<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, 1999
--------------------
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
--------------------------------------------------------
BOSTON LIFE SCIENCES, INC.
- --------------------------------------------------------------------------------
(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.)
137 Newbury Street, 8th Floor, Boston, Massachusetts 02116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(617) 425-0200
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(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former 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 11, 1999 there were 14,863,330 shares of Common Stock outstanding.
<PAGE>
BOSTON LIFE SCIENCES, INC.
INDEX TO FORM 10-Q
Page (s)
--------
Part I - Financial Information:
Item 1 - Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of 1
June 30, 1999 and December 31, 1998
Condensed Consolidated Statement of Operations 2
for the three and six months ended June 30, 1999 and 1998,
and for the period from inception (October 16, 1992) to
June 30, 1999
Condensed Consolidated Statement of Cash Flows 3
for the six months ended June 30, 1999 and 1998,
and for the period from inception (October 16, 1992) to
June 30, 1999
Notes to Condensed Consolidated Financial Statements 4 - 6
Item 2 - Management's Discussion and Analysis of 7 - 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 - 13
Security Holders
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signature (s) 14
<PAGE>
Part I -- Financial Information
Item 1 -- Financial Statements
Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
---------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $325,492 $71,834
Short-term investments 12,325,167 7,837,992
Other current assets 253,460 568,599
------------- -----------------
Total current assets 12,904,119 8,478,425
Fixed assets, net 32,101 14,417
Technology acquired 3,500,000 3,500,000
Other assets 466,860 276,206
------------- -----------------
Total assets $16,903,080 $12,269,048
============= =================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses 1,618,082 1,734,199
------------- -----------------
Total current liabilities 1,618,082 1,734,199
------------- -----------------
Series C Redeemable Convertible Preferred Stock, 6,150,000 0
$.01 par value; 475,000 shares authorized
315,416 shares outstanding on June 30, 1999
Stockholders' equity:
Series A Convertible Preferred stock, $.01 par value 52 170
13,404 shares authorized as of June 30, 1999
5,233 shares outstanding on June 30, 1999 and
16,996 shares outstanding on December 31, 1998
Common Stock, $0.01 par value; 145,177 132,770
30,000,000 shares authorized
14,517,706 shares outstanding on June 30, 1999 and
13,276,978 shares outstanding on December 31, 1998
Additional paid-in-capital 53,188,807 50,489,202
Unrealized gains (losses) on investments (320,715) 76,203
Deficit accumulated during development stage (43,878,323) (40,163,496)
------------- -----------------
Total stockholders' equity 9,134,998 10,534,849
------------- -----------------
Total liabilities and stockholders' equity $16,903,080 $12,269,048
============= =================
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0
Operating Expenses
Research and development 745,330 1,127,708 1,678,793 2,245,352
Licensing fees 0 0 0 55,000
Therafectin(R)related 503,937 133,782 1,081,621 260,782
General and administrative 622,558 667,767 1,319,025 1,267,078
Purchased research and development in-process 0 0 0 0
---------- ---------- ---------- ----------
Loss from operations (1,871,825) (1,929,257) (4,079,439) (3,828,212)
Net interest income 235,783 193,809 364,612 444,859
---------- ---------- ---------- ----------
Net loss $(1,636,042) $(1,735,448) $(3,714,827) $(3,383,353)
========== ========== ========== ==========
Calculation of net loss available to common stockholders:
Net loss $(1,636,042) $(1,735,448) $(3,714,827) $(3,383,353)
Preferred stock preferences (Note 6) 0 0 (4,240,000) 0
---------- ---------- ---------- ----------
Net loss available to common shareholders $(1,636,042) $(1,735,448) $(7,954,827) $(3,383,353)
========== ========== ========== ==========
Calculation of basic and diluted net loss per share available to
common stockholders:
Net loss per share ($0.11) ($0.13) ($0.26) ($0.26)
Preferred stock preferences per share (Note 6) 0 0 ($0.30) 0
---------- ---------- ---------- ----------
Basic and diluted net loss per share available to
common stockholders ($0.11) ($0.13) ($0.56) ($0.26)
========== ========== ========== ==========
Weighted average shares outstanding 14,492,526 13,050,970 14,120,048 13,031,926
========== ========== ========== ==========
<CAPTION>
From inception
(October 16, 1992)
to June 30, 1999
