==============================================
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 June 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 August 12, 1998:
Common Stock, par value $.10 per share 2,428,884
==============================================
<PAGE>
IMMUCELL CORPORATION
INDEX TO FORM 10-Q
June 30, 1998
PART I: FINANCIAL INFORMATION PAGE
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Consolidated Balance Sheets-
June 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Operations for the
three and six month periods ended June 30, 1998 and 1997 5
Consolidated Statement of Stockholders' Equity for the
six month period ended June 30, 1998 6
Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1998 and 1997 7
Notes to Unaudited Consolidated Financial Statements 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 10-12
PART II: OTHER INFORMATION
Items 1 through 6 12-13
Signatures 13
<PAGE>
IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31, 1998
1997
----------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,352,379 $1,021,324
Accounts receivable, net 326,800 681,267
Inventories 535,101 474,526
Prepaid expenses and
accrued interest 72,780 27,041
---------- ----------
Total current assets 2,287,060 2,204,158
EQUIPMENT, BUILDING AND
IMPROVEMENTS, at cost:
Laboratory and manufacturing 825,011 807,969
equipment
Building and improvements 583,472 580,822
Office furniture and equipment 63,212 60,953
Land 50,000 50,000
---------- ----------
1,521,695 1,499,744
Less - Accumulated depreciation 738,680 710,361
---------- ----------
Net equipment, building and
improvements 783,015 789,383
INVESTMENTS IN JOINT VENTURES 224,669 236,669
OTHER ASSETS 840 840
---------- ----------
TOTAL ASSETS $3,295,584 $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>
June 30, December 31,
1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accrued expenses s $ 191,973 $ 174,298
Accounts payable 135,831 157,223
Current portion of long term debt 16,519 230,274
--------- ---------
Total current liabilities 344,323 561,795
LONG TERM DEBT:
Notes payable -- 142,191
Mortgage loan 462,119 197,556
--------- ---------
Total long term debt 462,119 339,747
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,818,482 and 2,804,482
shares at June 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 (5,544,878) (5,683,906)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
--------- ---------
Total stockholders' equity 2,489,142 2,329,508
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,295,584 $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 SIX MONTH PERIODS
ENDED JUNE 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 818,251 $ 837,515 $2,128,650 $2,045,874
Technology licensing income -- -- -- 75,000
Grant income 38,136 10,000 62,772 26,881
---------- ---------- ---------- ----------
Total revenues 856,387 847,515 2,191,422 2,147,755
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Product costs 397,726 385,270 950,724 913,860
Research and development
expenses 215,491 318,723 411,861 524,725
Sales and marketing
expenses 175,035 205,026 417,639 447,728
General and administrative
expenses 156,416 136,095 294,310 297,313
---------- ---------- ---------- ----------
Total costs and expenses 944,668 1,045,114 2,074,534 2,183,626
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Equity in earnings of
joint venture -- -- 13,000 --
Interest and other income 19,550 11,999 33,766 20,297
Interest expense 11,502 19,350 24,626 36,892
---------- ---------- ---------- ----------
Net other income (expense) 8,048 (7,351) 22,140 (16,595)
---------- ---------- ---------- ----------
NET (LOSS) PROFIT $ (80,233) $ (204,950) $ 139,028 $ (52,466)
========== ========== ========== ==========
NET (LOSS) PROFIT PER
COMMON SHARE:
Basic $ (.03) $ (.09) $ .06 $ (.02)
Diluted $ (.03) $ (.09) $ .05 $ (.02)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 2,428,884 2,334,064 2,424,025 2,331,814
Diluted 2,428,884 2,334,064 2,574,875 2,331,814
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 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 Profit -- -- -- 139,028 -- -- 139,028
Exercise of Stock Options 14,000 1,400 19,206 -- -- -- 20,606
--------- ------- ---------- ---------- ------- -------- ---------
BALANCE,
June 30, 1998 2,818,482 $281,848 $8,338,907 $(5,544,878) 389,598 $(586,735) $2,489,142
========== ======== ========== ========== ======= ======== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, CASH FLOWS FROM OPERATING ACTIVITIES:
--------------------
1998 1997
---- ----
<S> <C> <C>
Net profit (loss) $ 139,028 $ (52,466)
Adjustments to reconcile net profit
(loss) to net cash provided by
operating activities-
Depreciation and amortization 53,230 48,087
Changes in:
