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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period of __________________ to ________________
Commission file number: 0-18700
SENTIGEN HOLDING CORP.
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(exact name of Registrant as specified in its charter)
Delaware 13-3570672
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
580 Marshall Street, Phillipsburg, NJ 08865
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(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number, including area code: (908) 387-1673
PRIME CELLULAR, INC.
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Former Name, Former Address and Former Fiscal year,
if changed since Last Report.
Check whether the issuer (1) 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 [_]
As of August 10, 2000 the registrant had 6,155,700 shares outstanding of
its Common Stock, $.01 par value.
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION............................................... 3
Item 1. Consolidated Financial Statements
Independent Accountants' Report................................... 3
Consolidated Balance Sheets (unaudited) at June 30, 2000
and December 31, 1999......................................... 4
Consolidated Statements of Operations (unaudited) for the
three months ended June 30, 2000 and June 30, 1999............ 6
Consolidated Statements of Operations (unaudited) for the
six months ended June 30, 2000 and June 30, 1999.............. 7
Consolidated Statements of Cash Flows (unaudited) for
the six months ended June 30, 2000 and June 30, 1999.......... 8
Notes to Consolidated Financial Statements........................ 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 16
PART II. OTHER INFORMATION.................................................. 16
Item 2. Changes in Securities............................................... 16
Item 4. Submission of Matters to a Vote of Security Holders................. 16
Item 6. Exhibits and Reports on Form 8-K.................................... 16
SIGNATURES.................................................................. 17
2
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PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Sentigen Holding Corp. and Subsidiaries
We have reviewed the consolidated balance sheet of Sentigen Holding Corp. and
Subsidiaries at June 30, 2000 and the related consolidated statements of
operations for each of the three-month and six-month periods ended June 30, 2000
and 1999 and the consolidated statements of cash flows for the six months ended
June 30, 2000 and 1999 as set forth in the accompanying unaudited financial
statements. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements as of June 30, 2000 and for the
three and six months ended June 30, 2000 and 1999 for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein); and in our report dated February 17,
2000, we expressed an unqualified opinion on these consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1999 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
RAICH ENDE MALTER & Co., LLP
East Meadow, New York
August 8, 2000
3
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31,
June 30, 2000 1999
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Assets
Current Assets
Cash $ 86,483 $ 125,954
Investment securities 4,972,542 5,008,533
Accounts receivable - less allowance
for doubtful accounts of $20,000 590,540 572,075
Unbilled services 142,340 109,809
Inventory 155,289 151,816
Prepaid expenses 30,326 14,968
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5,977,520 5,983,155
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Property, Plant and Equipment 2,090,896 1,759,290
Less: Accumulated depreciation 796,349 667,659
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1,294,547 1,091,631
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Other Assets
Investment securities 545,267 345,932
Security deposits 1,000 1,000
Deferred financing costs - net of
accumulated amortization of $848 and
$681 for 2000 and 1999, respectively 9,233 6,964
License costs - net of accumulated
amortization of $0 for 2000 and 1999 375,000 -
----------- -----------
930,500 353,896
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$ 8,202,567 $ 7,428,682
=========== ===========
See accompanying notes and accountants' report.
4
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31,
June 30, 2000 1999
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Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $ 200,829 $ 88,761
Current maturities of stockholders loans 555,691 -
Accounts payable and accrued expenses 327,028 315,433
Customer deposits 326,761 143,842
Unearned revenue 96,959 54,460
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1,507,268 602,496
Non-Current Liabilities
Long-term debt -net of current maturities 635,661 560,107
Stockholder loans -net of current maturities - 531,988
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2,142,929 1,694,591
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Stockholders' Equity
Common stock 61,537 60,787
Additional paid-in capital 6,278,197 5,832,704
Accumulated (deficit) (280,096) (159,400)
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6,059,638 5,734,091
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$ 8,202,567 $ 7,428,682
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See accompanying notes and accountants' report.
