==============================================
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 September 30, 1998
[ ] 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 November 12, 1998:
Common Stock, par value $.10 per share 2,428,884
==============================================
<PAGE>
IMMUCELL CORPORATION
INDEX TO FORM 10-Q
September 30, 1998
PART I: FINANCIAL INFORMATION PAGE
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Consolidated Balance Sheets-
September 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Operations for the
three and nine month periods ended
September 30, 1998 and 1997 5
Consolidated Statement of Stockholders' Equity
for the nine month period ended September 30, 1998 6
Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1998 and 1997 7
Notes to Unaudited Consolidated Financial Statements 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 10-12
PART II: OTHER INFORMATION
Items 1 through 6 13
Signatures 13
<PAGE>
IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $1,330,568 $1,021,324
Accounts receivable, net 425,629 681,267
Inventories 514,122 474,526
Prepaid expenses and
accrued interest 55,849 27,041
----------- -----------
Total current assets 2,326,168 2,204,158
EQUIPMENT, BUILDING AND
IMPROVEMENTS, at cost:
Laboratory and manufacturing 829,529 807,969
equipment
Building and improvements 583,472 580,822
Office furniture and equipment 61,639 60,953
Land 50,000 50,000
----------- -----------
1,524,640 1,499,744
Less - Accumulated depreciation 759,234 710,361
----------- -----------
Net equipment, building and
improvements 765,406 789,383
INVESTMENTS IN JOINT VENTURES 130,052 236,669
OTHER ASSETS 840 840
----------- -----------
TOTAL ASSETS $3,222,466 $3,231,050
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accrued expenses s $ 213,433 $ 174,298
Accounts payable 189,121 157,223
Current portion of long term debt 15,491 230,274
----------- -----------
Total current liabilities 418,045 561,795
LONG TERM DEBT:
Notes payable -- 142,191
Mortgage loan 459,230 197,556
----------- -----------
Total long term debt 459,230 339,747
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,818,482 and 2,804,482
shares at September 30,1998 and
December 31, 1997, respectively 281,848 280,448
Capital in excess of par value 8,338,907 8,319,701
Accumulated deficit (5,688,829) (5,683,906)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
----------- -----------
Total stockholders' equity 2,345,191 2,329,508
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,222,466 $3,231,050
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE
MONTH PERIODS ENDED SEPTEMBER 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
REVENUES:
Product sales $ 981,037 $ 958,770 $3,109,687 $3,004,644
Technology licensing income -- -- -- 75,000
Grant income 135,873 22,000 198,645 48,881
------------- ------------- ------------- ------------
Total revenues 1,116,910 980,770 3,308,332 3,128,525
------------- ------------- ------------- ------------
COSTS AND EXPENSES:
Product costs 515,443 429,664 1,466,168 1,343,524
Research and development
expenses 339,281 280,767 751,141 805,492
Sales and marketing
expenses 196,961 152,618 614,600 600,346
General and administrative
expenses 125,160 113,521 419,469 410,833
------------- ------------- ------------- ------------
Total costs and expenses 1,176,845 976,570 3,251,378 3,160,195
------------- ------------- ------------- ------------
Operating (loss) income (59,935) 4,200 56,954 (31,670)
------------- ------------- ------------- ------------
OTHER INCOME (EXPENSE):
Equity in net loss of
joint ventures (89,617) -- (76,617) --
Interest and other income 15,940 8,908 49,705 29,205
Interest expense (10,339) (16,477) (34,965) (53,369)
------------- ------------- ------------- ------------
Net other income (expense) (84,016) (7,569) (61,877) (24,164)
------------- ------------- ------------- ------------
NET LOSS $ (143,951) $ (3,369) $ (4,923) $ (55,834)
============= ============= ============= ============
NET LOSS PER COMMON SHARE:
Basic $ (0.06) $ (0.00) $ (0.00) $ (0.02)
Diluted $ (0.06) $ (0.00) $ (0.00) $ (0.02)
============= ============= ============= ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 2,428,884 2,334,064 2,425,662 2,332,564
Diluted 2,428,884 2,334,064 2,425,662 2,332,564
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
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, 1997 2,804,482 $280,448 $8,319,701 $(5,683,906) 389,598 $(586,735) $2,329,508
Net Loss -- -- -- (4,923) -- -- (4,923)
Exercise of Stock Options 14,000 1,400 19,206 -- -- -- 20,606
-----------------------------------------------------------------------------------------------
BALANCE,
September 30, 1998 2,818,482 $281,848 $8,338,907 $(5,688,829) 389,598 $(586,735) $2,345,191
===============================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
Nine Months Ended
September 30,
--------------------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (4,923) $ (55,834)
Adjustments to reconcile net
loss to net cash provided by
operating activities-
Depreciation and amortization 75,358 72,901
Equity in loss of joint ventures 81,617 --
Changes in:
Accounts receivable 255,638 23,812
Inventories (39,596) 53,088
Prepaid expenses (28,808) (30,871)
