4
<PAGE>
FORM 10-KSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 1999
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 10918
_____________________________________ ____________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code ___(914) 469-2042____
Securities registered pursuant to Section 12(b) of the Act:
None
__________________________________________________________________________
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
_____________________________________ ________________________________
Common stock, $.01 Par Value Over-the-Counter Bulletin Board
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 [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B, is not contained herein, and will not 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-
K or any amendment to this Form 10-KSB. [ X ]
Based on the closing sales price of February 28, 1999 the aggregate market
value of the voting and nonvoting common equity held by nonaffiliates of the
registrant was $ 15,924.
The number of shares outstanding of the registrant's common stock, $.01 par
value was 1,230,000 at February 28, 1999.
<PAGE>
GAMOGEN,INC.
Table of Contents
PART I Page
Item 1. Business 3
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters 5
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
6
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 17
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange 17
Act
Item 10. Executive Compensation 18
Item 11. Security Ownership of Certain Beneficial Owners
and Management 19
Item 12. Certain Relationships and Related Transactions 20
PART IV
Item 13. Exhibits and Reports on Form 8-K.
21
<PAGE> PART I
------
Item 1. Business
- -----------------
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. for the purpose of acquiring, developing and marketing 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. The assignment of these three
products included rights to all related technology and products.
On May 27, 1987, the Company acquired the rights to certain
gynecological products which it assigned to its Gyneco, Inc. subsidiary which
immediately commenced manufacturing and marketing a line of gynecological
products through US and foreign distributors, US hospitals and private
physicians. During 1999 the Gyneco subsidiary accounted for 100% of Gamogen's
consolidated sales. The Gyneco products include the Thermal Cautery System
for tubal ligation, 70% of 1999 sales, and the Masterson Endometrial Biopsy
System, 14% of 1999 sales. Gyneco's products are governed by the FDA's
regulations for Class II medical devices. A portion of Gyneco's sales, 11% in
1999, came from royalties paid by its affiliate Repro-Med. These royalties
began in fiscal 1993, when Repro-Med began compensating Gyneco for the use of
certain tooling and parts of Gyneco's proprietary design. Payments to Gyneco
totaled $27,308 in the 1999 and $33,038 in 1998. (See Item 12., Certain
Relationships and Related Transactions on Page 20.)
The Gyneco Thermal Cautery System was designed to provide a safe, and
effective method for female sterilization. The Gyneco Thermal Cautery Unit
provides low voltage coagulation via a rechargeable battery. 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 meets these criteria.
The Masterson Endometrial Biopsy System is a device for performing in-
office biopsy sampling procedures and can provide essential tissue samples
for 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.
In July of 1993 the Company acquired the rights to an Oral Treatment for
Male Impotence which was subsequently sold to a biotechnology company,
Zonagen, Inc. In September 1997, Gamogen received final payment of $558,000
from the sale. This payment represented the discounted sales price of
$708,000 less $150,000 of Option Maintenance payments the Company had
previously received from Zonagen, Inc.
In October of 1998, Gamogen, in the effort to improve its revenues and
cash flow from operations, entered into a joint venture with its affiliate,
Repro-Med Systems, Inc., to develop and market a new vacuum, impotence
treatment device named Restore. The Restore kit product consists of a manual
vaccum erection pump and cylinder, constricting rings of varying tensions,
instruction video, and lubricant. The constricting rings are also sold
separately under the Prolong name as replacements and as an erection
sustaining product. There remains a market for more conventional impotency
treatments, like Restore, after the introduction in early 1998 of
Viagra, which initially accounted for 95% of new prescriptions for the
treatment of impotence. In this market, men, due to specific health reasons
or for other problems which Viagra is ineffective, continue to require
traditional treatments using devices such as the Restore vacuum pump.
<PAGE>
The Company has contributed a total of $175,000 in cash: $100,000 in the
third quarter and $75,000 in the quarter ending February 28, 1999, for which
the Company will receive 5% of the gross revenues of the Restore product
shipped.(See Item 13., Exhibit 10(f)on Page 21) For fiscal 1999, Restore
sales were $2,674. Repro-Med Systems, which has contributed $300,000 to
development, marketing, distribution, and production of the Restore product,
has agreed to contribute additional funds for inventory, marketing, and
further development costs in excess of the Company's $175,000 contribution
but may terminate the joint venture at its discretion.