Accounts receivable 354,467 75,635
Inventories (60,575) 78,684
Prepaid expenses and accrued interest (45,739) (56,820)
Accounts payable (21,392) (100,284)
Accrued expenses 20,175 40,363
--------- --------
Net cash provided by
operating activities 439,194 33,199
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, building
and improvements, net (46,862) (23,050)
Equity in earnings of joint ventures 12,000 (17,000)
--------- --------
Net cash used for
investing activities (34,862) (40,050)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations 480,000 --
Payments of debt obligations (571,383) (111,860)
Proceeds from exercise of stock options 20,606 5,843
Stock issuance costs (2,500) --
--------- --------
Net cash used for
financing activities (73,277) (106,017)
--------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 331,055 (112,868)
BEGINNING CASH AND CASH EQUIVALENTS 1,021,324 1,044,441
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $1,352,379 $ 931,573
========= =========
CASH PAID FOR INTEREST $ 24,614 $ 37,094
========= =========
</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. The Statement does not
effect the weighted average basis of reporting the net loss per share. Basic
profit per share of common stock has been determined by dividing net profit by
the weighted average number of shares of common stock outstanding during the
period. Diluted profit per share reflects the potential dilution that would
occur if existing stock options were exercised. The following is a
reconciliation of the dual presentations of (loss) profit per share for the
periods presented:
<TABLE>
<CAPTION>
Net Common (Loss)
(Loss) Profit Shares Profit
(NUMERATOR) (DENOMINATOR) PER SHARE
------------- ------------- ---------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1998
Basic loss per share $ (80,233) 2,428,884 $(0.03)
=======
Dilutive potential shares 0
---------- ---------
Diluted loss per share $ (80,233) 2,428,884 $(0.03)
THREE MONTHS ENDED JUNE 30, 1997
Basic loss per share $(204,950) 2,334,064 $(0.09)
Dilutive potential shares 0 =======
---------- ---------
Diluted loss per share $(204,950) 2,334,064 $(0.09)
========== ========= =======
SIX MONTHS ENDED JUNE 30, 1998
Basic profit per share $ 139,028 2,424,025 $ 0.06
Dilutive potential shares 150,850 =======
---------- ---------
Diluted profit per share $ 139,028 2,574,875 $ 0.05
========== ========= =======
SIX MONTHS ENDED JUNE 30, 1997
Basic loss per share $ (52,466) 2,331,814 $(0.02)
Dilutive potential shares 0 =======
---------- ---------
Diluted loss per share $ (52,466) 2,331,814 $(0.02)
========== ========= =======
</TABLE>
<PAGE>
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 52,942 $ 17,583
Work-in-process 413,366 376,673
Finished goods 68,793 80,270
-------- -------
$535,101 $474,526
======== =======
</TABLE>
(4) DEBT OBLIGATIONS
The Company has long term debt obligations, net of current maturities,
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
8.62% Bank mortgage, collateralized by first security
interest in building, due 1998 to 2003 $478,638 --
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
--------- ---------
478,638 570,021
Less current portion 16,519 230,274
--------- ---------
Long term debt $462,119 $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 June 30, 1998, aggregate
approximately the following: $8,000 - 1998; $17,000 - 1999; $19,000 - 2000;
$21,000 - 2001; $22,000 - 2002; and $392,000 - 2003.
<PAGE>
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(5) INCOME TAXES
The Company's taxable income was fully offset by available net operating
loss carryforwards.
(6) 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.
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 SIX MONTH PERIODS ENDED JUNE 30, 1998
Total revenues equalled $856,000 and $2,191,000 for the three and six
month periods ended June 30, 1998, respectively, as compared to $848,000 and
$2,148,000 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 decreased by $19,000 (2%) to $818,000 and increased by
$83,000 (4%) during the three and six month periods ended June 30, 1998,
respectively, in comparison to the same periods in the prior year. Sales of
First Defense<reg-trade-mark> and the Kamar<reg-trade-mark> Heatmount{TM}
Detector aggregated 96% and 95% of total product sales during the three and six
month periods ended June 30, 1998, respectively. Comparatively, sales of these
two products aggregated 92% and 93% of total product sales during the three and
six month periods ended June 30, 1997. Sales of these two products increased
by 2% and 6% during the three and six month periods ended June 30, 1998,
respectively, 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. to 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.
