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 NOVEMBER 30, 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.
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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 November 30, 1996 the registrant had outstanding 1,230,000 shares of Common
Stock, $.01 par value.
<PAGE>
PART I
- ------
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - November 30, 1996 and November 30, 1995 and February 29, 1996.
Statements of Operations - For the three and nine months periods ended November
30, 1996 and November 30, 1995. Statements of Cash Flows - November 30, 1996
and November 30, 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
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOV 30, 1996 NOV 30, 1995 FEB 29, 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 12,747 $ 8,670 $ 431
Accounts Receivable 36,424 33,241 33,816
Inventory 173,766 157,036 176,480
Prepaid Expenses 11,563 13,487 5,987
----------- ------------ -----------
Total Current Assets 234,500 212,434 216,714
----------- ------------ -----------
PROPERTY, EQUIPMENT AND OTHER ASSETS
Property and Equipment, Net 28,009 36,232 34,176
Other Assets, Net 173,076 178,606 177,224
----------- ------------ -----------
Total Property, Equipment and Other Assets 201,085 214,838 211,400
----------- ------------ -----------
TOTAL ASSETS $ 435,585 $ 427,272 $ 428,114
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 3,669 $ 4,708 $ 5,849
Accrued Expenses 8,635 20,499 2,570
Other Liabilities - Due To Affiliate 118,729 43,611 108,170
----------- ------------ -----------
Total Current Liabilities 131,033 68,818 116,589
----------- ------------ -----------
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) (1,287,511) (1,233,609) (1,280,538)
----------- ------------ -----------
Total Stockholders' Equity 304,552 358,454 311,525
----------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 435,585 $ 427,272 $ 428,114
=========== ============ ===========
</TABLE>
3
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------- -------------------------------
NOV 30,1996 NOV 30,1995 NOV 30,1996 NOV 30,1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $102,746 $ 99,200 $273,538 $312,827
COSTS AND EXPENSES:
Cost of Goods Sold 41,552 36,314 117,728 121,636
Selling, General and Administrative 80,556 96,714 241,292 245,156
Depreciation and Amortization 3,439 3,438 10,315 10,778
-------- --------- --------- --------
125,547 136,466 369,335 377,570
-------- --------- --------- --------
Net Income (Loss) From Operations (22,801) (37,266) (95,797) (64,743)
OTHER INCOME (EXPENSE):
Licensing Income 0 0 87,800 0
Interest & Other Income 359 107 1,024 394
-------- --------- --------- --------
359 107 88,824 394
-------- --------- --------- --------
NET INCOME (LOSS) $(22,442) $ (37,159) $ (6,973) $(64,349)
======== ========= ========= ========
NET INCOME (LOSS) PER COMMON SHARE $ (0.02) $ (0.03) $ (0.01) $ (0.05)
======== ========= ========= ========
</TABLE>
4
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
NOV 30, 1996 NOV 30, 1995
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Income (Loss) from Operations $ (95,797) $ (64,743)
Non-Operating Income 88,824 394
---------- ----------
Net Income (Loss) (6,973) (64,349)
Adjustments To Reconcile Net Income (Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 10,315 10,778
(Increase) Decrease In Prepaid Expenses (5,576) (7,476)
(Increase) Decrease in Accounts Receivable (2,608) (4,945)
(Increase) Decrease in Inventory 2,714 (21,896)
(Increase) Decrease in Other Assets 0 0
Increase (Decrease) in Accounts Payable (2,180) 3,598
Increase (Decrease) in Accrued Expenses 6,065 7,027
Increase (Decrease) in Other Liabilities - Due To Affiliate 10,559 31,922
---------- ----------
Cash Provided By (Used In) Operating Activities 12,316 (45,341)
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Cash and Cash Equivalents - Beginning of Year 431 54,011
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 12,747 $ 8,670
========== ==========
</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
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GAMOGEN, INC. AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations for use with 10-QSB for
Quarter Ended November 30, 1996.
CAPITAL RESOURCES AND LIQUIDITY
At November 30, 1996, the Company's cash and cash equivalents balance on a
consolidated basis was $12,747 and net working capital was $103,467. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at November 30, 1995 were $8,670 and $143,616, respectively.
The Company's net loss for the quarter ended November 30, 1996 was $22,442.
