FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 01-19890
LIFECELL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0172936
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE MILLENNIUM WAY
BRANCHBURG, NEW JERSEY 08876
(Address of principal executive office) (zip code)
(908) 947-1100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 2002, there were outstanding 21,306,995 shares of common stock,
par value $.001, and 74,278 shares of Series B preferred stock, par value $.001
(which are convertible into approximately an additional 2,691,240 shares of
common stock), of the registrant.
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
LIFECELL CORPORATION
BALANCE SHEETS
June 30, December 31,
2002 2001
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,921,000 $ 4,650,000
Short-term investments 250,000 250,000
Accounts and other receivables, net 4,114,000 3,799,000
Inventories 5,858,000 4,691,000
Prepayments and other 162,000 319,000
------------- --------------
Total current assets 15,305,000 13,709,000
Fixed assets, net 7,989,000 8,728,000
Other assets, net 643,000 694,000
------------- --------------
Total assets $ 23,937,000 $ 23,131,000
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,317,000 $ 792,000
Accrued liabilities 3,084,000 2,732,000
Current maturities of long-term debt 996,000 1,334,000
------------- --------------
Total current liabilities 5,397,000 4,858,000
Deferred revenue 462,000 572,000
Long-term debt, net of current maturities 578,000 863,000
Other long-term liabilities 82,000 70,000
------------- --------------
Total liabilities 6,519,000 6,363,000
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Commitments and contingencies
Temporary equity:
Common stock, subject to redemption, $.001 par value, shares
issued and outstanding 460,636 in 2002 and 2001 1,935,000 1,935,000
------------- --------------
Stockholders' equity:
Series B preferred stock, $.001 par value, 182,205 shares authorized;
shares issued and outstanding 74,278 in 2002 and 101,726 in 2001
(liquidation preference at June 30, 2002 of $7,428,000) -- --
Undesignated preferred stock, $.001 par value, 1,817,795 shares
authorized; none issued and outstanding -- --
Common stock, $.001 par value, 48,000,000 shares authorized;
shares issued and outstanding 21,306,995 in 2002 and
19,851,868 in 2001 21,000 20,000
Warrants to purchase shares of common stock;
2,284,211 outstanding in 2002 and 2001 4,002,000 4,002,000
Additional paid-in capital 76,580,000 76,581,000
Accumulated deficit (65,120,000) (65,770,000)
------------- --------------
Total stockholders' equity 15,483,000 14,833,000
------------- --------------
Total liabilities and stockholders' equity $ 23,937,000 $ 23,131,000
============= ==============
The accompanying notes are an integral part of these financial statements.
2
LIFECELL CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ----------------------------
2002 2001 2002 2001
-------------- -------------- -------------- ------------
Revenues:
Product revenues $ 8,050,000 $ 7,011,000 $ 15,360,000 $13,435,000
Research grant revenues 344,000 440,000 693,000 787,000
-------------- -------------- -------------- ------------
Total revenues 8,394,000 7,451,000 16,053,000 14,222,000
-------------- -------------- -------------- ------------
Costs and expenses:
Cost of products sold 2,513,000 2,358,000 4,909,000 4,853,000
Research and development 1,111,000 1,164,000 2,191,000 2,289,000
General and administrative 1,219,000 1,247,000 2,305,000 2,340,000
Selling and marketing 3,296,000 3,141,000 6,154,000 6,338,000
-------------- -------------- -------------- ------------
Total costs and expenses 8,139,000 7,910,000 15,559,000 15,820,000
-------------- -------------- -------------- ------------
Income (loss) from operations 255,000 (459,000) 494,000 (1,598,000)
Interest and other expense, net (41,000) (198,000) (92,000) (375,000)
-------------- -------------- -------------- ------------
Income (loss) before income taxes 214,000 (657,000) 402,000 (1,973,000)
Income tax benefit - - 248,000 -
-------------- -------------- -------------- ------------
Net income (loss) 214,000 (657,000) 650,000 (1,973,000)
Preferred stock dividends - (147,000) - (290,000)
-------------- -------------- -------------- ------------
Net income (loss) applicable to
common stockholders $ 214,000 $ (804,000) $ 650,000 $(2,263,000)
============== ============== ============== ============
Net income (loss) per common share:
Basic $ 0.01 $ (0.05) $ 0.03 $ (0.14)
============== ============== ============== ============
Diluted $ 0.01 $ (0.05) $ 0.03 $ (0.14)
============== ============== ============== ============
Shares used in computing net income
(loss) per common share:
Basic 21,303,746 16,709,368 21,042,030 16,709,368
============== ============== ============== ============
Diluted 24,841,869 16,709,368 24,957,507 16,709,368
============== ============== ============== ============
The accompanying notes are an integral part of these financial statements
3
LIFECELL CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended June 30,