5
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
------------------------------
June 30, 2000 June 30, 1999
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Revenue
Contract revenue $ 768,466 $ 448,857
Sale of goods 481,060 367,471
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1,249,526 816,328
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Direct Costs
Contract revenue 324,150 263,432
Sale of goods 209,187 168,936
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533,337 432,368
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Income After Direct Costs
Contract revenue 444,316 185,425
Sale of goods 271,873 198,535
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716,189 383,960
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Other Operating Expenses
Contract revenue 252,238 134,140
Sale of goods 125,255 80,431
Contract revenue- research & development 16,123 5,464
Sentigen- research & development 188,335 -
---------- -----------
581,951 220,035
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Income (Loss) from Segment Operations
Contract revenue 175,955 45,821
Sale of goods 146,618 118,104
Sentigen (188,335) -
---------- -----------
134,238 163,925
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Corporate Activities
Selling, general and administ. exp. (173,705) (157,750)
Interest income 65,725 60,998
Interest expense (26,349) (22,251)
----------- ----------
(134,329) (119,003)
----------- ----------
Income (Loss) Before Provision for Income Taxes (91) 44,922
Provision for Income Taxes 22,345 (138)
----------- -----------
Net Income (Loss) $ (22,436) $ 45,060
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Basic and Diluted Net Income (Loss) Per Share $ .00 $ .01
=========== ===========
Weighted Average Shares Outstanding - Basic 6,116,200 6,108,700
=========== ===========
- Diluted 6,116,200 6,308,216
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See accompanying notes and accountants' report.
6
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months Ended
------------------------------
June 30, 2000 June 30, 1999
-------------- --------------
Revenue
Contract revenue $ 1,352,273 $ 991,563
Sale of goods 841,680 686,404
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2,193,953 1,677,967
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Direct Costs
Contract revenue 670,724 491,967
Sale of goods 392,696 338,694
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1,063,420 830,661
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Income After Direct Costs
Contract revenue 681,549 499,596
Sale of goods 448,984 347,710
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1,130,533 847,306
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Other Operating Expenses
Contract revenue 475,110 282,363
Sale of goods 238,695 153,499
Contract revenue- research & development 30,527 12,510
Sentigen- research & development 222,519 -
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966,851 448,372
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Income (Loss) from Segment Operations
Contract revenue 175,912 204,723
Sale of goods 210,289 194,211
Sentigen (222,519) -
---------- -----------
163,682 398,934
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Corporate Activities
Selling, general and administ. exp. (340,160) (289,367)
Interest income 130,961 171,731
Interest expense (52,834) (84,842)
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(262,033) (202,478)
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Income (Loss) Before Provision for Income Taxes (98,351) 196,456
Provision for Income Taxes 22,345 132
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Net Income (Loss) $ (120,696) $ 196,324
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Basic and Diluted Net Income (Loss) Per Share $ (.02) $ .03
=========== ===========
Weighted Average Shares Outstanding - Basic 6,103,700 6,108,700
=========== ===========
- Diluted 6,103,700 6,300,205
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See accompanying notes and accountants' report.
7
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
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June 30, 2000 June 30, 1999
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Cash Flows from Operating Activities
Net income (loss) $ (120,696) $ 196,324
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 128,921 107,630
Accrued interest on stockholder loans 23,703 25,473
Compensation on stock options 71,243 -
Changes in assets and liabilities:
Accrued interest on investment securities (13,641) 77,839
Accounts receivable (18,465) (329,509)
Unbilled services (32,531) (78,833)
Inventory (3,473) (21,471)
Prepaid expenses (15,358) (8,730)
Accounts payable and accrued expenses 11,595 314,904
Customer deposits 182,919 62,826
Unearned revenue 42,499 39,625
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256,716 386,078
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Cash Flows from Investing Activities
Acquisitions of property and equipment (331,606) (189,562)
Sale(purchase)of investment securities- net (149,703) 5,000,000
Payment of deferred finance cost (2,500) -
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(483,809) 4,810,438
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Cash Flows from Financing Activities
Repayments of notes payable - (60,000)
Proceeds from long term debt 240,000 -
Repayments of long term debt (52,378) (11,335)
Payment of collateralized investment loan - (5,000,000)
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187,622 (5,071,335)
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Net Increase (Decrease) in Cash (39,471) 125,181
Cash - beginning 125,954 84,146
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Cash - end $ 86,483 $ 209,327
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Supplemental Disclosures
Cash paid (refunded) during the year:
Interest $ 30,165 $ 49,032
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Income taxes $ 33,185 $ 417
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Non-cash Investing and Financing Activities:
Common stock issued for License $ 375,000 $ -
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See accompanying notes and accountants' report.
