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, 2002.
[ ] 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) (Zip Code)
(936) 448-2222
(Registrant's Telephone Number, Including Area Code)
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 March 31, 2002, 92,504,266 shares of Common Stock, par value $.001
per share, of Endovasc Ltd., Inc. were outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
Balance Sheet as of March 31, 2002 and
June 30, 2001 F-2
Statement of Operations for the three months
and nine months ended March 31, 2002 and
2001, and for the period from inception,
June 10, 1996, to March 31, 2002 F-3
Statement of Stockholders' Deficit for
the nine months ended March 31, 2002 F-4
Statement of Cash Flows for the nine months
ended March 31, 2002 and 2001, and for
the period from inception, June 10, 1996,
to March 31, 2002 F-6
Notes to Financial Statements F-7
F-1
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 31, 2002 AND JUNE 30, 2001
__________
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, JUNE 30,
2002 2001
ASSETS (UNAUDITED) (NOTE)
------ ------------ ----------
Current assets:
Cash and cash equivalents $ 38 $ 117
Accounts receivable 150 -
Other current assets 104 47
------------ ----------
Total current assets 292 164
Property and equipment, net 181 214
Other assets, net 132 144
------------ ----------
Total assets $ 605 $ 522
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
Current liabilities:
Current maturities of long-term debt $ 123 $ 43
Current portion of obligations under capital leases 35 35
Note payable to stockholder 233 99
Accounts payable 901 296
Accrued liabilities 136 532
------------ ----------
Total current liabilities 1,428 1,005
Long-term debt, net of current maturities 17 28
Long-term obligations under capital leases 35 74
Convertible debentures 270 -
------------ ----------
Total liabilities 1,750 1,107
------------ ----------
Commitment and contingencies
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares
authorized, 94,710,266 and 40,253,331 shares issued
and 92,504,266 and 38,168,331 shares outstanding at
March 31, 2002 and June 30, 2001, respectively 95 40
Preferred stock, $.001 par value, 20,000,000 shares
authorized, 8,184 and 15,760 shares of Series A 8%
cumulative convertible preferred stock issued and
outstanding at March 31, 2002 and June 30, 2001,
respectively, stated value $100 per share - -
Additional paid-in capital 9,700 8,121
Unissued common stock 80 -
Losses accumulated during the development stage (10,998) (8,729)
Treasury stock (22) (17)
------------ ----------
Total stockholders' deficit (1,145) (585)
------------ ----------
Total liabilities and stockholders' deficit $ 605 $ 522
============ ==========
<FN>
Note: The balance sheet at June 30, 2001 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.
The accompanying notes are an integral
part of these financial statements.
F-2
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1996, TO MARCH 31, 2002
__________
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------- INCEPTION
MARCH 31, MARCH 31, MARCH 31, MARCH 31, TO MARCH
31, 2002 31, 2001 31, 2002 31, 2001 31, 2002
------------ ------------ ------------ ------------ -----------
Income:
Sales $ 3 $ - $ 3 $ 75 $ 107
Interest income - 15 1 15 28
Other income 158 - 404 - 413
------------ ------------ ------------ ------------ -----------
Total income 161 15 408 90 548
------------ ------------ ------------ ------------ -----------
Costs and expenses:
Operating, general and
administrative expenses 249 314 913 870 5,240
Research and development
costs 245 354 984 1,009 4,508
Interest expense 14 2 207 3 555
Settlement with former
employee - - - - 408
------------ ------------ ------------ ------------ -----------
Total costs and expenses 508 670 2,104 1,882 10,711
------------ ------------ ------------ ------------ -----------
Net loss (347) (655) (1,696) (1,792) (10,163)
Extraordinary loss on extin-
guishment of convertible
debentures - - - - 127
------------ ------------ ------------ ------------ -----------
Net loss $ (347) $ (655) $ (1,696) $ (1,792) $ (10,290)
============ ============ ============ ============ ===========
Basic and diluted net loss
per common share $ - $ (0.04) $ (0.03) $ (0.12)
============ ============ ============ ============
Weighted average shares
outstanding 85,198,362 15,305,838 66,708,814 15,305,838
============ ============ ============ ============
The accompanying notes are an integral
part of these financial statements.