------------------
<S> <C>
Revenues $ 700,000
Operating Expenses
Research and development 18,457,795
Licensing fees 733,683
Therafectin(R)related 5,241,680
General and administrative 11,784,275
Purchased research and development in-process 10,421,544
-----------
Loss from operations (45,938,977)
Net interest income 2,060,654
-----------
Net loss $(43,878,323)
===========
Calculation of net loss available to common stockholders:
Net loss
Preferred stock preferences (Note 6)
Net loss available to common shareholders
Calculation of basic and diluted net loss per share available to
common stockholders:
Net loss per share
Preferred stock preferences per share (Note 6)
Basic and diluted net loss available to common stockholders
Weighted average shares outstanding
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
Boston Life Sciences, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------
1999 1998
-------------------- --------------------
<C> <C>
Cash flows from operating activities:
Net loss $(3,714,827) $(3,383,353)
Adjustments to reconcile net loss to net cash
used for operating activities:
Purchased research and development in-process 0 0
Compensation charge related to options and warrants 6,000 359,000
Amortization and depreciation 10,500 40,000
Changes in operating assets and liabilities:
Other current assets 315,139 78,042
Accounts payable and accrued expenses (116,117) (462,945)
-------------------- --------------------
Net cash used for operating activities (3,499,305) (3,369,256)
-------------------- --------------------
Cash flows from investing activities:
Net cash provided by acquisition of Greenwich Pharmaceuticals, Inc. 0 0
Increase in fixed assets (28,184) (5,480)
Increase in other assets (190,654) 0
Short term investments:
Purchases (7,318,466) (6,290,019)
Sales and maturities 2,434,373 8,527,642
-------------------- --------------------
Net cash provided by (used in) investing activities (5,102,931) 2,232,143
-------------------- --------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,218,746 137,458
Proceeds from issuance of convertible preferred stock 6,150,000 0
Proceeds from issuance of notes payable 0 0
Proceeds from issuance of convertible debt 0 0
Principal payments of notes payable 0 0
Payment of note issuance costs 0 0
Payment of stock issuance and merger transaction costs (512,852) 0
-------------------- --------------------
Net cash provided by financing activities 8,855,894 137,458
-------------------- --------------------
Net increase (decrease) in cash and cash equivalents 253,658 (1,096,881)
Cash and cash equivalents at beginning of period 71,834 1,713,975
-------------------- --------------------
Cash and cash equivalents at end of period $ 325,492 $ 617,094
==================== ====================
<CAPTION>
Period from
inception (October
16, 1992) through
June 30, 1999
-------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (43,878,323)
Adjustments to reconcile net loss to net cash
used for operating activities:
Purchased research and development in-process 10,421,544
Compensation charge related to options and warrants 1,599,765
Amortization and depreciation 1,462,316
Changes in operating assets and liabilities:
Other current assets 242,068
Accounts payable and accrued expenses 670,417
-------------------------
Net cash used for operating activities (29,482,213)
-------------------------
Cash flows from investing activities:
Net cash provided by acquisition of Greenwich Pharmaceuticals, Inc. 1,758,037
Increase in fixed assets (284,885)
Increase in other assets (457,060)
Short term investments:
Purchases (52,216,696)
Sales and maturities 39,570,814
--------------------------
Net cash provided by (used in) investing activities (11,629,790)
--------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 16,376,800
Proceeds from issuance of convertible preferred stock 27,022,170
Proceeds from issuance of notes payable 2,585,000
Proceeds from issuance of convertible debt 1,000,000
Principal payments of notes payable (2,796,467)
Payment of note issuance costs (399,702)
Payment of stock issuance and merger transaction costs (2,350,306)
-----------------------
Net cash provided by financing activities 41,437,495
-----------------------
Net increase (decrease) in cash and cash equivalents 325,492
Cash and cash equivalents at beginning of period 0
-----------------------
Cash and cash equivalents at end of period $ 325,492
=======================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1999)
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, these financial
statements 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 period 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, 1998, appearing in the
Company's Annual Report on Form 10-K for such year.
