As
filed with the Securities and Exchange Commission on June 18, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement under the Securities Act of 1933
UNILIFE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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3841
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27-1049354 |
(State or other jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer |
incorporation or organization)
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Classification Code number)
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Identification No.) |
633 Lowther Road
Lewisberry, Pennsylvania 17339
(717) 938-9323
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Alan Shortall
Chief Executive Officer
Unilife Corporation
633 Lowther Road
Lewisberry, Pennsylvania 17339
(717) 938-9323
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
Marjorie Sybul Adams, Esq.
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, NY 10020
(212) 335-4500
Approximate date of commencement of proposed sale to the public:
From time to time after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement number for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer þ (Do not check if a smaller reporting company) |
Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
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Proposed |
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Proposed |
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Maximum |
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Maximum |
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Title of Each Class of |
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Amount to be |
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Offering |
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Aggregate Offering |
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Amount of |
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Securities to be Registered |
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Registered (1) |
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Price Per Share (2) |
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Price (2) |
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Registration Fee |
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Common Stock, $0.01 par value per
share |
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5,444,633 |
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5.86 |
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31,905,549 |
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2,275 |
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(1) |
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Pursuant to Rule 416 under the Securities Act of 1933, as amended, the number of shares of common stock
registered hereby includes such indeterminate number of additional shares of common stock as may become
issuable as a result of stock splits, stock dividends or similar transactions.
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(2) |
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Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(c) under the
Securities Act of 1933, as amended, based upon the average high and
low prices of the common stock on June 15, 2010, as reported on the Nasdaq Global Market. |
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
Subject
to Completion, dated June 18, 2010
The information in this preliminary prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
PROSPECTUS
5,444,633 Shares of Common Stock
Unilife Corporation
This prospectus relates to the resale by selling stockholders identified in the section
entitled Selling Stockholders on page 65 of up to an
aggregate of 5,444,633 shares of common stock
of Unilife Corporation issued or issuable upon the exercise of
options previously issued. As of the date of this prospectus, 5,780
options have been exercised and 5,438,853 options are outstanding. We will not receive any
proceeds from the sale of the shares of common stock covered by this prospectus. We may receive
proceeds from the exercise of the options whose underlying shares of common stock are covered by
this prospectus.
The selling stockholders may offer and sell any of the shares of common stock from time to
time at fixed prices, at market prices or at negotiated prices, and may engage a broker, dealer or
underwriter to sell the shares. For additional information on the possible methods of sale that
may be used by the selling stockholders, you should refer to the section entitled Plan of
Distribution on page 74 of this prospectus.
Our common stock is currently listed on the Nasdaq Global Market under the symbol UNIS. On
June 8, 2010, the last reported sale price of our shares on the
Nasdaq Global Market was $5.28
per share.
You should consider carefully the risks that we have described in the section entitled Risk
Factors beginning on page 4 before deciding whether to invest in our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful and
complete. Any representation to the contrary is a criminal offense.
This prospectus is dated , 2010.
PROSPECTUS SUMMARY
This summary highlights selected information more fully described elsewhere in this
prospectus. You should read the following summary together with the entire prospectus, including
the more detailed information regarding us and the common stock being sold in this offering and our
financial statements and notes thereto appearing elsewhere in this prospectus. You should
carefully consider, among other things, the matters discussed in the section entitled Risk
Factors beginning on page 4 before deciding to invest in our common stock. Unless otherwise
stated or the context requires otherwise, references in this prospectus to we, our or us
refer to Unilife Corporation and its subsidiaries.
Overview
We are a U.S. based medical device company focused on the design, development, manufacture and
supply of a proprietary range of retractable syringes. Primary target customers for our products
include pharmaceutical manufacturers, suppliers of medical equipment
to healthcare facilities, and distributors to
patients who self-administer prescription medication. All of our syringes incorporate automatic and
fully-integrated safety features which are designed to protect those at risk of needlestick
injuries and injury from other unsafe injection practices. Our main product is the Unifill
ready-to-fill syringe, which is designed to be supplied to pharmaceutical manufacturers in a form
that is ready for filling with their injectable drugs and vaccines. We have a strategic partnership
with sanofi-aventis, a large global pharmaceutical company, pursuant
to which it has paid us a 10.0 million euro exclusivity fee and has
committed to pay us up to an additional 17.0 million euros to fund our
industrialization program for the Unifill syringe. Upon the scheduled completion of the
industrialization program in late 2010, we expect to commence the supply and sale of the Unifill
syringe to sanofi-aventis. We are also in discussions with other pharmaceutical companies that are
seeking to obtain access to the Unifill syringe. In addition, we have recently begun to manufacture
our Unitract 1mL insulin syringes at our FDA-registered manufacturing facility in Lewisberry,
Pennsylvania.
Our clinical and prefilled safety syringes incorporate automatic, also known as passive,
safety features which are fully integrated within the barrel. They are designed to assist
pharmaceutical manufacturers and healthcare facilities comply with needlestick prevention laws and
to encourage single use and safe disposal practices outside of healthcare settings. We consider the
following combination of core proprietary features available in our safety products to be unique
within the marketplace:
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Integrated design. All safety features are fully integrated inside the syringe barrel to
facilitate compact handling, intuitive use and convenient disposal. |
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Passive retraction. The activation of the needle retraction mechanism occurs
automatically while the needle is inside the body to help prevent the risk of needlestick
injury. |
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Controlled retraction. Operators can control the speed of needle retraction directly
from the body into the syringe barrel to help reduce the risk of infection through
transmission routes such as needlestick injuries and aerosol (splatter). |
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Auto-disable. Upon withdrawal of the needle into the barrel, the plunger is
automatically locked to prevent re-exposure or reuse. |
We have utilized this core proprietary technology to design and develop a range of prefilled
and clinical safety syringes. Furthermore, we are not aware of any other company that is
manufacturing safety syringes with automatic, integrated safety features in both a prefilled
(glass) and clinical (plastic) format which share the same common technology platform.
Key target markets for our products include pharmaceutical companies, healthcare facilities
and patients who self-administer prescription medication. We believe that the majority of our
products would be supplied, either directly or through pharmaceutical customers, for use within
sophisticated healthcare markets such as North America, Western Europe and some Asia-Pacific
countries that require or are transitioning toward the mandatory use of safety syringes.
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Our goal is to progressively move to the forefront of the international transition of
healthcare and pharmaceutical markets to the mandatory use of prefilled and clinical safety
syringes. We believe that the competitive strength of our proprietary technology puts us in a
strong position to become an established and preferred supplier of best-in-class safety syringe
products to pharmaceutical companies, healthcare facilities and patients who self-administer
prescription medication.
Key elements of our business strategy are the development, production and sale of our
patent-protected safety syringes, the continued expansion of our global operational and commercial
presence and the establishment of long-term supply relationships with multinational pharmaceutical
and healthcare equipment companies. We are committed to designing, developing and supplying
innovative medical devices that can enhance and save lives.
Corporate Information
Unilife Corporation was incorporated in the State of Delaware on July 2, 2009. On January 27,
2010, Unilife Medical Solutions Limited, an Australian corporation, or UMSL, whose ordinary shares
were listed on the Australian Securities Exchange, or ASX, completed a redomiciliation from
Australia to the State of Delaware pursuant to which the shareholders and option holders of UMSL
exchanged their interests in UMSL for equivalent interests in Unilife Corporation and Unilife
Corporation became the parent company of UMSL and its subsidiaries. The redomiciliation was
conducted by way of schemes of arrangement under Australian law. The issuance of Unilife
Corporation common stock and stock options under the schemes of arrangement was exempt from
registration under Section 3(a)(10) of the Securities Act of 1933, as amended.
Under the schemes, holders of UMSL ordinary shares or share options received one share of
Unilife Corporation common stock or an option to purchase one share of Unilife Corporation common
stock, for every six UMSL ordinary shares or share options, respectively, held by such holders,
unless the holder elected to receive, in lieu of Unilife Corporation
common stock, Chess
Depositary Interests of Unilife Corporation, or CDIs (each representing one-sixth of one share of
Unilife Corporation common stock), in which case such holder received one CDI for every UMSL
ordinary share. The redomiciliation was approved by the Australian Federal Court, and approved by
UMSL shareholders and option holders. As a result of the redomiciliation, the listing of UMSLs
ordinary shares on the ASX, has been replaced by Unilife Corporations CDIs.
Our principal executive offices are located at 633 Lowther Road, Lewisberry, Pennsylvania
17339, and our telephone number is (717) 938-9323. Our website address is www.unilife.com. The
information on, or that can be accessed through, our website is not part of this prospectus.
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The Offering
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Common stock offered by the selling stockholders
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Up to 5,444,633 shares of our
common stock issued or issuable
upon the exercise of options previously issued. |
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Use of Proceeds
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Proceeds from the sale of
common stock covered by
this prospectus will be
received by the selling
stockholders. We will
not receive any proceeds
from the sale of the
shares of common stock
covered by this
prospectus. We may
receive proceeds from the
exercise of the options
whose underlying shares
of common stock are
covered by this
prospectus. |
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Nasdaq Global Market symbol for our Common Stock
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UNIS |
As
of June 8, 2010, we had 54,604,696 shares of common stock outstanding and options
outstanding to purchase an aggregate of 10,567,976 shares of common stock.
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RISK FACTORS
Our business faces many risks. We believe the risks described below are the material risks
facing the Company. However, the risks described below may not be the only risks we face.
Additional unknown risks or risks that we currently consider immaterial may also impair our
business operations. If any of the events or circumstances described below actually occurs, our
business, financial condition or results of operations could suffer, and the trading price of our
shares of common stock could decline significantly. Investors should consider the specific risk
factors discussed below, together with the Cautionary Note Regarding Forward-Looking Information
and the other information contained in this registration statement and the other documents that we
file from time to time with the Securities and Exchange Commission.
Risks Relating to Our Business
Our success depends in large part on our ability to finalize the design of and complete the
industrialization program for our primary product, the Unifill syringe. If we experience problems
or delays in completing these activities, our business, including our ability to generate
significant revenues, will be materially and adversely affected.
We commenced the industrialization program for the Unifill syringe in July 2008 and expect to
finalize the design of and complete the industrialization program for the product, as well as the
development of production systems to support its manufacture and commercial sale, by the end of
calendar year 2010. Since the Unifill syringe is our primary product, any failure or significant
delay in completing these activities could materially harm our business and our ability to generate
any significant amount of revenues for the foreseeable future. We do not expect that our existing
contract manufacturing business will generate significant revenues in the future. In addition, our
contract with B. Braun expired on December 31, 2009 and while we and B. Braun continue to operate
under the contract, there is no assurance that we will be able to renew this contract on favorable
terms, if at all.
Our business is substantially dependent on our relationship with our strategic partner,
sanofi-aventis, which is funding the industrialization program for the Unifill syringe, and our
revenues from other sources are not significant.
To date, we have derived a substantial majority of our revenues from our exclusive licensing
and industrialization agreements with sanofi-aventis. For the year ended June 30, 2009, our
revenues from these agreements were $16.1 million, which represented 81% of our revenues for the
period. We expect that revenues from sanofi-aventis will continue to account for a substantial
majority of our revenues at least through the end of calendar 2010, which is when we expect to
complete our industrialization program for the Unifill syringe. In addition, we will need to
negotiate successfully with sanofi-aventis to finalize a supply agreement for the Unifill syringe.
Even if we finalize this agreement and commence commercial sales to sanofi-aventis, we expect that
sanofi-aventis will be our most significant customer, at least until its exclusive period
terminates, and that revenues from sanofi-aventis will continue to account for a substantial
majority of our revenues and cash flows from operations. Any termination or material breach of the
existing agreements between sanofi-aventis and us, any failure to successfully negotiate a supply
agreement, or any failure to perform under any supply agreement that we do negotiate, would be
likely to materially and adversely affect our business.
Our research and development and other operating expenses are significant and we do not expect to
be profitable unless and until we complete our industrialization program, negotiate a supply
agreement with sanofi-aventis or other pharmaceutical companies and begin commercial sale of the
Unifill syringe.
We have incurred and will continue to incur significant research and development expenses for
the completion of the industrialization program for the Unifill syringe, as well as for the
development of other product variants of our technology such as the Unitract Clinical Range of
larger syringe sizes. We will also incur general and administrative expenses related to increasing
our manufacturing operations, expanding our sales and marketing capabilities, seeking regulatory
approvals, and complying with the requirements related to being a public company in both the United
States and Australia. We will not be profitable unless we are successful in developing and
commercializing the Unifill syringe and other new products, obtaining regulatory approvals, and
manufacturing, marketing and selling commercial products.
The Unifill syringe has been designed to be compatible with the drug manufacturing systems
currently utilized by sanofi-aventis, which may hinder our ability to sell the product to other
pharmaceutical customers whose manufacturing processes may not be compatible with our current
product designs.
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The Unifill syringe has been designed to be compatible with the drug filling and packaging
systems of sanofi-aventis. While the standard glass barrels to be used for the Unifill syringe are
also currently utilized by most pharmaceutical companies, the specific processes used by other
pharmaceutical companies to fill, manufacture or package prefilled syringes with an injectable drug
product may vary from those of sanofi-aventis. Furthermore, pharmaceutical companies may in some
cases require the use of materials which are biocompatible with a particular drug compound and to
which we do not have access. Such events may require design, material or process changes to our
product, or restrict our ability to enter into supply relationships with other pharmaceutical
companies and accordingly, may have a material adverse effect on our results of operations and
financial condition.
Our ability to successfully market and sell our safety syringes outside of the pharmaceutical
market may be impaired until we are able to offer a full range of safety syringes in sizes commonly
used in acute-care facilities.
In addition to the Unifill syringe, our product portfolio also includes the Unitract 1mL
syringe, a plastic syringe which we refer to as a clinical syringe. Acute-care hospitals are the
largest single healthcare market for clinical syringes. These facilities use a range of clinical
syringes, including 1mL, 3mL and 5mL sizes, for the subcutaneous and intramuscular administration
of therapeutic drugs and vaccines. We have completed development and secured regulatory approvals
only for the marketing and sale of our Unitract 1mL syringe. While we intend to market the Unitract
1mL syringe to other healthcare sectors in addition to acute-care facilities, our ability to market
and sell our safety syringes successfully may be impaired until we are able to offer clinical
syringes in a full range of sizes.
Our success will depend on the full commercialization of our current products, and the development
and commercialization of other pipeline products. There can be no assurance that we will be
successful in these efforts.
A significant element of our strategy focuses on developing products that deliver greater
benefits to pharmaceutical companies, healthcare workers and patients. The development of these
products requires significant research and development, clinical evaluations and regulatory
approvals. The results of our product development efforts may be affected by a number of factors,
including our ability to innovate, develop and manufacture new products, complete clinical trials,
obtain regulatory approvals and secure customer orders for these products. In addition, patents
attained by others can preclude or delay our commercialization of a product. There can be no
assurance that any products now in development, or that we may seek to develop in the future, will
achieve technological feasibility, obtain regulatory approval or gain market acceptance.
We need substantial additional funding and may be unable to raise capital when needed, which would
force us to delay, reduce or eliminate our efforts in developing our new manufacturing facility and
in our product development or commercialization programs.
We are in the process of developing a new manufacturing facility in central Pennsylvania. We
estimate the total cost to be approximately $27.0 million. We
intend to internally fund $9.0 million of
the cost and seek external financing for up to $18.0 million. Although we currently believe that our
current cash resources, together with our anticipated cash flows, will be sufficient to fund our
operations (other than the development of the new manufacturing facility which we expect to finance
in part with the proceeds of external financing) through at least the second quarter of fiscal
2011, we may also need to obtain additional funding in the future for our product development
programs and commercialization efforts. In particular, if the amount of funding that sanofi-aventis
has agreed to provide to us under the industrialization agreement is insufficient to complete the
industrialization program for the Unifill syringe, we may need to obtain additional funding unless
sanofi-aventis were to agree to provide us with additional funding, which it has no obligation to
provide. We cannot assure you that we will be able to raise capital when needed on terms favorable
to us, or at all. If we raise additional funds from debt financing, we may be obligated to abide by
restrictive covenants contained in the debt financing agreements, which may make it more difficult
for us to operate our business. If we raise additional funds through the issuance of equity
securities, our shares of common stock may suffer dilution. If we are unable to secure additional
funding when needed, our ability to develop the new manufacturing facility and continue in our
product development and commercialization programs would be delayed, reduced or eliminated.
We may encounter difficulties managing our growth, which could materially harm our business.
We expect to expand our operations and grow our research and development, product development,
regulatory, manufacturing, sales, marketing and administrative operations. This expansion has
placed, and is expected to continue to place, a significant strain on our management, operational
and financial resources. To manage our growth and to develop and commercialize our products, we
will be required to improve existing, and implement new, operational and financial systems,
procedures and controls and expand, train and manage our growing
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employee base. In addition, we will need to manage relationships with various manufacturers,
suppliers, customers and other organizations. Our ability to manage our operations and growth will
require us to improve our operational, financial and management controls, as well as our internal
reporting systems and controls. We may not be able to implement such improvements to our management
information, disclosure controls and procedures and internal control systems in an efficient and
timely manner and may discover deficiencies in existing systems and controls. Our failure to
accomplish any of these tasks could materially harm our business.
We depend on our executive officers and key personnel and the loss of them could adversely affect
our business.
Our success depends upon the efforts and abilities of our executive officers and other key
personnel, particularly Mr. Alan Shortall, our Chief Executive Officer, to provide strategic
direction, manage our operations and maintain a cohesive and stable environment. Although we have
employment agreements with Mr. Shortall and other key personnel, as well as incentive compensation
plans that provide various economic incentives for them to remain with us, these agreements and
incentives may not be sufficient to retain them. Our ability to operate successfully and manage our
potential future growth also depends significantly upon our ability to attract, retain and motivate
highly skilled and qualified research, technical, clinical, regulatory, sales, marketing,
managerial and financial personnel. We face intense competition for such personnel, and we may not
be able to attract, retain and motivate these individuals. The loss of our executive officers or
other key personnel for any reason or our inability to hire, retain and motivate additional
qualified personnel in the future could prevent us from sustaining or growing our business. In
addition, we have a limited history of operations under our current officers and directors. Our
officers have not worked together for an extensive length of time. If for any reason our management
members cannot work efficiently as a team, our business will be adversely affected.
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will incur increased costs as a result of being a US reporting
company and we have limited experience
as a US reporting company.
We became subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended, or the Exchange Act, on February 11, 2010 when our registration statement on Form
10 became effective. Although UMSL had been listed on the ASX for several years and had been
required to file financial information and make certain other filings with the ASX, our status as a
U.S. reporting company under the Exchange Act causes us to incur additional legal, accounting and
other expenses that we had not previously incurred, including costs related to compliance with the
requirements of the Sarbanes-Oxley Act of 2002. We expect these rules and regulations to increase
our legal and financial compliance costs and to make some activities more time-consuming and
costly. We cannot predict or estimate the amount of additional costs we may incur or the timing of
such costs.
If our internal control over financial reporting or our disclosure controls and procedures are
found not to be effective by management or by an independent registered public accounting firm or
if we make disclosure of existing or potential significant deficiencies or material weaknesses in
those controls, investors could lose confidence in our financial reports, the price of our shares
of common stock may decline, and we may be subject to increased risks and liabilities.
We became a U.S. reporting company on February 11, 2010 and are subject to the Sarbanes-Oxley
Act of 2002 and applicable rules and regulations thereunder. Section 404 of the Sarbanes-Oxley Act
will require that we include a report of our management on our internal control over financial
reporting and a report of our independent registered public accounting firm on the effectiveness of
our internal control over financial reporting in our Annual Report on Form 10-K beginning with our
annual report for the fiscal year ending June 30, 2011. We will also have to include quarterly
reports and certifications of our management regarding the effectiveness of our disclosure controls
and procedures. Our management may conclude that our internal control over financial reporting is
not effective. Moreover, even if our management concludes that our internal control over financial
reporting is effective, our independent registered public accounting firm, after conducting its own
independent review, may issue a report that is qualified if it is not satisfied with our internal
controls or the level at which our internal controls are documented, designed, operated or
reviewed, or if it interprets the relevant requirements differently from the way we interpret them.
Our management may also conclude that our disclosure controls and procedures are not effective.
If we fail to achieve and maintain an effective internal control environment and disclosure
controls and procedures, we could suffer material misstatements in our financial statements and
other information we report and fail to meet our reporting obligations, which would likely cause
investors to lose confidence in our reported financial and other information. This could lead to a
decline in the trading price of our shares of common stock. Additionally,
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ineffective internal control over financial reporting could expose us to increased risk of fraud or
misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory
investigations and civil or criminal sanctions.
We have limited sales, marketing and distribution experience.
We have a small internal team to support the training of appointed distributors in the
marketing and clinical use of our Unitract 1mL syringes. Although we intend to expand this team as
we commence sales of our Unitract 1mL syringes, appoint additional distributors and commercialize
our larger-sized clinical syringes, we will have to devote significant financial and management
resources to this effort. In developing our sales, marketing and distribution functions, we could
face a number of risks, including:
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we may not be able to attract and build a significant marketing or sales force; |
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the cost of establishing, training and providing regulatory oversight for a marketing or
sales force may be substantial; and |
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there are significant legal and regulatory risks in medical device marketing and sales,
and any failure to comply with all legal and regulatory requirements for sales, marketing
and distribution could result in enforcement action by the FDA or other authorities that
could jeopardize our ability to market our product(s) or could subject us to substantial
liability. |
We have outsourced the development of automated assembly systems for our Unifill syringe to Mikron
Assembly Technology, a third-party contractor. Our ability to commercialize the Unifill syringe
will be dependent on the ability of this contractor to provide these systems according to
specifications and in a timely manner.
We have outsourced the development of automated assembly systems for our Unifill syringe to
Mikron Assembly Technology, a third party equipment manufacturer. The development of a pilot system
with a target production capacity of approximately 60 million units per year began in December 2009
with completion and installation scheduled for the fourth quarter of 2010. Additional assembly
lines with higher annual manufacturing capacity are expected to commission and operate beyond 2010.
The failure of this company to supply these automated assembly systems to us which meet contracted
specifications in a timely manner will significantly impair our business activities and the
completion of the industrialization program.
If we experience delays in developing our new manufacturing facility, our ability to produce our
Unifill syringe in commercial quantities would be impaired, which would harm our business. In
addition, all of our current commercial and production activity takes place in one facility which
subjects us to risk if we were to experience a catastrophic event at this facility.
We have a 50,000 square foot FDA-registered, medical device production facility in Lewisberry,
Pennsylvania, for the production of the Unilife 1mL syringes and for the future production of the
Unifill syringes. However, we will need to expand our manufacturing capabilities in order to
produce Unifill syringes and our other products in the quantities that may be necessary to meet
anticipated market demand. We are in the process of developing additional manufacturing facilities
in central Pennsylvania in conjunction with Keystone Redevelopment Group LLC, a Pennsylvania-based
real estate company. We may not successfully complete the development of the new manufacturing
facility in a timely manner, or at all. If we are unable to do so, we may not be able to produce
our products in sufficient quantities to meet the requirements for the launch of the products or to
meet future demand, if at all.
In addition, because all of our operations are currently conducted out of our Lewisberry
facility, a catastrophic event, such as fire, natural disaster, pandemic, war, terrorism, labor
disruption or governmental actions taken in response to such an event, could severely disrupt our
business activities and adversely affect our results of operations and financial condition.
Our manufacturing facilities and the manufacturing facilities of our suppliers must comply with
applicable regulatory requirements. If we or they fail to achieve or maintain regulatory approval
for these manufacturing facilities, our business and our results of operations would be harmed.
Commercialization of our products requires access to, or the development of, manufacturing
facilities that meet applicable regulatory standards to manufacture a sufficient supply of our
products. In addition, the FDA must approve facilities that manufacture our products for US
commercial purposes, as well as the manufacturing processes and specifications for the product.
Suppliers of components of, and products used to manufacture, our products must also comply with
FDA and foreign regulatory requirements, which often require significant time, money and
record-keeping and quality assurance efforts and subject us and our suppliers to potential
regulatory
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inspections and stoppages. We and our suppliers may not satisfy these requirements. If we or our
suppliers do not achieve or maintain required regulatory approval for our manufacturing operations,
our commercialization efforts could be delayed, which would harm our business and our results of
operations.
The costs of raw materials have a significant impact on the level of expenses that we incur. If the
prices of raw materials and related factors such as energy prices increase, and we cannot pass
those price increases on to our customers, our results of operations and financial condition would
suffer.
We use a number of raw materials including polymer plastics. The prices of many of these raw
materials, such as those sourced from petroleum-based raw materials, are cyclical and volatile.
While we would generally attempt to pass along increased costs to our customers in the form of
sales price increases, we might not be able to do so, for competitive or contract-related reasons
or otherwise. If we could not set our prices to reflect the costs of our raw materials, our results
of operations and our financial condition would suffer.
Disruptions in the supply of key raw materials and difficulties in the supplier qualification
process could adversely impact our operations.
We employ a supply chain management strategy which seeks to source components and materials
from a number of established third party companies. Where possible, we seek to establish dual
contracts for the supply of particular components or services. However, there is a risk that our
supply lines may be interrupted in the event of a supplier production problem, material recall or
financial difficulties. If one of our suppliers is unable to supply materials required for
production of our products or our strategies for managing these risks are unsuccessful, we may be
unable to complete the production of sufficient quantities of product to fulfill customer orders,
or complete the qualification of new replacement materials for some programs in time to meet future
production requirements. Prolonged disruptions in the supply of any of our key raw materials,
difficulty in completing qualification of new sources of supply, or in implementing the use of
replacement materials or new sources of supply, could have a material adverse effect on our results
of operations, our financial condition or cash flows.
Some companies we may utilize for the supply of components are also competitors, and they could
elect to cease supply relationships with us in the future for competitive reasons.
Some companies we may utilize for the supply of components for the Unifill syringe also
develop and market their own safety products which can be attached onto standard prefilled
syringes. These companies may elect to cease supply relationships with us in the future for
competitive reasons. This may disrupt our supply chain, cause difficulties in the qualification of
new sources of supply and impair our ability to supply customer orders. Such events may have a
material adverse effect on our results of operations, our financial condition or cash flows.
The medical device industry is very competitive.
Competition in the medical device industry is intense. We face this competition from a wide
range of companies. These include large medical device companies, most of which have greater
financial and human resources, distribution channels and sales and marketing capabilities than we
do. Our ability to compete effectively depends upon our ability to distinguish our company and our
products from our competitors and their products. Factors affecting our competitive position
include, for example, product design and performance, product safety, sales, marketing and
distribution capabilities, success and timing of new product development and introductions and
intellectual property protection.
We may be adversely impacted by next generation drug delivery technologies.
Much of our potential sales and potential profitability depends to a large extent on the sale
of drug products delivered by subcutaneous or intramuscular injection. Other device companies, and
pharmaceutical companies, are attempting to develop alternative therapies or drug administration
systems such as needle-free or intradermal injection technology for the treatment or prevention of
various diseases. The development of new or improved products, processes or technologies by other
companies may render our products or proposed products obsolete or less competitive. If the
products developed in the future by our customers or potential customers use another delivery
system, our sales and potential profitability could suffer. Furthermore, we will be largely reliant
upon the receipt of revenues from the sale of the Unifill syringe and the Unilife 1mL syringe and
will not have the benefit of diversification.
We are subject to extensive regulation.
We are subject to extensive regulation by the FDA pursuant to the FDC Act, by comparable
agencies in other countries, and by other regulatory agencies and governing bodies. Our products
must receive clearance or approval
8
from the FDA or counterpart non-U.S. regulatory agencies before they can be marketed or sold. The
process for obtaining marketing approval or clearance may take a significant period of time and
require the expenditure of substantial resources. The process may also require changes to our
products or result in limitations on the indicated uses of the products. As a result, our
expectations with respect to marketing approval or clearance may prove to be inaccurate and we may
not be able to obtain marketing approval or clearance in a timely manner or at all. For example, we
have experienced two recent delays in our ability to commence commercial sales of U.S.-manufactured
stock of our Unitract 1mL syringes due to the delay in obtaining the FDA clearance. In addition,
regulatory requirements outside the U.S. change frequently, requiring prompt action to maintain
compliance, particularly when product modifications are required.
Following the introduction of a product, these agencies also periodically review our
manufacturing processes and product performance. Our failure to comply with the applicable good
manufacturing practices, adverse event reporting, clinical trial and other requirements of these
agencies could delay or prevent the production, marketing or sale of our products and result in
fines, delays or suspensions of regulatory clearances, closure of manufacturing sites, seizures or
recalls of products and damage to our reputation.
We are subject to regulation by governments around the world, and if these regulations are not
complied with, existing and future operations may be curtailed, and we could be subject to
liability.
The design, development, manufacturing, marketing and labeling of our products are subject to
regulation by governmental authorities in the United States, Europe and other countries, including
the FDA. The regulatory process can result in required modification or withdrawal of existing
products and a substantial delay in the introduction of new products. Also, it is possible that
regulatory approval may not be obtained for a new product. Our business may be adversely affected
by changes in the regulation of drug products and medical devices.
Our target pharmaceutical customers are also subject to government regulations for the
manufacturing, approval, marketing and labeling of therapeutic drug products. An effect of the
governmental regulation of our customers injectable drug products and manufacturing processes is
that compliance with regulations makes it costly and time consuming to transition to the use of our
devices for existing products, or to secure approval for pipeline products targeted for use with
our devices. If regulation of our customers products incorporating our devices increases over
time, it is likely that this would adversely affect our sales and profitability.
Product defects could adversely affect the results of our operations.
The design, manufacture and marketing of medical devices involve certain inherent risks.
Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of
risks relating to the use of the product can lead to injury or other adverse events. These events
could lead to recalls or safety alerts relating to our products (either voluntary or required by
the FDA or similar governmental authorities in other countries), and could result, in certain
cases, in the removal of a product from the market. Any recall could result in significant costs,
as well as negative publicity and damage to our reputation that could reduce demand for our
products. Personal injuries relating to the use of our products can also result in product
liability claims being brought against us. In some circumstances, such adverse events could also
cause delays in new product approvals.
We may be sued for product liability, which could adversely affect our business.
The design, manufacture and marketing of medical devices carries a significant risk of product
liability claims. We may be held liable if any product we develop and commercialize causes injury
or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or consumer
use. In addition, the safety studies we must perform and the regulatory approvals required to
commercialize our medical safety products will not protect us from any such liability. We carry
product liability insurance. However, if there were to be product liability claims against us, our
insurance may be insufficient to cover the expense of defending against such claims, or may be
insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate product
liability insurance coverage for commercial sales of any of our approved products. If such
insurance is insufficient to protect us, our results of operations will suffer. If any product
liability claim is made against us, our reputation and future sales will be damaged, even if we
have adequate insurance coverage. We also intend to seek product liability insurance for any
approved products that we may develop or acquire in the future. There is no guarantee that such
coverage will be available when we seek it or at a reasonable cost to us.
We may not be able to effectively protect our intellectual property rights which could have an
adverse effect on our business, financial condition or results of operations.
9
Our success depends in part on our ability to obtain and maintain protection in the United
States and other countries of the intellectual property relating to or incorporated into our
technology and products. Our intellectual property portfolio includes, in addition to trademarks
and trade secrets, 24 issued patents in 13 countries, a significant number of patent applications
pending in the United States, Australia and the countries covered under the Patent Cooperation
Treaty. Our patents expire at various dates between 2018 and 2028. Our pending and future patent
applications may not issue as patents or, if issued, may not issue in a form that will provide us
with any competitive advantage. Even if issued, existing or future patents may be challenged,
narrowed, invalidated or circumvented, which could limit our ability to stop competitors from
marketing similar products or limit the length of terms of patent protection we may have for our
products. Changes in patent laws or their interpretation in the United States and other countries
could also diminish the value of our intellectual property or narrow the scope of our patent
protection. In addition, the legal systems of certain countries do not favor the aggressive
enforcement of patents, and the laws of foreign countries may not protect our rights to the same
extent as the laws of the United States. As a result, our patent portfolio may not provide us with
sufficient rights to exclude others from commercializing products similar or identical to ours. In
order to preserve and enforce our patent and other intellectual property rights, we may need to
make claims or file lawsuits against third parties. This can entail significant costs to us and
divert our managements attention from developing and commercializing our products.
Intellectual property litigation could be costly and disruptive to us.
The retractable syringe product lines in which we compete are relatively new inventions with
numerous companies having patents. In recent years, there have been several patent infringement
suits involving other industry participants. To-date, we have not been subject to any such patent
infringement suits and also hold freedom to operate reports which we believe indicate that our
technology and associated products are substantially different from other known patents. There is
no assurance, however, that third parties will not assert any patent, copyright, trademark and
other intellectual property rights to technologies used in our business. Any claims, with or
without merit, could be time-consuming, result in costly litigation, divert the efforts of our
technical and management personnel or require us to pay substantial damages. If we are unsuccessful
in defending ourselves against these types of claims, we may be required to do one or more of the
following:
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stop, delay or abandon our ongoing or planned commercialization of the product that is
the subject of the suit; |
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attempt to obtain a license to sell or use the relevant technology or substitute
technology, which license may not be available on reasonable terms or at all; or |
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redesign those products that use the relevant technology. |
If we are unable to protect the confidentiality of our proprietary information and know-how, the
value of our technology and products could be adversely affected.
In addition to patented technology, we rely on our unpatented proprietary technology, trade
secrets, processes and know-how. We generally seek to protect this information by confidentiality
agreements with our employees, consultants, scientific advisors and third parties. These agreements
may be breached, and we may not have adequate remedies for any such breach. In addition, our trade
secrets may otherwise become known or be independently developed by competitors. To the extent that
our employees, consultants or contractors use intellectual property owned by others in their work
for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Impairment of our goodwill, which represents a significant portion of our total assets, would
adversely affect our net income and we may never realize the full value of our goodwill.
A substantial portion of our assets is composed of goodwill, which we recorded as a result of
our acquisition activities. Goodwill is subject to, at a minimum, an annual impairment assessment
of its carrying value. Goodwill impairment is deemed to possibly exist if the net book value of a
reporting unit exceeds its estimated fair value. Any material impairment of our goodwill would
likely have a material adverse impact on our results of operations and financial condition.
Fluctuations in foreign currency exchange rates could adversely affect our financial condition and
results of operations.
Currently, the majority of our revenues are derived from payments under our industrialization
agreement with sanofi-aventis which provides that sanofi-aventis will pay us in euros, while we
incur most of our operating
10
expenses in U.S. dollars or Australian dollars. Changes in foreign currency exchange rates can
affect the value of our assets and liabilities, and the amount of our revenues and expenses. We do
not currently try to mitigate our exposure to currency exchange rate risks by using hedging
transactions. We cannot predict future changes in foreign currency exchange rates, and as a result,
we may suffer losses as a result of future fluctuations.
Risk Factors Related to Our Shares of Common Stock
An active trading market for our shares of common stock in the United States may not develop and
the trading price of our shares of common stock may fluctuate significantly.
Our common stock has been listed on the Nasdaq only since February 16, 2010. If an active
trading market does not develop in the United States, the market price and liquidity of our shares
may be adversely affected.
Prior to the redomiciliation which was completed on January 27, 2010, the ordinary shares of
UMSL were traded on the ASX. After the redomiciliation, Unilife Corporation replaced UMSL as the
listed entity on the ASX and its shares of common stock are now traded on the ASX in the form of
CDIs. It is possible that the development of an active trading market in the United States may be
adversely impacted by the existence of a trading market for CDIs in Australia.
The price of our shares and CDIs, on both the Nasdaq and the ASX, may be volatile, which means
that it could decline substantially within a short period of time. The trading price of the shares
may fluctuate, and investors may experience a decrease in the value of the shares that they hold,
sometimes regardless of our operating performance or prospects. The trading price of our common
stock could fluctuate significantly for many reasons, including the following:
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future announcements concerning our business and that of our competitors including in
particular, the progress of our industrialization program for the Unifill syringe; |
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regulatory developments, enforcement actions bearing on advertising, marketing or sales
of our current or pipeline products; |
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quarterly variations in operating results; |
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introduction of new products or changes in product pricing policies by us or our
competitors; |
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acquisition or loss of significant customers, distributors or suppliers; |
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business acquisitions or divestitures; |
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changes in third party reimbursement practices; |
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fluctuations of investor interest in the medical device sector; and |
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fluctuations in the economy, world political events or general market conditions. |
If there are substantial sales of our shares of common stock, our share price could decline.
As
of June 8, 2010, we had 54,604,696 shares of common stock issued and outstanding. All of
those shares of common stock other than approximately 4,918,808 shares held by our affiliates, are
freely tradable under the Securities Act. Shares
held by our affiliates are
eligible for resale pursuant to Rule 144. If our stockholders sell a large number of shares of
common stock or the public market, should one develop, perceives that our stockholders might sell a
large number of shares, the prices at which our common stock trades could decline significantly.
In
addition, as of the date of this registration statement, 10,567,976 shares of our common
stock are subject to outstanding stock options. We have filed a registration statement on Form S-8
to cover the issuance of 9,151,667 shares of our common stock that are issuable upon the exercise
of outstanding options (4,889,001 of which are currently outstanding) or options that may be issued
in the future under our employee benefit plans. This registration statement on Form S-1 is being
filed to cover the resale of 5,444,633 shares of our common stock that are issuable upon the exercise of
options not eligible for inclusion in our registration statement on Form S-8. The exercise of those
options may have a dilutive effect on current stockholders and if those parties exercising their
options choose to sell their shares, it could have an adverse effect on the market price for our
shares.
11
We do not intend to pay cash dividends in the foreseeable future.
For the foreseeable future, we do not intend to declare or pay any dividends on our common
stock. We intend to retain our earnings, if any, to finance the development and expansion of our
business and product lines. Any future decision to declare or pay dividends will be made by our
board of directors and will depend upon a number of factors including our financial condition and
results of operations. In addition, under our current bank financing agreements, we are not
permitted to pay cash dividends without the prior written consent of the lender.
We may be subject to arbitrage risks.
Investors may seek to profit by exploiting the difference, if any, in the price of our shares
of common stock on the Nasdaq and on the ASX. Such arbitrage activities could cause our stock price
in the market with the higher value to decrease to the price set by the market with the lower
value.
Our certificate of incorporation, bylaws, the Delaware General Corporation Law and the terms of our
industrialization agreement with sanofi-aventis may delay or deter a change of control transaction.
Certain provisions of our certificate of incorporation and bylaws may have the effect of
deterring takeovers, such as those provisions authorizing our board of directors to issue, from
time to time, any series of preferred stock and fix the designation, powers, preferences and rights
of the shares of such series of preferred stock; prohibiting stockholders from acting by written
consent in lieu of a meeting; requiring advance notice of stockholder intention to put forth
director nominees or bring up other business at a stockholders meeting; prohibiting stockholders
from calling a special meeting of stockholders; requiring a 662/3% majority stockholder approval
in order for stockholders to amend our bylaws or adopt new bylaws; and providing that, subject to
the rights of preferred shares, the number of directors is to be fixed exclusively by our board of
directors. Section 203 of the Delaware General Corporation Law, from which we did not elect to opt
out, provides that if a holder acquires 15% or more of our stock without prior approval of our
board of directors, that holder will be subject to certain restrictions on its ability to acquire
us within three years. In addition, our industrialization agreement with sanofi-aventis provides to
sanofi-aventis the right to match a change of control proposal and to terminate the
industrialization agreement under certain circumstances of a change of control event. See Business
Strategic Partnership with sanofi-aventis. These provisions may delay or deter a change of
control of us, and could limit the price that investors might be willing to pay in the future for
shares of our common stock.
12
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements that address operating
performance, events or developments that we expect or anticipate will occur in the future are
forward-looking statements. The forward-looking statements are contained principally in the
sections entitled Business, Risk Factors, and Managements Discussion and Analysis of
Financial Condition and Results of Operations. In some cases, you can identify forward-looking
statements by terms such as may, will, should, could, would, expects, plans,
anticipates, believes, estimates, projects, predicts, potential and similar expressions
intended to identify forward-looking statements.
These forward-looking statements are based on managements beliefs and assumptions and on
information currently available to our management. Our management believes that these
forward-looking statements are reasonable as and when made. However, you should not place undue
reliance on any such forward-looking statements because such statements speak only as of the date
when made. We do not undertake any obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required
by law. In addition, forward-looking statements are subject to certain risks and uncertainties that
could cause actual results, events and developments to differ materially from our historical
experience and our present expectations or projections. These risks and uncertainties include, but
are not limited to, those described in the section entitled Risk Factors and elsewhere in this
prospectus and those described from time to time in our reports which we file with the Securities
and Exchange Commission. You should read this prospectus and the documents that we have filed as
exhibits to the registration statement of which this prospectus forms a part in their entireties.
USE OF PROCEEDS
The selling stockholders will receive all of the net proceeds from the sale of the shares of
our common stock offered for resale by them under this prospectus. We will not receive any
proceeds from the resale of shares of our common stock by the selling stockholders covered by this
prospectus; however, we will receive proceeds from cash payments made in connection with the
exercise of options held by selling stockholders that are covered by this prospectus.
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Market Information
Commencing February 16, 2010, our shares of common stock began trading on the Nasdaq Global
Market under the symbol UNIS. Our shares of common stock have also traded in the form of CHESS
Depositary Interests (CDIs), each CDI representing one-sixth of a share of our common stock, on
the Australian Securities Exchange (ASX) under the symbol UNS since January 18, 2010. Prior to
that date, the ordinary shares of our predecessor Unilife Medical Solutions Limited (UMSL) were
traded on the ASX under the symbol UNI.
The following table sets forth, for the periods indicated, the high and low closing prices for
our common stock on the Nasdaq Global Market (commencing February 16, 2010), the high and low
closing prices for our CDIs on the ASX (from January 18, 2010 through February 15, 2010) and the
high and low closing prices for the ordinary shares of UMSL (prior to January 18, 2010). The prices
of our CDIs (and previously ordinary shares of UMSL) have been adjusted to give effect to the six
for one exchange ratio and have been converted to U.S. dollars using the spot rate applicable on
the relevant date.
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High |
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Low |
Period |
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(US$) |
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(US$) |
Fiscal Year 2010: |
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Fourth
Quarter (through June 8, 2010) |
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8.04 |
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5.28 |
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Third Quarter |
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17.90 |
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5.04 |
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Second Quarter |
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6.30 |
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4.68 |
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First Quarter |
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7.20 |
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|
1.62 |
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13
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High |
|
Low |
Period |
|
(US$) |
|
(US$) |
Fiscal Year 2009: |
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First Quarter |
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|
2.04 |
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|
|
1.26 |
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Second Quarter |
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|
1.20 |
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|
|
0.72 |
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Third Quarter |
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1.14 |
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|
0.96 |
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Fourth Quarter |
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|
1.50 |
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1.20 |
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Fiscal Year 2008: |
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First Quarter |
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1.68 |
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|
1.08 |
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Second Quarter |
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2.10 |
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|
1.32 |
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Third Quarter |
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1.98 |
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1.14 |
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Fourth Quarter |
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2.64 |
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1.32 |
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As
of June 8, 2010, we had 54,604,696 shares of common stock issued and outstanding, and
there were 176 holders of record of our common stock, including Chess Depositary Nominees which
held shares of our common stock on behalf of 8,388 CDI holders. The closing sales price for our
common stock on June 8, 2010 was $ 5.28, as reported by the Nasdaq Global Market.
Dividends
We currently intend to retain any earnings to finance research and development and the
operation and expansion of our business and do not anticipate paying any cash dividends for the
foreseeable future. The declaration and payment of any dividends in the future by us will be
subject to the sole discretion of our board of directors and will depend upon many factors,
including our financial condition, earnings, capital requirements of our operating subsidiaries,
covenants associated with certain of our debt obligations, legal requirements, regulatory
constraints and other factors deemed relevant by our board of directors. Moreover, if we determine
to pay any dividend in the future, there can be no assurance that we will continue to pay such
dividends . In addition, under our bank financing agreements, we are not permitted to pay cash
dividends without the prior written consent of the lender.
ASX-Required Disclosure Regarding Corporations Act 2001 (Cth) and Repurchases of Securities
We are not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the
acquisition of our shares (in particular, relating to substantial shareholdings and takeovers).
Under the Delaware General Corporation Law, we are generally permitted to purchase or redeem
our outstanding shares out of funds legally available for that purpose without obtaining
stockholder approval, provided that (i) our capital is not impaired; (ii) such purchase or
redemption would not cause our capital to become impaired; (iii) the purchase price does not exceed
the price at which the shares are redeemable at our option and (iv) immediately following any such
redemption, we shall have outstanding one or more shares of one or more classes or series of stock,
which shares shall have full voting powers. Our certificate of incorporation does not create any
further limitation on our purchase or redemption of our shares.
