UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------------------
Form 10-QSB
Quarterly report under section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended March 31, 2003
Commission file number: 000-30997
Astralis Ltd.
(exact name of small business issuer as specified in its charter)
Delaware 84-1508866
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
75 Passaic Avenue
Fairfield, NJ 07004
(Address of principal executive office)
973-227-7168
(Issuer's telephone number, including area code)
The number of shares of the Issuer's Common Stock outstanding as of May
12, 2003 was 37,538,189.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
ASTRALIS LTD.
INDEX
FOR QUARTERLY PERIOD ENDED MARCH 31, 2003
Part I. Financial Information 3
Item 1. Condensed Balance Sheets as of March 31, 2003 (unaudited)
and December 31, 2002 3
Condensed Statements of Operations (unaudited) 4
Condensed Statements of Cash Flows (unaudited) 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 9
Item 3. Controls and Procedures 11
Risk Factors 11
Part II. Other Information 11
Item 2. Changes in Securities and Use of Proceeds 16
Item 5 Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Balance Sheet
ASSETS
March 31, December 31,
2003 2002
------------ ------------
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 370,777 $ 227,193
Marketable securities 2,720,108 1,207,179
Interest receivable, net 9,154 5,891
Prepaid expense - related party 1,763,125 1,995,000
Prepaid expenses and supplies 90,918 103,488
------------ ------------
Total Current Assets 4,954,082 3,538,751
Intangible Assets, Net - Related Party 4,047,616 4,226,188
Other Intangible Assets, Net 44,356 43,833
Property and Equipment, Net 358,901 362,713
Deposits 29,953 29,953
------------ ------------
$ 9,434,908 $ 8,201,438
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 237,446 $ 263,245
------------ ------------
Total Current Liabilities 237,446 263,245
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Convertible preferred stock, Series A, $.001 par value;
2,000,000 shares authorized at 2003 and 2002; 2,000,000 and
1,750,000 issued and outstanding at 2003 and 2002, respectively
(liquidation preference - $21,218,494 at 2002) 2,000 1,750
Common stock; $.0001 par value; 75,000,000 shares authorized at
2003; 37,538,189 and 37,588,179 issued and outstanding at
2003 and 2002, respectively 3,754 3,754
Additional paid-in capital 35,937,651 33,429,396
Deferred compensation (17,325) (12,164)
Common stock subscriptions receivable (652,685) (885,000)
Accumulated other comprehensive loss (16,857) (15,181)
Deficit accumulated in the development stage (26,059,076) (24,584,362)
------------ ------------
Total Stockholders' Equity 9,197,462 7,938,193
------------ ------------
$ 9,434,908 $ 8,201,438
============ ============
The accompanying notes are an integral part of these
condensed financial statements.
3
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Statements of Operations
(Unaudited)
Three Months Three Months March 12, 2001
Ended Ended (Inception) to
March 31, 2003 March 31, 2002 March 31, 2003
-------------- -------------- --------------
Revenues $ -- $ -- $ --
------------ ------------ ------------
Operating Expenses
Research and development - related party 430,447 2,295,534 10,468,081
Research and development 731,058 -- 1,686,741
Depreciation and amortization 31,549 1,235 48,108
General and administrative 318,769 529,585 2,545,033
------------ ------------ ------------
Total Operating Expenses 1,511,823 2,826,354 14,747,963
------------ ------------ ------------
Loss From Operations (1,511,823) (2,826,354) (14,747,963)
Investment Income 37,109 30,425 157,637
------------ ------------ ------------
Net Loss (1,474,714) (2,795,929) (14,590,326)
Preferred Stock Dividends -- -- (11,468,750)
------------ ------------ ------------
Net Loss to Common Stockholders $ (1,474,714) $ (2,795,929) $(26,059,076)
============ ============ ============
Basic and Diluted Loss per Common Share $ (0.04) $ (0.07)
============ ============
Basic and Diluted Weighted Average Common Shares
Outstanding 37,538,189 37,551,373
============ ============
The accompanying notes are an integral part of these
condensed financial statements.
4
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Statement of Cash Flows
(Unaudited)
Three Months Three Months March 12, 2001
Ended Ended (Inception) to
March 31, 2003 March 31, 2002 March 31, 2003
-------------- -------------- --------------
Cash Flows from Operating Activities
Net loss $ (1,474,714) $ (2,795,929) $(14,590,326)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 210,121 179,807 1,057,216
Amortization of net premium paid on investments 2,978 14,375 51,792
Dividends reinvested (11,586) -- (21,382)
Members' contributed salaries -- -- 12,986
Research and development service fee netted against
proceeds received from preferred stock issuance -- 665,000 4,995,000
Operating expenses paid by related parties on
behalf of Company -- -- 17,587
Amortization of deferred compensation 3,345 33,188 170,349
Compensatory common stock -- -- 135,000
Loss on sale of marketable securities -- -- 7,145
Changes in assets and liabilities
Prepaid expenses 250,246 10,032 (1,818,003)
Interest receivable (3,263) (54,992) (9,154)
Supplies (5,802) -- (36,041)
Deposits -- (28,190) (29,953)
Accounts payable - related party -- (142,446) --
Accounts payable and accrued expenses (5,799) (90,274) 257,446
------------ ------------ ------------
Net Cash Used in Operating Activities (1,034,474) (2,209,429) (9,800,338)
------------ ------------ ------------
Cash Flows from Investing Activities
Purchases of marketable securities (1,665,997) (4,520,957) (9,304,434)
Proceeds from sale of marketable securities 160,000 756,000 6,529,914
Expenditures related to patent (1,113) (13,745) (32,282)
Purchases of property and equipment (27,147) (60,890) (460,211)
------------ ------------ ------------
Net Cash Used in Investing Activities (1,534,257) (3,839,592) (3,267,013)
------------ ------------ ------------
Cash Flows from Financing Activities
Repurchase of common stock -- (80,000) (80,000)
Proceeds from stock subscription receivable 232,315 -- 697,315
Issuance of common stock, net of offering and transaction costs -- -- 2,888,317
Issuance of preferred stock, net of research and development
service fee, technology option and costs of offering 2,480,000 1,835,000 9,932,496
------------ ------------ ------------
Net Cash Provided by Financing Activities 2,712,315 1,755,000 13,438,128
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 143,584 (4,294,021) 370,777
Cash and Cash Equivalents, Beginning of Period 227,193 4,451,874 --
------------ ------------ ------------
Cash and Cash Equivalents, End of Period $ 370,777 $ 157,853 $ 370,777
============ ============ ============
The accompanying notes are an integral part of these
condensed financial statements.