2. Net Loss Per Share
Basic and diluted net loss per share available to common stockholders has
been calculated by dividing net loss, adjusted for preferred stock
preferences, by the weighted average number of common shares outstanding
during the period. All potential common shares have been excluded from the
calculation of weighted average common shares outstanding since their
inclusion would be antidilutive.
Stock options and warrants to purchase approximately 4.5 million and
approximately 3.5 million shares of common stock were outstanding at June 30,
1999 and 1998, respectively, but were not included in the computation of
diluted net loss per common share because they were antidilutive. Also
excluded were approximately 1.8 million and approximately 0.3 million shares
of common stock issuable upon the conversion of the Series A and C preferred
stock outstanding at June 30, 1999 and 1998, respectively. The exercise of
these stock options and warrants, or the conversion of the preferred stock,
could potentially dilute earnings per share in the future.
3. Supplemental disclosure of non-cash investing and financing activities
During the six months ended June 30, 1999, the Company issued 206,296 shares
of common stock resulting from the conversion of 11,763 shares of preferred
stock. During the six months ended June 30, 1998, the Company issued 21,519
shares of common stock resulting from the conversion of 1,227 shares of
preferred stock.
4
<PAGE>
Boston Life Sciences, Inc.
(a development stage enterprise)
Notes to Unaudited Consolidated Financial Statements
(June 30, 1999)
4. Comprehensive Net Loss
Comprehensive net loss for the six months ended June 30, 1999 and 1998, and
for the period from inception to date, was as follows:
<TABLE>
<CAPTION>
From Inception
--------------
(October 16,
------------
1992) to
--------
March 31,
---------
1999 1998 1999
--------------- --------------- -----
<S> <C> <C> <C>
Net loss............................................ $(3,714,827) $(3,383,353) $(43,878,323)
Preferred stock preferences (Note 6)............... (4,240,000) -- (38,627,953)
Unrealized gains on securities
Unrealized holding gains (losses) arising during
the period..................................... (409,908) (34,861) (332,921)
Investment gains (losses) included in net loss.. 12,990 -- 11,706
----------- ----------- ------------
Comprehensive loss.................................. $(8,351,745) $(3,418,214) $(82,827,491)
=========== =========== ============
</TABLE>
Comprehensive net loss for the three months ended June 30, 1999 and 1998
was $2,019,470 and $1,696,459, respectively.
5. Investments
At June 30, 1999, the cost basis of short-term investments exceeded their
fair value by approximately $320,715. These investments, which are
classified as available-for-sale, are reported at fair value, with the
unrealized loss excluded from the statement of operations and reported as
a separate component of stockholders' equity.
6. Preferred Stock Issuance
In February 1999, the Company completed a private placement of Series C
Convertible Preferred Stock, $.01 par value, ("Series C Stock") which
raised proceeds of approximately $5.7 million, net of approximately $0.5
million of issuance costs. In connection with the financing, the Company
issued (i) 315,416 shares of Series C Stock and (ii) 569,248 warrants to
purchase common stock at $5.06 per share and 219,238 warrants to purchase
common stock at $6.09 per share. In connection with this financing, the
Company paid $372,725 to the placement agent and issued 162,307 warrants
to purchase common stock at $5.06 per share and 54,808 warrants to
purchase common stock at $6.09 per share to the placement agent.
Each share of the Series C Stock is convertible at any time at the option
of the holder into shares of common stock pursuant to a ratio of five
shares of common stock for each share of Series C Stock. The Series C
Stock provides for a minimum return of 25% whereby the Company may be
required to issue up to one additional share of common stock for each
share of common stock underlying Series C Stock still held by an investor
on the date that is 270 days after the closing, if the market price of the
common stock is below a specified level on such date. However, the
investor's right to receive additional shares terminates if the market
price of the common stock is above a specified level for a certain period,
as defined. The initial conversion price of the Series C Stock was at a
discount to the market price on the date of issuance. The intrinsic value
of this beneficial conversion feature totaled approximately $1.9 million.
