UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
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 0-15888
IGENE Biotechnology, Inc.
_____________________________________________________
(Exact Name of Registrant as Specified in Its Charter)
Maryland 52-1230461
______________________________ ____________________________________
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
9110 Red Branch Road, Columbia, Maryland 21045
________________________________________ _______________
(Address of principal executive offices) (Zip Code)
(410) 997-2599
______________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
______________________ __________________________________________
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $0.01 per share)
________________________________________
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [x] No
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Act.
[ ] Yes [x] No
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer, or a smaller reporting company. See definition of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check One):
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated Filer [ ] Smaller reporting Company [x]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).
[ ] Yes [x] No
State the aggregate market value of the voting and non-
voting common equity held by non-affiliates computed by reference
to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last
business day of the registrant's most recently completed year end
$3,191,027 as of March 26, 2010.
________________________________
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. As of March 26, 2010 there were 1,560,404,297 shares of
________________________________________________________
the issuer's common stock outstanding.
______________________________________
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
EXCEPT FOR HISTORICAL FACTS, ALL MATTERS DISCUSSED IN THIS
REPORT, WHICH ARE FORWARD-LOOKING, INVOLVE A HIGH DEGREE OF RISK
AND UNCERTAINTY. CERTAIN STATEMENTS IN THIS REPORT SET FORTH
MANAGEMENT'S INTENTIONS, PLANS, BELIEFS, EXPECTATIONS OR
PREDICTIONS OF THE FUTURE BASED ON CURRENT FACTS AND ANALYSES.
WHEN WE USE THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"ESTIMATE," "TARGET," "INTEND" OR SIMILAR EXPRESSIONS, WE INTEND
TO IDENTIFY FORWARD-LOOKING STATEMENTS. YOU SHOULD NOT PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK
ONLY AS OF THE DATE OF THIS REPORT. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENTS, DUE TO A
VARIETY OF FACTORS, RISKS AND UNCERTAINTIES INCLUDING, BUT NOT
LIMITED TO, COMPETITIVE PRESSURES FROM OTHER COMPANIES AND WITHIN
THE BIOTECH INDUSTRY, ECONOMIC CONDITIONS IN THE COMPANY'S
PRIMARY MARKETS, EXCHANGE RATE FLUCTUATIONS, REDUCED PRODUCT
DEMAND, INCREASED COMPETITION, INABILITY TO PRODUCE REQUIRED
CAPACITY, UNAVAILABILITY OF FINANCING, GOVERNMENT ACTION, WEATHER
CONDITIONS AND OTHER UNCERTAINTIES, INCLUDING THOSE DETAILED IN
"RISK FACTORS" THAT ARE INCLUDED FROM TIME TO TIME IN THE
COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS. IF ONE OR
MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR IF THE
UNDERLYING ASSUMPTIONS PROVE INCORRECT, OUR ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPECTED OR PROJECTED. WE ASSUME NO
OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO
REFLECT ANY EVENT OR CIRCUMSTANCE THAT MAY ARISE AFTER THE DATE
OF THIS REPORT, OTHER THAN AS MAY BE REQUIRED BY APPLICABLE LAW
OR REGULATION.
PART I
ITEM 1. BUSINESS
General
IGENE Biotechnology, Inc. ("Igene" or the "Company") was
incorporated in the State of Maryland on October 27, 1981, to
develop, produce and market value-added specialty biochemical
products. Igene is a supplier of natural astaxanthin, an
essential nutrient in different feed applications and a source of
pigment for coloring farmed salmon species. Igene's natural
astaxanthin product is marketed as AstaXin(R) and is made from
yeast, and used as a source of pigment for coloring farmed
salmonids. Igene is also venturing to supply astaxanthin as a
nutraceutical ingredient. Igene is focused on research and
development in the areas of fermentation technology, nutrition
and health and the marketing of products and applications
worldwide.
Igene has devoted its resources to the development of proprietary
processes to convert selected agricultural raw materials or
feedstocks into commercially useful and cost effective products
for the food, feed, flavor and agrochemical industries. In
developing these processes and products, Igene has relied on the
expertise and skills of its in-house scientific staff and, for
special projects, various consultants.
In 2000, Igene formed a wholly-owned subsidiary in Chile, Igene
Chile Comercial, Ltda. The subsidiary has a sales and customer
service office in Puerto Varas, Chile, and a product warehouse in
Puerto Montt, Chile.
In an effort to develop a dependable source of production, on
March 19, 2003, Tate & Lyle PLC ("Tate") and Igene announced a
50:50 joint venture to produce AstaXin(R) for the aquaculture
industry, which we refer to as the "Joint Venture." Production
utilized Tate's fermentation capability together with the unique
technology developed by Igene. Part of Tate's existing citric
acid facility located in Selby, England, was modified to include
the production of this product. Tate's investment of
approximately $24,600,000 included certain of its facility assets
that were used in citric acid production. Igene's contribution
to the Joint Venture, including its intellectual property and its
subsidiary in Chile, was valued by the parties as approximately
equal to Tate's contribution. For accounting purposes, Igene's
contribution was valued at zero.
-3-
On October 31, 2007, Igene and Tate entered into a Separation
Agreement pursuant to which the Joint Venture was terminated. As
part of the Separation Agreement, Igene sold to Tate its 50%
interest in the Joint Venture and the Joint Venture sold to Igene
its intellectual property, inventory and certain assets and lab
equipment utilized by the Joint Venture as well as Igene's
subsidiary in Chile. The purchase price paid by Tate to Igene
for its 50% interest in the Joint Venture was 50% of the Joint
Venture's net working capital. The purchase price paid by Igene
for the inventory was an amount equal to 50% of the Joint
Venture's net working capital, the assumption of various
liabilities and the current market price of the inventory, less
specified amounts. In addition, Igene agreed to pay to Tate an
amount equal to 5% of Igene's gross revenues from the sale of
astaxanthin up to a maximum of $5,000,000. Tate agreed for a
period of five years not to engage in the astaxanthin business.
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed a joint venture, Naturxan LLC ("Naturxan")
to manufacture and sell astaxanthin and derivative products
throughout the world. Both the Company and ADM have a 50%
ownership interest in Naturxan and have equal representation on
the Board of Managers of Naturxan.
Government Regulation
The manufacturing and marketing of most of the products Igene has
developed are, and will likely continue to be, subject to
regulation by various governmental agencies in the United States,
including the Food and Drug Administration ("FDA"), the
Department of Agriculture ("USDA"), the Environmental Protection
Agency ("EPA"), and comparable agencies in other countries.
Igene, as a matter of policy, requires that its products conform
to current Good Manufacturing Practices ("GMPs") (as defined
under the Federal Food, Drug and Cosmetic Act and the rules and
regulations thereunder) and Igene believes all of its products so
conform. The extent of any adverse governmental regulation that
might arise from future administrative or legislative action,
including rules and regulations pertaining to the process of GRAS
(Generally Recognized as Safe) affirmations, cannot be predicted.
In a notice published in the Federal Register on July 6, 2000,
the FDA announced the amendment of its color additive regulations
to provide for the safe use of Phaffia yeast, such as that in
Igene's product, AstaXin(R), as a color additive in aquaculture
feeds. This ruling, which became effective August 8, 2000,
allows Igene to market AstaXin(R) for aquaculture feeds and fish
produced in, or imported into, the United States. This ruling is
available to the public in the Federal Register. Igene has also
previously obtained approval for AstaXin(R) from the Canadian
Food Inspection Agency ("CFIA"). Additional foreign approval
applications for AstaXin(R) have been granted in the European
Union.
In July 2000, Igene also obtained clearance from the FDA to
market AstaXin(R) as a human dietary supplement in the United
States. Scientific literature indicates that natural
astaxanthin, such as that in Igene's product, AstaXin(R), may
offer health benefits for humans due to its antioxidant
properties. The FDA notification and Igene's submissions are
available to the public from the FDA. Comparable agencies in the
European Union and other foreign countries may have their own
additional registration procedures. No additional applications
for approval of AstaXin(R) as a human nutritional supplement have
yet been submitted.
Igene has not incurred and does not anticipate any material
environmental compliance costs.
Research and Development
As of December 31, 2009, Igene had expended approximately
$20,770,000 on research and development since its inception on
October 27, 1981. Sales of astaxanthin (through Igene and its
two joint ventures) resulted in revenues of $61,000,000 as of
December 31, 2009, $39,500,000 of which were realized through
joint ventures. For the year ended December 31, 2009, $4,000,000
of this revenue was recorded on the books of Igene. Igene will
continue to incur research and development costs in connection
with improvements in its existing processes and products, but it
does not anticipate development of new processes and products in
2010.
Research and development expenditures for each of the last two
years are as follows:
2009 $ 1,851,118
2008 $ 1,655,908
-4-
Igene's research and development activities have resulted in the
development of processes to produce the product AstaXin(R)
hereinafter discussed.
Commercial Products
AstaXin(R)
AstaXin(R) is Igene's registered trademark for its dried yeast
product made from a proprietary strain of yeast developed by
Igene. AstaXin(R) is a natural source of astaxanthin, a pigment
which imparts the characteristic red color to the flesh of
salmon, trout, prawns and certain other types of fish and
shellfish. In the ocean, salmon and trout obtain astaxanthin
from krill and other planktonic crustaceans in their diet. A
krill and crustacean diet would be prohibitively expensive for
farm-raised salmonids. Without the addition of astaxanthin, the
flesh of such fish is a pale, off-white color, which is less
appealing to consumers expecting the characteristic "salmon-
colored" fish. Fish feeding trials in Europe, Asia, and North
and South America have demonstrated the efficacy of AstaXin(R) in
pigmenting fish. Igene derived revenue during 2009 from sales of
AstaXin(R), the majority of which were to fish producers in the
aquaculture industry in the European Union, Japan, Chile and
Canada, and marketing efforts for AstaXin(R) are global.
Marketing efforts are through Igene and Naturxan personnel to
both farmers and feed manufacturers.
Based on studies of worldwide production of farm raised salmon,
Igene believes the market for astaxanthin as a color additive in
salmon feed exceeds 184 metric tons of AstaXin(R). A single
competitor, who produces a chemically synthesized product,
presently controls more than 80% of the world market for
astaxanthin as a pigment for aquaculture.
During 2001, Igene began investigating other possible commercial
uses of astaxanthin, including its application as a human
nutritional supplement. Igene has formulated natural astaxanthin
as a super-antioxidant, AstaXin(R), for the North American
dietary supplement market. Antioxidants are one of the largest
product categories in the health and nutrition industry.
Attempts to pursue this business have only been minimal in the
past and will intensify in 2010.
Patents and Trademarks
It is Igene's policy to protect its intellectual property rights
by a variety of means, including applying for patents and
trademarks in the United States and in other countries. Igene
also relies upon trade secrets and improvements, un-patented
proprietary know-how and continuing technological innovation to
develop and maintain its competitive position. Igene places
restrictions in its agreements with third parties with respect to
the use and disclosure of any of its proprietary technology.
Igene also has internal nondisclosure safeguards, including
confidentiality agreements with employees and consultants.
All patents and trademarks are carefully reviewed and those with
no foreseeable commercial value are abandoned to eliminate costly
maintenance fees. Patents and trademarks on technology and
products with recognized commercial value, and which Igene is
currently maintaining, including those for AstaXin(R), have
various remaining lives ranging from 1 to 22 years.
Competition
Competitors in the biotechnology field in the United States and
elsewhere are numerous and include major chemical, pharmaceutical
and food companies, as well as specialized biotechnology
companies. Competition can be expected to increase as small
biotechnology companies continue to be purchased by major
multinational corporations with substantial resources.
Competition is also expected to increase with the introduction of
more diverse products developed by biotechnology firms,
increasing research cooperation among academic institutions and
large corporations, and continued government funding of research
and development activities in the biotechnology field, both in
the United States and overseas. Unlike the majority of
biotechnology companies, which are developing products
principally for the pharmaceutical industry, Igene has focused
its own activities on the development of proprietary products for
use in the aquaculture and nutritional supplement industries. In
the future, however, competitors may offer products, that, by
reason of price, or efficacy, or more substantial resources for
technology advances, may be superior to Igene's existing or
future products.
-5-
A single large pharmaceutical company presently dominates the
market for astaxanthin pigment for aquaculture in which Igene's
product, AstaXin(R), is presently marketed and sold. Igene
believes that AstaXin(R), which is made from yeast, will compete
with this dominant producer and other producers whose products
are chemically synthesized, based on its use of natural
ingredients. As consumers and producers of fish become more aware
of other alternatives, Igene believes that they will desire
natural ingredients, such as those in AstaXin(R).
Several companies are also known to be developing and marketing
other natural astaxanthin products. Some of these companies'
products are made from algae, while others are made from yeast.
Igene believes that AstaXin(R) will compete with other companies'
astaxanthin products which are made from algae, due to what we
believe are Igene's higher production capacity and lower
production costs, but can provide no assurances in that regard.
Igene also believes that AstaXin(R) will compete with other
companies' astaxanthin products which are also made from yeast
due to Igene's proprietary process to disrupt yeast cell walls,
which, as studies have shown, makes AstaXin(R) more readily
absorbed by fish.
Igene is also beginning to explore the possible use of AstaXin(R)
as a human nutritional supplement. This market is attractive
because of potentially higher profit margins. Other companies are
known to also be developing and marketing astaxanthin products
for the human nutritional supplement market. Igene cannot yet
predict how competitive it would be in this market.
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed a joint venture, Naturxan LLC ("Naturxan")
to manufacture and sell astaxanthin and derivative products
throughout the world. Each of the Company and ADM has a 50%
ownership interest in Naturxan and has equal representation on
the Board of Managers of Naturxan. It is hoped that Igene's
technology joined with ADM manufacturing will improve their joint
position in the market.
Sources and Availability of Raw Materials
Raw materials used in the manufacture of AstaXin(R) consist
principally of agricultural commodities widely available in world
markets from many suppliers, which may be used interchangeably.
We do not anticipate significant price fluctuations or changes in
availability in these raw materials in the near future, but can
provide no assurances in that regard.
Employees
At December 31, 2009, Igene had eighteen full-time employees,
five of which are in administration and/or marketing, and
thirteen of which are engaged in research, process development
and support of manufacturing activities. Fifteen employees are
based in the U.S. and three are based in Chile. Igene also
utilizes various consultants on an as-needed or short-term basis.
