced production and sales of its 1cc Auto-Disable Syringes
(AD-syringes), which are designed to make accidental or deliberate reuse
difficult. The accidental or deliberate reuse of syringes is a frequent cause
of
the spread of the human immunodeficiency ("HIV") and hepatitis viruses, as
well
as other blood-borne pathogens. Univec has received 510(k) clearance from
the
U.S. Food and Drug Administration (the "FDA") to market it's AD-Syringes
in the
United States.
Univec
believes that its 1cc difficult-to-reuse syringes are more effective than
competitive syringes and that they are competitively priced. Univec also
believes that it is the only company that markets an AD-Syringe with a 1cc
barrel, which is ideal for dispensing accurate dosages of medicine (e.g.,
allergy, immunization and insulin medicines). It is more difficult to deliver
up
to a .95cc dosage accurately with a syringe barrel that is greater than 1cc.
Univec does not know of any other company that offers a lcc aspirating syringe
that can be locked. Healthcare workers need aspirating syringes to mix
medications in the syringe barrel and inject medications intravenously.
Furthermore, Univec believes that aspirating syringes are preferred by diabetes
patients and needle-exchange programs. Pursuant to programs of international
relief agencies, Univec has shipped its lcc AD-Syringes to over 80
countries.
Univec
also manufactures and markets patented Sliding Sheath Syringes designed to
protect patients and healthcare workers from needle stick injuries, in
compliance with the Federal Needlestick Safety and Prevention Act of the
United
States government, and requirements of the Occupational Safety and Health
Administration (OSHA). Univec has FDA approval for an extendible barrel sleeve
syringe used in the sliding sheath syringes based on technology licensed
by
Univec.
In
addition, Univec has developed a Bifurcated Needle Safety Syringe specifically
designed to comply with the Federal Needlestick Safety and Prevention Act
of the
United States government. Univec has been granted 510(k) clearance by the
FDA.
The device is intended for use in administering smallpox vaccines in response
to
potential bio-terrorist threats. The Needlestick Safety mandate requires
all
U.S. healthcare providers to evaluate and implement safer medical devices
under
their OSHA "Exposure Control Plans". All healthcare providers must now adopt
safer devices to protect workers and others from needles potentially
contaminated with blood borne pathogens such as hepatitis B, hepatitis C,
and
HIV.
In
general, this "safer device" rule applies in the normal course of operations,
as
well as in connection with any mass immunization program authorized by the
federal government.
Univec
markets its AD-Syringes and Sliding Sheath Safety Syringes to governments
of
developing countries, provided that such syringes are manufactured in the
United
States, private hospitals and health facilities in the United States, and
distributors in the United States.
Problems
Associated With Traditional Disposable Syringes
In
developing countries, accidental or deliberate reuse of disposable syringes
poses a serious risk of transmitting HIV-AIDS, hepatitis and other blood-borne
pathogens. Relief agencies, including UNICEF and WHO, administered almost
a
billion immunizations to women and children through immunization programs
in
developing countries in 1998 and anticipate administering 3.5 billion
immunizations by 2005. WHO reported that surveys carried out in four of its
six
regions indicated that up to a third of immunization injections were unsterile.
Immunization injections account for less than 10% of injections administered
within the health sector. The United Nations estimates that more than half
of
all non-immunization injections in developing countries are unsafe. According
to
WHO, an estimated 40.0 million adults and children worldwide are infected
with
HIV, 90% of who live in developing countries.
Intravenous
drug users, who share syringes or use syringes discarded by hospitals, medical
clinics and laboratories, doctors or diabetic patients, are extremely
susceptible to HIV, hepatitis and other blood-borne pathogens. An article
in the
May 1996 American Journal of Public Health for Disease Control written by
an
epidemiologist for the Center for Disease Control and Prevention (the "CDC")
estimates that nearly half of all new HIV infections are occurring in
intravenous drug users. In the United States, up to 30% of pregnant mothers
infected with HIV transmit the virus to their babies, according to the CDC.
Based on a study of children with HIV, who received care at Children's Hospital
of Wisconsin, researchers estimated that the mean total lifetime costs of
caring
for a child with HIV was close to $1 million.
As
a
result of findings in the United States and developing countries, public
health
officials have encouraged the medical industry to develop safer syringes
to
prevent the spread of blood-borne pathogens, such as HIV and hepatitis. In
1995,
the House of Delegates -- American Medical Association requested "manufacturers
of disposable hypodermic needles and syringes to adopt designs to prevent
reuse
and to include in the packaging clear directions for their correct disposal."
In
late 1995, UNICEF and WHO recommended "the use of auto-disable syringes instead
of disposable, single use syringes in order to avoid the hazards of unsafe
injection practices."
Needlestick
Prevention
Needlestick
prevention devices are designed to prevent accidental puncture injuries to
health care workers and patients before, during, and after the use of hypodermic
syringes and needles. Statistics indicate that less than 1% of all reported
HIV
infections in the United States are attributed to needlestick injuries. The
most
prevalent needle stick prevention device, the extendible barrel sleeve, is
not a
substitute for features that render a syringe difficult-to-reuse; however,
it
can be combined with devices that make a syringe difficult-to-reuse. Needlestick
prevention methods include:
Retracting
Needles retract the needle into the barrel after use. These devices are
effective needlestick prevention devices; however, operators must manually
trigger the retraction of needles. Retracting needle devices that automatically
trigger with a single use of the syringe can render the syringe design difficult
to reuse. However, such devices are costly to manufacture due to the complexity
of the mechanics required to retract the needle.
Self-Destruct
Needles permit the needle to be collapsed or deformed into a shape, which
cannot
result in a needlestick injury. Although self-destruct needle devices are
mechanically simpler than retracting needle devices, less prone to malfunction
and less costly to manufacture, such devices are effective only if the operator
triggers the self-destruct feature.
Extendible
Barrel Sleeves enclose the barrel of the syringe in a second cylinder. The
operator extends the sleeve before and after use to cover the tip of the
needle.
The extendible barrel sleeves often lock in the extended position after use.
In
virtually all designs, the operator of the syringe must manually extend the
barrel sleeve after use. The sleeve does not prevent multiple use of the
syringe
before the operator encloses the barrel. However, extendible barrel sleeves
are
more cost-effective than the other alternatives and can be combined with
a
device that makes the syringe difficult to reuse.
UNIVEC
Syringes
Univec
has developed a 1cc AD-Syringe for aspirating and non-aspirating applications,
which are ideally suited for dispensing accurate dosages of allergy,
immunization and insulin medicines. The Company's 1cc AD-Syringe can deliver
dosages of up to .95cc. With the aspirating syringe, the UNIVEC locking clip
does not limit the user's ability to withdraw and depress ("to aspirate")
the
plunger until the user locks the syringe voluntarily. With the non-aspirating
syringe, the UNIVEC locking clip limits the user's ability to aspirate the
plunger and locks the syringe passively.
When
the
non-aspirating syringes are assembled, the syringe clip is placed on the
ratcheted plunger in the position needed to limit dosage as desired. When
the
operator depresses the plunger, the clip travels down the barrel by an equal
distance. Withdrawal of the plunger by any amount embeds the prongs into
the
barrel and the user cannot retract the plunger.
Univec's
1cc non-aspirating syringe was developed for the needs of immunization programs.
Using existing components, the Company can limit its non-aspirating syringe
to
any dosage between .05cc and .95cc.
Univec's
1cc aspirating syringe works similarly to the non-aspirating model, except
that
the clip prongs do not engage the barrel until the operator withdraws the
plunger completely. Once the operator does so, the clip catches a
single
ratchet and travels down the barrel as the plunger is depressed and the operator
cannot withdraw the plunger.
Univec's
1cc aspirating syringe was developed for healthcare workers, who need to
mix
medications in the syringe barrel and inject medicines intravenously.
Furthermore, the Company believes that aspirating syringes are preferred
by
diabetes patients and needle-exchange programs. The Company does not know
of any
other company that offers an aspirating syringe that can be locked.
Univec
has licensed rights to a United States patent for a sliding sheath to function
on all standard syringes. The Company believes that its licensed design for
a
safety syringe will compete successfully with the other safety syringes on
the
market. This design can be used on barrels of various sizes.
Marketing
of Pharmaceutical Company Drug Samples to Physicians
PPSI
patient StarterScript prescription drug program allows the physician to
provide to the patient a cost effective means to support medication
management from both a clinical and economic perspective. The patient sees
if
they may tolerate the medication under both the physician and pharmacist
oversight.
The
PPSI
online network provides better marketing and clinical integration information
than traditional systems, and enables pharmaceutical companies to maintain
market share when competing with generic drugs. The PPSI information system
includes detailed information such as the individual sales representative,
zip
codes, DEA number, pharmacy and prescribing physician. The PPSI system provides
pharmaceutical companies with an easy, safe way to offer free samples through
physicians and increase their value to patients who benefit through savings
on
prescriptions. In addition, the PPSI system provides incentives for chain
drug
stores to stock the pharmaceutical products and for pharmaceutical companies
to
keep their products on managed care formularies. Pharmaceutical manufacturers
spend over $16 billion a year for the marketing of products. PPSI's strategy
is
to provide flexible sample programs supported by technology to assist with
distribution, dispensing, reporting, and clinical integration that
maximizes the intent of appropriate sample model for marketing.
Sales,
Marketing and Distribution
Univec
has entered into several agreements with large United States based wholesalers
for the support and expansion of distribution channels for nationwide delivery
of the Univec product line.
Univec
also markets its StarterScript patient prescription sampling services to
pharmaceutical companies desiring to maintain or expand market position.
The
company management believes that with the growth of third party payments
of
prescription drug such as Medicare and managed care companies the direct
to
consumer programs will grow. Univec also believes that with more branded
pharmaceutical products coming off patent will further enhance direct
patient sampling or StarterScript programs as an offense to generic drug
substitution.
Univec
has shipped its lcc AD-Syringes to over 80 countries. Univec intends to market
its Safety-Shield syringes, as well as the Demolizer medical waste disposal
system to governments of developing countries, private hospitals and health
facilities in the United States, and distributors in the United States. Univec
is a licensee of products and proprietary manufacturing processes relating
to
1cc AD-Syringes. For manufacturing in our facilities. The Company
markets
such syringes to governments of developing countries, private hospitals and
medical facilities. To stimulate demand for its safety syringes, Univec plans
to
initiate promotional and educational campaigns directed at (i) public health
officers and other government officials responsible for public health policies,
(ii) doctors and administrators of healthcare facilities responsible for
treatment of HIV-AIDS and hepatitis patients, and (iii) liability insurance
companies.
Univec
also markets its drug sampling services to pharmaceutical companies desiring
to
maintain or expand market position.
Production
Univec's
lcc locking syringes are being assembled by contract manufacturers in the
United
States, China and Portugal. (See Item 1, "Description of Business" and Item
3
"Legal Proceedings" for the current status of the Company's business. The
United
States manufacturers also mold the Company's proprietary syringe plungers.
Univec owns stamping, assembly, and molding equipment at its U.S. contract
manufacturer. Univec relocated its clip plunger assembly production facility
designed to produce 1cc AD-Syringes from Farmingdale, New York to
Baltimore, Maryland during July 2003. These assemblies are shipped to our
contract manufacturers to produce Auto-Disable Syringes.
Univec's
syringes consist of a standard needle, barrel, rubber stopper, a ratcheted
plunger designed by the Company, and a pronged stainless steel locking clip
designed by Univec. The locking clip and plunger can be assembled, with minor
modifications, into barrels manufactured by Becton-Dickinson, Tyco, and other
syringe manufacturers. Univec has obtained a patent on its stainless steel
locking clip, and has been granted a patent for the design of a plunger which,
when combined with the locking clip, results in a narrow-barreled,
difficult-to-reuse, locking syringe. The stainless steel for the locking
clip
and the plastic for the syringe barrels and plungers is readily available
from
several
sources. The syringe barrels for some of the syringes sold by Univec have
been
manufactured by a Portuguese contract manufacturer. Univec has been successful
through other sources worldwide in purchasing barrels to increase the overall
production capacity. In addition, Univec continues to send clip plunger
assemblies produced in the U.S. to syringe manufacturers to also increase
overall production. Univec continues to pursue alternate sources of supply
for
components. Should there be a need for a certain component from an alternate
supplier, there can be no assurance that the Company will be able to obtain
it
on acceptable terms, and there can be no assurance that production of certain
configurations of its lcc locking syringes will not be delayed. Delays resulting
from the selection of an alternate supplier to produce certain components
could
have a materially adverse effect on Univec's business.
Competition
Univec's
principal competition for syringes is from traditional disposable syringes.
Becton-Dickinson, Tyco and Terumo control approximately 90% of the worldwide
syringe market, and are substantially larger, more established and have
significantly greater financial, sales and marketing, distribution, engineering,
research and development and other resources than the Company. To Univec's
knowledge, only Becton-Dickinson and Bader, a German machine tool manufacturer,
distribute commercially a line of difficult-to-reuse syringes, none of which
allow for aspiration. The Bader DestroJect syringe and the Becton-Dickinson
SOLOSHOT syringe were designed to dispense a dosage of .5cc only, whereas
the
UNIVEC 1cc locking clip syringe was designed to dispense dosages up to .95cc.
Univec believes that UNIVEC syringes are more effective than competitors'
difficult-to-reuse syringes and that the UNIVEC syringes are competitively
priced. There can be no assurance that the major syringe manufacturers or
others
will not commence production of 1cc difficult to-reuse-syringes, or locking
syringes which aspirate, or that Univec will be able to successfully compete
in
this market.
PPSI's
competition comes from traditional sampling providers that include the actual
drug samples and other pharmaceutical benefit management companies that offer
similar services such as Caremark and Medco Health.
