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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-15281
 REPROS THERAPEUTICS INC.
  Delaware
    
    2408 Timberloch Place, Suite B-7
    
    76-0233274(State or other jurisdiction of
    
    The Woodlands, Texas 77380
    
    (IRS Employerincorporation or
    
    (Address of principal executive
    
    Identification No.)organization)
    
    offices and zip code)
  
 Zonagen, Inc.
(Former name, former address and former fiscal year, if changed since report)
 þ o
  o o þ
 o þ




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REPROS THERAPEUTICS INC.
   PageFACTORS AFFECTING FORWARD-LOOKING STATEMENTS
    
    
    3PART I.
    
    FINANCIAL INFORMATION
    
    
    4Item 1.
    
    Financial Statements (unaudited)Unaudited Condensed Consolidated Balance Sheets: September 30, 2006 and December 31, 2005
    
    
    5Unaudited Condensed Consolidated Statements of Operations: For the three-months and nine-months ended September 30, 2006 and 2005 and from Inception (August 20, 1987) through September 30, 2006
    
    
    6Unaudited Condensed Consolidated Statements of Cash Flows: For the nine-months ended September 30, 2006 and 2005 and from Inception (August 20, 1987) through September 30, 2006
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    25PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    26Item 1A.
    
    Risk Factors
    
    
    26Item 5.
    
    Other Information
    
    
    26Item 6.
    
    Exhibits
    
    
    26SIGNATURES
    
    
    27Certification pursuant to Section 302Certification pursuant to Section 302Certification pursuant to Section 906Certification pursuant to Section 906
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FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    2,117
    
    
    $
    2,165Marketable securities
    
    
    7,750
    
    
    
    14,667Prepaid expenses and other current assets
    
    
    256
    
    
    
    231Total current assets
    
    
    10,123
    
    
    
    17,063Fixed Assets,net
    
    
    69
    
    
    
    19Other assets,net
    
    
    737
    
    
    
    600Total assets
    
    $
    10,929
    
    
    $
    17,682LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    905
    
    
    $
    338Accrued expenses
    
    
    1,006
    
    
    
    389Total current liabilities
    
    
    1,911
    
    
    
    727Commitments and contingenciesStockholders EquityUndesignated Preferred Stock, $.001 par value, 5,000,000
shares authorized, none issued and outstanding
    
    
    
    
    
    
    Common Stock, $.001 par value, 20,000,000 shares
authorized, 12,087,997 and 12,016,636 shares issued,
respectively; 10,150,962 and 10,079,601 shares
outstanding, respectively
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    117,847
    
    
    
    117,166Deferred compensation
    
    
    
    
    
    
    (130
    )Cost of treasury stock, 1,937,035 and 1,937,035 shares, respectively
    
    
    (5,948
    )
    
    
    (5,948
    )Deficit accumulated during the development stage
    
    
    (102,893
    )
    
    
    (94,145
    )Total stockholders equity
    
    
    9,018
    
    
    
    16,955Total liabilities and stockholders equity
    
    $
    10,929
    
    
    $
    17,682
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 From Inception(August 20, 1987)Three Months Ended
    
    
    Nine Months Ended
    
    
    throughSeptember 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006RevenuesLicensing fees
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    28,755Product royalties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Research and development grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1,219Interest income
    
    
    146
    
    
    
    175
    
    
    
    486
    
    
    
    456
    
    
    
    14,242Gain on disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Other Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Total revenues and other income
    
    
    146
    
    
    
    175
    
    
    
    486
    
    
    
    460
    
    
    
    44,980ExpensesResearch and development
    
    
    3,073
    
    
    
    1,641
    
    
    
    7,245
    
    
    
    4,231
    
    
    
    107,606General and administrative
    
    
    713
    
    
    
    461
    
    
    
    1,989
    
    
    
    1,357
    
    
    
    30,536Interest expense and amortization
of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Total expenses
    
    
    3,786
    
    
    
    2,102
    
    
    
    9,234
    
    
    
    5,588
    
    
    
    138,530Loss from continuing operations
    
    
    (3,640
    )
    
    
    (1,927
    )
    
    
    (8,748
    )
    
    
    (5,128
    )
    
