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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 June 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
(State or other jurisdiction of
incorporation or
organization)
    
    76-0233274
(IRS Employer
Identification No.)
 
 
 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 StatementsUnaudited Condensed Consolidated Balance Sheets: June 30, 2006
and December 31, 2005
    
    
    5Unaudited Condensed Consolidated Statements of Operations: For
the three-months ended June 30, 2006 and 2005, six-months ended
June 30, 2006 and 2005 and from Inception (August 20, 1987) through
June 30, 2006
    
    
    6Unaudited Condensed Consolidated Statements of Cash Flows: For
the six-months ended
June 30, 2006 and 2005 and from Inception (August 20, 1987) through
June 30, 2006
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    22PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    25SIGNATURES
    
    
    26Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
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FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
  3




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  4




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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1,474
    
    
    $
    2,165Marketable securities
    
    
    11,035
    
    
    
    14,667Prepaid expenses and other current assets
    
    
    337
    
    
    
    231Total current assets
    
    
    12,846
    
    
    
    17,063Fixed Assets,net
    
    
    73
    
    
    
    19Other assets,net
    
    
    687
    
    
    
    600Total assets
    
    $
    13,606
    
    
    $
    17,682LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    784
    
    
    $
    338Accrued expenses
    
    
    420
    
    
    
    389Total current liabilities
    
    
    1,204
    
    
    
    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, 12,082,997 and 12,016,636 shares issued,
respectively; 10,145,962 and 10,079,601 shares
outstanding, respectively
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    117,590
    
    
    
    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
    
    
    (99,252
    )
    
    
    (94,145
    )Total stockholders equity
    
    
    12,402
    
    
    
    16,955Total liabilities and stockholders equity
    
    $
    13,606
    
    
    $
    17,682
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 From Inception(August 20, 1987)throughThree Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006RevenuesLicensing fees
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    28,755Product royalties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Research and development grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1,219Interest income
    
    
    166
    
    
    
    173
    
    
    
    340
    
    
    
    281
    
    
    
    14,096Gain on disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Other Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Total revenues and
other income
    
    
    166
    
    
    
    173
    
    
    
    340
    
    
    
    285
    
    
    
    44,834ExpensesResearch and development
    
    
    2,363
    
    
    
    1,355
    
    
    
    4,171
    
    
    
    2,590
    
    
    
    104,532General and administrative
    
    
    666
    
    
    
    465
    
    
    
    1,276
    
    
    
    896
    
    
    
    29,823Interest expense and amortization
of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Total expenses
    
    
    3,029
    
    
    
    1,820
    
    
    
    5,447
    
    
    
    3,486
    
    
    
    134,743Loss from continuing operations
    
    
    (2,863
    )
    
    
    (1,647
    )
    
    
    (5,107
    )
    
    
    (3,201
    )
    
    
    (89,909
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )Gain on disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    939Net loss before cumulative effect of
change in accounting principle
    
    
    (2,863
    )
    
    
    (1,647
    )
    
    
    (5,107
    )
    
    
    (3,201
    )
    
    
    (90,798
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,454
    )Net loss
    
    $
    (2,863
    )
    
    $
    (1,647
    )
    
    $
    (5,107
    )
    
    $
    (3,201
    )
    
    $
    (99,252
    )Income (loss) per share  basic and diluted:
    
    $
    (0.28
    )
    
    $
    (0.16
    )
    
    $
    (0.50
    )
    
    $
    (0.35
    )Shares used in loss per share calculation:Basic
    
    
    10,146
    
    
    
    10,080
    
    
    
    10,143
    
    
    
    9,208Diluted
    
    
    10,146
    
    
    
    10,080
    
    
    
    10,143
    
    
    
    9,208
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 From Inception(August 20, 1987)throughSix Months Ended June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006Cash Flows from Operating ActivitiesNet loss
    
    $
    (5,107
    )
    
    $
    (3,201
    )
    
    
    (99,252
    )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
    
    
    6
    
    
    
    3
    
    
    
    3,786Noncash expenses related to stock-based
transactions
    
    
    351
    
    
    
    38
    
    
    
    3,168Common stock issued for agreement not to
compete
    
    
    
    
    
    
    
    
    
    
    200Series B Preferred Stock issued for
consulting services
    
    
    
    
    
    
    
    
    
    
    18Maturities of marketable securities
    
    
    22,107
    
    
    
    9,725
    
    
    
    46,932Purchases of marketable securities
    
    
    (18,475
    )
    
    
    (23,689
    )
    
    
    (29,432
    )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
    
    
    (106
    )
    
    
    (188
    )
    
    
    (38
    )(Decrease) increase in accounts payable and
accrued expenses
    
    
    477
    
    
    
    143
    
    
    
    2,400Net cash provided by (used in) operating activities
    
    
    (747
    )
    
    
    (17,169
    )
    
    
    (73,141
    )Cash Flows from Investing ActivitiesMaturities (purchases) of marketable
securities
    
    
    
    
    
    
    
    
    
    
    (28,723
    )Capital expenditures
    
    
    (60
    )
    
    
    (6
    )
    
    
    (2,357
    )Purchase of technology rights and other
assets
    
    
    (87
    )
    
    
    (68
    )
    
    
    (2,708
    )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
    
    
    (147
    )
    
