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 September 30, 1999
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 November 12, 1999, there were 39,938,021 shares of the registrant's common
stock outstanding.
Page 1 of 24
IMMUNOMEDICS, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - 3
September 30, 1999 and June 30, 1999
Condensed Consolidated Statements of Operations
and Comprehensive Loss- 4
three months ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - 5
three months ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements - 6
September 30, 1999
Item 2. Management's Discussion and Analysis of 15
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks 22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
Page 2 of 24
IMMUNOMEDICS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, June 30,
1999 1999
--------------- ---------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,937,379 $ 3,469,261
Marketable securities 5,722,026 5,952,398
Accounts receivable, net of allowance for
doubtful accounts of $45,398 and $39,398 at
September 30, 1999 and June 30, 1999, respectively 772,556 1,101,820
Inventory 802,877 818,883
Other current assets 569,121 573,420
--------------- ---------------
Total current assets 9,803,959 11,915,782
Property and equipment, net of accumulated
depreciation of $7,033,706 and $6,789,157 at
September 30, 1999 and June 30, 1999, respectively 4,597,802 4,818,139
Other long-term assets 225,000 225,000
--------------- ---------------
$ 14,626,761 $ 16,958,921
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 147,298 $ 143,757
Accounts payable 2,111,117 2,078,562
Other current liabilities 1,644,365 1,870,949
--------------- ---------------
Total current liabilities 3,902,780 4,093,268
--------------- ---------------
Long-term debt 190,349 228,470
Minority interest 182,000 182,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized 10,000,000 shares;
Series F convertible, authorized 2,000 shares;
issued and outstanding 1,250 and 1,250 shares
at September 30, 1999 and June 30, 1999, respectively
(Liquidation preference aggregating $12,906,944 and $12,781,944
at September 30, 1999 and June 30, 1999, respectively 13 13
Common stock; $.01 par value, authorized 70,000,000 shares;
issued and outstanding 37,888,090 and 37,888,090 shares
at September 30, 1999 and June 30, 1999, respectively 378,881 378,881
Capital contributed in excess of par 111,591,439 111,466,439
Accumulated deficit (101,639,637) (99,398,278)
Accumulated other comprehensive income 20,936 8,128
--------------- ---------------
Total stockholders' equity 10,351,632 12,455,183
--------------- ---------------
$ 14,626,761 $ 16,958,921
=============== ===============
See accompanying notes to condensed consolidated financial statements.
Page 3 of 24
IMMUNOMEDICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three Months Ended
September 30,
1999 1998
----------------- -------------------
Revenues:
Product sales $ 1,153,788 $ 1,667,272
Royalties and license fee 1,438 4,387
Research and development 126,792 86,622
Interest and other 105,024 85,345
----------------- -------------------
1,387,042 1,843,626
----------------- -------------------
Costs and Expenses:
Cost of goods sold 61,722 68,662
Research and development 2,055,478 2,620,799
Sales and marketing 881,215 1,575,694
General and administrative 504,986 507,074
----------------- -------------------
3,503,401 4,772,229
----------------- -------------------
Net loss (2,116,359) (2,928,603)
----------------- -------------------
Preferred stock dividends 125,000 -
----------------- -------------------
Net loss allocable to common shareholders $ (2,241,359) $ (2,928,603)
================= ===================
Comprehensive Loss:
Net loss $ (2,116,359) $ (2,928,603)
----------------- -------------------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 12,808 (59,533)
Unrealized gain on securities available for sale - 15
----------------- -------------------
Other comprehensive income (loss) 12,808 (59,518)
----------------- -------------------
Comprehensive loss $ (2,103,551) $ (2,988,121)
================= ===================
Per Share Data:
Net loss per basic and diluted common share $ (0.06) $ (0.08)
================= ===================
Weighted average number of common
shares outstanding 37,888,090 37,586,087
================= ===================
See accompanying notes to condensed consolidated financial statements.
Page 4 of 24
IMMUNOMEDICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
1999 1998
--------------------- ---------------------
Cash flows used in operating activities:
Net loss $ (2,116,359) $ (2,928,603)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 244,549 257,923
Changes in operating assets and liabilities 155,540 (422,325)
Other 12,808 (59,533)
--------------------- ---------------------
Net cash used in operating activities (1,703,462) (3,152,538)
--------------------- ---------------------
Cash flows from investing activities:
Purchases of marketable securities (5,722,026) -
Proceeds from maturities of marketable securities 5,952,398 14,860
Additions to property and equipment (24,212) (78,129)
--------------------- ---------------------
Net cash provided by (used in) investing activities 206,160 (63,269)
--------------------- ---------------------
Cash flows used in financing activities - payments of debt (34,580) -
--------------------- ---------------------
Decrease in cash and cash equivalents (1,531,882) (3,215,807)
Cash and cash equivalents at beginning of period 3,469,261 7,568,147
--------------------- ---------------------
Cash and cash equivalents at end of period $ 1,937,379 $ 4,352,340
===================== =====================
See accompanying notes to condensed consolidated financial statements.
Page 5 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Business Overview and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Immunomedics, Inc. (the "Company"), which incorporate the Company's
majority owned subsidiaries, 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, 1999 has been derived from the audited
financial statements at that date. Operating results for the
three-month period ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year
ending June 30, 2000 or any other period.
The Company has not yet achieved profitable operations and there is no
assurance that profitable operations, if achieved, could be sustained
on a continuing basis. Further, the Company's future operations are
dependent on, among other things, the success of the Company's
commercialization efforts and market acceptance of the Company's
products.
Since its inception in 1982, the Company's source of funds has been
primarily dependent on private and public offerings of equity
securities, revenues from research and development alliances, and
product sales. The Company believes that its existing working capital
should be sufficient to meet its capital and liquidity requirements
through fiscal 2000 based on reduced spending levels, if necessary.