Patents,
Licenses and Proprietary Rights
In
1995,
Univec was granted a United States patent for a locking clip device not biased
against the plunger. The patent is broad enough to include several applications
of the design covering the first series of products to be marketed by Univec.
Univec was granted a United States patent for a plunger design which, in
conjunction with its patented locking clip, results in a narrow barrel,
difficult-to-reuse syringe that allows for aspiration during use.
In
the
past, Univec has filed patent applications for its locking clip and aspirating
plunger in certain foreign countries participating in the Patent Cooperation
Treaty (Canada, Brazil, Mexico, certain European countries, Japan, South
Korea,
China, Russia and Australia). However, patent applications filed in foreign
countries and patents granted in such countries are subject to laws, rules
and
procedures that differ from those in the United States, and accordingly,
patent
protection in such countries may be different from patent protection provided
by
United States laws. In December 2003, to settle an outstanding note with
Syrinter, Ltd. (Switzerland), the Company assigned certain patents for the
1cc
auto-disabled syringe as in full payment of the note and interest thereon.
The
Company in turn received relief from restrictive patent payments and a perpetual
license to exploit these patents provided manufacturing occurs in the United
States. In addition, the Company will continue to receive 15% of future
royalties being earned from the licensing of these items. Univec has registered
trademarks UNIVEC(R), and Rx Ultra(R), Rx Plus, The Univec Crest and the
symbol
representing no second use, (i.e., the number 2 crossed out inside of a circle),
with the United States Patent and Trademark Office.
In
March
2001, Univec exercised an option to acquire a license of a component for
a
period of the later of ten years or the expiration of the last patent relating
to the component and its improvements, with the right to terminate the agreement
if the Company fails to produce and ship at least ten million of this component
within three years. Univec is committed to pay a royalty of $.001, per component
sold, with an advance royalty fee of $15,000 previously paid. As of December
31,
2004, Univec has sold only an insignificant amount subject to royalties under
this agreement.
In
July
2000, Univec received FDA approval of the sliding sheath syringe and began
to
manufacture and market this product in 2001.
In
August
2000, Univec entered into a licensing agreement providing for the non-exclusive,
worldwide use of Univec patents for the manufacturing, use and marketing
of its
auto-disable syringes through the period any patents are still in effect,
providing for royalties on sales and for the sale of equipment necessary
to
manufacture the product. In accordance with this agreement, Univec has earned
royalties of $30,284 and $109,690 for the years ended December 31, 2004 and
2003, respectively.
In
2003
the Company assigned certain patents to a creditor in payment of an amount
due
and also assigned the future royalties under the auto-disable syringe licensing
agreement. The Company has licensed back the rights under these patents to
market and manufacture in North America.
In
2004
the Company applied for and received a Provisional Patent from the U.S.
Patent and Trademark Office on September 21, 2004, the Patent #60/611,670
and
Foreign Filing License Granted October 15,2004, code US60/611,670.
However, patent applications filed in foreign countries and patents granted
in
such countries are subject to laws, rules and procedures that differ from
those
in the United States, and accordingly, patent protection in such countries
may
be different from patent protection provided by United States laws. In brief
description, a medical device with a sliding sheath to protect caregivers
in the dental and the cosmetic market.
Government
Regulation
The
manufacture and distribution of medical devices are subject to extensive
regulation by the FDA in the United States, and in some instances, by foreign
and state regulatory authorities. Pursuant to the Federal Food, Drug, and
Cosmetic Act, as amended, and the regulations promulgated there under
(collectively, the "FDC Act"), the FDA regulates the clinical testing,
manufacture, labeling, sale, distribution and promotion of medical devices.
Before a new device can be introduced into the market, a manufacturer must
obtain FDA permission to market through either the 510(k) pre-market
notification process or the costlier, lengthier and less certain pre-market
approval ("PMA") application process. With the 510(k) notification, the Company
may sell its 1cc locking clip syringe in the United States, subject to
compliance with other applicable FDA regulatory requirements. As a Class
II
device, performance standards may be developed for the 1cc locking clip syringe
which the product would then be required to meet. Failure to meet standards
for
effectiveness and safety could require the Company to discontinue the
manufacturing and/or marketing of the product in the United States. Furthermore,
manufacturers of medical devices are subject to record-keeping requirements
and
required to report adverse experiences relating to the use of the device.
Device
manufacturers
are also required to register their establishments and list their devices
with
the FDA and with certain state agencies and are subject to periodic
inspections
by the FDA and certain state agencies.
Medical
devices are subject to strict federal regulations regarding the
quality
of manufacturing ("Good Manufacturing Practices" or "GMP"). GMP
regulations
impose certain procedural and documentation requirements upon the
Company
with respect to manufacturing and quality assurance activities. The FDA
conducts
periodic audits and surveillance of the manufacturing, sterilizing and
packaging
facilities of medical device manufacturers to determine compliance
with
GMP
requirements. These procedures may include a product recall or a "cease
distribution"
order which would require the manufacturer to direct its
distributors
and sales agents to stop selling products, as well as other
enforcement
sanctions. Univec's manufacturing facilities have not been certified
as
satisfying GMP requirements. Univec's facilities will be subject to extensive
audits
in
the future, pursuant to standard FDA procedure. No assurance can be
given
that when the Company is audited that it will be found to be in compliance
with
GMP
requirements, or that if it is not found in compliance, what penalties,
enforcement
procedures or compliance effort will be levied on or required of the
Company.
To date, Univec has not been audited by the FDA. The FDA also has
the
authority
to request repair, replacement or refund of the cost of any device
manufactured
or distributed by the Company, and the failure to meet standards
for
safety and effectiveness could require the Company to discontinue marketing
and/or
manufacturing its product in the United States.
The
introduction of Univec's products in foreign markets will also subject
Univec
to
foreign regulatory clearances which may impose additional substantive
costs
and
burdens. International sales of medical devices are subject to the
regulatory
requirements of each country. The regulatory review process varies
from
country to country. Many countries also impose product standards, packaging
requirements,
labeling requirements and import restrictions on devices. In
addition,
each country has its own tariff regulations, duties and tax
requirements.
Univec's products are required to satisfy international
manufacturing
standards for sale in certain foreign countries.
The
approval by the FDA and foreign government authorities is unpredictable
and
uncertain, and no assurance can be given that the necessary approvals or
clearances
for the Company's products will be granted on a timely basis or at
all.
Delays in receipt of, or a failure to receive, such approvals or
clearances,
or the loss of any previously received approvals or clearances,
could
have a materially adverse effect on the business, financial condition and
results
of operations of the Company. Furthermore, approvals that have been or
may
be
granted are subject to continual review, and later discovery of
previously
unknown problems may result in product labeling restrictions or
withdrawal
of the product from the market. Moreover, changes in existing
requirements
or adoption of new requirements or policies could adversely affect
the
ability of Univec to comply with regulatory requirements. There can be no
assurance
that Univec will not be required to incur significant costs to comply
with
applicable laws and regulations in the future. Failure to comply with
applicable
laws or regulatory requirements could have a materially adverse
effect
on
Univec's business, financial position and results of operations.
Research
and Development
For
the
years ended December 31, 2004 and 2003, Univec expended $28,871 and
$28,547,
respectively, on product development expenses.
Employees
As
of
July 31, 2005, Univec employed four persons, including two full time
in
sales
and marketing, one full time in financial administration, and one full
time
in
production. None of Univec's employees is covered by a collective
bargaining
agreement.
As
of
July 31, 2005, PPSI had no employees, but utilizes outside marketing
representatives
and consultants for marketing and administrative services.
Item
2. Description of Property.
Univec
occupies a production facility, warehouse, administrative, and
executive
offices in Baltimore, MD (comprised of approximately 22,000 square
feet
of
space) pursuant to a lease that expired on July 15, 2004 with ten (10)
renewable
one (1) year option terms which are automatically renewable by Univec.
Rental
expense for the space is $72,000 per annum plus certain common charges,
maintenance
costs and real estate taxes, subject to a maximum increase of 3% for
each
three year term.
PPSI
shares office space with a related company, owned by the Chief Executive
Officer
of Univec. The expenses of the space, together with other expenses, that
would
be allocated to PPSI are insignificant.
In
February 2000, a former consultant commenced an action against the
Company
and its directors, Alleging breach of contract and fiduciary duty, and
is
seeking consulting fees in the amount of: (1) 250,000 shares of common stock,
(2)
$192,000 and (3) costs of this action. The Company and counsel do not
believe
the consulting fees are due and will continue to vigorously defend this
action.
Item
4.
Submission of Matters to Vote of Security Holders.
The
Annual Meeting of Stockholders of Univec, Inc. for the year ended
December
31, 2003, was held on August 12, 2004, to consider and vote upon a proposal
to
elect
S. Robert Grass, Dr. David Dalton, John Frank and William Wooldridge as
directors,
The
number of votes cast for and against each of the foregoing proposals and
the
number
of
abstentions are set forth below.
Proposals
to Elect Directors:
|
|
For
|
|
Withheld
|
S.
Robert Grass
|
|
19,641,801
|
|
0
|
David
Dalton
|
|
19,620,601
|
|
21,200
|
John
Frank
|
|
19,620,601
|
|
21,200
|
William
Wooldridge
|
|
19,641,801
|
|
0
|
(a)(1)
Prior to July 2, 1999, the Company's Common Stock and redeemable
Common
Stock Purchase Warrants (expired April 2002) traded on the Nasdaq SmallCap
Market.
Following that date, the common stock and warrants have been quoted on
the
OTC
Bulletin Board under the symbols "UNVC" and "UNVCW", respectively.
Set
forth
below are the high and low closing sale prices for the Common Stock
on
the
over-the-counter bulletin board from January 1, 2003 through December 31,
2004
and
the first quarter of 2005.
|
Common
Stock
|
|
|
("UNVC")
|
|
Quarter
Ended
|
High
|
|
Low
|
|
|
|
|
|
|
March
31, 2003
|
$
|
0.070
|
|
$
|
0.040
|
|
June
30, 2003
|
$
|
0.110
|
|
$
|
0.100
|
|
September
30, 2003
|
$
|
0.260
|
|
$
|
0.050
|
|
December
31, 2003
|
$
|
0.140
|
|
$
|
0.070
|
|
March
31, 2004
|
$
|
0.150
|
|
$
|
0.090
|
|
June
30, 2004
|
$
|
0.120
|
|
$
|
0.070
|
|
September
30, 2004
|
$
|
0.090
|
|
$
|
0.060
|
|
December
31, 2004
|
$
|
0.110
|
|
$
|
0.040
|
|
March
31, 2005
|
$
|
0.110
|
|
$
|
0.100
|
|
(1)
As of
December 31, 2004, there were 120 holders of record of the Common
Stock.
(2)
During the fiscal year ended December 31, 2004, Univec sold
unregistered
securities to a limited number of persons in transactions exempt
from
the
registration requirements of the Securities Act, as described below.
Except
as
indicated, there were no underwriters involved in the transactions,
and
there
were no underwriting discounts or commissions paid in connection
therewith.
The purchasers of securities in each such transaction represented
their
intention to acquire the securities for investment only and not with a
view
to
or for sale in connection with any distribution thereof and appropriate
legends
were affixed to the certificates for the securities issued in such
transactions.
All purchasers of securities in each such transaction had adequate
access
to
information about Univec, and in the case of transactions exempt from
registration
under Section 4(2) of the Securities Act, were sophisticated
investors.
1.
During
2004, a Univec officer converted $125,262 of contractual benefits to
1,660,035
common shares.
2.
On
February 5, 2004, Univec converted 50 shares of Series E Preferred Stock
to
799,371
common shares at $.064 per common share.
3.
On
February 15, 2004, two Company officers exchanged 500,000 common shares
in
payment of a total of $50,000 compensation options at $.05 per
share.
4.
On
July 3, 2004, Univec issued 500,000 shares at $.02 per common share
of
common
stock to a former director as payment of $10,000 of notes payable.
5.
On
November 12, 2004 Univec issued 6,000,000 shares of common stock to a
vendor
in
exchange for $240,000 financial consulting services at $.04 per
share.
6.
On
December 8, 2004, Univec converted 30 shares of Series E Preferred Stock
to
990,970
common shares at $.0323per common share.
Item
6.
Management's Discussion and Analysis
The
following discussion and analysis should be read in conjunction
with
Univec,
Inc's ("Univec", "we" or "our"), consolidated financial statements,
including
the notes thereto, appearing elsewhere in this report.
Condensed
Consolidated Results of Operations
|
|
2004
|
|
2003
|
|
Change
|
|
|
|
|
|
(Restated)
|
|
|
|
Revenues
|
|
$
|
19,448,388
|
|
$
|
16,977,822
|
|
|
14
|
%
|
Cost
of Revenues
|
|
$
|
19,174,494
|
|
|
16,986,565
|
|
|
13
|
%
|
Gross
Margin
|
|
|
273,894
|
|
|
(8,743
|
)
|
|
(3,233%)
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
and Selling
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
123,400
|
|
|
379,738
|
|
|
(68
|
%)
|
Product
Development
|
|
|
28,871
|
|
|
28,547
|
|
|
1
|
%
|
General
and
|
|
|
|
|
|
|
|
|
|
|
Administrative
|
|
|
1,,847,246
|
|
|
847,013
|
|
|
118
|
%
|
Interest
Expense, Net
|
|
|
108,092
|
|
|
91,564
|
|
|
18
|
%
|
Gain
on Extinguishment
|
|
|
|
|
|
|
|
|
|
|
of Debt
|
|
|
(144,819
|
)
|
|
(24,872
|
)
|
|
482
|
%
|
Loss
on write-off of
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
1,774,119
|
|
|
-
|
|
|
-
|
|
Loss
on sale of Subsidiary
|
|
|
597,056
|
|
|
-
|
|
|
-
|
|
Other
Income
|
|
|
(47,795
|
)
|
|
-
|
|
|
-
|
|
Loss
on capitalized lease
|
|
|
-0-
|
|
|
121,366
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
|
4,286,170
|
|
|
1,443,356
|
|
|
197
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations
|
|
|
(8,260
|
)
|
|
(93,502
|
)
|
|
(91
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(4,020,536
|
)
|
$
|
(1,545,601
|
)
|
|
(160
|
)%
|
Sales
within PPSI’s GPO comprised more than 99% of the total sales for 2004. A
breakdown of revenues and cost of revenues for 2004 between the Company and
its
wholly-owned subsidiary, PPSI, are as follows:
|
Univec
|
PPSI
|
Total
|
Revenue
|
$59,816
|
$19,388,572
|
$19,448,388
|
Cost
of Revenues
|
53,933
|
19,120,561
|
19,174,494
|
|
|
|
|
Gross
Margin
|
$
5,883
|
$
268,011
|
$
273,894
|
The
Company has corrected an error which occurred during the year ended December
31,
2003
in
connection with the capitalized lease of equipment. The underlying fixed
assets
were
purchased
by an affiliated company owned by an officer of the company and leased to
the
Company.