5
ASTRALIS LTD.
(A Development Stage Entity)
Notes to Condensed Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed financial statements included herein have been prepared
by Astralis Ltd. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to
fairly present such information. All such adjustments are of a normal recurring
nature. Although the Company believes that the disclosures are adequate to make
the information presented not misleading, certain information and footnote
disclosures, including a description of significant accounting policies normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, have been
condensed or omitted pursuant to such rules and regulations.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's 2002 Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission. The results of
operations for interim periods are not necessarily indicative of the results for
any subsequent quarter or the entire fiscal year ending December 31, 2003.
NOTE 2 - DESCRIPTION OF BUSINESS
Nature of Operations
Astralis Ltd. is an emerging biotechnology company based in New Jersey and
engaged primarily in the research and development of novel treatments for immune
system disorders and skin diseases. The Company is currently developing two
products. Its primary product, Psoraxine, is an innovative vaccine under
development for the treatment of psoriasis. The Company's second product is for
the treatment of leishmaniasis.
NOTE 3 - GOING CONCERN
Pharmaceutical products must undergo an extensive process, including testing in
compliance with U.S. Food and Drug Administration ("FDA") regulations, before
they can be commercially sold and distributed in the United States. FDA testing
occurs in various phases over several years. The Company expects to commence
clinical testing of Psoraxine in 2003; however, the IND application to commence
clinical trials is currently on hold until the Company provides the FDA with
additional information and addresses certain issues regarding the design of the
pre-clinical studies. No assurance can be given that the FDA will release the
hold placed on the study or that clinical trials will commence. The Company will
need significant additional funds to complete all of the testing required by the
FDA. Currently, the Company has no products approved for commercial sale and
therefore no means to generate revenue. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Management plans to pursue opportunities to sell equity securities privately to
limited investors in 2003. These funds, in addition to its cash and marketable
securities held at March 31, 2003, will be needed in order to finance the
Company's currently anticipated needs for operating and capital expenditures for
2003, including the cost to complete Phase II of the FDA testing process for
Psoraxine. The Company will also need to raise significant additional funds from
outside sources in future years in order to complete future phases of FDA
required testing.
The Company's ability to adhere to its current business plan is dependent upon
raising capital through debt and equity financing. There can be no assurance
that the Company will successfully raise the required future financing on terms
desirable to the Company or that the FDA will approve Psoraxine for use in the
United States. If the Company does not obtain the needed funds, it will likely
be required to delay development of its products, alter its business plan, or in
the extreme situation, cease operations.
6
ASTRALIS LTD.
(A Development Stage Entity)
Notes to Condensed Financial Statements
NOTE 3 - GOING CONCERN (Continued)
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Continuing as a going concern is dependent
upon successfully obtaining additional working capital as described above. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets and amounts
and classifications of liabilities that might result from the outcome of this
uncertainty.
NOTE 4 - MARKETABLE SECURITIES
The Company's marketable equity securities consisted of certificates of
deposits, government securities and corporate bonds that have a readily
determinable fair market value. Management determines the appropriate
classification of its investments using Statement of Financial Accounting
Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" at the time of purchase, and re-evaluates such determinations
at each balance sheet date.
The securities reflected in these financial statements are deemed by management
to be "available-for-sale" and, accordingly, are reported at fair value, with
unrealized gains and losses reported in other comprehensive income and reflected
as a separate component within the Stockholders' Equity section of the balance
sheets. Realized gains and losses on securities available-for-sale are included
in other income/expense and, when applicable, are reported as a reclassification
adjustment, net of tax, in other comprehensive income. Gains and losses on the
sale of available-for-sale securities are determined using the
specific-identification method.
As of March 31, 2003, available-for-sale securities consist of the following:
Gross Gross
Amortized Unrealized Unrealized
Due Cost Loss Gains Fair Value
---------- ----------- ---------- ---------- -----------
Certificate of 7/2003 to
Deposits * 10/2014 $ 1,015,582 $ (8,234) $ 2,278 $ 1,009,626
Fixed Income Funds Current 1,721,368 (10,886) -- 1,710,482
----------- --------- -------- -----------
$ 2,736,950 $ (19,120) $ 2,278 $ 2,720,108
=========== ========= ======== ===========
*It will be necessary for the Company to utilize the proceeds from these
certificates of deposits to fund its operations in 2003 and therefore they have
been classified as short-term investments.