14
SELECTED FINANCIAL DATA
The
following table presents our selected statement of operations data
for the nine months
ended March 31, 2010 and 2009 and for each of the years in the five year period ended June 30,
2009 and our selected balance sheet data as of March 31, 2010 and as of June 30 of each year in
the five year period ended June 30, 2009. The statement of
operations data for the nine months ended
March 31, 2010 and 2009 and the balance sheet data as of
March 31, 2010 have been derived
from our unaudited condensed consolidated financial statements included elsewhere in this
registration statement. The statement of operations data for the years ended June 30, 2009, 2008
and 2007 and the balance sheet data as of June 30, 2009 and 2008 have been derived from our audited
consolidated financial statements included elsewhere in this registration statement. All such data
should be read in conjunction with the information under Managements Discussion and Analysis of
Financial Condition and Results of Operations, and our consolidated financial statements and the
related notes thereto included elsewhere in this registration statement. The statement of
operations data for the years ended June 30, 2006 and 2005 and the balance sheet data as of June
30, 2007, 2006 and 2005 have been derived from our unaudited consolidated financial statements not
included in this registration statement.
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Nine Months Ended |
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March 31, |
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Year Ended June 30, |
|
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2010 |
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2009 |
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2009 |
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2008 |
|
2007 (b) |
|
2006 |
|
2005 |
Statement of Operations Data: |
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Revenues |
|
$ |
8,770 |
|
|
$ |
12,273 |
|
|
$ |
19,976 |
(a) |
|
$ |
3,500 |
|
|
$ |
2,070 |
|
|
$ |
112 |
|
|
$ |
42 |
|
Net loss |
|
|
(20,043 |
) |
|
|
(2,748 |
) |
|
|
(517 |
) |
|
|
(8,537 |
) |
|
|
(8,969 |
) |
|
|
(8,220 |
) |
|
|
(6,466 |
) |
Basic loss per share |
|
|
(0.45 |
) |
|
|
(0.08 |
) |
|
|
(0.02 |
) |
|
|
(0.26 |
) |
|
|
(0.38 |
) |
|
|
(0.35 |
) |
|
|
(0.41 |
) |
Diluted loss per share |
|
|
(0.45 |
) |
|
|
(0.08 |
) |
|
|
(0.02 |
) |
|
|
(0.26 |
) |
|
|
(0.38 |
) |
|
|
(0.35 |
) |
|
|
(0.41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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Balance Sheet Data (end of period): |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total assets |
|
$ |
67,044 |
|
|
$ |
25,576 |
|
|
$ |
32,212 |
|
|
$ |
18,499 |
|
|
$ |
16,926 |
|
|
$ |
9,953 |
|
|
$ |
13,872 |
|
Long-term debt, including current portion |
|
|
2,841 |
|
|
|
4,098 |
|
|
|
3,133 |
|
|
|
7,209 |
|
|
|
4,261 |
|
|
|
106 |
|
|
|
157 |
|
|
|
|
(a) |
|
Includes $16.1 million in connection with our exclusive licensing agreement and our
industrialization agreement with sanofi-aventis. |
|
(b) |
|
Includes the results of Integrated BioSciences, Inc. since we acquired it on January 1, 2007. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated and condensed financial statements and related
notes appearing elsewhere in this registration statement. This discussion and analysis includes
certain forward-looking statements that involve risks, uncertainties and assumptions. You should
review the Risk Factors section of this registration statement for a discussion of important
factors that could cause actual results to differ materially from the results described in or
implied by such forward-looking statements. See Cautionary Note Regarding Forward-Looking
Information at the beginning of this registration statement. References to our fiscal year refer
to the fiscal year ending June 30.
Redomiciliation
On January 27, 2010, Unilife Medical Solutions Limited, an Australian corporation (UMSL),
completed a redomiciliation from Australia to the State of Delaware pursuant to which shareholders
and option holders of UMSL exchanged their interests in UMSL for equivalent interests in Unilife
Corporation, a Delaware corporation (Unilife) and Unilife became the parent company of UMSL and
its subsidiaries. The redomiciliation was conducted by way of schemes of arrangement under
Australian law. The issuance of Unilife common stock and stock options under the schemes of
arrangement was exempt from registration under Section 3(a)(10) of the
15
Securities Act of 1933, as amended. The redomiciliation was approved by the Australian
Federal Court, and approved by UMSL shareholders and option holders.
Under the schemes, holders of UMSL ordinary shares or share options received one share of
Unilife common stock or an option to purchase one share of Unilife Corporation common stock, for
every six UMSL ordinary shares or share options, respectively , held by such holders, unless the
holder elected to receive in lieu of Unilife common stock, Chess Depositary Interests of
Unilife, or CDIs (each representing one-sixth of one share of Unilife Corporation common stock, in
which case such holder received one CDI for every UMSL ordinary share. All share and per share
amounts in this registration statement have been restated to reflect the one for six share
consolidation effected in connection with the redomiciliation.
On February 16, 2010, Unilifes common stock began trading on the Nasdaq Global Market under
the symbol UNIS.
Overview
We are a U.S.-based medical device company focused on the design, development, manufacture and
supply of a proprietary range of retractable syringes. Primary target customers for our products
include pharmaceutical manufacturers and suppliers of medical equipment to healthcare facilities
and distributors to patients who self-administer prescription medication. All of our syringes incorporate automatic
and fully-integrated safety features which are designed to protect those at risk of needlestick
injuries and other unsafe injection practices.
Our main product is the Unifill ready-to-fill syringe, which is designed to be supplied to
pharmaceutical manufacturers in a form that is ready for filling with their injectable drugs and
vaccines. We have a strategic partnership with sanofi-aventis, a large global pharmaceutical
company, pursuant to which it has paid us a 10.0 million euro exclusivity fee and has committed to pay us
up to an additional 17.0 million euros to fund our industrialization program for the Unifill syringe. Upon
the scheduled completion of the industrialization program in late 2010, we expect to commence the
supply and sale of the Unifill syringe to sanofi-aventis. We are also in discussions with other
pharmaceutical companies that are seeking to obtain access to the Unifill syringe.
In addition, we have recently begun to manufacture our Unitract 1mL insulin syringes at our
FDA-registered manufacturing facility in Lewisberry, Pennsylvania. Our Unitract 1mL syringes are
designed primarily for use in healthcare facilities and by patients who self-administer
prescription medication such as insulin. We have recently begun U.S. production of this syringe,
which we expect to release commercially during July 2010.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with accounting principles generally
accepted in the United States of America. This requires management to make certain estimates,
judgments and assumptions that could affect the amounts reported in the consolidated financial
statements and accompanying notes. The following accounting policies require significant estimates,
judgments and assumptions.
Goodwill
Goodwill is the excess of purchase price over the value of net assets acquired in business
acquisitions. Goodwill is subject to, at a minimum, an annual impairment assessment of its carrying
value. Additional impairment assessments would be performed if events and circumstances warranted
such additional assessments during the year. Goodwill impairment is deemed to exist if the net book
value of a reporting unit exceeds its estimated fair value. Estimated fair values of the reporting
units are estimated using an earnings model and a discounted cash flow valuation model. The
discounted cash flow model incorporates managements estimates of future cash flows, allocations of
certain assets and cash flows among reporting units, future growth rates and managements judgment
regarding the applicable discount rates used to discount those estimated cash flows. The estimated
fair value of each reporting unit, if lower than the carrying value of the respective reporting
unit (such carrying value determined after management allocation of certain shared assets), would
then be allocated to the reporting units net identifiable assets based on their respective
estimated fair values. The remaining unallocated reporting unit fair value, if any, would then be
compared to the carrying amount of that units goodwill and, if lower, the Company would recognize
16
an impairment charge to the extent of the deficiency. We did not record any goodwill
impairments during fiscal 2009, 2008 or 2007.
The Company currently has two reporting units, each a component of its single syringe
manufacturing operating segment. One reporting unit is comprised of our contract manufacturing
business which was acquired in our January 2007 acquisition of Integrated BioSciences, Inc. and
primarily assembles syringes for its limited customers. This reporting unit has no goodwill. The
second reporting unit is comprised of our developing Unitract and Unifill syringe business, the
base technology which we obtained as part of our November 2002 acquisition of Unitract Syringe Pty
Limited and the manufacturing capability which we obtained in our acquisition of Integrated
BioSciences, Inc.
In estimating the reporting units fair value for purposes of the Companys fiscal 2009
impairment assessments, management prepared a cash flow analysis for the following five years,
limited to the expected cash flows from solely the Unitract business. Key assumptions used in the
cash flow analysis included a) sales volume which was dependent on expected timing of the
completion of the various phases of our production capabilities, b) selling prices we expect to
achieve based on our market studies and indications from identified willing buyers of this product,
c) gross margins of 26% to 40%, and d) a discount rate of 10%. While our Unitract syringe has only
recently been commercialized after its regulatory approval in the United States and has yet to
achieve significant sales, management believes that the assumptions used in the cash flow analysis
are reasonable. Included in the cash flows analysis is expected expenditure needed to build up our
Unitract production capability. While we expect the Unifill syringe business to be profitable,
including a fairly short payback period on the costs to build production lines dedicated to the
Unifill syringe, we did not include any of that expected business or development in our 2009
estimated cash flows analysis. Even without this Unifill business, the resulting estimated fair
value of the Unitract portion of this reporting unit was in excess of the reporting units entire
carrying value by 68%.
In addition to the above, management compared the estimated fair value of the Unitract
business portion of our second reporting unit to the Companys market capitalization as of June 30,
2009. Market capitalization of $55.7 million was well in excess of the Unitract business fair
value. Management also considered that market capitalization through early November 2009 continued
to be in excess of the Unitract business fair value, thereby providing some further assurance that
the reporting unit is not impaired.
Share-Based Compensation
Share-based compensation expense relating to options to purchase common stock is estimated at
the grant date based on the fair value of the related stock option using the Black-Scholes option
pricing model, with the exception of grants subject to market conditions which are valued based on
Barrier and Monte Carlo option pricing models. These models use various assumptions including the expected
dividend yield, the risk-free interest rate, the expected volatility and the expected life. We have
not historically paid dividends to our shareholders, and, as a result, we have assumed a dividend
yield of 0%. The risk free interest rate is based upon the rates of Australian bonds with a term
equal to that of the option. The expected volatility is based upon our historical share price. The
expected life of the options to purchase common stock is based upon the outstanding contractual
term of the stock option on the date of grant.
Revenue Recognition
We recognize revenue from licensing fees, industrialization efforts and products sold.
In June 2008, we granted an exclusive licensing arrangement to allow our pharmaceutical
partner to use certain of our intellectual property in order and solely to develop in collaboration
with us, our Unifill syringe for use in and sale to the pre-filled syringe market. The up-front,
non-refundable fee paid for this license is being amortized over the expected life of the related
agreement. In late fiscal 2009, we entered into an industrialization agreement with our
pharmaceutical partner, retroactive to July 2008, under which we received payments upon achievement
of certain pre-defined milestones in our development of the Unifill syringe. Revenue is recognized
upon achievement of the at risk milestone events, which represents the culmination of the
earnings process related to such events. Milestones include specific phases of the project such as
product design, prototype availability, user tests, manufacturing proof of principle and the
various steps to complete the industrialization of the product. Specific payment amounts and
completion dates were established for each milestone payment. Revenue recognized is
17
commensurate with the milestones achieved. Billings are similarly triggered, and we have no
future performance obligations related to previous milestone payments. Each milestone payment is
non-refundable when made.
We recognize revenue from sales of products at the time of shipment and when title passes to
the customer.
Results of Operations
The
following table summarizes our results of operations for the nine
months ended March
31, 2010 and 2009 and for the fiscal years ended June 30, 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Revenues |
|
$ |
8,770 |
|
|
$ |
12,273 |
|
|
$ |
19,976 |
|
|
$ |
3,500 |
|
|
$ |
2,070 |
|
Cost of sales |
|
|
1,835 |
|
|
|
2,774 |
|
|
|
3,537 |
|
|
|
2,456 |
|
|
|
1,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
6,935 |
|
|
|
9,499 |
|
|
|
16,439 |
|
|
|
1,044 |
|
|
|
509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
6,955 |
|
|
|
621 |
|
|
|
1,048 |
|
|
|
532 |
|
|
|
265 |
|
Selling, general, and administrative |
|
|
18,897 |
|
|
|
10,807 |
|
|
|
14,941 |
|
|
|
8,211 |
|
|
|
6,497 |
|
Depreciation and amortization |
|
|
1,727 |
|
|
|
655 |
|
|
|
804 |
|
|
|
636 |
|
|
|
169 |
|
Impairment of property, plant and
equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
547 |
|
Loss on the sale of property, plant
and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
27,579 |
|
|
|
12,083 |
|
|
|
16,793 |
|
|
|
9,379 |
|
|
|
9,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(20,644 |
) |
|
|
(2,584 |
) |
|
|
(354 |
) |
|
|
(8,335 |
) |
|
|
(8,577 |
) |
Interest expense |
|
|
91 |
|
|
|
279 |
|
|
|
249 |
|
|
|
459 |
|
|
|
537 |
|
Interest income |
|
|
(707 |
) |
|
|
(332 |
) |
|
|
(361 |
) |
|
|
(203 |
) |
|
|
(111 |
) |
Other (income) expense, net |
|
|
15 |
|
|
|
217 |
|
|
|
275 |
|
|
|
(54 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,043 |
) |
|
$ |
(2,748 |
) |
|
$ |
(517 |
) |
|
$ |
(8,537 |
) |
|
$ |
(8,969 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares
outstanding |
|
|
44,882,882 |
|
|
|
34,963,610 |
|
|
|
34,426,353 |
|
|
|
32,938,477 |
|
|
|
23,413,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted |
|
$ |
(0.45 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, 2010 Compared to Nine Months Ended March 31, 2009
Revenues. Revenues decreased by $3.5 million or 28.5%. Revenues from our industrialization
agreement with sanofi-aventis decreased from $7.3 million to $5.0 million due to the nature and
timing of milestones achieved during the nine months ended March 31, 2010. Revenues from our
exclusive licensing agreement with sanofi-aventis increased from $1.8 million to $2.0 million. We
have recognized and will continue to recognize the revenue from the exclusive licensing agreement
on a straight-line basis over the remaining term of the agreement. Since these revenues are based
in Australian dollars, the variations in revenues from the exclusive licensing agreement between
the nine months ended March 31, 2009 results from fluctuations in foreign currency translation
rates. Revenues from product sales of our contract manufacturing business decreased from $3.1 million to $1.7
million principally because most of our efforts have been devoted to the development of the Unifill
syringe in fiscal 2010.
18
Cost of sales. Cost of sales decreased by $1.0 million or 33.8%. The decrease was primarily
attributable to a reduction in product sales under our contract manufacturing sales activity, as no cost of sales were
associated with the revenue recognized under the exclusive licensing and industrialization
agreements.
Research and development expenses. Research and development expenses increased by $6.3
million, primarily as a result of $4.3 million incurred in connection with the issuance of 833,333
fully-vested shares of common stock to employees in consideration of their transfer to us of
certain intellectual property rights. The increase was also a result of additional expenditures to
finalize the product specifications of our Unifill syringe.
Selling, general and administrative expenses. Selling, general and administrative expenses
increased by $8.1 million or 74.8%. During the later part of fiscal 2009 and the beginning of
fiscal 2010, we increased the workforce at our Lewisberry, Pennsylvania facility, and as a result,
we incurred payroll expenses and recruiting fees during the nine months ended March 31, 2010
of $6.3 million, an increase of $3.3 million compared to the same period last year Additionally,
during the nine months ended March 31, 2010, we incurred legal and consulting fees of $4.6 million
an increase of $3.1 million compared to the same period last year. The increase was due primarily
to expenses we incurred related to our redomiciliation and Nasdaq listing. Additionally, during the
nine months ended March 31, 2010, we recorded $2.5 million in share-based compensation expense, a
decrease of $0.2 million compared to the same period last year. Our share-based compensation
expense during the nine months ended March 31, 2009 included $1.5 million recorded in December 2008
for the issuance of 1.7 million shares of common stock to our Chief Executive Officer.
Depreciation and amortization expense. Depreciation and amortization expense increased by $1.1
million or 163.7% which was primarily attributable to $9.6 million of property, plant and equipment
additions during the nine months ended March 31, 2010. We expect our depreciation and amortization
expense to increase in the future as a result of the construction of our new headquarters and
manufacturing facility and significant investments we have made and will continue to make to
develop the facility, which includes the purchase of pilot machinery for the Unifill syringe.
Interest expense. Interest expense decreased by $0.2 million, primarily as a result of lower
levels of outstanding debt. We expect that our interest expense will increase significantly in the
future as we are seeking to obtain approximately $18.0 million in debt financing for the
construction of our new headquarters and manufacturing facility.
Interest income. Interest income increased by $0.4 million, primarily as a result of higher
cash balances during the nine months ended March 31, 2010.
Other
expense. Other expense decreased by $0.2 million primarily a result of the appreciation
of the U.S. dollar against the Australian dollar.
Net loss and loss per share. Net loss for the nine months ended March 31, 2010 and 2009 was
$20.0 million and $2.7 million, respectively. Basic and diluted loss per share was $0.45 and $0.08,
respectively, on weighted average shares outstanding of 44,882,882 and 34,963,610, respectively.
The increase in the weighted average shares outstanding was primarily due to the issuance of common
stock in connection with our October 2009 equity financing.
Fiscal Year 2009 Compared to Fiscal Year 2008
Revenues. Revenues increased by $16.5 million or 470.7%. The increase was primarily
attributable to $13.6 million in revenue recognized under our industrialization agreement with
sanofi-aventis based on milestones achieved during fiscal 2009. Additionally, we recognized $2.5
million in revenue under our exclusive licensing agreement with sanofi-aventis based on amortizing
over the term of the related agreement the up front, non-refundable intellectual property licensing
fee we received. Revenues from our contract manufacturing business decreased by $0.7 million in
fiscal 2009.
Cost of sales. Cost of sales increased by $1.1 million or 44.0%. The increase was primarily
attributable to an increase in the cost of plastics and commodities we use to assemble certain of
our products within our contract
19
business line and to higher payroll-related expenses resulting from hiring additional
manufacturing personnel. There was no cost of sales associated with the exclusive licensing or
industrialization agreements.
Research and development expenses. Research and development expenses increased by $0.5
million, or 97.0% primarily as a result of additional expenditures to finalize the product
specifications of our Unifill syringe.
Selling, general and administrative expenses. Selling, general and administrative expenses
increased by $6.7 million or 82.0%. During 2009, we significantly increased our workforce at our
Lewisberry, Pennsylvania headquarters and manufacturing facility, which included hiring over ten
management-level personnel for our operational, regulatory affairs and finance departments. As a
result of these hires, we incurred $2.5 million in additional payroll, employee-related expenses
and recruiting fees. In addition, we incurred $1.0 million in legal, consulting and professional
fees, primarily related to our anticipated Nasdaq listing. Finally, during fiscal 2009, our
share-based compensation expense, included in selling general and administrative expense, increased
by $2.2 million. Of this increase, $1.5 million is due to the issuance of 1.7 million shares of
common stock to our Chief Executive Officer in December 2008 and $0.7 million is due to additional
expense resulting from significant issuances of stock options to employees, directors and
consultants during fiscal 2009.
Depreciation and amortization expense. Depreciation and amortization expense increased by $0.2
million or 26.4%, which was primarily attributable to $3.0 million we spent to purchase additional
property, plant and equipment.
Interest expense. Interest expense decreased by $0.2 million, primarily as a result of higher
levels of outstanding debt during the prior year.
Interest income. Interest income increased by $0.2 million during fiscal 2009 primarily as a
result of fluctuations in interest rates.
Other expense (income). Other expense during fiscal 2009 was $0.3 million compared to other
income of $0.1 million during fiscal 2008, primarily as a result of the depreciation of the U.S.
dollar against Australian dollar.
Income taxes. Due to the significant net operating losses recorded in recent years, we fully
offset any related income tax benefits with increases to our valuation allowance, thereby resulting
in no income tax provision or benefit recorded for either year.
Loss per share Due to the factors described above, net losses for the years ended June 30,
2009 and 2008 were $0.5 million and $8.5 million, respectively, with both basic and diluted losses
per share totaling $0.02 and $0.26, respectively, on weighted average shares outstanding of
34,426,353 and 32,938,477 respectively. The increase in weighted-average shares outstanding is
primarily due to 1.7 million shares of common stock issued to our chief executive officer in
November 2008.
Fiscal Year 2008 Compared to Fiscal Year 2007
Revenues. Revenues increased by $1.4 million or 69.1%. The increase was primarily attributable
to a full year of contract manufacturing business as compared to only six months in fiscal 2007,
resulting from the acquisition of Integrated BioSciences, Inc. in January 2007.
Cost of sales. Cost of sales increased by $0.9 million or 57.3%. The increase was primarily
attributable to a full year of contract manufacturing business as compared to only six months in
fiscal 2007, resulting from the acquisition of Integrated BioSciences, Inc. in January 2007.
Research and development expenses. Research and development expenses increased by $0.3
million, or 100.8% primarily as a result of additional expenditures related to the development of
our Unifill syringe.
Selling, general and administrative expenses. Selling, general and administrative expenses
increased by $1.7 million or 26.4%. The increase is attributable to a full year of contract
manufacturing business as compared to only six months in fiscal 2007, resulting from the
acquisition of Integrated BioSciences, Inc. in January 2007. The
20
increase is also attributable to a $0.3 million increase in non-cash compensation expense,
which is included in selling general and administrative expense.
Depreciation and amortization expense. Depreciation and amortization expense increased by $0.5
million or 276.3%, which was primarily attributable to the acquisition of Integrated BioSciences,
Inc. in January 2007.
Impairment of property, plant and equipment and associated loss on sale. During fiscal 2007,
we ceased operations at an Australian facility and made the determination not to relocate the
manufacturing equipment to the new U.S. facility. As a result, we recorded an impairment on
property, plant and equipment of $0.5 million. We sold the equipment and recorded a loss of $1.6
million.
Interest expense. Interest expense decreased by $0.1 million, primarily as a result of lower
interest expense related to the convertible notes issued during December 2006, as a majority of the
notes were converted during fiscal 2007.
Interest income. Interest income increased by $0.1 million, primarily as a result of
fluctuations in interest rates.
Other expense (income). Other income during fiscal 2008 and 2007 was $0.1 million.
Income taxes. Due to the significant net operating losses recorded over the recent years, we
fully offset any related income tax benefits with increases to our valuation allowance, thereby
resulting in no income tax provision or benefit recorded for either year.
Loss per share. Due to the factors described above, net losses for the years ended June 30,
2008 and 2007 were $8.5 million and $9.0 million, respectively, with both basic and diluted losses
per share totaling $0.26 and $0.38, respectively, on weighted average shares outstanding of
32,938,477 and 23,413,811 respectively. The increase in weighted average shares outstanding is due
to issuances of common stock related to the private placement and conversion of convertible debt
into common stock during fiscal 2008.
Liquidity and Capital Resources
To date, we have funded our operations primarily from a combination of equity issuances by
UMSL prior to the redomiciliation, borrowings under our bank term loans and payments from
sanofi-aventis under our exclusive licensing and industrialization agreements. As of June 30, 2009,
cash and cash equivalents were $3.6 million and our debt was $3.1 million. As described below,
since July 1, 2009, we have also raised approximately A$50.9 million ($47.l million) in equity
financing. We also expect to receive $5.2 million in assistance from the Commonwealth of
Pennsylvania and 4.0 million euros of additional milestone-based payments from sanofi-aventis under the
industrialization agreement during fiscal 2010. As of March 31,
2010, cash and cash equivalents
were $24.8 million, short-term investments in certificates of deposit with
original maturities of greater than 90 days were $9.2 million
and our debt was $2.8 million. We believe that our cash on hand, together with
the amount described above will be sufficient to fund our operations and business expansion
activities (other than the full development of a new manufacturing facility) through the
second quarter of fiscal 2011.
In October and November 2009, we raised an aggregate of A$50.9 million ($47.1 million) through
a combination of a US and Australian private placement and a share purchase plan for our Australian
and New Zealand shareholders. We also issued options to purchase 3.1 million shares for no
additional consideration to the investors in the private placement. Of these options, 50% are
exercisable at A$7.50 per share, and 50% are exercisable at A$12.00 per share. We also issued
options to purchase 497,662 shares to certain brokers as consideration for their services in
connection with the private placement, which are exercisable at A$5.10 per shares. All of the
options described above will expire in November 2012. The proceeds from the private placement and
the share purchase plan will be used to accelerate the expansion of our U.S. operational
capabilities and production facilities, to purchase capital equipment and complete the
industrialization program for the Unifill syringe.
In October 2009, we accepted a $5.2 million offer of assistance from the Commonwealth of
Pennsylvania. The offer includes $2.0 million for the development of our new global headquarters
and manufacturing facility as well as up to $2.0 million in low-interest financing loans for land,
building, acquisition and construction costs. The offer also includes a $0.5 million opportunity
grant as well as $0.5 million in tax credits. Finally, the offer includes up to
21
$0.2 million for the reimbursement of eligible job training costs. The offer is based on our
proposed project being expected to create more than 200 new full-time jobs by December 31, 2012, to
retain our 141 existing employees and to have a total cost of $86.0 million and is contingent upon
us submitting complete applications for each of these programs. The $2.0 million for the
development of our new global headquarters and manufacturing facility is contingent on the
Pennsylvania legislature passing legislation raising the authorized debt level for the program
under which that portion of the assistance would be provided. As the offer of assistance requires
us to make formal applications for these programs, there may be a number of contingencies relating
to the amount, if any, of funds that we may receive, the period over which we may receive those
funds and our right to retain any funds that we do receive. We may have obligations under the
programs that we may be unable to fulfill. We expect that these contingencies and our obligations
under the programs will be more clearly identified during the application process. As a result, at
this time, we cannot assure you that we will receive or have the right to retain all or any of the
assistance for our current development project or otherwise.
We are in the process of developing a new manufacturing facility in central Pennsylvania. We
estimate the total cost of the development to be approximately $27.0 million. We intend to fund
approximately $9.0 million of the cost from our own cash reserves and seek external financing for
up to approximately $18.0 million for construction during the next 12 months.
We funded the costs of the redomiciliation through cash from operations and cash on hand.
These expenditures have been expensed as incurred. Additionally, we will incur increased costs as a
result of becoming a U.S. reporting company, primarily in areas of human resources, tax, risk
management, accounting and financial reporting, investor relations, legal and other services.
We expect that the costs we will incur in connection with the completion of our
industrialization program will be offset by the revenue we earn under the industrialization
agreement with sanofi-aventis.
The
following table summarizes our cash flows during the nine months
ended March 31, 2010
and 2009 and the years ended June 30, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended March 31, |
|
Year Ended June 30, |
|
|
(in thousands) |
|
|
2010 |
|
2009 |
|
2009 |
|
2008 |
|
2007 |
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(8,752 |
) |
|
$ |
8,083 |
|
|
$ |
6,795 |
|
|
$ |
(7,623 |
) |
|
$ |
(5,010 |
) |
Investing activities |
|
|
(18,710 |
) |
|
|
(1,310 |
) |
|
|
(2,912 |
) |
|
|
(624 |
) |
|
|
(2,355 |
) |
Financing activities |
|
|
49,056 |
|
|
|
(3,183 |
) |
|
|
(3,265 |
) |
|
|
7,882 |
|
|
|
8,378 |
|
Nine
Months Ended March 31, 2010 compared to Nine Months Ended
March 31, 2009
Net Cash (Used In) Provided by Operating Activities
Net cash used
in operating activities during the nine months ended March 31, 2010 was $8.8 million
compared to net cash provided by operating activities of $8.1 million during the nine
months ended March 31, 2009. The decrease in cash flow was primarily due to the receipt of $13.0
million under the exclusive licensing agreement with sanofi-aventis in 2008, $1.8 million of which
was recognized as revenue during the nine months ended March 31, 2009.
Net Cash Used in Investing Activities
Net cash used in investing activities was $18.7 million during the nine months ended March 31,
2010, as a result of $9.6 million of costs incurred in connection with the purchase of machinery
related to the pilot lines for our Unifill syringe as well as the purchase of the land in
connection with our new headquarters and manufacturing facility. Additionally, during the nine
months ended March 31, 2010, we purchased $9.1 million in certificates of deposits.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities during the nine months ended March 31, 2010 was
$49.1 million compared to net cash used in financing activities of $3.2 million during the nine
months ended March 31, 2009. During the nine months ended March 31, 2010, we received $47.1 million
from the issuance of common stock related to our private placement and share purchase plan, and
$1.8 million upon the exercise of stock options. During the nine months ended March 31, 2009, we
elected to terminate a licensing agreement that we determined was no longer consistent with our
business strategies, and, as a final settlement, we repaid $2.3 million of the $3.0 million that we
had originally received in 2008 under the licensing agreement, while retaining $0.7 million to
cover related legal fees.
22
Fiscal Year 2009 Compared to Fiscal Year 2008
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities during fiscal 2009 was $6.8 million compared to net
cash used in operating activities $7.6 million during fiscal 2008. The increase in cash flow was
primarily due to $10.4 million of higher net income after adding back depreciation and amortization
and share-based compensation expense. The increase was also attributable to $9.8 million of
deferred revenue recorded in connection with our exclusivity agreement with sanofi-aventis, which
was partially offset by amounts due from sanofi aventis under our industrialization agreement.
These agreements were entered into during fiscal 2009.
Net Cash Used in Investing Activities
Net cash used in investing activities increased by $2.3 million, primarily due to significant
costs incurred in connection with the production of machinery used in the manufacturing of our
Unitract 1 mL Syringe. Additionally, during fiscal 2009, we incurred significant leasehold
improvement costs at our Lewisberry, Pennsylvania headquarters and manufacturing facility.
During fiscal 2010, we expect to incur capital expenditures of approximately $12.0 million to
purchase machinery required to manufacture our Unifill syringe and approximately $1.5 million to
purchase machinery for the production of our Unitract 1 mL syringe. We may incur additional, less
significant capital expenditures for general equipment, furniture and fixtures.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $3.3 million during fiscal 2009 compared to net cash
provided by financing activities of $7.9 million during fiscal 2008. During fiscal 2009, we elected
to terminate a licensing agreement that we determined was no longer consistent with our business
strategies, and, as a final settlement, we repaid $2.3 million of the $3.0 million that we had
originally received in 2008 under the licensing agreement, while retaining $0.7 million to cover
related legal fees. During fiscal 2008, we received $2.8 million from the issuance of common stock
and $1.9 million from the issuance of convertible debt.
Fiscal Year 2008 Compared to Fiscal Year 2007
Net Cash Used in Operating Activities
Net cash used in operating activities was $7.6 million during fiscal 2008 as compared to $5.0
million during fiscal 2007. The increase in cash flow was primarily due to $0.9 million of lower
income after adding back depreciation and amortization, share-based compensation expense,
impairment and a loss on the sale of property, plant and equipment in connection with the closing
of a factory in Australia.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased by $1.7 million during fiscal 2008 due to a
decrease in the purchase of property, plant and equipment. During fiscal 2007, we incurred
significant up-front fees in connection with the production of our machinery used to manufacture
our 1mL syringe.
Net Cash Provided by Financing Activities
23
Net cash provided by financing activities was $7.9 million during fiscal 2008 compared with
$8.4 million during fiscal 2007. During fiscal 2008, we received $2.8 million from the issuance of
common stock and $1.9 million from the issuance of convertible debt. During fiscal 2007, we
received $3.5 million and $4.4 million from the issuance of common stock and convertible debt,
respectively.
Contractual Obligations
The following table provides information regarding our contractual obligations as of June 30,
2009:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
More Than |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
|
|
(In Thousands) |
|
Long-term debt |
|
$ |
3,133 |
|
|
$ |
405 |
|
|
$ |
653 |
|
|
$ |
541 |
|
|
$ |
1,534 |
|
Interest |
|
|
811 |
|
|
|
148 |
|
|
|
222 |
|
|
|
170 |
|
|
|
271 |
|
Operating leases |
|
|
1,253 |
|
|
|
455 |
|
|
|
755 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
5,197 |
|
|
$ |
1,008 |
|
|
$ |
1,630 |
|
|
$ |
754 |
|
|
$ |
1,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our term loans bear interest at a rate of prime plus 1.50%. The future contractual obligations
for interest is based upon 4.75%, which is the prime rate as of June 30, 2009 (3.25%) plus 1.50%.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as such term is defined in the SEC rules.
Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168, The FASB Accounting Standards CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No.
162 (SFAS 168). SFAS 168 represents the last numbered standard issued by the FASB under the old
(pre-codification) numbering system, and amends the GAAP hierarchy. On July 1, 2009, the FASB
launched its new codification (i.e. the FASB Accounting Standards Codification ASC). The
codification supersedes existing GAAP for nongovernmental entities.
In May 2009, the FASB issued a new accounting standard included in ASC 855, Subsequent Events,
formerly SFAS No. 165, Subsequent Events. ASC 855 sets forth: 1) the period after the balance
sheet date during which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial statements; 2) the
circumstances under which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements; and 3) the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. ASC 855 is effective for
interim and annual periods ending after June 15, 2009.
In
October 2009, the FASB issued Accounting Standards Update
2009-13, Multiple-Deliverable Revenue Arrangements
(ASU 2009-13). ASU 2009-13 provides amendments to the criteria in Subtopic 605-24 for separating
consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling
prices to determine the selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific evidence is not
available) or estimated selling price if neither of the first two are available. ASU 2009-13 also
eliminates the residual method for allocating revenue between the elements of an arrangement and
requires that arrangement consideration be allocated at the inception of the arrangement. Finally,
ASU 2009-13 expands the
24
disclosure requirements regarding a vendors multiple-deliverable revenue arrangements. ASU
2009-13 should be applied on a prospective basis for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. We are evaluating the
impact the adoption of ASU 2009-13 will have on our consolidated financial statements.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in interest rates and foreign currency exchange
rates. Changes in these factors could cause fluctuations in our results of operations and cash
flows.
Interest Rate Risk
Our exposure to interest rate risk is limited to our cash that is invested in money market
funds with highly liquid short term investments and our variable interest rate term loans. We
currently do not utilize derivative instruments to mitigate changes in interest rates.
Foreign Currency Exchange Rate Fluctuations
The majority of our revenues are derived from payments under our industrialization agreement
received in euros while we incur most of our expenses in U.S. dollars and Australian dollars. In
addition, a substantial portion of our cash and cash equivalents and investments are held at
Australian banking institutions and are denominated in Australian dollars. We are exposed to
foreign currency exchange rate risks on these amounts. We currently do not utilize options or
forward contracts to mitigate changes in foreign currency exchange rates. For U.S. reporting
purposes, we translate all assets and liabilities of our non-U.S. entities into U.S. dollars using
the exchange rate as of the end of the related period and we translate all revenues and expenses of
our non-U.S. entities using the average exchange rate during the applicable period.
25
BUSINESS
Overview
We are a U.S. based medical device company focused on the design, development, manufacture and
supply of a proprietary range of retractable syringes. Primary target customers for our products
include pharmaceutical manufacturers, suppliers of medical equipment to healthcare facilities, and
distributors to patients who self-administer prescription medication. All of our syringes incorporate automatic and
fully-integrated safety features which are designed to protect those at risk of needlestick
injuries and injury from other unsafe injection practices. Our main product is the Unifill
ready-to-fill syringe, which is designed to be supplied to pharmaceutical manufacturers in a form
that is ready for filling with their injectable drugs and vaccines. We have a strategic partnership
with sanofi-aventis, a large global pharmaceutical company, pursuant
to which it has paid us a 10.0 million euro exclusivity fee and has
committed to pay us up to an additional 17.0 million euros to fund our
industrialization program for the Unifill syringe. Upon the scheduled completion of the
industrialization program in late 2010, we expect to commence the supply and sale of the Unifill
syringe to sanofi-aventis. We are also in discussions with other pharmaceutical companies that are
seeking to obtain access to the Unifill syringe. In addition, we have recently begun to manufacture
our Unitract 1mL insulin syringes at our FDA-registered manufacturing facility in Lewisberry,
Pennsylvania.
In the United States and a number of other sophisticated healthcare markets, hospitals and
other healthcare facilities, as well as pharmaceutical manufacturers who supply injectable drugs
and vaccines in a prefilled syringe format, are increasingly required to comply with legislation
aimed at protecting healthcare workers from the risk of acquiring blood-borne diseases such as HIV
and hepatitis C via needlestick injuries. Our core portfolio of safety syringe products, including
the Unifill syringe and the Unitract 1mL syringes, are designed for supply to pharmaceutical
manufacturers and healthcare facilities which are seeking to comply with these needlestick
prevention laws. We expect our products will also be used by patients who self-administer
prescription medication outside of the healthcare setting. The safety features incorporated into
our products include an automatic needle retraction mechanism which allows operators to control the
rate of needle withdrawal directly from the body into the barrel of the syringe, as well as an
independent auto-disable mechanism to prevent product tampering or re-use. The integration of these
safety features within the barrel is designed to make them intuitive to use and compact in size for
convenient handling and disposal.
The Unifill syringe is targeted for use by pharmaceutical manufacturers who utilize pre-filled
(ready-to-fill) syringes as a preferred drug delivery device for injectable drugs and vaccines. We
are aware of more than 50 drug products used within healthcare facilities, or by patients who
self-administer prescription medication, that are currently available in a prefilled syringe
format. We have designed the Unifill syringe for integration into the manufacturing systems currently used by target pharmaceutical customers to fill and package
standard prefilled syringes. To our knowledge, our Unifill product is the only known prefilled
syringe with automatic safety features which are integrated inside the glass barrel.
We have signed an exclusive licensing agreement and an industrialization agreement with
sanofi-aventis, who we believe to be the single largest global purchaser of pre-filled syringes.
Under the exclusive licensing agreement, sanofi-aventis paid us a
10.0 million euro upfront one-time fee,
and we granted sanofi-aventis a license to certain of our intellectual property in order and solely
to develop, in collaboration with us, the Unifill syringe. Pursuant to the exclusive licensing
agreement, we are negotiating a list of therapeutic drugs classes with respect to which
sanofi-aventis would have the exclusive right to the product for a specified term, during which
sanofi-aventis would purchase the product exclusively from us. We have retained the right to
negotiate other business arrangements with additional pharmaceutical companies seeking to market
the product for use within therapeutic drug classes outside of those exclusive to sanofi-aventis,
or after the expiration of the exclusive license with sanofi-aventis.
Under
the industrialization agreement, sanofi-aventis has agreed to provide
us with up to 17.0 million euros in payments based upon milestones to be achieved under the industrialization program for
the Unifill syringe. We expect to complete this program in late 2010. We have received payments of
11.5 million euros under the industrialization agreement from October 2008 through December 2009.
Although we have received the exclusivity fee and industrialization payments from sanofi-aventis,
to date we have not received any product revenues from sales of the Unifill syringe and our
revenues in respect of this product to date consist solely of the exclusivity fee and
industrialization payments. We describe our arrangements with sanofi-aventis in more detail under
Strategic Partnership with sanofi-aventis. We are also aware of more than 20 other pharmaceutical
companies that supply
26
injectable drugs in a prefilled syringe format, and we have received interest in the Unifill
syringe from a number of these companies.
Our Unitract 1mL syringes are designed primarily for use in healthcare facilities and by
patients who self-administer prescription medication such as insulin. We have recently begun U.S.
production of this syringe, which we expect to release commercially
during July 2010.
During March 2010, we signed an exclusive five year agreement with Stason Pharmaceuticals, a U.S.
based pharmaceutical company, to market our Unitract 1mL syringe in Japan, China and Taiwan. Under
the agreement, the pharmaceutical partner is required to purchase a minimum of 1.0 million units of
the Unitract 1mL syringe per year during the term of the contract. We have received regulatory
clearance for the marketing and sale of the Unitract 1mL syringe in the United States, the European Union, Canada and Australia. We have also filed patents for
other clinical and prefilled safety syringe products that may incorporate certain aspects of our
core technology for future commercialization. Our in-house team has fully designed, developed,
built and validated, to the requirements of the U.S. Food and Drug Administration (FDA) and ISO
13485, the automated assembly system that we use to support production of our Unitract 1mL syringe
at our FDA-registered manufacturing facility in Lewisberry, Pennsylvania. We consider our ability
to design and develop highly sophisticated, innovative medical devices, and the automated assembly
systems we use to manufacture them, to be a core business competency.
We also have an original equipment manufacturer relationship with B. Braun Medical, Inc., a
multinational healthcare equipment company. We refer to this as our contract manufacturing
business. Under our contract with B. Braun, we assemble a selection of their non-proprietary
specialty syringes. We purchase the pre-manufactured syringe components from various third party
suppliers. We then assemble the syringes on a build to order basis and perform the related quality
inspections and then sell the assembled product to B. Braun. We ship the stock that we assemble to
B. Braun for its own commercial use, in areas such as insertion into specialty procedural kits.
During the year ended June 30, 2009, we recognized revenues of $3.1 million under our contact with
B. Braun, which represented 15.6% of our total revenues during that year. The contract
manufacturing business was historically operated by Integrated BioSciences, Inc. which we acquired
in January 2007. We are currently concentrating substantially all of our commercial and operational
efforts towards the commercialization of our proprietary medical devices, namely the Unifill
syringe and the Unitract 1mL syringe, and do not expect the contract manufacturing business to
represent a significant portion of our business going forward. Our contract with B. Braun expired
in December 2009 and, although we currently continue to operate under the terms of this contract,
we do not know whether we will renew it.
Market Opportunity
The Syringe Market and the Increasing Use of Pre-Filled Syringes
According to the International Association of Safe Injection Technology, approximately 35
billion syringes are manufactured every year, half of which are used within sophisticated
healthcare markets such as North America, Europe, Japan and Australia. The majority of therapeutic
injections occur within healthcare facilities such as acute-care hospitals and long-term care
centers. Other sectors of the global syringe market include patients who self-administer
prescription medication such as insulin, government agencies which sponsor harm reduction programs,
and non-government organizations which conduct vaccination programs.
Injectable drugs and vaccines have traditionally been supplied in a vial or ampoule, with the
operator required to draw up a measured dose of medication into a conventional plastic syringe
immediately prior to an injection. Prefilled syringes typically utilize a glass barrel and are
filled by pharmaceutical manufacturers so that they are ready for use prior to shipment. While
conventional syringes make up the vast majority of syringes used, prefilled syringes are becoming
an increasingly popular method of drug delivery.
We are aware of more than 50 drugs and vaccines that are currently available in a prefilled
syringe format from more than 20 pharmaceutical companies, and believe that a number of pipeline
drugs are likely to be supplied in this format in the future. Greystone Associates, a medical and
health care technology consulting firm, has estimated that approximately 2.23 billion prefilled
syringes will be used globally in 2009, and that this number will increase significantly in the
coming years. Drugs that are currently supplied in a prefilled syringe format include
anti-coagulants to prevent and treat thrombosis, anti-inflammatories to treat rheumatoid arthritis,
anti-infectives to
27
treat hepatitis B and C, hematological drugs to stimulate production of red or white blood
cells to treat anemia or fight infection, and vaccines which seek to prevent a range of diseases.
We expect that prefilled syringes will also be increasingly used in the coming years as a drug
delivery device for other therapeutic drug classes including obstetrics, oncology, osteoporosis and
human growth hormone treatment.
Prefilled syringes have a number of advantages over conventional plastic syringes. First,
prefilled syringes help pharmaceutical companies improve manufacturing efficiencies through the
elimination of drug wastage commonly associated with the overfilling of multi-use vials. Second,
healthcare workers often prefer prefilled syringes because they can facilitate a relatively fast,
accurate and convenient administration of a drug. Furthermore, a pre-measured dose of an injectable
drug in a prefilled syringe can help reduce the risk of dosing errors. Finally, the relative
ease-of-use by patients of prefilled syringes also makes them suitable for the self-administration
of many types of prescription medication.
Increased Focus on Prevention of Needlestick Injuries
The World Health Organization estimates that 1.3 million people die each year as a result of
needlestick injuries, syringe re-use, and other unsafe injection practices. Needlestick injuries
and syringe sharing can result in the transmission of a number of blood-borne diseases such as
HIV/AIDS and hepatitis C. The U.S. Centers for Disease Control and Prevention estimates that
385,000 needlestick and other sharps-related injuries are sustained by U.S. hospital-based
healthcare personnel each year. The U.S. Occupational Safety and Health Administration, or OSHA,
estimates that when other secondary healthcare settings are also taken into account, there are as
many as 800,000 needlestick injuries to U.S. healthcare workers each year. To help minimize the
transmission of blood-borne pathogens caused by unsafe injection practices, many international
healthcare and pharmaceutical markets are transitioning to the mandatory use of safety syringes.
In sophisticated healthcare markets, governments are focused on the mandatory use of safety
devices within healthcare facilities to protect healthcare workers from the risk of acquiring
blood-borne pathogens such as HIV-AIDS and hepatitis C via needlestick injuries. The United States
was the first nation to mandate the use of safety syringes within healthcare facilities, with the
adoption of the Federal Needlestick Prevention Act in 2000, or FNSPA, and the subsequent revision
to the Bloodborne Pathogens Standard (BPS). According to the International Healthcare Worker Safety
Center at the University of Virginia Health System, approximately one in five healthcare facilities
that were inspected by OSHA between 2002 and 2007 have been issued with citations for
non-compliance with the BPS.
The European Union is also considering the introduction of legislation requiring member
countries to use needlestick prevention products within healthcare facilities, while other
countries such as Canada and Australia have also taken steps to encourage the use of safety
syringes. As a result of this existing and proposed legislation, safety syringes are now commonly
used within the healthcare facilities in a number of countries.
