NOTE 1 - DESCRIPTION OF BUSINESS
Nature of Operations
Astralis, Ltd. (the "Company") is an emerging stage biotechnology company, based
in New Jersey and incorporated under the laws of the State of Delaware, which
primarily engages in research and development of treatments for immune system
disorders and skin diseases. The Company is currently developing two products.
Psoraxine(R), administered by intramuscular injection, is a protein based
therapy for the treatment of psoriasis. The Company's second product is for the
treatment of leishmaniasis. The Company is also engaged in research on the
possible development of the technology underlying Psoraxine(R) for the treatment
of other indications, such as eczema, and psoriatic arthritis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company's financial statements are prepared on the accrual basis of
accounting in accordance with United States generally accepted accounting
principles ("US GAAP").
Development Stage Enterprise
The Company is a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards No. 7 "Accounting and Reporting for Development
Stage Enterprises" ("SFAS No. 7"). Under SFAS No. 7, certain additional
financial information is required to be included in the financial statements for
the period from inception of the Company to the current balance sheet date.
Since the inception of the Company, management has been in the process of
performing research and development activities, fulfilling FDA requirements in
order to enter human clinical trials in the US with Psoraxine(R), initiating
Phase I clinical studies and the raising of capital through private placement
stock offerings.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and investments in money market
funds. The Company considers all highly liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits at financial institutions. To
mitigate this risk, the Company places its cash deposits only with high credit
quality institutions.
F-12
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Furniture and equipment are recorded at cost, less accumulated depreciation
computed on a straight-line basis over the estimated useful lives of the
respective assets. Depreciation is computed using a four-year life for computer
and office equipment, three to four years for lab equipment, five-year for
automobile, seven-year for furniture and fixtures and three-year for leasehold
improvements.
Income Taxes
Income taxes are recorded in the period in which the related transactions are
recognized in the financial statements, net of the valuation allowances, which
have been recorded against deferred tax assets. Deferred tax assets and
liabilities are recorded for the expected future tax consequences of temporary
differences between the tax basis and the financial reporting of assets and
liabilities. Net deferred tax assets and liabilities, relating primarily to
federal and state net operating loss carryforwards and research and development
credits that have been deferred for tax purposes have also been recorded. A
valuation reserve has been recorded to offset a portion of the deferred tax
benefit (except for amount realized through the sale of a portion of the
Company's New Jersey net operating loss) because management has determined it is
more likely than not that the deferred tax assets will not be realized. See Note
7.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents,
accounts payable and accrued expenses, are carried at cost, which approximates
fair value.
Stock-Based Compensation Arrangements
The Company applies the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued To
Employees," and related interpretations, in accounting for its stock-based
grants to employees and directors. Under the intrinsic value method of
accounting, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price. The
Company applies the disclosure provisions specified in SFAS No. 148, "Accounting
For Stock Based Compensation - Transition and Disclosure - an Amendment of SFAS
123." The Company applies SFAS No. 123, "Accounting for Stock-Based
Compensation," in accounting for stock-based grants to non-employees.
The following table illustrates the effect on net loss and earnings per share if
the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," to stock-based compensation.
F-13
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Year Ended December 31,
------------------------------
2003 2002
----------- --------------
Net loss, as reported $(5,080,427) $ (18,388,998)
Add:
Stock-based compensation expense included in reported net
loss determined under APB No. 25, net of related tax effects -- --
Deduct:
Total stock-based director compensation expense determined
under fair-value-based method for all awards, net of related
tax effects 11,589 --
----------- --------------
Pro forma net loss $(5,092,016) $ (18,388,998)
=========== ==============
Loss per share:
Basic - as reported $ (0.14) $ (0.49)
Basic - pro forma $ (0.14) $ (0.49)
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be issued in future years. The
estimated fair value of each option granted was calculated using the
Black-Scholes option-pricing model. The following summarizes the weighted
average of the assumptions used in the model.
2003 2002
Risk free rate 2.1% --
Expected years until exercise 3.0 --
Expected stock volatility 100.0% --
Dividend yield -- --
Loss Per Share
Loss per common share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("FAS 128"). Basic loss per
common share is computed based upon the weighted average number of shares of
common stock outstanding for the period and excludes any potential dilution.
Shares associated with stock options, warrants and convertible preferred stock
are not included because their inclusion would be antidilutive (i.e., reduce the
net loss per share).
The common shares potentially issuable arising from these instruments, which
were outstanding during the periods presented in the financial statements,
consisted of:
2003 2002
Options $ 365,000 $ 315,000
Warrants 6,780,237 6,780,237
Convertible preferred stock 12,500,000 10,937,500
$19,645,237 $18,032,737
F-14
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Segment Information
The Company has determined it has one reportable operating segment as defined by
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information."
Research and Development Costs
The cost of research, development and product improvement expenditures, which
includes depreciation of the Company's laboratory and amortization of the
technology access option, are charged to expense as they are incurred. Research,
development and product improvement costs included in operating expenses
amounted to $4,045,673 and $7,761,542 for the years ending December 31, 2003 and
2002, respectively; and $15,038,990 for the period from March 12, 2001 (date of
inception) to December 31, 2003.
Included in this amount were payments to related parties (see Note 11).
