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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT
Pursuant to sections 13 or 15(d) of The Securities Exchange Act of 1934
For the fiscal year ended February 28, 1998
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.)
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24 Carpenter Road, Chester, NY, 10918
(Address of principal executive offices) (Zip Code)
(914) 469-2042
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(Registrant's telephone number, including area code)
Securities registered or to be registered pursuant to Section l2(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form
10-KSB or any amendment to this form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year: $1,016,392.
At February 28, 1998, the aggregate market value of the voting stock of the
registrant held by non-affiliates was approximately $15,924.
At February 28, 1998, the registrant had outstanding 1,230,000 shares of
Common Stock, $.01 par value.
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PART I
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Item 1. Business
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History of the Company
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Gamogen, Inc. (the "Company") was incorporated under the laws of the State
of New York, on March 17, 1986, by its parent company, Repro-Med Systems,
Inc. ("Repro-Med") for the purpose of acquiring, developing and marketing
three new medical products for use in the treatment of impotence. In
September 1986, the Company acquired by assignment from Repro-Med, Dr.
Adrian Zorgniotti, and Andrew Sealfon, all rights to an injectable drug
combination treatment for male impotence and two related products: a drug
intermixing delivery system and an implantable prosthesis for dispensing
drugs at a purchase price of $300,000. The assignment of these three
products included rights to all related technology and products. On
December 17, 1986, the Company completed a public offering of 400,000 units
consisting of one share of common stock and one warrant to purchase one-
half share of common stock at an offering price of $5.25 per unit or an
aggregate consideration of $2,100,000. The net proceeds to the Company,
after deduction of discounts, commissions and other expenses of the
offering were approximately $1,656,000.
On May 27, 1987, the Company acquired the rights to certain gynecological
products which it assigned to its Gyneco, Inc. ("Gyneco") subsidiary which
immediately commenced manufacturing and marketing a line of gynecological
products. (See "Gynecological Products").
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.
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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.
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 September 30, 1997 Gamogen received payment from
Zonagen for $558,000 which resulted from the sale of the impotence oral
treatment for $708,000 reduced by credits for maintenance payments
previously received of $150,000. As a result of this payment Zonagen has
exercised the Option and Gamogen has effectively sold its interest in this
product and 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.
Further work on Gamogen's 2-drug injectable impotence treatment program has
been deferred due to funding constraints. As discussed in Gamogen's form 10-
KSB Annual Report for the year ended February 28, 1997, Gamogen, beginning
March 1997, initiated the amortization, over a five-year period, of its
Other Asset - Impotence Technology of $153,567 related to Gamogen's 2-drug
injectable impotence treatment program. This amortization is based on the
anticipated FDA review schedule of the Oral Treatment. If the Oral
Treatment was earlier approved by the FDA, then the amortization of these
costs would be taken over a shorter period of time. As of May 9, 1998 the
Oral Treatment has not been approved by the FDA. However, on March 27, 1998
an orally administered drug similar to the Oral Treatment was approved by
the FDA. This similar orally administered drug ("Viagra") is manufactured
and marketed by Pfizer, Inc. under the tradename Viagra. Since its
introduction, Viagra has been very successful, accounting for 95% of new
prescriptions for the treatment of impotence. Due to the approval and
subsequent acceptance of Viagra, Gamogen recorded other expense of $153,567
for Research and Technology - Impotence Technology, in the fiscal year
ended February 28, 1998 to reflect the amortization of its Other Asset -
Impotence Technology.
Repro-Med, the controlling shareholder of the Company, owns 58.3% of the
Company's Common Stock. Repro-Med, a public corporation, was organized in
1980 and is currently manufacturing and marketing medical devices for the
treatment of male infertility, male impotence, emergency airway management,
and intravenous infusion. Repro-Med's President and Chairman and
controlling shareholder is Andrew I. Sealfon. Mr. Sealfon also serves as
Chairman of the Board and President of the Company.
Company Products
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Gynecological Products
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On May 27, 1987, the Company acquired the gynecological products of Lukens
Corporation of New Jersey for a cash purchase price of $550,000. The
acquisition included the proprietary rights to several gynecological
products including the Masterson Endometrial Biopsy System, the Gyneco
Thermal Cautery System for tubal ligation and certain manufacturing
equipment and inventory related to these products. The Company transferred
the assets acquired to its wholly-owned subsidiary, Gyneco, Inc.
The Masterson Endometrial Biopsy System is a device for performing in-
office biopsy sampling procedures. The Masterson Endometrial Biopsy System
can provide essential tissue samples for
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diagnosis of infertility, menstrual disorders, bleeding, hormonal therapy,
and screening for
abnormal cytology. The system is composed of a non-electric vacuum pump
which is easily operated with one hand and sterile individual procedure
trays containing a sized metal curette, fixative cup, cap and label.
The Gyneco Thermal Cautery System was designed to provide a safe, reliable
and effective method for female sterilization. The Gyneco Thermal Cautery
Unit provides low voltage coagulation via a rechargeable battery. In using
the Gyneco Thermal Cautery System, the fallopian tube is retracted by use
of a wire hook into a Teflon shield for safe coagulation and transsection
during the procedure. The acceptance of tubal sterilization has been
greatly influenced by the refinements of instrumentation and techniques
after the introduction of laparoscopy. The endoscopic approach to
sterilization constitutes a simple, safe and effective technique that can
be used without prolonged hospitalization. Research efforts in the field of
female sterilization have focused on methods that provide simplicity,
safety and effectiveness. The Gyneco Thermal Cautery System seems to meet
most of these criteria.
Impotency Products
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Oral Treatment for Male Impotence
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On May 27, 1987, the Company acquired the rights to certain gynecological
products which it assigned to its Gyneco, Inc. ("Gyneco") subsidiary which
immediately commenced manufacturing and marketing a line of gynecological
products. (See "Gynecological Products").
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
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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.
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 September 30, 1997 Gamogen received payment from
Zonagen for $558,000 which resulted from the sale of the impotence oral
treatment for $708,000 reduced by credits for maintenance payments
previously received of $150,000. As a result of this payment Zonagen has
exercised the Option and Gamogen has effectively sold its interest in this
product and is not entitled to further payments under the Assignment
Agreement and its amendments.
Injectable Drug Combination Treatment System
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The Company's injectable drug combination combines specific quantities of
two prescription drugs which are currently labeled for other indications,
papaverine hydrochloride and phentolamine mesylate. The drug combination
was tested in over 300 patients by Dr. Zorgniotti between 1984 and 1993 and
had been successful in approximately 80% of the cases. Observed side
effects of the drug combination consists of pharmacological reversible
prolonged erection and development of fibrotic changes of the corpus
cavernosum which do not appear to interfere with the function of the drug
but could impair the ability to insert a prosthesis at a future date.
Papaverine hydrochloride alone is now being used in the treatment of
impotence by some physicians.