The United States represents the largest and most mature market for safety syringes, with a
substantial majority of hypodermic syringes and needles used within acute-care facilities featuring
some type of needlestick prevention device. Notwithstanding the increased use of safety syringes,
we believe that current safety syringe technologies are in several respects inadequate to fully
protect healthcare workers from infection risk caused by needlestick injuries or other potential
transmission modes. First, most products currently available require operators to manually slide an
external plastic guard or sheath over the needle after use, or retract the needle into the barrel
at a rapid, uncontrolled rate. Second, healthcare workers may choose to remove or not activate the
safety feature of some types of safety syringe products. Moreover, activation of the needle
retraction mechanism in the open air for some retractable syringes, rather than inside the body of
the patient, may create the potential risk of infection via needlestick injuries or aerosol
(splatter).
OSHA differentiates safety features in two primary ways. First, it differentiates passive
safety features which remain in effect before, during and after use from active devices which
require the worker to activate the safety mechanism. Second, OSHA regulations state that products
with an integrated safety design that is an integral part of the device and cannot be removed are
usually preferred to those with an accessory safety device with safety features that are external
and dependent on employee compliance. We believe the majority of safety syringe products used in
U.S. healthcare facilities incorporate active safety features which are not fully integrated within
the barrel of the syringe.
28
We are not aware of any prefilled syringe with passive safety features that are integrated
within the glass barrel. To improve compliance with legislation such as the FNSPA, a number of
pharmaceutical companies attach ancillary safety products onto standard prefilled syringes
following dose filling and prior to packaging. We estimate that approximately half of the drugs
currently available in prefilled syringe format are supplied by the pharmaceutical manufacturer
with an ancillary safety device. The majority of these ancillary safety products slide an external
plastic sheath or guard over the needle once the injection has been completed.
It is costly for pharmaceutical companies to purchase these ancillary safety products and the
automated assembly systems required to attach them onto a standard prefilled syringe. The
relatively large size of prefilled syringes supplied with an ancillary safety device can also
significantly increase the shipment and packaging costs of pharmaceutical companies. Furthermore,
some of these prefilled syringes supplied with an ancillary safety device require the removal of
the safety device from the syringe prior to use, creating the risk of infection via needlestick
injury or aerosol (splatter). Thus, we believe that there is a significant market opportunity for a
prefilled syringe with passive and integrated safety features that is compatible with
pharmaceutical companies drug filling systems.
We also believe there are significant market opportunities for the use of conventional and
prefilled safety syringes outside of mainstream healthcare facilities. In addition to insulin, a
range of other injectable drugs designed for the prevention and/or treatment of chronic or
debilitating conditions such as arthritis, multiple sclerosis and osteoporosis and thrombosis are
now available for self-administration. We believe the popularity of safety syringes among patients
who self-administer prescription medication may increase due to their capacity to prevent
needlestick injuries to family members and encourage safe, convenient disposal. When purchased with
a prescription, a number of insurance providers in the U.S. now cover safety insulin syringes under
the same tier level for reimbursement as standard insulin syringes.
We believe that another market which may in the future transition towards the mandatory use of
non-reusable safety syringes is the harm reduction market, where governments provide free or
subsidized syringes to injecting drug users, or IDUs. The reuse and sharing of syringes by IDUs has
been identified as a prime accelerant in the transmission of blood-borne diseases and is
responsible for one-third of new HIV infections outside sub-Saharan Africa. The governments of more
than 60 countries worldwide now sponsor harm reduction programs which seek to minimize unsafe
injection practices by IDUs. While these programs have proven largely effective in preventing or
containing HIV epidemics, the continued sharing of standard syringes among IDUs has contributed to
the continuation of national epidemics of the relatively more infectious hepatitis C. Furthermore,
the unsafe disposal of syringes in public areas creates public concern regarding the risk of
needlestick injury. Recognizing the scale of HIV and hepatitis C epidemics, and the substantial
economic costs associated with their long-term treatment, many governments are considering the use
of single use, safety syringes as a way to enforce safe injection practices among IDUs.
Our Solution
Our clinical and prefilled safety syringes incorporate automatic, also known as passive,
safety features which are fully integrated within the barrel. They are designed to assist
pharmaceutical manufacturers and healthcare facilities comply with needlestick prevention laws and
to encourage single use and safe disposal practices outside of healthcare settings. We consider the
following combination of core proprietary features available in our safety products to be unique
within the marketplace:
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Integrated design. All safety features are fully integrated inside the syringe barrel to
facilitate compact handling, intuitive use and convenient disposal. |
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Passive retraction. The activation of the needle retraction mechanism occurs
automatically while the needle is inside the body to help prevent the risk of needlestick
injury. |
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Controlled retraction. Operators can control the speed of needle retraction directly
from the body into the syringe barrel to help reduce the risk of infection through
transmission routes such as needlestick injuries and aerosol (splatter). |
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Auto-disable. Upon withdrawal of the needle into the barrel, the plunger is
automatically locked to prevent re-exposure or reuse. |
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We have utilized this core proprietary technology to design and develop a range of
prefilled and clinical safety syringes. Furthermore, we are not aware of any other company
that is manufacturing safety syringes with automatic, integrated safety features in both a
prefilled (glass) and clinical (plastic) format which share the same common technology
platform.
Key target markets for our products include pharmaceutical companies, healthcare facilities
and patients who self-administer prescription medication. We believe that the majority of our
products would be supplied, either directly or through pharmaceutical customers, for use within
sophisticated healthcare markets such as North America, Western Europe and some Asia-Pacific
countries that require or are transitioning toward the mandatory use of safety syringes.
Business Strategy
Our goal is to progressively move to the forefront of the international transition of
healthcare and pharmaceutical markets to the mandatory use of prefilled and clinical safety
syringes. We believe that the competitive strength of our proprietary technology puts us in a
strong position to become an established and preferred supplier of best-in-class safety syringe
products to pharmaceutical companies, healthcare facilities and patients who self-administer
prescription medication.
Key elements of our business strategy are the development, production and sale of our
patent-protected safety syringes, the continued expansion of our global operational and commercial
presence and the establishment of long-term supply relationships with multinational pharmaceutical
and healthcare equipment companies. We are committed to designing, developing and supplying
innovative medical devices that can enhance and save lives. We plan to:
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Continue to build a strong relationship with sanofi-aventis: We believe sanofi-aventis
is currently the worlds largest consumer of prefilled syringes. We have had a business
relationship with sanofi-aventis since 2003, and under our industrialization agreement with
sanofi-aventis, they are funding our industrialization program for the Unifill syringe.
Upon completion of the industrialization program, we expect to begin supplying the product
to sanofi-aventis for use within defined therapeutic drug classes. |
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Enter into business relationships with additional pharmaceutical companies: We have
retained the right to negotiate licensing and other business arrangements relating to the
Unifill syringe with other pharmaceutical companies for use within those therapeutic drug
classes outside of those held by sanofi-aventis during its period of exclusivity. It is our
intention to secure agreements with other additional pharmaceutical companies who are
industry leaders within their respective therapeutic areas of expertise. By pursuing this
strategy, we believe our products can be marketed within a significant number of large
therapeutic drug classes where prefilled syringes are commonly used. |
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Expand our proprietary product portfolio: We will seek to enhance our competitive
position in the design, development and supply of innovative safety medical devices for use
within international pharmaceutical and healthcare markets. In addition to the production
and supply of the Unifill syringe and the Unitract 1mL syringes, we intend to commercialize
a number of additional proprietary products which we believe can also meet the
functionality and safety requirements of target customers. This may include the
commercialization of our range of Unitract Clinical Syringes in a 3mL and 5mL size targeted
for use within acute care hospitals and other healthcare facilities. We may also
commercialize additional ready-to-fill syringe products currently in our development
pipeline which, like the Unifill syringe, would be designed for supply to pharmaceutical
manufacturers. While our focus will remain on the pursuit of organic growth opportunities,
we may evaluate opportunities to acquire other complementary technologies or products on a
case-by-case basis. |
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Expand our operational capabilities within Central Pennsylvania: The United States
represents the worlds largest and most mature market for the supply and use of our
products and services. We will continue to consolidate the majority of our commercial and
operational activities within Central Pennsylvania, a national logistics hub situated
between several major pharmaceutical and medical device industry clusters. We intend to
make a significant investment in the expansion of our operational |
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capabilities within Pennsylvania to support the commercialization of our core products, such
as the Unifill syringe. |
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Manufacture and supply our Unitract 1mL Syringes to target international markets: We
commenced production of the Unitract range of 1mL safety syringes at our facility in
Pennsylvania in August 2009. We expect to release this product
commercially during July 2010. Product variants within this range have been certified for marketing
and sale within key international territories including the United States, Canada, Europe
and Australia. We intend to continue to expand our customer base of pharmaceutical
companies and healthcare distributors for the marketing and sale of the Unitract 1mL
syringes. |
Our Products
Unifill syringe
Our Unifill ready-to-fill syringe is, to our knowledge, the only prefilled syringe with
passive (automatic) and fully integrated safety features. Manufacturing features include a staked
needle with a glass barrel that requires shaping at only one end to allow sourcing from a multitude
of glass cartridge suppliers, and the development of components in the fluid path that use the same
materials as standard prefilled syringes to facilitate drug compatibility. The product is designed
to be a safe, compact and intuitive primary drug container suitable for use within healthcare
facilities and by patients who self-administer prescription medication.
The Unifill syringe is designed to fit the manufacturing systems currently used by
pharmaceutical customers to load and package a measured dose of an injectable drug into a standard
prefilled syringe. We believe the use of the Unifill syringe by a pharmaceutical customer can
eliminate its need to purchase and attach ancillary safety products onto standard prefilled
syringes to comply with needlestick prevention legislation. In addition to reducing production
costs associated with the purchase and attachment of these ancillary devices, we believe our
product can also significantly reduce comparable shipping and storage costs. The compact size,
intuitive use, functionality and automatic safety features of the Unifill syringe may also help
pharmaceutical companies extend product lifecycles, increase levels of market differentiation in
competitive therapeutic areas, and expand the marketability of some drugs for convenient
self-administration by patients outside of the healthcare setting.
We commenced initial pilot production of the Unifill syringe at our Lewisberry, Pennsylvania
facility in 2008. We intend to file a Type III Drug Master File for the product with relevant
regulatory authorities such as the FDA, although it is the ultimate responsibility of the
pharmaceutical customer to obtain final approval of the combination drug-delivery device. We expect
that the commencement of product sales will coincide with the completion of the industrialization
program with sanofi-aventis.
Unitract 1mL syringes
The Unitract 1mL range of safety syringes is primarily designed for the subcutaneous injection
of drugs within healthcare facilities and by patients who self-administer prescription medication
such as insulin. In addition to insulin and tuberculin variants, the Unitract 1mL range also
includes the Unitract safe syringe which is custom-designed for use by governments that utilize
harm reduction (needle exchange) programs to prevent the reuse, sharing and unsafe disposal
practices of IDUs. Unlike the Unifill ready-to-fill syringe, the Unitract 1mL syringes require
healthcare workers or patients to draw up the dose from a vial or ampoule immediately prior to the
injection.
We have received regulatory certification for the marketing and sale of various Unitract 1mL
syringe products in the United States, Australia and Canada and have received CE Mark approval in
the European Union. We commenced initial production of Unitract 1mL syringes in China during 2008
to support regulatory approval and marketing activities. In August 2009, we commenced production of
the Unitract 1mL syringes at our Pennsylvania facility utilizing an automated assembly system that
we designed and built in-house. During April 2010,
we received clearance from the FDA to permit us to commence
commercial sales of U.S. manfactured stock for our Unitract 1mL syringe.
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Pipeline Products
We also hold additional syringe-related intellectual property for products which we intend to
commercialize in the future. These pipeline products include a range of plastic clinical syringes
to be developed in a range of larger sizes such as 3mL and 5mL. We believe that commercialization
of this pipeline range of larger clinical syringes would further improve our opportunities to
market and sell our products within healthcare facilities such as acute-care hospitals. We have
also designed and filed patents for a number of other safety syringe products that utilize our
proprietary technology. We intend to continue to expand our competitive position within target
pharmaceutical and healthcare markets through the commercialization of a number of these other
pipeline products.
Strategic Partnership with sanofi-aventis
We started to collaborate with sanofi-aventis in 2003 for the development of the Unifill
syringe as a next-generation drug delivery safety device. Sanofi-aventis is a large, global
pharmaceutical company, whose products span multiple therapeutic areas, including cardiovascular
diseases, thrombosis, oncology, metabolic diseases, internal medicine and vaccines. We believe that
sanofi-aventis is currently the worlds largest purchaser of prefilled syringes.
We have signed an exclusive licensing agreement with sanofi-aventis. Under the exclusive
licensing agreement, we have granted sanofi-aventis an exclusive license to certain of our
intellectual property in order and solely to develop, in collaboration with us, the Unifill syringe
for use in and sale to the prefilled syringe market within those therapeutic areas agreed upon
between us, and a non-exclusive license outside those therapeutic areas that are exclusive to
sanofi-aventis or after the expiration of the exclusive license with sanofi-aventis.
We and sanofi-aventis have recently agreed on a list of therapeutic drug classes that are
exclusive to sanofi-aventis. These areas include the full therapeutic classes of antithrombotic
agents and vaccines and an additional six smaller subgroups that fall within other therapeutic
classes that we believe represent new market opportunities in the pharmaceutical use of prefilled
syringes.
Pursuant
to the exclusive licensing agreement, sanofi-aventis has paid to us a
10.0 million euros upfront one-time fee. The exclusive license granted thereunder has an initial term expiring on June
30, 2014. If, during the term of the exclusive license, sanofi-aventis has purchased the Unifill
syringe for use with a particular drug product, sanofi-aventis will receive a ten-year extension of
the term of the exclusive license, which extension will be reduced to five years if sanofi-aventis
does not sell a minimum of 20 million units of the product in any of the first five years of such
ten-year extension period.
Under the exclusive licensing agreement, we are not precluded from using certain of our
intellectual property to develop, license and sell any products in any market other than the
ready-to-fill syringe market, or from entering into licensing or other business arrangements with
other pharmaceutical companies for the ready-to-fill syringe market outside those therapeutic areas
that are exclusive to sanofi-aventis, or after the expiration of the exclusive license with
sanofi-aventis. If we grant a license to a third party in respect of the ready-to-fill syringe
market, then we are required to pay sanofi-aventis 70% of any access, license or other upfront fee
received from such third party for access to purchase the products until our payments to
sanofi-aventis have totaled 10.0 million euros, following which we are required to pay 30% of such fees we
receive through the end of the initial exclusivity period. We are also required to pay
sanofi-aventis an annual royalty payment of 5% of the revenue generated from any sale of the
Unifill syringe to third parties, up to a maximum amount of
17.0 million euros in such royalty payments.
On June 30, 2009, we signed an industrialization agreement with sanofi-aventis. The
industrialization agreement sets forth the terms for the collaboration between the parties to
design, develop, scale up and industrialize the Unifill syringe, including the timetable and
milestones for the industrialization program. Under the industrialization agreement, sanofi-aventis
has agreed to provide up to 17.0 million euros in payments to us based on milestones we achieve in our
industrialization program. The industrialization program began in July 2008 and is scheduled to be
completed by the end of 2010. From October 2008 through December 2009, we have received payments of
11.5 million euros under the industrialization agreement. Key hurdles which remain until we complete the
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industrialization program include the development of a pilot automated assembly system, the
completion of a new manufacturing facility and the establishment of a designated cleanroom for the
installation of the automated assembly system. The industrialization agreement required
sanofi-aventis to provide a list to us that specifies therapeutic drug classes for which it seeks
to market the Unifill syringe on an exclusive basis. We and sanofi-aventis are discussing the
exclusivity list sanofi-aventis provided us and if the list is agreed, sanofi-aventis will retain
exclusive rights to the use of the product within these designated therapeutic drug classes until
June 30, 2014, subject to the extension described above. If we are unable to reach an agreement on
the list, then sanofi-aventis will retain full exclusivity across all therapeutic classes only
until June 29, 2012. Unless terminated earlier, the industrialization agreement has a term until
the completion of the industrialization program.
The industrialization agreement provides that, subject to the full completion of the
industrialization program, the parties will negotiate a supply agreement for the manufacture and
purchase of the final product on a commercial scale. The supply agreement will provide that
sanofi-aventis and its affiliates will purchase the final product exclusively from us, and the
industrialization agreement provides that we are not required to commit more than 30% of our
expected installed production capacity to sanofi-aventis and its affiliates for the 12 months
following the receipt of a purchase order. Any order of sanofi-aventis, together with its other
orders, that will exceed the 30% capacity limit will require up to a maximum of 24 months lead time
before we are required to commence delivery of that order.
Pursuant to the industrialization agreement, if UMSL agrees to, or proposes to agree to, a
change of control with a third party, UMSL must give a written notice to sanofi-aventis, who will
be entitled, within five business days, to make an offer on at least equivalent terms. In the
absence of an improved change of control proposal, UMSL must accept the matching offer of
sanofi-aventis. If UMSL receives an improved change of control offer from the third party, then
UMSL must give a further notice to sanofi-aventis for it to make a further matching offer. In
addition, if during the term of the industrialization agreement, a change of control that does not
involve sanofi-aventis, or its affiliates, obtaining control of UMSL (i) is not recommended by
UMSLs board of directors, (ii) will cause harm to sanofi-aventis, as defined in the agreement or
(iii) under which Mr. Alan Shortall, our CEO and director, is not to continue in such capacities
for at least two years after the change of control, then sanofi-aventis will have the right to
terminate the industrialization agreement within ten business days after receiving a notice from
UMSL, or after it otherwise becomes aware of the change of control. Pursuant to the
industrialization agreement, a change of control means, in general terms, a change in the ownership
of 50% or more of UMSLs shares or the power to determine the majority composition of UMSLs board
of directors or any other event that UMSLs board determines to be a change of control event.
Manufacturing
We have an FDA-registered, 50,000 square foot medical device production facility in
Lewisberry, Pennsylvania. This facility has two class-eight clean rooms. The first clean room
houses a fully automated assembly system used to manufacture our Unitract 1mL syringes. This
automated assembly system, which has an optimum capacity of up to 40 million units per year, was
fully designed, developed, built and qualified by our in-house team. The other clean room is used
to assemble non-proprietary medical devices under contract with B. Braun. Other areas of our
Lewisberry facility are used for offices, product design and prototyping, engineering activities
and the construction of automated assembly systems. Prior to the commencement of commercial
production of the Unitract 1mL syringe at our Lewisberry facility, we utilized a medical device
company in China to manufacture sufficient volumes of these products to obtain regulatory approvals
and undertake preliminary marketing activities. We intend to focus upon the domestic manufacture of
our Unitract 1mL syringe at our Lewisberry facility in the foreseeable future.
To support our manufacturing plan for the high-volume production of the Unifill syringe, we
are outsourcing the development and manufacture of automated assembly systems for this product to
Mikron Assembly Technology, an established industry specialist. On November 12, 2009, we signed a
purchase agreement with Mikron for the development and supply of a pilot automated assembly system
to support the commercial production of our Unifill syringe. The development of the automated
assembly system began in December 2009, with completion and installation into our new facility
scheduled for the fourth quarter of 2010. We anticipate that this automated assembly system will
have a target production capacity of approximately 60 million units per year. Additional assembly
lines, which we expect to commission and operate beyond 2010, are targeted to have a significantly
higher annual manufacturing capacity. To support our business expansion activities, we are in the
process of developing a
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new manufacturing facility close to our Lewisberry facility within York County, Pennsylvania.
We expect to transition at least some of our manufacturing activities into the new manufacturing
facility during 2010. For more details regarding the development of the new manufacturing facility,
please see Item 3. Properties.
We source our components and raw materials under written contracts with a variety of
suppliers, all of which specialize in the medical device and pharmaceutical sectors. We have also
entered into a number of relationships with other companies for the initial supply of components,
raw materials and related services for the Unifill syringe. Due to an initial requirement for only
limited production volumes of components which comprise the Unifill syringe, we currently receive a
majority, or in some cases all, our components such as rubber seals and glass barrels from a single
source supplier. To support the industrialization program for this product and further strengthen
our supply chain in the long-term, we intend to establish, wherever feasible, a dual-source
strategy for the production of key components, raw materials and related services. The companies we
expect to appoint for the production and supply of items and related services pertaining to the
Unifill syringe all have an established presence in the international drug delivery market, with
the majority having facilities in both North America and Europe.
Sales and Marketing
We expect that our primary customers will be pharmaceutical companies which utilize prefilled
syringes as a primary container device for the administration of therapeutic drugs and vaccines. We
intend to enter into supply agreements for the Unifill syringe with sanofi-aventis and some other
pharmaceutical customers. The majority of these target pharmaceutical customers are multinational
companies with headquarters located in either the United States or Europe.
We expect the pharmaceutical customer to be primarily responsible for the sale, marketing and
clinical use of the combination drug-delivery device to target government agencies, healthcare
facilities or patients who self-administer prescription medication within indicated therapeutic
drug classes. We expect to support pharmaceutical customers in the development of documentation or
marketing material pertaining to the recommended clinical use of the device with the contained drug
or vaccine. We may also enter into agreements for the supply of the Unitract 1mL syringes directly
to pharmaceutical companies for use with injectable drug products which are supplied in a vial and
marketed in a kit format.
We also intend to distribute our Unitract 1mL syringes within the United States via
distributors which specialize in target markets such as long-term and acute care healthcare
facilities or the direct mail order of prescription medication and medical equipment to patients
for self-administration. We will also examine opportunities to enter into relationships for our
Unitract 1mL syringes with group purchasing organizations, or GPOs, which secure competitive
pricing for commodity items such as syringes on behalf of members such as acute-care hospitals.
Over the past decade, many GPOs have introduced programs that encourage the expedient evaluation
and selection of innovative products developed by smaller companies. However, we do not expect to
fully penetrate the acute-care hospital market until we have a complete range of clinical syringe
sizes.
Outside of the United States, we have a distributor to sell our Unitract 1mL syringes in
Canada and expect to appoint other distributors within other international healthcare markets such
as Western Europe and the Asia-Pacific region. Furthermore, we intend to review opportunities to
collaborate with governments seeking to examine the use of our Unitract 1mL syringes as a means of
helping to prevent the re-use, sharing and unsafe disposal of non-sterile syringes by injecting
drug users.
We have a small internal team to support the training of appointed distributors in the
marketing and clinical use of our Unitract 1mL syringes. We intend to expand this team as we
commence sales of our Unitract 1mL syringes, appoint additional distributors and commercialize our
larger-sized clinical syringes.
Intellectual Property
We have established an intellectual property portfolio through which we seek to protect our
products and technology. Our intellectual property portfolio includes 24 issued patents in 13
countries, with two issued patents each in Australia and the United States. We have filed a
significant number of patent applications that are now pending in Australia, the United States,
Europe, China, India and other countries covered under the Patent Cooperation Treaty. We also hold
provisional patent applications in both the United States and Australia and several
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registered trademarks. Our patents expire at various dates between 2018 and 2028. Trade
secrets law in the United States and other jurisdictions provides additional protection. We also
enter into non-disclosure agreements with certain vendors and customers. All active United States
based employees have signed confidentiality, non-compete and intellectual property assignment
agreements.
We classify our patents and patent applications as they relate to particular product
categories including 1mL insulin and safe syringes with an attached needle; clinical syringes which
include larger sizes and interchangeable luer needles; and our Unifill syringe. Many of the
features claimed in the insulin and safe syringes patents, such as the mechanism allowing automatic
and controlled needle retraction within an integrated medical device, also apply to our other
safety syringe products, including the Unifill syringe. Some key patents covering countries such as
Australia, the United States and Europe, as well as some of our international patent applications,
are described below:
INSULIN AND SAFE SYRINGE (UNITRACT)
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Description |
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Issued Patent No. |
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Patent Application No. |
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Publication No. |
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Patent Expiry Date |
Australian Patent |
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731159 |
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September 22, 2018 |
US Patent |
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6,083,199 |
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September 22, 2018 |
International
Patent Application |
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PCT/AU01/000458 |
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WO 01/80930 |
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April 20, 2021 |
Europe |
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01925194.1 |
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1 276 530 A |
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April 20, 2021 |
USA |
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7,500,967 |
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20030158525 |
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July 15, 2022 |
International
Patent Application |
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PCT/AU2004/000354 |
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WO 2004/082747 |
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Europe |
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04721775.7 |
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1 608 421A |
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March 19, 2024 |
USA |
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10/549,710 |
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20060235354 |
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March 19, 2024* |
The patents listed above cover the following features of the insulin and safe syringe:
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a compressed spring to retract the needle and rotate the plunger into a locked position
to prevent sharps exposure; and |
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a plastic mount on the needle to provide a needle pickup by the plunger for needle
retraction. |
CLINICAL SYRINGE
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Description |
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Issued Patent No. |
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Patent Application No. |
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Publication No. |
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Patent Expiry Date |
International
Patent Application |
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PCT/AU2005/000107 |
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WO 2005/072801 |
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Europe |
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05700138.0 |
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1 708 772 |
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January 28, 2025 |
USA |
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10/587,705 |
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20080255513 |
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January 28, 2025* |
International
Patent Application |
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PCT/AU2006/000618 |
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WO 2006/119570 |
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Europe |
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06721494.0 |
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1 879 635A |
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May 11, 2026 |
USA |
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11/914,092 |
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20090221962 |
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May 11, 2026* |
The patents listed above cover the following features of the clinical syringe:
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a plunger that holds a compressed spring that is used to retract a needle mount from the
end of the barrel; |
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a plunger that retracts with controlled reaction; and |
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a needle that is mounted in the barrel with retaining clips integrally formed in the
barrel and which uses an ejector to release the needle. |
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READY TO FILL SYRINGE (UNIFILL)
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Description |
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Issued Patent No. |
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Patent Application No. |
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Publication No. |
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Patent Expiry Date |
International
Patent Application |
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PCT/AU2006/000516 |
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WO 2006/108243 |
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Europe |
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06721397.5 |
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1 868 669 |
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April 18, 2026 |
USA |
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11/911,481 |
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2009093759 |
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April 18, 2026 |
International
Patent Application |
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PCT/AU2008/000971 |
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WO 2009/003234 A1 |
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Europe |
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08757038.8 |
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July 2, 2028 |
The patents listed above cover the following features of the Unifill syringe:
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a two-piece plunger seal and a needle seal with an ejector; |
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a plunger that is molded with a needle pickup feature; |
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a plunger where the control rod is broken off to reduce the disposal length; |
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a needle retainer and release ring that are glued to a glass barrel to overcome limited
moldability of glass; and |
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a needle retainer, ejector ring and needle seal that retain the needle mount until
released for retraction after the full dose is administered |
An issued patent, unlike a pending patent application, has been reviewed by the relevant
national patent office and has met the legal requirements for patentability required by the law of
that country. An issued patent can therefore be enforced against infringers in the courts of the
country where granted, although an issued patent does not guarantee that the company has freedom to
operate and could still infringe upon the issued patent of another patent held by a third party.
In a number of key countries, we have registered trademarks including Unitract and have
commenced applications to register trademarks for our company name, Unilife, as well as our
ready-to-fill syringe brand name Unifill. Unitract is a registered trademark in the United States
and is also filed under the Madrid Protocol Agreement for the international registration of marks
in 25 countries, including France, Germany, Japan, China, Switzerland and the United Kingdom.
Additionally, Unitract is a registered trademark in Australia, Mexico, New Zealand, Canada, India,
Indonesia, South Africa, and Brazil. Unitract Safe Syringe is also a registered trademark in
Australia.
Government Regulation
The development, manufacture, sale and distribution of medical devices are subject to
comprehensive government regulation. Our medical devices and manufacturing operations are subject
to regulation under the Federal Food, Drug and Cosmetic Act, or the FDC Act, as implemented and
enforced by the FDA and various other federal and state agencies and are also subject to regulation
by foreign governmental agencies. These laws and regulations govern the development, testing,
manufacturing, labeling, advertising, marketing and distribution and market surveillance of medical
devices.
FDAs Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical device we wish to distribute commercially in the
United States will require either prior 510(k) clearance or premarket approval from the FDA. The
FDA classifies medical devices intended for human use into three classes: Class I, Class II and
Class III. Class I or Class II devices require the manufacturer to submit to the FDA a premarket
notification requesting permission to commercially distribute the device. This process is generally
known as 510(k) clearance. Class III devices require premarket approval. Our clinical range of
syringes, including our Unitract 1mL syringe, are Class II devices. Our Unifill syringe does not
require 510(k) clearance because it will be sold to drug manufacturers for use as drug packaging.
None of our products require premarket approval.
36
There is a different regulatory process that will apply to our Unifill syringe because it will
be used by drug manufacturers to provide drugs in a prefilled format. In the case of the Unifill
syringe, it is the responsibility of the pharmaceutical customer who will use the Unifill syringe
for its drug to obtain final product approvals, either by submitting a new drug application or
abbreviated new drug application. In order to support the pharmaceutical customers application, we
intend to create what is known as a drug master file. A drug master file is a submission to the FDA
that may be used to provide information about facilities, processes or articles used in the
manufacturing, packaging and storing of one or more human drugs. The drug master file will define
the manufacturing and safety characteristics of the Unifill syringe while protecting proprietary
information regarding its technical design.
510(k) Clearance Pathway
When obtaining a 510(k) clearance is required, we must submit a premarket notification
demonstrating that our proposed device is substantially equivalent to another legally marketed
product (i.e., that it has the same intended use and that it is as safe and effective as a legally
marketed, or predicate, device and does not raise different questions of safety or effectiveness
than does a predicate device). According to FDA regulations, the FDA is required to clear or deny a
510(k) premarket notification within 90 days of submission of the application, or 30 days in the
case of an abbreviated 510(k) application that may be filed for product line extensions. As a
practical matter, 510(k) clearance often takes between three and twelve months.
We received 510(k) clearance for our Unitract 1mL insulin syringe in October 2008 that covered
the production of the device by a contractor outside the United States. We received 510(k) clearance for the production of
our Unitract 1mL insulin syringe at our Pennsylvania manufacturing facility in March 2010.
Premarket Approval Pathway
A premarket approval application must be submitted to the FDA if the device cannot be cleared
through the 510(k) process. A premarket approval application must be supported by extensive data,
including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling
to demonstrate to the FDAs satisfaction the safety and effectiveness of the device. This process
does not apply to our current range of products.
Pervasive and Continuing Regulation
After a device is placed on the market, numerous regulatory requirements apply. These include:
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quality system regulations, or QSR, which require manufacturers, including
third-party manufacturers, to follow stringent design, testing, control, documentation
and other quality assurance procedures during all aspects of the manufacturing
process; |
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labeling regulations and FDA prohibitions against the promotion of products for
uncleared, unapproved or off label uses; |
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medical device reporting regulations, which require that manufacturers report to
the FDA if their device may have caused or contributed to a death or serious injury or
malfunctioned in a way that would likely cause or contribute to a death or serious
injury if the malfunction were to occur; and |
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post-market surveillance regulations, which apply when necessary to protect the
public health or to provide additional safety and effectiveness data for the device. |
The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced
inspections by the FDA to determine our compliance with the QSR and other regulations, and these
inspections may include the manufacturing facilities of our manufacturing subcontractors.
Failure to comply with applicable regulatory requirements can result in enforcement action by
the FDA, which may include any of the following sanctions:
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fines, injunctions, consent decrees and civil penalties; |
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recall or seizure of our products; |
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operating restrictions, partial suspensions or total shutdown of production; |
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refusing our requests for 510(k) clearance or premarket approval of new products or
new intended uses; |
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withdrawing 510(k) clearance or premarket approvals that are already granted; and |
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criminal prosecution. |
Regulation in the European Union and Australia
The European Union has adopted numerous directives regulating the design, manufacture,
clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with
the requirements of the relevant directive will be entitled to bear CE conformity marking,
indicating that the device conforms with the essential requirements of the applicable directives
and, accordingly, can be commercially distributed throughout the member states of the European
Union. The method of assessing conformity varies depending on the type and class of the product,
but normally involves a combination of self-assessment by the manufacturer and a third party
assessment by a Notified Body which is an independent and neutral institution appointed by a
country to conduct the conformity assessment. This third-party assessment may consist of an audit
of the manufacturers quality system and specific testing of the manufacturers device. An
assessment by a Notified Body in one member state of the European Union is required in order for a
manufacturer to commercially distribute the product throughout these countries. ISO 9001 and ISO
13845 are voluntary harmonized standards. Compliance establishes the presumption of conformity with
the essential requirements for CE Marking. In July 2009, we received our ISO 13485:2003 quality
system certification. Our certification includes the design, development, production and
distribution or sterile syringes and insulin syringes and the provision of contract manufacturing
services to the medical device industry.
We have successfully completed a Notified Body audit to allow our Unitract syringes to bear
the CE mark and are currently awaiting certification from the Notified Body.
In Australia, the Therapeutic Goods Administration, or TGA, is responsible for administering
the Australian Therapeutics Goods Act. The Office of Devices, Blood and Tissues is the department
within the TGA responsible for medical devices. The Australian Register of Therapeutic Goods, or
ARTG, controls the legal supply of therapeutic goods in Australia. The ARTG is the register of
information about therapeutic goods for human use that may be imported, supplied in, or exported
from Australia. Any use of an unapproved medical device in humans, even in pilot trials, requires
an exemption from the requirement for inclusion on the ARTG. US manufacturers seeking to market
product in Australia must acquire CE certification and lodge manufacturer evidence, including the
CE certificate and a Declaration of Conformity to Australian Requirements, with the TGA. The
lodging of this information with the TGA is completed by an Australian sponsor, with the
assistance/support of the manufacturer. Upon TGA acceptance of the manufacturer evidence, the
Australian sponsor/manufacturer must create a medical device inclusion in the ARTG and only is then
able to release USA-manufactured product in Australia. Our only product that is included on the
ARTG is our Unitract 1mL syringe that was previously manufactured for
us in China. During June 2010, we received our CE certification for
U.S.-manufactured stock of this product. We are currently completing
the necessary registration and listing documents for sale of this
product in Australia.
With regard to the regulatory process in the European Union and Australia for the Unifill
syringe, as in the case of the U.S., it is the responsibility of the pharmaceutical customer who
will use the Unifill syringe for its drug to obtain final product approvals.
Other Regulations
We are also subject to various federal, state and local laws and regulations, both in the
United States and other international territories where we conduct business, relating to such
matters as safe working conditions, laboratory
38
and manufacturing practices and the use, handling and disposal of hazardous or potentially
hazardous substances used in connection with our research and development work. Although we believe
we are in compliance with these laws and regulations in all material respects, we cannot provide
assurance that we will not be required to incur significant costs to comply with environmental laws
or regulations in the future.
We are subject to various federal, state and local laws in the United States targeting fraud
and abuse in the healthcare industry, which generally prohibit us from soliciting, offering,
receiving or paying any remuneration in order to induce the ordering or purchasing of items or
services that are in any way paid for by Medicare, Medicaid or other government-sponsored
healthcare programs. Healthcare costs have been and continue to be a subject of study,
investigation and regulation by governmental agencies and legislative bodies around the world. The
U.S. federal government continues to scrutinize potentially fraudulent practices affecting
Medicare, Medicaid and other government healthcare programs. Payers have become more influential in
the marketplace and increasingly are focused on drug and medical device pricing, appropriate drug
and medical device utilization and the quality and costs of healthcare. Violations of fraud and
abuse-related laws are punishable by criminal or civil sanctions, including substantial fines,
imprisonment and exclusion from participation in healthcare programs such as Medicare and Medicaid
and health programs outside the United States.
Competition
The healthcare equipment, pharmaceutical and medical device industry sectors in which we
operate are highly competitive. We compete with many companies, both public and private, that range
in size from small, highly focused businesses to large diversified multinational manufacturers of
healthcare and pharmaceutical equipment, as more fully described below.
While we do not believe there are any other companies that offer a ready-to-fill syringe with
safety features which are fully integrated within the glass barrel, there is a highly concentrated
market for the production of standard ready-to-fill syringes for supply to pharmaceutical
manufacturers. We are aware of five companies which specialize in the production and supply of
glass ready-to-fill syringes. These companies are Becton, Dickinson and Company, or BD,
Gerresheimer Bünde GmbH, MGlas AG, SCHOTT forma vitrum AG, and Nuova Ompi. All of these companies
are larger and better capitalized than we are, and have an extensive base of pharmaceutical
customers. We estimate the market concentration rate for these five companies to be around 95%. We
believe BDs market share to be in excess of 50%, as it has supply relationships with most
pharmaceutical companies and contract manufacturing organizations. Of these five aforementioned
companies, we believe that BD is the only one which also markets and supplies ancillary safety
products for attachment onto standard prefilled syringes to assist pharmaceutical companies in
their compliance with needlestick prevention laws. We are aware of another specialist supplier of
ancillary safety products, Safety Syringes Inc, which has contracts with a number of pharmaceutical
manufacturers.
We have sought to strengthen our competitive position in this marketplace in a number of ways.
For example, the design of the Unifill syringe incorporates the use of a glass barrel which
requires shaping at only one end. As a result, the glass barrel for the Unifill syringe can be
sourced from the many global suppliers of glass cartridges and not just the five specialty
manufacturers mentioned above.
The global market for clinical (non-pre-filled) plastic syringes is highly competitive, with
at least 50 manufacturers located across North America, Europe and the Asia-Pacific. The market for
clinical safety syringes is relatively less competitive, yet highly concentrated. We believe BD is
the largest global supplier of clinical safety syringes. Other companies which compete in this
market sector include Retractable Technologies, Inc, Covidien and Smiths Medical. All of these
companies offer a full range of clinical safety syringes, operate a strong sales, distribution and
customer support network, and have existing supply relationships with major healthcare buying
groups.
Research and Development
During the fiscal years ended June 30, 2009 and 2008, we incurred approximately $1.0 million
and $0.5 million, respectively, on research and development of our technologies. Research and
development costs include activities related to the research, development, design, testing, and
manufacturing of prototypes of our products. It also includes clinical activities and regulatory
costs. Research and development costs also include costs
39
associated
with certain consultants engaged in research and development activities along with a portion
of the overhead costs we incur to operate our manufacturing facility. We expect our research and
development expenses to continue as we continue to develop other pipeline product variants of our
technology such as the Unitract clinical range of larger syringe sizes.
Employees
As
of June 8, 2010, we had 141 employees, of whom 117 are engaged in operations
activities including research and development, quality assurance and
manufacturing activities, six
are engaged in marketing and clinical activities and 18 are engaged in finance, legal and other
administrative functions. All but four of our employees and all of our executive officers are
located at our facilities in Central Pennsylvania. All but two of our employees are full-time
employees. None of our employees are represented by a labor union or covered by a collective
bargaining agreement. We consider our relations with our employees to be good.
Legal Proceedings
In the ordinary course of our business, we may be subject to various claims, pending and
potential legal actions for damages, investigations relating to governmental laws and regulations
and other matters arising out of the normal conduct of our business. We are not aware of any
material pending legal proceedings to which we or any of our subsidiaries is a party or of which
any of our properties is the subject
Corporate History
Unilife Corporation was incorporated in Delaware on July 2, 2009, and is currently a
wholly-owned subsidiary of UMSL. As we describe in more detail under Managements Discussion and
Analysis of Financial Condition and Results of OperationsRedomiciliation. On January 27, 2010,
Unilife Corporation became the parent company of UMSL upon completion of the redomiciliation and
UMSLs shareholders and option holders exchanged their interests in UMSL for equivalent interests in
Unilife Corporation. Our principal executive offices are located at 633 Lowther Road, Lewisberry,
PA 17339. Our telephone number at this address is +1 717 938-9323.
UMSL was incorporated on June 28, 1985, in South Australia, Australia. The registered office
of UMSL is located at Suite 3, Level 11, 1 Chifley Square, Sydney NSW 2000. Originally known as
Musgrave Block Holdings Limited, UMSL acquired all of the issued shares of Unitract Pty Limited in
November 2002, and changed its name to Unitract Limited (now Unilife Medical Solutions Limited),
listed on the Australian Securities Exchange, or ASX under the ticker UNI and continued the
business operations of Unitract Pty Limited and the development of Unitract Pty Limiteds
retractable syringe project. In January 2007, in order to obtain a manufacturing presence in the
United States, UMSL acquired all the stock of Integrated BioSciences, Inc., a Pennsylvania-based
company, which changed its corporate name to Unilife Medical Solutions, Inc. in February 2009. At
the time of its acquisition by UMSL, Integrated BioSciences, Inc. was in the business of contract
manufacturing of syringes for third parties and developing automated assembly equipment.
40
Properties
We currently lease approximately 50,000 square feet of a building in Lewisberry, Pennsylvania
under an operating lease expiring in August 2012 of which approximately 6,000 square feet are being
used as our executive offices and the remaining 44,000 square feet are being used as our
manufacturing facility and warehouse. The manufacturing facility is an FDA-registered medical
device production facility. This facility has two class-eight clean rooms. The first clean room
houses a fully automated assembly system used to manufacture our Unitract 1mL syringes. The other
clean room is used to assemble non-proprietary medical devices under contract for outsourcing
customers. Other areas of the manufacturing facility are used for offices, product design and
prototyping, engineering activities and the construction of automated assembly systems.
We have also entered into a short-term lease for a small office building near our main
facility. This office building is used for engineering and product development.
We also occupy an office of 1,100 square feet in Sydney, Australia under a lease expiring in
November 2010. This office space is used for certain finance and administrative operations in Australia.
Development of New Global Headquarters and Manufacturing Facility
To support our business expansion activities, we are in the process of developing a new global
headquarters and manufacturing facility in Pennsylvania in order to accommodate our projected
demand for the Unifill syringe. We purchased a tract of land on which we are developing our own
custom-built facility in conjunction with Keystone Redevelopment Group LLC, or Keystone, a
Pennsylvania-based real estate company specializing in large scale redevelopment and complex
economic development projects. The construction of the new facility has been progressing according
to schedule with the external walls and roof of the main section of the building now in place. The
following paragraphs summarize the key aspects of the development of the new facility.
Acquisition of Property
We, through Unilife Cross Farm, LLC, or Unilife CF, our newly formed subsidiary, acquired a 38
acre block of land in York County, Pennsylvania from Greenspring Partners, LP on November 16, 2009
for a purchase price of $2.0 million for the purposes of developing the new facility. The site is
located approximately 9.5 miles from our current premises in Lewisberry, Pennsylvania.
Development Agreement
On December 14, 2009, Unilife CF entered into a development agreement with Keystone to develop
the newly acquired property by constructing an approximately 165,000 square foot office,
manufacturing, warehousing and distribution facility to our specifications. The new facility is
initially intended to accommodate Unifill automated assembly lines with a combined annual capacity
of 360 million units per year, as well as the Unitract 1mL automated assembly line and other
contract manufacturing systems currently situated at our Lewisberry facility. The new facility will
also include a 54,000 square foot office section that will function as our global headquarters and
support administrative, marketing, new product development, quality laboratories and other
operational functions.
The new facility has been designed to allow for an additional 100,000 square feet of
contiguous production space to be constructed when required at a later date by us. Upon this
additional expansion occurring, it will provide us with the space required to produce up to one
billion syringes annually via the installation of additional Unifill assembly lines. Although this
additional expansion of the new facility forms part of the current planning approvals that have
been received by us, it is not part of the current development activity nor is it covered or
included in the contracts referred to in the development, construction and design agreements
described herein.
Unilife CF has appointed Keystone to provide services under the development agreement
including, but not limited to:
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assisting in the selection, review and management of architects, engineers,
designers, contractors and other experts and consultants engaged to assist in the
development of the new facility; |
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assisting Unilife CF in obtaining financing for the development of the new
facility; |
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monitoring all development and construction work undertaken in connection with the
development of the new facility; and |
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assisting in obtaining all necessary approvals, licenses, permits, certificates and
authorizations from all governmental authorities that are required for the new
facility. |
Unilife CF has agreed to pay Keystone $0.8 million as the development fee for the provision of
these services, which is payable in the following tranches:
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$50,000 was paid in connection with the execution of the development agreement; |
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$0.2 million will be paid to Keystone in six equal monthly installments commencing
January 1, 2010 and ending on June 1, 2010; |
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$0.2 million will be paid to Keystone upon Unilife CF obtaining access to the new
facility to install production equipment; and |
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$0.3 million will be paid to Keystone on the issue of the certificate of occupancy
evidencing permission to commence general occupancy of the new facility and compliance
with all applicable building codes affecting the new facility. |
Construction Agreement
On December 14, 2009, Unilife CF entered into a Construction Agreement with HSC Builders &
Construction Managers (HSC) of Pennsylvania, to construct the new facility. HSC is a
Pennsylvania-based company that specializes in building custom-designed facilities for biotech,
academic, healthcare, pharmaceutical and technology companies.
HSC has been engaged by Unilife CF under the construction agreement as the construction
manager and constructor of the new facility. Under the construction agreement, Unilife CF is
required to pay for the cost of construction (as defined in the construction agreement) estimated
to be approximately $21.4 million (Cost of Work), together with HSCs fee, subject to a Guaranteed
Maximum Price (GMP) as described below.
HSCs fee for constructing the new facility will be an amount equal to 1.25% of the Cost of
Work (which is approximately $0.3 million (HSC Fee) assuming the Cost of Work is $21.4 million).
