<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------
or
( ) 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 0-6533
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BOSTON LIFE SCIENCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 87-0277826
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
31 Newbury Street, Suite 300, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
(617) 425-0200
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, address and fiscal year, if changed since last report)
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.
(X) Yes ( ) No
As of August 8, 1996, there were 109,114,142 shares of Common Stock outstanding.
<PAGE>
BOSTON LIFE SCIENCES, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page (s)
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<S> <C>
Part I - Financial Information:
Item 1 - Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of 1
June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Income 2
for the three months ended June 30, 1996 and 1995
and the six months ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows 3 - 4
for the six months ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 5 - 7
Item 2 - Management's Discussion and Analysis of 8 - 11
Financial Condition and Results of Operations
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of 12
Security Holders
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13
Signature (s) 14
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheet
--------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------------------- ---------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $24,703,409 $ 2,125,838
Short-term investments 0 248,320
Prepaid sponsored research & development expenses 243,277 117,902
Other current assets 145,899 321,201
------------ ------------
Total current assets 25,092,585 2,813,261
Fixed assets, net 69,932 52,046
Stock issuance & deferred financing costs 0 211,794
Technology acquired 3,500,000 3,500,000
Other assets 107,674 8,000
------------ ------------
Total assets $28,770,191 $ 6,585,101
============ ============
Current liabilities:
Accounts payable and accrued expenses $818,306 1,026,566
Accrued merger transaction & stock issuance costs 475,000 484,605
Deferred revenue 183,607 83,060
Notes payable and current portion of long-term debt 96,486 1,516,333
------------ ------------
Total current liabilities 1,573,399 3,110,564
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Long-term liabilities 18,496 658,735
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Common stock subject to redemption 186,000 1,630,000
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Stockholders' equity:
Series A Convertible Preferred stock, $.01 par value 1,681 0
1,000,000 shares authorized
No shares outstanding on 12/31/95 and
168,053 shares outstanding on 6/30/96
Common stock, $0.01 par value; 1,046,997 833,275
175,000,000 shares authorized
83,327,474 shares outstanding on 12/31/95 and
104,699,668 shares outstanding on 6/30/96
Additional paid-in-capital 48,095,631 19,915,199
Deferred compensation (206,371) (266,363)
Deficit accumulated during development stage (21,945,642) (19,296,309)
------------ ------------
Total stockholders' equity 26,992,296 1,185,802
------------ ------------
Total liabilities and stockholders' equity $28,770,191 $ 6,585,101
============ ============
</TABLE>
See notes to consolidated financial statements
1
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Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended From inception
June 30, June 30, (October 16, 1992)
---------------------- ---------------------- to June 30,
1996 1995 1996 1995 1996
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 49,727 $ 16,393 $ 99,454 $ 66,393 $ 516,394
Operating Expenses
Research and development expenses 528,913 316,995 844,286 623,225 5,458,432
Licensing fees 50,000 0 60,000 20,000 303,683
THERAFECTIN(R) related expenses 180,117 0 547,379 0 547,379
General and administrative expenses 630,899 351,705 1,406,320 565,806 4,754,016
Purchased research and development in-process 0 10,421,544 0 10,421,544 10,421,544
----------- ------------ ----------- ------------ ------------
Loss from operations (1,340,202) (11,073,851) (2,758,531) (11,564,182) (20,968,660)
Net interest income (expense) 236,466 (320,282) 109,198 (318,617) (976,982)
----------- ------------ ----------- ------------ ------------
Net loss $(1,103,736) $(11,394,133) $(2,649,333) $(11,882,799) $(21,945,642)
=========== ============ =========== ============ ============
Net loss per common share $ (0.01) $ (0.23) $ (0.03) $ (0.26)
=========== ============ =========== ============
Weighted average shares outstanding 90,996,937 49,683,694 88,037,094 45,665,077
=========== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
2
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Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
Six Months Ended June 30 inception (October
---------------------------- 16, 1992) through
1996 1995 June 30, 1996
---------- ---------- ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,649,333) $(11,882,799) $(21,945,642)
Adjustments to reconcile net loss to net cash
used for operating activities:
Purchased research and development in-process 0 10,421,544 10,421,544