None of Igene's employees are represented by a labor union and
Igene has experienced no work stoppages. Igene believes its
relations with its employees are satisfactory.
ITEM 1A. RISK FACTORS
Igene is a smaller reporting company as defined by Rule 12b-2 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and is not required to provide the information required
under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Igene leases approximately 8,500 square feet of space in the
Oakland Ridge Industrial Park located at 9110 Red Branch Road,
Columbia, Maryland. Igene occupies the premises under a lease
extension which expires on January 31, 2011. The approximate
current annual rent is $125,000. Approximately 2,000 square feet
is used for executive and administrative offices and
approximately 2,500 square feet is used for research and
development activities. The remaining 4,000 square feet of space
is used for Igene's intermediate-stage or scale-up pilot plant
facility.
Igene leases approximately 220 square feet of office space in
Puerto Varas, Chile to conduct marketing and technical support
activities by its full-time technical representatives. This
lease renews annually in December of each year unless terminated
-6-
by prior notice. Igene also leases warehouse space on a month-to-
month basis as needed for product storage.
Igene currently owns or leases sufficient equipment and
facilities for its research operations and all of this equipment
is in satisfactory condition and is adequately insured. There
are no current plans for improvement of this property. When
Igene's product inventory increases, additional warehouse space
is leased on a month-to-month basis.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Igene is
a party or to which any of Igene's properties are subject; nor
are there material proceedings known to be contemplated by any
governmental authority; nor are there material proceedings known
to Igene, pending or contemplated, in which any of Igene's
directors, officers, affiliates or any principal security
holders, or any associate of any of the foregoing, is a party or
has an interest adverse to us.
-7-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Common Stock
Commencing on or about June 12, 1989, Igene's common stock began
quotation on the over-the-counter market on a limited basis and
is quoted on Pink Sheets. The following table shows, by calendar
quarter, the range of representative bid prices for Igene's
common stock for 2009 and 2008.
Calendar Quarter High Low
________________ ____ ____
2009: First Quarter $0.0150 $0.0050
Second Quarter $0.0140 $0.0050
Third Quarter $0.0250 $0.0066
Fourth Quarter $0.0106 $0.0031
2008: First Quarter $0.0180 $0.0130
Second Quarter $0.0150 $0.0060
Third Quarter $0.0130 $0.0060
Fourth Quarter $0.0120 $0.0020
Igene obtained the above information through Pink Sheets, LLC, a
national quotation bureau. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission, and may
not represent actual transactions. The above quotations do not
reflect the "asking price" quotations of the stock.
The approximate number of record holders of Igene's common stock
as of March 16, 2010, was 250. As of March 16, 2010, the high
bid and low offer prices for the common stock, as shown on Pink
Sheets were $0.0134 and $0.010, respectively.
Dividend Policy
When and if funds are legally available for such payment under
statutory restrictions, Igene may pay annual cumulative dividends
on the preferred stock of $0.64 per share on an annual basis.
During 1988, Igene declared and paid a cash dividend of $0.16 per
share on its preferred stock. In December 1988, Igene suspended
payment of the quarterly dividend of $0.16 per share of preferred
stock. No dividends on preferred stock have been declared or
paid since 1988. Any resumption of dividend payments on
preferred stock would require significant improvement in cash
flow. Preferred stock dividends are payable when and if declared
by Igene's board. Unpaid dividends accumulate for future payment
or addition to the liquidation preference and redemption price of
the preferred stock. As of December 31, 2009, total dividends in
arrears on Igene's preferred stock equaled $151,422 (or $13.60
per share) on Igene's Series A Preferred Stock and are included
in the carrying value of the Series A Preferred Stock.
Dividends on common stock are currently barred by the
preferential rights of holders of preferred stock. Igene has
paid no cash dividends on its common stock in the past and does
not intend to declare or pay any dividends on its common stock in
the foreseeable future.
-8-
8% Notes
Pursuant to the terms of an Indenture dated as of March 31, 1998,
as amended (the "Indenture") between Igene and American Stock
Transfer & Trust Company, as Trustee (the "Trustee"), Igene
issued and sold $5,000,000 of its 8% notes (the "8% Notes").
Concurrently with the issuance of the 8% Notes, Igene issued,
pursuant to a Warrant Agreement by and between Igene and American
Stock Transfer & Trust Company (the "Warrant Agent") dated as of
March 31, 1998, as amended (the "Warrant Agreement"), 50,000,000
warrants to purchase shares of Igene common stock for $0.10 per
share expiring March 31, 2008. The warrant purchase price under
the Warrant Agreement was reduced to $0.075 per share, and the
maturity date of the 8% Notes was extended to March 31, 2006, by
an amendment dated March 18, 2003, and approved by the requisite
number of holders of the securities.
On March 28, 2006, Igene and American Stock Transfer & Trust
Company, in its capacity as Trustee and Warrant Agent, entered
into a Second Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates that extended the maturity
date of the 8% Notes to March 31, 2009, and reduced the warrant
price under the Warrant Agreement from $0.075 to $0.056 per
share.
On October 23, 2008, Igene and American Stock Transfer & Trust
Company, in its capacity as Trustee and Warrant Agent, entered
into a Third Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates that extended the maturity
date of the 8% Notes to March 31, 2019. The warrants under the
Warrant Agreement expired as of March 31, 2008.
On December 3, 2008, Igene completed an offering to exchange
145,600 of our shares of common stock, par value $0.01 per share,
for each $1,000 principal amount of the 8% Notes outstanding and
accrued interest thereon. As of that date, $4,759,767 of 8%
Notes principal were outstanding, with $4,064,450 accrued
interest thereon. Of these notes, $4,436,515 of notes principal
with $3,788,419 of interest were exchanged for 645,956,606 shares
of Igene common stock at a price of $0.005 per share. As a
result, an addition to additional paid in capital of $4,995,151
was recorded on the retirement, pursuant to accounting literature
for related party debt forgiveness.
Securities Authorized for Issuance Under Equity Incentive Plans
Equity Compensation Plan Information as of December 31, 2009
Number of securities
remaining available for
future issuance under
Number of securities to Weighted-average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan category warrants and rights warrants and rights column (a))
______________________ _______________________ ____________________ ________________________
(a) (b) (c)
Equity compensation
plans approved by
security holders <FN1> --- --- 300,000,000
Equity compensation
plans not approved by
security holders --- --- ---
_______________________ ____________________ _________________________
TOTAL --- $0.00 300,000,000
_______________________ ____________________ _________________________
<FN>
<FN1> Includes Igene's 2001 Stock Incentive Plan, which
succeeded Igene's 1997 Stock Option Plan, which succeeded
Igene's 1986 Stock Option Plan.
</FN>
-9-
Sales of Unregistered Securities
On June 16, 2009, the Board of Directors of Igene approved a
repurchase of all outstanding employee stock options and
warrants. It was agreed to repurchase 51,425,000 options and
warrants, using 41,900,456 shares of restricted stock. Holders
of options and warrants were contacted and agreements were
reached. On July 16, 2009, shares were issued and options and
warrants were cancelled.
On November 28, 2008, Igene commenced offerings to exchange
shares of its common stock for its publicly and privately held
debt. On December 3, 2008, a total of 645,956,606 shares of
Igene common stock were exchanged for $4,436,515 in
aggregate principal amount of Igene's publicly held 8% notes and
$3,788,419 in related accrued interest. An additional
762,210,163 shares of Igene common stock were issued in exchange
for $5,618,090 in aggregate principal amount of Igene's privately
held notes and debentures, $3,073,015 of related interest, and
126,729,316 associated warrants, summarized as follows:
- On December 18, 66,371,244 shares of Igene's common stock
were issued in consideration of $762,000 in aggregate
principal amount of 5% convertible debentures and $67,641 of
related accrued interest.
- On December 18, 528,578,590 shares of Igene's common stock
were issued in consideration of $3,814,212 in aggregate
principal amount of 8% convertible debentures, $2,204,106 of
related accrued interest and associated warrants to purchase
66,427,650 shares of common stock.
- On December 18, 147,451,719 shares of Igene's common stock
were issued in consideration of $1,041,878 in aggregate
principal amount of variable rate notes and $801,269 of
related accrued interest. In addition, related warrants to
purchase 60,301,666 shares of common stock were exchanged
for 19,808,610 shares of Igene's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Igene is a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and is not required to provide the information
required under this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements in this report set forth management's
intentions, plans, beliefs, expectations or predictions of the
future based on current facts and analyses. Actual results may
differ materially from those indicated in such statements, due to
a variety of factors including competitive pressures from other
companies and within the biotech industry, economic conditions in
Igene's primary markets, exchange rate fluctuations, reduced
product demand, increased competition, unavailability of
production capacity, unavailability of financing, government
action, weather conditions and other uncertainties, including
those detailed in any "Risk Factors" that may be included from
time to time in Igene's Securities and Exchange Commission (the
"SEC") filings.
Results of Operations
_____________________
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed Naturxan, for the purpose of manufacturing
and selling astaxanthin and derivative products throughout the
world. Each of the Company and ADM has a 50% ownership interest
in Naturxan and has equal representation on the Board of Managers
of Naturxan.
Sales and other revenue
Igene recorded sales in the amounts of $3,957,903 and $7,644,477,
respectively, for 2009 and 2008, a decrease of $3,686,574 or 48%.
Sales had been limited in past years due to insufficient
production quantity and have been limited in the current period
as Igene has completed selling the inventory remaining from the
-10-
joint venture with Tate & Lyle. On January 8, 2009, Igene
entered into an agreement with ADM pursuant to which the Company
and ADM formed a joint venture to manufacture and sell
astaxanthin. All product manufactured through the joint Venture
is being recorded as part of Naturxan. Management believes that
this will provide saleable product that will allow Igene to be
competitive in the market place and allow for increased sales in
the future, though no assurances can be provided in this matter.
All future sales of product will be recorded through the Naturxan
joint venture.
Cost of sales and gross profit
Igene recorded cost of sales in the amounts of $2,942,340 and
$6,395,062, respectively, for 2009 and 2008, a decrease of
$3,452,722 or 54%. This resulted in a gross profit of
$1,015,563, or 26% for the year ended December 31, 2009 and gross
profit of $1,249,415, or 16% for the year ended December 31,
2008. The gross profit is mainly attributable to the discount in
which the product was purchased at the conclusion of the joint
venture with Tate & Lyle. On January 8, 2009, Igene entered into
an agreement with ADM pursuant to which the Company and ADM
formed a joint venture to manufacture and sell astaxanthin. All
product manufactured through the joint Venture is being recorded
as part of Naturxan. Management believes that this will provide
saleable product that will allow Igene to be competitive in the
market place and allow for increased sales in the future, though
no assurances can be provided in this matter. All future sales
of product will be recorded through the Naturxan joint venture.
Loss from Joint Venture
For the year ended December 31, 2009, Igene recorded a loss from
Naturxan of $1,094,502. On January 8, 2009, Igene entered into
an agreement with Archer-Daniels-Midland Company ("ADM") pursuant
to which the Company and ADM formed a joint venture (the
"Naturxan") to manufacture and sell astaxanthin and derivative
products throughout the world. Each of the Company and ADM has a
50% ownership interest in Naturxan and has equal representation
on the Board of Managers of Naturxan.
On October 31, 2007, Igene terminated its relationship with Tate
& Lyle. Igene maintained the saleable inventory after the
termination of the relationship. Igene sold the existing
inventory in order to maintain its relationship with customers
and used these funds to cover expenses. Naturxan began selling
product in the Third quarter of 2009 and preparation for full
scale production of product continues. For 2009, revenues from
sales of product were $4,653,810. Cost of sales for the period
was $4,103,028 resulting in a gross profit of $550,782 or 12%.
Expenses recorded by Naturxan were $2,739,786 resulting in a net
loss of $2,189,004 for the year ended December 31, 2009. Igene's
50% interest resulted in the $1,094,502 loss recorded.
Management believes that Naturxan will provide saleable product
that will allow Igene to be competitive in the market place and
allow for increased sales in the future, though no assurances can
be provided in this matter.
Expenses reimbursed by Joint Venture
On January 8, 2009, Igene entered into an agreement with ADM
pursuant to which the Company and ADM formed a joint venture to
manufacture and sell astaxanthin. Management believes that this
venture should provide cash flow from operations, though there
can be no assurance in this matter. As part of the ADM Joint
Venture Agreement, a portion of expenses incurred by Igene
related to production, research and development, those related to
the marketing of AstaXin(R), as well as those expenses related to
general and administrative functions of the Joint Venture are
considered expenses of the Joint Venture and are therefore
subject to reimbursement by Naturxan. For the year ended
December 31, 2009, such reimbursements totaled $2,086,166. The
expenses included the $1,800,852 of research and development
expenses, $139,238 of marketing expenses, and $146,076 of general
and administrative expenses.
As part of the Joint Venture Agreement with ADM, expenses
incurred by Igene related to production, research and
development, as well as those related to the marketing of
AstaXin(R), and some of the general and administrative expenses,
were considered expenses of the Joint Venture and therefore were
reimbursed by the Joint Venture.
Marketing and selling expenses
Marketing and selling expenses for 2009 were $387,916, a decrease
of $343,178, or 47%, from the marketing and selling expenses of
$731,094 for 2008. With the creation of Naturxan, responsibility
for the marketing and selling function is being assumed by the
Joint Venture. It is expected that marketing and selling
-11-
expenses will fluctuate as activities continue to maintain
customer base through the period of transition in which the
development of production continues. However, no assurances can
be made with regard to a new source of production or the
maintenance of the customer base. Expenses are expected to be
funded by Naturxan and cash flows from operations, to the extent
available for such purposes. During 2009, Naturxan reimbursed
$160,070 of the foregoing marketing expenses.
Research, development and pilot plant expenses
Research, development and pilot plant expenses for 2009 and 2008
were $1,851,118 and $1,655,908, respectively, reflecting an
increase of $195,210 or 12%. This increase is partially
attributable to expenses related to the development of the joint
venture with ADM and expenses related to support increasing the
efficiency of the manufacturing process through experimentation
in Igene's pilot plant, undertaken in an attempt to develop
higher yielding strains of yeast and other improvements in
Igene's AstaXin(R) technology. Igene has undertaken such
initiatives with the goal to reduce costs for salable product
marketed by Naturxan; however, no assurances can be made in that
regard. Expenses are expected to be funded by Naturxan and cash
flows from operations, to the extent available for such purposes.
