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 $.01 par value Common
Stock as of March 31, 1995 is 13,029,071 .
<PAGE>
FORM 10QSB/A
IGENE Biotechnology, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Balance Sheets ................................................. 4
Statements of Operations ....................................... 5
Statements of Stockholder's Deficit ............................ 6
Statements of Cash Flows ....................................... 8
Notes to Financial Statements .................................. 9
Management's Discussion and Analysis of Financial
Conditions and Results of Operations ..................... 10
PART II - OTHER INFORMATION .......................................... 12
SIGNATURES ........................................................... 13
IGENE BIOTECHNOLOGY, INC.
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
PART I - FINANCIAL INFORMATION
<TABLE>
IGENE Biotechnology, Inc.
Balance Sheets
<CAPTION>
March 31, March 31,
December 31,
1994 1995
1994
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C>
<C>
Current assets:
Cash and cash equivalents ...............................................$ 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
<CAPTION>
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
DEFICIT
<S> <C> <C>
<C>
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
</TABLE>
<PAGE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Operations
(Unaudited)
<CAPTION>
--- Three months ended ---
March 31, March 31,
1994 1995
<S> <C> <C>
Sales ............................................................... $ 35,109 $ 9,548
Cost of sales ....................................................... 22,547 8,251
12,562 1,297
<CAPTION>
Selling, general and administrative expenses:
<S> <C> <C>
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)
<CAPTION>
Other income (expenses):
<S> <C> <C>
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)
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Stockholder's Deficit
(Unaudited)
<CAPTION>
Redeemable
Preferred Stock Preferred Stock Common Stock
(Shares/Amount) (Shares/Amount) (Shares/Amount)
<S> <C> <C> <C>
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
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Stockholder's Deficit
(Unaudited- Continued)
<CAPTION>
Additional Total
Stockholder's
Paid-In Capital Deficit Deficit
<S> <C> <C> <C>
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)
$(2,712,180)
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Cash Flows
(Unaudited)
<CAPTION>
--- Three months ended ---
March 31, March 31,
1994 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................$( 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
<FN>
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.
</TABLE>
<PAGE>
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.
<PAGE>
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales revenue for the three month period ended March 31, 1995 consisted entirely
of sales of the Company's ClandoSan nematicide product. The revenue decereased
from the corresponding period in 1994. Selling expenses for the quarter also
declined when compared with the corresponding period of the prior year. These
decreases reflect a reduced in-house marketing effort for ClandoSan as the
Company focuses on its AstaXin product. The Company is actively seeking a
marketing partner for ClandoSan .
Research, development and pilot plant expenses decreased for the quarter due to
cost containment measures by management and a decrease in scale-up expense
related to the astaxanthin technology.
Decreases in general and administrative costs for the three month period ending
March 31, 1995 and for the current quarter also reflect successful cost
containment measures.
<PAGE>
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.
On March 4, 1994 the Company and the Food Science Group of Pfizer Inc, New York,
N.Y., signed a Technology Evaluation Agreement for AstaXin . The Agreement
provided for cash compensation to IGENE of $250,000 over a three month period
ending May 18, 1994. On April 28, 1994, the Company and the Food Science Group
of Pfizer Inc agreed to extend its Technology Evaluation Agreement for AstaXin
until it ended on July 18, 1994. The exclusive evaluation period has ended, and
it is unlikely that Pfizer will commit to a multiyear commitment for manufacture
and sale of AstaXin in the foreseeable future. Consequently, the Company is
actively seeking other potential manufacturers for AstaXin .
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.
The Company is actively seeking 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.
<PAGE>
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 plans to issue 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".
<PAGE>
FORM 10-QSB/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.
<PAGE>
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: August 24, 1995
/s/ Stephen F. Hiu
Stephen F. Hiu
President, Treasurer and
Secretary
(On behalf of the Registrant and as
Principal Financial Officer)
<PAGE>
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: August 24, 1995
Stephen F. Hiu
President, Treasurer and
Secretary
(On behalf of the Registrant and as
Principal Financial Officer)
