<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE ACT
For the transition period from to
Commission file Number 1-11055 -------------- --------------
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EPIGEN, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 04-3120713
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TOWER LODGE, NORTH TOWER HILL ROAD, BOX L, MILLBROOK, NY 12545
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(Address of principal executive offices) (Zip Code)
(914) 677-5317
-----------------------------------------------
(Issuer's telephone number including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the 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 [ ]
The number of shares outstanding of the issuer's common Stock, par
value $.001 per share, at November 11, 1998 was 4,764,915.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [ X ]
<PAGE> 2
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Statements
Balance Sheets
at September 30, 1998 and December 31, 1997 . . . . . . . . . . . . . 1
Statements of Operations
for the nine month periods ended September 30, 1998 and September 30,
1997, and for the three month periods ended September 30, 1998 and
September 30, 1997, and cumulative from Inception (January 28, 1987)
to September 30, 1998 . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Cash Flows
for the nine months periods ended September 30, 1998
and September 30, 1997 and cumulative from
Inception (January 28, 1987) to September 30, 1998 . . . . . . . . . 3
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 4 - 6
Item 2 - Management's Discussion and Analysis or
Plan of Operations . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION
- ---------------------------
Item 2 - Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . 8
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 3
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 236,030 $ 64,809
------------ ------------
Total current assets 236,030 64,809
Office equipment, net of accumulated
depreciation of $39,810 and $35,727 29,255 4,203
Long-term note receivable 88,761 53,931
Other assets, net of accumulated
amortization of $3,025 and $3,205
------------ ------------
354,046 122,943
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable demand 145,805 145,805
Notes payable - 25% interest 225,000 225,000
Notes payable - prime plus 5% 275,000 100,000
Accrued interest-note payable demand 49,207 39,367
Accrued direct research and development
costs 516,191 405,781
Accrued professional fees 263,315 259,582
Accrued payroll 1,220,839 1,145,336
Other accrued expenses 321,629 267,864
------------ ------------
Total current liabilities 3,016,986 2,588,735
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value
4,714,915 shares outstanding at
September 30, 1998 4,715 2,769
Additional paid-in capital 15,375,983 14,610,377
Deficit accumulated during development
stage (18,043,293) (17,078,593)
Less 5 shares of common stock held in
treasury, at cost (345) (345)
------------ ------------
Total stockholders' equity (2,662,940) (2,465,792)
------------ ------------
$ 354,046 $ 122,943
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
For the Three For the Three For the Nine For the Nine from
Months Ended Months Ended Months Ended Months Ended Inception to
September 30, September 30, September 30, September 30, September 30,
1998 1997 1998 1997 1998
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing fees $ 1,600 $ $ 1,600 $ $ 1,600
Interest income 8 3,712 219,711
------------ ------------ ------------ ------------ ------------
1,600 8 1,600 3,712 221,311
------------ ------------ ------------ ------------ ------------
Operating Costs & Expenses:
Direct research and
development 77,107 53,033 261,150 238,347 7,509,617
General and administrative 219,343 558,019 616,154 1,854,379 9,179,512
Fees due to General Partner
of the Predecessor and
affiliates, forgiven and
contributed to capital 1,188,893
Interest expense, net 29,922 3,416 88,996 9,976 386,582
------------ ------------ ------------ ------------ ------------
Total operating costs
and expenses 326,372 614,468 966,300 2,102,702 18,264,604
------------ ------------ ------------ ------------ ------------
Net (loss) (324,772) (614,460) (964,700) (2,098,990) $(18,043,293)
============ ============ ============ ============ ============
Net loss per common share $ (0.07) $ (0.40) $ (0.24) $ (2.19)
============ ============ ============ ============
Weighted average
Number of shares of common
stock outstanding - see note 8 4,714,915 1,511,714 3,961,473 955,435
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
For the Nine For the Nine from
Months Ended Months Ended Inception to
September 30, September 30, September 30,
1998 1997 1998
(unaudited) (unaudited) (unaudited)
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (964,700) $ (2,098,990) $(18,043,293)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense 4,083 3,494 100,756
Non-cash expenses paid in equity interest 2,195,115 2,809,845
Non-cash compensation expense associated
with the grant of stock options and warrants 427,964
Debt converted to equity 507,604
Changes in operating assets and liabilities
Decrease(increase) in prepaid expenses
Increase(decrease) in accrued direct
research and development costs 110,410 (69,240) 516,191
Increase(decrease) in accrued professional
fees 3,733 23,731 263,315
Increase(decrease) in accrued payroll 75,503 (709,895) 1,220,839
Increase(decrease) in accrued expenses to
