The accompanying notes are an integral part of the consolidated
financial statements.
The accompanying notes are an integral part of the consolidated
financial statements.
The accompanying notes are an integral part of the consolidated financial
statements.
The accompanying notes are an integral part of the consolidated
financial statements.
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
(1) Summary of Significant Accounting Policies
Nature of Operations
Igene Biotechnology, Inc. ("Igene") was incorporated under
the laws of the State of Maryland on October 27, 1981 as
"Industrial Genetics, Inc." Igene changed its name to "IGI
Biotechnology, Inc." on August 17, 1983 and to "Igene
Biotechnology, Inc." on April 14, 1986. Igene is located in
Columbia, Maryland and is engaged in the business of
industrial microbiology and related biotechnologies. Igene
has an operational subsidiary in Chile and through February
2003 had a subsidiary in Norway. Igene is engaged in the
business of developing, marketing, and manufacturing
specialty ingredients for human and animal nutrition.
Igene was formed to develop, produce and market value-added
specialty biochemical products. Igene is a supplier of
natural astaxanthin, an essential nutrient in different feed
applications and a source of pigment for coloring farmed
salmon species. Igene is also venturing to supply
astaxanthin as a nutraceutical ingredient. Igene is focused
on fermentation technology, pharmacology, nutrition and
health in its marketing of products and applications
worldwide.
Igene has devoted its resources to the development of
proprietary processes to convert selected agricultural raw
materials or feedstocks into commercially useful and cost
effective products for the food, feed, flavor and
agrochemical industries. In developing these processes and
products, Igene has relied on the expertise and skills of
its in-house scientific staff and, for special projects,
various consultants.
In an effort to develop a dependable source of production,
on March 18, 2003, Tate and Lyle and Igene announced a 50:50
joint venture to produce AstaXin(R) for the aquaculture
industry. Production utilizes Tate & Lyle's fermentation
capability together with the unique technology developed by
Igene. Part of Tate & Lyle's existing Selby, England, citric
acid facility was modified to include the production of
1,500 tons per annum of astaxanthin. Tate & Lyle's
investment of approximately $25 million includes certain of
its facility assets that were previously used in citric acid
production.
Principles of Consolidation
The accounts of our other wholly-owned subsidiary, Igene
Chile, are included in the consolidation of these financial
statements. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and cash equivalents
Igene considers cash equivalents to be short-term, highly
liquid investments that have original maturities of less
than 90 days. These include interest bearing money market
accounts.
Accounts Receivable
Accounts receivable are stated at the amount management
expects to collect from the outstanding balances.
Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation
allowance based upon its assessment of the current
collection status of individual accounts. Delinquent
amounts that are outstanding after management has conducted
reasonable collection efforts, are written off through a
charge to the valuation allowance and a credit to accounts
receivable. During 2005 assets were sold for less then the
initial agreed upon price with the distributor and the
$50,000 balance remaining was written off.
-31-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Investment in and advances to unconsolidated joint venture
The investment in the Joint Venture is accounted for under
the equity method whereby the Company's 50% ownership
percentage in the Joint Venture is reflected as an asset in
the consolidated balance sheet and the changes in the Joint
Venture's equity as a result of its operations is reflected
in the Company's consolidated statement of operations. The
Company evaluates its investment in the Joint Venture for
impairment, as it does for all long term assets. The
Company can not recognize the loss of the Joint Venture
beyond its investment in and advances to the Joint Venture
or the amount of debt guaranteed by Igene, if any. This
excess loss, and all future losses incurred as a result of
the Joint Venture, that are in excess of the Company's
investment and advances, are suspended until the point that
the profits of the Joint Venture, if any, exceed the
incurred losses. The accounting policies followed by the
Joint Venture are in conformity with accounting principles
generally accepted in the United States of America.
On June 15th 2005, the Company executed a limited guarantee
for one of the debt obligations of the Joint Venture. Under
the terms of the limited guarantee, the Company has agreed
to guarantee up to 4,200,000 British Pounds sterling
(approximately $8,237,000 at February 28, 2007). The
Company subsequently entered into an agreement with Tate &
Lyle (the other 50% partner in the Joint Venture) whereby
Tate & Lyle has agreed to arrange funds for the Joint
Venture, without recourse to Igene, until the Joint Venture
produces a regular monthly cash flow, as defined, for four
consecutive months. The Joint Venture has not met the cash
flow requirements. The Company has subsequently received a
full release from the guarantee.
Research and development costs
For financial reporting purposes, research, development and
pilot plant scale-up costs are charged to expense as
incurred.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation and amortization computed using the straight-
line method. Premises and equipment are depreciated over
the useful lives of the assets, which generally range from
three to ten years for furniture, fixtures and equipment,
three to five years for computer software and hardware.
Leasehold improvements are amortized over the terms of the
respective leases or the estimated useful lives of the
improvements, whichever is shorter. The cost of major
renewals and betterments are capitalized, while the costs of
ordinary maintenance and repairs are expensed as incurred.
Estimates
The preparation of financial statements in conformity with
accounting principles generally acceptable in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Foreign Currency Translation and Transactions
Since the day-to-day operations of Igene's foreign
subsidiary in Chile are dependent on the economic
environment of the parent's currency, the financial position
and results of operations of Igene's foreign subsidiary are
determined using Igene's reporting currency (US dollars) as
the functional currency. All exchange gains and losses from
remeasurement of monetary assets and liabilities that are
not denominated in US dollars are recognized currently in
income.
-32-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and short-term debt
approximate fair value because of the relatively short
maturity of these instruments. Management believes the
carrying amount of long-term debt approximates fair value
because of similar current rates at which Igene could borrow
funds with consistent remaining maturities.
Accounting for stock based compensation
Prior to January 1, 2006, the Company accounted for its
stock based compensation plans under the recognition and
measurement principles of APB opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations.
No stock option based employee compensation cost is
reflected in net income, as all options granted under the
plan had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following
table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" and disclosure provisions of SFAS No. 148,
"Accounting for Stock-Based Compensation-Transition and
Disclosure", to stock-based employee compensation for the
year ended December 31, 2005:
2005
_____________
Net loss, as reported $ (2,037,707)
Pro forma stock-based employee compensation
expense determined under fair value based
method net of related tax effects (38,677)
_____________
Pro forma net loss $ (2,076,384)
=============
Net loss per Share:
Basic - as reported $ (0.02)
Basic - pro forma $ (0.02)
Diluted - as reported $ (0.02)
Diluted - pro forma $ (0.02)
|
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants
during the year ended December 31, 2005:
2005
_____________
Dividend yield ---
Expected volatility 136.00%
Risk-free interest rate 4.63%
Expected lives in years 10
Fair value of options granted $ 0.027
|
New accounting pronouncements
In May 2005, the FASB issued SFAS No. 154, "Accounting
Changes and Error Corrections"("SFAS 154"), which replaces
APB Opinion No. 20 Accounting Changes and SFAS No. 3,
"Reporting Accounting Changes in Interim Financial
Statements-An Amendment of APB Opinion No. 28." SFAS 154
requires retrospective application to prior periods'
financial statement of a voluntary change in accounting
principal unless it is not practical. SFAS 154 is effective
for accounting changes and corrections of errors made in
-33-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
fiscal years beginning after December 15, 2005, and is
required to be adopted by the Company in the first quarter
of fiscal 2007. Although the Company will continually
evaluate its accounting policies, management does not
currently believe adoption will have a material impact on
the Company's results of operations, cash flows or financial
position.
In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards Number
157 - Fair Value Measurements ("SFAS157"). SFAS 157 defines
fair value, establishes a framework for measuring fair value
in generally accepted accounting principles ("GAAP"), and
expands disclosures about fair value measurements.
Prior to SFAS 157, there were different definitions of fair
value and limited guidance for applying those definitions in
GAAP. Moreover, that guidance was dispersed among the many
accounting pronouncements that require fair value
measurements. SFAS 157 clarifies that the exchange price is
the price in an orderly transaction between market
participants to sell the asset or transfer the liability in
the market in which the reporting entity would transact for
the asset or liability, that is, the principal or most
advantageous market for the asset or liability.
SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Company is currently
evaluating the impact, if any, that SFAS 157 will have on
its financial position, results of operations and cash
flows.