    
    (93,550
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )Gain on disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    939Net loss before cumulative effect of
change in accounting principle
    
    
    (3,640
    )
    
    
    (1,927
    )
    
    
    (8,748
    )
    
    
    (5,128
    )
    
    
    (94,439
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,454
    )Net loss
    
    $
    (3,640
    )
    
    $
    (1,927
    )
    
    $
    (8,748
    )
    
    $
    (5,128
    )
    
    $
    (102,893
    )Loss per share  basic and diluted:
    
    $
    (0.36
    )
    
    $
    (0.19
    )
    
    $
    (0.86
    )
    
    $
    (0.54
    )Shares used in loss per share calculation:Basic
    
    
    10,150
    
    
    
    10,080
    
    
    
    10,145
    
    
    
    9,501Diluted
    
    
    10,150
    
    
    
    10,080
    
    
    
    10,145
    
    
    
    9,501
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 From Inception(August 20, 1987)Nine Months Ended
    
    
    throughSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006Cash Flows from Operating ActivitiesNet loss
    
    $
    (8,748
    )
    
    $
    (5,128
    )
    
    
    (102,893
    )Gain on disposal of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (939
    )Gain on disposal of assets
    
    
    
    
    
    
    
    
    
    
    (102
    )Adjustments to reconcile net loss to net cash
used in operating activities:Noncash financing costs
    
    
    
    
    
    
    
    
    
    
    316Noncash inventory impairment
    
    
    
    
    
    
    
    
    
    
    4,417Noncash patent impairment
    
    
    
    
    
    
    
    
    
    
    1,339Noncash decrease in accounts payable
    
    
    
    
    
    
    
    
    
    
    (1,308
    )Depreciation and amortization
    
    
    12
    
    
    
    5
    
    
    
    3,792Noncash expenses related to stock-based transactions
    
    
    570
    
    
    
    64
    
    
    
    3,387Common stock issued for agreement not to compete
    
    
    
    
    
    
    
    
    
    
    200Series B Preferred Stock issued for consulting services
    
    
    
    
    
    
    
    
    
    
    18Maturities of marketable securities
    
    
    29,957
    
    
    
    17,925
    
    
    
    54,782Purchases of marketable securities
    
    
    (23,040
    )
    
    
    (29,178
    )
    
    
    (33,997
    )Changes in operating assets and liabilities
(net effects of purchase of businesses in 1988 and 1994):Decrease (increase) in receivables
    
    
    
    
    
    
    
    
    
    
    (199
    )Decrease (increase) in inventory
    
    
    
    
    
    
    
    
    
    
    (4,447
    )Decrease (increase) in prepaid expenses and other
current assets
    
    
    (26
    )
    
    
    (170
    )
    
    
    42(Decrease) increase in accounts payable and
accrued expenses
    
    
    1,184
    
    
    
    36
    
    
    
    3,107Net cash provided by (used in) operating activities
    
    
    (91
    )
    
    
    (16,446
    )
    
    
    (72,485
    )Cash Flows from Investing ActivitiesMaturities (purchases) of marketable securities
    
    
    
    
    
    
    
    
    
    
    (28,723
    )Capital expenditures
    
    
    (62
    )
    
    
    (8
    )
    
    
    (2,359
    )Purchase of technology rights and other assets
    
    
    (136
    )
    
    
    (147
    )
    
    
    (2,757
    )Proceeds from sale of PP&E
    
    
    
    
    
    
    
    
    
    
    225Cash acquired in purchase of FTI
    
    
    
    
    
    
    
    
    
    
    3Proceeds from sale of subsidiary, less
$12,345 for operating losses during
1990 phase-out period
    
    
    
    
    
    
    
    
    
    
    138Proceeds from sale of the assets of FTI
    
    
    
    
    
    
    
    
    
    
    2,250Increase in net assets held for disposal
    
    
    
    
    
    
    
    
    
    
    (213
    )Net cash used in investing activities
    
    
    (198
    )
    
    
    (155
    )
    
    
    (31,436
    )Cash Flows from Financing ActivitiesProceeds from issuance of common stock, net of
    
    
    
    
    
    
    18,180
    
    
    
    102,404offering costs
(Increase) decrease in prepaid offering costs
    
    
    
    
    
    
    600
    
    
    