affiliates, printing charges and other
expenses 63,605 12,146 370,838
------------ ------------ ------------
Net cash used in operating activities (707,366) (643,639) (11,825,941)
------------ ------------ ------------
Cash Flows from Investing Activities:
Purchase of office equipment (29,135) (4,904) (73,060)
Purchase of treasury stock (347)
Decrease(increase) in note receivable from
an officer/shareholder (34,830) 76,374 (88,761)
Decrease(increase) in other assets (3,025)
Increase in organizational costs (53,925)
------------ ------------ ------------
Net cash provided by investing
activities (63,965) 71,470 (219,118)
------------ ------------ ------------
Cash Flows from Financing Activities:
Reverse stock split (7,574)
Proceeds from issuance of common stock 1,946 8,333,078
Decrease(increase) in subscription 100,000
receivable
Capital contributions 765,606 230,328 2,907,206
Proceeds from issuance of preferred stock 220,000 395,000
Increase in note payable-demand 175,000 645,805
------------ ------------ ------------
Net cash provided by financing activities 942,552 542,754 12,281,089
------------ ------------ ------------
Net increase(decrease) in cash and cash
equivalents 171,221 (29,415) 236,030
Cash and cash equivalents, beginning period 64,809 64,537
------------ ------------ ------------
Cash and cash equivalents, end of period $ 236,030 $ 35,122 $ 236,030
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation:
The financial statements as of September 30, 1998 are unaudited, but
include all adjustments (consisting of normal, recurring adjustments)
which the Company considers necessary for a fair presentation of such
interim financial statements. The results of operations for the nine
month periods ended September 30, 1998 and September 30, 1997 and the
three month periods ended September 30, 1998 and 1997 are not
necessarily indicative of the results for the entire year. The
financial statements and notes are presented as permitted by Form
10-QSB and do not contain certain information included in the
Company's annual financial statements and notes.
2. Cash and Cash Equivalents:
Cash and cash equivalents include all funds held in checking and money
market bank accounts.
3. Note Receivable From an Officer/Stockholder:
During August 1992, the Company entered into a loan agreement with an
Officer/Stockholder for up to $200,000 plus $15,310 of associated
legal costs. On May 28, 1994 and on August 31, 1996, the Board of
Directors rescinded the requirements for reimbursement of the
Company's legal fees and expenses attributable to the promissory note.
The note is collateralized by 19,697 shares of the Company's common
stock held by the Officer/Stockholder. The outstanding balance $88,761
at September 30, 1998, accrues interest at a rate of prime plus 1%.
The principal and all accrued interest are payable in full on May 8,
1999.
4. Net Loss per Share:
Net loss per share is based on the weighted average number of shares
of common stock outstanding during the period. All outstanding
warrants and options have been excluded from the calculation as they
are antidilutive.
5. Licensing Agreements:
The Company's technology is used under an exclusive license from
Boston Biomedical Research Institute ("BBRI"). Pursuant to the terms
of this license agreement, the Company has been granted an exclusive,
worldwide license to manufacture, use, lease, sell or otherwise
transfer (a) any products utilizing any patents obtained by BBRI, or
(b) any products resulting from the Company-sponsored research at
BBRI, or (c) compositions
4
<PAGE> 7
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
5. Licensing Agreements (cont.):
containing such products. The agreement provides for royalty payments
to BBRI equal to 5% of the net selling price not to exceed $10,000,000
per year and subject to certain reductions described below. The
agreement expires the later of ten years from the first commercial
sale of any such products or the expiration of any applicable patent.
During 1992, the Company entered into a contract with the University
of Oslo (the "University") in close collaboration with BBRI for the
characterization of the Human Carcinoma Antigen. The agreement calls
for payment to the University of 1% of net sales of any human
therapeutic product utilizing these patent or biological material
rights sold to third parties. Pursuant to the Company's agreement with
BBRI, the royalty payable to BBRI is reduced to 4.5% of the net
selling price of any covered product for which a royalty is also
payable to the University.
During 1993, the Company entered into an agreement with Massachusetts
General Hospital ("MGH") to license certain antibodies for use in
developing the in vitro diagnostic test, the in vivo imaging agent and
the therapeutic vaccine. Under the agreement, the Company is required
to pay royalties ranging from 2% to 5% of the net sales price, as
defined, depending on the country in which the product is sold. The
term of the agreement expires, on a country-by-country basis, eight
years after the first commercial sale or for the life of a valid
patent in a country, whichever occurs first. Pursuant to the Company's
agreement with BBRI, if royalties are to be paid to both BBRI and MGH,
the royalty otherwise payable to BBRI will be reduced so that the
total royalty paid to BBRI and MGH does not exceed 6% of the net
selling price of any licensed product or process. On June 12, 1995,
MGH agreed to reduce royalty payments due pursuant to the June 1, 1993
agreement by 50%.