Recent Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Financial Interpretation No. 46, "Consolidation of Variable Interest Entities -
An Interpretation of ARB No. 51" (FIN 46 or Interpretation). FIN 46 is an
interpretation of Accounting Research Bulletin 51, "Consolidated Financial
Statements," and addresses consolidation by business enterprises of variable
interest entities (VIEs). The primary objective of the Interpretation is to
provide guidance on the identification of, and financial reporting for, entities
over which control is achieved through means other than voting rights; such
entities are known as VIEs. The Interpretation requires an enterprise to
consolidate a VIE if that enterprise has a variable interest that will absorb a
majority of the entity's expected losses if they occur, receive a majority of
the entity's expected residual returns if they occur or both. An enterprise is
required to consider the rights and obligations conveyed by its variable
interests in making this determination. On October 9, 2003, the FASB issued
Staff Position No. 46-6 which deferred the effective date for applying the
provisions of FIN 46 for interests held by public entities in variable interest
entities or potential variable interest entities created before February 1,
2003. On December 24, 2003, the FASB issued a revision to FIN 46. Under the
revised interpretation, the effective date was delayed to periods ending after
March 15, 2004 for all variable interest entities, other than SPEs. The adoption
of FIN 46 is not expected to have an impact on the Company's financial
condition, results of operations or cash flows.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 149 requires that contracts with comparable
characteristics be accounted for similarly. The statement is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The provisions of SFAS No. 149
generally are to be applied prospectively only. The adoption of SFAS No. 149 did
not have a material impact on the Company's results of operations or financial
position.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classification and measurement by an issuer of certain
financial instruments with characteristics of both liabilities and equity. The
statement requires that an issuer classify a financial instrument that is within
its scope as a liability (or asset in some circumstances). Many of those
instruments were previously classified as equity. This Statement also addresses
questions about the classification of certain financial instruments that embody
obligations to issue equity shares. This statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003, except as it relates to consolidated limited-life subsidiaries. The FASB
F-15
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
indefinitely deferred the effective date of this statement as it relates to
certain mandatorily redeemable non-controlling interests in consolidated
limited-life subsidiaries. The adoption of the effective provisions of SFAS No.
150 did not have a material impact on the Company's results of operations or
financial position.
On December 17, 2003, the Staff of the Securities and Exchange Commission (or
SEC) issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition,
which supersedes Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements ("SAB 101"). SAB 104's primary purpose is to rescind the
accounting guidance contained in SAB 101 related to multiple-element revenue
arrangements that was superseded as a result of the issuance of EITF
00-21,Accounting for Revenue Arrangements with Multiple Deliverables.
Additionally, SAB 104 rescinds the SEC's related Revenue Recognition in
Financial Statements Frequently Asked Questions and Answers issued with SAB 101
that had been codified in SEC Topic 13, Revenue Recognition. While the wording
of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104, which was effective upon issuance. The adoption of SAB 104 did not have
a material effect on the Company's financial position or results of operations.
NOTE 3 - GOING CONCERN
The Company incurred net losses to common stockholders of $5,080,427 and
$29,664,789 for the year ended December 31, 2003 and for the period March 12,
2001 (date of inception) to December 31, 2003, respectively. Included in these
net losses were non-cash preferred stock dividends generated from beneficial
conversion features of preferred stock in the amounts of $0 for the year ended
December 31, 2003 and $11,468,750 in the cumulative net loss (see Note 8).
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 a multiple number of years. The Company expects to
continue clinical testing of Psoraxine in 2004. 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.
Consequently, the aforementioned items raise substantial doubt about the
Company's ability to continue as a going concern.
Management plans to raise additional capital through private placement equity
offerings in 2004 (see Note 16). These funds, in addition to its cash and
marketable securities held at December 31, 2003, will be needed in order to
finance the Company's currently anticipated needs for operating and capital
expenditures for 2004, 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 continue as a going concern 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. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
F-16
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 4 - MARKETABLE SECURITIES
The Company's marketable equity securities consisted of certificates of deposit,
fixed income funds that have a readily determinable fair market value.
Management determines the appropriate classifications 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 Stockholder's 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 specification
method.
As of December 31, 2002, available-for-sale securities consist of the following:
Gross Gross
Amortized Unrealized Unrealized
Due Cost Loss Gains Fair Value
----------------- ---------- --------- ----------- ----------
Certificates of Deposit 1/2003 to 11/2014 $ 512,584 $ (8,294) $ 24 $ 504,314
Fixed Income Fund current 709,776 (6,911) -- 702,865
---------- --------- ----------- ----------
$1,222,360 $ (15,205) $ 24 $1,207,179
========== ========= =========== ==========
As of December 31, 2003, available-for-sale securities consist of the following:
Gross Gross
Amortized Unrealized Unrealized
Due Cost Loss Gains Fair Value
----------------- ---------- --------- ----------- ----------
Fixed Income Fund Current $1,401,872 $ (27,740) $ 42 $1,374,174
---------- --------- ----------- ----------
$1,401,872 $ (27,740) $ 42 $1,374,174
========== ========= =========== ==========
NOTE 5 - INTANGIBLE ASSETS
The Company's policy is to capitalize the costs of purchased and internally
developed patents and those expenses in connection with patent rights licensed
to the Company. The life of the patent is 20 years from the date the patent is
applied for or 17 years from when it is granted, whichever is longer. The
Company's policy is to capitalize direct costs related to the rights it has
licensed, and amortize them on a straight-line basis over the remaining portion
of the 20-year period, which commenced on March 16, 2001, the date the
application was filed for the patent the Company has licensed
The Company paid $5,000,000 for a technology access option from SkyePharma PLC
("SkyePharma"). This option gives the Company the right, until December 10,
2008, to enter into a non-exclusive license agreement to utilize any of three
drug delivery systems of SkyePharma in connection with any drugs it develops to
treat two specific immunotherapies. Upon exercise of the option, the Company
will be required to pay a license fee of 5% of net sales of any product
utilizing the drug delivery systems. All other terms of the license agreement
will be determined upon exercise of the option.