During the year ended December 31, 2009, $1,753,675 of the
research and development expenses was reimbursed by Naturxan.
General and administrative expenses
General and administrative expenses for 2009 decreased by
$212,641, or 20%, from 2008 (to $838,062 from $1,050,703). These
costs are expected to remain at this reduce amount. Igene works
to reduce overhead costs and spend funds on research and
development efforts. A portion of this cost is expected to be
covered by Naturxan as reimbursement for the overhead expenses
incurred on the part of Naturxan operations. The majority of
these expenses will need to be funded by cash flows from
operations, to the extent available for such purposes. $146,076
of the 2009 general and administrative cost was reimbursed by
Naturxan.
Interest expense (net of interest income)
Interest expense for 2009 and 2008 was $97,520 and $2,028,460,
respectively, a decrease of $1,930,940 or 95%. This interest
expense was composed of interest on Igene's long term financing
from its directors and other stockholders and interest on Igene's
subordinated and convertible debentures, as well as amortization
of discount on Igene's notes and debentures of $10,276 for 2009
and $1,294,680 for 2008. The reduction in this expense is due to
the recapitalization undertaken by Igene during the fourth
quarter of 2008, and the conversion of the majority of the Igene
debt into an equity position (see Note 3).
Additional paid in capital adjustment from termination of debt
On November 28, 2008, Igene commenced offerings to exchange
shares of its common stock for its publicly and privately held
debt. On December 3, 2008, a total of 645,956,606 shares of
Igene common stock were exchanged for $4,436,515 in
aggregate principal amount of Igene's publicly held 8% notes and
$3,788,419 in related accrued interest. An additional
762,210,163 shares of Igene common stock were issued in exchange
for $5,618,090 in aggregate principal amount of Igene's privately
held notes and debentures, $3,073,015 of related interest, and
126,729,316 associated warrants, summarized as follows:
- On December 18, 66,371,244 shares of Igene's common stock
were issued in consideration of $762,000 in aggregate
principal amount of 5% convertible debentures and $67,641 of
related accrued interest.
- On December 18, 528,578,590 shares of Igene's common stock
were issued in consideration of $3,814,212 in aggregate
principal amount of 8% convertible debentures, $2,204,106 of
related accrued interest and associated warrants to purchase
66,427,650 shares of common stock.
- On December 18, 147,451,719 shares of Igene's common stock
were issued in consideration of $1,041,878 in aggregate
principal amount of variable rate notes and $801,269 of
related accrued interest. In addition, related warrants to
purchase 60,301,666 shares of common stock were exchanged
for 19,808,610 shares of Igene's common stock.
-12-
As this was a transaction with a related party, Igene recorded
additional paid in capital as a result of the termination of this
private debt in the amount of $3,654,595. This plus the gain on
the public notes of $4,995,151 resulted in a total of $8,649,746
in connection with the exchanges, which was recorded as an
addition to additional paid in capital, pursuant to accounting
literature for related party debt forgiveness.
Other income
Igene had other income in 2009 of $1,026,642. Of this amount,
$1,025,741 is a one-time occurrence related to a liability
recorded in a prior period related to the termination of the
joint venture with Tate & Lyle. On February 26, 2009, Igene
signed a settlement agreement of past obligations and made a
final payment to Tate & Lyle in the amount of $714,227. At the
termination of the joint venture, Igene recorded liabilities of
$890,000 for payments of past payables of the joint venture as
well as $51,000 for costs related to collection of receivables of
the joint venture. The expense was recorded when it was thought
Igene could be liable for it, but with the exception of the
$5,000,000 liability related to future revenue (see Note 2),
Igene has settled its debt to Tate & Lyle.
Net loss and basic and diluted net loss per common share
As a result of the foregoing results of operations, Igene
reported comprehensive loss of $64,708 for 2009 and comprehensive
loss of $4,008,720 for 2008. This resulted in a net loss of
$0.00 per basic and diluted common share for 2009 based on a
weighted average of common stock outstanding of 1,537,789,530.
For 2008, this resulted in a net loss of $0.02 per basic common
share, based on a weighted average of common stock outstanding of
187,037,119. The increase in outstanding shares resulted mainly
from the shares related to the recapitalization undertaken by
Igene during the fourth quarter of 2008, and the conversion of
the majority of the Igene debt into an equity position (see Note
3).
Financial Position
During 2009 and 2008, the following also affected Igene's
financial position:
- During 2009, decreases in accounts receivable of $1,043,838
and decreases in inventory of $2,398,520 were sources of
cash. This allowed for decreases in accounts payable of
$2,384,050.
- During 2008, decreases in accounts receivable of $1,673,117
and decreases in inventory of $5,661,257 were sources of
cash. This allowed for decreases in accounts payable of
$4,326,565.
Since December 1988, as part of an overall effort to contain
costs and conserve working capital, Igene suspended payment of
the quarterly dividend on its preferred stock. Resumption of the
dividend will require significant improvements in cash flow.
Unpaid dividends cumulate for future payment or addition to the
liquidation preference or redemption value of the preferred
stock. As of December 31, 2009, total dividends in arrears on
Igene's Series A preferred stock equaled $151,422 (or $13.60 per
share) and are included in the carrying value of the preferred
stock.
Liquidity and Capital Resources
Historically, Igene has been funded primarily by equity
contributions and loans from directors and stockholders. As of
December 31, 2009, Igene had working capital of $2,099,781, and
cash and cash equivalents of $1,295,222.
Cash used by operating activities in 2009 was $97,049 as compared
to cash provided of $705,610 in 2008.
Cash used by investing activities in 2009 was $171,779 as
compared to $226,166 used by investing activities in 2008.
There was no cash provided by or used in financing activities
during 2008 or 2009.
Over the next twelve months, Igene believes it will need
additional working capital. Part of this funding is expected to
be received from sales of AstaXin(R). On January 8, 2009, Igene
entered into an agreement with ADM pursuant to which the Company
and ADM formed a joint venture to manufacture and sell
astaxanthin. Management believes that this venture should
provide cash flow from operations. However, there can be no
assurance that projected cash from sales, or additional funding,
will be sufficient for Igene to fund its continued operations.
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Igene does not believe that inflation had a significant impact on
its operations during 2009 and 2008.
Off-Balance Sheet Arrangements
Igene has no off-balance sheet arrangements that are reasonably
likely to have a current or future effect on its financial
position, revenues, results of operations, liquidity or capital
expenditures.
Critical Accounting Policies
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States
("GAAP") requires management to make judgments, assumptions and
estimates that affect the amounts reported in our financial
statements and accompanying notes. Actual results could differ
materially from those estimates. The following are critical
accounting policies important to our financial condition and
results of operations presented in the financial statements and
require management to make judgments and estimates that are
inherently uncertain:
The inventories are stated at the lower of cost or market. Cost
is determined using a weighted-average approach, which
approximates the first-in first-out method. If the cost of the
inventories exceeds their expected market value, provisions are
recorded for the difference between the cost and the market
value. Inventories consist of currently marketed products.
Revenue from product sales are recognized when there is
persuasive evidence that an arrangement exists, delivery has
occurred, the price is fixed and determinable, and collectability
is reasonably assured. Allowances are established for estimated
uncollectible amounts, product returns and discounts.
The Joint Venture is accounted for under the equity method of
accounting as Igene has a 50% ownership interest.
Igene will not recognize the loss of the Joint Venture beyond the
investment and advances to the Joint Venture.
The Company reviews intellectual property periodically for
impairment and an impairment charge is recorded in the periods in
which the recorded carrying value is more than its estimated fair
value. The goodwill impairment test is performed annually, or
more frequently, in the case of other events that indicate a
potential impairment. Evaluation of possible impairment is based
on the Company's ability to recover the asset from the expected
future pre-tax cash flows (undiscounted and without interest
charges) of the related operations. If the expected undiscounted
pre-tax cash flows are less than the carrying amount of such
asset, an impairment loss is recognized for the difference
between the estimated fair value and carrying amount of the
asset.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Igene is a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and is not required to provide the information
required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements follow Part III of this
Annual Report on Form 10-K and are hereby incorporated by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-14-
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
________________________________________________
We carried out an evaluation, under the supervision and with the
participation of our management, including our principal
executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act). Based upon that evaluation, our principal executive
officer and principal financial officer concluded that, as of the
end of the period covered in this report, our disclosure controls
and procedures were not effective to ensure that information
required to be disclosed in reports filed under the Exchange Act
is recorded, processed, summarized and reported within the
required time periods and is accumulated and communicated to our
management, including our principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
Our management, including our principal executive officer and
principal financial officer, does not expect that our disclosure
controls and procedures or our internal controls will prevent all
error or fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the
fact that there are resource constraints and the benefits of
controls must be considered relative to their costs. Due to the
inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. To address
the material weaknesses, we performed additional analysis and
other post-closing procedures in an effort to ensure our
consolidated financial statements included in this annual report
have been prepared in accordance with GAAP. Accordingly,
management believes that the financial statements included in
this report fairly present in all material respects our financial
condition, results of operations and cash flows for the periods
presented.
Management's Report on Internal Control Over Financial Reporting
________________________________________________________________
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Exchange Act. Our management assessed
the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, our
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") in
Internal Control-Integrated Framework. A material weakness is a
deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual
or interim financial statements will not be prevented or detected
on a timely basis. Our management has identified the following
material weaknesses.
1. As of December 31, 2009, we did not maintain effective
controls over the control environment. Specifically, we
have not formally adopted a written code of business
conduct and ethics that governs the Company's employees,
officers and directors. Additionally, we have not
developed and effectively communicated to our employees our
accounting policies and procedures. This has resulted in
inconsistent practices. Further, the Board of Directors
does not currently have any independent members and no
director qualifies as an independent audit committee
financial expert as defined in Item 407(d)(5)(ii) of
Regulation S-K. Since these entity level programs have a
pervasive effect across the organization, management has
determined that these circumstances constitute a material
weakness.
2. As of December 31, 2009, we did not maintain effective
controls over financial statement disclosure. Specifically,
controls were not designed and in place to ensure that all
disclosures required were originally addressed in our
financial statements. Accordingly, management has
determined that this control deficiency constitutes a
material weakness.
3. As of December 31, 2009, we did not maintain effective
controls over equity transactions. Specifically, controls
were not designed and in place to ensure that equity
transactions were properly reflected. Accordingly,
management has determined that this control deficiency
constitutes a material weakness.
Because of these material weaknesses, management has concluded
that the Company did not maintain effective internal control over
financial reporting as of December 31, 2009, based on the
criteria established in "Internal Control-Integrated Framework"
issued by the COSO.
-15-
Changes in Internal Control Over Financial Reporting
____________________________________________________
No change in the Company's internal control over financial
reporting occurred during the quarter ended December 31, 2009,
that materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not
subject to attestation by the Company's registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only
management's report in this annual report.
ITEM 9B. OTHER INFORMATION
Pursuant to the terms of an Indenture dated as of March 31, 1998,
as amended (the "Indenture") between the Company and American
Stock Transfer & Trust Company, as Trustee (the "Trustee"), the
Company issued and sold $5,000,000 of its 8% notes (the "8%
Notes"). Concurrently with the issuance of the 8% Notes, the
Company issued, pursuant to a Warrant Agreement by and between
the Company and American Stock Transfer & Trust Company, as
warrant agent (the "Warrant Agent") dated as of March 31, 1998,
as amended (the "Warrant Agreement"), 50,000,000 warrants to
purchase shares of the Company's common stock for $0.10 per
share. The warrant purchase price under the Warrant Agreement
was reduced to $0.075 per share, and the maturity date of the 8%
Notes extended to March 31, 2006, by an amendment to the
Indenture and Warrant Agreement dated March 18, 2003 and approved
by the requisite number of holders of the 8% Notes. The warrant
purchase price was further reduced to $0.56 per share, and the
maturity date of the 8% Notes was further extended to March 31,
2009 by a second amendment to the Indenture and Warrant Agreement
dated March 28, 2006 and approved by the requisite number of
holders of the 8% Notes.
On October 23, 2008, the Company, Trustee and Warrant Agent
entered into a Third Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates (the "Third Amendment") that
extended the maturity date of the 8% Notes to March 31, 2019.
The Third Amendment was approved by more than two-thirds in
principal amount of the holders of 8% Notes effective November 4,
2008, in accordance with Section 6.07 and Section 9.02 of the
Indenture.
The description of the Third Amendment is qualified in its
entirety by reference to the full text of such amendment, a copy
of which is filed as Exhibit 4.5 hereto and is incorporated
herein by reference.
-16-
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The names, ages, periods of service as a director, principal
occupations, business experience and election of our directors
are set forth in the Information Statement on Schedule 14C, filed
with the Commission on November 24, 2009 in the section entitled
"Directors," which information is incorporated herein by
reference.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of the Section 16(a) reports filed with
the SEC and written representations provided to Igene by its
officers and directors, and holders of more than ten percent of
any class of Igene's registered securities, Igene believes that
during fiscal year 2009, (i) one delinquent Form 4 was filed by
Stephen Hiu resulting in two transactions being untimely
reported, (ii) three delinquent Form 4s were filed by Thomas L.
Kempner resulting in 18 transactions being untimely reported,
(iii) two delinquent Form 4s were filed by Michael Kimelman
resulting in 11 transactions being untimely reported and (iv) one
delinquent Form 4 was filed by Patrick Monahan resulting in two
transactions being untimely reported.
Code of Ethics
Due to the size of Igene and its current operations, Igene has
not adopted a code of ethics for its principal executive and
financial officers. Igene's board of directors will revisit this
issue in the future to determine if adoption of a code of ethics
is appropriate. In the meantime, Igene's management intends to
promote honest and ethical conduct, full and fair disclosure in
its reports to the SEC, and compliance with applicable
governmental laws and regulations.
Corporate Governance
The Audit Committee of the Board of Directors is comprised of one
member: Michael G. Kimelman. Mr. Kimelman is an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation S-
K. Under the Nasdaq Marketplace Rules, in addition to satisfying
the independent director requirements under Rule 4200 of such
rules, audit committee members must also meet the criteria for
independence set forth in Rule 10A-3(b)(1) under the Exchange Act
(subject to the exemptions provided in Rule 10A-3(c)): they must
not accept any consulting, advisory, or other compensatory fee
from the Company other than for board service, and they must not
be an affiliated person of the Company. Mr. Kimelman is not
considered independent under the audit committee standards of the
Nasdaq Marketplace Rules.