8
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SENTIGEN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: ORGANIZATION OF THE COMPANY AND NATURE OF ITS OPERATIONS
In June 2000, the Company changed its name from Prime Cellular, Inc. to Sentigen
Holding Corp. The Company is comprised of three separate business segments. Cell
& Molecular Technologies, Inc. has two segments that provide goods and services
in the domestic biotechnology and pharmaceutical industries. The Specialty Media
Division ("SM") is a manufacturer and wholesaler of cell culture media and
reagents. The Molecular Cell Science Division ("MCS") provides research services
to pharmaceutical companies and other molecular and cell biology research and
development entities.
The Sentigen segment is engaged in scientific research regarding the mechanisms
of chemo-sensations in medical conditions and agricultural pests.
NOTE 2: UNAUDITED INTERIM STATEMENTS
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation of financial position and results of
operations have been included. All significant intercompany transactions and
balances have been eliminated. Operating results for the six months ended June
30, 2000, are not necessarily indicative of the results to be expected for the
year ending December 31, 2000. These financial statements and notes should be
read in conjunction with the financial statements and notes thereto included in
the Company's annual report on Forms 10-K for the year ended December 31, 1999.
NOTE 3: RECLASSIFICATION
Certain amounts from the prior periods have been restated to conform to the
current presentation. These reclassifications have no effect on previously
reported income periods.
NOTE 4: SEGMENT INFORMATION
The following is information pertaining to the Company's three operating
segments: (1) SM, which manufactures and wholesales cell culture media and
reagents, (2) MCS, which provides research services to pharmaceutical companies
and other molecular and cell biology research and development entities, and (3)
Sentigen which is engaged in scientific research regarding the mechanisms of
chemo-sensations in medical conditions and agricultural pests.
9
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For the Six Months Ended
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June 30, 2000 June 30, 1999
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Revenues:
MCS - $ 1,392,244 $ 991,563
Intersegment Revenues (39,971) --
-------- --------
MCS - Contract Revenues from
External Customers 1,352,273 991,563
--------- -------
SM 841,680 704,478
Intersegment Revenues -- (18,074)
------- ---------
SM - Sales of goods to External
Customers 841,680 686,404
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$ 2,193,953 $ 1,677,967
=========== ===========
Income (Loss) before Income Taxes:
MCS $ 175,912 $ 204,723
SM 210,289 194,211
Sentigen (222,519) --
---------- --------
163,682 398,934
Corporate income and expenses
unallocated to segments (262,033) (202,478)
--------- --------
$ (98,351) $ 196,456
=========== ===========
For the Three Months Ended
-------------------------------
June 30, 2000 June 30, 1999
-------------- --------------
Revenues:
MCS - $ 781,526 $ 448,857
Intersegment Revenues (13,060) --
-------- --------
MCS - Contract Revenues from
External Customers 768,466 448,857
------- -------
SM 481,060 378,530
Intersegment Revenues -- (11,059)
------- ---------
SM - Sales of goods to External
Customers 481,060 367,471
------- ---------
$ 1,249,526 $ 816,328
=========== ===========
Income (Loss) before Income Taxes:
MCS $ 175,955 $ 45,821
SM 146,618 118,104
Sentigen (188,335) --
---------- --------
134,238 163,925
Corporate income and expenses
unallocated to segments (134,329) (119,003)
--------- ---------
$ (91) $ 44,922
========== ===========
Grants-
------
The SM division is the recipient of a NIH (National Institute of Health) Federal
Phase II Grant for $757,532. The work performed under this grant covered
the period July 1998 to June 2000. For the six and the three months ended June
30, 2000, the company recognized $90,786 and $31,900, respectively, in grant
revenue under this grant which was offset by a like amount in cost.