In June 2006, the Financial Accounting Standards Board
("FASB") issued Financial Accounting Standards Board
Interpretation ("FIN") No. 48, "Accounting for Uncertainty
in Income Taxes-an interpretation of FASB Statement
No. 109." FIN No. 48 provides a comprehensive model for the
recognition, measurement and disclosure in the financial
statements of uncertain tax positions taken or expected to
be taken on a tax return. The Company will adopt FIN No. 48
effective beginning on January 1, 2007. The Company is
currently evaluating the impact this interpretation may have
on its future financial position, results of operations,
earnings per share, or cash flows.
In September 2006, the Securities and Exchange Commission
issued SAB No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements." SAB No. 108 was issued to address
diversity in practice in quantifying financial statement
misstatements. Current practice allows for the evaluation of
materiality on the basis of either (1) the error quantified
as the amount by which the current year income statement was
misstated ("rollover method") or (2) the cumulative error
quantified as the cumulative amount by which the current
year balance sheet was misstated ("iron curtain method").
The guidance provided in SAB 108 requires both methods to be
used in evaluating materiality ("dual approach"). SAB
No. 108 permits companies to initially apply its provisions
either by (1) restating prior financial statements as if the
dual approach had always been used or (2) recording the
cumulative effect of initially applying the "dual approach"
as adjustments to the carrying values of assets and
liabilities as of January 1, 2006 with an offsetting
adjustment recorded to the opening balance of retained
earnings. There were no matters warranting the Company's
consideration under the provisions of SAB No. 108 and,
therefore, it did not have an impact on the Company's
financial position, results of operations, earnings per
share or cash flows.
(2) Non-cash investing and financing activities:
During 2006, 7,375 shares of redeemable preferred stock,
with a recorded aggregate value of $141,600, were converted
into 14,750 shares of common stock. This included the 8%
Cumulative Convertible Preferred Stock, Series B and has
relieved the Company of this amount of long-term debt.
-34-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
During the course of 2006 and 2005, Fermic, Igene's
manufacturing agent, earned 545,569 and 4,724,416 shares,
respectively, of common stock as part of the manufacturing
agreement. Fermic earned 2,250 shares of common stock for
each kilogram pure astaxanthin produced and delivered as
part of the agreement. The average price is based on the
market value of the shares at the time the product was
produced. Fermic has earned all 20,000,000 shares available
under the contract. The 545,569 shares were earned at an
average price of $.056 per share for 2006, and 4,724,416
shares were earned at an average price of $.068 per share
for 2005.
During 2006, 312,000 shares of common stock were issued as
part of employee stock option exercises. The Company
received $10,300 based on an average exercise price of $.033
per share.
During 2006, 7,884 warrants were exercised for $788. 7,884
new shares of common stock were issued pursuant to the
exercise.
During 2006, 1,000,000 shares of common stock were issued to
the Joint Venture's new Vice President of Manufacturing as
part of his agreement in accepting the position. The cost
was expensed at a cost of $.05 per share or $50,000.
During 2006 and 2005, Igene recorded dividends in arrears on
its 8% Redeemable Preferred Stock, Series A at $.64 per
share aggregating $8,306 and $11,846 respectively, on such
preferred stock which has been removed from paid-in capital
and included in the carrying value of the redeemable
preferred stock. (see also note 9).
(3) Concentration of Credit Risk
The Joint Venture is potentially subject to the effects of a
concentration of credit risk in accounts receivable.
Accounts receivable is substantially composed of receivables
from customers in Chile, which is an important market for
Igene's product, AstaXin(R). Chile has from time to time
experienced political unrest and currency instability.
Because of the volume of business transacted by the Joint
Venture in Chile, recurrence of such unrest or instability
could adversely affect the businesses of its customers in
Chile or the Joint Venture's ability to collect its
receivables from these customers. In order to minimize
risk, the Joint Venture strictly evaluates the companies to
which it extends credit and all prices are denominated in US
dollars so as to minimize currency fluctuation risk. Losses
due to credit risks in accounts receivable are expected to
be immaterial.
(4) Property and Equipment
Property and equipment are stated at cost and are summarized
as follows:
Laboratory equipment and fixtures $ 181,042
Pilot plant equipment and fixtures 91,503
Office furniture and fixtures 36,990
___________
309,535
Less accumulated depreciation (275,964)
___________
$ 33,571
===========
|
(5) Investment in Joint Venture
On March 18 2003, the Company entered into a Joint Venture
Agreement with Tate & Lyle Fermentation Products Ltd.
("Tate"). Pursuant to a Joint Venture Agreement, the
Company and Tate agreed to form a joint venture (the "Joint
Venture") to manufacture, market and sell Astaxanthin and
derivative products throughout the world for all uses other
than as a nutraceutical or otherwise for direct human
-35-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
consumption. Tate contributed $24,600,000 in cash to the
Joint Venture, while the Company transferred to the Joint
Venture its technology relating to the production of
astaxanthin and assets related thereto. These assets
continue to be used by the Joint Venture in the same manner
as historically used by the Company. The Company and Tate
each have a 50% ownership interest in the Joint Venture and
equal representation on the Board of Directors of the Joint
Venture. The value of the Company's initial investment in
the Joint Venture has been recorded at an amount equal to
Igene's historical book value. As the cost of the Company's
technology and intellectual property has been previously
expensed and has a carrying amount of zero, the investment
in the Joint Venture was originally recorded with a book
value of $316,869, which represents the unamortized
production costs contributed to the Joint Venture. The
Company also contributed $6,000 to the capital of the Joint
Venture.
Production utilizes Tate's fermentation capability together
with the unique technology developed by Igene. Part of
Tate's existing Selby, England, citric acid facility was
modified to produce up to 1,500 tons per annum of this
astaxanthin. Tate's investment of approximately $25 million
includes certain of its facility assets previously used in
citric acid production. Sales and cost of sales activity
are now recorded as part of the earnings of the
unconsolidated venture.
As a result of the Joint Venture, the production, sales and
marketing of astaxanthin now take place in the
unconsolidated Joint Venture. From inception on March 18,
2003 through December 31, 2006, the Joint Venture's results
of operations included the following: Gross profit from
inception was a negative $15,165,979 on sales of
$27,772,879, less manufacturing cost of $42,938,858.
Selling and general and administrative expenses were
$13,090,287, and interest expense was $3,588,534. The
resulting loss was $31,844,800. Igene's 50% portion of the
Joint Venture loss was $15,922,400.
Because the Company accounts for its investment in the Joint
Venture under the equity method of accounting, it would
ordinarily recognize a loss representing its 50% equity
interest in the loss of the Joint Venture or the amount that
is guaranteed by the Company, if any. However, losses in
the Joint Venture are recognized only to the extent of the
investment in and advances to the Joint Venture. Losses in
excess of this amount are suspended from recognition in the
financial statements and are carried forward to offset
Igene's share of the Joint Venture's future income, if any.
On June 15, 2005, the Company executed a limited guarantee
for one of the debt obligations of the Joint Venture. Under
the terms of the limited guarantee, the Company will
guarantee up to 4,200,000 British Pounds sterling
(approximately $8,237,000 at February 28, 2007). The
Company subsequently entered into an agreement with Tate &
Lyle (the other 50% partner in the Joint Venture) where Tate
& Lyle has agreed to arrange funds for the Joint Venture,
without recourse to Igene Biotechnology, Inc., until the
Joint Venture produces a regular monthly cash flow, as
defined, for four consecutive months. The Joint Venture
has not met the cash flow requirements. The Company has
subsequently received a full release from the guarantee.
At December 31, 2006, prior to the recognition of its
portion of the Joint Venture loss, Igene's investment in the
Joint Venture consisted of $322,869 and its net advances to
the Joint Venture amounted to $1,169,112, for a total of
$1,491,981. For the year ended December 31, 2005, Igene
recognized $374,527 of its share of a $5,931,049 loss. For
the year ended December 31, 2006, Igene recognized losses to
the extent of the increase in advances of $109,147. The
remainder of approximately 5 million, is suspended and will
be carried forward to offset Igene's share of earnings from
the Joint Venture, if any. The balance in the advances to
and investment in Joint Venture account on the Company's
financial statements is zero at December 31, 2006.
