UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-14068
SEPRAGEN CORPORATION
(Exact name of small business issuer as specified in its charter)
California 68-0073366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
30689 Huntwood Avenue, Hayward, California 94544
(Address of principal executive offices)
(Issuer's telephone number (including area code): (510) 476-0650)
(Former name, former address and former fiscal year if changed
since last report:
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the
registrant's classes of Common equity, as of the latest practicable
date:
May 15,1999
Class A Common Stock 4,057,216
Class B Common Stock 701,177
Class E Common Stock 1,209,894
THIS REPORT INCLUDES A TOTAL OF 12 PAGES. THERE ARE NO EXHIBITS.
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
SEPRAGEN CORPORATION
CONDENSED BALANCE SHEET
ASSETS
March 31, 1999
Current Assets:
Cash and cash equivalents $ 11,361
Accounts receivable, less allowance for
doubtful accounts of $20,000 as of March
31, 1999 494,826
Inventories 279,047
Prepaid expenses and other 32,011
Total current assets 817,245
Furniture and equipment, net 154,826
Intangible assets 88,942
1,061,013
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable 556,870
Customer deposits 13,069
Notes Payable, including $135,000 from 559,430
shareholders
Accrued payroll and benefits 192,561
Accrued liabilities 86,167
Interest payable 49,045
Total current liabilities 1,457,142
Preferred stock, no par value - 5,000,000 shares
authorized; and 175,439 convertible, preferred
issued and outstanding 500,000
Class E common stock, no par value - 1,600,000
shares authorized; 1,209,894 shares issued and
outstanding at March 31, 1999 redeemable at $.01
per share -
Shareholders' deficit:
Class A common stock, no par value - 20,000,000
shares authorized; 4,057,216 shares issued
and outstanding 9,752,226
Class B common stock, no par value - 2,600,000
shares authorized; 701,177 shares issued and
outstanding 4,065,618
Additional paid in capital 202,220
Accumulated deficit (14,916,193)
Total shareholders' equity (deficit) (896,129)
1,061,013
The accompanying notes are an integral part of these condensed
financial statements.
SEPRAGEN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
Three Months
Ended March 31
1999 1998
Revenues:
Net Sales $553,661 $632,333
Costs and expenses:
Cost of goods sold 340,376 383,086
Selling, general and administrative 230,811 293,946
Research and development 156,227 213,094
Total costs and expenses 727,414 890,126
Loss from operations (173,753) (257,793)
Interest income, (expense) net (6,000) (89,282)
Net loss (179,753) (347,075)
Net loss per common share,
basic and diluted $(.04) $(.12)
Weighted average shares outstanding 4,758,393 2,856,431
The accompanying notes are an integral part of these condensed
financial statements.
SEPRAGEN CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1999 1998
Cash flows from operating activities:
Net Loss $(179,753) $(347,075)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and Amortization 30,677 104,023
Changes in assets and liabilities:
Accounts receivable 33,019 31,378
Inventories 166,345 119,456
Prepaid expenses and other -- 2
Accounts payable (408,808) 215,365
Accrued liabilities (10,456) (16,660)
Accrued payroll and benefits 36,498 36,988
Interest payable 6,001 19,283
Customer deposits (27,728) (242,429)
Net cash used in operating activities (354,205) (79,669)
Cash flows from financing activities:
Proceeds from issuance of notes
payable to shareholders -- 50,000
Proceeds from issuance of notes
payable 324,430 8,000
Net cash provided by financing
activities 324,430 58,000
Net (decrease) in cash (29,775) (21,669)
Cash and cash equivalents at the
beginning of the period 41,136 44,448
Cash and cash equivalents at the end of
the period $ 11,361 $ 22,779
The accompanying notes are an integral part of these condensed
financial statements.
SEPRAGEN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1999
Note 1 - Basis of Presentation
These condensed financial statements have been presented on a
going concern basis. Sepragen, ("the Company") has incurred
recurring losses and cash flow deficiencies from operations that
raise substantial doubt about its ability to continue as a going
concern. As of March 31, 1999, the Company had an accumulated
deficit of $14,916,193.