F-3
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED MARCH 31, 2002
__________
(IN THOUSANDS, EXCEPT SHARE DATA)
LOSSES
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL UNISSUED DURING THE
------------------- ---------------- PAID-IN COMMON TREASURY DEVELOPMENT
AMOUNT SHARES AMOUNT SHARES CAPITAL STOCK STOCK STAGE TOTAL
------- ---------- ------- ------- ----------- --------- ---------- ------------- -------
Balance at June 30, 2001 $ 40 40,253,331 $ - 15,760 $ 8,121 $ - $ (17) $ (8,729) $ (585)
Stock issued for services 4 3,766,677 - - 157 - - - 161
Stock issued for employee
compensation - 50,367 - - 5 - - - 5
Stock issued for financing
costs 1 1,200,000 - - 78 - - - 79
Stock issued in settlement of
lawsuit 8 8,000,000 - - 400 - - - 408
Purchase of treasury stock - - - - - 560 (565) - (5)
Issuance of treasury stock for
conversion of preferred stock
to common stock - - - (240) - - 182 (182) -
Issuance of treasury stock for
conversion of debentures - - - - - - 378 (324) 54
Dividends declared on preferred
stock - - - - - - - (67) (67)
Conversion of preferred stock
to common stock 27 26,219,070 - (7,336) (27) - - - -
The accompanying notes are an integral
part of these financial statements.
F-4
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
__________
(IN THOUSANDS, EXCEPT SHARE DATA)
LOSSES
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL UNISSUED DURING THE
------------------- --------------- PAID-IN COMMON TREASURY DEVELOPMENT
AMOUNT SHARES AMOUNT SHARES CAPITAL STOCK STOCK STAGE TOTAL
------- ---------- ------- ------ ---------- --------- ---------- ------------- ---------
Conversion of debentures to
common stock 6 5,945,870 - - 166 - - - 172
Stock issued as payment of
interest on debentures - 317,433 - - 9 - - - 9
Stock issued as payment of
dividends on preferred
stock 2 2,307,518 - - 62 - - - 64
Issuance of stock for debt
repayment 1 1,000,000 - - 84 - - - 85
Effect of the beneficial con-
version feature of the con-
vertible debentures - - - - 171 - - - 171
Issuance of unissued stock 6 5,650,000 - - 474 (480) - - -
Net loss - - - - - - - (1,696) (1,696)
------- ---------- ------- ------ ---------- --------- ---------- ------------- ---------
Balance at March 31, 2002 $ 95 94,710,266 $ - 8,184 $ 9,700 $ 80 $ (22) $ (10,998) $ (1,145)
======= ========== ======= ====== ========== ========= ========== ============= =========
The accompanying notes are an integral
part of these financial statements.
F-5
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2002 AND 2001, AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1996, TO MARCH 31, 2002
__________
(IN THOUSANDS)
NINE MONTHS ENDED
------------------ INCEPTION TO
MARCH 31, MARCH 31,
2002 2001 2002
-------- -------- ----------
Cash flows used in operating activities:
Net loss $(1,696) $(1,792) $ (10,290)
Adjustments to reconcile net loss to net
cash used in operating activities 961 412 4,952
-------- -------- ----------
Net cash used in operating activities (735) (1,380) (5,338)
-------- -------- ----------
Cash flows used in investing activities:
Capital expenditures (6) (66) (148)
Proceeds received from repayment of loan to
stockholder - - 72
-------- -------- ----------
Net cash used in investing activities (6) (66) (76)
-------- -------- ----------
Cash flows from financing activities:
Proceeds from sale of equity securities - - 337
Proceeds from sale of common stock - 30 212
Proceeds from sale of convertible debentures 400 - 1,437
Net proceeds from issuance of preferred stock - 570 2,263
Issuance of notes payable 123 - 229
Repayment of notes payable (36) (21) (100)
Payments of obligations under capital leases (39) - (62)
Proceeds from advances from stockholders 219 - 1,163
Repayments of notes to stockholder - (5) (5)
Purchase of treasury stock (5) - (22)
-------- -------- ----------
Net cash provided by financing activities 662 574 5,452
-------- -------- ----------
Net (decrease) increase in cash and cash
equivalents (79) (872) 38
Cash and cash equivalents at beginning of period 117 926 -
-------- -------- ----------
Cash and cash equivalents at end of period $ 38 $ 54 $ 38
======== ======== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 22 $ 3 $ 120
======== ======== ==========
Cash paid for income taxes $ - $ - $ -
======== ======== ==========
The accompanying notes are an integral
part of these financial statements.
