================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
         OF THE SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended: June 30, 1999

[ ]      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 1-11352
                         ------------------------------

                                  DYNAGEN, INC.
             (Exact name of registrant as specified in its charter)

             DELAWARE                                        04-3029787
             --------                                        ----------
  (State or other jurisdiction of                          (IRS Employer
   incorporation or organization)                        Identification No.)

                               840 MEMORIAL DRIVE
                               CAMBRIDGE, MA 02139
                    (Address of principal executive offices)

                                 (617) 491-2527
                           (Issuer's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
     ---              ---

As of July 31, 1999 there were outstanding 57,071,600 shares of common stock,
$.01 par value per share.

================================================================================

<PAGE>
                                  DYNAGEN, INC.

                                   FORM 10-QSB

                                QUARTERLY REPORT

                                  JUNE 30, 1999

                                TABLE OF CONTENTS


Facing Page                                                                  1
Table of Contents                                                            2

PART I.  FINANCIAL INFORMATION (*)

         Item 1.   Financial Statements:
                  Condensed Consolidated Balance Sheets                      3
                  Condensed Consolidated Statements of Loss                  5
                  Condensed Consolidated Statements of Changes
                     in Stockholders' Equity (Deficit)                       7
                  Condensed Consolidated Statements of
                    Cash Flows                                               9
                  Notes to Unaudited Condensed Consolidated
                    Financial Statements                                    11

         Item 2.  Management's Discussion and Analysis
                   of Financial Condition and Results

                   of Operations                                            16


PART II.  OTHER INFORMATION


         Item 1.  Legal Proceedings                                         25
         Item 2.  Changes in Securities                                     25
         Item 3.  Defaults on Senior Securities                             26
         Item 6.  Exhibits and Reports on Form 8-K                          27


SIGNATURES                                                                  28

(*)      The financial information at December 31, 1998 has been derived from
         the audited financial statements at that date and should be read in
         conjunction therewith. All other financial statements are unaudited.

                                        2

<PAGE>

PART I.   FINANCIAL INFORMATION

                                  DYNAGEN, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------
                                   (Unaudited)


                                     ASSETS
<TABLE>
<CAPTION>
                                                       June 30,            December 31,
                                                         1999                  1998
                                                     ------------          ------------
<S>                                                  <C>                   <C>
Current assets:
     Cash and cash equivalents                       $  1,398,284          $     97,045
         Accounts receivable, net of
         allowance accounts for
         doubtful accounts of
         $56,240 and $68,133                            3,797,320             3,673,472
     Rebates                                              359,220               398,724
     Inventory                                          8,122,235             6,647,079
     Notes receivable                                     111,500               150,000
     Prepaid expenses and other
         current assets                                   941,386               201,470
                                                     ------------          ------------
     Total current assets                              14,729,945            11,167,790
                                                     ------------          ------------

Property and equipment, net                             2,918,173             1,685,010
                                                     ------------          ------------

Other assets:
     Customer lists, net of accumulated
         amortization of $4,897,085 and
         $4,205,133                                     2,664,451             7,636,072
     Goodwill, net of accumulated amorti-
         tization of $0 and $48,567                           -0-               337,652
     Patents and trademarks, net of
         accumulated amortization of
         $10,870 and $0                                    54,359                65,229
     Deferred debt financing costs, net
         of accumulated amortization                      488,118               277,325
     Deposits and other assets                            576,091               276,372
                                                     ------------          ------------
     Total other assets                                 3,783,019             8,592,650
                                                     ------------          ------------
                                                     $ 21,431,137          $ 21,445,450
                                                     ============          ============
</TABLE>
     See accompanying notes to unaudited consolidated financial statements.

                                        3
<PAGE>

                                  DYNAGEN, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------



                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                           June 30,          December 31,
                                                             1999                1998
                                                         ------------        ------------
<S>                                                      <C>                 <C>
Current Liabilities:
     Bank overdraft                                      $  1,267,275        $    621,313
     Notes payable and current
         portion of long-term debt                          9,788,424          13,162,041
     Accounts payable and accrued expenses                  3,994,313           3,705,209
     Deferred revenue                                             -0-             100,000
     Settlement obligation, current portion                    64,616                 -0-
     Acquisition obligation                                       -0-           4,083,000
                                                         ------------        ------------
     Total current liabilities                             15,114,628          21,671,563

Warrant put liability                                         918,033             858,435
Long term debt, less current portion                        4,074,923           1,510,813
Settlement obligation, less current portion                   475,167                   -
                                                         ------------        ------------
     Total liabilities                                     20,582,751          24,040,811
                                                         ------------        ------------

Commitments and contingencies
Stockholders' equity (deficit):
     Preferred stock, $.01 par value, 10,000,000
shares authorized, 22,125 and 52,152 shares of
Series A through I outstanding, (liquidation value
$4,912,485 and $5,212,977)                                        221                 521
     Common stock, $.01 par value, 75,000,000
shares authorized, 56,038,796 and 37,612,612
shares issued and outstanding                                 560,388             376,126
     Additional paid-in capital                            53,940,154          47,181,545
     Accumulated deficit                                  (53,652,377)        (50,153,553)
                                                         ------------        ------------
     Total stockholders' equity (deficit)                     848,386          (2,595,361)
                                                         ------------        ------------
                                                         $ 21,431,137        $ 21,445,450
                                                         ============        ============
</TABLE>

            See accompanying notes to unaudited financial statements.

                                        4
<PAGE>

                                  DYNAGEN, INC.

                    CONDENSED CONSOLIDATED STATEMENTS OF LOSS
                    -----------------------------------------
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                   June 30,            June 30,
                                                     1999                1998
                                                 ------------        ------------
<S>                                              <C>                 <C>
Revenues:
     Product sales                               $  6,580,815        $  6,429,839
     Fees and royalties                                   225                 323
                                                 ------------        ------------
     Total revenues                                 6,581,040           6,430,162
                                                 ------------        ------------

Costs and expenses:
     Cost of sales                                  5,565,327           5,509,938
     Research and development                         322,282              93,670
     Selling, general and administrative            2,365,505           2,763,864
     Total costs and expenses                       8,253,114           8,367,472
                                                 ------------        ------------
     Operating loss                                (1,672,074)         (1,937,310)
                                                 ------------        ------------

Other income (expense):
     Investment and other income, net                 447,233             101,604
     Interest and financing expense                  (376,973)           (359,553)
                                                 ------------        ------------
     Other income (expense), net                       70,260            (257,949)
                                                 ------------        ------------
     Net loss                                      (1,601,814)         (2,195,259)

Less returns to Preferred stockholders:
     Beneficial conversion feature                    803,627             275,042
     Dividends paid and accrued                        31,992              35,425
                                                 ------------        ------------
Net loss applicable to common stock              $ (2,437,533)       $ (2,505,726)
                                                 ============        ============
Net loss per share-basic                         $      (0.05)       $      (0.13)
                                                 ============        ============
Weighted average shares outstanding                48,664,848          18,935,650
                                                 ============        ============
</TABLE>

            See accompanying notes to unaudited financial statements.

                                        5
<PAGE>

                                  DYNAGEN, INC.

                    CONDENSED CONSOLIDATED STATEMENTS OF LOSS
                    -----------------------------------------
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                    June 30,            June 30,
                                                      1999                1998
                                                  ------------        ------------
<S>                                               <C>                 <C>
Revenues:
     Product sales                                $ 13,605,612        $ 13,391,422
     Fees and royalties                                    225                 365
                                                  ------------
     Total revenues                                 13,605,837          13,391,787
                                                  ------------        ------------

Costs and expenses:
     Cost of sales                                  11,181,983          11,068,500
     Research and development                          498,636             320,287
     Selling, general and administrative             4,356,322           5,231,053
     Loss on impairment of customer lists              400,000                 -0-
                                                  ------------        ------------
     Total costs and expenses                       16,436,941          16,619,840
                                                  ------------        ------------
     Operating loss                                 (2,831,104)         (3,228,053)
                                                  ------------        ------------

Other income (expense):
     Investment and other income, net                  477,984             154,611
     Interest and financing expense                 (1,145,704)           (801,151)
                                                  ------------        ------------
         Other income (expense), net                  (667,720)           (646,540)
                                                  ------------        ------------
     Net loss                                       (3,498,824)         (3,874,593)


Less returns to Preferred stockholders:

     Beneficial conversion feature                     995,377             325,042
     Dividends paid and accrued                         48,115              97,649
                                                  ------------        ------------
Net loss applicable to common stock               $ (4,542,316)       $ (4,297,284)
                                                  ============        ============
Net loss per share-basic                          $      (0.10)       $      (0.33)
                                                  ============        ============
Weighted average shares outstanding                 44,303,126          13,219,985
                                                  ============        ============
</TABLE>

            See accompanying notes to unaudited financial statements.