On April 20, 1999 Repro-Med Systems received a letter from Timm Medical
Technologies (Timm) regarding possible patent conflicts between the Restore
product and the Timms Erect-Aid Classic(tm) product. Repro-Med's review of
the patents does not support this claim. Timm had purchased the rights, on
November 23, 1998, to the Erect-Aid Classic(tm) product from Imagyn Medical
Technologies(Imagyn). Imagyn, former company name Urohealth, had originally
bought the rights to the Erect-Aid Classic(tm) from Osbon Medical Systems. A
Company affiliate, Repro-Med has an off-setting counter claim which has not
been resolved, concerning an Osbon product called Esteem. In April 1996,
Osbon advised Repro-Med that it was withdrawing its commitment to Repro-Med
for manufacture of the Esteem(tm) products and had secured other options for
manufacture of these products. No prior notice was provided to the Company by
Osbon. Despite repeated requests to Osbon, the Company has not received an
explanation for this action. The Company has advised Osbon and Timm that
Repro-Med is due compensation for its work on the Esteem(tm) products and for
use of its proprietary design and manufacturing information.
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 13% of sales of such
products for the fiscal year ended February 28, 1999 and 9% for the fiscal
year ended February 28, 1998, excluding the Company's one-time sale of
$708,000 to Zonagen in fiscal 1998.
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 currently manufactures and markets medical devices regulated by the
FDA for: emergency medical treatment (52% of 1999 sales), impotency treatment
(31%), gynecological (13%), and infusion therapy (4%).
The Company and its subsidiary, Gyneco, assemble and test the products
at a facility in Chester, NY leased by Repro-Med Systems, Inc. Gyneco
purchases the parts required to manufacture its gynecological products from
various 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 at an outside contractor.
Item 2. Properties
- -------------------
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 1999, on a
combined basis, the Company and it's subsidiary Gyneco, paid Repro-Med
facility lease payments of $12,528. (See Item 12., Certain Relationships and
Related Transactions on Page 20.)
Item 3. Legal Proceedings
- --------------------------
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
- ------------------------------------------------------------
No matters were submitted to a vote of security holders of the Company
during the last quarter of the fiscal year ended February 28, 1999.
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
- -----------------------------------------------------------------------------
- -----
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, 1999. At December 15, 1989, the Company's Common Stock was held
by approximately 164 beneficial holders.
To the best of Management's knowledge there has been only minimal
trading in Gamogen securities for the fiscal years ended February 1998 and
February 1999. The Company's Common Stock is traded on the Over-The-Counter
Bulletin Board market. 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 interdealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions.
High Bid Low Bid
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:
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,
2000:
3/1/99 - $0.03 $0.03
5/15/99
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.
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of
Operations
- -----------------------------------------------------------------------------
- ------
Results of Operations
1999 vs. 1998
- -------------
Total sales in 1999 declined $768,546 to $247,846 primarily as a result
of a one-time sale of Gamogen's impotence oral treatment for $708,000 in 1998
which did not repeat in 1999. All of the Company's 1999 sales were made by
its Gyneco subsidiary. Gyneco's product lines represent a diminishing
segment of a market which is steadily moving toward lower cost and more
convenient disposables. The Thermal Cautery System, which represents 70% of
Gyneco's sales or $173,326 in 1999, declined 20% from the 1998 level of
$215,581. Sales of the Masterson Biopsy System, which represents 14% of the
Company's sales or $34,465, declined $25,908 or 43% in 1999, due to continued
erosion of the United States market for this device. In the fourth quarter
of 1999 there was interest from the international market for the Masterson
Biopsy product which Gyneco is pursuing. Marketing programs for Gyneco's
gynecological products have been investigated and may be implemented as
allowed by Gyneco's financial resources. There can be no guarantee that these
programs, if implemented, will prevent erosion of sales nor increase sales
over present levels. The Company's attempt to increase its revenues by entering
into the Restore joint venture has to-date resulted in the receipt of minimal
revenues.