Issuance of stock, stock options and
warrants to non-employees for services and fees 158,677 0 289,393
Amortization and depreciation 249,368 271,224 1,227,166
Loss on disposal of fixed assets 0 0 15,589
Changes in assets and liabilities:
(Increase) in prepaid sponsored research & development expense (125,375) (137,524) (243,277)
Decrease (increase) in other assets 75,628 (40,247) 249,955
Increase (decrease) in accounts payable and accrued expenses (208,260) (66,196) 355,246
Increase in deferred revenue 100,547 183,607 183,607
------------ ------------ ------------
Net cash used for operating activities (2,398,748) (1,250,391) (9,446,419)
------------ ------------ ------------
Cash flows from investing activities:
Net cash provided by acquisition of Greenwich Pharmaceuticals 0 1,758,039 1,758,037
Increase in fixed assets (27,150) (24,816) (102,457)
Proceeds from sale of fixed assets 0 0 9,800
Increase in other assets 0 0 (8,000)
Purchase of short-term investments 0 0 (248,320)
Proceeds from sale of short-term investments 248,320 0 248,320
------------ ------------ ------------
Net cash provided by investing activities 221,170 1,733,223 1,657,380
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 5,590,180 0 12,830,146
Proceeds from issuance of convertible preferred stock 23,991,000 0 23,991,000
Proceeds from issuance of notes payable 0 2,175,000 2,585,000
Proceeds from issuance of convertible debt 0 0 1,000,000
Principal payments of notes payable (1,574,832) 0 (2,681,485)
Payment of note issuance costs 0 (315,702) (399,702)
Payment of stock issuance and merger transaction costs (3,251,199) (139,330) (4,832,511)
------------ ------------ ------------
Net cash provided by financing activities 24,755,149 1,719,968 32,492,448
------------ ------------ ------------
Net increase in cash and cash equivalents 22,577,571 2,202,800 24,703,409
------------ ------------ ------------
Cash and cash equivalents at beginning of period 2,125,838 146,832 0
------------ ------------ ------------
Cash and cash equivalents at end of period $ 24,703,409 $ 2,349,632 $ 24,703,409
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
3
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Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1996)
Supplemental disclosure of non-cash investing and financing activities:
During the six months ended June 30, 1996:
$98,685 was ascribed to stock options issued to a consultant as partial
compensation for services.
The Company issued 472,047 shares of common stock upon the exercise of certain
warrant certificates which were net of 69,793 shares with a market value of
$118,132 surrendered to satisfy the exercise price of such warrants.
The Company issued 12,602,248 shares of common stock resulting from the
conversion of 71,858 shares of preferred stock.
The Company issued 472,741 shares of common stock to the placement agent for
the June 28, 1996 private placement as part of the payment for the placement
agent's services.
4
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Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1996)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
The interim unaudited consolidated financial statements contained herein
include, in management's opinion, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented.
The results of operations for the interim periods shown on this report are
not necessarily indicative of results for a full year. These financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes for the year ended December 31, 1995,
appearing in the Company's Annual Report on Form 10-K for such year.
2. Issuance of Common Stock, Preferred Stock and Warrants for Common Stock
In January and February 1996, the Company completed an equity private
placement which raised proceeds of approximately $20.7 million net of
approximately $3.3 million of issuance costs. In connection with the private
placement, the Company issued (i) 239,910 shares of Series A Convertible
Preferred Stock and (ii) granted warrants to purchase 5,997,750 shares of
common stock at $.6708 per share. Each share of the Series A Convertible
Preferred Stock is initially convertible at any time at the option of the
holder into shares of common stock at a ratio of 175.3771 shares of common
stock for each share of Series A Convertible Preferred Stock. The initial
conversion ratio is subject to adjustment in February 1997 if the fair market
value (as defined in the related agreements) of the Company's common stock
issuable upon conversion of one share of the Series A Convertible Preferred
Stock, is less than $130. The warrants may be redeemed at the election of
the Company, in whole but not in part, one year after issuance under certain
conditions as defined in the warrant agreements.
In connection with this financing, the Company granted to the placement
agent, a related party, options to acquire 23.991 units, each unit consisting
of 1,000 shares of Series A Convertible Preferred Stock and warrants to
purchase 25,000 shares of common stock at $.6708 per share, at a per unit
exercise price of $110,000. These options expire in February 2006. The
Series A Convertible Preferred Stock included as part of the unit purchase
options are subject to the same adjustment mechanism in February 1997 as the
Series A Convertible Preferred Stock.
