UNITED STATES
SECURITIES 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 December 31, 1999
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BIOENVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 113375915
--------------- -------------------
State of Incorporation IRS Employer ID No.
590 Madison Avenue
New York, New York 10022
- ------------------------------- --------------
Address of principal Executive Offices Zip Code
Registrant's Telephone Number (212) 521-4496
Check here whether the issuer (1) has filed all reports required
to be filed by Sections 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 December 31, 1999, the following shares of the
Registrant's common stock were issued and outstanding:
Voting common stock 7,249,897
Traditional Small Business Disclosure (check one): Yes X No
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INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . .3
CONDENSED CONSOLIDATED BALANCE SHEET . . . . . . . . .4
CONDENSED CONSOLIDATED INCOME STATEMENT. . . . . . . .5
STATEMENT OF CASH FLOWS. . . . . . . . . . . . . . . .6
Note 1. NATURE OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES. . . . . . . . . . . . .8
Note 2. USE OF OFFICE SPACE. . . . . . . . . . . . .9
Note 3. EARNINGS PER SHARE . . . . . . . . . . . . .9
Note 4. LIQUIDITY . . . . . . . . . . . . . . . . . 9
Note 5. SUBSEQUENT EVENTS . . . . . . . . . . . . . 9
Item 2. Management's Discussion And Analysis or Plan of
Operations. . . . . . . . . . . . . . . . . . . . . .12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 16
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 16
Item 3. Defaults upon Senior Securities. . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . 16
Item 5. Other information. . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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PART I - FINANCIAL INFORMATION
To the Board of Directors of Bioenvision, Inc.
Dover, DE
We have reviewed the accompanying balance sheet of Bioenvision
Inc., (a development stage company) as of December 31, 1999, and
the related statements of loss and retained earnings and cash
flows for the three months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants. All
information included in these financial statements is the
representation of the management of Bioenvision, Inc.
A review consists principally of inquiries of Company personnel
and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles.
New York, New York
February 21, 2000
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BIOENVISION INC.
(a development stage company)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31, 1999
-----------
ASSETS
Current assets:
Cash and cash equivalents ................ $ --
Accounts receivable ...................... --
-----------
Total current assets ..................... --
Property, plant and equipment .. .......... 53,674
Intangible assets ......................... 22,766
-----------
Total assets ......................... $ 76,440
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities ....................... $ 2,301,722
Other liabilities - related parties ....... 591,622
-----------
Total liabilities .................... 2,893,344
Stockholders' equity:
Common stock, $0.001 par value;
Authorized: 25,000,000 shares;
Issued and outstanding: 7,249,096 ......... 27,642
Additional paid-in capital ............. 300,761
Accumulated comprehensive loss
and deficit accumulated
during the development stage ............. (3,143,210)
Cumulative translation adjustment ......... (2,097)
-----------
Total stockholders' equity ................ $(2,816,904)
-----------
Total liabilities
and stockholders' equity .................. $ 76,440
===========
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BIOENVISION INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31,
-------------------------
1999 1998
---------- ----------
TOTAL REVENUES ........................ $ -- $ N.A
OPERATING EXPENSES:
General and administrative expenses $ 424,612
Research & development costs ....... 562,090
Interest payable ................... 20,134
Depreciation expense ............... 7,667
Amortization expense ............... 620
---------- ----------
Operating loss ..................... (1,015,123)
Income taxes ....................... -- N.A.
---------- ----------
NET LOSS .............................. (1,015,123) N.A.
========== ==========
Basic and diluted net loss per share .. $ (0.14) $ N.A.
========== ==========
Shares used in computing
basic and diluted
net loss per share ............... 7,249,096 N.A
========== ==========
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BIOENVISION INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
--------------------
1999 1998
-------- -------
OPERATING ACTIVITIES
Net loss ............................... $(1,015,123) N.A.
Adjustments to reconcile
net income (loss) to net cash
provided (used) by operating activities: --
Other liabilities - related party ...... 241,308
Depreciation ...................... 7,667
Amortization ...................... 620
Accounts receivable ............... 979
Accounts payable .................. 764,533
--------- -----
Net cash provided (used)
by operating activities ................ $ (16) $N.A.