--------------------------
2002 2001
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 650,000 $(1,973,000)
Adjustments to reconcile net income to net cash generated from (used in)
operating activities:
Depreciation and amortization 992,000 835,000
Provision for bad debt - 10,000
Accretion of debt discount - 49,000
Change in assets and liabilities:
(Increase) decrease in accounts and other receivables (315,000) 765,000
(Increase) decrease in inventories (1,167,000) 435,000
Decrease in prepayments and other 157,000 74,000
Increase (decrease) in accounts payable and accrued liabilities 878,000 (2,163,000)
(Decrease) in deferred revenues (110,000) (111,000)
Increase (decrease) in other liabilities 12,000 (26,000)
------------ ------------
Net cash generated from (used in) operating activities 1,097,000 (2,105,000)
------------ ------------
Cash flows from investing activities:
Capital expenditures (203,000) (240,000)
Addition to patents - (71,000)
------------ ------------
Net cash used in investing activities (203,000) (311,000)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (623,000) (541,000)
Cash dividends paid - (2,000)
------------ ------------
Net cash used in financing activities (623,000) (543,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 271,000 (2,959,000)
Cash and cash equivalents at beginning of period 4,650,000 5,220,000
------------ ------------
Cash and cash equivalents at end of period $ 4,921,000 $ 2,261,000
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 84,000 $ 436,000
============ ============
Supplemental disclosure of non-cash financing activities:
Series B preferred stock issued as payment of dividends $ - $ 285,000
============ ============
Fair value of warrants issued in connection with notes payable $ - $ 44,000
============ ============
The accompanying notes are an integral part of these financial statements.
4
LIFECELL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in the annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations. This
financial information should be read in conjunction with the financial
statements and notes thereto included within the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
The unaudited financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary by management for a fair
presentation of financial position, results of operations and cash flows for the
periods presented. The financial results for interim periods are not
necessarily indicative of the results to be expected for the full year or future
interim periods.
2. INVENTORIES
Inventories consist of the following:
June 30, December 31,
2002 2001
----------- --------------
Tissue and materials . . . . . . . $2,469,000 $ 1,314,000
Tissue products in-process . . . . 2,022,000 1,307,000
Finished tissue products . . . . . 1,367,000 2,070,000
----------- --------------
Total inventories. . . . . . . . $5,858,000 $ 4,691,000
=========== ==============
3. COMMITMENTS AND CONTINGENCIES
Litigation
- ----------
The Company is a party to litigation in the Superior Court of California, Los
Angeles County, Central District, captioned Regner, et al., on behalf of
themselves and others similarly situated, v. Inland Eye & Tissue Bank of
Redlands, et al. The complaint alleges among other things, defendants,
including the Company, make profits from the storing, processing, and
distribution of human tissue in contravention of California law. The Company is
also a party to litigation in the Superior Court of California, Los Angeles
County, Central District, captioned Thacker, et al., on behalf of themselves and
others similarly situated, v. Inland Eye & Tissue Bank of Redlands, et al. This
complaint contains similar allegations to the Regner complaint, and the two
cases have been combined. These actions are not denominated class actions and
do not involve tort theories. Both actions were brought under a statute that
allows individuals to sue on behalf of the people of California for unfair
business practices, with the court having the power to award injunctive relief
and disgorgement of all profits from the alleged illegal practices.
The plaintiffs have agreed to dismiss all claims against the Company, while the
Company promises not to sue plaintiffs for malicious prosecution. A court order
embodying this settlement, consented to by all parties of the suit, is currently
before the Court, but has not yet been signed.
In June 2002, a complaint was filed in the Superior Court of California, Los
Angeles County, Central District, captioned Joan Savitt, individually and on
behalf of others similarly situated, v. Doheny Eye & Tissue Bank, et al. The
complaint alleges among other things, the Company, by engaging in the storing,
processing and distribution of human tissue, violates the public policy and laws
of the state of California in various ways. The Company has not answered the
complaint. The Company believes that the claims against it in this complaint
are without merit and intends to vigorously defend against such action.