The Company will be required to conduct significant research,
development and testing activities which, together with expenses to
be incurred for manufacturing, the establishment of a large
marketing and distribution presence and other general and
administrative expenses, are expected to result in operating losses
for the foreseeable future. Accordingly, there can be no assurance
that the Company will ever achieve profitable operations. The
Company will have to obtain additional financing to support its
operating needs beyond July 31, 1999. The Company is currently
pursuing alternative funding sources to meet its cash flow needs,
including private debt and equity financing. Management intends to
use such funding to further its marketing efforts and expand sales.
It is uncertain, however, whether the Company will be successful
in such pursuits. No adjustments have been made to the
accompanying condensed financial statements for this uncertainty.
Note 2 - Interim Financial Reporting
The accompanying unaudited interim financial statements have
been prepared pursuant to the rules and regulations for reporting
on Form 10-QSB. Accordingly, certain information and footnotes
required by generally accepted accounting principles have been
condensed or omitted. These interim statements should be read in
conjunction with the financial statements and the notes thereto,
included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
Note 3 - Net Loss Per Share.
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earning per Share for all periods
presented. The adoption of SFAS No. 128 had no impact on
previously reported loss per share for the three months ended March
31, 1998. In accordance with SFAS No. 128, primary earnings (loss)
per share has been replaced with basic earnings (loss) per share,
and fully diluted earnings (loss) per share has been replaced with
diluted earnings (loss) per share which includes potentially
dilutive securities such as outstanding options and convertible
securities, using the treasury stock method. The assumed exercise
of options and warrants and assumed conversion of convertible
securities have not been included in the calculation of diluted
loss per share as the effect would be anti-dilutive.
Note 4 - The "Year 2000 Problem," dates following December 31, 1999
and beyond:
Many existing computer systems and applications, and other
devices, use only two digits to identify a year in the date field,
without considering the impact of the upcoming change in the
century. Such systems and applications could fail or create
erroneous results unless corrected. The Company relies on its
internal financial systems and external systems of business
enterprises such as customers, suppliers, creditors, and financial
organizations both domestically and globally, directly and
indirectly for accurate exchange of data. The Company has
evaluated such systems and believe the cost of addressing the "Year
2000 Problem" will not have a material adverse affect on the result
of operations of financial position of the Company. However, even
though the internal systems of the Company are not materially
affected by the Year 2000 issue the Company could be affected
through disruption in the operation of the enterprises with which
the Company interacts.
Note 5 - Notes Payable
Between May 1997 and August 1998, the Company borrowed an
aggregate of $400,000 of which $300,000 were from shareholders of
the Company, payable with interest at 9.5% per annum and $100,000
from an unrelated party payable with interest at 9.5% per annum. In
January 1999, $35,000 was paid to the unrelated party with the
remaining balance of $65,000 due on March 1, 1999. In December,
1998, the Company converted $165,000 of shareholder debt including
accrued interest of $11,657 into 368,035 shares of Class A Common
Stock. with a balance of $135,000 due to shareholders. On
January 22, 1999, the Company converted $484,430 due to a major
supplier from accounts payable to notes payable. The Note bears
12% interest per annum and is secured by agreement granting this
vendor a first priority interest in the assets of the Company
excluding patents and trade marks. The Note is to be paid at
$65,000 per month and the balance as of March 31, 1999 was $359,430
The notes payable that were due on March 1, 1999, and are now
past due. Terms for repayment and extension are being negotiated.
Note 6 - Bridge Notes Payable
On August 19, 1998, the Company completed a debt-refinancing
transaction whereby the Company borrowed $550,000 from Mr. K.
Charles Janac pursuant to a Convertible Secured Promissory Note
issued by the Company (the "Note") in the principal amount of
$550,000 and bearing interest at the rate of 9.75% per annum. The
Note is convertible into shares of Class A Common Stock at the
option of Mr. Janac at any time before December 15, 1998 by
converting the principal balance and any unpaid interest due under
the Note into Class A Common Stock at the rate of $0.46875 per
share. In addition, as further consideration for the loan of funds
to the Company, the Company issued to Mr. Janac a warrant ,
exercisable at any time on or before August 18, 2003, to purchase
up to 234,667 shares of Class A Common Stock at $.46875 per share
(the "Warrants"). As security for the Note, the Company entered
into a Security Agreement granting Mr. Janac a first priority
security interest in the property, tangible and intangible, of the
Company, as well as a Patent and Trademark Mortgage granting Mr.
