<PAGE>
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, 1997
Commission File Number 0-15382
GAMOGEN, INC.
(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.)
24 Carpenter Road, Chester, NY, 10918
(Address of principal executive offices) (Zip Code)
(914) 469-2042
(Registrant's telephone number, including area code)
17 Industrial Place, Middletown, NY, 10940
(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, 1997 the registrant had outstanding 1,230,000 shares of Common
Stock, $.01 par value.
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PART I
Item 1. Financial Statements
Balance Sheets - August 31, 1997 and August 31, 1996 and February 28, 1997.
Statements of Operations - For the three month period ended August 31, 1997 and
August 31, 1996. Statements of Cash Flows - August 31, 1997 and August 31,
1996.
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
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PART I, Item 1 - Financial Statements
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Aug 31, 1997 Aug 31, 1996 Feb 28, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 6,185 $ 61,974 $ 1,368
Accounts Receivable 585,798 26,446 23,657
Inventory 172,393 184,842 169,500
Prepaid Expenses 2,294 18,382 3,960
----------- ----------- -----------
Total Current Assets 766,670 291,644 198,485
----------- ----------- -----------
Property, Equipment and Other Assets
Property and Equipment, Net 18,863 30,065 25,954
Other Assets, Net 154,173 174,459 171,693
----------- ----------- -----------
Total Property, Equipment and Other Assets 173 036 204,524 197,647
----------- ----------- -----------
Total Assets $ 939,706 $ 496,168 $ 396,132
=========== =========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 8,234 $ 8,901 $ 0
Accrued Expenses 54,092 8,313 10,468
Other Liabilities - Due To Affiliate 97,629 151,960 66,314
----------- ----------- -----------
Total Current Liabilities 159,955 169,174 76,782
----------- ----------- -----------
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) (812,312) (1,265,069) (1,272,713)
----------- ----------- -----------
Total Stockholders' Equity 779,751 326,994 319,350
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 939,706 $ 496,168 $ 396,132
=========== =========== ===========
</TABLE>
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Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
----------------------------- ---------------------------
Aug 31, 1997 Aug 31, 1996 Aug 31,1997 Aug 31,1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Net sales of Products $ 77,546 $ 85,225 $ 152,024 $ 170,792
Sale of Impotence Treatment 708,000 0 708,000 0
--------- --------- --------- ---------
785,546 85,225 860,024 170,792
--------- --------- --------- ---------
Costs and Expenses:
Cost of Goods Sold 27,979 39,767 49,353 76,176
Selling, General and Administrative 139,148 85,084 225,051 160,736
Depreciation and Amortization 12,756 3,438 24,912 6,876
--------- --------- --------- ---------
179,883 128,289 299,316 243,788
--------- --------- --------- ---------
Net Income (Loss) From Operations 605,663 (43,064) 560,708 (72,996)
Other Income (Expense):
Licensing - Maintenance Payments (Credits) (125,000) 0 (75,000) 0
Licensing - Non-compete Payments 0 0 0 87,800
Interest & Other Income 44 517 136 665
--------- --------- --------- ---------
(124,956) 517 (74,864) 88,465
--------- --------- --------- ---------
Net Income (Loss) Before Income Taxes 480,707 (42,547) 485,844 15,469
Provision (Benefit) For Income Taxes 25,444 0 25,444 0
--------- --------- --------- ---------
Net Income (Loss) $ 455,263 $ (42,547) $ 460,400 $ 15,469
========= ========= ========= =========
Net Income (Loss) Per Common Share $ 0.37 $ (0.03) $ 0.37 $ 0.01
========= ========= ========= =========
</TABLE>
4
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Gamogen, Inc. and Subsidiary
Statements of Cash Flow
For The Six Months Ended
<TABLE>
<CAPTION>
Aug 31, 1997 Aug 31, 1996
------------ ------------
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 460,400 $ 15,469
Adjustments To Reconcile Net Income (Loss) To Cash
Provided By (Used In)
Operating Activities:
Depreciation and Amortization 24,912 6,876
(Increase) Decrease In Prepaid Expenses 1,666 (12,395)
(Increase) Decrease in Accounts Receivable (562,141) 7,370
(Increase) Decrease in Inventory (2,893) (8,362)
Increase (Decrease) in Accounts Payable 8,234 3,052
Increase (Decrease) in Accrued Expenses 43,624 5,743
Increase (Decrease) in Other Liabilities - Due To Affiliate 31,315 43,790
--------- ---------
Cash Provided By (Used In) Operating Activities 5,117 61,543
Cash Flows From Investing Activities
(Acquisition) of Equipment (300) 0
Cash and Cash Equivalents - Beginning of Year 1,368 431
--------- ---------
Cash and Cash Equivalents - End of Period $ 6,185 $ 61,974
========= =========
</TABLE>
5
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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 condensed 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.