5
From time to time the Company is party to various legal proceedings incident to
operating a company of its size which are not deemed to be material to its
business operations or financial condition. The Company maintains insurance
coverage for events and in amounts that it deems appropriate. There can be no
assurance that the level of insurance maintained will be sufficient to cover any
claims incurred by the Company or that the type of claims will be covered by the
terms of insurance coverage.
4. INCOME TAXES
The Company has not recorded a provision for income taxes in the three months
and six months ended June 30, 2002, as it expects to utilize net operating loss
and other tax credit carryforwards to offset its taxable income.
In July 2002, the State of New Jersey enacted tax legislation which limits the
ability to utilize state tax loss carryforwards to offset taxable income in 2002
and 2003. The legislation is retroactive to January 1, 2002, and accordingly,
the Company expects to record a provision for state income taxes in the second
half of 2002.
In March 2002, the Company realized $248,000 through the sale and transfer of
$3.2 million of state tax net operating losses. The sale and transfer was made
through the Technology Business Tax Certificate Program sponsored by the New
Jersey Economic Development Authority. The amount realized has been reflected
as an income tax benefit in the statement of operations.
5. NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share for the three month and six month periods ended June 30, 2002 and 2001:
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
2002 2001 2002 2001
------------- -------------- ------------- ------------
Net income (loss) applicable to
common stockholders $ 214,000 $ (804,000) $ 650,000 $(2,263,000)
============= ============== ============= ============
Weighted average common shares
outstanding 21,303,746 16,709,368 21,042,030 16,709,368
------------- -------------- ------------- ------------
Denominator for basic net income (loss)
per share 21,303,746 16,709,368 21,042,030 16,709,368
------------- -------------- ------------- ------------
Effect of dilutive securities:
Series B preferred stock assuming
conversion 2,694,489 - 2,956,207 -
Warrants 627,010 - 697,245 -
Common stock options 216,624 - 262,025 -
------------- -------------- ------------- ------------
Denominator for diluted net income (loss)
per share 24,841,869 16,709,368 24,957,507 16,709,368
------------- -------------- ------------- ------------
Basic net income (loss) per share $ 0.01 $ (0.05) $ 0.03 $ (0.14)
============= ============== ============= ============
------------- -------------- ------------- ------------
Diluted net income (loss) per share $ 0.01 $ (0.05) $ 0.03 $ (0.14)
============= ============== ============= ============
6
The calculation of net income per share for the three months and six months
ended June 30, 2002 excludes potentially dilutive common stock equivalents
consisting of outstanding options to purchase 2,081,269 shares of common stock
and warrants to purchase 334,211 shares of common stock because their inclusion
would be antidilutive. The calculation of net income per share for the three
months and six months ended June 30, 2001 excludes potentially dilutive common
stock equivalents consisting of Series B preferred stock which is convertible
into 3,490,384 shares of common stock, outstanding options to purchase 2,988,169
shares of common stock and warrants to purchase 1,244,067 shares of common stock
because their inclusion would be antidilutive.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
- --------------
The following discussion of our operations and financial condition should be
read in conjunction with the Financial Statements and Notes included in Part I.
"Financial Information".
This report contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements typically are identified by use of terms such as
"may," "will," "should," "plan," "expect," "anticipate," "estimate," "believe"
and similar words, although some forward-looking statements are expressed
differently. Forward-looking statements represent our management's judgment
regarding future events. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to be correct. All statements other than
statements of historical fact included in this report regarding our financial
position, business strategy, products, products under development and clinical
trials, markets, budgets, plans, or objectives for future operations are
forward-looking statements. We cannot guarantee the accuracy of the
forward-looking statements, and you should be aware that our actual results
could differ materially from those contained in the forward-looking statements
due to a number of factors, including the statements under "Risk Factors" and
Critical Accounting Policies" detailed in our Annual Report on form 10-K for the
year ended December 31, 2001 and other reports filed with the Securities and
Exchange Commission.
GENERAL AND BACKGROUND
We develop and market biologically based solutions for the repair and
replacement of damaged or inadequate human tissue in numerous different clinical
applications. Our core tissue matrix technology removes cells from the tissue
and preserves the tissue without damaging the essential biochemical and
structural components necessary for normal tissue regeneration. We currently
market three proprietary human tissue based products: AlloDerm(R) for plastic
reconstructive, burn and periodontal procedures; Cymetra(R) a version of
AlloDerm in particulate form for non-surgical correction of soft tissue defects;
and Repliform(TM), a version of AlloDerm for urology and gynecology procedures.