The MCS division is the recipient of a NIH Federal Phase I Grant for $ 100,270.
The work performed under this grant covered the period June 1999 to May
2000. For the six and the three months ended June 30, 2000, the company
recognized $ 44,613 and $31,569, respectively, in grant revenue under this grant
which was offset by a like amount in cost.
10
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NOTE 5: EARNINGS PER SHARE
Basic income (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the respective periods.
Diluted income (loss) per share includes the effects of securities which are
convertible into common stock, consisting of stock options, to the extent such
conversion would be dilutive.
Potential common stock was excluded from the computation for the six months
ended June 30, 2000 because of their anti-dilutive effect. The following is a
summary of the weighted average shares outstanding.
For the Six and the Three
Months Ended
-------------------------------
June 30, 2000 June 30, 1999
-------------- --------------
Basic 6,103,700 6,108,700
Effect of dilutive options - 191,505
--------- ---------
Diluted weighted average shares
outstanding 6,103,700 6,300,205
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Anti-dilutive options 628,159 260,000
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For the Three Months Ended
-------------------------------
June 30, 2000 June 30, 1999
-------------- --------------
Basic 6,116,200 6,108,700
Effect of dilutive options - 199,516
------------ ---------
Diluted weighted average
shares outstanding 6,116,200 6,308,216
============== ==============
Anti-dilutive options 698,627 260,000
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Note 6: Formation of Sentigen Corp.
During the quarter ended March 31, 2000, the Company formed Sentigen Corp.
("Sentigen") as a wholly owned subsidiary to engage in scientific research
regarding the mechanisms of chemo-sensations in medical conditions and
agricultural pests. Sentigen began its planned scientific research during the
quarter ended June 30, 2000. In that connection the Company has entered into the
following agreements:
On March 29, 2000 Sentigen entered into a three year employment agreement with
Dr. Kevin J. Lee for the position of executive vice president at $110,000 per
year plus annual performance-based incentive bonuses. In addition, Mr. Lee
received Options to purchase 200,000 shares of the Company's stock at $5.00 per
share, vesting 25% per year and expiring on March 29, 2005.
On April 10, 2000, Sentigen entered into a license agreement with Columbia
University for an exclusive worldwide right to Columbia's patent applications
and other proprietary rights in this area. A minimum of $1,000,000 must be
contributed by Sentigen Holding Corp. in Sentigen Corp. within one year of the
date of the agreement. A minimum of $50,000 per six month period or $100,000 per
annual period must be spent on bona fide research and development of the patents
11
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and licenses subject to the agreement from the second through the fourth years
or the Company must be involved in active negotiations to raise $1,000,000 in
additional funding. In consideration of the license, Columbia was issued 75,000
shares of the Company's stock and will receive royalties of 1% of the net sales
of any licensed products or services.
On April 18, 2000 Sentigen received a commitment from Norwest Bank to borrow up
to $500,000 to be repaid over five years with interest at 8.75% per annum.
During the quarter ended June 30, 2000 Sentigen was advanced $ 240,000 in loan
proceeds under this loan arrangement.
On May 1, 2000, Sentigen acquired a license to use laboratory space at Columbia
University in New York City for two years with the option to renew for an
additional two years. The license agreement calls for license fee commitments,
exclusive of operating expenses, as follows:
For the year ending June 30, 2001 $65,325
2002 55,792
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Total $121,117
========
Note 7: Stock Option Plans
The Company adopted the 2000 Performance Equity Plan (the "Performance Equity
Plan") which provides for grants and options to purchase up to 2,000,000 shares
of Common Stock. Under the Performance Equity Plan, options may be granted to
employees, directors, consultants, agents and other persons deemed valuable to
the Company or any of its subsidiaries. The Performance Equity Plan permits the
Board of Directors or the Committee of the Performance Equity Plan to issue
incentive stock options (ISO's) as defined in Section 422 of the Internal
Revenue Code (the "Code") and stock options that do not conform to the
requirements of that code section ("non-ISOs"). The exercise price of each ISO
may not be less then 100% of the fair market value of the Common Stock at the
time of grant, except that in the case of a grant to an employee who owns
(within the meaning of Code Section 422) 10% or more of the outstanding stock of
the Company or any subsidiary (a "10% stockholder"), the exercise price may not
be less then 100% of the market value of the Common Stock at the time of grant.
