-----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, NeQ8rALdZSkr8FgvBkOKxiDKBkeKOlaw6Q17BJl758p/odkcUd02tVkYzG234xs+ 197zJ8PkZGh48S3U367/0A== 0000950123-98-010910.txt : 19981228 0000950123-98-010910.hdr.sgml : 19981228 ACCESSION NUMBER: 0000950123-98-010910 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORTEC INTERNATIONAL INC CENTRAL INDEX KEY: 0000889992 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 113068704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-27368 FILM NUMBER: 98775775 BUSINESS ADDRESS: STREET 1: 3960 BROADWAY STREET 2: BLDG 28 CITY: NEW YORK STATE: NY ZIP: 10032 BUSINESS PHONE: 7183264698 10QSB/A 1 AMENDMENT: ORTEC INTERNATIONAL 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 10-QSB/A ------------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO _________________ COMMISSION FILE NUMBER 0-27368 ORTEC INTERNATIONAL, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) DELAWARE 11-3068704 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3960 BROADWAY NEW YORK, NEW YORK 10032 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 740-6999 ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE --------------- 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 The number of shares outstanding of the issuer's common stock is 5,894,190 (as of November 2, 1998) 2 ORTEC INTERNATIONAL, INC. INDEX TO QUARTERLY REPORT ON FORM 10-QSB/A FILED WITH THE SECURITIES AND EXCHANGE COMMISSION QUARTER ENDED SEPTEMBER 30, 1998 ITEMS IN FORM 10-QSB/A
Page ---- Facing page Part I Item 1. Financial Statements. 1 Item 2. Plan of Operation. None Part II Item 1. Legal Proceedings and Claims. None Item 2. Changes in Securities and Use None of Proceeds. Item 3. Default Upon Senior Securities. None Item 4. Submission of Matters to None a Vote of Security Holders. Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. 11 Signatures
3 PART I Item 1. FINANCIAL STATEMENTS ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1998 1997 ---- ---- (As Restated) ASSETS Current assets: Cash and equivalents $ 745,423 $11,950,693 Marketable securities 8,944,785 1,584,035 Other current assets 2,957 7,075 ----------- ----------- Total current assets 9,693,165 13,541,803 ----------- ----------- Property and equipment, at cost: Laboratory equipment 781,632 602,697 Office furniture and equipment 531,405 323,871 Leasehold improvements 1,194,443 675,906 ----------- ----------- 2,507,480 1,602,474 Accumulated depreciation and amortization 893,908 606,243 ----------- ----------- 1,613,572 996,231 ----------- ----------- Other assets: Patent application costs net of accumulated amortization of $54,461 at September 30, 1998 and $31,047 at December 31, 1997 439,134 406,166 Deposits 34,112 54,214 ----------- ----------- Total other assets 473,246 460,380 ----------- ----------- Total Assets $11,779,983 $14,998,414 ----------- -----------
See notes to condensed unaudited financial statements. 1 4 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1998 1997 ---- ---- (As Restated) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 605,266 $ 452,443 Capital lease obligations - current 37,470 43,102 Loans payable - current 109,359 63,547 ----------- ----------- Total current liabilities 752,095 559,092 ----------- ----------- Long-term liabilities: Capital lease obligations - noncurrent 9,614 34,608 Loans payable - noncurrent 1,175,412 688,096 ----------- ----------- Total long-term liabilities 1,185,026 722,704 ----------- ----------- Commitments and contingencies Shareholders' equity: Common stock, $.001 par value; authorized, 10,000,000 shares; issued and outstanding shares - 5,895,290 at September 30, 1998 and 5,760,734 at December 31, 1997 5,895 5,761 Additional paid-in capital 28,019,925 26,397,307 Deficit accumulated during the development stage (18,172,646) (12,686,450) Treasury stock, at cost (1,000 shares at September 30, 1998) (10,312) ----------- ----------- Total shareholders' equity 9,842,862 13,716,618 ----------- ----------- Total Liabilities and Shareholders' Equity $11,779,983 $14,998,414 ----------- -----------
See notes to condensed unaudited financial statements. 2 5 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (Unaudited)
