-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EqF+L77C1KqkezNpm9QpLhs7EO/J+5szgNmwfHAILKbd0CScJZBpDppZ4BxvLJVd S2ihFQjbFCFFC8VgG+iJeQ== 0000812796-96-000005.txt : 19961213 0000812796-96-000005.hdr.sgml : 19961213 ACCESSION NUMBER: 0000812796-96-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENDOREX CORP CENTRAL INDEX KEY: 0000812796 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 411505029 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16929 FILM NUMBER: 96679575 BUSINESS ADDRESS: STREET 1: 3233 15TH STREET SOUTH CITY: FARGO STATE: ND ZIP: 58104 BUSINESS PHONE: 7012329575 MAIL ADDRESS: STREET 1: 3233 15TH STREET SOUTH CITY: FARGO STATE: ND ZIP: 58104 FORMER COMPANY: FORMER CONFORMED NAME: IMMUNOTHERAPEUTICS INC DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended October 31, 1996 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 0-11572 Endorex Corporation (Exact name of registrant as specified in its charter) Delaware 41-1505029 (State of other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 3233 15th Street South, Fargo, ND 58104 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (701) 232-9575 ImmunoTherapeutics, Inc. (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act during the past 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 At September 8 1996, 16,262,047 shares of the registrant's common stock (par value, $.001 per share) were outstanding. ENDOREX CORPORATION INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet as of October 31, 1996 2 Statements of Operations for the three and nine month periods ended October 31, 1996 and October 31, 1995 3 Statements of Cash Flows for the nine month periods ended October 31, 1996 and October 31, 1995 4 Condensed Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of 7-8 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8K 10 Signatures 10 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEET (UNAUDITED)
October 31, 1996 ASSETS Current assets: Cash and cash equivalents $ 1,339,901 Prepaid Expenses 42,608 TOTAL CURRENT ASSETS $ 1,382,509 Office and lab equipment, Net of Accumulated Depreciation of $425,084. $ 104,734 Patent issuance costs, Net of Accumulated Amortization of $30,188 167,855 TOTAL ASSETS $ 1,655,098
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 41,118 TOTAL CURRENT LIABILITIES $ 41,118 STOCKHOLDERS' EQUITY: Preferred stock, $.05 par value. Authorized 500,000 shares; none issued and outstanding $ -- Common stock, $.001 par value. Authorized 50,000,000 shares; issued 18,041,675; outstanding 16,262,047 18,081 Additional paid-in capital 11,519,812 (Deficit) accumulated during the development stage (9,480,163) Total $ 2,057,730 Treasury Stock, at cost, 1,779,628 shares (443,750) TOTAL STOCKHOLDERS' EQUITY $ 1,613,980 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,655,098 See accompanying condensed notes to financial statements
2 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative from February 15, 1985 Three Months Ended October 31, (date of inception) 1996 1995 to October 31, 1996 SBIR contract revenue $ -- $ -- $ 100,000 Operating expenses: SBIR contract research and development $ -- $ -- 86,168 Proprietary research and development 287,985 $ 235,308 7,348,574 Rent expenses 13,809 $ 12,877 385,969 General and Admini- strative expenses $ 252,409 $ 53,742 2,535,352 Total Operating Expenses $ 554,202 $ 301,927 10,356,061 (Loss) from Operations $ (554,202) $ (301,927) $(10,256,061) Other Income $ -- $ -- $ 1,512 Interest Income $ 17,256 $ 16,956 $ 815,024 Interest Expense $ -- $ -- $ (40,638) Net (Loss) $ (536,946) $ (284,971) $ (9,480,163) Net (Loss) per share $ (0.03) $ (0.05) Weighted average common shares outstanding 16,262,047 5,272,048
See accompanying condensed notes to financial statements 3 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (cont.) (UNAUDITED)
Cumulative from February 15, 1985 Nine Months Ended October 31, (date of inception) 1996 1995 to October 31, 1996 SBIR contract revenue $ -- $ -- $ 100,000 Operating expenses: SBIR contract research and development $ -- $ -- 86,168 Proprietary research and development 796,818 $ 646,853 7,348,574 Rent expenses 30,566 $ 29,284 385,969 General and Admini- strative expenses $ 434,926 $ 268,910 2,535,352 Total Operating Expenses $ 1,262,308 $ 945,047 10,256,061 (Loss) from Operations $ (1,262,308) $ (945,047) $ (10,256,061) Other Income $ -- $ -- $ 1,512 Interest Income $ 38,948 $ 62,397 $ 815,024 Interest Expense $ -- $ -- $ (40,638) Net (Loss) $ (1,223,360) $ (882,650) $ (9,480,163) Net (Loss) per share $ (0.75) $ (0.17) Weighted average common shares outstanding 16,262,047 5,272,048 See accompanying condensed notes to financial statements