Under the Performance Equity Plan, the committee may award stock appreciation
rights, restricted stock, deferred stock, stock reload options and other
stock-based awards in addition to stock options. The Performance Equity Plan is
administered by the Board of Directors and may be administered by a committee
chosen by the Board of Directors. Subject to the provisions of the Performance
Equity Plan, the Board of Directors or such Committee, as applicable, have the
authority to determine the individuals to whom the stock options are to be
granted, the number shares to be covered by each option, the option price, the
type of option, the option period, the restrictions, if any, on the exercise of
the option, the terms for the payment of the option price and other terms and
conditions. Payment by option holders upon exercise of an option may be made (as
determined by the Board of Directors or the Committee) in cash, or, in certain
instances, by shares of Common Stock. Upon the Performance Equity Plan, no more
than 200,000 shares in the aggregate may be granted to any one holder in any one
calendar year.
On January 3, 2000 (the "Grant Date"), the Company granted to certain key
employees of the Company options, pursuant to the Company's 1990 Stock Option
Plan, to purchase up to an aggregate of 22,850 shares of the Company's Common
Stock, at an exercise price of $1.81. Such options vest and become exercisable
in five equal annual installments, commencing on the one (1) year anniversary of
the Grant Date.
On March 29, 2000 (the "Grant Date"), the Company granted to certain other
individuals, options, pursuant to the Company's 2000 Performance Equity Plan, to
purchase up to an aggregate of 495,000 shares of the Company's Common Stock, at
12
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an exercise price of $5.00. Such options vest and become exercisable in four
equal annual installments, commencing on the Grant date.
Options issued to other than employees are valued at the fair value of the
consideration received or the fair value of the equity investments issued,
whichever is more reliably measured.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a
"safeharbor" for forward-looking statements. Certain information included in
this Report contains statements that are forward-looking, such as statements
relating to plans for future activities. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: the Company's history of losses; the Company's need to obtain
additional financing and the ability to obtain such financing; outstanding
indebtedness; the ability to hire and retain key personnel; successful
completion and integration of prior and any future acquisitions; relationships
with and dependence on third-party equipment manufacturers and suppliers;
uncertainties relating to business and economic conditions in markets in which
the Company operates; uncertainties relating to government and regulatory
policies and other political risks; uncertainties relating to customer plans and
commitments; cost of and availability of component materials and inventories;
effect of governmental export and import policies; the highly competitive
environment in which the Company operates; potential entry of new,
well-capitalized competitors into the Company's markets; and the uncertainty
regarding the Company's continued ability, through sales growth, to absorb the
increasing costs incurred and expected to be incurred in connection with its
business activities. The words "believe", "expect", "anticipate", "intend" and
"plan" and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
Results of Operations
Comparison of Three Months Ended June 30, 2000 to Three Months Ended June 30,
1999.
Revenue for the three months ended June 30, 2000 was $1,249,526 as compared to
revenue of $816,328 for the three months ended June 30, 1999. This increase of
$433,198 was as a result of a $113,589 or a 31% increase in sales of goods and a
$319,609 or a 71% increase in contract revenue. Sale of goods, through the SM
Division, continue to grow due to the introduction of new products and addition
of international distributors. Contract revenue growth, through the MCS
Division, was attributable to the start up of numerous contracts which were not
started during the quarter ended March 31, 2000, due to unanticipated customer
delays.
Income after direct costs for the three months ended June 30, 2000 was $716,189
as compared to income after direct costs of $383,960 for the three months ended
June 30, 1999. This increase in income after direct costs is the result of a
$73,338 or 37% increase from the sales of goods plus a $258,891 or 140% increase
from MCS. This increase in income after direct costs from the sales of goods
resulted from the 31% increase in revenue plus higher margins from the new
products. The MCS Division's income after direct costs for the three months
ended June 30, 2000 increase was attributable to the efficient utilization of
additional manpower to staff the additional contracts which were started during
the three months ended June 30, 2000.
