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Interleukin Genetics Inc (ILI) filed Quarterly Report for the period ended 2011-09-30.
Interleukin Genetics Inc has a market cap of $28.29 million; its shares were traded at around $0 .
This is the annual revenues and earnings per share of ILI over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of ILI.
Highlight of Business Operations:
During the three months ended September 30, 2011, we continued to focus our resources on sales of our Inherent Health® brand of genetic tests and the execution of our clinical study with the University of Michigan and Renaisance Health Services for PST®. The Inherent Health® brand offers customers a full suite of affordable, easy-to-use and meaningful genetic tests in weight management, heart health, bone health and nutritional needs. We offer an additional product under the name Wellness Select that allows our e-commerce customers to purchase any combination of our Inherent Health® genetic tests at a discounted price. In addition to our Inherent Health® test products we offer PST®, the periodontal disease risk assessment test sold through a Licensing Agreement with OralDNA Labs, Inc. a Quest Diagnostics Inc. company.In the genetic test business, competition is in flux and the markets and customer base are not well established. Adoption of new technologies by consumers requires substantial market development and customer education. Historically, we have focused on our relationship with our primary customer, Amway North America, a subsidiary of Alticor, a significant direct marketing company, in order to assist us in developing the market for our products and educating our potential customers. Our challenge in the remainder of 2011 and beyond will be to develop the market for our own personalized health products. We continue to allocate considerable resources to our Inherent Health® brand of genetic test products. Due to the early stage of these initiatives, we cannot predict with certainty fluctuations we may experience in our test revenues or whether revenues derived from the Merchant Network and Channel Partner Agreement with Amway Global will ever be material or if material, will be sustained in future periods. Even though we expect that our current and anticipated financial resources, including $3.3 million available as of September 30, 2011 under our credit facility with Pyxis, are adequate to maintain our current and planned operations through June 30, 2012, if we are not successful in capital raising efforts, partnering negotiations, extending the due date of our debt or in generating additional revenues, we will not be able to fund operations beyond June 30, 2012. We continue to attempt to raise additional capital, seek additional streams of revenue, extend the due date of our debt and improve sales with existing channels. The Company expects to meet its goals in these areas and generate the additional cash needed to fund operations, however, there can be no assurance that we will be able to do so. Results of Operations Three Months Ended September 30, 2011 and September 30, 2010 Total revenue for the three months ended September 30, 2011 was $0.8 million, compared to $0.5 million for the three months ended September 30, 2010. The increase of $0.3 million, or 40.5%, is primarily attributable to increased sales of our Inherent Health® brand of genetic tests through our Merchant Network and Channel Partner Agreement with Amway Global. In addition, $78,000 was recognized in the three months ended September 30, 2011 from processing genetic tests as part of our ongoing PST® clinical study with the University of Michigan. Genetic testing revenue is derived from tests sold and processed, which is driven by consumer demand. During the three months ended September 30, 2011, 66% of our sales revenue came through our Merchant Network and Channel Partner Agreement with Amway Global compared to 29% during the three months ended September 30, 2010. Pursuant to this agreement, Amway Global sells our genetic tests through its e-commerce web site via a hyperlink to our e-commerce site. Cost of revenue for the three months ended September 30, 2011 was $0.4 million, or 48.4% of revenue, compared to $0.4 million, or 75.1% of revenue, for the three months ended September 30, 2010. The significant decrease in the cost of revenue as a percentage of revenue is primarily attributable to increased revenue and more efficient processing of genetic tests. During 2011, we worked with our genetic testing supply vendors to provide more efficient materials that result in a lower cost of production. Research and development expenses were $0.3 million for the three months ended September 30, 2011 and September 30, 2010. Research and development expenses are primarily attributable to consulting costs related to our weight management genetic test as well as compensation and allocated facility operating costs. Selling, general and administrative expenses were $1.1 million for the three months ended September 30, 2011, compared to $1.2 million for the three months ended September 30, 2010. The decrease of $0.1 million, or 7.0%, is primarily attributable to lower compensation, professional fees and promotion expenses partially offset by increased patent related legal fees and sales commissions paid to Amway Global as part of our Merchant Network and Channel Partner Agreement. Interest expense was $90,000 for the three months ended September 30, 2011, as compared to $74,000 for the three months ended September 30, 2010. The increase in interest expense of $16,000 is attributable to higher average borrowings on our credit facility with Pyxis. 