Increased reserves for inventory obsolescence resulted in a 12% increase
in cost of goods sold in 1999 as compared to 1998. The reserve was increased
to provide for items that are out-of-date, have lost their value or
usefulness occasioned by new developments or more economical products.
Selling, general and administrative expenses were $111,245 for 1999
compared to $390,586 in 1998. Selling, general and administrative expenses
decreased primarily due to reduced administrative costs and other allocated
intercompany expenses. Declining Gyneco's sales and the absence of one-time
sales and its commensurate additional expenses by the Company as in 1998,
resulted in a reduced allocation of intercompany operating expenses to the
Company by its affiliate.
In fiscal 1999, the Company's loss from operations of $6,048, included
Gyneco's profit from operations of $5,058. This compares to the Company's
1998 profit from operations of $479,366 which included Gyneco's loss from
operations of $114,023. The reduced Gyneco loss is primarily the result of
reduced selling, general and administrative expenses.
Net income for 1999 of $20,116 was materially lower than the $234,128
net income in 1998 which resulted from the one-time sale of Gamogen's
impotence oral treatment. Net income in 1999 included $14,321 of interest
income from short-term investments and a $11,843 reduction of income tax
expense.
1998 vs. 1997
- -------------
Total sales in 1998 increased $672,717 to $1,016,392 due to the one-time
sale of Gamogen's impotence oral treatment for $708,000. Gyneco's product
sales were $308,392 a decrease of $35,283 or 10%. The Thermal Cautery System,
represented 70% of Gyneco's sales or $215,581 in 1998, an increase of 7% over
the 1997 level of $201,907. Sales of the Masterson Biopsy System, which
represented 20% of the Company's sales or $60,373 in 1998, declined $18,984
or 24% from 1997 levels, due to declining demand in the US market for this
device. Marketing programs for Gyneco's gynecological products have been
investigated and may be implemented as allowed by Gyneco's financial
resources. There can be no guarantee that these programs, if pursued, will
prevent erosion of sales nor increase sales over present levels.
<PAGE>
Selling, general and administrative expenses were $390,586 for 1998
compared to $330,334
in 1997. Selling, general and administrative expenses increased primarily due
to additional
administrative costs and other expenses related to the sale of the impotence
oral treatment.
Net income for 1998 of $234,128 which resulted from the one-time sale of
Gamogen's impotence oral treatment for $708,000, compares with net income of
$7,825 for 1997 which included $162,800 of licensing income associated with
the impotence oral treatment which was sold in 1998.
Liquidity and Capital Resources
- -------------------------------
At the end of 1999, the Company had net working capital of $380,383, a
decrease of $143,676 from 1998. The decrease in working capital was due
primarily to a $381,875 decrease in short-term investments, attributable to
the Company's intercompany payments for rent, wages and operating expenses of
$156,618 and a $176,889 intercompany loan to its affiliate, Repro-Med. The
loan due from affiliate, outstanding at fiscal year end, will be offset over
the next 12 months through Company expenses paid by Repro-Med which are
reimbursed by the Company. Under terms of an agreement with its affiliate,
at the end of each quarter, the Company will be paid interest on the balance
outstanding for the quarter. These interest payments will continue until the
balance due from the affiliate is paid.
In terms of accounts receivable, in the United States, sales are made
primarily on net 30 day payment terms. A variety of terms are employed for
export sales including cash prepayments, irrevocable letters of credit, and
net 45 days. As of February 28, 1999, 2.3% of accounts receivable were over
60 days, 11.6% were at 30-59 days and 86.1% were current.
There were no capital expenditures in 1999, capital expenditures in 1998
were $1,225.
