FORM 10QSB
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, 1997
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, 1997 is 18,631,139.
FORM 10QSB
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
<TABLE>
IGENE Biotechnology, Inc.
Balance Sheets
<CAPTION>
March 31, March 31, December 31,
1997 1996 1996
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 4,138 $ 17,538 $ 41,339
Accounts receivable 19,804 18,229 9,996
Due from stockholder 29,540 --- 16,870
Supplies --- --- 6,126
Prepaid expenses 989 911 4,652
Total current assets 54,471 36,678 78,983
Property and equipment, net 23,338 27,814 19,471
Security deposits 10,600 10,600 10,600
$ 88,409 $ 75,092 $ 109,054
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and
other accrued expenses 306,022 223,833 300,799
Debenture interest payable 90,000 60,000 45,000
Promissory Notes payable 887,000 240,000 717,000
Total current liabilities 1,283,022 534,833 1,062,799
Long term liabilities:
Variable rate subordinated debenture 1,500,000 1,500,000 1,500,000
Total liabilities 2,783,022 2,034,833 2,562,799
Redeemable preferred stock -- 8% cumulative,
convertible, voting, Series A,
$.01 par value per share;
redemption value $13.44,
$12.80 and $13.28 per share.
Authorized 920,000 shares; issued
35,842, 35,842, and 35,842 shares 481,716 458,778 475,982
Stockholders' deficit:
Preferred stock -- $.01 par value per share.
8% cumulative, convertible, voting,
Series A. Authorized and issued
187,500 shares (aggregateinvoluntary
liquidation value of $2,520,000,
2,400,000, and 2,490,000) 1,875 1,875 1,875
Common stock -- $.01 par value per share.
Authorized 35,000,000 shares;issued
18,631,139, 13,029,071, and
18,631,139 shares 186,311 185,778 186,311
Additional paid-in capital 17,965,485 17,868,958 17,971,220
Deficit (21,330,002) (20,475,130) (21,089,133)
Total stockholders' deficit (3,176,331) (2,418,319) (2,929,727)
$ 88,409 $ 75,092 $ 109,054
The accompanying notes are an integral part of the financial statemen
</TABLE
</TABLE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Operations
(Unaudited)
<CAPTION>
--- Three months ended ---
March 31, March 31,
1997 1996
<S> <C> <C>
Sales $ 12,194 $ 22,969
Cost of sales 10,065 11,435
2,129 11,534
Technology services income --- 22,159
Net revenue 2,129 34,693
Selling, general and administrative expenses:
Marketing and selling (792) 1,156
Research, development and pilot plant 89,372 79,103
General and administrative 91,289 83,909
Total selling, general and
Administrative expenses 179,869 164,169
Operating loss (177,740) (129,476)
Other income (expenses):
Investment income --- 1
Joint Venture income --- ---
Other income (loss) --- ---
Interest expense (63,129) (33,395)
Forgiveness of Interest on Promissory Notes --- ---
Net loss (240,869) (162,870)
Deficit at beginning of period (21,089,133) (20,312,260)
Deficit at end of period $(21,330,002) $(20,475,130)
Net loss per common share $ (0.01) $ (0.01)
The accompanying notes are an integral part of the financial statements.
</TABLE
</TABLE>
<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, 1995 38,342/$484,643 187,500/$1,878 18,572,805/$185,728
Cumulative undeclared dividends
on redeemable
preferred stock 5,735 --- ---
Conversion of preferred
stock to common stock (2,500)/$(31,600) --- 5,000/$50
Net Loss for Quarter ended
March 31, 1996 --- --- ---
Balance at
March 31, 1996 38,342/$458,778 187,500/$1,875 8,577,805/$185,778
Balance at December 31, 1996 35,842/$475,982 187,500/$1,875 18,631,139/$186,311
Cumulative undeclared dividends
On redeemable preferred stock 5,734 --- ---
Net Loss for Quarter ended
March 31, 1997 --- --- ---
Balance at March 31, 1997 35,842/$481,716 187,500/$1,875 18,631,139/$186,311
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Stockholder's Deficit
(Unaudited- Continued)
<CAPTION>
Total
Additional Stockholder's
Paid-In Capital Deficit Deficit
<S> <C> <C> <C>
Balance at December 31, 1995 $17,843,142 $(20,312,260) (2,281,515)
Cumulative undeclared
dividends on redeemable
preferred stock (5,734) --- (5,734)
Conversion of preferred
stock to common stock 31,550 --- 31,600
Net Loss for Quarter ended
March 31, 1996 --- (162,870) (162,870)
Balance at
March 31, 1996 $17,868,958 $(20,475,130) $(2,418,519)
Balance at December 1996 $17,971,320 $(21,089,133) $(2,929,727)
Cumulative undeclared
dividends on redeemable
preferred stock (5,735) --- (5,735)
Net Loss for Quarter ended
March 31, 1997 --- (240,869) (240,869)
Balance at
March 31, 1997 17,965,485 (21,330,002) (3,176,331)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
IGENE Biotechnology, Inc.
