United States
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 March 31, 2001
[ ] 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 76-0512500
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
15001 Walden Road, Suite 108
Montgomery, Texas 77356
(Address of principal executive offices)
(936) 448-2222
(Registrants' telephone number, including area code)
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 May 14, 2001, 22,526,413 shares of Common Stock, par value $.001 per
share, of Endovasc Ltd., Inc. 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 NINE MONTHS ENDED MARCH 31, 2001 AND 2000,
AND FOR THE PERIOD FROM INCEPTION, JUNE 10, 1996,
TO MARCH 31, 2001
(UNAUDITED)
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
__________
PAGE(S)
-------
Financial Statements
Balance Sheet as of March 31, 2001
And June 30, 2000 1
Statement of Operations for the three months
and nine months ended March 31, 2001 and 2000,
and for the period from inception, June 10, 1996
to March 31, 2001 2
Statement of Changes in Stockholders' Deficit
for the nine months ended March 31, 2001 3
Statement of Cash Flows for the nine months
March 31, 2001 and 2000, and for the period from
inception , June 10, 1996, to March 31, 2001 4
Notes to Financial Statements 5
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
__________
MARCH 31, 2001 AND JUNE 30, 2000
MARCH 31, JUNE 30,
2001 2000
ASSETS (UNAUDITED) (NOTE)
-------- ----------- ------------
Current assets:
Cash and cash equivalents $ 54,339 $ 926,121
------------ ------------
Total current assets 54,339 926,121
Property and equipment-net 200,897 43,244
Other assets 149,969 160,271
------------ ------------
Total assets $ 405,205 $ 1,129,636
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
Current liabilities:
Current maturities of long-term debt $ 42,106 $ 37,387
Note payable-stockholder 541,054 795,748
Accounts payable 376,598 196,375
Accrued liabilities 110,327 34,174
------------ ------------
Total current liabilities 1,070,085 1,063,684
Long term debt, net of current maturities 111,921 22,858
------------ ------------
Total liabilities 1,182,006 1,086,542
------------ ------------
Stockholders= deficit:
Common stock, $.001 par value, 100,000,000
shares authorized, 20,602,056 and 14,553,370
shares issued and 18,517,056 and 12,468,370
shares outstanding at March 31, 2001
and June 30, 2000, respectively 20,602 14,553
Preferred stock, $.001 par value, 20,000,000
shares authorized, 16,068 and 15,000 shares
of series A 8% cumulative convertible pre-
ferred stock issued and outstanding at
March 31, 2001 and June 30, 2000, respec-
tively, stated value $100 per share 16 15
Additional paid in capital 6,860,339 5,797,501
Losses accumulated during the development
stage (7,640,847) (5,752,064)
Treasury stock (16,911) (16,911)
------------ ------------
Total stockholders= equity (deficit) (776,801) 43,094
------------ ------------
Total liabilities and stockholders=
deficit $ 405,205 $ 1,129,636
============ ============
<FN>
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.
-1-
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000 AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1996, TO MARCH 31, 2001
___________
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED INCEPTION TO
MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001 2000 2001
------------ ------------ ------------ ------------ ------------
Revenue $ - $ 10,000 $ 75,000 $ 24,283 $ 115,358
Interest income 15,116 - 15,116 - 15,116
------------ ------------ ------------ ------------ ------------
Total income 15,116 10,000 90,116 24,283 130,474
------------ ------------ ------------ ------------ ------------
Operating expenses:
Operating, general and
administrative
expenses 314,295 172,529 870,490 744,236 4,029,737
Research and development
costs 354,013 66,871 1,008,613 1,035,724 3,184,743
Interest expense 2,006 3,417 3,168 30,526 332,838
------------ ------------ ------------ ------------ ------------
Total costs and
expenses 670,314 242,817 1,882,271 1,810,486 7,547,318
------------ ------------ ------------ ------------ ------------
Net loss before extra-
ordinary item (655,198) (232,817) (1,792,155) (1,786,203) (7,416,844)
Extraordinary loss on ex-
tinguishment of conver-
tible debentures - - - - (127,375)
------------ ------------ ------------ ------------ ------------
Net loss $ (655,198) $ (232,817) $(1,792,155) $(1,786,203) $(7,544,219)
============ ============ ============ ============ ============
Basic and dilutive net
loss per common share $ (0.04) $ (0.02) $ (0.12) $ (0.16)
============ ============ ============ ============
Weighted average shares
outstanding 15,305,838 10,898,453 15,305,838 10,898,453
============ ============ ============ ============
See accompanying notes.