The gross margin percentage on products sales was 51% for the three
month period ended June 30, 1998 and 54% for the three month period ended June
30, 1997 and was 55% for the six month periods ended June 30, 1998 and 1997.
The gross margin decreased by $32,000 (7%) during the three month period ended
June 30, 1998 as compared to the respective period in 1997. The gross margin
increased by $46,000 (4%) during the six month period ended June 30, 1998 as
compared to the respective period in 1997. The changes in gross margin are
consistent with the comparable changes in product sales.
Research and development expenses declined by $103,000 (32%) during the
second quarter of 1998 as compared to the second quarter of 1997 and declined
by $113,000 (22%) during the six months ended June 30, 1998 as compared to the
respective period in 1997. 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 directly to veterinarians and to
dairy and beef farmers. Research and development expenses exceeded technology
licensing and grant income by $177,000 during the three month period ended June
30, 1998 and by $309,000 during the comparable period in 1997. Research and
development expenses exceeded technology licensing and grant income by $349,000
during the six month period ended June 30, 1998 and by $423,000 during the
comparable period in 1997. Research and development expenses aggregated 25%
and 19% of total revenues during the three and six month periods ended June 30,
1998, respectively. Comparatively, research and development expenses
aggregated 38% and 24% of total revenues during the three and six month periods
ended June 30, 1997, respectively.
Sales and marketing expenses decreased by $30,000 (15%) during the three
month period ended June 30, 1998 compared to the same period in 1997,
aggregating 21% of product sales in the 1998 period compared to 24% in 1997.
Sales and marketing expenses decreased by $30,000 (7%) during the six month
period ended June 30, 1998 compared to the same period in 1997, aggregating 20%
of product sales in the 1998 period compared to 22% in 1997. General and
administrative expenses increased by $20,000 (15%) during the three month
period ended June 30, 1998 and decreased by $3,000 (1%) during the six month
period ended June 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.
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 of the net loss of $80,000 for the
three month period ended June 30, 1998. In order to aggressively develop new
products, the Company expects to incur operating losses in the future.
In the third quarter of 1996, the Company made investments in two joint
ventures, AgriCell Company, LLC ("AgriCell") and Clearwater Diagnostics
Company, LLC ("CDC"). The operating activity of these joint ventures from
their inception to June 30, 1998 was not material. AgriCell has installed a
commercial production facility to manufacture lactoferrin, a nutritional
protein derived from cheese whey, and has initiated limited sales. 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. This test method is currently being evaluated by the U.S.
Environmental Protection Agency.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased by approximately $65,000 to $3,296,000 at June
30, 1998 from $3,231,000 at December 31, 1997. Cash and cash equivalents
increased by approximately $331,000 to $1,352,000 at June 30, 1998 from
$1,021,000 at December 31, 1997. Net working capital increased by $300,000 to
$1,943,000 at June 30, 1998 from $1,642,000 at December 31, 1997. Stockholders'
equity increased by $160,000 to $2,489,000 at June 30, 1998 from $2,330,000 at
December 31, 1997.
The Company obtained a $710,000 Phase II Small Business Innovation
Research grant in September 1997. As of July 1, 1998, approximately $447,000
was available under this grant to fund additional development expenses,
approximately 64% of which are intended 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
At the Annual Meeting of Stockholders held on June 12, 1998, the
stockholders voted to elect the Board of Directors for the next
ensuing year and to approve an amendment to the Company's 1989
Stock Option and Incentive Plan increasing the number of shares of
the Company's common stock reserved for issuance under such Plan
from 290,000 to 340,000 shares.
