UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the period ended March 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from____________ to ____________
Commission File Number: 0-12104
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1009366
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip code)
(973) 605-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 13, 1998, there were 37,586,087 shares of the registrant's common
stock outstanding.
Page 1 of 18
IMMUNOMEDICS, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - 3
March 31, 1998 and June 30, 1997
Condensed Consolidated Statements of Operations - 4
three and nine months ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows - 5
nine months ended March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements - 6
March 31, 1998
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
Page 2 of 18
PART I. - FINANCIAL INFORMATION
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1998 1997
______________ ______________
ASSETS
Current Assets
Cash and cash equivalents $ 6,181,021 6,013,355
Marketable securities 1,578,986 9,010,275
Inventory 630,730 690,695
Other current assets 1,345,050 1,227,000
______________ ______________
Total Current Assets 9,735,787 16,941,325
Property and equipment, net of
accumulated depreciation of
$5,569,000 and $4,852,000 at
March 31, 1998 and June
30, 1997, respectively 5,184,369 5,693,193
______________ ______________
TOTAL ASSETS $ 14,920,156 22,634,518
______________ ______________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 1,670,416 2,360,256
Other current liabilities 2,547,766 2,827,970
______________ ______________
Total Current Liabilities 4,218,182 5,188,226
Commitments and Contingencies
Preferred stock; $.01 par value,
authorized 10,000,000 shares;
series D convertible, authorized
200,000 shares; issued and
outstanding none and 4,999
shares at March 31, 1998 and
June 30, 1997, respectively 0 50
Common stock; $.01 par value,
authorized 70,000,000 shares;
issued and outstanding 36,818,832
and 36,297,170 shares at
March 31, 1998 and
June 30, 1997, respectively 368,188 362,971
Capital contributed in excess
of par 94,754,001 93,111,855
Accumulated deficit (84,418,921) (76,027,392)
Accumulated net unrealized
loss on securities (1,294) (1,192)
______________ ______________
Total stockholders' equity 10,701,974 17,446,292
______________ ______________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 14,920,156 22,634,518
______________ ______________
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
Page 3 of 18
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
___________ ___________ ___________ ___________
REVENUES:
Product sales $ 998,756 325,464 2,858,553 564,880
Royalties and licence
fees 1,347 13,675 14,401 571,324
Research and development 160,638 196,449 1,067,223 464,096
Interest and other 99,129 316,566 2,230,913 1,028,624
___________ ___________ ___________ ___________
1,259,870 852,154 6,171,090 2,628,924
___________ ___________ ___________ ___________
COST AND EXPENSES:
Cost of goods sold 77,758 5,570 147,180 13,537
Research and development 2,806,298 3,479,020 8,939,145 10,116,987
Sales and Marketing 1,216,880 510,337 3,739,480 1,174,222
General and administrative 495,029 909,198 1,736,814 2,132,386
___________ ___________ ___________ ___________
4,595,965 4,904,125 14,562,619 13,437,132
___________ ___________ ___________ ___________
NET LOSS $(3,336,095) (4,051,971) (8,391,529) (10,808,208)
___________ ___________ ___________ ___________
Basic net loss per share $ (0.09) (0.11) (0.23) (0.31)
___________ ___________ ___________ ___________
Diluted net loss per share $ (0.09) (0.11) (0.23) (0.31)
___________ ___________ ___________ ___________
Weighted average number of
common shares outstanding 36,448,634 35,820,962 36,378,635 35,221,934
___________ ___________ ___________ ___________
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
Page 4 of 18
IMMUNOMEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
1998 1997
______________ ______________
Cash Flows From Operating Activities:
Net loss $ (8,391,529) (10,808,208)
Adjustments to reconsile net loss to
net cash used in operating
activities:
Depreciation and amortization 716,864 852,731
Change in operating assets and
liabilities (1,028,129) (481,923)
______________ ______________
Net Cash Used In Operating
Activities $ (8,702,794) (10,437,400)
______________ ______________
Cash Flows From Investing Activities:
Purchase of marketable securities (10,345,629) (30,641,313)
Proceeds from maturities of
marketable securities 17,776,816 32,748,506
Additions to property and
equipment (208,040) (537,880)
______________ ______________
Net Cash Provided By
Investing Activities $ 7,223,147 1,569,313
______________ ______________
Cash Flows From Financing Activities:
Issuance of common stock, net 1,482,500 0
Exercise of stock options 164,813 210,947
______________ ______________
Net Cash Provided By Financing
Activities $ 1,647,313 210,947
______________ ______________
Increase / (Decrease) in cash
equivalents 167,666 (8,657,140)
Cash and cash equivalents at beginning
of period 6,013,355 13,646,000
______________ ______________
Cash and cash equivalents at end
of period $ 6,181,021 4,988,860
______________ ______________
______________ ______________
<FN>
See accompanying notes to condenced consolidated financial statements.