Other Assets increased by $175,000 in 1999 due to the Restore joint
venture investment. In October of 1998, Gamogen, in the effort to improve its
revenues and cash flow from operations, entered into a joint venture with its
affiliate, Repro-Med Systems, Inc., to develop and market a new vacuum
impotence device named Restore. The Company has contributed a total of
$175,000 in cash: $100,000 in the third quarter and $75,000 in the quarter
ending February 28, 1999, for which the Company will receive 5% of the gross
revenues of the Restore product shipped.(See Item 13., Exhibit 10(f)on Page
21) For fiscal 1999, Restore sales were $2,674. Unless Restore sales increase
materially or there is a substantial increase in OEM royalties from affiliates
(See Item 12., Certain Relationships and Related Transactions, Page 20) the
Company's long-term survival may depend on its ability to raise new capital
or enter into a merger with an entity seeking to become publicly owned.
At the end of 1999, the balance in Other Liabilities - Due to Affiliate
was $0 compared to the end of 1998 which was $101,505. Reduced intercompany
expenses and increases in loans due
from affiliates, resulted in this change.
The Company will be able to satisfy its cash requirements for the next
12 months through the use of available cash reserves and intercompany
balances.
Year 2000 Compliance
- -----------------
Company State of Readiness - The Company will be ready for the year 2000
in both information technology (IT) and non-IT systems. In terms of IT
systems, the Company has purchased and taken delivery of a software upgrade
to make its primary accounting, sales and manufacturing systems year 2000
compliant. The upgrade will be installed and validated by the
summer of 1999. The internal network on which the primary business IT
software runs, has been upgraded on schedule.
In regard to non-IT systems, which refers to systems using embedded
technology like microcontrollers, etc., the Company does not currently
manufacture, nor has it completed development of, products which utilize
microprocessors or similar date related functionality.
<PAGE>
The Company has surveyed third parties with which it has material
relationships to determine whether there are any known, significant risks for
business interruption, no risk has been identified.
Costs of Year 2000 Issues - The estimated total cost of upgrading the
Company's IT and non-IT systems is under $15,000.
Risks of Year 2000 Issues - The primary risk to the Company in terms of
year 2000 issues, relates to external communication networks in the area of
international telephone systems. This effects a small portion of the
Company's overall business activity in the areas of customers and suppliers.
Contingency Plans - The Company has the flexibility to temporarily
utilize off-the-shelf, year 2000 compliant software for key portions of
business system applications, should the Company experience an unforeseen
delay or problem with the aforementioned legacy system upgrades.
In regard to the risk of failures in international communications
networks, a contingency plan including provisions for sending and receiving
orders and payments using couriers and other secondary methods of
communication is currently being explored.
The Company believes that becoming Year 2000 compliant will not have a
significant impact on the financial position or results of operations of the
Company. Although the Company is not aware of any material operational
issues or costs associated with preparing its products or internal
information systems for the year 2000, there can be no asurances that the
Company will not experience significant unanticipated negative consequences
or costs caused by undetected errors or defects in the technology used in its
internal systems, which are composed predominately of third party software
and hardware, or caused by software used by its vendors or customers or by
goverment agencies.
Forward Looking Statements
- --------------------------
The Company has made and will make certain forward-looking statements in
the Annual Report relating to market and product development among others.
These forward-looking statements represent challenging goals for the Company
and are based on certain assumptions and estimates including the worldwide
economy, competitive activity, funding availability, product introductions,
governmental action and the development of certain markets. Some examples of
key factors necessary to achieve the Company's goals are: 1.) the success of
the Company's joint venture relative to the Restore product 2.) the avoidance
of adverse cost increases 3.) unexpected increases or decreases in sales of
Company's products 4.) uncertainty related to Food and Drug Administration the
or other government regulation 5.) introduction by other companies of
competitive products 6.) changes in the Company's relationships with its
customers and distributors 7.) adequate and available sources of funds. If
the Company's assumptions and estimates are incorrect or do not come to
fruition, or if the Company does not achieve all of these key factors, then
the Company's actual performance could vary materially from the forward-
looking statements made herein.
<PAGE>
Item 7. Financial Statements
- ------------------------------
Index to Consolidated Financial Statements
Page
- ------------------------------------------
Report of Independent Certified Public Accountants 10
Financial Statements:
Consolidated Balance Sheets, February 28, 1999 and 1998
11
Consolidated Statements of Income, Years Ended February 28, 1999
12
and 1998
Consolidated Statements of Changes in Stockholders' Equity, Years
Ended February 28, 1999 and 1998 13
Consolidated Statements of Cash Flows, Years Ended February 28, 1999 14
and 1998
Notes to Consolidated Financial Statements 15-
17
<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, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the two
years in the period ended February 28, 1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the two years in
the period ended February 28, 1999, in conformity with generally accepted
accounting principles.