FINANCING ACTIVITIES
Purchases of property and equipment ... --
INVESTMENT ACTIVITIES
Net proceeds from issuance of
common stock ........................ --
--------- -----
Net increase (decrease) in cash
& cash equivalents .................... (16) N.A.
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BIOENVISION INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICES.
DESCRIPTION OF BUSINESS
The Company is a development stage, biopharmaceutical company
primarily focused in the research and development of products and
technologies for the treatment of cancer. The Company has
acquired development and marketing rights to a portfolio of four
platform technologies.
BASIS OF PRESENTATION
In January 1999 the Company merged with Bioenvision, Inc, ("Old
Bioenvision") a development stage Company primarily engaged in
the research and development of products and technologies for the
treatment of cancer. The transaction was accounted for as a
reorganization of companies under common control in a manner
similar to a pooling of interests as they had a common majority
shareholder. All prior period amounts have been restated to
include the financial results of Old Bioenvision.
The financial statements expressed in pounds sterling for the
three months ended December 31, 1999 and 1998 have been restated
in U.S. dollars at the prevailing exchange rate of (pound)1.00 =
$1.5972 solely for the convenience of the reader only. These
restatements should not be construed as representations that the
pound sterling amounts actually represent U.S. dollar amounts or
that they could be converted into U.S. dollars at the rate
indicated or at any other rate.
The Company has incurred significant losses from operations and
is not currently generating cash from operations. The Company
anticipates that it may continue to incur significant operating
losses for the foreseeable future. Operations to date have been
funded principally by equity capital and borrowings. The Company
intends to continue to fund its development expenses through
additional capital raising activities, including one or more
offerings of equity and/or debt through private placements and/or
public offerings.
In particular, stockholders have approved the offering, through a
private placement, of 1,000,000 shares of 8% cumulative
convertible preferred stock in the Company. Based on its current
operating plan, the Company believes that the estimated amount of
net proceeds will be sufficient to meet its cash, operational and
liquidity requirements for at least the 12 months following the
closing of such a private placement.
In addition, the Company has entered into an agreement with Glen
Investments Limited, a related party (see note 8) whereby Glen
Investments Limited has agreed to loan funds to the Company on an
as-needed basis based upon previously agreed budgets. A facility
of (pound)1,000,000 ($1,597,200) is currently available to the
Company based on budgets that assume the above private placement
is successful. If the private placement proves to be
unsuccessful, Glen Investments Limited has agreed to support the
Company for the forthcoming year, subject to satisfactory review
of revised budgets.
The Company's ability to continue to develop its infrastructure
depends upon its ability to raise equity capital through the
approved private placement, the continuing availability of
funding from Glen Investments and upon its ability to raise other
additional capital. The financial statements do not include any
adjustments that may result from this uncertainty.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements as well
as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates, and such differences may be material to the financial
statements.
INCOME TAXES
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). Under FAS 109, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates that will be in effect
when the differences are expected to reverse.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation and
amortization is provided on a reducing balance basis at the rate
of 25% per year.
INTANGIBLE ASSETS
Intangible assets consist of acquired development and marketing
rights to platform technologies. Acquired development and
marketing rights are stated at their cost less accumulated
amortization. Amortization is provided on a straight-line basis
over 20 years.
RESEARCH AND DEVELOPMENT
Research and Development costs are charged to expense as
incurred.
NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average
number of common shares outstanding during the periods. Diluted
net loss per share is computed using the weighted average number
of common shares and potentially dilutive common shares
outstanding during the periods.
Presently exercisable options to purchase 500,000 shares of
common stock have not been included in the calculation of net
loss per share as their effect would have been anti-dilutive.
FOREIGN CURRENCY RESTATEMENT
The functional currency of the Company is pounds sterling. The
functional currency of the Company and its subsidiary, Old
Bioenvision, was previously the U.S. dollar. Following various
re-organizations all historical amounts have been restated with
the adoption of pounds sterling as the functional currency. This
did not have a material impact.