F-17
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 5 - INTANGIBLE ASSETS (Continued)
Management has taken the position that the technology access option fee is a
license fee which allows the Company, prior to commercialization of its drugs,
to utilize the established delivery system technologies of SkyePharma to test
for viability and enhancement of the Company's Psoraxine vaccine. In accordance
with Financial Accounting Standard No. 2 - Research and Development Costs ("SFAS
No. 2"), the Company has capitalized the technology access option as a research
and development intangible asset and is amortizing it over its seven-year life.
The Company will evaluate this intangible annually for impairment under FAS 144
"Accounting For The Impairment or disposal of Long-Lived Assets."
The Company has amortized $2,892 and $2,135 of patent costs and $714,288 of the
cost of the technology option license in 2003 and 2002, respectively. The
amortization related to the technology option license is recorded as research
and development cost as required by SFAS No. 2.
Intangible assets consisted of the following at December 31,
2003 2002
Patent $ 100,464 $ 46,765
Technology access fee 5,000,000 5,000,000
Less accumulated amortization (1,493,924) (776,744)
$ 3,606,540 $ 4,270,021
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31,
2003 2002
Furniture and Fixtures $ 28,281 $ 27,813
Computer Equipment 21,803 17,120
Leasehold Improvements 196,544 181,604
Lab Equipment 236,781 195,962
Automobiles 8,945 8,945
$ 492,354 $ 431,444
Accumulated depreciation and amortization (199,305) (68,731)
$ 293,049 $ 362,713
Depreciation expense amounted to $130,574 and $68,697 for the years ended
December 31, 2003 and 2002, respectively. The depreciation related to the
Company's laboratory and related equipment is recorded as research and
development as required by SFAS No. 2.
F-18
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 7 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary timing
differences between the carrying amounts of assets and liabilities reflected on
the financial statements and the amounts used for income tax purposes. The tax
effects of temporary differences and net operating loss carryforwards and tax
credits that give rise to significant portions of the deferred tax assets
recognized are presented below:
December 31,
2003 2002
----------- -----------
Deferred tax assets :
Prepaid research and development $ 798,800 $ 1,062,100
Deferred compensation 77,000 --
Accumulated depreciation and amortization 332,000 173,100
Research and development credits carryforward 1,125,400 437,200
Federal and state deferred tax benefit arising from
net operating loss carryforwards 5,612,500 3,838,000
----------- -----------
7,945,700 5,510,400
Less valuation allowance (7,945,700) (5,510,400)
----------- -----------
Total deferred tax assets $ -- $ --
=========== ===========
As of December 31, 2003, the Company had losses, which resulted in net operating
loss carryforwards for tax purposes amounting to approximately $14,500,000 that
may be offset against future taxable income. These carryforwards start to expire
in 2021. The Company generated federal research and development credits of
$784,400 that will expire in 2021 and state credits of $341,000 that will expire
in 2008. However, these carryforwards and credits may be significantly limited
due to changes in the ownership of the Company as a result of future equity
offerings.
Recognition of the benefits of the deferred tax assets and liabilities will
require that the Company generate future taxable income. There can be no
assurance that the Company generates any earnings or any specific level of
earnings in future years. Therefore, the Company has established a valuation
allowance for deferred tax assets (net of liabilities) of approximately
$7,945,700 and $5,510,400 as of December 31, 2003 and 2002.
In 2003, the Company sold $2,863,511 of its gross New Jersey net operating loss
carryforwards under the State of New Jersey's Technology Business Tax
Certificate Transfer Program (the "Program"). The Program allows qualified
technology and biotechnology businesses in New Jersey to sell unused amounts of
net operating loss carryforwards and defined research and development tax
credits for cash. The proceeds from the sale of the Company's carryforwards was
$221,600 (net of fees) and the amount was recorded as a tax benefit in the
statements of operations. The State of New Jersey renews the Program annually
and limits the aggregate proceeds of the program to $10,000,000. Due to the
uncertainty at any time as to the Company's ability to effectuate the sale of
available New Jersey net operating losses, and since the Company has no control
or influence over the Program, the benefits are recorded once the agreement with
the counterpart is signed and the sale is approved by the State.
In accordance with federal income tax regulations, the net loss incurred by
Astralis, LLC from inception to the date of its merger with the Company has been
excluded from the benefits of the net operating loss carryforwards reflected in
this footnote.
The following table presents the principal reasons for the difference between
the Company's effective tax rates and the United States federal statutory income
tax rate of 34%.
