UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from _______________ TO _______________.
000-28371
(Commission File Numbers)
ENDOVASC LTD., INC.
(Exact name of registrant as specified in its charter)
NEVADA 2834
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
15001 Walden Road, Suite 201
Montgomery, Texas 77356
(Address of principal executive offices)
(936) 448-2222
(Registrants' telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES [ X ] NO[ ]
As of September 30, 2000, 14,881,744 shares of Common Stock, par value
$.001 per share, of Endovasc Ltd., Inc. were issued and 12,796,744 shares were
outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
----------
FINANCIAL STATEMENTS
for the three months ended September 30, 2000 and 1999,
and for the period from inception, June 10, 1996,
to September 30, 2000
(Unaudited)
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
----------
Page(s)
Financial Statements:
Balance Sheet as of September 30, 2000 and
June 30, 2000 F-1
Statement of Operations for the three months ended
September 30, 2000 and 1999, and for the period
from inception, June 10, 1996, to September 30, 2000 F-2
Statement of Changes in Stockholders' Deficit for
the three months ended September 30, 2000 F-3
Statement of Cash Flows for the three months
ended September 30, 2000 and 1999, and for the
period from inception, June 10, 1996, to
September 30, 2000 F-4
Notes to Financial Statements F-5
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
----------
September 30, 2000 and June 30, 1999
September 30, June 30,
2000 2000
ASSETS (Unaudited) (Note)
Current assets:
Cash $ 435,660 $ 926,121
---------- ----------
Total current assets 435,660 926,121
Property and equipment-net 105,194 43,244
Other assets 158,053 160,271
---------- ----------
Total assets $ 698,907 $1,129,636
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 46,677 $ 37,387
Note payable stockholder 791,054 795,748
Accounts payable 290,871 196,375
Accrued liabilities 69,402 34,174
---------- ----------
Total current liabilities 1,198,004 1,063,684
Long term debt, net of current maturities 18,382 22,858
---------- ----------
Total liabilities 1,216,386 1,086,542
--------- ----------
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares authorized, 14,881,744 and
14,553,370 shares issued and 12,796,744 and 12,468,370 shares outstanding at
September 30, 2000
and June 30, 1999, respectively 14,881 14,553
Preferred stock, $.001 par value, 20,000,000
Shares authorized, 1,500 shares of series A 8% cumulative convertible
preferred stock issued and outstanding, stated value $100
per share 15 15
Additional paid in capital 5,822,173 5,797,501
Losses accumulated during the development
stage (6,337,637) (5,752,064)
Treasury stock (16,911) (16,911)
---------- ----------
Total stockholders' equity (deficit) (517,479) 43,094
---------- ----------
Total liabilities and stockholders'
deficit $ 698,907 $1,129,636
========== ==========
Note: The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
F-1
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the three months ended September 30, 2000
and 1999 and for the period from inception, June
10, 1996, to September 30, 2000
----------
(Unaudited)
Three Months Ended Inception to
September 30, September 30,
2000 1999 2000
------- ------------------ ---------------------------
Revenue $ - $ 14,283 $ 40,358
Operating expenses:
Operating, general and admin-
istrative expenses 237,137 84,628 3,396,384
Research and development costs 318,600 229,912 2,494,730
Interest expense 29,836 22,989 359,506
---------- ---------- -----------
Total costs and expenses 585,573 337,529 6,250,620
---------- ---------- -----------
Net loss before extraordinary
item 585,573 323,246 6,210,262
Extraordinary loss on extinguish-
ment of convertible debentures - - 127,375
---------- ---------- -----------
Net loss $ (585,573) $ (323,246) $(6,337,637)
========== ========== ===========
Basic and dilutive net loss
per common share $ (0.05) $ (0.04)
========== ==========
Weighted average shares
outstanding 12,714,918 8,426,773
========== ==========
See accompanying notes.
F-2
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
for the three months ended September 30, 2000
----------
(Unaudited)
Common Stock Preferred Stock
Number of Dollar Number of Dollar Paid-In Treasury Accumulated
Shares Amount Shares Amount Capital Stock Deficit
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 . 14,553,370 $ 14,553 15,000 $ 15 $ 5,797,501 $ (16,911) $(5,752,064)
Issue of common stock upon
exercise of warrants ... 250,000 250 -- -- 24,750 -- --
Conversion of preferred
stock to common stock .. 78,374 78 (500) -- (78) -- --
Net loss ................. -- -- -- -- -- -- (585,573)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30,
2000 14,881,744 $ 14,881 14,500 $ 15 $ 5,822,173 $ (16,911) $(6,337,637)
=========== =========== =========== =========== =========== =========== ===========
See accompanying notes.
