Zonagen Inc. is a biopharmaceutical company engaged in the development of products for the human reproductive system including sexual dysfunction vaccine adjuvants products for fertility and female health as well as urological applications specifically prostate cancer. Zonagen\'s products to treat sexual dysfunction all incorporate phentolamine mesylate an alpha-adrenergic blocker as the active agent. Zonagen\'s lead product VASOMAX(R) is a rapidly disintegrating oral formulation of phentolamine for the treatment of male erectile dysfunction. Repros therapeutics inc. has a market cap of $17.45 million; its shares were traded at around $1.15 with and P/S ratio of 40.3.
Highlight of Business Operations:As of June 30, 2009, we had approximately $4.0 million in cash and cash equivalents and our accounts payable and accrued expenses were approximately $7.5 million. Furthermore, as of August 14, 2009, we had approximately $2.7 million in cash and cash equivalents. Our accounts payable and accrued expenses as of August 14, 2009 is significantly higher than it was at the end of the second quarter. In addition, we are reviewing our obligations under our agreements with our contract research organizations to determine the extent of our obligations thereunder. As a result, the amount of cash on hand is not sufficient to continue to fund our ongoing clinical trials of Androxal®, complete all necessary activities relating to the suspension of our clinical trial program for Proellex®, pay our accounts payable and accrued expenses as well as our normal corporate overhead and expenses. Effective August 16, 2009, we adopted a 50% salary reduction program for all salaried employees in an effort to reduce expenses while maintaining our current effort without diminution. We are in the process of exploring potential new financing alternatives that may allow us to maintain our current reduced level of operations; however, there can be no assurance that we will be successful in raising any such funds on a timely basis or at all. Significant additional capital will be required for us to continue development of either of our product candidates. Failure to raise sufficient funds in the immediate short term as described above will likely result in the filing of bankruptcy and dissolution of the Company.
In addition, we have recently suspended dosing in the clinical trials of Proellex®, have not received regulatory approval for any of our product candidates, have not successfully earned any significant commercial revenues from any of our product candidates and may never launch either of our product candidates. If we cannot resume dosing in the clinical trials of Proellex® or do not successfully commercialize any of our product candidates, we will be unable to achieve our business objectives. In addition, the reported results of our clinical trials completed to date may not be indicative of results that will be achieved in later-stage clinical trials involving larger and more diverse patient populations. As of June 30, 2009, we had an accumulated deficit of approximately $162.9 million, accounts payable and accrued expenses of approximately $7.5 million and cash and cash equivalents of $4 million. Our accounts payable and accrued expenses as of August 14, 2009 is significantly higher than it was at the end of the second quarter. In addition, we are reviewing our obligations under our agreements with our contract research organizations to determine the extent of our obligations thereunder. There is a substantial doubt about our ability to continue as a going concern and we expect to continue to incur significant losses over the next several years, and we may never become profitable. Our financial statements do not include any adjustments that might result from the outcome of these uncertainties.
As of June 30, 2009, the Company had an accumulated deficit of $162.9 million, accounts payable and accrued expenses of approximately $7.5 million and cash and cash equivalents of approximately $4.0 million. Furthermore, as of August 14, 2009, we had approximately $2.7 million in cash and cash equivalents, and the amount of accounts payable and accrued expenses were significantly higher than $7.5 million. We have experienced negative cash flows from operations since inception and have funded our activities to date primarily from equity financings and corporate collaborations. Based on our current commitments associated with suspending our clinical trials for Proellex® and other existing and projected obligations and expenditures, we believe we do not have sufficient cash to continue normal operations and we will need to raise additional capital immediately in order to continue operations on a normal basis. In the event that we are unable to obtain adequate financing to meet our immediate short term liquidity needs, we will pursue other options, including but not limited to, additional reductions of expenses, sale of the Company, sale or license of a portion or all of our assets, a bankruptcy filing or the liquidation of the Company. The uncertainties relating to the foregoing matters raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of these uncertainties.
We capitalize the cost associated with building our patent library for Proellex® and Androxal®. As of June 30, 2009, other assets consist of capitalized patent and patent application costs in the amount of $2,009,000. Patent costs, which include legal and application costs related to the patent portfolio, are being amortized over 20 years, or the lesser of the legal or the estimated economic life of the patent. Amortization of patent costs was $13,000 and $5,000 for the three month period ended June 30, 2009 and 2008, respectively and was $25,000 and $8,000 for the six month period ended June 30, 2009 and 2008, respectively. Of the $2,009,000 in capitalized patents, $957,000 related to Proellex® patents and patent applications and $1,052,000 related to Androxal® patents and patent applications.
In December 2008, Repros committed to the purchase of at least $3 million of the bulk active ingredient of Proellex® which is to be produced under a new scaled-up amended manufacturing process by Gedeon Richter. Under this Purchase Request, as amended, the Company paid $750,000 in the first quarter of 2009 and $750,000 in the second quarter of 2009. As of June 30, 2009, $1.5 million is reflected under Prepaid Expenses and Other Current Assets on the balance sheet. Repros is obligated to make two additional payments of $750,000 each for the final two batches of Proellex® to be delivered in the third and fourth quarters of 2009. The remaining two payments are due based upon the delivery of finished product by Gedeon Richter and our acceptance of the finished product, with the first such payment due no sooner than mid August 2009 and the final payment due no sooner than mid January 2010. As of August 17, 2009 the Company has not received any shipment or accepted any product from Gedeon Richter of material produced from the scaled up process. On June 26, 2009, Gedeon Richter notified Repros that the material produced did not possess the required particle properties under the revised Purchase Request. The Company is in the process of considering whether such non-conforming material may still suit its purposes. Should we determine that such non-conforming material is acceptable and actually take shipment of it, we may be required to pay Gedeon Richter an additional $750,000 owed upon delivery of the first two batches. The Company intends to discuss with Gedeon Richter an amendment to the Purchase Request in an effort to reduce its future commitments and resolve the outcome of the non-conforming batches of material. At such time as we accept such material, we will recognize the prior $1.5 million reflected as Prepaid Expenses and Other Current Expenses as an expense associated with this purchase together with any additional amounts payable. If the Company is unable to make the remaining payments as required under the terms of this Purchase Request, we may not receive any of the finished product from Gedeon Richter and may not be refunded any of the previously paid $1.5 million reflected under Prepaid Expenses and Other Current Assets on our balance sheet, which may require us to expense the $1.5 million prepaid asset. This Purchase Request provides that all payments made to Gedeon Richter under the Purchase Request will be returned if they can not meet their obligations under this Purchase Request by March 31, 2010. It is anticipated that they will perform under the contract and, therefore, we will not receive reimbursement. See Note 5 to the Consolidated Financial Statements for a complete description of this agreement.
Total revenues and other income, which was comprised of interest income for the three month and six month periods ended June 30, 2009 and 2008, decreased 99% to $1,000 for the three month period ended June 30, 2009 as compared to $91,000 for the same period in the prior year and decreased 99% to $4,000 for the six month period ended June 30, 2009 as compared to $359,000 for the same period in the prior year. The decrease for the three and six month periods ended June 30, 2009 was primarily due to lower combined cash, cash equivalents and marketable securities balances and reduced interest rate yields that have occurred as we moved our cash investments solely into a money market mutual fund.
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