The GMP has been established at $21,700,000 (comprising HSCs Fee and the Cost of Work). Except for
certain items beyond the control of Unilife CF or HSC, or items changed at the option of Unilife
CF, any construction costs which exceed the GMP will be the responsibility and liability of HSC.
In the event that the final actual construction costs are less than the GMP, such savings will
be shared between Unilife CF and HSC on an 85% / 15% basis.
Unilife CF has also agreed under the construction agreement to pay HSC a performance bonus of
15% of the HSC Fee if it achieves Phase 1 (see below) of the construction by April 15, 2010 and
another 15% bonus of the HSC Fee if it achieves Phase 2 (see below) of the construction by December
10, 2010.
The fees payable to HSC and the Cost of Work as set out above, have been accounted for in the
US$26 million budget for the development of the new facility (as detailed below).
The projected timetable for the construction of the new facility to be undertaken by HSC is as
follows:
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Date |
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Activity |
By the end of June 2010
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Completion of utility rooms for equipment installation |
By the end of October 2010
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Completion of clean rooms for equipment installation (Phase 1) |
By the end of October 2010
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Temporary occupancy permit for manufacturing/warehouse |
By the end of December 2010
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Unrestricted occupancy permit for manufacturing/warehouse(Phase 2 ) |
By the end of December 2010
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Unrestricted occupancy permit for office |
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Design Agreement
In connection with the development of the new facility, we retained L2 Architecture, or L2, to
provide architectural design and structural, mechanical and electrical engineering services for the
new facility. L2 is a Philadelphia-based architectural and engineering design firm that specializes
in the pharmaceutical and medical device sector.
The design created by L2 incorporates the latest innovations in personnel and material flow
dynamics with the intention of maximizing the industrial productivity of the site while ensuring
compliance with the highest standards of good manufacturing practice.
L2s fee for the architectural services it will be providing to us in respect of the project
will be $1.56 million. In the event that additional services are required beyond the contracted
services agreed between us and L2, we will be required to pay L2 for such services on an hourly
basis. The fees payable to L2 have been accounted for in the budget for the development of the new
facility (as detailed below).
Proposed Financing of the Development
We expect the total cost to be approximately $27.0 million. This includes the projected
construction costs, the projected manufacturing facility fit out costs and the fees payable to
Keystone, HSC and L2.
We have provided for $8.0 million $10.0 million in projected capital expenditure to be used
towards the development of the new facility. At this stage, we intend to fund up to approximately
$9.0 million of the development costs for the new facility out of our existing cash reserves, which
includes amounts received in connection with our October and November 2009 equity financings and
will seek external financing for up to approximately $18.0 million from a commercial bank or other
lending institution in the U.S. and/or from the Commonwealth of Pennsylvania or other federal and
state bodies.
Under the development agreement, Keystone is required to assist Unilife CF in obtaining
external finance, on terms that are satisfactory to Unilife CF, for $18.0 million (or less if that
amount is not required). In the event that Keystone is unable to assist Unilife CF in obtaining
commitments for the required financing on or before December 31, 2009, Unilife CF had the right
terminate the development agreement without any further obligation to Keystone unless negotiations
with lenders (satisfactory to Unilife CF) are ongoing as at that date in which case the deadline
will be extended during the period of such negotiations. Negotiations with lenders for the
financing, which are satisfactory to Unilife CF, are ongoing and thus the development agreement
continues in effect. Unilife CFs right to terminate the development agreement will expire in the
event that the full financing commitments are obtained as a result of such negotiations. The
development agreement will otherwise terminate on the issue of the certificate of occupancy
evidencing permission to commence general occupancy of the new facility and compliance with all
applicable building codes affecting the new facility. In the event that Keystone is unable to meet
its commitments, we believe that we can secure an alternative development partner.
We are currently in discussions with a number of banks, government agencies and other
interested parties with respect to the required financing for the project.
Sale of Minority Interest in Unilife Cross Farm LLC
In connection with the development of the new facility, Unilife CF has agreed to issue to a
subsidiary of Keystone, Cross Farm, LLC, a 1% interest in Unilife CF for $90,000 and Unilife
Corporation has entered into an operating agreement with Cross Farm LLC with respect to the
operation and management of Unilife CF as the development company for the new facility.
Unilife CF has retained a call option over the minority interest which it can exercise at any
time during the first five years after completion of the sale of the minority interest for a
purchase price prescribed under the agreement. However, if certain events occur such as the sale of
the new facility, a change of control of the Unilife entities (excluding pursuant to the proposed
redomiciliation transaction) or a breach by Unilife CF of the terms of the
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development agreement, the call option will be accelerated and the minority interest must be
repurchased by Unilife CF at the prescribed price upon such events occurring.
44
MANAGEMENT
Directors and Executive Officers
The following table sets forth the name, age and position of each of our directors and
executive officers.
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Name |
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Age |
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Position |
Jim Bosnjak
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60 |
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Chairman and Director |
Alan Shortall
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56 |
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Director and Chief Executive Officer |
John Lund
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44 |
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Director |
William Galle
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70 |
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Director |
Jeff Carter
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52 |
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Director |
Mary
Katherine Wold
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57 |
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Director |
R.
Richard Wieland II
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65 |
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Chief Financial Officer and
Executive Vice President |
Eugene Shortall
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58 |
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Senior Vice President of Business
Development |
Bernhard Opitz
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53 |
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Senior Vice President of Operations |
Mark Iampietro
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57 |
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Vice President of Quality and Regulatory Affairs |
Stephen Allan
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35 |
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Vice President of Marketing and Communications |
Biographical Summaries
Jim Bosnjak. Mr. Bosnjak has served as a director of UMSL since February 2003 and of Unilife
Corporation since November 2009 and as Chairman of the board of UMSL since April 2006 and of
Unilife Corporation since November 2009. Mr. Bosnjak has been a co-owner and director of the Le
Meridian Lav Hotel in Split, Croatia since 2002 and is chairman and co-founder of Ultimate Outdoor
Ltd., an Australian outdoor advertising company. Mr. Bosnjak was a director of Westbus Pty Ltd.
from 1975 to 2001 and the chairman of Westbus Pty Ltd. between 1990 and 2001. He has also held
positions on Commonwealth and New South Wales advisory bodies, including the Greater Western Sydney
Economic Development Board, and the GROW Employment Council. Mr. Bosnjak also served as the
Chairman of the Tourism Council of Australia and Bus 2000, which coordinated bus services for the
Sydney 2000 Olympic Games. Mr. Bosnjak holds an honorary doctorate from the University of Western
Sydney for his services related employment growth and economic development.
Alan Shortall. Mr. Shortall has served as Chief Executive Officer and director of UMSL since
September 2002 and of Unilife Corporation since July 2009. Mr. Shortall co-founded Unilife in July
2002 and has guided the growth of Unilife since then. In 2008, the trade magazine Medical Device
and Diagnostic Industry named him as one of 100 Notable People in the medical device industry
worldwide. Mr. Shortall is the brother of Eugene Shortall, our Senior Vice President of Business
Development.
John Lund. Mr. Lund has served as a director of UMSL and Unilife Corporation since November
2009. Mr. Lund has also served as managing partner of M&A Holdings, LLC, a private consulting
company since July 2003, and as Vice President Finance and Controller of E-rewards, Inc., an
internet market research company since February 2009. Mr. Lund also served as Vice President and
Controller of Nexstar Broadcasting Group, Inc., a NASDAQ listed television broadcasting company,
from March 2008 to November 2008, Vice President of Finance and Corporate Controller of LQ
Management, LLC (LaQuinta) from November 2006 to March 2008, and Corporate Controller of
ExcellerateHRO from January 2005 to October 2006. Prior to that, Mr. Lund held Controller and Chief
Financial Officer positions for various companies, and was a Manager at KPMG.
William Galle. Mr. Galle has served as a director of UMSL since June 2008 and of Unilife
Corporation since November 2009. Mr. Galle has also been the managing director of American
Marketing Complex in New York City since October 2007 and president of Diversified Portfolio
Strategies LLC in Washington D.C. since 1993, which provides alternative investment advisory
services for institutions and substantial investors. Mr. Galle is a graduate of Columbia
University, Rutgers University, and the New York Institute of Finance.
Jeff Carter. Mr. Carter has served as a director of UMSL since April 2006 and of Unilife
Corporation since November 2009. From February 2005 until December 2008, Mr. Carter served as Chief
Financial Officer of UMSL. He has also served as Company Secretary since March 2007.
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Mr. Carter is a chartered accountant and holds a masters degree in
applied finance from Macquarie University of Sydney.
Mary
Katherine Wold. Ms. Wold has served as a director of Unilife
Corporation since May 2010. Ms. Wold served as Senior Vice President
of Finance from 2007 to 2009, Senior Vice President of Tax and
Treasury from 2005 to 2007 and Vice President of Tax from 2002 to 2005,
of Wyeth, an NYSE-listed pharmaceutical company, which was acquired by Pfizer in October 2009. Prior thereto, Ms. Wold spent 17 years with the international law firm of Shearman &
Sterling based in New York, specializing in international tax planning for multinational corporations
and in the tax aspects of mergers and acquisitions, capital markets and private equity transactions.
Ms. Wold received her law degree from the University of Michigan and her Bachelor of Arts degree from Hamline
University in St. Paul, Minnesota.
R.
Richard Wieland II. Mr. Wieland has served as our Chief Financial
Officer and Executive Vice President since June 2010. Mr. Wieland served as Chief Financial
Officer of Cytochroma Inc., a privately-held specialty pharmaceutical company,
from May 2008 to May 2009 and served as Executive Vice
President and Chief Financial Officer of Advanced Life Sciences
Holdings, Inc., a Nasdaq-listed clinical-stage biopharmaceutical company, from June
2004 to April 2008. Mr. Wieland obtained his B.A. in
Accounting and Economics from Monmouth College and his M.B.A. from
Washington University.
Eugene
Shortall. Mr. Shortall has served as our Senior
Vice President of Business Development since May 2010. From
February 2009 to May 2010 Mr. Shortall served as Senior
Vice President of RTFS of UMSL and of Unilife
Corporation from November 2009 to May 2010. From October 2007 to February 2009 he
served as our RTFS Project Director. From June 2003 to October 2007, Mr. Shortall was a consultant
for the Public Institute for Social Security in Kuwait and was previously employed as a consultant
for Behbehani National Construction. Mr. Shortall is the brother of Alan Shortall, our Chief
Executive Officer and director.
Bernhard Opitz. Mr. Opitz has served as Senior Vice President of Operations of UMSL since
December 2008 and of Unilife Corporation since November 2009. From August 2007 to June 2008, Mr.
Opitz served as Vice President Manufacturing at Nanosphere, Inc., a Nanotechnology-based
molecular diagnostics company. From December 2002 to July 2006, he was the Vice President -
Engineering/Operations at Wells Dairy, Inc., a large manufacturer of ice cream. From September
2000 to April 2002, he was Senior Vice President of Operations at Ikonisys Inc., a cell-based
diagnostics company. From 1980 to 2000, Mr. Opitz also held various positions at Bayer AG including
project engineer, manager of plant engineering, manager of engineering, production manager, vice
president of operations, and senior vice president of engineering. Mr. Opitz holds a Master of
Science degree in mechanical/process engineering from Technical University Graz in Austria.
Mark Iampietro. Mr. Iampietro has served as Vice President of Quality and Regulatory Affairs
of UMSL since October 2008 and of Unilife Corporation since November 2009. From May 2002 to July
2008, Mr. Iampietro was Vice President of Quality, Regulatory and Clinical Operations at Spherics,
Inc., a pharmaceutical manufacturer, where he managed various phases of quality, regulatory, and
clinical programs. Mr. Iampietro holds American Society for Quality certifications as both a
quality and reliability engineer and holds a Bachelor of Science degree in life sciences with a
minor in engineering from Worcester Polytechnic Institute.
Stephen Allan. Mr. Allan has served as Vice President of Marketing and Communications of UMSL
since October 2008 and of Unilife Corporation since November 2009. He served as our Director of
Communications from November 2007 to October 2008 and our Manager of Communications from July 2002
to November 2007. Prior to joining Unilife, Mr. Allan owned and operated his own Australian public
relations firm, which assisted in the management of media relations and government liaison for
industry groups in the transport, tourism and economic development sectors. He managed media
liaison activities relating to bus transportation during the Sydney 2000 Olympic Games. He also
spent five years as a journalist for various Sydney-based newspaper groups. Mr. Allan holds a
Bachelor of Communications from Charles Sturt University.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis describes our compensation philosophy for those
individuals who were our most highly compensated executives based on their fiscal 2009
compensation. These executives are referred to herein as named executives. Where applicable, this
Compensation Discussion and Analysis also describes the ways in which we anticipate that our
compensation philosophy may change after we become a U.S.-based public company.
During 2008, in anticipation of the relocation of our headquarters and principal operations
from Australia to the United States, the board of directors granted Alan Shortall, our Chief
Executive Officer, broad discretion to hire
46
a new U.S.-based executive management team and to set the initial terms of their employment.
In furtherance of this mandate, during fiscal 2009 Mr. Shortall assembled a new management team
whose members joined us at various times during calendar year 2008 and 2009. In addition, Mr.
Shortall, together with Stephen Allan, who had been with us since 2002, relocated to the United
States in early 2009.
Our named executives are:
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Alan Shortall, who is our Chief Executive Officer; |
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Jeff Carter, who was our Chief Financial Officer until December 2008; |
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Daniel Calvert, who became our Chief Financial Officer in
December 2008 and resigned in June 2010; |
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Eugene Shortall, who became our Senior Vice President, RTFS in February 2009; |
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Bernhard Opitz, who became our Senior Vice President of Operations in December
2008; and |
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Stephen Allan, who became our Vice President of Marketing and Communications in
October 2008. |
During the process of assembling the new executive management team, our Chief Executive
Officer negotiated on an arms length basis with each of our new named executives with respect to
the terms of his compensation package and, in the case of Mr. Allan, the terms of his compensation
package upon relocating to the United States. In each case, Mr. Shortall considered the
individuals prior relevant experience and compensation levels, as well as his prospective roles
and responsibilities with our Company. Due in part to the necessity of assembling an entirely new
team in a short amount of time, Mr. Shortall did not conduct a formal survey of compensation paid
by other companies, but rather conducted these negotiations using his best judgment of what would
constitute an appropriate compensation package. After reaching agreement with the prospective named
executives, Mr. Shortall presented the compensation packages to the board of directors which agreed
to the terms. The terms of the compensation packages were ultimately memorialized in agreements
which we describe below under Employment Offer Letters, Employment Agreements and Consultancy
Agreements.
Historically, we did not have a separate compensation committee of the board of directors.
Determinations regarding the compensation of our Chief Executive Officer, other executive officers
and non-employee directors were made by the entire board of directors. Under ASX listing rules,
board compensation and stock incentive compensation for executives is put to a vote of
shareholders. After we become a Nasdaq-listed company, we will continue to be subject to these
rules so long as we remain listed on the ASX. In preparation for our Nasdaq listing, we recently
established a compensation committee which will consider and approve executive compensation as
required by Nasdaq rules.
Objectives of the Compensation Program
The primary objective of our executive compensation program is to deliver a competitive
package to attract, motivate and retain key executives and align their compensation with our
overall business goals, core values and shareholder interests. To this end, our board of directors
followed an executive compensation philosophy that included the following considerations:
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a pay-for-performance orientation that delivers pay based on company and
individual performance; |
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long-term incentives, including stock-based awards, to more closely align the
interests of executives and shareholders; and |
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individual wealth accumulation through long-term incentives, rather than through
pensions. |
We expect that our compensation committee will establish a similar executive compensation
philosophy with respect to our named executives following redomiciliation. We expect that our
primary compensation objectives will be to reinforce consistent attainment of Unilifes key
strategic goals and to retain the executive talent we have hired.
47
The Design of the Compensation Program
Compensation for our named executives has included the following elements:
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base salary; |
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annual cash incentives and discretionary bonuses; |
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long-term incentives in the form of stock options and stock awards; and |
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other benefits and perquisites. |
We expect that our executive compensation program will continue to include these elements
going forward following our redomiciliation. In addition, we expect our future compensation program
to include grants of restricted stock which we could not issue as an Australian company. When
making compensation-related decisions, we believe it is important to be informed about the current
practices of similarly situated public companies. For this purpose, the board of directors has
retained a compensation consulting firm, Strategic Apex Group LLC, or Strategic Apex, to assist our
compensation committee in developing an appropriate comparator group for benchmarking. We currently
expect that this comparator group will consist of companies in the medical device industry as well
as companies in the mid-Atlantic region of the United States. We also expect that Strategic Apex
will assist the compensation committee in developing performance metrics and long-term incentives
for the named executives to ensure that key strategic goals are met and that the interests of key
decision makers and shareholders are aligned. The goals of our compensation program for our named
executives are to provide total direct compensation that is appropriate for an organization of our
size and stage of development and that will support continued recruitment of top talent and
retention of the executive team we have built over the last 18 months, as well as to reward
achievement of key strategic goals and to align executive compensation with shareholder interests.
We expect to evaluate individual performance in determining increases to base salary and awarding
annual incentive compensation and future equity grants. We will also consider employment agreement
terms and internal pay equity within the executive team. When considering internal pay equity, we
will consider the reported market rate for these positions and total direct compensation of other
executives who have a similar level of responsibility at the Company.
Elements of Compensation
Base Salary
Base salary is an important element of compensation because it provides the named executives
with a base level of income. Our board of directors negotiated the base salary of our Chief
Executive Officer in connection with the employment agreement that we entered into with him in
October 2008. Our board of directors set our Chief Executive Officers base salary at a level that
the board believed was commensurate with our Chief Executive Officers skills, knowledge and
duties. As described above, the initial base salary of each named executive (other than our Chief
Executive Officer) was negotiated by our Chief Executive Officer with such executive during the
hiring process of Messrs. Calvert and Opitz and, in the case of Eugene Shortall and Mr. Allan, in
connection with their relocation to the United States.
Our compensation committee will determine whether and when to adjust the base salaries of the
named executives in the future. We expect that our compensation committee will consider each
executives performance and level of responsibility and market data for similar positions.
Annual Cash Incentive Compensation and Bonuses
Our Chief Executive Officers annual cash incentive award is a discretionary award up to a
maximum amount provided for in his employment agreement. The amount of this award is determined by
our board of directors based on satisfaction of key performance indicators, or KPIs, determined by
our board of directors. Going forward, our compensation committee will set the KPIs of our Chief
Executive Officer, review his performance and determine the amount of any annual incentive
compensation earned by him.
48
As more fully described in the footnotes to the grants of plan-based awards table, each of
Messrs. Calvert and Opitz were entitled pursuant to the terms of his employment offer letter to
receive a cash incentive award, for calendar year 2009, and for the portion of calendar year 2008
during which he was employed with us, at the target level specified in his employment offer letter,
if his performance satisfies certain KPIs. Our Chief Executive Officer establishes the KPIs for
each named executive which are tailored to the named executives individual area of responsibility
and key strategic goals. Our Chief Executive Officer has broad discretion in interpreting the KPIs
and determining the extent to which a particular KPI has been met. In the case of fiscal 2009, the
KPIs were established and communicated at various points during the course of the year, as each
named executive was hired on a different date. In the future, we expect that KPIs will be
established and communicated during the first or second quarter of the applicable performance
period.
In respect of fiscal 2009, the following is a summary description of the KPIs for each named
executive:
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Alan Shortall relocation of our corporate headquarters to Lewisberry,
Pennsylvania; signing the industrialization agreement with sanofi-aventis; initiation
of production of the Unitract 1mL syringe in our FDA registered facility in
Lewisberry; and implementation of a new quality system. |
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Jeff Cartertransition of finance and accounting functions to U.S.-based personnel
and undertaking corporate secretarial and ASX reporting requirements. |
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Dan Calvertmanagement of our financial affairs and the development of business
plan models and corporate strategy. |
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Eugene Shortallmanagement of the ready-to-fill syringe project and completion of
key project milestones, including issuance of a design for manufacturing and assembly
report for review by sanofi-aventis, issuance of engineering performance
specifications, completion of sterilization studies, delivery of a report on needle
shield development and quarterly update on design and testing activities. |
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Bernhard Opitzexpansion of our operational, engineering and production personnel |
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Stephen Allanmanagement of our marketing and communications activities |
Our board of directors and Chief Executive Officer determined that each of the named
executives satisfied their KPIs. Consequently, the named executives received incentive compensation
payments at their target levels for fiscal 2009 as reflected in the summary compensation table and
grants of plan-based awards table below.
In addition to the incentive compensation awards, we may also provide discretionary cash
bonuses to our named executives to reward them for their contribution toward the achievement of
significant milestones of the Company. For fiscal 2009, our board of directors decided to pay a
discretionary bonus of A$150,000 to our Chief Executive Officer in recognition of his efforts in
securing the exclusive licensing agreement with sanofi-aventis in June 2008 and the
industrialization agreement with sanofi-aventis in June 2009. Securing these two agreements were
important milestones in our long-term business plan.
In addition, for fiscal 2009, our board of directors awarded discretionary bonuses of $79,497
(A$82,500) and $48,180 (A$50,000) to Messrs. Carter and Allan, respectively. In the case of Mr.
Carter, this bonus was paid in recognition of his achievements in transitioning the Companys
financial reporting systems from Australia to the United States. In the case of Mr. Allan, this
bonus was paid in recognition of the fact that despite Mr. Allans significant historical
contributions in the areas of marketing and communications, he had not received a bonus in several
years and that therefore, his compensation level did not reflect these prior contributions.
Commencing in calendar 2010, we expect to adopt an annual incentive plan with terms to be
determined by our compensation committee. We expect that our Chief Executive Officer, in
consultation with our compensation committee, will establish KPIs that represent key strategic
objectives relating to the industrialization of the ready-to-fill syringe, the commercial
production and sale of our 1 mL syringe, the further development of a world-class organization and
additional products, and building shareholder value. In accordance with our compensation
committees charter, our compensation committee will evaluate the performance of each named
executive in light of
49
his KPIs and will determine the amount of any annual incentive compensation earned by the
named executive based on such evaluation.
Long-Term Incentive Compensation
Our long-term incentive compensation has historically been in the form of grants of stock
options and stock awards under our Employee Share Option Plan, or ESOP. These grants were designed
to provide our executives with multiple awards over a number of years to encourage alignment with
shareholder interests and to retain highly valued employees. The ESOP was approved by the
shareholders of UMSL in 2007. Our board of directors historically has reviewed the performance of
our Chief Executive Officer and determined the equity awards to be granted to him subject to
shareholder approval pursuant to Australian law and ASX listing rules. Our Chief Executive Officer
historically has reviewed the performance of the other named executives and recommended the equity
awards to be granted to them for approval by our board of directors.
We view stock options as an important element of performance-based compensation because a
stock option provides no realizable value to a recipient until the vesting requirements have been
met and will increase in value only as the trading price of our shares increases. Vesting periods
are intended to require a long-term focus on overall Company performance for the executive to
realize any value from the exercise of options.
In fiscal 2009, we granted stock options to our named executives as reflected in the grants of
plan-based awards table. These stock option grants were made in fulfillment of the terms of each
named executives (other than Stephen Allans) respective offer letter or employment agreement. The
amount of each stock option grant for the named executives other than our Chief Executive Officer
was determined by our Chief Executive Officer in his best judgment during arms length negotiation
of the employment offer and approved by our board of directors.
In fiscal 2009, we granted stock options and a stock award to our Chief Executive Officer in
fulfillment of the terms of his employment agreement. The size and nature of these grants were
negotiated at arms length by our board of directors and Chief Executive Officer. Our Chief
Executive Officer received a stock award in addition to stock options to more fully align his
interests with those of our shareholders insofar as under the stock award, our Chief Executive
Officer will share in the downside risk and realize an economic loss if our share price declines.
As more fully described under Guidelines for Share Ownership and Holding Periods for Equity
Awards, restrictions have been placed on our Chief Executive Officers right to dispose of the
shares received under his stock award.
Our stockholders approved our adoption of our 2009 Stock Incentive Plan. The plan permits us
to grant stock options, stock appreciation rights, stock awards, and other stock-based awards and
cash awards to employees. Long-term incentive target compensation of each named executive following
redomiciliation is expected to be set by our compensation committee based on the named executives
level of responsibility, peer group data for similar positions and the named executives long-term
incentive compensation before redomiciliation. We anticipate that the total long-term incentive
target multiplier of base salary for each of our named executives will target the 50th percentile
of the comparator group that we expect to identify with the assistance of our compensation
consultant, aligning with our philosophy of driving wealth accumulation through long-term
incentives, and consistent with a business emphasizing high growth and innovation.
Savings Plans
We do not provide for wealth accumulation for retirement through defined benefit pension
plans; however, we make superannuation payments of 9% of cash compensation (up to a statutory
maximum cash compensation of A$40,170 per quarter) in accordance with Australian law for Australian
employees and executives, including those who transferred to the United States. Superannuation is a
retirement or pension contribution that is made to a pension fund selected by the employee, and is
not available to the employee until retirement. In addition, our U.S. subsidiary, Unilife Medical
Solutions, Inc., has a 401(k) plan, without a company match.
We expect to adopt a 401(k) plan to permit executives and other employees to accumulate wealth
on a tax-deferred basis. We do not anticipate providing for wealth accumulation for retirement
through defined benefit pensions or supplemental executive retirement plans. In addition, while our
U.S. subsidiary does not currently make
50
matching or fixed contributions to the balances of employees, including the named executives,
under the 401(k) plan, we do expect to adopt a company match in future years.
Other Benefits and Perquisites
The named executives are eligible to participate in employee benefit programs generally
offered to our other employees. In addition, we provide certain other perquisites to the named
executives that are not generally available to other employees. We also provide temporary housing
and other relocation assistance when an executive officer is hired or relocated for business
reasons. For more detailed information regarding benefits and perquisites provided to the named
executives, see Compensation of Named Executive Officers.
Our compensation committee will review these benefits and perquisites after redomiciliation.
We expect that we will continue to offer relocation benefits to newly hired or relocated employees
which are competitive and appropriate for their level of responsibility.
Severance
We must comply with Australian legal requirements regarding obtaining shareholder approval of
certain severance payments. Severance provisions are set forth in the employment agreements with
our named executives, as described under Potential Payments Upon Termination or Changes in
Control, with the exception of Mr. Carter who is not entitled to receive severance upon
termination of his consultancy agreement with us.
Our compensation committee will consider and develop policies, guidelines or programs with
respect to severance benefits after the redomiciliation. We expect to continue the severance
obligations under existing employment agreements. We believe that severance benefits allow us to
attract and retain talented executives and other employees to accept positions with us and to
relocate to our United States headquarters. In establishing these arrangements, we will consider
that we do not provide defined benefit pension or supplemental executive retirement plan benefits.
The employment agreements currently in place with the named executives have a double-trigger
feature, mandating cash severance payments on a change of control only if employment is terminated
in connection with or following the change of control. In contrast, equity awards under our
incentive compensation plans are single trigger awards and vest upon a change in control (as
defined in the relevant plan). Our board of directors believe that providing for accelerated
vesting of equity awards upon a change in control creates an important retention tool for the
Company by enabling employees to realize value from these awards in the event that the Company
undergoes a change in control transaction.
Policies, Guidelines and Practices Related to Executive Compensation
The Compensation Committee
Our compensation committee will make executive compensation determinations for the named
executives, and we anticipate that our executive officers will provide recommendations and support
to our compensation committee. In addition, the board of directors has retained Strategic Apex to
provide expert executive compensation advice and guidance to the compensation committee. The
compensation committee will operate in accordance with a written charter and will be composed of
three independent directors who will report their findings and recommendations to our board of
directors. In developing a compensation strategy, the compensation committee will pursue the
following goals:
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develop an executive compensation policy to support overall business strategies and
objectives, attract and retain key executives, link compensation with business
objectives and organizational performance, and provide competitive compensation; |
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approve compensation for the Chief Executive Officer, including relevant
performance goals and objectives, review and approve compensation for other executive
officers, and oversee their evaluations; |
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make recommendations to our board of directors with respect to the adoption of
equity-based compensation plans and incentive compensation plans; |
51
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review the outside directors compensation program for competitiveness and plan
design, and recommend changes to our board of directors as appropriate; |
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oversee the management succession process for our Chief Executive Officer and
selected senior executives; |
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oversee general compensation plans and initiatives; and |
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consult with management on major policies affecting employee relations. |
Guidelines for Share Ownership and Holding Periods for Equity Awards
Our Chief Executive Officer is also currently our largest shareholder. Even though we have not
had formal stock ownership requirements for our executives, our Chief Executive Officers ownership
position assists in ensuring that management decisions are aligned with shareholder interests. For
the stock award that our Chief Executive Officer received in fiscal 2009, he has agreed that he
will not dispose of any of the shares received under that award until at least 12 months after the
award was granted, and that he may dispose of no more than 50 percent of those shares until at
least 24 months after the award was granted.
We expect our compensation committee to adopt stock ownership guidelines to require our named
executives and directors to accumulate and hold a minimum number of shares of our common stock in
order to ensure that their interests are aligned with shareholder interests. Decisions about the
number of shares and time to accumulate will be made after consideration of best practices in the
United States and the advice of our compensation consultant.
Potential Impact on Compensation from Executive Misconduct
Under our incentive plans, our board of directors has the authority to revoke stock option
grants of employees who commit misconduct. These provisions are designed to deter and prevent
detrimental behavior and permit us to prevent such employees from exercising stock options, which
would lapse if that employee has engaged in certain misconduct.
We anticipate that our Compensation Committee will evaluate various claw-back options and
consider the advisability of adopting such policies as will protect our investors from financial
misconduct.
Tax Matters
Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, places a limit
of $1,000,000 on the amount of compensation that certain publicly held corporations may deduct for
U.S. federal tax purposes in any one year with respect to certain named executives. This limitation
did not apply to us for fiscal 2009 because, as of June 30, 2009, none of our shares were required
to be registered under the Exchange Act.
It is expected that Section 162(m) of the Code will apply to us following the re-domiciliation
and that our compensation committee will adopt a general practice of considering the adverse effect
of Section 162(m) of the Code on the deductibility of compensation when designing annual and
long-term compensation programs and approving payouts under these programs. While the tax treatment
of compensation is important, the primary factor influencing program design is the support of
business objectives. Consequently, it is expected that our compensation committee will reserve the
right to design and administer the programs in a manner that does not satisfy the requirements of
Section 162(m) of the Code and to approve the payment of nondeductible compensation if the
compensation committee believes doing so may achieve a result determined to be in Unilifes best
interest. Due to transition rules that apply to UMSL under Section 162(m) of the Code, we believe
that all of the compensation that will result when our named executives exercise their currently
outstanding stock options should be fully deductible.
Compensation Committee Interlocks and Insider Participation
During fiscal 2009, the board of directors of UMSL did not have a separate compensation
committee, as one is not required under ASX rules. During fiscal 2009, Mr. Alan Shortall, director
and Chief Executive Officer of UMSL, participated in deliberations of the board concerning the
compensation of all executive officers. During
52
fiscal 2009, no executive officer of UMSL served on the compensation committee or board of
directors of any other entity that had any executive officer who also served on the board of
directors of UMSL.
In November 2009, Unilife Corporation established a compensation committee, which is currently
composed of three independent directors, namely Jim Bosnjak, John Lund and William Galle. None of
the members of the compensation committee has ever been an executive officer or employee of
Unilife, UMSL or any of its subsidiaries, or has any relationship with Unilife, UMSL or its
executives, other than their directorship and equity interests in UMSL as disclosed in Item 4.
Security Ownership of Certain Beneficial Owners and Management of this registration statement.
Compensation of Named Executive Officers
The following table provides information regarding total compensation awarded to, earned by,
or paid to our named executives.
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Summary Compensation Table |
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Non-Equity |
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Incentive |
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Plan |
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All Other |
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Stock |
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Option |
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Compensati |
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Compensati |
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Salary |
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Bonus |
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Awards ($) |
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Awards |
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on |
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on |
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Total |
Name and Position |
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Year |
|
($) |
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($) |
|
(1) |
|
($) (2) |
|
($) (3) |
|
($) |
|
($) |
|
Alan Shortall (4)
Chief Executive
Officer |
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2009 |
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321,991 |
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144,540 |
|
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1,810,800 |
|
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384,035 |
|
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166,908 |
|
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142,035 |
(5) |
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2,970,309 |
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Jeff Carter (6)
Former Chief
Financial Officer |
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2009 |
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75,938 |
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79,497 |
|
|
|
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|
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47,850 |
|
|
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24,090 |
|
|
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318,150 |
(7) |
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545,525 |
|
Daniel Calvert (8)
Chief Financial
Officer |
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2009 |
|
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86,154 |
|
|
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|
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90,186 |
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|
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37,333 |
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7,722 |
(9) |
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221,395 |
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Eugene Shortall (10)
Senior Vice President
of RTFS |
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2009 |
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185,760 |
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|
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48,571 |
|
|
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41,941 |
|
|
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8,225 |
(11) |
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284,497 |
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Bernhard Opitz (12)
Senior Vice President
of Operations |
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2009 |
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121,154 |
|
|
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|
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|
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90,186 |
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36,750 |
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|
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22,374 |
(13) |
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270,464 |
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Stephen Allan (14)
Vice President of
Marketing and
Communications |
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2009 |
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117,595 |
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48,180 |
|
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68,864 |
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13,000 |
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82,563 |
(15) |
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330,202 |
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(1) |
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All restricted stock grants are issued with fair values determined in Australian dollars. Amounts were converted using the exchange rate at June 30, 2009 of A$1.00 = US$0.8048. The amount referenced is equal to the
weighted-average grant date fair value recognized during the year ended June 30, 2009. |
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(2) |
|
All option awards are issued with an exercise price in Australian dollars. Amounts were converted using the exchange rate at June 30, 2009 of A$1.00 = US$0.8048. The amount referenced is calculated using the Black-Scholes
and Barrier pricing models. See Note 3 of our consolidated financial statements contained elsewhere in this registration statement. |
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(3) |
|
We provide more detailed information about non-equity incentive plan compensation under Employment Offer Letters, Employment Agreements and Consultancy Agreements and in the footnotes to the grants of plan-based awards
table. |
|
(4) |
|
Prior to his relocation from Australia to the United States in February and until April 2009, Mr. Shortall had been receiving his cash compensation in Australian dollars, which, for purposes of this summary compensation
table, were converted into U.S. dollars using the average exchange rate during the applicable period. |
53
|
|
|
(5) |
|
Includes a payment of $100,000 for relocation expenses as well as $32,582 related to the purchase of an automobile. Also includes A$9,453 related to parking and telephone costs. |
|
(6) |
|
Mr. Carter has been receiving his cash compensation in Australian dollars, which, for the purposes of this summary compensation table, were converted into U.S. dollars using the average exchange rate during the applicable
period. |
|
(7) |
|
Includes $176,015 related to severance payments, as well as $12,213 related to the purchase of an automobile, $10,235 related to parking and other costs, $10,491 of statutory payments for superannuation and $109,196 of fees
under his consulting agreement. |
|
(8) |
|
Mr. Calvert served as our Chief Financial Officer from December 2008 to June 2010. The amounts disclosed in the table above reflect amounts earned from December 2008 to June 2009. |
|
(9) |
|
Represents amounts in connection with the rental of an apartment. |
|
(10) |
|
Mr. Shortall has been receiving his cash compensation primarily in Australian dollars, which, for purposes of this summary compensation table, were converted into U.S. dollars using the average exchange rate during the
applicable period. |
|
(11) |
|
Represents amounts related to the rental of an office and residence. |
|
(12) |
|
Mr. Opitz has served as our Senior Vice President of Operations since December 2008. The amounts disclosed in the table above reflect amounts earned from December 2008 to June 2009. |
|
(13) |
|
Includes $19,657 in connection with the rental of an apartment and $2,717 in costs related to relocation. |
|
(14) |
|
Prior to his relocation from Australia to the United States in December 2008, Mr. Allan had been receiving his cash compensation in Australian dollars, which, for purposes of this summary compensation table, were converted
into U.S. dollars using the average exchange rate during the applicable period. |
|
(15) |
|
Includes $60,000 related to relocation, as well as $12,337 related to the purchase of an automobile and rental of an apartment and $10,226 of statutory payments for superannuation. |
Employment Offer Letters, Employment Agreements and Consultancy Agreements
We have used employment offer letters, employment agreements and consultancy agreements to set
the initial compensation terms for our named executives. As described above, the employment offer
letters with our named executives other than our Chief Executive Officer were negotiated by our
Chief Executive Officer at arms length when he assembled the companys senior management team.
Below is a summary of the employment offer letters and employment agreements in effect with our
named executives during fiscal 2009. Additional information regarding potential payments upon
termination of employment pursuant to the terms of the employment offer letters and employment
agreements is set forth under Potential Payments Upon Termination and Changes of Control.
Alan Shortall, Chief Executive Officer
As our Chief Executive Officer, Mr. Shortall reports to our board of directors. He is
responsible for the executive management team and has responsibility for the effective leadership
and business development of the Company. The key elements of Mr. Shortalls employment agreement
are as follows:
|
|
|
Annual salary of $420,000, subject to annual review. |
|
|
|
|
Incentive compensation awards per fiscal year of up to $200,000, subject to
satisfaction of KPIs, to be determined by our board of directors. |
|
|
|
|
A grant of 1,666,667 shares of stock and 1,250,000 options. |
|
|
|
|
The employment agreement has a term of three years commencing on July 1, 2008. |
|
|
|
|
The employment agreement may be terminated by, among other ways, one party giving
the other three months prior written notice (or by us paying Mr. Shortall three
months of his total annual salary in lieu of the written notice). |
|
|
|
|
After the termination of Mr. Shortalls employment with us, he may not be involved
in any business which is a competitor of the Companys, or entice away any employee,
customer or supplier of the Company for up to 24 months worldwide (or for such shorter
period and geographical area as a court may decide). |
54
Mr. Shortalls base salary was paid in Australian dollars for the majority of fiscal 2009. In
April 2009, after he relocated to the United States, he began receiving payment of his base salary
in United States dollars. At the time of this change, the values of the United States and
Australian dollars were relatively equivalent but the exchange rate began to diverge later in the
year, accounting for the differential between the agreement rate and the amount reported in the
summary compensation table.
Our board of directors determined that Mr. Shortall met his KPIs to receive full payment of
his incentive compensation award. In addition, in recognition of the crucial role that Mr. Shortall
played in obtaining the sanofi-aventis exclusive licensing agreement on June 30, 2008, which
represented a significant milestone for the company, and the industrialization agreement with
sanofi-aventis on June 30, 2009, which was the second critical step in the sanofi-aventis
relationship, our board of directors awarded Mr. Shortall a discretionary bonus payment of
A$150,000 for fiscal 2009.
Jeff Carter, Former Chief Financial Officer
Mr. Carter served as our Chief Financial Officer from February 2005 until December 2008. As
our Chief Financial Officer, Mr. Carter was responsible for all financial aspects of the Company,
including financial reporting, statutory reporting, taxation and secretarial functions. In December
2008, Mr. Calvert replaced Mr. Carter as our Chief Financial Officer.
The key elements of compensation for Mr. Carter while he served as our Chief Financial Officer
during fiscal 2009 were as follows:
|
|
|
Annual salary of A$200,000, subject to annual review. |
|
|
|
|
Incentive compensation awards in respect of each financial year of up to A$25,000,
as determined at the discretion of our Chief Executive Officer, subject to
satisfaction of KPIs. |
Our Chief Executive Officer determined that Mr. Carter met his KPIs to receive full payment of
his incentive compensation award for fiscal 2009 notwithstanding the fact that he served as our
Chief Financial Officer for only half of the fiscal year. Our Chief Executive Officer and board of
directors also determined to award Mr. Carter an additional discretionary bonus of A$82,500 in
recognition of his achievements in transitioning the Companys financial reporting systems from
Australia to the United States.
When the Company made Mr. Carter redundant as its Chief Financial Officer in connection with
the relocation of the Companys operations to the United States, we paid him a severance amount
equal to nine months of his annual salary pursuant to the terms of his employment agreement.
Effective February 1, 2009, we entered into a consultancy agreement with Joblak Pty Ltd. under
which Mr. Carter will provide to us, among other services, corporate secretarial services. Mr.
Carter, through Joblak Pty Ltd., will receive compensation of $20,000 per month for the consulting
services. The consultancy agreement may be terminated by either party by giving two months advance
notice.
Daniel Calvert, Chief Financial Officer
Mr. Calvert
served as our Chief Financial Officer from December 2008 to
June 2010 and was responsible for all financial aspects of the
Company, including financial reporting, statutory reporting and taxation. The key elements of
compensation for Mr. Calvert under the terms of his employment offer letter in effect for fiscal
2009 were as follows:
|
|
|
Annual salary of $160,000, subject to annual review. |
|
|
|
|
Incentive compensation awards in respect of calendar year 2009 (and a pro rata
amount for services performed for December 2008) of up to 40 percent of base salary,
subject to satisfaction of KPIs. |
|
|
|
|
A grant of 250,000 stock options. |
|
|
|
|
Reimbursement of relocation and temporary living expenses. |
55
The employment offer letter with Mr. Calvert became effective on December 1, 2008, and did not
have a specified term. The employment offer letter was superseded by an employment agreement
effective November 10, 2009, which provided for the same cash
compensation package and which was for
an initial term expiring on December 31, 2012, subject to automatic renewal for successive one-year
periods unless a non-renewal notice is given. Mr. Calvert resigned in
June 2010.
Our Chief Executive Officer determined that Mr. Calvert met his KPIs to receive full payment
of his incentive compensation award for December 2008 and the six-month period ending June 30,
2009.
Eugene Shortall, Senior Vice President of RTFS
As Senior Vice President of RTFS, Eugene Shortall is responsible for overall management of the
project related to the design, development and production of our ready-to-fill syringe. During
fiscal 2009, Eugene Shortall provided these services to us under the terms of a consultancy
agreement between us and Medical Middle East Ltd. This consultancy agreement has been superseded by
an employment agreement between us and Eugene Shortall that became effective November 10, 2009, and
is for an initial term expiring on December 31, 2012, subject to automatic renewal for successive
one-year periods unless a non-renewal notice is given.
The key elements of compensation for Eugene Shortall under the terms of the consultancy
agreement in effect for fiscal 2009 are as follows:
|
|
|
Monthly consulting fee of A$20,000 (A$240,000 per year). |
In addition to the monthly consulting fee, our Chief Executive Officer determined that Eugene
Shortall satisfied his KPIs set for fiscal 2009 and provided Medical Middle East Ltd. with
additional payments of A$30,000 and $19,500 to be paid to Eugene Shortall as incentive compensation
awards for managing the ready-to-fill syringe project in such a manner that the Company earned and
received the milestone payments from sanofi-aventis.
Under the terms of his new employment agreement, Mr. Shortall receives an annual base salary
of $240,000 and is eligible to receive incentive compensation awards in respect of calendar year
2009 of up to 50% of base salary, subject to satisfaction of KPIs. The employment agreement also
provides that Mr. Shortall is eligible to participate in the companys benefits programs and is
entitled to certain termination benefits (as described in Potential Payments upon Termination of
Changes in Control), which provisions were not available to Mr. Shortall under the consultancy
agreement.
Bernhard Opitz, Senior Vice President of Operations
As Senior Vice President of Operations, Mr. Opitz is responsible for overseeing all aspects of
operational activities, including manufacturing, supply chain and engineering. The key elements of
compensation for Mr. Opitz under the terms of his employment offer letter in effect for fiscal 2009
are as follows:
|
|
|
Annual salary of $210,000, subject to annual review. |
|
|
|
|
Incentive compensation awards in respect of calendar year 2009 (and a pro rata
amount for services performed for December 2008) of up to $63,000, subject to
satisfaction of KPIs. |
|
|
|
|
A grant of 250,000 stock options. |
|
|
|
|
Reimbursement of relocation and temporary living expenses. |
The employment offer letter with Mr. Opitz became effective on December 2, 2008, and did not
have a specified term. The employment offer letter was superseded by an employment agreement
effective November 10, 2009, which provides for the same cash compensation package and which is for
an initial term expiring on December 31, 2012, subject to automatic renewal for successive one-year
periods unless a non-renewal notice is given.
56
Our Chief Executive Officer determined that Mr. Opitz met his KPIs to receive full payment of
his incentive compensation award for December 2008 and the six-month period ending June 30, 2009.
Stephen Allan, Vice President of Marketing and Communications
As Vice President of Marketing and Communications, Mr. Allan is responsible for the global
marketing of our products and other communications functions. During fiscal 2009, we did not have a
written employment agreement in place with Mr. Allan but the terms of his employment upon
relocating to the United States were negotiated at arms length with our Chief Executive Officer.
The key elements of compensation for Mr. Allan as in effect during fiscal 2009 are as follows:
|
|
|
Annual salary of $130,000, subject to annual review. |
|
|
|
|
Incentive compensation awards in respect of calendar year 2009 of up to 20 percent
of base salary, subject to satisfaction of KPIs. |
|
|
|
|
A one-time housing allowance of $60,000 for his relocation from Australia to the
United States in January 2009. |
Mr. Allans base salary was paid in Australian dollars for the first half of fiscal 2009. In
January 2009, after he relocated to the United States, he began receiving payment of his base
salary in United States dollars. At the time of this change, the values of the United States and
Australian dollars were relatively equivalent but the exchange rate began to diverge later in the
year, accounting for the differential between the agreement rate and the amount reported in the
summary compensation table.
