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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, 1997
[ ] 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 Evergreen Drive
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 12, 1997:
Common Stock, par value $.10 per share 2,334,064
==============================================
IMMUCELL CORPORATION
INDEX TO FORM 10-Q
June 30, 1997
PART I: FINANCIAL INFORMATION Page
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Consolidated Balance Sheets-
June 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Operations for the
three and six month periods ended June 30, 1997 and 1996 5
Consolidated Statement of Stockholders' Equity for the
six month period ended June 30, 1997 6
Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1997 and 1996 7
Notes to Unaudited Consolidated Financial Statements 8-9
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,
1997 1996
--------- ---------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 931,573 $1,044,441
Accounts receivable, net 295,163 370,798
Inventories 569,592 648,276
Prepaid expenses and
accrued interest 82,567 25,747
--------- ---------
Total current assets 1,878,895 2,089,262
EQUIPMENT, BUILDING AND
IMPROVEMENTS, at cost:
Laboratory and manufacturing 768,617 754,891
equipment
Building and improvements 580,822 580,747
Office furniture and equipment 59,026 54,977
Land 50,000 50,000
--------- ---------
1,458,465 1,440,615
Less - Accumulated depreciation 666,874 623,987
--------- ---------
Net equipment, building and
improvements 791,591 816,628
INVESTMENTS IN JOINT VENTURES 241,669 224,669
OTHER ASSETS 840 840
--------- ---------
TOTAL ASSETS $2,912,995 $3,131,399
========= =========
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
--------- ---------
(unaudited)
CURRENT LIABILITIES:
Accrued expenses $ 225,619 $ 185,256
Accounts payable 169,301 269,585
Current portion of long term debt 241,211 229,322
--------- ---------
Total current liabilities 636,131 684,163
LONG TERM DEBT:
Notes payable 246,028 367,165
Mortgage loan 200,245 202,857
--------- ---------
Total long term debt 446,273 570,022
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,723,662 and 2,719,162
shares at June 30,1997 and December
31, 1996, respectively 272,366 271,916
Capital in excess of par value 8,145,184 8,139,791
Accumulated deficit (6,000,224) (5,947,758)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
--------- ---------
Total stockholders' equity 1,830,591 1,877,214
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,912,995 $3,131,399
========= =========
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
REVENUES:
Product sales $ 837,515 $ 768,159 $2,045,874 $2,034,159
Collaborative research
and development revenue -- -- 75,000 65,000
Grant income 10,000 85,950 26,881 170,961
--------- --------- --------- ---------
Total revenues 847,515 854,109 2,147,755 2,270,120
--------- --------- --------- ---------
COSTS AND EXPENSES:
Product costs 385,270 350,432 913,860 895,487
Research and development
expenses 318,723 319,550 524,725 820,608
Sales and marketing
expenses 205,026 156,660 447,728 362,638
General and administrative
expenses 136,095 157,948 297,313 327,619
--------- --------- --------- ---------
Total costs and expenses 1,045,114 984,590 2,183,626 2,406,352
--------- --------- --------- ---------
Interest and other income 11,999 12,092 20,297 25,911
Interest expense (19,350) (16,901) (36,892) (36,647)
--------- --------- --------- ---------
Net interest and other
expense (7,351) (4,809) (16,595) (10,736)
--------- --------- --------- ---------
NET LOSS $ (204,950) $ (135,290) $ (52,466) $ (146,968)
========= ========= ========= =========
NET LOSS PER SHARE $ (.09) $ (.06) $ (.02) $ (.06)
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,334,064 2,321,617 2,331,814 2,306,799
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
(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, 1996 2,719,162 $271,916 $8,139,791 $(5,947,758) 389,598 $(586,735) $1,877,214
Net Loss -- -- -- (52,466) -- -- (52,466)
Exercise of Stock Options 4,500 450 5,393 -- -- -- 5,843
--------- -------- ---------- ----------- ------- --------- ----------
BALANCE,
June 30, 1997 2,723,662 $272,366 $8,145,184 $(6,000,224) 389,598 $(586,735) $1,830,591
========= ======== ========== =========== ======= ========= ==========
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, 1997 AND 1996
(Unaudited)
Six Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net loss $ (52,466) $ (146,968)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities-
Depreciation and amortization 48,087 59,604
Changes in:
Accounts receivable 75,635 62,689
Inventories 78,684 (34,586)
Prepaid expenses and accrued interest (56,820) (146,441)
Accounts payable (100,284) (42,831)
Accrued expenses and deferred income 40,363 (25,504)
-------- --------
Net cash provided by (used for)
operating activities 33,199 (274,037)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, building
and improvements (23,050) (202,814)
Investments in joint ventures (17,000) --
Decrease in other assets -- 1,310
-------- --------
Net cash used for
investing activities (40,050) (201,504)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations (111,860) (81,702)
Proceeds from exercise of stock options 5,843 38,101
-------- --------
Net cash used for
financing activities (106,017) (43,601)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (112,868) (519,142)
BEGINNING CASH AND CASH EQUIVALENTS 1,044,441 1,550,011
-------- --------
ENDING CASH AND CASH EQUIVALENTS $ 931,573 $1,030,869
======== ========
CASH PAID FOR INTEREST $ 37,094 $ 37,311
======== ========
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, 1996, 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 Loss Per Common Share
The net loss per common share has been computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. Common stock equivalents outstanding have not been included in the net
loss per share computation, as the effect would be antidilutive, thereby
decreasing the net loss per common share.