Other operating expenses for the three months ended June 30, 2000 was $581,951
as compared to $220,035 for the three months ended June 30, 1999. This $361,916
increase was a result of an administrative expansion which occurred in the
second half of 1999 and continued into the quarter ended June 30, 2000, plus
13
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contract revenue research and development increased by $10,659 and Sentigen
research and development cost of $188,335 were incurred during the three months
ended June 30, 2000 as compared to $0 for the three months ended June 30, 1999
as Sentigen was not incorporated until February 2000.
Corporate activities of $134,329 resulted in a net expense for the three months
ended June 30, 2000 as compared to net expense of $119,003 for the three months
ended June 30, 1999. This $15,326 net increase in expense resulted from
increased selling, general and administrative expenses mainly due to activities
in connection with the start up of the Company's wholly owned subsidiary,
Sentigen, Corp. Interest income increased $ 4,727 for the three months ended
June 30, 2000 as compared to the three months ended June 30, 1999 as well as an
increase in interest expense of $ 4,098 for the three months ended June 30, 2000
as compared to the three months ended June 30, 1999. This resulted because the
Company had approximately $285,000 in additional securities and related
investments for the three months ended June 30, 2000 as compared to the three
months ended June 30, 1999.
Net (loss) income for the three months ended June 30, 2000 was $(22,436) or $.00
per share basic and diluted, based on weighted average common shares outstanding
of 6,116,200, basic and diluted, as compared to a net income of $45,060 or $.01
per share based on 6,108,700, basic and 6,308,216, diluted weighted average
shares outstanding. The decrease in net income was mainly the result of a 53%
increase in revenue reduced by an increase in other operating expenses, which
included Sentigen research and development, which was not present for the three
month period ended June 30, 1999 as well as an increase in corporate activities
and provision for taxes.
Comparison of Six Months Ended June 30, 2000 to Six Months Ended June 30, 1999.
Revenue for the six months ended June 30, 2000 was $2,193,953 as compared to
revenue of $1,677,967 for the six months ended June 30, 1999. This increase of
$515,986 was as a result of a $155,276 or a 23% increase in sales of goods and a
$360,710 or a 36% increase in contract revenue. Sale of goods, through the SM
Division, continue to grow due to the introduction of new products and addition
of international distributors. Contract revenue growth, through the MCS
Division, was attributable to additional contracts as the division's customer
base broadens.
Income after direct costs for the six months ended June 30, 2000 was $1,130,533
as compared to income after direct costs of $847,306 for the six months ended
June 30, 1999. This increase in income after direct costs is the result of a
$101,274 or 29% increase from the sales of goods plus a $181,953 or 36% increase
from MCS. This increase in income after direct costs from the sales of goods
resulted from the 23% increase in revenue plus higher margins from the new
products. The MCS Division's income after direct costs for the six months ended
June 30, 2000 increase was attributable to the efficient utilization of
additional manpower to staff the additional contracts which were started during
the six months ended June 30, 2000.
Other operating expenses for the six months ended June 30, 2000 was $966,851 as
compared to $448,372 for the six months ended June 30, 1999. This $518,479
increase was a result of an administrative expansion which occurred in the
second half of 1999 and continued into the six months ended June 30, 2000, plus
contract revenue research & development increased by $18,017 and Sentigen
research and development cost of $222,519 were incurred during the six months
ended June 30, 2000 as compared to $0 for the six months ended June 30, 1999 as
Sentigen was not incorporated until February 2000.
Corporate activities of $262,033 resulted in a net expense for the six months
ended June 30, 2000 as compared to net expense of $202,478 for the six months
ended June 30, 1999. This $59,555 net increase in expense resulted from
increased selling, general and administrative expenses mainly due to activities
in connection with the start up of the Company's new wholly owned subsidiary,
Sentigen, Corp. Interest income decreased $ 40,770 for the six months ended June
30, 2000 as compared to the six months ended June 30, 1999 as well as an
14
<PAGE>
decrease in interest expense of $ 32,008 for the six months ended June 30, 2000
as compared to the six months ended June 30, 1999. This resulted because the
Company had approximately $4,500,000 in additional securities and a related
investment loan for the first three months of 1999, which was not present during
2000. This decrease of interest income during the six months ended June 30,2000
was partially offset as a result of approximately $285,000 in additional
securities and related investments for the three months ended June 30, 2000 as
compared to the three months ended June 30, 1999.