F-6
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO 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, 2001. 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, 2001 and 2000. 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. CONVERTIBLE DEBENTURES
----------------------
During the nine months ended March 31, 2002, the Company issued $400,000 in
convertible debentures. The debentures bear interest at 8% per year payable
quarterly in arrears. The debentures mature in September 2003 and are
convertible, at the option of the holder, to shares of the Company's common
stock at a conversion price per share equal to the lower of (i) 85% of the
average of the three lowest closing prices for the common stock for the
thirty days prior to the closing date of the debentures; or (ii) 70% of the
average of the three lowest closing prices for the common stock for the
thirty days prior to the conversion date. Accordingly, the actual weighted
average interest rate on these debentures, including the effect of the cost
of the beneficial conversion feature, is approximately 23%.
4. 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-7
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
__________
4. 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, 2002, 7,336 shares of preferred
stock were converted to 26,219,070 shares of common stock. In addition,
1,000,000 shares of treasury stock were issued for the conversion of 240
shares of 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. 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.
5. RESEARCH AGREEMENT
------------------
Effective July 1, 2001, the Company entered into an External Research
Agreement with another company (the "Sponsor") whereby the Sponsor has
agreed to assist in the funding of the Company's research and development
related to its Nicotine Receptor Agonist. The Sponsor has agreed to fund a
maximum of $511,829, of which $404,000 was recorded as other income in the
accompanying statement of operations for the nine months ended March 31,
2002.
Continued
F-8
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
__________
6. NON-CASH INVESTING AND FINANCING ACTIVITIES
-------------------------------------------
NINE MONTHS ENDED
------------------ INCEPTION TO
MARCH 31, MARCH 31,
2002 2001 2002
-------- -------- ---------
Non-cash investing and financing
activities:
Common stock or warrants issued for
services and license and patent
rights $ 166 $ 170 $ 3,264
======== ======== =========
Common stock issued for equity
securities $ - $ - $ 302
======== ======== =========
Common stock issued for settlement of
lawsuit $ 408 $ - $ 601
======== ======== =========
Common stock issued upon conversion of
debentures $ 226 $ - $ 1,515
======== ======== =========
Reduction of notes payable and accrued
liabilities through exercise of stock
options or issuance of common stock $ 323 $ 275 $ 1,291
======== ======== =========
Issuance of note payable for the purchase
of equipment $ - $ 115 $ 124
======== ======== =========
F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATIONS
- --------------
The statements contained in this Form 10-QSB 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 in our annual report filed in Form 10-KSB for the period ending June
30, 2001.
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, 2002, the Company had an accumulated deficit of $10,998,000.
We are conducting clinical trials of Liprostin(TM) (a liposomal formulation
of Prostaglandin E-1) to obtain the approval of the U.S. Food and Drug
Administration (FDA) for the sale of the product in the United States. Following
a meeting with the FDA in late 2001, the Company revised its Phase III protocol
for a Phase III randomized, multicenter study of Liprostin(TM) in conjunction
with percutaneous transluminal angioplasty in patients with critical limb
ischemia. In February 2002, the Company reviewed this new revised document with
the FDA. In this meeting, the Cardio-Renal Drug Products (CRDP) division of the
FDA provided significant input into the Phase III clinical trial design and took
into consideration the recent denial of orphan drug status for Liprostin(TM) by
the Office of Orphan Products Development (OOPD). Upon consideration of the
economic impact to the Company of OOPD's refusal to consider one-year incidence
of critical limb ischemia (CLI), and basing their decision instead on a
population beyond those patients with late-stage CLI, the CRDP division of FDA
recommended a split Phase III protocol that would simultaneously evaluate
Liprostin(TM) in two different patient populations with peripheral arterial
occlusive disease based on severity, and at the same time keep the trials within
an 800 patient population of 400 patients in each arm. This decision expanded
treatment to an additional patient population suffering from both late-stage
critical limb ischemia, as well as patients suffering from moderate to severe
but not ischemic effects of the disease (a much larger group than originally
requested for CLI). The benefit to the Company is a significant increase in the
market when we launch Liprostin(TM).