In connection with, and after the completion of, this private placement, the
Company filed a Registration Statement on Form S-3 to register approximately
48 million shares of the Company's
5
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Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1996)
common stock as well as warrants to purchase approximately 6 million shares
of common stock. This Registration Statement was declared effective by the
Securities and Exchange Commission on May 10, 1996. The amount of common
stock registered equals the number of shares into which the Series A
Convertible Preferred Stock is convertible plus the number of shares issuable
upon the exercise of the approximately 6 million warrants issued in January
and February 1996. The Preferred Stock and warrants are owned by certain
Selling Shareholders who may convert the Preferred Stock or exercise the
warrants and sell the common stock received. The net proceeds from the sale
of these securities will be received, and any commissions, discounts or other
fees incurred in connection with any such sale will be borne, by the Selling
Stockholders. The Company will not receive any proceeds from the sale of
these securities, although the Company will receive the proceeds of any cash
exercise of the warrants.
On June 28, 1996, the Company completed a private placement of 5,000,000
shares of common stock which raised approximately $5 million in net proceeds.
The net proceeds of the sale are expected to be used for research and
development of certain of the Company's newest proposed products and
programs. In connection with and after completion of this offering, the
Company filed a Registration Statement on Form S-3 covering all such shares,
which it expects will be declared effective by the Securities and Exchange
Commission in mid-August 1996.
3. Conversion of Convertible Debentures
In February 1996, the holder of all of the Company's 7% convertible
debentures elected to convert them into shares of the Company's common stock.
As a result, the Company issued 1,566,047 shares of common stock and recorded
the carrying value of the related debentures of $578,000 (including accrued
interest expense and net of unamortized discount attributable to the
conversion feature and unamortized deferred financing fees) as par value of
the stock issued and additional paid-in-capital.
4. Repayment of Senior Bridge Notes
During the first quarter of 1996, the Company repaid accrued interest and
$1,400,000 in principal of the $1,525,000 of notes payable. On April 1,
1996, the Company paid the remaining principal of $125,000 and associated
accrued interest.
6
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Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1996)
5. Common Stock Subject to Redemption
During the six month period ended June 30, 1996, an aggregate value of
$1,444,000 of the amount previously recorded as common stock subject to
redemption was no longer subject to possible repayment and was reclassified
as common equity. The Company has received or will receive approximately
$169,000 in additional proceeds from the investors due to the expiration of
certain valuation periods as defined in the investment agreements.
6. Net Loss Per Share
Net loss per share has been calculated by dividing net loss by the weighted
average number of common shares outstanding during the period. All common
stock equivalents have been excluded from the calculation of weighted average
common shares outstanding since their inclusion would be anti-dilutive.
7. Subsequent Events
On July 26, 1996, the Company filed a Registration Statement on Form S-3 to
register approximately 11 million shares of the Company's common stock as
well as warrants to purchase approximately 600,000 shares of common stock.
These shares, which include the 5 million shares issued in conjunction with
the June 28, 1996 private placement described in Note 2, and shares
underlying units issued to the placement agents in the January - February
1996 equity private placement may be sold by certain Selling Stockholders
from time to time. The net proceeds from the sale of these securities will
be received, and any commissions, discounts or other fees incurred in
connection with any such sale will be borne, by the Selling Stockholders.
The Company will not receive any proceeds from the sale of these securities,
although the Company will receive the proceeds of any cash exercise of the
warrants.
7
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
(June 30, 1996)
This Quarterly Report on Form 10-Q may contain forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by any such forward-looking
statements. These factors include, without limitation, clinical trials and
their effect on the FDA regulatory process, uncertainties regarding receipt of
approvals for products and any commercial acceptance of such products, possible
difficulties with obtaining necessary patent protection, and uncertainties
regarding the outcome of any of the Company's collaborations or alliances with
third parties. Other factors include those set forth under the caption
"Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and the documents referred to under such caption.
Results of Operations
Overview
On June 15, 1995, Greenwich Pharmaceuticals Incorporated ("Greenwich")
acquired all of the outstanding common stock of Boston Life Sciences, Inc. ("Old
BLSI") and Greenwich and Old BLSI merged. Effective June 15, 1995, the merged
company was renamed "Boston Life Sciences, Inc." (the "Company") and management
and the Board of Directors of Old BLSI assumed management of the Company. The
acquisition of Old BLSI by Greenwich has been treated as a recapitalization of
Old BLSI with Old BLSI as the acquiror (reverse acquisition). The historical
financial statements prior to June 15, 1995 are those of Old BLSI.
