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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 MAY 31, 1997
Commission File Number 0-15382
GAMOGEN, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13-3341562.
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24 Carpenter Road, Chester, NY, 10918
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(Address of principal executive offices) (Zip Code)
(914) 469-2042
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(Registrant's telephone number, including area code)
17 Industrial Place, Middletown, NY, 10940
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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 May 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 - May 31, 1997 and May 31, 1996 and February 28, 1997.
Statements of Operations - For the three month period ended May 31, 1997 and
May 31, 1996. Statements of Cash Flows - May 31, 1997 and May 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>
May 31, 1997 May 31, 1996 Feb 28, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 1,932 $ 91,138 $ 1,368
Accounts Receivable 81,264 34,964 23,657
Inventory 174,802 180,611 169,500
Prepaid Expenses 1,578 21,826 3,960
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Total Current Assets 259,576 328,539 198,485
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Property, Equipment and Other Assets
Property and Equipment, Net 22,258 32,120 25,954
Other Assets, Net 163,233 175,841 171,693
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Total Property, Equipment and Other Assets 185,491 207,961 197,647
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Total Assets $ 445,067 $ 536,500 $ 396,132
=========== =========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 1,335 $ 2,071 $ 0
Accrued Expenses 3,092 16,426 10,468
Other Liabilities - Due To Affiliate 116,153 148,462 66,314
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Total Current Liabilities 120,580 166,959 76,782
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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 1,579,723 1,579,723 1,579,723
Capital
Accumulated (Deficit) (1,267,576) (1,222,522) (1,272,713)
----------- ----------- -----------
Total Stockholders' Equity 324,487 369,541 319,350
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Total Liabilities and Stockholders' Equity $ 445,067 $ 536,500 $ 396,132
=========== =========== ===========
</TABLE>
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Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
For The Three Months Ended
<TABLE>
<CAPTION>
May 31, 1997 May 31, 1996
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<S> <C> <C>
Sales $ 74,478 $ 85,567
Costs and Expenses:
Cost of Goods Sold 21,374 36,409
Selling, General and Administrative 85,903 75,652
Depreciation and Amortization 12,156 3,438
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119,433 115,499
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Net Income (Loss) From Operations (44,955) (29,932)
Other Income (Expense):
Licensing Income 50,000 87,800
Interest & Other Income 92 148
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50,092 87,948
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Net Income $ 5,137 $ 58,016
========= =========
Net Income (Loss) Per Common Share $ 0.00 $ 0.05
========= =========
</TABLE>
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Gamogen, Inc. and Subsidiary
Statements of Cash Flow
For The Three Months Ended
<TABLE>
<CAPTION>
May 31, 1997 May 31, 1996
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<S> <C> <C>
Cash Flow From Operating Activities:
Net Income 5,137 58,016
Adjustments To Reconcile Net Income (Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 12,156 3,438
(Increase) Decrease In Prepaid Expenses 2,382 (15,838)
(Increase) Decrease in Accounts Receivable (57,607) (1,148)
(Increase) Decrease in Inventory (5,302) (4,131)
Increase (Decrease) in Accounts Payable 1,335 (3,778)
Increase (Decrease) in Accrued Expenses (7,376) 13,856
Increase (Decrease) in Other Liabilities - Due To Affiliate 49,839 40,292
-------- --------
Cash Provided By (Used In) Operating Activities 564 90,707
Cash and Cash Equivalents - Beginning of Year 1,368 431
-------- --------
Cash and Cash Equivalents - End of Period $ 1,932 $ 91,138
======== ========
</TABLE>
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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 May 31, 1997.
Capital Resources and Liquidity
At May 31, 1997, the Company's cash and cash equivalents balance on a
consolidated basis was $1,932 and net working capital was $138,996. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at May 31, 1996 were $91,138 and $161,580, respectively. The
Company's net income for the quarter ended May 31, 1997 was $5,137. This
compares to the Company's net income for the quarter ended May 31, 1996 of
$58,016.
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
as follows payable in cash to Gamogen. Future product royalties payable to
Gamogen under the Impotence Agreement are equal to 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.
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). 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 the terms
of the Impotence Agreement. On June 10, 1996 the Company received an offer of
$4.50 per share, a total of $87,800, on the 19,512 restricted shares from a
small group of private investors. This price was approximately 50% of the then
NASDAQ market price for Zonagen, Inc. common stock. On June 20, 1996 the
Company sold the 19,512 restricted shares to the same group of private
investors for $87,800.
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
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regulatory approval for and commence marketing of the Oral Treatment.
The Option is conditioned on the payment to Gamogen of one of the following
amounts ("Option Price") less any Maintenance Payments (see below) received by
Gamogen pursuant to the conditional amendment:
(i) if the Option is exercised on or before January 24, 1998, $750,000;
(ii) if the Option is exercised after January 24, 1998 but on or before January
24, 1999, $1,000,000; (iii) if the Option is exercised after January 24, 1999
but on or before July 24, 1999, $1,500,000; (iv) if the Option is exercised
after July 24, 1999 but before the expiration of the Option, $1,750, 000.