(3) New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 - Earnings
per Share. This Statement is effective for financial statements issued for
periods ending after December 15, 1997 with earlier application not permitted.
The Statement requires dual presentation of basic and diluted earnings per
share on the income statement. The Statement does not effect the weighted
average basis of reporting the net loss per share.
In June 1997, the FASB issued SFAS No. 130 - Reporting Comprehensive
Income, which requires the separate reporting of all changes to shareholders'
equity, and SFAS No. 131 - Disclosures about Segments of an Enterprise and
Related Information, which revises existing guidelines about the level of
financial disclosure of a Company's operations. Both Statements are effective
for financial statements issued after December 15, 1997. The Company has not
determined the impact of the new standards, but does not expect them to have
a material impact to existing financial reporting.
(4) Inventories
Inventories consist of the following:
June 30, December 31,
1997 1996
Raw materials $ 41,782 $ 55,682
Work-in-process 406,811 548,083
Finished goods 120,999 44,511
-------- --------
$569,592 $648,276
======== ========
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(5) Debt Obligations
The Company has long term debt obligations, net of current maturities,
as follows:
June 30, December 31,
1997 1996
10.27% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1997 to 1998 $191,407 $256,054
9.5% Bank mortgage, collateralized by first security
interest in building, due 1997 to 2000 205,296 207,728
10% Note payable to bank, collateralized by accounts
receivable inventory and certain fixed assets due 1997
to 2000 168,516 189,701
9.62% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1997 to 1999 122,265 145,861
-------- --------
687,484 799,344
Less current portion 241,211 229,322
-------- --------
Long term debt $446,273 $570,022
======== ========
Principal payments under the above debt obligations due subsequent to
June 30, 1997 are approximately as follows: $117,000 - 1997; $230,000 - 1998;
$104,000 - 1999; and $236,000 - 2000.
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997
Total revenues equalled $848,000 and $2,148,000 for the three and six
month periods ended June 30, 1997, respectively, as compared to $854,000 and
$2,270,000 in the comparable periods in 1996. Collaborative research and
development revenue and grant income decreased by $76,000 (88%) and by
$134,000 (57%) during the three and six month periods ended June 30, 1997,
respectively. The 1997 grant income was recognized under a federally sponsored
research grant to support the development of the Company's water test. The
1996 grant income was recognized under two federally sponsored research grants
in support of the Company's passive antibody development programs, which
research funding was complete as of December 31, 1996. The $75,000 licensing
fee recognized during the first quarter of 1997 was received
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
for an option payment on a license to use the Company's milk processing
technology for the production of whey protein isolate and certain other
proteins. The $65,000 in collaborative research and development revenue
recognized during the first quarter of 1996 supported a portion of the
Company's effort to develop a process to manufacture lactoferrin, a nutritional
milk protein derived from cheese whey.
Product sales increased by $69,000 (9%) to $838,000 and by $12,000 (1%)
during the three and six month periods ended June 30, 1997, respectively, in
comparison to the same periods in the prior year. Sales of First
Defense<reg-trade-mark> and the Kamar<reg-trade-mark> Heatmount{TM} Detector
aggregated 92% and 93% of total product sales during the three and six month
periods ended June 30, 1997, respectively. Comparatively, sales of these two
products aggregated 88% and 86% of total product sales during the three and six
month periods ended June 30, 1996. Sales of these two products increased by
14% and 10% during the three and six month periods ended June 30, 1997,
respectively, as compared to the same periods of the prior year.