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, 1999.
(2) Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of three months or less, at the time of purchase, to be cash
equivalents. Included in other current assets at September 30, 1999 and
June 30, 1999 is accrued interest earned on cash equivalents and
marketable securities of $39,100 and $38,600, 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 2000;
therefore, no income taxes have been reflected for the three-month
period ended September 30, 1999.
Page 6 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(4) Net Loss Per Share
Basic and diluted net loss allocable to common shareholders is based on
the net loss for the relevant period, adjusted for Preferred Stock
dividends of $125,000 related to a 4% per annum stated value increase
in security (see Note 7), divided by the weighted average number of
shares issued and outstanding during the period. For the purposes of
the diluted loss per share calculations, the exercise or conversion of
all potential common shares is not included because their effect would
have been anti-dilutive, due to the net loss recorded for the period
ended September 30, 1999 and 1998. The Company has certain securities
outstanding at September 30, 1999 that could potentially dilute basic
earnings per share in the future that were not included in the
computation of diluted earnings per share because to do so would have
been anti-dilutive for the periods presented.
(5) Comprehensive Income
Comprehensive income consists of net income (loss) and net unrealized
gains (losses) on securities and certain foreign exchange changes and
is presented in the consolidated statements of operations and
comprehensive loss.
(6) Inventory
Inventory is stated at the lower of average cost (which approximates
first-in, first-out) or market, and includes materials, labor and
manufacturing overhead.
(7) 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 could have received up to an aggregate of
$30,000,000 over a 36-month period. The Company terminated the Equity
Line as of December 9, 1998. As of the termination date, the Company
had received a total of $5,350,000 for which the Company issued
1,358,838 shares of common stock. In connection with the Equity Line,
the Company issued to the Investor a four-year warrant to purchase
50,000 shares of the common stock at an exercise price of $7.5375 per
share (180% of closing sales price of common stock at the time of
issuance). In addition, the Company is required to issue to the
Investor an additional four-year warrant to purchase 54,000 shares of
common stock (representing 5,000 shares for each $500,000 of common
stock purchased by the Investor under the Equity Line during calendar
1998). The exercise price of such additional warrant is $7.087 per
share (180% of the weighted average purchase price of the common stock
purchased by the Investor during the year).
On December 9, 1998, the Company completed a private placement of 1,250
shares of Series F Convertible Preferred Stock (the "Series F Stock")
to several investors and
Page 7 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
received net proceeds of $12,349,800. Each share of Series F Stock has
an initial stated value of $10,000, which increases at the rate of 4%
per annum. The increase in stated value of the Series F Stock totaled
$406,944 at September 30, 1999. The Series F Stock became convertible
at the option of the investors, in whole or in part, on June 8, 1999.
The number of shares of common stock issuable upon conversion of each
share of Series F Stock will be determined by dividing the stated value
of $10,000 plus an accretion of 4% per annum, by the conversion price
then in effect. In accordance with the terms of the Series F Preferred
Stock, the Company was required to recognize an assumed incremental
yield of $127,500 (calculated at the date of issuance and based on a
beneficial conversion feature). Such amount was amortized as a
preferred stock dividend over a six month period beginning with the
date of issuance.
The conversion price is equal to:
(a) the Variable Price, if the Variable Price is less than $2.50;
except that prior to December 9, 1999, subject to acceleration
in certain instances, if the Variable Price is greater than
$1.80 and less than $2.50, the conversion price will equal
$2.50; or
(b) $2.50, if the Variable Price is equal to or greater than the
$2.50 and less than $3.75; or
(c) $2.50 plus one-half of the amount, if any, by which the
Variable Price exceeds $3.75, if the Variable Price is greater
than $3.75.
The $2.50 conversion price was set based on 125% of the "Initial Fixed
Price" of $2.00, which was the average closing bid price of the Common
Stock during the 20 trading days ended June 6, 1999. The "Variable
Price" is equal to the average of the 15 lowest closing bid prices for
the Common Stock during the 45 trading days immediately preceding a
conversion date.
Under certain circumstances and at certain prices, the Company may
elect to redeem any shares of Series F Stock. Under certain
circumstances, the Company may require the investors to convert their
Series F Stock. The Company has granted the investors certain
participation rights if the Company issues any future floating rate
convertible securities. The holders of the Series F Stock generally do
not have the right to vote for the election of directors or on other
matters, except to the extent their rights would be adversely affected.
Upon the occurrence of certain events, the Company may be required to
redeem the Series F Stock, pay certain penalties and/or adjust the
conversion price. These events include the following:
(a) If the Company consolidates, merges or otherwise combines with
another entity and as a result the stockholders of the Company
immediately prior to the transaction do not retain sufficient voting
power to elect a majority of the board of directors of the new or
Page 8 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
combined entity, then the holders of the Series F Stock may require the
Company to redeem their shares at a price per share equal to the
greater of (1) 125% of the stated value of $10,000 per share plus the
accretion of 4% per annum, and (2) the value of the Common Stock that
would be issuable upon conversion of the Series F Stock. However, if
the consolidation, merger or other business combination occurs as a
result of a proxy solicitation which was not approved or recommended by
the Company's Board of Directors, then, if the holders exercise their
redemption rights, the Company may, in lieu of redemption, (y) readjust
the Initial Fixed Price to 80% of the lower of (A) the lowest Variable
Price during the period beginning on the date the solicitation is
announced and ending on the date the solicitation is consummated,
abandoned or terminated or (B) the Initial Fixed Price then in effect,
and (z) pay a penalty of 1% per day of the stated value of $10,000 per
share plus the accretion of 4% per annum for a maximum of 10 days in
any 365-day period.