Net (loss) income for the six months ended June 30, 2000 was $(120,696) or
$(.02) per share basic and diluted, based on weighted average common shares
outstanding of 6,103,700, basic and diluted, as compared to a net income of
$196,324 or $.03 per share based on 6,108,700, basic and 6,300,205, diluted
weighted average shares outstanding. The decrease in net income was mainly the
result of a 31% increase in revenue reduced by an increase in other operating
expenses, which included $222,519 in Sentigen research and development, which
was not present for the six month period ended June 30, 1999 as well as an
increase in corporate activities and provision for taxes.
Liquidity and Capital Resources
At June 30, 2000, the Company had approximately $86,000 in cash and working
capital of approximately $4,500,000.
Net cash provided by operating activities aggregated $256,716 and $386,078 for
the six months ended June 30, 2000 and 1999, respectively. The $129,362 net
decrease provided by operating activities was principally attributable to a net
(loss) for the six months ended June 30,2000 coupled with a reduction in accrued
interest on investment securities and accounts payable offset by a net decrease
in accounts receivable and an increase in customer deposits for the six months
ended June 30, 2000 as compared to 1999.
Net cash used by investing activities aggregated $(483,809) for the six months
ended June 30, 2000 as compared with net cash provided by investing activities
of $4,810,438 for the six months ended June 30, 1999. This net decrease in cash
provided by investing activities was primarily attributable to the $5,000,000
sale of investment securities for the six months ended June 30, 1999 as well as
a net $199,125 purchase of investment securities and the purchase of $331,606 in
fixed assets for the six months ended June 30, 2000.
Net cash provided by financing activities aggregated $187,622 for the six months
ended June 30, 2000 as compared net cash used by financing activities of
$5,071,335 for the six months ended June 30, 1999. The decrease was due
primarily to the repayment of the $5,000,000 collateralized investment loan
during the six months ended June 30, 1999 offset by $240,000 in proceeds from
new financing for the six months ended June 30, 2000.
During the six months ended June 30, 2000, the Company financed its operations
primarily through working capital plus $240,000 in new financing.
Pursuant to a License Agreement between Sentigen Corp. and Columbia University,
for an exclusive worldwide right to Columbia patent applications and other
proprietary rights in the area of the mechanisms of chemosentations in medical
conditions and agricultural pests, a minimum of $1,000,000 must be invested by
the Company by April 10, 2001. A minimum of $50,000 per sixth month period or
$100,000 per annual period must be spent on bona fide research and development
15
<PAGE>
of the patents and licenses subject to the agreement from the second through the
fourth years or the Company must be involved in active negotiations to raise
$1,000,000 in additional funding. The Company has enough funds available in
working capital to make the required investment if it chooses not to raise the
money through debt and equity financings.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Recent Sales of Unregistered Securities
During the three months ended June 30, 2000, we made the sale of unregistered
securities described below. We relied on Section 4(2) of the Securities Act of
1933 as the basis for any exemption from registration for such transaction below
because such transaction did not involve a public offering.
On June 21, 2000 the Company issued to Columbia University 75,000 shares of
common stock in consideration of an exclusive worldwide right to Columbia
University's patent applications and other proprietary rights granted to the
Company pursuant to a License Agreement.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on June 23, 2000. At
the meeting the directors nominated for re-election, Joseph K. Pagano, Thomas
Livelli, Richard Malavarca, Frederick R. Adler, Brett Fialkoff and Samuel A.
Rozzi, were each re-elected with 4,390,126 shares voted in favor of their
re-election.
At the meeting, the Company's stockholders also voted upon a proposal to
amend the Company's Certificate of Incorporation to change the Company's name
from "Prime Cellular, Inc." to its current name "Sentigen Holding Corp."