F-19
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 7 - INCOME TAXES (Continued)
December 31,
2003 2002
----------- -----------
Federal income tax benefit at statutory rate $ 1,727,300 $ 3,165,000
State income tax benefit (net of effect of federal benefit) 296,300 600,800
Non-deductible expenses (54,900) (142,700)
Research and development credit 688,200 232,500
Valuation allowance (2,435,300) (3,855,600)
----------- -----------
Income Tax Benefit $ 221,600 $ --
=========== ===========
Effective Income Tax Rate (13%) 0%
=========== ===========
NOTE 8 - CAPITAL STOCK ACTIVITY
On December 15, 2003, the Company amended it's Articles of Incorporation to
authorize the issuance of 150,000,000 shares of common stock, $0.0001 par value
per share, and 3,000,000 shares of Series A preferred stock, $0.001 par value of
which 37,538,189 shares of common and 2,000,000 shares of Series A preferred
were outstanding as of December 31, 2003.
In 2001 Astralis LLC and the Company merged and this transaction was treated as
a recapitalization of the Company, whereby the Company issued to the members of
Astralis, LLC, 28,000,000 shares of common stock and warrants to purchase
6,300,000 shares of Company common stock for $1.60 per share in a one-for-one
exchange for all of the outstanding 28,000,000 Astralis, LLC member units of
ownership and 6,300,000 options to purchase member units.
Astralis LLC issued 25,300,000 units on April 25, 2001 to various members for an
aggregate subscription receivable amount of $33,183. During 2001, the members
paid $33,183 on behalf of the Company to satisfy their subscription receivable.
On September 1, 2001, five new members were admitted as members of the LLC
through the execution of a subscription agreement. These new members subscribed
to units ("Units") from Astralis LLC consisting of an aggregate of 2,700,000
membership interests (the "Membership Interests") in Astralis LLC and 6,300,000
options to purchase additional Membership Interests in Astralis LLC for an
exercise price of $1.60 per Membership Interest. On November 13, 2001, the
aforementioned Units were exchanged for an aggregate of 2,700,000 shares of our
common stock and warrants to purchase 6,300,000 shares of common stock at an
exercise price of $1.60 per share. The aggregate purchase price for such Units
was $1,350,000 and was paid with subscription notes. Warrants to purchase
3,150,000 shares of common stock, as amended, expire on December 13, 2004 and
3,150,000 expire November 13, 2006.
In 2002 and 2003, the Company collected $465,000 and $825,000 in cash of the
subscription receivables, respectively. In April 2003, the Company entered into
the Amended Investor Relation Agreement with one of the stockholders who has
outstanding subscription receivable with the Company. The Company reduced the
stockholder's subscription receivable for services received, valued at $36,000,
that the stockholder provided to the Company. The Company will receive services
valued at $24,000 in 2004 in lieu of payment of the outstanding subscription
receivable balance.
F-20
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 8 - CAPITAL STOCK ACTIVITY (Continued)
Common Stock
In September 2001, Astralis, LLC granted 500,000 membership units to a
consultant in return for services rendered. The membership units were
subsequently exchanged for shares of common stock of the Company. The cost of
the services, based on an independent valuation of the units granted, which
amounted to $135,000, were recorded at the time the services were rendered in
2001.
In November 2001, the Company completed a $3,321,887 private placement offering
pursuant to which it sold 103.81 units at $32,000 per unit for an aggregate
amount of $3,321,887. Each unit consisted of 20,000 shares of common stock and
warrants to purchase 4,000 shares of the Company's common stock at $4.00 per
share. The warrants expire on November 13, 2006. The holders of these shares of
common stock and warrants received registration rights. The Company was required
to file a registration statement by March 13, 2002 to register the sale of these
shares and the shares underlying the warrants. Upon consummation of the private
placement, the Company paid a $100,000 investment banking fee and entered into
an agreement for future investment banking services amounting to $144,000,
payable in 24 equal monthly installments of $6,000.
In April 2001, the Company issued warrants to purchase 75,000 shares of common
stock at an exercise price of $1.75 per share. These warrants expire in April
2004.
In January 2002, the Company agreed to amend a subscription agreement with one
of the investors who participated in the November 2001 private placement
offering. The Company consented to reduce the number of shares in the
subscription agreement by 49,990 shares of common stock. The Company cancelled
the respective shares and returned the corresponding amount of funds to the
investor amounting to $80,000.
Preferred Stock
On December 13, 2001, the Company authorized 2,000,000 shares of preferred stock
to be designated as "Series A Convertible Preferred Stock" ("Series A
Preferred") with a $0.001 par value per share. If the Company declares a
dividend, holders of each share of Series A Preferred are entitled to
non-cumulative cash dividends which will be the greater of i) 6% of the
preferred share purchase price; or ii) the amount such holders would have
received had the holders converted to common stock immediately prior to record
date for payment of a dividend to holders of common stock. No dividend can be
declared or paid on common stock without an equal or greater dividend being paid
or declared on the Series A Preferred. Holders of each share of Series A
Preferred were entitled to vote on all matters at stockholder meetings. Holders
of each share of the Series A Preferred could convert their shares to common
stock at an initial conversion price of $2.50. The conversion price could be
adjusted and reset as set forth in the purchase agreement for the Series A
Preferred.
On December 10, 2001, the Company and SkyePharma entered into a purchase
agreement whereby SkyePharma agreed to purchase 2,000,000 shares of Series A
Preferred at a price of $10 per share over a 13-month period with five separate
closings. On December 10, 2002, the one-year anniversary of the agreement,
SkyePharma received registration rights on the common stock underlying its
Series A Preferred shares. The first closing occurred in December 2001 and the
Company sold 1,000,000 shares of Series A Preferred for a purchase price of
$10,000,000.