Janac a security interest in all the patents and trademarks of the
Company. The Company used the funds loaned by Mr. Janac to retire
$532,242 of existing debt and accrued interest incurred by the
Company in connection with a certain bridge financing undertaken by
the Company in October of 1997, to pay legal fees and costs of the
transaction, and approximately $7,000 was utilized for working
capital.
On December 8, 1998, the Company paid $200,000 to Mr. Janac as
a partial payment of the Note. Mr. Janac also agreed to convert the
remaining balance of $366,308 of the Note in principal and accrued
interest into Class A Common Stock at $0.46875 per share. In
consideration of the conversion the Company issued 781,457 of
Common A Shares to Mr. Janac. At the same time the UCC filing
granting Mr. Janac security interest in the Company's assets was
removed. In addition, the Company converted an additional $10,000
of Bridge Debt principal and $1,186 in accrued interest into 23,304
shares of Class A Common Stock.
Note 7 - Convertible Preferred Stock
On September 1, 1998, the Company sold 175,439 Shares of
Series A Preferred Stock.
All of the shares of Series A Preferred Stock were sold to
Anchor Products Limited of Hamilton, New Zealand ("Anchor"). The
acquisition of Series Preferred Stock by Anchor was consummated in
connection with the execution of a Commercial License Agreement
between the Company and Anchor, whereby the Company licensed Anchor
a technology that isolates proteins from whey, a low value cheese
by-product. The shares of Series A Preferred Stock were sold for
cash in the aggregate amount of $500,000 ($2.85 per share). There
were no underwriting discounts or commissions paid in connection
with the transaction.
The shares of Series A Preferred Stock were sold pursuant to
exemptions from registration under section 4(2) and registration S
under the Securities Act of 1933, in a transaction that was not
publicly offered. Anchor is a New Zealand corporation.
The Company's Series A Preferred Stock provides for both a 7%
dividend and liquidation preferences. The dividend is payable from
time to time at the election of the Board of Directors of the
Company subject to the Company retaining sufficient earnings and
profits. The Preferred Stock is also convertible on or before
September 30, 2000 into Class A Common Stock, at the conversion
rate of $2.86 per share. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders
of series A Preferred Shares shall receive, out of the assets of
the Company, the sum of $2.86 per Series A Preferred Share, plus
an amount equal to
any dividends accrued and unpaid on those Series A Preferred
Shares, before any payment shall be made or any assets distributed
to the holders of Common Stock. The Series A Preferred Shares shall
be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring
December 31, 2008, at the cash price of $2.86 per share, plus any
accrued and unpaid dividends on the Series A Preferred Shares which
are redeemed. In addition, each share of Series A Preferred Stock
shall be automatically converted into one (1) share of Class A
Common Stock, if not previously redeemed, on January 1, 2009, or at
any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety
(90) consecutive trading days prior to January 1, 2004. The
conversion ratio for the Series A Preferred Stock shall be adjusted
in the event of recapitalization, stock dividend, or any similar
event effecting the Class A Common Stock.
Anchor may require the Company to immediately redeem the
preferred shares in the event of certain covenant breaches of the
license agreement by the Company. The Company is currently in
compliance with all such covenants and does not anticipate any
breaches in the future.
Note 8 - Class A Common Stock:
On December 15, 1998, the Company issued to Charles Janac
781,457 shares of Class A Common stock and Warrants to purchase
234,667 shares of Class A Common Stock at $0.46875 per share
(expiring August 19, 2003) in exchange for the conversion of
$366,308 of notes and accrued interest held by Mr. Janac. The
shares of Class A Common Stock and warrants were sold pursuant to
exemptions from registration under sections 3(a)(11), 4(2) and 4(6)
and Regulation D under the Securities Act of 1933, in a transaction
that was not publicly offered.
On December 15, 1998, the Company issued to Eliezer Sternheim
520,833 shares of Class A Common stock and Warrants to purchase
52,083 shares of Class A Common Stock at $0.48 per share (expiring
December 15, 2003) in exchange for $250,000 cash. The shares of
Class A Common Stock and warrants were sold pursuant to exemptions
from registration under sections 3(a)(11), 4(2) and 4(6) under the
Securities Act of 1933, in a transaction that was not publicly
offered.