The Company is a biotechnology company engaged in the research and
development of novel therapeutic and diagnostic products to treat chronic
debilitating diseases such as cancer, central nervous system disorders and
autoimmune diseases. The Company anticipates that its (i) research and
development and (ii) general and administrative costs will continue to increase
as the Company attempts to gain regulatory approval for commercial introduction
of its proposed products. At June 30, 1996, the Company is considered a
"development stage enterprise" as defined in Statement of Financial Accounting
Standards No. 7.
Three Months Ended June 30, 1996 and 1995
The Company's operating loss was $1,340,202 during the three month period
ended June 30, 1996 as compared with $11,073,851 during the three month period
ended June 30, 1995. Net loss per common share decreased to $.01 per share
during the three month period ended June 30, 1996 as compared with $.23 per
share during the three month period ended June 30, 1995. The operating loss for
the 1995 period included approximately $10.4 million of purchased research and
development in-process which was expensed in conjunction with the Company's
merger with Greenwich on June 15, 1995. Exclusive of the purchased research and
development in-process, the Company's operating loss increased from
approximately $652,000 for the three months ended June 30, 1995 to approximately
$1.3 million for the three months ended June 30, 1996. The higher loss in the
1996 period was primarily due to (i) costs associated with the Phase III
clinical trial for THERAFECTIN/(R)/ (amiprilose HCl) which began in March 1996,
(ii) costs associated with the Company's Phase I/II clinical trial for
Altropane/(R)/, and (iii)
8
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higher costs associated with being a publicly traded company during the three
month period ended June 30, 1996 as compared to the comparable period during
1995.
Revenue was $49,727 during the three month period ended June 30, 1996 as
compared with $16,393 during the comparable 1995 period. Revenue for both
periods is attributable to the research and development agreement entered into
by the Company and Zeneca Pharmaceuticals in 1995.
Research and development expenses were $528,913 during the three month
period ended June 30, 1996 as compared with $316,995 during the comparable 1995
period. This increase was primarily due to the Company incurring additional
clinical development expenses in 1996 for the Company's Altropane/(R)/ product
which were not incurred in 1995. The majority of the Company's research and
development expenses were sponsored research obligations paid to Harvard
University and its affiliated hospitals. The Company expects to incur research
and development costs in excess of $1.5 million during 1996 as the Company's
technologies continue to advance.
Licensing fees were $50,000 during the three month period ended
June 30, 1996 as compared with zero during the comparable 1995 period. This
increase was due to the Company executing certain licensing agreements during
the three month period ended June 30, 1996 as compared to none during the
comparable 1995 period. Additionally, under its licensing agreements, the
Company is obligated to remit certain amounts to its licensors in connection
with the recognition of technology specific revenue. Future licensing fees will
result from the timing and terms of agreements which may be executed for
technologies currently being developed or which may be developed in the future.
THERAFECTIN/(R)/ (amiprilose HCI) related expenses were $180,117 during the
three month period ended June 30, 1996 as compared with zero during the
comparable 1995 period. This increase was primarily due to the Company
incurring costs associated with the Phase III clinical trial for THERAFECTIN
which began in March 1996.
In order to develop a commercially viable product from Therafectin, whereby
revenues may be expected to be generated with the technology acquired from
Greenwich, the Company anticipates that approximately $1.5 million dollars of
additional future expense will be necessary. There can be no assurance,
however, that the expenditure of an additional $1.5 million dollars will result
in the approval of any compounds or that approval will ever be able to be
obtained by the Company.
General and administrative expenses were $630,899 during the three month
period ended June 30, 1996 as compared with $351,705 during the comparable 1995
period. This increase was primarily due to the Company (i) expanding its
operations, including the number of its personnel, and (ii) incurring higher
costs associated with being a publicly traded company during the three month
period ended June 30, 1996 as compared to the comparable 1995 period.
Net interest income was $236,466 during the three month period ended
June 30, 1996 as compared with net interest expense of $320,282 during the
comparable 1995 period. The net interest income recognized during the 1996
period primarily related to higher cash balances associated with the Company
raising net proceeds of approximately $20.7 million during a private placement
in the first quarter. In addition, the Company paid the remaining principal on
its notes payable at the beginning of the quarter. The net interest expense
incurred during the 1995 period related to the issuance of $2.175 million of
notes payable during that quarter as well as the amortization of the debt
issuance costs thereon.
At June 30, 1996, the Company has net deferred tax assets for which a full
valuation allowance has been established. As a result of its concentrated
efforts on research and development, the Company has a history of incurring net
operating losses and anticipates incurring additional net operating losses for
the foreseeable future. Accordingly, management believes that it is more likely
than not that the future
9
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benefits related to the deferred tax assets will not be realized and, therefore,
has provided a full valuation allowance for these assets.