-36-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
The following schedules display certain account balances of
the Joint Venture as of December 31, 2006 and for the period
since March 18, 2003 (inception):
December 31,
2006
_______________
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,612,000
Accounts Receivable 2,524,000
Inventories 11,469,000
_______________
16,605,000
Fixed Assets 20,519,000
Intellectual Property 24,614,000
_______________
TOTAL ASSETS $ 61,738,000
===============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 30,123,000
Working capital loan 11,752,000
_______________
TOTAL LIABILITIES 41,875,000
Equity 19,863,000
_______________
TOTAL LIABILITIES AND EQUITY $ 61,738,000
===============
|
Period from
initial investment to
December 31, 2006
_____________________
(Unaudited)
Net Sales $ 27,772,879
Less: manufacturing cost (42,938,858)
_____________________
Gross Profit (Loss) (15,165,979)
Less: selling, general and administrative (13,090,287)
_____________________
Operating Loss (28,256,266)
Interest Expense (3,588,534)
_____________________
Net Loss $ (31,844,800)
=====================
Igene's 50% equity interest in the net loss $ (15,922,400)
Igene's Investment in and Advances to the Joint Venture $ (1,491,981)
_____________________
Igene's suspended loss $ (14,430,419)
=====================
|
-37-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
The following schedule displays certain account balances of
the Joint Venture for the years ended December 31, 2006 and
2005. As shown, 50% of the activity is recorded as equity
in loss of Joint Venture:
Year Year
Ended Ended
December 31, 2006 December 31, 2005
_________________ _________________
(Unaudited) (Unaudited)
Net Sales $ 10,027,656 $ 10,961,223
Less: manufacturing cost (14,165,042) (17,633,816)
_________________ _________________
Gross Profit (Loss) (4,137,386) (6,672,593)
Less: selling, general and admin (3,874,710) (3,947,577)
_________________ _________________
Operating Loss (8,012,096) (10,620,170)
Interest Expense (2,195,607) (1,241,927)
_________________ _________________
Loss before tax $ (10,207,703) $ (11,862,097)
================= =================
50% equity interest Igene $ (5,103,852) $ (5,931,049)
================= =================
Igene's additional Investment in
and Advances to the Joint Venture $ (109,147) $ (374,527)
_________________ _________________
Igene's incremental suspended loss $ (4,994,705) $ (5,556,522)
================= =================
|
As a result of the Joint Venture, the production, sales and
marketing of Astaxanthin now take place in the
unconsolidated Joint Venture. For the years ended 2006 and
2005, Igene's portion of the Joint Venture loss was
$5,103,852 and $5,931,049, respectively.
On March 29, 2007 the Company was informed by their 50%
partner in the Joint Venture, Tate and Lyle, that they
determined to write down their portion of the investment in
the Joint Venture. There has been no impairment charge
reflected by the Joint Venture as of December 31, 2006.
(6) Convertible Debentures
On July 17, 2002, Igene issued and sold $300,000 in
aggregate principal amount of 8% convertible debentures, 50%
each to certain directors of Igene. These debentures are
convertible into shares of Igene's common stock at $.03 per
share based on the market price of Igene's shares at the
time the debentures were agreed to. In consideration of the
commitment to purchase the 8% convertible debenture, these
directors also received an aggregate of 10,000,000 warrants
to purchase common stock at $.03 per share. These
debentures, if not converted earlier, become due on July 17,
2012.
On February 22, 2002, Igene issued and sold $1,000,000 in
aggregate principal amount of 8% convertible debentures, 50%
each to certain directors of Igene. These debentures are
convertible into shares of Igene's common stock at $.04 per
share based on the market price of Igene's shares at the
time the debentures were agreed to. In consideration of the
commitment to purchase the 8% convertible debenture, these
directors also received an aggregate of 25,000,000 warrants
to purchase common stock at $.04 per share. These
debentures, if not converted earlier, become due on February
22, 2012.
In March 2001, Igene issued $1,014,211 of 8%, 10-year,
convertible debentures to certain directors of Igene in
exchange for the cancellation of $800,000 of demand notes
payable (including accrued interest of $14,212) and $200,000
in cash. $600,000 of these demand notes were issued during
2000 and $200,000 were issued subsequently. These
debentures are convertible into 10,142,110 shares of Igene's
common stock at $.08 per share. These directors also
received 10,142,110 warrants to purchase common stock at
$.08 per share. Interest is payable at maturity.
-38-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
In March 2001, certain directors of Igene also committed to
provide additional funding in the form of 8%, 10-year,
convertible debentures in the amount of $1,500,000. In
consideration of this commitment, these directors also
received 18,750,000 warrants to purchase common stock at
$.08 per share. These debentures are convertible into
18,750,000 shares of Igene's common stock at $.08 per share.
Interest is payable at maturity.
In December 2001, Igene issued $1,000,000 of 6%, 3-year
convertible debentures in connection with the purchase of
ProBio, now known as Igene Norway AS. These convertible
debentures are convertible into the Company's stock at a
price of $.10 per share, 10,000,000 shares in total.
Accrued interest on this note is due every six months. Of
these $295,000 have been converted to common stock. These
notes have been repaid in full as of February 23, 2007 (see
note 17).
The warrants issued in connection with the above debt
totaling 66,427,651 warrants have been valued at $1,896,094
utilizing the Black Scholes model. In addition, there was a
beneficial conversion feature due to the resulting bond
discount. The total discount resulting from the valuation
of the warrants and the beneficial conversion feature was
$3,792,188 which is being amortized over the life of the
debt (ten years).
Convertible debentures are summarized as follows as of
December 31, 2006:
Accrued
Principal Interest
____________ ____________
8%, 10-year, convertible debenture issued 7/17/02 $ 300,000 $ 106,718
8%, 10-year, convertible debenture issued 2/22/02 1,000,000 384,877
8%, 10-year, convertible debenture issued 3/1/01 1,014,212 473,137
8%, 10-year, convertible debenture issued 3/27/01 1,500,000 654,180
10%, 3-year, convertible debenture issued 11/30/01 705,000 46,570
____________ ____________
$ 4,519,212 $ 1,665,482
Less current maturities (705,000) (46,570)
Less unamortized debt discount (1,710,768) ---
____________ ____________
$ 2,103,444 $ 1,618,912
============ ============
|
(7) Notes Payable
This long term debt, approximately $5,800,000 which was
scheduled to become payable in March 2003, had been extended
to be due March 2006. It has been extended a second time to
be due March 2009. Management felt any attempts to satisfy
the debt on it's original due date would have had materially
adverse effects on the Company.
As a part of the terms of the first extension of the debt,
the exercise prices of the warrants and any conversion
features were discounted by 25%, thus a $.10 warrant is now
convertible at $.075 cents. As part of the terms of the
second extension of the debt, the exercise prices of the
warrants and any conversion features were discounted again
by 25%, thus a $.075 warrant is now convertible at $.056
cents.
Beginning November 16, 1995 and continuing through May 8,
1997, Igene issued promissory notes to certain directors for
aggregate consideration of $1,082,500. These notes specify
that at any time prior to repayment the holder has the right
to convert the notes to common stock of Igene at prices
ranging from $0.05 per share to $0.135 per share, based on
the market price of common shares at the respective issue
dates. The notes were convertible in total into 13,174,478
shares of common stock. As a result of the extensions they
are now convertible into 23,421,273 shares of common stock.
-39-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Concurrently, with each of the $1,082,500 of promissory
notes, the holders also received 13,174,478 warrants for an
equivalent number of shares at the equivalent price per
share. The warrants expire ten years from the date of issue
of the notes. As a result of the extension of debt the
warrant exercise prices were reduced by 25%. These notes
were modified in conjunction with the 1998 rights offering
to be due on March 31, 2003, and have been extended to
March 31, 2009 as part of the extension. The notes bear
interest at the prime rate.
As part of the rights offering in March 1998, Igene issued
$5,000,000 of its 8% Notes due March 31, 2003 and 50,000,000
warrants to purchase one share of common stock at an
exercise price of $0.10 per share expiring March 31, 2008.
The maturity date of these notes had been extended to March
31, 2006, and the exercise price reduced to $.075 per share.
The maturity date of these notes have again been extended to
March 31, 2009, and the exercise price reduced to $.056 per
share.
