<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 MAY 31, 1998
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)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
At May 31, 1998 the registrant had outstanding 1,230,000 shares of Common
Stock, $.01 par value.
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PART I
Item 1. Financial Statements
Balance Sheets - May 31, 1998 and May 31, 1997 and February 28, 1998.
Statements of Income - For the three month periods ended May 31, 1998
and May 31, 1997.
Statements of Cash Flows - May 31, 1998 and May 31, 1997.
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
Extension of Warrants
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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PART I, Item 1 - Financial Statements
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
May 31, May 31, Feb 28,
1998 1997 1998
--------- --------- ---------
Assets
- ------
Current Assets
- --------------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 19,540 $ 1,932 $ 19,228
Short-Term Investments 469,152 0 463,227
Accounts Receivable 17,474 81,264 33,537
Inventory 145,039 174,802 149,078
Prepaid Expenses 500 1,578 500
------- ------- -------
Total Current Assets 651,705 259,576 665,570
------- ------- -------
Property, Equipment and Other Assets
- ------------------------------------
Property and Equipment, Net 8,121 22,258 11,826
Other Assets, Net 16,688 163,233 17,593
------ ------ ------
Total Property, Equip and Other Assets 24,809 185,491 29,419
------ ------ ------
Total Assets $ 676,514 $ 445,067 $ 694,989
============ ======= ======= =======
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 1,564 $ 1,355 $ 4,315
Accrued Expenses 36,942 3,092 35,691
Other Liabilities - Due To Affiliate 133,850 116,153 101,505
------- ------- -------
Total Current Liabilities 172,356 120,580 141,511
------ ------ ------
Stockholders' Equity
Common Stock, $.01 Par Value
Authorized 4,000,000 Shares, Issued
and Outstanding 1,230,000 12,300 12,300 12,300
Warrants Outstanding 40 40 40
Additional Paid-In Capital 1,579,723 1,579,723 1,579,723
Accumulated (Deficit) (1,087,905)(1,267,576)(1,038,585)
--------- --------- ---------
Total Stockholders' Equity 504,158 324,487 553,478
--------- --------- ---------
Total Liab and Stockholders'Equity $ 676,514 $ 445,067 $ 694,989
==================================== ========= ========= =========
</TABLE>
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Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
<TABLE>
<CAPTION>
For The Three Months Ended
May 31,1998 May 31,1997
----------- -----------
<S> <C> <C>
Sales $ 60,701 $ 74,478
Costs and Expenses:
- -------------------
Cost of Goods Sold 25,017 21,374
Selling, General and Administrative 86,318 85,903
Depreciation and Amortization 4,610 12,156
------- -------
115,945 119,433
------- -------
Income (Loss) From Operations (55,244) (44,955)
Other Income (Expense):
- -----------------------
Licensing Income 0 50,000
Research and Technology - Impotence 0 0
Technology
Interest & Other Income 5,925 92
--------- -------
5,925 50,092
--------- -------
Net Income (Loss) $ (49,319) $ 5,137
================== ========= =======
Earnings (Loss) Per Common Share:
=================================
Primary $ (0.04) $ 0.00
Fully Diluted $ (0.03) $ 0.00
</TABLE>
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Gamogen, Inc. and Subsidiary
Statements of Cash Flow
<TABLE>
<CAPTION>
For The Three Months Ended
May 31,1998 May 31,1997
------------ -----------
Cash Flow From Operating Activities:
- ------------------------------------
<S> <C> <C>
Net Income (Loss) $ (49,319) $ 5,137
Adjustments To Reconcile Net Income
(Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 4,610 12,156
(Incr)/Decr in Short-Term Investments (5,925) 0
(Incr)/Decr in Prepaid Expenses 0 2,382
(Incr)/Decr in Accounts Receivable 16,063 (57,607)
(Incr)/Decr in Inventory 4,038 (5,302)
Incr/(Decr) in Accounts Payable (2,751) 1,335
Incr/(Decr) in Accrued Expenses 1,251 (7,376)
--------- ---------
Cash Provided By (Used In) Operating (32,033) (49,275)
Activities
Cash Flows From Investing Activities
- -----------------------------------
(Acquisition) of Equipment 0 0
Cash Flows From Financing Activities
- ------------------------------------
Increase (Decrease) in Other 32,345 49,839
Liabilities - Due To Affiliate
--------- ---------
Net Incr in Cash and Cash Equivalents 312 564
Cash and Cash Equivalents - Beg of Year 19,228 1,368
--------- ---------
Cash and Cash Equivalents - End of Year $ 19,540 $ 1,932
- --------------------------------------- ========= =========
Supplementary Data - Income Taxes Paid $ 0 $ 0
- ------------------ ========= =========
</TABLE>
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Gamogen, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements included in the
Company's Annual Report)
(1) Management's Statement
==========================
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-KSB.
<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 May 31, 1998.
