SEC SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the Quarterly Period Ended September 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________
Commission File No. 1-14778
ENDOREX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1505029
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
28101 BALLARD DRIVE, SUITE F, LAKE FOREST, IL 60045
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (847) 573-8990
(Former name, former address and former fiscal year, if changed since last
report)
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 [ ]
At November 12, 2001, 12,741,858 shares of the registrant's common stock (par
value, $.001 per share) were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
PART I. - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
ENDOREX CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $8,090,848 $10,831,266
Marketable securities - available for sale 0 2,014,984
Related party receivable 32,636 126,538
Prepaid expenses 38,038 58,803
------------ -----------
Total current assets 8,161,522 13,031,591
Leasehold improvements and equipment,
net of accumulated amortization of $883,409 378,171 384,162
Patent issuance costs, net of accumulated
amortization of $13,030 252,297 253,705
Other Assets:
Prepaid Acquisition Cost 1,404,847 0
------------ -----------
TOTAL ASSETS $10,196,837 $13,669,458
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 320,460 $ 642,440
Accrued compensation 256,744 147,205
Due to joint ventures 2,283,133 2,010,713
Current portion of line of credit 129,638 118,793
----------- -----------
Total current liabilities 2,989,975 2,919,151
Long-term liabilities:
Long-term portion of line of credit 129,236 204,162
------------ -----------
Total long-term liabilities 129,236 204,162
------------ -----------
Total Liabilities 3,119,211 3,123,313
Series C exchangeable convertible preferred stock,
$.05 par value. Authorized 200,000 shares; 97,603
issued and outstanding at liquidation value 10,176,524 9,665,512
Stockholders' equity:
Preferred stock, $.001 par value. Authorized
4,600,000 shares; none issued and outstanding -- --
Series B convertible preferred stock,
$.05 par value. Authorized 200,000 shares;
100,410 issued & outstanding at liquidation value 10,641,809 10,041,000
Common stock, $.001 par value. Authorized
50,000,000 shares; 12,860,500 issued,
and 12,741,858 outstanding 12,861 12,861
Additional paid-in capital 39,262,334 40,365,410
Unearned compensation (3,758) (4,852)
Deficit accumulated during the development stage (52,568,664) (49,090,111)
Unrealized gain/(loss) on marketable securities 270 75
------------ ------------
(2,655,148) 1,324,383
Less:
Treasury stock, at cost, 118,642 shares (443,750) (443,750)
------------ ------------
Total Stockholders' Equity (3,098,898) 880,633
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,196,837 $ 13,669,458
============= ============
See accompanying condensed notes to financial statements.
ENDOREX CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative from
Nine Months February 15, 1985
Ended September 30, (date of inception)
2001 2000 to September 30, 2001
Revenue:
SBIR contract revenue $ -- $ -- $ 100,000
Expenses:
SBIR contract
research and
development -- -- 86,168
Proprietary research
and development 1,766,813 673,044 16,599,818
General and
administrative 1,430,979 1,473,260 14,503,023
------------ ------------ -------------
Total operating expenses 3,197,792 2,146,304 31,189,009
------------ ------------ -------------
Loss from operations (3,197,792) (2,146,304) (31,089,009)
Equity losses in
joint ventures (620,053) (2,201,706) (23,266,304)
Other income (1,577) -- 253,725
Interest income 376,752 549,527 3,418,340
Interest expense (35,883) (38,637) (349,191)
------------ ------------ -------------
Net loss (3,478,553) (3,837,120) (51,032,439)
Preferred stock dividends (1,111,822) (1,034,844) (4,492,622)
------------ ------------ -------------
Net loss available to common
stockholders $(4,590,375) $ (4,871,964) $(55,525,061)
============ ============= =============
Basic and diluted
net loss per share
available to common
stockholders $ (0.36) $ (0.41) $ (15.61)
Basic and diluted
weighted average common
shares outstanding 12,741,858 12,009,995 3,557,416
See accompanying condensed notes to financial statements.