The gross margin percentage on products sales was 54% for the three
month periods ended June 30, 1997 and 1996 and was 55% and 56% for the six
month periods ended June 30, 1997 and 1996, respectively. The gross margin
increased by $35,000 (8%) during the three month period ended June 30, 1997 as
compared to the respective period in 1996. The gross margin decreased by
$7,000 (less than 1%) during the six month period ended June 30, 1997 as
compared to the respective period in 1996. The changes in gross margin are
consistent with the comparable changes in product sales.
Research and development expenses were essentially unchanged during the
second quarter of 1997 as compared to the second quarter of 1996 and declined
by $295,000 (36%) during the six months ended June 30, 1997 as compared to the
respective period in 1996. These expenses were incurred primarily to develop
specific antibodies to be used to prevent and/or treat gastrointestinal
infections in humans. Additionally, funds have been invested in the
development of a product to detect infectious pathogens in water and in the
development of a process to manufacture lactoferrin, a nutritional milk protein
derived from cheese whey. Research and development expenses exceeded
collaborative research and development revenue and grant income by $309,000
during the three month period ended June 30, 1997 and by $234,000 during the
comparable period in 1996. Research and development expenses exceeded
collaborative research and development revenue and grant income by $423,000
during the six month period ended June 30, 1997 and by $585,000 during the
comparable period in 1996.
Sales and marketing expenses increased by $48,000 (31%) during the
three month period ended June 30, 1997 compared to the same period in 1996,
aggregating 24% of product sales in the 1997 period compared to 20% in 1996.
Sales and marketing expenses increased by $85,000 (23%) during the six month
period ended June 30, 1997 compared to the same period in 1996, aggregating 22%
of product sales in the 1997 period compared to 18% in 1996. General and
administrative expenses decreased by $22,000 (14%) during the three month
period ended June 30, 1997 and by $30,000 (9%) during the six month period
ended June 30, 1997 compared to the same periods in 1996, as the Company
continues its efforts to control these expenses while incurring all the
necessary costs associated with being a publicly held company.
Management believes that the expenses incurred resulting from the
investment in the research and development of new products is necessary to
foster growth for the Company in the future. 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. The research and development expenses,
described above, were the principal cause of the net losses of $205,000 and
$52,000 for the three and six month periods ended June 30, 1997. In order to
aggressively develop new products, the Company expects to incur operating
losses in the future.
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In the third quarter of 1996, the Company made investments in two joint
ventures, AgriCell Company, LLC, ("AgriCell") and Clearwater Diagnostics
Company, LLC, ("CDC"). The operating activity of these joint ventures for the
period from inception to June 30, 1997 was not material. AgriCell is
completing the installation of a commercial production facility to manufacture
lactoferrin, a nutritional protein derived from cheese whey. In June 1997, CDC
entered into a distribution agreement with an England-based company covering
the sales of Crypto-Scan{TM} water diagnostic test in the United Kingdom. This
test method is currently being evaluated by the U.S. Environmental Protection
Agency.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased by approximately $218,000 to $2,913,000 at June
30, 1997 from $3,131,000 at December 31, 1996. Cash and cash equivalents
decreased by approximately $113,000 to $932,000 at June 30, 1997 from
$1,044,000 at December 31, 1996. Net working capital decreased by $162,000 to
$1,243,000 at June 30, 1997 from $1,405,000 at December 31, 1996.
Stockholders' equity decreased by $47,000 to $1,831,000 at June 30, 1997 from
$1,877,000 at December 31, 1996.
The Company obtained a $100,000 Phase I Small Business Innovation
Research grant in September 1996 to complete the development of its test to
detect Cryptosporidium in drinking water and to partially fund the design of a
commercial prototype machine. As of July 1, 1997, approximately $22,000 was
available under this grant to fund additional development services to be
performed under contract by an outside laboratory.
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 6, 1997, the
stockholders voted to elect the Board of Directors for the next
ensuing year.
Each of the six 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: 1,831,993; withhold: 14,987),
Thomas C. Hatch (for: 1,834,543; withhold: 12,437),
George W. Masters (for: 1,834,667; withhold: 12,313),
William H. Maxwell (for: 1,834,567; withhold: 12,413),
John R. McKernan, Jr. (for: 1,834,543; withhold: 12,437)
and Mitchel Sayare (for: 1,834,567; withhold: 12,413).
IMMUCELL CORPORATION
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (for electronically
filed copies only).
(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 12, 1997 By: /s/ Thomas C. Hatch
Thomas C. Hatch
President and Chief
Executive Officer
Date: August 12, 1997 By: /s/ Michael F. Brigham
Michael F. Brigham
Chief Financial Officer,
Treasurer and Secretary
IMMUCELL CORPORATION
Exhibit Index
27.1 Financial Data Schedule (for electronically filed copies only).