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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
0-15507
Commission file number
IMMUCELL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 01-0382980
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
56 EvergreenDrive
Portland, ME 04103
(Address of principal executive office and zip code)
(207) 878-2770
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Class of Securities: Outstanding at August 1, 1995:
Common Stock, par value $.10 per share 2,291,981
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IMMUCELL CORPORATION
INDEX TO FORM 10-Q
JUNE 30, 1995
PART I: FINANCIAL INFORMATION Page
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Consolidated Balance Sheets-
June 30, 1995 and December 31, 1994 3-4
Consolidated Statements of Operations-
Three and six month periods ended June 30, 1995 and 1994 5
Consolidated Statement of Stockholders' Equity-
Six months ended June 30, 1995 6
Consolidated Statements of Cash Flows-
Six month periods ended June 30, 1995 and 1994 7
Notes to Unaudited Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9-11
PART II: OTHER INFORMATION
Items 1 through 6 11-12
Signatures 12
IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 882,631 $1,295,246
Short-term investments 449,276 --
Accounts receivable, net 383,574 401,179
Inventories 523,234 565,531
Prepaid expenses and
accrued interest 99,395 34,946
Total current assets 2,338,110 2,296,902
EQUIPMENT, BUILDING AND
LEASEHOLD IMPROVEMENTS, at cost:
Laboratory equipment 819,936 959,869
Building and leasehold improvements 426,938 426,228
Office furniture and equipment 83,956 130,133
Land 50,000 50,000
1,380,830 1,566,230
Less - Accumulated depreciation 708,959 798,785
Net equipment, building and
leasehold improvements 671,871 767,445
OTHER ASSETS 10,416 10,302
TOTAL ASSETS $3,020,397 $3,074,649
============= ============
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1995 1994
(unaudited)
CURRENT LIABILITIES:
Accrued expensess $ 329,832 $ 296,983
Accounts payable 137,679 158,866
Current portion of note
payable 114,042 108,358
Current portion of mortgage loans 5,420 5,170
Total current liabilities 586,973 569,377
LONG TERM DEBT:
Note Payable 316,558 375,013
Mortgage loans 252,342 254,754
Total long term debt 568,900 629,767
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,681,579 shares 268,159 268,159
Capital in excess of par value 8,105,448 8,105,448
Accumulated deficit (5,922,348) (5,911,367)
Treasury stock, at cost--
389,598 shares (586,735) (586,735)
Total stockholders' equity 1,864,524 1,875,505
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,020,397 $3,074,649
=========== ===========
The accompanying notes are an integral part of the financial
statements.
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
______________________ ______________________
1995 1994 1995 1994
REVENUES:
Product sales $1,022,186 $ 946,303 $2,383,594 $2,016,532
Collaborative research
and development revenue -- 220,000 -- 250,000
Grant income 134,852 -- 248,630 --
___________ ___________ ___________ __________
Total revenues 1,157,038 1,166,303 2,632,224 2,266,532
___________ ___________ ___________ ___________
COSTS AND EXPENSES:
Product costs 448,806 471,512 1,067,630 1,026,845
Research and development
expenses 482,658 392,386 856,122 641,017
Sales and marketing
expenses 163,098 181,134 395,309 386,229
General and administrative
expenses 181,013 146,396 333,640 289,146
___________ ___________ ___________ ___________
Total costs and expenses 1,275,575 1,191,428 2,652,701 2,343,237
___________ ___________ ___________ ___________
Interest and other income 24,227 15,952 45,205 30,302
Interest expense 19,065 8,016 35,709 15,645
___________ ___________ ___________ ___________
Net interest and other 5,162 7,936 9,496 14,657
___________ ___________ ___________ ___________
NET LOSS $ (113,375) $ (17,189) $ (10,981) $ (62,048)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (.05) $ (.01) $ -- $ (.02)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,291,981 2,634,838 2,291,981 2,634,838
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial
statements
IMMUCELL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
Common Stock
$.10 Par Value Capital in Treasury Stock Total
------------- Excess of Accumulated ------------- Stockholders'
Shares Amount Par Value Deficit Shares Amount Equity
BALANCE
December 31, 1994 2,681,579 $268,159 $8,105,448 $(5,911,367) 389,598 $(586,735) $1,875,505
Net Loss -- -- -- $ (10,981) -- -- $ (10,981)
BALANCE
June 30, 1995 2,681,579 $268,159 $8,105,448 $(5,922,348) 389,598 $(586,735) $1,864,524
==================================================================================================
The accompanying notes are an integral part of the
financial statements.