</FN>
Page 5 of 18
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Immunomedics, Inc. (the "Company"), which incorporate the Company's
wholly-owned subsidiary Immunomedics Europe, have been prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, the statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date. Operating results for the nine-month
period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 1998.
For further information, refer to the annual financial statements and
footnotes thereto included in the Company's Form 10-K for the fiscal
year ended June 30, 1997.
(2) Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with maturities of
three months or less, at the time of purchase, to be cash equivalents.
Included in other current assets at March 31, 1998 and June 30, 1997 is
accrued interest earned on cash equivalents and marketable securities
of $31,000 and $104,000, respectively.
(3) Income Taxes
The Company has never made payments of Federal or State income taxes
and does not anticipate generating book income in fiscal 1998;
therefore, no income taxes have been reflected for the nine-month
period ended March 31, 1998.
(4) Net Loss Per Share
Basic loss per share is based on net loss for the relevant period,
divided by the weighted average number of common shares outstanding
during the period.
Diluted loss per share is based on net loss for the relevant period,
divided by the weighted average number of common shares outstanding
during the period. Common share equivalents, such as outstanding stock
options, are not included in the computations since the effect would be
antidilutive.
Page 6 of 18
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(5) Stockholders' Equity
On December 23, 1997, the Company entered into a structured Equity Line
Flexible Financing Agreement (the "Equity Line") with an investor (the
"Investor"), pursuant to which, subject to the satisfaction of certain
conditions, the Company may receive up to an aggregate of $30 million
over a 36-month period. During each three month period (each, an
"Investment Period"), the Company, subject to the satisfaction of
certain conditions, can require the Investor to purchase shares of the
Company's common stock for an aggregate purchase price of between $1.0
million and $2.5 million and the Investor, at its option, may purchase
additional shares of common stock for an aggregate purchase price of
$1.0 million. The Company retains the right to provide that no
purchases can be made in any given Investment Period. The Investor may
select the dates on which the purchase of shares of the Company's
common stock will occur. The purchase price per share to be paid by the
Investor for the shares of the Company's common stock acquired under
the Equity Line will equal 98% of the lowest sales price of the common
stock during the three trading days immediately preceding the notice of
purchase by the Investor. The Investor's obligation to purchase shares
of the Company's common stock under the Equity Line is subject to
various conditions, including, among other things, the price of the
Company's common stock being at least such price as the Company may
from time to time set as the minimum purchase price. In addition, the
Investor is not required to purchase, in any Investment Period, an
amount in excess of 8% of the product of the daily average value of
open market trading of the common stock and the number of trading days
in the Investment Period during either the current or immediately
preceding Investment Period. The Company has granted the Investor the
right to purchase additional $1.0 million during the Investment Period
ending May 31, 1998. As of March 31,1998, the Company had received
$1.5 million for which the Company issued 404,080 shares of common
stock. During the first Investment Period, which commenced March 1,
1998 through May 13, 1998, the Company has received total of $4.5
million for which the Company has issued 1,056,835 shares of common
stock.