F-3
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
for the three months ended September 30, 2000 and
1999 and for the period from inception, June 10, 1996,
to September 30, 2000
----------
(Unaudited)
Inception to
September 30, September 30,
2000 1999 2000
---------- ---------- -----------
Cash flows used in operating
activities $ (453,633) $ (227,544) $(3,113,580)
---------- ---------- -----------
Cash flows used in investing
activities (61,948) (1,302) (47,845)
---------- ---------- -----------
Cash flows from financing activities:
Proceeds from sale of equity
securities - - 302,332
Proceeds from sale of common stock 25,000 - 230,501
Purchase of treasury stock - - (16,911)
Proceeds from sale of convertible
debt - 130,500 1,036,750
Proceeds from issuance of preferred
stock 1,040,300
Issuance (repayment) of notes payable 4,814 (3,193) 65,059
Issuance (repayment) of note payable
to stockholder, net (4,694) - 939,054
---------- ---------- -----------
Net cash provided by financing
activities 25,120 127,307 3,597,085
---------- ---------- -----------
Increase (decrease) in cash and cash
equivalents (490,461) (101,539) 435,660
Cash and cash equivalents, beginning
of period 926,121 120,058 -
---------- ---------- -----------
Cash and cash equivalents, end of period $ 435,660 $ 18,519 $ 435,660
========== ========== ===========
Non-cash investing and financing
activities:
Common stock issued for services
and license and patent rights $ - $ - $ 2,286,670
========== ========== ===========
Common stock issued for equity
securities $ - $ - $ 302,332
========== ========== ===========
Common stock issued for settlement
of lawsuit $ - $ - $ 210,000
========== ========== ===========
Common stock issued upon conversion
of debentures $ - $ 80,000 $ 1,241,555
========== ========== ===========
See accompanying notes.
F-4
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
1. Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles and
the rules of the U.S. Securities and Exchange Commission, and should be
read in conjunction with the audited financial statements and notes
thereto for the year ended June 30, 2000. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of financial position and the results
of operations for the interim periods presented have been included.
Operating results for the interim periods are not necessarily indicative
of the results that may be expected for the respective full year.
A summary of the Company's significant accounting policies and other
information necessary to understand the interim financial statements is
presented in the Company's audited financial statement for the years
ended June 30, 2000 and 1999. Accordingly the Company's audited financial
statements should be read in connection with these financial statements.
2. Income Taxes
The difference between the 34% federal statutory income tax rate and
amounts shown in the accompanying interim financial statement is
primarily attributable to an increase in the valuation allowance applied
against the tax benefit from utilization of net operating loss
carryforwards.
3. Preferred Stock
The Company's articles of incorporation authorize the issuance of up to
20,000,000 shares of preferred stock with characteristics determined by
the Company's board of directors. Effective May 5, 2000, the board of
directors authorized the issuance and sale of up to 55,000 shares of
Series A 8% convertible preferred stock.
Continued
F-5
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
3. Preferred Stock, continued
On May 9, 2000, the Company issued 15,000 shares of $0.001 par value and
$100 per share stated and liquidation value Series A 8% non-voting
convertible preferred stock for $1,500,000. The actual proceeds received
by the Company were $1,040,300, which are net of related offering costs.
The Series A convertible preferred stock can be converted to common stock
at any time at the option of the holder. The conversion rate is the
stated value per share plus any accrued and unpaid dividends divided by
85% of the average of the three lowest closing bid prices of the
Company's common stock for the thirty trading days immediately preceding
May 9, 2000, or 70% of the average of the three lowest closing bid prices
for the thirty days immediately preceding the conversion of the
respective preferred stock.
In addition, the Series A preferred stockholders are obligated to
purchase an additional 30,000 shares of Series A 8% convertible preferred
stock ("Put Stock") at the option of the Company subject to the Company
being in compliance with various covenants. The Company is currently not
in compliance with these covenants but the stockholders maintain a right
to waive any violations. The purchase price of the additional shares is
$100 per share, which is its stated and liquidation value.
If the conversion price is lower than the initial price on the date of
issue, the Company has the right to redeem the shares of Series A 8%
convertible preferred stock at 130% of its stated value per share.
During the three months ended September 30, 2000, 500 shares of preferred
stock were converted to 78,374 shares of common stock.
4. Exercise of Warrants
During the three months ended September 30, 2000, 250,000 shares of the
Company's common stock was issued due to the exercise of warrants.
F-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The statements contained in this Report that are not historical are
forward-looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future. Forward-
looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward-looking statements included in this Report are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statement. It is important to note
that the Company's actual results could differ materially from those in such
forward-looking statements. Additionally, the following discussion and analysis
should be read in conjunction with the Financial Statements and notes thereto
appearing elsewhere in this Report.