ITEM 11. EXECUTIVE COMPENSATION
The following tables show the compensation paid or accrued by
Igene to each of the three officers (the "named executive
officers").
Summary Compensation Table
All Other
Name and Compensation
Principal Position Year Salary ($)<FN1> Stock Awards ($) ($) <FN2> Total ($)
__________________ _______ ________________ _______________ _______________ _______________
Stephen Hiu 2009 $ 177,060 $ 0 $ 15,555 $ 192,615
President 2008 163,575 0 11,189 174,764
2007 153,886 0 6,396 160,282
Patrick Monahan 2009 154,790 0 14,155 168,945
Vice President 2008 140,773 0 10,225 150,998
Secretary and 2007 137,914 10,000<FN3> 5,968 153,882
Director of
Manufacturing
Edward Weisberger 2009 156,752 0 14,704 171,456
Chief Financial 2008 145,973 0 9,473 155,446
Officer 2007 132,793 0 5,712 138,505
<FN>
<FN1> Gross salary of the named executive officers listed.
<FN2> Includes annual taxable compensation for health insurance
premium and employer match of 401(k).
<FN3> Includes issuance of 1,000,000 shares of Igene common stock
at $0.01 per share value based on current stock price in
addition to restriction and blockage discounts.
</FN>
There are no employment agreements or arrangements, written or
unwritten, for any of the executive officers.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning the
outstanding equity awards of each of the named executive officers
as of December 31, 2008. All options reflected on the table were
repurchased for restricted shares during 2009 and balances were
zero as of December 31, 2009.
Number of Securities
Underlying
Unexercised Options Option Exercise Option Expiration
Name (#) Exercisable Price ($/Share) Date
_______________ ____________________ ________________ __________________
Stephen Hiu 2,000,000 0.05 01/19/2010
45,000 0.065 01/02/2011
4,800,000 0.025 08/13/2012
5,000,000 0.10 06/25/2014
Patrick Monahan 1,317,500 0.05 01/19/2010
2,900,000 0.025 08/13/2012
2,000,000 0.10 06/25/2014
Edward Weisberger 2,500,000 0.05 12/01/2011
500,000 0.10 06/25/2014
1,500,000 0.027 12/09/2015
Retirement Plans
Effective February 1, 2004, Igene discontinued use of the Simple
Retirement Plan and began use of a 401(k) savings/retirement
plan, or 401(k) Plan. The 401(k) Plan permits Igene's eligible
employees to defer annual compensation, subject to limitations
imposed by the Internal Revenue Code. All employees that have
been employed for six months are eligible for the plan. The plan
permits elective contributions by Igene's eligible employees
-18-
based under the Internal Revenue Code, which are immediately
vested and non-forfeitable upon contribution to the 401(k) Plan.
Effective January 1, 2004, Igene made an elective contribution,
subject to limitations, of 4% of each eligible employee's
compensation for each year. For 2008 that amount was increased
to 5%. Igene's contributions to the plan for 2009 and 2008 were
$47,081 and $42,657, respectively, which is expensed in the
statement of operations.
Life Insurance Plans
Igene provides life insurance benefits to its employees that in
the event of an employee's death would pay to the employee's
beneficiary two times the employee's annual salary, up to
$150,000.
Severance Benefit
In cases where a termination of employment is initiated by Igene
for economic reasons (e.g. reduction in force, reorganization or
position elimination), it is Igene's policy that the terminated
employee will receive one week of severance at base pay for each
year of service, up to a maximum of 12 weeks.
Compensation of Directors
None of Igene's directors were compensated for their services
during fiscal 2009. Directors Hiu and Monahan received
compensation in their capacities as officers of Igene, as
reported in the Summary Compensation Table above.
Stock Option Plans
Igene currently maintains one stock incentive plan. Igene's 2001
Stock Incentive Plan (the "Plan") succeeded Igene's 1997 Stock
Option Plan, which succeeded Igene's 1986 Stock Option Plan, as
amended. The Plan was approved by Igene's stockholders on June
12, 2001, and authorized for issuance restricted stock and
options to purchase up to 55,000,000 shares of common stock. The
number of shares authorized for incentive awards was increased on
November 3, 2008, to 300,000,000.
The purpose of the Plan is to further the long-term stability and
financial success of Igene by attracting and retaining employees
and consultants through the use of stock-based incentives, and to
provide non-employee members of the Board of Directors with an
additional incentive to promote the success of Igene. It is
believed that ownership of Igene common stock will stimulate the
efforts of those employees, consultants and non-employee
directors upon whose judgment and interests Igene is and will be
largely dependent upon the successful conduct of its business.
It is also believed that incentive awards granted to employees
under this Plan will strengthen their desire to remain employed
with Igene and will further the identification of employees'
interests with those of Igene.
Options are exercisable at such rates and times as may be fixed
by the committee. Options also become exercisable in full upon
(i) the holder's retirement on or after his 65th birthday, (ii)
the disability or death of the holder, or (iii) under other
circumstances as determined by the compensation committee.
Options generally terminate on the tenth business day following
cessation of service as an employee, director, consultant or
independent contractor.
Options may be exercised by payment in full of the option price
in cash or by check, or by delivery of previously-owned shares of
common stock having a total fair market value on the date of
exercise equal to the option price, or by such other methods as
permitted by the committee.
The Plan contains anti-dilution provisions in the event of
certain corporate transactions.
The Board of Directors may at any time withdraw from, or amend,
the Plan and any options not heretofore granted. Stockholder
approval is required to (i) increase the number of shares
issuable under the Plan, (ii) increase the number of options
which may be granted to any individual during a year, (iii) or
change the class of persons to whom options may be granted. No
options shall be granted under the Plan after April 30, 2011.
No options to acquire shares of common stock were outstanding
under the Plan as of December 31, 2009.
-19-
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 9, 2010,
with respect to beneficial ownership of shares of Igene's
outstanding common stock by (i) each person known to Igene to own
or beneficially own more than five percent of its common stock or
preferred stock, (ii) each director of Igene, and (iii) each
named executive officer, and (iv) all directors and executive
officers as a group. On March 9, 2010, there were 1,560,426,565
shares of common stock issued and outstanding. Shares of common
stock subject to options or warrants currently exercisable or
exercisable within 60 days of February 18, 2010, are deemed
outstanding for computing the share ownership and percentage of
the person holding such options and warrants, but are not deemed
outstanding for computing the percentage of any other person.
Unless otherwise noted, each beneficial owner listed on the table
below has sole voting and investment power with respect to his or
her shares beneficially owned. No shares of preferred stock are
beneficially owned by the persons listed below.
Common Stock
__________________________________
Number of
Name and Address Shares Percent (%)
________________ ____________________ ___________
Directors and officers
______________________
Stephen F. Hiu 11,526,633<FN1> 0.74
9110 Red Branch Road
Columbia, MD 21045
Thomas L. Kempner 543,901,561<FN2> 34.84
61 Broadway
New York, NY 10006
Michael G. Kimelman 146,069,174<FN3> 9.10
100 Park Avenue
New York, NY 10017
Sidney R. Knafel 532,711,201<FN4> 34.12
810 Seventh Avenue
New York, NY 10019
Patrick F. Monahan 7,637,200<FN5> 0.49
9110 Red Branch Road
Columbia, MD 21045
Edward J. Weisberger 4,049,697<FN6> 0.26
9110 Red Branch Road
Columbia, MD 21045
All Directors and Officers 1,241,895,466<FN7> 79.55
as a Group (6 persons)
Others
_______
Sheila Baird 111,559,750<FN8> 7.15
100 Park Avenue
New York, NY 10017
<FN>
<FN1> Includes 11,526,633 shares held directly or indirectly by Dr. Hiu.
<FN2> Includes 268,895,202 shares held directly or indirectly by Mr. Kempner.
Also includes (i) 263,800,317 shares held by a trust under which
Mr. Kempner is one of two trustees and the sole beneficiary and
(ii) 11,206,042 shares held by trusts under which Mr. Kempner is one of
two trustees and is a one-third beneficiary. Mr. Kempner shares voting
and investment power with respect to the shares listed in (i)-(ii) above.
<FN3> Includes 142,069,174 shares held directly or indirectly by Mr. Kimelman.
<FN4> Includes 532,711,201 shares held directly or indirectly by Mr. Knafel.
<FN5> Includes 7,637,200 shares held directly or indirectly by Mr. Monahan.
<FN6> Includes 4,049,697 shares held directly by Mr. Weisberger.
<FN7> Includes 1,241,895,466 shares of common stock.
<FN8> Includes 111,559,750 shares held directly or indirectly by Ms. Baird.
</FN>
Equity Incentive Plans
The information set forth under the caption "Securities
Authorized for Issuance Under Equity Incentive Plans" under Item
5 of this Annual Report on Form 10-K is hereby incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
On June 16, 2009, the Board of Directors of Igene approved a
repurchase of all outstanding employee stock options and
warrants. It was agreed to repurchase 51,425,000 options and
warrants, using 41,900,456 shares of restricted stock. Holders
of options and warrants were contacted and agreements were
reached. On July 16, 2009, shares were issued and options and
warrants were cancelled.
On November 28, 2008, Igene commenced offerings to exchange
shares of its common stock for its publicly and privately held
debt. Much of Igene's indebtedness was held by current and
former directors. The related party transactions in connection
with the exchange offerings are described below:
- As a result of this transaction, 33,185,622 shares of
Igene's common stock were issued to each of Thomas Kempner
and Sidney Knafel, directors of the Company, in exchange for
the 5% convertible debenture in the principal amount of
$381,000 and $33,820 in related interest, held by each of
them.
- As a result of this transaction, 152,729,546 shares of
Igene's common stock were issued to each of Thomas Kempner
and Sidney Knafel, directors of the Company, in exchange for
the 8% convertible debenture in the principal amount of
$1,107,106 and $655,170 in related interest and warrants,
held by each of them.
- As a result of this transaction, 279,625,624 shares of
Igene's common stock were issued to Thomas Kempner and
276,004,622 shares of Igene's common stock were issued to
Sidney Knafel, directors of the Company, in exchange for
their 8% notes and accrued interest.
- As a result of this transaction, 51,070,264 shares of
Igene's common stock were issued to Thomas Kempner and
43,324,547 shares of Igene's common stock were issued to
Sidney Knafel, directors of the Company, in exchange for
their variable rate demand notes and accrued interest.
In order to provide the Company with working capital as the
inventory received from the termination of the joint venture with
Tate & Lyle PLC is sold and the receivables are collected, on
December 12, 2007, the Company issued and sold an aggregate
principal amount of $300,000 in 8.5% secured notes, $150,000 to
each of Thomas Kempner and Sidney Knafel. These notes are
secured by the accounts receivable of the Company. As of
December 31, 2009 these notes have accrued $31,875 of interest,
and no payments have been made.
On October 15, 2007, Mr. Monahan, the Company's Vice President,
Secretary and Director of Manufacturing, was issued 1,000,000
shares of the Company's common stock, valued at $21,000, in
connection with his employment with, and services to, the
-21-
Company. The shares of common stock were issued pursuant to the
exemption from registration provided under Section 4(2) of the
Securities Act of 1933, as amended.
In order to provide the Company with sufficient funds to settle
the litigation with the holders of the convertible notes issued
by the Company in 2001, on February 15, 2007, the Company issued
and sold an aggregate principal amount of $762,000 in 5%
convertible debentures, $381,000 to each of Thomas Kempner and
Sidney Knafel, directors of the Company. These debentures are
convertible into shares of the Company's common stock at $0.02
per share based on the offer made to the original debenture
holders as the market price of the Company's common shares as of
February 26, 2007. As reported above, these debentures in the
aggregate principal amount of $762,000, and the related interest
in the aggregate amount of $67,641, were converted into
66,371,244 shares of Igene's common stock in connection with the
exchange offerings.
Director Independence
Since Igene is not a listed company, it has determined to apply
rule 4200(a)(15) of the Nasdaq Marketplace Rules to determine
independence of its directors. Based on such rule, Igene has
determined that none of its directors are deemed to be
independent and that, accordingly, the sole member of its audit
committee, Michael G. Kimelman, is not independent.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
REGISTERED PUBLIC ACCOUNTANTS
The accounting firm of M&K CPAS, PLLC ("M&K") audited the
financial statements of the Company for the fiscal years 2009 and
2008. M&K has advised the Company that neither the accounting
firm nor any of its members or associates has any direct
financial interest in or any connection with the Company other
than as independent public auditors.
AUDIT FEES AND SERVICES
The following table shows the aggregate fees paid or accrued by
the Company for the audit and other services provided by M&K for
fiscal years 2009 and 2008:
FY 2009 FY 2008
___________ ____________
Audit Fees $ 70,000 $ 85,000
Audit-Related Fees 0 0
Tax Fees 0 1,500
All Other Fees 0 0
__________ ___________
TOTAL $ 70,000 $ 86,500
Audit services provided by M&K for fiscal years 2009 and 2008
consisted of the audit of the consolidated financial statements
and quarterly reviews of financial statements. "Tax Fees"
include charges primarily related to tax return preparation and
tax consulting services.
In 2003, the SEC adopted a rule pursuant to the Sarbanes-Oxley
Act of 2002 that, except with respect to certain de minimis
services discussed below, requires audit committee pre-approval
of audit and non-audit services provided by the Company's
independent auditors. The audit committee reviews and pre-
approves audit and non-audit services of the independent auditors
in conformity with the requirements of Sarbanes-Oxley. All of
the 2009 and 2008 services described above were pre-approved by
the audit committee pursuant to this SEC rule.
-22-
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits filed herewith or incorporated by reference herein are
set forth in the following table prepared in accordance with Item
601 of Regulations S-K.
EXHIBIT DESCRIPTION
NO.
3.1 Articles of Incorporation of the Registrant, as
amended as of November 17, 1997, constituting
Exhibit 3.1 to the Registration Statement No. 333-
41581 on Form SB-2 filed with the SEC on December
5, 1997, are hereby incorporated by reference.
3.2 Articles of Amendment to Articles of Incorporation
of the Registrant, constituting Exhibit 3.1(b) to
the Registration Statement No. 333-76616 on Form S-
8 filed with the SEC on January 11, 2002, are
hereby incorporated by reference.
3.3 By-Laws of the Registrant, constituting Exhibit 3.2
to the Registration Statement No. 33-5441 on Form S-
1 filed with the SEC on May 6, 1986, are hereby
incorporated by reference.