ENDOREX CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months
Ended September 30,
2001 2000
Revenue:
SBIR contract revenue $ -- $ --
Expenses:
SBIR contract
research and
development -- --
Proprietary research
and development 595,319 204,851
General and
administrative 522,710 491,739
------------ ------------
Total operating expenses 1,118,029 696,590
------------ ------------
Loss from operations (1,118,029) (696,590)
Equity losses in
joint ventures (42,392) (622,850)
Other income -- --
Interest income 82,066 228,562
Interest expense (8,563) (15,618)
------------ ------------
Net loss (1,086,918) (1,106,496)
Preferred stock dividends (374,680) (347,466)
------------ ------------
Net loss available to common
stockholders $(1,461,598) $(1,453,962)
============ ============
Basic and diluted
net loss per share
available to common
stockholders $ (0.11) $ (0.11)
Basic and diluted
weighted average common
shares outstanding 12,741,858 12,741,858
See accompanying condensed notes to financial statements.
ENDOREX CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative Period
Nine Months February 15, 1985
Ended September 30, (Inception) to
2001 2000 September 30, 2001
----------- ------------ ------------------
NET CASH USED IN OPERATING
ACTIVITIES (2,531,401) (1,732,681) (21,653,569)
INVESTING ACTIVITIES:
Patent issuance cost (6,534) (68,795) (765,759)
Investment in joint ventures (620,053) (1,329,755) (20,583,936)
Organizational costs incurred -- -- (135)
Purchases of leasehold
improvements (7,098) -- (702,711)
Purchases of office and lab
equipment (104,193) (52,236) (1,101,654)
Proceeds from assets sold -- -- 4,790
Purchases of marketable
securities--available for sale (3,973,724) (4,967,596) (14,977,804)
Proceeds from sale of marketable
securities--available for sale 5,988,708 5,500,000 15,088,123
Prepaid acquisition cost (1,404,847) -- (1,404,847)
----------- ------------ ------------
NET CASH USED IN INVESTING
ACTIVITIES (127,741) (918,382) (24,443,933)
FINANCING ACTIVITIES:
Net proceeds from issuance of
common stock 7,791,239 37,799,270
Net proceeds from issuance of
preferred stock -- -- 16,325,712
Proceeds from exercise of
options -- 215,888 417,092
Proceeds from borrowings under
line of credit 77,193 1,196,534
Repayment of borrowings under
line of credit (81,276) (121,116) (954,855)
Repayment of long-term note
receivable -- -- 50,315
Repayment of note payable issued
in exchange for legal service -- (71,968)
Purchase and retirement of
common stock -- -- (130,000)
Purchase of treasury stock -- -- (443,750)
----------- ------------ ------------
NET CASH PROVIDED BY(USED IN)
FINANCING ACTIVITIES (81,276) 7,963,204 54,188,350
----------- ------------ ------------
NET INCREASE(DECREASE) IN CASH
AND CASH EQUIVALENTS (2,740,418) 5,312,141 8,090,848
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 10,831,266 4,995,906 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 8,090,848 $10,308,047 $ 8,090,848
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW:
Cash paid for interest $ 35,883 $ 38,637 $ 196,224
NON-CASH TRANSACTIONS
Issuance of common stock
dividends in kind $ -- -- $ 1,536,223
Issuance of preferred stock
dividends in kind 1,111,822 1,034,844 4,492,622
The accompanying notes are an integral part of the consolidated financial
statements
ENDOREX CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED NOTES TO FINANCIAL STATEMENTS
We prepared these unaudited interim consolidated financial statements under
the rules and regulations for reporting on Form 10-QSB. Accordingly, we omitted
some information and footnote disclosures normally accompanying the annual
financial statements. You should read these interim financial statements and
notes in conjunction with the consolidated financial statements and their notes
included in our latest annual report on Form 10-KSB, as amended. It is our
opinion that the consolidated financial statements include all adjustments
necessary for a fair statement of the results of operations, financial position
and cash flows for the interim periods. All adjustments were of a normal
recurring nature. The results of operations for interim periods are not
necessarily indicative of the results for the full fiscal year.
NET LOSS PER SHARE
Net loss per share is presented on the Consolidated Statements of Operations
in accordance with SFAS No. 128 for the current and prior periods. Endorex had a
net loss for all periods being presented, which resulted in diluted and basic
earnings per share being the same for all periods presented. The potential
impact of warrants and stock options outstanding was not included in the
calculation because their inclusion would have been anti-dilutive.