17 Nine Months Ended September 30, 2011 and September 30, 2010 Total revenue for the nine months ended September 30, 2011 was $2.3 million, compared to $1.5 million for the nine months ended September 30, 2010. The increase of $0.8 million, or 53.5%, is primarily attributable to increased sales of our Inherent Health® brand of genetic tests through our Merchant Network and Channel Partner Agreement with Amway Global. In addition, $127,000 was recognized in the nine months ended September 30, 2011 from processing genetic tests as part of our ongoing PST® clinical study with the University of Michigan. During the nine months ended September 30, 2011, 66% of our sales revenue came through our Merchant Network and Channel Partner Agreement with Amway Global compared to 31% during the nine months ended September 30, 2010. Cost of revenue for the nine months ended September 30, 2011 was $1.2 million or 51.1% of revenue, compared to $1.3 million, or 84.4% of revenue, for the nine months ended September 30, 2010. The significant decrease in the cost of revenue as a percentage of revenue is primarily attributable to increased revenue and more efficient processing of genetic tests. During 2011, we worked with our genetic testing supply vendors to provide more efficient materials that result in a lower cost of production. Research and development expenses were $1.0 million for the nine months ended September 30, 2011, compared to $1.1 million for the nine months ended September 30, 2010. The decrease of $0.1 million, or 6.6% is primarily attributable to decreased compensation and allocated facility operating costs partially offset by increased consulting costs related to our weight management genetic test. Selling, general and administrative expenses were $3.5 million for the nine months ended September 30, 2011, compared to $4.2 million for the nine months ended September 30, 2010. The decrease of $0.7 million, or 15.9% is primarily attributable to lower compensation, professional fees and promotion expenses partially offset by increased patent related legal fees and sales commissions paid to Amway Global as part of our Merchant Network and Channel Partner Agreement. Interest expense was $267,000 for the nine months ended September 30, 2011, as compared to $213,000 for the nine months ended September 30, 2010. The increase in interest expense of $54,000 is attributable to higher average borrowings on our credit facility with Pyxis. Liquidity and Capital Resources As of September 30, 2011, we had cash and cash equivalents of $1.0 million and borrowings available under our credit facility with Pyxis of approximately $3.3 million, which permits borrowing at any time prior to June 30, 2012. On November 9, 2011, we borrowed an additional $2.0 million under our credit facility with Pyxis leaving $1.3 million available. Cash used in operations was $3.2 million for the nine months ended September 30, 2011, as compared to $4.5 million for the nine months ended September 30, 2010. Cash used in operations is primarily impacted by operating results and changes in working capital, particularly the timing of the collection of receivables, inventory levels and the timing of payments to suppliers. This use of cash was offset in 2010 by a significant increase in genetic test sales resulting from media attention we received in 2010 and in 2011 by increased sales through the Merchant Network and Channel Partner Agreement with Amway Global. A significant use of cash in the first nine months of 2010 was total payments of $0.4 million relating to the settlement of our obligations with former customers of the Alan James Group in connection with their rights of return of purchased product. The total payments of $0.4 million included a final settlement of $0.3 million reached with a major customer for inventory yet to be returned in accordance with the contractual terms of the relationship. During the nine months ended September 30, 2011, $5,900 was paid to former customers. We believe that any payments that may be made to former customers in the future will be minimal. Cash received from genetic test sales, which is reflected in deferred revenue until the test report is issued, increased by $276,000 to $792,000 at September 30, 2011 as compared to December 31, 2010. 18 Cash provided by investing activities was $197,000 for the nine months ended September 30, 2011 compared to cash used of $82,000 for the nine months ended September 30, 2010. Fixed asset purchases were $3,000 for the nine months ended September 30, 2011, compared to $82,000 for the nine months ended September 30, 2010. In addition, the $0.2 million in other current assets at December 31, 2010 representing a receivable from Nutraceutical Corporation in connection with the transaction in July 2009 was received on July 1, 2011. Cash provided by financing activities was $26,000 for the nine months ended September 30, 2011 compared to $8.9 million for the nine months ended September 30, 2010. During the nine months ended September 30, 2010 we received $4.0 million under our existing credit facility with Pyxis. During the nine months ended September 30, 2011 we did not borrow any amounts under the credit facility. We have no financial covenants as part of our credit facility with Pyxis. As of September 30, 2011, we had $11.0 million outstanding under the credit facility, which is reflected as current portion of long term debt on our balance sheet and is convertible, at the option of Pyxis into shares of our common stock at a price of $5.6783 per share. On March 5, 2010, we sold $5.3 million of securities in a registered direct offering with certain institutional investors. The investors purchased an aggregate of 4,375,002 units for $1.20 per unit, with each unit consisting of a share of common stock and a warrant to purchase 0.40 of a share of common stock. The warrants are exercisable at $1.30 per share and expire in March 2015. Net proceeds after fees and expenses were approximately $4.9 million. We received approximately $26,000 and $34,000, respectively, from the exercise of stock options and stock purchases through the employee stock purchase plan for the nine months ended September 30, 2011 and 2010. The amount of cash we generate from operations is not sufficient to continue to fund and grow our business. We believe our success depends on our ability to have sufficient capital and liquidity to achieve our objectives of closing negotiations with partners and creating additional distribution channels for our genetic testing products and technology. In addition to maintaining our current operating