Under the conditional amendment Zonagen is granted the option for a period of
three years ending January 24, 2000, however, Gamogen may terminate the Option
prior to January 24, 2000 if Zonagen fails to make any of 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, with the final payment due on July 24, 1999.
On January 24, 1997 the Company received from Zonagen the initial Maintenance
Payment of $75,000. As a result of the sale on June 20, 1996 of the 19,512
restricted Zonagen shares for $87,800 and receipt of the initial maintenance
payment of $75,000 on January 24, 1997 the Company recorded licensing income of
$162,800 for the year ended February 1997.
As of May 19, 1997 Zonagen had not received approval by the US FDA or approvals
in other countries for the marketing of Vasomax (the Oral Treatment). 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. As of May 19, 1997 the Company has
not received any royalty payments under the Impotence Agreement. The Company
does not anticipate royalty payments under the Impotence Agreement from Zonagen
within the next 12 months, with the exception, subject to the Option, of
possible royalty payments by Zonagen resulting from the sale of the Oral
Treatment in Mexico. Although there can be no guarantee concerning Maintenance
Payments under the Option, the Company does anticipate Maintenance Payments
from Zonagen of $150,000 within the next 12 months.
As discussed in the Company's form 10-KSB Annual Report for the year ended
February 28, 1997, the Company will amortize its Other Asset - Impotence
Technology of $153,567 beginning in the fiscal year ending February 28, 1998.
In the 3 months ended March 31, 1997 amortization expense of $7,678 is included
in Depreciation and Amortization to reflect amortization of the Other Asset -
Impotence Technology of $153,567. This amortization is based on the anticipated
schedule of the FDA review of the Oral Treatment. If the Oral Treatment is
approved by the FDA, amortization will be taken over a shorter period of time.
The Company derived a significant portion of its funds for continuing operation
as a result of loan advances from an affiliate. As of May 31, 1997 total
outstanding net loan advances from the affiliate are $116,153 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 May 31, 1997, additional net loan advances from the
affiliate were $49,839, which is due on July 31, 1997. Gamogen anticipates
paying by July 31, 1997 the net loan advances from the affiliate of $49,839.
Gamogen's cash flow from operations is expected to be sufficient to enable it
to meet its total net cash requirements through February 1998, however, the
Company anticipates that it will continue to rely on loan advances from an
affiliate to fund
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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, 1998 for full payment of the net loan advance amount of $66,314 due on
March 1, 1998 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 1998 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.
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 the Company's
affiliate continuing to make loan advances to the Company or to grant an
extension beyond March 1, 1998 for full payment of the amount owed of $66,314
if unpaid, Zonagen's inability or refusal to pay the Maintenance Payments,
Zonagen's exercise of the Option, approval of, sale of or royalties earned from
the Oral Treatment, other unexpected increases or decreases in sales of the
Company's products, and uncertainty related to 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 May 31, 1997 As Compared With Three Months Ended
May 31, 1996:
The Company's sales for the quarter ended May 31, 1997 were $74,478. This
represents an decrease of $11,089 or 13% versus the quarter ended May 31, 1996.
The Company's loss from operations was $44,955 in the quarter ended May 31,
1997. This compares to a loss from operations of $29,932 for the same quarter
of the previous fiscal year. The increase in the Company's loss from operations
results primarily from amortization of the Company's Other Asset - Impotence
Technology and increased operating losses by its subsidiary, Gyneco. The
Company's loss from operations in the quarter ended May 31, 1997 includes
Gyneco's operating loss of $23,083. In the quarter ended May 31, 1996 the loss
from operations included Gyneco's operating loss of $17,192.
Net income for the quarter ended May 31, 1997 was $5,137. This compares to the
net income for the quarter ended May 31, 1996 of $58,016. The Company's net
income for the quarters ended May 31, 1997 and May 31, 1996 result primarily
from licensing income from the Company's Impotence Agreement with Zonagen. The
Company's net income per share of common stock was $0.00 in the current fiscal
quarter versus income per share of $0.05 in the quarter ended May 31, 1996.
Selling, general and administrative expenses were $85,903 in the current fiscal
quarter compared to $75,652 in the same quarter of the prior fiscal year.
Depreciation and amortization was $12,156 in the quarter ended May 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 initiated beginning March 1, 1997 (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 July 14, 1997
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and Chief
Executive Officer
/s/ Jesse A. Garringer July 14, 1997
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Jesse A. Garringer, Executive Vice-President,
Secretary, Director, and Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> MAY-31-1997
<CASH> 1,932
<SECURITIES> 0
<RECEIVABLES> 81,264
<ALLOWANCES> 0
<INVENTORY> 174,802
<CURRENT-ASSETS> 259,576
<PP&E> 203,324
<DEPRECIATION> 181,066
<TOTAL-ASSETS> 445,067
<CURRENT-LIABILITIES> 120,580
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 312,187
<TOTAL-LIABILITY-AND-EQUITY> 445,067
<SALES> 74,478
<TOTAL-REVENUES> 74,478
<CGS> 21,374
<TOTAL-COSTS> 119,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,137
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,137
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