In 2003, the Company originally reported the payoff of the lease from proceeds
of loans.
The
restatement recorded the reinstatement and subsequent write-off of the
old
capitalized lease and the capitalization of the new lease, which resulted
in an
additional loss of $115,031, which was offset by a reduction of $115,031
in
general and administrative expenses less than $0.01, per share.
The
Company determined that the goodwill with a carrying value of $1,774,119
had
been
fully
impaired and has written-off the entire balance.
The
Company has its focus on the marketing, production, development and
distribution
of its pharmaceutical and proprietary products and licensing of the
technology
of its insulin and tuberculin sliding sheath safety syringes.
Gross
profit for the year ended December 31, 2004 increased to 1.4% from (0.1%)
in
2003. Gross profit based on product sales for 2004 decreased to $273,894
as
compared to $(8,743) in 2003. The increased gross profit is primarily
due to the
lower gross profit contribution from PPSI’s GPO revenue and also from lower
sales volume of our 1cc clip syringe. The GPO gross profit was 1.4% and
(0.1)%
for the year 2004 and 2003, respectively. During 2003 the Company encountered
a
non-recurring $381,949 cost adjustment being paid to a significant GPO
customer. The reduction of syringe gross profit is largely the result
of
decreased sales volume and fixed overhead costs of $7,290. We anticipate
gross
profit levels to remain at current levels, unless we increase our market
penetration, our prices, product mix and/or realize anticipated production
or
economic benefits that we anticipate as a result of our relocation to
Maryland
from New York during 2003 and recent financings.
As
a
result of the acquisitions of PPSI, we have broadened our pharmaceutical
product
distribution base. We anticipate increases in sales on a period by period
basis
from PPSI if we can increase our market penetration in these
areas.
Marketing
and selling costs in 2004 decreased $256,338 (68%) from 2003. This decrease
is due to decreases in shipping costs, rent and compensation costs, as a
result
of limited funds available to conduct marketing activities. As a result of
our
2004 financing, we anticipate increasing our marketing activities.
Product
development expense for 2004 increased by $324 (1.1%) as compared to 2003.
This
increase was the result of increased expenditures for patent legal costs
and
product testing expense.
General
and administrative expenses for the year ended December 31, 2004 increased
$1,000,233 (118%) as compared to 2003. This increase is due primarily
to
increases in professional fees, insurance and relocation costs offset
in part by
decreases in compensation, GPO cost adjustments, securities maintenance
expenses and a $75,000 reserve provided for inventory valuation. There was
also an $85,088 provision for equipment located at former suppliers,
which is no
longer being used in production activities of the Company.
Interest
expense for the year ended December 31, 2004 increased by $16,528
(18%)
as
compared to 2003 primarily as a result of increased debt during
2004.
Other
income for the year ended December 31, 2004 includes $36,349 gain on the
sale of
marketable
securities plus $11,446 gain on the sale of equipment.
Net
loss for 2004 increased by $(2,474,935) (160%) primarily due to the $1,774,119
write-off of goodwill and a loss of $597,056 on the sale of a subsidiary.
The
subsidiary was sold during August 2004 in order to reduce fixed costs
associated
with its operation. Without considering the loss on the sale of the subsidiary
and gain on extinguishment of debt ($144,819), the gain on the sale of
equipment
and marketable securities of $47,795, the increase in the net loss before
non-recurring items of $(2,129,860) was primarily related to the $1,000,233
increase in general and administrative expenses .
Liquidity
and Capital Resources
Liquidity
and Capital Resources, Page 11 - “Viable Plan” to generate positive
cash
.
The
Form
10-KSB states that the Registrant’s management is currently seeking additional
investment capital to support its entrance into new business ventures and
provide the capital needed to operate. Further, in Part I, Item 1 the Registrant
states that during late 2004 the company was established as a distributor
of
specialty and highly regulated pharmaceutical products. The company intends
to
expand the product line to take further advantage of its group purchasing
and
closed systems purchasing. Additionally, In 2004 the Company applied for
and
received a Provisional Patent from the U.S. Patent and Trademark Office on
September 21, 2004, the Patent #60/611,670 and Foreign Filing License Granted
October 15, 2004, code US60/611,6700 .… in brief description, a medical device
with a sliding sheath to protect caregivers in the dental and cosmetic
markets.
These
significant new products are anticipated to provide the company with revenue
sources and gross profits which will adequately support its continued
operations. Because of their prior discussion in the Description of the Business
segment of the Form 10-KSB, any revisions to Note 3 of the financial statements
would be repetitious in these circumstances.
The
working capital deficit of $2,542,657 at December 31, 2003, increased to
a
deficit
of
$4,207,570 at December 31, 2004. A significant reason for this increase is
the
classification
of
$457,377 of formerly long-term debt as current debt due to $79,651 in late
payments and $377,726
for
non-compliance with contractual covenants. Further, net increases in accounts
payable and
accrued
expenses, total loans payable and deferred compensation, partially offset
by an
increase
in
accounts receivable also accounted for the decrease in working capital.
The
accompanying financial statements have been prepared on a going concern basis,
which
contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business.
As
of
December 31, 2004, the Company had negative working capital of $4,207,570
and
stockholders'
deficit
of $3,717,269 and had previously incurred net losses of $(4,020,536) and
$(1,646,989) for the
years
ended December 31, 2004 and 2003. The Company is also in default of
approximately $1,200,000
of
loan
and notes payable all of which are payable on demand as a result of such
defaults. These factors,
among
others, indicate that the Company's continuation as a going concern is dependent
upon its ability
to
obtain adequate financing and/or achieve profitable operations.
The financial statements do not
include
any adjustments related to the recoverability and classification of recorded
asset amounts or the
amounts
and classification of liabilities that might be necessary should the Company
be
unable to
continue
in existence.
Management
is currently seeking additional investment capital to support its entrance
into
new
business ventures and provide the capital needed to operate.
Net
cash
used in operating activities increased by $
463,293
(163%)
to $747,984 for the
year
ended December 31, 2004 from 2003, primarily due to the increased net
loss.
Net
cash
used in investing activities of $743,145 resulted from the purchases of
restricted cash
deposits,
fixed assets and cash used in the sale of the subsidiary during 2004.
Net
cash
provided by financing activities increased by $1,299,498 (620%) to
$1,508.751 for 2004 from $209,253 provided during 2003. This increase
resulted
from an increase in aggregate borrowings of $1,244,795 and decrease in
aggregate
repayments of borrowings of approximately $27,870. There was also a $50,000
non-recurring sale of securities during 2004.
Although
revenue increased as a result of the 2004 PPSI GPO operations for the entire
year as we
continued
to market our safety syringes, we suffered from a serious shortage of working
capital,
which
resulted in the Company’s limited ability to market and sell its
products.
In
July
2004, the Company borrowed an aggregate of $1,000,000 from a city development
agency,
a
state
development agency and a stockholder. These proceeds provided us with resources
to acquire
equipment,
refinance an equipment capital lease and for working capital to enable us
to
continue
implement
our business strategy. The proceeds from the above loans and our designation
as
a
minority
business enterprise (MBE) should increase our marketing services to
pharmaceutical
companies,
to increase our sales of safety syringes and develop new products.
As
a
result of these actions, Univec’s management anticipates that operations will
generate a
positive
cash flow during our next fiscal year, but there can be no assurance this
will
occur.
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
In
conformity with interpretive MD&A guidance provided in Release 33-8350, we
herein provide details of significant estimates and assumptions involved
in the
Company’s application of GAAP.
In
accordance with SFAS 142 - Goodwill and Other Intangible Assets the Company
wrote-off of the entire $1,774,119 balance of impaired goodwill. This judgment
was provided in accordance with the GAAP provisions used to evaluate the
future
value of intangible assets. The Company determined that the excess value
of
goodwill paid in the course of the acquisition of its wholly owned subsidiary,
Physicians and Pharmacy Services, Inc. could no longer be supported by the
evaluation of potential future profitability of the subsidiary. Management’s
appraisal of future discounted cash flows and other factors resulted in the
complete write-off of the wholly impaired asset. Further, the Company applied
SFAS 5 to determine its provision for losses on litigation. Finally, the
Company, which was listed as a public company during 2004 on the OTC Bulletin
Board during 2004, applied SFAS 123 and EITF 96-18 to value equity securities
which were issued in payment of various corporate obligations.
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. Financial Accounting Standards Board Statement
#
123R
Stock Based Compensation is not expected to have a material effect on the
Company’s
financial statements.
Major
Customer
For
the
year ended December 31, 2004, our largest customer was a company
owned
by
our chief executive officer. We intend to reduce our reliance
on
this
customer through expanding sales to others.
Forward
Looking Statements
Except
for the historical information contained herein, the matters discussed
in
this
report are forward-looking statements that involve risks and
uncertainties,
including market acceptance of Univec's products, timely
development
and acceptance of new products, impact of competitive products,
development
of an effective organization, interruptions to production, and other
risks
detailed from time to time in Univec's SEC reports and its Prospectus
dated
April 24, 1997 (as supplemented by the Prospectus Supplement dated
April
29,
1997)
forming a part of its Registration Statement on Form SB-2 (File No.
333-20187),
as amended, which was declared effective by the Commission on April
24,
1997.
The
financial statements follow Item 13 of this report.
Item
8.
Changes in and Disagreements with Accountants on Accounting and
Financial
Disclosure.
A
Form
8-K was filed on June 13, 2005 and amended by a Form 8-K/A filed on August
1,
2005,
reporting the resignation of the Company’s principal registered
independent
public
accounting firm. Further, the Registrant reported that the auditor’s report for
the
previously issued Form 10-KSB for the year ended December 31, 2003 could
no
longer
be
relied upon. Also, the former principal registered independent public accounting
firm
has informed the Registrant that it may no longer rely upon review reports
issued for
all
Form
10-QSB for all quarters starting with the quarter-ended March 31, 2003 through
the quater
-ended
September 30, 2004.
Item
8A
CONTROLS AND PROCEDURES
(a)
The “Evaluation Date” of the Company’s disclosure controls and procedures was
concluded at December 31, 2004 the year-end for this Form 10-KSB annual
report.
The “Evaluation Date” evaluation disclosed that the Company's disclosure
controls and procedures were adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries
would be
made known to them by others within those entities, particularly during
the
period in which this annual report was being prepared.
(b)
Changes in internal controls. There were no significant changes in the
Company's
internal controls or in other factors that could significantly affect
the
Company's disclosure controls and procedures subsequent to the Evaluation
Date,
nor any significant deficiencies or material weaknesses in such disclosure
controls and procedures requiring corrective actions. As a result, no
corrective
actions were taken.
Item
III
Item
9.
Directors, Executive Officers, Promoters and Control Persons; Compilance
With
section 16 (a) of the Exchange Act.
Directors,
Executive Officers and Key Employees
The
directors, executive officers and key employees of Univec are as
follows:
Name
|
Age
|
Position
|
Dr.
David Dalton
|
56
|
Chief
Executive Officer, President and a Director
|
S.
Robert Grass
|
71
|
Chairman
of the Board of Directors
|
William
Wooldridge
|
60
|
Director
|
Raphael
Langford
|
60
|
Chief
Operating Officer and Executive Vice President
|
Michael
Lesisko
|
55
|
Treasurer,
Secretary and Chief Financial
Officer
|
Dr.
David
Dalton assumed the position of President and Chief Executive
Officer
of the Company on January 1, 2002, concurrent with the acquisition
by
Univec,
Inc. of Physician and Pharmaceutical Services, Inc. (PPSI), a
Baltimore
based
company founded by Dr. Dalton. Dr. Dalton has over 35 years experience
in
the
healthcare industry, including 18 years with Rite-Aid where he served
as
Corporate
Vice President.
Dr.
Dalton founded Health Resources, Inc., in 1983, a pharmacy service
provider
having contracts with over 50,000 retail pharmacies for billing and
payment
of prescription orders through plan providers. HRI is recognized as
one
of
the
leading Black Enterprises in the United States. Dr. Dalton also
founded
Pharmacy
Services, Inc., a pharmacy fulfillment center for correctional and
other
institutions, with facilities in Maryland, Tennessee and
Pennsylvania.
On
March
15, 2002 S. Robert Grass was elected a director of Univec. He was
elected
Chairman of the Board of Directors in May, 2002. Mr. Grass has been
associated
with the pharmaceutical and medical device industry for over
thirty-two
years. Mr. Grass developed a chain of pharmacies known as White
Shield
Drugstores in Pennsylvania, serving as President, Chief Executive
Officer
and
Chairman of the Board from 1970 to 1996. Mr. Grass also served as
Chief
Executive
Officer and Chairman of the Board of Managed Care RX, a drug
fulfillment
and mail order business from 1994 to 1999.