Our Chief Executive Officer determined that Mr. Allan met his KPIs to receive full payment of
his incentive compensation awards for the six-month period ending June 30, 2009. Mr. Allan was not
entitled to receive an incentive award for the six-month period ending December 31, 2008, but he
did receive a discretionary bonus of $48,180.
We entered into an employment agreement with Mr. Allan effective on November 10, 2009 to
memorialize the terms of his employment with us after his relocation to the United States. The
employment agreement is for an initial term expiring on December 31, 2012, subject to automatic
renewal for successive one-year periods unless a non-renewal notice is given.
The following table provides information regarding all plan-based awards made to our named
executives during the year ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants of Plan-Based Awards |
For the year ended June 30, 2009 * |
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Payouts |
|
All Other |
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
Under Non- |
|
Stock |
|
All Option |
|
|
|
|
|
Fair Value |
|
|
|
|
|
|
Equity |
|
Awards: |
|
Awards: |
|
Exercise or |
|
of |
|
|
|
|
|
|
Incentive Plan |
|
Number of |
|
Number of |
|
Base Price or |
|
Stock and |
|
|
|
|
|
|
Awards |
|
Shares of |
|
Securities |
|
Option |
|
Option |
|
|
|
|
|
|
Target |
|
Stock |
|
Underlying |
|
Awards |
|
Awards |
Name and Position |
|
Grant Date |
|
($) |
|
or Units |
|
Options |
|
($) (1) |
|
($) |
|
Alan Shortall |
|
|
11/28/08 |
|
|
|
|
|
|
|
1,666,667 |
|
|
|
|
|
|
|
|
|
|
|
1,810,800 |
|
Chief Executive
Officer |
|
|
11/28/08 |
|
|
|
|
|
|
|
|
|
|
|
1,250,000 |
|
|
|
1.62 |
|
|
|
1,408,400 |
|
|
|
|
|
|
|
|
166,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants of Plan-Based Awards |
For the year ended June 30, 2009 * |
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Payouts |
|
All Other |
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
Under Non- |
|
Stock |
|
All Option |
|
|
|
|
|
Fair Value |
|
|
|
|
|
|
Equity |
|
Awards: |
|
Awards: |
|
Exercise or |
|
of |
|
|
|
|
|
|
Incentive Plan |
|
Number of |
|
Number of |
|
Base Price or |
|
Stock and |
|
|
|
|
|
|
Awards |
|
Shares of |
|
Securities |
|
Option |
|
Option |
|
|
|
|
|
|
Target |
|
Stock |
|
Underlying |
|
Awards |
|
Awards |
Name and Position |
|
Grant Date |
|
($) |
|
or Units |
|
Options |
|
($) (1) |
|
($) |
|
Jeff Carter |
|
|
|
|
|
|
24,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Calvert |
|
|
12/2/08 |
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
1.62 |
|
|
|
277,656 |
|
Chief Financial
Officer |
|
|
|
|
|
|
69,328 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene Shortall |
|
|
|
|
|
|
41,941 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice
President of
RTFS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernhard Opitz |
|
|
12/2/08 |
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
1.62 |
|
|
|
277,656 |
|
Senior Vice
President of
Operations |
|
|
|
|
|
|
68,250 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Allan |
|
|
9/1/08 |
|
|
|
|
|
|
|
|
|
|
|
166,667 |
|
|
|
1.44 |
|
|
|
225,344 |
|
Vice President of
Marketing and
Communications |
|
|
|
|
|
|
28,000 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes only those columns relating to grants awarded to the named executives in fiscal 2009. All other columns have been omitted. |
|
(1) |
|
All stock option awards are issued with an exercise price in Australian dollars. Amounts were converted using the exchange rate at June 30, 2009 of A$1.00 = US$0.8048. |
|
(2) |
|
Mr. Calvert served as our Chief Financial Officer from
December 2008 to June 2010. Pursuant to Mr. Calverts employment agreement, he was eligible to receive, subject to satisfaction of specified KPIs, an incentive
compensation payment, payable on June 30, 2009, of up to 3.33% of his base salary for his services performed in December 2008 and incentive compensation of up to 40% of his base salary for services performed during
calendar year 2009, payable in two installments on June 30, 2009 and December 31, 2009. |
|
(3) |
|
Mr. Shortall was eligible to receive as communicated to him verbally, and subject to satisfaction of specified KPIs, incentive compensation payments of up to $30,000 and $19,500, all of which was payable during
fiscal 2009. |
|
(4) |
|
Mr. Opitz has served as our Senior Vice President of Operations since December 2008. Pursuant to Mr. Opitzs employment offer letter, he was eligible to receive, subject to satisfaction of specified KPIs, an
incentive compensation payment, payable on June 30, 2009, of up to $5,250 for his services performed in December 2008 and incentive compensation of up to $63,000 for services performed during calendar year 2009,
payable in two installments on June 30, 2009 and December 31, 2009. |
|
(5) |
|
Mr. Allan became our Vice President of Marketing and Communications in October 2008 and relocated to the United States in early 2009. Mr. Allan was eligible to receive, subject to satisfaction of specified KPIs, an
incentive compensation payment of up to 20 percent of his base salary for calendar year 2009, which was paid at an annualized rate of $130,000 during the six-month period ended June 30, 2009 and at an annualized
rate of $150,000 for the six-month period ended December 31, 2009. Amounts earned will be paid during the first quarter of calendar year 2010. |
During the year ended June 30, 2009, no options were exercised and no stock awards vested.
The following table provides information regarding all outstanding equity awards for our named
executives as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Equity Awards |
As of June 30, 2009* |
|
|
Option Awards |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
|
|
|
|
|
Options (# |
|
Options (# |
|
Option Exercise |
|
Option |
Name and Position |
|
Exercisable) |
|
Unexercisable) |
|
Price ($) (1) |
|
Expiration Date |
Alan Shortall
Chief Executive Officer |
|
|
|
|
|
|
1,250,000 |
|
|
|
1.62 |
|
|
|
09/30/13 |
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Equity Awards |
As of June 30, 2009* |
|
|
Option Awards |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
|
|
|
|
|
Options (# |
|
Options (# |
|
Option Exercise |
|
Option |
Name and Position |
|
Exercisable) |
|
Unexercisable) |
|
Price ($) (1) |
|
Expiration Date |
Jeff Carter
Former Chief Financial Officer |
|
|
333,333 |
|
|
|
83,333 |
|
|
|
1.20 |
|
|
|
12/31/10 |
|
Daniel Calvert
Chief Financial Officer |
|
|
83,333 |
|
|
|
166,667 |
|
|
|
1.62 |
|
|
|
06/30/12 |
|
Eugene Shortall
Senior Vice President of RTFS |
|
|
100,000 |
|
|
|
25,000 |
|
|
|
1.68 |
|
|
|
12/31/10 |
|
Bernhard Opitz
Senior Vice President of Operations |
|
|
83,333 |
|
|
|
166,667 |
|
|
|
1.62 |
|
|
|
06/30/12 |
|
Stephen Allan
Vice President of Marketing and
Communications |
|
|
9,167 |
|
|
|
|
|
|
|
9.18 |
|
|
|
12/31/09 |
|
|
|
|
83,333 |
|
|
|
|
|
|
|
1.20 |
|
|
|
12/31/09 |
|
|
|
|
|
|
|
|
166,667 |
|
|
|
1.44 |
|
|
|
06/30/12 |
|
|
|
|
* |
|
Includes only those columns which are applicable. |
|
(1) |
|
All option awards were issued with an exercise price in Australian dollars. Amounts were converted using the exchange rate at
June 30, 2009 of A$1.00 = US$0.8048. |
|
(2) |
|
The market value of all stock awards is based upon the closing price of our common stock of A$0.31 on June 30, 2009 converted at
the exchange rate on June 30, 2009 of A$1.00 = US$0.8048. |
In connection with the redomiciliation transaction, our shareholders approved the adoption of
the 2009 Stock Incentive Plan. On November 20, 2009, our compensation committee approved a new
incentive package for Mr. Alan Shortall, our Chief Executive Officer, which package includes the
issuance of 1,166,000 shares of restricted stock and 834,000 options to purchase common stock under
our 2009 Stock Incentive Plan. The new incentive package was subject to the approval by the
shareholders of UMSL. UMSL shareholders approved the package on January 8, 2010 and the shares and
options were issued on February 3, 2010.
The shares of our restricted stock are subject to vesting based on the achievement of the
following performance milestones: 233,200 restricted shares will vest upon the signing of supply
agreements with sanofi-aventis for 100 million or more Unifill syringes. 233,200 restricted shares
will vest upon the signing of the first new agreement for the Unifill syringe with a pharmaceutical
company other than sanofi-aventis or its affiliates. 233,200 restricted shares will vest upon the
signing of an agreement with any pharmaceutical company, including sanofi-aventis, for a new
product (other than the Unifill syringe). 233,200 restricted shares will vest upon the installation
of the first Unifill syringe production line into a clean room in our new facility, including the
successful operation qualification of the line. 233,200 restricted shares will vest upon the first
shipment of production quality sterile Unifill syringes to sanofi-aventis from a commercial
production line.
The options to purchase our common stock have an exercise price equal to six times the closing
price on ASX of our CDIs (each CDI representing one-sixth of one share of our common stock) on the
date of grant and are exercisable for five years from the date of grant. The options will vest as
follows: 250,000 options will vest upon our share price reaching $9.45 or more for a minimum of 20
out of any 30 consecutive trading days, 250,000 options will vest upon our share price reaching
$12.15 or more for a minimum of 20 out of any 30 consecutive trading days and 334,000 options will
vest upon our share price reaching $17.82 or more for a minimum of 20 out of any 30 consecutive
trading days.
Potential Payments Upon Termination or Changes in Control
We have entered into employment and consulting agreements with our named executives. Below is
a summary of the material termination and change in control provisions.
Alan Shortall, Chief Executive Officer
The employment agreement with Mr. Shortall has a term of three years commencing on July
1, 2008. The employment agreement may be terminated by, among other circumstances, one party giving
the other three months prior written notice (or by paying Mr. Shortall three months of his total
annual salary in lieu of the written notice). If
59
Mr. Shortalls employment is terminated without cause prior to the first anniversary of
his relocation to the United States on February 6, 2009, he will receive severance equal to 15
months of his annual salary; if Mr. Shortall is terminated without cause after February 6, 2010, he
will receive severance equal to nine months of his annual salary. Certain non-competition
obligations, as specified in the employment agreement, apply to Mr. Shortall during his employment
and within certain periods thereafter (ranging from six to 24 months depending on the specific
non-competition obligations). We also have an obligation to pay for the relocation of Mr. Shortall
and his dependents back to Australia, including moving his personal and household effects, at the
end of his employment with Unilife in the United States. Assuming Mr. Shortall was so terminated as
of June 30, 2009, he would have been entitled to receive severance in the amount of A$525,000, 15
months of his annual salary.
Jeff Carter, Former Chief Financial Officer
During January 2009, we made Mr. Carter redundant as our Chief Financial Officer and paid him
severance in the amount of A$180,000, which was equal to nine months of his annual salary. Mr.
Carter has remained on our board of directors and as our Company Secretary and as a consultant. We
have entered into a consulting agreement with Mr. Carter, under which Mr. Carter receives a minimum
compensation of A$20,000 per month for his consulting services.
Daniel
Calvert, Former Chief Financial Officer
We entered into an employment offer letter with Mr. Calvert in November 2008 that was
superseded by an employment agreement entered into in November 2009. Mr. Calverts employment offer
letter, which was in effect on June 30, 2009, entitled him to receive severance consisting of six
months of his annual salary if we terminated his employment other than for cause or inability to
perform his duties.
Under Mr. Calverts current employment agreement, if we terminate Mr. Calverts employment
without cause or elect not to renew the employment agreement, he will receive severance consisting
of six months of his annual salary and payment for the cost of his COBRA health care continuation
coverage for six months. Certain non-competition obligations, as specified in the employment
agreement, apply to Mr. Calvert during his employment and for two years thereafter. Assuming Mr.
Calverts current employment agreement was in effect as of June 30, 2009, and his employment was
terminated without cause on that date, he would have been entitled to receive severance totaling
$83,762, consisting of $80,000 (six months of his annual salary) and $3,762 (cost of his COBRA
health care continuation coverage for six months).
In the event that Mr. Calverts employment is terminated coincident with or following a change
in control of Unilife, then, in lieu of the severance described immediately above, Mr. Calvert is
entitled to (i) 18 months of his annual salary, (ii) payment for the cost of his COBRA health care
continuation coverage for 18 months, (iii) payment of an amount equal to the bonus, if any, earned
by and paid to him for the prior completed fiscal year, and (iv) all of his outstanding options
vesting immediately upon such termination. Assuming Mr. Calverts employment was so terminated as
of June 30, 2009, and his current employment agreement was in effect as of that date, he would have
been entitled to receive severance totaling $288,620, consisting of (i) $240,000 (18 months of his
annual salary), (ii) $11,287 (cost of his COBRA health care continuation coverage for 18 months),
and (iii) $37,333 (the bonus paid to him for the prior completed fiscal year). In addition, 166,667
unvested options would have vested.
Mr.
Calvert resigned from his position as Chief Financial Officer in June
2010. Unilife and Mr. Calvert have agreed that Mr. Calvert
will receive severance benefits consisting of six months of his
annual salary, paid in installments, and payment for the cost of his
COBRA health care continuation coverage for six months.
Eugene Shortall, Senior Vice President of RTFS
We entered into an employment agreement with Mr. Shortall in November 2009. Under the terms of
the employment agreement, if we terminate Mr. Shortalls employment without cause or elect not to
renew the employment agreement, he will receive severance consisting of six months of his annual
salary and payment for the cost of his COBRA health care continuation coverage for six months.
Certain non-competition obligations, as specified in the employment agreement, apply to Mr.
Shortall during his employment and for two years thereafter. Assuming Mr. Shortalls employment
agreement was in effect as of June 30, 2009, and his employment was terminated without cause on
that date, he would have been entitled to receive severance totaling $123,083, consisting of
$120,000 (six months of his annual salary) and $3,083 (cost of his COBRA health care continuation
coverage for six months).
60
In the event that Mr. Shortalls employment is terminated coincident with or following a
change in control of Unilife, then, in lieu of the severance described immediately above, Mr.
Shortall is entitled to (i) 18 months of his annual salary, (ii) payment for the cost of his COBRA
health care continuation coverage for 18 months, (iii) payment of an amount equal to the bonus, if
any, earned by and paid to him for the prior completed fiscal year, and (iv) all of his outstanding
options vesting immediately upon such termination. Assuming Mr. Shortalls employment was so
terminated as of June 30, 2009, and his employment agreement was in effect as of that date, he
would have been entitled to receive severance totaling $411,189, consisting of (i) $360,000 (18
months of his annual salary), (ii) $9,248 (cost of his COBRA health care continuation coverage for
18 months), and (iii) $41,941 (the bonus paid to him for the prior completed fiscal year). In
addition, 25,000 unvested options would have vested. We also have an obligation to pay for the
relocation of Mr. Shortall and his dependents to France or Kuwait, including moving his personal
and household effects, at the end of his employment with Unilife in the United States.
Bernhard Opitz, Senior Vice President of Operations
We entered into an employment offer letter with Mr. Opitz in November 2008 that was superseded
by an employment agreement entered into in November 2009. Mr. Opitzs employment offer letter,
which was in effect on June 30, 2009, entitled him to receive severance consisting of nine months
of his annual salary if we terminated his employment other than for cause or disability.
Under Mr. Opitzs current employment agreement, if we terminate Mr. Opitzs employment without
cause or elect not to renew the employment agreement, he will receive severance consisting of nine
months of his annual salary and payment for the cost of his COBRA health care continuation coverage
for nine months. Certain non-competition obligations, as specified in the employment agreement,
apply to Mr. Opitz during his employment and for two years thereafter. Assuming Mr. Opitzs current
employment agreement was in effect as of June 30, 2009, and his employment was terminated without
cause on that date, he would have been entitled to receive severance totaling $163,167, consisting
of $157,500 (nine months of his annual salary) and $5,667 (cost of his COBRA health care
continuation coverage for nine months).
In the event that Mr. Opitzs employment is terminated coincident with or following a change
in control of Unilife, then, in lieu of the severance described immediately above, Mr. Opitz is
entitled to (i) 18 months of his annual salary, (ii) payment for the cost of his COBRA health care
continuation coverage for 18 months, (iii) payment of an amount equal to the bonus, if any, earned
by and paid to him for the prior completed fiscal year, and (iv) all of his outstanding options
vesting immediately upon such termination. Assuming Mr. Opitzs employment was so terminated as of
June 30, 2009, and his current employment agreement was in effect as of that date, he would have
been entitled to receive severance totaling $363,083, consisting of (i) $315,000 (18 months of his
annual salary), (ii) $11,333 (cost of his COBRA health care continuation coverage for 18 months),
and (iii) $36,750 (the bonus paid to him for the prior completed fiscal year). In addition, 166,667
unvested options would have vested.
Stephen Allan, Vice President of Marketing and Communications
We entered into an employment agreement with Mr. Allan in November 2009. Under the terms of
the employment agreement, if we terminate Mr. Allans employment without cause or elect not to
renew the employment agreement, he will receive severance consisting of six months of his annual
salary and payment for the cost of his COBRA health care continuation coverage for six months.
Certain non-competition obligations, as specified in the employment agreement, apply to Mr. Allan
during his employment and for two years thereafter. Assuming Mr. Allans employment agreement was
in effect as of June 30, 2009, and his employment was terminated without cause on that date, he
would have been entitled to receive severance totaling $80,896, consisting of $75,000 (six months
of his annual salary) and $5,896 (cost of his COBRA health care continuation coverage for six
months).
In the event that Mr. Allans employment is terminated coincident with or following a change
in control of Unilife, then, in lieu of the severance described immediately above, Mr. Allan is
entitled to (i) 18 months of his annual salary, (ii) payment for the cost of his COBRA health care
continuation coverage for 18 months, (iii) payment of an amount equal to the bonus, if any, earned
by and paid to him for the prior completed fiscal year, and (iv) all of his outstanding options
vesting immediately upon such termination. Assuming Mr. Allans employment was so terminated as of
June 30, 2009, and his employment agreement was in effect as of that date, he
61
would have been
entitled to receive severance totaling $290,868, consisting of (i) $225,000 (18 months of his
annual salary), (ii)
$17,688 (cost of his COBRA health care continuation coverage for 18 months), and (iii) $48,180
(the bonus paid to him for the prior completed fiscal year). In addition 116,667 unvested options
would have vested. We also have an obligation to pay for the relocation of Mr. Allan and his
dependents back to Australia, including moving his personal and household effects, at the end of
his employment with Unilife in the United States.
R.
Richard Wieland II, Chief Financial Officer and Executive Vice
President
On June 8, 2010, R. Richard Wieland II was appointed to serve as our Chief Financial Officer
and Executive Vice President.
We entered into an employment agreement with Mr. Wieland, which has an initial term until June
30, 2012 and will automatically renew for successive one-year terms unless either party gives the
other party 30 days written notice in advance of the relevant expiration date of the intention not
to renew the agreement. Under the Employment Agreement, Mr. Wieland receives a starting annualized
base salary of $245,000, subject to annual review by the compensation committee of our board of
directors; is eligible to participate in our incentive bonus plan in amounts and percentages as
determined by the board and Chief Executive Officer of Unilife, with a target cash bonus for
calendar year 2010 of 40% of his annual base salary, prorated based on the number of days employed
with us during 2010, and a target cash bonus for calendar years 2011 and 2012 of a minimum of 40%
of annual base salary; and is also eligible to participate in our benefits programs (including
equity incentive plans) as they may change from time to time. Mr. Wieland will also receive certain
relocation payments.
Under the employment agreement, if we terminate Mr. Wielands employment without cause or
elect not to renew the employment agreement, or if Mr. Wieland resigns his employment with us
within 180 days after Alan Shortall ceases to be our Chief Executive Officer for any reason, Mr.
Wieland may receive, depending on the circumstances of his termination, some or all of the
following severance benefits: (i) payment of twelve or eighteen months of his annual salary, paid
in installments, (ii) payment for the cost of his COBRA health care continuation coverage for
twelve or eighteen months (provided that he is eligible for and timely elects to receive such
coverage), (iii) a lump sum payment of an amount equal to the bonus, if any, earned by and paid to
him for the prior completed fiscal year, and (iv) immediate vesting of all of his outstanding
options and other stock-based awards. As a condition to receiving severance benefits from us, Mr.
Wieland will be required to execute a general release of claims against Unilife and Unilife has
agreed to provide a similar release of claims against Mr. Wieland. Mr. Wieland also agrees to
certain confidentiality and noncompetition covenants during and following his employment.
On June 8, 2010, the compensation committee of our board of directors approved a grant of
80,000 restricted shares of common stock of Unilife under the Unilife Corporation 2009 Stock
Incentive Plan. The restricted shares will vest as follows provided that Mr. Wieland remains
employed with us through the relevant vesting date: 20,000 restricted shares will vest on the third
trading day after the Companys release of earnings for the fiscal quarter which includes the first
anniversary of the grant date; 20,000 restricted shares will vest on the third trading day after
the Companys release of earnings for the fiscal quarter which includes the second anniversary of
the grant date; and 40,000 restricted shares will vest on the third trading day after the Companys
release of earnings for the fiscal quarter which includes the third anniversary of the grant date.
The restricted shares will also vest upon a change in control of Unilife, upon Mr. Wielands
resignation within 180 days after Alan Shortall ceases to be our Chief Executive Officer for any
reason, or upon Mr. Wielands death or termination of employment due to total disability.
On June 8, 2010, the compensation committee of our board of directors also approved a grant of
options for Mr. Wieland to purchase 240,000 shares of common stock of Unilife under the Unilife
Corporation 2009 Stock Incentive Plan. The options will be exercisable at US$5.28 per share (the
closing price of the common stock of Unilife on June 8, 2010, the date of grant) for a period of
five years from the date of grant, and will vest as follows provided that Mr. Wieland remains
employed with us through the relevant vesting date: 60,000 options will vest upon our market
capitalization reaching $500 million or more for 20 consecutive trading days; 60,000 options will
vest upon our market capitalization reaching $750 million or more for 20 consecutive trading days;
60,000 options will vest upon our market capitalization reaching $1,250 million or
more for 20 consecutive trading days; and 60,000 options will vest upon our market capitalization
reaching $1,500 million or more for 20 consecutive trading days. The options will also vest upon a
change in control of Unilife, upon Mr. Wielands resignation within 180 days after Alan Shortall
ceases to be our Chief Executive Officer for any reason, or upon Mr. Wielands death or termination
of employment due to total disability.
DIRECTOR COMPENSATION
The following table provides information regarding the total compensation that UMSL paid or
awarded to its non-employee directors during the year ended June 30, 2009. Directors of UMSL who
are also employees do not receive compensation for their services as directors.
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Director Compensation |
|
|
Fees Earned |
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
or Paid in |
|
Stock |
|
Option |
|
Deferred |
|
All Other |
|
|
|
|
Cash |
|
Awards |
|
Awards |
|
Compensation |
|
Compensation |
|
Total |
Name |
|
($) |
|
($) |
|
($) (1) |
|
Earnings($)(2) |
|
($) |
|
($) |
Jim Bosnjak |
|
|
89,764 |
(3) |
|
|
|
|
|
|
66,365 |
|
|
|
8,079 |
|
|
|
|
|
|
|
164,208 |
|
William Galle |
|
|
52,500 |
|
|
|
|
|
|
|
43,986 |
|
|
|
|
|
|
|
|
|
|
|
96,486 |
|
Jeff Carter |
|
|
13,626 |
(4) |
|
|
|
|
|
|
|
|
|
|
1,458 |
|
|
|
|
|
|
|
15,084 |
|
|
|
|
(1) |
|
All option awards were issued with an exercise price in Australian dollars. Amounts were converted using the exchange rate at June 30, 2009 of A$1.00 = US$0.8048. The amount referenced is
calculated using the Black-Scholes pricing model. See footnote 3 of our consolidated financial statements contained elsewhere in this registration statements. |
|
(2) |
|
Statutory contributions of 9% of fees to a superannuation fund (i.e., pension) for Australian directors only. |
|
(3) |
|
Mr. Bosnjaks fees represent A$120,000 paid in Australian dollars. Amounts were converted using the average exchange rate during the applicable period. |
|
(4) |
|
Mr. Carters fees represent A$18,930 paid in Australian dollars. Amounts were converted using the average exchange rate during the applicable period. This amount represents fees earned
solely for serving as a director. For Mr. Carters other compensation, see Compensation of Named Executive Officers. |
During fiscal 2009, we paid each of our three non-employee directors different amounts of cash
compensation. The levels of cash compensation were based on what our board believed was appropriate
for a company of our size, with recognition given to the amount of time a particular director was
required to spend on Company matters and the directors length of board service. We paid Mr.
Bosjnak an annual cash fee of A$120,000 for all of his services as a director, including his
service as chairman of the board. We did not compensate him separately for attendance at meetings
or for service on board committees. Mr. Bosjnak received the highest level of cash compensation in
recognition of his long standing board service and the significant amount of time he spent on the
Companys affairs.
Mr. Galle was also paid an annual fee with no separate meeting or committee fees. His level of
compensation was determined by negotiation between our Chief Executive Officer and Mr. Galle at the
time he joined the board.
Mr. Carter was also paid an annual cash fee with no separate meeting fees.
The amount under Option Awards represents share-based compensation expense in respect of (i)
166,667 options granted to Mr. Bosjnak in each of fiscal 2008 and 2009 at exercise prices of A$1.50
and A$1.98, respectively and (ii) 91,667 options granted to Mr. Galle in fiscal 2009 at an exercise
price of A$2.10.
In January 2010, UMSL issued options to purchase ordinary shares to three members of the board
of directors, Jeff Carter, John Lund and William Galle. Each of these board members received
100,000 options exercisable at A$7.20 per share for a period of five years from the date of grant.
The options will vest as follows: 16,667 options vested on the date of grant, 25,000 options will
vest on the 12 month anniversary from the date of grant, 25,000 options will vest on the 24 month
anniversary from the date of grant and 33,333 options will vest on the 36 month anniversary from
the date of grant. The issuance of these options was approved by UMSL shareholders on January 8,
2010.
62
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of our common stock by (i) each
person, or group of affiliated persons who is known by us to beneficially own 5% or more of our
common stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all
current directors and executive officers as a group. All of this information gives effect to the
redomiciliation and the share consolidation effected in connection therewith.
Beneficial ownership is determined according to the rules of the SEC and generally includes
any shares over which a person exercises sole or shared voting or investment power. The beneficial
ownership percentages set forth below are based on 54,604,696 shares of common stock outstanding as
of June 8, 2010. All shares of common stock owned by such person, including shares of common stock
underlying stock options that are currently exercisable or
exercisable within 60 days after June
8, 2010 (all of which we refer to as being currently exercisable) are deemed to be outstanding and
beneficially owned by that person for the purpose of computing the ownership percentage of that
person, but are not considered outstanding for the purpose of computing the percentage ownership of
any other person. Except as otherwise indicated, to our knowledge, each person listed in the table
below has sole voting and investment power with respect to the shares shown to be beneficially
owned by such person, except to the extent that applicable law gives spouses shared authority.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Percentage of Shares |
Name and Address of Beneficial Owner |
|
Beneficially Owned |
|
Beneficially Owned |
Directors and Named Executive Officers (1) |
|
|
|
|
|
|
|
|
Jim Bosnjak |
|
|
606,745 |
(2) |
|
|
1.1 |
% |
Alan Shortall |
|
|
4,241,630 |
(3) |
|
|
7.7 |
% |
John Lund |
|
|
36,667 |
(4) |
|
|
* |
|
William Galle |
|
|
108,333 |
(5) |
|
|
* |
|
Jeff Carter |
|
|
133,378 |
(6) |
|
|
* |
|
Mary
Katherine Wold |
|
|
|
(7) |
|
|
* |
|
Daniel Calvert |
|
|
166,667 |
(8) |
|
|
* |
|
Eugene Shortall |
|
|
325,000 |
(9) |
|
|
* |
|
Bernhard Opitz |
|
|
167,332 |
(10) |
|
|
* |
|
Stephen Allan |
|
|
135,725 |
(11) |
|
|
* |
|
All
directors and executive officers as a group (11 persons) |
|
|
6,118,808 |
|
|
|
11.2 |
% |
|
|
|
* |
|
Indicates less than 1% |
|
(1) |
|
The address of each director and executive officer listed above is c/o Unilife Corporation, 633 Lowther Road, Lewisberry, Pennsylvania 17339. |
|
(2) |
|
Includes options to purchase 108,333 shares of common stock which are currently exercisable. Does not include options to purchase 58,333 shares of common stock which
are not currently exercisable. |
|
(3) |
|
Includes (i) 833,333 shares of common stock subject to certain transfer restrictions set forth in Mr. Shortalls employment agreement dated October 26, 2008 and (ii)
options to purchase 500,000 shares of common stock which are currently exercisable. Does not include options to purchase 1,584,000 shares of common stock which are
not currently exercisable. |
|
(4) |
|
Includes options to purchase 16,667 shares of common stock which are currently exercisable. Does not include options to purchase 83,333 shares of common stock which
are not currently exercisable. |
|
(5) |
|
Represents options to purchase 108,333 shares of common stock
which are currently exercisable. Does not include options to purchase
83,334 shares of common stock which are not currently exercisable. |
|
(6) |
|
Includes options to purchase 16,667 shares of common stock which are currently exercisable. Does not include options to purchase 83,333
shares of common stock that are not currently exercisable. |
|
(7) |
|
Does not include options to purchase 100,000 shares
of common stock, the issuance of which is subject to shareholder
approval pursuant to the ASX listing rules. |
|
(8) |
|
Represents options to purchase 166,667 shares of common stock which are currently exercisable. Does not include options to purchase 83,333
shares of common stock which are not currently exercisable. |
|
(9) |
|
Includes options to purchase 125,000 shares of common stock which are currently exercisable. |
|
(10) |
|
Includes options to purchase 166,667 shares of common stock which are currently exercisable. Does not include options to purchase 83,333
shares of common stock which are not currently exercisable. |
63
|
|
|
(11) |
|
Includes options to purchase 50,000 shares of common stock which are currently exercisable. Does not include options to purchase 116,667
shares of common stock which are not currently exercisable. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last three fiscal years, we have been a party to the following transaction in which
the amount involved exceeded $120,000 and in which any director, executive officer, holder of more
than 5% of our capital stock, or their immediate family members, had a material interest.
On January 22, 2009, we entered into a consulting agreement with Jeff Carter, a member of our
board of directors and former Chief Financial Officer. Under the terms of the agreement, Mr. Carter
will perform finance, accounting and secretarial consulting services in Australia. The agreement
had an initial term of seven months that expired on September 30, 2009 and was extended for a six
month term expiring on March 31, 2010. Under the agreement, we will pay Mr. Carter a fee for the
consulting services of A$20,000 per month.
On October 26, 2008, we entered into a Deed of Settlement and Release with Alan Shortall, our
director and Chief Executive Officer, and certain other individuals (collectively, the Founding
Shareholders), pursuant to which, as a final settlement of our obligations under the agreement for
our acquisition of Unitract, we agreed to issue 1,666,667 shares of common stock to the Founding
Shareholders if we reported net income of at least A$6.5 million during any fiscal year prior to
October 31, 2014 and to issue an additional 1,666,667 shares of common stock if we reported net
income of at least A$12 million during any fiscal year prior to October 31, 2014. Pursuant to a
subsequent notification from the Founding Shareholders to us dated as of October 27, 2009, three of
the four Founding Shareholders (Alan Shortall, Joseph Kaal and Craig Thorley) each relinquished,
for no consideration, all of the shares he would have received pursuant to the Deed of Settlement
and Release and directed us to issue all his founder shares to the fourth Founding Shareholder,
Roger Williamson, in recognition of the fact that Mr. Williamson provided seed capital in
connection with the founding of the company. During the year ended June 30, 2009, we met both of
the net income requirements and therefore, in November 2009, we issued 3,333,333 shares of common
stock to Mr. Williamson, which were in full satisfaction of our obligation to all of the Founding
Shareholders.
We review all relationships and transactions in which we and our directors and executive
officers or their immediate family members are participants to determine whether such persons have
a direct or indirect material interest. Our Chief Executive Officer and Chief Financial Officer are
primarily responsible for the development and implementation of processes and controls to obtain
information from the directors and executive officers with respect to related party transactions.
Our audit committee reviews and approves or ratifies any related party transaction pursuant to the
authority given under the charter of the audit committee.
Director Independence
Our board of directors
currently consists of six members: Jim Bosnjak, Alan Shortall, John
Lund, William Galle, Jeff Carter and Mary Katherine Wold.
Our board of directors has an audit committee, a compensation
committee, a nominating and corporate governance committee
and a strategic partnerships committee. The audit committee consists
of Jim Bosnjak, John Lund and Mary Katherine Wold. The compensation committee and the
nominating and corporate governance committee consist of Jim Bosnjak, John Lund and William Galle. The
strategic partnerships committee consists of Alan Shortall, John Lund and Mary
Katherine Wold.
Our board of directors has determined that each of Jim Bosnjak, John Lund,
William Galle and Mary Katherine Wold is independent within the meaning of Rule 10A-3 under the Exchange Act and the
Nasdaq listing standards.
64
SELLING STOCKHOLDERS
An
aggregate of 5,444,633 shares of common stock issued or issuable upon
the exercise of previously issued options may be offered for sale and sold from time to time pursuant to this prospectus by the
selling stockholders. The term selling stockholders includes the stockholders listed below and
their transferees, pledgees, donees, assignees or other successors. We are paying all of the
expenses in connection with such registration and the sale of the shares, other than selling
commissions and the fees and expenses of counsel and other advisors to the selling stockholders.
Information concerning the selling stockholders may change from time to time, and any changed
information will be set forth if and when required in prospectus supplements or other appropriate
forms permitted to be used by the SEC. Except as otherwise disclosed herein, none of the selling
stockholders has had any material relationship within the past three years with the Company or any
of its predecessors or, to the Companys knowledge, its affiliates. Except as otherwise disclosed
herein, to our knowledge, none of the selling stockholders is a broker-dealer and/or affiliated
with a broker-dealer.
The following table sets forth, for each of the selling stockholders to the extent known by
us, the number of shares of our common stock beneficially owned, the number of shares of our common
stock offered hereby and the number of shares and percentage of outstanding common stock to be
owned after completion of this offering, assuming all shares offered hereby are sold. Shares
offered hereby represent such shares of our common stock issued or
issuable upon exercise of previously issued options by respective selling stockholders.
Unless otherwise indicated, the selling stockholders have sole voting and investment power
with respect to their shares of common stock. All of the information contained in the table below
is based solely upon information provided to us by the selling stockholders or otherwise known by
us. In addition to the shares offered hereby, which represent such
shares of our common stock issued or issuable upon exercise of
previously issued options by the respective selling
stockholders, the selling stockholders may otherwise beneficially own our shares of common stock as
a result of, among others, open market purchases, which information is not obtainable by us without
undue effort and expense. The selling stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or from time to time since
the date on which the information regarding the shares beneficially owned was last known by us, all
or a portion of the shares beneficially owned in transactions exempt from the registration
requirements of the Securities Act.
The number of shares outstanding and the percentages of beneficial ownership are based on
54,604,696 shares of our common stock issued and outstanding as of June 8, 2010.
For the purposes of the following table, the number of shares of our common stock beneficially
owned has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
and such information is not necessarily indicative of beneficial ownership for any other purpose.
