12
<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 AUGUST 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
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(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 August 31, 1998 the registrant had outstanding 1,230,000 shares of
Common Stock, $.01 par value.
<PAGE>
PART I
Item 1. Financial Statements
Balance Sheets - August 31, 1998 and August 31, 1997 and February 28, 1998.
Statements of Income - For the three month and six month periods ended
August 31, 1998 and August 31, 1997.
Statements of Cash Flows - August 31, 1998 and August 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
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
PART I, Item 1 - Financial Statements
Gamogen, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Aug 31, Aug 31, Feb 28,
1998 1997 1998
--------- --------- ---------
Assets
- ------
Current Assets
- --------------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 16,227 $ 6,185 $ 19,228
Short-term Investments 351,513 0 463,227
Accounts Receivable 19,392 585,798 33,537
Inventory 142,100 172,393 149,078
Prepaid Expenses 500 2,294 500
------- ------- -------
Total Current Assets 529,732 766,670 665,570
------- ------- -------
Property, Equipment and Other Assets
- ------------------------------------
Property and Equipment, Net 4,416 18,863 11,826
Other Assets, Net 15,783 154,173 17,593
------ ------- ------
Total Property, Equip and Oth Assets 20,199 173,036 29,419
------ ------- ------
Total Assets $ 549,931 $ 939,706 $ 694,989
============ ======= ======= =======
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 747 $ 8,234 $ 4,315
Accrued Expenses 32,776 54,092 35,691
Other Liabilities - Due To Affiliate 58,803 97,629 101,505
------ ------- -------
Total Current Liabilities 92,326 159,955 141,511
------ ------ ------
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) (1,134,458) (812,312) (1,038,585)
--------- --------- ---------
Total Stockholders' Equity 457,605 779,751 553,478
--------- --------- ---------
Total Liab & Stockholders'Equity $ 549,931 $ 939,706 $ 694,989
==================================== ========= ========= =========
</TABLE>
<PAGE>
Gamogen, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
<TABLE>
<CAPTION>
For Three Months For Six Months
Ended Ended
Aug 31,1998 Aug 31,1997 Aug 31,1998 Aug 31,1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales
- -------------------
Net Sales of Products $ 64,948 $ 77,546 $ 125,649 $ 152,024
Sale of Impotence Treatment 0 708,000 0 708,000
------- ------- ------- -------
64,948 785,546 125,649 860,024
Costs and Expenses:
- -------------------
Cost of Goods Sold 31,242 28,528 56,259 49,353
Selling, General and
Administrative 79,982 139,148 166,300 225,051
Depreciation and 4,610 12,756 9,220 24,912
Amortization
------- ------- ------- -------
115,834 180,432 231,779 299,316
------- ------- ------- -------
Income (Loss) From (50,886) 605,663 (106,130) 560,708
Operations
Other Income (Expense):
- -----------------------
Licensing Income 0 (125,000) 0 (75,000)
Interest & Other Income 4,583 44 10,508 136
--------- -------- --------- -------
4,583 (124,956) 10,508 (74,864)
--------- -------- --------- -------
Net Income (Loss) Before
Income Taxes (46,303) 480,707 (95,622) 485,844
Provision For Income Tax 250 25,444 250 25,444
--------- ------- --------- -------
Net Income (Loss) After $ (46,553) $ 455,263 $ (95,872) $ 460,400
Income Tax
========================== ========= ======= ========= =======
Earnings (Loss) Per Common
Share:
==========================
Primary $ (0.04) $ 0.37 $ (0.08) $ 0.37
Fully Diluted $ (0.03) $ 0.32 $ (0.07) $ 0.32
</TABLE>
<PAGE>
Gamogen, Inc. and Subsidiary
Statements of Cash Flow
<TABLE>
<CAPTION>
For The Six Months Ended
Aug 31,1998 Aug 31,1997
------------ -----------
Cash Flow From Operating Activities:
- ------------------------------------
<S> <C> <C>
Net Income (Loss) $ (95,872) $ 460,400
Adjustments To Reconcile Net Income
(Loss) To Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 9,220 24,912
(Incr) Decr in Short-Term Investments 111,714 0
(Increase) Decrease in Prepaid Expenses 0 1,666
(Increase) Decrease in Accounts Receivable 14,145 (562,141)
(Increase) Decrease in Inventory 6,978 (2,893)
Increase (Decrease) in Accounts Payable (3,568) 8,234
Increase (Decrease) in Accrued Expenses (2,915) 43,624
--------- ---------
Cash Provided By (Used In) Operating
Activities 39,702 (26,198)
Cash Flows From Investing Activities
- -----------------------------------
(Acquisition) of Equipment 0 (300)
Cash Flows From Financing Activities
- ------------------------------------
Increase (Decrease) in Other (42,703) 31,315
Liabilities - Due To Affiliate
--------- ---------
Net Increase in Cash and Cash (3,001) 4,817
Equivalents
Cash and Cash Equivalents - Beginning 19,228 1,368
of Year
--------- ---------
Cash and Cash Equivalents - End of Year $ 16,227 $ 6,185
- --------------------------------------- ========= =========
</TABLE>
<PAGE>
Gamogen, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements included in the
Company's Annual Report)
(1) Management's Statement
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-KSB.
<PAGE>
Part I, Item 2
Gamogen, Inc. and Subsidiary
Management's Discussion and Analysis of Financial Condition and Results of
Operations
for use with 10-QSB for Quarter Ended August 31, 1998.
Capital Resources and Liquidity
===============================
At August 31, 1998, the Company's cash and cash equivalents balance on a
consolidated basis was $16,227 and net working capital was $437,406. The
Company's cash and cash equivalents and net working capital balances on a
consolidated basis at August 31, 1997 were $6,185 and $606,715,
respectively. The decrease in working capital of $169,309 was reflected
primarily in the decrease in accounts receivable resulting from cummulative
net losses for the period September 1997 through August 1998 of $322,144
offset by the effect of a decrease in other assets (Impotence Technology)
of $138,390 (see comments below).
