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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 March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
0-15507
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Commission file number
IMMUCELL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 01-0382980
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
56 Evergreen Drive
Portland, ME 04103
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(Address of principal executive office and zip code)
(207) 878-2770
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(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 May 10, 2000:
Common Stock, par value $.10 per share 2,655,684
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IMMUCELL CORPORATION
INDEX TO FORM 10-Q
March 31, 2000
PART I: FINANCIAL INFORMATION Page
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ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 3-4
Consolidated Statements of Operations for the
three month periods ended March 31, 2000 and 1999 5
Consolidated Statement of Stockholders' Equity for the
three month period ended March 31, 2000 6
Consolidated Statements of Cash Flows for the
three month periods ended March 31, 2000 and 1999 7
Notes to Unaudited Consolidated Financial Statements 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-11
PART II: OTHER INFORMATION
Items 1 through 6 12
Signatures 12
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IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
------
March 31, December 31,
2000 1999
---------- ----------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $2,103,020 $1,823,688
Accounts receivable, net of
allowance for doubtful accounts
of $40,000 and $41,000 at
March 31, 2000 and December 31,
1999, respectively 570,771 453,139
Inventories 623,625 520,656
Prepaid expenses 25,483 27,826
---------- ----------
Total current assets 3,322,899 2,825,309
PROPERTY, PLANT AND
EQUIPMENT, at cost:
Laboratory and manufacturing
equipment 965,925 961,554
Building and improvements 586,242 586,242
Office furniture and equipment 65,803 63,418
Land 50,000 50,000
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1,667,970 1,661,214
Less - accumulated depreciation 907,732 881,384
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Net property, plant and
equipment 760,238 779,830
Product rights, net 243,750 250,000
OTHER ASSETS 840 840
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TOTAL ASSETS $4,327,727 $3,855,979
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
2000 1999
---------- ----------
(unaudited)
CURRENT LIABILITIES:
Accounts payable $ 326,742 $ 322,241
Accrued expenses 243,083 264,991
Current portion of long term debt 19,197 18,691
---------- ----------
Total current liabilities 589,022 605,923
LONG TERM DEBT:
Mortgage loan 429,577 434,658
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Total long term debt 429,577 434,658
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--3,015,782 and 2,834,682
shares at March 31, 2000 and
December 31, 1999 301,578 283,468
Capital in excess of par value 8,602,852 8,354,246
Accumulated deficit (5,008,567) (5,235,581)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
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Total stockholders' equity 3,309,128 2,815,398
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,327,727 $3,855,979
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31,
------------------------------
2000 1999
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REVENUES:
Product sales $ 1,432,904 $ 1,366,724
Grant income 10,910 36,876
Royalty income 3,206 --
----------- -----------
Total revenues 1,447,020 1,403,600
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COSTS AND EXPENSES:
Product costs 677,554 585,056
Research and development
expenses 161,392 232,809
Sales and marketing
expenses 274,530 228,761
General and administrative
expenses 119,985 105,817
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Total costs and expenses 1,233,461 1,152,443
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Operating income 213,559 251,157
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OTHER INCOME (EXPENSE):
Interest and other income 23,121 12,685
Interest expense (9,666) (9,943)
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Net other income 13,455 2,742
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NET PROFIT $ 227,014 $ 253,899
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NET PROFIT PER
COMMON SHARE:
Basic $ 0.09 $ 0.10
Diluted $ 0.08 $ 0.10
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 2,544,779 2,428,884
Diluted 2,812,389 2,487,093
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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IMMUCELL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000
(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, 1999 2,834,682 $ 283,468 $ 8,354,246 $(5,235,581) 389,598 $(586,735) $ 2,815,398
Net Profit -- -- -- 227,014 -- -- 227,014
Exercise of
Stock Options 181,100 18,110 248,606 -- -- -- 266,716
--------- --------- ----------- ----------- --------- --------- -----------
BALANCE,
March 31, 2000 3,015,782 $ 301,578 $ 8,602,852 $(5,008,567) 389,598 $(586,735) $ 3,309,128
========= ========= =========== =========== ========= ========= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-6-
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
Three Months Ended
March 31,
--------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 227,014 $ 253,899
Adjustments to reconcile net
profit to net cash provided
by operating activities-
Depreciation and amortization 32,598 27,090
Changes in:
Accounts receivable (117,632) (256,291)
Inventories (102,969) 117,954
Prepaid expenses 2,343 18,202
Accounts payable 4,501 32,539
Accrued expenses (21,908) (130,081)
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Net cash provided by
operating activities 23,947 63,312
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment, net (6,756) (13,720)
Investment in joint venture -- (13,023)
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Net cash used for