The Company signed an agreement in January 1988 granting Humagen, Inc.
("Humagen") the exclusive right to market Gamogen's injectable impotence
product in the United States. On August 21, 1989, Humagen and Gamogen
terminated this agreement subject to Humagen's rights to certain royalties
on the future sales of the Company's Injectable Drug Combination Treatment.
Management believes that the Company's injectable drug combination has some
commercial potential, however, due to the significant direct investment
required, the Company has suspended spending on this program. The Company
has not been successful in securing a new partner to continue the
development of the injectable drug combination. There can be no assurance
that a new partner will be secured or if secured that a new partner would
be successful in commercializing the product.
Since spending on the injectable drug combination product has been
suspended, the Company has discontinued development of its two accessory
products: the drug intermixing delivery system and the implantable
dispensing prosthesis, including discontinuing support of their related
patents.
As discussed in Gamogen's form 10-KSB Annual Report for the year ended
February 28, 1997, Gamogen, beginning March 1997, initiated the
amortization, over a five-year period, of its Other Asset - Impotence
Technology of $153,567 related to Gamogen's 2-drug injectable impotence
treatment program. This amortization was based on the anticipated FDA
review schedule of the Oral Treatment. If the Oral Treatment was earlier
approved by the FDA, then the amortization of these costs would be taken
over a shorter period of time. As of May 9, 1998 the Oral Treatment has not
been approved by the FDA. However, on March 27, 1998 an orally administered
drug similar to the Oral Treatment was approved by the FDA. This similar
orally administered drug is manufactured and marketed by Pfizer, Inc. under
the tradename Viagra. Since its introduction, Viagra has been very
successful, accounting for 95% of new prescriptions for the treatment of
impotence. Due to the approval and subsequent acceptance of Viagra, Gamogen
recorded other expense of $153,567 for Research and Technology - Impotence
Technology, in the fiscal year ended February 28, 1998, to reflect the
amortization of its
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Other Asset - Impotence Technology.
Patents
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The Company had conducted limited research into a device for amniocentesis
to improve the sensitivity of the assay. The device was designed to permit
amniocentesis, a process by which the genetic disposition of a fetus is
determined, to be obtained at a much earlier stage in a pregnancy. The US
Patent Office issued Patent Number 5,000,192 for a Prenatal Specimen
Collection Method on March 19,1991.
The patent position of companies such as Gamogen generally is highly
uncertain and involves complex legal and factual questions. Accordingly,
there can be no assurance that patent applications relating to the
Company's products or technology will result in patents being issued or
that, if issued, the patents will afford protection against competitors
with similar technology. Moreover, some patent licenses held may be
terminated upon the occurrence of certain events or become non-exclusive
after a specified period. There can be no assurance that the Company will
have the financial resources necessary to enforce any patent rights it may
hold.
Government Regulation
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The development, testing, production and marketing of the Company's
products are subject to regulation by the FDA and the New York State
Department of Health, and may be subject to further FDA regulation as
devices under 1976 Medical Device Amendments to the Federal Food, Drug and
Cosmetic Act. Additionally, the Company's products may be subject to
regulation by similar agencies in other states and foreign countries. All
the Company's currently marketed products have received the necessary FDA
approvals for marketing in the US. The FDA reviews all devices regulated
within its domain, and may require additional testing, clinical trials, or
create other regulatory action which may adversely affect the Company's
ability to market its medical products. One of the Company's gynecological
products, the Thermal Cautery System, was approved by a grandfather
provision of the FDA regulations having been in use prior to the Device Act
of 1976, and therefore may at the FDA's direction require recertification
under the Pre-Market Approval Application (PMA) to permit continued
marketing. The FDA's PMA process may be costly and may not be cost
effective when applied to products with limited market share and annual
revenues.
Marketing
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Sales of the Masterson Biopsy System were $60,373 and decreased $18,984 or
24% in the year due to continued erosion of the market for this device in
the US due to competition from more convenient lower cost devices. Sales of
Thermal Cautery System products were $215,581 and increased $13,674 in the
current fiscal year. Marketing programs for Gyneco's gynecological products
have been investigated and may be implemented as Gyneco financial resources
allow. There can be no guarantee that these programs, if pursued, will
prevent erosion of sales nor increase sales over present levels.
Although no individual customer, either physician, hospital or group of
hospitals under common control accounts for a significant portion of sales
of gynecological products, one hospital group accounted for 11% of sales of
such products for the fiscal year ended February 28, 1998 and 10% for the
fiscal year ended February 28, 1997.
Manufacturing
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The Company and its subsidiary, Gyneco, assemble and test the products at a
facility in Chester, NY which is owned by Repro-Med. Gyneco purchases the
parts required to manufacture its gynecological products from various
vendors. The Company believes that it obtains a better price by purchasing
certain parts from a single vendor. Certain injection molded parts are
produced with tooling owned by the Company, which believes that it could
locate an
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alternate source of supply by transferring the tooling to one of numerous
injection molding vendors. Raw materials for molding of the Company's
gynecological products are available from multiple sources at competitive
prices. The Company currently assembles its disposable products and
processes them for sterilization with an outside contractor.
Research & Development
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Due to limited financial resources, the Company curtailed research and
development and patent approval work on its Impotence Drug Combination. As
a result of the approval and subsequent acceptance of Viagra (see History
of the Company section above), the Company has decided to suspend
development of its Impotence Drug Combination product. The Company
continues to seek a partner for development of this product.
Agreements with Repro-Med
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The Company has agreements with Repro-Med for the lease of manufacturing,
warehouse and office space at Repro-Med's Chester, NY facility and
reimbursement of payroll and other operating expenses based on actual and
estimated payroll allocations, occupancy and equipment utilization.
For the fiscal year ended February 28, 1998, on a combined basis, the
Company and it's subsidiary Gyneco paid Repro-Med facility lease payments
of $12,528. The Company's subsidiary Gyneco has an agreement with Repro-
Med for the use of certain tooling owned by Gyneco (see item 12). Under
this agreement Repro-Med paid to Gyneco $33,038 in the fiscal year ended
February 1998 versus $62,776 in the fiscal year ended February 1997. The
reason for the decline in payments under this agreement, in the current
fiscal year, is the decline in sales of OEM products to Osbon.
Hourly and management compensation costs are paid by Repro-Med and
allocated to Gamogen and Gyneco based on agreements for the reimbursement
of operating expenses. Salary and payroll related costs are allocated based
on individual employee time-card reporting. Executive salary and payroll
related costs are allocated based on estimates of time spent in the
management of the three companies. For the fiscal year ended February 1998,
on total salary costs of $1,012,820, these allocations averaged as follows:
Repro-Med 82%, Gyneco 16%, and Gamogen 2%. This compares to total salary
costs of $923,196 for the fiscal year ended February 1997 which were
allocated as follows: Repro-Med 74%, Gyneco 24%, and Gamogen 2%. Incentive
bonuses are paid based on a percentage of consolidated income before taxes
for management on a percentage of Gamogen consolidated income after tax for
executives. Bonuses accrued by Gamogen for the fiscal year ended February
1998 were $27,100. No bonuses were accrued in the fiscal year ended
February 1997 due to minimal earnings.
