<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 NOVEMBER 30, 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 November 30, 1997 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, 1997 and November 30, 1996 and February 28,
1997.
Statements of Income - For the three and nine month periods ended November
30, 1997 and November 30, 1996.
Statements of Cash Flows - November 30, 1997 and November 30, 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
<PAGE>
PART I, Item 1 - Financial Statements
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Nov 30,1997 Nov 30,1996 Feb 28,1997
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $472,073 $12,747 $ 1,368
Accounts Receivable 28,355 36,424 23,657
Inventory 165,427 173,766 169,500
Prepaid Expenses 938 11,563 3,960
-------- ------- -------
Total Current Assets 666,793 234,500 198,485
-------- ------- -------
Property, Equipment and Other Assets
Property and Equipment, Net 15,158 28,009 25,954
Other Assets, Net 145,590 173,076 171,693
-------- ------- -------
Total Property, Equip and Other Assets 160,748 201,085 197,647
-------- ------- -------
Total Assets $ 827,541 $ 435,585 $ 396,132
======== ======= =======
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 5,265 $ 3,669 $ 0
Accrued Expenses 44,905 8,635 10,468
Other Liabilities - Due To Affiliate 44,978 118,729 66,314
-------- ------- -------
Total Current Liabilities 95,148 131,033 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) (859,670) (1,287,511) (1,272,713)
--------- ----------- -----------
Total Stockholders' Equity 732,393 304,552 319,350
--------- ----------- -----------
Total Liabilities & Stockholders'
Equity $ 827,541 $ 435,585 $ 396,132
========= =========== ===========
</TABLE>
<PAGE>
Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
-------------------------- -------------------------
Nov 30,1997 Nov 30,1996 Nov 30,1997 Nov 30,1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Net Sales of Products $ 79,107 $ 102,746 $ 231,131 $ 273,538
Sale of Impotence Treatment 0 0 708,000 0
------ ------- ------- -------
79,107 102,746 939,131 273,538
------ ------- ------- -------
Costs and Expenses:
Cost of Goods Sold 29,150 41,552 78,503 117,728
Selling, General and
Administrative 85,163 80,556 310,214 241,292
Depreciation and Amort. 12,287 3,439 37,199 10,315
------- ------- ------- -------
126,600 125,547 425,916 369,335
------- ------- ------- -------
Net Income/(Loss) From
Operations (47,493) (22,801) 513,215 (95,797)
Other Income (Expense):
Licensing - Maint. Payments
(Credits) 0 0 (75,000) 0
Licensing - Non-compete
Payments 0 0 0 87,800
Interest & Other Income 0 359 136 1,024
------- ------- ------- -------
0 359 (74,864) 88,824
------- ------- ------- -------
Net Income/(Loss) Bef.Taxes (47,493) (22,442) 438,351 (6,973)
Provision/(Benefit) For
Income Taxes (137) 0 25,307 0
------- ------- ------- -------
Net Income (Loss) $ (47,356) $ (22,442) $ 413,044 $ (6,973)
======= ======= ======= =======
Net Income (Loss) Per
Common Share $ (.04) $ (.02) $ .34 $ (.01)
======= ======= ======= =======
</TABLE>
<PAGE>
Gamogen, Inc. and Subsidiary
Statements of Cash Flow
For The Nine Months Ended
<TABLE>
<CAPTION>
Nov 30,1997 Nov 30,1996
----------- -----------
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 413,044 (6,973)
Adjustments To Reconcile Net Income
(Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 37,199 10,315
(Increase) Decrease In Prepaid Expenses 3,022 (5,576)
(Increase) Decrease in Accounts
Receivable (4,698) (2,608)
(Increase) Decrease in Inventory 4,073 2,714
Increase (Decrease) in Accounts Payable 5,265 (2,180)
Increase (Decrease) in Accrued Expenses 34,436 6,065
Increase (Decrease) in Other
Liabilities - Due To Affiliate (21,336) 10,559
-------- --------
Cash Provided By (Used In) Operating
Activities 471,005 12,316
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 $ 472,073 $ 12,747
======= ========
</TABLE>
<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 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.
<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 November 30, 1997.
Capital Resources and Liquidity
At November 30, 1997, the Company's cash and cash equivalents balance on a
consolidated basis was $472,073 and net working capital was $571,645. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at November 30, 1996 were $12,747 and $103,467,
respectively. The Company's net loss for the quarter ended November 30,
1997 was $47,356. This compares to the Company's net loss for the quarter
ended November 30, 1996 of $22,442. The Company's net income for the nine
month period ended November 30, 1997 was $413,044. This compares to the
Company's net loss for the nine month period ended November 30, 1996 of
$6,973.
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, 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 countries 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
income. In July 1997 Gamogen received a second maintenance payment of
$75,000 under the conditional amendment.
<PAGE>
In November 1997 Gamogen negotiated with Zonagen for revision to the
Conditional Amendment Number 1 of The Assignment Agreement. In November
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 resulted from the sale of the impotence oral treatment for $708,000
reduced by credits for maintenance payments previously received of
$150,000. Gamogen received payment from Zonagen for the full amount of
this account receivable on October 1, 1997. 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 nine months ended November 30, 1997 amortization
expense of $23,035 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 may be taken over a
shorter period of time. As of January 1, 1998 Zonagen had not received
approval by the US FDA for the marketing of the Oral Treatment.
