SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT
Pursuant to sections 13 or 15(d) of The Securities Exchange Act of 1934
FOR THE QUARTER ENDED AUGUST 31, 1996
Commission File Number 0-15382
GAMOGEN, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13-3341562.
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
17 Industrial Place, Middletown, New York 10940
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(Address of principal executive offices) (Zip Code)
(914) 343-2083
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
during the past 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 __
At August 31, 1996 the registrant had outstanding 1,230,000 shares of Common
Stock, $.01 par value.
<PAGE>
PART I
Item 1. Financial Statements
Balance Sheets - August 31, 1996 and August 31, 1995 and February 29, 1996.
Statements of Operations - For the three and six months periods ended August
31, 1996 and August 31, 1995.
Statements of Cash Flows - August 31, 1996 and August 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II
Item 1. Legal Proceedings
None
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
2
<PAGE>
PART I, Item 1 - Financial Statements
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Aug 31, 1996 Aug 31, 1995 Feb 29, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $61,974 $ 10,847 $ 431
Accounts Receivable 26,446 41,885 33,816
Inventory 184,842 134,439 176,480
Prepaid Expenses 18,382 24,320 5,987
------------ ------- -------
Total Current Assets 291,644 211,491 216,714
============ ======= =======
Property, Equipment and Other Assets
Property and Equipment, Net 30,065 38,287 34,176
Other Assets, Net 174,459 179,989 177,224
------------ ----------- -------------
Total Property, Equipment and Other Assets 204,524 218,276 211,400
------------ ----------- -------------
Total Assets $ 496,168 $ 429,767 $ 428,114
============ ============ =========== =============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 8,901 $ 6,134 $ 5,849
Accrued Expenses 8,313 7,390 2,570
Other Liabilities - Due To Affiliate 151,960 20,630 108,170
------------ ------------- -------------
Total Current Liabilities 169,174 34,154 116,589
============ ============= =============
Stockholders' Equity
Common Stock, $.01 Par Value Authorized 4,000,000 Shares, Issued
and Outstanding 1,230,000 12,300 12,300 12,300
Warrants Outstanding 40 40 40
Additional Paid-In Capital 1,579,723 1,579,723 1,579,723
Accumulated (Deficit) (1,265,069) (1,196,450) (1,280,538)
----------- ----------- -----------
Total Stockholders' Equity 326,994 395,613 311,525
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 496,168 $ 429,767 428,114
=========== =========== ===========
</TABLE>
3
<PAGE>
Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
Aug 31, 1996 Aug 31, 1995 Aug 31, 1996 Aug 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 85,225 $ 104,946 $ 170,792 $ 213,627
Costs and Expenses:
Cost of Goods Sold 39,767 40,832 76,176 85,322
Selling, General and Administrative 85,084 85,157 160,736 148,442
Depreciation and Amortization 3,438 3,576 6,876 7,340
---------- -------- --------- -------
128,289 129,565 243,788 241,104
---------- -------- --------- -------
Net Income (Loss) From Operations (43,064) (24,619) (72,996) (27,477)
Other Income (Expense):
Licensing Income 0 0 87,800 0
Interest & Other Income 517 130 665 287
---------- -------- --------- --------
517 130 88,465 287
---------- -------- --------- --------
Net Income (Loss) $ (42,547) $ (24,489) $ 15,469 $ (27,190)
================= ========== ========== ========= ==========
Net Income (Loss) Per Common Share $ (0.03) $ (0.02) $ 0.01 $ (0.02)
================================== ========== ============ =========== ============
</TABLE>
4
<PAGE>
Gamogen, Inc. and Subsidiary
Statements of Cash Flow
For The Six Months Ended
<TABLE>
<CAPTION>
August 31, 1996 August 31, 1995
--------------- ---------------
<S> <C> <C>
Cash Flow From Operating Activities:
Income (Loss) from Operations $ (72,996) $ (27,477)
Non-Operating Income 88,465 287
---------- -----------
Net Income (Loss) 15,469 (27,190)
Adjustments To Reconcile Net Income (Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 6,876 7,340
(Increase) Decrease In Prepaid Expenses (12,395) (18,309)
(Increase) Decrease in Accounts Receivable 7,370 (13,589)
(Increase) Decrease in Inventory (8,362) 701
(Increase) Decrease in Other Assets 0 0
Increase (Decrease) in Accounts Payable 3,052 5,024
Increase (Decrease) in Accrued Expenses 5,743 (6,082)
Increase (Decrease) in Other Liabilities - Due To Affiliate 43,790 8,941
------- ---------
Cash Provided By (Used In) Operating Activities 61,543 (43,164)
Cash and Cash Equivalents - Beginning of Year 431 54,011
------- ---------
Cash and Cash Equivalents - End of Period $61,974 $ 10,847
========================================= ======= =========
</TABLE>
5
<PAGE>
Gamogen, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements
included in the Company's Annual Report)
(1) Management's Statement
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condenses or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-KSB.