(b) If at least a specified percentage of the holders of the Common
Stock accept a purchase, tender or exchange offer, then the holders of
the Series F Stock may require the Company to redeem their shares at a
price per share equal to the greater of (1) 125% of the stated value of
$10,000 per share plus the accretion of 4% per annum, and (2) the value
of the Common Stock that would be issuable upon conversion of the
Series F Stock. However, if the purchase, tender or exchange offer was
not approved or recommended by the Company's Board of Directors; then,
if the holders exercise their redemption rights, the Company may, in
lieu of redemption, (y) readjust the Initial Fixed Price to 80% of the
lower of (A) the lowest Variable Price during the period beginning on
the date such offer is announced and ending on the date such offer is
consummated, abandoned or terminated or (B) the Initial Fixed Price
then in effect, and (z) pay a penalty of 1% per day of the stated value
of $10,000 per share plus the accretion of 4% per annum for a maximum
of 10 days in any 365-day period.
(c) If the Company completes a sale of all or substantially all of its
assets, then the holders of the Series F Stock may require the Company
to redeem their shares at a price per share equal to the greater of (1)
125% of the stated value of $10,000 per share plus the accretion of 4%
per annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock.
(d) If the registration statement under the Securities Act of 1933
covering the resale by the investors of the Common Stock issuable upon
conversion of the Series F Stock ceases to be available to the
investors for the resale of their shares for more than 10 consecutive
days, then the holders of the Series F Stock may require the Company to
redeem their shares at a price per share equal to the greater of (1)
125% of the stated value of $10,000 per share plus the accretion of 4%
per annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock. However, if the unavailability
of the registration statement is not the result of the Company's
failure to use its best efforts, then, if the holders exercise their
redemption rights, the Company may, in lieu of redemption, (y) pay a
penalty of 1% per day of the stated value of $10,000 per
Page 9 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
share plus the accretion of 4% per annum for a maximum of 15 days in
any 365-day period, and (z) readjust the Initial Fixed Price to 80% of
the lowest Variable Price during the period commencing on the day the
registration statement became unavailable and ending on the day the
registration statement is again available for use.
(e) If the Common Stock is delisted or suspended from the Nasdaq
National Market for a period of more than five consecutive days, then
the holders of the Series F Stock may require the Company to redeem
their shares at a price per share equal to the greater of (1) 125% of
the stated value of $10,000 per share plus the accretion of 4% per
annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock. However, if the Common Stock is
delisted from the Nasdaq National Market then, if the holders exercise
their redemption rights, the Company may, in lieu of redemption, (y)
readjust the Initial Fixed Price to 68.5% of the lowest Variable Price
during the period commencing on the date of delisting and continuing
for 45 days thereafter, or (z) pay a penalty of 1% per day of the
stated value of $10,000 per share plus the accretion of 4% per annum
for a maximum of 15 days in any 365-day period.
In certain cases, if the events described above occur more than once in
any 365-day period, there will be a further downward adjustment of the
Initial Fixed Price.
Pursuant to its agreement with the investors, the Company called a
Special Meeting of Stockholders on March 19, 1999, at which meeting
stockholders approved the issuance of any shares of common stock upon
conversion of the Series F Stock in excess of 20% of the number of
shares of common stock the Company had outstanding on December 9, 1998
(i.e., 7,577,617) in accordance with the rules and regulations of The
Nasdaq Stock Market, Inc.
Each investor has agreed that if it engages in short sales transactions
or other hedging activities during the 45 trading days immediately
preceding a conversion date which involve, among other things, sales of
shares of the Common Stock, the investor will place its sale orders for
common stock in the course of such activities so as not to complete or
effect any such sale on any trading day during such period at a price
which is lower than the lowest sale effected on such day by persons
other than such investor or its affiliates.
Because the market price of the Common Stock is subject to fluctuation,
the Company agreed, pursuant to the terms of a registration rights
agreement, to register for resale by the investors at least 200% of the
number of shares of common stock that would be issuable if all the
Series F Stock were converted as of the date of the filing of the
registration statement and, thereafter, maintain the registration of at
least 150% of the number of shares of common stock that would be
issuable if all the Series F Stock were then converted. Accordingly,
when the Company originally filed its registration statement in
December 1998, the prospectus covered 10,000,000 shares of common
stock, which was the Company's good faith estimate of this obligation
at that time. As the registration shares
Page 10 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
issuable upon conversion of the Series F Stock, the investors, in
addition to any other remedies, claimed they had the right to require
the Company to redeem all or any portion of the remaining outstanding
shares of Series F Stock (at a price equal to the greater of 125% of
the stated value of $10,000 per share plus the accretion of 4% per
annum and the value of the Common Stock which would have been issued
upon conversion) as well as pay to them a penalty of $5 per share of
Series F Stock with respect to each day that the registration statement
was insufficient.
The Company has received a waiver, dated October 11, 1999, from the
holders of the Series F Stock with respect to the rights discussed
above either to require redemption or to receive penalties, conditioned
upon the Company's (a) filing a registration statement, on or before
November 11, 1999, covering at least 200% of the number of shares of
common stock that would be issuable if all the Series F Stock were
converted as of the date of the filing of the registration statement
and (b) having such registration statement declared effective on or
before December 11, 1999. The Company filed such registration statement
on November 9, 1999, covering an additional 9,878,463 shares of Common
Stock. However, if failure of the registration statement to be
declared effective by December 11, 1999 is not the result of the
Company's failure to use its best efforts, then, if the holders
exercise their redemption rights, the Company may, in lieu of
redemption, (y) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of
15 days in any 365-day period, and (z) readjust the Initial Fixed Price
to 80% of the lowest Variable Price during the period commencing on the
day the registration statement became unavailable for sale of all the
shares and ending on the day the registration statement is again
available for use for sale of all the shares. In addition,
notwithstanding whether or not the Company has used its best efforts,
if the registration statement is not declared effective by December 11,
1999, the investors also will be entitled to the $5 per day penalty
(discussed above) accruing from the first day that the Company was in
breach of such registration obligation, which penalties would be
significant. The Company intends to use its best efforts to have the
registration statement declared effective on or before December 11,
1999. Even though the Company filed the registration statement on
November 9, 1999, there can be no assurance that it will be declared
effective by December 11, 1999; the timing of such declaration of
effectiveness is, for the most part, within the discretion of the SEC.