5,300,826 shares were voted "For", 3,800 shares were voted "Against" and 774,074
shares were not voted in connection with the name change.
The Company's Stockholders also voted to approve the 2000 Performance
Equity Plan. 4,152,359 shares were voted "For", 2,000 shares were voted
"Against", 600 shares "Abstained" and 1,923,741 shares were not voted in
connection with the 2000 Performance Equity Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
August 14, 2000 SENTIGEN HOLDING CORP.
By: /s/ ROBERT A. REINHART
---------------------------------
Robert A. Reinhart,
Chief Financial Officer and
Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated
By Reference No. in
Exhibit Number Description from Document Document Page
-------------- ----------- ------------- -------- -----
<S> <C> <C> <C> <C>
3.1 Certificate of Incorporation, as amended A Exhibit 3.1
3.2 By-laws of the Company A Exhibit 3.2
10.1 1990 Stock Option Plan A Exhibit 10.1
10.2 Consulting Agreement dated July 2, 1991, among B Exhibit 10.2
the Company, Prime Cellular of Florida, Inc.
and Joseph K. Pagano (the
"Consulting Agreement")
10.3 Amendment to Consulting Agreement B Exhibit 10.3
10.4 Agreement and Plan of Merger, dated as of C Exhibit 2.1
May 14, 1996, by and among the Company,
Prime Cellular Acquisition Corp., Bern
Associates, Inc. and the stockholders of Bern
10.5 Registration Rights Agreement, dated June C Exhibit 10.1
10, 1996, between Registrant and the Bern
Stockholders
10.6 Escrow Agreement, dated June 10, 1996, C Exhibit 10.2
between Registrant and the Bern Stockholders
10.7 Indemnification Agreement, dated June 10, C Exhibit 10.3
1996 between Registrant and the Bern
Stockholders
10.8 Form of Amendment to Merger Agreement, dated D Exhibit 10.9
June 11, 1997
10.9 Form of Settlement Agreement, dated August 28, D Exhibit 10.10
1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Incorporated
By Reference No. in
Exhibit Number Description from Document Document Page
-------------- ----------- ------------- -------- -----
<S> <C> <C> <C> <C>
10.10 Agreement and Plan of Merger, dated as of May E Exhibit 2
29, 1998, by and among the Company, CMT
Acquisition Corp., Cell & Molecular
Technologies, Inc. and the stockholders of
Cell & Molecular Technologies, Inc.
10.11 Mortgage dated February 6, 1997, with respect F Exhibit 10.11
to premises located at 580 Marshall Street,
Phillipsburg, NJ 08865, assumed by the Company
in connection with the CMT Merger
10.12 Form of Employment Agreement dated May 22, F Exhibit 10.12
1997 between Cell & Molecular Technologies,
Inc. and Thomas Livelli
10.13 Form of Amendment to Employment Agreement G Exhibit 10.13
dated as of May 29, 1998 between Cell &
Molecular Technologies, Inc. and Thomas
Livelli
10.14 Employment Agreement between Joseph K. Pagano H Exhibit 10.14
and the Company
10.15 Employment Agreement between Kevin Lee and I Exhibit 10.15
Sentigen Corp.
10.16 Option Agreement between the Company and Kevin I Exhibit 10.16
Lee
21 List of Subsidiaries H Exhibit 21
27.1 Financial Data Schedule -- -- Filed
Herewith
99 Risk Factors H Exhibit 99
</TABLE>
A. Company's Registration Statement on Form S-18 (Registration No.
33-35537-NY)
B. Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1992.
C. Company's Report on Form 8-K dated June 11, 1996.
D. Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1997.
<PAGE>
E. Company's Report on Form 8-K for the event dated May 29, 1998.
F. Company's Report on Form 10-K for the fiscal year ended December 31, 1998.
G. Company's Report on Form 10-K/A for the fiscal year ended December 31,
1998.
H. Company's Report on Form 10-K for the fiscal year ended December 31, 1999.
I. Company's Report on Form 10-Q for the quarter ended March 31, 2000.