The second, third and fourth closing occurred in January 2002, April 2002, and
July 2002. On each closing, the Company sold 250,000 shares of Series A
Preferred for a purchase price of $2,500,000. The final 250,000 shares of Series
A Preferred totaling $2,500,000 closed on January 31, 2003.
The Company's stock price on December 10, 2001 was $3.03; consequently, pursuant
to the requirements of EITF 98-5 "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", as
amended by EITF 00-27, the issuance of the Series A Preferred, which was
convertible initially at $2.50 per share at any time, resulted in a beneficial
conversion feature recorded as a preferred stock dividend in the amount of
$2,120,000.
F-21
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 8 - CAPITAL STOCK ACTIVITY (Continued)
The Company's stock price on April 30, 2002 was $2.77; consequently, the
issuance of the Series A Preferred, which was convertible initially at $2.50 per
share at any time, resulted in a beneficial conversion feature recorded as a
preferred stock dividend in the amount of $270,000.
Since the conversion price of the Series A Preferred was subject to reset
provisions as described above, there was a beneficial conversion feature
applicable to the Series A Preferred. Using the potential conversion price of
$1.60 for the first anniversary date as specified in the purchase agreement, the
beneficial conversion feature resulted in an additional preferred stock dividend
of $9,078,750 in December 2002.
On January 20 ,2004, SkyePharma converted 2,000,000 shares of Series A Preferred
into 25,000,000 shares of common stock at a reduced conversion price of $0.80
per share (see Note 16).
Stock Warrants
At December 31, 2003, the Company had the following outstanding common stock
warrants to purchase its securities:
Number of Warrants Exercise Price
Issued Per Share
6,780,237 $1.60 - $4.00
These warrants were primarily issued in connection with the exchange with
Astralis, LLC and the private placement offering.
NOTE 9 - STOCK OPTION PLAN
On September 10, 2001, the Company adopted its 2001 Stock Option Plan that
provides for the granting of options to officers, directors, employees, and
consultants. The number of shares of common stock that can be purchased under
this plan is limited to 5,000,000 shares, adjustable for changes in the capital
structure of the Company. No options can be granted under this plan after
September 10, 2011. Options granted under this plan may be either incentive
stock options or non-qualified stock options. Options terms are not to exceed 10
years. The options have limited transferability, and will be subject to various
vesting provisions as determined at the date of grant. The Board of Directors or
a committee thereof will determine the exercise price of options granted in
accordance with the provisions of this plan. The Board has the ability to amend,
suspend or terminate this plan at any time, subject to restrictions imposed by
applicable law.
On December 31, 2001, the Company granted two consultants options to purchase an
aggregate 300,000 shares of the Company's common stock in exchange for their
services. These options vest ratably, at 75,000 per year, over a four-year
period commencing in 2001. The expiration terms of these options are 4 years, 3
years, 2 years and 1 year, for options vesting in 2001, 2002, 2003 and 2004,
respectively. The strike price for all of these options is $2.75.
During July 2002, the Company granted 15,000 stock options with a strike price
of $2.50, as compensation to a consultant.
F-22
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 9 - STOCK OPTION PLAN (Continued)
The Company records deferred compensation when it makes compensatory stock
option grants to employees, members of the Board of Directors, consultants or
advisory board members. For the options granted to consultants, the amount of
deferred compensation recorded is the fair value of the stock options on the
grant date as determined using a Black-Scholes option-pricing model. The Company
records deferred compensation as a reduction to shareholders' equity with an
offsetting increase to additional paid-in capital. The Company then amortizes
deferred compensation into stock-based compensation expense over the performance
period, which typically coincides with the vesting period of the stock-based
award.
During April 2003, the Company granted options to purchase 50,000 shares of
common stock at an exercise price of $0.45 per share to one of its directors.
Options to purchase 12,500 shares of common stock vested on April 4, 2003, and
options to purchase an additional 12,500 shares will vest each year thereafter
for the following three years.
NOTE 10 - DEFERRED COMPENSATION
The components of deferred compensation for the options granted are as follows
at December 31,
2003 2002
Balance at January 1 $ 12,164 $ 398,250
Deferred compensation recorded -- 5,700
Fair value adjustments 18,321 (357,532)
Amortization to stock-based compensation (25,663) (34,254)
Balance at December 31 $ 4,822 $ 12,164
Exercise prices for stock options outstanding as of December 31, 2003 and the
weighted average remaining contractual life are as follows:
Weighted Average Weighted
Remaining Number Average
Exercise Prices Options Outstanding Contractual Life Exercisable Exercise Price
--------------- ------------------- ---------------- ----------- --------------
$ 0.45 50,000 2.25 years 12,500 $ 0.45
$ 2.50 - 2.75 315,000 1.0 years 232,500 $ 2.74
In accordance with FAS 123 the fair value of the options were estimated as of
the date of the grant or subsequent vesting date, or December 31, 2003 if not
vested, using a Black-Scholes option-pricing model. The assumptions used in
estimating the fair value of the options ranged as follows:
Volatility 100% - 130%
Risk-free interest rate 2.0% - 4.1%
Expected life 1 - 5 years
Dividend yield -
F-23
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 11 - RELATED PARTY - TRANSACTIONS/COMMITMENTS/INDEMNIFICATIONS
Patent
A founding member of the Company is the owner of a patent application, filed
March 16, 2001 with the United States Patent and Trademark Office, entitled
"Compositions and Methods for the Treatment and Clinical Remission of Psoriasis"
(the "Invention"). On April 26, 2001, the Company, in exchange for $10, entered
into an exclusive license agreement to use and exploit the Invention, the
technology related thereto, and the related patent rights, including the ability
to license foreign patent rights. The term of the license agreement expires on
the last date of expiration of the patent or earlier date as specified in the
license agreement.