Six Months Ended June 30, 1996 and 1995
The Company's operating loss was $2,758,531 during the six month period
ended June 30, 1996 as compared with $11,564,182 during the six month period
ended June 30, 1995. Net loss per common share decreased to $.03 per share
during the six month period ended June 30, 1996 as compared with $.26 per share
during the six month period ended June 30, 1995. The operating loss for the
1995 period included approximately $10.4 million of purchased research and
development in-process which was expensed in conjunction with the Company's
merger with Greenwich on June 15, 1995. Exclusive of the purchased research and
development in-process, the Company's operating loss increased from
approximately $1.1 million for the six months ended June 30, 1995 to
approximately $2.8 million for the six months ended June 30, 1996. The higher
loss in the 1996 period was primarily due to (i) costs associated with the
preparation and initiation of the Phase III clinical trial for THERAFECTIN/(R)/
(amiprilose HCl) which began in March 1996, (ii) costs associated with the
Company's Phase I/II clinical trial for Altropane/(R)/, and (iii) higher costs
associated with being a publicly traded company during the six month period
ended June 30, 1996 as compared to the comparable period during 1995.
Revenue was $99,454 during the six month period ended June 30, 1996 as
compared with $66,393 during the comparable 1995 period. Revenue for both
periods is attributable to the research and development agreement entered into
by the Company and Zeneca Pharmaceuticals in 1995.
Research and development expenses were $844,286 during the six month period
ended June 30, 1996 as compared with $623,225 during the comparable 1995 period.
This increase was primarily due to the Company incurring additional clinical
development expenses in 1996 for the Company's Altropane/(R)/ product which were
not incurred in 1995. The majority of the Company's research and development
expenses were sponsored research obligations paid to Harvard University and its
affiliated hospitals. The Company expects to incur increased research and
development costs in excess of $1.5 million during 1996 as the Company's
technologies continue to advance.
Licensing fees were $60,000 during the six month period ended June 30, 1996
as compared with $20,000 during the comparable 1995 period. This increase was
due to the Company executing certain licensing agreements during the six month
period ended June 30, 1996 for a total amount greater than the licensing
agreement executed during the comparable 1995 period. Additionally, under its
licensing agreements, the Company is obligated to remit certain amounts to its
licensors in connection with the recognition of technology specific revenue.
Future licensing fees will result from the timing and terms of agreements which
may be executed for technologies currently being developed or which may be
developed in the future.
THERAFECTIN/(R)/ (amiprilose HCI) related expenses were $547,379 during the
six month period ended June 30, 1996 as compared with zero during the comparable
1995 period. This increase was primarily due to the Company incurring costs
associated with the Phase III clinical trial for THERAFECTIN which began in
March 1996.
In order to develop a commercially viable product from Therafectin, whereby
revenues may be expected to be generated with the technology acquired from
Greenwich, the Company anticipates that approximately $1.5 million dollars of
additional future expense will be necessary. There can be no assurance,
however, that the expenditure of an additional $1.5 million dollars will result
in the approval of any compounds or that approval will ever be able to be
obtained by the Company.
10
<PAGE>
General and administrative expenses were $1,406,320 during the six month
period ended June 30, 1996 as compared with $565,806 during the comparable 1995
period. This increase was primarily due to the Company (i) incurring $175,000 of
contractual obligations associated with the employment contract with its Chief
Executive Officer, (ii) expanding its operations, including its headcount, and
(iii) incurring higher costs associated with being a publicly traded company
during the six month period ended June 30, 1996 as compared to the comparable
1995 period.
Net interest income was $109,198 during the six month period ended
June 30, 1996 as compared with net interest expense of $318,617 during the
comparable 1995 period. The net interest income recognized during the 1996
period primarily related to higher cash balances associated with the Company
raising net proceeds of approximately $20.7 million during a private placement
in the first quarter of 1996. In addition, the Company paid the remaining
principal on its notes payable on April 1, 1996. The net interest expense
incurred during the 1995 period related to the issuance of $2.175 million of
notes payable during that quarter as well as the amortization of the debt
issuance costs thereon.