                                        6

<PAGE>

                                  DYNAGEN, INC.

      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                    (DEFICIT)

                     Six Months Ended June 30, 1999 and 1998
                                   (Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                   Preferred Stock                    Common Stock
                                                Shares         Amount             Shares         Amount
                                              ----------     ----------         ----------     ----------
<S>                                           <C>            <C>                <C>            <C>
Balance at December 31, 1997                      63,522      $     635          4,315,137      $  43,151
Stock issued for GDI acquisition                  12,000            120                  -              -
Shares issued in private placements               29,250            293                  -              -
Stock issued for services                              -              -          1,165,175         11,651
Delayed registration penalty                           -              -                  -              -
Conversion of note payable                             -              -          1,798,526         17,986
Conversion of family loans                             -              -          1,560,000         15,600
Conversion of preferred stock                    (48,760)          (488)        13,688,745        136,888
Adjustment due to change in                            -              -                  -              -
  ownership of former subsidiary

Comprehensive income: Net loss                        --              -                  -              -
                                              ----------     ----------         ----------     ----------
Balance at June 30, 1998                          56,012      $     560         22,527,583      $ 225,276
                                              ==========     ==========         ==========     ==========

---------------------------------------------------------------------------------------------------------

Balance at December 31, 1998                      52,152      $     521         37,612,612      $ 376,126
Stock options and warrants exercised                   -              -            345,488          3,455
Shares issued in private placement                 3,000             30                  -              -
Conversion of preferred stock                    (33,027)          (330)        10,258,055        102,581
Conversion of debt                                     -              -          3,407,641         34,076
Stock issued for bonus                                 -              -            125,000          1,250
Stock issued for services                              -              -          2,790,000         27,900
Stock and warrants issued for                          -              -          1,500,000         15,000
    Superior settlement

Comprehensive income: Net Loss                         -              -                  -              -
                                              ----------     ----------         ----------     ----------
Balance at June 30, 1999                          22,125      $     221         56,038,796      $ 560,388
                                              ==========     ==========         ==========     ==========
---------------------------------------------------------------------------------------------------------
</TABLE>
                                        7

<PAGE>
                                  DYNAGEN, INC.

      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                    (DEFICIT)

               Six Months Ended June 30, 1999 and 1998 (continued)
<TABLE>
<CAPTION>
                                              Additional       Accumulated
                                           Paid-In Capital       Deficit           Total
                                              ----------       ----------       ----------
<S>                                          <C>            <C>               <C>
Balance at December 31, 1997                 $39,137,311     $(36,556,469)     $ 2,624,628
Stock issued for GDI acquisition               1,199,880                -        1,200,000
Shares issued in private placements            2,776,739                -        2,777,032
Stock issued for services                        511,063                -          522,714
Delayed registration penalty                    (175,000)               -         (175,000)
Conversion of note payable                       412,014                -          430,000
Conversion of family loans                       179,400                -          195,000
Conversion of preferred stock                   (136,400)               -                -
Adjustment due to change in                                             -
  ownership of former subsidiary                 468,888                           468,888
Comprehensive Income:  Net loss                       --     $ (3,874,593)              --
                                              ----------       ----------       ----------
Balance at June 30, 1998                     $44,373,894     $(40,431,062)     $ 4,168,668
                                              ==========       ==========       ==========



Balance at December 31, 1998                 $47,181,545     $(50,153,553)     $(2,595,361)
Stock options and warrants exercised              (3,355)               -              100
Shares issued in private placement             2,999,970                -        3,000,000
Conversion of preferred stock                   (102,251)               -                -
Conversion of debt                             1,016,810                -        1,050,886
Stock issued for bonus                            27,500                -           28,750
Stock issued for services                        837,935                -          865,835
Stock and warrants issued for
    superior settlement                        1,982,000                -        1,997,000
Comprehensive income: Net Loss                        --       (3,498,824)      (3,498,824)
                                              ----------       ----------       ----------
Balance at June 30, 1999                     $53,940,154     $(53,652,377)     $   848,386
                                              ==========       ==========       ==========

</TABLE>
                                        8

<PAGE>
                                  DYNAGEN, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                            June 30,              June 30,
                                                              1999                  1998
                                                          ------------          ------------
<S>                                                       <C>                   <C>
Cash flows from operating activities:
     Net loss                                             $ (3,498,824)         $ (3,874,593)
     Adjustments to reconcile net loss to net
         cash for operating activities:
     Depreciation and amortization                             938,366             1,684,434
     Loss on impairment of customer lists                      400,000                    --
     Stock, stock options and warrants issued for
         services                                              894,585               522,714
     (Increase) decrease in operating assets:
     Accounts receivable                                      (123,848)              287,062
     Rebates                                                    39,504                19,643
     Inventory                                              (1,475,156)            2,751,422
     Prepaid expenses and other current assets                (701,416)               50,604
     Deposits and other assets                                (513,970)              (71,092)
     Increase (decrease) in operating liabilities:
     Accounts payable and accrued expenses                     750,322            (2,949,566)
     Deferred revenue                                         (100,000)                   --
                                                          ------------          ------------
     Net cash used for operating activities                 (3,390,437)           (1,579,372)
                                                          ------------          ------------

     Cash flows from investing activities:
     Cash paid in Superior settlement                       (1,500,000)                    -
     Purchase of wholly-owned subsidiary net of
         cash received in acquisition                                -              (756,406)
     Purchase of property and equipment                     (1,397,046)             (297,242)
     Increase in deferred financing and
     acquisition costs                                               -               (50,000)
                                                          ------------          ------------
     Net cash provided (used) by investing
         activities                                         (2,897,046)           (1,103,648)
                                                          ------------          ------------
</TABLE>
                                        9

<PAGE>
                                  DYNAGEN, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                          June 30,              June 30,
                                                                            1999                  1998
                                                                        ------------          ------------
<S>                                                                     <C>                   <C>
Cash flows from financing activities:
     Proceeds from bank loan                                                      --             1,200,000
     Repayments of loan payable - bank                                      (299,825)           (1,701,287)
     Net proceeds from debt placements                                     4,705,000               500,000
     Net proceeds from private stock placements                            3,000,000             2,777,032
     Proceeds from stock options exercised                                       100                    --
     Repayment of debt obligation                                           (345,000)                   --
     Net change in accounts receivable factoring                            (117,515)


     Increase (decrease) in bank overdraft                                   645,962              (142,616)
     Repayment of Superior note payable                                           --              (416,666)
                                                                        ------------          ------------
     Net cash provided by financing activities                             7,588,722             2,216,463
                                                                        ------------          ------------

     Net change in cash and cash equivalents                               1,301,239              (466,557)
     Cash and cash equivalents at beginning                                   97,045               697,045
                                                                        ------------          ------------
     Cash and cash equivalents at end                                   $  1,398,284          $    230,488
                                                                        ============          ============

Supplemental cash flow information:

     Interest paid                                                           651,504               498,737
     Common stock issued for note payable and accrued interest             1,050,886               450,000
     Debt issued for delayed registration penalty                                                  262,500


Schedule of non-cash investing and financing activities:
On March 2, 1998, the Company purchased the net assets of
Generic Distributors Limited Partnership for $2,350,000.
In connection with the acquisition, non-cash financing
activities, liabilities assumed and customer lists were as
follows:
Fair value of assets acquired                                                                   $2,375,274
Cash paid                                                                                       (1,150,000)
Preferred stock issued                                                                          (1,200,000)
Liabilities assumed                                                                               (658,274)
                                                                                              ------------

Customer lists (exclusive of other acquisition costs of $96,205)                              $    633,000
                                                                                              ============
</TABLE>
          Additional non-cash investing activities as described in Note 2.