4.1 Form of Variable Rate Convertible Subordinated
Debenture Due 2002 (Class A), constituting Exhibit
4.4 to the Registration Statement No. 33-5441 on
Form S-1 filed with the SEC on May 6, 1986, is
hereby incorporated by reference.
4.2 Form of Indenture by and between the Registrant and
American Stock Transfer and Trust Company, as
Trustee, dated as of March 31, 1998, constituting
Exhibit 4.2 to the Registration Statement No. 333-
41581 on Form SB-2/A filed with the SEC on January
23, 1998, is hereby incorporated by reference.
4.3 First Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of March 18, 2003, constituting
Exhibit 10.11 to the Quarterly Report on Form 10-
QSB filed with the SEC on May 14, 2003, is hereby
incorporated by reference.
4.4 Second Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of March 28, 2006, constituting
Exhibit 4.5 to the Annual Report on Form 10-KSB
filed with the SEC on April 13, 2006, is hereby
incorporated by reference.
4.5 Third Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of October 23, 2008.*
10.1 Form of Conversion and Exchange Agreement used in
May 1988 in connection with the conversion and
exchange by certain holders of shares of preferred
stock for common stock and Warrants, constituting
Exhibit 10.19 to the Registration Statement No. 33-
5441 on Form S-1 filed with the SEC on May 6, 1986,
is hereby incorporated by reference.
10.2 Preferred Stockholders' Waiver Agreement dated May
5, 1988, constituting Exhibit 10.3 to the
Registration Statement No. 33-23266 on Form S-1
filed with the SEC on July 22, 1988, is hereby
incorporated by reference.
10.3 Form of Agreement between the Registrant and
Certain Investors in Preferred Stock dated
September 30, 1987, constituting Exhibit 10.4 to
the Registration Statement No. 33-23266 on Form S-
1/A, is hereby incorporated by reference.
10.4 Agreement of Lease between Columbia Warehouse
Limited Partnership and the Registrant effective
December 15, 1995, constituting Exhibit 10.13 to
the Annual Report on Form 10-KSB filed with the SEC
on April 12, 1996, is hereby incorporated by
reference.
10.5 First Amendment to Lease between the Registrant and
Red Branch Center, LLC made September 13, 2000,
constituting Exhibit 10.8 to the Annual Report on
Form 10-KSB filed with the SEC on April 2, 2001, is
hereby incorporated by reference.
-23-
10.6 Separation Agreement between the Registrant and
Tate & Lyle Fermentation Products Ltd. dated as of
October 31, 2007, constituting Exhibit 10.1 to the
Current Report on Form 8-K filed with the SEC on
November 6, 2007, is hereby incorporated by
reference.
10.7 Limited Liability Company Agreement dated as of
January 8, 2009 between Archer-Daniels-Midland
Company and the Registrant, constituting Exhibit
10.1 to the Current Report on Form 8-K filed with
the SEC on January 21, 2009, is hereby incorporated
by reference. [Portions of this exhibit have been
omitted pursuant to a request for confidential
treatment.]
21.1 Subsidiaries*
31.1 Rule 13a-14(a) or 15d-14(a) Certification of the
Registrant's principal executive officer.*
31.2 Rule 13a-14(a) or 15d-14(a) Certification of the
Registrant's principal financial officer.*
32.1 Rule 13a-14(b) or 15d-14(b) Certification of the
Registrant's principal executive officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to
Rule 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Rule 13a-14(b) or 15d-14(b) Certification of the
Registrant's principal financial officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to
Rule 906 of the Sarbanes-Oxley Act of 2002.*
*Filed herewith
-24-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_______________________________________________________
To the Board of Directors
IGENE Biotechnology, Inc.
Columbia, Maryland
We have audited the accompanying consolidated balance sheets of
IGENE Biotechnology, Inc. as of December 31, 2009 and 2008, and
the related consolidated statements of operations, stockholders'
deficiency and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of IGENE Biotechnology, Inc. as of December 31, 2009 and 2008,
and the results of its operations and cash flows for the periods
described above in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 13 to the financial statements, the Company has suffered
recurring losses from operations which raises substantial doubt
about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 13. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
____________________
M&K CPAS, PLLC
www.mkacpas.com
_______________
Houston, Texas
March 31, 2010
-25-
IGENE Biotechnology, Inc. and Subsidiary
Consolidated Balance Sheets
December 31,
_______________________________
2009 2008
______________ ______________
ASSETS
______
CURRENT ASSETS
Cash and cash equivalents $ 1,295,222 $ 1,488,011
Accounts receivable 1,929 1,045,767
Inventory --- 2,398,520
Due from Naturxan - related party 2,318,085 ---
Prepaid expenses and other current assets 44,452 23,702
______________ ______________
TOTAL CURRENT ASSETS 3,659,688 4,956,000
Property and equipment, net 852,894 831,838
5 year non-compete, net 92,386 123,181
Intellectual property 149,670 149,670
Other assets 5,125 5,125
______________ ______________
TOTAL ASSETS $ 4,759,763 $ 6,065,814
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
________________________________________
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 465,405 $ 2,849,455
Guarantee in debt of Naturxan - related party 1,094,502 ---
______________ ______________
TOTAL CURRENT LIABILITIES 1,559,907 2,849,455
LONG-TERM DEBT
Notes payable, net 363,874 353,598
Contingent liability on joint venture separation 5,000,000 5,000,000
Accrued interest 338,059 307,247
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
convertible, voting, series A, $0.01 par value per share.
Stated value $21.60 and $20.96, respectively per share.
Authorized 1,312,500 shares; issued and outstanding 11,134
shares. Redemption amount $240,494 and $233,377,
respectively. 240,494 233,377
______________ ______________
TOTAL LIABILITIES 7,502,334 8,743,677
______________ ______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock -- $0.01 par value per share. Authorized
3,000,000,000 shares; issued and outstanding 1,560,404,297
and 1,518,503,841 shares respectively 15,604,043 15,185,038
Additional paid-in capital 34,466,644 34,885,649
Accumulated deficit (52,871,514) (52,730,767)
Accumulated other comprehensive income (loss) 58,256 (17,783)
______________ ______________
TOTAL STOCKHOLDERS' DEFICIENCY (2,742,571) (2,677,863)
______________ ______________
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 4,759,763 $ 6,065,814
============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
-26-
IGENE Biotechnology, Inc. and Subsidiary
Consolidated Statements of Operations
December 31,
________________________________
2009 2008
_______________ _______________
REVENUE
_______
Sales $ 3,957,903 $ 7,644,477
Cost of sales 2,942,340 6,395,062
_______________ _______________
GROSS PROFIT 1,015,563 1,249,415
LOSS OF JOINT VENTURE (1,094,502) ---
_______________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 387,916 731,094
Research, development and pilot plant 1,851,118 1,655,908
General and administrative 838,062 1,050,703
Less expenses reimbursed by Joint Venture (2,086,166) ---
_______________ _______________
TOTAL OPERATING EXPENSES 990,930 3,437,705
_______________ _______________
OPERATING (LOSS) (1,069,869) (2,188,290)
OTHER INCOME 1,026,642 225,813
INTEREST EXPENSE (including amortization of debt
discount of $10,276 for 2009, and $1,294,680 for 2008) (97,520) (2,028,460)
_______________ _______________
NET (LOSS) $ (140,747) $ (3,990,937)
_______________ _______________
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign exchange translation gain (loss) 76,039 (17,783)
TOTAL COMPREHENSIVE LOSS $ (64,708) $ (4,008,720)
=============== ===============
NET (LOSS) PER COMMON SHARE BASIC AND FULLY DILUTED $ 0.00 $ (0.02)
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 1,537,789,530 187,037,119
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
-27-
IGENE Biotechnology, Inc. and Subsidiary
Consolidated Statements of Stockholders' Deficiency
Years ended December 31, 2009 and 2008
Common Stock Additional
_____________________________ Paid-in Accumulated Comprehensive Stockholders'
# Shares Amount Capital Deficit Income (Loss) Deficiency
______________ _____________ _____________ _____________ _____________ _____________
Balance at December 31, 2007 110,337,072 $ 1,103,371 $ 33,276,687 $(48,739,830) $ --- $(14,359,772)
______________ _____________ _____________ _____________ _____________ _____________
Exchange of debt for equity 645,956,606 6,459,566 1,765,419 --- --- 8,224,985
Exchange of debt for equity 762,210,163 7,622,101 (156,457) --- --- 7,465,644
Loss due to currency translation --- --- --- --- (17,783) (17,783)
Net loss for 2008 --- --- --- (3,990,937) --- (3,990,937)
______________ _____________ _____________ _____________ _____________ _____________
Balance at December 31, 2008 1,518,503,841 $ 15,185,038 $ 34,885,649 $(52,730,767) $ (17,783) $ (2,677,863)
______________ _____________ _____________ _____________ _____________ _____________
Exchange of employee
options for equity 41,900,456 419,005 (419,005) --- --- ---
Gain due to currency
translation --- --- --- --- 76,039 76,039
Net loss for 2009 --- --- --- (140,747) --- (140,747)
______________ _____________ _____________ _____________ _____________ _____________
Balance at December 31, 2009 1,560,404,297 $ 15,604,043 $ 34,466,644 $(52,871,514) $ 58,256 $ (2,742,571)
============== ============= ============= ============= ============= =============
The accompanying notes are an integral part of the consolidated financial statements.
-28-
IGENE Biotechnology, Inc. and Subsidiary
Consolidated Statements of Cash Flows
December 31,
__________________________________
2009 2008
________________ ________________
CASH FLOWS FROM OPERATING ACTIVITIES
____________________________________
Net (loss) $ (140,747) $ (3,990,937)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of debt discount 10,276 1,294,680
Depreciation 150,723 107,821
Loss of joint venture 1,094,502 ---
Gain on forgiveness of debt (1,025,741) ---
Advances to joint venture (2,318,085) ---
Amortizations of customer contracts and non-compete 30,795 264,454
Increase in preferred stock for cumulative dividend
classified as interest 7,117 7,134
Decrease (increase) in:
Accounts receivable 1,043,838 1,673,117
Inventory 2,398,520 5,661,257
Prepaid expenses and other assets (20,750) 14,649
Increase (decrease) in:
Accounts payable and other accrued expenses (1,327,497) (4,326,565)
________________ ________________
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (97,049) 705,610
________________ ________________
CASH FLOWS FROM INVESTING ACTIVITIES
____________________________________
Cash used for purchase of property and equipment (171,779) (226,166)
________________ ________________
NET CASH USED IN INVESTING ACTIVITIES (171,779) (226,166)
________________ ________________
CASH FLOWS FROM FINANCING ACTIVITIES
____________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES --- ---
________________ ________________
GAIN (LOSS) DUE TO CURRENCY TRANSLATION 76,039 (17,783)
NET DECREASE IN CASH AND CASH EQUIVALENTS 192,789 461,661
CASH AND CASH EQUIVALENTS - BEGINNING OF THE YEAR 1,488,011 1,026,350
________________ ________________
CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 1,295,222 $ 1,488,011
================ ================
SUPPLEMENTARY DISCLOSURE AND CASH FLOW INFORMATION
__________________________________________________
Cash paid during the year for interest $ --- $ ---
Cash paid during the year for income taxes --- ---
NON-CASH TRANSACTIONS
_____________________
Exchange of debt for common stock $ --- $ 15,690,630
Exchange of options for common stock $ 419,005 $ ---
The accompanying notes are an integral part of the consolidated financial statements.
-29-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
(1) Summary of Significant Accounting Policies
__________________________________________
Nature of Operations
____________________
Igene Biotechnology, Inc. ("Igene") was incorporated under
the laws of the State of Maryland on October 27, 1981, as
"Industrial Genetics, Inc." Igene changed its name to "IGI
Biotechnology, Inc." on August 17, 1983, and to "Igene
Biotechnology, Inc." on April 14, 1986. Igene is located in
Columbia, Maryland, has an operational subsidiary in Chile,
and through February 2003, had a subsidiary in Norway.
Igene was formed to develop, produce and market value-added
specialty biochemical products. Igene is a supplier of
natural astaxanthin, an essential nutrient in different feed
applications and a source of pigment for coloring farmed
salmon species. Igene is also venturing to supply
astaxanthin as a nutraceutical ingredient. Igene is focused
on fermentation technology, pharmacology, nutrition and
health in its marketing of products and applications
worldwide.
Igene has devoted its resources to the development of
proprietary processes to convert selected agricultural raw
materials or feedstocks into commercially useful and cost
effective products for the food, feed, flavor and
agrochemical industries. In developing these processes and
products, Igene has relied on the expertise and skills of
its in-house scientific staff and, for special projects,
various consultants.
In an effort to develop a dependable source of production,
on March 19, 2003, Tate & Lyle PLC ("Tate") and Igene
announced a 50:50 joint venture (the "Joint Venture") to
produce AstaXin(R) for the aquaculture industry. Production
utilized Tate's fermentation capability together with the
unique technology developed by Igene. Part of Tate's
existing Selby, England citric acid facility was modified to
include the production of 1,500 tons per annum of
astaxanthin.
On October 31, 2007, Igene and Tate entered into a
Separation Agreement pursuant to which the Joint Venture was
terminated. As part of the Separation Agreement, Igene sold
to Tate its 50% interest in the Joint Venture and the Joint
Venture sold to Igene its intellectual property, inventory
and certain assets and lab equipment utilized by the Joint
Venture as well as Igene's subsidiary in Chile. The
purchase price paid by Tate to Igene for its 50% interest in
the Joint Venture was 50% of the Joint Venture's net working
capital. The purchase price paid by Igene for the inventory
was an amount equal to 50% of the Joint Venture's net
working capital, the assumption of various liabilities and
the current market price of the inventory, less specified
amounts. In addition, Igene agreed to pay to Tate an amount
equal to 5% of Igene's gross revenues from the sale of
astaxanthin up to a maximum of $5,000,000. Tate agreed for
a period of five years not to engage in the astaxanthin
business.
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed a joint venture ("Naturxan") to
manufacture and sell astaxanthin and derivative products
throughout the world. Each of the Company and ADM has a 50%
ownership interest in Naturxan and has equal representation
on the Board of Managers of Naturxan.
Principles of Consolidation
___________________________
The accounts of our other wholly-owned subsidiary, Igene
Chile, are included in the consolidation of these financial
statements. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
_________________________
Igene considers cash equivalents to be short-term, highly
liquid investments that have original maturities of less
than 90 days. These include interest bearing money market
accounts. There were no cash equivalents as of December 31,
2009 or 2008.