NOTE 5 - STOCK SUBSCRIPTION RECEVIABLE
Certain stockholders owed $1,350,000 to the Company, under stock subscription
agreements, which was due February 13, and May 13, 2002. This money was not paid
to the Company causing the notes to become in default. As of March 31, 2003, the
stockholders were late on the scheduled payments in the amount of $652,685.
The board of directors of the Company have voted to cancel, effective June 1,
2003, the proportionate shares of common stock for which the related
subscription receivables are not paid in full by May 31, 2003.
7
ASTRALIS LTD.
(A Development Stage Entity)
Notes to Condensed Financial Statements
NOTE 6 - CAPITAL STOCK ACTIVITY
Under the terms of a purchase agreement dated December 10, 2001, SkyePharma PLC
("SkyePharma") agreed to purchase 2,000,000 shares of Series A Convertible
Preferred Stock of the Company at a price of $10 per share. On January 31, 2003,
the Company sold 250,000 shares of the Series A Convertible Preferred Stock to
SkyePharma for a purchase price of $2,500,000, which represented the final
installment under the purchase agreement. The Company owed SkyePharma $20,000
related to the final payment of a service agreement. That amount was deducted
from the proceeds of the January 2003 issuance of the preferred stock.
NOTE 7 - COMPREHENSIVE LOSS
Excluding net loss, the Company's source of comprehensive loss is from the net
unrealized loss on its marketable debt securities, which are classified as
available-for-sale. The following summarizes the components of comprehensive
loss:
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Net loss $(1,474,714) $(2,795,929)
Unrealized gain (loss), net (1,676) (56,158)
----------- -----------
Comprehensive loss $(1,476,390) $(2,852,087)
=========== ===========
NOTE 8 - NET LOSS PER SHARE
Basic and diluted net loss per common share are presented in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("FAS
128"), for all periods presented. In accordance with FAS 128, basic and diluted
net loss per common share have been computed using the weighted-average number
of shares of common stock outstanding during the period. Shares associated with
stock options, stock warrants, and convertible preferred stock are not included
because the inclusion would be anti-dilutive (i.e., reduce the net loss per
share). The total numbers of such shares excluded from diluted net loss per
common share 19,595,237 and 12,080,239 at March 31, 2003 and 2002, respectively.
NOTE 9 - SUBSEQUENT EVENTS
On April 1, 2003, the Company amended an investor relation agreement with one of
its shareholders. The agreement was amended to provide that in lieu of paying
$4,000 per month in consideration for services provided, the Company would
credit the shareholder's subscription note receivable for said amount until the
receivable is paid in full. At March 31, 2003, the balance on the note was
$60,000.
On March 24, 2003, the Board of Directors approved, effective on April 4, 2003,
the grant of options to a director to purchase 50,000 shares of common stock at
an exercise price of $0.45 per share. Options to purchase 12,500 shares of
common stock vested on April 4, 2004, and options to purchase an additional
12,500 shares will vest each year thereafter for the following three years.
8
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains many forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate" and "continue" or similar words. You should read statements that
contain these words carefully because they discuss our future expectations,
contain projections of our future operating results or of our financial
condition or state other "forward-looking" information.
We believe that it is important to communicate our future expectations to
our investors. However, we may be unable to accurately predict or control events
in the future. The factors listed in the sections captioned Risk Factors, as
well as any other cautionary language in this filing, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of certain
of the events described in the Risk Factors section could seriously harm our
business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion of our financial condition and plan of operation
should be read in conjunction with our financial statements and the related
notes included elsewhere in this quarterly report on Form 10-QSB. This quarterly
report contains certain statements of a forward-looking nature relating to
future events or our future financial performance. We caution prospective
investors that such statements involve risks and uncertainties, and that actual
events or results may differ materially. In evaluating such statements,
prospective investors should specifically consider the various factors
identified in this quarterly report, including the matters set forth under the
caption "Risk Factors" which could cause actual results to differ materially
from those indicated by such forward-looking statements. We disclaim any
obligation to update information contained in any forward-looking statement.
Overview
We are a development stage biotechnology company engaged primarily in the
research and development of treatments for immune system disorders and skin
diseases. Our initial product candidate, Psoraxine, is a protein extract used
for the treatment of the skin disease psoriasis.
Currently, we are engaged in the following activities to further our
development efforts of our initial product candidate:
o Ongoing research and development of Psoraxine;
o Production of drug supply for use in clinical trials in the United States;
and
o Doctor and site enrollment for clinical trials in the United States.
Three months ended March 31, 2003 compared to the three months ended March 31,
2002.
For the three months ended March 31, 2003:
On January 31, 2003, we sold to SkyePharma PLC ("SkyePharma") pursuant to
a Purchase Agreement dated December 10, 2001, 250,000 shares of our Series A
Convertible Preferred Stock for an aggregate purchase price of $2,500,000. We
received net proceeds of approximately $2,480,000 after we netted out from the
proceeds $20,000 due to SkyePharma for services they provided under our Service
Agreement with them which was treated as an expense at the time of payment.
9
For the three months ended March 31, 2003, we had no revenue and incurred
operating expenses of $1,511,823 which consisted primarily of:
o Research and development costs of $1,161,505, including $430,447
that was paid to SkyePharma for services provided under our Service
Agreement with them and amortization of approximately $178,572 under
our technology option license which is being amortized over a seven
year period.
o General and administrative costs of approximately $318,769,
including professional fees and our general corporate expenditures.