William
Wooldridge has been a director since August 5, 2003. Mr.
Wooldridge
is a recognized and respected entrepreneur. He is the founder of
MedEcon,
Inc. one of the largest group purchasing organizations in the
United
States.
Over a twenty-eight year period he has developed a corporation with
medical
portfolio sales in excess of $3.5 billion. In 1999, Mr. Wooldridge
formed
OrderButton.Net,
a new web-based transaction processing service that facilitates
the
establishment of merchant sites on the internet. Since 2002, Mr.
Wooldridge
has
been
developing a franchised, non-traditional based photography company.
Raphael
Langford has been Chief Operating Officer and Executive Vice-President
of
Univec
Corporation since April 2003. Prior to April 2003, Raphael Langford was
Vice-President
of Physician Pharmaceutical Services, Inc. (PPSI) A nationwide PBM with
Over
50,000 pharmacies in its network. Mr. Langford managed the design and creation
of
products/services
that serve the PBM market for PPSI, he was responsible for operations
planning
and control; material management; total quality management; benchmarking;
and
performance
measurement. Mr. Langford career highlights also include as Executive Director
of
the
National Foundation of Women Legislators. Mr. Langford served as liaison
to
Federal
and
State
elected officials. He was responsible for implementing National Policy
Committees
for
Women
Legislators to set guidelines for Alternative, Holistic & Complementary
Health.
Mr.
Langford co-chaired committees on Alcohol and Substance Abuse and served
as
chairman
for
Health, Longevity & Long-Term Care Pain Management. He has work on special
projects
with
HHS
and DEA in Washington, DC. Mr. Langford is a past President & CEO of Olympic
International,
Inc. The company specialized in international brokering, manufacturing
and
the
network of raw materials to more than 17 countries. Mr. Langford has over
thirty-five
years
experience in senior management positions with AT&T, Inc., Norton Simon,
Inc.
and
other
telecommunications and pharmaceuticals entities. He has received credits
in
business
management studies and Industrial psychology at Case Western Reserve University.
Michael
Lesisko, a certified public accountant, was named as Chief
Financial
Officer of Univec on September 9, 2002. Mr. Lesisko was named
Treasurer
and Secretary of Univec on February 11, 2003. From June 1996 to
September
2002 Mr. Lesisko was a CPA in public practice. He served as Vice
President
of Finance of CarrerCom Corporation and Subsidiaries from November
1988
to
May 1996. Prior thereto, he served as a partner with KPMG Peat
Marwick
from
July
1982 to August 1988, where he managed financial audits and a
diverse
tax
practice.
All
directors hold office until the annual meeting of stockholders of
the
Company following their election or until their successors are duly
elected
and
qualified. Officers are appointed by the Board of Directors and serve at
its
discretion.
Meetings
of the Board of Directors and Information Regarding Committees
The
Board
of Directors has two standing committees, an Audit Committee and
a
Compensation Committee. On August 12, 2004, Mr. John Frank and William
Wooldridge
were
elected to the Audit Committee. The duties of the Audit Committee
include
recommending
the engagement of independent auditors, reviewing and considering
actions
of management in matters relating to audit functions, reviewing
with
independent
auditors the scope and results of its audit engagement, reviewing
reports
from various regulatory authorities, reviewing the system of
internal
controls
and procedures of Univec, and reviewing the effectiveness of
procedures
intended
to prevent violations of law and regulations. The Audit Committee held
two
meetings
in 2004. On August 12, 2004, Mr. S. Robert Grass was elected to the
Compensation
Committee. There was one meeting of the Compensation Committee in
2004.
The
Board
of Directors held four meetings in 2004, which included special
telephonic
meetings. All Directors attended at least 75% of the total number
of
Board
meetings and meetings of committees on which they served during the
period
they served thereon during 2004.
Section
16(a) Beneficial Ownership Reporting
Section
16(a) of the Securities Exchange Act of 1934 requires Univec's
Officers,
Directors
and persons who own more than ten percent of a registered class of
Univec's
equity securities within specified time periods to file certain
reports
of
ownership and changes in ownership with the Securities and Exchange
Commission
(the "Commission"). Officers, Directors and ten percent
stockholders
are
required by regulation to furnish Univec with copies of all Section
16(a)
forms
they file. Based solely on a review of Copies of such reports received
by
Univec
and written representations from such persons concerning the necessity
to
file
such
reports, Univec is not aware of any failures to file reports or
report
transactions
in a timely manner during the fiscal year ended December 31, 2004.
Item
10.
Executive Compensation.
The
following table sets forth the compensation awarded to, earned by
or
paid
to
Univec's Chief Executive Officer and each other executive officers
of
the
Company whose salary and bonus for the two years ended December 31,
2004
exceeded
$100,000.
|
|
Annual
Compensation
|
Long-Term
Compensation
|
|
|
|
Other
Annual
|
Securities
|
Name
and Principal Position
|
Year
|
Salary
|
Compensation
|
Underlying
Options
|
|
|
|
|
|
Dr.
David Dalton
|
2003
|
$
360,000(1)
|
-
|
1,000,000(1)
|
Chief
Executive Officer and
|
|
|
|
|
President
|
|
|
|
|
|
2004
|
$
396,000(2)
|
-
|
-
|
|
|
|
|
|
Jonathan
Bricken
|
2003
|
$
129,969
|
-
|
None
|
Vice
President
|
|
|
|
|
(1)
During 2003, Dr. David Dalton earned a salary of $360,000, plus
life,
health
and disability insurance, as well as an automobile lease and
insurance
allowance equal to $24,000 per year. He was granted an option
to
purchase 1,000,000 shares of common stock on April 21, 2003.
(2)
During 2004, Dr. David Dalton earned a salary of $396,000, plus
life,
health
and disability insurance, as well as an automobile lease and
insurance
allowance equal to $24,000 per year.
Employment
Agreements
Dr.
David
Dalton provides the amount of time necessary to perform his
corporate
duties. Dr Dalton's salary was $396,000 for 2004, plus a bonus
determined
by the agreement of Dr. Dalton and the Compensation Committee. On
each
January 1, the base salary will be increased by an amount agreed upon
by
Dr.
Dalton and the Compensation Committee. The agreement also provides
Dr.
Dalton
with an option to purchase 2,000,000 shares of Common Stock at an
exercise
price of $.24 per share, vesting 500,000 shares on the first
anniversary
of the agreement, and an additional 41,667 shares vesting each
month
following
the initial vesting date. The unexpired term of the agreement will
be
extended
automatically by one year on each January 1 following the date of
the
agreement,
such that the unexpired term of the agreement will at all times not
be
less
than two years following each extension. The agreement provides for
payment
by Univec of annual premiums on a term life insurance policy with a
face
amount
of
$2 million. The agreement also provides for health and disability
benefits,
as well as an automobile lease and insurance allowance equal to
$24,000
per year. Under the terms of the agreement, Dr. Dalton is entitled to
a
severance
payment equal to his highest annual base salary during the term for
the
remainder of the term if the agreement is terminated by Dr. Dalton for
good
reason,
or in the event of a change in control of Univec.
Stock
Options
The
following table contains information concerning the grant of stock
options
to Dr. David Dalton ( the "Named Executive Officer") during the
fiscal
year
ended December 31, 2004.
|
Number
of Shares
|
Percent
of Total Options
|
|
|
|
Underlying
Options
|
Granted
to Employees in
|
Exercise
Price
|
Expiration
|
Name
|
Granted
|
Fiscal
Year
|
Per
Share
|
Date
|
Dr.
David Dalton
|
-
|
0%
|
$0.00
|
N/A
|
AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR
VALUES
The
following table summarizes for Dr. Dalton the total number of
shares
acquired upon exercise of options during the year ended December
31,
2004,
and
the value realized (fair market value at the time of exercise less
exercise
price), the total number of unexercised options, if any, held at
December
31, 2004, and the aggregate dollar value of in-the-money,
unexercised
options,
held at December 31, 2004. The value of the unexercised,
in-the-money
options
at December 31, 2004, is the difference between their exercise or
base
price,
and the fair market value of the underlying Common Stock on December
31,
2004.
The
closing bid price of the Common Stock on December 31, 2004 was
$0.11.
|
Shares
Acquired Upon
|
Number
of Securities
|
In-The-Money
|
|
Exercise
of Options
|
Underlying
Unexercised
|
Options
at
|
|
During
Fiscal 2004
|
Options
at December 31, 2004
|
December
31, 2004
|
Name
|
Number
|
Value
Realized
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|
|
|
|
|
|
|
Dr.
David Dalton
|
None
|
None
|
2,500,000
|
500,000
|
$40,000
|
$
-
|
Certain
Transactions
At
December 31, 2004, the following Deferred Payroll was payable to
executive
officers and other employees:
David
Dalton, Chief Executive Officer and President
|
|
$
|
856,000
|
|
Raphael
Langford, Chief Operating Officer
|
|
|
127,585
|
|
Michael
Lesisko, Secretary - Treasurer
|
|
|
97,300
|
|
|
|
|
1,080,885
|
|
Other
employees
|
|
|
190,603
|
|
|
|
$
|
1,271,488
|
|
On
July
3, 2003, the Company authorized the issuance of 500,000 shares of
common
stock to Richard Mintz, a Director of the Company, at $0.02 per share in
full
discharge
of a $10,000 note payable.
At
December 31, 2004, notes payable to companies owned by David
Dalton,
President,
amounted to $578,800. These loans are the result of providing
working
capital
to the Company.
At
December 31, 2004, notes payable to David Dalton, President
amounted
to
$100,000 and notes payable to S. Robert Grass, Chairman of the Board
of
Directors
amounted to $153,300. These amounts were advanced to the Company at
terms
and
rates similar to commercial bank provisions. The funds were
provided
to
the
Company for working capital operating needs.
On
February 5, 2004, the Series E preferred stockholder exchanged 50
preferred
shares plus $1,170 accrued dividends for 799,371 shares of Common
Stock
at
$0.064 per share On December 8, 2004 this the Series E preferred
stockholder
exchanged 30 preferred shares plus $2,008 accrued dividends for
990,970
shares of Common Stock at $0.0323 per share
On
February 15, 2004, two executive officers exchanged a combined
$50,000
of accrued Payroll for 500,000 common shares at $0.10 per share.
These
exchanges
were authorized by the Company's Board of Directors on August 5,
2003.
On
April
16, 2004, the Company's Chief Executive Officer exchanged
$108,104
of employment Contract benefits for 1,403,948 common shares. On August
31,
2004,
the Chief Executive Officer exchanged an additional $17,158 of
employment
contract benefits for 256,087 common shares. These exchanges
were
authorized by the Company's Board of Directors on August 5,
2003
Item
11.
Security Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information concerning the
beneficial
ownership of the Common Stock as of August 31, 2005 by (i) each
stockholder
known by the Company to be a beneficial owner of more than five
percent
of the outstanding Common Stock, (ii) each director of the Company
and
each
Named Executive Officer and (iii) all directors and officers as a
group.
|
Amount
and Nature of Beneficial
|
Percentage
of common Stock Beneficially
|
Name
|
Ownership
(1)
|
Owned
(2)
|
|
|
|
David
Dalton (4)
|
23,396,378
(5)
|
39.40%
(6)
|
S.
Robert Grass (4)
|
1,065,951
(9)
|
1.87%
(10)
|
William
Wooldridge (4)
|
250,000
(13)
|
0.44%
(14)
|
Raphael
Langford (4)
|
3,366,667
(7)
|
5.85%
(8)
|
Michael
Lesisko (4)
|
2,474,001
(11)
|
4.31%
(12)
|
All
directors and executive
|
|
|
officers
as a group (5 persons)
|
30,552,997
(3)(16)
|
49.02%
(17)
|
|
|
|
Emerald
Capital Partners LP
|
6,000,000
|
10.63%
(15)
|
(1)
Unless otherwise indicated, each person has sole investment and
voting
power
with respect to the shares indicated, subject to community property
laws,
where applicable. For purposes of computing the percentage of
outstanding
shares held by each person or group of persons named above as
of
August
31, 2005 any security which such person or group of persons has
the
right
to acquire within 60 days after such date is deemed to be
outstanding
for the purpose of computing the percentage ownership for such
person
or
persons, but is not deemed to be outstanding for the purpose of
computing
the percentage ownership of any other person.
(2)
Except as otherwise stated, calculated on the basis of 56,464,432 shares
of
Common
Stock issued and outstanding on August 31, 2005.
(3)
For
purposes of this calculation, shares of Common Stock beneficially
owned
by
more
than one person have only been included once.
(4)
Address is c/o the Company, 4810 Seton Drive, Baltimore, Maryland
21215.
(5)
Includes 2,916,674 shares issuable upon exercise of presently
exercisable
options.
(6)
Calculated on the basis of 59,381,106 shares of Common Stock issued
and
outstanding.
(7)
Includes 1,133,333 shares issuable upon exercise of presently
exercisable
options.
(8)
Calculated on the basis of 57,597,765 shares of Common Stock issued
and
outstanding.
(9)
Includes 312,501 shares issuable upon conversion of Series D
Preferred
Stock
and
250,000 issuable upon exercise of presently exercisable options.
(10)
Calculated on the basis of 57,026,933 shares of Common Stock issued
and
outstanding.
(11)
Includes 1,000,000 shares issuable upon exercise of presently
exercisable
options.
(12)
Calculated on the basis of 57,464,432 shares of Common Stock issued
and
outstanding.
(13)
Includes 250,000 shares issuable upon exercise of presently
exercisable
options.
(14)
Calculated on the basis of 56,714,432 shares of Common Stock issued
and
outstanding.
(15)
Calculated on the basis of 56,714,432 shares of Common Stock issued
and
outstanding.
(16)
Includes 5,862,508 shares issuable upon exercise of presently
exercisable
options.
(17)
Calculated on the basis of 56,464,432 shares of Common Stock issued
and
outstanding.