-2-
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS= DEFICIT
FOR THE NINE MONTHS ENDED MARCH 31, 2001
___________
(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 500,301 500 - - 169,911 - -
Issue of preferred stock - - 7,500 7 569,750 - -
Conversion of preferred
stock to common stock 3,988,050 3,988 (6,628) (6) (3,988) - -
Dividends declared on
preferred stock - - - - - - (96,628)
Issue of common stock as
payment of dividends on
preferred stock 182,835 183 - - 23,043 - -
Issue of common stock for
cash 27,500 28 - - 5,472 - -
Net loss - - - - - - (1,792,155)
---------- ------- ---------- -------- ----------- ---------- -------------
Balance at March 31,
2001 20,602,056 $20,602 15,872 $ 16 $6,860,339 $ (16,911) $ (7,640,847)
========== ======= ========== ======== =========== ========== =============
See accompanying notes.
-3-
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000 AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1996, TO MARCH 31, 2001
__________
(UNAUDITED)
INCEPTION TO
MARCH 31, MARCH 31,
2001 2000 2001
------------ ----------- --------------
Cash flows used in operating
activities $(1,379,980) $ (484,567) $ (4,039,927)
------------ ----------- --------------
Cash flows used in investing
activities (66,183) (1,237) (52,080)
------------ ----------- --------------
Cash flows from financing activities:
Proceeds from sale of equity
securities - - 302,332
Proceeds from sale of common stock 30,500 - 236,001
Purchase of treasury stock - - (16,911)
Proceeds from sale of convertible
debt - 230,500 1,036,750
Net proceeds from issuance of pre-
ferred stock 569,757 - 1,610,057
Issuance (repayment) of notes payable (21,182) (12,754) 39,063
Issuance (repayment) of note payable
to stockholder, net (4,694) 148,000 939,054
------------ ----------- --------------
Net cash provided by financing
activities 574,381 365,746 4,146,346
------------ ----------- --------------
Increase (decrease) in cash and cash
equivalents (871,782) (120,058) 54,339
Cash and cash equivalents, beginning
of period 926,121 120,058 -
------------ ----------- --------------
Cash and cash equivalents, end of
period $ 54,339 $ - $ 54,339
============ =========== ==============
Non-cash investing and financing
activities:
Common stock issued for services
and license and patent rights $ 170,411 $1,349,699 $ 2,300,564
============ =========== ==============
Common stock issued for equity
securities $ - $ - $ 302,332
============ =========== ==============
Common stock issued for settlement
of lawsuit $ - $ 210,000 $ 210,000
============ =========== ==============
Common stock issued upon conversion
of debentures $ - $ 558,500 $ 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 $ 114,964 $ - $ 114,964
============ =========== ==============
See accompanying notes.
-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 statements 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
-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 nine months ended March 31, 2001, 6,628 shares of preferred
stock were converted to 3,988,050 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 nine months ended March 31, 2001, 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
-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.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this prospectus 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 prospectus 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 prospectus.
General Overview
- -----------------
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 March 31, 2001, the Company had an accumulated deficit of $7,640,847.
During the Company's quarter ended March 31, 2001, the Company has successfully
completed Phase I clinical trials of Liprostin(TM) (liposome encapsulated
prostaglandin E-1) for critical limb ischemia (CLI). The Phase I study,
conducted at Healthcare Discoveries in San Antonio, TX with Dr. Dennis A. Ruff
as the Investigator, was with a small population of healthy human volunteers to
specifically determine the toxicity, absorption, distribution metabolism and
dose-ranging for Liprostin(TM). Following evaluation of Phase I data in January
2001, an Investigator's Meeting was held on February 13, 2001 at the University
of Texas-Houston, Memorial Hermann Hospital to review the results and to discuss
the protocol for Phase II and III clinical trials. Subsequently a decision was
made by Management and the Investigators to accept the FDA original
recommendation, waiving Phase I and II, and proceed directly to Phase III based
on positive evidence from Phase I. Phase III clinical trials will be conducted
in a larger patient population of individuals afflicted with CLI.