Accounts payable 31,898 (52,011)
Accrued expenses 41,635 (8,268)
------------- ------------
Net cash provided by
operating activities 412,819 2,817
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, building
and improvements, net (51,381) (68,181)
Distributions from (investments in)
joint ventures 25,000 (17,000)
------------- ------------
Net cash used for
investing activities (26,381) (85,181)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations 480,000 --
Payments of debt obligations (575,300) (169,760)
Proceeds from exercise of stock options 20,606 5,843
Stock issuance costs (2,500) --
------------- ------------
Net cash used for
financing activities (77,194) (163,917)
------------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 309,244 (246,281)
BEGINNING CASH AND CASH EQUIVALENTS 1,021,324 1,044,441
------------- ------------
ENDING CASH AND CASH EQUIVALENTS $1,330,568 $ 798,160
============= ============
CASH PAID FOR INTEREST $ 34,983 $ 53,913
============= ============
</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, 1997, 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) (LOSS) PROFIT PER COMMON SHARE
Effective for the 1997 fiscal year, the Company adopted STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 128 - EARNINGS PER SHARE. The Statement
requires dual presentation of basic and diluted profit per share of common
stock on the consolidated statements of operations. Basic profit per share of
common stock would be determined by dividing net profit by the weighted average
number of shares of common stock outstanding during the period. Diluted profit
per share would reflect the potential dilution that would occur if existing
stock options were exercised. The Statement does not effect the weighted
average basis of reporting the net loss per share.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
Raw materials $ 61,524 $ 17,583
Work-in-process 390,944 376,673
Finished goods 61,654 80,270
--------- ---------
$ 514,122 $ 474,526
========= =========
</TABLE>
<PAGE>
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(4) DEBT OBLIGATIONS
The Company has long term debt obligations, net of current maturities,
as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
8.62% Bank mortgage, collateralized by first security
interest in building, due 1998 to 2003 $474,721 --
9.5% Bank mortgage, collateralized by first security
interest in building -- $202,856
10% Note payable to bank, collateralized by accounts
receivable inventory and certain fixed assets -- 146,180
10.27% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets -- 123,456
9.62% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets -- 97,529
---------- ----------
474,721 570,021
Less current portion 15,491 230,274
---------- ----------
Long term debt $459,230 $339,747
========== ==========
</TABLE>
In May 1998, the Company refinanced its bank debt obligations by
entering into a $480,000 mortgage loan secured by the Company's building
located at 56 Evergreen Drive in Portland, Maine and using these proceeds,
together with an additional $29,000 in cash, to repay all of the then
outstanding bank debt obligations. The new mortgage 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 September 30, 1998,
aggregate approximately the following: $4,000 - 1998; $17,000 - 1999; $19,000
- - 2000; $21,000 - 2001; $22,000 - 2002; and $392,000 - 2003.
(5) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS (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 for fiscal years beginning 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.
<PAGE>
IMMUCELL CORPORATION
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 NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998
Total revenues equalled $1,117,000 and $3,308,000 for the three and nine
month periods ended September 30, 1998, respectively, as compared to $981,000
and $3,129,000 in the comparable periods in 1997. The 1998 grant income was
recognized under a federally sponsored research grant in support of one of the
Company's passive antibody development programs. The 1997 grant income was
recognized under a federally sponsored research grant in support of the
development of the Company's water test. The $75,000 in technology licensing
income 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.
Product sales increased by $22,000 (2%) to $981,000 and increased by
$105,000 (3%) to $3,110,000 during the three and nine month periods ended
September 30, 1998, respectively, in comparison to the same periods in the
prior year. Sales of First Defense{R} and the Kamar{R} Heatmount{TM} Detector
aggregated 93% and 94% of total product sales during the three and nine month
periods ended September 30, 1998, respectively. Comparatively, sales of these
two products aggregated 96% and 94% of total product sales during the three and
nine month periods ended September 30, 1997. Sales of these two products
decreased by 2% during the three month period ended September 30, 1998 and
increased by 4% during the nine month period ended September 30, 1998, as
compared to the same periods of the prior year. 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. Extending this license was an important element of
the Company's strategy to maintain and grow animal health product sales.
