4
<PAGE>
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 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
--------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 31, 1999
_____________________________________ ________________________________
Common stock, $.01 par value 1,230,000
<PAGE>
GAMOGEN,INC.
Table of Contents
PART I Financial Information
Page
Consolidated balance sheets -
May 31, 1999, February 28, 1999 and May 31, 1998 3
Consolidated statements of income -
three months ended May 31, 1999 and May 31, 1998 4
Consolidated statements of cash flow -
three months ended May 31, 1999 and May 31, 1998 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
PART I - FINANCIAL INFORMATION
-------------------------------
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31,1999 May 31,1998 Feb 28,1999
--------- --------- ---------
Assets
<S> <C> <C> <C>
Current Assets
Cash and Cash Equivalents $ 8,751 $ 19,540 $ 8,589
Short-term Investments 81,303 469,152 81,352
Accounts Receivable 31,248 17,474 24,196
Inventory 88,588 145,039 92,549
Prepaid Expenses 3,903 500 3,903
Due from Affiliate 190,757 0 176,889
------- ------- -------
Total Current Assets 404,550 651,705 387,478
------- ------- -------
Property, Equipment and Other Assets
- -------------------------------------
Property and Equipment, Net 4,250 8,121 4,421
Other Assets, Net 188,531 16,688 188,790
------- ------- -------
Total Property, Equipment and Other 192,781 24,809 193,211
Assets ------- ------- -------
Total Assets $ 597,331 $ 676,514 $ 580,689
============ ======= ======== =======
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 4,770 $ 1,564 $ 39
Accrued Expenses 3,489 36,942 7,056
Other Liabilities - Due To Affiliate 0 133,850 0
------- ------- -------
Total Current Liabilities 8,259 172,356 7,095
======= ======= =======
Stockholders' Equity
Common Stock, $.01 Par Value Authorized
4,000,000 Shares, Issued and 12,300 12,300 12,300
Outstanding 1,230,000
Warrants Outstanding 40 40 40
Additional Paid-In Capital 1,579,723 1,579,723 1,579,723
Accumulated (Deficit) (1,002,991) (1,087,905)(1,018,469)
--------- --------- ---------
Total Stockholders' Equity
589,072 504,158 573,594
--------- --------- ---------
Total Liabilities and Stockholders' $ 597,331 $ 676,514 $ 580,689
======================================= ========= ========= =========
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
May 31,1999 May 31,1998
----------- -----------
<S> <C> <C>
Sales :
Net Sales of Products $ 63,490 $ 60,701
Sale of Impotence Treatment 0 0
--------- --------
63,490 60,701
--------- --------
Costs and Expenses:
- -------------------
Cost of Goods Sold 20,788 25,017
Selling, General and Administrative 31,208 86,318
Depreciation and Amortization 431 4,610
------- -------
52,427 115,945
------- -------
Income (Loss) From Operations 11,063 (55,244)
------- -------
Other Income (Expense):
- -----------------------
Licensing Income 0 0
Research and Technology - Impotence 0 0
Technology
Interest & Other Income 4,795 5,925
--------- -------
4,795 5,925
--------- -------
Income Before Income Taxes 15,858 (49,319)
Provision (Benefit) For Income Taxes 380 0
--------- --------
Net Income (Loss) $ 15,478 $(49,319)
================== ========= ========
Earnings (Loss) Per Common Share :
=======================================
========
Primary $ 0.01 $(0.04)
Fully Diluted $ 0.01 $(0.03)
</TABLE>
<PAGE>
GAMOGEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998
------------ ------------
Operating Activities:
<S> <C> <C>
Income (Loss)from continuing operations $ 15,478 $ (49,319)
Adjustments to reconcile net income to cash
provided by
operating activities:
Depreciation and amortization 431 4,610
------------ ------------
15,909 (44,709)
Changes in assets and liabilities: ------------ ------------
Accounts receivable - trade (7,052) 16,063
Inventories 3,960 4,038
Prepaid expenses & other accounts receivable 0 0
Accounts payable 4,731 (2,751)
Accrued expenses (3,567) 1,251
Other assets 0 0
------------ ------------
(1,928) 18,601
------------ ------------
Net cash provided by (used in) operating 13,981 (26,108)
activities
Investing activities
Short term investments 49 (5,925)
Capital expenditures 0 0
Due from affiliate - short term loan 0 0
Other assets - investment in joint venture 0 0
------------ ------------
Net cash provided by (used in) investing 49 (5,925)
activities
------------ ------------
Financing activities:
Other liabilities - due to affiliate (13,868) 32,345
------------ ------------
Net cash provided by (used in) financing (13,819) 26,420
activities
------------ ------------
Net increase (decrease) in cash & cash 162 312
equivalents
Cash & cash equivalents, beginning of period 8,589 19,228
------------ ------------
Cash & cash equivalents, end of period $ 8,751 $ 19,540
============ ============
Supplemental disclosures:
Cash Payments for:
Interest 0 0
Income taxes 0 0
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- -----------------------------------------------------------------------------
Results of Operations
Three months ending May 31, 1999 vs. May 31, 1998
- -------------------------------------------------
