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 December 31, 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 December 31, 2000, 17,137,211 shares of Common Stock, par value $.001
per share, of Endovasc Ltd., Inc. were issued and 15,052,211 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 and six months ended
December 31, 2000 and 1999, and for
the period from inception, June 10, 1996,
to December 31, 2000
(Unaudited)
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
----------
F- Page(s)
Financial Statements:
Balance Sheet as of December 31, 2000 and
June 30, 2000 1
Statement of Operations for the three months
and six months ended December 31, 2000 and
1999, and for the period from inception,
June 10, 1996, to December 31, 2000 2
Statement of Changes in Stockholders' Deficit
for the six months ended December 31, 2000 3
Statement of Cash Flows for the six months ended
December 31, 2000 and 1999, and
for the period from inception, June 10, 1996,
to December 31, 2000 4
Notes to Financial Statements 5
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
----------
December 31, 2000 and June 30, 2000
December 31, June 30,
2000 2000
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 431,862 $ 926,121
---------- ----------
Total current assets 431,862 926,121
Property and equipment-net 152,522 43,244
Other assets 155,391 160,271
---------- ----------
Total assets $ 739,775 $1,129,636
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 25,182 $ 37,387
Note payable-stockholder 541,054 795,748
Accounts payable 126,015 196,375
Accrued liabilities 89,491 34,174
---------- ----------
Total current liabilities 781,742 1,063,684
Long term debt, net of current maturities 85,648 22,858
---------- ----------
Total liabilities 867,390 1,086,542
---------- ----------
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares authorized, 17,137,211 and
14,553,370 shares issued and 15,052,211 and 12,468,370 shares outstanding at
December 31, 2000
and June 30, 2000, respectively 17,137 14,553
Preferred stock, $.001 par value, 20,000,000
shares authorized, 19,924 and 15,000 shares of series A 8% cumulative
convertible pre- ferred stock issued and outstanding at December 31, 2000
and June 30, 2000, respec-
tively, stated value $100 per share 20 15
Additional paid in capital 6,821,184 5,797,501
Losses accumulated during the development
stage (6,949,045) (5,752,064)
Treasury stock (16,911) (16,911)
---------- ----------
Total stockholders' equity (deficit) (127,615) 43,094
---------- ----------
Total liabilities and stockholders'
deficit $ 739,775 $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
forthe three months and six months ended December 31,
2000 and 1999 and for the period from inception,
June 10, 1996, to December 31, 2000
----------
(Unaudited)
Three Months Ended Six Months Ended Inception to
December 31, December 31, December 31,
2000 1999 2000 1999 2000
------------------------------------------------------------------------------
Revenue $ 75,000 $ - $ 75,000 $ 14,283 $ 115,358
------------------------------------------------------------------------------
Operating expenses:
Operating, general and ad-
ministrative expenses 319,058 64,955 556,195 149,583 3,715,442
Research and development
costs 336,000 89,548 654,600 319,460 2,830,730
Interest expense 31,350 4,120 61,186 27,109 390,856
------------------------------------------------------------------------------
Total costs and expenses 686,408 158,623 1,271,981 496,152 6,937,028
------------------------------------------------------------------------------
Net loss before extraordi-
nary item 611,408 158,623 1,196,981 481,869 6,821,670
Extraordinary loss on ex-
tinguishment of conver-
tible debentures - - - - 127,375
------------------------------------------------------------------------------
Net loss $ (611,408) $ (158,623) $(1,196,981) $ (481,869) $(6,949,045)
========== ========== =========== ========== ===========
Basic and dilutive net loss
per common share $ (0.04) $ (0.02) $ (0.09) $ (0.05)
========== ========== =========== ==========
Weighted average shares
outstanding 14,023,721 8,937,266 14,023,721 8,937,266
========== ========= ========== =========
See accompanying notes.