/s/ Weingast, Zucker & Ruttenberg, LLP
- --------------------------------------
White Plains, NY
May 25, 1999
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Feb 28, 1999 Feb 28, 1998
--------------- -------------
Assets
- ------
Current Assets
- --------------
<S> <C> <C>
Cash and Cash Equivalents (Note 1) $ $
8,589 19,228
Short-term Investments (Note 1) 81,352 463,227
Accounts Receivable 24,196 33,537
Inventory (Notes 1 & 2) 92,549 149,078
Prepaid Expenses 3,903 500
Due From Affiliate 176,889 0
------- -------
Total Current Assets 387,478 665,570
------- -------
Property, Equipment and Other Assets
(Notes 1 & 3)
- -----------------------------------------
- ---------
Property and Equipment, Net 4,421 11,826
Other Assets, Net 188,790 17,593
------ -------
Total Property, Equipment and Other 193,211 29,419
Assets
------ -------
Total Assets $ 580,689 $ 694,989
============ ======= =======
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 39 $
4,315
Accrued Expenses 7,056 35,691
Other Liabilities - Due To Affiliate 0 101,505
(Note 4)
------- ------
Total Current Liabilities 7,095 141,511
======= ======
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) (1,018,469) (1,038,585)
----------- -----------
Total Stockholders' Equity 573,594 553,478
----------- -----------
Total Liabilities and Stockholders' $ 580,689 $ 694,989
Equity
========================================= =========== ===========
=
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED
<TABLE>
<CAPTION>
Feb 28, Feb 28,
1999 1998
----------- -----------
--- --
<S> <C> <C>
Sales (Note 4):
Net Sales of Products $ $
247,846 308,392
Sale of Impotence Treatment 0
708,000
--------- --------
247,846
1,016,392
Costs and Expenses:
- -------------------
Cost of Goods Sold 134,403 131,087
Selling, General and Administrative 111,245 390,586
Depreciation and Amortization 8,246 15,353
------- -------
253,894 537,026
------- -------
Income (Loss) From Operations (6,048) 479,366
Other Income (Expense):
- -----------------------
Licensing Income 0 (75,000)
Research and Technology - Impotence 0 (153,567)
Technology
Interest & Other Income 9,014
14,321
--------- -------
14,321 (219,553)
Income Before Income Taxes 8,273 259,813
Provision (Benefit) For Income Taxes 25,685
(Note 6) (11,843)
--------- -------
Net Income (Loss) $ 20,116 $ 234,128
================== ========= =======
Earnings (Loss) Per Common Share (Notes
1 & 5):
=======================================
========
Primary $ 0.02 $ 0.19
Fully Diluted $ 0.01 $ 0.16
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended February 28, 1999 and 1998
<TABLE>
<CAPTION>
Warrants
Common Stock and
.01 Par Value Addition
Total al
Equity Shares $ Paid-In Accumulated
Amt. Capital (Deficit)
------- ------- ------ --------- -----------
-- - - --
<S> <C> <C> <C> <C> <C>
Stockholders' Equity 319,350 1,230,0 (1,272,713)
2/97 00 12,300 1,579,763
Net Income FYE 2/98
234,128 234,128
------- -----------
-- -
Stockholders' Equity 1,230,0 $12,30 $ $(1,038,585
2/98 553,478 00 0 1,579,763 )
Net Income FYE 2/99 20,116 20,116
------- -----------
-- -
Stockholders' Equity 573,594 1,230,0 $12,30 $ $(1,018,469
2/99 00 0 1,579,763 )
======= ===========
== =
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Feb 28, 1999 Feb 28, 1998
------------ ------------
Operating Activities:
<S> <C> <C>
Income (Loss)from continuing operations $ 20,116 $ 234,128
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 8,246 15,353
------------ ------------
28,362 249,481
Changes in assets and liabilities: ------------ ------------
Accounts receivable - trade 9,341 (9,880)
Inventories 56,529 20,422
Prepaid expenses & other accounts receivable (3,403) 3,460
Accounts payable (4,276) 4,315
Accrued expenses (28,635) 25,223
Other assets 2,962 154,100
------------ ------------
32,518 232,831
------------ ------------
Net cash provided by (used in) operating 60,880 447,121
activities
Investing activities
Short term investments 381,875 (463,227)
Capital expenditures 0 (1,225)
Due from affiliate - short term loan (176,889) 0