Cumulative from March 12, 1991 Nine months (inception) to Quarter ended September 30, ended September 30, September 30, 1998 --------------------------- ------------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (As Restated) (As Restated) (As Restated) Revenue Interest income $ 147,889 $ 63,824 $ 466,375 $ 221,603 $ 996,192 ----------- ----------- ----------- ----------- ------------ Expenses Research and development 494,016 309,901 1,281,446 823,455 5,814,698 Rent 64,907 49,153 171,453 153,949 500,900 Consulting 338,226 149,223 575,604 265,464 1,807,908 Personnel 683,732 391,752 2,760,988 1,001,419 6,537,795 General and administrative 405,298 321,449 1,085,998 912,804 4,240,858 Interest and other expense 27,617 11,531 77,082 35,087 266,679 ----------- ----------- ----------- ----------- ------------ 2,013,796 1,233,009 5,952,571 3,192,178 19,168,838 ----------- ----------- ----------- ----------- ------------ Net loss $(1,865,907) $(1,169,185) $(5,486,196) $(2,970,575) $(18,172,646) ----------- ----------- ----------- ----------- ------------ Net loss per share $(.32) $(.25) $(.94) $(.64) $(5.76) ----- ----- ----- ----- ------ Weighted average common stock outstanding (basic and diluted) 5,894,123 4,655,401 5,843,239 4,631,458 3,152,456 --------- --------- --------- --------- ---------
See notes to condensed unaudited financial statements. 3 6 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Deficit accumulated Common Stock Additional in the Paid-in development Treasury Shares Amount Capital stage Stock Total ------ ------ ------- ----------- -------- ---------- Issuance of stock: Founders 1,553,820 $1,554 $ (684) $ 870 First private placement 217,440 217 64,783 65,000 The Director 149,020 149 249,851 250,000 Second private placement 53,020 5 499,947 500,000 Share issuance expenses (21,118) (21,118) Net loss for the period from March 12, 1991 (inception) to December 31, 1991 $ (281,644) (281,644) --------- ------ ---------- ----------- --------- Balance - December 31, 1991 1,973,300 1,973 792,779 (281,644) 513,108 Issuance of stock: Second private placement 49,320 49 465,424 465,473 Stock purchase agreement with The Director 31,820 32 299,966 299,998 Share issuance expenses (35,477) (35,477) Net loss for the year ended December 31, 1992 (785,941) (785,941) --------- ------ ---------- ----------- ----------- Balance - December 31, 1992 2,054,440 2,054 1,522,692 (1,067,585) 457,161 Issuance of stock: Third private placement 132,150 132 1,321,368 1,321,500 Stock purchase agreement with Home Insurance Company 111,111 111 999,888 999,999 Stock purchase agreement with The Director 21,220 21 199,979 200,000 Shares issued in exchange for commissions earned 600 1 5,999 6,000 Share issuance expenses (230,207) (230,207) Net loss for the year ended December 31, 1993 (1,445,624) (1,445,624) --------- ------ ---------- ----------- ---------- Balance - December 31, 1993 2,319,521 $2,319 $3,819,719 $(2,513,209) $(1,308,829) --------- ------ ---------- ----------- ----------
See notes to condensed unaudited financial statements. 4 7 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Deficit accumulated Common Stock Additional in the Paid-in development Treasury Shares Amount Capital stage Stock Total --------- ------ ----------- ----------- -------- ----------- (brought forward) 2,319,521 $2,319 $3,819,719 $(2,513,209) $1,308,829 Issuance of stock: Fourth private placement 39,451 40 397,672 397,712 Stock purchase agreement with Home Insurance Company 50,000 50 499,950 500,000 Share issuance expenses (8,697) (8,697) Net loss for the year ended December 31, 1994 (1,675,087) (1,675,087) --------- ------ ---------- ----------- ---------- Balance - December 31, 1994 2,408,972 2,409 4,708,644 (4,188,296) 522,757 Rent forgiveness 40,740 40,740 Net loss for the year ended December 31, 1995 (1,022,723) (1,022,723) --------- ------ ---------- ----------- ---------- Balance - December 31, 1995 2,408,972 2,409 4,749,384 (5,211,019) (459,226) Issuance of stock: Initial public offering 1,200,000 1,200 5,998,800 6,000,000 Exercise of warrants 33,885 34 33,851 33,885 Fifth private placement 959,106 959 6,219,838 6,220,797 Share issuance expenses (1,580,690) (1,580,690) Non-cash stock compensation and interest 152,000 152,000 Net loss for the year ended December 31, 1996 (2,649,768) (2,649,768) --------- ------ ----------- ----------- ---------- Balance - December 31, 1996 4,601,963 $4,602 $15,573,183 $(7,860,787) $7,716,998 --------- ------ ----------- ----------- ----------