Product Liability Insurance
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The Company could be exposed to possible claims for personal injury
resulting from the sale of allegedly defective gynecological products. The
Company has obtained product liability insurance in an amount customary in
the medical device industry for its gynecological products. However, there
is no assurance that this insurance will be sufficient to cover judgments
which might be entered against the subsidiary.
Competition
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Endometrial biopsy is a fast, reliable, safe and simple physician-office
based procedure. It is felt to be a cost-effective alternative to dilation
and curettage (D&C) which, although reliable in diagnosing intrauterine
abnormalities, is typically performed in a hospital operating-room setting
utilizing general anesthesia.
Competitors to Gyneco's Masterson Biopsy System for endometrial biopsy
include the following disposable single-patient devices: Pipelle Vacuum
Curette, Vabra Aspirator, and Tis-U-Trap
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system. Some physicians continue to use traditional stainless steel biopsy
instruments which are available from a number of manufacturers. Stainless
steel biopsy instruments are much less convenient but can be sterilized and
reused many times.
Imported from France, the Pipelle is a very inexpensive device combining a
flexible plastic tube 3mm in diameter with a small port near the tip.
After inserting the device, suction is generated by manually withdrawing a
locking plunger. As the plunger is withdrawn a sample column of tissue is
suctioned into the tube. The tube is then withdrawn. Due to it's low cost
and convenience the Pipelle is the leading device for use in outpatient
endometrial biopsy procedures. Numerous devices similar to the Pipelle,
including the Z-Sampler, are also available in the marketplace at prices
competitive with the Pipelle.
The Vabra Aspirator and Tis-U-Trap, similar to the Masterson, are ideal
when the physician needs larger specimen samples. Both feature plastic
cannula and a tissue collection chamber but require an external source of
suction, typically a portable electric vacuum pump.
The Gyneco Thermal Cautery System provides a simple, quick, and effective
transection and coagulation of the fallopian tubes. There are three main
surgical device systems which compete with Gyneco's Thermal Cautery System.
The first of these are bipolar cauterization systems, which include a
generator and reusable forceps, and can be acquired from a number of
manufacturers. Bipolar cauterization systems accomplish transection and
electrocoagulation through the use of alternating current arcing to heat
and destroy tissue. These systems are also used in surgery on a routine
basis for the elimination of tissue. The remaining two device systems use
mechanical occlusion to effect a tubal sterilization. Mechanical Occlusion
tubal sterilization involves permanently attaching a number of small
mechanical devices using a specialized forceps-like instrument to occlude
portions of each fallopian tube. The two systems are the Hulka Clip and the
Yoon Falope Ring. The Hulka Clip consists of a plastic clamp and fastening
spring. Use of the Hulka Clip requires specialty forceps called a "clip
applicator" and a number of the single-use Hulka Clips. The Hulka Clip is
marketed by Richard Wolf Medical Devices Corporation, Vernon Hills, IL. The
Yoons Falope Ring method consists of a silicone rubber ring which is
applied to a "loop" formed from the fallopian tube. Similar to the Hulka
Clip, use of the Yoons Falope Ring requires a specialty forceps-like
applicator. The Yoon Falope Ring system is marketed by Cabot Medical
Corporation, Langhorne, PA.
Employee Incentive Stock Option Plan
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The Company's Board of Directors and shareholders have approved an
Incentive Stock Option Plan ("the Plan"). The Plan authorizes the granting
to key employees of options to purchase an aggregate of 40,000 shares of
the Company's Common Stock at an option price of not less than the fair
market value on the date of the grant. To date no options have been granted
under the Plan.
Employees
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There are no employees working solely for the Company or its subsidiary
Gyneco. The Company has an agreement with Repro-Med for the reimbursement
of operating expenses of Gamogen and Gyneco which is based on actual
payroll allocations, occupancy and equipment utilization (see "Agreements
with Repro-Med"). Repro-Med had 31 full time employees and 5 temporary
employees as of February 28, 1998.
Item 2. Properties
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The Company has agreements with Repro-Med for the lease of manufacturing,
warehouse and office space at Repro-Med's Chester, NY facility and
reimbursement of payroll and other operating expenses based on actual
payroll allocations, occupancy and equipment utilization. For the fiscal
year ended February 28, 1998, on a combined basis, the Company and it's
subsidiary Gyneco paid Repro-Med facility lease payments of $12,528.
<PAGE>
Item 3. Legal Proceedings
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The Company is not a party to any material litigation, nor to the knowledge
of the officers and directors of the Company, is there any material
litigation threatened against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders of the Company
during the last quarter of the fiscal year ended February 28, 1998.
Part II
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Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
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The Company is authorized to issue 4,000,000 shares of Common Stock, $.01
par value, of which 1,230,000 shares were issued and outstanding as of
February 28, 1998. At December 15, 1989, the Company's Common Stock was
held by approximately 164 beneficial holders.
From December 4, 1986, to March 29, 1987, the Company's stock was traded
over-the-counter. From March 30, 1987, through April 12, l988, the
Company's Units were listed on NASDAQ under the symbol "GAMOU". Starting
April 13, 1988, the Company's Common Stock was listed on NASDAQ under the
symbol "GAMO" and its warrants were listed under the symbol "GAMOU". As of
June 1, 1990 the Company was unable to continue its listing on NASDAQ and
may be traded on the "pink sheets" in the over the counter market.
To the best of Management's knowledge there has been only minimal trading
in Gamogen securities for the fiscal years ended February 1993 through
1998. The Company's Common Stock is traded in the over-the-counter market
and was quoted through the National Daily Quotation Service. The following
table sets forth the high and low closing bid quotations for the Company's
Common Stock as reported by the National Quotation Bureau, Inc. for the
periods indicated. These quotations represent bid prices between dealers,
do not include retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions.
High Bid Low Bid
Fiscal Year Ending
February 28, 1997:
1st Quarter $0.03 $0.03
2nd Quarter $0.03 $0.03
3rd Quarter $0.03 $0.03
4th Quarter $0.03 $0.03
Fiscal Year Ending
February 28, 1998:
1st Quarter $0.03 $0.03
2nd Quarter $0.03 $0.03
3rd Quarter $0.03 $0.03
4th Quarter $0.03 $0.03
Fiscal Year Ending
February 28, 1999:
3/1/98 - 5/15/98 $0.03 $0.03
The Company has not declared or paid any cash dividends on its Common Stock
and does not anticipate that any dividends will be paid in the foreseeable
future.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of
Operations
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Liquidity and Capital Resources
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The Company completed its initial public offering in December 1986 from
which it received net proceeds of approximately $1,656,000. The Company
spent $75,000 of the net proceeds of the offering in the period between
December 8, 1986 and the end of the fiscal year on February 28, 1987, and
approximately $319,000 during the fiscal year ended February 1988, in
connection with research, development, and regulatory approval efforts for
the Company's impotence products and other administrative expenses. During
the year ended February 1989, the Company applied the remainder of such
proceeds on the acquisition for $550,000 of certain assets of Gyneco,
research, development, and regulatory approval efforts for the Company's
impotence products and other administrative expenses.