3a ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative from February 15, 1985 Nine Months ended October 31, (date of inception) 1996 1995 to October 31, 1996 OPERATING ACTIVITIES: Net (loss) $ (1,223,360) $ (882,650) $ (8,943,217) Adjustments to Reconcile Net (Loss) to Cash Provided by Operating Activities: Depreciation and Amortization $ 121,824 $ 144,371 851,097 Amortization of Discounted Note Receivable -- -- -- Amortization of Deferred Revenue -- -- -- Amortization of Deferred Compensation -- 13,500 131,786 Excess of Fair Market Value Over Option Price on Non-Qualified Stock Options Granted -- (5,474) 283,680 Gain on Sale of Assets -- -- (740) Write-off on Patent Issuance Cost -- -- 101,006 Changes in Assets and Liabilities: (Increase) Decrease in: Prepaid Expenses 1,697 (38,457) (42,610) (53,826) Increase (Decrease) in: Accounts Payable and Accrued Expenses (43,109) (51,605) 104,273 Accrued Salaries 26,868 124 26,868) Accrued Payroll Taxes (114) -- (114) Deleware Franchise Tax $ -- $ (4,151) $ -- Total Adjustments $ 107,156 $ (131,222) $ 1,485,120 NET CASH - OPERATING ACTIVITIES - Forward $ (1,116,204) $ (747,438) $ (7,795,043) INVESTING ACTIVITIES: Patent Issuance Cost $ (6,176) $ (60,959) $ (299,049) Organizational Costs Incurred -- -- (135) Deposit on Leasehold Improvements -- -- (5,000) Purchase of Leasehold Improvements -- -- (414,671) Purchases of Office and Lab Equipment (18,988) (6,628) (535,970) Proceeds from Assets Sold -- -- 1,000 NET CASH - INVESTING ACTIVITIES - Forward $ (25,164) $ (67,587) $ (1,253,765) See Accompanying Condensed Notes to Financial Statements
4 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative from February 15, 1985 Nine Months ended October 31, (date of inception) 1996 1995 to October 31, 1996 NET CASH - OPERATING ACTIVITIES - Forwarded $ (1,116,204) $ (747,428) $ (7,795,043) NET CASH - INVESTING ACTIVITIES - Forwarded $ (25,164) $ (67,587) $ (1,253,765) FINANCING ACTIVITIES: Net Proceeds from Issuance of Common Stock $ 1,314,609 $ -- $ 10,909,485 Proceeds from Exercise of Options 144,540 -- 144,627 Proceeds from Borrowings from President -- -- 41,333 Repayment of Borrowings from President -- -- (41,333) Proceeds from Borrowings Under Line of Credit -- -- 300,000 Repayment of Borrowings Under Line of Credit -- -- (300,000) Proceeds from Note Payable to Bank -- -- 150,000 Payments on Note Payable to Bank -- -- (150,000) Proceeds from Borrowings from Stockholders -- -- 15,867 Repayment of Borrowings from Stockholders -- -- (15,867) Advances from Parent Company -- -- 135,000 Payments to Parent Company -- -- (135,000) Repayment of Long-Term Note Receivable -- 50,315 Repayment of Note Payable Issued in Exchange for Legal Service -- -- (71,968) Purchase of Treasury Stock $ -- $ -- $ (443,750) NET CASH - FINANCING ACTIVITIES $ 1,459,149 $ -- $ 10,588,709 NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS $ 317,781 $ (815,015) $ 1,339,901 CASH AND CASH EQUIVALENTS- BEGINNING OF PERIODS $ 1,022,119 $ 2,236,156 $ -- CASH AND CASH EQUIVALENTS - END OF PERIODS $ 1,339,901 $ 1,421,141 $ 1,339,901 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the periods for: Interest $ -- $ -- $ -- See accompanying Condensed Notes to Financial Statements
5 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Financial Statements The Balance Sheet as of October 31, 1996, the Statements of Operations for the three and nine periods ended October 31, 1996 and 1995; and the cumulative period from February 15, 1985 (date of inception) to October 31, 1996; and the Statements of Cash Flows for the nine month periods ended October 31, 1996 and October 31, 1995 have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present fairly the financial position at October 31, 1996 and the results of operations and cash flows for the periods ended October 31, 1996 and October 31, 1995 have been made. All adjustments were of a normally recurring nature. The results of operations for interim periods are not necessarily indicative of the full fiscal year. 6 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Company is a development stage enterprise and expects no significant revenue from the sale of products for the current fiscal year. At