In connection with entering into the Equity Line, the Investor received
a four-year warrant (the "Warrant") to purchase 50,000 shares of the
Common Stock at an exercise price equal to $7.5375 per share (180% of
closing sales price of Common Stock at the time of issuance). In
addition, the Company has agreed to issue to the Investor, at the end
of each calendar year an additional four-year warrant (each, an
"Additional Warrant" and collectively, the Additional Warrants") to
purchase Common Stock in an amount equal to 5,000 shares for each
$500,000 of Common Stock purchased by the Investor during such year.
The exercise price will be equal to 180% of the weighted average
purchase price of the Common Stock purchased by the Investor during the
year, provided that the number of shares issuable upon exercise of all
the Additional Warrants will not exceed 125,000.
Page 7 of 18
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S under the Securities Act of 1933, pursuant to which
several foreign investors purchased 200,000 shares of 5% Series D
Convertible Preferred Stock (the "Series D Preferred") for $10,000,000.
The terms of the transaction allow the investors, at their discretion,
to convert the Series D Preferred into shares of the Company's common
stock during a twenty-four month period beginning in June 1996, at a
price equal to 89% of the average market price per share over a 20-day
trading period surrounding the date of conversion. As of May 13, 1998,
all of the 200,000 shares of Series D Preferred had been converted into
1,795,771 shares of common stock.
(6) License and Distribution Agreements
On November 24, 1997, the Company entered into a Distribution Agreement
with Eli Lilly Deutschland GmbH ("Lilly") pursuant to which Lilly
packages and distributes LeukoScan(R) within the countries comprising
the European Union and certain other countries subject to receipt of
regulatory approvals. Also, effective April 6, 1998, Lilly began
packaging and distributing CEA-Scan within the countries comprising the
European Union. The Company will pay Lilly a service fee based
primarily on the number of units of product packaged and shipped. The
parties contemplate that other Company products may be handled under
this arrangement when appropriate.
On August 2, 1995, the Company announced that its Development and
License Agreement with Pharmacia, Inc. (which subsequently became
Pharmacia & Upjohn Inc.- "Pharmacia") was terminated and the Company
regained the North American marketing and selling rights for CEA-Scan.
The Company and Pharmacia were subsequently unable to agree on the
amount owed to the Company as a result of termination. In June, 1996,
the Company filed a claim against Pharmacia before the American
Arbitration Association. On November 28, 1997, the Company was awarded
$1.8 million, including interest, which was recognized as revenue
during the quarter ended December 31, 1997. Additionally, the Company
recognized as revenue a portion of funds previously received from
Pharmacia pertaining to CEA-Scan clinical trials for which the Company
no longer has an obligation. Such amounts had been recorded as deferred
revenue.
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V., pursuant to which Mallinckrodt Medical B.V.
undertook to market, sell and distribute CEA-Scan(R) throughout Western
Europe and in specified Eastern European countries, subject to receipt
of regulatory approval in the specified Eastern European countries. In
April 1996, the Company entered into a U.S. Marketing and Distribution
Agreement with Mallinckrodt Medical, Inc. Pursuant to which
Mallinckrodt Medical, Inc. undertook to market,
Page 8 of 18
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
sell and distribute CEA-Scan for use in colorectal cancer diagnostic
imaging in the U.S. on a consignment basis. Effective as of April 6,
1998, the Company terminated the agreements with Mallinckrodt Medical
B.V. and Mallinckrodt Medical Inc.. In addition, effective as of April
30, 1998, the Company terminated its agreement with MMD Specialty
Services, Inc. and employed directly substantially all of the people
who previously comprised the contract sales force.
Effective as of April 6, 1998, the Company entered into a non-exclusive
Distributor and Product Service Agreement (the "Agreement") with Bergen
Brunswig Specialty Company ("BBSC") pursuant to which BBSC undertook to
provide product support services including distribution, order
management and customer services for CEA-Scan and other products as
agreed from time to time. The Company has agreed to sell CEA-Scan to
BBSC at a fixed price per vial, for resale to certain customers. The
Company has retained the right to sell CEA- Scan to certain national
accounts for which it has agreed to pay a service fee based primarily
on the number of units shipped. The Company and BBSC are currently
discussing a modification to the Agreement pursuant to which sales to
all customers would be made by BBSC on a consignment basis.