JOINT VENTURE ESTIMATES
The preparation of the quarterly consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts
related to the activities of InnoVaccines Corporation, or InnoVaccines, and
Endorex Newco, Ltd., or Newco, our joint ventures with Elan Corporation, plc, or
Elan, including the reported net liabilities related to the joint ventures and
the reported amounts of equity in losses from joint ventures. Actual results
could differ from those estimates.
UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR UNCONSOLIDATED JOINT VENTURES
Condensed, unaudited financial statement information of the joint ventures is
stated below. The joint ventures had no revenues. Net expenses equaled the net
loss for all periods.
For the nine months ended
September 30,
2001 2000
------------ ------------
InnoVaccines, net of Endorex mark up on
billings to InnoVaccines $ (533,205) $(2,890,170)
Newco, net of Endorex mark up on billings
to Newco (238,078) (243,723)
------------ ------------
Total net loss $ (771,282) $(3,133,893)
============ ============
Reconciliation to equity in losses from joint ventures:
Total joint venture net losses $ (771,282) $(3,133,893)
Less: Elan minority interest 151,229 932,188
------------ ------------
Equity in losses from joint ventures $ (620,053) $(2,201,705)
============ ============
ITEM 2 - Management's Discussion and Analysis or Plan of Operation
The following discussion provides information to explain our results of
operations and financial condition. You should also read our unaudited
consolidated interim financial statements and their notes, our most recent
Annual Report on Form 10-KSB, as amended and our registration statement on Form
S-4, as amended. This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe-harbors created by those sections. These forward-looking statements are
subject to significant risks and uncertainties, including those identified in
Exhibit 99 "Risk Factors" of this Form 10-QSB, which may cause actual results to
differ materially from those discussed in any forward-looking statements. The
forward-looking statements within this Form 10-QSB are identified by words such
as "believes," "anticipates," "expects," "intends," "may," "will" "plans" and
other similar expressions. However, these words are not the exclusive means of
identifying such statements. In addition, any statements that refer to
expectations, projections, or other characterizations of future events or
circumstances are forward-looking statements. We undertake no obligation to
publicly release the results of any revisions to forward-looking statements that
may be made to reflect events or circumstances occurring subsequent to the
filing of this Form 10-QSB with the SEC. You should carefully review and
consider the various disclosures we make in this report and our other reports
filed with the SEC that attempt to advise interested parties of the risks and
factors that may affect our business.
Endorex is a development stage enterprise and expects no significant revenue
from the sale of products in the near future.
Material Changes in Results of Operations
For the three month period ended September 30, 2001, the Company had a net
loss available to common shareholders of $1,461,598 or an increase of 1 percent,
as compared to a loss of $1,453,962 for the third quarter ended September 30,
2000. Net loss available to common shareholders includes preferred stock
dividends, which are paid-in-kind in shares of preferred stock.
Research and development, or R&D expenditures for the third quarter ended
September 30, 2001 were $595,319 a 191 percent increase when compared with
$204,851 for the corresponding period ended September 30, 2000. This increase in
R&D expenditures represents an increase of proprietary pre-clinical R&D drug
delivery activities.
General and administrative expenses for the third quarter ended September 30,
2001 were $522,710 compared to $491,739 for the same period ended September 30,
2000, a 6 percent increase. This increase is due to increased legal expense
related to the SEC filing of Form S-8 for registration of shares related to the
Amended and Restated Omnibus Employee Stock Option program.
Total operating expenses of $1,118,029 for the third quarter of 2001
increased 61 percent compared to $696,590 for the same period last year, due to
increased investment in proprietary R&D pre-clinical drug delivery activities on
peptides and small molecule drugs.
Operating expense increases in proprietary activities during the third
quarter were offset by reductions in equity losses in joint ventures, which
totaled $42,392 during the third quarter of 2001, compared with losses of
$622,850 during the same period in 2000. This gain reflects a reduction in
activities from the two joint ventures with Elan and an increase in proprietary
activities.
Interest income for the third quarter 2001 was $82,066, a decrease of 64
percent compared with $228,562 for the same period last year, reflecting the
reduction in interest rates as well as a reduction in the available cash
investment balance.