investing activities (6,756) (26,743)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations (4,575) (4,311)
Proceeds from exercise of stock options 266,716 --
----------- -----------
Net cash provided by (used for)
financing activities 262,141 (4,311)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 279,332 32,258
BEGINNING CASH AND CASH EQUIVALENTS 1,823,688 1,538,905
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ENDING CASH AND CASH EQUIVALENTS $ 2,103,020 $ 1,571,163
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CASH PAID FOR INTEREST $ 9,700 $ 9,973
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
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The accompanying financial 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, 1999, 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) Inventories
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Inventories consist of the following:
March 31, December 31,
2000 1999
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Raw materials $ 168,439 $ 136,909
Work-in-process 262,517 243,895
Finished goods 192,669 139,852
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$ 623,625 $ 520,656
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(3) Debt Obligations
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The Company has long term debt obligations, net of current maturities, as
follows:
March 31, December 31,
2000 1999
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8.62% Bank mortgage, collateralized
by first security interest in
building, due 1999 to 2003 $ 448,774 $ 453,349
Less current portion 19,197 18,691
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Long term debt $ 429,577 $ 434,658
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The mortgage, which was entered into in May 1998, has a 15 year
amortization schedule with interest payable at the fixed rate of 8.62% per year
for the first five years. The Company intends to repay the then outstanding
principal at the end of this five year period, but the mortgage does provide the
option of resetting at a new fixed interest rate to be determined at that time
for one additional five year period. Principal payments under this mortgage
obligation, due in monthly installments subsequent to March 31, 2000, aggregate
approximately the following: $15,000 - 2000; $20,000 - 2001; $22,000 - 2002; and
$392,000 - 2003.
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IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(4) Net Profit per Common Share
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The basic net profit per share of common stock is determined by dividing
the net profit by the weighted average number of shares of common stock
outstanding during the period. The diluted profit per share reflects the
potential dilution that would occur if existing stock options were exercised.
(5) Segment and Significant Customer Information
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The Company principally operates in the business segment described in Note
1 to its Annual Report on Form 10-K for the year ended December 31, 1999. The
Company's primary customers for the majority (84% and 86% for the three month
periods ended March 31, 2000 and 1999, respectively) of its product sales are in
the United States dairy and beef industries. Sales to foreign customers, who are
principally in the dairy industry, aggregated 14% and 13% of product sales for
the three month periods ended March 31, 2000 and 1999, respectively. Government
grant income amounted to less than 1% ($11,000) and approximately 3% ($37,000)
of total revenues in the three month periods ended March 31, 2000 and 1999,
respectively.
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131. The Company's two reportable segments are: (1) Animal Health Products
and (2) Research and Development ("R&D"). The accounting policies of the
segments are the same as those described in Note 2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. The Company evaluates
the performance of its segments and allocates resources to them based on
contribution before allocation of corporate overhead charges. The table below
presents information about reported segments for the three month periods ended
March 31, 2000 and 1999:
Three Months Ended March 31, 2000: Animal
(in thousands) Health
Products R&D Other Total
------ ------ ------ ------
Product Sales $1,407 -- $ 26 $1,433
Grant Income -- $ 11 -- 11
Royalty Income -- -- 3 3
------ ------ ------ ------
Total Revenues 1,407 11 29 1,447
Product Costs 666 -- 12 678
Research and Development Expenses -- 161 -- 161
Sales and Marketing Expenses 275 -- -- 275
Other Expenses -- -- 106 106
------ ------ ------ ------
Net Profit (Loss) $ 466 $ (150) $ (89) $ 227
====== ====== ====== ======
Three Months Ended March 31, 1999: Animal
(in thousands) Health
Products R&D Other Total
------ ------ ------ ------
Product Sales $1,351 -- $ 16 $1,367
Grant Income -- $ 37 -- 37
------ ------ ------ ------
Total Revenues 1,351 37 16 1,404
Product Costs 581 -- 4 585
Research and Development Expenses -- 233 -- 233
Sales and Marketing Expenses 229 -- -- 229
Other Expenses -- -- 103 103
------ ------ ------ ------
Net Profit (Loss) $ 541 $ (196) $ (91) $ 254
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IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(6) Recent Accounting Pronouncements
--------------------------------
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 "SAB
101", "Revenue Recognition in Financial Statements". SAB 101 summarizes certain
of the SEC's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The Company is required to adopt
SAB 101 in the second quarter of 2000. Management does not expect the adoption
of SAB 101 to have a material effect on the Company's financial condition or
results of operations.
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 MONTH PERIOD ENDED MARCH 31, 2000
Total revenues equalled $1,447,000 for the three month period ended March
31, 2000, as compared to $1,404,000 in the comparable period in 1999. Grant
income in 2000 and 1999 was recognized under a federally sponsored research
grant in support of the Company's passive antibody development programs.