(7) Commitments and Contingencies
On February 1, 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having
an aggregate acquisition cost of up to $2,200,000. The basic lease
payments under the master lease agreement are determined based on
current market rates of interest at the inception of each equipment
schedule take- down, and are payable in monthly installments over a
four-year period. The lease agreement contains an early purchase option
for each equipment schedule, at an amount which is deemed to be fair
value, exercisable no later than ninety days before the thirty-ninth
installment is due. On November 1, 1996, December 9, 1996, and April 1,
1997, the Company exercised the early purchase options on equipment
leased on February 14, 1994, April 1, 1994, and June 1, 1994,
respectively. Under the lease agreement, continued compliance with
certain financial ratios is required and, in the event of default, the
Company will be required to provide an irrevocable letter of credit
which is generally equal to the outstanding balance of lease payments
due at the time of default. As of March 31, 1998, the Company was not
in compliance with certain of these ratios, but the lessor has not yet
declared an event of default or requested a letter of credit. The
Company does not believe that such a request would have a material
adverse effect on the Company. As of April 30, 1998, the Company has
leased equipment with a cost basis aggregating $1,247,000 under the
master lease agreement. The Company has recorded lease expense for the
three and nine months ended March 31, 1998 of $87,000 and $261,000,
respectively.
Page 9 of 18
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(8) Reclassification
Certain amounts previously reported have been reclassified to conform
to current year presentation.
Page 10 of 18
IMMUNOMEDICS, INC.
Part I - Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Statements made in this Form 10-Q, other than those concerning historical
information, should be considered forward-looking and subject to various risks
and uncertainties. Such forward-looking statements are made based on
management's belief as well as assumptions made by, and information currently
available to, management pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors, including those identified in
"Business" and elsewhere in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997.
Since its inception, the Company has been engaged primarily in the research and
development and, more recently, the commercialization of proprietary products
relating to the detection, diagnosis and treatment of cancer and infectious
diseases. On June 28, 1996, the U.S. Food and Drug Administration ("FDA")
licensed CEA-Scan for use with other standard diagnostic modalities for the
detection of recurrent and/or metastatic colorectal cancer. On October 4, 1996,
the European Commission granted marketing authorization for use of the product
in the 15 countries comprising the European Union for the same indication. On
September 16, 1997, the Company received a notice of compliance from the Health
Protection Branch permitting it to market CEA-Scan in Canada for colorectal
cancer for recurrent and metastatic colorectal cancer.
On December 19, 1996, the Company filed a Biologics License Application for
LeukoScan with the FDA for the same indication approved in Europe, plus an
additional indication for the diagnosis of acute, atypical appendicitis. On
February 14, 1997, the Company was granted regulatory approval by the European
Commission to market LeukoScan, an in vivo infectious disease diagnostic imaging
product, in all 15 countries which are members of the European Union, for the
detection and diagnosis of osteomyelitis (bone infection) in long bones and in
diabetic foot ulcer patients. The Company has also been pursuing the broadening
of its approval for LeukoScan in Europe to include the acute, atypical
appendicitis indication. As with all filings, there can be no assurance that
regulatory approval for such indications will be received.
The Company is also engaged in developing other biopharmaceutical products,
which are in various stages of development and clinical testing. The Company has
not achieved profitable operations and does not anticipate achieving profitable
operations during fiscal year 1998. The Company will continue to experience
operating losses until such time, if at all, that it is able to generate
sufficient revenues from sales of CEA-Scan, LeukoScan and its other proposed in
vivo products. Further, the Company's working capital will continue to decrease
until such time, if at all, that the Company is able to generate positive cash
flow from operations or until such time, if at all, that the Company receives an
additional infusion of cash from the sale of the Company's securities, from
other financing or from corporate alliances to finance the Company's operating
expenses and capital expenditures.
