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, 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 May 12, 1997:
Common Stock, par value $.10 per share 2,334,064
<PAGE>
IMMUCELL CORPORATION
INDEX TO FORM 10-Q
March 31, 1997
PART I: FINANCIAL INFORMATION Page
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Consolidated Balance Sheets-
March 31, 1997 and December 31, 1996 3-4
Consolidated Statements of Operations for the
three month periods ended March 31, 1997 and 1996 5
Consolidated Statement of Stockholders' Equity for the
three month period ended March 31, 1997 6
Consolidated Statements of Cash Flows for the
three month periods ended March 31, 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
Signatures 11
<PAGE>
IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,061,287 $1,044,441
Accounts receivable, net 454,600 370,798
Inventories 587,297 648,276
Prepaid expenses and
accrued interest 31,012 25,747
---------- ----------
Total current assets 2,134,196 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 60,214 54,977
Land 50,000 50,000
---------- ----------
1,459,653 1,440,615
Less - Accumulated depreciation 647,675 623,987
---------- ----------
Net equipment, building and
improvements 811,978 816,628
INVESTMENTS IN JOINT VENTURES 241,669 224,669
OTHER ASSETS 840 840
---------- ----------
TOTAL ASSETS $3,188,683 $3,131,399
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accrued expenses $ 206,780 $ 185,256
Accounts payable 202,449 269,585
Current portion of long term debt 235,112 229,322
---------- ----------
Total current liabilities 644,341 684,163
LONG TERM DEBT:
Notes payable 307,286 367,165
Mortgage loan 201,514 202,857
---------- ----------
Total long term debt 508,800 570,022
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,723,662 and 2,719,162
shares at March 31,1997 and December
31, 1996, respectively 272,366 271,916
Capital in excess of par value 8,145,184 8,139,791
Accumulated deficit (5,795,273) (5,947,758)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
---------- ----------
Total stockholders' equity 2,035,542 1,877,214
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,188,683 $3,131,399
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTH PERIODS ENDED MARCH 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
REVENUES:
Product sales $ 1,208,359 $1,266,000
Collaborative research
and development revenue 75,000 65,000
Grant income 16,881 85,011
---------- ---------
Total revenues 1,300,240 1,416,011
---------- ---------
COSTS AND EXPENSES:
Product costs 528,591 545,056
Research and development
expenses 206,002 501,058
Sales and marketing
expenses 242,701 195,852
General and administrative
expenses 161,217 179,796
---------- ---------
Total costs and expenses 1,138,511 1,421,762
---------- ---------
Interest and other income 8,298 13,818
Interest expense 17,542 19,745
---------- ---------
Net interest and other
expense (9,244) (5,927)
---------- ---------
NET PROFIT (LOSS) $ 152,485 $ (11,678)
========== =========
NET PROFIT (LOSS) PER SHARE $ .06 $ --
========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,334,064 2,291,981
---------- --------- ______________ ______________
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1997
(Unaudited)
Common Stock
$.10 Par Value Capital in Treasury Stock Total
------------------ Excess of Accumulated ---------------- Stockholders'
Shares Amount Par Value Deficit Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1996 2,719,162 $271,916 $8,139,791 $(5,947,758) 389,598 $(586,735) $1,877,214
Net Profit -- -- -- 152,485 -- -- 152,485
Exercise of Stock
Options 4,500 450 5,393 -- -- -- 5,843
BALANCE,
March 31, 1997 2,723,662 $272,366 $8,145,184 $(5,795,273) 389,598 $(586,735) $2,035,542
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
<S> <C> <C>
Net profit (loss) $ 152,485 $ (11,678)
Adjustments to reconcile net profit
(loss) to net cash provided by
(used for) operating activities-
Depreciation and amortization 23,688 31,945
Changes in:
Accounts receivable (83,802) (176,188)
Inventories 60,979 51,075
Prepaid expenses and accrued interest (5,265) (11,833)
Accounts payable (67,136) (81,669)
Accrued expenses and deferred income 21,524 (18,275)
Net cash provided by (used for)
operating activities 102,473 (216,623)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, building
and improvements, net (19,038) (148,757)
Investments in joint ventures (17,000) --
Increase in other assets -- (850)
Net cash used for
investing activities (36,038) (149,607)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations (55,432) (40,472)
Proceeds from exercise of stock options 5,843 --
Net cash used for financing activities (49,589) (40,472)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 16,846 (406,702)
BEGINNING CASH AND CASH EQUIVALENTS 1,044,441 1,550,011
ENDING CASH AND CASH EQUIVALENTS $1,061,287 $1,143,309
CASH PAID FOR INTEREST $ 17,267 $ 19,993
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
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 Profit (Loss) Per Common Share
The net profit per common share has been computed by dividing the net
profit by the primary number of shares outstanding during the period. The
effect of using the fully diluted number of shares outstanding in this
calculation was less than $.01 per 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) Income Taxes
The Company's provision for income taxes was fully offset by available net
operating loss carryforwards.