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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, 1997.
Capital Resources and Liquidity
At August 31, 1997, the Company's cash and cash equivalents balance on a
consolidated basis was $6,185 and net working capital was $606,715. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at August 31, 1996 were $61,974 and $122,470, respectively.
The Company's net income for the quarter ended August 31, 1997 was $455,263.
This compares to the Company's net loss for the quarter ended August 31, 1996
of $42,547. The Company's net income for the six month period ended August 31,
1997 was $460,400. This compares to the Company's net income for the six month
period ended August 31, 1996 of $15,469.
On July 10, 1993 the Company acquired the rights to an Oral Treatment for Male
Impotence developed by Dr. Zorgniotti. On April 12, 1994 the Board of Directors
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 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 the Company's
agreement not to compete, future payments of $200,000 in restricted common
stock of Zonagen, and royalties on Zonagen's future sales of the Oral
Treatment.
In the year ended February 1995 the Company recorded income from the Impotence
Agreement of $47,107 ($100,000 in licensing payments made by Zonagen less
related expenses of $52,893). In the year ended February 1996 no payments were
received by the Company under the Impotence Agreement.
On May 28, 1996 a stock payment was received by the Company in the form of
19,512 restricted common stock shares of Zonagen in accordance with certain
non-compete terms of the Impotence Agreement. On June 20, 1996 the Company sold
the 19,512 restricted shares to a small group of private investors for $87,800.
This price was approximately 50% of the then NASDAQ market price for Zonagen,
Inc. non-restricted common stock.
On January 24, 1997 the Board of Directors approved and signed with Zonagen a
conditional amendment to the Impotence Agreement granting Zonagen the right
("Option") to amend the Impotence Agreement eliminating the following:
1) Gamogen's rights to royalties on Zonagen's future sales of the Oral
Treatment;
2) Gamogen's rights to market the Oral Treatment in counties where Zonagen does
not timely obtain regulatory approval for and commence marketing of the Oral
Treatment.
The Option was conditioned on the payment to Gamogen the amount of $750,000
("Option Price") if the Option were exercised by January 24, 1998 less any
Maintenance Payments (see below) received by Gamogen. The Option included
increases in the Option Price for later exercise of the Option through January
24, 2000.
Under the conditional amendment Zonagen was granted the option, provided
however, that Zonagen make the following payments ("Maintenance Payments") in
cash to Gamogen: $75,000 upon the execution of the conditional amendment and
$75,000 on each July 24 and January 24 which occurs after the execution of the
conditional amendment and before Zonagen's exercise of the Option. On January
24, 1997 the Company received from Zonagen the initial Maintenance Payment of
$75,000 which the Company recorded as licensing
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income. In July 1997 Gamogen received a second maintenance payment of $75,000
under the conditional amendment.
In August 1997 Gamogen negotiated with Zonagen for revision to the Conditional
Amendment Number 1 of The Assignment Agreement. In September 1997 the Board of
Directors approved and signed with Zonagen a conditional amendment, Amendment
Number 2 to the Assignment Agreement, establishing an option price of $708,000
if the option were exercised on or before September 30, 1997. On August 31,
1997 Gamogen recorded a $558,000 accounts receivable which results from the
sale of the impotence oral treatment for $708,000 and offsetting credits
allowed on two maintenance payments previously received totaling $150,000.
Gamogen subsequently received payment from Zonagen on October 1, 1997 in the
net amount of $558,000. The amount of $558,000 is detailed as follows:
Sale of Impotence Oral Treatment $708,000
less : credits for Maintenance Payments (150,000)
--------
Net Payment $558,000
As a result of this payment Zonagen has exercised the Option and Gamogen is not
entitled to further payments under the Assignment Agreement and its amendments.
In August 1997 Gamogen recorded general and administrative expenses of $55,660
for certain administrative costs and other expenses related to the sale of the
impotence oral treatment and the conditional amendments.