Page 11 of 18
Results of Operations
Revenues for the nine-month period ended March 31, 1998 were $6,171,000 as
compared to $2,629,000 for the same period in 1997, representing an increase of
$3,542,000. The product sales for the nine-month period ended March 31, 1998
increased by $2,294,000 as compared to the same period of 1997, as the product
launch for CEA-Scan and LeukoScan did not occur until October 1996 and April
1997, respectively. Royalties and license fees for the nine-month period ended
March 31, 1998 decreased by $557,000 primarily due to the receipt of a
non-recurring $500,000 license fee from a corporate partner in July 1996.
Research and development revenue for the nine-month period ended March 31, 1998
increased by $603,000 as compared to same period of 1997, due to higher grant
income and recognition of previously deferred revenue received from Pharmacia &
Upjohn. Interest and other income for the nine-month period ended March 31, 1998
increased by $1,202,000, primarily due to the receipt of an arbitration award of
$1.8 million, including interest, in its dispute with Pharmacia & Upjohn, offset
by a decrease in interest income of $615,000 due to less cash available for
investments.
Revenues for the three-month period ended March 31, 1998 were $1,260,000 as
compared to $852,000 for the same period in 1997, representing a increase of
$408,000. The product sales for the three-month period ended March 31, 1998
increased by $673,000 as compared to the same period of 1997, as the product
launch for CEA-Scan and LeukoScan did not occur until October 1996 and April
1997, respectively. Research and development revenue for the three-month period
ended March 31, 1998 decreased by $36,000 as compared to same period of 1997
primarily due to reduced deferred revenue recognition. Interest and other income
for the three-month period ended March 31, 1998 decreased by $217,000, primarily
due to less cash available for investments.
Total operating expenses for the nine-month period ended March 31, 1998 were
$14,563,000 as compared to $13,437,000 for the same period in 1997, representing
an increase of $1,126,000. Research and development costs for the nine-month
period ended March 31, 1998 decreased by $1,178,000 as compared to the same
period in 1997, primarily due to a decrease in the level of expenditures
required to obtain validation of the Company's new manufacturing facility and
lower cost associated with reduced patient enrollment for clinical trials. Sales
and marketing expenses for the nine-month period ended March 31, 1998 increased
by $2,565,000 primarily due to expenses of $1,183,000 associated with the
Company's full-time oncology sales force provided by MMD Specialty Services,
Inc. and operating expenses for Immunomedics Europe which increased by
$1,088,000 as compared to the same period of 1997. General and administrative
costs for the nine-month period ended March 31, 1998 decreased by $396,000 as
compared to the same period of 1997, primarily due to reduced legal costs as a
result of the conclusion of the Pharmacia & Upjohn arbitration which was settled
in November 1997.
Total operating expenses for the three-month period ended March 31, 1998 were
$4,596,000 as compared to $4,904,000 for the same period in 1997, representing a
decrease of $308,000. Research and development costs for the three-month period
ended March 31, 1998 decreased by $673,000 as compared to the same period in
1997, primarily due to a decrease in the level of expenditures required to
obtain validation of the Company's new manufacturing facility and lower cost
associated with reduced
Page 12 of 18
Results of Operations (Continued)
patient enrollment for clinical trials. Sales and marketing expenses for the
three-month period ended March 31, 1998 increased by $707,000 primarily due to
expenses of $460,000 associated with the Company's full-time oncology sales
force provided by MMD Specialty Services, Inc. and operating expenses for
Immunomedics Europe which increased by $254,000 as compared to the same period
of 1997. General and administrative costs for the three-month period ended March
31, 1998 decreased by $414,000 as compared to the same period of 1997, primarily
due to reduced legal costs as a result of the conclusion of the Pharmacia &
Upjohn arbitration which was settled in November 1997.