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10,981) $(62,048)
Adjustments to reconcile net loss
to net cash provided by
operating activities-
Depreciation and amortization 98,129 70,019
Changes in:
Accounts receivable 17,605 32,837
Inventories 42,297 29,240
Prepaid expenses and accrued interest (64,449) (56,116)
Accounts payable (21,187) 44,332
Accrued expenses 40,867 103,886
Net cash provided by
operating activities 102,281 162,150
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments (449,276) --
Purchases of equipment, building and
leasehold improvements, net (2,555) (258,689)
Increase in other assets (114) --
Net cash used for
investing activities (451,945) (258,689)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations (54,933) (2,182)
Proceeds from sale of common stock -- 285,000
Stock issuance costs (8,018) (10,810)
Proceeds from installment note payable -- 30,000
Net cash (used for)/provided by
financing activities (62,951) 302,008
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (412,615) 205,469
BEGINNING CASH AND CASH EQUIVALENTS 1,295,246 1,459,510
ENDING CASH AND CASH EQUIVALENTS $ 882,631 $1,664,979
=========== ===========
CASH PAID FOR INTEREST $ 36,370 $ 15,652
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The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying statements have been prepared by ImmuCell Corporation
(the "Company") without audit, and reflect the adjustments, all of which are
of a normal recurring nature, that are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented. Certain information and footnote disclosures normally included in
the annual financial statements which are prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Accordingly, the Company believes that although the disclosures are adequate
to make the information presented not misleading, these financial statements
should be read in conjunction with the financial statements and the notes to
the financial statements as of December 31, 1994, contained in the Company's
Annual Report to shareholders on Form 10-K as filed with the Securities and
Exchange Commission.
The consolidated financial statements of the Company include the
accounts of the Company and its wholly-owned subsidiary, the Kamar Marketing
Group, Inc. All intercompany accounts and transactions have been eliminated
in consolidation.
(2) Net Profit/(Loss) Per Common Share
Earnings (losses) per share are based on the weighted average number
of common shares outstanding adjusted to reflect the assumed exercise of
outstanding stock options and warrants, to the extent these items had a
dilutive effect on the computations.
(3) Inventories
Inventories consist of the following:
June 30, December 31,
1995 1994
Raw materials $ 32,562 $ 38,575
Work-in-process 364,699 451,137
Finished goods 125,973 75,819
_________ _________
$523,234 $565,531
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IMMUCELL CORPORATION
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1995
Total revenues equalled $2,632,000 for the six months ended June 30,
1995 compared to $2,267,000 for the same period in 1994, an increase of
$366,000 (16%). For the three months ended June 30, 1995, total revenues
decreased to $1,157,000 from $1,166,000 for the three months ended June 30,
1994, a decrease of $9,000 (1%).
Total revenues include $249,000 and $135,000 of grant income for the
six and three months periods ended June 30, 1995, respectively, and $250,000
and $220,000 of collaborative research and development revenue for the six
and three month periods ended June 30, 1994, respectively. The 1995 grant
income was recognized primarily under three federally sponsored research
grants that support two of the Company's passive antibody development
programs. The 1994 collaborative research and development revenues included a
milestone payment of $210,000 in May 1994 from Univax Biologics, Inc.