The warrants issued in connection with the above debt
totaling 65,168,639 warrants have been valued at $731,127
utilizing the Black Scholes model at March 31, 2003. In
addition, as a result of the repricing of the warrants in
March 2006, the warrants were re-value at $2,663,310. The
$1,082,500 of convertible debt has a beneficial conversion
feature in addition to the valuation of the related
warrants. The total discount resulting from the valuation
of the warrants and the beneficial conversion was $3,082,676
which is being amortized over the life of the debt (three
years).
Notes Payable are summarized as follows as of December 31,
2006:
Accrued
Principal Interest
____________ ____________
Long-term unsecured notes payable, bearing interest
at prime, scheduled to mature
March 31, 2003, extended to March 31,
2009, convertible into common stock $ 1,082,500 $ 702,734
Long-term unsecured notes payable, bearing interest
at 8%, scheduled to mature March 31, 2003,
extended to March 31, 2009 4,759,767 3,334,184
____________ ____________
$ 5,842,267 $ 4,036,918
Less unamortized debt discount (2,226,378) ---
____________ ____________
$ 3,615,889 $ 4,036,918
============ ============
|
Combined aggregate amounts of maturities for all convertible
debentures and notes payable are as follows:
Year Amount
______ ____________
2007 $ 705,000
2008 ---
2009 5,842,267
2010 ---
2011 2,514,212
2012 1,300,000
|
-40-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
(8) Redeemable Preferred Stock
Each share of redeemable preferred stock is entitled to vote
on all matters requiring shareholder approval as one class
together with holders of common stock. Each share of
redeemable preferred stock is entitled to two votes and each
share of common stock is entitled to one vote.
Redeemable preferred stock is convertible at the option of
the holder at any time, unless previously redeemed, into
shares of Igene's common stock at the rate of two shares of
common stock for each share of preferred stock (equivalent
to a conversion price of $4.00 per common share), subject to
adjustment under certain conditions.
Shares of redeemable preferred stock are redeemable for cash
in whole or in part at the option of Igene at any time at
the stated value plus accrued and unpaid dividends to the
redemption date. Dividends are cumulative and payable
quarterly on January 1, April 1, July 1 and October 1, since
January 1, 1988.
Mandatory redemption of Series A preferred stock was to be
made in October 2002. As Igene is operating at a negative
cash flow and negative earnings, Maryland law does not allow
for the redemption of these shares. As such they will
remain outstanding and continue to accrue dividends until
such time as Igene is able to undertake redemption, though
there can be no assurance this will develop. Igene does not
expect to be able to redeem the Series A preferred stock
unless, after giving effect to such redemption (a) the
Company would be able to pay its indebtedness in the usual
course of business and (b) the Company's total assets would
be greater than the sum of its total liabilities plus the
amount that would be needed if the Company were to be
dissolved as of the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights on dissolution are superior to those
receiving the distribution.
In December 1988, as part of an overall effort to contain
costs and conserve working capital, Igene suspended payment
of the quarterly dividend on its preferred stock.
Resumption of the dividend will require significant
improvements in cash flow. Unpaid dividends cumulate for
future payment or addition to the liquidation preference or
redemption value of the preferred stock. As of December 31,
2006, total dividends in arrears on Igene's preferred stock
equal $130,045 (or $11.68 per share) on Igene's Series A and
are included in the carrying value of the redeemable
preferred stock.
(9) Stockholders' Equity
Options
In June of 2001, the stockholders approved the 2001 Stock
Option Plan (the "2001 Plan"), which succeeds the 1997 Stock
Option Plan (the "1997 Plan"), which succeeded Igene's 1986
Stock Option Plan (the "1986 Plan"), as amended. All
outstanding, unexercised options granted under the 1997 and
1986 Plans remain outstanding with unchanged terms. The
number of shares authorized for issuance under the 2001 Plan
is 55,000,000. This is in addition to the 20,000,000 shares
authorized for issuance under the 1997 Plan, and the
2,000,000 shares authorized for issuance under the 1986
Plan.
-41-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
The following is a summary of options granted and
outstanding under the plans as of December 31, 2006 and
2005:
2006 2005
______________________ _______________________
Weighted Weighted
Average Average
Exercise Exercise
Number Price Number Price
__________ _________ __________ __________
Options outstanding
and exercisable,
beginning of year 48,427,750 $ .061 46,927,750 $ .061
Options granted --- --- 1,500,000 $ .027
Options exercised 312,000 $ .033 --- ---
Options forfeited,
or withdrawn with
consent of holders 1,600,000 $ .100 --- ---
Options expired 1,670,750 $ .050 --- ---
__________ _________ __________ __________
Options outstanding
and exercisable,
end of year 44,845,000 $ .059 48,427,750 $ .061
========== ========= ========== ==========
|
Options Outstanding
Weighted Average
Exercise Price Shares Remaining Life (Years)
______________ ______________ ______________________
$.025 16,333,000 5.6
$.027 1,500,000 8.9
$.050 1,500,000 2.8
$.050 3,837,500 3.0
$.050 2,500,000 4.9
$.065 45,000 4.0
$.080 5,500,000 4.8
$.100 10,389,500 7.5
$.100 3,240,000 1.3
_______________
$.059 44,845,000
===============
|
Warrants
The following table summarizes warrants issued, outstanding
and exercisable:
As of December 31,
________________________________________________
2006 2005
______________ ______________
Issued 205,261,073 205,261,073
Outstanding 205,261,073 205,261,073
Exercisable 205,261,073 205,261,073
|
-42-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Common Stock
At December 31, 2006, 205,261,073 shares of authorized but
unissued common stock were reserved for issuance upon
exercise of outstanding warrants, 44,845,000 shares of
authorized but unissued common stock were reserved for
exercise pursuant to the 1997 and 2001 Stock Option Plans,
22,268 shares of authorized but unissued common stock were
reserved for issuance upon conversion of Igene's outstanding
preferred stock, and 96,898,924 shares of authorized but
unissued stock were reserved for issuance upon conversion of
outstanding convertible notes.
Preferred Stock
As of December 31, 2006, total dividends in arrears on
Igene's preferred stock equal $130,045 (or $11.68 per share)
on Igene's Series A preferred stock and are included in the
carrying value of the Series A preferred stock.
(10) Net Loss Per Common Share
Net loss per common share for 2006 and 2005 is based on
108,387,454 and 103,384,377 weighted average shares,
respectively. For purposes of computing net loss per common
share, the amount of net loss has been increased by
dividends declared and cumulative undeclared dividends in
arrears on preferred stock.
Common stock equivalents, including: options, warrants,
convertible debt, convertible preferred stock, and
exercisable rights have not been included in the computation
of earnings per share in 2006 and 2005 because to do so
would have been anti-dilutive. However, these common stock
equivalents could have potentially dilutive effects in the
future.
(11) Commitments
Igene is obligated for office and laboratory facilities and
other rentals under operating lease agreements, which expire
in 2011. The base annual rentals are approximately $98,000,
increasing to $106,000 by the end of the lease term, plus
the Company's share of taxes, insurance and other costs.
Annual rent expense relating to the leases for the years
ended December 31, 2006 and 2005 approximated $118,600 and
$113,400, respectively.
Future minimum rental payments, in the aggregate and for
each of the next five years are as follows:
Year Amount
____ ________
2007 $ 98,000
2008 101,000
2009 103,000
2010 106,000
2011 9,000
________
Total $417,000
========
|
Effective May 20, 2000, Igene signed an exclusive
manufacturing agreement with Fermic, S.A. de C.V.
("Fermic"), of Mexico City, Mexico, for the production of
AstaXin(R). The Fermic contract provides that the
manufacturer has a limited exclusive right to produce
AstaXin(R) and is paid a monthly fee in cash, which is based
on manufacturing capacity, plus shares of Igene common stock
based on production quantities. Fermic provides equipment
and facilities necessary to manufacture and store the
product and is responsible for purchasing raw materials.
The Joint Venture is responsible for sales efforts and for
ensuring the quality of the pigment. The Joint Venture also
has a role in ensuring that the manufacturing process works
effectively. The term of the contract has expired.
-43-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Based on production of AstaXin(R), Igene had committed to
issue to Fermic up to a maximum of 20,000,000 shares of
Igene common stock during the six year period which expired
May 20, 2006 in accordance with the manufacturing agreement.