The net proceeds of approximately $5.7 million has been allocated between
the warrants (approximately $1.9 million) and the Series C Stock
(approximately $3.8
5
<PAGE>
million) based on their relative fair values. The value attributable to
the beneficial conversion feature ($1.9 million) and the warrants ($1.9
million) has been included in the amount recognized as a preferred stock
preference in the statement of operations for the six months ended June
30, 1999. These amounts represent a non-cash charge in the determination
of net loss available to common shareholders.
Under certain circumstances, the Company may be required to redeem the
Series C Stock at a cost of $6.15 million which equals the gross proceeds
from the sale of the Series C Stock. Because the redemption of the Series
C Stock is not completely within the control of the Company, the amount
allocated to the Series C Stock has been reflected outside of
stockholders' equity as "mezzanine" financing. The amount allocated to the
warrants has been credited to additional paid-in capital.
As of August 11, 1999, a total of 62,702 shares of Series C stock has been
converted into 313,510 shares of common stock, resulting in a decrease in
the amount reported as Series C Preferred Stock of approximately 1.2
million with a corresponding increase in stockholders' equity.
6
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
(June 30, 1999)
This Quarterly Report on Form 10-Q contains forward-looking statements.
Specifically, 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 meaningful 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, the duration and results
of clinical trials and their effect on the FDA regulatory process, uncertainties
regarding receipt of approvals for any possible 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, 1998 and the
documents referred to under such caption.
Results of Operations
Overview
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 expects that its research and development
costs will increase as the Company attempts to gain regulatory approval for
commercial introduction of its proposed products. At June 30, 1999, the Company
is considered a "development stage enterprise" as defined in Statement of
Financial Accounting Standards No. 7.
Three Months Ended June 30, 1999 and 1998
The Company's net loss was $1,636,042 during the three months ended June
30, 1999 as compared with $1,735,448 during the three months ended June 30,
1998. The lower net loss in the 1999 period was primarily due to lower research
and development expenses which were substantially offset by higher
Therafectin(R) related expenses. Net loss per common share equaled $.11 per
share for the 1999 period as compared to $.13 per share for the 1998 period.
The decrease in the net loss per common share related to an increase in the
number of weighted average shares outstanding primarily resulting from the
private placement of common stock completed in the first quarter of 1999.
Research and development expenses were $745,330 during the three months
ended June 30, 1999 as compared with $1,127,708 during the three months ended
June 30, 1998. The decrease was primarily attributable to lower expenditures for
three of the technologies currently under pre-clinical development, partially
offset by higher expenditures for another technology currently under development
and increased expenditures related to the initiation of Phase III clinical
trials for Altropane. Expenditure levels for a specific technology can
fluctuate significantly from period to period depending upon the nature of the
pre-clinical and clinical activities in process during each respective period.
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 total research and development costs between $4
million and $5 million during 1999.
Licensing fees were zero during both the three months ended June 30, 1999
and during the three months ended June 30, 1998. The Company did not execute
any new licensing agreements during either period or incur any obligations under
its existing licensing agreements. In addition to an initial licensing fee
payment, the Company is obligated to pay additional amounts upon the attainment
of development
7
<PAGE>
milestones, as defined in each respective licensing agreement, as well as
royalties upon the sales of any resulting products. The Company expects to pay
future licensing fees, the timing and amounts of which will depend upon the
terms of agreements which may be executed for technologies currently being
developed or which may be developed in the future. There can be no assurance
regarding the likelihood or materiality of any such future licensing agreements.
Therafectin(R) related expenses were $503,937 during the three months ended
June 30, 1999 as compared with $133,782 during the three months ended June 30,
1998. This increase reflects differences in the development status of
Therafectin(R) during each respective period. Expenses during the 1999 period
primarily related to manufacturing costs related to the production of three lots
of GMP ("Good Manufacturing Practices") material as required under applicable
law and regulations for the Company's amended NDA ("New Drug Application")
filing with the FDA ("Food & Drug Administration"). Expenses during the 1998
period primarily related to patients enrolled in the extension phase of the
Phase III trial. Before any commercially viable product from Therafectin(R) may
be developed, and any revenue generated therefrom, the Company currently expects
that at least $0.5 million of additional future expense will be necessary. There
can be no assurance, however, that the expenditure of these additional amounts
will result in the regulatory approval of any compounds or that such approval
will ever be able to be obtained by the Company.