For the nine month period ended September 30, 2001, the Company had a net
loss available to common shareholders, including preferred stock dividends,
which are paid-in-kind in shares of preferred stock, of $4,590,375 or a 6
percent decrease, as compared to a loss of $4,871,964 for the same nine month
period ended September 30, 2000.
R&D expenditures for the full year through September 30, 2001 were $1,766,813
a 163 percent increase when compared with $673,044 for the corresponding period
ended September 30, 2000. This increase in R&D expenditures represents a
continuation of Endorex's investment into proprietary pre-clinical R&D drug
delivery activities of peptide and small molecule drugs.
General and administrative expenses for the nine months ended September 30,
2001 were $1,430,979 compared to $1,473,260 for the same period ended September
30, 2000, a 3 percent decrease. This decrease is a result of timing differences
related to annual meeting costs, which will be incurred in the fourth quarter of
2001, due to the proposed merger with Corporate Technology Development, Inc.
Total operating expenses of $3,197,792 for the full year through September
30, 2001 increased 49 percent compared to $2,146,304 for the same period last
year, due to the company's increased investment in proprietary pre-clinical drug
delivery activities.
Consistent with operating results throughout the year, operating expense
increases in proprietary activities for the nine months ended September 30, 2001
were more than offset by reductions in equity losses in joint ventures which
totaled $620,053 during 2001, compared with losses of $2,201,706 during the same
period in 2000. Resources were shifted from R&D activities in the Elan joint
ventures and towards proprietary R&D.
Net loss for the nine months ended September 30, 2001 was $3,478,553 a
decrease of 9% as compared to a loss of $3,837,120 for the same period in 2000.
The lower level of net loss year to date versus the prior year reflects an
overall decrease in joint venture R&D activities.
Year to date interest income of $376,752 decreased 31 percent compared to
$549,527 for the same period last year reflecting the decline in interest rates
as well as a reduction in the available cash investment balance generated by the
April 2000 equity financing.
Plan of Operation and Financial Condition
On October 19, 2001 we filed a registration statement S-4 with the Securities
and Exchange Commission, or SEC, for the proposed merger between a wholly owned
subsidiary of Endorex and Corporate Technology Development, Inc, or CTD., If the
proposed merger is approved by the requisite vote of the shareholders of Endorex
and CTD and if certain conditions are satisfied, upon consummation of the
merger, CTD will become a wholly owned subsidiary of Endorex.
CTD is a privately held, development-stage specialty pharmaceutical company
developing novel oral and mucosal formulations and therapeutic indications of
small molecule drugs, based in Miami, Florida. The S-4 became effective with the
SEC on Oct. 23, 2001 and stockholders should carefully read the S-4 and the
joint proxy statement/prospectus in their entirety.
Endorex has been focusing its efforts on oral delivery of macromolecular
drugs which are currently available commercially only in an injectable format.
Most of Endorex's efforts have focused on the higher molecular weight drugs,
generally 20 kilodaltons, or kd, or above. Examples of these types of drugs
include vaccines, which generally range from 50 to 100 kd, and human growth
hormone, which is 22 kd. This contrasts with traditional orally delivered drugs,
most of which are small molecule drugs with molecular weights under .5 kd and
for which oral delivery is generally much easier. Endorex's competition is
mainly in the area of oral delivery of macromolecular drugs, focusing on drugs
ranging from .5 to 10 kd, such as peptides, while most of Endorex's work has
focused on protein-based drugs ranging above 10 kd.
Endorex is currently in the process of shifting its business strategy,
research and development and technology focus to include the oral delivery of
small molecule drugs. Over the next 12 months Endorex plans to continue to shift
its focus to evaluate its delivery systems for oral delivery of drugs in the
lower macromolecular weight range as well as oral delivery of other classes of
drugs not currently available in oral formulations. A large number of small
molecule drugs also present delivery challenges, particularly water insoluble
drugs, such as drugs used for chemotherapy and immunosuppressant drugs. Endorex
expects to evaluate a number of such drugs to identify those that are compatible
with its oral drug delivery systems and which it may decide to take into human
clinical trials in the future. Endorex's proposed acquisition of CTD fits
strategically with Endorex's business plans, as CTD has acquired and is
developing new formulations of small molecule Approved Chemical Entities, or
ACEs for new proprietary therapeutic uses. Its two lead drug candidates are in
human clinical trials, including orBec, for which CTD has initiated a
multicenter phase III trial in the United States. Endorex envisions that CTD's
product candidates will become its key products, with Endorex's proprietary oral
delivery systems potentially allowing the oral delivery of such products.
