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, 1999
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE ACT
For the transition period from __________ to __________
Commission file Number 1-11055
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
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914) 677-5317
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(Issuer's telephone number including area code)
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(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 share outstanding of the issuer's common Stock, par value $.001
per share, at May 12, 1999 was 5,085,475.
Traditional Small Business Disclosure Format (check one)
Yes [X] No [_]
<PAGE>
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, 1999 and December 31, 1998 . . . . . . . . . . . . 1
Statement of Operations
for the three month periods ended March 31, 1999
and March 31, 1998 and cumulative from
Inception (January 28, 1987) to March 31, 1999 . . . . . . . . 2
Statements of Cash Flows
for the three months periods ended March 31,
1999 and March 31, 1998 and cumulative from
Inception (January 28, 1987) to March 31, 1999 . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . 4 - 5
Item 2 - Management's Discussion and Analysis or
Plan of Operations . . . . . . . . . . . . . . . . . . . . . 6 - 7
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports of Form 8-K . . . . . . . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i)
<PAGE>
EPIGEN, INC.
(formerly COD Associates, L.P.)
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
1999 1998
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents .................. $ 74,394 $ 24,215
------------ ------------
Total current assets .................... 74,394 24,215
Office equipment, net of accumulated
depreciation of $42,999 and $41,043 ......... 26,066 28,022
Other assets, net of accumulated
amortization of $3,025 and $3,205 ........... -- --
------------ ------------
$ 100,460 $ 52,237
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable demand ......................... 135,805 145,805
Notes payable - 25% interest ................ 200,000 200,000
Notes payable - prime plus 5% ............... 250,000 250,000
Accrued interest-note payable demand ........ 174,165 150,697
Accrued direct research and development
costs ...................................... 451,745 430,973
Accrued professional fees ................... 288,956 357,535
Accrued payroll ............................. 1,225,132 1,173,520
Other accrued expenses ...................... 406,685 368,749
------------ ------------
Total current liabilities ............... 3,132,488 3,077,279
------------ ------------
Stockholders' Equity:
Common stock $.001 par value
5,082,475 shares outstanding at
March 31, 1999 ............................. 5,083 4,787
Additional paid-in capital .................. 15,770,851 15,484,456
Deficit accumulated during development
stage ...................................... (18,807,615) (18,513,938)
Less 5 shares of common stock held in
treasury, at cost .......................... (347) (347)
------------ ------------
Total stockholders' equity .............. (3,032,028) (3,025,042)
------------ ------------
$ 100,460 $ 52,237
============ ============
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
EPIGEN, INC.
(formerly COD Associates, L.P.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
Cumulative
For the Three For the Three from
Months Ended Months Ended Inception to
March 31, March 31, March 31,
1999 1998 1999
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
Revenues:
Licensing fees ................ $ -- $ -- $ 1,600
Interest income ............... -- -- 219,711
------------ ------------ ------------
-- -- 221,311
------------ ------------ ------------
Operating Costs & Expenses:
Direct research and
development .................. 21,145 89,095 7,512,118
General and administrative .... 214,400 188,152 9,724,701
Fees due to General Partner
of the Predecessor and
affiliates, forgiven and
contributed to capital ....... -- -- 1,188,893
Interest expense, net ......... 58,132 28,977 603,214
------------ ------------ ------------
Total operating costs
and expenses ............. 293,677 306,224 19,028,926
------------ ------------ ------------
Net (loss) ..................... (293,677) (306,224) $(18,807,615)
============ ============ ============
Net loss per common share ...... $ (0.06) $ (0.16)
============ ============
Weighted average
Number of shares of common
stock outstanding ............. 4,925,805 1,901,100
============ ============
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
EPIGEN, INC.