Statements of Cash Flows
(Unaudited)
<CAPTION>
---Three months ended---
March 31, March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $( 240,869) $( 162,870)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and amortization 1,474 1,706
Changes in assets and liabilities:
Increase (decrease) in
accounts payable and
other accrued expenses 5,223 (36,293)
Debenture interest payable 45,000 30,000
Decrease (increase) in
accounts receivable (9,807) (7,100)
Decrease (increase) in prepaid
expenses and deposits 9,790 (911)
Net cash used in
operating activities (189,189) (175,468)
Cash flows from investing activities:
Capital expenditures (5,342) ---
Net cash used in investing activities (5,342) ---
Cash flows from financing activities:
Payment of amount due
from stockholders (12,670) 44,460
Issuance of promissory notes 170,000 140,000
Net cash provided by (used in)
financing activities 157,330 184,680
Net increase (decrease) in
cash and cash equivalents (37,201) 9,212
Cash and cash equivalents
at beginning of year 41,339 8,326
Cash and cash equivalents at
end of period $ 4,138 $ 17,533
Supplementary disclosure -
cash paid for interest $ --- $ ---
Noncash investing and financing activities:
During the three months ended March 31, 1997 and 1996, the Company
recorded dividends in arrears on 8% redeemable preferred stock at $.16 per
share aggregating $5,735 and $5,735 in each period which has been removed from
paid-in capital and included in the carrying value of the redeemable preferred
stock.
The accompanying notes are an integral part of the 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, 1997 and 1996 and
for the three-month period ended March 31, 1997 and 1996 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, 1997 and 1996, 71,684 shares of authorized but unissued common
stock were reserved for issuance upon conversion of the Company's
outstanding preferred stock.
As of March 31, 1997 and 1996, 2,000,000 shares of authorized but unissued
common stock were reserved for exercise pursuant to the 1986 Stock Option
Plan.
As of March 31, 1996, 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. In addition, 680,667 warrants to purchase
common stock at $.75 per share were issued to other qualified investors as
part of the private placement. These warrants expired June 26, 1996.
These Warrants were not publicly traded and thre were no trades of these
Warrants before the expiration date.
As of March 31, 1997 and 1996, 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.
(4) Net Loss Per Common Share
Net loss per common share for the three-month periods ended March 31, 1997
and 1996 is based on 18,631,139 and 18,576,596 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, 1997 decreased from $22,969 in
the
first quarter of 1996 to $12,195 in the first quarter of 1997. This decrease
(53%) resulted from a decrease in marketing efforts for ClandoSanr as the
Company
focuses on commercializing its AstaXinr product. Cost of product sales as a
percentage of product sales increased from 50% in the first quarter of 1996 to
83% in the first quarter of 1997 because of costs incurred for packaging to
meet
new EPA labelling requirements. Additional sales of ClandoSanr will depend on
continued marketing arrangements with distributors for the product and the
Company's own limited direct sales. Long term, the Company hopes to license
rights to manufacture, sell, and distribute ClandoSanr. The company expects to
continue to focus its efforts on AstaXinr and is in discussion with potential
manufacturing and marketing partners for the product. In addition, the Company
is actively seeking a contract manufacturer for AstaXinr or a plant which could
be leased for production of the product. Long-term production and sale of
AstaXinr will depend on the Company's ability to find suitable manufacturing
partners as it has no commercial scale manufacturing facilities of its own.
Research, development and pilot plant expenses increased by 13% for the current
quarter when compared to the corresponding quarter in 1996. This increase was
due to a increase in equipment repairs, as well as utility increases. Research
and development costs may be expected to increase gradually in support of
increased manufacturing efforts for AstaXinr, but would be offset by technology
licensing and sales of the product.
Marketing expenses decreased for the current quarter when compared to the
corresponding quarter in 1996 and are related primarily to the Company's
ClandoSanr product. Reimbursements for freight which were posted in the 1st
quarter of 1997 resulted in a net credit. Marketing expenses related to
AstaXinr
could be expected to increase if production and sales increase, and will depend
on marketing arrangements with distributors of the product. This income would
be offset by revenue from sales of product.
General and administrative expenses increased by approximately 9% for the first
quarter of 1997 over the same period in 1996. This increase reflects an
increase
in legal fees for patent maintenance, as well as increased fees related to
consulting services.
Interest expense for the quarter ended March 31, 1997 increased by
approximately
$29,734 over the same period in the prior year and reflects an increase in
accumulating interest due on promissory notes issued to certain directors of
the
Company.
