<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 MARCH 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE ACT
For the transition period from to
Commission file Number 1-11055
---------
EPIGEN, INC.
-----------------------------------------------------------------
(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
- ---------------------------------------------------------------
(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 June 19, 1998, was 3,554,615.
Traditional Small Business Disclosure Format (check one)
Yes ( X ) No ( )
<PAGE> 2
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
INDEX
PAGE
NUMBER
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Statements
Balance Sheets
at March 31, 1998 and December 31, 1997 ......................... 1
Statements of Operations
for the three month periods ended March 31, 1998
and March 31, 1997 and cumulative from
Inception (January 28, 1987) to March 31, 1998 .................. 2
Statements of Cash Flows
for the three month periods ended March 31,
1998 and March 31, 1997 and cumulative from
Inception (January 28, 1987) to March 31, 1998 .................. 3
Notes to Financial Statements .................................... 4 - 6
Item 2 - Management's Discussion and Analysis or
Plan of Operations .................................. 6 - 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
<PAGE> 3
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,303 $ 64,809
------------ ------------
Total current assets 1,303 64,809
Office equipment, net of accumulated
depreciation of $36,073 and $35,727 5,260 4,203
Long-term note receivable 92,038 53,931
Other assets, net of accumulated
amortization of $3,025 and $3,205
98,601 122,943
============ ============
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% 240,500 100,000
Accrued interest-note payable demand 42,647 39,367
Accrued direct research and development
costs 470,157 405,781
Accrued professional fees 257,688 259,582
Accrued payroll 1,179,386 1,145,336
Other accrued expenses 308,919 267,866
------------ ------------
Total current liabilities 2,870,102 2,588,737
------------ ------------
Stockholders' Equity:
Common stock $.001 par value
3,283,508 shares outstanding at
March 31, 1998 3,284 2,769
Additional paid-in capital 14,610,377 14,610,377
Deficit accumulated during development
stage (17,384,817) (17,078,593)
Less 5 shares of common stock held in
treasury, at cost 345 345
------------ ------------
Total stockholders' equity (2,770,811) (2,465,102)
------------ ------------
$ 99,291 $ 123,635
============ ============
</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 from
Months Ended Months Ended Inception to
March 31, March 31, March 31,
1998 1997 1998
---- ---- ----
(unaudited) (unaudited) (unaudited)
<S> <C> <C>
Revenues:
Interest income $ $ 1,852 $ 219,711
---------- ----------- ------------
Operating Costs & Expenses:
Direct research and
development 89,095 115,989 7,337,562
General and administrative 188,152 453,094 8,751,510
Fees due to General Partner
of the Predecessor and
affiliates, forgiven and
contributed to capital 1,188,893
Interest expense, net 28,977 3,348 326,563
---------- ----------- ------------
Total operating costs
and expenses 306,224 572,431 17,604,528
---------- ----------- ------------
Net (loss) (306,224) (570,579) $(17,384,817)
========== =========== ============
Net loss per common share $ (0.16) $ (0.87)
========== ===========
Weighted average
Number of shares of common
stock outstanding - See note 8
1,901,100 653,987
=========== ===========
</TABLE>
The accompanying notes are in 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 Three For the Three from
Months Ended Months Ended Inception to
March 31, March 31, March 31,
1998 1997 1998
---- ---- ----
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $(306,224) $ (570,579) $(17,384,817)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense 346 1,033 97,019
Non-cash expenses paid in equity interest 527,631 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 64,376 (75,039) 470,157
Increase(decrease) in accrued professional (1,894) 1,992 257,688
fees
Increase(decrease) in accrued payroll 34,050 82,000 1,179,386
Increase(decrease) in accrued expenses to
affiliates, printing charges and other
expenses 44,335 (48,116) 351,568
--------- ----------- ------------
Net cash used in operating activities (165,011) (81,078) (11,283,586)
--------- ----------- ------------
Cash Flows from Investing Activities:
Purchase of office equipment (1,403) (45,328)
Purchase of treasury stock (347)
Decrease(increase) in note receivable from
an officer/shareholder (38,107) (1,853) (92,038)
Decrease(increase) in other assets (3,025)
Increase in organizational costs (53,925)
Net cash provided by investing
activities (39,510) (1,853) (194,663)
--------- ----------- ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 515 8,331,647
Decrease(increase) in subscription
receivable
Capital contributions 2,141,600
Proceeds from issuance of preferred stock 180,000 395,000
Increase in note payable-demand 140,500 611,305
--------- ------------
Net cash provided by financing activities 141,015 180,000 11,479,552
--------- ----------- ------------
Net increase(decrease) in cash and cash
equivalents (63,506) 97,069 1,303
Cash and cash equivalents, beginning period 64,809 64,537 --
--------- -----------
Cash and cash equivalents, end of period $ 1,303 $ 161,606 $ 1,303
========= =========== ============
</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 March 31, 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 three month periods
ended March 31, 1998 and March 31, 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 $92,038 at March 31, 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 March 31, 1998
50,000 share of common shares were issued for services.
350,000 shares of common shares were issued as a bonus to the Chairman of the
Board of Directors.
50,000 shares of common shares issued to two members of the Board of
Directors of the Company.
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 March 31, 1998 were as Follows
(cont.):
During the March 1998 quarter the Company issued an aggregate of $140,500
principal amount of its prime plus 5% one year promissory notes. Each note
is prepayable within ten days of the completion of a sale of the Company's
common stock aggregating at least $1,000,000. The holders of these notes
received an aggregate of 64,672 shares of the Company's common stock and an
aggregate of 94,165 warrants to purchase shares of the Company's common
stock at a rate of $2.66 per share.
The above 514,672 shares of common stock were booked at par value.
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 to $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.
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 and 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.
6
<PAGE> 9
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 biopharmeceutical 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.
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 March 31, 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
None
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K
during the three months ended March 31, 1998.
8
<PAGE> 11
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.
EPIGEN, INC.
------------
Company
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
DATE: July 7, 1998
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,303
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,303
<PP&E> 41,333
<DEPRECIATION> 36,073
<TOTAL-ASSETS> 98,601
<CURRENT-LIABILITIES> 2,870,102
<BONDS> 0
0
0
<COMMON> 3,284
<OTHER-SE> (2,774,785)
<TOTAL-LIABILITY-AND-EQUITY> 98,601
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 277,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,977
<INCOME-PRETAX> (306,244)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (306,244)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