See notes to condensed unaudited financial statements. 5 8 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Deficit accumulated Common Stock Additional in the Paid-in development Treasury Shares Amount Capital stage Stock Total --------- ------ ------------ ------------ -------- ----------- (brought forward) 4,601,963 $4,602 $15,573,183 $ (7,860,787) $ 7,716,998 Exercise of warrants 1,158,771 1,159 10,821,632 10,822,791 Share issuance costs (657,508) (657,508) Stock options and warrants issued for services 660,000 660,000 Net loss for the year ended December 31, 1997 (4,825,663) (4,825,663) --------- ------ ----------- ------------ ----------- Balance - December 31, 1997 5,760,734 5,761 26,397,307 (12,686,450) 13,716,618 Exercise of options and warrants 134,556 134 526,368 526,502 Share issuance costs (20,000) (20,000) Stock options and warrants issued for services (as restated) 1,116,250 1,116,250 Net loss for the nine months ended September 30, 1998 (as restated) (5,486,196) (5,486,196) Purchase of treasury stock $(10,312) (10,312) --------- ------ ----------- ------------ -------- ----------- Balance - September 30, 1998 5,895,290 $5,895 $28,019,925 $(18,172,646) $(10,312) $ 9,842,862 --------- ------ ----------- ------------ -------- -----------
See notes to condensed unaudited financial statements. 6 9 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative from Quarter ended Nine months ended March 12, 1991 September 30, September 30, (inception) to --------------------------- ---------------------------- September 30, 1998 1998 1997 1998 1997 ------------------ ---- ---- ---- ---- (As Restated) (As Restated) Cash flows from operating activities: Net loss $(1,865,987) $(1,169,185) $ (5,486,196) $(2,970,575) $(18,172,646) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 109,364 84,131 311,079 233,897 958,606 Unrealized loss on marketable securities 11,404 Realized loss on marketable securities 5,250 Non cash stock compensation and interest 33,750 60,000 1,116,250 60,000 1,928,250 Changes in operating assets and liabilities Other current assets 130,130 (3,244) 4,118 (1,493) (2,957) Accounts payable and accrued liabilities 318,888 (468) 152,823 (80,998) 693,093 ----------- ----------- ------------ ----------- ------------ Net cash used in operating activities (1,273,775) (1,028,766) (3,901,926) (2,759,169) (14,579,000) ----------- ----------- ------------ ----------- ------------ Cash flows from investing activities: Purchases of property and equipment, excluding capital leases (107,289) (14,638) (905,006) (190,660) (2,420,414) Payments for patent application (40,295) 537 (56,382) (12,552) (493,595) Organization costs (10,238) Deposits 282 (857) 20,102 (1,648) (32,129) Purchases of marketable securities (3,686,128) (17,481,750) (19,604,971) Sales of marketable securities 4,499,000 10,121,000 10,643,532 ----------- ----------- ------------ ----------- ------------ Net cash provided by (used in) investing activities 665,570 (14,958) (8,302,036) (204,860) (11,917,815) ----------- ----------- ------------ ----------- ------------
See notes to condensed unaudited financial statements. 7 10 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (Unaudited)
Cumulative from March 12, 1991 Quarter Ending Nine Months (Inception) to September 30, Ended September 30, September 30, 1998 --------------------- ---------------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (As Restated) (As Restated) Cash flows from financing activities: Proceeds from issuance of notes payable 515,500 Repayment of notes payable $ (515,500) Proceeds from issuance of common stock $ 82,299 $ 30,689 $ 526,502 $ 71,253 28,604,528 Share issuance expenses (20,000) (2,547,697) Purchase of treasury stock (10,312) (10,312) (10,312) Proceeds of issuance from loans payable 600,000 1,425,850 Repayment of loan payable (25,988) (8,888) (66,872) (28,952) (170,011) Repayment of capital lease obligations (10,969) (8,332) (30,626) (26,407) (60,120) --------- -------- ------- -------- ----------- Net cash provided by financing activities 35,030 13,469 998,692 15,894 27,242,238 --------- -------- ------- -------- ----------- Net increase (decrease) in cash and cash equivalents (573,175) (1,030,255) (11,205,270) (2,948,135) 745,423 Cash and cash equivalents at beginning of period 1,318,598 5,535,349 11,950,693 7,453,229 ---------- ----------- ---------- ---------- ----------- Cash and cash equivalents at end of period $ 745,423 $ 4,505,094 $ 745,423 $ 4,505,094 $ 745,423 ---------- ----------- ----------- ---------- -----------