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At February 28, 1998, the Company had cash and cash equivalents on a
consolidated basis of $19,228 and had net working capital of $524,059.
Working capital increased $402,356 versus the balance at February 29, 1997.
The increase in working capital was due primarily to a $463,227 increase in
short-term investments, resulting from the payment on September 30, 1997
from Zonagen for $558,000 for the sale of the impotence oral treatment.
The Company attempts to maintain sufficient inventory to enable it to
promptly satisfy all customer orders out of existing inventory. The Company
sells its products to US and foreign distributors, US hospitals, and
private physicians. Sales to US distributors, hospitals, and private
physicians are mainly on 30 day net payment terms. A variety of payment
terms are employed for export sales including cash prepayments, irrevocable
letters of credit, and 45 day net payment. As of February 28, 1998, 11% of
accounts receivable were over 60 days, 1% were at 30-59 days and 88% were
current.
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.
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, <PAGE>
establishing an option price of $708,000 if the option were exercised on or
before September 30, 1997. On September 30, 1997 Gamogen received payment
from Zonagen for $558,000 which resulted from the sale of the impotence
oral treatment for $708,000 reduced by credits for maintenance payments
previously received of $150,000. As a result of this payment Zonagen has
exercised the Option and Gamogen has effectively sold its interest in this
product and is not entitled to further payments under the Assignment
Agreement and its amendments.
Due to the approval and subsequent acceptance of Viagra (see History of the
Company section above), Gamogen recorded other expense of $153,567 for
Research and Technology - Impotence Technology, in the fiscal year ended
February 28, 1998, to reflect the amortization of its Other Asset -
Impotence Technology.
For the fiscal year ended February 1997, the Company derived a significant
portion of its funds for continuing operation as a result of loan advances
from an affiliate. As of February 1997 outstanding net loan advances from
the affiliate were $66,314 and were included in Other Liabilities -
Financing Due To Affiliate. Under terms of an agreement with its affiliate
to extend repayment terms on this advance balance, the net loan advance of
$66,314 was paid in October 1997. Related interest for the use of these
funds of $3,730 was paid through October 1997. Gamogen's current cash and
cash equivalents and anticipated cash flow from operations is expected to
be sufficient to enable it to meet its total net cash requirements through
February 1999, however, the Company anticipates that it may issue loan
advances to its affiliate to fund periodic cash shortfalls of its
affiliate. These periodic loan advances are anticipated to be extended
under terms more favorable than those available to Gamogen in the normal
course of its business.
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 1999 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, unexpected increases or decreases in sales of the
Company's products, 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
- ---------------------
Fiscal 1998 Compared To Fiscal 1997:
- ------------------------------------
The Company's sales for the fiscal year ended February 28, 1998 were
$1,016,392. This represents an increase of $672,717 versus the fiscal year
ended February 28, 1997. 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 $479,366 in the fiscal year ended February 28, 1998,. This
compares to a loss from operations of $148,794 for the previous fiscal
year. Income from operations of $479,366 for the fiscal year ended
February 28, 1998 results from the sale of Gamogen's impotence oral
treatment, offset in part by Gyneco's operating loss of $114,023. In the
fiscal year ended February 28, 1997 the Company's loss from operations of
$148,794 included Gyneco's operating loss of $97,587.
In the fiscal year ended February 28, 1998, Gamogen's income before income
taxes was $259,813 as compared to income before taxes of $15,102 in the
prior fiscal year. Income before income taxes for the fiscal year ended
February 28, 1998, resulted primarily from income from operations of
$479,366 offset in part by reversal of licensing income from Maintenance
Payments recorded in the previous fiscal year of $75,000 and other expense
of $153,567 for
<PAGE>
Research and Technology - Impotence Technology (see above). The credits for
Maintenance Payments of $75,000 result from the sale of Gamogen's impotence
oral treatment (see Liquidity and Capital Resources section above). The
income before taxes for the fiscal year ended February 28, 1997, resulted
primarily from licensing income of $162,800 offset in part by the Company's
net loss from operations of $148,794.
Net income for the fiscal year ended February 28, 1998 was $234,128. This
compares with net income of $7,825 in the previous fiscal year. Net income
for the fiscal year ended February 28, 1998, resulted from income before
taxes of $259,813, offset in part by the related provision of $25,685 for
income taxes. The Company's net income per share of common stock is $0.19
for the fiscal year ended February 28, 1998, which results primarily from
the one-time, non-recurring sale of Gamogen's impotence oral treatment (see
Liquidity and Capital Resources section above). The Company's net income
per share of common stock was $0.01 for the fiscal year ended February 28,
1997.
Selling, general and administrative expenses were $390,586 for the fiscal
year ended February 28, 1998 compared to $330,334 in 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 Liquidity
and Capital Resources section above). Depreciation and amortization was
$15,353 in the fiscal year ended February 28, 1998 versus $13,753, an
increase of $1,600.
Fiscal 1997 Compared To Fiscal 1996:
- ------------------------------------
Sales were $343,675 in the fiscal year ended February 28, 1997 a decrease
of $50,792 or 13% as compared with sales of $394,467 in fiscal 1996. The
sales decrease was due primarily to decreased sales of the Masterson Biopsy
System and Thermal Cautery System. Selling, general, and administrative
expenses were $330,334 in the current fiscal year as compared with $325,437
in the previous fiscal year. Depreciation and amortization expense
decreased from $14,216 in the previous fiscal year to $13,753 in the
current year. There were no expenditures for research and development in
the current fiscal year.
Due to increased operating losses by the Company's subsidiary, Gyneco,
Inc., the Company's loss from operations of $148,794 in the fiscal year
ended February 28, 1997 increased versus the loss from operations of
$111,800 in the previous fiscal year. The Company's loss from operations in
the fiscal year ended February 28, 1997 includes Gyneco's loss from
operations of $97,587. In the fiscal year ended February 29, 1996 the
Company's loss from operations included a loss from operations by Gyneco of
$62,570.
Due to licensing income of $162,800, the Company's net profit for the
fiscal year ended February 28, 1997 was $7,825. This compares to the
Company's net loss for the fiscal year ended February 29, 1996 of $111,278.