6
<PAGE>
Part I, Item 2
Gamogen, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations for
use with 10-QSB for Quarter Ended
August 31, 1996.
Capital Resources and Liquidity
At August 31, 1996, the Company's cash and cash equivalents balance on a
consolidated basis was $61,974 and net working capital was $122,470. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at August 31, 1995 were $10,847 and $177,337, respectively.
The Company's net loss for the quarter ended August 31, 1996 was $42,547. This
compares to the Company's net loss for the quarter ended August 31, 1995 of
$24,489. The Company's net income for the six months ended August 31, 1996 was
$15,469, which included licensing income of $87,800 (see below). This compares
to the Company's net loss for the same period ended August 31, 1995 of
$27,190. The Company did not have any licensing income in the period ended
August 31, 1995.
On April 12, 1994 the Board of Directors of the Company approved and on April
14, 1994 the Company signed with Zonagen, a small US based biotechnology
company, an agreement under which Zonagen acquired all rights of Gamogen to
the Company's Oral Treatment for Male Impotence ("Impotence Agreement"). In
exchange for the above rights the Company received from Zonagen $100,000 in
cash and, subject to certain FDA approvals and Gamogen's agreement not to
compete, future payments of $200,000 in restricted common stock of Zonagen,
valued based on the closing price on the day due, and royalties on Zonagen's
future sales of the Oral Treatment as follows payable in cash to Gamogen.
Future product royalties payable to Gamogen under the Impotence Agreement are
equal the following percentages of net sales of the Oral Treatment for Male
Impotence:
Aggregate Net Sales: % Royalty
First $100,000,000 6%
Second $100,000,000 5%
Third $100,000,000 4%
Excess Over $300,000,000 3%
Under certain terms of the Impotence Agreement the above royalty percentages
may be reduced by two percentage points for sales in countries where patent
protection is unavailable or deemed ineffective. There can be no guarantee
concerning the Oral Treatment that FDA approvals will be secured and if
secured that Zonagen will be successful in marketing of the product.
In the year ended February 1995 the Company recorded Licensing Income from the
Impotence Agreement of $47,107 ($100,000 in payments made by Zonagen less
related expenses of $52,893). As disclosed in Gamogen's Form 10KSB Annual
Report dated February 29, 1996, on May 28, 1996 a stock payment was received
by Gamogen in the form of 19,512 restricted common stock shares of Zonagen in
accordance with the terms of the Impotence Agreement. The number of shares was
computed by dividing $200,000 by the NASDAQ closing price on April 12, 1996 of
$10.25 per share. In accordance with the terms of the Impotence Agreement, the
19,512 shares are restricted and bear the appropriate legend. Considering the
generally limited market for restricted shares, the Rule 144 holding period of
a minimum of two years, and the historical variance in the market prices for
Zonagen stock, Gamogen initially valued these shares at 50% of the stock price
on April 12, 1996 or $100,000. Gamogen valued these shares understanding that
the future valuation of these shares may be changed to reflect the length of
the holding period, changes in the current market price of Zonagen common
stock, or other factors which in the opinion of management may affect the
value of these securities. On June 10, 1996 Gamogen received an offer of $4.50
per share, a total of $87,800, on the 19,512 restricted shares from a small
7
<PAGE>
group of private investors. This price was approximately 50% of the then
NASDAQ market price for Zonagen, Inc. common stock. On June 20, 1996 Gamogen
sold the 19,512 restricted shares to the same group of private investors for
$87,800. As a result of these transactions the Company recorded Licensing
Income from the Impotence Agreement of $87,800 in the quarter ended May 31,
1996.
On June 24, August 2 and September 30 1996 Zonagen issued press releases
concerning FDA and US patent approvals on its Vasomax product (the Oral
Treatment) which included the following:
"The Woodlands, Texas, June 24, 1996 - Zonagen, Inc. (NASDAQ: ZONA;
Pacific ZNG) announced today that it has received notification from
the United States Patent and Trademark Office that the patent covering
the use of VASOMAX(TM) as a treatment for erectile dysfunction
(impotency) has been allowed. The second, more recent application, is
still pending.
Zonagen also announced that it has submitted the IND for VASOMAX(TM)
to the FDA as the first step in its US Phase III development program.