Preliminary Phase I/II discussions with the FDA in late 2001 for its
Nicotine Receptor Agonist (NRA) product resulted in recommendations from FDA
that the Company proceed with a Phase III clinical trial in chronic coronary
Ischemia instead. The Company's Pre-Ind meeting after the first of the year to
review the new Phase III protocol was positive with only a few suggestions to be
made prior to filing the IND. It is anticipated that the IND will be filed by
mid-year with treatment of first patient for chronic myocardial ischemia in
third quarter 2002. A Notice of Allowance was granted in March 2002 by the
United States Patent and Trademark Office (USPTO) for the trade name, ANGIOGENIX
(TM) for NRA. In February 2002 the Company signed an Option Agreement with
Stanford University to acquire an exclusive, worldwide patent license for the
use of nicotine in stem cell and progenitor cell recruitment focused in the
areas of cardiology and neurology. This technology is described in Stanford's
international application published under the Patent Cooperation Treaty, WO
01/8683 A1. Endovasc now has the option to evaluate its use in the recruitment
and mobilization of stem cells for regeneration of various organs, such as the
heart. During the option period through January 24, 2003, the Company will
conduct independent studies to further evaluate Stanford's discovery of nicotine
and stem cells.
The Company's stent coating process, PROStent(TM) was expanded through a
Notice of Allowance from the USPTO on the patent filed in May 1999 covering the
use of biodegradable surface coating and method for making same. PROStent(TM)
is a stent-coating process which coats vascular stents to prevent restenosis
(reblockage) after coating using our own cardiovascular clinical product PGE-1,
a naturally occurring, chemically related fatty acid, which has shown to be a
potent vasodilator, platelet inhibitor and anti-thrombotic. The product is
still in preclinical work and projects an animal study by mid-year 2002.
With the continuing growth of a multi-billion dollar medical device market,
the Company continues its research and development of a resorbable,
biodegradable stent (prosthesis). Stents, which are commonly deployed after
angioplasty, usually will re-occlude as much as 50% of the time requiring a
repeated angioplasty procedure within three to six months because of restenosis
(reblockage) due to more plaque build up. The resorbable prosthesis comprises a
method of making a totally resorbable, biodegradable, drug delivery prosthesis
having both mechanical properties of maintaining the strength needed to acutely
open and maintain a vessel, duct, tract, or organ confirmation, but having
precise chronicity controlling the release and delivery of drugs or biologic
agents.
The addition of Dr. Alan J. Garber to the Company's Scientific and Advisory
Board supports the Company's efforts to identify and develop products that will
improve the quality of life for patients suffering with diabetes throughout the
world. Dr. Garber is Professor of Medicine, Biochemistry and Molecular Biology
and Molecular and Cellular Biology at Baylor College of Medicine, as well as
Chief of Endocrinology, Diabetes and Metabolism at The Methodist Hospital in
Houston. His research interest in diabetes, cardiovascular disease,
dyslipidemia, insulin resistance and atherosclerosis and his international
recognition in this field will significantly contribute to the Company's
development of its drug, Liprostin(TM) for treatment of diabetes.
RESULTS OF OPERATIONS
- -----------------------
THREE MONTH PERIOD ENDED MARCH 31, 2002 AND 2001
- --------------------------------------------------------
During the three months ended March 31, 2002, the Company had revenue of
$161,000 compared with $15,000 of revenues for the three months ended March 31,
2001. The revenue during the three months ended March 31, 2002 was a result of
revenue received from an external research agreement with another company
entered into in July 2001 whereby the Company received assistance from the
company in funding its research and development costs related to its Nicotine
Receptor Agonist.
During the three months ended March 31, 2002 and 2001, administrative and
operating expenses were $249,000 and $314,000, respectively. The decrease in
costs and operating expenses is primarily due to a reduction in staffing during
the three months ended March 31, 2002.
Research and development costs totaled $245,000 during the three months
ended March 31, 2002, compared to $354,000 during the three months ended March
31, 2001. This decrease of $109,000 was the result of a reduction in research
and development expenditures as the Company awaited FDA approval for its
product.
Interest expense increased from $2,000 during the three months ended March
31, 2001 to $14,000 during the three months ended March 31, 2002. This increase
is a result of interest on convertible debentures that were issued during the
nine months ended March 31, 2002.