6. Equity Transactions During the Quarter Ended September 30, 1998 were as
follows:
Investors purchased an aggregate of 592,170 shares of the Company's
common at a cost of $0.83 per share, and an aggregate of 50,000 shares
of the Company's common at a cost of $1.00 per share. These shares
were booked at par value with the additional investment credited to
paid in capital. The 50,000 share purchase included warrants to
purchase another 50,000 shares of the Company's common stock at $1.50
per share over a three year period, plus piggyback registration
rights.
5
<PAGE> 8
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
6. Equity Transactions During the Quarter Ended September 30, 1998 were as
Follows (cont.):
The Company issued 300,000 shares of its common stock in recognition
of substantial services by Donald Fresne, and 50,000 shares each of
the Company's common stock in recognition of substantial services by
the Directors of the Company and the law firm Harley & Deickler.
The Company issued 1865 shares of its common stock at $4.29 per share
to convert an $8,000 debt of the Company.
7. Related Party Transactions
The Company had previously leased office space in Millbrook, New York
from Donald C. Fresne. Effective January 1, 1997, the Company agreed
to again lease this space on a month-to-month basis in an amount equal
$3,000 per month. The Company believes that the terms of this lease
agreement are at least as favorable as could be obtained from a
non-affiliated lessor.
8. Weighted Average Common Shares
During the quarter ended September 30, 1997, there was a 1 for 22
reverse stock split. The weighted average of the outstanding common
shares was adjusted for this split.
6
<PAGE> 9
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
PART I FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company presently is insolvent and unable to pay its debts as they become
due. The officers have agreed temporarily to allow part of their salaries to
accrue. Currently, liabilities exceed assets. Should a sufficient number of the
Company's creditors pursue the obligations owed them, the Company might be
forced into a voluntary or involuntary bankruptcy.
The Company does not presently have the resources to complete the development
of, conduct prospective clinical trials for, manufacture and market, the COD
Test. The Company continues to seek funding for future development and clinical
trials of its products. Certain potential strategic partners and other sources
for such funding are currently reviewing the efficacy of such products.
The Company continues to pursue its business plan to the extent resources
permit. The Company has entered into arrangements with (i) a group of physicians
from several leading hospitals to obtain prostate serum samples in order to
conduct both retrospective and prospective clinical trials on the Company's in
vitro blood test for prostate cancer patents, and (ii) is in discussions with
major biopharmaceutical firms to participate in these retrospective and
prospective clinical trials for prostrate cancer patients. The Company has also
entered into a collaboration to gather additional data to demonstrate the
efficiency of the Company's in vitro blood test for breast cancer patients with
a physician from a leading hospital. If such tests yield sufficiently positive
results, the Company believes that it will be able to enter into a strategic
alliance. There can be no assurance that such test results will yield
sufficiently positive results. The results of such tests and collaborations will
determine to a significant extent the Company's ability to structure potential
strategic alliances.
In the event positive results are achieved in either the prostate or breast
clinical trials, the Company will attempt to form a strategic alliance with a
European partner to begin marketing the in vitro blood test in Europe where the
regulatory environment is less formal that in the United States. There can be no
assurance, however, that the Company will be successful in such endeavor.
The Company does not anticipate using any significant funds for work on its
other products over the next 12 months. Research continues on its therapeutic
vaccine at Columbia Presbyterian Hospital under the auspices of Dr. Carl Olsson.
Work on the Company's in vivo imaging agent is being delayed until sufficient
funds are available to continue such work.
7
<PAGE> 10
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
For a description of the securities issued by the Company during the
fiscal quarter ended September 30, 1998, see Note 6 of the Notes to
Financial Statements, incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three
months ended September 30, 1998.
8
<PAGE> 11
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: November 14, 1998
EPIGEN, INC.
by /s/ Donald C. Fresne
-------------------------
Donald C. Fresne
Chief Executive Officer,
Chairman of the Board
and President
and
by /s/ Richard E. Kent
-------------------------
Richard E. Kent
Vice Chairman,
Secretary and
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 236,030
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 236,030
<PP&E> 69,065
<DEPRECIATION> 39,810
<TOTAL-ASSETS> 354,046
<CURRENT-LIABILITIES> 3,016,986
<BONDS> 0
0
0
<COMMON> 4,715
<OTHER-SE> (2,662,940)
<TOTAL-LIABILITY-AND-EQUITY> 354,046
<SALES> 0
<TOTAL-REVENUES> 1,600
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 877,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,996
<INCOME-PRETAX> (964,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (964,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (964,700)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