On December 15, 1998, the Company issued to Armin Ramel, a
director of the Company, 59,946 shares of Class A Common stock and
Warrants to purchase 5,995 shares of Class A Common Stock at $0.48
per share (expiring December 15, 2003) in exchange for the
conversion of $28,774 of notes and accrued interest held by Mr.
Ramel. The shares of Class A Common Stock and warrants were sold
pursuant to exemptions from registration under sections 3(a)(11),
4(2) and 4(6) under the Securities Act of 1933, in a transaction
that was not publicly offered.
On December 15, 1998, the Company issued to Henry Edmunds, a
director of the Company, 127,471 shares of Class A Common stock and
Warrants to purchase 12,747 shares of Class A Common Stock at $0.48
per share (expiring December 15, 2003) in exchange for $50,000 cash
and the conversion of $11,186 of notes and accrued interest held by
Mr. Edmunds. The shares of Class A Common Stock and warrants were
sold pursuant to exemptions from registration under sections
3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a
transaction that was not publicly offered.
On December 15, 1998, the Company issued to Marcel Raedts
104,167 shares of Class A Common stock and Warrants to purchase
10,417 shares of Class A Common Stock at $0.48 per share (expiring
December 15, 2003) in exchange for the conversion of $50,000 in
amounts owed to Mr. Raedts for services rendered. The shares of
Class A Common Stock and warrants were sold pursuant to exemptions
from registration under sections 3(a)(11) and 4(2) and under the
Securities Act of 1933, in a transaction that was not publicly
offered.
On December 15, 1998, the Company issued to Michael Schneider,
principal and director of Romic Technologies Corp., 275,614 shares
of Class A Common stock and Warrants to purchase 27,561 shares of
Class A Common Stock at $0.48 per share (expiring December 15,
2003) in exchange for the conversion of $132,294 of notes and
accrued interest held by Mr. Schneider. The shares of Class A
Common Stock and warrants were sold pursuant to exemptions from
registration under sections 3(a)(11), 4(2) and 4(6) under the
Securities Act of 1933, in a transaction that was not publicly
offered.
On December 15, 1998, the Company issued to Robert Leach, a
former director of the Company, 32,475 shares of Class A Common
stock and Warrants to purchase 3,248 shares of Class A Common Stock
at $0.48 per share (expiring December 15, 2003) in exchange for the
conversion of $15,588 of notes and accrued interest held by Mr.
Leach. The shares of Class A Common Stock and warrants were sold
pursuant to exemptions from registration under sections 3(a)(11),
4(2) and 4(6) under the Securities Act of 1933, in a transaction
that was not publicly offered.
Item 2. Management's Discussion and Analysis.
First quarter of 1999 compared to first quarter of 1998.
The main focus of the company in the first quarter of 1999 was
to ensure a successful installation and commissioning of the dairy
installation at Anchor Products and Carbery Milk products. Related
to this was the work with a resin manufacturing partner to ensure a
rapid, cost-effective scaled-up production of resin to meet current
and up-coming needs in the dairy industry. In addition, some
progress was made toward the submission of a petition to the
Federal Drug Administration (FDA) for the approval of the Sepraprep
resin as a secondary food additive for use in dairy and food
process.
Despite some increase in bookings, net sales decreased by
$78,000 or 12% from $632,000 in the first quarter of 1998 to
$554,000 for the comparable period in 1999. Net sales has been
adversely affected by the Company's cash shortage creating
difficulties to procure inventory to manufacture and ship goods.
Management is working on securing external financing (see Liquidity
and Capital Resources).
Gross Margin as a percentage of gross sales remained
essentially the same at 39% for the first quarters of 1998 and
1999. However, the absolute dollar gross margin decreased by
$36,000 or 14% from $249,000 in the first quarter of 1998 to
$213,000 in the first quarter of 1999. The decrease in gross margin
is due to lower volume from the biotech sector and no contribution
from licenses or royalties.
Selling, general and administrative expenses decreased by
$63,000 from $294,000 in the first quarter of 1998 to $231,000 in
the first quarter of 1999. The decrease was primarily due to the
Company's choosing to sell its biotech products through external
channels as opposed to making direct sales.