Item
12.
Certain Relationships and Related Transactions
During
2003, Univec received a line of credit from Dr. David Dalton,
President
and Chief Executive Officer, and S. Robert Grass, Chairman of the
Board
of
prime plus 2%, per annum. This line of credit was issued under the
same
terms
as
an underlying line of credit which Dr, Dalton and Mr. Grass received
from
a
commercial bank. As of December 31, 2004, the outstanding balance of this
loan
was
$200,000.
During
February 2004, Univec borrowed $50,000 from Mr. S. Robert Grass,
Chairman
of the Board of Directors, repayable on demand at prime plus 2%,
per
annum.
During
the years ended December 31, 2004 and 2003, Univec has borrowed an
aggregate
of $388,305 from Pharmacy Services, Inc., Health Resources, Inc.
and
other
companies all owned by Dr. David Dalton, President and Chief
Executive
Officer.
These loans are repayable on demand at 10%, per annum. At December
31,
2004
and
2003, the aggregate balance outstanding was $578,800 and $378,569,
respectively.
During
2004, Pharmacy Services, Inc., a company owned by Dr. David Dalton,
President
and Chief Executive Officer, purchased $19,388,572 from PPSI's GPO.
This
transaction represented 99% of total revenue.
PPSI
shares office space and other administrative expenses with
affiliated
companies
owned by Dr. David Dalton, the Chief Executive Officer of Univec.
These
expenses have not been allocated between the companies, but PPSI's
portion
would
be
insignificant.
Item
l3.
Exhibits and Reports on Form 8-K.
(a)
Exhibits
Exhibit
Description
2.1(1)
Stock Purchase Agreement and Plan of Reorganization made and
entered
into
as of December 31, 2001, by and among Physician and Pharmaceutical
Services,
Inc. ("PPSI"), the stockholder of PPSI and the Registrant.
2.2(2)
Stock Purchase Agreement made and entered into as of February 28,
2002,
by
and among Thermal Waste Technologies, Inc. ("TWT"), the stockholders of
TWT
and
the Registrant.
3.1(4)
Restated Certificate of Incorporation of the Registrant, as
amended.
3.2(3)
By-laws of the Registrant, as amended. 4.1(3) Agreement and Plan of
Merger
dated as of October 7, 1996 between the Registrant and UNIVEC,
Inc.,
a New York corporation.
4.3(3)
Form of warrant between the Registrant and the underwriters of the
Registrant's
initial public offering.
4.4(3)
Specimen Common Stock Certificate.
4.5(3)
Specimen Warrant Certificate (included as Exhibit A to Exhibit 4.3
herein).
4.6(3)
Registration Rights Agreement among Registrant and the holders
of
bridge warrants.
4.7(5)
Certificate of Designation of Series B Preferred Stock. 4.8(6)
Certificate
of Amendment of Certificate of Designation of Series B
Preferred
Stock.
4.9(5)
Form of Warrant Agreement dated July 27, 1998, between Company and
selling
security-holder.
4.10(6)
Form of Amended and Restated Warrant Agreement, amending and
restating
the
Warrant Agreement dated July 27, 1998, between the Company and the
selling
security-holder.
4.11(5)
Registration Rights Agreement dated July 27, 1998, between the
Company'
and selling security-holder.
4.12(6)
Registration Rights Agreement, dated February 8, 1999, between the
Company
and the selling security-holder.
4.13(6)
Certificate of Designation of Series C Preferred Stock. 4.14(6)
Form
of
Warrant Agreement dated February 8, 1999. between the Company
and
selling security-holder.
10.1(3)
Amended 1996 Stock Option Plan of the Registrant.
10.2(7)
1998 Stock Option Plan of the Registrant.
10.3(8)
2000 Stock Option Plan of the Registrant.
10.4(7)
Employment Agreement dated as of September 4, 1998 between the
Registrant
and Joel Schoenfeld.
10.5(9)
Patent License Agreement dated August 16, 2000 by and between the
Company
and Terumo Europe, NV.
10.6(9)
Manufacturing Agreement dated August 16, 2000, by and between the
Company
and Terumo, N.V.
10.7(9)
Equipment Purchase Agreement dated August 16, 2000, by and between
the
Company and Terumo Europe, N.V.
10.10(9)
Employment Agreement dated as of January 1, 2002, between the
Registrant
and David L. Dalton.
10.11
Employment Agreement dated as of December 31, 2001, between the
Registrant
and Joel Schoenfeld.
21.1(3)
List of Subsidiaries.
31.1(10)
Statement of the Chief Executive Officer pursuant to
Section
302 of the
Sarbanes-Oxley
Act of 2002.
31.2(10)
Statement of the Chief Financial Officer pursuant to Section 302 of
the
Sarbanes-Oxley
Act of 2002.
32.1(10)
Statement of the Chief Executive Officer
pursuant to 18 U.S.C. Section
1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2(10)
Statement of the Chief Financial Officer
pursuant to 18 U.S.C.
Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley
Act of 2002.
(1)
Incorporated by reference to the Registrant's Form 8K filed January
4,
2002.
(2)
Incorporated by reference to the Registrant's Form 8K filed March
11,
2002.
(3)
Incorporated by reference from the Registrant's Registration
Statement
on
Form SB-2 (File No. 333-20187) declared effective on
April
24,
1997.
(4)
Incorporated by reference from the Registrant's Periodic Quarterly
Report
on
Form 10-QSB for the fiscal quarter ended September 30,
2000.
(5)
Incorporated by reference from the Registrant's Registration
Statement
on
Form S-3 (File No. 333-62261) declared effective
December
11,
1999.
(6)
Incorporated by reference from Amendment No. 2 to the Registrant's
Registration
Statement Form 10-S-3 (File 333-74199).
(7)
Incorporated by reference to the Registrant's Annual Report on Form
10-KSB
for
the year ended December 31, 1998 (File No. 0-22413).
(8)
Incorporated by reference from the Registrant's Post-Effective
Amendment
No
1 on Form S-2 to Form S-3 (File No. 333-74199) declared
effective
on
January 26, 2001.
(9)
Incorporated by reference to the Registrant's Annual Report on Form
10-KSB
for
the year ended December 31, 2000 (File No. 0-22413).
(10)
Filed herewith.
(b)
Reports on Form 8-K filed during the fourth quarter 2003.
No
Forms
8-K were filed during the fourth quarter 2003.
Item
14.
Principal Accountant Fees and Services.
The
following table presents the cost of Univec's principal
accountants'
fees
and
services for the years ended December 31, 2004 and 2003,
respectively:
|
|
2004
|
|
2003
|
|
Audit
fees
|
|
$
|
110,261
|
|
$
|
98,794
|
|
Audit
related fees
|
|
|
-
|
|
|
-
|
|
Tax
fees
|
|
|
18,750
|
|
|
14,199
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
129,011
|
|
$
|
112,993
|
|
Univec's
Audit Committee pre-approves the engagement of the principal
accountant
and the estimated audit fee, by each category.
In
accordance with Section 13 or 15(d) of the Securities Exchange Act
of
1934,
the
Registrant caused this report to be signed on its behalf by the
undersigned,
thereunto duly authorized.
|
|
|
|
UNIVEC,
INC.
|
|
|
|
Date: January
11, 2006
|
By:
|
/s/ Dr.
David
Dalton
|
|
Dr.
David Dalton
|
|
Chief
Executive Officer
(Principal
Executive
Officer)
|
In
accordance with the Securities Exchange Act of 1934, this report
has
been
signed below by the following persons on behalf of the Registrant on
January
11, 2006 in the capacities indicated.
Signatures
Title
/
s/
Dr. David Dalton
Chief
Executive Officer and
a Director
Dr.
David
Dalton
Principal Executive Officer)
/s/
Michael Lesisko
Chief Financial
Officer, Treasurer, Secretary
Michael
Lesisko
/s/
S.
Robert Grass
Chairman and a
Director
S.
Robert
Grass
/s/
William Wooldridge
Director
William
Wooldridge
UNIVEC,
INC. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2004 AND FOR THE TWO YEARS THEN ENDED
Index
to
Consolidated Financial Statements
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F--2
|
Consolidated
Balance Sheet - December 31, 2004
|
F--3
|
Consolidated
Statements of Operations - years ended
|
|
December 31, 2004 and 2003
|
F--4
|
Consolidated
Statements of Stockholders' Equity - years
|
|
ended December 31, 2004 and 2003
|
F--5
|
Consolidated
Statements of Cash Flows - years ended
|
|
December 31, 2004 and 2003
|
F--6
|
Notes
to Consolidated Financial Statements
|
F--7
to F--16
|
The
Registrant’s auditor has amended their opinion of the 2003 financial statements
as being “restated”.
Report
of
Independent Registered Public Accounting Firm
To
the
Board of Directors and
Stockholders
of Univec, Inc.
We
have
audited the accompanying consolidated balance sheet of Univec,
Inc. and
Subsidiaries as of December 31, 2004 and the related consolidated
statements of
operations, stockholders' equity and cash flows for each of the
years in the
two-year periods ended December 31, 2004 and 2003. These consolidated
financial
statements are the responsibility of the Company's management.
Our
responsibility is to express an opinion on these consolidated
financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether
the
consolidated financial statements are free of material misstatement.
The company
is not required to have, nor were we engaged to perform, an audit of
its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing
audit
procedures that are appropriate in the circumstances, but not for the
purpose of
expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. An audit also includes examining, on a test
basis,
evidence supporting the amounts and disclosures in the consolidated
financial
statements, assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall consolidated
financial
statement presentation. We believe that our audits provide a reasonable
basis
for our opinion. We also audited the adjustments described in Note
2 that were
applied to restate the 2003 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the consolidated financial position of Univec,
Inc. as
of December 31, 2004 and the consolidated results of their operations
and their
consolidated cash flows for each of the years in the two-year period
ended
December 31, 2004 in conformity with accounting principles generally
accepted in
the United States of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note
3 to the
consolidated financial statements, the Company has suffered from recurring
losses from operations, has negative working capital, has a total stockholders’
deficit and is in default on certain debt, all of which raise substantial
doubt
about its ability to continue as a going concern. Management’s plans in regard
to these matters are also discussed in Note 3. The consolidated financial
statements do not include any adjustments that might result from the
outcome of
this uncertainty.
|
|
|
|
Abrams,
Foster,
Nole & Williams, P.A
|
|
|
|
September
9,
2005
Revised
November 4, 2005
|
By:
|
/s/ Abrams,
Foster, Nole & Williams, P.A
|
|
Abrams,
Foster, Nole & Williams, P.A
|
|
Baltimore,
Maryland
|
The
Company has labeled the appropriate 2003 financial statements as being
“restated”. Also, the Company has referred to the footnote which describes the
restatement.
Univec,
Inc. and Subsidiaries
|
|
Consolidated
Balance Sheet
|
|
December
31, 2004
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Cash
|
|
$
|
29,443
|
|
Marketable
securities
|
|
|
36,349
|
|
Accounts
receivable
|
|
|
3,123,493
|
|
Inventories
|
|
|
179,878
|
|
Certificates
of deposit - restricted
|
|
|
340,407
|
|
Other
current assets
|
|
|
46,630
|
|
|
|
|
|
Total
current assets
|
|
|
3,756,200
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
622,685
|
|
Other
assets
|
|
|
79,468
|
|
|
|
|
|
Total
assets
|
|
$
|
4,458,353
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
4,380,826
|
|
Deferred
payroll
|
|
|
1,271,488
|
|
Notes
and loans payable - current
|
|
|
1,472,163
|
|
Loans
payable - officers/directors
|
|
|
260,493
|
|
Due
to affiliated companies
|
|
|
578,800
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
7,963,770
|
|
|
|
|
|
|
Notes
and loans payable - long-term
|
|
|
211,852
|
|
|
|
|
|
Total
liabilities
|
|
|
8,175,622
|
|
|
|
|
|
Commitments
and contingencies (Notes 3, 4, 12 and 13)
|
|
|
|
|
|
|
|
|
|
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:
125,000 shares (aggregate liquidation
|
|
|
|
|
value:
$336,808)
|
|
|
125
|
|
Series
E cumulative convertible preferred stock,
|
|
|
|
|
$.001
par value; authorized: 2,000 shares; issued and
|
|
|
|
|
outstanding:
412 shares (aggregate liquidation
|
|
|
|
|
value:
$441,397)
|
|
|
1
|
|
Common
stock $.001 par value; authorized: 75,000,000 shares;
|
|
|
45,619
|
|
issued:
45,618,852 and outstanding: 45,214,698 shares
|
|
|
|
|
Additional
paid-in capital
|
|
|
10,977,627
|
|
Treasury
stock, 404,154 shares - at cost
|
|
|
(28,291
|
)
|
Stock
Subscription Receivable
|
|
|
(210,000
|
)
|
Accumulated
deficit
|
|
|
(14,502,350
|
)
|
|
|
|
|
Total
stockholders' deficit
|
|
|
(3,717,269
|
)
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
4,458,353
|
|
|
|
|
|
Univec,
Inc. and Subsidiaries
|
|
Consolidated
Statement of Operations
|
|
Years
ended December 31, 2004 and 2003 (Restated)
|
|
| |
| |
| |
| |
| |
| |
| | Year-Ended
| | Year-Ended
| |
| | Dec. 31, 2004
| | Dec. 31, 2003
| |
| |
| | (Restated)
| |
| |
| |
| |
Revenues
| | $
| 19,448,388
| | $
| 16,977,822
| |
Cost of revenues
| | | 19,249,494
| | | 16,986,565
| |
| | |
| | |
| |
Gross Margin
| | | 198,894
| | | (8,743
| )
|
| | |
| | |
| |
Operating Expenses
| | |
| | |
| |
Marketing and selling
| | | 123,400
| | | 397,738
| |
Product development
| | | 28,871
| | | 28,547
| |
General and administrative
| | | 1,772,246
| | | 847,013
| |
| | | 1,924,517
| | | 1,255,298
| |
| | |
| | |
| |
Loss from Operations
| | | (1,725,623
| )
| | (1,264,041
| )
|
| | |
| | |
| |
Other Income (Expense)
| | |
| | |
| |
Interest expense, net
| | | (108,092
| )
| | (91,564
| )
|
Gain on extinguishments of debt
| | | 144,819
| | | 24,872
| |
Loss on write-off of goodwill
| | | (1,774,119
| )
| | -
| |
Loss on sale of subsidiary
| | | (597,056
| )
| | -
| |
Other income
| | | 47,795
| | | -
| |
Loss on write-off of capitalized lease
| | |
| | |
| |
Total other expenses
| | | (2,286,653
| )
| | (188,058
| )
|
| | |
| | |
| |
Loss from continuing operations
| | | (4,012,276
| )
| | (1,452,099
| )
|
| | |
| | |
| |
Loss from discontinued operations
| | | (8,260
| )
| | (93,502
| )
|
| | |
| | |
| |
Net loss
| | | (4,020,536
| )
| | (1,545,601
| )
|
| | |
| | |
| |
Dividends attributable to preferred stock
| | | (35,921
| )
| | (39,025
| )
|
| | |
| | |
| |
Loss attributable to common stockholders
| | $
| (4,056,457
| )
| $
| (1,584,626
| )
|
| | |
| | |
| |
Share information
| | |
| | |
| |
Basic net loss per common share
| | $
| (0.11
| )
| $
| (0.05
| )
|
| | |
| | |
| |
Basic weighted average number
| | |
| | |
| |
of common shares outstanding
| | | 38,510,467
| | | 33,751,508
| |
| | |
| | |
| |
Univec,
Inc. and Subsidiaries
Consolidated
Statement of Stockholders' Equity
Years
ended December 31, 2004 and 2003
(Restated)
|
|
Series
A Preferred
|
|
Series
B Preferred
|
|
Series
C Preferred
|
|
Series
D Preferred
|
|
Series
E Preferred
|
|
Common
Stock
|
|
|
|
Treasury
Stock
|
|
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Shares
|
|
Amount
|
|
Services
|
|
Deficit
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2003
|
|
|
124
|
|
$
|
1
|
|
|
167
|
|
$
|
1
|
|
|
250
|
|
$
|
1
|
|
|
104,167
|
|
$
|
104
|
|
|
|
|
|
|
|
|
31,772,773
|
|
$
|
31,773
|
|
$
|
10,296,627
|
|
|
|
|
|
|
|
|
|
|
|
($8,843,338
|
)
|
$
|
1,485,169
|
|
Exchange
of Series B and C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
Series E
|
|
|
|
|
|
|
|
|
(122
|
)
|
|
(1
|
)
|
|
(250
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
522
|
|
$
|
1
|
|
|
|
|
|
|
|
|
89,708
|
|
|
|
|
|
|
|
|
|
|
|
(89,707
|
)
|
|
|
|
Common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.