The Company's sales for the period ending May 31, 1999 increased $2,789
or 4.6% over the same period last year, primarily as a result of its
subsidiary, Gyneco, Inc.'s, ("Gyneco") increased sales of Thermal Cautery
products. Thermal Cautery product sales increased $12,916 or 37% for the
three month period. This increase was partially offset by a decrease in
sales of the Company's Masterson Endometrial Biopsy products which declined
$2,463 or 26.2% and a $3,448 or 32.9% reduction in royalties from an
affiliate. All of the Company's sales for the three month period ending May
31, 1999 were made by its Gyneco subsidiary. Gyneco's sales for the three
month period ending May 31, 1999, came from the Thermal Cautery System
product line, which represented 75% of the Company's sales, the Masterson
Biopsy System, at 11% of sales, royalties from affiliates of 11% and other
sales of 3%. Gyneco's product lines represent a diminishing segment of a
market which is steadily moving toward lower cost and more convenient
disposables. The increase in the three month sales for the period ending May
31, 1999 was a result of variations in Gyneco's customers buying patterns and
was not a harbinger of an overall shift in the market towards Gyneco's types
of products. 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.
Cost of goods sold was down 17% or $4,229 due to improved labor
efficiencies and reductions in certain production expenses.
Selling, general and administrative expenses were $31,208 for the three
month period ending May 31, 1999 compared to $86,318 in 1998. Selling,
general and administrative expenses decreased due to reduced administrative
costs and other allocated intercompany expenses.
The Company's profit from operations was $11,063, including Gyneco's
profit from operations of $21,424. This compares to the same period in 1998
with a loss from operations of $55,244 which included Gyneco's loss from
operations of $41,732. The improvement in Gyneco's results is primarily the
result of reduced intercompany allocations for selling, general and
administrative expenses.
Net income for the three months ending May 31, 1999 of $15,478 was a
significant improvement over the $49,319 net loss for the same three month
period in 1998.
Liquidity and Capital Resources
- -------------------------------
For the period ending May 31, 1999, the Company had net working capital
of $396,299, an increase of $15,916 from the February 28, 1999 fiscal year
end. The increase in working capital was due primarily to increases in
accounts receivable and amounts due from affiliates.
The loan due from affiliate which was $176,889 at February 28, 1999,
increased to $190,757 at May 31, 1999. Under terms of an agreement with its
affiliate, Repro-Med Systems, Inc., 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. The first quarter interest of $3,980 was paid to the Company on July
15, 1999.
<PAGE>
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 May 31, 1999, 3.7% of accounts receivable were over 60
days, 5.3% were at 30-59 days and 91% were current.
There were no capital expenditures in the three month period ending May
31, 1999.
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.
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 assurances 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
government agencies.
<PAGE>
Forward Looking Statements
- --------------------------
The Company has made and will make certain forward-looking statements in
the Quarterly 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.) the ability to achieve projected
sales of the Company's products 4.) uncertainty related to Food and Drug
Administration 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.
PART II - OTHER INFORMATION
----------------------------
Item 1. 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 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
None
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None
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 period ended May 31, 1999.
Item 5. Other Information
- -----------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
None
<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: July 16, 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.
<TABLE>
<S> <C>
July 16, 1999
/s/ Andrew I. Sealfon
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board,
Director, and Chief Executive Officer
July 16, 1999
/s/ Norman E. Rathfelder
Norman E. Rathfelder, Secretary, Director, and Chief
Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> Feb-28-2000
<PERIOD-END> May-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 8,751
<SECURITIES> 0
<RECEIVABLES> 31,248
<ALLOWANCES> 0
<INVENTORY> 88,588
<CURRENT-ASSETS> 404,550
<PP&E> 173,331
<DEPRECIATION> 169,081
<TOTAL-ASSETS> 597,331
<CURRENT-LIABILITIES> 8,259
<BONDS> 0
0
0
<COMMON> 12,300
<OTHER-SE> 576,772
<TOTAL-LIABILITY-AND-EQUITY> 597,331
<SALES> 63,490
<TOTAL-REVENUES> 63,490
<CGS> 20,788
<TOTAL-COSTS> 52,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,795)
<INCOME-PRETAX> 15,858
<INCOME-TAX> 380
<INCOME-CONTINUING> 15,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,478
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