Research and development expenses decreased by $57,000 from
$213,000 in the first quarter of 1998 to $156,000 in the first
quarter of 1998. The decrease was due to reduction in management
overhead associated with Research and development expenses.
Interest expense decreased by $82,000 in the first quarter of
1999 compared to the first quarter 1998 due to the payment of the
bridge notes and conversion of some of the notes payable to equity
in December 1998.
Net loss decreased by half from $347,000 in the first quarter
of 1998 to $179,700 for the comparable period in 1999. The
Company's plan is to continue to keep expenses down and minimize
losses while building up the revenue and profit contribution from
the dairy/juice business. The ability of the Company to become
profitable is dependent for now from the biotech sector, which is
being hampered by cash shortage to procure goods for sale.
Management is currently pursuing several alternatives to raise
additional capital which the Company hopes will materialize in the
near future. No assurances can be made that the Company will be
profitable.
Inflation.
The Company believes that the impact of inflation on its
operations since its inception has not been material.
Liquidity and Capital Resources:
The Company used cash of $354,200 and $79,600 for operations
during the first quarter of 1999 and 1998, respectively. Cash used
in operations in the first quarter of 1999 was the result of net
loss incurred for the quarter of $179,700, offset by net non-cash
expense of $30,700, the net change in operating assets and
liabilities resulting in use of cash of $205,200. Cash used in the
first quarter of 1998 was the result of net loss incurred for the
quarter of $347,000, offset by net non-cash expenses of $104,000,
and the net change in operating assets and liabilities resulting in
source of cash of $163,400.
Financing activities provided cash of $354,200 and $58,000
during the first quarter of 1999 and 1998, respectively. The cash
provided in the first quarter of 1999 was due to conversion of
$359,500 in accounts payable to notes payable partially offset by
$35,000 paid notes payable. The cash provided in the first quarter
of 1998 resulted from the issuance of $58,000 in notes payable.
At March 31, 1999 the Company had cash and cash equivalents of
$11,300 as compared with $41,100 on December 31, 1998. At March
31, 1999, the Company had working capital deficit of $651,900, as
compared to working capital deficit of $490,800 at December 31,
1998. The decrease in cash in the first quarter of 1999 is a
result of the aforementioned decrease in cash used in operating and
increase in cash from financing activities noted above. The
decrease in working capital for the first quarter is primarily a
result of the net loss incurred offset by non-cash charges.
This negative cash out flow from operations must be reversed
and working capital increased significantly in order for the
Company to fund its existing activities and to extend the use of
its technology to new applications in the food and dairy and juice
industries, and to attract the interest of strategic partners in
one or more of these markets.
Based on the Company's current operating plan, the Company
believes that it will only be able to fund the Company's operations
through July 31, 1999. Accordingly, the Company will have to
either turn profitable or obtain additional funds to support its
operations. The Company is currently pursuing several avenues
including increasing revenues and reducing costs in order to turn
profitable, secure funds through additional strategic partnerships
and secure either debt or equity financing.
Following this strategy, on August 25, 1998 Sepragen announced
the signing of a license agreement with Anchor Products. Under this
agreement, Anchor Products will have exclusive manufacturing rights
to the Sepralac(R) process in Australia and New Zealand and non-
exclusive worldwide marketing rights to products produced by the
Sepralac(R) Process. In return, Sepragen has received $700,000 out
of a total of about $1 million from Anchor Products, comprised of
a license fee of $200,000 and an equity investment of $500,000 for
the purchase of 175,439 redeemable, cumulative, preferred stock at
$2.85 per share. The preferred stock is convertible into common
stock (on share for share basis) at any time within the next 2
years and extendible for a further 1 year at Sepragen's option.
On October 15, 1998 the Company announced a licensing
agreement for the Sepralac(R) Process with Carbery Milk Products of
Ballineen, County Cork, Ireland. Under the agreement, Carbery will
have manufacturing and marketing rights to certain products
produced from the Sepralac(R) Process. In return the Company will
receive a license fee of $350,000, $200,000 was received in 1998
with the balance over three years at $50,000 per year.