The net income per share of common stock is $0.01 for the fiscal year ended
February 28, 1997 and compares to a net loss per share of $0.09 in the
prior fiscal year.
Fiscal 1996 Compared To Fiscal 1995:
- ------------------------------------
Sales were $394,467 in the fiscal year ended February 29, 1996 increasing
$20,570 or 6% as compared with sales of $373,897 in fiscal 1995. Selling,
general, and administrative expenses were $325,437 in the current fiscal
year as compared with $253,899 in the previous fiscal year. Depreciation
and amortization expense decreased from $15,257 in the previous fiscal year
to $14,216 in the current year. There were no expenditures for research
and development expenditures in the current fiscal year. The Company's loss
from operations of $111,800 in the fiscal year ended February 29, 1996
increased versus the loss from operations of $43,900 in the previous fiscal
year due primarily to operating losses by the Company's subsidiary, Gyneco,
Inc. The Company's loss from operations in the fiscal year ended February
29, 1996 includes Gyneco's loss from operations of $62,570. In the fiscal
year ended February 28, 1995
<PAGE>
the Company's loss from operations included a loss from operations by
Gyneco of $2,830.
The Company's net loss for the fiscal year ended February 29, 1996 was
$111,278. This compares to the Company's net loss for the fiscal year ended
February 28, 1995 of $30,728, which included licensing income of $47,107
from the sale of certain of the Company's impotence and a Loss On
Termination Of Building Lease of $35,609. The net loss per share of common
stock is $0.09 for the fiscal year ended February 29, 1996 and compares to
a net loss per share of $0.02 in the prior fiscal year.
Fiscal 1995 Compared To Fiscal 1994:
- ------------------------------------
Sales were $373,897 in the fiscal year ended February 28, 1995 declining
$13,439 or 3% as compared with sales of $387,336 in fiscal 1994. Selling,
general, and administrative expenses were $253,899 in the fiscal year ended
February 1995 as compared with $286,989 in the previous fiscal year.
Depreciation and amortization expense increased slightly from $15,194 in
the previous fiscal year to $15,257 in the fiscal year ended February 1995.
There were no expenditures for research and development expenditures in the
fiscal year ended February 1995 as compared $5,477 in the prior fiscal
year. The Company's net loss from operations of $43,900 for the fiscal year
ended February 1995 was less than the loss from operations of $95,889 for
the previous fiscal year.
The Company's net loss for the fiscal year ended February 1995 was $30,728
as compared to a net loss of $95,182 in the prior fiscal year and improved
versus the prior fiscal year primarily as a result of the reduction in its
net loss from operations and licensing income of $47,107 from the Impotence
Agreement (see Capital Resources and Liquidity section above). These
improvements were offset in part by a Loss On Termination Of Building Lease
of $35,609. The Company's net losses included the net losses of its
subsidiary Gyneco which were $2,830 in the fiscal year ended February 1995
and $41,968 in the prior fiscal year. The Company had a net loss per share
of $0.02 per share in the fiscal year ended February 1995 versus a net loss
per share of $0.08 in the fiscal year ended February 1994.
Item 7. Financial Statements and Supplementary Data
This information appears in a separate section of this report following
Part IV. Selected Financial Data.
<TABLE>
<CAPTION>
Selected Income Statement Data
------------------------------
Year Ended February
-------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales $387,336 $373,897 $394,467 $343,675 $1,016,392
Costs and Expenses 483,225 417,797 506,267 492,469 690,593
Interest & Other Income 707 13,172 522 163,896 (65,986)
(Expense)
Net Income (Loss) (95,182) (30,728) (111,278) 7,825 234,128
Earnings (Loss) Per $(0.08) $(0.02) $(0.09) $0.01 $0.19
Share - Primary
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data
---------------------------
Year Ended February
-------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Current Assets $198,782 $223,458 $216,714 $198,485 $665,570
Total Assets 466,806 449,074 428,114 396,132 694,989
Current Liabilities 13,275 26,271 116,589 76,782 141,511
Total Liabilities 13,275 26,271 116,589 76,782 141,511
Working Capital 185,507 197,187 100,125 121,703 524,059
Stockholders' Equity 453,531 422,803 311,525 319,350 553,478
</TABLE>
Item 8. Disagreements on Accounting and Financial Disclosure
- ------- ----------------------------------------------------
None
<PAGE>
PART III
- --------
Item 9. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
The following table sets forth certain information with respect to the
Executive Officers and Directors:
<TABLE>
<CAPTION>
Name Age Positions (Held since) Address
----- --- ---------------------- -------
<S> <C> <C> <C>
Andrew I. Sealfon 53 President (4/87) 23 Allison Drive
* Treasurer (3/86) Monroe, NY, 10950
Chairman (7/94)
Director (3/86)
Chief Executive Officer
(3/86)
Jesse A. Garringer 48 Executive VP (9/92) 11 Orchard Hill
Secretary (8/93) Vista
Director (7/94) Florida, NY 10921
Chief Financial Officer
(1/95)
Dr. Paul Mark 49 Director (7/94) 92 Irwin Ave
Baker Middletown, NY
10940
</TABLE>
* Mr. Sealfon may be deemed to be a "parent" and "promoter", as those
terms are defined under the Securities Act of 1933, as amended, (the "Act")
.
Andrew I. Sealfon has served as President and Director of Repro-Med since
March, 1980, and as Repro-Med's Treasurer since May, 1983. He has been
Treasurer of Gamogen since March, 1986, and President of Gamogen since
April, 1987. Mr. Sealfon is an electrical engineer and inventor and has
been granted numerous United States patents on medical devices, fluid
systems, and electronic equipment. From 1971 to June 1981, Mr. Sealfon
served as Vice President and Chief Engineer of Ceco Systems, Inc., Glen
Cove, New York. He was employed as a member of the research staff of
Riverside Research Institute from 1969 to 1971 and as a member of the
technical staff of ITT Federal Laboratories, Avionics Division from 1967 to
1969. Mr. Sealfon is a graduate of Lafayette College.
Jesse A. Garringer was hired by the Company and Repro-Med in September 1992
to the position of Executive Vice President, was elected Secretary of both
companies in August 1993, and was appointed to the Board of Directors of
Gamogen in July 1994. In his position as Executive Vice-President, Mr.