Based on quantities of AstaXin(R) produced, all shares have
been earned and issued to Fermic. Since the inception of
the agreement stock has been recorded as a manufacturing
expense and also as an increase in common stock and
additional paid in capital of $1,356,520. The expense is
now recorded on the books of the Joint Venture with the
related receivable from the Joint Venture on the books of
Igene. This amount has been computed based on the fair
value of the stock as of the period in which the shares were
earned.
(12) Income Taxes
No income tax benefit or deferred tax asset is reflected in
the financial statements. Deferred tax assets are
recognized for future deductible temporary difference and
tax loss carry forwards if their realization is "more likely
than not".
At December 31, 2006 Igene has federal and state net
operating loss carry-forwards of approximately $22,400,000
that expire at various dates from 2006 through 2026. The
recorded deferred tax asset, representing the expected
benefit from the future realization of the net operating
losses, net of the valuation allowance, was $-0- for 2006
and 2005.
The sources of the deferred tax asset are approximately as
follows:
Net operating loss carry-forward benefit $ 8,850,000
Valuation allowance (8,850,000)
____________
Deferred tax asset, net $ ---
============
|
(13) Uncertainty
Igene has incurred net losses in each year of its existence,
aggregating approximately $46,841,000 from inception to
December 31, 2006 and its liabilities exceeded its assets by
approximately $12,482,000 at that date. These factors
indicate that Igene will not be able to continue in
existence unless it is able to raise additional capital and
attain profitable operations.
As discussed in Subsequent Event (Note 17) as of October 31,
2007 Igene has terminated its relationship with the Joint
Venture with Tate & Lyle. Igene maintains the saleable
inventory after the termination of the relationship and is
currently reviewing alternatives for a future manufacturing
alternative. In the interim Igene will sell the existing
inventory in order to maintain its relationship with
customers and use these funds to cover expenses.
(14) Nature of Risks and Concentrations
Revenue of the Joint Venture during 2006 and 2005 were
derived from sales of the product, AstaXin(R). The majority
of the Joint Venture's 2006 and 2005 sales were to fish
producers in the aquaculture industry in Chile.
-44-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
The preceding concentrations subject Igene to certain risks.
For example, it is considered at least reasonably possible
that any particular customer, distributor, product line, or
provider of services or facilities could be lost in the near
term. It is also considered at least reasonably possible
that operations located outside the United States could be
disrupted in the near term. However, Igene has at present
no information that would lead it to believe that it will
lose its principal product, principal customers, or its
contracted manufacturer; or that its operations in Mexico
City or Chile will be disrupted, though this belief can not
be assured.
(15) Retirement Plan
Effective February 1, 1997 Igene adopted a Simple Retirement
Plan under Internal Revenue Code Section 408(p). The plan
was a defined contribution plan, which covered all of
Igene's U.S. employees who receive at least $5,000 of
compensation for the preceding year. The plan permits
elective employee contributions. Effective January 1, 2003,
Igene made an elective contribution of 3% of each eligible
employee's compensation for each year. Igene's
contributions to the plan for 2003 were $17,631.
Effective February 1, 2004 Igene discontinued use of the
Simple Retirement Plan and began use of a 401K
savings/retirement plan, or 401(k) Plan. The 401(k) Plan
permits our eligible employees to defer annual compensation,
subject to limitations imposed by the Internal Revenue Code.
All employees that have been employed for three months are
eligible for the plan. The plan permits elective
contributions by the Company's eligible employees based
under the Internal Revenue Code, which are immediately
vested and non-forfeitable upon contribution to the 401(k)
Plan. Effective January 1, 2004, Igene made an elective
contribution, subject to limitations, of 4% of each eligible
employee's compensation for each year. Igene's
contributions to the plan for 2006 and 2005 were $25,996 and
$23,052, respectively, which is expensed in the 2006
statement of operations.
(16) Loss on Disposal
During the year ended December 31, 2005, Igene sold
equipment and wrote-off a receivable from the prior sale of
equipment. The resulting loss of $106,150 has been
reflected as a loss on disposal on the accompanying 2005
statement of operations.
(17) Subsequent Event
On October 31, 2007, Igene Biotechnology, Inc. (the
"Company") and Tate & Lyle Fermentation Products Ltd.
("T&L") entered into a Separation Agreement (the
"Agreement") pursuant to which the Joint Venture Agreement
dated March 19, 2003, as amended, between the parties
(the "Joint Venture") was terminated. As part of the
Agreement, the Company sold to T&L its 50% interest in the
joint venture and the joint venture sold to the Company its
intellectual property, inventory and certain assets and
lab equipment utilized by the Joint Venture. The purchase
price paid by T&L to the Company for its 50% interest
was 50% of the Joint Venture's net working capital. The
purchase price paid by the Company for the inventory was
an amount equal to 50% of the joint venture's net working
capital, the assumption of various liabilities and the
current market price of the inventory, less specified
amounts. The purchase price paid by the Company for
the intellectual property was $1.00. The purchase price
paid by the Company for the assets and lab equipment was
$1,000,000. In addition, the Company agreed to pay to T&L
an amount equal to 5% of the Company's gross revenues from
the sale of astaxanthin up to a maximum of $5,000,000.
T&L agreed for a period of five years not to engage in the
astaxanthin business.
-45-
As previously stated in the Registrant's third quarter Form
10-QSB, on November 30, 2001, Igene entered Into Convertible
Promissory Notes (the "Convertible Notes") with each of the
following note holders for the following respective amounts
(a) NorInnova AS (formerly Forskningsparken I Tromso AS) for
$106,500; (b) Knut Gjernes for $7,500; (c) Magne Russ
Simenson for $378,000; and (d) Nord Invest AS for $313,000.
Each of the Convertible Notes had a maturity date of
November 1, 2004. On November 18, 2005, each of the
Convertible Note Holders provided Igene with written notice
of default under each of the Convertible Notes.
On November 29, 2006, the Convertible Note holders filed a
complaint against the Company in the Circuit Court of Howard
County, Maryland seeking payment of all outstanding amounts
due under the Convertible Notes. On February 23, 2007, the
Company, paid $762,638 to the Convertible Note holders as
settlement of all claims related to the Convertible Notes.
The complaint was dismissed with prejudice on March 6, 2007.
In an attempt to settle the matter, the Note holders were
offered the ability to extend the notes they held for a
period of ten years at an interest rate of 5%. The
conversion would be changed from the original debenture rate
of $.10 (ten cents) per share to the current market rate of
$.02 (two cents) per share. They rejected the offer.
The funds to settle the litigation were provided by Igene's
directors using the terms offered above to the debenture
holders. On February 15, 2007, Igene issued and sold
$762,000 in aggregate principal amount of 5% convertible
debentures, 50% each to certain directors of Igene. These
debentures are convertible into shares of Igene's common
stock at $.02 per share based on the offer made to the
original debenture holders as the market price of Igene's
shares at the time the debentures were agreed to. These
debentures, if not converted earlier, become due on February
15, 2007.
(18) RESTATEMENT - Fiscal Years Ended December 31, 2006 and 2005
The Company has historically reported the warrants issued in
connection with the Notes as having zero value and has not
recognized any discount on the Notes but rather recorded the
full face value of the Notes as Long Term Debt in its
consolidated financial statements. The restatement is based
on the Company's using a Black Scholes model and ignoring
any discounts for illiquidity of shares or blockage
discounts. The warrants are valued with a corresponding
amount of discount on the Notes. The amortization of this
discount over the term of the Notes has required the
Registrant to revise its Consolidated Financial Statements
and the accompanying notes thereto in order to, among other
things, reflect an increase in Additional Paid in Capital, a
decrease in Long Term Debt, an increase in Accumulated
Deficit, an increase in Interest Expense and an increase in
Net Loss and Net Loss per Common Share, for fiscal years
2005 and 2006, as shown in the Registrant's Consolidated
Financial Statements and accompanying notes included in this
amended form 10-KSB.
-46-
The following is the effect on the Stockholder's Deficiency
at January 1, 2005.