In addition, until the registration statement is declared effective,
the Company will be unable to exercise certain of its rights with
respect to the Series F Stock and assuming that the Company had
otherwise satisfied the other conditions to the exercise of these
rights, including (a) the right, upon 20 days advanced notice, to
redeem all of the outstanding shares of Series F Stock at a 20%
annualized premium, and (b) the right, upon three days advanced notice,
to require the investors to convert their Series F Stock if the closing
bid price of the Company's common stock has exceeded $5.00 for a
specified period of time. The Company will lose these rights altogether
if the Company fails to have the registration statement declared
effective by December 11, 1999. The Company continues to have the
right, upon five days advanced notice, to redeem any or all shares of
Series F Stock presented for conversion at a conversion price of less
than $1.80 at a redemption price equal to 105% of the stated value of
$10,000 per share plus the accretion of 4% per annum.
Page 11 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
While the registration statement filed on November 9, 1999 covers an
additional 9,878,463 shares of the Company's Common Stock in addition
to the 7,950,069 shares of Common Stock included in the Company's prior
prospectus, the Company would not be required to issue any shares which
are the subject of this additional registration statement unless the
Variable Price at the time of conversion on average is below $1.33
(increased over time due to the 4% accretion to the stated value).
The Company also plans to continue its separate discussions with each
of the investors concerning a possible restructuring of certain other
terms of the Series F Stock. However, the Company cannot assure that
any restructuring can be accomplished upon terms the Company finds
acceptable, if at all.
If the Company were required to redeem the Series F Stock or make any
of the penalty payments, it may not have the financial ability to make
such payments. Even if the Company did have the financial ability to
redeem the Series F Stock or pay the required penalties, such payment
could significantly and adversely affect its financial condition and
deplete its cash resources.
As of November 12, 1999, 232.5 shares of the Series F Stock had been
converted into 2,049,931 shares of Common Stock. If all the remaining
outstanding shares of Series F Stock had been converted as of November
12, 1999, the Company would have been required to issue approximately
8,750,000 additional shares of Common Stock.
(8) 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 will
package and distribute LeukoScan 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 pays Lilly a service fee based primarily on
the number of units of product packaged and shipped. The parties
contemplate that other future Company products may be handled under
this arrangement when appropriate.
Effective as of April 6, 1998, the Company appointed a subsidiary of
Bergen Brunswig Specialty Corporation as a non-exclusive distributor of
CEA-Scan in the U.S. Such subsidiary (currently Integrated
Commercialization Solutions, Inc. ("ICS")) serves as an agent of the
Company in providing product support services, including customer
service, order management, distribution, invoicing and collection.
On December 21, 1998, the Company received $300,000 in final settlement
of all claims between the Company and Mallinckrodt, Inc. and its
affiliate under the prior distribution agreements, which were
terminated in April 1998. This amount was recognized as other revenue
in fiscal year 1999.
Page 12 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The Company, through its 80% owned subsidiary, IMG Technology, LLC
("IMG"), has formed a joint venture with Coulter Corporation
("Coulter") for the purpose of developing targeted cancer therapeutics.
The joint venture, known as IBC Pharmaceuticals, LLC ("IBC"), has been
organized as a Delaware limited liability company. On March 5, 1999 the
Company contributed to IBC, on behalf of IMG , certain rights to its
proprietary humanized antibodies against the cancer marker
carcinoembryonic antigen (which had a financial reporting carrying
value of zero), which is used in its CEA-Cide therapeutic, and Coulter
contributed to IBC certain rights to its bispecific targeting
technology called the "Affinity Enhancement System" or AES. The Company
assigned its rights pursuant to the terms of a license agreement with
IBC dated March 5, 1999 in exchange for the grant to IMG of its
interest in IBC ("Immunomedics License Agreement"). Coulter received
its interest in IBC in exchange for its contribution. The license
granted to IBC is a worldwide, royalty free, exclusive license which is
limited to the "IBC Field" with respect to the "Immunomedics Patent
Property" and the "Immunomedics Biotechnology Assets," as those terms
are defined in the Immunomedics License Agreement. Additionally on
March 5, 1999, several investors contributed $3,000,000 to IBC in
exchange for a 7% interest in the venture. IMG's and Coulter's
interests in IBC are 49.55% and 43.45% respectively. Coulter, IMG and
the investors entered into an operating agreement (the "IBC Operating
Agreement") which establishes the rights and obligations of the
respective members. Under the terms of the IBC Operating Agreement,
neither IMG nor Coulter may sell any portion of its interest in IBC
without first providing the other with a right of first refusal with
respect to such sale, provided that after a public offering of IBC
securities, IMG and Coulter will be permitted to sell up to 20% of
their respective interests in IBC free of such right of first refusal.
IMG is a Delaware limited liability company owned 80% by the Company
and 20% by Dr. David Goldenberg, the Chairman of the Board and Chief
Executive Officer of the Company. Dr. Goldenberg received his interest
pursuant to the terms of his employment agreement with the Company. IMG
is intended to be a single purpose entity, its sole asset being its
interest in IBC. Dr. Goldenberg and IMG have entered into an operating
agreement (the "IMG Operating Agreement") which establishes their
relative rights and obligations. In connection with Dr. Goldenberg's
receipt of an interest in IMG, the Company recognized $182,000 of
compensation expense, based on the fair value of technology
transferred, and has reflected his interest as a minority interest on
the consolidated financial statements as of June 30, 1999. Dr.
