SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10QSB/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 13 or 15(d) of
THE SECURITIES AND EXCHANGE ACT OF 1934
IGENE BIOTECHNOLOGY, INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 2
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its March 31, 1995 Report on Form
10QSB as set forth in the pages attached hereto:
PART I. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, therunto duly authorized.
IGENE BIOTECHNOLOGY, INC.
Date: October 13, 1995 By: /s/ Stephen F. Hiu
Chief Executive Officer
Principal Financial Officer &
Principal Accounting Officer
FORM 10QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 of incorporation (I.R.S. Employer
or organization) Identification No.)
9110 Red Branch Road, Columbia, Maryland 21045-2020
(Address of principal executive officers) (Zip code)
Registrant's telephone number, including area code: (410) 997-2599
None
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a 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.
YES X NO
The number of shares outstanding of the Registrant's $.01 par value Common
Stock as of March 31, 1995 is 13,029,071 .
FORM 10QSB/A
IGENE Biotechnology, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Balance Sheets ................................................. 4
Statements of Operations ....................................... 5
Statements of Stockholder's Deficit ............................ 6
Statements of Cash Flows ....................................... 8
Notes to Financial Statements .................................. 9
Management's Discussion and Analysis of Financial
Conditions and Results of Operations ..................... 11
PART II - OTHER INFORMATION .......................................... 14
SIGNATURES ........................................................... 15
IGENE BIOTECHNOLOGY, INC.
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
PART I - FINANCIAL INFORMATION
IGENE Biotechnology, Inc.
Balance Sheets
March 31, March 31, December 31,
1994 1995 1994
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents .....$ 62,779 $ 16,989 $ 19,529
Accounts receivable (no
allowance for doubtful
accounts) ................... 44,235 8,962 10,790
Due from stockholder .......... 76,550 --- ---
Prepaid expenses .............. 1,781 4,307 1,438
Total current assets ..... 185,345 30,258 31,757
Property and equipment, net ..... 60,222 30,856 35,199
Security deposits ............... 10,600 10,600 10,600
$ 256,167 $ 71,714 $ 77,556
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and other
accrued expenses ............ 204,462 223,765 238,022
Debenture interest payable .... 60,000 60,000 30,000
Promissory Notes payable ...... 261,300 533,850 409,550
Total current liabilities. 525,762 817,615 677,572
Long term liabilities:
Variable rate subordinated
debenture ................... 1,500,000 1,500,000 1,500,000
Total liabilities ........ 2,025,762 2,317,615 2,177,572
Redeemable preferred stock -- 8% cumulative, convertible, voting,
Series A, $.01 par value per share; redemption value $11.52,
$12.16 and $12.00 per share. Authorized 920,000 shares; issued
38,592, 38,342, and
38,592 shares............... 444,580 466,279 463,104
Stockholders' deficit:
Preferred stock -- $.01 par
value per share. 8%
cumulative, convertible,
voting, Series A.
Authorized and issued
187,500 shares (aggregate
involuntary liquidation
value of $2,160,000,
2,280,000, and 2,250,000.... 1,875 1,875 1,875
Common stock -- $.01 par value
per share. Authorized 35,000,000 shares;
issued 12,975,237, 13,029,071,
and 13,028,571 shares ...... 129,752 130,291 130,285
Additional paid-in capital .... 17,012,881 17,110,644 17,113,824
Deficit ....................... (19,358,683) (19,954,990) (19,809,104)
Total stockholders' deficit .. (2,214,175) (2,712,180) (2,563,120)
$ 256,167 $ 71,714 $ 77,556
See accompanying notes to financial statements
IGENE Biotechnology, Inc.
Statements of Operations
(Unaudited)
--- Three months ended ---
March 31, March 31,
1994 1995
Sales ................................... $ 35,109 $ 9,548
Cost of sales ........................... 22,547 8,251
12,562 1,297
Selling, general and administrative expenses:
Marketing and selling .............. 988 872
Research, development and pilot plant 92,730 84,156
General and administrative ......... 64,688 56,096
(158,406) (141,124)
(145,844) (139,827)
Other income (expenses):
Investment income .................. 6 13
Joint Venture income ............... 100,000 ---
Other income (loss) ................ 10,054 442
Interest expense ................... (33,947) (39,909)
Forgiveness of Interest
on Promissory Notes .............. --- 33,395
Net loss ................................ ( 89,839) (145,886)
Deficit at beginning of period .......... (19,268,844) (19,809,104)
Deficit at end of period ................ $(19,358,683) $(19,954,990)
Net loss per common share ............... $ (0.01) $ (0.01)
See accompanying notes to financial statements
IGENE Biotechnology, Inc.