During the term of the license agreement, the Company is required to pay all
fees and costs relating to the filing, prosecution, and maintenance of the
patent and associated rights. In addition, the Company is required to pay all
reasonable attorneys' fees of the Company, or patent owner, in the pursuit of
any patent infringement litigation.
SkyePharma PLC Agreements
On December 10, 2001, the Company executed three agreements with SkyePharma, a
pharmaceutical company located in England.
The Company entered into a stock purchase agreement whereby SkyePharma agreed to
purchase 2,000,000 shares of Series A Preferred at a price of $10 per share in
five separate closings over a 13-month period commencing in December 2001 (see
Note 8).
The Company entered into a technology option agreement whereby it agreed to pay
SkyePharma $5,000,000 in return for the right, for 7 years, to enter into a
non-exclusive license agreement with SkyePharma to utilize three drug delivery
systems ($2,000,000, $2,000,000, and $1,000,000, respectively per delivery
system). The royalty fee in this license agreement is specified to be 5% of the
net sales of any product the Company sells utilizing a SkyePharma drug delivery
system. All other terms of this license agreement would need to be determined
upon exercise of the option. The Company can transfer this option to another
party, subject to approval by SkyePharma. This license would only allow the
Company to use these delivery systems for drugs that treat two particular
immunotherapies - psoriasis and leishmaniasis. The $5,000,000 fee was required
to be paid on December 10, 2001 and was netted (for convenience purposes) out of
the first $10,000,000 installment purchase of preferred stock by SkyePharma.
The Company entered into a services agreement whereby it paid $11,000,000 to
SkyePharma in return for SkyePharma providing all development, manufacturing,
pre-clinical and clinical development services for the Company's primary -
second generation Psoraxine, up to the completion of Phase II clinical studies.
The contract recognized that SkyePharma performed $3,000,000 of these services
in the fourth quarter of 2001 and that SkyePharma will perform and be paid for
the remaining $8,000,000 of services in 2002 and 2003. The payment terms for the
services agreement are fixed. The Company paid $3,000,000 in 2001, $7,980,000 in
2002 and $20,000 in 2003.
The service agreement terminated on December 31, 2002. In March 2003, the
Company and SkyePharma amended the original service agreement, effective January
1, 2003, to extend the term of the agreement and modify the services to be
provided by SkyePharma. SkyePharma will continue to provide certain services to
the Company through December 31, 2004 in consideration for payments it received
from the Company during 2002 in connection with this agreement, as a prepaid
expense. This prepaid amount will be expensed during the remaining period of the
amended service agreement. In 2003 and 2002, the Company expensed $1,007,500 and
$5,985,000, respectively, in connection with the services agreement.
SkyePharma has the right of first negotiation to acquire the worldwide licensing
and distribution rights to Psoraxine up to the completion of the Phase II
studies. On completion of Phase II studies, Astralis will offer SkyePharma the
option to acquire the worldwide licensing and distribution rights to Psoraxine.
If SkyePharma does not take the option, Astralis will seek a marketing partner
to fund Phase III clinical studies and to provide a sales and marketing
infrastructure.
F-24
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 11 - RELATED PARTY - TRANSACTIONS/COMMITMENTS/INDEMNIFICATIONS (Continued)
Indemnification
The Company has agreed, subject to specific provisions in the Technology Access
Agreement, to indemnify SkyePharma, its directors and employees against any and
all losses, claims, demands, proceedings, actions, etc. which may be brought or
established against them as a result of, among other items, i) negligence of
Company personnel or contractors or ii) death, personal injury or property
damage or loss caused by the Company selling a product containing a SkyePharma
delivery system which is defective or not merchantable. However, this
indemnification does not apply to any death or personal injury arising from
defects inherent in the delivery systems or technical know-how of SkyePharma
licenses with the delivery system technology.
Other
A research entity owned by the spouse of the majority shareholder provided
research and development services to the Company totaling $0 and $135,111 for
the years ended December 31, 2003 and 2002, respectively.
NOTE 12 - OPERATING LEASES
On March 13, 2002, the Company entered into a lease agreement for laboratory and
office space. The lease period is for three years and rent is $77,500 annually.
The Company also entered into a concurrent service agreement with the lessor of
the laboratory space on a time and material basis.
During 2002 and 2003, the Company leased two apartments and an automobile for
two different key employees, one of whom is an officer.
The Company incurred rent expense in the amount of $137,070 and $80,071 for 2003
and 2002, respectively.
The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining lease terms of one year or
greater, as of December 31, 2003:
Year Ending December 31:
2004 $ 83,224
2005 19,454
$ 102,678
F-25
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 13 - 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:
Year Ended December 31,
2003 2002
Net loss $(5,080,427) $(9,040,248)
Unrealized gain (loss) on securities:
Unrealized gain arising during period (26,245) (15,181)
Reclassification adjustment for loss
realized in net loss 13,728 --
Unrealized gain (loss), net (12,517) (15,181)
Comprehensive loss $(5,092,944) $(9,055,429)
NOTE 14 - CONCENTRATIONS
The Company currently has two products that are under development. Lack of
product development or customer interest could have a materially adverse effect
on the Company. Further, significant changes in technology could lead to new
products or services that compete with the product to be offered by the Company.