Gross margin as a percentage of product sales was 47% and 55% during the
three month periods ended September 30, 1998 and 1997, respectively. Gross
margin as a percentage of product sales was 53% and 55% during the nine month
periods ended September 30, 1998 and 1997, respectively. The gross margin
decreased by $64,000 (12%) during the three month period ended September 30,
1998 as compared to the respective period in 1997. The gross margin decreased
by $18,000 (1%) during the nine month period ended September 30, 1998 as
compared to the respective period in 1997.
Research and development expenses increased by $59,000 (21%) to $339,000
during the third quarter of 1998 and declined by $54,000 (7%) to $751,000
during the nine months ended September 30, 1998 as compared to the respective
periods in 1997. Research and development expenses exceeded grant income by
$203,000 (which amount equals 21% of product sales) during the three month
period ended September 30, 1998 and by $259,000 (which amount equals 27% of
product sales) during the comparable period in 1997. Research and development
expenses exceeded grant income by $552,000 (which amount equals 18% of product
sales) during the nine month period ended September 30, 1998 and by $757,000
(which amount equals 25% of product sales) during the comparable period in
1997. Research and development expenses aggregated 30% and 29% of total
revenues during the three month periods ended September 30, 1998 and 1997,
respectively. Research and development expenses aggregated 23% and 26% of
total revenues during the nine month periods ended September 30, 1998 and 1997,
respectively. 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.
In 1998, increased funding has been invested in the development of new animal
health products that fit the Company's strategy of delivering cost saving,
beneficial products to veterinarians and to dairy and beef producers. The
research and development expenses described above were the principal cause of
the net loss for the nine month period ended September 30, 1998.
<PAGE>
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In September 1998, the Company reported negative clinical trial results
on its product under development, TravelGAM{TM} bovine anti-E. COLI
immunoglobulins. The study, funded under a grant from the National Institutes
of Health, was designed to address differences in product performance between
the product's clinical success in a 1995 study and the inconclusive results
obtained in a field trial completed earlier in 1998. Because no treatment
effect was detected in this latest clinical trial, the Company has discontinued
further development of this product. As a result, the Company's human passive
antibody development efforts are now limited to DiffGAM{TM} bovine anti-
CLOSTRIDIUM DIFFICILE immunoglobulins, a product intended to treat CLOSTRIDIUM
DIFFICILE-associated diarrhea. The Company expects to initiate a small
effectiveness study of this product by early 1999 with results expected in late
1999. This study will be partially funded by a grant from the National
Institutes of Health. If clinical results are positive, further development of
this product would require a development and marketing alliance with a
corporate partner. 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. During 1998, the
Company determined to increase development of new animal health products and to
decrease its 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 record a profit in 1999.
Sales and marketing expenses increased by $44,000 (29%) during the three
month period ended September 30, 1998 compared to the same period in 1997,
aggregating 20% of product sales in the 1998 period compared to 16% in 1997.
Sales and marketing expenses increased by $14,000 (2%) during the nine month
period ended September 30, 1998 compared to the same period in 1997,
aggregating 20% of product sales in both the 1998 and 1997 periods. General
and administrative expenses increased by $12,000 (10%) during the three month
period ended September 30, 1998 and increased by $9,000 (2%) during the nine
month period ended September 30, 1998 compared to the same periods in 1997, as
the Company continues its efforts to control these expenses while incurring all
the necessary costs associated with being a publicly held company.
In the third quarter of 1996, the Company made investments in two joint
ventures, AgriCell Company, LLC ("AgriCell") and Clearwater Diagnostics
Company, LLC ("CDC"). AgriCell has installed a commercial production facility
in Middlebury, Vermont to manufacture bovine lactoferrin, a nutritional protein
derived from cheese whey. Sales of lactoferrin have been significantly less
than expected due principally to the financial crisis in South Korea and Japan,
the primary markets for lactoferrin. This negative development resulted in a
non-cash charge of approximately $90,000 against the Company's equity interest
in AgriCell during the third quarter of 1998. 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. In August 1998,
the Company obtained a royalty-bearing license from its joint venture partner
to the relevant technology previously held by CDC and then dissolved the joint
venture. The Company intends to continue to develop and market the Crypto-Scan
water diagnostic test while this test method is being evaluated by the U.S.