Under Rule 13d-3, beneficial ownership includes any shares as to which a selling stockholder has
sole or shared voting power or investment power and also any shares which that selling stockholder
has the right to acquire within 60 days of the date of this prospectus through the exercise of any
stock option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Consultants and advisors who received
options as consideration for their
consulting services provided to the
Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Fine |
|
|
475,000 |
|
|
|
475,000 |
|
|
|
0 |
|
|
|
0 |
|
Carpe DM, Inc. (1) |
|
|
100,000 |
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
Jeffrey Kraws (2) |
|
|
41,666 |
|
|
|
41,666 |
|
|
|
0 |
|
|
|
0 |
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Karen Goldfarb (2) |
|
|
41,666 |
|
|
|
41,666 |
|
|
|
0 |
|
|
|
0 |
|
LSGH LLC (3) |
|
|
4,290 |
|
|
|
4,290 |
|
|
|
0 |
|
|
|
0 |
|
I D & E Pty Ltd. (4) |
|
|
83,333 |
|
|
|
83,333 |
|
|
|
0 |
|
|
|
0 |
|
Inteq Limited (5) |
|
|
41,666 |
|
|
|
41,666 |
|
|
|
0 |
|
|
|
0 |
|
Mick Baron Healthcare Advisors LLC (6) |
|
|
433,333 |
|
|
|
433,333 |
|
|
|
0 |
|
|
|
0 |
|
Medical Middle East Ltd. (7) |
|
|
154,941 |
|
|
|
125,000 |
|
|
|
29,941 |
|
|
|
* |
|
Former IBS shareholders who received
options in connection with our
acquisition of IBS in January 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith Bocchicchio (8) |
|
|
163,565 |
|
|
|
159,575 |
|
|
|
3,990 |
|
|
|
* |
|
Steve Witkowski (9) |
|
|
63,103 |
|
|
|
63,103 |
|
|
|
0 |
|
|
|
0 |
|
Dan Adlon (10) |
|
|
398,665 |
|
|
|
113,455 |
|
|
|
285,210 |
|
|
|
* |
|
Edward Paukovits (11) |
|
|
139,235 |
|
|
|
119,235 |
|
|
|
20,000 |
|
|
|
* |
|
Australian and U.S. investors who
received options in our October and
November 2009 private placement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rockmore Investment Master Fund Ltd |
|
|
27,508 |
|
|
|
27,508 |
|
|
|
0 |
|
|
|
0 |
|
Kingsbrook Opportunities Master Fund LP |
|
|
27,508 |
|
|
|
27,508 |
|
|
|
0 |
|
|
|
0 |
|
Iroquois Master Fund Ltd |
|
|
110,032 |
|
|
|
110,032 |
|
|
|
0 |
|
|
|
0 |
|
Alphabet Partners LP |
|
|
98,038 |
|
|
|
98,038 |
|
|
|
0 |
|
|
|
0 |
|
HSBC Custody Nominees |
|
|
98,038 |
|
|
|
98,038 |
|
|
|
0 |
|
|
|
0 |
|
Hudson Bay Overseas Fund Ltd |
|
|
36,080 |
|
|
|
36,080 |
|
|
|
0 |
|
|
|
0 |
|
Hudson Bay Fund LP |
|
|
20,294 |
|
|
|
20,294 |
|
|
|
0 |
|
|
|
0 |
|
Empery Asset Master Ltd. |
|
|
29,410 |
|
|
|
29,410 |
|
|
|
0 |
|
|
|
0 |
|
Hartz Capital Investments LLC |
|
|
29,410 |
|
|
|
29,410 |
|
|
|
0 |
|
|
|
0 |
|
Platinum
Partners Liquid Opportunity Master Fund LP |
|
|
110,032 |
|
|
|
110,032 |
|
|
|
0 |
|
|
|
0 |
|
Jagen Nominees Pty Ltd |
|
|
9,802 |
|
|
|
9,802 |
|
|
|
0 |
|
|
|
0 |
|
Crawford Falls Pty Ltd |
|
|
6,250 |
|
|
|
6,250 |
|
|
|
0 |
|
|
|
0 |
|
Neil Mount (Super Fund A/C) |
|
|
14,700 |
|
|
|
14,700 |
|
|
|
0 |
|
|
|
0 |
|
MDS Tiling Pty Ltd |
|
|
83,332 |
|
|
|
83,332 |
|
|
|
0 |
|
|
|
0 |
|
Jaronach Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Rodney Stephen Adler |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
David James Azar |
|
|
2,932 |
|
|
|
2,932 |
|
|
|
0 |
|
|
|
0 |
|
TPC Pty Ltd |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Jamber Investments Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Richard Colreavy |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Craig Scheef & Alison Scheef |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
0 |
|
|
|
0 |
|
Balclutha
Investments Pty Ltd (Ryan Mount) |
|
|
8,104 |
|
|
|
8,104 |
|
|
|
0 |
|
|
|
0 |
|
John Cook Super Fund Pty Ltd |
|
|
974 |
|
|
|
974 |
|
|
|
0 |
|
|
|
0 |
|
Mark Thorpe Apps |
|
|
29,408 |
|
|
|
29,408 |
|
|
|
0 |
|
|
|
0 |
|
Yue Liu |
|
|
2,932 |
|
|
|
2,932 |
|
|
|
0 |
|
|
|
0 |
|
Patricia Nicholls |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
Stephen Aboud |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Chris Hancock-Redopts Pty Ltd |
|
|
974 |
|
|
|
974 |
|
|
|
0 |
|
|
|
0 |
|
Karen Locke |
|
|
2,932 |
|
|
|
2,932 |
|
|
|
0 |
|
|
|
0 |
|
James Winston Patierson |
|
|
1,958 |
|
|
|
1,958 |
|
|
|
0 |
|
|
|
0 |
|
John Michael Ryan |
|
|
1,466 |
|
|
|
1,466 |
|
|
|
0 |
|
|
|
0 |
|
Bluesteel Trading Pty Ltd |
|
|
5,882 |
|
|
|
5,882 |
|
|
|
0 |
|
|
|
0 |
|
LSAF Holdings Pty Ltd (Owen Family A/C) |
|
|
13,724 |
|
|
|
13,724 |
|
|
|
0 |
|
|
|
0 |
|
Newhaven Nominees Limited |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
Demeta Pty Ltd |
|
|
24,500 |
|
|
|
24,500 |
|
|
|
0 |
|
|
|
0 |
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Hinona Pty Ltd |
|
|
16,666 |
|
|
|
16,666 |
|
|
|
0 |
|
|
|
0 |
|
Varisell Pty Ltd |
|
|
12,500 |
|
|
|
12,500 |
|
|
|
0 |
|
|
|
0 |
|
Peter Howard Hall |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
0 |
|
|
|
0 |
|
Parlen Pty Ltd |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
0 |
|
|
|
0 |
|
Cantrina Pty Ltd |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
Alan Gaffney |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
0 |
|
|
|
0 |
|
Brumarg Investments Pty Ltd |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
Christopher Paul Watts |
|
|
832 |
|
|
|
832 |
|
|
|
0 |
|
|
|
0 |
|
Corrie Pastoral Co Pty Ltd |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
0 |
|
|
|
0 |
|
Jestar Pty
Ltd (Vagg Family Super Fund A/C) |
|
|
5,832 |
|
|
|
5,832 |
|
|
|
0 |
|
|
|
0 |
|
Reef Securities Ltd |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Susan Houston |
|
|
7,332 |
|
|
|
7,332 |
|
|
|
0 |
|
|
|
0 |
|
Cameron Bloom Photography Pty Ltd |
|
|
2,666 |
|
|
|
2,666 |
|
|
|
0 |
|
|
|
0 |
|
John Richard Reynolds |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
Red Wine Investements Pty Ltd |
|
|
832 |
|
|
|
832 |
|
|
|
0 |
|
|
|
0 |
|
Fristino Investments Pty Ltd |
|
|
31,824 |
|
|
|
31,824 |
|
|
|
0 |
|
|
|
0 |
|
Penila
Investments Pty Ltd (Hornung S/F A/C) |
|
|
27,000 |
|
|
|
27,000 |
|
|
|
0 |
|
|
|
0 |
|
Hurley
Investments Pty Ltd (Banks Family A/C) |
|
|
24,500 |
|
|
|
24,500 |
|
|
|
0 |
|
|
|
0 |
|
ACN 123895107 Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Pramod Thakkar |
|
|
3,332 |
|
|
|
3,332 |
|
|
|
0 |
|
|
|
0 |
|
Pramod Thakkar (Thakkar Super Fund A/C) |
|
|
6,466 |
|
|
|
6,466 |
|
|
|
0 |
|
|
|
0 |
|
Bradley Downes |
|
|
35,098 |
|
|
|
35,098 |
|
|
|
0 |
|
|
|
0 |
|
John Hughes |
|
|
3,920 |
|
|
|
3,920 |
|
|
|
0 |
|
|
|
0 |
|
James Clifton |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Paul Sproule |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Wealth Planning Pty Ltd |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Lisa Houghton |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Dunedin
Corporation Pty Ltd (PW Harvey Super Fund A/C) |
|
|
980 |
|
|
|
980 |
|
|
|
0 |
|
|
|
0 |
|
Daniel
Kenneth Bates and Rachael Anne Bates |
|
|
1,592 |
|
|
|
1,592 |
|
|
|
0 |
|
|
|
0 |
|
Henroth Pty Ltd |
|
|
25,000 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
HSBC Custody
Nominees (Australia) Limited |
|
|
20,832 |
|
|
|
20,832 |
|
|
|
0 |
|
|
|
0 |
|
Michael S
Haifer Pty Ltd (Michael S. Haifer S/FA/C) |
|
|
1,958 |
|
|
|
1,958 |
|
|
|
0 |
|
|
|
0 |
|
Kim Lindsay
Pty Ltd (K&R Jacobs Family A/C) |
|
|
2,250 |
|
|
|
2,250 |
|
|
|
0 |
|
|
|
0 |
|
Andrew Cohen (the Pemberley A/C) |
|
|
1,958 |
|
|
|
1,958 |
|
|
|
0 |
|
|
|
0 |
|
Alan John Taylor |
|
|
1,958 |
|
|
|
1,958 |
|
|
|
0 |
|
|
|
0 |
|
Robert Bain Thomas |
|
|
4,832 |
|
|
|
4,832 |
|
|
|
0 |
|
|
|
0 |
|
Scott Property Services Pty Ltd |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Edna Securities Pty Ltd |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Pipda Investments Pty Limited |
|
|
1,958 |
|
|
|
1,958 |
|
|
|
0 |
|
|
|
0 |
|
Hawgood Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Amachong
Nominees Pty Ltd (John Chong Med Serv S/FA/C) |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
The Herbert Group Pty Ltd |
|
|
20,000 |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
0 |
|
Warman (Nominees) Pty Ltd |
|
|
16,666 |
|
|
|
16,666 |
|
|
|
0 |
|
|
|
0 |
|
Caskey
Investments Pty Ltd (John Caskey Super Fund A/C) |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
BWM Investments Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Warren Scott |
|
|
2,374 |
|
|
|
2,374 |
|
|
|
0 |
|
|
|
0 |
|
Gregory Forsyth |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Avanteos Investments Limited |
|
|
9,374 |
|
|
|
9,374 |
|
|
|
0 |
|
|
|
0 |
|
Washington H
Soul Pattinson and Company Limited |
|
|
17,500 |
|
|
|
17,500 |
|
|
|
0 |
|
|
|
0 |
|
Minton Consulting Pty Ltd (Superannuation A/C) |
|
|
2,416 |
|
|
|
2,416 |
|
|
|
0 |
|
|
|
0 |
|
Waler Group Holdings Pty Ltd |
|
|
66,666 |
|
|
|
66,666 |
|
|
|
0 |
|
|
|
0 |
|
Adgemis Holdings Pty Ltd |
|
|
49,016 |
|
|
|
49,016 |
|
|
|
0 |
|
|
|
0 |
|
Botanical
Nominees Pty Ltd (Wilson Asset Management Equity) |
|
|
7,350 |
|
|
|
7,350 |
|
|
|
0 |
|
|
|
0 |
|
Charas Pty Ltd (Charas ANZ M/L) |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Cranport Pty Ltd |
|
|
98,032 |
|
|
|
98,032 |
|
|
|
0 |
|
|
|
0 |
|
Donohoe
Holdings Pty Ltd (Measured Account) |
|
|
24,508 |
|
|
|
24,508 |
|
|
|
0 |
|
|
|
0 |
|
Emlarlil Pty Ltd (The Seymore Family A/C) |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
Fortis Clearing Nominees Pty Ltd (Blue Lake Partners) |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
G D Franz & Associates Pty Ltd |
|
|
8,816 |
|
|
|
8,816 |
|
|
|
0 |
|
|
|
0 |
|
Golden Words Pty Ltd |
|
|
49,016 |
|
|
|
49,016 |
|
|
|
0 |
|
|
|
0 |
|
Headland Capital Pty Ltd |
|
|
24,508 |
|
|
|
24,508 |
|
|
|
0 |
|
|
|
0 |
|
John C Anderson Pty Ltd |
|
|
27,450 |
|
|
|
27,450 |
|
|
|
0 |
|
|
|
0 |
|
Kas Developments Pty Ltd |
|
|
50,974 |
|
|
|
50,974 |
|
|
|
0 |
|
|
|
0 |
|
Liquid Capital Australia Pty Ltd |
|
|
29,408 |
|
|
|
29,408 |
|
|
|
0 |
|
|
|
0 |
|
Merricks
Capital Multi Strategy Fund (Onshore A/C) |
|
|
6,860 |
|
|
|
6,860 |
|
|
|
0 |
|
|
|
0 |
|
Merricks Capital Multi-Strategy (Cayman) Fund (Offshore A/C) |
|
|
2,940 |
|
|
|
2,940 |
|
|
|
0 |
|
|
|
0 |
|
Merrill Lynch Equities (Australia) Ltd |
|
|
100,000 |
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
Godfrey
Franz, Patricia Franz and Ryan Franz (Franz Family Super Fund A/C) |
|
|
5,874 |
|
|
|
5,874 |
|
|
|
0 |
|
|
|
0 |
|
Gregory Wilkins |
|
|
7,840 |
|
|
|
7,840 |
|
|
|
0 |
|
|
|
0 |
|
James John Peach |
|
|
24,508 |
|
|
|
24,508 |
|
|
|
0 |
|
|
|
0 |
|
James Peach
and Arlene Peach (Peach Family Super Fund A/C) |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
James Peach and Patricia Peach |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Mr Jonathan
James Marchant + Mrs Anna Lisa Marchant (Marchant Family S/F A/C) |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
Mr Kingsley Bartholomew |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Michael John Walker |
|
|
19,600 |
|
|
|
19,600 |
|
|
|
0 |
|
|
|
0 |
|
Ryan Paul Cross |
|
|
2,932 |
|
|
|
2,932 |
|
|
|
0 |
|
|
|
0 |
|
Samantha Small |
|
|
8,332 |
|
|
|
8,332 |
|
|
|
0 |
|
|
|
0 |
|
Phillipsgate Pty Ltd |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
0 |
|
|
|
0 |
|
Pontville Investments Pty Ltd |
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0 |
|
|
|
0 |
|
RBC Dexia
Investor Services Australia Nominees Pty Ltd (D. Traylen) |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
0 |
|
|
|
0 |
|
Sweet Sydney Pty Ltd (David and Angela Sweet Fam A/C) |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Tartan Investment Group Pty Ltd |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
0 |
|
|
|
0 |
|
Van Zyl Tripp Pty Ltd |
|
|
49,016 |
|
|
|
49,016 |
|
|
|
0 |
|
|
|
0 |
|
WAM Active Limited |
|
|
12,500 |
|
|
|
12,500 |
|
|
|
0 |
|
|
|
0 |
|
WAM Capital Limited |
|
|
53,674 |
|
|
|
53,674 |
|
|
|
0 |
|
|
|
0 |
|
Abdulrazack
Nominees Pty Ltd (Abdulrazack Super Fund A/C) |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
0 |
|
|
|
0 |
|
Bowmal Pty
Ltd (Kwantum Super Fund A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Cradling Pty
Ltd (Cradling P/L Super Fund A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Dalbow Superannuation Pty Limited (Executives Super Fund A/C) |
|
|
946 |
|
|
|
946 |
|
|
|
0 |
|
|
|
0 |
|
DFA Australia Limited |
|
|
28,750 |
|
|
|
28,750 |
|
|
|
0 |
|
|
|
0 |
|
Andrew Chang
(Dr. Chang Share Trading A/C) |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Anthony John Shakeshaft and Angela Irene Shakeshaft (A&A Shakeshaft SF
A/C) |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
John Francis Dowsett and Delia Ruth Dowsett (Dowsett Pension Fund A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
John Francis Kraegen and Bernadette Margaret Kelly (John F. Kraegen P/L
Super A/C) |
|
|
7,352 |
|
|
|
7,352 |
|
|
|
0 |
|
|
|
0 |
|
Michael John and Anne Louise Dodd (Dodd Super Fund A/C) |
|
|
2,082 |
|
|
|
2,082 |
|
|
|
0 |
|
|
|
0 |
|
S T Prince and E E McGirr (McGirr/Prince P/F A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Thomas David Crisp |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
GIW
Management Pty Ltd (GIW Superannuation Fund A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Gladstone Ganite Pty Ltd |
|
|
490 |
|
|
|
490 |
|
|
|
0 |
|
|
|
0 |
|
John Joseph
Nominees Pty Ltd (Rainbow Valley A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Joseph Engineering Pty Ltd |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Jovimero Pty
Ltd (The Marvic Super Fund A/C) |
|
|
7,842 |
|
|
|
7,842 |
|
|
|
0 |
|
|
|
0 |
|
Kagelu Holdings Pty Ltd |
|
|
4,166 |
|
|
|
4,166 |
|
|
|
0 |
|
|
|
0 |
|
Matun Pty Ltd (WR Macdonald A/C) |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Anthony Ross Miller |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Anthony Ross Miller (No 2 Account) |
|
|
958 |
|
|
|
958 |
|
|
|
0 |
|
|
|
0 |
|
Bruce Alfred Little |
|
|
1,960 |
|
|
|
1,960 |
|
|
|
0 |
|
|
|
0 |
|
Bradley John
Givney and Maree Louise Givney (Givney Family Super Fund A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Colin James Walz and Desley Anne Walz |
|
|
14,706 |
|
|
|
14,706 |
|
|
|
0 |
|
|
|
0 |
|
David Gillett (Professor Gillett S/FA/C) |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
Darryl John
Hughes and Lynette May Hughes (Darryl Hughes Super Fund A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Darryl John Hughes and Lynette May Hughes |
|
|
2,940 |
|
|
|
2,940 |
|
|
|
0 |
|
|
|
0 |
|
Gary David Mares (Mares Family A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Ian Kenneth
Liddell and Mirrella Liddell (I&M Liddell Retire Fund A/C) |
|
|
1,166 |
|
|
|
1,166 |
|
|
|
0 |
|
|
|
0 |
|
Ian Liddell |
|
|
1,006 |
|
|
|
1,006 |
|
|
|
0 |
|
|
|
0 |
|
Ian Stanley
Kruger and Jennie Maree Kruger (Kruger Family Super Fund A/C) |
|
|
7,842 |
|
|
|
7,842 |
|
|
|
0 |
|
|
|
0 |
|
John William Lauder |
|
|
39,214 |
|
|
|
39,214 |
|
|
|
0 |
|
|
|
0 |
|
Kenneth Richard Simmons and J E Simmons |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Lindsay
Bevan and Lynette Jean Zropf (LB&L Zropf Super Fund A/C) |
|
|
7,352 |
|
|
|
7,352 |
|
|
|
0 |
|
|
|
0 |
|
Lindsay Bevan and Lynette Jean Zropf |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Mark Andrew
Haydon and Michelle Elizabeth Haydon (Haydon Super Fund
A/C) |
|
|
1,500 |
|
|
|
1,500 |
|
|
|
0 |
|
|
|
0 |
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Michael James Sparrow and Ramona Renate
Sparrow (MJ &RR Sparrow S/Fund A/C) |
|
|
1,470 |
|
|
|
1,470 |
|
|
|
0 |
|
|
|
0 |
|
Malcolm
Robert Wallace and Susan Marie Hoadley
(Wallace Family S/FA/C) |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
Mark Andrew Haydon |
|
|
1,458 |
|
|
|
1,458 |
|
|
|
0 |
|
|
|
0 |
|
Peter Marcus
and K E Barr (Regnal Super Fund A/C) |
|
|
39,214 |
|
|
|
39,214 |
|
|
|
0 |
|
|
|
0 |
|
Perry Sutton
and Deirdre Margaret Sutton (Quay Street Super Fund A/C) |
|
|
2,082 |
|
|
|
2,082 |
|
|
|
0 |
|
|
|
0 |
|
Peter Adrian
Harris and Luke Harris (Peter Harris Homes S/F A/C) |
|
|
2,450 |
|
|
|
2,450 |
|
|
|
0 |
|
|
|
0 |
|
Peter Adrian Harris (Beach Avenue A/C) |
|
|
3,920 |
|
|
|
3,920 |
|
|
|
0 |
|
|
|
0 |
|
Pieter Jacovus Groen-Int-Woud |
|
|
980 |
|
|
|
980 |
|
|
|
0 |
|
|
|
0 |
|
Peter Lloyd
and Robert William Ingram (Ingram Super Fund A/C) |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Richard
Frederick Lund and Marie-Rose Lund (RF Lund Super Fund A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Ronald Mark Bush and Vicki Lorraine Bush |
|
|
980 |
|
|
|
980 |
|
|
|
0 |
|
|
|
0 |
|
Robert Peter
Saville and Melissa Kate Saville (Bob Saville Super Fund A/C) |
|
|
2,446 |
|
|
|
2,446 |
|
|
|
0 |
|
|
|
0 |
|
Simon Searle Lanyon and Janice Lanyon |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
Timothy John
Monger and Margaret Emelda Monger (Acorn Personal Super A/C) |
|
|
1,666 |
|
|
|
1,666 |
|
|
|
0 |
|
|
|
0 |
|
B A Groen-Int-Woud |
|
|
1,470 |
|
|
|
1,470 |
|
|
|
0 |
|
|
|
0 |
|
K E Barr (Zander & Flynn A/C) |
|
|
4,902 |
|
|
|
4,902 |
|
|
|
0 |
|
|
|
0 |
|
Nora Margaret Gilmore |
|
|
7,352 |
|
|
|
7,352 |
|
|
|
0 |
|
|
|
0 |
|
Palmer Super Fund Pty Ltd |
|
|
1,458 |
|
|
|
1,458 |
|
|
|
0 |
|
|
|
0 |
|
Poppeta Pty Ltd (Robson Family A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
R L Hope Pty
Limited (Richard Hope Super Fund A/C) |
|
|
1,000 |
|
|
|
1,000 |
|
|
|
0 |
|
|
|
0 |
|
RITL Pty Ltd (RITL Super Fund A/C) |
|
|
7,342 |
|
|
|
7,342 |
|
|
|
0 |
|
|
|
0 |
|
Robher
Investments Pty Ltd (The Hertogs Family A/C) |
|
|
29,166 |
|
|
|
29,166 |
|
|
|
0 |
|
|
|
0 |
|
Starburst IAO Pty Ltd |
|
|
1,960 |
|
|
|
1,960 |
|
|
|
0 |
|
|
|
0 |
|
Supercomp No
99 Pty Ltd (Super Fund Account) |
|
|
9,804 |
|
|
|
9,804 |
|
|
|
0 |
|
|
|
0 |
|
T D & S R Crisp Pty Ltd (Super Fund A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Trust
Company Superannuation Services Limited (AMG Super-Dale Fisher A/C) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
Trust Company Superannuation Services Limited (Gavin Stewart Murray A/C) |
|
|
2,082 |
|
|
|
2,082 |
|
|
|
0 |
|
|
|
0 |
|
Bluelake Partners Pty Ltd |
|
|
9,582 |
|
|
|
9,582 |
|
|
|
0 |
|
|
|
0 |
|
Cadence Capital Ltd |
|
|
35,832 |
|
|
|
35,832 |
|
|
|
0 |
|
|
|
0 |
|
Prime Value Asset Management Limited |
|
|
33,332 |
|
|
|
33,332 |
|
|
|
0 |
|
|
|
0 |
|
Renaissance Asset Management Pty Ltd |
|
|
196,666 |
|
|
|
196,666 |
|
|
|
0 |
|
|
|
0 |
|
Irrewarra Investments Pty Ltd |
|
|
95,832 |
|
|
|
95,832 |
|
|
|
0 |
|
|
|
0 |
|
Naos Asset
Management Pty Ltd (Naos Small Companies Fund A/C) |
|
|
175,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
0 |
|
UBS Nominees Pty Ltd |
|
|
164,698 |
|
|
|
164,698 |
|
|
|
0 |
|
|
|
0 |
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares |
|
|
% of Common Stock |
|
|
|
Beneficially Owned |
|
|
Number of |
|
|
Beneficially Owned |
|
|
Beneficially Owned |
|
Name of Selling Stockholder |
|
Prior to the Offering |
|
|
Shares Offered |
|
|
After the Offering |
|
|
After the Offering |
|
Brokers who received options as
compensation for their services
provided to the Company in our October
and November 2009 private placement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCZ Equities Pty Limited |
|
|
49,437 |
|
|
|
49,437 |
|
|
|
0 |
|
|
|
0 |
|
Berne No 132 Nominees Pty Ltd |
|
|
37,183 |
|
|
|
37,183 |
|
|
|
0 |
|
|
|
0 |
|
YBR Securities Pty Ltd |
|
|
32,423 |
|
|
|
32,423 |
|
|
|
0 |
|
|
|
0 |
|
Neil Norman Mount (Super Fund A/C) |
|
|
180,568 |
|
|
|
180,568 |
|
|
|
0 |
|
|
|
0 |
|
Euna Kim |
|
|
3,166 |
|
|
|
3,166 |
|
|
|
0 |
|
|
|
0 |
|
Inteq Limited |
|
|
86,868 |
|
|
|
86,868 |
|
|
|
0 |
|
|
|
0 |
|
Bradley Gavin Downes |
|
|
8,333 |
|
|
|
8,333 |
|
|
|
0 |
|
|
|
0 |
|
Summer Street Research Partners |
|
|
23,529 |
|
|
|
23,529 |
|
|
|
0 |
|
|
|
0 |
|
Olympus Securities, LLC |
|
|
28,100 |
|
|
|
28,100 |
|
|
|
0 |
|
|
|
0 |
|
Crystal Research Associates, LLC |
|
|
18,733 |
|
|
|
18,733 |
|
|
|
0 |
|
|
|
0 |
|
Griffen Securities |
|
|
29,317 |
|
|
|
29,317 |
|
|
|
0 |
|
|
|
0 |
|
Total: |
|
|
5,783,774 |
|
|
|
5,444,633 |
|
|
|
339,141 |
|
|
|
0 |
|
* Less than one percent.
(1) |
|
Carpe DM, Inc. is a consulting firm. Stuart Fine, a principal of Carpe DM, Inc., exercises the sole
voting and dispositive power with respect to the shares to be offered hereby by Carpe DM, Inc. |
|
(2) |
|
Jeffrey Kraws and Karen Goldfarb are principals of Crystal Research Associates, an independent securities
research firm, which provides consulting services to the Company. |
|
(3) |
|
LSGH LLC is a corporation that provides life sciences within
Pennsylvania. Mel Billingsley exercises the voting and dispositive
power with respect to the shares to be offered hereby by LSGH LLC. |
|
(4) |
|
ID&E Pty Ltd. is an Australian research and development firm. Richard Sokolov, Ian Johnson and George
Sidis exercise the voting and dispositive power with respect to the shares to be offered hereby by ID&E
Pty Ltd. |
|
(5) |
|
Inteq Limited is an Australian corporate advisory firm. Andrew Cohen, David Allen, Kim Jacobs, Alan
Taylor and John Fletcher exercise the voting and dispositive power with respect to the shares to be
offered hereby by Inteq Limited. |
|
(6) |
|
Mick Barron Healthcare Advisors is a healthcare advisory firm which provides consulting services to the
Company. Jeffrey Kraws exercises the sole voting and dispositive power with respect to the shares to be
offered hereby by Mick Barron Healthcare Advisors. |
|
(7) |
|
Shahed Dashti exercises the sole voting and dispositive power with respect to the shares to be offered
hereby by Medical Middle East Ltd. |
|
(8) |
|
The shares offered hereby represent those issuable upon exercise of options to purchase 46,120 shares of
common stock held by Keith Bocchicchio and options to purchase 113,455 shares of common stock held
jointly by Keith Bocchicchio and his spouse, Sue Bocchicchio. |
|
(9) |
|
The shares offered hereby represent those issuable upon exercise of options to purchase 63,103 shares of
common stock held jointly by Steve Witkowski and his spouse, Amy Witkowski. |
|
(10) |
|
The shares offered hereby represent those issuable upon exercise of options to purchase 113,455 shares of
common stock held jointly by Dan Adlon and his spouse, Deb Adlon. |
|
(11) |
|
The shares offered hereby represent 5,780 shares of common stock held by Edward Paukovits and options to
purchase 113,455 shares of common stock held jointly by Edward Paukovits and his spouse, Dianne
Paukovits. |
71
DESCRIPTION OF SECURITIES
The following description of our capital stock is a summary only and is qualified in its
entirety by reference to our Certificate of Incorporation and Bylaws, which are included as
Exhibits 3.1 and 3.2 of this registration statement.
Common Stock
We are authorized to issue up to 250,000,000 shares of common stock, US$0.01 par value per
share.
Holders of our common stock are entitled to receive dividends when and as declared by our
board of directors out of funds legally available.
Holders of our common stock are entitled to one vote for each share on all matters voted on by
stockholders, including the election of directors.
Holders of our common stock do not have any conversion, redemption or preemptive rights. In
the event of our dissolution, liquidation or winding up, holders of our common stock are entitled
to share ratably in any assets remaining after the satisfaction in full of the prior rights of
creditors and the aggregate liquidation preference of any preferred stock then outstanding. The
rights, preferences and privileges of the holders of our common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of preferred stock that we
may designate and issue in the future.
All outstanding shares of our common stock are fully paid and non-assessable.
Preferred Stock
We are authorized to issue up to 50,000,000 shares of preferred stock, US$0.01 par value per
share. We may issue any class of preferred stock in any series. Our board of directors has the
authority to establish and designate series, and to fix the number of shares included in each such
series and the variations in the relative rights, preferences and limitations as between series,
provided that, if the stated dividends and amounts payable on liquidation are not paid in full, the
shares of all series of the same class shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums which would be payable on such shares if all
dividends were declared and paid in full, and in any distribution of assets other than by way of
dividends in accordance with the sums which would be payable on such distribution if all sums
payable were discharged in full. Shares of each series when issued shall be designated to
distinguish the shares of each series from shares of all other series.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation
and Bylaws
Certain provisions of our Certificate of Incorporation and Bylaws may be considered as having
an anti-takeover effect, such as those provisions:
|
|
|
authorizing our board of directors to issue from time to time any series of
preferred stock and fix the designation, powers, preferences and rights of the shares
of such series of preferred stock; |
|
|
|
|
prohibiting stockholders from acting by written consent in lieu of a meeting,
effective upon the implementation date (the Implementation Date) of the
Implementation Agreement between us and UMSL; |
|
|
|
|
requiring advance notice of stockholder intention to put forth director nominees
or bring up other business at a stockholders meeting; |
|
|
|
|
prohibiting stockholders from calling a special meeting of stockholders; |
72
|
|
|
requiring a 662/3% majority stockholder approval in
order for stockholders to amend our bylaws or adopt new bylaws; and |
|
|
|
providing that, subject to the rights of the holders of any series of preferred
stock, the number of directors shall be fixed from time to time exclusively by our
board of directors pursuant to a resolution adopted by a majority of the total number
of authorized directors (whether or not there exist any vacancies in previously
authorized directorships). Newly created directorships resulting from any increase in
our authorized number of directors will be filled only by a majority of our board of
directors then in office, even less than a quorum, or, to the extent if there are no
directors, by the stockholders. |
We are also subject to Section 203 of the DGCL, which in general prohibits a Delaware
corporation from engaging in any business combination with any interested stockholder for a period
of three years following the date that the stockholder became an interested stockholder, unless:
|
|
|
prior to that date, our board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; |
|
|
|
|
upon consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding (but not the outstanding
voting stock owned by the interested stockholder) those shares owned by (i) persons
who are directors and also officers and (ii) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or |
|
|
|
|
on or subsequent to that date, the business combination is approved by our board
of directors and authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of at least 662/3%
of the outstanding voting stock that is not owned by the interested stockholder. |
In general, Section 203 defines an interested stockholder as an entity or person beneficially
owning 15% or more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by any of these entities or persons.
The above-summarized provisions of the Delaware General Corporation Law (the DGCL) and our
Certificate of Incorporation and Bylaws could make it more difficult to acquire us by means of a
tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These
provisions are expected to discourage certain types of coercive takeover practices and takeover
bids that our board of directors may consider inadequate and to encourage persons seeking to
acquire control of us to first negotiate with our board of directors. We believe that the benefits
of increased protection of our ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging
takeover or acquisition proposals because, among other things, negotiation of these proposals could
result in an improvement of their terms.
Listing
Our shares of common stock are listed on the Nasdaq Global Market under the symbol of UNIS.
Our shares of common stock are traded on the ASX in the form of CDIs under the symbol UNS.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare.
73
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to time by the selling
stockholders. The term selling stockholders includes transferees, pledgees, donees, assignees or
other successors in interest selling shares received after the date of this prospectus from each
selling stockholder. The number of shares beneficially owned by a selling stockholder will
decrease as and when any such transfers are completed. The plan of distribution for the selling
stockholders shares sold hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees assignees or other successors will be selling stockholders hereunder. To the
extent required, we may amend and supplement this prospectus from time to time to describe a
specific plan of distribution.
The selling stockholders may, from time to time, sell any and all of their shares of common
stock on the Nasdaq Global Market or in the form of CDIs on the Australian Securities Exchange (or
any other market, exchange or trading facility on which the shares are then listed) or in private
transactions. The selling stockholders may make these sales at prices and under terms then
prevailing or at prices related to the then current market price. The selling stockholders may
also make sales in negotiated transactions. The selling stockholders may offer their shares from
time to time pursuant to one or more of the following methods:
|
|
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers; |
|
|
|
|
one or more block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal to facilitate
the transaction; |
|
|
|
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its
account; |
|
|
|
|
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
|
|
public or privately negotiated transactions; |
|
|
|
|
through underwriters, brokers or dealers (who may act as agents or principals) or
directly to one or more purchasers; |
|
|
|
|
a combination of any such methods of sale; and |
|
|
|
|
any other method permitted pursuant to applicable law. |
The selling stockholders may enter into derivative transactions with third parties, or sell
securities not covered by this prospectus to third parties in privately negotiated transactions.
If the applicable prospectus supplement indicates, in connection with those derivatives, the third
parties may sell securities covered by this prospectus and the applicable prospectus supplement,
including in short sale transactions. If so, the third party may use securities pledged by the
selling stockholders or borrowed from the selling stockholders or others to settle those sales or
to close out any related open borrowings of stock, and may use securities received from the selling
stockholders in settlement of those derivatives to close out any related open borrowings of stock.
In connection with distributions of the shares or otherwise, the selling stockholders may:
|
|
|
enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the shares in the course of hedging the
positions they assume; |
|
|
|
|
sell the shares short and redeliver the shares to close out such short positions; |
|
|
|
|
enter into option or other transactions with broker-dealers or other financial
institutions which require the delivery to them of shares offered by this prospectus,
which they may in turn resell; and |
|
|
|
|
pledge shares to a broker-dealer or other financial institution, which, upon a
default, they may in turn resell. |
In addition to the foregoing methods, the selling stockholders may offer their shares from
time to time in transactions involving principals or brokers not otherwise contemplated above, in a
combination of such methods or described above or any other lawful methods. The selling
stockholders may also transfer, donate or assign their shares to lenders, family members and others
and each of such persons will be deemed to be a selling stockholder for purposes of this
prospectus. The selling stockholders may from time to time pledge or grant a security interest in
some or all of the shares of common stock, and if the selling stockholders default
74
in the performance of their secured obligations, the pledgees or secured parties may offer and
sell the shares of common stock from time to time under this prospectus; provided, however, in the
event of a pledge or then default on a secured obligation by the selling stockholder, in order for
the shares to be sold under this registration statement, unless permitted by law, we must
distribute a prospectus supplement and/or amendment to this registration statement amending the
list of selling stockholders to include the pledge, secured party or other successors in interest
of the selling stockholder under this prospectus.
The selling stockholders may also sell their shares pursuant to Rule 144 under the Securities
Act, which permits resale of shares purchased in a private placement subject to the satisfaction of
certain conditions.
Sales through brokers may be made by any method of trading authorized by any stock exchange or
market on which the shares may be listed or quoted, including block trading in negotiated
transactions. Without limiting the foregoing, such brokers may act as dealers by purchasing any or
all of the shares covered by this prospectus, either as agents for others or as principals for
their own accounts, and reselling such shares pursuant to this prospectus. The selling
stockholders may effect such transactions directly, or indirectly through underwriters,
broker-dealers or agents acting on their behalf. In effecting sales, broker-dealers or agents
engaged by the selling stockholders may arrange for other broker-dealers to participate.
Broker-dealers or agents may receive commissions, discounts or concessions from the selling
stockholders, in amounts to be negotiated immediately prior to the sale (which compensation as to a
particular broker-dealer might be in excess of customary commissions for routine market
transactions).
In offering the shares covered by this prospectus, the selling stockholders, and any
broker-dealers and any other participating broker-dealers who execute sales for the selling
stockholders, may be deemed to be underwriters within the meaning of the Securities Act in
connection with these sales. Any profits realized by the selling stockholders and the compensation
of such broker-dealers may be deemed to be underwriting discounts and commissions.
We will pay all fees and expenses incident to the registration of the shares.
LEGAL MATTERS
The validity of the common stock offered in this prospectus will be passed upon for us by DLA
Piper LLP (US).
EXPERTS
The consolidated financial statements of Unilife Corporation and its subsidiaries as of June
30, 2009 and 2008 and for each of the three fiscal years ended June 30, 2009, 2008 and 2007
contained herein have been audited by BDO Audit (WA) Pty Ltd (formerly known as BDO Kendalls Audit
& Assurance (WA) Pty Ltd), an independent registered public accounting firm, as stated in their
report dated November 11, 2009, which is included herein, and such consolidated financial
statements have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and copy any document
we file at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 on
official business days during the hours of 10:00 am to 3:00 pm. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the Public Reference Room. Our SEC
filings are also available to the public at the SECs website at http://www.sec.gov.
This prospectus is only part of a Registration Statement on Form S-1 that we have filed with
the SEC under the Securities Act with respect to the shares of common stock to be sold in this
offering. This prospectus does not contain all the information included in the Registration
Statement. For further
information about us and the shares of our common stock to be sold in this offering, please
refer to the Registration Statements including its exhibits.
75
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page |
|
Unaudited Condensed Consolidated Interim Financial Statements |
|
|
|
|
|
|
|
F-2 |
|
|
|
|
F-3 |
|
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
Audited Consolidated Financial Statements |
|
|
|
|
|
|
|
F-15 |
|
|
|
|
F-16 |
|
|
|
|
F-17 |
|
|
|
|
F-18 |
|
|
|
|
F-19 |
|
|
|
|
F-20 |
|
F-1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNILIFE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
June 30, 2009 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
24,805 |
|
|
$ |
3,627 |
|
Short-term investments |
|
|
9,195 |
|
|
|
|
|
Accounts receivable |
|
|
1,733 |
|
|
|
7,333 |
|
Inventories |
|
|
713 |
|
|
|
1,097 |
|
Prepaid expenses and other current assets |
|
|
1,079 |
|
|
|
223 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
37,525 |
|
|
|
12,280 |
|
Property, plant and equipment, net |
|
|
17,657 |
|
|
|
9,137 |
|
Goodwill |
|
|
11,557 |
|
|
|
10,235 |
|
Intangible assets, net |
|
|
45 |
|
|
|
43 |
|
Other assets |
|
|
260 |
|
|
|
517 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
67,044 |
|
|
$ |
32,212 |
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
975 |
|
|
$ |
1,103 |
|
Accrued expenses |
|
|
654 |
|
|
|
6,097 |
|
Current portion of long-term debt |
|
|
1,702 |
|
|
|
405 |
|
Deferred revenue |
|
|
2,348 |
|
|
|
2,642 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,679 |
|
|
|
10,247 |
|
Long-term debt, less current portion |
|
|
1,139 |
|
|
|
2,728 |
|
Deferred revenue |
|
|
7,631 |
|
|
|
7,926 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
14,449 |
|
|
|
20,901 |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 50,000,000
shares authorized as of March 31, 2010; none
issued or outstanding as of March 31, 2010 and
June 30, 2009 |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000
shares authorized as of March 31, 2010;
54,355,770 and 36,625,802 shares issued and
outstanding as of March 31, 2010 and June 30,
2009, respectively |
|
|
543 |
|
|
|
366 |
|
Additional paid-in-capital |
|
|
119,399 |
|
|
|
57,987 |
|
Accumulated deficit |
|
|
(69,945 |
) |
|
|
(49,902 |
) |
Accumulated other comprehensive income |
|
|
2,598 |
|
|
|
2,860 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
52,595 |
|
|
|
11,311 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
67,044 |
|
|
$ |
32,212 |
|
|
|
|
|
|
|
|
See notes to the condensed consolidated financial statements.
F-2
UNILIFE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Revenues |
|
$ |
8,770 |
|
|
$ |
12,273 |
|
Cost of sales |
|
$ |
1,835 |
|
|
|
2,774 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
6,935 |
|
|
|
9,499 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
|
6,955 |
|
|
|
621 |
|
Selling, general and administrative |
|
|
18,897 |
|
|
|
10,807 |
|
Depreciation and amortization |
|
|
1,727 |
|
|
|
655 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
27,579 |
|
|
|
12,083 |
|
|
|
|
|
|
|
|
Operating loss |
|
|
(20,644 |
) |
|
|
(2,584 |
) |
Interest expense |
|
|
91 |
|
|
|
279 |
|
Interest income |
|
|
(707 |
) |
|
|
(332 |
) |
Other expense |
|
|
15 |
|
|
|
217 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,043 |
) |
|
$ |
(2,748 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(0.45 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(0.45 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
See notes to the condensed consolidated financial statements.
F-3
UNILIFE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders Equity and Comprehensive Loss
(in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional- |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income |
|
|
Total |
|
Balance as of July 1, 2009 |
|
|
36,625,802 |
|
|
$ |
366 |
|
|
$ |
57,987 |
|
|
$ |
(49,902 |
) |
|
$ |
2,860 |
|
|
$ |
11,311 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,043 |
) |
|
|
|
|
|
|
(20,043 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(262 |
) |
|
|
(262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,305 |
) |
Issuance of options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
1,831 |
|
|
|
|
|
|
|
|
|
|
|
1,831 |
|
Issuance of common stock to employees |
|
|
833,333 |
|
|
|
8 |
|
|
|
4,331 |
|
|
|
|
|
|
|
|
|
|
|
4,339 |
|
Issuance of restricted stock |
|
|
1,738,000 |
|
|
|
17 |
|
|
|
578 |
|
|
|
|
|
|
|
|
|
|
|
595 |
|
Issuance of common stock upon exercise of
stock options |
|
|
1,280,341 |
|
|
|
13 |
|
|
|
1,804 |
|
|
|
|
|
|
|
|
|
|
|
1,817 |
|
Issuance of common stock in connection with
private placement and share purchase plan
net of issuance costs |
|
|
10,544,961 |
|
|
|
106 |
|
|
|
47,011 |
|
|
|
|
|
|
|
|
|
|
|
47,117 |
|
Issuance of common stock to former
shareholders of Unitract Syringe Pty
Limited |
|
|
3,333,333 |
|
|
|
33 |
|
|
|
5,857 |
|
|
|
|
|
|
|
|
|
|
|
5,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2010 |
|
|
54,355,770 |
|
|
$ |
543 |
|
|
$ |
119,399 |
|
|
$ |
(69,945 |
) |
|
$ |
2,598 |
|
|
$ |
52,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the condensed consolidated financial statements.
F-4
UNILIFE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,043 |
) |
|
$ |
(2,748 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,727 |
|
|
|
655 |
|
Share-based compensation expense |
|
|
6,765 |
|
|
|
2,675 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
5,744 |
|
|
|
(2,872 |
) |
Inventories |
|
|
384 |
|
|
|
(579 |
) |
Prepaid expenses and other current assets |
|
|
(821 |
) |
|
|
(337 |
) |
Other assets |
|
|
255 |
|
|
|
5 |
|
Accounts payable |
|
|
(150 |
) |
|
|
(291 |
) |
Accrued expenses |
|
|
(604 |
) |
|
|
1,138 |
|
Deferred revenue |
|
|
(2,009 |
) |
|
|
10,437 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(8,752 |
) |
|
|
8,083 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(9,604 |
) |
|
|
(1,310 |
) |
Purchases of certificates of deposit |
|
|
(9,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(18,710 |
) |
|
|
(1,310 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt |
|
|
|
|
|
|
88 |
|
Proceeds from the issuance of common stock, net of issuance costs |
|
|
47,117 |
|
|
|
|
|
Proceeds from the exercise of options to purchase common stock |
|
|
1,817 |
|
|
|
38 |
|
Principal payments on long-term debt |
|
|
(311 |
) |
|
|
(3,309 |
) |
Increase in restricted cash |
|
|
433 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
49,056 |
|
|
|
(3,183 |
) |
Foreign currency exchange on cash |
|
|
(416 |
) |
|
|
(1,023 |
) |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
21,178 |
|
|
|
2,567 |
|
Cash and cash equivalents at beginning of period |
|
|
3,627 |
|
|
|
2,887 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
24,805 |
|
|
$ |
5,454 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Conversion of convertible notes into common stock |
|
|
|
|
|
$ |
75 |
|
Issuance of common stock to former shareholders of Unitract Syringe Pty Limited |
|
$ |
5,890 |
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the condensed consolidated financial statements.
F-5
Unilife Corporation and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
PART I FINANCIAL INFORMATION
1. Description of Business and Unaudited Financial Statements
Unilife Corporation (collectively with its consolidated subsidiaries, the Company) and
subsidiaries is a medical device company focused on the design, development, manufacture and supply
of a proprietary range of retractable syringes. The primary target customers for the Companys
products include pharmaceutical manufacturers and suppliers of medical equipment to healthcare
facilities and distributors to patients who self-administer prescription medication. The Company
also manufactures non-proprietary Class I and Class II medical devices, such as specialty syringes,
under contract for outsourcing customers.
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP).
The accompanying unaudited condensed consolidated financial statements contain all normal and
recurring adjustments that, in the opinion of management, are necessary for a fair presentation for
the periods presented as required by Rule 10-01 of Regulation S-X. Interim results may not be
indicative of results for a full year. The condensed consolidated financial statements should be
read in conjunction with the Companys consolidated financial statements and the notes thereto for
the fiscal year ended June 30, 2009 contained in its registration statement on Form 10.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Unilife Corporation
and its wholly-owned subsidiaries. The condensed consolidated financial statements have been
prepared in accordance with GAAP. All intercompany accounts and transactions have been eliminated
in consolidation.
On September 1, 2009, Unilife Medical Solutions Limited, an Australian Corporation, (UMSL)
entered into a Merger Implementation Agreement with Unilife Corporation, a newly formed Delaware
subsidiary of UMSL, pursuant to which stockholders and option holders of UMSL would exchange their
existing interests in UMSL for equivalent interests in Unilife Corporation and Unilife Corporation
would become the parent or ultimate parent of UMSL and its subsidiaries. The redomiciliation
transaction was approved by the Australian Federal Court and the shareholders and option holders of
UMSL and was completed on January 27, 2010. In the redomiciliation each holder of UMSL ordinary
shares or share options received one share of common stock or one stock option, of Unilife
Corporation for every six UMSL ordinary shares or share options, respectively, held by such holder,
unless a holder of UMSL ordinary shares elected to receive, in lieu of common stock, Chess
Depository Interests, or CDIs of Unilife (each representing one-sixth of a share of Unilife common
stock) in which case such holder received one CDI of Unilife for each ordinary share of UMSL. All
share and per share data have been retroactively restated to reflect the one for six share
recapitalization.
References to the Company include Unilife Corporation and its consolidated subsidiaries,
including UMSL, unless the context otherwise requires. References to Unilife are references
solely to Unilife Corporation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. The estimates are principally in the areas of revenue recognition and
share-based compensation expense. Management bases its estimates on historical experience and
various assumptions that are believed to be reasonable under the circumstances. Actual results
could differ from those estimates.
F-6
Inventories
Inventories consist primarily of plastic syringe components and include direct materials,
direct labor and manufacturing overhead. Inventories are stated at the lower of cost or market,
with cost determined using the first in, first out method. The Company routinely reviews its
inventory for obsolete, slow moving or otherwise impaired inventory and records estimated
impairments in the periods in which they occur. Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
June 30, 2009 |
|
|
|
(in thousands) |
|
Raw materials |
|
$ |
654 |
|
|
$ |
567 |
|
Work in process |
|
|
59 |
|
|
|
530 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
713 |
|
|
$ |
1,097 |
|
|
|
|
|
|
|
|
Share-Based Compensation
The Company grants stock options, restricted stock and common stock as compensation to its
employees, directors and consultants. Certain employee and director awards vest over stated vesting
periods and others also require achievement of specific performance or market conditions. The
Company expenses the grant-date fair value of awards to employees and directors over their
respective vesting periods. To the extent that employee and director awards vest only upon the
achievement of a specific performance condition, expense is recognized over the period from the
date management determines that the performance condition is probable of achievement through the
date they are expected to be met. Awards granted to consultants are sometimes granted for past
services, in which case their fair value is expensed on their grant date, while other awards
require future service, or the achievement of performance or market conditions. Timing of expense
recognition for consultant awards is similar to that of employee and director awards; however,
aggregate expense is re-measured each quarter end based on the then fair value of the award through
the vesting date of the award. The Company estimates the fair value of stock options using the
Black-Scholes option-pricing model, with the exception of market-based grants, which are valued
based on Barrier and Monte Carlo pricing models. Option pricing methods require the input of highly
subjective assumptions, including the expected stock price volatility. See Note 3 for additional
information regarding share-based compensation.
Revenue Recognition
The Company recognizes revenue from licensing fees, industrialization efforts and product
sales.
In June 2008, the Company entered into an exclusive licensing arrangement to allow its
pharmaceutical partner to use certain of the Companys intellectual property in order and solely to
develop in collaboration with the Company, the Companys Unifill syringe for use in and sale to the
pre-filled syringe market. The 10.0 million Euro up-front, non-refundable fee paid for this license
is being amortized over the expected life of the related agreement. In late fiscal 2009, the
Company entered into an industrialization agreement with its pharmaceutical partner, under which
specific payment amounts and completion dates were established for achievement of certain
pre-defined milestones in its development of the Unifill syringe. Revenue is recognized upon
achievement of the at risk milestone events, which represents the culmination of the earnings
process related to such events. Milestones include specific phases of the project such as product
design, prototype availability, user tests, manufacturing proof of principle and the various steps
to complete the industrialization of the product. Revenue recognized is commensurate with the
milestones achieved and the Company has no future performance obligations related to previous
milestone payment as each milestone payment is non-refundable when received.
The Company recognizes revenue from sales of products at the time of shipment and when title
passes to the customer. Product sales were $1.7 million and $3.1 million during the nine
months ended March 31, 2010 and 2009, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.
Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162
(SFAS 168). SFAS 168 represents the last numbered standard issued by the FASB under the old
(pre-codification) numbering system, and amends the GAAP hierarchy. On July 1, 2009, the FASB
launched its new codification (i.e. the FASB Accounting Standards Codification ASC). The
codification supersedes existing GAAP for nongovernmental entities.
F-7
In October 2009, the FASB issued Accounting Standards Update 2009-13, Multiple-Deliverable
Revenue Arrangements (ASU 2009-13). ASU 2009-13 provides amendments to the criteria in Subtopic
605-24 for separating consideration in multiple-deliverable revenue arrangements. It establishes a
hierarchy of selling prices to determine the selling price of each specific deliverable which
includes vendor-specific objective evidence (if available), third-party evidence (if
vendor-specific evidence is not available) or estimated selling price if neither of the first two
are available. ASU 2009-13 also eliminates the residual method for allocating revenue between the
elements of an arrangement and requires that arrangement consideration be allocated at the
inception of the arrangement. Finally, ASU 2009-13 expands the disclosure requirements regarding a
vendors multiple-deliverable revenue arrangements. ASU 2009-13 should be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. The Company is evaluating the impact the adoption of ASU 2009-13 will have on
its consolidated financial statements.
3. Equity Transactions and Share-Based Compensation
During the nine months ended March 31, 2010, the Company issued 10,544,961 shares of common
stock and raised an aggregate of A$50.9 million ($47.1 million), net of issuance costs through a
combination of a U.S. and Australian private placement and a share purchase plan for the Companys
Australian and New Zealand shareholders. The Company also issued options to purchase 3,145,767
shares of common stock for no additional consideration to the investors in the private placement.
Of these options, 50% are exercisable at A$7.50 per share, and 50% are exercisable at A$12.00 per
share. The Company also issued options to purchase 497,662 shares of common stock to certain
brokers as consideration for their services in connection with the private placement, which are
exercisable at A$5.10 per share. All of the options described above are immediately exercisable and
will expire in November 2012. The proceeds from the private placement and the share purchase plan
will be used to accelerate the expansion of the Companys U.S. operational capabilities and
production facilities, to purchase capital equipment and complete the industrialization program for
the Unifill syringe.
On November 17, 2009, the Company issued 3,333,333 shares of common stock to the former
shareholders of Unitract Syringe Pty Limited. These shares were issued in full satisfaction of the
Companys obligation for the purchase of that business which had been accrued for on the date of
purchase.
On January 14, 2010, the Company issued 833,333 fully vested shares of common stock to certain
employees in consideration of their transfer to the Company of certain intellectual property rights
and recognized $4.3 million of share-based compensation expense classified in research and
development expense.
The Company recognized total share-based compensation expense related to stock options, grants
of restricted stock and common stock to employees, directors and consultants of $6.8 million
and $2.7 million during the nine months ended March 31, 2010 and 2009, respectively.
Stock Options
The Company has granted stock options to certain employees and directors under the Employee
Share Option Plan (the Plan). The Plan is designed to assist in the motivation and retention of
employees and to recognize the importance of employees to the long-term performance and success of
the Company. The Company has also granted stock options to certain consultants outside of the Plan.
The majority of the options to purchase common stock vest on the anniversary of the date of grant,
which ranges from one to three years. Additionally, certain stock options vest upon the closing
price of the Companys common stock reaching certain minimum levels, as defined in the agreements.