These changes could materially affect the price of the Company's products or
render them obsolete.
NOTE 15 - SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
The Company did not pay any interest or taxes in 2003 or 2002.
Payment of the 2002 service fees totaling $1,330,000 were netted against the
SkyePharma 2002 installment purchases of the Company's Series A Preferred stock.
The Company recorded an unrealized loss on its securities available-for-sale in
the amount of $27,698 and $15,181 for the years ended December 31, 2003 and
2002, respectively.
NOTE 16 - SUBSEQUENT EVENTS
On January 20, 2004, the Company closed a private placement from which it
received gross proceeds of approximately $4,080,000. The transaction consisted
of the sale to accredited investors of units consisting of 8,159,964 shares of
common stock and warrants to purchase 8,159,964 shares of common stock. The
warrants have an exercise price of $.73 and expire in four years.
F-26
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Financial Statements
NOTE 16 - SUBSEQUENT EVENTS (Continued)
Concurrently with the closing of the private placement, Skyepharma converted all
of its outstanding shares of Series A Preferred Stock of the Company into
25,000,000 shares of common stock at a reduced conversion price of $0.80 per
share. Skyepharma agreed that up to 12,500,000 shares of its common stock issued
upon conversion of the Series A Preferred Stock will be subject to a call option
at the discretion of the Company upon completion of an agreed upon milestone at
a premium in excess of the conversion price. The call option can be exercised on
or after July 21, 2004. In connection with this transaction and in accordance
with SFAS 84, "Induced Conversions of Convertible Debt, an Amendment of APB
Opinion No. 26" the Company will record a non-cash preferred stock dividend in
January 2004 amounting to $10,750,000.
On the closing date of conversion, January 20, 2004, the Company and other
original stockholders amended the stockholders agreement dated as of December
10, 2001. After the date of that Amendment, the Board of Directors is required
to be comprised of at least seven directors and include at least two independent
directors. Per the Amendment, SkyePharma shall have the right to nominate one
director, who shall initially be Michael Ashton. From the date of the Amendment
until the third anniversary, Jose Antonio O'Daly, Mike Ajnsztajn, Gaston
Liebhaber and Gina Tedesco (the "Founders"), each has the right to nominate one
director. The Founders will initially be directors. The Agreement will terminate
upon the later of (i) the SkyePharma Termination Date or (ii) the third
anniversary of this Amendment, which is January 20, 2007. Further, this
agreement may be terminated by the mutual written consent. "The SkyePharma
Termination Date" is the date on which SkyePharma no longer beneficially owns,
in the aggregate, at least 20% of the outstanding common stock of the Company.
On February 19, 2004, the Company closed the second round of its private
placement from which it received $1,150,000. The transaction consisted of the
sale to accredited investors of units consisting of 2,299,902 shares of common
stock and warrants to purchase 2,299,902 shares of common stock.
The Company paid a 5% commission in the amount of $261,496 to a related party in
February 2004 for the consulting services related to two private placements
completed in 2004. In addition, he, or his assignees, received warrants to
purchase 418,394 shares of the Company's common stock at $0.50 per share and
warrants to purchase 418,394 shares of the Company's common stock at $0.73 per
share. An additional cash commission will be paid upon exercise of the warrants.
On February 19, 2004, after including the effects of the above transactions, the
Company had approximately 73 million shares of common stock and no shares of
preferred stock outstanding.
F-27
INTERIM FINANCIAL STATEMENTS
F-28
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Balance Sheets
ASSETS
March 31, December 31,
2004 2003
------------ ------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 708,223 $ 10,660
Marketable securities 4,709,681 1,374,174
Prepaid expense - related party 755,625 1,007,500
Prepaid expenses and supplies 184,794 171,939
------------ ------------
Total Current Assets 6,358,323 2,564,273
Intangible Assets, Net - Related Party 3,333,328 3,511,900
Other Intangible Assets, Net 109,973 94,640
Property and Equipment, Net 261,890 293,049
Deposits 29,953 29,953
------------ ------------
$ 10,093,467 $ 6,493,815
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 633,760 $ 279,506
------------ ------------
Total Current Liabilities 633,760 279,506
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Convertible preferred stock, Series A, $.001 par value;
3,000,000 shares authorized at 2004 and 2003; 0 and 2,000,000
issued and outstanding at 2004 and 2003, respectively
(liquidation preference - $0 and $22,122,600 at 2004 and 2003) -- 2,000
Common stock; $.0001 par value; 150,000,000 shares authorized
at 2004 and 2003; 72,998,055 and 37,538,189 issued and
outstanding at 2004 and 2003, respectively 7,300 3,754
Additional paid-in capital 51,633,776 35,929,864
Deferred compensation (3,453) (4,822)
Common stock subscriptions receivable (12,000) (24,000)
Accumulated other comprehensive loss (3,154) (27,698)
Deficit accumulated in the development stage (42,162,762) (29,664,789)
------------ ------------
Total Stockholders' Equity 9,459,707 6,214,309
------------ ------------
$ 10,093,467 $ 6,493,815
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
F-29
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Statements of Operations
(Unaudited)
Three Months Ended March 31, March 12, 2001
----------------------------- (Inception) to
2004 2003 March 31, 2004
------------ ------------ --------------
Revenues $ -- $ -- $ --
------------ ------------ ------------
Operating Expenses
Research and development - related party 430,447 430,447 12,189,869
Research and development 900,694 731,058 4,180,262
Depreciation and amortization 7,510 31,549 50,131
General and administrative 421,898 318,769 3,938,508
------------ ------------ ------------
Total Operating Expenses 1,760,549 1,511,823 20,358,770
------------ ------------ ------------
Loss From Operations (1,760,549) (1,511,823) (20,358,770)
Investment Income 12,576 37,109 193,122
------------ ------------ ------------
Loss Before Income Tax Benefit (1,747,973) (1,474,714) (20,165,648)
Income Tax Benefit -- -- 221,636
------------ ------------ ------------
Net Loss (1,747,973) (1,474,714) (19,944,012)
Preferred Stock Dividends (10,750,000) -- (22,218,750)
------------ ------------ ------------
Net Loss to Common Stockholders $(12,497,973) $ (1,474,714) $(42,162,762)
============ ============ ============
Basic and Diluted Loss per Common Share $ (0.19) $ (0.04) $ (1.13)
============ ============ ============
Basic and Diluted Weighted Average Common Shares
Outstanding 64,861,411 37,575,404 37,335,293
============ ============ ============
The accompanying notes are an integral part of these condensed financial
statements
F-30
ASTRALIS LTD.