Environmental Protection Agency.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased by approximately $9,000 to $3,222,000 at
September 30, 1998 from $3,231,000 at December 31, 1997. Cash and cash
equivalents increased by approximately $309,000 to $1,331,000 at September 30,
1998 from $1,021,000 at December 31, 1997. Net working capital increased by
$266,000 to $1,908,000 at September 30, 1998 from $1,642,000 at December 31,
1997. Stockholders' equity increased by $16,000 to $2,345,000 at September 30,
1998 from $2,330,000 at December 31, 1997.
<PAGE>
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company obtained a $710,000 Phase II Small Business Innovation
Research grant in September 1997. As of October 1, 1998, approximately
$312,000 was available under this grant to fund additional development
expenses. Approximately $104,000 of these available funds are budgeted for
closing out the TravelGAM{TM} development program, and the balance is intended
to support the DiffGAM{TM} 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.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with imbedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. In the event that the Company does not effectively address the
Year 2000 issue, these functions could be performed manually on a short-term
basis. The Company has determined that the risks associated with exposure to
third parties that suffer problems with Year 2000 issues are not material
because of the Company's ability to source needed supplies and services from
multiple sources.
In conjunction with a consultant, the Company has reviewed the ability
of its computer equipment and software to function properly with respect to
dates in the Year 2000 and thereafter. For this purpose, the term "computer
equipment and software" includes systems that are commonly thought of as
information technology ("IT") systems, including accounting, data processing,
and telephone/PBX systems, and other miscellaneous systems, as well as systems
that are not commonly thought of as IT systems, such as alarm systems, fax
machines, processing equipment, or other miscellaneous systems. Based upon its
identification and assessment efforts to date, the Company believes that
certain of the computer equipment and software it currently uses (principally
its financial accounting system and several personal computers) will require
replacement or modification. In addition, in the ordinary course of replacing
computer equipment and software, the Company attempts to obtain replacements
that are Year 2000 compliant. The Company estimates that the total costs of
efforts required to address the Year 2000 issue will not exceed $20,000. These
costs, a portion of which may be capitalized, are expected to be incurred while
the project is completed in the fourth quarter of 1998.
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
profitability, expected timelines for the Company's clinical trials 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.
<PAGE>
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
*10.1 Amendment No. 1 to Distribution and Licensing
Agreement between the Registrant and Kamar, Inc. dated
July 1, 1998.
27.1 Financial Data Schedule (for electronically filed
copies only).
(b) Reports on Form 8-K
None
*Confidential Treatment as to certain portions has been requested
effective until December 31, 2003. The copy filed as an exhibit omits the
information subject to the confidentiality request. The omitted information
has been deleted and replaced with [______].
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: November 12, 1998 By: /S/ THOMAS C. HATCH
-------------------------
Thomas C. Hatch
President and Chief
Executive Officer
Date: November 12, 1998 By: /S/ MICHAEL F. BRIGHAM
--------------------------
Michael F. Brigham
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
IMMUCELL CORPORATION
Exhibit Index
10.1 *Amendment No. 1 to Distribution and Licensing Agreement between the
Registrant and Kamar, Inc. dated July 1, 1998.
27.1 Financial Data Schedule (for electronically filed copies only).
*Confidential Treatment as to certain portions has been requested effective
until December 31, 2003. The copy filed as an exhibit omits the
information subject to the confidentiality request. The omitted
information has been deleted and replaced with [______].
IMMUCELL CORPORATION
Exhibit 10.1*
Amendment No. 1 to Distribution and Licensing Agreement
between the Registrant and Kamar, Inc. dated July 1, 1998
*Confidential Treatment as to certain portions has been requested effective
until December 31, 2003. The copy filed as an exhibit omits the
information subject to the confidentiality request. The omitted
information has been deleted and replaced with [______].
<PAGE>
CONFIDENTIAL TREATMENT
AMENDMENT NO. 1 TO DISTRIBUTION AND LICENSING AGREEMENT
THIS AMENDMENT, made and entered into as of the first day of July,
1998, by and among CHAMBER, INC., a Colorado corporation ("Kamar"),
IMMUCELL CORPORATION, a Delaware corporation ("ImmuCell"), and KAMAR
MARKETING GROUP, INC., a Colorado corporation and a wholly-owned subsidiary
of ImmuCell ("KMG"). ImmuCell and KMG are sometimes hereinafter referred
to collectively as "ImmuCell/KMG".