At June 30, 1996, the Company has net deferred tax assets for which a full
valuation allowance has been established. As a result of its concentrated
efforts on research and development, the Company has a history of incurring net
operating losses and anticipates incurring additional net operating losses for
the foreseeable future. Accordingly, management believes that it is more likely
than not that the future benefits related to the deferred tax assets will not be
realized and, therefore, has provided a full valuation allowance for these
assets.
Liquidity and Capital Resources
Since its inception, the Company has satisfied its working capital
requirements from the sale of the Company's securities through private
placements. In January and February 1996, the Company raised approximately $24
million of gross proceeds by completing a private placement of units consisting
of (i) shares of its Series A Convertible Preferred Stock and (ii) warrants to
purchase shares of the Company's common stock (See Note 10 and Note 15 of Notes
to the Consolidated Financial Statements in the Company's Annual Report filed on
Form 10-K). In June 1996, the Company raised approximately $5 million of net
proceeds by completing a private placement of 5 million shares of common stock.
In the future, the Company's working capital and capital requirements will
depend on numerous factors, including the progress of the Company's research and
development activities, the level of resources that the Company devotes to the
developmental, clinical, and regulatory aspects of its products, and the extent
to which the Company enters into collaborative relationships with pharmaceutical
and biotechnology companies.
At June 30, 1996, the Company had available cash of $24.7 million and
working capital of $23.5 million. The Company believes that the level of
financial resources available at June 30, 1996 will provide sufficient working
capital to meet its anticipated expenditures for more than the next twelve
months. The Company may raise additional capital in the future through
collaboration agreements with other pharmaceutical or biotechnology companies,
debt financings and equity offerings. There can be no assurance, however, that
the Company will be successful in such efforts or that additional funds will be
available on acceptable terms, if at all.
11
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PART II -- OTHER INFORMATION
----------------------------
ITEM 1: LEGAL PROCEEDINGS.
-----------------
None.
ITEM 2: CHANGES IN SECURITIES.
---------------------
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES.
-------------------------------
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
The annual meeting of stockholders was held on June 26, 1996. The
holders of more than a majority of the shares entitled to vote were
represented at the meeting in person or by proxy, constituting a
quorom. At the meeting, the following matters were voted upon by the
stockholders, receiving the number of affirmative and withheld or
negative votes set forth below each matter.
1. Proposal to elect directors, each to serve until the date of the
1997 annual meeting of stockholders and until their successors are
elected and qualified:
For Withheld
--- --------
Colin B. Bier 76,186,856 105,357
Edson D. deCastro 76,186,032 106,181
S. David Hillson 76,186,632 105,581
Steven H. Kanzer 76,184,556 105,469
Marc E. Lanser 76,186,744 107,657
Ira W. Lieberman 76,184,956 107,257
Christopher Palmer 76,187,144 105,069
2. Proposal to ratify Price Waterhouse as auditors to examine and
verify the accounts of the Company and to report thereon to the Board
of Directors and the shareholders for the fiscal year ending
December 31, 1996.
For Against
--- -------
75,657,093 515,993
ITEM 5: OTHER INFORMATION.
-----------------
None.
12
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K: The Registrant filed the following reports on
Form 8-K during the quarter ended June 30, 1996 and through
August 12, 1996.
Date of Report Item Reported
-------------- -------------
1. Form 8-K filed June 26, 1996 5
2. Form 8-K filed July 9, 1996 5
3. Form 8-K filed July 19, 1996 5
4. Form 8-K filed July 26, 1996 5
13
<PAGE>
SIGNATURE
---------
Pursuant to the 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.
Boston Life Sciences, Inc.
--------------------------
(Registrant)
DATE: August 12, 1996 /s/ S. David Hillson
-----------------------------
S. David Hillson
President and Chief Executive Officer
(Principal Executive and Financial
Officer)
/s/ Marc E. Lanser, M.D.
-----------------------------
Marc E. Lanser, M.D.
Executive Vice President & Chief
Scientific Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from June 30,
1996 Financial Statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,703,409
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,092,585
<PP&E> 69,932
<DEPRECIATION> 39,244
<TOTAL-ASSETS> 28,770,191
<CURRENT-LIABILITIES> 1,573,399
<BONDS> 114,982
0
1,681
<COMMON> 1,046,997
<OTHER-SE> 25,943,618
<TOTAL-LIABILITY-AND-EQUITY> 28,770,191
<SALES> 99,454
<TOTAL-REVENUES> 99,454
<CGS> 0
<TOTAL-COSTS> 2,857,985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,373
<INCOME-PRETAX> (2,649,333)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,649,333)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,649,333)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