VASOMAX(TM) is currently in a pivotal Phase III trial in Mexico
scheduled to be completed in 1996. The Company has selected
Pharmaco-LSR and Affiliated Research Centers (ARC) for its US clinical
development team and clinical sites. Dr. Irwin Goldstein of Boston
University Medical Center, a renowned researcher in the field of
impotency therapy, has been appointed as Scientific Advisor for the
VASOMAX(TM) program and Dr. David Ferguson, Senior Vice President,
Affiliated Research Centers, will act as special consultant during the
Phase III trials."
"The Woodlands, Texas, August 2, 1996 - Zonagen, Inc. (NASDAQ: ZONA;
Pacific ZNG) today has announced it has begun its U.S. pivotal
clinical trials of VASOMAX (TM), the Company's "on-demand" oral
therapeutic for male impotency. Based in part by what it considers to
be encouraging early data from its Mexican study, the Company has
decided to accelerate its U.S. clinical program. VASOMAX (TM) will be
administered to patients this week in the U.S. and the Company expects
to begin pivotal studies by late August. The Company plans to complete
the Phase III portion of the trials by the first quarter of 1997 and
submit an NDA to the FDA by June of 1997.
Joseph S. Podolski, President and CEO said, `The continued clinical
success of VASOMAX(TM) confirms our belief that it may provide a
cost-effective, user-friendly therapy for approximately 40-50% of all
impotent men. Particular attention has been placed on both side effect
profiles and the ability to restore sufficient erectile function to
achieve organism on every sexual attempt. The interim analysis of the
Mexican data shows the drug to be well tolerated, with no incidence of
hypotension or fainting. Furthermore, the number of men who were able
to achieve orgasm using VASOMAX(TM) was consistent with earlier
pre-clinical and clinical human studies.'
The Company's Board of Directors made a decision on July 31, 1996 to
accelerate the clinical development of VASOMAX(TM). As a result of
this accelerated U.S. clinical plan, the Company will require
additional funds in the beginning of the fourth quarter of 1996."
"The Woodlands, Texas, September 30, 1996 - ZONAGEN, INC. (Nasdaq:
ZONA) announced today that it completed an initial closing of a
private placement in which the Company sold 1.14 million shares of
newly-authorized Series B Convertible Preferred Stock at a price of
$10.00 per share representing gross proceeds of $11.4 million. Each
share of the Company's Series B Convertible Preferred Stock is
initially convertible into approximately 1.51 shares of Common Stock.
The conversion price is subject to adjustment in certain
circumstances."
Based on the above press releases by Zonagen, Gamogen does not anticipate
royalty payments under the Impotence Agreement from Zonagen within the next 12
months, with the exception of possible royalty payments by Zonagen resulting
from the sale of the Oral Treatment in Mexico. There can be no guarantee
concerning the Oral Treatment that approvals by the US FDA or approvals in
other countries will be secured and if secured that Zonagen will be successful
in marketing of the product.
The Company derived a significant portion of its funds for continuing
operation as a result of loan advances from an affiliate. As of August 31,
1996 total outstanding net loan advances from the affiliate are $151,960 and
are
8
<PAGE>
included in Other Current Liabilities. As of February 29, 1996 outstanding
net loan advances from the affiliate totaled $108,170. Under terms of an
agreement with its affiliate to extend repayment terms on the February 1996
advance balance, $108,170 of the current net loan advance is due on March 1,
1997. Under terms of the extension Gamogen will pay its affiliate an
additional $9,735 in interest on this portion of the advance on March 1, 1997.
If Gamogen pays the $108,170 portion of the advance in whole or in part
earlier than March 1, 1997 then the interest amount will be prorated
accordingly at an APR of 9%. For the three months ended August 31, 1996,
additional net loan advances from the affiliate were $43,790, which is due on
October 15, 1996. Due in part to the receipt of $87,800 on June 20, 1996 from
the sale of Zonagen restricted common stock (see above), Gamogen anticipates
paying on October 15, 1996 the net loan advances from the affiliate of
$43,790. Gamogen's cash flow from operations is expected to be sufficient to
enable it to meet its total net cash requirements through February 1997,
however, the Company anticipates that it will continue to rely on loan
advances from an affiliate to fund periodic cash shortfalls due to payments
required by its vendors under standard trade terms. There can be no guarantee
however that these loan advances from the Company's affiliate will continue to
be made nor that extensions beyond March 1, 1997 for full payment of the net
loan advance amount of $108,170 due on March 1, 1997 will be made.
In an effort to improve its cash flows from operations, the Company has
curtailed research and development in favor of efforts to improve sales of
current products and reduce expenses. There can be no guarantee that
obligations beyond February 1997 can be met from current projected cash flow.