Additional Total
Common Stock Paid-in Accumulated Stockholders'
# Shares Amount Capital Deficit Deficiency
____________ ____________ _____________ _____________ _____________
BALANCE AT JANUARY 1, 2005
(As originally reported) 101,732,453 $ 1,017,325 $ 25,138,748 $(40,601,360) $(14,445,287)
Restatement --- --- 4,523,315 (1,769,780) 2,753,535
____________ ____________ _____________ _____________ _____________
BALANCE AT JANUARY 1, 2005
(As restated) 101,732,453 $ 1,017,325 $ 29,662,063 $(42,371,140) $(11,691,752)
============ ============ ============= ============= =============
|
-47-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
The following presents the effect of the restatement on the
Consolidated Balance Sheet and Income Statements. There was
no change to the cash flows from operations for any of the
periods.
Previously reported Restated
December 31, December 31,
2005 Restatement 2005
___________________ _______________ _______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 119,745 $ 119,745
Accounts receivable 15,618 15,618
Prepaid expenses and other current assets 20,520 20,520
___________________ _______________
TOTAL CURRENT ASSETS 155,883 155,883
Property and equipment, net 50,059 50,059
Loans receivable from manufacturing agent 19,993 19,993
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 231,060 $ 231,060
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 99,285 $ 99,285
Convertible debenture 705,000 705,000
Accrued interest 11,750 11,750
___________________ _______________
TOTAL CURRENT LIABILITIES 816,035 816,035
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (40,619) 5,801,648
Convertible debentures (Net of discount) 3,814,212 (2,089,988) 1,724,224
Accrued interest 4,902,255 4,902,255
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $19.04. Authorized 1,312,500 shares,
issued 18,509 352,411 --- 352,411
___________________ _______________ _______________
TOTAL LIABILITIES 15,727,180 (2,130,607) 13,596,573
___________________ _______________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 107,456,869. 1,074,569 1,074,569
Additional paid-in capital 25,445,450 4,523,315 29,968,765
Accumulated Deficit (42,016,139) (2,392,708) (44,408,847)
___________________ _______________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (15,496,120) 2,130,607 (13,365,513)
___________________ _______________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 231,060 $ 231,060
=================== ===============
|
-48-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
Year Ended Year Ended
December 31, December 31,
2005 Restatement 2005
___________________ _______________ _______________
EQUITY IN LOSS OF JOINT VENTURE $ (374,527) $ (374,527)
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 282,451 282,451
Research, development and pilot plant 819,782 819,782
General and administrative 805,054 805,054
Operating expenses reimbursed by Joint Venture (1,830,198) (1,830,198)
___________________ _______________
TOTAL OPERATING EXPENSES 77,089 77,089
___________________ _______________
OPERATING LOSS (451,616) (451,616)
___________________ _______________
LOSS ON DISPOSAL (106,150) (106,150)
INTEREST EXPENSE
(including amortization of debt discount of $622,928) (857,013) (622,928) (1,479,941)
___________________ _______________ _______________
NET LOSS $ (1,414,779) $ (622,928) $ (2,037,707)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.02)
=================== =============== ===============
|
-49-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
December 31, December 31,
2006 Restatement 2006
___________________ _______________ _______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 21,786 $ 21,786
Prepaid expenses and other current assets 14,093 14,093
___________________ _______________
TOTAL CURRENT ASSETS 35,879 35,879
Property and equipment, net 33,571 33,571
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 74,575 $ 74,575
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 210,424 $ 210,424
Convertible debenture 705,000 705,000
Accrued interest 46,570 46,570
___________________ _______________
TOTAL CURRENT LIABILITIES 961,994 961,994
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (2,226,378) 3,615,889
Convertible debentures (Net of discount) 3,814,212 (1,710,768) 2,103,444
Accrued interest 5,655,830 5,655,830
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $19.68. Authorized 1,312,500 shares,
issued 11,134 219,117 --- 219,117
___________________ _______________ _______________
TOTAL LIABILITIES 16,493,420 (3,937,146) 12,556,274
___________________ _______________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 109,337,072. 1,093,371 1,093,371
Additional paid-in capital 25,659,696 7,605,991 33,265,687
Accumulated Deficit (43,171,912) (3,668,845) (46,840,757)
___________________ _______________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (16,418,845) 3,937,146 (12,481,699)
___________________ _______________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 74,575 $ 74,575
=================== ===============
|
-50-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
Year Ended Year Ended
December 31, December 31,
2006 Restatement 2006
___________________ _______________ _______________
EQUITY IN LOSS OF JOINT VENTURE $ (109,147) $ (109,147)
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 98,240 98,240
Research, development and pilot plant 847,598 847,598
General and administrative 1,022,051 1,022,051
Operating expenses reimbursed by Joint Venture (1,660,519) (1,660,519)
___________________ _______________
TOTAL OPERATING EXPENSES 307,370 307,370
___________________ _______________
OPERATING LOSS (416,517) (416,517)
___________________ _______________
OTHER INCOME 14,535 14,535
INTEREST EXPENSE
(including amortization of debt discount of $1,276,137) (753,791) (1,276,137) (2,029,928)
___________________ _______________ _______________
NET LOSS $ (1,155,773) $ (1,276,137) $ (2,431,910)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.02)
=================== =============== ===============
|
(19) RESTATEMENT - Quarterly information for the Fiscal Years
Ended December 31, 2006 and 2005
(Unaudited)
The Company has historically reported the warrants issued in
connection with the Notes as having zero value and has not
recognized any discount on the Notes but rather recorded the
full face value of the Notes as Long Term Debt in its
consolidated financial statements. The restatement is based
on the Company's using a Black Scholes model and ignoring
any discounts for illiquidity of shares or blockage
discounts. The warrants are valued with a corresponding
amount of discount on the Notes. The amortization of this
discount over the term of the Notes has required the
Registrant to revise its Consolidated Financial Statements
and the accompanying notes thereto in order to, among other
things, reflect an increase in Additional Paid in Capital, a
decrease in Long Term Debt, an increase in Accumulated
Deficit, an increase in Interest Expense and an increase in
Net Loss and Net Loss per Common Share, for fiscal years
2005 and 2006, as shown in the Registrant's Consolidated
Financial Statements and accompanying notes included in this
amended form 10-KSB. The following presents the effect of
the restatement on the Consolidated Balance Sheet and Income
Statements. There was no change to the cash flows from
operations for any of the periods.