Statements of Stockholder's Deficit
(Unaudited)
Redeemable
Preferred Stock Preferred Stock Common Stock
(Shares/Amount) (Shares/Amount) (Shares/Amount)
Balance at
December 31,
1993........ 38,592/$438,405 187,500/$1,875 12,975,237/$129,752
Cumulative
undeclared
dividends
on redeemable
preferred
stock..... 6,175 --- ---
Net Loss
for Quarter
ended
March 31, 1994 . --- --- ---
Balance at
March 31, 1994.. 38,592/$444,580 187,500/$1,875 12,975,237/$129,752
Balance at
December 31,
1994............. 38,592/$463,104 187,500/$1,875 13,028,571/$130,286
Cumulative
undeclared
dividends on
redeemable
preferred stock..... 6,175 --- ---
Conversion of
preferred stock
to common stock..... (250)/($3,000) --- 500/$5
Net Loss for
Quarter ended
March 31, 1995 ..... --- --- ---
Balance at
March 31, 1995 .... 38,342/$466,279 187,500/$1,875 13,029,071/$130,291
See accompanying notes to financial statements
IGENE Biotechnology, Inc.
Statements of Stockholder's Deficit
(Unaudited- Continued)
Additional Total Stockholder's
Paid-In Capital Deficit Deficit
Balance at
December 31, 1993.... $17,019,056 $(19,268,844) $(2,118,161)
Cumulative undeclared
dividends on redeemable
preferred stock...... (6,175) --- (6,175)
Net Loss for Quarter
ended March 31,
1994 ................ --- (89,839) (89,839)
Balance at
March 31, 1994 ...... $17,012,881 $(19,358,683) $(2,214,175)
Balance at
December 31, 1994.... 17,113,824 $(19,809,104) $(2,563,120)
Cumulative undeclared
dividents on redeemable
preferred stock...... (6,175) --- (6,175)
Conversion of
preferred stock
to common stock...... 2,995 --- 3,000
Net Loss for
Quarter ended
March 31, 1995 ...... --- (145,886) (145,886)
Balance at
March 31, 1995 ...... $17,110,644 $(19,954,990) $(2,712,180)
See accompanying notes to financial statements
IGENE Biotechnology, Inc.
Statements of Cash Flows
(Unaudited)
--- Three months ended ---
March 31, March 31,
1994 1995
Cash flows from operating activities:
Net loss ...................................$( 89,839) $( 145,886)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........... 7,422 4,343
Loss on sale of assets .................. 10,054 ---
Changes in assets and liabilities:
Increase (decrease) in accounts payable and
other accrued expenses ............ 35,589 (14,257)
Debenture interest payable ........... 30,000 30,000
Decrease (increase) in
accounts receivable ............... (36,223) 1,828
Decrease (increase) in prepaid expenses and
deposits .......................... (948) (2,869)
Net cash used in operating activities ...... ( 43,945) (126,841)
Cash flows from investing activities:
Capital expenditures ....................... (6,973) ---
Proceeds from Sales of Equipment ........... 25,800 ---
Net cash used in investing activities ...... 18,827 ---
Cash flows from financing activities:
Issuance of promissory notes ............... 22,000 124,300
Net cash provided by (used in)
financing activities ..................... 22,000 124,300
Net increase (decrease) in cash
and cash equivalents ...................... ( 3,118) ( 2,541)
Cash and cash equivalents
at beginning of year ...................... 65,897 19,529
Cash and cash equivalents
at end of period ..........................$ 62,779 $ 16,989
Supplementary disclosure
- cash paid for interest ...................$ --- $ 131
Noncash investing and financing activities:
During the three months ended March 31, 1994 and 1995, the Company
recorded dividends in arrears on 8% redeemable preferred stock at $.16 per
share aggregating $6,175 in each period which has been removed from paid-in
capital and included in the carrying value of the redeemable preferred stock.
See accompanying notes to financial statements.
IGENE Biotechnology, Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Unaudited Financial Statements
The financial statements presented herein as of March 31, 1994 and 1995
and for the three-month period ended March 31, 1994 and 1995 are unaudited
and, in the opinion of management, include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of
financial position and results of operations. Such financial statements
do not include all of the information and footnote disclosures normally
included in audited financial statements prepared in accordance with
generally accepted accounting principles.
(2) Inventories
None.
(3) Stockholders' Equity
At March 31, 1994 and 1995, 77,184 and 76,684 shares of authorized but
unissued common stock were reserved for issuance upon conversion of the
Company's outstanding preferred stock.
As of March 31, 1994 and 1995, 1,200,000 share of authorized but unissued
common stock were reserved for exercise pursuant to the 1986 Stock Option
Plan.