-30-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Accounts Receivable
___________________
Accounts receivable are stated at the amount management
expects to collect from the outstanding balances.
Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation
allowance based upon its assessment of the current
collection status of individual accounts. Delinquent
amounts that are outstanding after management has conducted
reasonable collection efforts are written off through a
charge to the valuation allowance and a credit to accounts
receivable. Management has determined no allowance was
necessary as of December 31, 2009 or 2008.
Research and Development Costs
______________________________
For financial reporting purposes, research, development and
pilot plant scale-up costs are charged to expense as
incurred, consistent with current accounting literature.
Property and Equipment
______________________
Property and equipment are stated at cost less accumulated
depreciation and amortization computed using the straight-
line method. Premises and equipment are depreciated over
the useful lives of the assets, which generally range from
three to seven years for furniture, fixtures and equipment,
three to five years for computer software and hardware.
Leasehold improvements are amortized over the terms of the
respective leases or the estimated useful lives of the
improvements, whichever is shorter. The cost of major
renewals and betterments are capitalized, while the costs of
ordinary maintenance and repairs are expensed as incurred.
Estimates
_________
The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Foreign Currency Translation and Transactions
_____________________________________________
Since the day-to-day operations of Igene's foreign
subsidiary in Chile are dependent on the economic
environment of the parent's currency, the financial position
and results of operations of Igene's foreign subsidiary are
determined using Igene's reporting currency (U.S. dollars)
as the functional currency. All exchange gains and losses
from remeasurement of monetary assets and liabilities that
are not denominated in U.S. dollars are recognized currently
in other comprehensive income. All transactional gains and
losses are part of income or loss from operations pursuant
to current accounting literature.
Fair Value of Financial Instruments
___________________________________
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and short-term debt
approximate fair value because of the relatively short
maturity of these instruments. Management believes the
carrying amount of long-term debt approximates fair value
because of similar current rates at which Igene could borrow
funds with consistent remaining maturities.
-31-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Accounting for Stock-Based Compensation
_______________________________________
Stock issued to employees is recorded at the fair value of
the shares granted based upon the closing market price of
Igene's stock at the measurement date and recognized as
compensation expense over the applicable requisite service
period. Warrants granted to non-employees are recorded at
the estimated fair value of the warrants granted using the
Black-Scholes pricing model and recognized as general and
administrative expense over the applicable requisite service
period.
Credit Risk
___________
Igene does not require collateral from its customers with
respect to accounts receivable but performs periodic credit
evaluations of such customers' financial conditions. Igene
determines any required allowance by considering a number of
factors including lengths of time accounts receivable are
past due and previous loss history. Igene provides reserves
for accounts receivable when they become uncollectible, and
payments subsequently received on such receivables are
credited to the allowance for doubtful accounts.
Igene's cash may exceed FDIC protection levels at different
points throughout the year; management believes the risk
associated with this possible exposure is minimal. Igene has
exceeded FDIC protection limits at December 31, 2009 and
2008.
Long-Lived Assets
_________________
The Company reviews goodwill and certain intangible assets
periodically for impairment and an impairment charge is
recorded in the periods in which the recorded carrying value
of goodwill and certain intangibles is more than its
estimated fair value. The goodwill impairment test is
performed annually, or more frequently, in the case of other
events that indicate a potential impairment.
The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that
indicate that the carrying value of the asset may not be
recoverable. Evaluation of possible impairment is based on
the Company's ability to recover the asset from the expected
future pre-tax cash flows (undiscounted and without interest
charges) of the related operations. If the expected
undiscounted pre-tax cash flows are less than the carrying
amount of such asset, an impairment loss is recognized for
the difference between the estimated fair value and carrying
amount of the asset. Igene performed an impairment test on
its acquired tangible and intangible assets at December 31,
2009 and 2008 and determined no impairment was necessary.
Inventories
___________
Inventories consist of finished goods, and are stated based
on the valuation received at the close of the separation of
the Joint Venture and are at the lower of cost or market.
Inventory is tracked by specific lot number.
Income Taxes
____________
Igene utilizes the asset and liability method in accounting
for income taxes. Under this method, deferred tax assets and
liabilities are recognized for operating loss and tax credit
carry forwards and for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the results of operations in the
period that includes the enactment date. A valuation
-32-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
allowance is recorded to reduce the carrying amounts of
deferred tax assets unless it is more likely than not that
the value of such assets will be realized.
Revenue Recognition
___________________
Igene's revenue recognition policy is consistent with the
criteria set forth in Staff Accounting Bulletin (SAB) 104,
"Revenue Recognition in Financial Statements," for
determining when revenue is realized or realizable and
earned. In accordance with the requirements of SAB 104, the
Company recognizes revenue when (1) persuasive evidence of
an arrangement exists, (2) delivery has occurred, (3) the
seller's price is fixed or determinable, and (4)
collectability is reasonably assured.
Intangible Assets
_________________
Intangible assets with estimable useful lives are amortized
over respective estimated useful lives, and reviewed for
impairment in accordance with current accounting literature.
Igene has recorded values for customer contracts,
intellectual property and a non-compete contract received as
part of the separation from Tate & Lyle. These values are
based on the independent valuation received at the close of
the venture. As this valuation was received after December
31, 2007, and deemed to be accurate as of that date, no
amortization was taken for 2007, and has been taken in 2008
and 2009.
Customer contracts are for a term of one year and the value
was amortized over 2008. The non-compete contract is for a
term of five years and will be amortized over the life of
the contract. The original value of the contract was
$153,977 at December 31, 2007, of which $30,796 was
amortized during 2008 and 2009. Intellectual property will
be tested annually for impairment, and any impaired value
shall be written-off. The intellectual property represents
the technology used in the production of astaxanthin as this
asset is currently creating revenue in excess of its value.
Management has determined its life is currently indefinite.
At December 31, 2009 the value was recorded at $149,670. It
was determined based on future revenue expectations that
this was not impaired.
New Accounting Pronouncements
_____________________________
On January 1, 2009, the Company adopted a new accounting
standard issued by the FASB related to accounting for
business combinations using the acquisition method of
accounting (previously referred to as the purchase method).
Among the significant changes, this standard requires a
redefining of the measurement date of a business
combination, expensing direct transaction costs as incurred,
capitalizing in-process research and development costs as an
intangible asset and recording a liability for contingent
consideration at the measurement date with subsequent re-
measurements recorded in the results of operations. This
standard also requires costs for business restructuring and
exit activities related to the acquired company to be
included in the post-combination financial results of
operations and also provides new guidance for the
recognition and measurement of contingent assets and
liabilities in a business combination. In addition, this
standard requires several new disclosures, including the
reasons for the business combination, the factors that
contribute to the recognition of goodwill, the amount of
acquisition related third-party expenses incurred, the
nature and amount of contingent consideration, and a
discussion of pre-existing relationships between the parties
The adoption of this standard did not have a material impact
on the Company's consolidated financial statements.
On January 1, 2009, the Company adopted a new accounting
standard issued by the FASB that establishes accounting and
reporting standards for noncontrolling interests in a
subsidiary in consolidated financial statements, including
deconsolidation of a subsidiary. This standard requires
entities to record the acquisition of noncontrolling
interests in subsidiaries initially at fair value The
adoption of this standard did not have a material impact on
the Company's consolidated financial statements.
-33-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
On January 1, 2009, the Company adopted a new accounting
standard issued by the FASB related to the disclosure of
derivative instruments and hedging activities. This standard
expanded the disclosure requirements about an entity's
derivative financial instruments and hedging activities,
including qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures
about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-
related contingent features in derivative instruments. The
adoption of this standard did not have a material impact on
the Company's consolidated financial statements.
Effective June 30, 2009, the Company adopted a newly issued
accounting standard related to accounting for and disclosure
of subsequent events in its consolidated financial
statements. This standard provides the authoritative
guidance for subsequent events that was previously addressed
only in United States auditing standards. This standard
establishes general accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued and
requires the Company to disclose the date through which it
has evaluated subsequent events and whether that was the
date the financial statements were issued or available to be
issued. This standard does not apply to subsequent events or
transactions that are within the scope of other applicable
GAAP that provide different guidance on the accounting
treatment for subsequent events or transactions. The
adoption of this standard did not have a material impact on
the Company's consolidated financial statements.
In June 2009, the FASB issued an amendment to the accounting
standards related to the consolidation of variable interest
entities ("VIE"). This standard provides a new approach for
determining which entity should consolidate a VIE, how and
when to reconsider the consolidation or deconsolidation of a
VIE and requires disclosures about an entity's significant
judgments and assumptions used in its decision to
consolidate or not consolidate a VIE. Under this standard,
the new consolidation model is a more qualitative assessment
of power and economics that considers which entity has the
power to direct the activities that "most significantly
impact" the VIE' s economic performance and has the
obligation to absorb losses or the right to receive benefits
that could be potentially significant to the VIE. This
standard is effective for the Company as of January 1, 2010
and the Company does not expect the impact of its adoption
to be material to its consolidated financial statements.
In October 2009, the FASB issued an amendment to the
accounting standards related to the accounting for revenue
in arrangements with multiple deliverables including how the
arrangement consideration is allocated among delivered and
undelivered items of the arrangement. Among the amendments,
this standard eliminates the use of the residual method for
allocating arrangement consideration and requires an entity
to allocate the overall consideration to each deliverable
based on an estimated selling price of each individual
deliverable in the arrangement in the absence of having
vendor-specific objective evidence or other third party
evidence of fair value of the undelivered items. This
standard also provides further guidance on how to determine
a separate unit of accounting in a multiple-deliverable
revenue arrangement and expands the disclosure requirements
about the judgments made in applying the estimated selling
price method and how those judgments affect the timing or
amount of revenue recognition. The adoption of this standard
did not have a material impact on the Company's consolidated
financial statements.
In October 2009, the FASB issued an amendment to the
accounting standards related to certain revenue arrangements
that include software elements. This standard clarifies the
existing accounting guidance such that tangible products
that contain both software and non-software components that
function together to deliver the product's essential
functionality, shall be excluded from the scope of the
software revenue recognition accounting standards.
Accordingly, sales of these products may fall within the
scope of other revenue recognition accounting standards or
may now be within the scope of this standard and may require
an allocation of the arrangement consideration for each
element of the arrangement. The adoption of this standard
did not have a material impact on the Company's consolidated
financial statements.
-34-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
In January 2010, the FASB issued an amendment to the
accounting standards related to the disclosures about an
entity's use of fair value measurements. Among these
amendments, entities will be required to provide enhanced
disclosures about transfers into and out of the Level 1(fair
value determined based on quoted prices in active markets
for identical assets and liabilities) and Level 2 (fair
value determined based on significant other observable
inputs) classifications, provide separate disclosures about
purchases, sales, issuances and settlements relating to the
tabular reconciliation of beginning and ending balances of
the Level 3 (fair value determined based on significant
unobservable inputs) classification and provide greater
disaggregation for each class of assets and liabilities that
use fair value measurements. Except for the detailed Level 3
roll-forward disclosures, the new standard is effective for
the Company for interim and annual reporting periods
beginning after December 31, 2009. The requirement to
provide detailed disclosures about the purchases, sales,
issuances and settlements in the roll-forward activity for
Level 3 fair value measurements is effective for the Company
for interim and annual reporting periods beginning after
December 31, 2010. The Company does not expect that the
adoption of this new standard will have a material impact to
its consolidated financial statements.
(2) Non-Cash Investing and Financing Activities
___________________________________________
On June 16, 2009, the Board of Directors of Igene approved a
repurchase of all outstanding employee stock options and
warrants. It was agreed to repurchase 51,425,000 options
and warrants, using 41,900,456 shares of restricted stock.
Holders of options and warrants were contacted and
agreements were reached. On July 16, 2009, shares were
issued and options and warrants were cancelled.
During November of 2008, Igene commenced the process of
offering to exchange common stock to holders of Igene notes,
debentures and warrants. The exchanges that occurred
resulted in recording of additional paid in capital,
pursuant to current accounting literature for related party
debt forgiveness, on the termination of the debt in the
amount of $8,649,796. The details are as follows:
Pursuant to the terms of an Indenture dated as of March 31,
1998, as amended (the "Indenture") between Igene and
American Stock Transfer & Trust Company, as Trustee (the
"Trustee"), Igene issued and sold $5,000,000 of its 8% notes
(the "8% Notes"). Concurrently with the issuance of the 8%
Notes, Igene issued, pursuant to a Warrant Agreement by and
between Igene and American Stock Transfer & Trust Company
(the "Warrant Agent") dated as of March 31, 1998, as amended
(the "Warrant Agreement"), 50,000,000 warrants to purchase
shares of Igene common stock for $0.10 per share expiring
March 31, 2008. The warrant purchase price under the
Warrant Agreement was reduced to $0.075 per share, and the
maturity date of the 8% Notes was extended to March 31,
2006, by an amendment dated March 18, 2003, and approved by
the requisite number of holders of the securities.
On March 28, 2006, Igene and American Stock Transfer & Trust
Company, in its capacity as Trustee and Warrant Agent,
entered into a Second Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2009, and reduced
the warrant price under the Warrant Agreement from $0.075 to
$0.056 per share.
On October 23, 2008, Igene and American Stock Transfer &
Trust Company, in its capacity as Trustee and Warrant Agent,
entered into a Third Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2019. The
warrants under the Warrant Agreement expired as of March 31,
2008.
On December 3, 2008, Igene completed an offering to exchange
145,600 of our shares of common stock, par value $0.01 per
share, for each $1,000 principal amount of the 8% Notes
outstanding and accrued interest thereon. As of that date,
$4,759,767 of 8% Notes principal were outstanding, with
$4,064,450 accrued interest thereon. Of these notes,
$4,436,515 of notes principal with $3,788,419 of interest
were exchanged for 645,956,606 shares of Igene common stock
at a price of $0.005 per share. As a result, additional
-35-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
paid in capital was recorded for the gain of $4,995,151 on
the retirement, pursuant to current accounting literature
for related party debt forgiveness.
On November 28, 2008, Igene commenced an offering to
exchange shares of its common stock to holders of its
privately held debt and associated warrants. Much of this
indebtedness was held by current and past directors and
consisted of the following:
The funds to settle the ProBio litigation were provided by
Igene's directors. On February 15, 2007, Igene issued and
sold $762,000 in aggregate principal amount of 5%
convertible debentures, 50% each to two directors of Igene.