Other assets - investment in joint venture (175,000) 0
------------ ------------
Net cash provided by (used in) investing
activities 29,986 (464,452)
------------ ------------
Financing activities:
Other liabilities - due to affiliate (101,505) 35,191
------------ ------------
Net cash provided by (used in) financing (101,505) 35,191
activities
------------ ------------
Net increase (decrease) in cash & cash
equivalents (10,639) 17,860
Cash & cash equivalents, beginning of period 19,228 1,368
------------ ------------
Cash & cash equivalents, end of period $ 8,589 $ 19,228
============ ============
Supplemental disclosures:
Cash Payments for:
Interest 0 $ 3,753
Income taxes $ (11,843) $ 25,685
</TABLE>
<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 28,1999 February 28,1998
---------------- ----------------
Inventory consists of:
Raw Materials $ 73,575 $ 67,516
Work in Process 12,830 25,768
Finished Goods 61,820 79,288
Reserve for Obsolete Inventory (55,676) (23,494)
--------- ---------
Total $ 92,549 $ 149,078
========= =========
<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,
1999 1998
- ----------------------- ---------------- ----------------
- --
<S> <C> <C>
Manufacturing Equipment, Tooling & $ 173,331 $ 173,331
Furniture
Less: Accumulated Depreciation (168,910) (161,505)
--------- ----------
Net Property and Equipment $ 4,421 $ 11,826
- -------------------------- --------- ----------
Other Assets:
Investment in Restore $175,000 0
Patent Costs 106,792 $ 106,792
Goodwill 14,137 14,137
Less: Accumulated Amortization (107,139) (103,336)
--------- ----------
188,790 17,593
========= ==========
</TABLE>
Due to the approval and subsequent acceptance of Viagra, 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 1999 and 1998 were $27,308,
$33,038, respectively, received from an affiliate for use of tooling
equipment.
The company rents space from Repro-Med Systems, Inc. and reimburses Repro-Med
for allocated overhead expenses. Rent totaled $12,528 as of February 28,
1999 and 1998, respectively. The reimbursed expenses totaled $ 156,616 and $
387,585 as of February 28, 1999 and 1998, respectively.
The Company has entered into a joint venture with its affiliate, Repro-Med
Systems, Inc. to develop and market a new impotency treatment. The Company
has currently contributed $175,000 toward this venture.
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,
Share 1999 1998
<S> <C> <C>
Primary Earnings Per Share $0.02 $0.19
Number of Shares - Primary 1,230,000 1,230,000
Fully Diluted Earnings Per $0.01 $0.16
Share
Number of Shares - Fully 1,430,000 1,430,000
Diluted
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Income Tax
- -------------------
At February 28, 1999 the Company had cumulative federal net operating losses
of approximately $1,099,128. 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, 1999 and 1998, sales to Kaiser, Inc. were $
31,697 and $ 28,975 respectively. A significant reduction in sales to
Kaiser, Inc. could materially affect the company's liquidity, cash and
profitability.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- ------- -------------------------------------------------------------------
- ------------------
None
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section
16(a) of the Exchange Act
- ------- --------------------------------------------------------------------
- ------------------
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
(1) Treasurer (3/86) Monroe, NY, 10950
Chairman (7/94)
Director (3/86)
Chief Executive Officer
(3/86)
Norman E. 46 Chief Financial Officer 299 Pine Hill Road
Rathfelder(2) (6/99) Chester, NY 10918
Secretary (6/99)
Director (6/99)
Manager-Finance & Operations
(3/98)
Manager - Finance (4/97)
Dr. Paul Mark 49 Director (7/94) 92 Irwin Ave
Baker Middletown, NY
10940
Jesse A. Garringer 48 Terminated (1/99) 11 Orchard Hill
Executive VP (9/92) Vista
Secretary (8/93) Florida, NY 10921
Director (7/94)
Chief Financial Officer (1/95-
11/98)
</TABLE>
(1) 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") .