For the three months ended March 31, 2002:
On January 31, 2002, we sold to SkyePharma pursuant to a Purchase
Agreement dated December 10, 2001, 250,000 shares of our Series A Convertible
Preferred Stock for an aggregate purchase price of $2,500,000. We received net
proceeds of approximately $1,835,000 from this placement after we netted out
from the proceeds $665,000 due to SkyePharma for services they provided under
our Service Agreement with them which was treated as an expense at the time of
payment.
For the three months ended March 31, 2002, we had no revenue and incurred
operating expenses of $2,826,534 which consisted primarily of:
o Research and development costs of $2,295,534, including $1,995,000
that was paid to SkyePharma for services provided under our Service
Agreement with them and amortization of approximately $178,000 under
our technology option license which is being amortized over a seven
year period.
o General and administrative costs of approximately $529,585,
including professional fees related to our merger with Astralis, LLC
and our general corporate expenditures.
The Next Twelve Months
At March 31, 2003 we had cash balances of $370,777 and marketable
securities of $2,720,108.
We anticipate collecting a portion of our outstanding amounts on our
subscription notes receivable. These subscription notes receivable were
originally due in two installments during 2002. We did not receive all of the
amounts due under the installment payments. We entered into a payment plan
agreement with the note holders of the subscription notes receivable. As of
March 31, 2003, the note holders failed to make scheduled payments in the
aggregate amount of $652,685. In accordance with the terms of the payment plan
agreement, we have decided that on June 1, 2003, we will cancel any shares of
common stock corresponding to any unpaid balance.
Based on our current operating plan, we anticipate conducting the
following activities and using our cash over the course of the next twelve
months as follows:
o Our primary focus is to further our development efforts of our
initial product candidate, Psoraxine. Upon receiving approval of our
Investigational New Drug application, we will conduct clinical
trials in the process of obtaining FDA approval of Psoraxine. We
will maintain ongoing research and development of Psoraxine. We will
expend approximately $2,700,000 in connection with these
activities.
o We intend to implement our business plan and facilitate the
operations of our company. We will spend approximately $750,000 to
pay management salaries and salaries of employees.
o We also expect to expend approximately $1,250,000 for our public
relations, general administrative and working capital requirements.
10
We will need to raise additional funds to continue our operations for the
period following the third quarter of 2003. Furthermore, substantial additional
funds will be needed in order to fund our continued efforts to obtain FDA
approval of Psoraxine. No assurance can be given that we will be able to obtain
financing, or successfully sell assets or stock, or, even if such transactions
are possible, that they will be on terms reasonable to us or that they will
enable us to satisfy our cash requirements. In addition, raising additional
funds by selling additional shares of our capital stock will dilute the
ownership interest of our stockholders. If we do not obtain additional funds, we
will likely be required to eliminate programs, delay development of our
products, or in the extreme situation, cease operations.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Based on their evaluation as of a date within 90 days of the filing date
of this Quarterly Report on Form 10-QSB, our chief executive officer and chief
financial officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934 (the "Exchange Act")) are effective to ensure that information required to
be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
(b) Changes in internal controls.
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
RISK FACTORS
We Have No Sales, We Will Not Have Sales In The Foreseeable Future, We Are
In An Early Stage of Development And We May Never Sell Products Or Become
Profitable.
We commenced our current operations in 2001 and such operations remain in
an early stage of development. We have no products approved for sale and
therefore, no means to generate revenue. We have not commercialized any
products, had no revenues and had incurred a net loss of approximately
$26,059,076 as of March 31, 2003 which has increased to date. We expect that
substantial losses will continue for the foreseeable future. In order to obtain
revenue from the sales of our product candidate, Psoraxine, we must successfully
develop, test, obtain regulatory approval for, manufacture, market and
eventually sell such product candidate. Our expenses have consisted principally
of costs incurred in research and development and from general and
administrative costs associated with our operations. We expect our expenses to
increase and to continue to incur operating losses for at least the next several
years as we continue our research and development efforts for Psoraxine and any
subsequent product candidates. Commercialization of any of our products will
take a significant amount of time and successful commercialization may not occur
at all. As a result, we may never become profitable.
We Will Need To Obtain Additional Funds To Support Our Future Operation
Expenses. Our Auditors Have Expressed Uncertainty Regarding Our Ability To
Continue As A Going Concern.
Based on our current plans, we believe that we currently have sufficient
funds to meet our operating expenses and capital requirements through
approximately the third quarter of 2003. We will need additional funds to
continue our operations following that period. Furthermore, substantial
additional funds will be needed in order to fund our continued efforts to obtain
FDA approval of Psoraxine. No assurance can be given that we will be able to
obtain financing, or successfully sell assets or stock, or, even if such
transactions are possible, that they will be on terms reasonable to us or that
they will enable us to satisfy our cash requirements. In addition, raising
additional funds by selling additional shares of our capital stock will dilute
the ownership interest of our stockholders. If we do not obtain additional
funds, we will likely be required to eliminate programs, delay development of
our products, alter our business plans, or in the extreme situation, cease
operations.
11
As a result of our losses and the matters described in the preceding
paragraph, the Independent Auditors' Report on our financial statements includes
a paragraph indicating doubt about our ability to continue as a going concern.
The financial statements that accompany this report do not include any
adjustments that might be necessary if we are unable to continue as a going
concern.
We May Not Be Successful In The Development And Commercialization Of
Products.