We also distribute cryopreserved allograft skin for use as a temporary dressing
in the treatment of burns. Our development programs include the potential
application of our tissue matrix technology to vascular, nerve and orthopedic
tissue; investigation of human tissues as carriers for therapeutics;
ThromboSol(TM), a formulation for extended storage of platelets and technologies
to enhance the storage of red blood cells for transfusion.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 AND 2001
Total revenues for the three months ended June 30, 2002 increased 13% to $8.4
million compared to $7.5 million for the same period in 2001. The increase was
primarily attributable to a 15% increase in product revenues to $8.1 million in
the current period as compared to $7.0 million in the prior year. The increase
in product revenues was largely due to increased demand for our AlloDerm
products. AlloDerm revenues increased 24% to $4.1 million in the three months
ended June 30, 2002 compared to $3.3 million in the same period in 2001.
Repliform revenues were $2.5 million in the second quarter of 2002 and 2001.
Cymetra revenues contributed $1.0 million in the second quarter of 2002 and
2001.
Boston Scientific Corporation is our exclusive worldwide sales and marketing
representative for Repliform for use in the urology and gynecology markets and
OMP, Inc. is our exclusive sales and marketing representative for Cymetra for
office-based dermatologists and plastic surgeons. During the three months ended
June 30, 2002, sales of our products through Boston Scientific and OMP
represented 31% and 9%, respectively, of our total product revenues compared to
7
36% and 9%, respectively, for the same period in 2001. Both Boston Scientific
and OMP are paid agency fees based on the amount of product revenues they
generate for us. Such fees are recorded as selling and marketing expenses.
Cost of products sold for the three months ended June 30, 2002 was $2.5 million,
or 31% of product revenues, compared to cost of products sold of $2.4 million,
or 34% of product revenues for the same period in 2001. The cost of products
sold as a percentage of product revenues improved due to efficiencies realized
in our processing operation as a result of volume increases and process
improvements.
Total research and development expenses of $1.1 million for the three months
ended June 30, 2002 were down slightly from $1.2 million for the same period in
2001 primarily due to lower spending on certain research programs. Research
grant revenues totaled $344,000 for the three months ended June 30, 2002 down
from $440,000 for the same period in 2001. The decrease was due to lower
spending on certain research programs that are funded by government grants.
General and administrative expenses remained unchanged at $1.2 million for the
three months ended June 30, 2002 and 2001.
Selling and marketing expenses increased 5% to $3.3 million for the three months
ended June 30, 2002 compared to $3.1 million in the same period in 2001. The
increase in the second quarter of 2002 was primarily attributable to higher
selling expense related to the increase in revenues.
Interest and other income (expense), net decreased $157,000 for the three months
ended June 30, 2002 compared to 2001. The net decrease was due to a $166,000
decrease in interest expense resulting from a decrease in debt outstanding,
partially offset by a $9,000 decline in interest income resulting from lower
average interest rates during the period.
No provision for income taxes was recorded in the three months ended June 30,
2002 as we expect to utilize net operating loss and other tax credit
carryforwards to offset taxable income.
Net income for the three months ended June 30, 2002 totaled $214,000, an
$871,000 improvement from the $657,000 loss for the same period in 2001. The
improvement in net income in 2002 was principally due to higher product revenues
and the decrease in cost of products. Basic and diluted net income per common
share in the three months ended June 30, 2002 increased to $0.01 per share
compared to $0.05 per share net loss in the same period in 2001. The net loss
per common share in the same period in 2001 included $0.01 per share
attributable to dividends on preferred stock, which no longer accrue.
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
Total revenues for the six months ended June 30, 2002 increased 13% to $16.1
million compared to $14.2 million for the same period in 2001. Product revenues
of $15.4 million were 14% above the $13.4 million reported in the first six
months of 2001. The increase in product revenues was largely due to increased
demand for our AlloDerm products. AlloDerm revenues increased 25% to $7.9
million in the six months ended June 30, 2002 compared to $6.3 million in the
same period in 2001. Repliform revenues increased 3% to $4.8 million in the
six months ended June 30, 2002 compared to $4.7 million for the same period in
2001 while Cymetra revenues decreased slightly to $2.0 million in the first six
months of 2002 from $2.1 million in the first six months of 2001. During the
six months ended June 30, 2002, sales of our products generated through Boston
Scientific Corporation and OMP represented 31% and 9%, respectively, of our
total product revenues, compared to 35% and 9%, respectively, for the same
period in 2001.