General and administrative expenses were $622,558 during the three months
ended June 30, 1999 as compared with $667,767 during the comparable 1998 period.
An increase in professional service costs during the 1999 period was offset by
the absence of a non-recurring, non-cash charge related to certain changes in
the provisions of the Company's stock option plans during the 1998 period.
Net interest income was $235,783 during the three months ended June 30,
1999 as compared with net interest income of $193,809 during the three months
ended June 30, 1998. The higher level of interest income recognized during the
1999 period primarily related to higher average short-term investment, cash and
cash equivalent balances. In February 1999, the Company received approximately
$8.2 million of net proceeds by completing two separate private placements.
Six Months Ended June 30, 1999 and 1998
The Company's net loss, excluding preferred stock preferences, was
$3,714,827 during the six months ended June 30, 1999 as compared with $3,383,353
during the six months ended June 30, 1998. Net loss per common share, excluding
preferred stock preferences, equaled $.26 per share for the 1999 period as
compared to $.26 per share for the 1998 period. The higher net loss in the 1999
period was primarily due to higher Therafectin (R) related expenses, partially
offset by a reduction in research and development expenses and, to a lesser
degree, a reduction in net interest income.
The net loss available to common stockholders for the 1999 period,
including preferred stock preferences of $4,240,000, totaled $7,954,827. Net
loss per common share available to common stockholders for the 1999 period,
including $0.30 attributable to preferred stock preferences, totaled $0.56. In
February 1999, the Company completed a private placement of Series C Convertible
Preferred Stock and warrants. Based on the market price of the Company's stock
on the date of issuance, the preferred stock had a beneficial conversion feature
with an intrinsic value of approximately $1.9 million and the warrants had a
fair value of approximately $1.9 million, which amounts are included in the
preferred stock preferences.
Research and development expenses were $1,678,793 during the six months
ended June 30, 1999 as compared with $2,245,352 during the six months ended June
30, 1998. The decrease was primarily attributable to lower expenditures for four
of the technologies currently under pre-clinical development, partially offset
by increased expenditures related to the preparation for and initiation of Phase
III clinical trials for Altropane. Expenditure levels for a specific technology
can fluctuate significantly from period
8
<PAGE>
to period depending upon the nature of the pre-clinical and clinical activities
in process during each respective period. 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 between $4 million and $5 million during 1999.
Licensing fees were zero during the six months ended June 30, 1999 as
compared with $55,000 during the six months ended June 30, 1998. During the 1998
period, the Company paid $15,000 to license one new technology as compared to no
new licensing agreements during the 1999 period. In addition to an initial
licensing fee payment, the Company is obligated to pay additional amounts upon
the attainment of development milestones, as defined in each respective
licensing agreement, as well as royalties upon the sales of any resulting
products. During the 1998 period, the Company made a milestone payment of
$40,000 related to the development of one of its technologies. The Company
expects to pay future licensing fees, the timing and amounts of which will
depend upon the progress attained in developing existing technologies and the
terms of agreements which may be executed for technologies currently being
developed or which may be developed in the future. There can be no assurance
regarding the likelihood or materiality of any such future licensing agreements.
Therafectin(R) related expenses were $1,081,621 during the six months ended
June 30, 1999 as compared with $260,782 during the six months ended June 30,
1998. This increase reflects differences in the development status of
Therafectin(R) during each respective period. Expenses during the 1999 period
primarily related to manufacturing costs related to the production of three lots
of GMP ("Good Manufacturing Practices") material as required under applicable
law and regulations for the Company's amended NDA ("New Drug Application")
filing with the FDA ("Food & Drug Administration"). Expenses during the 1998
period primarily related to patients enrolled in the extension phase of the
Phase III trial. Before any commercially viable product from Therafectin(R) may
be developed, and any revenue generated therefrom, the Company currently expects
that at least $0.5 million of additional future expense will be necessary. There
can be no assurance, however, that the expenditure of these additional amounts
will result in the regulatory approval of any compounds or that such approval
will ever be able to be obtained by the Company.