As of March 31, 1994 shares were reserved for exercise of Warrants to
purchase an aggregate of 800,000 shares of Common Stock to Kimelman &
Baird, LLC, an employee of the same and Anthony B. Low-Beer, exercisable
at $.25 per share expiring February 14, 1995. The Warrants were issued to
the aforementioned for acting as placement agent in the Company's private
placement of $1,149,000 in gross proceeds which closed February 15, 1991
and there are substantial restrictions against the transfer of these
Warrants. The Warrants were not publicly traded and there were no trades
of these Warrants before the expiration date.
As of March 31, 1994 and 1995, the Company has reserved shares for the
exercise of Warrants to purchase an aggregate of 252,400 shares of Common
Stock to Kimelman & Baird, LLC, at $.75 per share expiring June 26, 1996.
The Warrants were issued to the aforementioned for acting as placement
agent in the Company's private placement of $510,500 in gross proceeds
which closed June 26, 1992 and there are substantial restrictions against
the transfer of these Warrants.
As of March 31, 1994 and 1995, the Company has reserved shares for the
exercise of Warrants to purchase an aggregate of 680,667 shares of Common
Stock to purchasers of stock in the Company's Private Placement of June
26,1992. The exercise price of the Warrants is $.75 per share expiring
June 26, 1995 and there are substantial restrictions against the transfer
of these warrants.
As of March 31, 1994 and 1995, 800,000 shares of authorized but unissued
common stock were reserved for issuance upon reinvestment of interest on
the variable rate subordinated debenture and 375,000 shares of authorized
but unissued common stock were reserved for issuance upon conversion of
thE variable rate subordinated debenture.
As of March 31, 1994 and 1995, 994,416 and 3,995,374 shares of Common
Stock were reserved for the conversion of Promissory Notes and the issue
of Warrants subject to that conversion. The Promissory Notes are held by
Directors of the Company.
(4) Net Loss Per Common Share
Net loss per common share for the three-month periods ended March 31, 1994
and 1995 is based on 12,975,237 and 13,028,971 weighted average shares,
respectively. For purposes of computing net loss per common share, the
amount of net loss has been increased by cumulative undeclared dividends
in arrears on preferred stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales revenue for the quarter ended March 31, 1995, consisting entirely of
sales of the Company's ClandoSan product, decreased by 72% relative to the
corresponding quarter in 1994. Selling expenses for the quarter ended March 31,
1995 decreased 12% relative to the quarter ended March 31, 1994. These
decreases are reflective of the reduced selling and marketing efforts for
ClandoSan as the Company focuses on obtaining a technology licensing agreement
for the manufacture and sale of its AstaXin product. The Company is actively
seeking a selling and marketing partner for ClandoSan .
Research, development and pilot plant expenses for the quarter ended March 31,
1995 decreased by 9% relative to the quarter ended March 31, 1994, due to cost
containment measures and reduced scale-up activities related to the AstaXin
technology.
A decrease in general and administrative expenses for the quarter ended March
31, 1995 over the quarter ended March 31, 1994 of 13% is reflective of
successful administrative cost containment measures.
Interest expense remained at comparable levels for the quarters ended March 31,
1994 and 1995, and is composed mainly of interest on the Company's variable rate
subordinated debenture ($30,000 in each of the quarters ended March 31, 1994 and
1995). During the quarter ended March 31, 1995, the holders of the Company's
promissory notes agreed to waive all accrued interest payable, resulting in
income of $33,395 from forgiveness of debt.
$100,000 of the increased net loss for the quarter ended March 31, 1995 when
compared with the corresponding quarter in 1994 is caused by the $100,000 of
other income recorded for the quarter ended March 31, 1994 for a Technology
Evaluation Agreement for the Company's AstaXin product. (See additional
discussion of this item below, under Liquidity and Capital Resources).
As a result of the forgoing, the Company reported net losses of $89,839 and
$145,886, respectively, for the quarters ended March 31, 1994 and 1995. Net
loss per common share, however, remained constant at $.01 per share for the
quarters ended March 31, 1994 and 1995 due to the increase in weighted average
number of shares outstanding. Weighted average number of shares outstanding
increased from 12,975,237 for the quarter ended March 31, 1994 to 13,028,971 for
the quarter ended March 31, 1995 due to the issuance of 53,333 shares of common
stock in lieu of cash in payment of the interest on the variable rate
subordinated debenture.
Financial Position
In December 1988, the Company 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
increase the liquidation preference or redemption value of the preferred stock.
As of March 31, 1995, total dividends in arrears on the Company's preferred
stock was $939,503, of which $159,503 ($4.16 per share) was included in the
carrying value of the redeemable preferred stock and $780,000 ($4.16 per share)
was included in the liquidation preference of the preferred stock.
Liquidity and Capital Resources
Historically, the Company has been funded primarily by equity contributions,
loans from stockholders and license fees. As of March 31, 1995, the Company had
a working capital deficit of approximately $787,000, and cash and cash
equivalents of $17,000, consisting of proceeds from Promissory Notes issued to
certain Directors of the Company described below.