We may not develop products that prove to be safe and effective, that meet
applicable regulatory standards or that we can manufacture at reasonable costs
or market successfully. Successful products will require significant development
and investment, including testing, to demonstrate their safety and efficacy
prior to their commercialization. We have not proven our ability to develop and
commercialize products. We must conduct a substantial amount of additional
research and development before any regulatory authority will approve our
initial product candidate, Psoraxine. Our research and development and clinical
trials may not confirm the safety and efficacy of our products, in which case
regulatory authorities may not approve them. In addition, even if we
successfully complete our research and development efforts, our initial product
candidate, Psoraxine, may not perform in the manner we anticipate, and may not
be accepted for use by the public.
The Development Of Our Initial Product Remains In An Early Stage Of
Development And Substantial Additional Funds And Effort Will Be Necessary For
Further Development And Commercialization.
Our initial product candidate, Psoraxine, remains in an early stage of
development and will require the commitment of substantial resources to move it
towards commercialization. Before obtaining regulatory approvals for the
commercial sale of Psoraxine, we must demonstrate the safety and efficacy of our
product candidate through preclinical testing and clinical trials. Conducting
clinical trials involves a lengthy, expensive and uncertain process. Completion
of clinical trials may take several years or more. The length of time generally
varies substantially according to the type, complexity, novelty and intended use
of the product. If we or the U.S. Food and Drug Administration believe that our
clinical trials, when commenced, expose participating patients to unacceptable
health risks, we may suspend such trials. We may encounter problems in our
studies which will cause us or the FDA to delay or suspend the studies. Some of
the factors that may delay our commencement and rate of completion of clinical
trials include:
o ineffectiveness of the study compound, or perceptions by physicians that
the compound will not successfully treat a particular indication;
o inability to manufacture sufficient quantities of compounds for use in
clinical trials;
o failure of the FDA to approve our clinical trial protocols;
o slower than expected rate of patient recruitment;
o unforeseen safety issues; or
o government or regulatory delays.
The failure of future clinical trials may harm our business, financial
condition and results of operations.
Our Potential Therapeutic Products Face A Lengthy And Uncertain Regulatory
Process. If We Do Not Obtain Regulatory Approval Of Our Potential Products, We
Will Not Be Able To Commercialize These Products.
The FDA must approve any therapeutic product before it can be marketed in
the United States. Before we obtain FDA approval of a new drug application or
biologics license application, the product must undergo extensive testing,
including animal and human clinical trials, which can take many years and
requires substantial expenditure.
12
Data obtained from such testing may be susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. In addition, changes in
regulatory policy for product approval during the period of product development
and regulatory agency review of each submitted new drug application may cause
delays or rejections. We must devote a substantial amount of time and resources
in the regulatory process in order to obtain regulatory approval of our initial
product candidate, Psoraxine.
Because our initial product candidate, Psoraxine, involves the application
of new technologies and may be used upon new therapeutic approaches, government
regulatory authorities may subject this product to more rigorous review and may
grant regulatory approvals more slowly for this product than for products using
more conventional technologies. We have not conducted any clinical trials for
Psoraxine in the United States, nor have we received approval from the FDA or
any other regulatory authority to test any potential products in humans or to
market any product candidate. Although we have filed an Investigational New Drug
application with the FDA, a representative of the FDA has informed us that,
before clinical trials may proceed, we must provide the FDA with additional
information and address certain issues regarding the design of the pre-clinical
studies. As a result, the FDA has indicated that we will be receiving a letter
instructing us not to proceed with any clinical studies unless and until these
matters have been resolved to the satisfaction of the FDA. No assurance can be
given that the FDA will release the hold placed on our study or whether or when
we may commence clinical trials. In addition, we may not obtain the necessary
approvals from the FDA or other regulatory authorities to market our product.
The regulatory agencies of foreign governments must also approve any therapeutic
product we may develop before the product can be sold in those countries. To
date, although we have obtained regulatory approval for clinical testing of
Psoraxine in Venezuela, we have not obtained final regulatory approval for the
manufacture or commercial distribution of Psoraxine in Venezuela.
Even after investing significant time and resources, we may not obtain
regulatory approval for our product. If we do not receive regulatory approval,
we cannot sell the product. Even if we receive regulatory approval, this
approval may place limitations on the indicated uses for which we can market the
product. Further, after granting regulatory approval, regulatory authorities
subject a marketed product and its manufacturer to continual review, and
discovery of previously unknown problems with a product or manufacturer may
result in restrictions on the product, manufacturer and manufacturing facility,
including withdrawal of the product from the market. In certain countries,
regulatory agencies also set or approve prices.
We Are Exposed To International Risks As A Result Of Our Conduct Of
Clinical Studies In Venezuela.
We are continuing clinical trials of Psoraxine in Venezuela. During recent
months, Venezuela has suffered from political instability and popular unrest. As
a result, at times, participants in our clinical trials were unable to reach the
facilities where our studies are conducted. This may have impaired the results
of our studies. Since the FDA requires that we report all studies conducted on
human subjects, in the event our Investigational New Drug application is
approved, we must include our Venezuela studies as previous human experience in
our annual reporting to the FDA. This data will be used only as supporting
information and will not likely increase the chance of faster FDA approval of
Psoraxine.
Even If Product Candidates Emerge Successfully From Clinical Trials, We
May Not Be Able To Successfully Manufacture, Market And Sell Them.