Each of the six nominees recommended by management to the
stockholders was re-elected to the Board. The following list by
name of director shows how the votes were cast for each director:
Anthony B. Cashen (for: 1,886,617; withhold: 49,374), Thomas
C. Hatch (for: 1,893,133; withhold: 42,858), George W.
Masters (for: 1,893,337; withhold: 42,654), William H.
Maxwell (for: 1,892,287; withhold: 43,704), John R.
McKernan, Jr. (for: 1,892,313; withhold: 43,678) and Mitchel
Sayare (for: 1,892,287; withhold: 43,704).
The proposal to amend the 1989 Stock Option and Incentive Plan was
approved by the stockholders. The voting tabulation was as
follows:
For: 1,787,629, Against: 130,716, Abstain: 17,646
and Broker non-votes: 0.
Item 5. Other Information
None
<PAGE>
IMMUCELL CORPORATION
PART II. OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 $480,000 Note Payable to Peoples Heritage Bank dated
May 6, 1998.
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: August 12, 1998 By: /S/ THOMAS C. HATCH
Thomas C. Hatch
President and Chief
Executive Officer
Date: August 12, 1998 By: /S/ MICHAEL F. BRIGHAM
Michael F. Brigham
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
IMMUCELL CORPORATION
Exhibit Index
4.1 $480,000 Note Payable to Peoples Heritage Bank dated May 6, 1998.
27.1 Financial Data Schedule (for electronically filed copies only).
<PAGE>
IMMUCELL CORPORATION
Exhibit 4.1
$480,000 Note Payable to Peoples Heritage Bank dated May 6, 1998
<PAGE>
PEOPLES HERITAGE BANK
NOTE
$480,000 May 6, 1998
FOR VALUE RECEIVED, the undersigned Maker promises to pay to the order of
PEOPLES HERITAGE BANK the principal sum of Four Hundred Eighty Thousand Dollars
($480,000) (or so much thereof as may be advanced from time to time) together
with interest thereon:
. for the initial five (5) year portion of the term hereof at a fixed
interest rate of Eight and One-Half Percent (8.5%) per annum; AND
THEREAFTER
. at a fixed rate of interest equal to the Lender's cost, as of the date
five (5) years from the date hereof, of borrowing funds from the
Federal Home Loan Bank, plus Three Percent (3%) per annum.
Equal consecutive monthly payments of principal and interest in the amount
of Four Thousand Seven Hundred Sixty-One Dollars and Sixty-Nine Cents
($4,761.69) each, shall be payable, commencing on June 6, 1998 and continuing
on the same day of each month thereafter until May 6, 2008 ("Maturity Date"),
when all Amounts Owing Hereunder shall be due and payable in full. Lender
reserves the right to adjust the amount of the monthly principal and interest
payments, at the time of the interest rate adjustment, to reflect the change in
interest rate, if any, and to generally preserve a hypothetical fifteen (15)
year amortization schedule commencing on the date hereof, provided, however,
that this shall not be deemed to extend the Maturity Date.
DEFINITIONS. As used herein the following terms shall have the meanings
assigned:
a. "Amounts Owing Hereunder" shall mean the entire outstanding principal
balance of this Note; all accrued, unpaid interest; and all charges and
expenses payable by the Maker to Lender under the Loan Documents,
including, without limitation, all unpaid Prepayment Fees, Late Payment
Fees and Default Interest, if any.
b. "Lender" shall mean PEOPLES HERITAGE BANK, its successors and assigns,
including any subsequent holder hereof.
c. "Loan Document(s)" shall mean this Note, any other debt instrument of
the Maker held by Lender, and all other agreements, documents or
writings evidencing, governing or securing the indebtedness and
obligations of the Maker to Lender, including, without limitation, all
guaranties and security therefor.
d. "Maker" shall mean IMMUCELL CORPORATION, a Delaware corporation.
e. "Parties Liable Herefor" shall mean the Maker and any guarantor,
indorser, accommodation party or other surety hereafter arising. All
undertakings and obligations of Parties Liable Herefor shall be joint
and several.