line of credit we will need to raise additional capital. Even though we are experiencing sales increases in our genetic testing business we continue to explore additional steps to reduce our operating costs. In 2010, we reduced our headcount in non-essential areas. We were successful in the second quarter of 2010 in completing a sublease of approximately 6,000 square feet, or one-third of our total office space. The space includes offices and a laboratory that was being underutilized. Our remaining office and laboratory space is adequate for our current business needs. We are able to process high volumes of genetic tests in our current laboratory. During the first nine months of 2011, we reduced our cost of processing samples in our laboratory by working with our raw material vendors to make our genetic testing process more efficient resulting in lower processing costs. We have significantly reduced our research and development programs to only those that focus on technology related to agreements with potential commercial partners. We have taken steps to reduce our corporate administrative expenses by working with or seeking new vendors who offer the same service for a lower cost. Our common stock was delisted from the NYSE Amex in 2010 and is currently trading on the OTCQB™. As a result, our access to capital through the public markets may be more limited. We expect that our current and anticipated financial resources, including the $3.3 million available as of September 30, 2011 under our credit facility with Pyxis, are adequate to maintain current and planned operations through June 30, 2012, however, if we are not successful in capital raising efforts, partnering negotiations, extending the due date of our debt or in generating additional revenues, we will not be able to fund operations beyond June 30, 2012. We continue to attempt to raise additional capital, seek additional streams of revenue, extend the due date of our debt and improve sales with new and existing channels. The Company expects to meet its goals in these areas and generate the additional cash needed to fund operations into 2013 and beyond, however, there can be no assurance that we will be able to do so. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements. The preparation of these financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to (i) make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenue and expenses; and (ii) disclose contingent assets and liabilities. A critical accounting estimate is an assumption that could have a material effect on our financial statements if another, also reasonable, amount were used or a change in the estimates is reasonably likely from period to period. We base our accounting estimates on historical experience and other factors that we consider reasonable under the circumstances. However, actual results may differ from these estimates. To the extent there are material differences between our estimates and the actual results, our future financial condition and results of operations will be affected. Our most critical accounting policies and estimates upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are set forth in Note 4 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no significant changes in our accounting policies or changes from the methodology applied by management for critical accounting estimates previously disclosed in our most recent Annual Report on Form 10-K. 19
Total revenue for the three months ended September 30, 2011 was $0.8 million, compared to $0.5 million for the three months ended September 30, 2010. The increase of $0.3 million, or 40.5%, is primarily attributable to increased sales of our Inherent Health® brand of genetic tests through our Merchant Network and Channel Partner Agreement with Amway Global. In addition, $78,000 was recognized in the three months ended September 30, 2011 from processing genetic tests as part of our ongoing PST® clinical study with the University of Michigan. Genetic testing revenue is derived from tests sold and processed, which is driven by consumer demand.
Total revenue for the nine months ended September 30, 2011 was $2.3 million, compared to $1.5 million for the nine months ended September 30, 2010. The increase of $0.8 million, or 53.5%, is primarily attributable to increased sales of our Inherent Health® brand of genetic tests through our Merchant Network and Channel Partner Agreement with Amway Global. In addition, $127,000 was recognized in the nine months ended September 30, 2011 from processing genetic tests as part of our ongoing PST® clinical study with the University of Michigan.
Cash used in operations was $3.2 million for the nine months ended September 30, 2011, as compared to $4.5 million for the nine months ended September 30, 2010. Cash used in operations is primarily impacted by operating results and changes in working capital, particularly the timing of the collection of receivables, inventory levels and the timing of payments to suppliers. This use of cash was offset in 2010 by a significant increase in genetic test sales resulting from media attention we received in 2010 and in 2011 by increased sales through the Merchant Network and Channel Partner Agreement with Amway Global. A significant use of cash in the first nine months of 2010 was total payments of $0.4 million relating to the settlement of our obligations with former customers of the Alan James Group in connection with their rights of return of purchased product. The total payments of $0.4 million included a final settlement of $0.3 million reached with a major customer for inventory yet to be returned in accordance with the contractual terms of the relationship. During the nine months ended September 30, 2011, $5,900 was paid to former customers. We believe that any payments that may be made to former customers in the future will be minimal. Cash received from genetic test sales, which is reflected in deferred revenue until the test report is issued, increased by $276,000 to $792,000 at September 30, 2011 as compared to December 31, 2010.
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