Garringer is responsible for marketing, financial, and general management
of Repro-Med and Gamogen's subsidiary Gyneco, and assists in the strategic
and financial management of Gamogen. Prior to accepting the position of
Executive Vice President Mr. Garringer served in the position of Vice
President Operations for Matrx Medical, Inc. Mr. Garringer held this
position from July, 1988 until June, 1992. During the period July and
August, 1992 Mr. Garringer was employed completing certain private
consulting projects. Mr. Garringer helped co-found Matrx Medical, Inc. in
a management buyout of two divisions of Ohmeda in July 1988 and was a major
shareholder until its purchase by a large Canadian medical company in
January 1992. Matrx Medical is a leading manufacturer of medical equipment
for the Emergency Medical, Dental and Veterinary anesthesia markets. In
his position, Mr. Garringer was responsible for Matrx's manufacturing,
quality, and distribution operations. Prior to the buyout and
establishment of Matrx Medical, Mr. Garringer held the position of Business
Manager of Emergency Care for Ohmeda and established Ohmeda's position as a
supplier to the Emergency Medical Market. In this position, Mr. Garringer
provided strategic, marketing, product and manufacturing management for the
Ohmeda's Emergency Care
<PAGE>
division. Mr. Garringer held this position from March, 1984 until July,
1988. Prior to this position, Mr. Garringer served in various financial
and business planning positions for the following companies: Ohmeda,
Division of BOC Ltd., Carborundum Co. a division of Standard Oil of Ohio,
and Pratt & Lambert, Inc.. Mr. Garringer holds an M.B.A in finance from
Canisius College, graduated as an Advanced E.M.T. in the state of NY, and
has served on numerous medical standards committees and as a delegate to
the ISO committee on Medical Suction.
Dr. Paul Mark Baker was appointed to the Board of Directors of Repro-Med in
May 1991 and to the Board of Directors of Gamogen in July 1994. Dr. Baker
was awarded his medical degree from Cornell University Medical College in
1975, is a practicing pediatrician in Middletown, NY and is attending at
the Department of Pediatrics Horton Memorial Hospital and attending at New
York Hospital-Cornell Medical Center in New York City.
Item 10. Executive Compensation
- -------- ----------------------
Andrew I. Sealfon, President of the Company, received $171,379 in salary
from the Repro-Med (including amounts attributable to services to the
Company and Gyneco) during the fiscal year ended February 28, 1998 and
earned an incentive bonus of $10,400 from Gamogen in fiscal 1998 which is
deferred payment until Repro-Med cash flow warrants payment.. Under an
agreement between the Company and Repro-Med for reimbursement of operating
expenses and payroll costs, 25% of Mr. Sealfon's salary is allocated to the
Company. Mr. Sealfon has been granted incentive stock options in Repro-Med
under its 1995 Stock Option Plan.
Jesse A. Garringer, Executive Vice President and Secretary, received
$143,337 in salary from Repro-Med (including an amount attributable to
services to the Company and Gyneco) and earned an incentive bonus of $7,800
from Gamogen in fiscal 1998 which is deferred payment until Repro-Med cash
flow warrants payment.. Mr. Garringer's salary is paid by Repro-Med and
charged to the Company and it's subsidiary on a basis commensurate with a
direct allocation of time. Mr. Garringer has been granted incentive stock
options in Repro-Med under its 1995 Stock Option Plan.
Officers of the Company are reimbursed for travel and other expenses
incurred on behalf of the Company. The Company does not have any pension
or profit sharing plan.
Summary Compensation Table:
- ---------------------------
(all figures are in dollars)
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Restricted Options All
Name & Principle Position FYE Salary Bonus Oth Stock /SARS LTIP Oth
Awards Pay Compens
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew I. 1998 171,379 10,400 12,682 0 0 0 0
Sealfon, 1997 164,219 5,800 11,926 0 0 0 0
President 1996 142,488 10,100 12,060 0 0 0 0
Jesse A. 1998 143,337 7,800 6,182 0 0 0 0
Garringer, 1997 138,108 4,350 5,926 0 0 0 0
Executive VP 1996 121,863 7,500 6,060 0 0 0 0
</TABLE>
(1) Includes employee medical insurance premiums paid and $6,000 for
unreimbursed costs of lab facilities maintained by Mr. Sealfon.
* Note, under an agreement between Repro-Med and Gamogen (see Item 1),
Executive salaries and all other payroll costs are allocated between Repro-
Med, Gamogen, and Gamogen's subsidiary, Gyneco, on the basis of individual
employee time reporting. The total percentages allocated for the fiscal
year ended February 1998 were as follows: for Gamogen 2%, for Gyneco 16%,
and for Repro-Med 82%. Bonuses were allocated at the following percentages
in each of the fiscal years consistent with earnings of Repro-Med and
Gamogen: 1998 - 100% Gamogen, 1997 - 100% Repro-Med, 1996 - 100% Repro-Med.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -------------------------------------------------------------------------
The only voting security of the Company is its Common Stock, par value $.01
per share. The following table sets forth certain information with respect
to each beneficial owner of 5% or more of the outstanding Common stock,
each director and for all officers and directors as a group:
Percent of Outstanding
Name and Address Shares owned Common
Stock
- ---------------- ------------ --------------------
- --
Repro-Med Systems, Inc. (1) 699,200 (2) 58.3%
All officers and directors as a group
(3 persons) 699,200 (2) 58.3%
(1) Repro-Med and Mr. Sealfon May be deemed to be "parents" and
"promoters" as those terms are defined under the Securities Act of 1933, as
amended, (the "Act").
(2) Certain rules and regulations promulgated under the Act may deem the
shares owned by Repro-Med to be beneficially owned by Mr. Sealfon as
principal shareholder of Repro-Med and as Repro-Med's Chairman of the Board
and President.
Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
In April, 1986, the Company issued 699,200 shares of Common Stock to Repro-
Med for $41,779.
Repro-Med and Gamogen have a facility lease and expense sharing agreements
(see item 1).
To economize the Company's production, Repro-Med has designed some of its
needed components around parts which were used in its Gyneco operations.
Commencing in fiscal 1993, Repro-Med compensated Gyneco for the use of
certain tooling, and parts of its proprietary design patent for those items
using such parts on the following basis: on Repro-Med OEM sales, Gyneco is
compensated with a 3% royalty on those OEM sales employing parts relating
to Gyneco tooling used to create such parts, on Repro-Med sales based on
the Res-Q-Vac items employing such tooling is compensated on the basis of a
4% royalty to Gyneco. Payments to Gyneco from Repro-Med under this
arrangement totaled $33,038 in the fiscal year ended February 1998 and
$62,776 in the prior fiscal year. The reason for the decline in payments
under this agreement, in the current fiscal year, is the decline in sales
of OEM products to Osbon.
The foregoing transactions are believed by the Company to be on terms no
less favorable to the Company than those that could have been obtained from
unaffiliated third parties.
<PAGE>
Part IV
- --------
<TABLE>
<CAPTION>
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------- ----------------------------------------------------------------
<S> <C>
(a) 1 and 2 The response to this portion is submitted in the index to
Item 8 which is submitted in a separate
section following Part IV
3. Exhibits
3.* Articles of Incorporation and By-laws
4.** Form of Warrant Agreement between the Company and American
Stock Transfer Company.
l0 Material Contracts
l0(1)* Assignment Agreement between the Company and Repro-Med dated
9/26/86.
l0(2)* License Agreement between the Company and Repro-Med dated
9/26/86.
l0(3)** Assignment Agreement Among Zonagen, Inc., Gamogen, Inc. and
Dr. Adrian Zorgniotti dated 4/13/94.