(formerly COD Associates, L.P.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<CAPTION>
Cumulative
For the Three For the Three from
Months Ended Months Ended Inception to
March 31, March 31, Marh 31,
1999 1998 1999
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ........................................................ $ (293,677) $ (306,224) $(18,807,615)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense .......................... 1,956 346 103,945
Non-cash expenses paid in equity interest ...................... -- -- 2,810,878
Non-cash compensation expense associated
with the grant of stock options and warrants .................. -- -- 427,964
Debt converted to equity ........................................ 76,680 -- 642,830
Changes in operating assets and liabilities
Increase(decrease) in accrued direct
research and development costs ................................. 20,772 64,376 451,745
Increase(decrease) in accrued professional fees ................. (68,579) (1,894) 288,956
Increase(decrease) in accrued payroll ........................... 51,612 34,050 1,225,132
Increase(decrease) in accrued expenses to
affiliates, printing charges and other expenses ................ 61,404 44,335 580,850
------------ ------------ ------------
Net cash used in operating activities ....................... (149,832) (165,011) (12,275,315)
------------ ------------ ------------
Cash Flows from Investing Activities:
Purchase of office equipment .................................... -- (1,403) (73,060)
Purchase of treasury stock ...................................... -- -- (347)
Decrease(increase) in note receivable from
an officer/shareholder ......................................... -- (38,107) --
Decrease(increase) in other assets .............................. -- -- (3,025)
Increase in organizational costs ................................ -- -- (53,925)
------------ ------------ ------------
Net cash provided by investing activities ................... -- (39,510) (130,357)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock .......................... 296 515 9,147,946
Capital contributions ........................................... 209,715 -- 2,351,315
Proceeds from issuance of preferred stock ....................... -- -- 395,000
Increase (decrease) in note payable-demand ...................... (10,000) 140,500 135,805
Net increase in notes payable - demand .......................... -- -- 450,000
------------ ------------ ------------
Net cash provided by financing activities ................... 200,011 141,015 12,480,066
------------ ------------ ------------
Net increase(decrease) in cash and cash equivalents .............. 50,179 (63,506) 74,394
Cash and cash equivalents, beginning period ...................... 24,215 64,809 --
------------ ------------ ------------
Cash and cash equivalents, end of period ......................... $ 74,394 $ 1,303 $ 74,394
============ ============ ============
The accompanying notes are an integral part of these financial statements.
3
</TABLE>
<PAGE>
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, 1999 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
period ended March 31, 1999 and March 31, 1998 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. 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.
4. 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 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
4
<PAGE>
EPIGEN, INC.
(formerly COD Associates, L.P.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
4. Licensing Agreements (cont.):
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%.
5. Equity Transactions During the Quarter Ended March 31, 1999 were as follows:
The Company sold 210,000 shares of common stock to investors at $1.00
per share with two five year warrants attached to each share. One
warrant with an exercise price of $1.50 and one warrant with an exercise
price of $2.00.
On February 15, 1999, a creditor converted $75,000 debt to equity in
exchange for 75,000 shares of the Company's common stock, and on March
5, 1999, a creditor converted $1,680 debt to equity in exchange for 560
shares of the Company's common stock. These shares were recorded at par
value.
The Company issued 10,000 shares of common stock to Dr. Gelber for
services to be provided. These shares were recorded at par value.
5
<PAGE>
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.
The Company is currently in preliminary negotiations with several major
biopharmaceutical companies, and in the event positive results are achieved in
either the prostate or breast clinical trials, the Company expects to form a
strategic alliance with one of these companies. There can be no assurance,
however, that the Company will be successful in such endeavor.
Phase 1 and 2 clinical trials will commence on its therapeutic vaccine at
Columbia Presbyterian Hospital under the auspices of Dr. Carl Olsson as soon as
funds are available. Work on the Company's in vivo imaging agent is being
delayed until sufficient funds are available to continue such work. The Company
does not anticipate using any significant funds for work on its other products
over the next 12 months.
6
<PAGE>
EPIGEN, INC.
(FORMERLY COD ASSOCIATES, L.P.)
(A DEVELOPMENT STAGE COMPANY)
The Company has entered into an arrangement with Vacold, LLC and its affiliate,
ImmunoTherapy, Inc., to develop a new generation of IgG antibodies for use in
the Company's prostate diagnostic products. Research presently is continuing on
the new antibodies. The precise terms of the arrangement between the Company and
Vacold, LLC and its affiliate presently are being negotiated. The Company
anticipates that the arrangement will require the Company to issue an as yet
undetermined amount of its Common Stock and to pay an as yet undetermined
royalty to Vacold, LLC in exchange for all patent and other rights associated
with the new antibodies, subject to certain minimum sales goals.
7
<PAGE>
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 March 31, 1999 see Note 5 of the Notes to
Financial Statements, incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
16.1 Letter on change in certifying accountant included in the
Company's report on Form 8-K dated March 25, 1999,
incorporated herein by reference.
(b) REPORTS ON FORM 8-K
The Company filed one report on Form 8-K dated March 25, 1999, during
the three months ended March 31, 1999 regarding a change in the
Company's certifying accountant, which report is incorporated herein
by reference.
8
<PAGE>
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: May 12, 1999
EPIGEN, INC.
By: /s/ Donald C. Fresne
-----------------------------------
Donald C. Fresne, Chief
Executive Officer, Chairman
of the Board of Directors and
President
By: /s/ L. Courtney Schroder
-----------------------------------
L. Courtney Schroder, Treasurer
and Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 74,394
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 69,065
<DEPRECIATION> 42,999
<TOTAL-ASSETS> 100,460
<CURRENT-LIABILITIES> 3,132,488
<BONDS> 0
0
0
<COMMON> 5,083
<OTHER-SE> (3,026,945)
<TOTAL-LIABILITY-AND-EQUITY> 100,460
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 235,545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,132
<INCOME-PRETAX> (293,677)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,677)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