(2) Mr. Rathfelder became acting Chief Financial Officer, Secretary and
Director of the Company <PAGE>
in November 1998 and was elected to the positions in June 1999.
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.
Norman Rathfelder was appointed acting Chief Financial Officer in
November 1998 and was elected Chief Financial Officer in June 1999, after
serving as the Manager of Finance and Manager of Finance & Operations for the
previous 2 years. He is a Certified Public Accountant and has an MBA-Finance
from the University of Dayton in Dayton, Ohio. He has received the CPIM
(Certified in Production & Inventory Control) designation from the American
Production and Inventory Control Society(APICS). Mr. Rathfelder is a
Certified Quality Auditor (CQA) as designated by the American Society for
Quality (ASQ). Mr. Rathfelder was Controller and Human Resource Director
from June, 1995 to April, 1997 for Spence Engineering, Inc., a subsidiary of
Watts Regulator, Inc., a New York Stock Exchange company, which designs and
manufactures process control valves and regulator systems. From January, 1994
to June, 1995 Mr. Rathfelder was a Senior Implementation & Training
Consultant for Datalogix International, a software development company owned
by Oracle, Inc. a Fortune 500 company. Responsibilities included software
implementation and support; customer training and product development of
Enterprise Resource Planning (ERP) systems. Mr. Rathfelder's domestic and
international clients included Allied Signal-Belgium, Revlon, PPG and New
Zealand Dairy. These assignments complimented his previous 9 years
manufacturing and distribution experience, including Chief Financial Officer
and general managment responsibilities for privately held companies in the
aseptic food and dairy industry.
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.
Jesse A. Garringer's employment with the Company was terminated on
January 15, 1999. (see Item 13. Exhibit 10e, Termination Agreement, Page
21). On January 15, 1999 a Sales Representative's Agreement was entered into
between Mr. Garringer and the Company's affiliate, Repro-Med Systems, Inc.
(see Item 13. Exhibit 10d, Sales Representative Agreement, Page 21). On On
March 19, 1999 the Sales Representative Agreement was terminated by the
Company for failure and inability to perform.
Item 10. Executive Compensation
- -------- ----------------------
Andrew I. Sealfon, President of the Company, received $146,144 in salary
from Repro-Med (including amounts attributable to services to the Company and
Gyneco) during the fiscal year ended February 28, 1999. This is a reduction
from the $171,379 paid in the previous fiscal year. On June 29, 1998, Mr.
Sealfon reduced his salary 25% to help the Company cut expenses as it worked
on developing new sources of revenue. The salary reduction is currently
still in effect. Under an agreement between the Company and Repro-Med for
reimbursement of operating expenses and payroll costs, 10% 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.
Officers of the Company are reimbursed for travel and other expenses
incurred on behalf of the Company. The Company does not have a pension or
profit sharing plan.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Secur-
ities
Restr- Under-
icted lying LTIP All Other
Stock Options Pay- Compensa-
Awards /SAR's outs tion
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name & Year Salary (1)Bo (2)Ot
Principal nus her
Position Annua
l
Compe
nsati
on
Andrew I. 1999 146,14 0 11,89 0 0 0 0
Sealfon, 1998 4 0 513,1 0 0 0
President 1997 171,37 5,800 60 0 0 0 0
9 13,47 0
164,21 2
9
Jesse A. 1999 110,46 0 5,336
Garringer, 1998 2 0 5,822 0 0 0 0
Executive Vice 1997 143,33 4,350 4,016 0
President 7 0 0 0 0
138,10 0
8 0 0
</TABLE>
(1)Mr. Sealfon's and Mr. Garringer's fiscal 1998 incentive bonuses were
rescinded to the Company
on December 18, 1998, the amounts were $10,400 and $7,800 respectively.