            See accompanying notes to unaudited financial statements.

                                       10

<PAGE>

                                  DYNAGEN, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                       BUSINESS AND BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of DynaGen,
Inc. (the "Company") and its wholly-owned subsidiaries, Able Laboratories,
Inc.("Able"), which is engaged in the manufacture of generic pharmaceuticals,
Superior Pharmaceutical Company ("Superior") and Generic Distributors Inc.
("GDI"), both of which are engaged in the distribution of generic
pharmaceuticals, and Apex Pharmaceuticals, Inc. which is developing therapeutic
products. The consolidated financial statements no longer include the accounts
of BioTrack, Inc. In 1998, the Company sold the majority of its shares in
BioTrack. Accordingly, BioTrack's financial statements are not included in the
accompanying consolidated financial statements. All significant intercompany
balances and transactions have been eliminated in consolidation.

         The results of operations for the periods reported are not necessarily
indicative of those that may be expected for a full year. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair statement of operating results for the interim
periods presented have been made.

         The financial information included in this report has been prepared in
conformity with the accounting policies reflected in the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998 filed with the Securities and Exchange Commission.

USE OF ESTIMATES

         In preparing consolidated financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet date and reported amounts of revenues and
expenses during the reporting period. Material estimates that are particularly
susceptible to significant change in the near term relate to the carrying values
of rebates receivable and intangible assets, the valuation of equity instruments
issued by the Company and the amount of obligations due as a result of defaults
on certain debt obligations. Actual results could differ materially from those
estimates.

EARNINGS PER SHARE

         Basic earnings per share represents income available to common stock
divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustment to income that would result from the assumed issuance.


                                       11

<PAGE>

         For all periods presented, the effect of including shares issuable upon
exercise or conversion of options, warrants and put warrants, would have been
anti-dilutive, and so these shares were excluded in calculating diluted earnings
per share.

         The loss applicable to common stockholders has been increased by the
stated dividends on the convertible preferred stock and the amortization of
discounts on convertible preferred stock due to beneficial conversion features.

2.       IMPACT OF SUPERIOR SETTLEMENT

         On June 18, 1997, the Company acquired all of the outstanding stock of
Superior Pharmaceutical Company ("Superior"), a distributor of generic
pharmaceutical products. The Company paid the shareholders of Superior
$6,250,000 in cash, $5,000,000 in three-year secured promissory notes and
166,667 shares of DynaGen's common stock with a guaranteed value of $5,000,000.
The secured promissory notes were subsequently reduced by $400,000 due to a
deficiency in the required net worth of Superior as of the acquisition date.
DynaGen was obligated to issue to the shareholders up to an additional 1,666,667
shares of its common stock on June 18, 1998 if its common stock was not trading
at an average of at least $30.00 per share for 10 consecutive trading days. The
merger agreement provided further that DynaGen would pay to the former Superior
stockholders the difference between $5,000,000 and the current aggregate market
value of the shares issued to the former Superior stockholders. The Company
recorded a $4,083,000 acquisition obligation at December 31, 1997 based on the
difference between the current estimated fair value of the 1,833,334 shares of
common stock issued and issuable and the guaranteed value of $5,000,000. The
former shareholders of Superior who remain as senior management at Superior may
also receive certain incentive payments based on Superior's performance during
the three years following the closing of the acquisition. Any such payments will
be expensed as incurred.

         The Superior acquisition has been accounted for as a purchase. The
results of operations of Superior have been included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price allocation was based on the estimated fair values at the date of
acquisition. The Company allocated $13,612,000 of the purchase price to customer
lists, which was being amortized on a straight line basis over five years. The
Company also recorded goodwill of $386,219 which, was being amortized over 15
years.

         On July 31, 1998, DynaGen entered into a contingent settlement
agreement to reduce the remaining purchase price to approximately $4,000,000 and
issued the former shareholders of Superior 416,167 shares of common stock in
connection therewith. The shares were valued at $143,700 and charged to expense.
The agreement expired and the Company did not obtain funding sufficient to
settle the outstanding claims.

         On December 17, 1998, the former Superior stockholders commenced a
civil action in the Court of Common Pleas, Hamilton County, Ohio. The complaint
filed by the former Superior stockholders alleged that we owed them
approximately $9,000,000, including $4,166,667 in connection with promissory
notes issued in connection with the merger as well as $4,817,660 as an
adjustment to the purchase price. In May 1999, we settled all issues between us
and the former Superior stockholders. The former Superior stockholders agreed to
dismiss their lawsuit in exchange for our:


                                       12

<PAGE>

         -        paying $1,500,000 in cash;

         -        issuing 1,500,000 shares of Common Stock valued at
                  $1,290,000;

         -        issuing warrants to purchase 1,000,000 shares of Common Stock
                  at a price of $0.86 per share valued at $ 452,000;

         -        issuing warrants to purchase 300,000 shares of Common Stock at
                  a price of $.01 per share valued at $ 255,000; and

         -        modifying the Commercial Lease Agreement between Superior and
                  a company controlled by the former Superior stockholders.

         The Company recorded a liability of $539,783 for the present value of
the additional rent payable under the lease modification and wrote off all of
its other obligations to the former Superior shareholders, consisting of the
acquisition obligation of $4,083,000, the notes payable obligation of $3,766,667
and accrued interest payable of $395,832. This resulted in an adjustment of
$3,879,669 to the customer list and the goodwill balance was adjusted by
$329,047 due to the reduction in the purchase price of Superior.

3.       GENERIC DISTRIBUTORS, INC.

         On March 2, 1998, the Company through its subsidiary, Generic
Distributors, Inc. ("GDI"), completed the acquisition of substantially all of
the assets and liabilities of Generic Distributors Limited Partnership ("GDLP"),
of Monroe, LA. In connection with the acquisition, the Company paid the limited
partnership $1,200,000 in cash, 10,500 shares of Series E Convertible Preferred
Stock valued at $1,050,000 and 1,500 shares of Series F Convertible Preferred
Stock valued at $100,000, for a total purchase price of $2,350,000. The Series E
Preferred Stock is convertible beginning 12 months from the closing into the
Company's common shares at the then prevailing market prices. The Series F
Preferred Stock is convertible into $100,000 in value of the Company's common
stock commencing 120 days after the closing at the then prevailing market
prices. In connection with the transaction, GDI received $1,200,000 in a
five-year term loan from Fleet Bank. The loan matures on April 26, 2003. Fleet
Bank also established a revolving line of credit for general working capital in
the amount of $300,000. The line bears interest at LIBOR plus 2-1/2%. The loans
are secured by all of the assets of GDI and Able, a pledge of all of the common
stock of GDI, and are guaranteed by the Company. In addition, the Company
entered into employment and consulting agreements with the sellers.

         The GDI acquisition has been accounted for as a purchase. The results
of operations of GDI have been included in the Company's consolidated financial
statements since the date of acquisition. The purchase price allocation was
based on the estimated fair values at the date of acquisition. The Company
allocated $729,205 of the purchase price to customer lists, based on an
independent appraisal. This amount is being amortized on a straight line basis
over five years. Amortization of customer lists amounted to $72,920 and $48,613
for the six months ended June 30, 1999 and 1998, respectively.