Net loss for the nine-month period ended March 31, 1998 was $8,392,000, or $0.23
per share, as compared to a loss of $10,808,000, or $0.31 per share, for the
same period in 1997. The lower net loss of $2,416,000 in 1998 as compared to
1997 primarily resulted from higher revenues, partially offset by higher
operating expenses, as discussed above. In addition, the net loss per share for
the nine-month period ended March 31, 1998 was positively impacted by the higher
weighted average number of common shares outstanding for this period, as
compared to the same period in 1997. The increase in the weighted average number
of common shares outstanding was primarily due to the conversion of Preferred
Stock into the Company's Common Stock (see Note 5 to Unaudited Condensed
Consolidated Financial Statements).
Net loss for the three-month period ended March 31, 1998 was $3,336,000, or
$0.09 per share, as compared to a loss of $4,052,000, or $0.11 per share, for
the same period in 1997. The lower net loss of $716,000 in 1998 as compared to
1997 primarily resulted from higher revenues and reduced operating expenses, as
discussed above. In addition, the net loss per share for the three-month period
ended March 31, 1998 was positively impacted by the higher weighted average
number of common shares outstanding for this period, as compared to the same
period in 1997. The increase in the weighted average number of common shares
outstanding was primarily due to the conversion of Preferred Stock into the
Company's Common Stock (see Note 5 to Unaudited Condensed Consolidated Financial
Statements).
Liquidity and Capital Resources
At March 31, 1998, the Company had working capital of $5,518,000, which
represents a decrease of $6,235,000 from June 30, 1997, and had no long-term
debt other than certain lease obligations (see Note 7 to Unaudited Condensed
Consolidated Financial Statements). The net decrease in working capital resulted
principally from the funding of operating expenses and capital expenditures.
On February 1, 1994, the Company entered into a master lease agreement, which
was subsequently amended, pursuant to which the Company may lease equipment for
research, development and manufacturing purposes having an aggregate acquisition
cost of up to $2,200,000. The basic lease payments under the master lease
agreement will be determined based on current market rates of interest at the
inception of each equipment schedule take-down, and payable in monthly
installments over a four-year period. The lease agreement contains an early
purchase option for each equipment schedule, at an amount which is deemed to be
fair value, exercisable no later than ninety days before the thirty-ninth
installment is due. On November 1, 1996, December 9, 1996, and April 1, 1997,
the Company exercised the early purchase options on equipment leased on February
14, 1994, April 1, 1994, and June 1, 1994,
Page 13 of 18
Liquidity and Capital Resources (Continued)
respectively. Under the lease agreement, continued compliance with certain
financial ratios is required and, in the event of default, the Company will be
required to provide an irrevocable letter of credit which is generally equal to
the outstanding balance of lease payments due at the time of default. As of
March 31, 1998, the Company was not in compliance with certain of these ratios,
but the lessor has not yet declared an event of default or requested a letter of
credit. The Company does not believe that such a request would have a material
adverse effect on the Company. As of April 30, 1998, the Company has leased
equipment with a cost basis aggregating $1,247,000 under the master lease
agreement (see Note 7 to Unaudited Condensed Consolidated Financial Statements).
The Company's liquid asset position, measured by its cash, cash equivalents and
marketable securities, was $7,760,000 at March 31, 1998, representing a decrease
of $7,264,000 from June 30, 1997. This decrease was primarily attributable to
the funding of operating expenses and capital expenditures as discussed above.
It is anticipated that working capital and cash, cash equivalents and marketable
securities will decrease during the remainder of fiscal year 1998 as a result of
planned operating and capital expenditures. At present, the Company believes
that its current cash resources and funds available under the Equity Line, as
described below, will be sufficient to fund anticipated operating expenses and
capital expenditures through fiscal year 1999.
On December 23, 1997, the Company entered into a structured Equity Line Flexible
Financing Agreement (the "Equity Line") with an investor (the "Investor"),
pursuant to which, subject to the satisfaction of certain conditions, the
Company may receive up to an aggregate of $30 million over a 36- month period.