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
<PAGE>
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.
Due to the approval and subsequent acceptance of Viagra, 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 three month period ended May 31, 1998
advances made by the Company's affiliate were $32,345. These advances of
$32,345 were due and paid to the affiliate on July 15, 1998. During the
quarter ended August 31, 1998 advances made by the Company's affiliate were
$58,803. These advances of $58,803 are due and payable on October 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 and marketing 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.
<PAGE>
Results of Operations
=====================
Results For Three Months Ended August 31, 1998 As Compared With Three
Months Ended August 31, 1997:
The Company's sales for the quarter ended August 31, 1998 were $64,948.
This represents a decrease of $720,598 versus the quarter ended August 31,
1997, due primarily to the sale in the quarter ended August 1997 of the
Company's impotence treatment technology for $708,000. The Company's loss
from operations was $50,886 in the quarter ended August 31, 1998. This
compares to a profit from operations of $605,663 for the same quarter of
the previous fiscal year. The Company's loss from operations in the quarter
ended August 31, 1998 of $50,886 includes Gyneco's operating loss of
$37,368. In the quarter ended August 31, 1997 the Company's profit from
operations of $605,663 included Gyneco's operating loss of $21,203. The
Company's net loss for the quarter ended August 31, 1998 was $46,553. This
compares with a net profit of $455,263 in the same quarter of the previous
fiscal year. The Company's net profit in the quarter ended August 31, 1997
resulted primarily from $708,000 in revenues from sale of the Company's
impotence treatment technology which did not repeat in the quarter ended
August 31, 1998. The Company's net loss per share of common stock was $0.04
in the current fiscal quarter ended August 31, 1998 versus a profit per
share of $0.37 in the quarter ended August 31, 1997.
Selling, general and administrative expenses were $79,982 in the current
fiscal quarter compared to $139,148 in the same quarter of the prior fiscal
year. The decrease in selling, general and administrative expenses in the
current fiscal quarter of $59,166 as compared to the same quarter of the
prior fiscal year was due to certain administrative costs in the prior year
period related to the sale of the impotence treatment technology which did
not repeat in the current fiscal period. Depreciation and amortization was
$4,610 in the quarter ended August 31, 1998 versus $12,756 in the same
quarter of the prior fiscal year. The decrease in depreciation and
amortization results from a $7,678 charge for amortization of other assets
(Impotence Technology) in the quarter ended August 31, 1997, which did not
repeat in the quarter ended August 31, 1998 (see Capital Resources and
Liquidity section above).
Results For Six months Ended August 31, 1998 As Compared With Six months
Ended August 31, 1997:
The Company's sales for the six month period ended August 31, 1998 were
$125,649. This represents a decrease of $734,375 versus the six month
period ended August 31, 1997, due primarily to the sale in the quarter
ended August 1997 of the Company's impotence treatment technology for
$708,000. The Company's loss from operations was $106,130 in the six month
period ended August 31, 1998. This compares to a profit from operations of
$560,708 for the same six month period of the previous fiscal year. The
Company's loss from operations in the six month period ended August 31,
1998 of $106,130 includes Gyneco's operating loss of $79,100. In the six
month period ended August 31, 1997 the Company's profit from operations of
$560,708 included Gyneco's operating loss of $44,377. The Company's net
loss for the six month period ended August 31, 1998 was $95,872. This
compares with a net profit of $460,400 in the same six month period of the
previous fiscal year. The Company's net profit in the six month period
ended August 31, 1997 resulted primarily from $708,000 in revenues from
sale of the Company's impotence treatment technology which did not repeat
in the quarter
<PAGE>
ended August 31, 1998. The Company's net loss per share of common stock was
$0.08 in the current fiscal six month period ended August 31, 1998 versus a
profit per share of $0.37 in the six month period ended August 31, 1997.
Selling, general and administrative expenses were $166,300 in the current
six month period compared to $225,051 in the same six month period of the
prior fiscal year. The decrease in selling, general and administrative
expenses in the six month period of the current fiscal period of $58,751 as
compared to the same period of the prior fiscal year was due primarily to
certain administrative costs in the prior year period related to the sale
of the impotence treatment technology which did not repeat in the current
fiscal period. Depreciation and amortization was $9,220 in the six month
period ended August 31, 1998 versus $24,912 in the same six month period of
the prior fiscal year. The decrease in depreciation and amortization
results from $15,692 in charges for amortization of other assets (Impotence
Technology) in the six month period ended August 31, 1997, which did not
repeat in the six month period ended August 31, 1998 (see Capital Resources
and Liquidity section above).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the following persons, thereunto duly authorized.
GAMOGEN, INC.
Oct 9, 1998
/s/ Andrew I. Sealfon
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
Oct 9, 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> 6-MOS
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-END> Aug-31-1998
<CASH> 16,227
<SECURITIES> 0
<RECEIVABLES> 19,392
<ALLOWANCES> 0
<INVENTORY> 142,100
<CURRENT-ASSETS> 529,732
<PP&E> 173,331
<DEPRECIATION> 168,915
<TOTAL-ASSETS> 549,931
<CURRENT-LIABILITIES> 92,326
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 445,305
<TOTAL-LIABILITY-AND-EQUITY> 549,931
<SALES> 125,649
<TOTAL-REVENUES> 125,649
<CGS> 56,259
<TOTAL-COSTS> 231,779
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (95,622)
<INCOME-TAX> 250
<INCOME-CONTINUING> (95,872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95,872)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.07)
</TABLE>