         Unaudited pro forma consolidated operating results for the Company,
assuming the acquisition of GDI had been made as of the beginning of fiscal
1998, are as follows:

                                       13

<PAGE>

                                       Six Months Ended
                                       ----------------
                                        June 30, 1998
                                        -------------

Revenues                                $ 14,572,510
Net loss                                $ (4,288,211)

Net loss per share                      $      (0.32)

         The unaudited pro forma information is not necessarily indicative of
either (i) the actual results of operations that would have occurred had the
purchases been made as of the beginning of the fiscal period presented or (ii)
future results of operations of the combined companies.

4.       INVENTORY

         Inventory consists of the following:

                                      June 30, 1999           December 31, 1998
                                      -------------           -----------------

         Raw materials                  $  830,584                $  401,531
         Work-in-progress                   18,739                    66,372
         Finished goods                  7,272,912                 6,179,176
                                        ----------                ----------
                                        $8,122,235                $6,647,079
                                        ==========                ==========
5.       DEBT

         Notes payable consist of the following:
                                                     June 30,      December 31,
                                                       1999           1998
                                                  -----------      -----------
         Convertible note payable                 $         -      $   155,000
         Bridge loans                               1,830,000          725,000
         Accounts receivable factoring                 67,315          184,830
         Machinery & Equipment
          Financing                                   609,333          586,333
         7% Convertible Debenture                           -          250,000
         8% Convertible Debenture                           -          328,500
         9% Convertible Debenture                     980,000                -
         Secured debt - Fleet Bank                  1,085,700        1,171,420
         Loan Payable -Huntington                   4,290,999        4,505,104
         Notes payable - Superior Acquisition               -        3,766,667
         Senior subordinated debt                   3,000,000        3,000,000
         NJEDA Bond                                 2,000,000                -
                                                  -----------      -----------
                  Total                            13,863,347       14,672,854

         Less current portion                       9,788,424       13,162,041
                                                  -----------      -----------
                  Long-term debt                  $ 4,074,923      $ 1,510,813
                                                  ===========      ===========

                                       14

<PAGE>

9% CONVERTIBLE DEBENTURE

         In the second quarter, the Company received $980,000 by issuing 9%
Convertible Subordinated Debentures. The debentures mature in one year from date
of issuance and carry a quarterly interest payment of 9% per annum. The
principal and interest accrued shall be automatically converted into shares of
Common Stock on the maturity date. Each tranche of $1,000,000 will be converted
into 5% of the shares of Common Stock of DynaGen that are issued and outstanding
on the date of conversion and smaller amounts will be prorated.

NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY BOND

         On June 23, 1999, Able Laboratories, Inc., completed the Industrial
Development Revenue Bond offering issued by the New Jersey Economic Development
Authority. The bonds consist of series 1999A $1,700,000, 8% non-taxable and
series 1999B $300,000, 8.25% taxable. Series 1999A bonds will mature in 15 years
and series 1999B bonds will mature in 4 years. The total cost of the bond issue
is estimated at $240,000 and the net proceeds of approximately $1,700,000 are
being used for the acquisition, installation and commissioning of equipment and
machinery.

         In connection with these bonds, the Company has entered into various
agreements with the New Jersey Economic Development Authority and the
bondholders, including an escrow agreement pursuant to which the Company has
deposited into escrow amounts intended to cover the Company's obligations under
the bond documents for periods of between two and six months.

6.       PREFERRED STOCK

         In May and June 1999, the Company received $3,000,000 from the issuance
of 3,000 shares of Series I to various unaffiliated investors. Shares of Series
I are convertible into Common Stock at 80% of the average of the closing bid
price of Common Stock for the three (3) selected, closing bids of past five (5)
trading days immediately preceeding any conversion date. The Company issued
165,652 Common Stock warrants at an exercise price of $0.91 and 34,722 Common
Stock warrants at an exercise price of $0.396 in connection with this financing.

7.       SUBSEQUENT EVENTS

         On July 19, 1999, the Company received $1,000,000 from the proceeds of
sales of its Series J Preferred Stock. According to the terms of Series J
Preferred Stock, the investor may convert his holdings to Common Stock of the
Company at 80% of the average quoted price for the three days preceding the
conversion notice. The discount rate varies between 80% and 70% as the holding
time increases.

         During July 1999, 40 shares of Series I Preferred Stock were converted
into 840,640 shares of Common Stock and 300 shares of Series B Preferred Stock
were converted into 70,336 shares of Common Stock.


                                       15

<PAGE>

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS

INTRODUCTION

         The following information should be read in conjunction with the
consolidated financial statements and notes thereto in Part I, Item 1 of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998.

         The Company does not provide forecasts of the future financial
performance of the Company. However, from time to time, information provided by
the Company or statements made by its employees may contain "forward-looking"
information that involves risks and uncertainties. In particular, statements
contained in this Form 10-QSB which are not historical facts constitute
forward-looking statements and are made under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Each forward-looking statement
should be read in conjunction with the consolidated financial statements and
notes thereto in Part I, Item 1, of this Quarterly Report and with the
information contained in Item 2, including, but not limited to, "Certain Factors
That May Affect Future Results" contained herein, together with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998, including, but not limited to, the section therein entitled
"Certain Factors That May Affect Future Results."

RESULTS OF OPERATIONS

         DynaGen makes and sells generic drugs for the human health care market.
During 1998 and the first quarter of 1999, we shifted our business focus from
being a development and licensing company to building a company focused on the
manufacture and distribution of generic drug products and specialty
pharmaceuticals. We intend to implement this strategy through internal product
development as well as through the acquisition of businesses, technologies and
products that we believe are undervalued. In August 1996, we acquired the tablet
business of Able Laboratories, Inc. ("Able"), a generic pharmaceutical product
subsidiary of Alpharma, Inc. In addition, we acquired Superior Pharmaceutical
Company ("Superior"), a distributor of generic pharmaceuticals, in June 1997. In
March 1998, we acquired Generic Distributors Limited Partnership through our
wholly-owned subsidiary, Generic Distributors Incorporated ("GDI").

         We have financed our operating losses primarily through the proceeds
from public and private stock offerings and debt offerings. We anticipate that
revenues from product sales will not be sufficient to fund our current
operations or produce an operating profit until such time as we can establish
acceptance of our products in their respective markets and expand our
distribution channels. We have incurred losses since inception and expect to
incur additional losses until such time as we can successfully develop,
manufacture, and sell or license our existing and proposed products and
technologies.

         Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing or to renegotiate our agreements with our existing
creditors, we may have to file for bankruptcy. Our independent auditors issued
an opinion on our financial statements as of December 31, 1998 and for the year
then ended which included an explanatory paragraph expressing substantial doubt
about our ability to continue as a going concern. See "-- Certain Factors That
May Affect Future Results."


                                       16

<PAGE>

Three-Month Period Ended June 30, 1999

         Revenues for the three-month period ended June 30, 1999 were
$6,581,040, compared to $6,430,162 for the period ended June 30, 1998. The
increase of $150,878 is primarily the result of increased product sales by
Superior Pharmaceuticals.

         Cost of product sales was $5,565,327, or 85% of product sales for the
three-month period ended June 30, 1999, compared to $5,509,938, or 86% of
product sales for the period ending June 30, 1998. The Company's gross profit
margin was approximately 15% due to the smaller margins of the distribution
business.

         Research and development expenses for the three-month period ended June
30, 1999 were $322,282, compared to $93,670 for the three-month period ended
June 30, 1998. All of these expenses relate to research which is currently being
conducted at Able Laboratories to identify and develop generic drug candidates
for future manufacturing and sales.

         Selling, general and administrative expenses for the three-month period
ended June 30, 1999 were $2,365,505 compared to $2,763,864 for the three-month
period ended June 30, 1998. The $398,359 decrease is primarily due to the cost
cutbacks and reduction of staff at our headquarters in Cambridge.

         Investment and other income was $447,233 for the three months ended
June 30, 1999, compared to $101,604 for the three-month period ended June 30,
1998. Other income during 1999 includes $341,000 of income recorded from
forgiveness of old payables. Interest and financing expenses of $376,973 for the
three-month period ended June 30, 1999, compared to $359,553 for the three-month
period ended June 30, 1998, relate primarily to private placements of debt. We
issued several warrants in connection with debt placements, the values of which
are included in our financing costs.