Goldenberg also serves as Chairman of the Board of IBC.
(9) Debt
On October 28, 1998, the Company entered into an Equipment Financing
Agreement with the New England Capital Corporation, pursuant to which
the Company has received $450,000, at the interest rate of 9.52% per
annum, to be repaid over a 36-month period. The proceeds of such
financing were used to exercise the early purchase options for
equipment previously leased through a master lease agreement. The
financing is secured by various equipment and an irrevocable letter of
credit in the amount of $225,000. The letter of credit is
collateralized by a cash deposit of an equivalent amount which is
included in "Other long- term assets" on the accompanying condensed
consolidated balance sheet. At
Page 13 of 24
IMMUNOMEDICS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
September 30, 1999, the Company's indebtedness under this agreement
was $337,647. The Company paid $8,587 for the three months ended
September 30, 1999, in interest under this agreement.
(10) Geographic Segment
The Company manages its operations as one line of business of
researching, developing, manufacturing and marketing biopharmaceutical
products, particularly antibody-based diagnostics and therapeutics for
cancer and infectious diseases, and it currently reports as a single
industry segment. The Company markets and sells its products in the
U.S. and throughout Europe.
The following table presents financial information based on the
geographic location of the facilities of Immunomedics, Inc. as of and
for the three-month periods ended September 30, 1999 and 1998:
September 30, 1999
--------------------
United States Europe Total
------------- ------------- -------------
Revenues $ 707,541 $ 679,501 $ 1,387,042
Net income (loss) (2,282,689) 166,330 (2,116,359)
September 30, 1998
--------------------
United States Europe Total
------------- ------------- -------------
Revenues $ 1,148,124 $ 695,502 $ 1,843,626
Net income (loss) (3,079,599) 150,996 (2,928,603)
Page 14 of 24
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. Such forward-looking statements are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual results could differ materially from the results
anticipated in these forward-looking statements as a result of a variety of
factors, including (i) the risks described in Exhibit 99 to this Form 10-Q, (ii)
the risks described under the caption "Business-Business Risks in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 (the "1999
10-K"), (iii) the risks described elsewhere under the caption "Business" in the
1999 10-K and (iv) the risks described elsewhere in the 1999 10-K. The Company
assumes no obligation to update its forward-looking statements.
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. The Company has incurred significant operating losses since its
formation in 1982 and has not earned a profit since its inception. These
operating losses and failure to be profitable have been due mainly to the
significant amount of money that the Company has had to spend on research and
development. As of September 30, 1999, the Company had an accumulated deficit of
approximately $101,640,000. The Company expects to continue to experience
operating losses until such time, if at all, that it is able to generate
sufficient revenues from sales of CEA-Scan(R), LeukoScan(R) and its other
potential products.
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 this 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 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. 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. As part of the review
process, the Company is in discussions with the FDA to address the FDA's
comments regarding the adequacy of the Company's data to support final approval
for these indications. The Company believes that it can bring these discussions
with the FDA to successful and timely closure, although no assurances can be
given that the Company will receive approval from the FDA to market and sell
LeukoScan in the United States in a timely manner, if at all. In the meantime,
the Company is continuing to implement its plans for market introduction, and is
Page 15 of 24
working diligently on preparations to bring this new product to the U.S.
marketplace.
CEA-Scan and LeukoScan are the only products which the Company is currently
licensed to market and sell. To date, the Company has received only limited
revenues from the sale of these products. There can be no assurance that these
products will achieve market acceptance or generate significant sales. Unless
the Company receives substantial revenues from these products, future revenues
will be dependent in large part upon its receiving payments from corporate
partners under licensing and research agreements or from government grants. The
Company is now engaged in such negotiations. However, there can be no assurance
that the Company will receive such payments in a timely manner, or at all.
The Company is also engaged in developing other biopharmaceutical products,
which are in various stages of development and clinical testing.
Results of Operations
Revenues for the three-month period ended September 30, 1999 were $1,387,000 as
compared to $1,844,000 for the same period in 1998, representing a decrease of
$457,000. Product sales for the three-month period ended September 30, 1999
decreased by $513,000 as compared to the same period of 1998, mainly due to the
reorganization of the U.S. and European sales forces which occurred in April
1999. Research and development revenue for the three-month period ended
September 30, 1999 increased by $40,000 as compared to same period of 1998,
primarily due to the higher grant revenue. Interest and other income for the
three-month period ended September 30, 1999 increased by $20,000, as compared to
the same period of 1998, primarily due to more cash available for investments as
a result of the Company's Series F Preferred Stock financing.
Total operating expenses for the three-month period ended September 30, 1999
were $3,503,000 as compared to $4,772,000 for the same period in 1998,
representing a decrease of $1,269,000. Research and development costs for the
three-month period ended September 30, 1999 decreased by $565,000 as compared to
the same period in 1998, primarily due to the reduced patient enrollment in
clinical trials and continued decrease in the level of expenditures required to
obtain validation of the Company's manufacturing facility and due to the
Company's restructuring in fiscal 1999. Sales and marketing expenses for the
three-month period ended September 30, 1999 decreased by $694,000, primarily due
to Company-wide reorganization/restructuring. General and administrative costs
for the three-month periods ended September 30, 1999 and 1998 are essentially
the same.
Net loss allocable to common shareholders for the three-month period ended
September 30, 1999 was $2,241,000, or $0.06 per share, as compared to a loss of
$2,929,000, or $0.08 per share, for the same period in 1998. The lower net loss
in 1999 as compared to 1998 primarily resulted from reduced expenses partially
offset by lower revenues and dividends relating to the Series F Preferred Stock.