These debentures were convertible into shares of Igene's
common stock at $0.02 per share. At the time of the
exchange the accrued interest on this debt was $67,641. All
debt and interest under the 5% convertible debentures were
exchanged for 66,371,244 shares of common stock.
Igene issued $3,814,212 of 8% convertible debentures between
March 2001 and July 2002. The debt had accrued $2,204,106
of interest at the time of the exchange. Also, 66,427,650
warrants were issued in connection with the 8% convertible
debentures. All of the debt and interest, as well as all of
the warrants, were exchanged for 528,578,590 shares of Igene
common stock.
Beginning November 16, 1995, and continuing through May 8,
1997, Igene issued promissory notes to certain directors for
aggregate consideration of $1,082,500. These notes
specified that at any time prior to repayment the holder had
the right to convert the notes to common stock of Igene at
prices ranging from $0.05 per share to $0.135 per share,
based on the market price of common shares at the respective
issue dates. The notes were convertible in total into
23,421,273 shares of common stock. At the time of the
exchange the debt had accrued interest in the amount of
$832,485. Of the amount outstanding, holders of $1,041,878
of debt with $801,269 of accrued interest agreed to exchange
their holdings for 147,451,719 shares of Igene common stock.
As part of this debt Igene had 60,541,666 warrants
outstanding to purchase Igene common stock. 60,301,666 of
these warrants were additionally settled in exchange for
19,808,610 shares of Igene common stock.
In total, 762,210,163 shares of Igene common stock were
issued in exchange for $5,618,090 of notes and debentures,
$3,073,015 of related interest, and 126,729,316 related
warrants.
During 2009 and 2008, Igene recorded dividends in arrears on
its 8% Redeemable Preferred Stock, Series A at $0.64 per
share aggregating $7,117 and $7,134, respectively, on such
preferred stock, which has been removed from paid-in capital
and included in the carrying value of the redeemable
preferred stock (see also note 9).
(3) Concentration of Credit Risk
____________________________
Igene is potentially subject to the effects of a
concentration of credit risk in accounts receivable. The
accounts receivable is substantially composed of receivables
from two customers, with one of the customers maintaining
58% of the December 31, 2008 receivables balance and a
second customer maintaining 39% of the December 31, 2008
receivables balance. Because of the volume of business
transacted with these two customers by Igene, Igene's
ability to collect its receivables from these customers
could adversely affect its business. In order to minimize
risk, Igene strictly evaluates the companies to which it
extends credit and all prices are denominated in U.S.
dollars so as to minimize currency fluctuation risk. Losses
due to credit risks in accounts receivable are expected to
be immaterial. There were no concentrations of credit risk
at December 31, 2009.
-36-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
(4) Property and Equipment
______________________
Property and equipment are stated at cost and are summarized
as follows:
2009 2008
____________ ____________
Laboratory equipment and fixtures $ 218,878 $ 184,744
Idle equipment 866,881 793,921
Pilot plant equipment and fixtures 229,275 169,170
Office furniture and fixtures 49,501 44,920
____________ ____________
1,393,118 1,192,755
Less accumulated depreciation (511,641) (360,917)
____________ ____________
$ 852,894 $ 831,838
============ ============
(5) Investment in Joint Venture
___________________________
Igene has recorded a gain of $1,025,741. This is a one-time
occurrence related to a liability recorded in a prior period
related to the termination of the joint venture with Tate &
Lyle. On February 26, 2009, Igene signed a settlement
agreement of past obligations and made a final payment to
Tate & Lyle in the amount of $714,227. At the termination
of the joint venture, Igene recorded liabilities of $890,000
for payments of past payables of the joint venture as well
as $51,000 for costs related to collection of receivables of
the joint venture. The expense was recorded when it was
thought Igene could be liable for it, but with the exception
of the $5,000,000 liability related to future revenue, Igene
has settled its debt to Tate & Lyle.
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed a joint venture (the "ADM JV") to
manufacture and sell astaxanthin and derivative products
throughout the world. Each of the Company and ADM has a 50%
ownership interest in the ADM JV and has equal
representation on the Board of Managers of the ADM JV
ADM has provided a working line of credit to the ADM JV
bearing interest at the rate of 4% in excess of the one year
LIBOR. As part of the ADM JV agreement both Igene and ADM
agreed to provide a Guarantee for 50% of the indebtedness of
the new venture Naturxan, LLC, up to $1,612,500. The
$1,828,444 due from Naturxan is for services provided by
Igene to the ADM JV. These fees are payable within 30 days
of the receipt of the invoice. Unpaid invoices will accrue
interest at the six month LIBOR.
Currently the joint venture is in the process of developing
the manufacturing process. Management expects dependable
production in 2010. As of the end of the 2009, Igene has
not made an investment in the ADM JV.
(6) Convertible Debentures
______________________
On November 28, 2008, Igene commenced an offering to
exchange shares of its common stock for its privately held
debt and warrants. Much of this liability was held by
current and past directors and consisted of the following:
The funds to settle the ProBio litigation were provided by
Igene's directors. On February 15, 2007, Igene issued and
sold $762,000 in aggregate principal amount of 5%
convertible debentures, 50% each to two directors of Igene.
These debentures were convertible into shares of Igene's
common stock at $0.02 per share. At the time of the
exchange, the accrued interest on this debt was $67,641.
All debt and interest under the 5% convertible debentures
were exchanged for 66,371,244 shares of common stock.
-37-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Igene issued $3,814,212 of 8% convertible debentures between
March 2001 and July 2002. The debt had accrued $2,204,106
of interest at the time of the exchange. Also, 66,427,650
warrants were issued in connection with the 8% convertible
debentures. All of the debt and interest, as well as all of
the warrants, under the 8% convertible debentures were
exchanged for 528,578,590 shares of Igene common stock.
Beginning November 16, 1995, and continuing through May 8,
1997, Igene issued promissory notes to certain directors for
aggregate consideration of $1,082,500. These notes
specified that at any time prior to repayment the holder had
the right to convert the notes to common stock of Igene at
prices ranging from $0.05 per share to $0.135 per share,
based on the market price of common shares at the respective
issue dates. The notes were convertible in total into
23,421,273 shares of common stock. At the time of the
exchange, the debt had accrued interest in the amount of
$832,485. Of the amount outstanding, holders of $1,041,878
of debt with $801,269 of accrued interest agreed to exchange
their holdings for 147,451,719 shares of Igene common stock.
As part of this debt, Igene had 60,541,666 warrants
outstanding to purchase Igene common stock. 60,301,666 of
these warrants were additionally settled in exchange for
19,808,610 shares of Igene common stock.
In total, 762,210,163 shares of Igene common stock were
issued in exchange for $5,618,090 of notes and debentures,
$3,073,015 of related interest, and 126,729,316 related
warrants.
(7) Notes Payable
_____________
Pursuant to the terms of an Indenture dated as of March 31,
1998, as amended (the "Indenture") between Igene and
American Stock Transfer & Trust Company, as Trustee (the
"Trustee"), Igene issued and sold $5,000,000 of its 8% notes
(the "8% Notes"). Concurrently with the issuance of the 8%
Notes, Igene issued, pursuant to a Warrant Agreement by and
between Igene and American Stock Transfer & Trust Company
(the "Warrant Agent") dated as of March 31, 1998, as amended
(the "Warrant Agreement"), 50,000,000 warrants to purchase
shares of Igene common stock for $0.10 per share expiring
March 31, 2008. The warrant purchase price under the
Warrant Agreement was reduced to $0.075 per share, and the
maturity date of the 8% Notes was extended to March 31,
2006, by an amendment dated March 18, 2003, and approved by
the requisite number of holders of the securities.
On March 28, 2006, Igene and American Stock Transfer & Trust
Company, in its capacity as Trustee and Warrant Agent,
entered into a Second Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2009, and reduced
the warrant price under the Warrant Agreement from $0.075 to
$0.056 per share.
On October 23, 2008, Igene and American Stock Transfer &
Trust Company, in its capacity as Trustee and Warrant Agent,
entered into a Third Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2019. The
warrants under the Warrant Agreement expired as of March 31,
2008.
On December 3, 2008, Igene completed an offering to exchange
145,600 of our shares of common stock, par value $0.01 per
share, for each $1,000 principal amount of the 8% Notes
outstanding and accrued interest thereon. As of that date,
$4,759,767 of 8% Notes principal were outstanding, with
$4,064,450 accrued interest thereon. Of these notes,
$4,436,515 of notes principal with $3,788,419 of interest
were exchanged for 645,956,606 shares of Igene common stock
at a price of $0.005 per share. As a result, additional
paid in capital was recorded to recognize the gain of
$4,995,151 on the retirement, pursuant to current accounting
literature for related party debt forgiveness.
-38-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Combined aggregate amounts of maturities for all notes
payable are in 2019.
Notes Payable was summarized as follows as of December 31, 2009:
Accrued
Principal Interest
_______________ _______________
Long-term unsecured notes payable, bearing interest
at prime, scheduled to mature
March 31, 2003, extended to March 31,
2019, convertible into common stock $ 40,622 $ 33,971
Long-term unsecured notes payable, bearing interest
at 8%, scheduled to mature March 31, 2003,
extended to March 31, 2019 323,252 304,088
_______________ _______________
$ 363,874 $ 338,059
=============== ===============
Notes Payable was summarized as follows as of December 31, 2008:
Accrued
Principal Interest
_______________ _______________
Long-term unsecured notes payable, bearing interest
at prime, scheduled to mature
March 31, 2003, extended to March 31,
2019, convertible into common stock $ 40,622 $ 31,432
Long-term unsecured notes payable, bearing interest
at 8%, scheduled to mature March 31, 2003,
extended to March 31, 2019 323,252 275,815
_______________ _______________
Less unamortized debt discount (10,276) ---
_______________ _______________
$ 353,598 $ 307,247
=============== ===============
(8) Redeemable Preferred Stock
__________________________
Each share of redeemable preferred stock is entitled to vote
on all matters requiring shareholder approval as one class
together with holders of common stock. Each share of
redeemable preferred stock is entitled to two votes and each
share of common stock is entitled to one vote.
Redeemable preferred stock is convertible at the option of
the holder at any time, unless previously redeemed, into
shares of Igene's common stock at the rate of two shares of
common stock for each share of preferred stock (equivalent
to a conversion price of $4.00 per common share), subject to
adjustment under certain conditions.
Shares of redeemable preferred stock are redeemable for cash
in whole or in part at the option of Igene at any time at
the stated value plus accrued and unpaid dividends to the
redemption date. Dividends are cumulative and payable
quarterly on January 1, April 1, July 1 and October 1, since
January 1, 1988.
Mandatory redemption of Series A preferred stock was to be
made in October 2002. As Igene is operating at a negative
cash flow and negative earnings, Maryland law does not allow
for the redemption of these shares. As such they will
remain outstanding and continue to accrue dividends until
such time as Igene is able to undertake redemption, though
there can be no assurance this will develop. Igene does not
expect to be able to redeem the Series A preferred stock
unless, after giving effect to such redemption (a) the
Company would be able to pay its indebtedness in the usual
course of business and (b) the Company's total assets would
be greater than the sum of its total liabilities plus the
amount that would be needed if the Company were to be
-39-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
dissolved as of the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights on dissolution are superior to those
receiving the distribution.
In December 1988, as part of an overall effort to contain
costs and conserve working capital, Igene suspended payment
of the quarterly dividend on its preferred stock.
Resumption of the dividend will require significant
improvements in cash flow. Unpaid dividends cumulate for
future payment or addition to the liquidation preference or
redemption value of the preferred stock. As of December 31,
2009, total dividends in arrears on Igene's preferred stock
equal $151,422 (or $13.60 per share) on Igene's Series A and
are included in the carrying value of the redeemable
preferred stock. The redemption amount of shares is $8.00
per share plus the accrued dividends. For the 11,134 shares
outstanding this equated to a value of $240,494 and $233,377
for the years ended December 31, 2009 and 2008,
respectively.
(9) Stockholders' Equity
____________________
Options
_______
In June of 2001, the stockholders approved the 2001 Stock
Option Plan (the "2001 Plan"), which succeeds the 1997 Stock
Option Plan (the "1997 Plan"), which succeeded Igene's 1986
Stock Option Plan (the "1986 Plan"), as amended. All
outstanding, unexercised options granted under the 1997 Plan
and the 1986 Plan have expired. The number of shares
authorized for issuance under the 2001 Plan was 55,000,000,
and amended at the November 2008 stockholders' meeting to
300,000,000.
The following is a summary of options granted and
outstanding under the plan as of December 31, 2009 and 2008:
2009 2008
________________________________ ________________________________
Weighted Weighted
Average Average
Exercise Exercise
Number Price Number Price
_______________ _______________ _______________ _______________
Options outstanding
and exercisable,
beginning of year 40,605,000 $ 0.059 44,845,000 $ 0.059
Options granted --- --- --- ---
Options exercised --- --- --- ---
Options forfeited,
or withdrawn with
consent of holders 40,605,000 $ 0.059 --- ---
Options expired --- --- 4,240,000 0.100
_______________ _______________ _______________ _______________
Options outstanding
and exercisable,
end of year --- $ --- 40,605,000 $ 0.059
=============== =============== =============== ===============
-40-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Common Stock
____________
At December 31, 2009, 11,000,000 shares of authorized but
unissued common stock were reserved for issuance upon the
exercise of outstanding warrants, 40,605,000 shares of
authorized but unissued common stock were reserved for
exercise pursuant to outstanding equity awards under the
2001 Stock Option Plan, 22,268 shares of authorized but
unissued common stock were reserved for issuance upon
conversion of Igene's outstanding preferred stock, and
656,428 shares of authorized but unissued stock were
reserved for issuance upon conversion of outstanding
convertible notes.
During November of 2008, Igene commenced offerings to
exchange common stock to holders of Igene notes, debentures
and warrants. The exchanges that occurred resulted in a
gain on the termination of the debt in the amount of
$8,399,925. The details are as follows:
Pursuant to the terms of an Indenture dated as of March 31,
1998, as amended (the "Indenture") between Igene and
American Stock Transfer & Trust Company, as Trustee (the
"Trustee"), Igene issued and sold $5,000,000 of its 8% notes
(the "8% Notes"). Concurrently with the issuance of the 8%
Notes, Igene issued, pursuant to a Warrant Agreement by and
between Igene and American Stock Transfer & Trust Company
(the "Warrant Agent") dated as of March 31, 1998, as amended
(the "Warrant Agreement"), 50,000,000 warrants to purchase
shares of Igene common stock for $0.10 per share expiring
March 31, 2008. The warrant purchase price under the
Warrant Agreement was reduced to $0.075 per share, and the
maturity date of the 8% Notes was extended to March 31,
2006, by an amendment dated March 18, 2003 and approved by
the requisite number of holders of the securities.