Six-Month Period Ended June 30, 1999

         Revenues for the six-month period ended June 30, 1999 were $13,605,837,
compared to $13,391,787 for the period ended June 30, 1998. The increase of
$214,050 is primarily the result of increased product sales by Superior
Pharmaceuticals. The GDI acquisition, completed on March 1, 1998, also
contributed to the increase in product sales. Results for the first six months
of 1998 include only four months of sales for GDI.

         Cost of product sales was $11,181,983, or 82% of product sales for the
six-month period ended June 30, 1999, compared to $11,068,500, or 83% of product
sales for the period end of June 30, 1998. The Company has maintained a gross
profit margin of 18% and 17%, respectively, due to the smaller margins of the
distribution business.

         Research and development expenses for the six-month period ended June
30, 1999 were $498,636, compared to $320,287 for the six-month period ended June
30, 1998. All of these expenses relate to research conducted at Able
Laboratories to identify and develop generic drug candidates for future
manufacturing and sales.

         Selling, general and administrative expenses for the six-month period
ended June 30, 1999 were $4,356,322, compared to $5,231,053 for the six-month
period ended June 30, 1998. The $874,731 decrease is primarily due to the cost
cutbacks and reduction of staff at our headquarters in Cambridge.

                                       17
<PAGE>

         We recorded an additional $400,000 of loss on impairment of Superior's
customer lists in the first quarter of 1999 based on our revised projections of
Superior's cash flows after reviewing Superior's performance during the first
quarter of 1999.

         Investment and other income was $477,984 for the six months ended June
30, 1999, compared to $154,611 for the six-month period ended June 30, 1998. The
first quarter 1998 includes income received from sale of BioTrack stock held by
the Company whereas the second quarter 1999 includes $362,000 of income recorded
from forgiveness of old payables. Interest and financing expenses of $1,145,704
for the six-month period ended June 30, 1999, compared to $801,151 for the
six-month period ended June 30, 1998, consists of interest expense, debt
placement fees and other related costs. We issued several warrants in connection
with debt placements, the values of which are included in our financing costs.

Liquidity and Capital Resources

         As of June 30, 1999, we had a working capital deficit of $384,683,
compared to a working capital deficit of $10,503,773 at December 31, 1998. This
significant improvement in the Company's working capital is due to the
settlement with the former Superior shareholders, the New Jersey bond financing
and sale of Series I preferred stock. Cash was $1,398,284 at June 30, 1999
compared to $97,045 at December 31, 1998. The Company continued raising funds
through short term debt placements. We expect our cash needs for the next 12
months to be approximately $5,000,000. We intend to generate the needed cash
through additional financing activities. We can give no assurance, though, that
we will be able to obtain such financing or, if we do, that the financing will
be sufficient for our needs. If we are not able to raise the needed financing,
we will likely need to seek the protection of the bankruptcy courts. See
"Certain Factors That May Affect Future Results."

         In June 1997, we acquired Superior Pharmaceutical Company, of
Cincinnati, Ohio, for an adjusted purchase price of $15.9 million in cash, notes
and stock. The merger agreement guaranteed that the selling shareholders would
receive at least $5,000,000 in the stock value as of June 1998. The agreement
provided that we would make up any shortfall in this guaranteed stock value
through the issuance of additional stock and cash.

         The Common Stock traded at approximately $0.50 per share as of June 18,
1998, and we therefore became obligated to pay approximately $4,000,000 in cash
to the former stockholders of Superior. Under the agreement, we then owed the
former stockholders a total of approximately $9,000,000 in common stock, cash
and notes. On July 31, 1998 we entered into a contingent settlement agreement to
reduce the remaining purchase price to approximately $4,000,000. We were unable,
however, to obtain financing sufficient in amount and appropriate in form of
payment (i.e., cash and/or stock) to fund the final settlement.

         On December 17, 1998, the former Superior stockholders commenced a
civil action in the Court of Common Pleas, Hamilton County, Ohio. The former
Superior stockholders alleged that we owed them approximately $9,000,000,
including $4,166,667 in connection with promissory notes issued in connection
with the merger as well as $4,817,660 as an adjustment to the purchase price. In
May 1999, we settled all issues between us and the former Superior stockholders.
The former Superior stockholders agreed to dismiss their lawsuit in exchange for
our:

         o        paying $1,500,000 in cash;

         o        issuing 1,500,000 shares of Common Stock;

                                       18
<PAGE>

         o        issuing warrants to purchase 1,000,000 shares of Common Stock
                  at a price of $0.86 per share;

         o        issuing warrants to purchase 300,000 shares of Common Stock at
                  a price of $0.01 per share; and

         o        amending Superior's commercial lease agreement.

         We recorded a liability of $539,783 for the present value of the
additional rent payable under the lease and wrote off all our other obligations
to the former Superior shareholders, consisting of the acquisition obligation of
$4,083,000, the notes payable obligation of $3,766,667 and accrued interest.
Accordingly, we decreased the carrying value of the customer list by $3,879,669
and the goodwill balance by $329,047 due to the reduction in the purchase price.

         We have satisfied various liabilities by divesting substantially all of
our equity ownership in BioTrack, Inc., a subsidiary formed to develop and
commercialize a technology involving tumor localization and tracking. In 1998,
in connection with our shift in business focus, the Board of Directors
determined that BioTrack did not fit into our plan to be a generic drug
manufacturing and distribution company. On April 30, 1998, the Board of
Directors unanimously voted to divest our majority share in BioTrack. Our equity
interest in BioTrack was reduced to approximately 1,300,000 shares, or
approximately 20% of the issued and outstanding shares of BioTrack, as of June
30, 1999.

         We have senior secured working capital and lending facilities from
three separate entities. Huntington National Bank has provided working capital
for Superior Pharmaceutical. The initial note matured in June 1998 and since
then, Huntington has extended the facility on a monthly basis. Fleet Capital
provided a term loan for the acquisition of GDI. K&L Financial has provided
working capital for Able Laboratories. We are in default of certain financial
covenants, but we have not defaulted on payment obligations in connection with
the above agreements.

         To date we have met substantially all of our capital requirements
through the sale of securities and loans convertible into common stock. The
negative impact of events in 1997 and 1998 has severely limited our ability to
raise capital in a conventional sale of our securities. We have engaged an
investment banking firm that specializes in the turnaround of companies to seek
both debt and equity financing. We cannot give any assurance that we will raise
the needed financing. If we cannot raise such financing, we will not have
adequate working capital for our operations. Under such circumstances we may
have to seek protection of the bankruptcy courts. See "Certain Factors That May
Affect Future Results."

         We have also been working with our trade creditors to reduce our
obligations. A substantial majority of the creditors have accepted our payment
plans, which include periodic payments, discounts of amounts outstanding, and
acceptance of shares of Common Stock. We can give no assurance, however, that
our creditors will continue to accept our proposed payment plans or that we will
be able to execute any such plan if it is accepted. If we are unable to meet our
obligations to our trade creditors, we may have to seek the protection of the
bankruptcy courts. See "Certain Factors That May Affect Future Results."

YEAR 2000 COMPLIANCE

         Many computer systems and software products could experience problems
handling dates beyond the year 1999 because the systems are coded to accept only
two-digit entries in the date code fields. Inability of products and systems on
which we rely to process these dates could have a material adverse

                                       19
<PAGE>
effect on our business.

         We have assessed our internal processes and systems. We believe that
our sales, administration, and general operations are substantially year 2000
compliant. Prior to purchasing any new equipment or software, it is company
policy to ensure that the specifications include year 2000 compliance.

         We intend to query major suppliers and other third parties upon which
we may be dependent to determine the extent of their Year 2000 compliance. We
intend to complete this inquiry and assessment of the Year 2000 readiness of the
systems and products of these suppliers and other third parties as soon as
practicable. However, due to the need to devote management and financial
resources to other matters, we have not as yet completed this inquiry and
assessment.