NINE MONTH PERIOD ENDED MARCH 31, 2002 AND 2001
- -------------------------------------------------------
During the nine months ended March 31, 2002, the Company had total revenues
of $408,000 compared with $90,000 of revenues for the nine months ended March
31, 2001. The increase relates to revenue received from an external research
agreement with another company entered into in July 2001 whereby the Company
received assistance from this company in funding its research and development
costs related to its Nicotine Receptor Agonist.
During the nine months ended March 31, 2002 and 2001, administrative and
operating expenses were $913,000 and $870,000, respectively. The increase is
the result of financing costs and legal fees associated with securing the
convertible debentures, which were expensed during the nine months ended March
31, 2002.
Research and development costs totaled $984,000 during the nine months
ended March 31, 2002, compared to $1,009,000 during the nine months ended March
31, 2001. This decrease of $25,000 was the result of a reduction in research
and development expenditures as the Company awaited FDA approval for its
product.
Interest expense increased from $3,000 during the nine months ended March
31, 2001 to $207,000 during the nine months ended March 31, 2002. This increase
is a result of the cost of the beneficial conversion feature and the additional
interest related to the convertible debentures recorded during the nine months
ended March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
The Company had a working capital deficit at March 31, 2002 of $1,136,000,
compared to a deficit of $841,000 at December 31, 2001. This increase in the
working capital deficit is primarily related to the increase in accounts payable
and decrease in cash resulting from additional operating losses and less
proceeds from issuance of preferred stock.
The Company requires significant additional funds to enable it to proceed
with its two Phase III Liprostin(TM) and Phase III ANGIOGENIX(TM) clinical
trials. 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, $569,757 on November 2000, and $653,488 on April 12, 2001 which is net of
related offering costs. There can be no assurance that the Company will take
down the remaining tranches.
During the nine months ended March 31, 2002 the Company issued $400,000 of
convertible debentures, of which it received $333,000, net of related offering
costs. The debentures bear interest at 8%, which is due quarterly in arrears,
with the principal due September 2003.
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 ANGIOGENIX(TM) and possibly
adversely affect the Company's operations. In order to continue as a going
concern, the Company must raise additional funds and ultimately achieve profit
from its operation; however, there can be no assurance that the Company will
obtain profitability or that future debt or equity funding will be available or
have terms acceptable to the Company. These factors raise substantial doubt as
to the Company's ability to continue as a going concern. The report of the
Company's independent public accountants, which accompanied the consolidated
financial statements for the year ended June 30, 2001, was qualified with
respect to that risk.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
- ------ ---------------------
Recent Sale Of Unregistered Securities. During the nine months ended March 31,
2002, the following transactions not previously reported were effected by us in
reliance upon exemptions from registration under the Securities Act of 1933 as
amended (the "Act"). Unless stated otherwise, we believe that each of the
persons who received these unregistered securities had knowledge and experience
in financial and business matters which allowed them to evaluate the merits and
risk of the receipt of these securities, and that they were knowledgeable about
our operations and financial condition. No underwriter participated in, nor did
we pay any commissions or fees to any underwriter in connection with the
transactions. These transactions did not involve a public offering. Each
certificate issued for these unregistered securities contained a legend stating
that the securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities.
In November 2001, we issued an aggregate of 985,000 shares of common stock
to 5 consultants, which we valued at $0.05 to $.07 per share, for services
rendered. These transactions were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended.
In December 2001, we issued an aggregate of 50,367 shares of common stock
to seven employees, which we valued at $0.08 to $.10 per share. These
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
In February 2002, we issued an aggregate of 31,677 shares of common stock
to seven employees, which we valued at $0.16 to $.18 per share. These
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
In February 2002, we issued an aggregate of 5,650,000 shares of common
stock to two individuals, which we valued at $0.085 per share, to reimburse them
for shares they returned to the Company for use in conversion of preferred stock
and conversion of convertible debentures. These transactions were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
In February 2002, we issued an aggregate of 1,000,000 shares of common
stock valued at $.085 to repay debt to one individual. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
In March 2002, we issued an aggregate of 1,200,000 shares of common stock
valued at $.07 for financing costs. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
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.
Date: May 15, 2002 By: /s/ David P. Summers
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David P. Summers
Chief Executive Officer
Date: May 15, 2002 By: /s/ M. Dwight Cantrell
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M. Dwight Cantrell
Chief Financial Officer