10(3)2*** Conditional Amendment No. 1 To Assignment Agreement
Between Gamogen, Inc. and Zonagen, Inc.
22 Subsidiary of Registrant: Gyneco, Inc., a wholly owned NY
Corporation.
(b) No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended February 28, 1998.
- ---------------------------------------------------------------------------
- ----------------
<FN>
* Incorporated by reference from the Form S-1 Registration Statement of
Gamogen, Inc., dated Sep 30, 1986
** Incorporated by reference from Form 10-K Report of Gamogen, Inc. dated
Feb 28, 1994.
*** Incorporated by reference from Form 8-K Report of Gamogen, Inc. dated
Jan 24, 1997.
</TABLE>
<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 undersigned, thereunto duly authorized.
GAMOGEN, INC.
/s/ Andrew I. Sealfon
- ---------------------
Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
Dated: June 10, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Andrew I. Sealfon June 10, 1998
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer June 10, 1998
Jesse A. Garringer, Executive Vice-President,
Secretary,
Director, and Chief Financial Officer
/s/ Dr. Paul Mark Baker June 10, 1998
Dr. Paul Mark Baker, Director
</TABLE>
<PAGE>
WEINGAST, ZUCKER & RUTTENBERG, LLP
CERTIFIED PUBLIC ACCOUNTANTS
11 HOLLAND AVENUE
WHITE PLAINS, NEW YORK 10603
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
GAMOGEN, INC. AND SUBSIDIARY
We have audited the accompanying consolidated balance sheets of Gamogen,
Inc. and Subsidiary as of February 28, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the two years in the period ended February 28, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Gamogen, Inc. and Subsidiary as of February 28, 1998 and 1997,
and the results of their operations and their cash flows for each of the
two years in the period ended February 28, 1998, in conformity with
generally accepted accounting principles.
/s/ Weingast, Zucker & Ruttenberg, LLP
- --------------------------------------
White Plains, NY
May 8, 1998
<PAGE>
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Feb 28, 1998 Feb 28, 1997
--------------- -------------
Assets
- ------
Current Assets
- --------------
<S> <C> <C>
Cash and Cash Equivalents (Note 1) $ 19,228 $ 1,368
Short-term Investments (Note 1) 463,227 0
Accounts Receivable 33,537 23,657
Inventory (Notes 1 & 2) 149,078 169,500
Prepaid Expenses 500 3,960
------- -------
Total Current Assets 665,570 198,485
------- -------
Property, Equipment and Other Assets
(Notes 1 & 3)
- -----------------------------------------
Property and Equipment, Net 11,826 25,954
Other Assets, Net 17,593 171,693
------ -------
Total Property, Equipment and Other Assets 29,419 197,647
Total Assets $ 694,989 $ 396,132
============ ======= =======
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 4,315 $ 0
Accrued Expenses 35,691 10,468
Other Liabilities - Due To Affiliate 101,505 66,314
(Note 4)
------- ------
Total Current Liabilities 141,511 76,782
======= ======
Stockholders' Equity
Common Stock, $.01 Par Value Authorized
4,000,000 Shares, Issued and Outstanding 12,300 12,300
1,230,000
Warrants Outstanding 40 40
Additional Paid-In Capital 1,579,723 1,579,723
Accumulated (Deficit) (1,038,585) (1,272,713)
----------- -----------
Total Stockholders' Equity 553,478 319,350
----------- -----------
Total Liabilities and Stockholders' $ 694,989 $ 396,132
Equity
========================================= =========== ===========
</TABLE>
See Notes To Financial Statements
<PAGE>
Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
For the Years Ended
<TABLE>
<CAPTION>
Feb 28, Feb 28,
1998 1997
----------- -----------
--- --
<S> <C> <C>
Sales (Note 4):
Net Sales of Products $308,392 $343,675
Sale of Impotence Treatment 708,000 0
--------- --------
1,016,392 343,675
Costs and Expenses:
- -------------------
Cost of Goods Sold 131,087 148,382
Selling, General and Administrative 390,586 330,334
Depreciation and Amortization 15,353 13,753
------- -------
537,026 492,469
------- -------
Income (Loss) From Operations 479,366 (148,794)
Other Income (Expense):
- -----------------------
Licensing Income (75,000) 162,800
Research and Technology - Impotence (153,567) 0
Technology
Interest & Other Income 9,014 1,096
--------- -------
(219,553) 163,896
Income Before Income Taxes 259,813 15,102
Provision (Benefit) For Income Taxes 25,685 7,277
(Note 6)
--------- -------
Net Income (Loss) $ 234,128 $ 7,825
================== ========= =======
Earnings (Loss) Per Common Share (Notes
1 & 5):
=======================================
Primary $ 0.19 $ 0.01
Fully Diluted $ 0.16 $ 0.01
</TABLE>
See Notes To Financial Statements
<PAGE>
Gamogen, Inc. and Subsidiary
Statements of Cash Flow
For the Years Ended
----------------------------
<TABLE>
<CAPTION>
Feb 28, 1998 Feb 28, 1997
------------ ------------
Cash Flow From Operating Activities:
- ------------------------------------
<S> <C> <C>
Net Income (Loss) $ 234,128 $ 7,825
Adjustments To Reconcile Net Income (Loss) To
Cash Provided By (Used In) Operating Activities:
Depreciation and Amortization 15,353 13,753
(Increase) Decrease in Short-Term Investments (463,227) 0
(Increase) Decrease in Prepaid Expenses 3,460 2,027
(Increase) Decrease in Accounts Receivable (9,880) 10,159
(Increase) Decrease in Inventory 20,422 6,980
(Increase) Decrease in Other Assets, Net 154,100 0
Increase (Decrease) in Accounts Payable 4,315 (5,849)
Increase (Decrease) in Accrued Expenses 25,223 7,898
--------- ---------
Cash Provided By (Used In) Operating Activities (16,106) 42,793
Cash Flows From Investing Activities
- ------------------------------------
(Acquisition) of Equipment (1,225) 0
Cash Flows From Financing Activities
- ------------------------------------
Increase (Decrease) in Other Liabilities - Due 35,191 (41,856)
To Affiliate
--------- ---------
Net Increase in Cash and Cash Equivalents 17,860 937
Cash and Cash Equivalents - Beginning of Year 1,368 431
--------- ---------
Cash and Cash Equivalents - End of Year $ 19,228 $ 1,368
- --------------------------------------- ========= =========
Supplementary Data - Income Taxes Paid $ 27,871 $ 894
</TABLE>
See Notes To Financial Statements
<PAGE>
Gamogen, Inc. And Subsidiary
Consolidated Statements of Stockholders' Equity
-------------------------------------------------
<TABLE>
<CAPTION>
Warrants
and
Common Stock Addition
Total .01 Par Value al
Equity Shares $ Paid-In Accumulated
Amt. Capital (Deficit)
------- ------- ------ --------- -----------
-- - - --
<S> <C> <C> <C> <C> <C>
Stockhold Equity 2/95 $422,803 1,230,000 $12,300 $1,579,763 $(1,169,260)
Net Loss FYE 2/96 (111,278) (111,278)
-------- -----------
Stockhold Equity 2/96 311,525 1,230,000 12,300 1,579,763 (1,280,538)
Net Income FYE 2/97 7,825 7,825
------- -----------
Stockhold Equity 2/97 319,350 1,230,000 12,300 1,579,763 (1,272,713)
Net Income FYE 2/98 234,128 234,128
------- -----------
Stockhold Equity 2/98 $553,478 1,230,000 $12,300 $1,579,763 $(1,038,585)
======= ===========
</TABLE>
See Notes To Financial Statements
<PAGE>
Gamogen, Inc. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
A. Gamogen, Inc. (the "Company) was incorporated on March 17, 1986 to
acquire, develop and market medical products and services.