Finally, certain other stock options vest upon the meeting of certain performance milestones such
as the signing of specific agreements and the completion of the Companys anticipated listing on a
U.S. stock exchange. As of March 31, 2010, the Company expects that all such performance conditions
that have not currently been met will be met. Share-based compensation expense related to options
granted to employees is recognized on a straight-line basis over the related vesting term.
Share-based compensation expense related to options granted to consultants is recognized ratably
over each vesting tranche of the options.
During the nine months ended March 31, 2010, the Company granted a total of 383,333 options to
purchase common stock to certain employees and directors under the Plan. The options are
exercisable at prices ranging from A$2.10 to A$7.20 per share and vest over a period of three
years. The weighted-average grant date fair value of the options is $2.08 per share.
During the nine months ended March 31, 2010, the Company granted a total of 3,643,429 options
to purchase common stock outside the Plan in connection with
the Companys private placement as discussed above.
F-8
In November 2009, the Company adopted the 2009 Stock Incentive Plan (the Stock Incentive
Plan). The Stock Incentive Plan provides for a maximum of 6,000,000 shares of common stock to be
reserved for the issuance of stock options and other stock-based
awards. Commencing on January 1, 2011, and on each January 1st thereafter, through January 1,
2019, the share reserve will automatically adjust so that it will equal 12.5% of the weighted
average number of shares of common stock outstanding.
On November 20, 2009, the Companys compensation committee approved a new incentive package
for its Chief Executive Officer, which included the issuance of 834,000 options to purchase common
stock under the Stock Incentive Plan. The options were issued on February 3, 2010 following
shareholder approval of the incentive package. The options are exercisable at
$6.64 per share and vest upon the trading price of the Companys common stock reaching certain
minimum levels on Nasdaq. The grant date fair value of the options is $3.18 per share and the fair
value of the options is being expensed on a straight-line basis over a derived service of period
1.92 years.
In January 2010, the Company issued 1,000,000 options to purchase common stock to a consultant
under the Stock Incentive Plan in consideration for various services to be performed for the
Company. The options to purchase common stock are exercisable at A$6.33 per share and vest upon
the trading price of the Companys CDIs reaching certain minimum levels on the Australian Stock
Exchange. The options were valued on the last day of the quarter at $3.18 per share and the fair
value of the options is being expensed ratably over the vesting period of each tranche, which
ranges from 0.96 years to 1.94 years. The options will be re-valued on a quarterly basis and
marked to market until exercised.
During the nine months ended March 31, 2010, the Company granted a total of 70,000 options to
purchase common stock to employees under the Stock Incentive Plan. The options are exercisable at
$5.80 per share and vest over a period of three years. The weighted-average grant date fair value
of the options is $2.71 per share.
The following is a summary of stock option activity during the nine months ended March 31,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Remaining |
|
|
|
|
|
|
Number of |
|
|
Average |
|
|
Contractual |
|
|
Aggregate Intrinsic |
|
|
|
Options |
|
|
Exercise Price |
|
|
Life (in years) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Outstanding as of July 1, 2009 |
|
|
6,322,500 |
|
|
$ |
1.82 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
5,930,762 |
|
|
|
7.49 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,280,341 |
) |
|
|
1.42 |
|
|
|
|
|
|
|
|
|
Cancelled |
|
|
(472,500 |
) |
|
|
2.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2010 |
|
|
10,500,421 |
|
|
$ |
5.02 |
|
|
|
3.0 |
|
|
$ |
18,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of March 31, 2010 |
|
|
6,879,755 |
|
|
$ |
5.31 |
|
|
|
2.5 |
|
|
$ |
13,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value is defined as the difference between the market value of the
Companys common stock as of the end of the period and the exercise price of the in-the-money stock
options. The total intrinsic value of stock options exercised during the nine months ended March 31,
2010 and 2009 was $4.6 million and $0.1 million, respectively. Of the 3,620,666 non vested options,
1,083,333 are held by consultants.
The Company used the following weighted-average assumptions in calculating the fair value of
options granted during the period from January 27, 2010 to March 31, 2010 (the period subsequent to
the Companys redomiciliation), the period from July 1, 2009 to January 26, 2010 (the period prior
to the Companys redomiciliation) and the nine months ended March 31, 2009 (prior to the Companys
redomiciliation):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From |
|
|
Period From |
|
|
|
|
|
|
January 27, 2010 to |
|
|
July 1, 2009 to |
|
|
Nine Months Ended |
|
|
|
March 31, 2010 |
|
|
January 26, 2010 |
|
|
March 31, 2009 |
|
Number of Stock Options Granted |
|
|
904,000 |
|
|
|
1,383,333 |
|
|
|
3,975,000 |
|
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
2.43 |
% |
|
|
4.68 |
% |
|
|
4.76 |
% |
Expected volatility |
|
|
60 |
% |
|
|
77 |
% |
|
|
80 |
% |
Expected life (in years) |
|
|
3.99 |
|
|
|
4.38 |
|
|
|
4.1 |
|
F-9
Subsequent to the Companys redomiciliation, the fair value of each stock option was estimated
at the grant date using the Black-Scholes pricing model, with the exception of grants subject to
market conditions, which were valued using a Monte Carlo pricing model. The Company has not
historically paid dividends to its stockholders and, as a result, assumed a dividend yield of 0%.
The risk free interest rate is based upon the rates of U.S. Treasury bonds with a term equal to the expected
term of the option. Due to the Companys limited Nasdaq trading history, the expected volatility
used to value options granted after January 27, 2010 is based upon a blended rate of the historical
share price of the Companys stock on the Australian Stock Exchange and the volatility of peer
companies traded on U.S. exchanges operating in the same industry as the Company. The expected
term of the options to purchase common stock is based upon the simplified method, which is the
mid-point between the vesting date of the option and its contractual term.
Prior to the Companys redomiciliation, the fair value of each stock option was estimated at
the grant date using the Black-Scholes option pricing model, with the exception of grants subject
to market conditions which were valued based on a Barrier option pricing model. The Company has not
historically paid dividends to its shareholders and, as a result, assumed a dividend yield of 0%.
The risk free interest rate is based upon the rates of Australian bonds with a term equal to the
expected term of the option. The expected volatility is based upon the historical share price of
the Companys common stock on the Australian Stock Exchange. The expected term of the stock options
to purchase common stock is based upon the outstanding contractual term of the stock option on the
date of grant.
Restricted Stock
The Company has granted shares of restricted stock to certain employees and consultants under
the Stock Incentive Plan. During the period prior to vesting, the holder of the non-vested
restricted stock will have the right to vote and the right to receive all dividends and other
distributions declared. All non-vested shares of restricted stock are reflected as outstanding;
however, they have been excluded from the calculation of basic earnings per share.
For employees the fair value of restricted stock is measured on the date of grant using the
price of the Companys common stock on that date. Share-based compensation expense for restricted
stock issued to employees is recognized on a straight-line basis over the requisite service period,
which is generally the longest vesting period. For restricted stock granted to consultants, the
fair value of the awards will be re-valued on a quarterly basis and marked to market until vested.
Share-based compensation expense for restricted stock issued to consultants is recognized ratably
over each vesting tranche.
On
November 20, 2009, the Companys compensation committee approved the issuance of 1,166,000
shares of restricted stock to the Companys Chief Executive Officer under the Stock Incentive
Plan.
The shares were issued on
February 3, 2010 following shareholder approval. The shares of restricted stock vest upon the satisfaction of certain performance
targets, as defined in the agreement. The grant date fair value of the restricted shares was
$6.64 per share.
On March 26, 2010, the Company issued 572,000 shares of restricted stock to certain employees
and a consultant. The majority of the shares of restricted stock vest on certain anniversaries
from the date of grant, ranging from one to three years. The remaining shares vest upon the
satisfaction of certain performance targets, as defined in the agreements. The weighted-average
grant date fair value of the restricted shares was $6.07 per share.
As of
March 31, 2010, the total compensation cost related to all non-vested awards not yet
recognized is $17.2 million. This amount is expected to be recognized over a remaining
weighted-average period of 2.20 years.
4. Land and Construction-in-Progress
In November 2009, the Company acquired 38 acres of land in York County, Pennsylvania for $2.0
million and entered into a development agreement with Keystone Redevelopment Group, LLC
(Keystone) to develop its new 165,000 square foot office, manufacturing, warehousing and
distribution facility. In accordance with the agreement, Keystone is assisting the Company with
the selection of, as well as the review and management of, architects, engineers, designers,
contractors and other experts and consultants engaged to assist in the development of the new
facility. Additionally, Keystone is assisting the Company in obtaining financing for the facility.
Under the terms of the agreement, the Company will pay Keystone a total of $0.8 million.
The Company has also entered into a construction agreement for the new facility for a total of
1.25% of the cost of work, which is estimated to be $0.3 million and an agreement with an
architectural firm for design and structural, mechanical, and electrical engineering services for
the new facility for a total cost of $1.6 million.
F-10
The Company estimates the cost of the facility to be approximately $27.0 million. This
includes the projected construction costs, the projected manufacturing facility fit out costs and
the fees described above. The Company intends to fund up to approximately
$9.0 million of the development costs for the new facility out of its existing cash reserves
and is seeking external financing for up to approximately $18.0 million from a commercial bank or
other lending institution in the U.S. and/or from the Commonwealth of Pennsylvania or other federal
and state bodies. The Company has budgeted for $8.0 million $10.0 million in projected capital
expenditures to be used towards further development of the new facility.
The Company began construction of its new facility in November 2009.
In November 2009, the Company signed a purchase agreement with Mikron Assembly Technology for
the development and supply of a pilot automated assembly system to support the commercial
production of its Unifill syringe. The development of the system began in December 2009, with
scheduled completion and installation into the Companys new facility during the fourth quarter of
calendar 2010. The Company anticipates that this automated assembly system will have a target
production capacity of approximately 60.0 million units per year.
5. Goodwill
The changes in the carrying amount of goodwill during the nine months ended March 31, 2010 are
as follows:
|
|
|
|
|
|
|
(in thousands) |
|
Balance as of July 1, 2009 |
|
$ |
10,235 |
|
Foreign currency translation |
|
|
1,322 |
|
|
|
|
|
Balance as of March 31, 2010 |
|
$ |
11,557 |
|
|
|
|
|
In connection with the acquisition of Unitract Syringe Pty Limited in October 2002, the
Company agreed to issue 1,666,667 shares of common stock to certain founders of Unitract Syringe
Pty Limited if the Company reported net income (under International Financial Reporting Standards)
of at least A$6.5 million during any fiscal year prior to October 31, 2014, as amended. The
agreement also provided for the issuance of an additional 1,666,667 shares of common stock upon the
Company reporting net income of at least A$12.0 million during any fiscal year prior to October 31,
2014. During the year ended June 30, 2009, the Company met both the net income requirements, and as
a result, accrued for the issuance of 3,333,333 shares based upon the closing price of the
Companys common stock as of June 30, 2009 which was recorded as additional goodwill of $5.1
million. These shares were issued in November 2009 in full satisfaction of the Companys obligation
to the founders.
6. Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
June 30, 2009 |
|
|
|
(in thousands) |
|
Bank term loans |
|
$ |
2,485 |
|
|
$ |
2,709 |
|
Commonwealth of Pennsylvania assisted loans |
|
|
356 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
2,841 |
|
|
|
3,133 |
|
Less: current portion of long-term debt |
|
|
1,702 |
|
|
|
405 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
1,139 |
|
|
$ |
2,728 |
|
|
|
|
|
|
|
|
Bank term loans consist of four term loans payable. The loans bear interest at a rate of prime
(3.25% as of March 31, 2010) plus 1.50%. (4.75% as of March 31, 2010) per annum and mature on dates
ranging from December 2010 through August 2021. The borrowings under the bank term loans are
collateralized by the Companys accounts receivable, inventories and certain machinery and
equipment and are subject to certain financial covenants which require the Companys tangible
assets to equal at least 10% of the stockholders equity determined in accordance with GAAP. Under
the term loan agreements, the Company is not permitted to pay cash dividends without the prior
written consent of the lender. Certain of these bank term loans also have a minimum debt service
ratio financial covenant, with which the Company was not in compliance as of March 31, 2010. The
$1.3 million outstanding as of March 31, 2010 under these bank term loans is classified in the
current portion of long-term debt. Subsequent to March 31, 2010, the Company received a waiver
from its lender for its previous non-compliance with this covenant.
The Company has qualified for two Commonwealth of Pennsylvania assisted loans for the purchase
of specific machinery and equipment. These loans bear interest at rates ranging from 2.75% to 3.25%
per annum and mature on dates ranging from July 2011 through July 2013. The borrowings under these
loans are collateralized by the related equipment.
F-11
7. Loss Per Share
The Companys net loss per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands, except share and per share data) |
|
Numerator |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(20,043 |
) |
|
$ |
(2,748 |
) |
Denominator |
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute
basic loss per share |
|
|
44,882,882 |
|
|
|
34,963,610 |
|
Effect of dilutive options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute
diluted loss per share |
|
|
44,882,882 |
|
|
|
34,963,610 |
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(0.45 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(0.45 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
During the nine months ended March
31, 2010 and 2009, 2,368,950 and 212,102 shares related to potentially dilutive securities were
excluded from the computation of diluted loss per share, respectively, as their effect would have
been anti-dilutive.
8. Contingencies
The Company is involved in, or has pending, various legal proceedings, claims, suits and
complaints arising out of the normal course of business. Based on the facts currently available to
the Company, management believes that these claims, suits and complaints are adequately provided
for, covered by insurance, without merit or not probable that an unfavorable outcome will result.
9. Business Alliance
sanofi-aventis
On June 30, 2008, the Company signed an exclusive licensing agreement with a pharmaceutical
company, sanofi-aventis, which was amended in June 2009. Under the amended agreement, the Company
has granted sanofi-aventis an exclusive license to certain of the Companys intellectual property
in order and solely to develop, in collaboration with the Company, the Unifill syringe for use in
and sale in the pre-filled syringe market within those therapeutic areas to be agreed upon between
the Company and sanofi-aventis and a non-exclusive license outside those therapeutic areas that are
exclusive to sanofi-aventis or after the expiration of the exclusive license with sanofi-aventis.
The exclusive license granted thereunder has an initial term expiring on June 30, 2014. If during
the term of the exclusive license, sanofi-aventis has purchased the Unifill syringe for use with a
particular drug product, sanofi-aventis will receive a ten-year extension of the term of the
exclusive license, which extension will be reduced to five years if sanofi-aventis does not sell a
minimum of 20,000 units of the product in any of the first five years of such ten-year extension
period. Pursuant to the exclusive licensing agreement, sanofi-aventis has paid the Company a 10.0
million Euro ($13.0 million) up front non-refundable one-time fee. During the year ended June 30,
2009, the Company recognized $2.5 million of this up-front payment as revenue and deferred $10.6
million which will be recognized on a straight-line basis over the
remaining term of the agreement. During the nine months ended March 31,
2010 and 2009, the Company recognized $2.0 million and $1.8 million of this up-front payment as
revenue, respectively.
Under the exclusive licensing agreement, the Company is not precluded from using certain of
its intellectual property to develop, license and sell any products in any market other than the
ready-to-fill syringe market, or from entering into licensing or other business arrangements with
other pharmaceutical companies for the ready-to-fill syringe market outside those therapeutic areas
that are exclusive to sanofi-aventis, or after the expiration of the exclusive license with
sanofi-aventis. If the Company grants a license to a third party in respect of the ready-to-fill
syringe market, then the Company is required to pay sanofi-aventis 70% of any access, license or
other upfront fee received from such third party for access to purchase the products until our
payments to sanofi-aventis have totaled 10.0 million Euro, following which the Company is required
to pay 30% of such fees it receives through the end of the initial exclusivity period. The Company
is also required to pay sanofi-aventis an annual royalty payment of 5% of the revenue generated
from any sale of the Unifill syringe to third parties, up to a maximum amount of 17.0 million Euro
in such royalty payments.
F-12
Under a related industrialization agreement, signed on June 30, 2009, sanofi-aventis has
agreed to pay the Company up to 17.0 million Euro ($23.4 million) in milestone-based payments to
fund the completion of the Companys industrialization program for the Unifill syringe. The
industrialization program began in July 2008 and is scheduled to be completed by the end of
calendar 2010. Unless terminated earlier, the industrialization agreements term extends to the
completion of the industrialization program. During the nine months ended March 31, 2010 and 2009, the Company recognized $5.0
million and $7.3 million in revenue related to the milestones achieved, respectively.
The industrialization agreement provides that, subject to the full completion of the
industrialization program, the parties will negotiate a supply agreement for the manufacture and
purchase of the final product on a commercial scale. The supply agreement will provide that
sanofi-aventis and its affiliates will purchase the final product exclusively from us, and the
industrialization agreement provides that we are not required to commit more than 30% of our
expected installed production capacity to sanofi-aventis and its affiliates for the 12 months
following the receipt of a purchase order. Any order of sanofi-aventis, together with its other
orders, that will exceed the 30% capacity limit will require up to a maximum of 24 months lead time
before we are required to commence delivery of that order.
On February 25, 2010, the Company and sanofi-aventis executed a letter agreement, pursuant to
which the parties agreed on a list of therapeutic drug classes within which sanofi-aventis has the
exclusive right to purchase the Unifill syringe. Pursuant to the letter agreement and the exclusive
licensing agreement, sanofi-aventis has secured exclusivity for the Unifill syringe within the full
therapeutic classes of antithrombotic agents and vaccines until June 30, 2014 and has also secured
exclusivity in an additional six smaller subgroups that fall within other therapeutic classes that
the Company believes represent new market opportunities in the pharmaceutical use of prefilled
syringes.
Stason Pharmaceuticals
In March 2010, the Company signed an exclusive five year agreement with Stason
Pharmaceuticals; a U.S. based pharmaceutical company to market its Unitract 1mL syringe in Japan,
China and Taiwan. Under the agreement, Stason Pharmaceuticals is required to purchase a minimum of
1.0 million units of the Unitract 1 mL syringe per year during the term of the contract.
10. Financial Instruments
The Company does not hold or issue financial instruments for trading purposes. The estimated
fair values of the Companys financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
June 30, 2009 |
|
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
|
|
Amount |
|
|
Fair Value |
|
|
Amount |
|
|
Fair Value |
|
|
|
(in thousands) |
|
Assets : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
certificates
of
deposit |
|
$ |
22,364 |
|
|
$ |
22,364 |
|
|
$ |
243 |
|
|
$ |
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
certificates of
deposit |
|
$ |
9,195 |
|
|
$ |
9,195 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of the Companys cash and cash equivalents, which includes certificates of
deposit, accounts receivable and accounts payable approximate their fair value due to the short
term maturities of these items. The estimated fair value of the Companys debt approximates its
carrying value based upon the rates that the Company would currently be able to receive for similar
instruments of comparable maturity.
The Company categorizes its assets and liabilities measured at fair value into a fair value
hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of
the fair value hierarchy are as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted
prices for similar assets and liabilities in active markets; quoted prices for identical or similar
assets and liabilities in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data.
F-13
Level 3 Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. This includes certain pricing models,
discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The levels in the fair value hierarchy within which a fair value measurement in its entirety
falls is based on the lowest level input that is significant to the fair value measurement in its
entirety.
The following table presents the Companys assets that are measured at fair value on a recurring
basis for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Based On |
|
|
|
Quoted Market |
|
|
|
|
|
|
|
|
|
|
|
|
Prices in Active |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Unobservable |
|
|
Total |
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
|
Fair Value |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Measurements |
|
|
|
(in thousands) |
|
Cash equivalents
certificates of
deposit (March 31,
2010) |
|
$ |
|
|
|
$ |
22,364 |
|
|
$ |
|
|
|
$ |
22,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
certificates of
deposit (March 31,
2010) |
|
$ |
|
|
|
$ |
9,195 |
|
|
$ |
|
|
|
$ |
9,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
certificates of
deposit (June 30,
2009) |
|
$ |
|
|
|
$ |
243 |
|
|
$ |
|
|
|
$ |
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Unilife Corporation
Lewisberry, Pennsylvania
We have audited the accompanying consolidated balance sheets of Unilife Corporation and
subsidiaries as of June 30, 2009 and 2008 and the related consolidated statements of operations,
stockholders equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2009.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 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 audits 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 Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Unilife Corporation and subsidiaries at June 30, 2009
and 2008, and the results of its operations and its cash flows for each of the three years in the
period ended June 30, 2009, in conformity with accounting principles generally accepted in the
United States of America.
/s/ BDO Kendalls Audit & Assurance (WA) Pty Ltd
Perth, Western Australia
November
11, 2009
F-15
UNILIFE
CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Assets |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,627 |
|
|
$ |
2,887 |
|
Accounts receivable |
|
|
7,333 |
|
|
|
745 |
|
Inventories |
|
|
1,097 |
|
|
|
1,065 |
|
Prepaid expenses and other current assets |
|
|
223 |
|
|
|
107 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
12,280 |
|
|
|
4,804 |
|
Property, plant and equipment, net |
|
|
9,137 |
|
|
|
7,799 |
|
Goodwill |
|
|
10,235 |
|
|
|
5,555 |
|
Intangible assets, net |
|
|
43 |
|
|
|
60 |
|
Other assets |
|
|
517 |
|
|
|
281 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
32,212 |
|
|
$ |
18,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,103 |
|
|
$ |
552 |
|
Accrued expenses |
|
|
6,097 |
|
|
|
1,231 |
|
Current portion of long-term debt |
|
|
405 |
|
|
|
4,169 |
|
Deferred revenue |
|
|
2,642 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
10,247 |
|
|
|
5,952 |
|
Long-term debt, less current portion |
|
|
2,728 |
|
|
|
3,040 |
|
Deferred revenue |
|
|
7,926 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
20,901 |
|
|
|
8,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 50,000,000 shares authorized
as of June 30, 2009; none issued or outstanding as of June
30, 2009 and 2008 |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares
authorized as of June 30, 2009; 36,625,802 and 34,295,718
shares issued or outstanding as of June 30, 2009 and 2008,
respectively |
|
|
366 |
|
|
|
343 |
|
Additional paid-in-capital |
|
|
57,987 |
|
|
|
53,835 |
|
Accumulated deficit |
|
|
(49,902 |
) |
|
|
(49,385 |
) |
Accumulated other comprehensive income |
|
|
2,860 |
|
|
|
4,714 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
11,311 |
|
|
|
9,507 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
32,212 |
|
|
$ |
18,499 |
|
|
|
|
|
|
|
|
See
notes to the consolidated financial statements.
F-16
UNILIFE
CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenues |
|
$ |
19,976 |
|
|
$ |
3,500 |
|
|
$ |
2,070 |
|
Cost of sales |
|
|
3,537 |
|
|
|
2,456 |
|
|
|
1,561 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
16,439 |
|
|
|
1,044 |
|
|
|
509 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,048 |
|
|
|
532 |
|
|
|
265 |
|
Selling, general and administrative |
|
|
14,941 |
|
|
|
8,211 |
|
|
|
6,497 |
|
Depreciation and amortization |
|
|
804 |
|
|
|
636 |
|
|
|
169 |
|
Impairment of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
547 |
|
Loss on sale of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
1,608 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
16,793 |
|
|
|
9,379 |
|
|
|
9,086 |
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(354 |
) |
|
|
(8,335 |
) |
|
|
(8,577 |
) |
Interest expense |
|
|
249 |
|
|
|
459 |
|
|
|
537 |
|
Interest income |
|
|
(361 |
) |
|
|
(203 |
) |
|
|
(111 |
) |
Other expense (income), net |
|
|
275 |
|
|
|
(54 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(517 |
) |
|
$ |
(8,537 |
) |
|
$ |
(8,969 |
) |
|
|
|
|
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(0.02 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(0.02 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
See
notes to the consolidated financial statements.
F-17
UNILIFE
CORPORATION AND SUBSIDIARIES
Consolidated Statements
of Stockholders Equity and Comprehensive Income
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional- |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Total |
|
Balance as of July 1, 2006 |
|
|
21,378,854 |
|
|
$ |
214 |
|
|
$ |
38,424 |
|
|
$ |
(31,879 |
) |
|
$ |
2,083 |
|
|
$ |
8,842 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,969 |
) |
|
|
|
|
|
|
(8,969 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,225 |
|
|
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,744 |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
509 |
|
|
|
|
|
|
|
|
|
|
|
509 |
|
Issuance of common stock upon
exercise of stock options |
|
|
3,990 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Issuance of common stock upon
conversion of convertible notes |
|
|
3,870,833 |
|
|
|
39 |
|
|
|
3,718 |
|
|
|
|
|
|
|
|
|
|
|
3,757 |
|
Issuance of common stock for
cash, net of transaction costs |
|
|
3,284,133 |
|
|
|
33 |
|
|
|
3,515 |
|
|
|
|
|
|
|
|
|
|
|
3,548 |
|
Issuance of common stock in
connection with the acquisition
of Integrated BioSciences, Inc. |
|
|
1,833,333 |
|
|
|
18 |
|
|
|
1,936 |
|
|
|
|
|
|
|
|
|
|
|
1,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2007 |
|
|
30,371,143 |
|
|
|
304 |
|
|
|
48,109 |
|
|
|
(40,848 |
) |
|
|
3,308 |
|
|
|
10,873 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,537 |
) |
|
|
|
|
|
|
(8,537 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,406 |
|
|
|
1,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,131 |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
846 |
|
|
|
|
|
|
|
|
|
|
|
846 |
|
Issuance of common stock upon
exercise of stock options |
|
|
293,375 |
|
|
|
3 |
|
|
|
431 |
|
|
|
|
|
|
|
|
|
|
|
434 |
|
Issuance of common stock upon
conversion of convertible notes |
|
|
1,275,834 |
|
|
|
13 |
|
|
|
1,648 |
|
|
|
|
|
|
|
|
|
|
|
1,661 |
|
Issuance of common stock for
cash, net of transaction costs |
|
|
2,333,333 |
|
|
|
23 |
|
|
|
2,801 |
|
|
|
|
|
|
|
|
|
|
|
2,824 |
|
Issuance of common stock in
connection with Employee Share
Plan |
|
|
22,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2008 |
|
|
34,295,718 |
|
|
|
343 |
|
|
|
53,835 |
|
|
|
(49,385 |
) |
|
|
4,714 |
|
|
|
9,507 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(517 |
) |
|
|
|
|
|
|
(517 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,854 |
) |
|
|
(1,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,371 |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
3,059 |
|
|
|
|
|
|
|
|
|
|
|
3,059 |
|
Issuance of common stock upon
exercise of stock options |
|
|
97,532 |
|
|
|
1 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
38 |
|
Issuance of common stock upon
conversion of convertible notes |
|
|
520,000 |
|
|
|
5 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
621 |
|
Issuance of common stock in
connection with Employee Share
Plan |
|
|
45,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock options in
connection with the acquisition
of Integrated BioSciences, Inc. |
|
|
|
|
|
|
|
|
|
|
457 |
|
|
|
|
|
|
|
|
|
|
|
457 |
|
Grants of common stock |
|
|
1,666,667 |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2009 |
|
|
36,625,802 |
|
|
$ |
366 |
|
|
$ |
57,987 |
|
|
$ |
(49,902 |
) |
|
$ |
2,860 |
|
|
$ |
11,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to the consolidated financial statements.
F-18
UNILIFE
CORPORATION AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(517 |
) |
|
$ |
(8,537 |
) |
|
$ |
(8,969 |
) |
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
915 |
|
|
|
727 |
|
|
|
218 |
|
Share-based compensation expense |
|
|
3,059 |
|
|
|
846 |
|
|
|
509 |
|
Impairment of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
547 |
|
Loss on the sale of property, plant and equipment |
|
|
5 |
|
|
|
|
|
|
|
1,608 |
|
Changes in assets and liabilities, net of effect of acquired business |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(6,172 |
) |
|
|
(6 |
) |
|
|
503 |
|
Inventories |
|
|
(40 |
) |
|
|
(649 |
) |
|
|
795 |
|
Prepaid expenses and other current assets |
|
|
(126 |
) |
|
|
(28 |
) |
|
|
80 |
|
Other assets |
|
|
(232 |
) |
|
|
33 |
|
|
|
(51 |
) |
Accounts payable |
|
|
586 |
|
|
|
(400 |
) |
|
|
(295 |
) |
Accrued expenses |
|
|
(506 |
) |
|
|
391 |
|
|
|
45 |
|
Deferred revenue |
|
|
9,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
6,795 |
|
|
|
(7,623 |
) |
|
|
(5,010 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(2,926 |
) |
|
|
(904 |
) |
|
|
(3,314 |
) |
Proceeds from the sale of property, plant and
equipment |
|
|
14 |
|
|
|
280 |
|
|
|
159 |
|
Cash
acquired in acquisition of subsidiary |
|
|
|
|
|
|
|
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(2,912 |
) |
|
|
(624 |
) |
|
|
(2,355 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt |
|
|
88 |
|
|
|
3,017 |
|
|
|
500 |
|
Principal payments on long-term debt |
|
|
(3,391 |
) |
|
|
(313 |
) |
|
|
(97 |
) |
Proceeds from the issuance of convertible debt |
|
|
|
|
|
|
1,920 |
|
|
|
4,420 |
|
Proceeds from the issuance of common stock |
|
|
|
|
|
|
2,824 |
|
|
|
3,548 |
|
Proceeds from the exercise of options to purchase
common stock |
|
|
38 |
|
|
|
434 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(3,265 |
) |
|
|
7,882 |
|
|
|
8,378 |
|
Foreign currency exchange on cash |
|
|
122 |
|
|
|
(334 |
) |
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
740 |
|
|
|
(699 |
) |
|
|
645 |
|
Cash and cash equivalents at beginning of year |
|
|
2,887 |
|
|
|
3,586 |
|
|
|
2,941 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
3,627 |
|
|
$ |
2,887 |
|
|
$ |
3,586 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
183 |
|
|
$ |
249 |
|
|
$ |
251 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activities |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes into common stock |
|
$ |
621 |
|
|
$ |
1,661 |
|
|
$ |
3,757 |
|
|
|
|
|
|
|
|
|
|
|
Provision for issuance of common shares to former shareholders |
|
$ |
5,070 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-19
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
1. Description of Business
Unilife Corporation and subsidiaries (the Company) is a medical device company focused on
the design, development, manufacture and supply of a proprietary range of retractable syringes.
The primary target customers for the Companys products include pharmaceutical manufacturers and
suppliers of medical equipment to healthcare facilities or patients who self-administer
prescription medication. The Company also manufactures non-proprietary Class I and Class II
medical devices, such as specialty syringes under contract for outsourcing customers.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Unilife Medical Solutions
Limited (UMSL) and its wholly-owned subsidiaries. Subsequent to June 30, 2009, a newly formed
subsidiary, Unilife Corporation, became UMSLs parent holding company in a transaction
described in Note 15. The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP) and in U.S.
currency. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash on hand, deposits at banks and other
short-term highly liquid investments with original maturities of three months or less. Cash and
cash equivalents are stated at cost which approximates fair value.
Accounts Receivable
Accounts receivable are stated at amounts due from customers, which also represents the net
realizable amount. The Company has historically not recorded an allowance for doubtful accounts,
but rather evaluates the collectability of its accounts receivable on a periodic basis. In
instances in which management is aware of circumstances that may impair a particular customers
ability to meet its obligation, the related obligation would be written off. Accounts receivable
as of June 30, 2009 consists principally of amounts due from a pharmaceutical company related to
the achievement of certain milestones under the related industrialization agreement described in
Note 13.
Inventories
Inventories consist primarily of plastic syringe components and include direct materials,
direct labor and manufacturing overhead. Inventory is stated at the lower of cost or market, with
cost determined using the first in, first out method. The Company routinely reviews its inventory
for obsolete, slow moving or otherwise impaired inventory and records estimated impairments in the
periods in which they occur. Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
567 |
|
|
$ |
457 |
|
Work in process |
|
|
530 |
|
|
|
608 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
1,097 |
|
|
$ |
1,065 |
|
|
|
|
|
|
|
|
F-20
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Property, Plant and Equipment
Property, plant and equipment, including significant improvements, are recorded at cost, net
of accumulated depreciation and amortization. Repairs and maintenance are expensed as incurred.
Depreciation and amortization expense is recorded on a straight-line basis over the estimated
useful life of the asset as listed below:
|
|
|
Asset Category |
|
Useful Lives |
Machinery and equipment
|
|
3 to 15 years |
Furniture and fixtures
|
|
7 years |
Leasehold improvements
|
|
Shorter of improvement life or remaining term of lease |
The Company reviews the carrying value of the long-lived assets periodically to determine if
facts and circumstances exist that would suggest that assets might be impaired or that the useful
lives should be modified. Among the factors the Company considers in making the evaluation are
changes in market position and profitability. If facts and circumstances are present which may
indicate impairment is probable, the Company will prepare a projection of the undiscounted cash
flows of the specific business entity and determine if the long-lived assets are recoverable based
on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce
the carrying amount of these assets to their fair value.
Goodwill and Intangible Assets
Goodwill is the excess of purchase price over the value of net assets acquired in business
acquisitions. Goodwill is subject to, at a minimum, an annual impairment assessment of its
carrying value. Additional impairment assessments would be performed if events and circumstances warranted such
additional assessments during the year. Goodwill impairment is deemed to exist if the net book value of a reporting unit
exceeds its estimated fair value. Estimated fair values of the reporting units are estimated using
an earnings model and a discounted cash flow valuation model. The discounted cash flow model
incorporates the Companys estimates of future cash flows, allocations of certain assets and cash
flows among reporting units, future growth rates and managements judgment regarding the applicable
discount rates used to discount those estimated cash flows. The estimated fair value of each reporting unit, if
lower than the carrying value of the respective reporting unit (such carrying
value determined after management allocation of certain shared assets), would then be allocated to the
reporting units net identifiable assets based on their respective estimated fair values.
The remaining unallocated reporting unit fair value, if any, would then
be compared to the carrying amount of that units goodwill and, if lower, the Company would recognize an impairment charge to the extent of the deficiency.
There were no impairments recorded on
goodwill during the years ended June 30, 2009, 2008 and 2007.
Definite-lived intangible assets include patents which are amortized on a straight-line basis
over their estimated useful lives of 15 years. The Company reviews intangible assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If the sum of the estimated future cash flows (undiscounted)
expected to result from the use and eventual disposition of an asset is less than the carrying
amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based
on the fair value of the asset. There were no impairments recorded on intangible assets during the
years ended June 30, 2009, 2008 or 2007.
The Company expenses costs related to internally developed patents as incurred.
Deferred Financing Costs
Deferred financing costs consist of costs incurred in connection with debt financings. These
costs are amortized over the term of the related debt using the effective interest rate method.
Income Taxes
The Company uses the liability method of accounting for income taxes. Deferred income taxes
reflect tax credit carryforwards and the net effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes using enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to
the amount expected to be realized.
F-21
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
The Company requires that the realization of an uncertain income tax position must be more
likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be
recognized in the financial statements. The benefit to be recorded in the financial statements is
the amount most likely to be realized assuming a review by tax authorities having all relevant
information and applying current conventions. The Company includes interest and penalties related
to uncertain tax positions within the provision (benefit) for income taxes within the Companys
consolidated statements of operations.
In June 2006, the Financial Accounting Standards Board (FASB) issued
revised guidance regarding accounting for uncertainty in income taxes, which clarifies the accounting for
uncertainties in income taxes recognized in an enterprises financial statements. The new guidance requires
that the Company determine whether it is more likely than not that a tax position will be sustained
upon examination by the appropriate taxing authority. If a tax position meets the more likely than
not recognition criteria, the tax position be measured at the largest amount of
benefit greater than 50% likely of being realized upon ultimate settlement. This accounting
standard was effective for fiscal years beginning after December 15, 2006. Management has
evaluated the positions taken in connection with the tax provisions and tax compliance for the
years included in these financial statements. The Company does not believe
that any positions it has taken will not prevail on a more likely than not basis. As such no
disclosure of such positions was deemed necessary. Our open tax years include all returns filed
for 2002 and later in Australia and for 2005 and later in the United States. Should the Company be
required to provide for interest or penalties in regards to its tax positions, such changes will be
included in selling, general and administrative expenses in the statement of operations.
Fair Value of Financial Instruments
The carrying value of financial instruments such as accounts receivable, accounts payable and
accrued expenses are reasonable estimates of their fair value because of the short maturity of
these items. The Company believes that the current carrying amount of its long-term debt
approximates fair value because the interest rates on these instruments are subject to change with,
or approximate, market interest rates.
Share-Based Compensation
The Company grants both stock options and shares as compensation to its employees, directors
and consultants. Certain employee and director awards vest over stated service periods and others
also require achievement of specific performance or market conditions. The Company expenses the
grant date fair value of awards to employees and directors over their respective service periods or
over the period from grant date to the date the required performance or market conditions are
expected to be met, if shorter. To the extent that employee and director awards vest only upon the
achievement of a specific performance condition, expense is recognized over the period
from the date management determines that the conditions are achievable through the date they are
expected to be met. Awards granted to consultants are sometimes granted for past services, in
which case their fair value is expensed on their grant date, and sometimes granted with future
service, performance or market conditions. Timing of expense recognition for consultant awards is
similar to that of employee and director awards; however, aggregate expense is re-measured each
quarter end based on the fair value of the award at that date. The Company determines the fair
value of stock options using the Black-Scholes option pricing model, with the exception of
market-based performance grants, which are valued based on a Barrier pricing model. Option pricing
methods require the input of highly subjective assumptions, including the expected stock price
volatility. See Note 3 for additional information regarding share-based compensation.
Foreign Currency Translation
The Australian dollar (A$) is the functional currency for the Companys Australian
operations. Foreign currency assets and liabilities are translated into U.S. dollars at the rate of
exchange existing at the year-end date. Revenues and expenses are translated at the average annual
exchange rates. Adjustments resulting from these translations are recorded in accumulated other
comprehensive income (loss) within the Companys consolidated balance sheets and will be included
in income upon sale or liquidation of the foreign investment. Gains and losses from foreign
currency transactions, denominated in a currency other than the functional currency, are recorded
in other (income) expense within the Companys consolidated
statements of operations and aggregated $345, $(19) and $1 during the years ended June 30, 2009,
2008 and 2007, respectively.
F-22
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss).
The Companys other comprehensive income (loss) consists only of foreign currency translation
adjustments.
Revenue Recognition
The
Company recognizes revenue from licensing fees, industrialization
efforts and products sold.
In
early fiscal 2008, the Company granted an exclusive licensing
arrangement to allow its pharmaceutical partner to use certain of the
Companys intellectual property in order and solely to develop
in collaboration with the Company, the Companys Unifill syringe
for use in and sale to the pre-filled syringe market. The up-front,
non-refundable fee paid for this license is being amortized over the
expected life of the related agreement. In late fiscal 2009, the
Company entered into an industrialization agreement with its
pharmaceutical partner, retroactive to July 2008, under which
the Company received payments upon achievement of certain pre-defined
milestones in its development of the Unifill syringe. Revenue is
recognized upon achievement of the at risk milestone
events, which represents the culmination of the earnings process
related to such events. Milestones include specific phases of
the project such as product design, prototype availability, user tests,
manufacturing proof of principle and the various steps to complete the
industrialization of the product. Specific payment amounts and completion dates
were established for each milestone payment.
Revenue recognized is commensurate with the
milestones achieved. Billings are similarly triggered and the Company
has no future performance obligations related to previous milestone
payments. Each milestone payment is non-refundable when made.
The
Company recognizes revenue from sales of products at the time of
shipment and when title passes to the customer. These amounts were
$3,874, $3,420 and $1,946 during the years ended June 30, 2009,
2008, and 2007, respectively.
Advertising Costs
Advertising costs are expensed in the period incurred. The Company incurred total advertising
costs of $51, $43 and $38 during the years ended June 30, 2009, 2008 and 2007, respectively.
Research and Development Costs
Research and development costs, which primarily consist of salaries, benefits and contracted
services are expensed as incurred.
Earnings (Loss) Per Share
Basic earning (loss) per share is computed as net income (loss) divided by the
weighted-average number of shares outstanding during the period. Diluted earnings per share
reflect the potential dilution that could occur from common shares issued through common stock
equivalents. The dilutive effect of potential common shares, consisting of outstanding options to
purchase common stock, is calculated using the treasury stock method.
Government Grants
Government grants are recognized when there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. When a grant relates to an expense
item, it is recognized as income over the period necessary to match the grant on a systematic basis
to the costs that it is intended to compensate. When a grant relates to an
asset, it is recognized as deferred income and recognized in the income statement on a
systematic basis over the expected useful life of the related asset.
F-23
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Recently Issued Accounting Pronouncements
In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles
- a replacement of FASB Statement No. 162 (SFAS 168) SFAS 168 represents the last numbered
standard issued by the FASB under the old (pre-codification) numbering system, and amends the GAAP
hierarchy. On July 1, 2009, the FASB launched its new codification (i.e. the FASB Accounting
Standards Codification). The codification supersedes existing GAAP for nongovernmental entities.
In
December 2007, the FASB issued a new accounting standard
included in ASC 805, Business Combinations, formerly SFAS
No. 141 (revised), Business Combinations. ASC 805 significantly changes the accounting and disclosure requirements for business
combinations. ASC 805 is effective for business combinations occurring in fiscal years beginning
after December 15, 2008. ASC 805 will be applied prospectively to business combinations with an
acquisition date on or after the effective date. The impact that the adoption of ASC 805 will
have on the Companys consolidated financial statements will be dependent upon the extent of future
business combinations.
In
December 2007, the FASB issued a new accounting standard
included in ASC 810, Consolidation, formerly SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements and amendment of Accounting Research
Bulletin No. 51. This new standard establishes accounting and reporting standards for the noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary. ASC 810 is effective for financial statements issued
for fiscal years beginning after December 15, 2008. The Company currently has no noncontrolling
interests and therefore, does not believe that the adoption of ASC 810 will have a material impact
on its consolidated financial statements.
In
April 2008, the FASB issued a new accounting standard included
in ASC 350, Intangibles-Goodwill and Other, formerly FASB Staff Position (FSP) No. 142-3, Determination of the
Useful Life of Intangible Assets. This new standard amends the factors that should
be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under SFAS 142,Goodwill and Other Intangible Assets. This new standard also provides guidance for expanded disclosures related to the determination of
intangible asset useful lives and is effective for fiscal years beginning after
December 15, 2008. Early adoption is prohibited. The Company does not believe that the adoption
of this new standard will have a material impact on its consolidated financial statements.
In
June 2008, the FASB issued a new accounting standard included in
ASC 260, Earnings Per Share, formerly FSP No. EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities.
This new standard states that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall
be included in the computation of earnings per share pursuant to the
two-class method and is effective for fiscal years beginning after December 15, 2008. The Company does not
believe that the adoption of this new standard will have a material impact on its consolidated
financial statements.
In
May 2009, the FASB issued a new accounting standard included in
ASC 855, Subsequent Events, formerly SFAS No. 165,
Subsequent Events. ASC 855 sets
forth: 1) the period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or disclosure in
the financial statements; 2) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements; and 3) the
disclosures that an entity should make about events or transactions that occurred after the balance
sheet date. ASC 855 is effective for interim and annual periods ending after June 15, 2009. The
Company has adopted ASC 855 for its year ended June 30, 2009.
The Company originally evaluated
subsequent events through the date the accompanying financial
statements were originally issued, which was
November 12, 2009. The Company re-evaluated subsequent events through
February 11, 2010 (unaudited) for purposes of the reissuance of these
statements on that date.
F-24
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
3. Equity and Share-Based Compensation
During
the year ended June 30, 2007, the Company issued 980,571 and
2,303,562 shares of its
common stock in a private placement with various investors at a price
of $0.90 and $1.26 per share,
respectively. The aggregate offering price of the private placement was approximately $3,785, and
the net proceeds to the Company, after payment of approximately $237 in expenses, was approximately
$3,548.
During
the year ended June 30, 2008, the Company issued 2,333,333 shares of its common stock
in a private placement with various investors at a price of $1.32. The aggregate offering price of
the private placement was approximately $3,080, and the net proceeds to the Company, after payment
of approximately $256 in expenses, was approximately $2,824.
The Company recognized share-based compensation expense related to stock options and grants of
common stock to employees, directors and consultants of $3,059, $846 and $509 during the years
ended June 30, 2009, 2008 and 2007, respectively. The increased
expense during the year ended June 30, 2009 is primarily related to
more awards issued during that fiscal year compared to prior fiscal
years. The total tax benefit recognized related to
these awards was $918, $254 and $153 during the years ended June 30, 2009, 2008 and 2007,
respectively, which was fully offset by changes in the Companys valuation allowance. The Company
calculated its available APIC pool of net excess benefits using the
transition method as defined in ASC 718.
As of June 30, 2009, the total compensation cost related to all nonvested awards not yet
recognized is $895. This amount is expected to be recognized over the remaining weighted-average
period of 0.58 years.