In addition, the net loss per share for the three-month period ended September
30, 1999 was positively impacted by the higher weighted average number of common
shares outstanding for this period, as compared to the same period in 1998. The
increase in the weighted average number of common shares outstanding was
primarily due to prior year equity financings (see Note 7 to Unaudited Condensed
Consolidated Financial Statements).
Page 16 of 24
Liquidity and Capital Resources
At September 30, 1999, the Company had working capital of $5,901,000, which
represents a decrease of $1,921,000 from June 30, 1999. The decrease in working
capital resulted primarily due to the funding of operating expenses.
On October 28, 1998, the Company entered into an Equipment Financing Agreement
with the New England Capital Corporation, pursuant to which the Company has
received $450,000, to be repaid over a 36-month period. The proceeds of such
financing were used to exercise the early purchase options for the equipment
previously leased through a master lease agreement. The financing is secured by
various used equipment and an irrevocable letter of credit in the amount of
$225,000. The letter of credit is collateralized by a cash deposit of an
equivalent amount (see Note 9 to Unaudited Condensed Consolidated Financial
Statements).
The Company's liquid asset position, measured by its cash, cash equivalents and
marketable securities, was $7,659,000 at September 30, 1999, representing a
decrease of $1,763,000 from June 30, 1999. This decrease was primarily
attributable to the funding of operating expenses as discussed above. It is
anticipated that working capital and cash, cash equivalents and marketable
securities will decrease during the remainder of fiscal year 2000 as a result of
planned operating expenses and capital expenditures, offset in part by projected
revenues from product sales in the U. S. and Europe. However, there can be no
assurance, as to the amount of revenues, if any, these products will provide. In
April 1999, the Company implemented a cost reduction program which the Company
anticipates will produce cost savings of approximately $3.5 million during the
12 months ending March 31, 2000. Primarily due to the restructuring, the Company
has recognized savings during the six months ended September 30, 1999 of
approximately $1,600,000.
To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital should be sufficient to meet
its capital and liquidity requirements through fiscal year 2000 based on reduced
spending levels, if necessary. However, the Company's working capital and
working capital requirements are affected by numerous factors and there is no
assurance that such factors will not have a negative impact on the Company's
liquidity. Principal among these are the success of its product
commercialization and selling products, the technological advantages and pricing
of the Company's products, and access to capital markets that can provide the
Company with the resources when necessary to fund its strategic priorities.
Without a significant increase in product revenues or other infusion of capital,
the Company will be required to significantly reduce its operating expenses,
including the amount of resources devoted to marketing and sales, product
development and clinical trials, which could have a significant and adverse
effect on the Company. The Company believes that it will require additional
financial resources by the beginning of fiscal year 2001 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. There can be no assurance that any additional financing will be
available to the Company at all or on terms it finds acceptable or that the
terms of any equity financing will not cause substantial dilution to existing
stockholders.
The Company will seek to supplement its financial resources from time to time as
market conditions permit through additional financing and/or through
collaborative marketing and distribution agreements. 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 Liquidity and
Page 17 of 24
Capital Resources (Continued)
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.
On December 9, 1998, the Company completed a private placement of 1,250 shares
of Series F Convertible Preferred Stock (the "Series F Stock") to several
investors and received net proceeds of $12,349,800. Each share of Series F Stock
has an initial stated value of $10,000, which increases at the rate of 4% per
annum. The increase in stated value of the Series F Stock totaled $406,944 at
September 30, 1999. The Series F Stock became convertible at the option of the
investors, in whole or in part, on June 8, 1999. The number of shares of common
stock issuable upon conversion of each share of Series F Stock will be
determined by dividing the stated value of $10,000 plus an accretion of 4% per
annum, by the conversion price then in effect. In accordance with the terms of
the Series F Preferred Stock, the Company was required to recognize an assumed
incremental yield of $127,500 (calculated at the date of issuance and based on a
beneficial conversion feature). Such amount was amortized as a preferred stock
dividend over a six month period beginning with the date of issuance.
The conversion price is equal to:
(a) the Variable Price, if the Variable Price is less than of
$2.50; except that prior to December 9, 1999, subject to
acceleration in certain instances, if the Variable Price is
greater than $1.80 and less than $2.50, the conversion price
will equal $2.50; or
(b) $2.50, if the Variable Price is equal to or greater than $2.50
and less than $3.75; or
(c) $2.50 plus one-half of the amount, if any, by which the
Variable Price exceeds $3.75, if the Variable Price is greater
than $3.75.
The $2.50 conversion price was set based on 125% of the "Initial Fixed Price" of
$2.00, which was the average closing bid price of the Common Stock during the 20
trading days ended June 6, 1999. The "Variable Price" will be equal to the
average of the 15 lowest closing bid prices for the Common Stock during the 45
trading days immediately preceding a conversion date.
Under certain circumstances and at certain prices, the Company may elect to
redeem any shares of Series F Stock. Under certain circumstances, the Company
may require the investors to convert their Series F Stock. The Company has
granted the investors certain participation rights if the Company issues any
future floating rate convertible securities. The holders of the Series F Stock
generally do not have the right to vote for the election of directors or on
other matters, except to the extent their rights would be adversely affected.