Historically, the Company derived a significant portion of its funds for
continuing operation as a result of periodic loan advances from an
affiliate. As of November 30, 1997 total outstanding net loan advances from
the affiliate are $44,978 and are included in Other Current Liabilities.
This advance of $44,978 is due by January 15, 1998. 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 balance of $66,314, payment was due on March 1, 1998. Under
terms of the extension agreement Gamogen would have paid an added $5,968
in interest on the $66,314 advance on March 1, 1998 unless, however, if
Gamogen paid the $66,314 advance earlier than March 1, 1998 then the
interest amount will be reduced on a prorata basis. Gamogen paid the
$66,314 balance in full plus accrued interest on October 16, 1997.
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
November 1998. Excluding cash flow from the sale of the impotence
technology, Gamogen's cash flow from operations is anticipated to be
negative through November 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 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 November 30, 1997 As Compared With Three
Months Ended November 30, 1996:
The Company's sales for the quarter ended November 30, 1997 were $79,107.
This represents a decrease of $23,639 versus the quarter ended November
30, 1996. The decrease in sales is due primarily to an unusual export
sale in the quarter ended November 30, 1996 by the Company's subsidiary,
Gyneco. The Company's loss from operations was $47,493 in the quarter ended
November 30, 1997. This compares to a loss from operations of $22,801 for
the same quarter of the previous fiscal year. The Company's loss from
operations in the quarter ended November 30, 1997 includes Gyneco's
operating loss of $26,060. In the quarter ended November 30, 1996 the
Company's loss from operations of $22,801 included Gyneco's operating loss
of $9,835.
<PAGE>
The Company's net loss for the quarter ended November 30, 1997 was $47,356.
This compares with a net loss of $22,442 in the same quarter of the
previous fiscal year. The Company's net loss per share of common stock was
$0.04 in the current fiscal quarter versus a loss per share of $0.02 in the
quarter ended November 30, 1996.
Selling, general and administrative expenses were $85,163 in the current
fiscal quarter compared to $80,556 in the same quarter of the prior fiscal
year. Depreciation and amortization was $12,287 in the quarter ended
November 30, 1997 versus $3,439 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 Nine Months Ended November 30, 1997 As Compared With Nine
Months Ended November 30, 1996:
The Company's sales for the nine month period ended November 30, 1997 were
$939,131. This represents an increase of $665,593 versus the nine month
period ended November 30, 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 $513,215 in the nine month period ended November 30,
1997. This compares to a loss from operations of $95,797 for the same nine
month period of the previous fiscal year. Income from operations of
$513,215 for the nine month period ended November 30, 1997 results
primarily from the sale of Gamogen's impotence oral treatment. The
Company's income from operations in the nine month period ended November
30, 1997 includes Gyneco's operating loss of $70,415. In the nine month
period ended November 30, 1996 the Company's loss from operations of
$95,797 included Gyneco's operating loss of $57,051.
In the nine month period ended November 30, 1997, Gamogen's income before
income taxes was $438,351 as compared to a loss before taxes of $6,973 in
the same nine month period of the prior fiscal year. Income before income
taxes for the nine month period ended November 30, 1997, resulted
primarily from income from operations of $513,215 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). The loss before income
taxes for the nine month period ended November 30, 1996, resulted
primarily from the Company's net loss from operations of $95,797, offset in
part by proceeds of $87,800 from the sale of Zonagen restricted stock
received from Zonagen in accordance with the terms of the Impotence
Agreement.
Net income for the nine month period ended November 30, 1997 was $413,044.
This compares with a net loss of $6,973 in the same nine month period of
the previous fiscal year. Net income for the nine month period ended
November 30, 1997, resulted from income before taxes of $438,351, offset in
part by the related provision of $25,307 for income taxes. The Company's
net income per share of common stock is $0.34 for the nine month period
ended November 30, 1997. The Company's net loss per share of common stock
was $0.01 for the nine month period ended November 30, 1996.
Selling, general and administrative expenses were $310,214 for the nine
month period ended November 30, 1997 compared to $241,292 in the same nine
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 $37,199 in the nine month period ended
November 30, 1997 versus $10,315 in the same nine month period of the prior
fiscal year. The increase in depreciation and amortization results from
$23,035 in charges for amortization of the Other Asset - Impotence
Technology (see Capital Resources and Liquidity section above).
<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, 1998
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board, Director, and Chief Executive Officer
/s/ Jesse A. Garringer January 8,1998
Jesse A. Garringer, Executive Vice-President,
Secretary, Director, and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-30-1997
<CASH> 472,073
<SECURITIES> 0
<RECEIVABLES> 28,355
<ALLOWANCES> 0
<INVENTORY> 165,427
<CURRENT-ASSETS> 666,793
<PP&E> 203,624
<DEPRECIATION> 188,466
<TOTAL-ASSETS> 827,541
<CURRENT-LIABILITIES> 95,148
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 720,093
<TOTAL-LIABILITY-AND-EQUITY> 827,541
<SALES> 939,131
<TOTAL-REVENUES> 939,131
<CGS> 78,503
<TOTAL-COSTS> 425,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 438,351
<INCOME-TAX> 25,307
<INCOME-CONTINUING> 413,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 413,044
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