|
|
issued
for Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
500
|
|
|
19,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
Consulting
fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
100
|
|
|
9,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
Loans
payable - officers/directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444,805
|
|
|
444
|
|
|
49,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
Adjustment
to conversion of series A and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options
|
|
|
(124
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convert
Series B
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,843,322
|
|
|
1,841
|
|
|
(1,843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convert
Series E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
340,909
|
|
|
341
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options by officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,667
|
|
|
167
|
|
|
6,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
Options
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,400
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,545,601
|
)
|
|
(1,545,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
104,167
|
|
|
104
|
|
|
492
|
|
|
1
|
|
|
35,168,476
|
|
|
35,169
|
|
|
10,506,007
|
|
|
|
|
|
|
|
|
|
|
|
(10,478,646
|
)
|
|
62,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Series D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,833
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
Common
stock issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000,000
|
|
|
6,000
|
|
|
234,000
|
|
|
|
|
|
|
|
|
($240,000
|
)
|
|
|
|
|
|
|
Deferred
payroll and accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
- officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,160,035
|
|
|
2,160
|
|
|
173,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,262
|
|
Loans
payable - officers/directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
500
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
Sale
of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,829
|
|
|
404,154
|
|
|
($28,291
|
)
|
|
|
|
|
|
|
|
(25,462
|
)
|
Convert
Series E and dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
1,790,341
|
|
|
1,790
|
|
|
(1,790
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,168
|
)
|
|
(3,168
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
30,000
|
|
Options
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,020,536
|
)
|
|
(4,020,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
$
|
125
|
|
|
412
|
|
$
|
1
|
|
|
45,618,852
|
|
$
|
45,619
|
|
$
|
10,977,627
|
|
|
404,154
|
|
|
($28,291
|
)
|
|
($210,000
|
)
|
|
($14,502,350
|
)
|
|
($3,717,269
|
)
|
See
notes
to consolidated financial statements.
Univec,
Inc. and Subsidiaries
|
|
Consolidated
Statement of Cash Flows
|
|
Years
ended December 31, 2004 and 2003 (Restated)
|
|
|
|
2004
|
|
2003
(Restated)
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,020,536
|
)
|
$
|
(1,545,601
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
used in operating activities
|
|
|
|
|
|
|
|
Loss on write-off of goodwill
|
|
|
1,774,119
|
|
|
|
|
Loss on sale of subsidiary
|
|
|
481,719
|
|
|
|
|
Depreciation and amortization
|
|
|
189,008
|
|
|
165,511
|
|
Write-off of equipment
|
|
|
57,295
|
|
|
|
|
Valuation allowance for inventories
|
|
|
75,000
|
|
|
45,000
|
|
Stock based compensation
|
|
|
4,000
|
|
|
36,400
|
|
Loss (gain) on cancellation of capital lease
|
|
|
(2,894
|
)
|
|
121,366
|
|
Gain on extinguishment of debt
|
|
|
(98,547
|
)
|
|
(24,872
|
)
|
Gain on receipt of marketable securities
|
|
|
(36,349
|
)
|
|
|
|
Other
|
|
|
(11,435
|
)
|
|
|
|
Changes
in assets and liabilities, net of
|
|
|
|
|
|
|
|
effects from sale of TWT
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(506,983
|
)
|
|
(2,293,183
|
)
|
Inventories
|
|
|
17,698
|
|
|
128,413
|
|
Other current assets and other assets
|
|
|
(3,320
|
)
|
|
7,727
|
|
Accounts payable and accrued expenses
|
|
|
713,610
|
|
|
2,547,614
|
|
Deferred payroll
|
|
|
619,631
|
|
|
536,934
|
|
Escrow deposits
|
|
|
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(747,984
|
)
|
|
(284,691
|
)
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Purchases of fixed assets (net of capitalized
|
|
|
|
|
|
|
|
lease obligation of $250,000 in 2003)
|
|
|
(397,068
|
)
|
|
(1
|
)
|
Increase in restricted cash
|
|
|
(340,407
|
)
|
|
|
|
Cash used in sale of subsidiary (net of notes and
|
|
|
|
|
|
|
|
other payables of $103,600)
|
|
|
(5,670
|
)
|
|
|
|
Net cash used in investing activities
|
|
|
(743,145
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
Proceeds from notes and loans payable,
|
|
|
|
|
|
|
|
net of expenses of $80,146 in 2004
|
|
|
1,104,343
|
|
|
178,453
|
|
Increase in due from affiliated companies
|
|
|
567,194
|
|
|
71,870
|
|
Increase in loans payable - officers/directors
|
|
|
54,000
|
|
|
230,419
|
|
Proceeds from sale of stock
|
|
|
50,000
|
|
|
20,000
|
|
Payments on notes and loans payable
|
|
|
(242,386
|
)
|
|
(229,363
|
)
|
Payments of capitalized lease obligations
|
|
|
(21,232
|
)
|
|
(62,125
|
)
|
Dividends converted to preferred stock
|
|
|
(3,168
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
1,508,751
|
|
|
209,253
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
17,622
|
|
|
(75,439
|
)
|
Cash,
beginning of period
|
|
|
11,821
|
|
|
87,260
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
29,443
|
|
$
|
11,821
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
48,709
|
|
$
|
102,961
|
|
Supplemental
disclosures of noncash activity
|
|
|
|
|
|
|
|
Common stock issued in payment of
|
|
|
|
|
|
|
|
loans payable - officers/directors
|
|
$
|
10,000
|
|
$
|
20,000
|
|
Common stock and options issued in payment
|
|
$
|
179,262
|
|
|
|
|
of deferred payroll and accrued expenses
|
|
|
|
|
|
|
|
Conversions of Series E to common stock,
|
|
|
|
|
|
|
|
including dividends
|
|
$
|
3,168
|
|
$
|
89,807
|
|
Treasury stock received, net of options issued,
|
|
|
|
|
|
|
|
on sale of subsidiary
|
|
$
|
(125,462
|
)
|
|
|
|
Univec,
Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
1.
Nature
of Operations
Univec,
Inc. (Company) produces, licenses and markets medical products, primarily
syringes,
on
a
global basis. Physician and Pharmaceutical Services, Inc. (PPSI), a subsidiary,
provides
pharmaceutical
sample and group purchasing services of pharmaceutical products. Thermal
Waste
Technologies,
Inc. (TWT), a subsidiary until its sale, marketed a medical waste disposal
unit.
2.
Restatement
The
Company restated its 2003 sales and related cost of revenues
by a net $12,439
increase in gross margin to reflect the overall effect of an
incorrect 2003
year-end sales cutoff.
The
general and administrative expenses for 2003 have been reduced
by $101,388 to
properly report only costs actually incurred as 2003 expenditures.
Certain
previously reported fee expenses were established to be subsequent
period
costs.
Year-end
December 31, 2003 (net loss) as originally reported
|
|
$
|
(1,545,601
|
)
|
|
|
|
|
|
Increase
in gross margin
|
|
|
12,439
|
|
Increase
in net interest expense
|
|
|
(5,623
|
)
|
Decrease
in depreciation expense
|
|
|
11,958
|
|
Loss
on write-off of capital lease
|
|
|
(121,366
|
)
|
General
and Administrative expense adjustment
|
|
|
101,388
|
|
Miscellaneous
adjustments
|
|
|
_
1,204
|
|
Year-end
December 31, 2003 (net loss) as restated
|
|
$
|
(1,545,601
|
)
|
|
Univec,
Inc and Subsidiaries
|
|
|
|
|
|
|
|
Consolidated
Statement of Operations
(Restated)
|
|
|
|
|
|
|
|
Year
ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
Year-Ended
|
|
|
|
Year-Ended
|
|
|
|
Dec.
31, 2003
|
|
|
|
Dec.
31, 2003
|
|
|
|
(Originally
reported)
|
|
Restatements
|
|
(
Restated
)
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
16,133,652
|
|
$
|
844,170
|
|
$
|
16,977,822
|
|
Cost
of revenues
|
|
|
15,722,885
|
|
|
1,263,680
|
|
|
16,986,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
410,767
|
|
|
(419,510
|
)
|
|
(8,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Marketing
and selling
|
|
|
387,769
|
|
|
(8,031
|
)
|
|
379,738
|
|
Product
development
|
|
|
28,617
|
|
|
(70
|
)
|
|
28,547
|
|
General
and administrative
|
|
|
1,478,913
|
|
|
(631,900
|
)
|
|
847,013
|
|
|
|
|
1,895,299
|
|
|
(640,001
|
)
|
|
1,255,298
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(1,484,532
|
)
|
|
220,491
|
|
|
(1,264,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(85,941
|
)
|
|
(5,623
|
)
|
|
(91,564
|
)
|
Gain
on extinguishments of debt
|
|
|
24,872
|
|
|
|
|
|
24,872
|
|
Loss
on write-off of goodwill
|
|
|
-
|
|
|
|
|
|
-
|
|
Loss
on sale of subsidiary
|
|
|
-
|
|
|
|
|
|
-
|
|
Other
income
|
|
|
-
|
|
|
|
|
|
-
|
|
Loss
on write-off of capitalized lease
|
|
|
|
|
|
(121,366
|
)
|
|
(121,366
|
)
|
Total
other expenses
|
|
|
(61,069
|
)
|
|
(126,989
|
)
|
|
(188,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(1,545,601
|
)
|
|
93,502
|
|
|
(1,452,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
|
-
|
|
|
(93,502
|
)
|
|
(93,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,545,601
|
)
|
|
-
|
|
|
(1,545,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
attributable to preferred stock
|
|
|
(39,025
|
)
|
|
-
|
|
|
(39,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to common stockholders
|
|
$
|
(1,584,626
|
)
|
$
|
-
|
|
$
|
(1,584,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Share
information
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss per common share
|
|
$
|
(0.05
|
)
|
$
|
-
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average number
|
|
|
|
|
|
|
|
|
|
|
of
common shares outstanding
|
|
|
33,751,508
|
|
|
-
|
|
|
33,751,508
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
Going
Concern
The
accompanying financial statements have been prepared on a going concern
basis,
which
contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of
business.
As of December 31, 2004, the Company had negative working capital of $4,207,570
and
stockholders' deficit of $3,717,269 and had previously incurred net losses
of
$(4,020,536)
and
$(1,646,989) for the years ended December 31, 2004 and 2003. The Company
is also
in
default
of approximately $1,200,000, of loans and notes payable all of which are
payable
on
demand
as
a result of such
defaults.
These factors, among others, indicate that the Company's
continuation
as a going
concern
is dependent upon its ability to obtain adequate financing
and/or
achieve profitable
operations.
The financial statements do not include any adjustments
related
to the recoverability
and
classification of recorded asset amounts or the amounts and
classification
of liabilities that
might
be
necessary should the Company be unable to continue
in
existence.