         Contingency Plan

         To minimize potential disruptions, we intend to adopt a contingency
plan, if deemed necessary, to address any issues raised during our planned
assessment in 1999. Because no specific instance of material Year 2000
non-compliance has been discovered to date, we have not adopted a contingency
plan to deal with Year 2000 issues.

         Costs

         Based on our internal investigation to date, we do not expect the total
costs of our Year 2000 review and compliance to have a material adverse effect
on our business or financial results.  However, as we have not completed an
inquiry of our material suppliers and other third parties, we may have to spend
a material amount to develop and implement a contingency plan during 1999, if we
find that a material supplier or other third party on whom we rely will face
business interruptions as a result of Year 2000 issues.

         Risks

         Based on our limited review of our Year 2000 issues to date, we do not
anticipate significant interruption of normal internal operations. The risk
posed by Year 2000 issues depends substantially on the number and type of any
instances of non-compliance that have not yet been discovered by us. To the
extent that our internal systems, or products and services obtained from third
parties, are found not to be year 2000 compliant, we could face business
disruptions which could, in turn, cause delays in meeting operating goals and
could divert significant management resources. Also, because we have not
completed an inquiry of suppliers and other third parties, we have not ruled out
any problems that might result from Year 2000 issues. In the worst case, we
might be unable to acquire necessary raw materials or process orders for our
inventory, and could be forced to curtail or suspend our operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

         We do not provide forecasts of our future financial performance.
However, from time to time, information provided by us or statements made by our
employees may contain "forward-looking" information that involves risks and
uncertainties. In particular, statements contained in this Report that are not
historical facts, including statements relating to liquidity and capital
resources, constitute forward-looking statements and are made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Our
actual results of operations and financial condition have varied, and may in the
future vary, significantly from those stated in any forward-looking statements.
Factors that may cause such differences include, without limitation, the risks,
uncertainties and other information discussed within this Form 10-QSB, the
matters discussed under the heading "Certain Factors That May Affect Future
Results" in our Annual Report on Form 10-KSB for the year ended December 31,
1998, as well as the accuracy of our internal estimates of revenue and operating
expense levels.

                                       20
<PAGE>
         The following risk factors should be read in conjunction with the
financial statements and related notes thereto. The following factors, among
others, could cause our actual results to differ materially from those contained
in forward-looking statements contained or incorporated by reference in this
report and presented by management from time to time. Such factors, among
others, may have a material adverse effect upon our business, results of
operations and financial condition.


IF WE CONTINUE TO INCUR LOSSES, THE VALUE OF OUR COMMON STOCK WILL LIKELY
DECLINE

         Our financial condition is highly uncertain. We have a history of
losses and we anticipate future losses. We have incurred operating losses in
every operating period since our inception. We had an accumulated deficit of
$53,652,377 as of June 30, 1999. We incurred a net loss of $3,498,824 in the six
months ended June 30, 1999.

         Our losses have resulted principally from expenses we incurred in
research and development activities, and from general and administrative costs
associated with our development efforts. In addition, our Able subsidiary has
incurred operating losses, primarily because its revenues have not equaled its
expenses. To continue development of our current and proposed products, we will
need to expend substantial additional resources to conduct further product
development and to establish and expand our manufacturing, sales, marketing,
regulatory and administrative capabilities. Therefore, we expect to incur
substantial operating losses over the next several years as we expand our
product programs and commence marketing efforts.

         We can give no assurance that we will ever generate substantial
revenues from our business, or achieve profitability.


IF WE CANNOT RAISE SIGNIFICANT ADDITIONAL FUNDS, WE WILL LIKELY FACE BANKRUPTCY

         Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing or to renegotiate our agreements with our existing
creditors, we may be obliged to seek protection from our creditors by declaring
bankruptcy. Our independent auditors issued an opinion on our financial
statements as of December 31, 1998 and for the year then ended which included an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. The reasons cited by the independent auditors include the
following:

         o        we have incurred recurring losses from operations resulting in
                  a stockholders' deficit and a working capital deficiency at
                  December 31, 1998;

         o        we have defaulted on conditions placed upon us by our banks
                  and other lenders; and

         o        our ability to use cash generated by our subsidiaries is
                  restricted under the terms of the subsidiaries' loan
                  agreements.


         WE FACE INTENSE COMPETITION FROM OTHER MANUFACTURERS OF GENERIC DRUGS

         The generic drug manufacturing and distribution business is highly
competitive. We compete with several companies that are better capitalized than
we are and that have financial and human resources significantly greater than
ours. Because we manufacture generic drugs, our products by their very nature
are chemically and biologically equivalent to the products of our larger and
profitable competitors. Also, we believe that, as a rule, the first one or two
companies to bring a generic alternative to the market will capture the highest
market share for that product. These larger companies, with their greater
resources, could bring products to market before us, and could capture a
significant share of the market at our expense.

                                       21
<PAGE>

         IF THE BOSTON STOCK EXCHANGE DELISTS OUR COMMON STOCK, WE WILL FACE
         GREATER DIFFICULTY RAISING CAPITAL WE NEED TO CONTINUE OPERATIONS

         Our Common Stock was delisted from the Nasdaq Stock Market as of the
close of trading on October 6, 1998. We received a notice from the Boston Stock
Exchange on April 12, 1999 informing us that our Common Stock does not meet the
requirements for continued listing on that exchange.

         Our Common Stock has been delisted from the Nasdaq Stock Market and may
be delisted from the Boston Stock Exchange. The Boston Stock Exchange requires a
minimum of $500,000 in stockholders' equity for continued listing. As of March
31, 1999, we had an accumulated stockholders deficit of approximately
$4,024,000, a shortfall of approximately $4,524,000, and therefore we did not
meet the listing requirements. We responded to the Boston Stock Exchange,
explaining our plan for regaining compliance with this requirement by June 30,
1999. On July 8, 1999, we advised the Boston Stock Exchange that we expected our
stockholders' equity as of June 30, 1999 would exceed $500,000. Stockholders'
equity as of June 30, 1999 was approximately $848,000. Therefore, as of that
date we met the requirement and so the Common Stock remains listed on the Boston
Stock Exchange. Our Common Stock could face delisting action again, however, if
we do not continue to meet this or other listing requirements.

         Delisting of our Common Stock from the Boston Stock Exchange could have
a material adverse effect on the public perception of the value of the Common
Stock and, consequently, on our ability to raise capital necessary for our
continued operations. We anticipate that the Common Stock would continue to be
quoted on the OTC Bulletin Board if it is delisted from the Boston Stock
Exchange.

         IF OUR COMMON STOCK BECOMES SUBJECT TO PENNY STOCK RULES, INVESTORS MAY
         HAVE GREATER DIFFICULTY SELLING THEIR SHARES

         The Securities Enforcement and Penny Stock Reform Act of 1990 applies
to stock characterized as "penny stocks," and requires additional disclosure
relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
The exceptions include exchange-listed equity securities and any equity security
issued by an issuer that has


         o        net tangible assets of at least $2,000,000, if the issuer has
                  been in continuous operation for at least three years,

         o        net tangible assets of at least $5,000,000, if the issuer has
                  been in continuous operation for less than three years, or

         o        average annual revenue of at least $6,000,000 for the last
                  three years. Unless an exception is available, the regulations
                  require the delivery, prior to any transaction involving a
                  penny stock, of a disclosure schedule explaining the penny
                  stock market and the risks associated therewith.

         If our Common Stock is delisted from the Boston Stock Exchange, then
trading in the Common Stock would be covered by Rules 15g-1 through 15g-6 and
15g-9 promulgated under the Securities Exchange Act. Under those rules,
broker/dealers who recommend such securities to persons other than established
customers and institutional accredited investors must make a special written
suitability determination for the purchaser and must have received the
purchaser's written agreement to a transaction prior to sale. These regulations
would likely limit the ability of broker/dealers to trade in our Common Stock
and thus would make it more difficult for purchasers of Common Stock to sell
their securities in the secondary market. The market liquidity for the Common
Stock could be severely affected.