The Company continued work at Stanford University on its nicotine receptor
agonist (NRA) with a rabbit study of ischemic hind limb which models peripheral
artery occlusive disease (PAOD) in humans. Further confirmation from the rabbit
study of significant safety and efficacy of the drug in stimulating angiogenesis
(the growth of new blood vessels) was presented in February to the American
Heart Association (AHA) meeting in Santa Fe, New Mexico on Therapeutic
Angiogenesis. An abstract and poster entitled "Nicotine Enhances Peripheral
Conductance in a Rabbit Model of Femoral Occlusion" was presented by Christopher
Heeschen, M.D. Dr. Daniel Burkhoff, Associate Professor of Medicine in the
Division of Circulatory Physiology at Columbia University's College of
Physicians and Surgeons and an Associate Attending Physician at the New York
Presbyterian Hospital completed animal testing of NRA in dogs in the quarter
ending March 31, 2001. Animal studies of NRA are proceeding in an ischemic pig
model in the current quarter. Upon completion of the pig studies, the Company
expects to proceed later this year with a human pilot study to be conducted by
Dr. Antonio Colombo at EMO Centro Cuore Columbus in Milan, Italy in patients
with diseased heart muscle resulting from a 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 March 31, 2001, the Company continued its stent
coating feasibility study with a major medical device company as well as its own
development studies with positive results achieved in the further development of
this technology.
Results of Operations
- -----------------------
Three month period ended March 31, 2001 and 2000
- --------------------------------------------------------
During the three months ended March 31, 2001, the Company had revenues of
$-0- compared with revenues of $10,000 for the three months ended March 31,
2000.
During the three months ended March 31, 2001 and 2000, costs and operating
expenses were $670,314 and $242,817, 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 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 $354,013 during the three months
ended March 31, 2001, compared to $66,871 during the three months ended March
31, 2000. This increase of $287,142 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.
Nine month period ended March 31, 2001 and 2000
- -------------------------------------------------------
During the nine months ended March 31, 2001, the Company had revenues of
$75,000 compared with revenues of $24,283 for the nine months ended March 31,
2000. This increase in revenue was a result of a feasibility study agreement
entered into in 2001, relating to the Company's stent-coating technology, with
Advanced Cardiovascular Systems, Inc., a California Corporation and subsidiary
of Guidant Corporation.
During the nine months ended March 31, 2001 and 2000, costs and operating
expenses were $1,882,271 and $1,810,486, 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 $1,008,613 during the nine months
ended March 31, 2001, compared to $1,035,724 during the nine months ended March
31, 2000. This change reflects the continued cost of new equipment, materials,
labor and travel associated with 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.
Patent activity for the Company during the nine months ended March 31, 2001
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.
Cash flows used in operating activities for the nine months ended March 31,
2001 increased $895,413 to $1,379,980, compared to $484,567 for the nine months
ended March 31, 2000, primarily due to the cash payments for the cost of
scientific personnel, materials and drug manufacturing in preparation for the
Liprostin(TM) clinical trials, as compared to the expenses being paid for in
stock during the nine months ended March 31, 2000.
Liquidity and Capital Resources
- ----------------------------------
The Company had a working capital deficit at March 31, 2001, of $1,015,746,
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
OTHER INFORMATION
Item 1. Legal Proceedings
We have been named as a defendant in a case styled David F. Miller v.
Endovasc Ltd., Inc., Number 99-4-02283, in the 9th Judicial District Court of
Montgomery County, Texas. The plaintiff is claiming that he is owed 540,000
shares of common stock of Endovasc Ltd., Inc. in connection with a consulting
agreement. A bench trial was held on May 14, 2001. No verdict has been rendered
at this time.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- None.
(b Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
ENDOVASC LTD., INC.
_____________________________
May 14, 2001 By: /s/ David P. Summers
David P. Summers
Chief Executive Officer
_____________________________
May 14, 2001 By: /s/ M. Dwight Cantrell
M. Dwight Cantrell
Chief Financial Officer