F-2
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
for the six months ended December 31, 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 -- --
Issue of common stock upon
exercise of options .... 1,100,000 1,100 -- -- 273,900 -- --
Issue of common stock for
services ............... 390,201 390 -- -- 156,127 -- --
Issue of preferred stock . -- -- 7,500 7 569,750 -- --
Conversion of preferred
stock to common stock .. 843,640 844 (2,576) (2) (844) -- --
Net loss ................. -- -- -- -- -- -- (1,196,981)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31,
2000 17,137,211 $ 17,137 19,924 $ 20 $ 6,821,184 $ (16,911) $(6,949,045)
=========== =========== =========== =========== =========== =========== ============
See accompanying notes.
F-3
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended December 31, 2000 and 1999 and
for the period from inception, June 10, 1996, to December 31, 2000
----------
(Unaudited)
Inception to
December 31, December 31,
2000 1999 2000
----------- ---------- -----------
Cash flows used in operating
activities $(1,013,108) $ (299,262) $(3,673,055)
----------- ---------- -----------
Cash flows used in investing
activities (66,183) (1,302) (52,080)
----------- ---------- -----------
Cash flows from financing activities:
Proceeds from sale of equity
securities - - 302,332
Proceeds from sale of common stock 25,000 131,000 230,501
Purchase of treasury stock - - (16,911)
Proceeds from sale of convertible
debt - 130,500 1,036,750
Net proceeds from issuance of preferred
stock 569,757 - 1,610,057
Issuance (repayment) of notes payable (5,031) (9,104) 55,214
Issuance (repayment) of note payable
to stockholder, net (4,694) - 939,054
----------- ---------- -----------
Net cash provided by financing
activities 585,032 252,396 4,156,997
----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents (494,259) (48,168) 431,862
Cash and cash equivalents, beginning
of period 926,121 120,058 -
----------- ---------- -----------
Cash and cash equivalents, end of
period $ 431,862 $ 71,890 $ 431,862
=========== ========== ===========
Non-cash investing and financing
activities:
Common stock issued for services
and license and patent rights $ 156,517 $ - $ 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
=========== ========== ===========
Reduction of note payable to stock-
holder and accrued liabilities
through exercise of stock options $ 275,000 $ - $ 275,000
=========== ========== ===========
Issuance of note payable for the
purchase of equipment $ 55,616 $ - $ 55,616
=========== ========== ===========
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. During the six months ended December 31,
2000, 2,576 shares of preferred stock were converted to 843,640 shares of
common 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. During
November 2000, the Company issued an additional 7,500 shares of this
Series A preferred stock for proceeds to the Company of $569,757, which
is net of related offering costs.
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.
4. Stock Options and Warrants
During the six months ended December 31, 2000, 250,000 shares of the
Company's common stock were issued due to the exercise of warrants. In
addition, 1,100,000 shares of common stock were issued due to the
exercise of stock options, of which 1,000,000 of the shares was paid for
through the reduction in the note payable to stockholder.
Continued
F-6
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
4. Stock Options and Warrants, continued
On December 13, 2000 the Company granted options to purchase 1,325,500
shares of the Company's common stock at a price ranging from $0.40 to
$1.00 per share, which was greater than the market price of the stock at
the grant date.
F-7
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.
General
Research and Development
The Company is in the research and development stage and has had
limited operating revenues since its inception on June 10, 1996. From June 10,
1996 through December 31, 2000, the Company had an accumulated deficit of
$6,949,045. During the Company's quarter ended December 31, 2000, the Company
has moved forward with clinical trials of Liprostin(TM) (liposome encapsulated
prostaglandin E-1) for critical limb ischemia (CLI); advanced in the animal
studies of Nicotine Receptor Agonist (NRA); and entered into a collaboration
with a major medical device manufacturer in the development of the Company's
stent coating technology. On October 3, 2000, the company filed its
investigational new drug application (IND) for Liprostin(TM) with the Food and
Drug Administration (FDA). Following the successful review of the IND by the
FDA, the company began Phase I clinical trial preparation. Phase I studies were
designed to establish the effects of Liprostin(TM) in a small population of
healthy humans to determine toxicity, absorption, distribution and metabolism.
Phase I clinical site selected by the Company was Healthcare Discoveries in San
Antonio, Texas, with Dr. Dennis A. Ruff as the Investigator. Following
evaluation of Phase I data in January 2001, the IND will be submitted to the FDA
for Phase II clinical trials, which will be conducted in a larger patient
population of individuals afflicted with CLI and will test for safety and
efficacy.