("Univax") to maintain its marketing rights to CryptoGAMTM, a passive antibody
product intended to prevent diarrhea in AIDS patients, that is currently in
Phase I/II clinical trials. In May 1995, Univax terminated its sponsorship
of this program, and ImmuCell reacquired marketing rights to this product.
The Company is funding the completion of the Phase I/II trial internally.
Product sales equalled $2,384,000 for the six months ended June 30,
1995 compared to $2,017,000 for the same period in 1994, an increase of
$367,000 (18%). For the three months ended June 30, 1995, product sales
increased to $1,022,000 from $946,000 for the three months ended June 30,
1994, an increase of $76,000 (8%). Sales of First DefenseR and the Kamar
Heatmount Detector aggregated 86% and 85% of total product sales for the six
and three month periods ended June 30, 1995, respectively. Sales of these
two products increased by 14% during the six month period ended June 30, 1995
compared to the same period in 1994; sales of these two products increased by
11% during the three month period ended June 30, 1995 compared to the same
period in 1994.
The gross margin on product sales improved to 55% and 56% of product
sales for the six and three month periods ended June 30, 1995, respectively,
as compared to 49% and 50% of product sales for the six and three month
periods ended June 30, 1994, respectively. This gross margin increased by
$326,000 (33%) to $1,316,000 during the six months ended June 30, 1995 and by
$99,000 (21%) to $573,000 during the three months ended June 30, 1995 over
the corresponding periods in the prior year.
Research and development expenses increased by $215,000 (34%) to
$856,000 during the first six months of 1995 compared to the same period in
1994 and by $90,000 (23%) to $483,000 during the three month period ended
June 30, 1995 compared to the same period in 1994. These expenses were
incurred primarily to develop specific antibodies to be used to prevent
gastrointestinal diseases in humans. Additionally, during the 1995 periods,
work was performed to develop a diagnostic test intended for use in
monitoring public water supplies for the presence of Cryptosporidium parvum.
The second quarter of 1995 expenses included significant clinical trial
expenses not incurred during the comparable prior periods. The 1994 expenses
and to a reduced degree the 1995 expenses also included an effort to develop
and commercialize the Company's new purification system, which is intended to
enable the Company to harvest antibodies from milk whey.
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Research and development expenses exceeded grant income by $607,000
during the six months ended June 30, 1995 and by $348,000 during the three
months ended June 30, 1995. In comparison, research and development expenses
exceeded collaborative research and development revenues by $391,000 and
$172,000 in the respective periods of 1994. Management believes that the
losses incurred resulting from the increasing investment in the research and
development of new products are necessary to foster growth for the Company in
the future. In June 1995, the Company announced that its oral, milk-based E.
coli preventive antibody product demonstrated highly significant protection
in a human challenge-protection study. It has been, and continues to be, the
Company's strategy to demonstrate efficacy in Phase I/II clinical trials and
then actively pursue corporate partners to fund continued development in
exchange for marketing rights.
Sales and marketing expenses increased modestly (by $9,000 or 2%)
during the six months ended June 30, 1995 compared to the six months ended
June 30, 1994 and decreased by $18,000 (10%) during the second quarter of
1995 compared to the second quarter of 1994. General and administrative
expenses increased by $44,000 to $334,000 for the six months ended June 30,
1995 and by $35,000 to $181,000 for the three months ended June 30, 1995, as
the Company continues its efforts to control its expense levels and manage
its operating efficiency.
The increase in research and development expenses, described above,
principally caused the operating losses of $11,000 and $113,000 during the
six and three month periods ended June 30, 1995, respectively. These losses
compare to losses of $62,000 and $17,000 in the same periods of the prior
year. In order to aggressively develop products to prevent gastrointestinal
diseases in humans, the Company expects to incur further operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased by approximately $54,000 to $3,020,000 at June
30, 1995 from $3,075,000 at December 31, 1994. Cash, cash equivalents and
short-term investments increased by approximately $37,000 to $1,332,000 at
June 30, 1995 from $1,295,000 at December 31, 1994. Net working capital
increased by $24,000 to $1,751,000 at June 31, 1995 from $1,728,000 at
December 31, 1994.