General and administrative expenses were $1,319,025 during the six months
ended June 30, 1999 as compared with $1,267,078 during the comparable 1998
period. An increase in professional service costs during the 1999 period was
offset by the absence of a non-recurring, non-cash charge related to certain
changes in the provisions of the Company's stock option plans during the 1998
period.
Net interest income was $364,612 during the six months ended June 30, 1999
as compared with net interest income of $444,859 during the six months ended
June 30, 1998. The higher level of interest income recognized during the 1998
period primarily related to higher average short-term investment, cash and cash
equivalent balances.
Year 2000 Readiness Disclosure
The Company has initiated planning for issues related to the upcoming new
millenium. These issues derive from the use of software and hardware with
embedded chips or processors that use two digits to refer to a year and do not
properly recognize a year that begins with "20" instead of the familiar "19."
The Company's plan to address these issues and to enhance the Company's
readiness for the Year 2000 is primarily focused on (1) network and facility
infrastructure, (2) business applications and software, and (3) external
partners. Within each area, the Year 2000 program will involve (a) the
identification of systems that may be susceptible to Year 2000 issues, (b) the
assessment of the degree of readiness of those systems for the Year 2000 and an
assessment of the risks to the Company's business, (c) the remediation of
problems that are identified, and (d) contingency planning.
9
<PAGE>
The Company's network and facility infrastructure, located at its Boston
headquarters, includes personal computers and other network equipment, together
with general facility systems such as telephone and security systems. The
Company expects that the identification and assessment phases will be completed
during the second half of 1999, at which time remediation and contingency
planning will be initiated as appropriate. The Company primarily operates its
business applications software using the Microsoft Office suite of products. For
many software applications, the Company will, in the assessment phase, rely on
the software developer's representations regarding Year 2000 compliance of their
software. There can be no assurance, however, that software applications
represented by developers as being Year 2000 compliant will be free from Year
2000 errors and defects.
The Company intends to assess the possible effects on its operations of the
Year 2000 compliance of certain relevant third parties, primarily its service
providers, by requesting confirmation from such parties regarding their Year
2000 readiness and, if required, site visits and interviews to solicit
information from these parties. In the event the Company identifies a problem
with respect to a particular vendor, then the Company may be forced to identify
alternative sources of supply or services. However, the Company's ability to
seek alternative sources of supply is subject to FDA restrictions and may
involve extensive validation processes. The failure to timely identify and
validate an alternative supplier could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company does not expect to incur costs in its Year 2000 program that will
be material to its business, financial condition or results of operations.
However, until the Company completes the identification and assessment phases of
its program, the full extent of the remediation costs will not be known and
there can be no assurance that such costs will not be material. The Company will
utilize both internal and external resources, such as consultants and
professional advisors, in implementing the Year 2000 program and the Company
currently estimates that the external resources required during the
identification and assessment phases of the Year 2000 program will not cost more
than approximately $15,000. Because the Year 2000 program is an ongoing process,
all cost estimates are subject to change. Specific contingency plans will be
developed upon completion of the assessment phases.
Although the Company intends to complete all phases of its Year 2000 program
by December 31, 1999, there can be no assurance, even if this program is
successfully completed on schedule, that disruptions in the Company's business
will be avoided. Year 2000 issues are pervasive in nature and involve highly
technical issues, not all of which are under the Company's control. Possible
consequences of Year 2000 issues that the Company is unable to adequately
identify, assess or remediate include but are not limited to: delays in
obtaining supplies from vendors, errors in processing transactions and diversion
of management time and effort to address difficulties that emerge. The goal of
the Company's Year 2000 program is to plan for and reduce the risk of such
difficulties. There can be no assurance that the Year 2000 program will be
completed in a timely manner or will be successful.