Management
is currently seeking additional investment capital to support its entrance
into
new
business ventures and provide the capital needed to operate.
4.
Significant Accounting Policies
Basis
of
Presentation
The
consolidated financial statements include all the accounts of the
Company
and
its
wholly-owned subsidiaries, Physician and Pharmaceutical Services, Inc.
(PPSI),
Thermal Waste Technologies, Inc. (TWT), until its sale and Rx Ultra, Inc.
(inactive). All
material
inter-company balances and transactions have been eliminated. The consolidated
financial
statements
include all the accounts of Thermal Waste Technologies, Inc. until its
sale
Accounts
Receivable
Accounts
receivable consisted of receivables from customers. The Company
records
a
provision for doubtful receivables, if necessary, to allow for any
amounts
which may be unrecoverable and is based upon an analysis of the
Company's
prior collection experience, customer creditworthiness, and current
economic
trends. As of December 31, 2004, no allowance was necessary.
Inventories
Inventories
are valued at the lower of cost, determined by the first-in,
first-out
method, or market.
Fixed
Assets
Fixed
assets are stated at cost, less accumulated depreciation, and are
depreciated
on a straight-line basis over the estimated useful lives of seven
years.
Maintenance
and repairs are charged to expense as incurred; renewals and
improvements
which
extend the life of assets are capitalized. Upon retirement or disposal,
the
asset
cost and related accumulated depreciation and amortization are
eliminated
from
the
respective accounts and the resulting gain or loss, if any, is included
in
the
results of operations.
The
carrying value of fixed assets is evaluated whenever changes in
circumstances
indicate the carrying amount of such assets may not be
recoverable.
If necessary, the Company recognizes an impairment loss for the
difference
between the carrying amount of the assets and their estimated fair
value.
Fair value is based on current and anticipated future undiscounted cash
flows.
Shipping
Income and Expense
Shipping
income is included in product sales. Shipping expenses are included
in
marketing and selling.
Product
Development
Research
and development costs have been expensed as incurred.
Basic
Loss per Share
Basic
net
loss per common share was computed based on the weighted average
number
of
common shares outstanding during the year. Dilutive net loss per
share
has
not
been presented as they are anti-dilutive.
Revenue
Recognition
Product
sales are recognized when products are shipped. Although the
Company
warrants
its products, it is unable to estimate the future costs relating to
warranty
expense and, as such, recognizes warranty expenses as incurred.
Revenues
for
PPSI's group purchasing service are recognized when the products are
shipped.
Stock
Based Compensation
Compensation
cost for stock, stock options, warrants, etc., issued to
employees
and non-employees is based on the fair value method.
Income
Taxes
Deferred
income taxes have been provided for temporary differences between
financial
statement
and income tax reporting under the liability method , using expected tax
rates
and laws
that
are
expected to be in effect when the differences are expected to reverse.
A
valuation
allowance
is provided when it is more likely than not , that the deferred tax assets
will
not be
realized.
Estimates
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 the reported amounts of revenues and expenses during the
reporting
period. Actual results could differ from those estimates.
Fair
Values
The
carrying amounts of cash, accounts receivable, accounts payable and
accrued
expenses, notes and loans payable and deferred payroll approximate
their
fair
values.
New
Accounting Pronouncements
Financial
Accounting Standards Board Statement # 123R, Stock Based
Compensation,
effective
for the year ended December 31, 2006, has not been analyzed to determine
if it
will
have
a
material effect on the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet
effective
accounting
pronouncements, if adopted, would have a material effect on the
accompanying
financial statements.
5.
Marketable Securities
As
of
December 31, 2004, marketable securities consisted of an investment in
an equity
security,
with
a
fair market value of $36,349. Management has classified the investment
as
available-for-sale.
The
Company received this security in December 2004 upon the conversion from
a
mutual to a
stock
insurance company in which Univec had owned a policy.
In
January 2005, the security was sold for $36,101.
6.
Inventories
Inventories
consisted of the following:
Raw
materials
|
|
$
|
152,252
|
|
Work-in-process
|
|
|
89,740
|
|
Finished
goods
|
|
|
62,886
|
|
|
|
|
304,878
|
|
Less:
allowance for valuation
|
|
|
(125,000
|
)
|
|
|
$
|
179,878
|
|
The
Company provided a $75,000 and $50,000 valuation allowance in 2004
and
2003,
respectively.
7.
Fixed
Assets
Fixed
assets consisted of the following:
Equipment
|
|
$
|
1,100,784
|
|
Less:
accumulated depreciation
|
|
|
478,099
|
|
|
|
$
|
622,685
|
|
As
of
December 31, 2004, the Company wrote-off fixed assets located at former
suppliers
with
a
cost of $371,764 and a net book value of $85,088.
Depreciation
expense was $128,901 and $174,541 in 2004 and 2003, respectively. For the
year
ended
December 31, 2004, fully depreciated assets were approximately
$43,000.
8.
Notes
and Loans Payable
As
of
December 31, 2004, notes and loans payable consisted of:
Loan
due to a shareholder through July, 2009,
|
|
|
|
|
w
ith
interest at 4% (1) (3
)
|
|
$
|
500,000
|
|
Loans
payable to agencies for economic
|
|
|
|
|
development payable at $9,230 per month until
|
|
|
|
|
July 2009, with interest at 4% per annum (1) (3)
|
|
|
470,208
|
|
Loan
payable to a vendor without specific
|
|
|
|
|
payment terms or interest (2)
|
|
|
211,852
|
|
Loan
payable to a vendor without, specific interest (3)
|
|
|
135,000
|
|
Loan
payable to a vendor due April 30, 2007
|
|
|
|
|
with interest at prime plus 2% per annum (3)
|
|
|
105,516
|
|
Notes
payable on August 14, 2005, with interest at 8%
|
|
|
85,000
|
|
Note
payable on to a former officer upon sale of
|
|
|
|
|
subsidiary due June 2005, without specific interest
|
|
|
60,000
|
|
Notes
payable on June 2005, with interest at 12%,
|
|
|
|
|
per annum
|
|
|
55,000
|
|
Notes
payable to a shareholder's trusts, with interest
|
|
|
|
|
at 12%, per annum (2)
|
|
|
27,000
|
|
Other
|
|
|
34,438
|
|
|
|
|
1,684,014
|
|
Less:
Current portion of notes and loans payable
|
|
|
1,472,162
|
|
|
|
$
|
211,852
|
|
(1)
On
July 23, 2004, the Company borrowed an aggregate of $500,000 from the City
of
Baltimore
Development Corporation and the Maryland Department of Business and
Economic
Development
payable in aggregate equal monthly installments of $9,230 over five
years,
with
interest at 4%, per annum. Proceeds are to be used to purchase equipment
of
$450,000,
which together with certain other equipment of the Company, collateralize
the
borrowings. The borrowings also required deposits of $335,000 and an irrevocable
standby
letter of credit of $200,000. Loans from certain officers and directors
of
approximately
$180,000 have been subordinated.
As
required under the borrowings, the Company has obtained a revolving line
of
credit
of
$500,000 from a stockholder of the Company under which the Company may
borrow
for
working
capital through July 22, 2009. Loans under the line bear interest at the
prime
rate,
plus 2%, per annum, and may be converted into common stock at $.065, per
share,
as
defined.
If the line of credit is terminated within one year, there is a penalty
of up
to
90
days
of interest. The Maryland Department of Business and Economic Development
has
guaranteed
80% of the loan and interest thereon. In July 2004, the Company borrowed
$500,000
under
the
line of credit. As of December 31, 2004, interest rate was 7%, per annum.
Financing
expenses in connection with these borrowings were $80,146 and will be
amortized
over
the
term of the borrowings.
(2)
Subject to forgiveness upon the vendor's sale of shares of the
Company’s
common
stock.
(3)
In
default due to either noncompliance or late payments. As a result of
these
defaults,
the Company has reclassified long-term debt of $457,376 to current.
9.
Due to
Affiliated Companies
Due
to
affiliated companies, owned by the chief executive officer of
the
Company, on demand, with interest at 10%, per annum.
10.
Loans
Payable - Officer/Directors
As
of
December 31, 2004, loans payable - officer / directors consisted
of:
Note
payable to the chief executive officer
|
|
|
|
|
and
the chairman of the board of the
|
|
|
|
|
Company,
due on demand, with interest
|
|
|
|
|
at
prime, plus 2%, per annum (1)
|
|
$
|
200,000
|
|
Note
payable to a director
|
|
|
53,300
|
|
Others
|
|
|
7,193
|
|
|
|
$
|
260,493
|
|
(1)
The
same terms as an underlying borrowing from a bank and collateralized
by
certain
equipment. As of December 31, 2004 the interest rate was 7%, per
annum.
11.
Income Taxes
The
Company files consolidated income tax returns with its
subsidiaries.
Prior
to
its acquisition, PPSI was a Subchapter S Corporation.
As
of
December 31, 2004, the Company had net operating loss carry
forwards
of
approximately $15,250,000 available to reduce future taxable income
expiring
through
2024, which may be limited due to ownership changes.
For
the
years ended December 31, 2004 and 2003, the Company's deferred tax
benefits
(expenses) were as follows:
|
|
2004
|
|
2003
|
|
Net
operating loss carry forwards
|
|
$
|
615,000
|
|
$
|
200,000
|
|
Depreciation
|
|
|
191,000
|
|
|
184,000
|
|
Goodwill
|
|
|
(19,000
|
)
|
|
(59,000
|
)
|
Compensation
|
|
|
132,000
|
|
|
200,000
|
|
Inventory
and equipment valuation
|
|
|
|
|
|
|
|
allowances
|
|
|
60,000
|
|
|
|
|
Valuation
allowance
|
|
|
(979,000
|
)
|
|
(525,000
|
)
|
|
|
|
None
|
|
|
None
|
|
As
of
December 31, 2004, the tax effects of the components of deferred
tax
assets
and liabilities were as follows:
Deferred
tax assets
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
5,352,000
|
|
Compensation
|
|
|
482,000
|
|
Depreciation
|
|
|
183,000
|
|
|
|
|
|
|
Total
deferred tax asset
|
|
|
6,017,000
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
Goodwill
|
|
|
(120,000
|
)
|
|
|
|
|
|
Net
deferred tax asset
|
|
|
5,897,000
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(5,897,000
|
)
|
|
|
|
|
|
|
|
|
None
|
|
As
of
December 31, 2004, realization of the Company's net deferred tax
asset
of
approximately $5,425,000 was not considered more likely than not
and,
accordingly,
a valuation allowance of $5,425,000 was provided.
The
following is a reconciliation of expected income tax benefit
utilizing
the
Federal statutory tax rate to income tax benefit reported on the
statement
of
operations.
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
Expected
income tax benefit
|
|
$
|
(437,000
|
)
|
$
|
(303,000
|
)
|
Change
in valuation allowance arising in current year
|
|
|
1,164,000
|
|
|
504,000
|
|
State
income tax benefit, net of federal income tax effect
|
|
|
(107,000
|
)
|
|
(75,000
|
)
|
Other
|
|
|
(620,000
|
)
|
|
(126,000
|
)
|
|
|
|
None
|
|
|
None
|
|
12.
Commitments and Contingency
Lease
The
Company is committed under a non-cancelable lease for production,
storage
and office space through July 2005. The lease provides for minimum
annual
rent of $72,000, additional rents for the Company's share of normal
maintenance
plus its pro-rata share of real estate taxes and eight one year
renewals
at the Company's option.
For
2004
and 2003, total rent expense was $73,200 and $77,439, respectively.
Employment
Agreement
The
Company is committed under an employment agreement to the chief
executive
officer, through January 2005, requiring annual compensation
to
be
determined annually by the officer and Company. Annually, the
agreement
shall
automatically renew for one year, resulting in a new three year term
each
January
1. For the years ended December 31, 2004 and 2003, the compensation
was
$396,000
and $360,000, respectively, which have been deferred by the chief executive
officer.
The agreement also provides for bonuses, as determined by the officer and
the
Company, an automobile allowance (of $24,000, per annum, for 2004) and
life,
disability
and health insurance. In addition, the officer was granted options to
purchase
2,000,000 shares of common stock exercisable at $.24, per share,
through
2012.
The
options vest 25% on January 1, 2003 and 41,667 during each subsequent
month.
13.
Litigation Reserve
In
December 2003, the Company assigned certain of their patents,
earned
royalties
of $72,125 and 85% of all future royalties being earned from these
patents
in payment of a note payable and interest thereon for an aggregate
of
$99,434,
in settlement to a collection matter. The Company recognized a
$24,872
gain
upon
extinguishment of the debt. The Company in turn received relief
from
the
restrictive patent payments and a perpetual license to exploit, market
and
manufacture
these patents in North America. As the value of the license
received
could
not
be determined, no value was assigned to them.
In
March
2004, the Company settled a collection matter with a former
consultant
in the amount of $165,000, payable in varying amounts through March
2007
and
options to purchase 359,375 shares of common stock of the Company,
all
of
which
have been accrued as of December 31, 2003.
In
February 2000, a former consultant commenced an action against the
Company
and its directors, alleging breach of contract and fiduciary duty,
and
is
seeking consulting fees in the amount of: (1) 250,000 shares of common
stock,
(2)
$192,000 and (3) costs of this action. The Company and counsel do
not
believe
the consulting fees are due and will continue to vigorously defend
this
action.
14.
Stockholders' Equity
During
2004, the Company was listed as a public company on the OTC Bulletin
Board. All
of the transactions reported in Note 14 - Stockholders’ Equity had fair market
valuations based on the publicly listed closing prices of the Company’s common
stock for the pertinent transaction dates. Such publicly listed valuations
are
in accordance with the guidance provided by SFAS 123 and EITF
96-18
Common
Stock
During
the year ended December 31, 2003, the Company issued an aggregate of
444,805
shares of common stock to a stockholder and an officer in payment of
notes and
loans and deferred payroll of $20,000 and compensation of $30,000.