We have not completed development of our initial product candidate,
Psoraxine, and we have not received approval for its use in clinical trials in
the United States. If Psoraxine emerges successfully from clinical trials, we
will either commercialize products resulting from our proprietary programs
directly or through licensing arrangements with other companies. We have no
experience in manufacturing and marketing, and we currently do not have the
resources or capability to manufacture, market or sell our products on a
commercial scale. In order to commercialize Psoraxine directly, we would need to
develop or obtain through outsourcing arrangements the capability to
manufacture, market and sell products. We have an agreement with SkyePharma
under which SkyePharma will provide development, manufacturing, pre-clinical and
clinical development services for Psoraxine until December 31, 2004. However, we
do not currently have a written agreement covering any period after December 31,
2004 and we may not be able to enter into such an agreement on commercially
reasonable terms, or at all. In addition, we currently do not have any
agreements for the marketing or sale of any of our products and we may not be
able to enter into such agreements on commercially reasonable terms, or at all.
13
We License And Do Not Own Our Intellectual Property. Any Inability To
Protect Our Proprietary Technologies Adequately Could Harm Our Competitive
Position.
Dr. Jose Antonio O'Daly has filed a patent application for Psoraxine, and
under the terms of a license agreement and assignment of license agreement, we
have the right to use any patent issued pursuant to that application. We
license, and do not own, the intellectual property rights to Psoraxine. In
addition, we do not have any protection from issued patents covering any of our
technology. Our success will depend in part on our ability to obtain patents and
maintain adequate protection of other intellectual property for our technologies
and products in the United States and other countries. If we do not adequately
protect our intellectual property, competitors may be able to use our
technologies and erode or negate our competitive advantage. The laws of some
foreign countries do not protect our proprietary rights to the same extent as
the laws of the United States, and we may encounter significant problems in
protecting our proprietary rights in these foreign countries.
The patent positions of biotechnology companies, including our patent
positions, involve complex legal and factual questions and, therefore, validity
and enforceability cannot be predicted with certainty. Patents may be
challenged, deemed unenforceable, invalidated or circumvented. We will be able
to protect our proprietary rights from unauthorized use by third parties only to
the extent that we cover our proprietary technologies with valid and enforceable
patents or we effectively maintain such proprietary technologies as trade
secrets. We will apply for patents covering both our technologies and product
candidates as we deem appropriate. However, we may fail to apply for patents on
important technologies or products in a timely fashion, or at all, and in any
event, the applications we do file may be challenged and may not result in
issued patents. Any future patents we obtain may not be sufficiently broad to
prevent others from practicing our technologies or from developing competing
products. Furthermore, others may independently develop similar or alternative
technologies or design around our patented technologies. In addition, others may
challenge or invalidate our patents, or our patents may fail to provide us with
any competitive advantages. If we encounter challenges to the use or validity of
any of our patents, resulting in litigation or administrative proceedings, we
would incur substantial costs and the diversion of management in defending the
patent. In addition, we do not control the patent prosecution of technology that
we license from others. Accordingly, we cannot exercise the same degree of
control over this intellectual property as we would over technology we own.
We rely upon trade secrets protection for our confidential and proprietary
information. We have taken measures to protect our proprietary information.
These measures may not provide adequate protection for our trade secrets or
other proprietary information. We seek to protect our proprietary information by
entering into confidentiality agreements with employees, collaborators and
consultants. Nevertheless, employees, collaborators or consultants may still
disclose our proprietary information, and we may not be able to meaningfully
protect our trade secrets. In addition, others may independently develop
substantially equivalent proprietary information or techniques or otherwise gain
access to our trade secrets.
Many Potential Competitors Which Have Greater Resources And Experience
Than We Do May Develop Products And Technologies That Make Ours Obsolete.
Companies in the biotechnology industry face rapid technological change in
a rapidly evolving field. Our future success will depend on our ability to
maintain a competitive position with respect to technological advances. Rapid
technological development by others may result in our products and technologies
becoming obsolete.
We face, and will continue to face, intense competition from organizations
such as large biotechnology and pharmaceutical companies, as well as academic
and research institutions and government agencies. Our competitors may include
Biogen, Amgen, Genentech, SmithKline Beecham, Protein Design Labs, Ligand
Pharmaceuticals, Schering-Plough, Pfizer and Novartis. These organizations may
develop technologies that provide superior alternatives to our technologies.
Further, our competitors may be more effective at implementing their
technologies to develop commercial products.
Any products that we develop through our technologies will compete in
multiple, highly competitive markets. Many of the organizations competing with
us in the markets for such products have greater capital resources, research
14
and development and marketing staffs, facilities and capabilities, and greater
experience in obtaining regulatory approvals, product manufacturing and
marketing. Accordingly, our competitors may be able to develop technologies and
products more easily, which would render our technologies and products obsolete
and noncompetitive.
If We Lose Our Key Personnel Or Fail To Attract And Retain Additional
Personnel, We May Be Unable To Discover And Develop Our Products.
We depend on the services of Dr. Jose Antonio O'Daly, the loss of whose
services would adversely impact the achievement of our objectives. Our key
personnel have no prior experience managing a start-up biotechnology company. We
do not currently have sufficient executive management personnel to execute our
business plan fully. In addition, recruiting and retaining qualified scientific
personnel to perform future research and development work will be critical to
our success. Although we believe we can successfully attract and retain
qualified personnel, we face intense competition for experienced scientists.
Failure to attract and retain skilled personnel would prevent us from pursuing
collaborations and developing our products and core technologies to the extent
otherwise possible.