January 31, 1996, and October 31, 1996, the Company had cash and cash equivalents of $1,022,120 and $1,339,900, respectively, and working capital of $1,008,943 and $1,341,391, respectively. The Company's current level of research and development activities r equires the expenditure of approximately $150,000 per month. Additional expenses will be incurred in outside expanded clinical trials to accomplish the necessary data collection and clinical trials required by the FDA for the commercial production, marketing and distribution of the Company's first proposed product. Management of the Company believes that its current cash resources will be sufficient to support its current level of operations for at least through January 31, 1997. The Company's cash resources will not be sufficient to permit the Company to complete the clinical trials of its initial proposed product necessary to obtain any FDA approvals. Accordingly, the Company may be required to collaborate with one or more large pharmaceutical companies which will provide the necessary financing and expertise to obtain regulatory approvals, complete clinical development, manufacture and market such product. Alternatively, the Company will be required to seek additional funds from other sources not now identified. There can be no assurance that the Company will be able to enter into the collaborative agreements or raise additional capital necessary to complete its clinical trials, obtain necessary regulatory approvals, or fully develop or commercialize its proposed product on acceptable terms. In such event, if the Company was unable to obtain from alternative sources the substantial financing necessary on acceptable terms, it would be unable to complete the development or commercialize any products. On March 1, 1996, the Company entered into a Stock Purchase Agreement with Dominion Resources, Inc. ("Dominion") pursuant to which Dominion agreed to purchase and the Company agreed to sell 5,000,000 shares of the Company's Common Stock at a purchase price per share of $.065 or an aggregate purchase price of $325,000. Such shares were sold in three approximately equal installments at closings held on March 18, April 15, and May 15, 1996. The purchase agreement contains various representations and warranties concerning the Company and its activities and also various affirmative and negative covenants, including a covenant to elect as a Director of the Company one person designated by Dominion. Mr. William McManus, President and a Director of Dominion, was elected as a Director of the Company to serve as Dominion's designee to the Company's Board of Directors and served until June 14, 1996. The purchase agreement also grants to Dominion the right to have registered 7 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Item 2 (Cont.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS under the Securities Act of 1933, as amended, the shares sold to Dominion to enable the public offer and sale of those shares. The agreement restricts the Company from entering into mergers, acquisitions or sales of its assets without the prior approval of Dominion's representative on the Company's Board of Directors. The purchase price was paid from Dominion's working capital. On June 13, 1996, Dominion entered into an agreement with Aries Fund, a Cayman Island Trust, and the Aries Domestic Fund, L.P., a Delaware limited partnership ("The Aries Fund" and the "Aries Domestic Fund, L.P." are collectively referred to as "Aries"), with the Company a party to the agreement, whereby Dominion sold and Aries purchased an aggregate of 4,000,000 shares of the Company's Common Stock at a price of $.10 per share. The purchase price was paid from Aries general funds. As part of the transaction, Dominion transferred to Aries certain of its rights under the March 1, 1996 agreement including, among others, the right to designate a Director of the Company and rights to have the shares registered under the Securities Act of 1933, as amended. Upon completion of the sale of the 4,000,000 shares, Mr. Steve Kanzer was elected a Director of the Company as the designee of Aries and Mr. McManus resigned. Also concurrently with the completion of the transaction, the Company redeemed its outstanding rights under the Shareholders Rights Agreement dated as of September 23, 1994. On June 26, 1996, Aries purchased from the Company an additional 5,000,000 shares of the Company's Common Stock at a price