In
August
2003, the Company sold 500,000 shares of common stock for $20,000.
In
December 2003, an officer exercised options to purchase 166,667 shares
of common
stock for $6,667.
In
December 2003, the Company issued 100,000 shares of common stock in
exchange for
financial consulting services of $10,000.
During
the year ended December 31, 2004, the Company issued an aggregate of
2,660,034
shares of common stock to a stockholder and three officers in payment
of notes
and loans of $10,000, deferred payroll of $$50,000 and benefits of
$125,262.
In
November 2004, the Company exchanged 6,000,000 shares of common
stock
for
$240,000 of professional consulting services over a one-year term.
As of
December 31, 2004, the remaining balance of services to be rendered
was
$210,000, which is reflected as Stock Subscription Receivable in the
Stockholders’ Deficit.
During
2004, the Company was listed as a public company on the OTC Bulletin
Board. All
of the transactions reported in the preceding discussion had fair market
valuations based on the publicly listed closing prices of the Company’s common
stock for the pertinent transaction dates. Such publicly listed valuations
are
in accordance with the guidance of SFAS 123 and EITF 96-18.
Preferred
Stock
During
the year ended December 31, 2002, 31.5 shares of Series B were converted
into
949,464 shares of common stock at prices of $.0525 to $.15, per share.
During
the year ended December 31, 2003, 45 shares of Series B were converted
into
1,843,322 shares of common stock at prices of $.0163 to $.0325, per
share.
Series
D
The
Company has designated 1,250,000 shares of 5% cumulative convertible
preferred
stock (Series D), which are entitled to receive, prior to the payment
of
dividends to the common stock, cumulative dividends of 5%, per share,
per annum.
The Series D stock may be redeemed at the option of the Company, in
cash at
$2.40, per share. In addition, Series D stockholders are entitled to
a
liquidation preference of $2.40, per share, plus unpaid dividends.
Each share of
Series D is initially convertible into three shares of common
stock.
In
December 2004, the Company sold 20,833 shares of Series D preferred
stock to a
customer for $50,000. The Company will also sell similar amounts on
March 31,
June 30,
September
30 and December 31, 2005.
Series
E
In
August
2003, the Company designated 2000 shares of 5% cumulative
convertible
preferred
stock (Series E), which are entitled to receive, prior to the payment
of
dividends to the Series D and common stock, cumulative dividends of
5%, per
share, per annum. The Series E stock may be redeemed at the option
of the
Company, in cash, at 135% of the stated value, per share, plus all
unpaid
dividends. In addition, Series E stockholders are entitled to a liquidation
preference of $1,000, per share, plus all unpaid dividends. Each share
of Series
E is convertible into shares of common stock at the lesser of $1.10
or 80% of
market value, as defined. In August 2006, the Company is required to
convert all
the Series E into common stock at the conversion price, unless the
holder
becomes a 5% or greater stockholder. The Company may redeem the Series
E in cash
at $1,350, per share, plus all unpaid dividends, as defined.
On
August
5, 2003, the Company exchanged 122 shares of Series B and 250 shares
of Series
C, all the outstanding shares, for 522 shares of Series E.
In
2004
and 2003, 80 and 30 shares of Series E were converted into 1,790,341
and 340,909
shares of common stock at prices ranging from $.03 to $.09, per
share.
Holders
of preferred shares have no voting rights.
As
of
December 31, 2004, cumulative dividends in arrears on preferred stock
were:
Series
D
|
|
$
|
36,736
|
|
Series
E
|
|
|
30,994
|
|
|
|
$
|
67,730
|
|
Non
Plan
Options
During
the year ended December 31, 2003, the Company issued options to purchase
an
aggregate of 6,200,000 shares of common stock of the Company to officers,
directors and others. The options are exercisable at $.04 to $.25,
per share,
through various dates until November 2008 and were valued at $36,400.
Certain of
these options to officers and directors vest over three years.
During
the year ended December 31, 2004, the Company issued options to purchase
an
aggregate of 1,050,000 shares of common stock of the Company to two
officers and
an employee. The options are exercisable at $.04, per share, through
December
2009 and were valued at $4,000.
During
2004 and 2003, options to purchase 4,850,000 and 1,763,941 shares,
respectively,
of common stock expired or were cancelled without being exercised.
9.
Reserved
Shares
As
of
December 31, 2004, the Company has reserved shares of common stock
as
follows:
Non-plan
options and warrants
|
|
|
9,280,172
|
|
Options
under the Plans
|
|
|
1,335,000
|
|
Series
D conversions
|
|
|
375,000
|
|
Series
E conversions(a)
|
|
|
4,027,218
|
|
Litigation
|
|
|
250,000
|
|
|
|
|
15,267,390
|
|
(a)
assumes conversions as of December 31, 2004 at $.11, per
share.
15.
Stock
Option Plans
The
1996
Stock Option Plan (Plan) is administered by the Board of Directors
or
a
committee thereof and options to purchase 4,709,219 shares of common
stock
may
be
granted under the Plan to directors, employees (including officers)
and
consultants
to the Company. The Plan authorizes the issuance of incentive stock
options
(ISO's), as defined in Section 422A of the Internal Revenue Code of
1986,
as
amended, and non-qualified stock options (NQSO's). Consultants and
directors
who are not also employees of the Company are eligible for grants
of
only
NQSOs. The exercise price of each ISO may not be less than 100% of the
fair
market
value of the common stock at the time of grant, except that in the
case
of
a
grant to an employee who owns 10% or more of the outstanding stock of
the
Company
or a subsidiary or parent of the Company, the exercise price may not
be
less
than
110% of the fair market value on the date of grant. The aggregate
fair
market
value of the shares covered by ISO's granted under the Plan that
become
exercisable
by a Plan participant for the first time in any calendar year is
subject
to a $100,000 limitation. The exercise price of each NQSO is
determined
by
the
Board, or committee thereof, in its discretion; provided that
NQSO's
granted
a
10% Stockholder be no less than 110% of the fair market value on
the
date
of
grant.
Under
the
1998 Stock Option Plan (98 Plan), the Company may grant options to
purchase
300,000 shares of common stock to employees, directors, independent
contractors
and consultants of the Company. The 98 Plan is similar to the Plan
and
authorizes the issuance of ISO's, NQSO's and Stock Appreciation
Rights.
Under
the
2000 Stock Option Plan (2000 Plan), the Company may grant options
to
purchase 2,000,000 shares of common stock to employees, directors,
independent
contractors and consultants of the Company. The Plan includes
options
to purchase an addition 250,000 shares of common stock, reserved for
an
Industrial
and Scientific Advisory Committee to be formed as necessitated by
the
Company.
The
following table summarizes the activity of the Plans for 2004 and
2003.
|
2004
|
2003
|
|
|
Weighted
|
|
Weighted
|
|
|
Average
|
|
Average
|
|
|
Exercise
|
|
Exercise
|
|
Shares
|
Price
|
Shares
|
Price
|
|
|
|
|
|
Options
outstanding, beginning of year
|
1,335,000
|
$0.70
|
2,569,000
|
$1.20
|
Granted
|
None
|
-
|
None
|
|
Canceled,
exercised, expired or exchanged
|
None
|
-
|
(1,234,000)
|
$1.74
|
Options
outstanding, end of year
|
1,335,000
|
$0.70
|
1,335,000
|
$0.70
|
Options
exercisable, end of year
|
1,335,000
|
$0.70
|
1,335,000
|
$0.70
|
Options
available for grant, end of year
|
1,050,000
|
|
1,050,000
|
|
Weighted-average
fair value of options granted
|
|
|
|
|
during
the year
|
$.00
|
|
$.00
|
|
The
following table summarizes information about stock options
outstanding
under
the
Plan at December 31, 2004:
|
|
Weighted
|
|
|
|
|
Average
|
|
Weighted
|
|
|
Remaining
|
|
Average
|
Range
of
|
Outstanding
|
Contractual
|
Exercisable
|
Exercisable
|
Exercise
Prices
|
Options
|
Life
(Years)
|
Options
|
Price
|
$3.50
|
65,000
|
2.50
|
65,000
|
$3.50
|
$2.00
|
70,000
|
3.00
|
70,000
|
$2.00
|
$0.675
|
650,000
|
.50
|
650,000
|
$0.675
|
$0.50
|
100,000
|
6.25
|
100,000
|
$0.50
|
$0.24
|
35,000
|
8.00
|
35,000
|
$0.24
|
$0.20
|
60,000
|
1.75
|
60,000
|
$0.20
|
$0.15
|
355,000
|
5.50
|
355,000
|
$0.15
|
$0.15
to $3.50
|
1,335,000
|
2.70
|
1,335,000
|
$0.70
|
16.
Revenues
Sales
of
Technology
Through
September 1, 2003, the Company licensed the non-exclusive,
worldwide
use
of
the Company's patents for the manufacture, use and marketing of its
auto-disable
syringes providing for royalties on sales. In December 2003, the
Company
sold
this
license and assigned certain patents to a creditor in payment of $99,433
and
also
assigned certain future royalties under the auto-disable syringe
licensing
agreement. The Company has licensed back the rights under these
patents
to market and manufacture in North America.
Note
17 - Concentrations
The
Company purchased 99% of its pharmaceutical drugs for its group purchasing
service from one vendor. This supplier is not a related party as
defined in SFAS
57. The arrangement requires the Company to pay for the drugs within
forty five
days after the respective period month-end.
The
Company maintains a corporate group purchasing sales arrangements
with an
affiliated company, Pharmacy Services, Inc. (PSI), which is
a related party as
defined in SFAS 57. This related party is a private company
wholly owned by the
President of Univec, Inc. The president of Univec, Inc. is
also a significant
shareholder of Univec, Inc.. The Company, through its wholly
owned subsidiary
Physicians and Pharmaceutical Services, Inc. (PPSI), sells certain
pharmaceutical drugs to PSI at competitive corporate group
purchasing
competitive prices. PSI paid $19,046,224 for pharmaceutical
drugs to PPS I
during 2004. PSI must pay the Company for such goods within
thirty days of the
appropriate month-end. PSI pays the Company a specified price,
which is based on
the cost of the drugs as determined by the Company’s market experience with its
non-related providers. PPSI purchases these drugs at competitive
rates from a
national pharmaceutical drug manufacturer.
Revenue
Recognition
The
Company utilizes the gross sales method of recognizing the
amount of revenue
from product sales. This method is influenced by several factors
as defined by
EITF 99-19, which the Company’s market agreement has indicated to be in
accordance with the gross sales method, The most significant
factors under the
agreement include: the Company, rather than the supplier is
the primary obligor
in the arrangement, the Company retains absolute control over
which product is
supplied to the user, the Company retains control over selection
of the
pharmaceutical drug supplier, the Company defines the product
specifications for
the drugs utilized, the Company maintains the credit risk under
the arrangement.
However, the supplier maintains the general inventory risk
until the point when
the pharmaceutical drug is administered to the patient in compliance
with the
“just in time” inventory method.
Sales
Cost Adjustments
For
the
year-end December 31, 2003, the Company recognized $381,949
of cost
adjustments provided to the Company’s group purchasing customer as general
and administrative expenses. However, EITF 01-9 requires
that such cost
adjustments be reported as a reduction of revenues. This
reclassification is
reported on the enclosed Statement of Operations for year-end
December 31, 2003.
No such cost adjustment payments have been made to any
customer after that
time.
Distributor
Arrangements
The
Company markets its syringe products exclusively through distributors
and
various government agencies. Accounts receivable balances are payable
within
thirty days of shipment. Univec provides a product quality warranty
on its
products. The Company has never had any of its products returned
due to product
deficiencies. The products are priced under competitive arrangements
with each
customer. The product revenue recognition is based upon the prices
charged to
each customer. The Company has no price concessions which allow
payments below
the agreed prices.
Product
Warranties
The
Company provides a product warranty for the products sold. However,
the Company
has never had a product returned due to defective quality. Further,
there are no
warranty costs recognized in any of the years ended December 31,
2004 and 2003.
The Company believes that because no warranty costs were incurred
during any of
the periods mentioned, there is no need to disclose any additional
warranty cost
policy or amounts.
Note
18, Discontinued Operations - Page 15
The
Company recognized a loss of $597,056 on the 2004 sale of Thermal
Waste
Technology Corporation (TWT) a wholly owned subsidiary. This loss
included a
$554,542 write-off for the total impairment of goodwill attributable
to the
subsidiary. TWT was sold to an officer of the Company and his related
parties,
all former owners of TWT, in exchange for 404,154 shares of common
stock of the
Company, cancellation of deferred compensation to the officer of
$221,042 and
cancellation of the officer’s employment agreement. In addition, the officer
received options to purchase 97,710 shares of common stock of the
Company,
exercisable at $.01, per share, for 10 years and the other purchasers
received
option to purchase 296,444 shares of common stock of the Company,
exercisable at
$.07, per share, for 10 years. The officer also will receive $100,000
in cash,
payable in monthly installments of $10,000, commencing August 2004
and medical
insurance payments of $3,600. All of the Univec, Inc. common stock
and options
exchanged in the transaction was valued at publicly listed closing
prices of the
Company’s common stock. Such publicly listed valuations are in accordance
with
the guidance of SFAS 123 and EITF 96-18.
During
the year-ended December 31, 2003 the Company reported that a corporate
officer
had instituted a legal action for approximately $200,000 for wages
plus
approximately $12,000 related to health and dental insurance premiums
plus
interest. All amounts within the claim were previously accrued by
the Company as
operating expenses as they were incurred. However, the Company’s defense in the
matter included a claim that the officer had entered into one or
more agreements
with third parties on behalf of the Company without notifying the
Company’s
President or Board of Directors. The Company asserted that damages
to the
Company in excess of the alleged liability to the officer had been
incurred.