PREPAYMENT PREMIUM. All unscheduled partial or full prepayments of
principal hereunder are subject to the obligation of all Parties Liable Herefor
to pay to the holder hereof a prepayment premium in the amount of Five Percent
(5%) of the principal amount prepaid during the first year of the term hereof,
Four Percent (4%) of the principal amount prepaid during the second year of the
term hereof, Three Percent (3%) of the principal amount prepaid during the
third year of the term hereof, Two Percent (2%) of the principal amount prepaid
during the remainder of the term hereof. All prepayment premiums hereunder
shall be due and payable to Lender in all cases of prepayment, whether
voluntary or involuntary, including, without limitation, any prepayment arising
in connection with the refinancing of this Note whether by Lender or any other
party, and whether or not the result of default or acceleration, or collection
or enforcement activities of Lender. The Maker hereby acknowledges and agrees
that the prepayment premium is neither a penalty nor a form of liquidated
damages, but is rather a negotiated element of the borrowing contract entered
into herein by the Maker, as a necessary inducement to Lender to make the loan
evidenced by this Note. NOTWITHSTANDING THE FOREGOING, no prepayment premium
shall be payable as a result of prepayment in connection with a bona fide,
arm's-length sale, to an unrelated party, of premises of the Maker at 56
Evergreen Drive, Portland, Maine.
LATE PAYMENT FEE. If any agreed payment is not received within fifteen (15)
days of when due, then all Parties Liable Herefor shall be liable to Lender for
a late payment fee of Six Percent (6.0%) of the total amount of such delinquent
payment, to be assessed at the option of Lender at any time while any balance
remains outstanding hereunder.
DEFAULT INTEREST RATE. Lender shall have the right to charge interest on
the unpaid principal balance hereof at an interest rate Three Percent (3%) per
annum in excess of the rate of interest otherwise payable as provided herein,
for any period during which any Party Liable Herefor shall be in default under
any material provision of any Loan Document. In the event of default followed
by collection and enforcement activity by Lender, the Default Interest Rate
shall accrue and be payable until actual payment and satisfaction of all
Amounts Owing Hereunder.
360-DAY YEAR. All interest hereunder shall be computed on the basis of the
actual number of days elapsed over a 360-day year.
All payments due hereunder shall be payable to PEOPLES HERITAGE BANK at any
of its offices, or to such other parties or addresses as Lender may from time
to time designate in writing. After the date of this Note, if future advances
are made to the Maker under this Note, such advances shall be added to the
principal balance due hereunder, shall bear interest as provided in this Note,
and shall be governed by all of the terms of this Note.
This Note and any extensions, renewals, refinances hereof and substitutions
herefor shall be deemed to be secured by the terms of any mortgages or other
security documents now held by, or in the future to be granted to, Lender,
whether from the Maker or any other Party Liable Herefor, and whether or not
such security is described below. Lender shall have the right, without notice,
to reduce to possession and to set-off against any and all obligations and
liabilities of the Maker any account, deposit or other property of the Maker
coming into Lender's possession, or any other claim of the Maker against
Lender.
This Note and all Amounts Owing Hereunder shall become immediately due and
payable, without notice or demand, if a default be made in the obligation to
make any required payment of principal and/or interest which continues for
fifteen (15) days beyond its due date. This Note and all Amounts Owing
Hereunder shall also become due and payable, subject to a fifteen (15) day
written notice and cure period, if default be made in the performance of any
other obligation referred to in this Note or in any Loan Document or upon the
occurrence of any of the following to or by any Party Liable Herefor: death;
dissolution; complete or partial liquidation; transfer of a sufficient amount
of voting stock such that control is transferred (if any such party is a
corporation); transfer of a controlling interest (if any such party is a
partnership or limited liability company); suspension of business; termination
of existence; insolvency; the appointment of or taking possession by a
receiver, trustee, assignee, bailee, creditor, or other custodian of
substantially all property; commencement of any kind of insolvency, dissolution
or bankruptcy proceeding; attachment, trustee process, lien, levy or similar
action (collectively a "Lien") against any sums credited by or due from Lender
to any such parties; the transfer of substantial assets to third parties out of
the ordinary course of business; default in the Maker's obligations to Lender
or to any other institutional lender on any debt instrument or documentation
governing or securing such debt instrument; or if Lender in good faith deems
itself insecure because the prospect of repayment, or the value of any
collateral, or the priority of any of the Loan Documents is impaired.