    Exercise of stock options
    
    
    241
    
    
    
    85
    
    
    
    326Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    23,688Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (21,487
    )Proceeds from issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    2,839Principal payments on notes payable
    
    
    
    
    
    
    
    
    
    
    (1,732
    )Net cash provided by (used by) financing activities
    
    
    241
    
    
    
    18,865
    
    
    
    106,038Net increase (decrease) in cash and cash equivalents
    
    
    (48
    )
    
    
    2,264
    
    
    
    2,117Cash and cash equivalents at beginning of period
    
    
    2,165
    
    
    
    736
    
    
    
    Cash and cash equivalents at end of period
    
    $
    2,117
    
    
    $
    3,000
    
    
    $
    2,117
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2006
 NOTE 1  Organization, Operations and Liquidity
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Recent Accounting Pronouncements
   NOTE 2  Stock-based Compensation
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Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Net loss, as reported
    
    $
    (1,927
    )
    
    $
    (5,128
    )Add: Stock-based
employee compensation
expense included in
reported net income,
net of related tax
effects
    
    
    26
    
    
    
    64Deduct: Total
stock-based employee
compensation expense
determined under fair
value based method for
all awards, net of
related tax effects
    
    
    (181
    )
    
    
    (591
    )Pro-forma net loss
    
    $
    (2,082
    )
    
    $
    (5,655
    )Loss per share-Basic  as reported
    
    $
    (0.19
    )
    
    $
    (0.54
    )Basic  pro-forma
    
    
    (0.21
    )
    
    
    (0.60
    )Diluted  as reported
    
    
    (0.19
    )
    
    
    (0.54
    )Diluted  pro-forma
    
    
    (0.21
    )
    
    
    (0.60
    )
  AggregateWeighted Average
    
    Intrinsic ValueStock Options
    
    Exercise Price
    
    (in thousands)Outstanding at December 31, 2005
    
    
    1,715,363Granted
    
    
    65,000Exercised
    
    
    (71,361
    )
    
    
    
    
    
    $
    308Forfeited
    
    
    (176,854
    )Outstanding at September 30, 2006
    
    
    1,532,148
    
    
    $
    4.51
    
    
    $
    4,882Exercisable at September 30, 2006
    
    
    1,077,172
    
    
    $
    4.58
    
    
    $
    3,358
  NOTE 3  Marketable Securities
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NOTE 4  Patents
  NOTE 5  Loss Per Share
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net Loss
    
    $
    (3,640
    )
    
    $
    (1,927
    )
    
    $
    (8,748
    )
    
    $
    (5,128
    )Average common shares
outstanding
    
    
    10,150
    
    
    
    10,080
    
    
    
    10,145
    
    
    
    9,501Basic loss per share
    
    $
    (0.36
    )
    
    $
    (0.19
    )
    
    $
    (0.86
    )
    
    $
    (0.54
    )Diluted loss per share
    
    $
    (0.36
    )
    
    $
    (0.19
    )
    
    $
    (0.86
    )
    
    $
    (0.54
    )
  NOTE 6  Stockholders Equity
  NOTE 7  Commitments and Contingencies
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such statements reflect the Companys current views with respect to future events and
financial performance and are subject to certain risks, uncertainties and assumptions. Should one
or more of these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated in such forward-looking
statements. The following discussion of financial condition should be read in conjunction with the
accompanying consolidated financial statements and related notes.
 Overview
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Results of Operations
 Three-Month and Nine-Month Periods Ended September 30, 2006 and 2005
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Revenues and other income
   Research and Development Expenses
 General and Administrative Expenses
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Liquidity and Capital Resources
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4. Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 5. Other Information
  
 Item 6. Exhibits
 31.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).31.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).32.1
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).32.2
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
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SIGNATURES
  REPROS THERAPEUTICS INC.Date: November 13, 2006By:
    
    /s/ Joseph S. Podolski

Joseph S. PodolskiPresident, Chief Executive Officer and Director(Principal Executive Officer)Date: November 13, 2006By:
    
    /s/ Louis Ploth, Jr.

Louis Ploth, Jr.Vice President Business Development,Chief Financial Officer, Director and Secretary(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
 31.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).31.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).32.1
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).32.2
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
 28