Upon the occurrence of certain events, the Company may be required to redeem the
Series F Stock, pay certain penalties and/or adjust the conversion price. These
events include the following:
(a) If the Company consolidates, merges or otherwise combines with another
entity and as a result the stockholders of the Company immediately
prior to the transaction do not retain sufficient voting power to
elect a majority of the board of directors of the new or combined
entity, then the holders of the Series F Stock may require the Company
to redeem their
Page 18 of 24
Liquidity and Capital Resources (Continued)
shares at a price per share equal to the greater of (1) 125% of the
stated value of $10,000 per share plus the accretion of 4% per annum,
and (2) the value of the Common Stock that would be issuable upon
conversion of the Series F Stock. However, if the consolidation, merger
or other business combination occurs as a result of a proxy
solicitation which was not approved or recommended by the Company's
Board of Directors, then, if the holders exercise their redemption
rights, the Company may, in lieu of redemption, (y) readjust the
Initial Fixed Price to 80% of the lower of (A) the lowest Variable
Price during the period beginning on the date the solicitation is
announced and ending on the date the solicitation is consummated,
abandoned or terminated or (B) the Initial Fixed Price then in effect,
and (z) pay a penalty of 1% per day of the stated value of $10,000 per
share plus the accretion of 4% per annum for a maximum of 10 days in
any 365-day period.
(b) If at least a specified percentage of the holders of the Common
Stock accept a purchase, tender or exchange offer, then the holders of
the Series F Stock may require the Company to redeem their shares at a
price per share equal to the greater of (1) 125% of the stated value of
$10,000 per share plus the accretion of 4% per annum, and (2) the value
of the Common Stock that would be issuable upon conversion of the
Series F Stock. However, if the purchase, tender or exchange offer was
not approved or recommended by the Company's Board of Directors; then,
if the holders exercise their redemption rights, the Company may, in
lieu of redemption, (y) readjust the Initial Fixed Price to 80% of the
lower of (A) the lowest Variable Price during the period beginning on
the date such offer is announced and ending on the date such offer is
consummated, abandoned or terminated or (B) the Initial Fixed Price
then in effect, and (z) pay a penalty of 1% per day of the stated value
of $10,000 per share plus the accretion of 4% per annum for a maximum
of 10 days in any 365-day period.
(c) If the Company completes a sale of all or substantially all of its
assets, then the holders of the Series F Stock may require the Company
to redeem their shares at a price per share equal to the greater of (1)
125% of the stated value of $10,000 per share plus the accretion of 4%
per annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock.
(d) If the registration statement under the Securities Act of 1933
covering the resale by the investors of the Common Stock issuable upon
conversion of the Series F Stock ceases to be available to the
investors for the resale of their shares for more than 10 consecutive
days, then the holders of the Series F Stock may require the Company to
redeem their shares at a price per share equal to the greater of (1)
125% of the stated value of $10,000 per share plus the accretion of 4%
per annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock. However, if the unavailability
of the registration statement is not the result of the Company's
failure to use its best efforts, then, if the holders exercise their
redemption rights, the Company may, in lieu of redemption, (y) pay a
penalty of 1% per day of the stated value of $10,000 per share plus the
accretion of 4% per annum for a maximum of 15 days in any 365-day
period, and (z) readjust the Initial Fixed Price to 80% of the lowest
Variable Price during the period commencing on the day the registration
statement became unavailable and ending on the day the registration
statement is again available for use.
Page 19 of 24
Liquidity and Capital Resources (Continued)
(e) If the Common Stock is delisted or suspended from the Nasdaq
National Market for a period of more than five consecutive days, then
the holders of the Series F Stock may require the Company to redeem
their shares at a price per share equal to the greater of (1) 125% of
the stated value of $10,000 per share plus the accretion of 4% per
annum, and (2) the value of the Common Stock that would be issuable
upon conversion of the Series F Stock. However, if the Common Stock is
delisted from the Nasdaq National Market then, if the holders exercise
their redemption rights, the Company may, in lieu of redemption, (y)
readjust the Initial Fixed Price to 68.5% of the lowest Variable Price
during the period commencing on the date of delisting and continuing
for 45 days thereafter, or (z) pay a penalty of 1% per day of the
stated value of $10,000 per share plus the accretion of 4% per annum
for a maximum of 15 days in any 365-day period.
In certain cases, if the events described above occur more than once in any
365-day period, there will be a further downward adjustment of the Initial Fixed
Price.
Pursuant to its agreement with the investors, the Company called a Special
Meeting of Stockholders on March 19, 1999, at which meeting stockholders
approved the issuance of any shares of common stock upon conversion of the
Series F Stock in excess of 20% of the number of shares of common stock the
Company had outstanding on December 9, 1998 (i.e., 7,577,617) in accordance with
the rules and regulations of The Nasdaq Stock Market, Inc.
Each investor has agreed that if it engages in short sales transactions or other
hedging activities during the 45 trading days immediately preceding a conversion
date which involve, among other things, sales of shares of the Common Stock, the
investor will place its sale orders for common stock in the course of such
activities so as not to complete or effect any such sale on any trading day
during such period at a price which is lower than the lowest sale effected on
such day by persons other than such investor or its affiliates.
Because the market price of the Common Stock is subject to fluctuation, the
Company agreed, pursuant to the terms of a registration rights agreement, to
register for resale by the investors at least 200% of the number of shares of
common stock that would be issuable if all the Series F Stock were converted as
of the date of the filing of the registration statement and, thereafter,
maintain the registration of at least 150% of the number of shares of common
stock that would be issuable if all the Series F Stock were then converted.
Accordingly, when the Company originally filed its registration statement in
December 1998, the prospectus covered 10,000,000 shares of common stock, which
was the Company's good faith estimate of this obligation at that time. As the
registration statement became insufficient to permit the resale by the investors
of all the common shares issuable upon conversion of the Series F Stock, the
investors, in addition to any other remedies, claimed they had the right to
require the Company to redeem all or any portion of the remaining outstanding
shares of Series F Stock (at a price equal to the greater of 125% of the stated
value of $10,000 per share plus the accretion of 4% per annum and the value of
the Common Stock which would have been issued upon conversion) as well as pay to
them a penalty of $5 per share of Series F Stock with respect to each day that
the registration statement was insufficient.