CTD's lead product, orBec(TM), is currently in a multi-center phase III
clinical trial, and is being studied for the treatment of intestinal
graft-versus-host disease, or GVHD, a life-threatening complication affecting
the skin, liver, and the gastrointestinal, or GI, tract, following bone marrow
transplantation. According to the International Bone Marrow Transplant Registry
& Autologous Blood and Marrow Transplant Registry, there were 12,748 allogeneic
bone marrow transplants (transplants of blood or bone marrow cells from another
person) worldwide from January 1, 2001 through July 31, 2001. According to
published studies and despite improved preventive measures, acute GVHD still
occurs in 50% to 70% of transplants where the donor was HLA-mismatched and in
30% to 40% of transplants where the donor was HLA-matched. Special blood tests,
called human leukocyte antigen, or HLA, typing, determine whether a patient has
a suitable donor for bone-marrow-cell transplant. These same studies indicate
that intestinal GVHD accounts for 15% to 30% of all cases of GVHD. CTD has
recently initiated a phase II clinical trial for the treatment of another GI
related disorder, Crohns disease. This disease is estimated by the Crohns and
Colitis Society to affect 800,000 persons in the United States.
The FDA has granted orBec(TM) "fast track" status for the treatment of
intestinal GVHD, allowing for an expedited review process. orBec(TM) has also
been designated as an "orphan drug" by the FDA for the prevention of Intestinal
GVHD.
orBec(TM) is an oral dual-release formulation of beclomethasone dipropionate,
or "BDP," a potent site-active corticosteroid drug. BDP has already been
approved by the FDA and is sold by GlaxoSmithKline, as Beconase(R), in an
inhaled and nasal formulation for the treatment of asthma, allergic rhinitis,
and nasal polyposis. orBec(TM) allows for larger doses of BDP to be delivered to
the afflicted GI area without systemic side effects associated with other
steroids used to treat intestinal GVHD.
CTD's second clinical-stage compound is Oraprine(TM), a liquid formulation of
a commonly prescribed immunosuppressant, azathioprine, the active pharmaceutical
ingredient in Imuran(R). Imuran(R) is currently marketed in tablet form for the
treatment of transplant rejection by Faro Pharmaceuticals, Inc. in North America
and GlaxoSmithKline worldwide. Oraprine(TM) has recently completed a phase I
bioequivalency trial which demonstrated that Oraprine(TM) is equivalent to
Imuran(R). In addition, a pilot phase I/II trial has been completed for the
treatment of chronic oral autoimmune diseases, such as oral GVHD. Oraprine(TM)
has been designated an "orphan drug" for the treatment of oral GVHD.
The acquisition of CTD may require Endorex to enhance its regulatory,
clinical development and manufacturing skills by either hiring additional
employees or hiring specialized consultants to assist the combined company over
the next 12 months. Additionally, Endorex is considering assembling a small
sales and marketing group to directly market these product candidates in the
United States, since the initial product indications are for niche markets with
limited number of specialists (requiring a small but targeted sales force), such
as organ transplant specialists and hematologists. With its own sales force,
Endorex could potentially capture more of the product revenue stream than it
would by using a sales and marketing partner.
Upon closing, CTD's Chairman, Colin Bier, Ph.D., will join our organization
as Chairman of the Board and Chief Executive Officer. The current Chairman,
Kenneth Tempero, M.D., Ph.D., will continue to serve as a director on our board.
Michael S. Rosen, our current President and Chief Executive Officer, will remain
as President and assume the newly created position of Chief Operating Officer.
Steve H. Kanzer, currently CTD's President and Chief Executive Officer and an
Endorex director, will remain on our board. Additionally, three members of the
CTD board, including Dr. Bier, will become members of the Endorex board.
In September, 2001, we presented the parameters of the proposed merger as
well as an overview of the combined companies management team, product pipeline,
expanded patent portfolios, and enhanced balance sheet at the Wells Fargo Van
Kasper investor conference, held in San Francisco.