As discussed in the Company's form 10-KSB Annual Report for the year ended
February 28, 1997, the Company has initiated the amortization of its Other
Asset - Impotence Technology of $153,567 related to Gamogen's 2-drug injectable
impotence treatment program. Further work on Gamogen's 2-drug injectable
impotence treatment program has been deferred due to funding constraints. In
the 6 months ended August 31, 1997 amortization expense of $15,356 is included
in Depreciation and Amortization to reflect amortization of the Other Asset -
Impotence Technology. This amortization is based on the anticipated FDA review
schedule of the Oral Treatment. If the Oral Treatment is approved by the FDA,
amortization will be taken over a shorter period of time. As of October 1, 1997
Zonagen had not received approval by the US FDA for the marketing of the Oral
Treatment.
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, 1997 total
outstanding net loan advances from the affiliate are $97,629 and are included
in Other Current Liabilities. As of February 28, 1997 outstanding net loan
advances from the affiliate totaled $66,314. Under terms of an agreement with
its affiliate to extend repayment terms on the February 1997 advance balance,
$66,314 of the current net loan advance balance is due on March 1, 1998. Under
terms of the extension agreement Gamogen will pay its affiliate an additional
$5,968 in interest on this portion of the advance on March 1, 1998. If Gamogen
pays the $66,314 portion of the advance in whole or in part earlier than March
1, 1998 then the interest amount will be prorated accordingly at an APR of 9%.
For the three months ended August 31, 1997, additional net loan advances from
the affiliate were $31,315, which is due on October 31, 1997. Gamogen
anticipates paying by October 31, 1997 all outstanding net loan advances from
the affiliate.
Gamogen's cash flow from sale of the impotence technology is expected to be
sufficient to enable it to meet its total net cash requirements through August
1998. Excluding cash flow from the sale of the impotence technology, Gamogen's
cash flow from operations is anticipated to be negative through August 1998,
due in large part to continuing losses from operations by its subsidiary
Gyneco. In an effort to improve its cash flows from operations, the Company has
pursued efforts to improve sales of current Gyneco products and reduce
8
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expenses. As previously reported, the Company, in consideration of the above
items, is investigating other options to improve its operating cash flow and
liquidity. Under investigation are the issuance of additional common stock and
the sale of the Company's Gyneco subsidiary.
Any statements which are not historical facts contained in this report are
forward looking statements that involve risks and uncertainties, including but
not limited to those relating to the uncertainty related to unexpected
increases or decreases in sales of the Company's products, Food and Drug
Administration or other government regulation, and other risks identified in
the Company's Securities and Exchange Commission filings.
Results of Operations
Results For Three Months Ended August 31, 1997 As Compared With
Three Months Ended August 31, 1996:
The Company's sales for the quarter ended August 31, 1997 were $785,546. This
represents an increase of $700,321 or versus the quarter ended August 31, 1996.
The increase in sales is due to the sale of the Gamogen's impotence oral
treatment for $708,000. The Company's income from operations was $605,663 in
the quarter ended August 31, 1997. This compares to a loss from operations of
$43,064 for the same quarter of the previous fiscal year. Income from
operations of $605,663 for the quarter ended August 31, 1997 results primarily
from the sale of Gamogen's impotence oral treatment. The Company's income from
operations in the quarter ended August 31, 1997 was reduced in part by Gyneco's
operating loss of $21,203. In the quarter ended August 31, 1996 the Company's
loss from operations of $43,064 included Gyneco's operating loss of $30,023.
In the quarter ended August 31, 1997, Gamogen's income before income taxes was
$480,707 as compared to a loss of $42,547 in the same quarter of the prior
fiscal year. Income before income taxes for the quarter ended August 31, 1997,
resulted from income from operations of $605,663 offset in part by reversal of
licensing income from Maintenance Payments previously recorded of $125,000. The
credits for Maintenance Payments of $125,000 result from the sale of Gamogen's
impotence oral treatment (see capital Resources and Liquidity section above).
Net income for the quarter ended August 31, 1997 was $455,263. This compares
with a net loss of $42,547 in the same quarter of the previous fiscal year. Net
income for the quarter ended August 31, 1997, resulted from income before taxes
of $480,707, offset in part by $25,444 in related income tax expense.