Cost of products sold for the six months ended June 30, 2002 was $4.9 million,
or 32% of product revenues, compared to cost of products sold of $4.9 million,
or 36% of product revenues for the same period in 2001. The cost of products
sold as a percentage of product revenues improved due to efficiencies realized
in our processing operation as a result of volume increases and process
improvements.
Total research and development expenses of $2.2 million for the six months ended
June 30, 2002 were down 4% from $2.1 million from the first half of 2001,
primarily as the result of lower spending on certain funded research programs.
Research grant revenues were down $94,000, totaling $693,000 for the six months
ended June 30, 2002 and $787,000 for the same period in 2001.
General and administrative expenses remained essentially unchanged at $2.3
million for the six months ended June 30, 2002 and 2001.
8
Selling and marketing expenses decreased slightly to $6.2 million for the six
months ended June 30, 2002 compared to $6.3 million in the same period in 2001.
The decrease in 2002 was primarily attributable to lower marketing and promotion
expenses, partially offset by higher selling expenses.
Interest and other income (expense), net decreased $283,000 for the six months
ended June 30, 2002 compared to 2001. The net decrease was due to a $323,000
decrease in interest expense resulting from a decrease in debt outstanding,
partially offset by a $40,000 decline in interest income resulting from lower
average interest rates during the period.
No provision for income taxes was recorded in the six months ended June 30, 2002
as we expect to utilize net operating loss and other tax credit carryforwards to
offset taxable income.
In July 2002, the State of New Jersey enacted tax legislation that limits the
ability to utilize state tax loss carryforwards to offset taxable income in 2002
and 2003. The legislation is retroactive to January 1, 2002, and accordingly,
we expect to record a provision for state income taxes in the second half of
2002.
During the first six months of 2002, we realized $248,000 from the sale and
transfer of $3.2 million of state tax net operating losses. The sale and
transfer was made through the Technology Business Tax Certificate Program
sponsored by the New Jersey Economic Development Authority.
Net income for the six months ended June 30, 2002 totaled $650,000, a $2.6
million improvement from the $2.0 million loss for the same period in 2001. The
improvement in net income in 2002 was principally due to higher product revenues
and the income tax benefit from the sale of the state tax net operating losses.
Basic and diluted net income per common share in the six months ended June 30,
2002 increased to $0.03 per share compared to $0.14 per share net loss in the
same period in 2001. The net loss per common share in 2001 included $0.02 per
share attributable to dividends on preferred stock, which no longer accrue.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, we had cash and cash equivalents and short-term investments
of $5.2 million compared to $4.9 million at December 31, 2001. Working capital
increased to $9.9 million at June 30, 2002 from approximately $8.9 million at
December 31, 2001. The increase resulted principally from increases in cash,
accounts receivable and inventory, partially offset by an increase in accounts
payable and accrued liabilities. Inventory increased as a result of higher
receipts of donated tissue from our organ procurement organizations and tissue
banks.
Our operating activities generated net cash of $1,098,000 for the six months
ended June 30, 2002 compared to net cash used of $2.1 million for the same
period in 2001. The increase in 2002 resulted primarily from higher net income
and increases in accounts payable and accrued liabilities primarily associated
with the increase in inventory.
Our investing activities, which consist of purchases of capital equipment and
additions to patents, used net cash of $203,000 for the six months ended June
30, 2002 compared to $311,000 for the same period in 2001.
Our financing activities used $623,000 for the six-month period ended June 30,
2002 for principal payments on long-term debt compared to $543,000 in 2001. At
June 30, 2002, we had an aggregate of $1.6 million outstanding under our
borrowing arrangements compared to $5.8 million outstanding at June 30, 2001.
The following table reflects a summary of our contractual cash obligations as of
June 30, 2002:
Payments Due by Period
---------------------------------------------------------------------------
Less than one
Total year 1 to 3 years 4 to 5 years After 5 years
-------------- ------------- ------------- -------------- -------------
Long-term debt(1) $ 1,574,000 $ 996,000 $ 108,000 $ 129,000 $ 340,000
Operating leases 6,244,000 833,000 1,708,000 1,777,000 1,926,000
-------------- ------------- ------------- -------------- -------------
Total contractual
cash obligations $ 7,818,000 $ 1,829,000 $ 1,816,000 $ 1,906,000 $ 2,266,000
============== ============= ============= ============== =============
(1) Under our debt agreements, the maturity of our outstanding debt could be
accelerated if we do not maintain certain covenants.