         WE ARE OBLIGATED TO ISSUE A LARGE NUMBER OF SHARES OF COMMON STOCK AT
         PRICES BELOW THE MARKET PRICE, WHICH COULD ADVERSELY AFFECT THE VALUE
         OF THE COMMON STOCK

         We are obligated to issue a large number of shares of Common Stock at
prices lower than market value. Therefore, the Common Stock could lose value if
a large number of shares are issued into the market. At June 30, 1999 we had
56,038,796 shares of Common Stock issued and outstanding. We have issued a large
number of securities, such as options, warrants, convertible preferred stock and
convertible notes, that are convertible by their holders into shares of Common
Stock. As of June 30, 1999, we were obligated to issue up to approximately
8,643,592 shares of Common Stock upon the conversion or

                                       22
<PAGE>
exercise of convertible securities. We have also reserved 8,744,774 shares of
Common Stock for issuance pursuant to options granted to our employees,
officers, directors and consultants. The holders of these convertible securities
likely would only exercise their rights to acquire Common Stock at times when
the exercise price is lower than the price at which they could buy the Common
Stock on the open market. Therefore, because we would likely receive less than
current market price for any shares of Common Stock issued upon exercise of
options and warrants, the exercise of a large number of these convertible
securities could reduce the per-share market price of Common Stock held by
existing investors. Also, the exercise of a large number of convertible
securities could limit our ability to obtain additional equity capital by
selling Common Stock. In all likelihood, we would be able to sell shares of
Common Stock elsewhere on more favorable terms at the time the holders of
convertible securities choose to exercise their rights.


THE VALUE OF THE COMMON STOCK FLUCTUATES WIDELY AND COULD CAUSE STOCKHOLDERS TO
LOSE MONEY ON THEIR INVESTMENT IN OUR STOCK

         The price of our Common Stock has fluctuated widely in the past, and it
is likely that it will continue to do so in the future. The market price of our
Common Stock could fluctuate substantially based on a variety of factors,
including:

         o        quarterly fluctuations in our operating results;

         o        announcements of new products by us or our competitors;

         o        key personnel losses;

         o        sales of common stock; and

         o        developments or announcements with respect to industry
                  standards, patents or proprietary rights.

         The market price of our Common Stock has fluctuated between $70.00 and
$.10 from January 1, 1993 to December 31, 1998 and was approximately $.51 on
August 13, 1999. Over the past twelve months, the Common Stock has fluctuated
between approximately $.89 and approximately $.05. These broad market
fluctuations could adversely affect the market price of our Common Stock, in
that at the current price, any fluctuation in the dollar price per share could
constitute a significant percentage decrease in the value of a stockholder's
investment. Also, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. If any of our stockholders brought such a lawsuit
against us, we could incur substantial costs defending the lawsuit. A lawsuit
could also divert the time and attention of our management. Any of these events
could seriously harm our business.

         WE MAY FACE YEAR 2000 ISSUES

         Many software products and computer systems are coded to accept only
two digit entries in the date code field. These date code fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. This ability is commonly referred to as being Year 2000 compliant. We
have not conducted a Year 2000 compliance review of the computer software we
use, or that is used by our vendors and suppliers use. If the software and
computer systems we use are not Year 2000 compliant, we could face system
failures or miscalculations causing disruptions of operations, including a
temporary inability to process transactions, send invoices or engage in similar
normal business activities. If the systems maintained by our vendors and
suppliers are not Year 2000 compliant, we could incur significant unanticipated
expenses to remedy any problems or to replace affected vendors and suppliers. We
have not ruled out any problem that might result from Year 2000 issues. In the
worst case, we might be unable to obtain necessary raw materials or process
orders for our inventory, and we could be forced to curtail or suspend our
operations.

         WE MAY FACE PRODUCT LIABILITY FOR WHICH WE ARE NOT ADEQUATELY INSURED

         The testing, marketing and sale of drug products for human use is
inherently risky. Liability might result from claims made directly by consumers
or by pharmaceutical companies or others selling our products. Superior, GDI and
Able presently carry product liability insurance in amounts that we

                                       23
<PAGE>

believe to be adequate, but we can give no assurance that such insurance will
remain available at a reasonable cost or that any insurance policy would offer
coverage sufficient to meet any liability arising as a result of a claim. We can
give no assurance that we will be able to obtain or maintain adequate insurance
on reasonable terms or that, if obtained, such insurance will be sufficient to
protect us against such potential liability or at a reasonable cost. The
obligation to pay any product liability claim or the recall of a product could
have a material adverse affect on our business, financial condition and future
prospects.

         INTENSE REGULATION BY GOVERNMENT AGENCIES MAY DELAY OUR EFFORTS TO
         COMMERCIALIZE OUR PROPOSED DRUG PRODUCTS

         Research, preclinical development, clinical trials, manufacturing and
marketing of our proposed products are subject to extensive regulation by
numerous governmental authorities in the United States (including the FDA), and
other equivalent foreign regulatory authorities. The process of obtaining FDA
and other required regulatory approvals is lengthy and expensive. We can give no
assurance that we will be able to obtain the necessary approvals for clinical
testing or for the manufacturing or marketing of our proposed products. Present
and future governmental regulatory processes could prevent or delay approval of
our products or make them too costly for us to pursue. Also, if we failed to
comply with applicable regulatory requirements we could face fines, suspensions
of regulatory approvals, product recalls, operating restrictions and criminal
prosecution. Our success in the generic drug market depends in part on our
ability to obtain FDA approval of Abbreviated New Drug Applications for our new
products, as well as our ability to procure a continuous supply of raw materials
and to validate the manufacturing processes used to produce consistent test
batches for FDA approval. Sources for certain materials for our products must be
approved by the FDA, and in many instances only one source has been approved. If
raw materials from a specified supplier were to become unavailable, we would be
required to file a supplement to our Abbreviated New Drug Application and
revalidate the manufacturing process using a new supplier's materials. This
could cause a delay of several months in the manufacture of the drug involved
and the consequent loss of potential revenue and market share. For example, for
a period of time, we were unable to acquire the active drug for our clorazapate
dipotassium product and so we had to discontinue production of the product. The
active drug ingredient has since become available again. Additionally, there is
often a time lag, sometimes significant, between the receipt of Abbreviated New
Drug Application approval and the actual marketing of the approved product due
to this validation process.

         Our Able Laboratories facility is subject to plant inspections by the
FDA to determine compliance with current Good Manufacturing Practices standards.
We could be subject to fines and sanctions such as the suspension of
manufacturing or the seizure of drug products if we were found not to comply
with current Good Manufacturing Practices standards.


                                       24

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS
                -----------------

         On March 12, 1999, the Company commenced a civil lawsuit against Kali
Laboratories, Inc. (hereafter "Kali"), its principal officer, and two of its
employees in the Superior Court of New Jersey, Chancery Division, in Middlesex
County. The litigation arises out of the Company's 1997 agreement with Kali for
the development and marketing of seven products. The Company seeks to 1) recover
monetary damages for defendants' breaches of contract and confidentiality,
misappropriation of the Company's intellectual property, and unfair dealing, and
2) enjoin the defendants from using the Company's intellectual property for
their purposes. In May of 1999, the defendants filed counterclaims against the
Company and three of its corporate officers. In its counterclaim, Kali claims
monetary damages for breach of contract, and alleges ownership of the
intellectual property. The employee defendants, who are former employees of the
Company, claim to have been defamed and wrongfully terminated. The Company and
its officers share a common legal defense to these counterclaims, and intend
vigorously to defend against them.

         Except for the above matter, the Company is not presently a party to
any pending legal proceedings, other than routine litigation that is incidental
to the business, which would have a material adverse effect on the Company's
financial position or results of operations for the six-month period ended June
30, 1999.

ITEM 2.         CHANGES IN SECURITIES
                ---------------------

       a.    Not applicable.

       b.    Sales of Unregistered Securities - In the three months ended June
             30, 1999, the Company sold the following securities:

         On April 27, 1999, the Company issued 500,000 shares of common stock to
an employee who had advanced a bridge loan to us in October 1997. The entire
balance of $175,000 with accumulated interest was settled with issuance of
Common Stock.