Notwithstanding the foregoing there shall be a sixty (60) day grace period for
any Party Liable Herefor to obtain dismissal of an involuntary bankruptcy or
insolvency proceeding, and a thirty (30) day grace period for any Party Liable
Herefor to obtain dismissal of any Lien, by bond or otherwise, provided that
Lender shall have the right during such grace periods to take all actions and
enforce all rights and remedies which Lender deems necessary or convenient to
protect its interests. Any notice required hereunder shall be effective on
mailing, by first class mail postage prepaid, to Maker at Maker's last known
address.
All Parties Liable Herefor acknowledge and agree that Lender may sell or
transfer any or all of the Loan Documents, with or without consideration, to a
purchaser, whether in a recognized commercial loan secondary market or
otherwise, and thereupon all obligations of Lender to the Parties Liable
Herefor, if any, shall cease.
Delay or failure on the part of Lender in exercising any rights hereunder
shall not operate as a waiver of these or any other rights under this Note.
After the due date, or acceleration or demand of all Amounts Owing Hereunder,
the acceptance by Lender of any payment representing less than the total
balance of all Amounts Owing Hereunder shall not constitute a waiver or
relinquishment of Lender's right to full and immediate payment of all remaining
Amounts Owing Hereunder.
All Parties Liable Herefor agree to pay, upon demand, all expenses of any
nature, whenever incurred, whether incurred in or out of court, including but
not limited to reasonable attorney's fees and costs, which Lender may deem
necessary or proper in connection with the collection or satisfaction of the
indebtedness, or the administration, supervision, preservation, protection or
realization of the Loan Documents or any collateral. Lender is authorized, but
not required, to pay at any time and from time to time any or all of such
expenses, add the amount of such payment to the amount of the principal
indebtedness hereunder and charge interest thereon at the rate specified
herein.
All Parties Liable Herefor hereby waive demand, presentment, notice of
dishonor and protest. This Note shall take effect as if under seal. This Note
evidences a loan for business and/or commercial purposes.
<PAGE>
All Parties Liable Herefor assent to its terms and consent to any and all
modifications, extensions or indulgences, to any substitution, exchange or
release of collateral and/or to the addition or release of any other party or
person primarily or secondarily liable, all without notice, and generally defer
all suretyship rights and defenses while any sums remain outstanding hereunder.
Each Party Liable Herefor waives all rights of exoneration against any other
Party Liable Herefor, and defers all rights of reimbursement, contribution, and
subrogation against any other Party Liable Herefor, while any sums remain
outstanding hereunder.
All Parties Liable Herefor submit to the jurisdiction of the courts of the
State of Maine and of the United States of America located within the State of
Maine, in connection with any suit or proceeding arising hereunder or under any
Loan Document.
This Note is secured by a Mortgage on premises at 56 Evergreen Drive,
Portland (Lot #3, Evergreen Industrial Park), and by an assignment of leases
and a security interest in fixtures and equipment related to the premises.
WITNESS: IMMUCELL CORPORATION
/S/ DANIEL P. THORNTON By: /S/ MICHAEL F. BRIGHAM
Michael F. Brigham, Chief Financial
Officer and Treasurer
<TABLE> <S> <C>
<PAGE>
<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 JUNE
30, 1998 AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,352,379
<SECURITIES> 0
<RECEIVABLES> 371,893
<ALLOWANCES> 45,093
<INVENTORY> 535,101
<CURRENT-ASSETS> 2,287,060
<PP&E> 1,521,695
<DEPRECIATION> 738,680
<TOTAL-ASSETS> 3,295,584
<CURRENT-LIABILITIES> 344,323
<BONDS> 462,119
0
0
<COMMON> 2,489,142
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,295,584
<SALES> 2,128,650
<TOTAL-REVENUES> 2,191,422
<CGS> 950,724
<TOTAL-COSTS> 2,074,534
<OTHER-EXPENSES> (46,766)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,626
<INCOME-PRETAX> 139,028
<INCOME-TAX> 0
<INCOME-CONTINUING> 139,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,028
<EPS-PRIMARY> .06
<EPS-DILUTED> .05
</TABLE>
