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Previous: ALLBRITTON COMMUNICATIONS CO, 10-K, 1998-12-24 |
Next: ORTEC INTERNATIONAL INC, 10QSB/A, 1998-12-24 |
<PAGE> 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)
<TABLE>
<S> <C>
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)
</TABLE>
(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)
<PAGE> 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<PAGE> 3
PART I
Item 1. FINANCIAL STATEMENTS
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
(As Restated)
<S> <C> <C>
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
----------- -----------
</TABLE>
See notes to condensed unaudited financial statements.
1
<PAGE> 4
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
(As Restated)
<S> <C> <C>
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
----------- -----------
</TABLE>
See notes to condensed unaudited financial statements.
2
<PAGE> 5
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C>
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
--------- --------- --------- --------- ---------
</TABLE>
See notes to condensed unaudited financial statements.
3
<PAGE> 6
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Additional in the
Paid-in development Treasury
Shares Amount Capital stage Stock Total
------ ------ ------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
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)
--------- ------ ---------- ----------- ----------
</TABLE>
See notes to condensed unaudited financial statements.
4
<PAGE> 7
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Additional in the
Paid-in development Treasury
Shares Amount Capital stage Stock Total
--------- ------ ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
(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
--------- ------ ----------- ----------- ----------
</TABLE>
See notes to condensed unaudited financial statements.
5
<PAGE> 8
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Additional in the
Paid-in development Treasury
Shares Amount Capital stage Stock Total
--------- ------ ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
(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
--------- ------ ----------- ------------ -------- -----------
</TABLE>
See notes to condensed unaudited financial statements.
6
<PAGE> 9
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C>
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)
----------- ----------- ------------ ----------- ------------
</TABLE>
See notes to condensed unaudited financial statements.
7
<PAGE> 10
ORTEC INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C>
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
---------- ----------- ----------- ---------- -----------
</TABLE>
See notes to condensed unaudited financial statements.
8
<PAGE> 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
<PAGE> 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
<PAGE> 13
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule *
</TABLE>
- ------------------------
* Filed herewith.
11
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 745,423
<SECURITIES> 8,944,785
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,693,165
<PP&E> 2,507,480
<DEPRECIATION> 893,908
<TOTAL-ASSETS> 11,779,983
<CURRENT-LIABILITIES> 752,095
<BONDS> 0
0
0
<COMMON> 5,895
<OTHER-SE> 9,836,967
<TOTAL-LIABILITY-AND-EQUITY> 11,779,983
<SALES> 0
<TOTAL-REVENUES> 466,375
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,952,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,486,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,486,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,486,196)
<EPS-PRIMARY> (.94)
<EPS-DILUTED> 0
</TABLE>
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