Our planned activities will require additional expertise. These activities
will require the addition of new personnel, including management, and the
development of additional expertise by existing management personnel. The
inability to acquire or develop this expertise could impair the growth, if any,
of our business.
If We Face Claims In Clinical Trials Of A Drug Candidate, These Claims
Will Divert Our Management's Time And We Will Incur Litigation Costs.
We face an inherent business risk of clinical trial liability claims in
the event that the use or misuse of our initial product candidate, Psoraxine,
results in personal injury or death. We may experience clinical trial liability
claims if our drug candidates are misused or cause harm before regulatory
authorities approve them for marketing. We currently do not maintain clinical
liability insurance coverage. Even if we obtain such an insurance policy, it may
not sufficiently cover any claims made against us. Clinical trial liability
insurance may be expensive, difficult to obtain and may not be available in the
future on acceptable terms, if at all. Any claims against us, regardless of
their merit, could strain our financial resources in addition to consuming the
time and attention of our management. Law suits for any injuries caused by our
products may result in liabilities that exceed our total assets.
Some Of Our Existing Stockholders Can Exert Control Over Us And May Not
Make Decisions That Further The Best Interests Of All Stockholders.
Our officers, directors and principal stockholders (greater that 5%
stockholders) together control approximately 75.75% of our outstanding common
stock. In addition, as a result of the application of certain preferred stock
adjustment rights, SkyePharma's percentage ownership may increase substantially
from its current 25.41% and may result in it having control of the company. As a
result, these stockholders, if they act individually or together, may exert a
significant degree of influence over our management and affairs and over matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Furthermore, the interests of this
concentration of ownership may not always coincide with our interests or the
interests of other stockholders and accordingly, they could cause us to enter
into transactions or agreements which we would not otherwise consider. In
addition, this concentration of ownership may delay or prevent a merger or
acquisition resulting in a change in control of us and might affect the market
price of our common stock, even when such a change in control may be in the best
interest of all stockholders. In the event of a merger or acquisition resulting
in a change in control, SkyePharma also has a right to a premium equal to its
purchase price for the preferred stock plus 30% of such purchase price per annum
commencing on the date of issuance of the preferred stock.
The Market Price Of Our Common Stock May Be Highly Volatile.
The market price of our common stock has been and will likely continue to
be highly volatile. From the date trading of our common stock commenced until
May 12, 2003, the range of our stock price has been between $0.22 and $7.15.
Factors including announcements of technological innovations by us or other
companies, regulatory matters, new or existing products or procedures, concerns
about our financial position, operating results, government regulation,
developments or disputes relating to agreements, patents or proprietary rights
may have a significant
15
impact on the market price of our stock. In addition, potential dilutive effects
of future sales of shares of common stock by stockholders and by us could have
an adverse effect on the price of our common stock.
A Large Number Of Shares Of Our Common Stock May Be Sold In The Market,
Which May Depress The Market Price Of Our Common Stock.
Sales of substantial amounts of our common stock in the public market, or
the perception that these sales might occur, could materially and adversely
affect the market price of our common stock or our future ability to raise
capital through an offering of our equity securities. We have an aggregate of
37,538,189 shares of our common stock outstanding. If all options and warrants
currently outstanding to purchase shares of our common stock are exercised and
all of the 2,000,000 shares of preferred stock are converted into common stock
at the current conversion price of $1.60, there will be approximately 57,233,416
shares of common stock outstanding. The conversion price of preferred stock may
be further adjusted through 2004, increasing substantially the number of shares
of common stock that may be outstanding. Of the outstanding shares, up to
13,163,114 shares are freely tradable without restriction or further
registration under the Securities Act, unless the shares are held by one of our
"affiliates" as such term is defined in Rule 144 of the Securities Act. The
remaining shares may be sold only pursuant to a registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act. The sale and distribution of these shares may cause a decline in
the market price of our common stock.
Our Common Stock Qualifies As A "Penny Stock" Under SEC Rules Which May
Make It More Difficult For Our Stockholders To Resell Their Shares Of Our Common
Stock.
Our common stock trades on the Over-The-Counter Bulletin Board. As a
result, the holders of our common stock may find it more difficult to obtain
accurate quotations concerning the market value of the stock. Stockholders also
may experience greater difficulties in attempting to sell the stock than if it
were listed on a stock exchange or quoted on the Nasdaq National Market or the
Nasdaq Small-Cap Market. Because our common stock does not trade on a stock
exchange or on the Nasdaq National Market or the Nasdaq Small-Cap Market, and
the market price of the common stock is less than $5.00 per share, the common
stock qualifies as a "penny stock." SEC Rule 15g-9 under the Securities Exchange
Act of 1934 imposes additional sales practice requirements on broker-dealers
that recommend the purchase or sale of penny stocks to persons other than those
who qualify as an "established customer" or an "accredited investor." This
includes the requirement that a broker-dealer must make a determination on the
appropriateness of investments in penny stocks for the customer and must make
special disclosures to the customer concerning the risks of penny stocks.