In April 1994, the Company obtained notice from the National Institute
of Allergy and Infectious Diseases ("NIAID") that it had been awarded a Phase
II Small Business Innovation Research ("SBIR") grant aggregating $446,000
over two years. These funds will be used to develop recombinant vaccines to
Cryptosporidium parvum. In July 1994, the Company obtained notice from the
NIAID that it had been awarded a second Phase II SBIR grant aggregating
$507,000 over two years. These funds will be used to develop a passive
antibody product for the prevention of cryptosporidiosis in AIDS patients.
In April 1995, the Company obtained notice from the NIAID that it had been
awarded a Phase I SBIR grant aggregating $100,000 over approximately six
months. These funds will be used to develop the Company's passive antibody
product for prevention of diarrhea caused by enterotoxigenic E. coli
(commonly known as Travelers' Diarrhea). Approximately 66% of the combined
aggregate proceeds of $1,054,000 will be used to fund internal research and
development expenses, and the balance will fund development services
performed under contract by outside laboratories. Approximately $235,000 and
$132,000 in income was recognized under these three grants in the six and
three month periods ended June 30, 1995, respectively.
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In order to maintain an exclusive world-wide license to the use of a
certain milk whey purification machine for all milk purification
applications, the Company must meet certain performance requirements,
including the purchase of a machine valued at approximately $450,000.
Effective May 1995, the date for this purchase was extended from August 1995
to May 1996. The Company does not intend to use current cash to make the
acquisition. Therefore, in the event that the Company decides to make this
purchase, outside funding would need to be arranged.
The Company believes that it has sufficient capital resources to meet
its working capital requirements and to finance its ongoing business
operations during the next twelve months.
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
At the Annual Meeting of Stockholders held on June 23, 1995, the
stockholders voted to elect the Board of Directors for the next
ensuing year and to approve the Company's 1995 Stock Option Plan
for Outside Directors.
Each of the seven nominees recommended by management to the
stockholders was elected to the Board. The following list by
name of director shows how the votes were cast for each director:
Anthony B. Cashen (for: 1,648,244; withhold: 36,059), Thomas
C. Hatch (for: 1,650,980; withhold: 33,323), George W.
Masters (for: 1,650,980; withhold: 33,323), William H.
Maxwell (for: 1,650,980; withhold: 33,323), John R.
McKernan, Jr. (for: 1,637,583; withhold: 46,720), Frank E.
Ruch, Jr. (for: 1,650,980; withhold: 33,323) and Mitchel
Sayare (for: 1,648,310; withhold: 35,993).
The proposal to approve the Company's 1995 Stock Option Plan for
Outside Directors was approved by the stockholders. The voting
tabulation was as follows:
For: 1,535,780, Against: 96,575, Abstain: 33,607, Broker
non-votes: 18,341.
IMMUCELL CORPORATION
PART II. OTHER INFORMATION
(Continued)
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 1995 Stock Option Plan for Outside Directors.
10.2 Form of Stock Option Agreement.
10.3 Research Agreement dated April 19, 1995 between the
Registrant and Membrex, Inc. of Fairfield, New Jersey.
10.4 Term Letter dated April 19, 1995 between the
Registrant and Membrex, Inc. of Fairfield, New Jersey.
10.5 Amendment No. 3 to Agreement of Exclusivity between
Advanced Separation Technologies, Inc. and the
Registrant dated May 3, 1995.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
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 hereunto duly authorized.
ImmuCell Corporation
Registrant
Date: August 3, 1995 By: /s/ Thomas C. Hatch
Thomas C. Hatch
President and Chief
Executive Officer
Date: August 3, 1995 By: /s/ Michael F. Brigham
Michael F. Brigham
Chief Financial Officer
and Treasurer