(2)Includes employee car allowances and $6,000 for unreimbursed cost of lab
facilities maintained
by Mr. Sealfon.
Under an agreement between Repro-Med and Gamogen, executive salaries and
all other payroll costs are allocated between Repro-Med, Gamogen, and
Gamogen's subsidiary, Gyneco. The total percentages allocated for the fiscal
year ended February 1999 were as follows: Gamogen 1.9%, Gyneco 6.2%, and
Repro-Med 91.9%.
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").
<PAGE>
(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.
During the years ended February 28, 1999 and February 28, 1998, the
Company paid to an affiliate $27,038, and $33,038 respectively for use of
tooling equipment.
Repro-Med leases office space to its subsidiaries totaling $12,528 as of
February 28, 1998 and 1997. Repro-Med also allocated overhead expenses to
its subsidiaries totaling $156,616, and $387,585 February 28, 1999 and
February 28,1998 respectively.
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 $27,308 in the fiscal year ended February 1999 and $33,038 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.
Repro-Med and Gamogen have entered into a joint venture to produce and
market a vacuum, impotence treatment device called Restore. (See Item 13.,
Exhibit 10(f)on Page 21)
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
--------
Item 13. Exhibits and Reports on Form 8-K
- ------- ----------------------------------------------------------------
(a) Exhibits
(3) Articles of Incorporation and By-Laws
3(a) - Articles of Incorporation(1)
3(b) - By-Laws(1)
(10) Material Contracts:
10(a) - Assignment Agreement between the Company and Repro-
Med dated 9/26/86(1)
10(b) - License Agreement between the Company and Repro-Med
dated 9/26/86(1)
10(c) - Assignment Agreement Among Zonagen, Inc., Gamogen,
Inc and Dr. Adrian
Zorgniotti dated 4/13/94(2)
10(c)2 - Conditional Amendment No.1 to Assignment Agreement
Between Gamogen, Inc. and Zonagen, Inc.(3)
10(d) - Sales Representative Agreement, dated January 15, 1999(4)
10(e) - Termination Agreement, dated January 15, 1999(4)
10(f) - Joint Venture Agreement with Repro-Med Systems, Inc.
dated October 28, 1998(4)
(21) Subsidiary of Registrant:
21(a) - Gyneco, Inc., a wholly owned New York Corporation
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the Registrant during the last
quarter of the period covered by this report.
(1) Incorporated by reference from the Form S-1 Registration Statement of
Gamogen, Inc., dated
September 30, 1986.
(2) Incorporated by reference from Form 10-KSB Report, Gamogen, Inc., dated
February 28, 1994.
(3) Incorporated by reference from Form 8-K Report of Gamogen, Inc., dated
January 24, 1997.
(4) Incorporated by reference from Form 10-QSB Report, Gamogen, Inc., dated
November 30, 1998.
<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, 1999
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.
June 10, 1999
/s/ Andrew I. Sealfon
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board,
Director, and Chief Executive Officer
June 10, 1999
/s/ Norman E. Rathfelder
Norman E. Rathfelder, Secretary, Director, and Chief
Financial Officer
June 10, 1999
/s/ Paul Mark Baker
Dr. Paul Mark Baker, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-END> Feb-28-1999
<PERIOD-TYPE> 12-MOS
<CASH> 8,589
<SECURITIES> 0
<RECEIVABLES> 24,196
<ALLOWANCES> 0
<INVENTORY> 92,549
<CURRENT-ASSETS> 387,478
<PP&E> 173,331
<DEPRECIATION> 168,910
<TOTAL-ASSETS> 580,689
<CURRENT-LIABILITIES> 141,511
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 561,294
<TOTAL-LIABILITY-AND-EQUITY> 580,689
<SALES> 247,846
<TOTAL-REVENUES> 247,846
<CGS> 134,403
<TOTAL-COSTS> 253,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,321)
<INCOME-PRETAX> 8,273
<INCOME-TAX> (11,843)
<INCOME-CONTINUING> 20,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,116
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.01
</TABLE>