-51-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously
Reported Restated
March 31, 2005 Restatement March 31, 2005
___________________ _______________ _______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 86,377 $ 86,377
Accounts receivable 80,075 80,075
Prepaid expenses and other current assets 30,944 30,944
___________________ _______________
TOTAL CURRENT ASSETS 197,396 197,396
Property and equipment, net 120,092 120,092
Loans receivable from manufacturing agent 70,982 70,982
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 393,595 $ 393,595
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 64,446 $ 64,446
Convertible debenture 705,000 705,000
Accrued interest 29,375 29,375
___________________ _______________
TOTAL CURRENT LIABILITIES 798,821 798,821
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (223,400) 5,618,867
Convertible debentures 3,814,212 (2,374,403) 1,439,809
Accrued interest 4,319,955 4,319,955
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $18.56. Authorized 1,312,500 shares,
issued 18,509 343,527 --- 343,527
___________________ _______________ _______________
TOTAL LIABILITIES 15,118,782 (2,597,803) 12,520,979
___________________ _______________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 102,794,142. 1,027,942 1,027,942
Additional paid-in capital 25,236,268 4,523,315 29,759,583
Accumulated Deficit (40,989,397) (1,925,512) (42,914,909)
___________________ _______________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (14,725,187) 2,597,803 (12,127,384)
___________________ _______________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 393,595 $ 393,595
=================== ===============
|
-52-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
Quarter Ended Quarter Ended
March 31, 2005 Restatement March 31, 2005
___________________ _______________ _______________
EQUITY IN LOSS OF JOINT VENTURE $ (183,093) $ (183,093)
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 48,288 48,288
Research, development and pilot plant 166,007 166,007
General and administrative 188,908 188,908
Operating expenses reimbursed by Joint Venture (411,339) (411,339)
___________________ _______________
TOTAL OPERATING EXPENSES (8,136) (8,136)
___________________ _______________
OPERATING LOSS (174,957) (174,957)
___________________ _______________
INTEREST EXPENSE
(including amortization of debt discount of $155,732) (213,080) (155,732) (368,812)
___________________ _______________ _______________
NET LOSS $ (388,037) $ (155,732) $ (543,769)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ (0.00) (0.01)
=================== =============== ===============
|
-53-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
June 30, 2005 Restatement June 30, 2005
___________________ _______________ _______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 47,112 $ 47,112
Accounts receivable 11,793 11,793
Prepaid expenses and other current assets 9,081 9,081
___________________ _______________
TOTAL CURRENT ASSETS 67,986 67,986
Property and equipment, net 115,280 115,280
Loans receivable from manufacturing agent 70,982 70,982
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 259,373 $ 259,373
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 181,265 $ 181,265
Convertible debenture 705,000 705,000
Accrued interest --- ---
___________________ _______________
TOTAL CURRENT LIABILITIES 886,265 886,265
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (162,473) 5,679,794
Convertible debentures (Net of discount) 3,814,212 (2,279,598) 1,534,614
Accrued interest 4,539,066 4,539,066
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $18.72. Authorized 1,312,500 shares,
issued 18,509 346,488 --- 346,488
___________________ _______________ _______________
TOTAL LIABILITIES 15,428,298 (2,442,071) 12,986,227
___________________ _______________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 103,964,926
shares. 1,039,650 1,039,650
Additional paid-in capital 25,313,660 4,523,315 29,836,975
Accumulated Deficit (41,522,235) (2,081,244) (43,603,479)
___________________ _______________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (15,168,925) 2,442,071 (12,726,854)
___________________ _______________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 259,373 $ 259,373
=================== ===============
|
-54-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Restated
Reported Quarter Quarter
June 30, 2005 Restatement June 30, 2005
___________________ _______________ _______________
EQUITY IN LOSS OF JOINT VENTURE $ (282,977) $ (282,977)
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 70,876 70,876
Research, development and pilot plant 217,082 217,082
General and administrative 246,592 246,592
Operating expenses reimbursed by Joint Venture (527,398) (527,398)
___________________ _______________
TOTAL OPERATING EXPENSES 7,152 7,152
___________________ _______________
OPERATING LOSS (290,129) (290,129)
___________________ _______________
LOSS ON DISPOSAL (50,000) (50,000)
INTEREST EXPENSE
(including amortization of debt discount of $155,732) (192,709) (155,732) (348,441)
___________________ _______________ _______________
NET LOSS $ (532,838) $ (155,732) $ (688,570)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.00) (0.01)
=================== =============== ===============
|
Previously Reported Restated
Six months ended Six months ended
June 30, 2005 Restatement June 30, 2005
___________________ _______________ ________________
EQUITY IN LOSS OF JOINT VENTURE $ (466,070) $ (466,070)
___________________ ________________
OPERATING EXPENSES
__________________
Marketing and selling 119,164 119,164
Research, development and pilot plant 383,089 383,089
General and administrative 435,500 435,500
Operating expenses reimbursed by Joint Venture (938,737) (938,737)
___________________ ________________
TOTAL OPERATING EXPENSES (984) (984)
___________________ ________________
OPERATING LOSS (465,086) (465,086)
___________________ ________________
LOSS ON DISPOSAL (50,000) (50,000)
INTEREST EXPENSE
(including amortization of debt discount of $311,464) (405,789) (311,464) (717,253)
___________________ _______________ ________________
NET LOSS $ (920,875) $ (311,464) $ (1,232,339)
=================== =============== ================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.00) $ (0.01)
=================== =============== ================
|
-55-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
September 30, September 30,
2005 Restated 2005
___________________ _______________ ________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 30,819 $ 30,819
Accounts receivable 15,227 15,227
Prepaid expenses and other current assets 9,361 9,361
___________________ ________________
TOTAL CURRENT ASSETS 55,407 55,407
Property and equipment, net 110,468 110,468
Loans receivable from manufacturing agent 70,982 70,982
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ ________________
TOTAL ASSETS $ 241,982 $ 241,982
=================== ================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 94,184 $ 94,184
Convertible debenture 705,000 705,000
Accrued interest 29,375 29,375
___________________ ________________
TOTAL CURRENT LIABILITIES 828,559 828,559
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (101,546) 5,740,721
Convertible debentures (Net of discount) 3,814,212 (2,184,793) 1,629,419
Accrued interest 4,700,261 4,700,261
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $18.88. Authorized 1,312,500 shares,
issued 18,509 349,450 --- 349,450
___________________ _______________ ________________
TOTAL LIABILITIES 15,534,749 (2,286,339) 13,248,410
___________________ _______________ ________________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 105,003,661
shares. 1,050,037 1,050,037
Additional paid-in capital 25,360,926 4,523,315 29,884,241
Accumulated Deficit (41,703,730) (2,236,976) (43,940,706)
___________________ _______________ ________________
TOTAL STOCKHOLDERS' DEFICIENCY (15,292,767) 2,286,339 (13,006,428)
___________________ _______________ ________________
TOTAL LIABILITIES AND DEFICIENCY $ 241,982 $ 241,982
=================== ================
|
-56-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Reported Quarter Restated Quarter
September 30, September 30,
2005 Restatement 2005
___________________ _______________ ________________
EQUITY IN LOSS OF JOINT VENTURE $ 52,886 $ 52,886
___________________ ________________
OPERATING EXPENSES
__________________
Marketing and selling 44,934 44,934
Research, development and pilot plant 196,072 196,072
General and administrative 186,104 186,104
Operating expenses reimbursed by Joint Venture (418,657) (418,657)
___________________ ________________
TOTAL OPERATING EXPENSES 7,453 7,453
___________________ ________________
OPERATING PROFIT 44,433 44,433
___________________ ________________
GAIN ON DISPOSAL 3,006 3,006
INTEREST EXPENSE
(including amortization of debt discount of $155,732) (228,934) (155,732) (384,666)
___________________ _______________ ________________
NET LOSS $ (181,495) $ (155,732) $ (337,227)
=================== =============== ================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ (0.00) $ (0.00)
=================== =============== ================
|
Reported Restated
Nine months ended Nine month ended
September 30, September 30,
2005 Restatement 2005
___________________ _______________ ________________
EQUITY IN LOSS OF JOINT VENTURE $ (413,184) $ (413,184)
___________________ ________________
OPERATING EXPENSES
__________________
Marketing and selling 164,098 164,098
Research, development and pilot plant 579,161 579,161
General and administrative 621,604 621,604
Operating expenses reimbursed by Joint Venture (1,357,394) (1,357,394)
___________________ ________________
TOTAL OPERATING EXPENSES 7,469 7,469
___________________ ________________
OPERATING LOSS (420,653) (420,653)
___________________ ________________
LOSS ON DISPOSAL (46,994) (46,994)
INTEREST EXPENSE
(including amortization of debt discount of $467,196) (634,723) (467,196) (1,101,919)
___________________ _______________ ________________
NET LOSS $ (1,102,370) $ (467,196) $ (1,569,566)
=================== =============== ================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.00) $ (0.02)
=================== =============== ================
|
-57-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
March 31, 2006 Restatement March 31, 2006
___________________ _______________ ________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ --- $ ---
Accounts receivable 5,306 5,306