The Company has received a waiver, dated October 11, 1999, from the holders of
the Series F Stock with respect to the rights discussed above either to require
redemption or to receive Penalties, conditioned upon the Company's (a) filing a
registration statement, on or before November 11, 1999, covering at least 200%
of the number of shares of common stock that would be issuable if all the Series
F Stock were converted as of the date of the filing of the registration
statement and (b) having such registration statement declared effective on or
before December 11, 1999. The Company filed such registration statement on
November 9, 1999, covering an additional 9,878,463 shares of Common Stock.
Page 20 of 24
Liquidity and Capital Resources (Continued)
However, if failure of the registration statement to be declared effective by
December 11, 1999 is not the result of the Company's failure to use its best
efforts, then, if the holders exercise their redemption rights, the Company may,
in lieu of redemption, (y) pay a penalty of 1% per day of the stated value of
$10,000 per share plus the accretion of 4% per annum for a maximum of 15 days in
any 365-day period, and (z) readjust the Initial Fixed Price to 80% of the
lowest Variable Price during the period commencing on the day the registration
statement became unavailable for sale of all the shares and ending on the day
the registration statement is again available for use for sale of all the
shares. In addition, notwithstanding whether or not the Company has used its
best efforts, if the registration statement is declared effective by December
11, 1999, the investors also will be entitled to the $5 per day penalty
(discussed above) accruing from the first day that the Company was in breach of
such registration obligation, which penalties would be significant. The Company
intends to use its best efforts to have the registration statement declared
effective on or before December 11, 1999. Even though the Company filed the
registration statement on November 9, 1999, there can be no assurance that it
will be declared effective by December 11, 1999; the timing of such declaration
of effectiveness is, for the most part, within the discretion of the SEC.
In addition, until the registration statement is declared effective, the Company
will be unable to exercise certain of its rights with respect to the Series F
Stock and assuming that the Company had otherwise satisfied the other conditions
to the exercise of these rights, including (a) the right, upon 20 days advanced
notice, to redeem all of the outstanding shares of Series F Stock at a 20%
annualized premium, and (b) the right, upon three days advanced notice, to
require the investors to convert their Series F Stock if the closing bid price
of the Company's common stock has exceeded $5.00 for a specified period of time.
The Company will lose these rights altogether if the Company fails to have the
registration statement declared effective by December 11, 1999. The Company
continues to have the right, upon five days advanced notice, to redeem any or
all shares of Series F Stock presented for conversion at a conversion price of
less than $1.80 at a redemption price equal to 105% of the stated value of
$10,000 per share plus the accretion of 4% per annum.
While the registration statement filed on November 9, 1999, covers an additional
9,878,463 shares of the Company's Common Stock in addition to the 7,950,069
shares of Common Stock included in the Company's prior prospectus, the Company
would not be required to issue any shares which are the subject of this
additional registration statement unless the Variable Price at the time of
conversion on average is below $1.33 (increased over time due to the 4%
accretion to the stated value).
The Company also plans to continue its separate discussions with each of the
investors concerning a possible restructuring of certain other terms of the
Series F Stock. However, the Company cannot assure that any restructuring can be
accomplished upon terms the Company finds acceptable, if at all.
If the Company were required to redeem the Series F Stock or make any of the
penalty payments, it may not have the financial ability to make such payments.
Even if the Company did have the financial ability to redeem the Series F Stock
or pay the required penalties, such payment could significantly and adversely
affect its financial condition and deplete its cash resources.
As of November 12, 1999, 232.5 shares of the Series F Stock had been converted
into 2,049,931
Page 21 of 24
Liquidity and Capital Resources (Continued)
shares of Common Stock. If all the remaining outstanding shares of Series F
Stock had been converted as of November 12, 1999, the Company would have been
required to issue approximately 8,750,000 additional shares of Common Stock.
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 could have received up to an aggregate of $30,000,000 over a 36-month
period. The Company terminated the Equity Line as of December 9, 1998. As of the
termination date, the Company had received a total of $5,350,000 for which the
Company issued 1,358,838 shares of common stock.
Impact of Year 2000
The Company has completed a review of its business systems, including its
computer systems and manufacturing equipment, and has sent written inquiries to
its customers, distributors and vendors as to their progress in identifying and
addressing problems that their systems may face in correctly interpreting and
processing date information as the year 2000 approaches and is reached. Based on
this review, the Company has implemented a plan to achieve year 2000 compliance
which the Company expects to complete by early December, 1999. The Company
believes that it will achieve year 2000 compliance in a manner which will be
non-disruptive to its operations. In addition, the Company has commenced work on
various types of contingency planning to address potential problem areas with
internal systems, suppliers and other third parties which the Company expects to
complete by early December, 1999. Year 2000 compliance should not have a
material adverse effect on the Company, including the Company's financial
condition, results of operations or cash flow. The Company has incurred
approximately $210,000 of costs to date related to year 2000. The Company
estimates the additional cost of its year 2000 efforts to be approximately
$30,000 based on management's current assessment and is subject to change.
However, the Company may encounter problems with supplier and/or revenue sources
which could adversely affect the Company's financial condition, results of
operations or cash flow. The Company cannot accurately predict the occurrence
and/or outcome of any such problems, nor can the dollar amount of such problems
be estimated. In addition, there can be no assurance that the failure to ensure
year 2000 compliance by a third party would not have a material adverse effect
on the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
See Item 7A of the 1999 10-K.
Page 22 of 24
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
99 Risk Factors
(b) Reports on Form 8-K during the quarter ended September
30, 1999:
None
Page 23 of 24
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: November 15, 1999 /s/ David M. Goldenberg
--------------------------------
David M. Goldenberg
Chairman and Chief executive
Officer
(Principal Executive Officer)
DATE: November 15, 1999 /s/ Shailesh R. Asher
--------------------------------
Shailesh R. Asher
Controller and Acting Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Page 24 of 24