As previously reported, the Company, in consideration of the above items, is
investigating other options to improve its projected cash flow and liquidity.
Under investigation are the issuance of additional common stock and the sale
of the Company's Gyneco subsidiary.
Results of Operations
Results For Three Months Ended August 31, 1996 As Compared With Three Months
Ended August 31, 1995:
The Company's sales for the quarter ended August 31, 1996 were $85,225. This
represents a decrease of $19,721 or 19% versus the quarter ended August 31,
1995. The Company's loss from operations was $43,064 in the quarter ended
August 31, 1996. This compares to a loss from operations of $24,619 for the
same quarter of the previous fiscal year. The Company's loss from operations
in the quarter ended August 31, 1996 includes Gyneco's loss from operations,
due to lower sales, of $30,023. In the quarter ended August 31, 1995 the loss
from operations included income from operations by Gyneco of $11,677. For the
quarter ended August 31, 1996 as compared to the quarter ended August 31,
1995, Gyneco's loss from operations increased due primarily to lower sales and
increased production labor costs.
The Company's net loss for the quarter ended August 31, 1996 was $42,547. This
compares to the Company's net loss for the quarter ended August 31, 1995 of
$24,489. The Company's net loss for the quarters ended August 31, 1996 and
August 31, 1995 result primarily from the Company's losses from operations.
The Company's net loss per share of common stock was $0.03 in the current
fiscal quarter versus a loss per share of $0.02 in the quarter ended August
31, 1995.
Selling, general and administrative expenses were $85,084 in the current
fiscal quarter compared to $85,157 in the same quarter of the prior fiscal
year. Depreciation and amortization was $3,438 in the quarter ended August 31,
1996 versus $3,576 in the same quarter of the prior fiscal year.
9
<PAGE>
Results For Six Months Ended August 31, 1996 As Compared With Six Months Ended
August 31, 1995:
The Company's sales for the six months ended August 31, 1996 were $170,792.
This represents a decrease of $42,835 or 20% versus the six months ended
August 31, 1995. The Company's loss from operations was $72,996 in the six
months ended August 31, 1996. This compares to a loss from operations of
$27,477 for the same six months of the previous fiscal year. The Company's
loss from operations in the six months ended August 31, 1996 includes Gyneco's
loss from operations, due to lower sales, of $47,215. In the six months ended
August 31, 1995 the loss from operations included income from operations by
Gyneco of $3,482. For the six month period ended August 31, 1996 as compared
to the same period ended August 31, 1995, Gyneco's loss from operations
increased due primarily to lower sales, increased production labor costs, and
increased marketing and interest expense.
The Company's net income for the six months ended August 31, 1996 was $15,469.
This compares to the Company's net loss for the six months ended August 31,
1995 of $27,190. The Company's net income for the six months ended August 31,
1996 resulted primarily from Licensing Income from the Impotence Agreement of
$87,800. The Licensing Income of $87,800 resulted from the sale in June 1996
of 19,512 restricted shares of Zonagen for $87,800 (see Capital Resources and
Liquidity section above). The Company's net loss for the six months ended
August 31, 1995 resulted primarily from the Company's loss from operations.
Net income per share of common stock was $0.01 in the current fiscal six
months versus a loss per share of $0.02 in the six months ended August 31,
1995.
Selling, general and administrative expenses were $160,736 in the six months
ended August 31, 1996 and were $148,442 in the same period of the prior fiscal
year. Selling, general and administrative expense increased due to spending by
the Company's subsidiary, Gyneco, Inc., directed primarily towards increasing
sales of its products, and increased interest expense at Gyneco, Inc.
Depreciation and amortization was $6,876 in the six months ended August 31,
1996 versus $7,340 in the same six months of the prior fiscal year.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the following persons, thereunto duly authorized.
GAMOGEN, INC.
/s/ Andrew I. Sealfon October 1, 1996
- ------------------------
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer October 1, 1996
- ------------------------
Jesse A. Garringer
Executive Vice-President, Secretary,
Director, and Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-END> Aug-31-1996
<PERIOD-TYPE> 6-MOS
<CASH> 61,974
<SECURITIES> 0
<RECEIVABLES> 26,446
<ALLOWANCES> 0
<INVENTORY> 184,842
<CURRENT-ASSETS> 291,644
<PP&E> 203,324
<DEPRECIATION> 173,259
<TOTAL-ASSETS> 496,168
<CURRENT-LIABILITIES> 169,174
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 314,694
<TOTAL-LIABILITY-AND-EQUITY> 496,168
<SALES> 170,792
<TOTAL-REVENUES> 170,792
<CGS> 76,176
<TOTAL-COSTS> 243,788
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,469
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,469
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