The Company confirmed plans for a human pilot study to be conducted at
EMO Centro Cuore Columbus in Milan, Italy by Investigator Dr. Antonio Colombo
using its nicotine-based blood vessel growth agent, NRA. 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). In animal studies
conducted at Stanford University Medical Center in the laboratory of Dr. John
Cooke, the application of minute amounts of nicotine administered directly to
blocked arteries resulted in very significant new blood vessel growth
(angiogenesis) in both mice and rabbits. Further studies of NRA in animals (dogs
and pigs) will be conducted at Columbia University by Dr. Daniel Burkhoff in the
first quarter of 2001.
Results of Operations
Three month period ended December 31, 2000 and December 31, 1999
During the three months ended December 31, 2000, the Company had
revenues of $75,000 compared with revenues of $-0- for the three months ended
December 31, 1999. This revenue was a result of a feasibility study agreement,
relating to the Company's stent-coating technology, with Advanced Cardiovascular
Systems, Inc., a California Corporation and subsidiary of Guidant Corporation.
Patent activity for the Company during the three months ended December
31, 2000 included the filing of two new patents: Method and Apparatus for
Treating Vascular Disease with PGE-1 Bearing Liposomes, patent application
serial no. 08/867,189; and Resorbable Prosthesis for Medical Treatment, patent
application serial no. 60/236,593.
During the three months ended December 31, 2000 and 1999, costs and
operating expenses were $686,408 and $158,623, respectively. The increase in
costs and operating expenses 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, as well as the advances
made in animal studies of NRA and human clinical trials of Liprostin(TM).
Research and development expenses totaled $336,000 during the three
months ended December 31, 2000, compared to $89,548 during the three months
ended December 31, 1999. This increase of $246,452 was related to the cost of
new equipment, materials, labor and travel connected to the initiation of the
rabbit study at Stanford University with NRA, the Phase I and II clinical
studies and preparation with Liprostin(TM) and the ongoing, in-house projects
for medicinally coated vascular stents.
Six month period ended December 31, 2000 and December 31, 1999
During the six months ended December 31, 2000, the Company had revenues
of $75,000 compared with revenues of $14,283 for the six months ended December
31, 1999. This increase in revenue was a result of a feasibility study
agreement, relating to the Company's stent-coating technology, with Advanced
Cardiovascular Systems, Inc., a California Corporation and subsidiary of Guidant
Corporation.
During the six months ended December 31, 2000 and 1999, costs and
operating expenses were $1,271,981 and $496,152, respectively. The increase in
costs and operating expenses 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, as well as the advances
made in animal studies of NRA and human clinical trials of Liprostin(TM).
Research and development expenses totaled $654,600 during the six
months ended December 31, 2000, compared to $319,460 during the six months ended
December 31, 1999. This increase of $335,140 was related to the cost of new
equipment, materials, labor and travel associated with the initiation of the
rabbit study at Stanford University with NRA, the Phase I and II clinical
studies and preparation with Liprostin(TM) and the ongoing, in-house projects
for medicinally coated vascular stents.
Cash flows used in operating activities for the six months ended
December 31, 2000 increased $713,486 to $1,013,108, compared to $299,262 for the
six months ended December 31, 1999, primarily due to the increased cost of
scientific personnel, materials and drug manufacturing in preparation for the
Liprostin(TM) clinical trials.
Liquidity and Capital Resources
The Company had a working capital deficit at December 31, 2000, of
$349,880, compared to a deficit of $137,563 at June 30, 2000.
The Company requires significant additional funds to enable it to
proceed with its Phase II/III Liprostin(TM) clinical trials, as well as research
and development of its 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 tranches. Pursuant to the commitment, the Company received $1,040,300 on
May 10, 2000, and $569,757 in November 2000, which is net of related offering
costs. There can be no assurance that the Company will take down the remaining
tranches.
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(TM) 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 December 31, 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.
February 14, 2001 By: /s/ DAVID P. SUMMERS
David P. Summers,
Chief Executive Officer
(Principal Financial and
Accounting Officer)