(4) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Raw materials $ 55,291 $ 55,682
Work-in-process 443,394 548,083
Finished goods 88,612 44,511
-------- --------
$587,297 $648,276
======== ========
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
10.27% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1997 to 1998 $ 224,051 $ 256,054
9.5% Bank mortgage, collateralized by first security
interest in building, due 1997 to 2000 206,445 207,728
10% Note payable to bank, collateralized by accounts
receivable inventory and certain fixed assets due 1997
to 2000 179,244 189,701
9.62% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1997 to 1999 134,172 145,861
743,912 799,344
Less current portion 235,112 229,322
Long term debt $508,800 $570,022
</TABLE>
Principal payments under the above debt obligations due subsequent to
March 31, 1997 are approximately as follows: $174,000 - 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 MONTH PERIOD ENDED MARCH 31, 1997
Total revenues equalled $1,300,000 for the three month period ended
March 31, 1997, as compared to $1,416,000 in the comparable period in 1996.
Collaborative research and development revenue and grant income decreased by
$58,000 (39%) during the three month period ended March 31, 1997. 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 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
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
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 decreased by $58,000 (5%) to $1,208,000 during
the three month period ended March 31, 1997 in comparison to the same period
in the prior year. The Company attributes the decline in sales primarily
to a decrease in the sale of diagnostic reagents during the 1997 quarter.
Sales of First Defense<reg-trade-mark> and the Kamar<reg-trade-mark>
Heatmount{TM} Detector aggregated 94% and 84% of total product sales during
the three month periods ending March 31, 1997 and 1996, respectively. Sales of
these two products increased by 7% during the three month period ended
March 31, 1997 as compared to the same period of the prior year.
The gross margin percentage on products sales was 56% and 57% for the
three month periods ended March 31, 1997 and 1996, respectively. The gross
margin decreased by $41,000 (6%) during the three month period ended
March 31, 1997 as compared to the respective period in 1996. This decline is
consistent with the related decrease in product sales.
Research and development expenses declined by $295,000 (59%) during the
three months ended March 31, 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 $114,000 during the three month
period ended March 31, 1997 and by $351,000 during the comparable period in
1996. Significant clinical trial costs performed by outside laboratories were
incurred during the first quarter of 1996; similar costs were not incurred
during the first quarter of 1997.
Sales and marketing expenses increased by $47,000 (24%) during the
first three months of 1997 compared to the same period in 1996, aggregating 20%
of product sales in the 1997 period compared to 15% in 1996. General and
administrative expenses decreased by $19,000 (10%) during the three month
period ending March 31, 1997 compared to the same period 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 limiting the net profit
during the three months ending March 31, 1997 to $152,000. This net profit
compares to a net loss in the same period of 1996 of $12,000. In order to
aggressively develop new products, the Company expects to incur operating
losses in the future.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased by approximately $57,000 to $3,189,000 at March
31, 1997 from $3,131,000 at December 31, 1996. Cash and cash equivalents
increased by approximately $17,000 to $1,061,000 at March 31, 1997 from
$1,044,000 at December 31, 1996. Net working capital increased by $85,000 to
$1,490,000 at March 31, 1997 from $1,405,000 at December 31, 1996.
Stockholders' equity increased by $158,000 to $2,036,000 at March 31, 1997
from $1,877,000 at December 31, 1996.
<PAGE>
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
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 April 1, 1997, approximately $32,000 was
available under this grant to fund additional development services to be
performed under contract by outside laboratories.
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
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
Registrant
Date: May 13, 1997 By: /s/ Thomas C. Hatch
Thomas C. Hatch
President and Chief
Executive Officer
Date: May 13, 1997 By: /s/ Michael F. Brigham
Michael F. Brigham
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
IMMUCELL CORPORATION
Exhibit Index
27.1 Financial Data Schedule (for electronically filed copies only).
<PAGE>
IMMUCELL CORPORATION
Exhibit 27.1
Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
IMMUCELL CORPORATION
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED March
31, 1997 AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,061,287
<SECURITIES> 0
<RECEIVABLES> 505,478
<ALLOWANCES> (50,878)
<INVENTORY> 587,297
<CURRENT-ASSETS> 2,134,196
<PP&E> 1,459,652
<DEPRECIATION> 647,675
<TOTAL-ASSETS> 3,188,683
<CURRENT-LIABILITIES> 644,341
<BONDS> 508,800
0
0
<COMMON> 2,035,542
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,188,683
<SALES> 1,208,359
<TOTAL-REVENUES> 1,300,240
<CGS> 528,591
<TOTAL-COSTS> 1,138,512
<OTHER-EXPENSES> (8,298)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,542
<INCOME-PRETAX> 152,485
<INCOME-TAX> 0
<INCOME-CONTINUING> 152,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,485
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