This compares to the Company's net loss for the quarter ended November 30, 1995
of $37,159. The Company's net loss for the nine months ended November 30, 1996
was $6,973, which included licensing income of $87,800 (see below). This
compares to the Company's net loss for the same period ended November 30, 1995
of $64,349. The Company did not have any licensing income in the nine month
period ended November 30, 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 November 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, November 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 November 30, 1996 total
outstanding net loan advances from the affiliate are $118,729 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 November 30, 1996, additional net loan
advances from the affiliate were $10,559, which is due on January 15, 1997.
Gamogen anticipates paying by January 15, 1997 the net loan advances from the
affiliate of $10,559. 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 NOVEMBER 30, 1996 AS COMPARED WITH THREE MONTHS
ENDED NOVEMBER 30, 1995:
The Company's sales for the quarter ended November 30, 1996 were $102,746.
This represents an increase of $3,546 or 4% versus the quarter ended November
30, 1995, due primarily to increased export sales. The Company's loss from
operations was $22,801 in the quarter ended November 30, 1996. This compares
to a loss from operations of $37,266 for the same quarter of the previous
fiscal year. The Company's loss from operations in the quarter ended November
30, 1996 includes Gyneco's loss from operations of $9,835. In the quarter
ended November 30, 1995 the loss from operations included income from
operations by Gyneco of $24,671. For the quarter ended November 30, 1996 as
compared to the quarter ended November 30, 1995, Gyneco's loss from operations
decreased due primarily to decreased selling, general and administrative
expenses and increased sales.
The Company's net loss for the quarter ended November 30, 1996 was $22,442.
This compares to the Company's net loss for the quarter ended November 30, 1995
of $37,159. The Company's net loss for the quarters ended November 30, 1996 and
November 30, 1995 result primarily from the Company's losses from operations.
The Company's net loss per share of common stock was $0.02 in the current
fiscal quarter versus a loss per share of $0.03 in the quarter ended
November 30, 1995.
Selling, general and administrative expenses were $80,556 in the current fiscal
quarter compared to $96,714 in the same quarter of the prior fiscal year.
Depreciation and amortization was $3,439 in the quarter ended November 30, 1996
versus $3,438 in the same quarter of the prior fiscal year.
9
<PAGE>
RESULTS FOR NINE MONTHS ENDED NOVEMBER 30, 1996 AS COMPARED WITH NINE MONTHS
ENDED NOVEMBER 30, 1995:
The Company's sales for the nine months ended November 30, 1996 were $273,538.
This represents a decrease of $39,289 or 13% versus the nine months ended
November 30, 1995. The Company's loss from operations was $95,797 in the nine
months ended November 30, 1996. This compares to a loss from operations of
$64,743 for the same nine month period of the previous fiscal year. The
Company's loss from operations in the nine months ended November 30, 1996
includes Gyneco's loss from operations of $57,051. In the nine months ended
November 30, 1995 the loss from operations included income from operations by
Gyneco of $28,428. For the nine month period ended November 30, 1996 as
compared to the same period ended November 30, 1995, Gyneco's loss from
operations increased due primarily to lower sales, increased production labor
costs, and increased interest expense.
The Company's net loss for the nine months ended November 30, 1996 was $6,973.
This compares to the Company's net loss for the nine months ended November 30,
1995 of $64,349. The decrease in the Company's net loss for the nine months
ended November 30, 1996 as compared to the net loss for same period ended
November 30, 1995, 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 per share of
common stock was $0.01 in the current fiscal nine months versus a loss per
share of $0.05 in the nine months ended November 30, 1995.
Selling, general and administrative expenses were $241,292 in the nine months
ended November 30, 1996 and were $245,156 in the same period of the prior
fiscal year. Depreciation and amortization was $10,315 in the nine months ended
November 30, 1996 versus $10,778 in the same nine 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
- ------------------------------------------ January 8, 1997
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer
- ------------------------------------------ January 8, 1997
Jesse A. Garringer
Executive Vice-President, Secretary,
Director, and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<CASH> 12,747
<SECURITIES> 0
<RECEIVABLES> 36,424
<ALLOWANCES> 0
<INVENTORY> 173,766
<CURRENT-ASSETS> 234,500
<PP&E> 203,324
<DEPRECIATION> 175,315
<TOTAL-ASSETS> 435,585
<CURRENT-LIABILITIES> 131,033
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 292,252
<TOTAL-LIABILITY-AND-EQUITY> 435,585
<SALES> 273,538
<TOTAL-REVENUES> 273,538
<CGS> 117,728
<TOTAL-COSTS> 369,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,973)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,973)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,973)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