of $.20 per share or an aggregate of $1,000,000. The purchase price was paid from Aries' general funds. The purchase agreement relating to such shares contains various representations and warranties concerning the Company and its activities and also various affirmative and negative covenants. The purchase agreement grants to Aries the right to have registered under the Securities Act of 1933, as amended, the shares sold to Aries to enable the public offer and sale of those shares. The agreement restricts the Company from entering into mergers, acquisitions or sales of its assets without the prior approval of Aries. On October 25, 1996, the Company entered into an Employment Agreement with Michael S. Rosen to serve as the President, Chief Executive Officer and a Director of the Company. Mr. Rosen's employment with the Company commenced on August 19, 1996 and terminates on August 30, 2000. Mr. Rosen's initial salary pursuant to the agreement is $200,000. Mr. Rosen was elected a Director of the Company on August 22, 1996. Mr. Rosen was also granted a seven-year option to purchase 700,000 shares of the Company's Common Stock at an exercise price of $1.25 per share with such option to vest as to 100,000 shares on August 19, 1996 and quarterly thereafter at the rate of 25,000 shares per quarter through June 30, 1997, 37,500 shares per quarter through September 30, 2000, and 12,500 shares on December 31, 2000 at which time the option shall be fully vested. If Mr. Rosen's employment terminates prior to December 31, 2000 the option shall be exercisable thereafter only to the extent exercisable on the date of termination. The agreement contains other provisions, including, among others, a covenant restricting Mr. Rosen's ability to engage in activities competitive with the Company for the term of the agreement and for 18 months thereafter. 8 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Item 2 (Cont.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On October 31, 1996, Dr. Gerald Vosika, the Chairman of the Board and a Director of the Company, purchased an aggregate of 2,100,000 shares of Common Stock on exercise of options. The Company intends, from time to time in the future, to seek to expand its research and development activities into other immunopharmaceutical agents that it either may license from other persons or seek to develop. There can be no assurance that the Company will be successful in this regard. Any such activities may require the expenditure of funds not presently available to the Company. The Company intends to seek to obtain these funds from possible future public or private sales of its securities or other sources, none of which have been presently identified. Results of Operations Nine Months Ended October 31, 1996 Compared With Nine Months Ended October 31, 1995. Total operating expenses for the nine months ended October 31, 1996 were $1,262,308 compared to $945,047 in the preceding year representing an increase of $317,261 or 34%. Proprietary research and development expenses increased by $149,965 to $769,818 in 1996 compared to $646,853 in 1995, due to the increase in research and development activities. Rent also increased by $1,282 reflecting a periodic increase per the lease agreement. Total general and administrative expenses decreased by $166,016 or 62% reflecting an increase in management personel and associated office facilities. Interest income decreased from $62,397 to $38,948, reflecting the decrease in the Company's cash balances resulting from its activities. The Company's net loss increased from $882,650 to $1,223,360 or 39%, reflecting the Company's increase in administrative personnel and travel. 9 ENDOREX CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Item 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-k None. 10 SIGNATURES Pursuant to requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENDOREX CORPORATION By _/s/____________________________________ Gerald J. Vosika President and Director of the Company Date December 5, 1996 By _/s/___________________________________ James Burrow Chief Financial Officer 11 EX-27 2
5 THIS SCHEDULE CONTAINS AMMENDED FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF OPERATION. 9-MOS JAN-31-1996 OCT-31-1996 1,339,901 0 0 0 0 1,382,509 42,608 121,824 1,655,098 41,118 0 18,081 0 0 1,613,980 1,655,098 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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