2. PROPERTY PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31, 1999
------------------------------
(pounds sterling) (dollars)
----------------- ---------
Office equipment ........ 1,140 1,820
Motor vehicles .......... 67,154 107,258
------ -------
68,294 109,078
Less: accumulated depreciation (34,689) (55,404)
------ -------
33,605 53,674
====== ======
3. INTANGIBLE ASSETS
December 31, 1999
-----------------------------
(pounds sterling) (dollars)
----------------- ---------
Purchased technology ...... 15,541 24,822
Accumulated amortization .. (1,287) (2,056)
------ ------
At September 30, 1999 ..... 14,254 22,766
====== ======
4. COMMITMENTS
The Company leases its principal facilities under an operating
lease arrangement. The future minimum annual rental payments are
as follows for years ended June 30:
(pounds sterling) (dollars)
----------------- ---------
2000 .................. 18,000 29,648
2001 .................. -- --
2003 .................. -- --
2004 .................. -- --
2005 .................. -- --
Thereafter ............ -- --
------ ------
18,000 29,648
====== ======
Rent expense for the three months ended December 31, 1999 was
(pound) 9,000 ($14,375).
The Company uses office space for its executive offices which it
receives from its financial advisor at no cost.
5. INCOME TAXES
Due to operating losses and the inability to recognize
corporation tax benefit therefrom, there is no provision for
income taxes for the three months ended December 31, 1998 and
1999.
6. STOCKHOLDERS' EQUITY
In January 1999, the Board of Directors and stockholders approved
a 1-for-15 reverse stock split. All share and per share amounts
in the accompanying financial statements have been adjusted for
this stock split retroactively.
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 8, 1998 the Company entered to an agreement with
Glen Investments Limited, a Jersey (Channel Islands) corporation
wholly owned by Kevin R. Leech, whereby Glen Investments has
agreed to loan funds to the Company on an as-needed basis based
upon previously agreed budgets. Mr. Leech is a private investor
who is also the sole owner of Phoenix Ventures Limited, a
Guernsey (Channel Islands) corporation and the holder of
approximately 19% of the outstanding shares of Common Stock of
the Company. In exchange for its agreement to loan funds to the
Company, the Company issued to Glen Investments options to
purchase up to 500,000 shares of Common Stock at an exercise
price of $1.00 per share, all of which options are currently
exercisable. As such options were issued at an exercise price
greater than the fair value of common stock, no amount has been
included in the statement of operations to reflect the issuance
of the options.
In May 1998, Bioheal Ltd., a subsidiary of the Company, entered
into an agreement with Christopher B. Wood, the Chairman of the
Board and Chief Executive Officer of the Company, to co-develop a
gene marker and immunomodulator system for use in gene therapy
and related technologies. Under the terms of the agreement,
Bioheal was granted the exclusive license to make, use and sell
products derived from technology, and to utilize technical
information related to the technology to obtain patent and other
proprietary rights to products developed by Bioheal and its
collaborators from the technology for a term expiring on the date
of expiration of all current and future patents covered by the
agreement, subject to earlier termination under certain
circumstances. In consideration of the licenses granted to
Bioheal, Bioheal agreed to pay to Dr. Wood, among other things, a
royalty of 10% of the gross sales revenues of all products, less
any discounts or deductions for value-added taxes. In addition,
Bioheal has agreed to pay, among other things, certain costs
associated with pre-clinical development and clinical trials of
such products. Under the terms of the agreement, the pre-clinical
costs are not to exceed $1,500,000, and the clinical trial costs
are not to exceed $4,000,000, unless agreed by both parties.
8. SUBSEQUENT EVENT
During October 1999 the stockholders approved the offering,
through a private placement, of 1,000,000 shares of 8% cumulative
convertible preferred stock in the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Bioenvision is a development stage international bio-
pharmaceutical company with a primary focus on the diagnosis and
treatment of cancer. Bioenvision's aim to manage the convergence
of groundbreaking science to create strong, commercially
successful cancer treatments has been actively pursued in the
last quarter.
During that last quarter, pre-clinical studies of the estrogen
receptor beta product have progressed and strongly suggest that
the product has a significant action on the newly described
hormone receptor, ER-beta. In particular, the product has been
shown to modulate binding of hormone to ER-beta receptor in
normal prostate and prostate cancer cell lines. The company
expects to commence Phase II clinical trials of Modrefen in
prostate cancer within the next quarter. It should be noted that
the product is already licensed for the treatment of advanced
breast cancer. The addition of prostate cancer as a possible
target for the drug greatly extends the commercial potential for
the product. There is, of course, no guarantee that clinical
trials will be successful.