    
    (74
    )
    
    
    (31,385
    )Cash Flows from Financing ActivitiesProceeds from issuance of common stock, net
of offering costs
    
    
    
    
    
    
    18,180
    
    
    
    102,404(Increase) decrease in prepaid offering costs
    
    
    
    
    
    
    600
    
    
    
    Exercise of stock options
    
    
    203
    
    
    
    85
    
    
    
    288Proceeds 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
    
    
    203
    
    
    
    18,865
    
    
    
    106,000Net increase (decrease) in cash and cash equivalents
    
    
    (691
    )
    
    
    1,622
    
    
    
    1,474Cash and cash equivalents at beginning of period
    
    
    2,165
    
    
    
    736
    
    
    
    Cash and cash equivalents at end of period
    
    $
    1,474
    
    
    $
    2,358
    
    
    $
    1,474
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REPROS THERAPEUTICS INC. AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006
 NOTE 1  Organization and Operations
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NOTE 2  Stock-based Compensation
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Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Net loss, as reported
    
    $
    (1,647
    )
    
    $
    (3,201
    )Add: Stock-based
employee compensation
expense included in
reported net income,
net of related tax
effects
    
    
    34
    
    
    
    38Deduct: Total
stock-based employee
compensation expense
determined under fair
value based method
for all awards, net
of related tax
effects
    
    
    (135
    )
    
    
    (410
    )
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Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Pro-forma net loss
    
    $
    (1,748
    )
    
    $
    (3,573
    )Loss per share Basic  as reported
    
    $
    (0.16
    )
    
    $
    (0.35
    )Basic  pro-forma
    
    
    (0.17
    )
    
    
    (0.39
    )Diluted  as reported
    
    
    (0.16
    )
    
    
    (0.35
    )Diluted  pro-forma
    
    
    (0.17
    )
    
    
    (0.39
    )
  Aggregate IntrinsicWeighted Average
    
    Value (inStock Options
    
    Exercise Price
    
    thousands)Outstanding at December 31, 2005
    
    
    1,715,363Granted
    
    
    45,000Exercised
    
    
    (66,361
    )
    
    
    
    
    
    $
    337Forfeited
    
    
    (176,854
    )Outstanding at June 30, 2006
    
    
    1,517,148
    
    
    $
    4.58
    
    
    $
    5,397Exercisable at June 30, 2006
    
    
    1,008,775
    
    
    $
    4.71
    
    
    $
    3,462
  NOTE 3  Marketable Securities
   NOTE 4  Patents
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NOTE 5  Loss Per Share
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net Loss
    
    $
    (2,863
    )
    
    $
    (1,647
    )
    
    $
    (5,107
    )
    
    $
    (3,201
    )Average common shares
outstanding
    
    
    10,146
    
    
    
    10,080
    
    
    
    10,143
    
    
    
    9,208Basic loss per share
    
    $
    (0.28
    )
    
    $
    (0.16
    )
    
    $
    (0.50
    )
    
    $
    (0.35
    )Diluted loss per share
    
    $
    (0.28
    )
    
    $
    (0.16
    )
    
    $
    (0.50
    )
    
    $
    (0.35
    )
  NOTE 6  Stockholders Equity
  NOTE 7  Commitments and Contingencies
   12




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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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®
     16




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®
      17




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®
     18




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Results of Operations
 Three-Month and Six-Month Periods Ended June 30, 2006 and 2005
  Revenues and other income
   19




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Research and Development Expenses
 General and Administrative Expenses
 Liquidity and Capital Resources
   20




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21




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    22




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We currently rely on third-party manufacturers and other third parties for production of our
product candidates, and our dependence on these manufacturers may impair the development of our
product candidates.
    23




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Our product candidates have only been manufactured in small quantities to date, and we may
face delays or complications in manufacturing quantities of our product candidates in sufficient
quantities to meet the demands of late stage clinical trials and marketing.
  We may incur increased costs as a result of laws and regulations relating to corporate
governance matters.
  24




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Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    
    WithheldJoseph S. Podolski
    
    
    8,962,317
    
    
    
    14,224Louis Ploth, Jr.
    
    
    8,960,507
    
    
    
    16,034Daniel F. Cain
    
    
    8,959,249
    
    
    
    17,292Jean Fourcroy, M.D., Ph.D., M.P.H.
    
    
    8,959,659
    
    
    
    16,882Jeffrey R. Harder, J.D.
    
    
    8,952,609
    
    
    
    23,932Nola Masterson
    
    
    8,959,517
    
    
    
    17,024David Poorvin, Ph.D.
    
    
    8,959,659
    
    
    
    16,882
  For 8,630,084
    
    Against 343,457
    
    Abstain 3,000
  For 8,945,301
    
    Against 12,352
    
    Abstain 19,158
 
 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
  Date: August 3, 2006
    REPROS THERAPEUTICS INC.By:
    /s/ Joseph S. PodolskiJoseph S. PodolskiPresident, Chief Executive Officer and Director
(Principal Executive Officer)Date: August 3, 2006By:
    /s/ Louis Ploth, Jr.Louis Ploth, Jr.Vice President Business Development, Chief Financial Officer, Director and Secretary
(Principal Financial and Accounting Officer) 26




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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).
 27