During each three month period (each, an "Investment Period"), the Company,
subject to the satisfaction of certain conditions, can require the Investor to
purchase shares of the Company's common stock for an aggregate purchase price of
between $1.0 million and $2.5 million and the Investor, at its option, may
purchase additional shares of common stock for an aggregate purchase price of
$1.0 million. The Company retains the right to provide that no purchases can be
made in any given Investment Period. The Investor may select the dates on which
the purchase of shares of the Company's common stock will occur. The purchase
price per share to be paid by the Investor for the shares of the Company's
common stock acquired under the Equity Line will equal 98% of the lowest sales
price of the common stock during the three trading days immediately preceding
the notice of purchase by the Investor. The Investor's obligation to purchase
shares of the Company's common stock under the Equity Line is subject to various
conditions, including, among other things, the price of the Company's common
stock being at least such price as the Company may from time to time set as the
minimum purchase price. In addition, the Investor is not required to purchase,
in any Investment Period, an amount in excess of 8% of the product of the daily
average value of open market trading of the common stock and the number of
trading days in the Investment Period during either the current or immediately
preceding Investment Period (see Note 5 to Unaudited Condensed Consolidated
Financial Statements).
In addition to the funds available under the Equity Line, the Company believes
that it may require additional financial resources by the beginning of fiscal
year 2000 in order for it to continue its projected levels of research and
development and clinical trials of its proposed products and regulatory filings
for new indications of existing products.
Page 14 of 18
Liquidity and Capital Resources (Continued)
In addition, the Company intends to supplement its financial resources from time
to time as market conditions permit through additional financing and through
collaborative marketing and distribution agreements. Also, the Company continues
to evaluate various programs to raise additional capital and to seek additional
revenues from the licensing of its proprietary technology. At the present time,
the Company is unable to determine whether any of these future activities will
be successful and, if so, the terms and timing of any definitive agreements.
Page 15 of 18
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds.
As discussed above under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources," on
December 23, 1997, the Company entered into the Equity Line. During the fiscal
quarter ended March 31, 1998, the Company issued 404,080 shares of its common
stock to the Investor and received gross proceeds of $1.5 million. The proceeds
from the Equity Line have been and will continue to be used for general
corporate purposes, including research and development, marketing, sales and
clinical and regulatory activities. The share of common stock issued to the
Investor under the Equity Line were offered for sale, and were sold, without
registration thereof under the Securities Act of 1933, pursuant to the exemption
from registration provided by Section 4 (2) under such Act.
On January 23, 1998, the Company adopted a standard Shareholder Rights Plan (the
"Plan"). Pursuant to the Plan, one Right was distributed as a dividend on each
outstanding share of the Company's common stock. Pursuant to the Plan, if a
party makes a tender offer to acquire 15% or more of the Company's common stock,
each Right will entitle shareholders, other than the acquiring party, to buy
one-hundredth of a share of a new series of junior participating preferred
stock, which is equivalent to one share of common stock. The exercise price is
$37 per Right. Should a party or group acquire 15% or more of the Company's
outstanding common stock, each Right will entitle its holder (other than such
acquiring party) to purchase, at the Right's exercise price, the Company's
common shares having a market value of twice the exercise price in lieu of
receiving preferred stock. Under those circumstances, the Board of Directors may
instead allow each Right (other than Rights owned by such acquiring party), to
be exchanged for one share of common stock. The exercising or exchanging of this
Right by Shareholders would have a substantial dilutive effect on the acquiring
party. The dividend distribution was made on February 2, 1998 to shareholders of
record on that date. The Rights will expire on January 23, 2008.
Page 16 of 18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.27 Distribution and Product Services Agreement,
dated as of March 13, 1998, between
Immunomedics, Inc. and Alternate Site
Distributors, Inc. d.b.a. Bergen Brunswig
Specialty Company (Confidentiality treatment
has been requested for certain portions of
the Agreement).
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K
during the three-month period ended March 31, 1998.
Page 17 of 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
(Registrant)
DATE: May 13, 1998 /s/ David M. Goldenberg
------------------------
David M. Goldenberg,
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
DATE: May 13, 1998 /s/ Kevin F.X. Brophy
----------------------
Kevin F.X. Brophy,
Vice President, Finance &
Administration (Principal Financial and
Accounting Officer)
Page 18 of 18