Capital Resources and Liquidity
At May 31, 1998, the Company's cash and cash equivalents balance on a
consolidated basis was $19,540 and net working capital was $479,349. The
Company's cash and cash equivalents net working capital balances on a
consolidated basis at May 31, 1997 were $1,932 and $138,996, respectively.
The increase in working capital was due primarily to a $469,152 increase in
short-term investments, resulting from the payment from Zonagen of $558,000
on September 30, 1997 for the sale of the impotence oral treatment.
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.
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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.
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 fourth fiscal
quarter of the year ended February 28, 1998, to reflect the amortization of
its Other Asset - Impotence Technology.
Payroll and certain other Company expenses and purchases are paid directly
by an affiliate and charged to the Company as advances. These advances,
classified as other liabilities - due to affiliate, are due for payment to
the affiliate following the close of each fiscal quarter and fiscal year.
As of February 1998 outstanding advances from the affiliate were $101,505.
These advances of $101,505 were due and were paid by the Company to the
affiliate on July 9, 1998. During the quarter ended May 31, 1998 advances
from the Company's affiliate were $32,345. These advances of $32,345 are
due and payable on July 15, 1998. 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 advances
to its affiliate to fund periodic cash shortfalls of its affiliate. These
periodic 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 assisting the Company's affiliate in
development of affiliate products in exchange for royalties on use of
Company tooling, 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
======================
Results For Three Months Ended May 31, 1998 As Compared With Three Months
Ended May 31, 1997:
The Company's sales for the quarter ended May 31, 1998 were $60,701. This
represents a decrease of $13,777 versus the quarter ended May 31, 1997. The
Company's loss from operations was $55,244 in the quarter ended May 31,
1998. This compares to a loss from operations of $44,955 for the same
quarter of the
<PAGE>
previous fiscal year. The Company's loss from operations in the quarter
ended May 31, 1998 of $55,244 includes Gyneco's operating loss of $41,732.
In the quarter ended May 31, 1997 the Company's loss from operations of
$44,955 included Gyneco's operating loss of $23,083. The Company's net loss
for the quarter ended May 31, 1998 was $49,319. This compares with a net profit
of $5,137 in the same quarter of the previous fiscal year. The Company's net
profit in the quarter ended May 31, 1997 resulted primarily from $50,000 in
licensing income from Zonagen which did not repeat in the quarter ended May 31,
1998, due to the purchase of the impotence technology by Zonagen in September
1997. The Company's net loss per share of common stock was $0.04 in the
current fiscal quarter ended May 31, 1998 versus a profit per share of
$0.00 in the quarter ended May 31, 1997.
The Company's sales for the quarter ended May 31, 1998 were $60,701. This
represents a decrease of $13,777 versus the quarter ended May 31, 1997. The
decline in sales is due to a decline in sales of Gyneco products of $15,552
offset in part by an increase royalties paid by its affiliate, Repro-Med
Systems, Inc, for the use of certain tooling owned by Gyneco, of $1,775.
Under its agreement with Repro-Med, Gyneco was paid $10,465 in the quarter
ended May 31, 1998 and $8,690 in the quarter ended May 31, 1997. In the
fiscal year ended February 1998, Gyneco was paid $33,038 under this
agreement.
Selling, general and administrative expenses were $86,318 in the current
fiscal quarter compared to $85,903 in the same quarter of the prior fiscal
year. Depreciation and amortization was $4,610 in the quarter ended May 31,
1998 versus $12,156 in the same quarter of the prior fiscal year. The
decrease in depreciation and amortization results from a $7,678 charge for
amortization of the Other Asset - Impotence Technology in the quarter ended
May 31, 1997, which did not repeat in the quarter ended May 31, 1998 (see
Capital Resources and Liquidity section above).
<PAGE>
Part II, Item 2 - Change in Securities
=======================================
By resolution of the Board of Directors on 5/2/98, the Company extended the
warrants due to expire on June 3, 1998 for a period of 12 months. The new
expiration date is June 3, 1999.
<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.
July 14, 1998
/s/ Andrew I. Sealfon
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
July 14, 1998
/s/ Jesse A. Garringer
Jesse A. Garringer
Executive Vice-President, Secretary, Director, and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-END> May-31-1998
<CASH> 19,540
<SECURITIES> 0
<RECEIVABLES> 17,474
<ALLOWANCES> 0
<INVENTORY> 145,039
<CURRENT-ASSETS> 651,705
<PP&E> 173,331
<DEPRECIATION> 165,210
<TOTAL-ASSETS> 676,514
<CURRENT-LIABILITIES> 172,356
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 491,858
<TOTAL-LIABILITY-AND-EQUITY> 676,514
<SALES> 60,701
<TOTAL-REVENUES> 60,701
<CGS> 25,017
<TOTAL-COSTS> 115,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (49,319)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,319)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.03)
</TABLE>
