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.
<PAGE>
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 shareholders
559,430
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.
<PAGE>
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.
<PAGE>
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>
<ARTICLE> 5
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,361
<SECURITIES> 0
<RECEIVABLES> 494,826
<ALLOWANCES> 20,000
<INVENTORY> 279,047
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0
0
<COMMON> 14,020,064
<OTHER-SE> (14,916,193)
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<CGS> 340,376
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<INCOME-TAX> (179,753)
<INCOME-CONTINUING> (179,753)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (179,753)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