These consolidated financial statements include the accounts of Gamogen,
Inc. and its wholly-owned subsidiary, Gyneco, Inc. All intercompany
balances and transactions have been eliminated in consolidation.
B. The Company has acquired from Repro-Med Systems, Inc. all rights and
technology to certain impotence products being developed. Repro-Med
Systems, Inc. owns 699,200 shares of the Company's Common Stock.
C. Property and Equipment is stated at cost. Property is being
depreciated over thirty-one and a half years and equipment is being
depreciated over five to twelve years utilizing both the straight-line and
accelerated methods of depreciation.
D. Costs incurred in obtaining patents have been capitalized and are being
amortized over seventeen years. Organization costs have been capitalized
and are being amortized over five years. Goodwill costs have been
capitalized and are being amortized over thirty-five years.
E. Inventory is valued at the lower of cost (first-in, first-out method),
or market.
F. Earnings Per Share - The Consolidated Financial Earnings Per Share are
presented in accordance with SFAS No. 128 "Earnings Per Share". Basic
earnings per share are computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share
incorporate the shares issuable upon the assumed exercise of warrants.
G. Cash and cash equivalents are comprised of certain highly liquid
investments with maturities of three months or less.
H. Short-term investments are investments with maturities greater than
three months and less than one year. Short-term investments are recorded at
lower of cost or market.
I. Use of estimates- the Consolidated Financial Statements are prepared in
conformity with generally accepted accounting principles and, accordingly
include amounts that are based on management's best estimates and
judgments.
The actual results could differ from those estimates.
Note 2 - Inventory
- ------------------
February 28,1998 February 28,1997
---------------- ----------------
Inventory consists of:
Raw Materials $ 65,794 $ 69,112
Work in Process 15,768 34,510
Finished Goods 67,516 65,878
--------- ---------
Total $ 149,078 $ 169,500
========= =========
<PAGE>
Gamogen, Inc., and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------
Note 3 - Property, Equipment And
Other Assets
------ --------------------------------------
<TABLE>
<CAPTION>
Property and Equipment: February 28, February 28,
1998 1997
- ----------------------- ---------------- ----------------
<S> <C> <C>
Furniture and Equipment $ 173,331 $ 172,639
Less: Accumulated Depreciation (161,505) (146,685)
--------- ----------
Net Property and Equipment $ 11,826 $ 25,954
- -------------------------- --------- ----------
Other Assets:
Patent Costs $ 106,792 $ 106,792
Goodwill 14,137 14,137
Less: Accumulated Amortization (103,336) (102,803)
--------- ----------
17,593 18,126
Impotence Technology 0 153,567
--------- ----------
Net Other Assets $ 17,593 $ 171,693
- ----------------- --------- ----------
</TABLE>
Due to the approval and subsequent acceptance of Viagra (see History of the
Company section above), Gamogen fully amortized its Other Asset - Impotence
Technology of $153,567 in the fiscal year ended February 28, 1998.
Note 4 - Related Party Transactions
- -----------------------------------
Included in sales for the years ended February 1998 and 1997 were $33,038,
$62,776, respectively, received from an affiliate for use of tooling
equipment.
The company rents space from an affiliated company and reimburses the
affiliated company allocated overhead expenses. Rent totaled $12,528 as of
February 28, 1998 and 1997, respectively. The reimbursed expenses totaled
$ 387,585 and $ 384,495 as of February 28, 1998 and 1997, respectively.
Note 5 - Earnings Per Share
- ---------------------------
Primary earnings per share are computed by dividing net earnings by the
weighted average number of shares of Common Stock and Common Stock
Equivalents outstanding during the period. (Fully diluted earnings per
share are computed by dividing net earnings by the weighted average number
of shares of Common Stock and Common Stock Equivalents outstanding during
the period as if Warrants were converted into common stock at the beginning
of the period.)
<TABLE>
Earnings (Loss) Per Common February 28, February 28, February 29,
Share 1998 1997 1996
<S> <C> <C> <C>
Primary Earnings Per Share $0.19 $0.01 $ (0.09)
Number of Shares - Primary 1,230,000 1,230,000 1,230,000
Fully Diluted Earnings Per $0.16 $0.01 $ (0.08)
Share
Number of Shares - Fully 1,430,000 1,430,000 1,430,000
Diluted
</TABLE>
<PAGE>
Note 6 - Income Tax
- -------------------
At February 28, 1998 the Company had cumulative federal net operating
losses of approximately $1,039,000. These losses can be carried forward for
twenty years and begin to expire on February 28, 2002.
Note 7 - Major Customer
- -----------------------
The company sells a substantial portion of its products to Kaiser, Inc. For
the years ending February 28, 1998 and 1997, sales to Kaiser, Inc. were $
28,975 and $ 28,090 respectively. A significant reduction in sales to
Kaiser, Inc could materially affect the company's liquidity, cash and
profitability.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-END> Feb-28-1998
<PERIOD-TYPE> 12-MOS
<CASH> 19,228
<SECURITIES> 0
<RECEIVABLES> 33,537
<ALLOWANCES> 0
<INVENTORY> 149,078
<CURRENT-ASSETS> 665,570
<PP&E> 173,331
<DEPRECIATION> 161,505
<TOTAL-ASSETS> 694,989
<CURRENT-LIABILITIES> 141,511
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 541,178
<TOTAL-LIABILITY-AND-EQUITY> 694,989
<SALES> 1,016,392
<TOTAL-REVENUES> 1,016,392
<CGS> 131,087
<TOTAL-COSTS> 537,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 259,813
<INCOME-TAX> 25,685
<INCOME-CONTINUING> 234,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 234,128
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.16
</TABLE>