         In May and June 1999, the Company received $3,000,000 from the issuance
of 3,000 shares of Series I Preferred Stock to various unaffiliated investors.
Shares of Series I Preferred Stock are convertible into Common Stock at 80% of
the average of the closing bid price of Common Stock for the three selected,
closing bid prices over the five (5) trading days immediately preceding any
conversion date, as selected by the stockholder. The Company issued 165,662
warrants at an exercise price of $0.91 and 34,722 warrants at an exercise price
of $0.396 in connection with this financing.

         On May 27, 1999, the Company issued 1,500,000 shares to the former
shareholders of Superior together with a warrant to purchase 1,000,000 shares at
an exercise price of $0.86 and a warrant to purchase 300,000 shares at an
exercise price of $0.01 as a full and final settlement of all its acquisition
obligations of Superior.

                                       25

<PAGE>

         On June 14, 1999, the Company issued 2,750,000 shares to a consultant
retained to provide investor relations services and strategic business planning,
pursuant to the Company's agreement with the consultant.

         During the second quarter the Company issued approximately 4,480,000
non-qualified stock options to various employees at Able Laboratories. The stock
options were issued at an exercise price of $0.25 and are exercisable for a
period of ten years. The vesting period of these options is between twelve and
thirty-six months.

         During the quarter ending June 30, 1999, the Company issued an
aggregate of 8,754,125 shares of Common Stock upon the exercise of options and
warrants and conversion of convertible debt and equity securities.

ITEM 3.           DEFAULTS ON SENIOR SECURITIES
                  -----------------------------

         The Company has incurred recurring losses from operations resulting in
an accumulated deficit of $53,652,377 and a working capital deficiency of
$384,683 at June 30, 1999. In addition, the Company is in default with respect
to certain covenants in its debt agreements and obligated to make payments as
follows:

         Sirrom Capital Corporation ("Sirrom") and Odyssey Investment Partners,
L.P. ("Odyssey") - The Company issued secured promissory notes in the aggregate
principal amount of $3,000,000 on June 18, 1997 due June 17, 2002. In addition,
the Company issued stock warrants to purchase in the aggregate 400,000 shares of
the Company's common stock and granted Sirrom and Odyssey the right to sell to
the Company the warrants (put warrants) under a put and substitution agreement.
At the time of issuance, $702,000 of the proceeds was allocated to the put
warrants, resulting in a discount on the promissory notes.

         The discount on the notes was being amortized to expense over the term
of the promissory notes. The Company is in default of certain covenants in the
loan agreement and has not obtained a waiver of the defaults from the lender.
Accordingly, the total principal amount of the loan, $3,000,000, has been
classified as a current liability and the unamortized discount on the loan has
been charged to expense.

         The Huntington National Bank - The Company's subsidiary, Superior, has
a line of credit with the Huntington National Bank in the amount of
approximately $4,500,000. At June 30, 1999, Superior is in default of certain
loan covenants, in the loan and security agreement with the bank. Superior is in
negotiations with the bank with respect to the defaults, but has not received a
waiver of the defaults at the present time.

         The Company has guaranteed the loan to the bank. The loan and security
agreement with the bank requires the Company to achieve a tangible net worth,
exclusive of the tangible net worth of Superior, of $4,000,000, which the
Company has not achieved at June 30, 1999.

         The loan and security agreement with the bank allowed Superior to make
distributions to the Company in amounts sufficient to enable the Company to pay
the debt service due to the former stockholders of Superior, provided, however,
that such permitted payments cannot be made by Superior in the event of a
default.


                                       26

<PAGE>

ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K
                --------------------------------

       (a)      List of Exhibits

       The following exhibits, required by Item 601 of Regulation S-B, are filed
as part of this Quarterly Report on Form 10-QSB. Exhibit numbers, where
applicable, in the left column correspond to those of Item 601 of Regulation
S-B.

Exhibit
No.                        Description of Exhibit
---                        ----------------------

          10.1   Form of 9% Subordinated Convertible Debenture

          10.2   Securities Purchase Agreement dated May 13, 1999 by and among
                 the Company and the several purchasers named therein(1)

          10.3   Form of Debenture issued in connection with the May 13, 1999
                 Securities Purchase Agreement(2)

          10.4   Form of Common Stock Purchase Warrant issued in connection with
                 the May 13, 1999 Securities Purchase Agreement(3)

          10.5   Registration Rights Agreement dated May 13, 1999(4)

          10.6   Form of Exchange Agreement dated June 29, 1999(5)

          10.7   Certificate of Designations, Preferences, and Rights of Series
                 I Preferred Stock(6)

          10.8   Loan Agreement between Able Laboratories, Inc. and New Jersey
                 Economic Development Authority dated June 1, 1999

          10.9   $2,000,000 Promissory Note of Able Laboratories, Inc. dated
                 June 1, 1999

          10.10  Leasehold Mortgage, Security Agreement, Assignment of Rents and
                 Financing Statement dated June 1, 1999

          10.11  Guaranty of DynaGen, Inc. dated June 1, 1999 in favor of New
                 Jersey Economic Development Authority

          10.12  Warrant to Purchase 100,000 shares of Common Stock in the name
                 of Project Capital Partners, LLC

          10.13  Consulting Agreement with Investor Relations Services, Inc.
                 dated April 1, 1999

          27     Financial Data Schedule

         ----------------
          (1)    Filed as Exhibit 4.2 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (2)    Filed as Exhibit 4.3 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (3)    Filed as Exhibit 4.4 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (4)    Filed as Exhibit 4.5 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (5)    Filed as Exhibit 4.6 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (6)    Filed as Exhibit 4.7 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.


                                       27

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               DYNAGEN, INC.

                                               By: /s/ Dhananjay G. Wadekar
                                                  -----------------------------
                                               Dhananjay G. Wadekar
                                               Duly Authorized Officer and
                                               Principal Financial and
                                               Accounting Officer
Dated:  August 16, 1999

                                       28

<PAGE>

                                  EXHIBIT INDEX

           Exhibit
           No.               Item
           ---               ----

          10.1   Form of 9% Subordinated Convertible Debenture

          10.2   Securities Purchase Agreement dated May 13, 1999 by and among
                 the Company and the several purchasers named therein(1)

          10.3   Form of Debenture issued in connection with the May 13, 1999
                 Securities Purchase Agreement(2)

          10.4   Form of Common Stock Purchase Warrant issued in connection with
                 the May 13, 1999 Securities Purchase Agreement(3)

          10.5   Registration Rights Agreement dated May 13, 1999(4)

          10.6   Form of Exchange Agreement dated June 29, 1999(5)

          10.7   Certificate of Designations, Preferences, and Rights of Series
                 I Preferred Stock(6)

          10.8   Loan Agreement between Able Laboratories, Inc. and New Jersey
                 Economic Development Authority dated June 1, 1999

          10.9   $2,000,000 Promissory Note of Able Laboratories, Inc. dated
                 June 1, 1999

          10.10  Leasehold Mortgage, Security Agreement, Assignment of Rents and
                 Financing Statement dated June 1, 1999

          10.11  Guaranty of DynaGen, Inc. dated June 1, 1999 in favor of New
                 Jersey Economic Development Authority

          10.12  Warrant to Purchase 100,000 shares of Common Stock in the name
                 of Project Capital Partners, LLC

          10.13  Consulting Agreement with Investor Relations Services, Inc.
                 dated April 1, 1999

          27     Financial Data Schedule

         ----------------
          (1)    Filed as Exhibit 4.2 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (2)    Filed as Exhibit 4.3 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (3)    Filed as Exhibit 4.4 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (4)    Filed as Exhibit 4.5 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (5)    Filed as Exhibit 4.6 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.

          (6)    Filed as Exhibit 4.7 to the Company's Registration Statement on
                 Form S-3, File No. 333-82785, and incorporated herein by
                 reference.


                                       29