Bioenvision's primary objective is to continue developing its
existing platform technologies and to commercialize products
derived from such technologies. Bioenvision has adopted an
aggressive product development program and, assuming the
successful completion of FDA and EMEA clinical trials,
anticipates that by the end of 2002, five of such products and
technologies will have received regulatory approval for certain
disease indications in the United States or Europe, and six will
be emerging through the clinical trial process.
Bioenvision is also currently exploring the possibility of
licensing and co-marketing certain products with several major
pharmaceutical and biotechnology companies. In order to market
its products effectively, Bioenvision intends to establish a
dedicated oncology sales force for the North American market
while establishing a joint venture sales force in Europe.
The Company's lead product, Modrefen, has undergone extensive
experimental testing to confirm its mode of action on the newly
discovered second estrogen receptor, ERbeta. The tests have
shown that Modrefen modulates ERbeta specifically with little or
no action on ERalpha. Management believes this action makes it
the first commercially available selective estrogen receptor
modulator (SERM) to specifically target the second receptor,
which distinguishes it from other SERMs. Data from recent studies
show that Modrefen also modulates ERbeta in the prostate, and in
prostate cancer cell lines. Since ERbeta is believed to play an
important role in controlling growth of the prostate, an ERbeta
modulator could be an important agent in the management of benign
prostatic hypertrophy and prostate cancer. Animal studies with
Modrefen have shown the drug decreases prostate gland weight by
up to 60%. Clinical trials of Modrefen in prostate cancer are
planned. Clinical trials are continuing with Modrefen for the
treatment of Cushings disease in dogs. This adrenal disorder is a
relatively common illness in certain types of dogs, and Modrefen
has been shown to be effective. A clinical trial of Modrefen for
the treatment of laminitis in horses is in progress and early
results show the drug to be effective in this condition. The
large scale clinical trials are a prelude to plans to launch the
product in veterinary practices in the USA.
Bioenvision is actively developing the purine nucleoside,
clofarabine, which it acquired under license from Southern
Research Institute, Birmingham, Alabama. A Phase I clinical trial
has been completed at the M D Anderson Cancer Center, Houston.
The trial showed the drug to be a potent immunosuppressive agent,
with no unexpected toxicity. A Phase II trial of the drug in
acute and chronic leukemia has commenced.
Bioenvision's Gene Therapy program has seen significant
developments over the past few months. The clinical trial of the
albumin gene product in patients with hypoalbuminemia due to
cirrhosis of the liver has shown no major toxic reactions to the
product. Furthermore, all patients treated showed a rise in serum
albumin levels that was sustained for up to five months in some
cases. The work that Bioenvision has acquired under license
relates to DNA Vectors and the use of muscle element promotors to
enhance the production of protein from gene sequences. Early
clinical trials, as well as laboratory experiments, have shown
that combining the muscle elements with a known gene will induce
skeletal muscle to produce the gene product. This technology has
considerable potential in a wide range of human diseases. In the
past few months animal experiments and a limited clinical trial
have been conducted with other gene products. These experiments
confirm that the muscle-element plasmid is an effective vector
for expression of gene product. Bioenvision has agreed to
continue the pre-clinical development of the technology and to
expand the possible applications of the invention.
Bioenvision is considered a development-stage company for
accounting purposes because it has not generated any material
revenues to date. Accordingly, Bioenvision has no relevant
operating history upon which an evaluation of the Company's
performance and prospects can be made. Moreover, Bioenvision is
still subject to all of the business risks associated with a new
enterprise, including, but not limited to, risks of unforeseen
capital requirements, lack of fully developed products, failure
of market acceptance, failure to establish business
relationships, reliance on outside contractors for the
manufacture and distribution of proposed products, and
competitive disadvantages as against larger and more established
companies. The likelihood of the success of Bioenvision must be
considered in light of the development cycles of new
pharmaceutical products and technologies and the competitive and
regulatory environment in which the Company operates.
Bioenvision's viability to operate as a going concern is
dependent upon raising additional capital, and ultimately, having
net income. The Company requires additional capital principally
to meet its costs for the implementation of its business plan,
for general and administrative expenses and to fund research and
development into oncology focused products. The Company does not
have a working capital line of credit with any financial
institution. Therefore, future sources of liquidity will be
limited to the Company's ability to obtain additional debt or
equity funding. There is no guarantee that the Company will be
able to generate sufficient revenue or income to fully implement
its business plans.