WITNESSETH:
WHEREAS, Kamar, ImmuCell and KMG are parties to a certain Distribution
and Licensing Agreement dated as of December 3, 1993 (the "Agreement"); and
WHEREAS, Kamar, ImmuCell and KMG desire to extend the term of the
Agreement and to amend the Agreement in certain respects in connection with
such extension;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Paragraph 1.05(a) of the Agreement is amended by deleting the
first sentence in its entirety and by inserting the following sentence in
lieu thereof:
"$[___] for each Detector sold by ImmuCell/KMG commencing
January 1, 1994 through and including June 30, 1998; $[____]
for each Detector sold by ImmuCell/KMG commencing July 1, 1998
through and including December 31, 1999; and $[___] for each
Detector sold by ImmuCell/KMG commencing January 1, 2000
and thereafter during the term of this Agreement."
2. Paragraph 1.07 of the Agreement is amended by deleting the date
"December 31, 1999" where it appears in the penultimate line of such
paragraph, and by inserting the date "December 31, 2003" in lieu thereof.
3. Paragraph 1.08 of the Agreement is amended by deleting the date
"December 31, 1999" where it appears in the third line of such paragraph,
and by inserting the date "December 31, 2003" in lieu thereof.
4. Paragraph 1.09 of the Agreement is amended by adding the clause
"and for a period of three years thereafter" following the clause "During
the term of this Agreement" in the first sentence of such paragraph.
5. Paragraph 1.09 of the Agreement is further amended by adding the
following sentence at the end thereof:
<PAGE>
CONFIDENTIAL TREATMENT
"Notwithstanding anything to the contrary contained in the
first sentence of this Paragraph 1.09, if Kamar shall elect to
terminate this Agreement pursuant to Paragraph 3.06 by sending
twelve months prior written notice to ImmuCell on or before
December 31, 2002, then in such event the prohibition on
ImmuCell marketing or selling any device to detect physical
mounting of Bovines following the termination of this Agreement,
as set forth in such first sentence, shall become null and void
and ImmuCell shall be have no restrictions whatsoever on selling
a competitive Detector following termination of this Agreement."
5. The Agreement is further amended by adding the following the new
Paragraph 1.10:
"1.10. GLUE FILL PROCESS. Kamar agrees to arrange for a third
party vendor to fill the tubes which constitute a part of the
Supplemental Components with glue (the "Glue Fill Process"), and
ImmuCell agrees to bear the actual costs, up to but not exceeding
$[___] per Detector, for the third party services relating to the
Glue Fill Process. Kamar shall provide a monthly statement to
ImmuCell/KMG summarizing the costs of the Glue Fill Process
accompanied by copies of the original invoices from the third party
vendor. Payments to Kamar for the Glue Fill Process in each calendar
month shall be made within ten (10) days following the end of each
month."
6. Except as specifically provided herein, all of the terms and
conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
KAMAR, INC.
By: /S/ CARL E. VAIL
--------------------------------
Carl E. Vail, President
KAMAR MARKETING GROUP, INC.
By: /S/ MICHAEL F. BRIGHAM
--------------------------------
Michael F. Brigham, Treasurer
IMMUCELL CORPORATION
By: /S/ MICHAEL F. BRIGHAM
--------------------------------
Michael F. Brigham, Chief Financial
Officer, Treasurer and Secretary
<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
SEPTEMBER 30, 1998 AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,330,568
<SECURITIES> 0
<RECEIVABLES> 466,374
<ALLOWANCES> 40,745
<INVENTORY> 514,122
<CURRENT-ASSETS> 2,326,168
<PP&E> 1,524,640
<DEPRECIATION> 759,234
<TOTAL-ASSETS> 3,222,466
<CURRENT-LIABILITIES> 418,045
<BONDS> 459,230
0
0
<COMMON> 2,345,191
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,222,466
<SALES> 3,109,687
<TOTAL-REVENUES> 3,308,332
<CGS> 1,466,168
<TOTAL-COSTS> 3,251,378
<OTHER-EXPENSES> 26,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,965
<INCOME-PRETAX> (4,923)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,923)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