(A Development Stage Entity)
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, March 12, 2001
----------------------------- (Inception) to
2004 2003 March 31, 2004
------------ ------------ --------------
Cash Flows from Operating Activities
Net loss $ (1,747,973) $ (1,474,714) $(19,944,012)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 214,792 210,121 1,909,641
Amortization of net premium paid on investments -- 2,978 54,551
Dividends reinvested (25,489) (11,586) (107,593)
Members' contributed salaries -- -- 12,986
Research and development service fee netted against
proceeds received from preferred stock issuance -- -- 5,015,000
Operating expenses paid by related parties on
behalf of Company -- -- 17,587
Amortization of deferred compensation 1,369 3,345 194,036
Investor relations fee netted against subscription receivable 12,000 -- 48,000
Compensatory common stock -- -- 135,000
Loss on sale of marketable securities 14,336 -- 45,240
Changes in assets and liabilities
Prepaid expenses 276,135 250,246 (816,267)
Interest receivable -- (3,263) --
Supplies (37,115) (5,802) (124,152)
Deposits -- -- (29,953)
Accounts payable and accrued expenses 339,377 (5,799) 601,453
------------ ------------ ------------
Net Cash Used in Operating Activities (952,568) (1,034,474) (12,988,483)
------------ ------------ ------------
Cash Flows from Investing Activities
Purchases of marketable securities (3,800,010) (1,665,997) (13,358,181)
Proceeds from sale of marketable securities 500,200 160,000 8,653,146
Expenditures related to patent (1,868) (1,113) (69,304)
Purchases of property and equipment (3,647) (27,147) (497,621)
------------ ------------ ------------
Net Cash Used in Investing Activities (3,305,325) (1,534,257) (5,271,960)
------------ ------------ ------------
Cash Flows from Financing Activities
Repurchase of common stock -- -- (80,000)
Proceeds from stock subscription receivable -- 232,315 1,290,000
Issuance of common stock, net of offering and transaction costs 4,955,456 -- 7,826,170
Issuance of preferred stock, net of research and development
service fee, technology option and costs of offering -- 2,480,000 9,932,496
------------ ------------ ------------
Net Cash Provided by Financing Activities 4,955,456 2,712,315 18,968,666
------------ ------------ ------------
Net Increase in Cash and Cash Equivalents 697,563 143,584 708,223
Cash and Cash Equivalents, Beginning of Period 10,660 227,193 --
------------ ------------ ------------
Cash and Cash Equivalents, End of Period $ 708,223 $ 370,777 $ 708,223
============ ============ ============
The accompanying notes are an integral part of these condensed financial
statements.
F-31
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 2003 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, 2004.
Stock Based Compensation
On April 4, 2003, the Company granted stock-based director compensation options
to one member of the Board of Directors. The Company accounts for those options
under the recognition and measurement principles of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. No stock-based director compensation cost is included in net
loss, as all the options granted had an exercise price equal to the market value
of the stock on the date of grant. The following table illustrates the effect on
net loss and earnings per share if the Company had applied the fair value
recognition provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," to stock-based compensation.
Three Months Ended March 31,
-----------------------------
2004 2003
------------ ------------
Net loss to common stockholders, as reported $(12,497,973) $ (1,474,714)
Add: Stock-based employee/ director compensation
included in reported net loss -- --
Deduct: Total stock-based employee/director compensation
expense under the fair value based method for all awards,
net of tax (3,914) --
------------ ------------
Pro forma net loss $(12,501,887) $ (1,474,714)
============ ============
Loss per share basic and diluted - as reported (.19) (.04)
Loss per share basic and diluted - pro forma (.19) (.04)
Shares used in basic and diluted loss per share amounts 64,861,411 37,575,404
============ ============
F-32
ASTRALIS, LTD.
(A Development Stage Entity)
Notes to Condensed Financial Statements
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