Cash used by operations in the quarters ended March 31, 1994 and 1995 amounted
to $43,945 and $126,841, respectively. IGENE continues to focus on research and
development of its products, achieving only minimal sales of its ClandoSan and
AstaXin products. IGENE was able to reduce (from 1993 levels) the amount of
cash required to fund 1994 operations through an increase in product sales over
1993, and through a Technology Evaluation Agreement for AstaXin , with the Food
Science Group of Pfizer, Inc., New York, New York, signed in March of 1994. That
Agreement provided for cash compensation of $250,000 over the evaluation period
which was extended to July 1994, of which $100,000 was recorded for the three
months ended March 31, 1994. The exclusive evaluation period has ended, and it
is unlikely that Pfizer will agree to a multi-year commitment for the
manufacture and sale of AstaXin in the foreseeable future. Consequently, the
Company is actively seeking other potential manufacturers for AstaXin , and is
in discussion with a potential manufacturer of its AstaXin technology. The
Company believes this technology to be highly marketable and that it is likely
that an income-producing technology licensing agreement will be executed during
1995 for this product. (See also item 7, page 14).
Cash provided by investing activities in the quarter ended march 31, 1994
amounted to $18,827. This resulted from proceeds from the sale of unused
equipment of $25,800, offset by $6,973 in capital expenditures. No cash was
provided by investing activities for the quarter ended March 31, 1995. This is
reflective of the Company's continued plan to minimize capital expenditures,
since existing equipment is believed to be sufficient to meet the needs of the
Company for the foreseeable future.
The following is a summary of the Company's financing activities for 1994 and
the quarter ended March 31, 1995:
On February 10, 1994, September 26, 1994, October 24, 1994, November 28, 1994,
January 23, 1995, and March 7, 1995 the Company issued promissory notes to
certain directors of the Company for a total aggregate consideration of
$534,550. The notes specify that at any time prior to repayment the holder has
the right to convert the note to common stock of the Company at $.375 per share
for the note issued February 10, 1994 and at $.25 per share for notes issued
September 26, 1994, October 24, 1994, and November 28, 1994 and at a $.1875 per
share for the note issued January 23, 1995 and at $.125 per share for the note
issued March 7, 1995 and to receive warrants for an equivalent number of common
shares at $.375 per share for the note issued February 10, 1994 and at $.25 per
share for notes issued September 26, 1994, October 24, 1994, and November 28,
1994 and at $.1875 per share for the note issued January 23, 1995, and $.125 per
share for the note issued March 7, 1995. The promissory notes are due on demand
with interest charged at the prime rate. The Directors subsequently agreed to
waive all interest charges on these notes.
In October 1993, as part of the settlement for an unexecuted license agreement,
Burns Philp Food Inc. purchased 76,550 newly issued shares of common stock at
$1.00 per share for an aggregate consideration of $76,550, which was received
during 1994.
On May 10, 1995, the Company signed an Agreement for sale of a non-exclusive
license to Archer-Daniels-Midland Company, Decatur, Illinois for technology
relating to the manufacture of astaxanthin pigment using the Company's AstaXin
product. The agreement provides for a cash payment to IGENE of $200,000 at
signing, an advance of royalties of $500,000 within 6 months and a royalty based
on gross sales for 10 years.
To supplement this anticipated income from a technology licensing agreement, the
Company will consider issuing additional stock to officers and directors and
encouraging holders of outstanding warrants to exercise these rights. To
increase its working capital position the Company will also encourage the
holders of promissory notes to convert them into common stock. To meet short-
term cash needs the Company issued additional promissory notes to officers and
directors in March of 1995.
In the long-term, the Company is continuing its development of additional
AstaXin technology which it hopes to license and market to benefit future
periods.
The Company does not believe that inflation has had a significant impact on the
Company's operations during the past two years.
Effective January 1, 1993, the Company adopted the provision of FASB Statement
no. 109 "Accounting for income taxes".
FORM 10QSB/A
IGENE Biotechnology, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
Item 7. Subsequent Events
On May 10, 1995, the Company signed an Agreement for sale of a non-
exclusive license to Archer-Daniels-Midland Company, Decatur, Illinois for
technology relating to the manufacture of astaxanthin pigment using the
Company's AstaXin product. The agreement provides for a cash payment to IGENE
of $200,000 at signing, an advance of royalties of $500,000 within 6 months and
a royalty based on gross sales for 10 years.
FORM 10QSB/A
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IGENE Biotechnology, Inc.
(Registrant)
Date: October 13, 1995
/s/ Stephen F. Hiu
Stephen F. Hiu
President, Treasurer and
Secretary
(On behalf of the Registrant and as
Principal Financial Officer