In addition to Mr. Janac's conversion of debt to equity (see
Note 6), in December, 1998 the Company converted $604,151 of its
debt and accrued expenses in to Class A Common stock. It also sold
625,000 shares of Class A Common Stock in a private transactions,
exempt from securities registration under the Securities Act of
1993, as amended, and raised $300,000 of proceeds. In all, a total
of $904,151 (including Mr. Janac's) was either invested or
converted in to stock. In consideration of the above, 1,901,962
shares of Class A Common Stock and 346,718 Warrants to purchase
Common Stock were issued.
The Company currently has no credit facility with a bank or
other financial institution. Further, the Company's stock is
traded over-the-counter and as such there is limited liquidity in
the Company's stock which makes financing difficult.
The Company is seeking to enter into strategic alliances with
corporate partners in the industries comprising its primary target
markets (biopharmaceutical, food, dairy and juice). The Company's
ability to further develop and market its Sepralac(R) Process for
whey separation and other potential food and juice products and
processes will be substantially dependent upon its ability to
negotiate partnerships, joint ventures or alliances with
established companies in each market. In particular, the Company
will be reliant on such joint venture partners or allied companies
for both market introduction, operational assistance and financial
assistance. The Company believes that development, manufacturing
and market introduction of products in these industries, will cost
millions of dollars and require operational capabilities in excess
of those currently available to the Company. No assurance can be
given, however, that the terms of any additional alliances will be
successfully negotiated or that such alliance will be successful
in generating the revenue required to make the Company profitable.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995.
This report contains or incorporates by reference forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Where any such forward-looking
statement includes a statement of the assumptions or bases
underlying such forward-looking statement, the Company cautions
that, while such assumptions or bases are believed to be reasonable
and are made in good faith, assumed facts or bases almost always
vary from the actual results, and the differences between assumed
facts or bases and actual results can be material, depending upon
the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to
future results, such expectation or belief is expressed in good
faith and is believed to have a reasonable basis, but there can be
no assurance that the statement of expectation or belief will
result or be achieved or accomplished. The words "believe,"
"estimate," "anticipate," and similar expressions may identify
forward-looking statements.
Taking into account the foregoing, the following are
identified as some but not all of the important factors that could
cause actual results to differ materially from those expressed in
any forward-looking statement made by, or on behalf of the Company:
Inability to Secure Additional Capital. The Company has
incurred operating losses each fiscal year since its inception.
The Company must secure additional financing through either the
sale of additional securities or debt financing to continue
operations past July 31, 1999. Although the Company is attempting
to secure such financing, there can be no assurance that such
financing will be available to the Company on reasonable terms.
The Company has been delisted from the Nasdaq SmallCap Market and
the Pacific Stock Exchange. See Item 2 "Management's Discussion
and Analysis-Liquidity and Capital Resources."
Competition. In both its biopharmaceutical industry market
and in the market for its process systems for food, beverage, dairy
and environmental industries, the Company faces intense competition
from better capitalized competitors.
Dependence on Joint Ventures and Strategic Partnerships. The
Company's entry into the food, dairy and beverage market for its
process systems will be substantially dependent upon its ability to
enter into strategic partnerships, joint ventures or similar
collaborative alliance with established companies in each market.
As of the date of this report, two licensing agreements have been
signed but there can be no assurance that the terms of any such
alliance will produce profits for the Company nor can there be
assurance that additional joint ventures or alliances will be
signed.
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Reports on Form 8-K
No Forms 8-K were filed in the first quarter of 1999:
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEPRAGEN CORPORATION
DATE: July 12, 1999 By: /s/ Vinit Saxena
Vinit Saxena
Chief Executive Officer, President
and Principal Financial and Chief
Accounting Officer
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR MARCH 31, 1999 AS FILED ON FORM 10QSB WITH THE
SECURITIES EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1999
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<CASH> 11,361
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<RECEIVABLES> 494,826
<ALLOWANCES> 20,000
<INVENTORY> 279,047
<CURRENT-ASSETS> 817,245
<PP&E> 88,942
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,061,013
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0
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<OTHER-SE> (14,916,193)
<TOTAL-LIABILITY-AND-EQUITY> 1,061,013
<SALES> 553,661
<TOTAL-REVENUES> 553,661
<CGS> 340,376
<TOTAL-COSTS> 340,376
<OTHER-EXPENSES> 387,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> (179,753)
<INCOME-TAX> (179,753)
<INCOME-CONTINUING> (179,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (179,753)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