As of September 30, 2001, CTD had approximately $4.4 million in cash and no
debt. CTD believes this will be sufficient to fund development of their two
primary products in the near term as well as to take orBec(TM), its lead drug
candidate in phase III clinical trials, through the FDA approval process.
The proposed merger with CTD and the renewed focus on proprietary R&D
activities have prompted a review of our existing joint ventures to determine
the progress to date and strategic rationale.
InnoVaccines, the oral/mucosal vaccine delivery joint venture, has been
developing several delivery systems for oral and mucosal vaccines. Newco has
been developing Elan's Medipad(R), a small, disposable microinfusion pump, for
the
delivery of iron chelation drugs to treat a type of genetic blood disease known
as iron overload disorders (e.g. Cooley's anemia, and sickle cell anemia). Our
share of the research, development and business expenditures through these joint
ventures has been recorded as equity losses in joint ventures. Activities to
evaluate the efficacy of selected oral vaccines were still underway in
Innovaccines in the third quarter, however, both partners in the joint venture
are discussing its possible termination. We anticipate a resolution by the end
of the year, 2001. InnoVaccine development activities during the third quarter
included evaluation of development work of oral and mucosal delivery of the PLGA
microparticle system licensed from the Southern Research Institute for an
influenza vaccine.
Newco is assessing its commercial relationship with Watson Pharmaceuticals.
Watson, the marketing and development partner to the joint venture, has verbally
expressed its intent to discontinue its iron chelation therapy program with the
Medipad(R) device. As a result, the joint venture partners are reviewing the
future direction of Newco. We are also exploring other commercial collaborations
with Elan, including the possibility of licensing the MEDIPADs technology from
Elan.
During the third quarter Endorex and Novo Nordisk A/S mutually agreed to end
their joint research collaboration on the oral delivery of Norditropin(R) (Novo
brand of human growth hormone) and terminate the joint research and option
agreement.
On September 30, 2001 and December 31, 2000, Endorex had cash, cash
equivalents, and marketable securities of approximately $8.1 million and $12.8
million, respectively, and working capital of approximately $5.2 million and
$10.1 million, respectively. We believe that our cash and cash equivalents are
sufficient to satisfy our cash requirements for the next eighteen months to
twenty four months, independent of the merger with CTD.
We believe that the cash of the combined companies is sufficient to fund
operations and the research and development of certain key product candidates
and programs of the combined companies for the next 24 months. Additionally, we
expect that we will need to seek additional funding for the development of the
drugs for additional therapeutic indications for larger market segments and
diseases with greater prevalence, particularly in the area of gastrointestinal
disorders.
Endorex will seek to prioritize the research and development programs of the
combined companies after the merger to best utilize the combined assets of the
companies. We will also seek to reduce and eliminate duplicative administrative
expenses between the companies after the merger.
Additionally, from time to time in the future, we intend to seek to expand
our research and development activities into other drug delivery technologies
and/or products that we either may license from other persons or develop,
depending on our financial resources to support such programs. Any such
activities may require the expenditure of funds not presently available and may
deplete our cash resources sooner than anticipated. We also may seek to obtain
funds from possible future public or private sales of our securities or other
sources. See Exhibit 99--"Risk Factors."
PART II. - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
--------------------------------
10.1 Second Amendment, dated October 31, 2001 to the
License Agreement dated September 16, 1996 between
Massachusetts Institute of Technology and Orasomal
Technologies, Inc.
99.1 Risk Factors
--------------------
(b) On August 1, 2001, Endorex filed a Current Report on Form 8-K,
reporting under Item 5 thereof. Endorex's execution of the
Agreement and Plan of Merger dated as of July 31, 2001 by and among
Endorex, Roadrunner Acquisition Inc. and Corporate Technology
Development Inc. ("CTD") and filing as an exhibit under Item 7
thereof the press release issued by Endorex and CTD regarding the
execution of the agreement.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ENDOREX CORPORATION
November 14, 2001 /s/ Michael S. Rosen
--------------------
Michael S. Rosen
President and Chief Executive Officer
(Principle executive officer)
November 14, 2001 /s/ Steve Koulogeorge
---------------------
Steve Koulogeorge
Controller and Assistant Treasurer
(Principle financial officer)