Prepaid expenses and other current assets 8,437 8,437
___________________ _______________
TOTAL CURRENT ASSETS 13,743 13,743
Property and equipment, net 45,386 45,386
Loans receivable from manufacturing agent 19,993 19,993
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 84,247 $ 84,247
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank Overdraft $ 61,715 $ 61,715
Accounts payable and accrued expenses 120,510 120,510
Convertible debenture 705,000 705,000
Accrued interest 29,375 29,375
___________________ _______________
TOTAL CURRENT LIABILITIES 916,600 916,600
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (2,997,046) 2,845,221
Convertible debentures 3,814,212 (1,995,183) 1,819,029
Accrued interest 5,088,068 5,088,068
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $19.20. Authorized 1,312,500 shares,
issued 18,509. 355,373 --- 355,373
___________________ _______________ _______________
TOTAL LIABILITIES 16,016,520 (4,992,229) 11,024,291
___________________ _______________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 108,222,324. 1,082,223 1,082,223
Additional paid-in capital 25,474,244 7,605,991 33,080,235
___________________ _______________ _______________
Accumulated Deficit (42,488,740) (2,613,762) (45,102,502)
___________________ _______________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (15,932,273) 4,992,229 (10,940,044)
___________________ _______________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 84,247 $ 84,247
=================== ===============
|
-58-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Reported Restated
Quarter Ended, Quarter Ended
March 31, 2006 Restatement March 31, 2006
___________________ _______________ _______________
EQUITY IN LOSS OF JOINT VENTURE $ (189,902) $ (189,902)
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 42,811 42,811
Research, development and pilot plant 208,649 208,649
General and administrative 224,783 224,783
Operating expenses reimbursed by Joint Venture (399,943) (399,943)
___________________ _______________
TOTAL OPERATING EXPENSES 76,300 76,300
___________________ _______________
OPERATING LOSS (266,202) (266,202)
___________________ _______________
INTEREST EXPENSE
(including amortization of debt discount of $221,054) (206,399) (221,054) (427,453)
___________________ _______________ _______________
NET LOSS $ (472,601) $ (221,054) $ (693,655)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ (0.00) (0.01)
=================== =============== ===============
|
-59-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
June 30, 2006 Restatement June 30, 2006
___________________ _______________ _______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,527 $ 9,527
Accounts receivable 8,526 8,526
Prepaid expenses and other current assets 8,294 8,294
___________________ _______________
TOTAL CURRENT ASSETS 26,347 26,347
Property and equipment, net 40,713 50,059
Loans receivable from manufacturing agent 19,993 19,993
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ _______________
TOTAL ASSETS $ 92,178 $ 92,178
=================== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 165,476 $ 165,476
Convertible debenture 705,000 705,000
Accrued interest 11,750 11,750
__________________ _______________
TOTAL CURRENT LIABILITIES 882,226 882,226
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (2,740,157) 3,102,110
Convertible debentures (Net of discount) 3,814,212 (1,900,378) 1,913,834
Accrued interest 5,275,946 5,275,946
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $19.04. Authorized 1,312,500 shares,
issued 11,134 215,554 --- 215,554
__________________ ________________ _______________
TOTAL LIABILITIES 16,030,205 (4,640,535) 11,389,670
__________________ ________________ _______________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 108,337,072
shares. 1,083,371 1,083,371
Additional paid-in capital 25,619,696 7,605,991 33,225,687
Accumulated Deficit (42,641,094) (2,965,456) (45,606,550)
__________________ ________________ _______________
TOTAL STOCKHOLDERS' DEFICIENCY (15,938,027) 4,640,535 (11,297,492)
__________________ ________________ _______________
TOTAL LIABILITIES AND DEFICIENCY $ 92,178 $ 92,178
================== ===============
|
-60-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Reported Restated
Quarter Ended Quarter Ended
June 30, 2006 Restatement June 30, 2006
___________________ _______________ _______________
EQUITY IN REPAID ADVANCES OF JOINT VENTURE $ 171,639 $ 171,639
___________________ _______________
OPERATING EXPENSES
__________________
Marketing and selling 47,399 47,399
Research, development and pilot plant 237,088 237,088
General and administrative 292,231 292,231
Operating expenses reimbursed by Joint Venture (459,917) (459,917)
___________________ _______________
TOTAL OPERATING EXPENSES 116,801 116,801
___________________ _______________
OPERATING PROFIT 54,838 54,838
___________________ _______________
INTEREST EXPENSE
(including amortization of debt discount of $351,694) (207,192) (351,694) (558,886)
___________________ _______________ _______________
NET LOSS $ (152,354) $ (351,694) $ (504,048)
=================== =============== ===============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ (0.00) $ (0.00)
=================== =============== ===============
|
Restated
Reported Six Months Six Months ended
ended June 30, 2006 Restatement June 30, 2006
___________________ _______________ ________________
EQUITY IN LOSS OF JOINT VENTURE $ (18,263) $ (18,263)
___________________ ________________
OPERATING EXPENSES
__________________
Marketing and selling 90,210 90,210
Research, development and pilot plant 445,737 445,737
General and administrative 517,014 517,014
Operating expenses reimbursed by Joint Venture (859,860) (859,860)
___________________ ________________
TOTAL OPERATING EXPENSES 193,101 193,101
___________________ ________________
OPERATING LOSS (211,364) (211,364)
___________________ ________________
INTEREST EXPENSE
(including amortization of debt discount of $572,748) (413,591) (572,748) (986,339)
___________________ _______________ ________________
NET LOSS $ (624,955) $ (572,748) $ (1,197,703)
=================== =============== ================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.01)
=================== =============== ================
|
-61-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Previously Reported Restated
September 30, 2006 Restatement September 30, 2006
___________________ _______________ __________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25,279 $ 25,279
Accounts receivable 4,926 4,926
Prepaid expenses and other current assets 9,963 9,963
___________________ __________________
TOTAL CURRENT ASSETS 40,168 40,168
Property and equipment, net 36,039 36,039
Loans receivable from manufacturing agent 19,993 19,993
Investment in and advances to unconsolidated joint venture --- ---
Other assets 5,125 5,125
___________________ __________________
TOTAL ASSETS $ 101,325 $ 101,325
=================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 140,646 $ 140,646
Convertible debenture 705,000 705,000
Accrued interest 29,375 29,375
___________________ __________________
TOTAL CURRENT LIABILITIES 875,021 875,021
LONG-TERM DEBT
Notes payable (Net of discount) 5,842,267 (2,483,267) 3,359,000
Convertible debentures (Net of discount) 3,814,212 (1,805,573) 2,008,639
Accrued interest 5,465,888 5,465,888
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 8% cumulative,
Convertible, voting, series A, $.01 par value per share.
Stated value was $19.52. Authorized 1,312,500 shares,
issued 11,134 217,336 --- 217,336
___________________ _______________ __________________
TOTAL LIABILITIES 16,214,724 (4,288,840) 11,925,884
___________________ _______________ __________________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock --- $.01 par value per share. Authorized
750,000,000 shares; issued and outstanding 109,337,072
shares. 1,093,371 1,093,371
Additional paid-in capital 25,659,696 7,605,991 33,265,687
Accumulated Deficit (42,866,466) (3,317,151) (46,183,617)
___________________ _______________ __________________
TOTAL STOCKHOLDERS' DEFICIENCY (16,113,399) 4,288,840 (11,824,559)
___________________ _______________ __________________
TOTAL LIABILITIES AND DEFICIENCY $ 101,325 $ 101,325
=================== ==================
|
-62-
IGENE Biotechnology, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006 and 2005
Reported Quarter, Restated Quarter
September 30, 2006 Restatement September 30, 2006
__________________ _______________ __________________
EQUITY IN REPAID ADVANCES OF JOINT VENTURE $ 11,299 $ 11,299
__________________ __________________
OPERATING EXPENSES
__________________
Marketing and selling 5,328 5,328
Research, development and pilot plant 173,526 173,526
General and administrative 247,241 247,241
Operating expenses reimbursed by Joint Venture (388,421) (388,421)
__________________ __________________
TOTAL OPERATING EXPENSES 37,674 37,674
__________________ __________________
OPERATING LOSS (26,375) (26,375)
__________________ __________________
OTHER INCOME 10,305 10,305
INTEREST EXPENSE
(including amortization of debt discount of $351,694) (209,302) (351,694) (560,996)
__________________ __________________
NET LOSS $ (225,372) $ (351,694) $ (577,066)
================== =============== ==================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ (0.00) $ (0.01)
================== =============== ==================
|
Reported Restated
Nine Months Ended Nine Months Ended
September 30, 2006 Restatement September 30, 2006
__________________ _______________ __________________
EQUITY IN LOSS OF JOINT VENTURE $ (6,964) $ (6,964)
___________________ __________________
OPERATING EXPENSES
__________________
Marketing and selling 95,538 95,538
Research, development and pilot plant 619,263 619,263
General and administrative 764,255 764,255
Operating expenses reimbursed by Joint Venture (1,248,281) (1,248,281)
___________________ __________________
TOTAL OPERATING EXPENSES 230,775 230,775
___________________ __________________
OPERATING LOSS (237,739) (237,739)
___________________ __________________
OTHER INCOME 10,305 10,305
INTEREST EXPENSE
(including amortization of debt discount of $924,442) (622,893) (924,442) (1,547,335)
__________________ _______________ __________________
NET LOSS $ (850,327) $ (924,442) $ (1,774,769)
================== =============== ==================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.02)
================== =============== ==================
|
-63-