9
We believe that our current cash resources together with anticipated product
revenues and committed research and development grant funding will be sufficient
to finance our planned operations, research and development programs and fixed
asset requirements in the foreseeable future. However, there can be no
assurance that such sources of funds will be sufficient to meet our needs and as
a result, we may need additional funding. Currently we have no additional
borrowing availability through our existing credit facilities or commitments for
any future funding. There can be no assurance that we will be able to obtain
additional funding from either debt or equity financing, bank loans,
collaborative arrangements or other sources on terms acceptable to us, or at
all. If adequate funds are not available, we expect that we will be required to
delay, scale back or eliminate one or more of our research and development
programs. Any additional equity financing may be dilutive to stockholders, and
debt financing, if available, may involve significant restrictive covenants.
Collaborative arrangements, if necessary to raise additional funds, may require
us to relinquish our rights to certain of our technologies, products or
marketing territories.
At June 30, 2002, there were 460,636 shares of common stock outstanding that are
subject to redemption by us under certain conditions. These shares were issued
to one investor in a private placement in November 1999. Pursuant to the terms
of the purchase agreement, if we do not maintain a listing on or quotation of
our shares of common stock on a U.S. stock exchange or market system we will be
required to redeem such shares at $4.20 per share or $1.9 million in the
aggregate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
----------------------------------------------------------------
We are exposed to changes in interest rates primarily from our debt arrangements
and, secondarily, from our investments in certain securities. Although our
short-term investments are available for sale, we generally hold such
investments until maturity. We do not utilize derivative instruments or other
market risk sensitive instruments to manage exposure to interest rate changes.
We believe that a hypothetical 100 basis point adverse move in interest rates
along the entire interest rate yield curve would not materially affect the fair
value of our interest sensitive financial instruments at June 30, 2002.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
------------------
In June 2002, a complaint was filed in the Superior Court of California, Los
Angeles County, Central District, captioned Joan Savitt, individually and on
behalf of others similarly situated, v. Doheny Eye & Tissue Bank, et al. The
complaint alleges among other things, the Company, by engaging in the storing,
processing and distribution of human tissue, violates the public policy and laws
of the state of California in various ways. The Company has not answered the
complaint. The Company believes that the claims against it in this complaint
are without merit and intends to vigorously defend against such action.
Item 4. Submission of Matters to A Vote of Security Holders.
------------------------------------------------------------
An Annual Meeting of Stockholders was held on May 31, 2002. The directors
elected at the annual meeting were: Paul G. Thomas, Stephen A. Livesey, M.D.,
Ph.D., Michael E. Cahr, David Fitzgerald, James G. Foster and Jonathan
Silverstein. All directors of the Company hold office until the next annual
meeting of stockholders or until their respective successors are duly elected
and qualified or their earlier resignation or removal.
10
The matters voted upon at the Annual Meeting and the results of the voting are
set forth below:
(i) With respect to the election of Directors by the holders of Common
Stock and Series B Preferred Stock, voting together as a class, the
persons named below received the following number of votes:
Name Votes For Votes Withheld
---- ---------- --------------
Paul G. Thomas 16,995,061 265,656
Stephen A. Livesey, M.D., Ph.D. 17,020,832 239,885
Michael E. Cahr 17,220,590 40,127
David Fitzgerald 17,217,783 42,934
James G. Foster 17,219,565 41,152
Jonathan Silverstein 17,216,408 44,309
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------------
a. EXHIBITS
none
b. REPORTS ON FORM 8-K
On April 1, 2002, the Company announced the resignation of a
member of the Board of Directors and the appointment of a new
member of the Board of Directors.
On April 23, 2002, the Company announced its first quarter 2002
financial results and also announced that it planned to conduct a
conference call to discuss the operating results and related
matters.
On May 9, 2002, the Company announced that it entered into an
agreement with LifeNet and Arthrex Tissue Systems, Inc. to
develop and market acellular allografts for sports medicine
applications.
On June 20, 2002, the Company announced that it dismissed Arthur
Andersen LLP and engaged PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ended December
31, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIFECELL CORPORATION
Date: August 14, 2002 By: /s/ Paul Thomas
-----------------
Paul G. Thomas
Chairman of the Board
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2002 By: /s/ Steven Sobieski
---------------------
Steven T. Sobieski
Vice President, Finance
Chief Financial Officer and Secretary
(Principal Financial Officer)
Date: August 14, 2002 By: /s/ Bradly Tyler
------------------
Bradly C. Tyler
Controller
(Principal Accounting Officer)
12