The Company's net income per share of common stock was $0.37 in the current
fiscal quarter versus a loss per share of $0.03 in the quarter ended August 31,
1996.
Selling, general and administrative expenses were $139,148 in the current
fiscal quarter compared to $85,084 in the same quarter of the prior fiscal
year. Selling, general and administrative expenses increased due to $55,660 in
administrative costs and other expenses related to the sale of the impotence
oral treatment and the conditional amendments (see capital Resources and
Liquidity section above).
Depreciation and amortization was $12,756 in the quarter ended August 31, 1997
versus $3,438 in the same quarter of the prior fiscal year. The increase in
depreciation and amortization results from a $7,678 charge for amortization of
the Other Asset Impotence Technology (see Capital Resources and Liquidity
section above).
Results For Six Months Ended August 31, 1997 As Compared With
Six Months Ended August 31, 1996:
The Company's sales for the six month period ended August 31, 1997 were
$860,024. This represents an increase of $689,232 versus the six month period
ended August 31, 1996. The increase in sales is due to the sale of the
Gamogen's impotence oral treatment for $708,000. The Company's income from
operations was
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$560,708 in the six month period ended August 31, 1997. This compares to a loss
from operations of $72,996 for the same six month period of the previous fiscal
year. Income from operations of $560,708 for the six month period ended August
31, 1997 results primarily from the sale of Gamogen's impotence oral treatment.
The Company's income from operations in the six month period ended August 31,
1997 includes Gyneco's operating loss of $44,377. In the six month period ended
August 31, 1996 the Company's loss from operations included Gyneco's operating
loss of $47,215.
In the six month period ended August 31, 1997, Gamogen's income before income
taxes was $485,844 as compared to income before taxes of $15,469 in the same
six month period of the prior fiscal year. Income before income taxes for the
six month period ended August 31, 1997, resulted from income from operations of
$560,708 offset in part by reversal of licensing income from Maintenance
Payments recorded in the previous fiscal year of $75,000. The credits for
Maintenance Payments of $75,000 result from the sale of Gamogen's impotence
oral treatment (see capital Resources and Liquidity section above). Income
before income taxes for the six month period ended August 31, 1996, resulted
from proceeds of $87,800 from the sale on June 20, 1996 of Zonagen restricted
stock received from Zonagen in accordance with certain non-compete terms of the
Impotence Agreement offset in part by the Company's net loss from operations of
$72,996.
Net income for the six month period ended August 31, 1997 was $460,400. This
compares with net income of $15,469 in the same six month period of the
previous fiscal year. Net income for the six month period ended August 31,
1997, resulted from income before taxes of $485,844, offset in part by the
related provision of $25,444 for income taxes.
The Company's net income per share of common stock was $0.37 for the six month
period ended August 31, 1997. The Company's net income per share of common
stock was $0.01 for the six month period ended August 31, 1996.
Selling, general and administrative expenses were $225,051 for the six month
period ended August 31, 1997 compared to $160,736 in the same six month period
of the prior fiscal year. Selling, general and administrative expenses
increased due primarily to increased administrative costs and other expenses
related to the sale of the impotence oral treatment and the conditional
amendments (see capital Resources and Liquidity section above).
Depreciation and amortization was $24,912 in the six month period ended August
31, 1997 versus $6,876 in the same six month period of the prior fiscal year.
The increase in depreciation and amortization results from a $15,356 charge for
amortization of the Other Asset - Impotence Technology (see Capital Resources
and Liquidity section above).
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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 6, 1997
- ---------------------
Andrew I. Sealfon, President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer October 6, 1997
- ----------------------
Jesse A. Garringer, Executive Vice-President, Secretary,
Director, and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 6,185
<SECURITIES> 0
<RECEIVABLES> 585,798
<ALLOWANCES> 0
<INVENTORY> 172,393
<CURRENT-ASSETS> 766,670
<PP&E> 203,624
<DEPRECIATION> 184,761
<TOTAL-ASSETS> 939,706
<CURRENT-LIABILITIES> 159,955
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 767,451
<TOTAL-LIABILITY-AND-EQUITY> 939,706
<SALES> 860,024
<TOTAL-REVENUES> 860,024
<CGS> 49,353
<TOTAL-COSTS> 299,316
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 485,844
<INCOME-TAX> 25,444
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<NET-INCOME> 460,400
<EPS-PRIMARY> 0.37
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