Application of the penny stock rules to our common stock could adversely affect
the market liquidity of the shares, which in turn may affect the ability of
holders of our common stock to resell the stock.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
We entered into a Purchase Agreement dated as of December 10, 2001 with
SkyePharma PLC, a company incorporated under the laws of England and Wales. The
Purchase Agreement provides that SkyePharma would make a total equity investment
of $20 million. Pursuant to the Purchase Agreement, as of December 31, 2002,
SkyePharma purchased 1,750,000 shares of our Series A Convertible Preferred
Stock, par value $.001 per share, at a purchase price of $10.00 per share, or an
aggregate purchase price of $17.5 million. The remaining $2.5 million investment
involved the sale of an additional 250,000 shares of preferred stock to
SkyePharma on January 31, 2003. Each share of preferred stock issued pursuant to
the Purchase Agreement was initially convertible into four shares of common
stock at the option of SkyePharma at a conversion price of $2.50 per share of
common stock (an aggregate of 8 million shares of common stock). The conversion
price is subject to multiple adjustments for three years from the date of the
Purchase Agreement depending on our stock price maintaining certain levels. The
conversion price is also subject to anti-dilution protection. However, the
conversion price will not adjust to a level greater than approximately 50 shares
of common stock for each share of preferred stock (an equivalent conversion
price of $0.20 per share). On December 10, 2001, the conversion price was reset
to $1.60 per share of common stock (convertible into an aggregate of 12,500,000
shares of common stock). We relied on the exemption from registration with the
Securities and Exchange Commission provided under Section 4(2) and Rule 506 of
Regulation D under the Securities Act of 1933. We relied
16
on the fact that the offering was only made available to "Accredited Investors"
as defined in Rule 501 of Regulation D, the offering of preferred stock pursuant
to the Purchase Agreement was made available to less than 35 purchasers as
required by Rule 506(a)(2) of Regulation D and the required number of manually
executed originals and true copies of Form D were duly and timely filed with the
Securities and Exchange Commission. No underwriter was used in connection with
the offering.
Item 5. Other Information
The FDA has reviewed the IND Application for Psoraxine that we filed on
March 28, 2003. A representative of the FDA has informed us that, before
clinical trials may proceed, we must provide the FDA with additional information
and address certain issues regarding the design of the pre-clinical studies. As
a result, the FDA has indicated that we will be receiving a letter instructing
us not to proceed with any clinical studies unless and until these matters have
been resolved to the satisfaction of the FDA. No assurance can be given that the
FDA will release the hold placed on our study or whether or when we may commence
clinical trials.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
3.1 * Certificate of Incorporation of Astralis Ltd.
3.2 * Bylaws of Astralis Ltd.
10.1 * Agreement and Plan of Merger
10.2 # Contribution Agreement dated September 10, 2001
10.3 ## Purchase Agreement dated December 10, 2001
10.4 ## Stockholder Agreement dated December 10, 2001
10.5 + 2001 Stock Option Plan
10.6 ** Sub-Lease Agreement
10.7 ** License Agreement dated April 26,2001 between Jose Antonio
O'Daly and Astralis, LLC
10.8 ** Assignment of License
10.9 ** Form of Warrant
10.10 ++ Agreement for Services dated December 10, 2001 between
SkyePharma Inc. and Astralis Ltd.
10.11 ++ Technology Access Option Agreement dated December 10, 2001 by
and among SkyePharma Inc., SkyePharma Holding AG and Astralis
Ltd.
10.12+++ Employment Agreement dated December 10, 2001, between Dr. Jose
Antonio O'Daly and Astralis Ltd.
10.13+++ Amendment #1 to Agreement for Services dated March 18, 2003
between SkyePharma Inc. and Astralis Ltd.
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
----------
* Previously filed with the Securities and Exchange Commission as an Exhibit
to the Preliminary Proxy Statement for Astralis Pharmaceuticals Ltd. on
November 16, 2001.
# Previously filed with the Securities and Exchange Commission as an Exhibit
to the Current Report on Form 8-K for Astralis Pharmaceuticals Ltd. on
November 14, 2001.
## Previously filed with the Securities and Exchange Commission as an Exhibit
to the Current Report on Form 8-K for Astralis Ltd. on December 14, 2001.
+ Previously filed with the Securities and Exchange Commission as an Exhibit
to the Preliminary Proxy Statement for Hercules Development Group Inc. on
October 4, 2001.
17
** Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registration Statement on Form SB-2 for Astralis Ltd. on March 14,
2002.
++ Previously filed with the Securities and Exchange Commission as an Exhibit
to the Amendment to the Registration Statement on Form SB-2 for Astralis
Ltd. on July 23, 2002.
+++ Previously filed with the Securities and Exchange Commission as an Exhibit
to the Annual Report on Form 10-KSB for Astralis Ltd. on March 31, 2003.
(b) Reports on Form 8-K
On March 31, 2003, we filed a current report on Form 8-K reporting that we
issued a press release regarding our earnings for the fiscal year ended December
31, 2002.
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ASTRALIS LTD.
(Registrant)
Dated: May 13, 2003 By: /s/ Mike Ajnsztajn
--------------------------------------------
Mike Ajnsztajn
Chief Executive Officer
(Principal Executive Officer; Authorized
Signatory on behalf of Registrant)
Dated: May 13, 2003 By: /s/ Gina Tedesco
--------------------------------------------
Gina Tedesco
Chief Financial Officer
(Principal Financial and Accounting Officer)
19
Certification of Quarterly Report
I, Mike Ajnsztajn, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Astralis Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ Mike Ajnsztajn
-------------------------------------
Name: Mike Ajnsztajn
Title: Chief Executive Officer
20
Certification of Quarterly Report
I, Gina Tedesco, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Astralis Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ Gina Tedesco
------------------------------------
Name: Gina Tedesco
Title: Chief Financial Officer
21