Stock Options
The Company has granted stock options to certain employees and directors under the Employee
Share Option Plan, (the Plan). The Plan is designed to assist in the motivation and retention of
employees and to recognize the importance of employees to the long-term performance and success of
the Company. The Company has also granted stock options to certain consultants outside of the
Plan. The majority of the options to purchase common stock vest on the anniversary of the date of
grant, which ranges from one to three years. Additionally, certain stock options vest upon the
closing price of the Companys common stock reaching certain minimum levels, as defined in the
agreements. Finally, certain other stock options vest upon the meeting of certain Company
milestones such as the signing of specific agreements and the completion of the Companys
anticipated listing on a U.S. stock exchange. As of June 30, 2009, the Company expects that all
such market and performance conditions will be met. Share-based compensation expense related to
these awards is recognized on a straight-line basis over the related
vesting term. The Plan does not provide for a fixed number of
available shares.
The following is a summary of the Plan and non-Plan stock option activity during the year
ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Remaining |
|
|
|
|
|
|
Number of |
|
|
Average Exercise |
|
|
Contractual Life |
|
|
Aggregate Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
(in years) |
|
|
Value |
|
Outstanding as of July 1, 2008 |
|
|
9,438,996 |
|
|
$ |
2.00 |
|
|
|
|
|
|
$ |
|
|
Granted |
|
|
3,850,000 |
|
|
|
1.63 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(97,531 |
) |
|
|
0.33 |
|
|
|
|
|
|
|
|
|
Cancellations |
|
|
(6,868,965 |
) |
|
|
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2009 |
|
|
6,322,500 |
|
|
$ |
1.58 |
|
|
|
2.5 |
|
|
$ |
551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of June 30, 2009 |
|
|
3,339,167 |
|
|
$ |
1.56 |
|
|
|
1.9 |
|
|
$ |
519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value is defined as the difference between the market value of the
Companys common stock as of the end of the period and the exercise price of the in-the-money stock
options. The total intrinsic value of stock options exercised during the years ended June 30,
2009, 2008 and 2007 was $93, $120, and $0, respectively. Of the
2,983,333 non vested options, 316,667 are
held by consultants, the majority of which vested in August 2009.
F-25
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
The following is a summary of stock options outstanding and exercisable as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options |
|
|
Exercisable Options |
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
|
|
|
Weighted- |
|
|
Remaining |
|
Range of Exercise |
|
Outstanding as of |
|
|
Exercise |
|
|
Contractual |
|
|
Exercisable as of |
|
|
Average |
|
|
Contractual Life |
|
Prices |
|
June 30, 2009 |
|
|
Price |
|
|
Life (in years) |
|
|
June 30, 2009 |
|
|
Exercise Price |
|
|
(in years) |
|
$0.00 $1.50 |
|
|
2,041,667 |
|
|
$ |
1.23 |
|
|
|
1.5 |
|
|
|
1,791,667 |
|
|
$ |
1.20 |
|
|
|
1.3 |
|
$1.56 $1.80 |
|
|
3,733,333 |
|
|
|
1.61 |
|
|
|
3.3 |
|
|
|
1,083,333 |
|
|
|
1.62 |
|
|
|
3.2 |
|
$1.86 $9.30 |
|
|
547,500 |
|
|
|
2.72 |
|
|
|
1.3 |
|
|
|
464,167 |
|
|
|
2.82 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,322,500 |
|
|
$ |
1.58 |
|
|
|
2.5 |
|
|
|
3,339,167 |
|
|
$ |
1.56 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average
fair value of stock options granted during the years ended June 30, 2009,
2008 and 2007 was $0.62, $0.87, and $0.42 respectively.
The fair value of each stock option is estimated at the grant date using the Black-Scholes
option pricing model, with the exception of grants subject to market conditions which are valued
based on a Barrier option pricing model. The Company has not historically paid dividends to its
shareholders, and, as a result assumed a dividend yield of 0%. The risk free interest rate is
based upon the rates of Australian bonds with a term equal to the expected term of the option. The
expected volatility is based upon the historical share price of the Companys common stock. The
expected term of the stock options to purchase common stock is based upon the outstanding
contractual term of the stock option on the date of grant. The Company used the following
weighted-average assumptions in calculating the fair value of options granted during the years
ended June 30, 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
4.76 |
% |
|
|
5.61 |
% |
|
|
6.05 |
% |
Expected volatility |
|
|
80 |
% |
|
|
55 |
% |
|
|
67 |
% |
Expected life (in years) |
|
|
4.4 |
|
|
|
3.5 |
|
|
|
2.8 |
|
Grants of Common Stock to Employees
During the years ended June 30, 2009 and 2008, the Company granted 45,885 and 22,033 shares
of common stock, respectively, to certain employees. During the years ended June 30, 2009 and
2008, the Company recorded a charge to operations of $44 and $48, respectively, related to these
awards.
During
the year ended June 30, 2009, the Company granted 1,666,667 shares of common stock to
its Chief Executive Officer. The shares are subject to certain transfer restrictions in which
833,333 cannot be sold until the first anniversary of the date of grant and 833,334 cannot be
sold until the second anniversary of the date of grant. During the year ended June 30, 2009, the
Company recorded a charge to operations of $1,541 related to these awards. The charge represents
the entire fair value of the awards.
F-26
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
4. Property, Plant and Equipment
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Machinery and equipment |
|
$ |
5,906 |
|
|
$ |
4,890 |
|
Furniture and fixtures |
|
|
787 |
|
|
|
540 |
|
Construction in progress |
|
|
3,041 |
|
|
|
3,222 |
|
Leasehold improvements |
|
|
1,067 |
|
|
|
737 |
|
|
|
|
|
|
|
|
|
|
|
10,801 |
|
|
|
9,389 |
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization |
|
|
(1,664 |
) |
|
|
(1,590 |
) |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
9,137 |
|
|
$ |
7,799 |
|
|
|
|
|
|
|
|
Construction in progress consists primarily of amounts incurred in connection with the
construction of machinery that will be used to manufacture the Companys Unitract 1 mL Syringe.
During the year ended June 30, 2007, the Company ceased operations at its Australian facility.
The Company determined that it was not economically favorable to relocate certain manufacturing
equipment to the new U.S. facility. In connection with this closing, the Company recorded an
impairment on property, plant and equipment and a loss on the sale of property, plant and equipment
of $547 and $1,608, respectively.
5. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill during the years ended June 30, 2008 and 2009
are as follows:
|
|
|
|
|
Balance as of July 1, 2007 |
|
$ |
4,946 |
|
Foreign currency translation |
|
|
609 |
|
|
|
|
|
Balance as of June 30, 2008 |
|
|
5,555 |
|
Issuance of stock options in connection with the acquisition of
Integrated BioSciences, Inc |
|
|
457 |
|
Issuance of common stock to former Unitract Syringe Pty Limited
shareholders |
|
|
5,070 |
|
Foreign currency translation |
|
|
(847 |
) |
|
|
|
|
Balance as of June 30, 2009 |
|
$ |
10,235 |
|
|
|
|
|
In connection with the acquisition of Unitract Syringe Pty Limited in October 2002, the
Company agreed to issue 1,666,667 shares of common stock to certain former shareholders of
Unitract Syringe Pty Limited if the Company reported net income (as defined in the agreement) of at least A$6,500 during any
fiscal year prior to October 31, 2014, as amended. The agreement also provided for the issuance of
an additional 1,666,667 shares of common stock upon the Company reporting net income (as defined in the agreement) of at least
A$12,000 during any fiscal year prior to October 31, 2014. During the year ended June 30, 2009,
the Company met both the net income requirements, and as a result, has accrued for the issuance of
3,333,333 shares based upon the closing price of the Companys common stock as of June 30, 2009.
During the year ended June 30, 2008, as approved by the stockholders, the Company granted
options to purchase 1,166,667 shares of common stock to certain selling shareholders in connection
with the acquisition of Integrated BioSciences, Inc. The vesting terms of the options were based
upon the signing of the exclusive licensing agreement with sanofi-avenits. During the year ended
June 30, 2009, options to purchase 500,000 shares of common stock vested and as a result, the
Company has recorded $457 as an increase to goodwill based on the Black-Scholes pricing model
assumptions as of June 30, 2008. During the year ended June 30, 2009, the remaining options to purchase
666,667 shares of common stock were cancelled, as the related financial milestones were not
achieved.
As of June 30, 2009, intangible assets consist of patents acquired in a business acquisition
of $80. Related accumulated amortization as of June 30, 2009 and 2008 was $37 and $20,
respectively, and future amortization expense is scheduled to be $5 annually.
F-27
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
6. Accrued Expenses
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Accrued payroll and other employee related expenses |
|
$ |
671 |
|
|
$ |
494 |
|
Accrued interest |
|
|
|
|
|
|
108 |
|
Accrued other |
|
|
356 |
|
|
|
629 |
|
Provision for the issuance of common stock to former Unitract Syringe Pty Limited shareholders |
|
|
5,070 |
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses |
|
$ |
6,097 |
|
|
$ |
1,231 |
|
|
|
|
|
|
|
|
7. Commitments
The Company leases certain facilities, office equipment and automobiles under non-cancellable
operating leases. The future minimum lease payments related to the Companys non-cancellable
operating lease commitments as of June 30, 2009 were as follows:
|
|
|
|
|
For the year ending June 30, |
|
|
|
|
2010 |
|
$ |
455 |
|
2011 |
|
|
415 |
|
2012 |
|
|
340 |
|
2013 |
|
|
43 |
|
|
|
|
|
|
|
$ |
1,253 |
|
|
|
|
|
Rental expenses under operating leases during the years ended June 30, 2009, 2008, and 2007
was $686, $583 and $649, respectively.
8. Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Bank term loans |
|
$ |
2,709 |
|
|
$ |
2,946 |
|
Pennsylvania State assisted loans |
|
|
424 |
|
|
|
514 |
|
Convertible notes |
|
|
|
|
|
|
749 |
|
MedPro Safety Products note payable |
|
|
|
|
|
|
3,000 |
|
|
|
|
|
|
|
|
|
|
|
3,133 |
|
|
|
7,209 |
|
Less: current portion of long-term debt |
|
|
405 |
|
|
|
4,169 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
2,728 |
|
|
$ |
3,040 |
|
|
|
|
|
|
|
|
Bank
term loans include four term loans payable. The loans bear interest
at a rate of prime (3.25% as of June 30, 2009) plus 1.50% (4.75% as of June 30, 2009) per annum and mature on dates ranging from December 2010 through August 2021.
The borrowings under the bank term loans are collateralized by the Companys accounts receivable,
inventory and certain pieces of machinery and equipment and are subject to certain financial
covenants which require the Companys tangible assets to equal at least 10% of the balance sheet
equity determined in accordance with GAAP. Under the term loan
agreements, the Company is not permitted to pay cash dividends
without the prior written consent of the lender. The Company was in compliance with these covenants as
of June 30, 2009.
The Company has qualified for the two Pennsylvania state assisted loans for the purchase of
specific machinery and equipment. These loans bear interest at rates ranging from 2.75% to 3.25%
per annum and mature on dates ranging from July 2011 through July 2013. The borrowings under the
state assisted loans are collateralized by certain production equipment.
During the year ended June 30, 2008, the Company issued A$2,000 (approximately $1,920) of
convertible notes which were convertible into shares of the Companys common stock at a conversion
price of A$1.5 (approximately $1.44) per share. Interest was payable semi-annually at a rate of
12% per annum. A$780 and $A1,220 of these convertible notes were
exchanged for 520,000 and 813,334 shares of the Companys common stock during the years ended
June 30, 2009 and 2008, respectively.
F-28
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
During the year ended June 30, 2007, the Company issued A$5,200 (approximately $4,420) of
convertible notes which were convertible into shares of the Companys common stock at a conversion
price of A$1.2 approximately $1.02 per share. Interest was payable semi-annually at a rate of
10% per annum. A$555 and A$4,645 of these convertible notes were
exchanged for 462,500 and
3,870,833 shares of the Companys common stock during the years ended June 30, 2008 and 2007,
respectively.
During the year ended June 30, 2008, the Company signed an Option Agreement with MedPro Safety
Products, Inc. (MedPro) pursuant to which MedPro paid the Company $3,000 for an option to
negotiate and enter into a License Agreement for the exclusive distribution of the Unitract 1mL
safety syringe within the United States. During the year ended June 30, 2009, the agreement with
MedPro was terminated and the Company repaid MedPro $2,300, plus interest at 7.0%. The Company
retained the remaining $700 as reimbursement for legal fees.
As of June 30, 2009, aggregate maturities of long-term obligations are as follows:
|
|
|
|
|
For the year ending June 30, |
|
|
|
|
2010 |
|
$ |
405 |
|
2011 |
|
|
381 |
|
2012 |
|
|
272 |
|
2013 |
|
|
271 |
|
2014 |
|
|
270 |
|
Thereafter |
|
|
1,534 |
|
|
|
|
|
|
|
$ |
3,133 |
|
|
|
|
|
9. Loss Per Share
The Companys net loss per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(517 |
) |
|
$ |
(8,537 |
) |
|
$ |
(8,969 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute
basic loss per share |
|
|
34,426,353 |
|
|
|
32,938,477 |
|
|
|
23,413,811 |
|
Effect of dilutive options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute
diluted loss per share |
|
|
34,426,353 |
|
|
|
32,938,477 |
|
|
|
23,413,811 |
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(0.02 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(0.02 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
During the years ended
June 30, 2009, 2008 and 2007, options to purchase 6,322,500,
9,438,996 and 8,425,204 shares of common stock were excluded from the computation of diluted loss
per share, respectively as their effect would have been anti-dilutive.
F-29
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
10. Income Taxes
Income tax expense (benefit) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Current |
|
|
Deferred |
|
|
Total |
|
|
Current |
|
|
Deferred |
|
|
Total |
|
|
Current |
|
|
Deferred |
|
|
Total |
|
Federal |
|
$ |
|
|
|
$ |
(1,070 |
) |
|
$ |
(1,070 |
) |
|
$ |
|
|
|
$ |
(755 |
) |
|
$ |
(755 |
) |
|
$ |
|
|
|
$ |
(544 |
) |
|
$ |
(544 |
) |
State |
|
|
|
|
|
|
(339 |
) |
|
|
(339 |
) |
|
|
|
|
|
|
(123 |
) |
|
|
(123 |
) |
|
|
|
|
|
|
(82 |
) |
|
|
(82 |
) |
Australian |
|
|
|
|
|
|
(663 |
) |
|
|
(663 |
) |
|
|
|
|
|
|
(9,883 |
) |
|
|
(9,883 |
) |
|
|
|
|
|
|
(7,962 |
) |
|
|
(7,962 |
) |
Changes in
valuation allowance |
|
|
|
|
|
|
2,072 |
|
|
|
2,072 |
|
|
|
|
|
|
|
10,761 |
|
|
|
10,761 |
|
|
|
|
|
|
|
8,588 |
|
|
|
8,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Income Tax Assets and Liabilities
In 2005, the Company qualified and was awarded Job Creation Tax Credits from the Commonwealth
of Pennsylvania, acting through the Department of Community and Economic Development. The maximum
credits the Company qualifies for was $21 in Pennsylvania Corporate Net Income Tax, which expires
in 2012. The credits are contingent on the Company maintaining its operating facility in York
County, Pennsylvania, continued operations for five years after the award, creating 65 full-time
jobs within three years which pay at least 150% of the Federal minimum wage rate and investing at
least $2,425 in the business.
In assessing the realizability of deferred income tax assets, management considers whether it
is more likely than not that some portion or all of the deferred income tax assets will not be
realized. The ultimate realization of deferred income tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible.
In assessing the realizability of the Companys deferred tax assets, which are principally net
operating loss carry forwards, management considers the reversal of deferred tax liabilities which
are scheduled to reverse during the carry forward period and tax planning strategies.
As of June 30, 2009, the Company had net operating loss carry forwards for federal, state and
Australian income tax purposes of approximately $3,146, $3,118 and $17,562, respectively which are
available to offset future taxable income, if any. The federal, state and Australian net operating
loss carry forwards begin to expire on various dates from 2023 through 2029.
Deferred taxes are comprised of the following at June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
Net operating loss carryforwards |
|
$ |
4,208 |
|
|
$ |
10,270 |
|
Share-based compensation expense |
|
|
1,112 |
|
|
|
183 |
|
Deferred revenue |
|
|
3,170 |
|
|
|
|
|
Depreciation differences |
|
|
239 |
|
|
|
55 |
|
Valuation allowance |
|
|
(8,729 |
) |
|
|
(10,508 |
) |
|
|
|
|
|
|
|
Net deferred taxes |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
F-30
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
The reconciliation of income tax computed at the U.S. federal statutory rate to the effective
income tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, |
|
|
2009 |
|
2008 |
|
2007 |
Tax at U.S. statutory rate |
|
|
(35 |
%) |
|
|
(35 |
%) |
|
|
(34 |
%) |
State taxes, net of federal benefit |
|
|
(11 |
%) |
|
|
(6 |
%) |
|
|
(5 |
%) |
Non-deductible and non-taxable items |
|
|
2 |
% |
|
|
1 |
% |
|
|
|
% |
Change in valuation allowance |
|
|
44 |
% |
|
|
40 |
% |
|
|
39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Employee Benefit Plans
The Company has a retirement savings 401(k) plan covering all U.S. employees. Participating
employees may contribute up to 100% of their pre-tax earnings, subject to the statutory limits.
During the years ended June 30, 2009, 2008 and 2007, the Company did not match any employee
contributions.
12. Contingencies
The Company is involved in, or has pending, various legal proceedings, claims, suits and
complaints arising out of the normal course of business. Based on the facts currently available to
the Company, management believes that these claims, suits and complaints are adequately provided
for, covered by insurance, without merit or not probable that an unfavorable outcome will result.
13. Business Alliance
On June 30, 2008 the Company signed an exclusive licensing agreement with a pharmaceutical
company, sanofi-aventis, which was amended in June, 2009. Under the amended agreement, the Company
has granted sanoifi-aventis an exclusive license to certain of the Companys intellectual property
in order and solely to develop, in collaboration with the Company, the Unifill syringe for use in
and sale to the pre-filled syringe market within those therapeutic areas to be agreed upon between
the Company and sanofi-aventis and a non-exclusive license outside those therapeutic areas that are
exclusive to sanofi-aventis or after the expiration of the exclusive license with sanofi-aventis.
Pursuant to the exclusive licensing agreement, sanofi-aventis has paid the Company a 10,000 Euro
($13,024) up front non-refundable one-time fee. The exclusive license granted thereunder has an
initial term expiring on June 30, 2014, unless the Company and sanofi-aventis fail to agree upon
the list of therapeutic areas that are exclusive to sanofi-aventis, in which event the exclusive
license will have a term until June 29, 2012 for all therapeutic areas. If during the term of the
exclusive license, sanofi-aventis has purchased the Unifill syringe for use with a particular drug
product, sanofi-aventis will receive a ten-year extension of the term of the exclusive license,
which extension will be reduced to five years if sanofi-aventis does not sell a minimum of 20,000
units of the product in any of the first five years of such ten-year extension period. During the
year ended June 30, 2009, the Company recognized $2,456 of this up front payment as revenue and
deferred $10,568 which will be recognized on a straight-line basis over the remaining term of the
agreement.
Under the exclusive licensing agreement, the Company is not precluded from using certain of
its intellectual property to develop, license and sell any products in any market other than the
ready-to-fill syringe market, or from entering into licensing or other business arrangements with
other pharmaceutical companies for the ready-to-fill syringe market outside those therapeutic areas
that are exclusive to sanofi-aventis, or after the expiration of the exclusive license with
sanofi-aventis. If the Company grants a license to a third party in respect of the ready-to-fill
syringe market, then the Company is required to pay sanofi-aventis 70% of any access, license or
other upfront fee received from such third party for access to purchase the products until our
payments to sanofi-aventis have totaled 10 million, following which the Company is required to pay
30% of such fees it receives through the end of the initial exclusivity period. The Company is also
required to pay sanofi-aventis an annual royalty payment of 5% of the revenue generated from any
sale of the Unifill syringe to third parties, up to a maximum amount of 17 million in such royalty
payments.
F-31
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Under a related industrialization agreement, signed on June 30, 2009, sanofi-aventis has
agreed to pay the Company up to 17,000 Euro ($23,400) in milestone-based payments to fund the
completion of the Companys industrialization program for the Unifill syringe. The
industrialization program began in July 2008 and is scheduled to be completed by the end of 2010.
The industrialization agreement requires sanofi-aventis to provide a list to the Company that
specifies therapeutic drug classes for which it seeks to market the Unifill syringe on an exclusive
basis. The Company and sanofi-avenits will then discuss the exclusivity list during a several
month negotiation period, and if the list is agreed, sanofi-aventis will retain exclusive rights to
the use of the product within these designated therapeutic drug classes until June 30, 2014,
subject to the extension described above. If the Company and sanofi-aventis are unable to reach an
agreement on the list, sanofi-aventis will retain full exclusivity across all therapeutic classes
until July 1, 2012. Unless terminated earlier, the industrialization agreement has a term until
the completion of the industrialization program. During the year ended June 30, 2009, the Company
recognized $13,601 in revenue related to the milestones achieved under the industrialization
agreement of which
$7,024 was
collected after year end.
The industrialization agreement provides that, subject to the full completion of the
industrialization program, the parties will negotiate a supply agreement for the manufacture and
purchase of the final product on a commercial scale. The supply agreement will provide that
sanofi-aventis and its affiliates will purchase the final product exclusively from us, and the
industrialization agreement provides that we are not required to commit more than 30% of our
expected installed production capacity to sanofi-aventis and its affiliates for the 12 months
following the receipt of a purchase order. Any order of sanofi-aventis, together with its other
orders, that will exceed the 30% capacity limit will require up to a maximum of 24 months lead time
before we are required to commence delivery of that order.
14. Quarterly Results (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
Quarter ended |
|
Quarter ended |
|
Quarter ended |
|
|
September 30, 2008 |
|
December 31, 2008 |
|
March 31, 2009 |
|
June 30, 2009 |
Year ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
2,305 |
|
|
$ |
5,822 |
|
|
$ |
4,146 |
|
|
$ |
7,703 |
|
Gross profit |
|
|
1,174 |
|
|
|
4,780 |
|
|
|
3,466 |
|
|
|
7,019 |
|
Net income (loss) |
|
|
(1,616 |
) |
|
|
(861 |
) |
|
|
(271 |
) |
|
|
2,231 |
|
Basic earnings (loss) per share |
|
$ |
(0.05 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.07 |
|
Diluted earnings (loss) per share |
|
$ |
(0.05 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
Quarter ended |
|
Quarter ended |
|
Quarter ended |
|
|
September 30, 2007 |
|
December 31, 2007 |
|
March 31, 2008 |
|
June 30, 2008 |
Year ended June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,019 |
|
|
$ |
553 |
|
|
$ |
1,181 |
|
|
$ |
747 |
|
Gross profit |
|
|
418 |
|
|
|
(204 |
) |
|
|
396 |
|
|
|
434 |
|
Net loss |
|
|
(1,767 |
) |
|
|
(2,690 |
) |
|
|
(1,648 |
) |
|
|
(2,432 |
) |
Basic loss per share |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
Diluted loss per share |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
15. Subsequent Events
On September 1, 2009, UMSL announced that it entered into a Merger Implementation Agreement
with the Unilife Corporation, pursuant to which shareholders and optionholders of UMSL will
exchange their existing interests in UMSL for equivalent interests in Unilife Corporation and
Unilife Corporation will become the parent, or ultimate parent of UMSL and its subsidiaries. Each
holder of UMSL ordinary shares or share options will receive one share of common stock or one stock
option, of Unilife Corporation for every six UMSL ordinary shares or share options, respectively,
held by such holder, unless a holder of UMSL ordinary shares elects to receive, in lieu of common
stock, Chess Depository Interests, or CDIs (each representing one-sixth of a share of the
Companys common stock) of the Company, in which case such holder will receive one CDI of Unilife
Corporation for each ordinary share of UMSL. All share and per share data has been retroactively
restated to reflect the one for six share consolidation. The redomiciliation transaction is subject to various
conditions, including without limitation, approval by the Australian
Federal Court, approval by the shareholders and optionholders of
UMSL, and a report by an independent expert concluding that the
redomiciliation transaction is fair, reasonable and in the best
interests of the shareholders and optionholders.
As part of its
subsequent events re-evaluation through February 1, 2010, the
Company noted that this redomiciliation occurred as described above
on January 27, 2010 (unaudited).
F-32
Unilife Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
On October 8,
2009, UMSL issued 3,460,344 shares of common stock to a group of Australian and
US investors in a private placement. As part of the private placement, UMSL will, subject to
shareholder approval, issue an additional 2,831,191 shares of common stock and options to purchase
3,145,767 shares of common stock to the investors in the private placement. The shares of common
stock were or will be issued at a price of A$5.10 per share for aggregate proceeds of A$32,086, of
which A$14,439 is subject to shareholder approval and the options will be issued for no additional
consideration. Each of the options will be exercisable within three years after the date of grant.
Half of the options will have an exercise price of A$7.50 per share, and the other half of the
options will have an exercise price of A$12.00 per share. In conjunction with the private
placement, UMSL also provided its eligible Australian and New Zealand shareholders with an
opportunity to purchase shares of common stock in a share purchase
plan, at a price of A$5.10 per
share, for a total consideration of up to A$10,000. In addition, UMSL will, subject to shareholder
approval, issue options to purchase up to 500,000 shares of common stock to certain advisors and
brokers as compensation for their services with respect to the private placement and the share
purchase plan. These options will be exercisable within three years after the date of grant at a
price of A$5.10 per share. UMSL plans to seek the requisite shareholder approval at a shareholders
meeting to be held in November 2009. The Company intends to use the proceeds raised from the
private placement and the share purchase plan to accelerate the expansion of its operational
capabilities, production facilities and equipment requirements in the United States, and complete
the industrialization of the Unifill syringe. As part of its subsequent events re-evaluation
through January 5, 2010, the Company notes that shareholder approval was obtained in November 2009 and the Australian and New Zealand shareholders actually
acquired A$21,500 (unaudited) under the share purchase plan.
While the private placement was conducted by UMSL prior to the redomiciliation, all of the
share numbers and share option exercise prices referred to above give effect to the share
consolidation the Company will effect in connection with the redomiciliation (one share of the
Companys common stock equals six ordinary shares of UMSL). The ordinary shares and share options
issued in the placement will be exchanged for shares of the Companys common stock and options to
purchase its common stock in connection with the redomiciliation.
During October 2009, the Company accepted a $5,200 offer of assistance from the Commonwealth
of Pennsylvania. The offer includes $2,000 for the development of the Companys new global
headquarters and manufacturing facility as well as up to $2,000 in low interest financing loans for
land, building, acquisition and construction costs.
The offer also includes a $500 opportunity grant, as well as $500
in tax credits. Finally, the offer includes up to $200
for the reimbursement of eligible job training costs. The offer is
based on the Companys proposed project being expected to create
more than 200 new full-time
jobs by December 31, 2012, to retain the Companys 97 existing employees and to have a total cost of $86,000 and
is contingent upon the Company submitting complete applications and
meeting all program guidelines. The Company cannot assure that it
will be able to receive any or all of the assistance for the
Companys current development project or otherwise.
F-33
5,444,633 Shares of Common Stock
UNILIFE CORPORATION
Prospectus
, 2010
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the Companys estimates of the expenses in connection with the
sale and distribution of the securities being registered, all of which will be paid by the Company.
|
|
|
|
|
Item |
|
Amount |
|
SEC registration fee |
|
$ |
2,275 |
|
Legal fees and expenses |
|
$ |
40,000 |
|
Accounting fees and expenses |
|
$ |
15,000 |
|
Printing fees and expenses |
|
$ |
20,000 |
|
|
|
|
|
Total |
|
$ |
77,275 |
|
Item 14. Indemnification of Directors and Officers
Our Certificate of Incorporation provides that, to the fullest extent permitted by the
Delaware General Corporation Law, our directors shall not be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director. Our Bylaws provide
that, to the fullest extent permitted by Delaware law, we will indemnify, and advance expenses to,
a director or officer in an action brought by reason of the fact that the director or officer is or
was our director or officer, or is or was serving at our request as a director or officer of any
other entity, against all expenses, liability and loss reasonably incurred or suffered by such
person in connection therewith. We may maintain insurance to protect a director or officer against
any expense, liability or loss, whether or not we would have the power to indemnify such person
against such expense, liability or loss under Delaware law.
The limitation of liability and indemnification provisions in our Certificate of Incorporation
and Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of
their fiduciary duty. These provisions may also have the effect of reducing the likelihood of
derivative litigation against our directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. However, these provisions do not limit
or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as
injunction or rescission in the event of a breach of a directors duty of care. The provisions will
not alter the liability of directors under the federal securities laws. In addition, your
investment may be adversely affected to the extent that, in a class action or direct suit, we pay
the costs of settlement and damage awards against directors and officers pursuant to these
indemnification provisions. There is currently no pending litigation or proceeding against any of
our directors, officers or employees for which indemnification is sought.
Item 15. Recent Sales of Unregistered Securities.
Issuances by UMSL:
During the past three years, UMSL has issued and sold the following securities that were not
registered under the Securities Act: All of the share numbers and share option exercise prices
referred to below give effect to the share consolidation we will effect in connection with the
redomiciliation (one share of our common stock equals six ordinary shares of UMSL).
On January 1, 2007, in connection with its acquisition of Integrated BioSciences, Inc., a
privately-held company, UMSL issued 1,833,333 ordinary shares to the selling shareholders of the
acquired company. The issuance of these shares was exempt from registration pursuant to Section
4(2) of the Securities Act.
In May and June 2007, UMSL issued an aggregate of 2,303,562 ordinary shares in connection with
two private placements to investors in Australia for aggregate proceeds of $2.5 million (A$3.0
million). The issuance of these shares was exempt from registration pursuant to Regulation S under
the Securities Act.
II-1
During the year ended June 30, 2007, UMSL issued 3,990 ordinary shares upon the exercise of
stock options for aggregate proceeds of $0.1 million (A$0.1 million). The issuance of these shares
was exempt from registration pursuant to Rule 701 and/or Regulation S under the Securities Act.
On July 20, 2007, UMSL issued 2,333,333 ordinary shares in connection with a rights issue to
its Australian shareholders for aggregate proceeds of $2.8 million (A$3.2 million). The issuance of
these shares was exempt from registration pursuant to Regulation S under the Securities Act.
On June 27, 2008, UMSL issued 22,033 ordinary shares to certain Australian employees for no
proceeds. The issuance of these shares was exempt from registration pursuant to Rule 701 and/or
Regulation S under the Securities Act.
During the year ended June 30, 2008, UMSL issued 293,375 ordinary shares upon the exercise of
stock options for aggregate proceeds of $0.4 million (A$0.4 million). The issuance of these shares
was exempt from registration pursuant to Rule 701 and/or Regulation S under the Securities Act.
From time to time during 2007, 2008 and 2009, UMSL issued an aggregate of 5,666,667 ordinary
shares to certain non-US noteholders in connection with the conversion of outstanding convertible
notes. The issuance of these shares was exempt from registration pursuant to Section 3(a)(9) of the
Securities Act.
On December 29, 2008, UMSL issued 1,666,667 ordinary shares to its Chief Executive Officer,
subject to certain transfer restrictions. The issuance of these common shares was exempt from
registration pursuant to Regulation S under the Securities Act.
On February 1, 2009, UMSL issued 45,885 ordinary shares to certain employees for no proceeds.
The issuance of these shares was exempt from registration pursuant to Rule 701 and/or Regulation S
under the Securities Act.
During the year ended June 30, 2009, UMSL issued 97,532 ordinary shares upon the exercise of
stock options for aggregate proceeds of $0.1 million (A$0.1 million). The issuance of these shares
was exempt from registration pursuant to Rule 701 and/or Regulation S under the Securities Act.
In October and November 2009, UMSL issued 6,291,535 ordinary shares and options to purchase
3,645,767 ordinary shares to certain investors, brokers, and advisors in connection with a private
placement for aggregate proceeds of $29.4 million (A$32.1 million). The issuances of these shares
and options were exempt from registration pursuant to Regulation S and/or Regulation D under the
Securities Act.
In conjunction with the private placement referenced in the immediately preceding paragraph,
on November 17, 2009, UMSL issued 4,218,338 ordinary shares to certain shareholders Australian and
New Zealand for aggregate proceeds of $20.1 million (A$21.5 million) pursuant to a share purchase
plan. The issuance of these shares was exempt from registration pursuant to Regulation S under the
Securities Act.
On November 17, 2009, UMSL issued 35,088 ordinary shares to certain US employees in connection
with the exercise of stock options for aggregate proceeds of $0.2 million. The issuance of these
shares was exempt from registration pursuant to Rule 701 under the Securities Act.
On November 17, 2009, UMSL issued an aggregate of 3,333,333 ordinary shares to four founders
of UMSL pursuant to an agreement between UMSL and the founders, which required UMSL to issue
certain number of shares to the founders depending on the results of operations of the UMSL. These
shares were in full satisfaction of UMSL obligations to the founders. The issuance of these shares
was exempt from registration pursuant to Regulation S under the Securities Act.
During the six months ended December 31, 2009, UMSL issued 1,280,341 ordinary shares upon the
exercise of stock options for aggregate proceeds of $1.7 million (A$2.0 million). The issuance of
these shares was exempt from registration pursuant to Rule 701 and/or Regulation S under the
Securities Act.
On January 14, 2010, UMSL issued an aggregate of 833,333 ordinary shares to two inventors of
certain of our technology. The issuance of these shares was exempt from registration pursuant to
Regulation S under the Securities Act.
Issuances by Unilife Corporation:
II-2
Since our incorporation in July 2009, we have issued and sold the following securities that
were not registered under the Securities Act:
In connection with our incorporation and initial organization, we issued 100 shares of common
stock to UMSL for a total consideration of $1.00, which was exempt from registration pursuant to
Regulation S under the Securities Act.
On January 27, 2010, pursuant to two separate schemes of arrangement under Australian law,
Unilife Corporation issued shares of common stock and options to purchase shares of common stock in
exchange for outstanding UMSL ordinary shares and options to purchase UMSL ordinary shares. The
schemes of arrangement were approved by the Australian Federal Court and by UMSL shareholders and
option holders. The issuances were exempt from registration pursuant to Section 3(a)(10) of the
Securities Act.
Pursuant to the share scheme of arrangement, UMSL shareholders had the right to elect to
receive either shares of common stock of Unilife Corporation or Chess Depositary Interests
(CDIs), with each CDI representing one-sixth of one share of Unilife Corporation common stock.
Holders of 281,904,534 UMSL ordinary shares elected to receive CDIs, which are tradable on the ASX.
Holders of 33,780,966 UMSL ordinary shares elected to receive shares of Unilife Corporation common
stock (equivalent to 5,630,161 shares of common stock). As a result of these elections, Unilife
Corporation issued 281,904,534 CDIs and 5,630,161 shares of common stock. Option holders of UMSL
have the right to elect to receive either shares of common stock or CDIs upon exercise of their
options. Shares of common stock may be converted into CDIs and CDIs may be converted into shares of
common stock, in each case, in the ratio of one share of common stock for six CDIs. Only CDIs are
tradable on the ASX and only shares of common stock will be tradable on Nasdaq.
On February 3, 2010, we issued 1,166,000 shares of restricted stock to Alan Shortall, our
Chief Executive Officer, pursuant to an incentive award approved by our board of directors and
shareholders. The issuance of these shares was exempt from registration pursuant to Section 4(2) of
the Securities Act.
Item 16. Exhibits
The Exhibits listed on the Exhibit Index of this Registration Statement are filed herewith or
are incorporated herein by reference to other filings.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
|
1. |
|
To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: |
|
i. |
|
To include any prospectus required by Section 10(a)(3) of the
Securities Act; |
|
|
ii. |
|
To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; and |
|
|
iii. |
|
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement. |
II-3
|
2. |
|
That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof. |
|
|
3. |
|
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering. |
|
|
4. |
|
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Registrant,
the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in
Lewisberry, Pennsylvania on June 18, 2010.
|
|
|
|
|
|
UNILIFE CORPORATION
|
|
|
By: |
/s/ Alan Shortall
|
|
|
|
Name: |
Alan Shortall |
|
|
|
Title: |
Chief Executive Officer |
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors of Unilife
Corporation, a Delaware corporation (the Corporation), hereby constitute and appoint Alan
Shortall and R. Richard Wieland II and each of them, the true and lawful agents and attorneys-in-fact of
the undersigned with full power and authority in said agents and attorneys-in-fact, and in any one
or more of them, to sign for the undersigned and in their respective names as an officer/director
of the Corporation, any and all amendments (including post-effective amendments) to this
registration statement on Form S-1 (or any other registration statement for the same offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act) and to file the
same, with all exhibits thereto and other documents in connection therewith, with the Securities
and Exchange Commission, and with full power of substitution; hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
|
|
|
|
|
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ Alan Shortall
|
|
Director and Chief Executive Officer
|
|
June 18, 2010 |
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/
R. Richard Wieland II
|
|
Chief Financial Officer and
Executive Vice President
|
|
June 18, 2010 |
|
|
(Principal Financial Officer and Principal
Accounting Officer) |
|
|
|
|
|
|
|
/s/ John Lund
|
|
Director
|
|
June 18, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ William Galle
|
|
Director
|
|
June 18, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Jeff Carter
|
|
Director
|
|
June 18, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Jim Bosnjak
|
|
Chairman and Director
|
|
June 18, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Mary Katherine Wold
|
|
Director
|
|
June 18, 2010 |
|
|
|
|
|
II-5
EXHIBIT INDEX
|
|
|
Exhibit Number |
|
Description |
2.1
|
|
Amended and Restated Merger Implementation Agreement dated as of September 1, 2009 between Unilife Medical Solutions Limited
and Unilife Corporation ** |
|
|
|
2.2
|
|
Share Purchase Agreement among Unilife Medical Solutions Limited, Edward Paukovits, Jr., Keith Bocchicchio, and Daniel Adlon
dated as of October 25, 2006 and amended as of September 26, 2007 ** |
|
|
|
3.1
|
|
Certificate of Incorporation of Unilife Corporation** |
|
|
|
3.2
|
|
Bylaws of Unilife Corporation** |
|
|
|
4.1
|
|
Form of Common Stock Certificate** |
|
|
|
5.1
|
|
Opinion of DLA Piper LLP (US) |
|
|
|
10.1
|
|
Exclusive Agreement dated as of June 30, 2008 between Unilife Medical Solutions Limited and Sanofi Winthrop Industrie** |
|
|
|
10.2
|
|
First Amendment dated as of June 29, 2009 to Exclusive Agreement dated as of June 30, 2008 between Unilife Medical Solutions
Limited and Sanofi Winthrop Industrie** |
|
|
|
10.3
|
|
Industrialization Agreement dated as of June 30, 2009 between Unilife Medical Solutions
Limited and Sanofi Winthrop Industrie** |
|
|
|
10.4
|
|
Business Lease, dated as of August 17, 2005, between Integrated BioSciences, Inc. and AMC
Delancey Heartland Partners, L.P.** |
|
|
|
10.5
|
|
Agreement dated as of September 15, 2003 between Integrated BioSciences, Inc. and B. Braun
Medical, Inc. and amendments thereto** |
|
|
|
10.6
|
|
Promissory Note, dated as of December 30, 2005 between Integrated BioSciences, Inc. and
Commerce Bank** |
|
|
|
10.7
|
|
Promissory Note, dated as of August 25, 2006 between Integrated BioSciences, Inc. and Commerce
Bank** |
|
|
|
10.8
|
|
Employment Agreement, dated as of October 26, 2008 between Unilife Medical Solutions Limited
and Alan Shortall** |
|
|
|
10.9
|
|
Employment Agreement, dated as of February 15, 2005 between Unilife Medical Solutions Limited
and Jeff Carter** |
|
|
|
10.10
|
|
Employment Agreement, dated as of November 10, 2009 between Unilife Medical Solutions, Inc.
and Daniel Calvert** |
|
|
|
10.11
|
|
Employment Agreement, dated as of November 10, 2009 between Unilife Medical Solutions, Inc.
and Bernhard Opitz** |
|
|
|
10.12
|
|
Employment Agreement, dated as of November 10, 2009 between Unilife Medical Solutions, Inc.
and Mark Iampietro** |
|
|
|
10.13
|
|
Employment Agreement, dated as of November 10, 2009 between Unilife Medical Solutions, Inc.
and Stephen Allan** |
|
|
|
10.14
|
|
Employment Agreement, dated as of November 10, 2009 between Unilife Medical Solutions, Inc.
and Eugene Shortall** |
|
|
|
10.15
|
|
Consulting Agreement, dated as of January 22, 2009 between Unilife Medical Solutions Limited
and Joblak Pty Ltd** |
|
|
|
10.16
|
|
Deed of Mutual Release, dated January 12, 2009 between Unilife Medical Solutions Limited and
Jeff Carter** |
|
|
|
10.17
|
|
Unilife Corporation Employee Stock Option Plan** |
|
|
|
10.18
|
|
Unilife Corporation 2009 Stock Incentive Plan** |
|
|
|
10.19
|
|
Unilife Medical Solutions Limited Exempt Employee Share Plan** |
|
|
|
10.20
|
|
Agreement dated November 12, 2009 between Unilife Medical Solutions, Inc. and Mikron Assembly
Technology** |
|
|
|
10.21
|
|
Purchase and Mutual Indemnification Agreement dated November 16, 2009 between Unilife Cross
Farm LLC and Greenspring Partners, LP** |
|
|
|
10.22
|
|
Offer of assistance dated October 16, 2009 from the Commonwealth of Pennsylvania to Unilife
Medical Solutions and acceptance of the offer** |
|
|
|
|
Exhibit Number |
|
Description |
10.23
|
|
|
Agreement Between Unilife Cross Farm LLC and L2 Architecture dated as of December 29, 2009, as
amended** |
|
|
|
|
10.24
|
|
|
Agreement between Unilife Cross Farm LLC and HSC Builders & Construction Managers dated as of
December 14, 2009, as amended** |
|
|
|
|
10.25
|
|
|
Development Agreement, dated December 14, 2009 between Unilife Cross Farm LLC and Keystone
Redevelopment Group LLC** |
|
|
|
|
10.26
|
|
|
Amended and Restated Operating Agreement dated December 14, 2009 of Unilife Cross Farm LLC** |
|
|
|
|
10.27
|
|
|
Form of Share Purchase Agreement between Unilife Medical Solutions Limited and each of the US
investors in the October and November 2009 private placement** |
|
|
|
|
10.28
|
|
|
Form of Subscription Agreement between Unilife Medical Solutions Limited and each of the
Australian investors in the October and November 2009 private placement** |
|
|
|
|
10.29
|
|
|
2009 Share Purchase Plan Terms and Conditions** |
|
|
|
|
10.30
|
|
|
Offer Letter dated November 12, 2008 from Unilife Medical Solutions Limited to Daniel Calvert** |
|
|
|
|
10.31
|
|
|
Offer Letter dated November 20, 2008 from the Coelyn Group, on behalf of Unilife Medical
Solutions Limited to Bernhard Opitz** |
|
|
|
|
10.32
|
|
|
Consulting Agreement between Unilife Medical Solutions Limited and Medical Middle East
Limited** |
|
|
|
|
10.33
|
|
|
Option Deed, dated January 21, 2010 between Unilife Medical Solutions Limited and Edward Fine** |
|
|
|
|
10.34
|
|
|
Deed of Settlement and Release dated October 26, 2008 among Unilife Medical Solutions Limited
and Craig Thorley, Joseph Kaal, Alan Shortall and Roger Williamson and notification related
thereto dated October 27, 2009** |
|
|
|
|
10.35
|
|
|
Deed of Confirmation of Intellectual Property Rights and Confidentiality among Unilife Medical
Solutions Limited, Unitract Syringe Pty Limited, Craig Thorley and Joseph Kaal** |
|
|
|
|
10.36
|
|
|
Form of Restricted Stock Agreement under the Unilife Corporation 2009 Stock Incentive Plan
between Unilife Corporation and Alan Shortall** |
|
|
|
|
10.37
|
|
|
Form of Unilife Corporation Nonstatutory Stock Option Agreement between Unilife Corporation
and Alan Shortall** |
|
|
|
|
10.38
|
|
|
Membership Interest Purchase Agreement, dated December 14, 2009 between Unilife Cross Farm LLC
and Cross Farm, LLC.** |
|
|
|
|
10.39
|
|
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Letter Agreement dated January 29, 2010 between sanofi-aventis and Unilife Medical Solutions.** |
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10.40
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Letter Agreement dated February 25, 2010 between sanofi-aventis and Unilife Medical Solutions
Limited**** |
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10.41
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Form of Restricted Stock Agreement under the Unilife Corporation 2009 Stock Incentive Plan *** |
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10.42
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Form of Unilife Corporation Nonstatutory Stock Option Notice *** |
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21.1
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List of subsidiaries of Unilife Corporation** |
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23.1
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Consent of BDO Audit (WA) Pty Ltd |
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23.2
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Consent of DLA Piper LLP (US) (contained in Exhibit 5.1 to this Registration Statement) |
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24.1
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Power of Attorney (included on the signature page of this Registration Statement) |
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* |
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Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment under Rule 406 of the Securities
Act of 1933, as amended. The omitted materials have been filed
separately with the Securities and Exchange Commission. |
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** |
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Incorporated by reference to the respective exhibits to the
Registrants Registration Statement on Form 10 (File Number
001-34540). |
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*** |
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Incorporated by reference to the respective exhibits to the
Registrants Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 2009 filed on March 23, 2010. |
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**** |
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Incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2010 filed on May 17, 2010. |