See notes to condensed unaudited financial statements. 8 11 ORTEC INTERNATIONAL, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 AND 1997 NOTE 1 - FINANCIAL STATEMENTS The condensed balance sheet as of September 30, 1998 and the statements of operations, shareholders' equity and cash flows for the three and nine month periods ended September 30, 1998 and 1997 and for the period from March 12, 1991 (inception) to September 30, 1998 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring accrual adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 1998 and for all periods presented have been made. Certain information and footnote disclosure normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto in the Company's December 31, 1997 annual report on Form 10-KSB filed with the Securities and Exchange Commission. The results of operations for the nine months ended September 30, 1998 is not necessarily indicative of the operating results for the full year. NOTE 2 - FORMATION OF THE COMPANY AND BASIS OF PRESENTATION FORMATION OF THE COMPANY Ortec International, Inc. ("Ortec" or the "Company") was incorporated in March 1991 as a Delaware corporation to secure and provide funds for the further development of the technology developed by Dr. Mark Eisenberg of Sydney, Australia, to replicate in the laboratory, composite cultured skin for use in skin replacement procedures (the "Technology"). Pursuant to a license agreement dated September 7, 1991, Dr. Eisenberg had granted Ortec a license for a term of ten years, with automatic renewals by Ortec for two additional ten-year periods, to commercially use and exploit the Technology for the development of products. In April, 1998, Dr. Eisenberg assigned his patent for the Technology to Ortec. 9 12 BASIS OF PRESENTATION The Company is a development stage enterprise, and has neither realized any operating revenue nor has any assurance of realizing any future operating revenue. Successful future operations depend upon the successful development and marketing of the Company's Composite Cultured Skin to be used in skin replacement procedures. NON-CASH COMPENSATION EXPENSE During the fourth quarter of 1997, the Company granted warrants to purchase an aggregate of 240,000 shares to three executive officers. The vesting of such warrants is contingent upon the occurrence of certain events. At December 31, 1997, the Company determined the likelihood of these events occurring was probable and recorded compensation expense of approximately $42,000 in accordance with Accounting Principles Board Opinion No. 25 and its related interpretations. During the nine months ended September 30, 1998, several of these events occurred sooner than expected resulting in the re-measurement of compensation expense as of the date the event took place. The Company has restated its financial statements for the nine months ended September 30, 1998 to record additional non-cash compensation expense of $670,000. The effect of this non-cash compensation expense adjustment would be to increase the net loss for the nine months ended September 30, 1998 by $.12 per share and cumulative from March 12, 1991 (inception) to September 30, 1998 of $.21 per share. 10 13 PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description ----------- ----------- 27.1 Financial Data Schedule *
- ------------------------ * Filed herewith. 11 14 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Registrant: ORTEC INTERNATIONAL, INC. Date: December 24, 1998 By: /s/ Steven Katz --------------------------------- Steven Katz, PhD President and Chief Executive Officer (Principal Executive Officer) Date: December 24, 1998 By: /s/ Ron Lipstein --------------------------------- Ron Lipstein Chief Financial Officer (Principal Financial Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 745,423 8,944,785 0 0 0 9,693,165 2,507,480 893,908 11,779,983 752,095 0 0 0 5,895 9,836,967 11,779,983 0 466,375 0 0 5,952,571 0 0 (5,486,196) 0 (5,486,196) 0 0 0 (5,486,196) (.94) 0
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