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
$20.7 million of net 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. In June 1996, the
Company raised approximately $5 million of net proceeds by completing a private
placement of 500,000 shares of common stock (See Notes 8 and 9 of Notes to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998). In February 1999, the Company received
approximately $8.2 million of net proceeds by completing two separate private
placements, one consisting of shares of Series C Convertible Preferred Stock and
a second private placement consisting of common stock (See Notes 8 and 9 of
Notes to the Consolidated Financial Statements in the Company's Annual Report on
Form 10-K
10
<PAGE>
for the year ended December 31, 1998). In the future, the Company's ability to
meet, and the level of, its 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, 1999, the Company had available cash, cash equivalents and short
term investments of approximately $12.7 million and working capital of
approximately $11.3 million. The Company believes that the level of financial
resources available at June 30, 1999 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 collaborative
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
<PAGE>
PART II -- OTHER INFORMATION
----------------------------
ITEM 1: LEGAL PROCEEDINGS.
-----------------
None.
ITEM 2: CHANGES IN SECURITIES.
---------------------
During the three months ended June 30, 1999, the Company issued, in
transactions qualifying as transactions not involving public offerings
under Section 4(2) of the Securities Act of 1933, as amended (a "private
placement"), 67,175 shares of common stock related to the exercise of
options and warrants outstanding for which the Company received
consideration in the amount of $176,063.
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 28, 1999. 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 witheld or
negative ("withheld") votes set forth below each matter.
1. Proposal to elect directors each to serve until the date of the 2000
annual meeting of stockholders and until their successors are
elected and qualified:
For Withheld
--- --------
Colin B. Bier, Ph.D. 11,027,065 92,299
S. David Hillson, Esq. 11,019,391 99,973
Adrian M. Gerber 11,016,331 103,033
E. Christopher Palmer, CPA 11,022,071 97,293
Edson D. de Castro 11,016,031 103,333
Marc E. Lanser, M.D. 11,022,280 97,084
Ira W. Lieberman, Ph.D. 11,020,541 98,823
2. Approval of an amendment to increase to 30,000,000 the number of
shares of Common Stock authorized for issuance under the Company's
Amended and Restated Certificate of Incorporation filed with the
Secretary of the State of Delaware on March 29, 1996, as heretofore
amended, an increase of 5,000,000 shares:
For Against Abstain
--- ------- -------
10,629,564 433,469 56,312
12
<PAGE>
3. To increase the amount of shares of Common Stock authorized for
issuance under the 1998 Omnibus Stock Option Plan from 500,000 to
1,000,000, an increase of 500,000 shares:
For Against Abstain
--- ------- -------
9,954,564 692,833 51,036
4. To increase the amount of shares of Common Stock authorized for
issuance under the Amended and Restated 1990 Non-Employee Director's
Non-Qualified Stock Option Plan from 450,000 to 600,000, an increase
of 150,000 shares:
For Against Abstain
--- ------- -------
10,069,841 570,681 57,911
ITEM 5: OTHER INFORMATION.
-----------------
(a) Exhibits.
None.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K: The Registrant filed the following reports
on Form 8-K during the quarter ended June 30, 1999 and through
August 11, 1999.
Date of Report Item Reported
-------------- -------------
June 28, 1999 5, 7
August 3, 1999 5, 7
13
<PAGE>
SIGNATURES
----------
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 11, 1999 /s/ S. David Hillson
-----------------------------
S. David Hillson
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Joseph Hernon
-----------------------------
Joseph Hernon
Chief Financial Officer
(Principal Financial and Accounting
Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS
AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 325,492
<SECURITIES> 12,325,167
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,904,119
<PP&E> 267,413
<DEPRECIATION> 258,496
<TOTAL-ASSETS> 16,903,080
<CURRENT-LIABILITIES> 1,618,082
<BONDS> 0
0
6,150,052
<COMMON> 145,177
<OTHER-SE> 8,989,769
<TOTAL-LIABILITY-AND-EQUITY> 16,903,080
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4,079,439
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (364,612)
<INCOME-PRETAX> (3,714,827)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,714,827)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,240,000)<F1>
<CHANGES> 0
<NET-INCOME> (7,954,827)<F1>
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.56)<F1>
<FN>
<F1>
Reflects preferred stock preference amounts equal to $4,240,000, and (0.30) per
share.
</FN>
</TABLE>