As a result of the foregoing, the Company reported a net loss of $240,869, or
$.01 per common share during the first quarter of 1997, compared to a net loss
of $162,870, or $.01 per common share in the same period in 1996. The weighted
average number of common shares outstanding increased to 18,604,171 in the
first
quarter of 1997 compared to 18,576,596 in the first quarter of 1996. This
increase in shares reflects the annual issuance of common stock as payment of
interest on a variable note 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, 1997, total dividends in arrears on the Company's preferred
stock
was $1,214,980, of which $194,980 ($5.44 per share) was included in the
carrying
value of the redeemable preferred stock and $102,000 ($5.44 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, 1997, the Company
had
a working capital deficit of approximately $1,229,000, and cash and cash
equivalents of $4,138, 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, 1997 and 1996 amounted
to $189,189 and $175,468, respectively. To date, the Company has achieved only
minimal sales of its ClandoSanr and AstaXinr products while it seeks additional
manufacturing capability for AstaXinr.
Approximately $5,300 was provided by investing activities for the quarters
ended
March 31, 1997 and March 31, 1996. This is reflective of the Company's
continued
plan to keep capital expenditures to the minimum needed to operate efficiently.
The following is a summary of the Company's financing activities for 1996 and
the
quarter ended March 31, 1997:
On February 9, 1996 and March 11, 1996, the Company issued promissory notes to
certain directors of the Company for an aggregate consideration of $140,000.
These 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 $.10 per share for the
note
issued February 9, 1996 and at $.09 per share for the note issued March 11,
1996,
and to receive warrants for an equivalent number of common shares at $.10 per
share for the note issued February 9, 1996 and at $.09 per share for the note
issued March 11, 1996. The promissory notes are due on demand with interest
charged at the prime rate.
On April 23, May 9, and June 7, 1996, the Company issued promissory notes to
certain directors of the Company for an aggregate consideration of $177,000.
These 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 $.09 per share for the
note
issued April 23, 1996, $.06 per share for the note issued May 9, 1996, and $.05
per share for the note issued June 7, 1996, and to receive warrants for an
equivalent number of common shares at $.09 per share for the note issued April
23, 1996, $.09 per share for the note issued May 9, 1996, and $.05 for the note
issued June 7, 1996. The promissory notes are due on demand with interest
charged at the prime rate.
On July 24, and September 24, 1996, the Company issued promissory notes to
certain directors of the Company for an aggregate consideration of $160,000.
These 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 $.115 per share for the
note issued July 24, 1996, and $.125 per share for the note issued September
24,
1996, and to receive warrants for an equivalent number of common shares at
$.115
per share for the note issued July 24, 1996, and $.125 per share for the note
issued September 24, 1996. The promissory notes are due on demand with
interest
charged at the prime rate.
On November 13, and December 11, 1996, the Company issued promissory notes to
certain directors of the Company for an aggregate consideration of $140,000.
These notes specify that at any time prior to repayment the holder has the
right
to convert the notes to common stock of the Company at $.09 per share for the
notes issued November 13, and December 11, 1996, and to receive warrants for an
equivalent number of common shares at $.09 per share for the notes issued
November 13, and December 11, 1996. The promissory notes are due on demand
with
interest charged at the prime rate.
On January 14, 1997, and February 24, 1997, the Company issued promissory notes
to certain directors of the Company for an aggregate consideration of $170,000.
These 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 $.07 per share for the
note
issued January 14, 1997, and $.11 per share for the note issued February 24,
1997, and to receive warrants for an equivalent number of common shares at $.07
per share for the note issued January 14, 1997, and $.115 per share for the
note
issued February 24, 1997. The promissory notes are due on demand with interest
charged at the prime rate.
In the long-term, the Company is continuing its development of additional
AstaXinr 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 te past two years.
FORM 10QSB
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 April 3, 1997, the Company issued promissory notes to certain directors
of the Company for an aggregate consideration of $99,500. These notes specify
that at any time prior to repayment the holder has the right to convert the
notes
to common stock of the Company at $.10 per share of common stock and to receive
warrants for an equivalent number of common shares at $.10 per share. The
promissory notes are due on demand with interest charged at the prime rate.
On May 8 and 9, 1997, the Company issued promissory notes to certain
directors of the Company for an aggregate consideration of $136,000. These
notes
specify that at any time prior to repayment the holder has the right to convert
the notes to common stock of the Company at $.135 per share of common stock and
to receive warrants for an equivalent number of common shares at $.135 per
share.
The promissory notes are due on demand with interest charged at the prime rate.
FORM 10QSB
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: May 15, 1997
/s/ Stephen F. Hiu
Stephen F. Hiu
President, Treasurer and
Secretary
(On behalf of the Registrant and as
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,138
<SECURITIES> 0
<RECEIVABLES> 19,804
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,471
<PP&E> 23,338
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,409
<CURRENT-LIABILITIES> 1,283,022
<BONDS> 1,500,000
<COMMON> 186,311
481,716
1,875
<OTHER-SE> (3,364,517)
<TOTAL-LIABILITY-AND-EQUITY> 88,409
<SALES> 12,194
<TOTAL-REVENUES> 12,194
<CGS> 10,065
<TOTAL-COSTS> 10,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,129
<INCOME-PRETAX> (240,869)
<INCOME-TAX> 0
<INCOME-CONTINUING> (240,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (240,869)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