On March 28, 2006, Igene and American Stock Transfer & Trust
Company, in its capacity as Trustee and Warrant Agent,
entered into a Second Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2009, and reduced
the warrant price under the Warrant Agreement from $0.075 to
$0.056 per share.
On October 23, 2008, Igene and American Stock Transfer &
Trust Company, in its capacity as Trustee and Warrant Agent,
entered into a Third Amendment to Indenture, Securities,
Warrant Agreement and Warrant Certificates that extended the
maturity date of the 8% Notes to March 31, 2019. The
warrants under the Warrant Agreement expired as of March 31,
2008.
On December 3, 2008, Igene completed an offering to exchange
145,600 of our shares of common stock, par value $0.01 per
share, for each $1,000 principal amount of the 8% Notes
outstanding and accrued interest thereon. As of that date,
$4,759,767 of 8% Notes principal were outstanding, with
$4,064,450 accrued interest thereon. Of these notes,
$4,436,515 of notes principal with $3,788,419 of interest
were exchanged for 645,956,606 shares of Igene common stock
at a price of $0.005 per share. As a result, additional
paid in capital was recorded to recognize the gain of
$4,995,151 on the retirement, pursuant to current
accounting literature for related party debt forgiveness.
On November 28, 2008, Igene commenced an offering to
exchange shares of Igene common stock to holders of Igene's
privately held debt and the associated warrants. Igene's
liabilities consisted of the following:
The funds to settle the ProBio litigation were provided by
Igene's directors. On February 15, 2007, Igene issued and
sold $762,000 in aggregate principal amount of 5%
convertible debentures, 50% each to two directors of Igene.
These debentures were convertible into shares of Igene's
common stock at $0.02 per share. At the time of the
exchange the accrued interest on this debt was $67,641. All
debt and interest under the 5% convertible debentures were
exchanged for 66,371,244 shares of common stock.
-41-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Igene issued $3,814,212 of 8% convertible debentures between
March 2001 and July 2002. The debt had accrued $2,204,106
of interest at the time of the exchange. Also, 66,427,650
warrants were issued in connection with the 8% convertible
debentures. All of the debt and interest, as well as all of
the warrants, were exchanged for 528,578,590 shares of Igene
common stock.
Beginning November 16, 1995, and continuing through May 8,
1997, Igene issued promissory notes to certain directors for
aggregate consideration of $1,082,500. These notes
specified that at any time prior to repayment the holder had
the right to convert the notes to common stock of Igene at
prices ranging from $0.05 per share to $0.135 per share,
based on the market price of common shares at the respective
issue dates. The notes were convertible in total into
23,421,273 shares of common stock. At the time of the
exchange the debt had accrued interest in the amount of
$832,485. Of the amount outstanding holders of $1,041,878
of debt with $801,269 of accrued interest agreed to exchange
their holdings for 147,451,719 shares of Igene common stock.
As part of this debt Igene had 60,541,666 warrants
outstanding to purchase Igene common stock. 60,301,666 of
these warrants were additionally settled in exchange for
19,808,610 shares of Igene common stock.
In total, 762,210,163 shares of Igene common stock were
issued in exchange for $5,618,090 of notes and debentures,
$3,073,015 of related interest, and 126,729,316 related
warrants. Igene recorded additional paid in capital,
pursuant to current accounting literature for related party
debt forgiveness, to recognize the gain on termination of
this private debt in the amount of $3,832,921. This gain
plus the gain on the public notes of $4,567,004 resulted in
the $8,399,925.
Preferred Stock
_______________
As of December 31, 2009 and 2008, respectively, total
dividends in arrears on Igene's preferred stock equal
$151,422 (or $13.60 per share) and $144,296 (or $12.96 per
share) on Igene's Series A and are included in the carrying
value of the redeemable preferred stock.
(10) Net Loss Per Common Share
_________________________
Basic net loss per common share for 2009 and 2008 is based
on 1,537,789,530 and 187,037,119 weighted average shares,
respectively. For purposes of computing net loss per common
share, the amount of net loss has been increased by
dividends declared and cumulative undeclared dividends in
arrears on preferred stock.
Common stock equivalents, including: options, warrants,
convertible debt, convertible preferred stock, and
exercisable rights have not been included in the computation
of earnings per share in 2009 or 2008 because to do so would
have been anti-dilutive. Potentially dilutive shares
totaled 678,698 and 52,283,696 as of December 31, 2009 and
2008, respectively.
(11) Commitments
___________
Igene is obligated for office and laboratory facilities and
other rentals under operating lease agreements, which expire
in 2011. The base annual rents are currently approximately
$103,000, which increase to $106,000 by the end of the lease
term, plus the Company's share of taxes, insurance and other
costs. Annual rent expense relating to the leases for the
years ended December 31, 2009 and 2008 approximated $131,520
and $124,470, respectively. As per current accounting
literature, rent expenses will be recorded on a straight
line basis.
-42-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
Future minimum rental payments, in the aggregate and for
each of the next two years are as follows:
Year Amount
______ __________
2010 106,000
2011 9,000
__________
Total $ 115,000
==========
(12) Income Taxes
____________
No income tax benefit or deferred tax asset is reflected in
the financial statements for 2009 and 2008, nor are there
any uncertain tax provisions. Deferred tax assets are
recognized for future deductible temporary difference and
tax loss carry forwards if their realization is "more likely
than not." Igene had no uncertain tax positions as of
December 31, 2009.
At December 31, 2009, Igene has federal and state net
operating loss carry-forwards of approximately $27,690,000
that expire at various dates from 2009 through 2028.
The sources of the deferred tax asset are approximately as
follows:
Net operating loss carry-forward benefit $ 9,356,000
Valuation allowance (9,356,000)
_____________
Deferred tax asset, net $ ---
=============
(13) Going Concern
_____________
Igene has incurred net losses in each year of its existence,
aggregating approximately $52,800,000 from inception to
December 31, 2009 and its liabilities exceeded its assets by
approximately $2,700,000 at that date. These factors
indicate that Igene will not be able to continue in
existence unless it is able to raise additional capital and
attain profitable operations.
On January 8, 2009, Igene entered into an agreement with
Archer-Daniels-Midland Company ("ADM") pursuant to which the
Company and ADM formed Naturxan to manufacture and sell
astaxanthin and derivative products throughout the world.
Each of the Company and ADM has a 50% ownership interest in
Naturxan and has equal representation on the Board of
Managers of the Naturxan. Igene hopes this will provide
profitable operations.
(14) Nature of Risks and Concentrations
__________________________________
Revenue during 2009 and 2008 were derived from sales of the
product AstaXin(R). The majority of the 2009 and 2008 sales
were to fish producers in the aquaculture industry.
The preceding concentrations subject Igene to certain risks.
For example, it is considered at least reasonably possible
that any particular customer, distributor, product line, or
provider of services or facilities could be lost in the near
term.
-43-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2009 and 2008
(15) Retirement Plan
_______________
Effective February 1, 2004, Igene discontinued use of its
Simple Retirement Plan and began use of a 401K
savings/retirement plan, or 401(k) Plan. The 401(k) Plan
permits our eligible employees to defer annual compensation,
subject to limitations imposed by the Internal Revenue Code.
All employees that have been employed for six months are
eligible for the plan. The plan permits elective
contributions by the Company's eligible employees based
under the Internal Revenue Code, which are immediately
vested and non-forfeitable upon contribution to the 401(k)
Plan. Effective January 1, 2004, Igene made an elective
contribution, subject to limitations, of 4% of each eligible
employee's compensation for each year. For 2008, the
percentage was increased to 5%. Igene's contributions to
the plan for 2009 and 2008 were $47,656 and $42,657,
respectively, which is reflected as an expense in the
statement of operations.
(16) Forgiveness of Debt
___________________
Igene has recorded a gain of $1,025,741. This is a one-time
occurrence related to a liability recorded in a prior period
related to the termination of the joint venture with Tate &
Lyle. On February 26, 2009, Igene signed a settlement
agreement of past obligations and made a final payment to
Tate & Lyle in the amount of $714,227. At the termination
of the joint venture, Igene recorded liabilities of $890,000
for payments of past payables of the joint venture as well
as $51,000 for costs related to collection of receivables of
the joint venture. The expense was recorded when it was
thought Igene could be liable for it, but with the exception
of the $5,000,000 liability related to future revenue (see
Note 2), Igene has settled its debt to Tate & Lyle.
(17) Subsequent Events
_________________
Subsequent events have been evaluated by management through
March 31, 2010, the date the financial statements were
issued and no material subsequent events existed.
-44-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
IGENE Biotechnology, Inc.
________________________________________
(Registrant)
By /S/STEPHEN F. HIU
________________________________________
STEPHEN F. HIU
President, Chief Technical Officer
and Treasurer
Date March 31, 2010
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
___________________________ ________________________________ _________________
/S/ STEPHEN F. HIU Director, President, Chief March 31, 2010
___________________________ Technical Officer (principal
STEPHEN F. HIU executive officer)
/S/ EDWARD J. WEISBERGER Chief Financial Officer March 31, 2010
___________________________ (princiopal financial and
EDWARD J. WEISBERGER accounting officer)
/S/ THOMAS L. KEMPNER Vice Chairman of the Board March 31, 2010
___________________________ of Directors
THOMAS L. KEMPNER
/S/ MICHAEL G. KIMELMAN Chairman of the Board March 31, 2010
___________________________ of Directors
MICHAEL G. KIMELMAN
/S/ SIDNEY R. KNAFEL Director March 31, 2010
___________________________
SIDNEY R. KNAFEL
/S/ PATRICK F. MONAHAN Vice President and March 31, 2010
___________________________ Director of Manufacturing
PATRICK F. MONAHAN
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO.
3.1 Articles of Incorporation of the Registrant, as
amended as of November 17, 1997, constituting
Exhibit 3.1 to the Registration Statement No. 333-
41581 on Form SB-2 filed with the SEC on December
5, 1997, are hereby incorporated by reference.
3.2 Articles of Amendment to Articles of Incorporation
of the Registrant, constituting Exhibit 3.1(b) to
the Registration Statement No. 333-76616 on Form S-
8 filed with the SEC on January 11, 2002, are
hereby incorporated by reference.
3.3 By-Laws of the Registrant, constituting Exhibit 3.2
to the Registration Statement No. 33-5441 on Form S-
1 filed with the SEC on May 6, 1986, are hereby
incorporated by reference.
4.1 Form of Variable Rate Convertible Subordinated
Debenture Due 2002 (Class A), constituting Exhibit
4.4 to the Registration Statement No. 33-5441 on
Form S-1 filed with the SEC on May 6, 1986, is
hereby incorporated by reference.
4.2 Form of Indenture by and between the Registrant and
American Stock Transfer and Trust Company, as
Trustee, dated as of March 31, 1998, constituting
Exhibit 4.2 to the Registration Statement No. 333-
41581 on Form SB-2/A filed with the SEC on January
23, 1998, is hereby incorporated by reference.
4.3 First Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of March 18, 2003, constituting
Exhibit 10.11 to the Quarterly Report on Form 10-
QSB filed with the SEC on May 14, 2003, is hereby
incorporated by reference.
4.4 Second Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of March 28, 2006, constituting
Exhibit 4.5 to the Annual Report on Form 10-KSB
filed with the SEC on April 13, 2006, is hereby
incorporated by reference.
4.5 Third Amendment to Indenture, Securities, Warrant
Agreement and Warrant Certificates by and between
Registrant and American Stock Transfer and Trust
Company dated as of October 23, 2008.*
10.1 Form of Conversion and Exchange Agreement used in
May 1988 in connection with the conversion and
exchange by certain holders of shares of preferred
stock for common stock and Warrants, constituting
Exhibit 10.19 to the Registration Statement No. 33-
5441 on Form S-1 filed with the SEC on May 6, 1986,
is hereby incorporated by reference.
10.2 Preferred Stockholders' Waiver Agreement dated May
5, 1988, constituting Exhibit 10.3 to the
Registration Statement No. 33-23266 on Form S-1
filed with the SEC on July 22, 1988, is hereby
incorporated by reference.
10.3 Form of Agreement between the Registrant and
Certain Investors in Preferred Stock dated
September 30, 1987, constituting Exhibit 10.4 to
the Registration Statement No. 33-23266 on Form S-
1/A, is hereby incorporated by reference.
10.4 Agreement of Lease between Columbia Warehouse
Limited Partnership and the Registrant effective
December 15, 1995, constituting Exhibit 10.13 to
the Annual Report on Form 10-KSB filed with the SEC
on April 12, 1996, is hereby incorporated by
reference.
10.5 First Amendment to Lease between the Registrant and
Red Branch Center, LLC made September 13, 2000,
constituting Exhibit 10.8 to the Annual Report on
Form 10-KSB filed with the SEC on April 2, 2001, is
hereby incorporated by reference.
10.6 Separation Agreement between the Registrant and
Tate & Lyle Fermentation Products Ltd. dated as of
October 31, 2007, constituting Exhibit 10.1 to the
Current Report on Form 8-K filed with the SEC on
November 6, 2007, is hereby incorporated by
reference.
10.7 Limited Liability Company Agreement dated as of
January 8, 2009 between Archer-Daniels-Midland
Company and the Registrant, constituting Exhibit
10.1 to the Current Report on Form 8-K filed with
the SEC on January 21, 2009, is hereby incorporated
by reference. [Portions of this exhibit have been
omitted pursuant to a request for confidential
treatment.]
21.1 Subsidiaries*
31.1 Rule 13a-14(a) or 15d-14(a) Certification of the
Registrant's principal executive officer.*
31.2 Rule 13a-14(a) or 15d-14(a) Certification of the
Registrant's principal financial officer.*
32.1 Rule 13a-14(b) or 15d-14(b) Certification of the
Registrant's principal executive officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to
Rule 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Rule 13a-14(b) or 15d-14(b) Certification of the
Registrant's principal financial officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to
Rule 906 of the Sarbanes-Oxley Act of 2002.*
*Filed herewith