The Company is in the development stage and has had limited operating
revenues since its inception on June 10, 1996. From June 10, 1996 through
September 30, 2000, the Company had an accumulated deficit of $6,337,637. During
its quarter ended September 30, 2000, the Company created a Regulatory Affairs
Department and hired personnel to insure that the Company is aligned with the
Food and Drug Administration (FDA) requirements in filing the Investigational
New Drug application and the subsequent progress in clinical trials. At this
time, the management and scientific and advisory boards reviewed the FDA's
November 1999 waiver of Phase I and II trials with Liprostin(TM) and concurred
that in order to ensure correct dosing and the success of the trials, the
company should proceed with a short Phase I/II trial. With this approach, the
company believes that fewer patients will be required for the pivotal Phase III
trial and thereby project a shorter time-line to the successful completion of
the trial. The Company convened its first Clinical Advisory Board Meeting at
which the Advisory Board applauded the company's announcement that significant
progress was being made in the development of a liposomal delivery system for
Endovasc's licensed nicotine-based "angiogenic" agent nicotine receptor agonist,
NRA to stimulate the growth of new blood vessels in diseased parts of the body.
With this significant development, the company has now moved forward from pure
research on nicotine into the development of an actual drug that can be used to
treat human beings. The company now has two major vascular related drugs in the
pipeline. The company confirmed that it will begin human studies in Italy using
its nicotine-based blood vessel growth agent, NRA. In animal studies, the
application of minute amounts of nicotine administered directly to blocked
arteries resulted in very significant new blood vessel growth (angiogenesis).
The human pilot study will involve patients with diseased heart muscle due to
the deficiency of blood caused by obstruction in the blood vessel (ischemic
cardiomyopathy) and chronic or uncontrolled chest pain (intractable angina
pectoris).
During the quarter ended September 30, 2000, the Company had no
revenues compared with revenues of $14,283 during the quarter ended September
30, 1999. During the quarter ended September 30, 1999, the Company had agreement
s with two device manufacturers for original research and development of the
proprietary use of Liprostin in the treatment of various vascular diseases by
application of medicinal coatings to vascular stents for elimination or
reduction of new tissue growth in and around the stents, a condition known as
restenosis. At the close of this quarter, the company was in negotiations to
extend these agreements for the next stage of research and development which
will move the company closer to license agreements with these device
manufacturers.
Patent activity for the company during this quarter included the filing of a
Continuation in Part (CIP) to its Biodegradable Stent patent 5,980,551,
"Resorbable Prosthesis with Biodegradable Surface Coating and Method for Making
Same" and the filing of the company's licensed nicotine receptor agonist for
therapeutic angiogenesis in a number of Patent Convention Treaty (PTC) countries
in Europe and Japan, which will provide world-wide patent protection of its
exclusive world-wide license.
During the quarter ending September 30, 2000 and 1999, costs and
operating expenses were $585,573 and $337,529, respectively. The increase in
costs and operating expenses for the quarter is primarily due to an increase in
research and development, facilities, personnel and overhead as rent and other
costs increased due to the ongoing expenditures required in the furnishing,
equipment purchase and staffing of the new in-house laboratory.
Cash flows used in operating activities for the quarter ending
September 30, 2000 increased $226,089 to $453,633, compared to$227,544 for the
previous quarter, primarily due to the increased cost of scientific personnel,
materials and prototype manufacturing.
Research and development expenses totaled $318,600 and $229,912 during
the quarters ending September 30, 2000 and 1999, respectively. This increase is
related to the cost of new equipment, materials, labor and travel connected to
the initiation of the rabbit study at Stanford University with NRA and the
ongoing, in-house projects for medicinally coated vascular stents.
Liquidity and Capital Resources
The Company had a working capital deficit on September 30, 2000, of
$762,344, compared to a deficit of $673,512 at June 30, 2000.
This increase is a result of the Company's need for significant
additional funds to enable it to proceed with its Phase I/II/III Liprostin
clinical trials, as well as research and development of it's licensed product
nicotine receptor agonist (NRA). In May 2000, the Company completed a $4.5
million financing commitment related to the private placement and sale of its
convertible preferred stock in three (3) $1.5 million traunches. Pursuant to the
commitment, the Company received $1.5 million on May 10, 2000, with $3 million
remaining in the "take-down"; although the company anticipates the take-down of
another $1.5 million in November, there can be no assurance that the Company
will receive any funds from the remaining traunches.
The Company continues to actively pursue additional financing,
collaborations with firms, and other arrangements aimed at increasing its
capital resources. Failure to acquire such funds may adversely impact the
scheduled marked introduction of Liprostin and possibly adversely affect the
Company's operations. In order to continue as a going concern, the Company must
raise additional funds as noted above and ultimately achieve profit from its
operation.
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three month
period ended September 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the project to be signed on its behalf by the
undersigned thereto duly authorized.
ENDOVASC LTD., INC.
November 14, 2000 By: /s/ DAVID P. SUMMERS
David P. Summers,
Chief Executive Officer
(Principal Financial and
Accounting Officer)