Product sales increased by $66,000 (5%) to $1,433,000 during the three
month period ended March 31, 2000, in comparison to the same period in the prior
year. Sales of FIRST DEFENSE(R) and the KAMAR(R) HEATMOUNT(TM) DETECTOR
aggregated 86% and 96% of total product sales during the three month periods
ended March 31, 2000 and 1999, respectively. The decrease in the percentage of
product sales that is comprised of these two products is principally the result
of the addition of sales of WIPE OUT(TM) DAIRY WIPES to the product mix in 2000.
THE introduction of sales of TIP-TEST(TM): JOHNE'S did not have a significant
impact on the product mix in the firST quarter of 2000 because those sales have
been limited to date principally due to state regulatory barriers that the
Company is working to overcome. Sales of FIRST DEFENSE and the KAMAR HEATMOUNT
DETECTOR decreased by 6% during the three month period ended March 31, 2000, as
compared to the same period of the prior year. Sales of FIRST DEFENSE in the
first quarter of 2000 were negatively impacted by a backlog of orders valued at
approximately $250,000, which backlog the Company intends to fill in the second
quarter of 2000. In July 1998, the Company entered into a four year extension to
the term of its product license from Kamar, Inc. for the Kamar Heatmount
Detector from December 31, 1999 through December 31, 2003, subject to the right
of either party to give 12 months' notice of early termination.
Gross margin as a percentage of product sales was 53% and 57% during the
three month periods ended March 31, 2000 and 1999, respectively. The gross
margin decreased by $26,000 (3%) during the three month period ended March 31,
2000 as compared to the respective period in 1999. The decreases resulted
principally from WIPE OUT having a lower gross margin than FIRST DEFENSE.
Research and development expenses decreased by $71,000 (31%) to $161,000
during the three month period ended March 31, 2000, as compared to the
respective period in 1999. Research and development expenses aggregated 11% and
17% of total revenues during the three month periods ended March 31, 2000 and
1999, respectively. Research and development expenses exceeded grant income by
$150,000 (which amount equals 11% of product sales) and by $196,000 (which
amount equals 14% of product sales) during the three month periods ended March
31, 2000 and 1999, respectively. Since 1999, internal resources have been
invested principally in the development of new animal health products that fit
the Company's objective of commercializing its proprietary technologies and
helping dairy and beef producers and their veterinarians manage disease and
reproduction in their herds. Additionally, funds have been invested in the
development of a product to detect infectious pathogens in water.
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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
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. Beginning in 1998, the Company
determined to increase development of new animal health products and to decrease
its internally funded research and development investment in products targeted
towards the human health care markets. Because funding requirements for these
animal health programs are less than the requirements for the human health
programs, the Company anticipates that it will be able to continue to report
profitable results of operations. The Company has made no provision for income
taxes because of the availability of sufficient net operating loss
carryforwards.
Sales and marketing expenses increased by $46,000 (20%) during the three
month period ended March 31, 2000 compared to the same period in 1999,
aggregating 19% of product sales in the 2000 period compared to 17% in 1999.
General and administrative expenses increased by $14,000 (13%) during the three
month period ended March 31, 2000 in comparison to the same period in 1999,
while the Company continues its efforts to control these expenses while
incurring all the necessary costs associated with being a publicly held company.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased by approximately $472,000 to $4,328,000 at March
31, 2000 from $3,856,000 at December 31, 1999. Cash and cash equivalents
increased by approximately $279,000 to $2,103,000 at March 31, 2000 from
$1,824,000 at December 31, 1999. Net working capital increased by $514,000 to
$2,734,000 at March 31, 2000 from $2,219,000 at December 31, 1999. Stockholders'
equity increased by $494,000 to $3,309,000 at March 31, 2000 from $2,815,000 at
December 31, 1999.
The Company was awarded a $710,000 Phase II Small Business Innovation
Research grant in September 1997. As of April 1, 2000, approximately $55,000 was
available under this grant to fund additional development expenses relating to
the DiffGAM clinical development program.
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.
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Such statements include, but are not limited
to, any statements relating to the Company's objectives concerning future
product sales and profitability and any other statements that are not historical
facts. Such statements involve risks and uncertainties, including, but not
limited to, those risks and uncertainties relating to difficulties or delays in
development, testing, regulatory approval, production and marketing of the
Company's products, competition within the Company's anticipated product
markets, the uncertainties associated with product development, and other risks
detailed from time to time in filings the Company makes with the Securities and
Exchange Commission, including its Annual Report on Form 10-K and its Quarterly
Reports on Form 10-Q. Such statements are based on management's current
expectations, but actual results may differ materially due to various factors,
including those risks and uncertainties mentioned or referred to in this
Quarterly Report.
-11-
IMMUCELL CORPORATION
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
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
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Registrant
Date: May 10, 2000 By: /s/ Michael F. Brigham
----------------------
Michael F. Brigham
President and Chief Executive Officer,
Treasurer, Secretary and Director
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IMMUCELL CORPORATION
EXHIBIT INDEX
27.1 Financial Data Schedule (for electronically filed copies only).