LIQUIDITY AND CAPITAL RESOURCES
From the period of its inception through December 1998, the
Company did not engage in any active trade or business. In
January 1999, the Company consummated a merger with Old
Bioenvision by effecting a 1-for-15 reverse stock split of its
then outstanding shares of Common Stock and thereafter issuing
7,013,897 post-reverse split shares of Common Stock to the former
stockholders of Old Bioenvision in exchange for all of the issued
and outstanding shares of capital stock of Old Bioenvision.
Consequently, upon consummation of the merger, the former
stockholders of Old Bioenvision became the controlling
stockholders of the Company, Old Bioenvision became a
wholly-owned subsidiary of the Company and changed its name to
Bionco Marketing Inc., and the Company changed its name from
Ascot Group Inc. to Bioenvision Inc.
For the most recent quarter, the Company has incurred significant
net losses of GBP 412,968. The Company had an accumulated deficit
of GBP1,541,055 compared with GBP1,128,087 for the previous
quarter ending June 30, 1999. The Company anticipates that it
may continue to incur significant operating losses for the
foreseeable future. There can be no assurance as to whether or
when the Company will generate material revenues or achieve
profitable operations. The Company's independent public
accountants have included an explanatory paragraph in their
report on the Company's financial statements, stating that
certain factors raise substantial doubt about the Company's
ability to continue as a going concern.
For the quarter ended September 30, 1999 administrative expenses
totaled pound 106,035 compared to pound 87,234 for the quarter
ended September 30, 1998. The increase in expenses is a result of
the Company's attempt to further develop its technology platform.
Research and development expenses were GBP 300,257 for the
quarter ended September 30, 1999 compared to GBP 25,000 for the
quarter ended September 30, 1998. The significant increase in
research and development costs is a result of the Company
increasing it's research activities in accordance with the
development of its products.
Based on its current operating plan, the Company believes that
the estimated minimum amount of net proceeds from its anticipated
private financing will be sufficient to meet its cash,
operational and liquidity requirements for at least 12 months
following the completion of such financing, and that the
estimated maximum net proceeds from such private financing will
be sufficient to meet its cash, operational and liquidity
requirements for at least 18 months following the completion
thereof. The Company may, however, require additional financing
within this time frame due to unanticipated changes in economic
conditions or other unforeseen circumstances. In the event the
Company's plans change or its assumptions change or prove to be
inaccurate, the Company could be required to seek additional
financing sooner than currently anticipated.
The Company currently has an agreement with Glen Investments
Limited, a Jersey (Channel Islands) company wholly owned by Kevin
R. Leech (a private investor who is also the sole owner of
Phoenix Ventures Limited, the holder of approximately 19% of the
outstanding shares of Common Stock of the Company), whereby Glen
Investments has agreed to loan funds to the Company on an as
needed basis based upon previously agreed budgets. A facility of
GBP is currently available to the Company based an budgets that
assume the above private placement is successful. Glen
Investments Ltd. has agreed to satisfactory review of revised
budgets. Any additional financing may not, however, be available
to the Company when needed on commercially reasonable terms, or
at all. If the Company is unable to obtain such additional
financing, the Company's operations will, in all likelihood,
cease.
YEAR 2000 ISSUE
The Company has not experienced any problems relating to the year
2000 issue and has therefore not incurred any additional costs or
expenses.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no pending legal proceedings against the
company.
Item 2. Changes in Securities
There have been no changes in the Company's securities for the
period reported.
Item 3. Defaults upon Senior Securities
There has been no default in the payment of principal, interest,
sinking or purchase fund installment.
Item 4. Submission of Matters to a Vote of Security Holders
No matter has been submitted to a vote of security holders during
the period covered by this report.
Item 5. Other information
There is no other information to report which is material to the
company's financial condition not previously reported.
Item 6. Exhibits and Reports on Form 8-K
There have been no Reports on Form 8-K for the period covered by
this filing.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
______________________
Bioenvision, Inc.
(Registrant)
/s/ Christopher Wood
President
Date: February 21, 2000
