##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q

(Mark One)

|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | -------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



For the quarterly period ended March 31, 2003

|
|

OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | --------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



For the transition period from
 to



Commission File Number 0-6533



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BOSTON LIFE SCIENCES,
INC.

(Exact name of registrant as specified in its charter)



|Delaware (State or other jurisdiction of incorporation
or organization)                      |  | 87-0277826 (IRS Employer Identification
No.)
|-------------------------------------------------------------------------------------------- |  | --------------------------------------------
|                                                                                            
|20 Newbury Street, 5th Floor, Boston, Massachusetts (Address of principal executive offices) |  | 02116 (Zip code)                            



(617)
425-0200

(Registrants telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x  No ̈



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



As of May 9, 2003
there were 32,469,588 shares of Common Stock outstanding.



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##### Table of Contents



BOSTON LIFE SCIENCES, INC.



INDEX TO FORM 10-Q



|                                                                                                                                                                 |  | Page (s)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|Part I  Financial Information                                                                                                                                   |  |         
|                                                                                                                                                                
|Item 1  Financial Statements (Unaudited)                                                                                                                        |  |         
|                                                                                                                                                                
|Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                                                                                           |  | 1       
|                                                                                                                                                                
|Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002, and for the period from inception (October 16, 1992) to March 31, 2003 |  | 2       
|                                                                                                                                                                
|Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002, and for the period from inception (October 16, 1992) to March 31, 2003 |  | 3       
|                                                                                                                                                                
|Notes to Consolidated Financial Statements                                                                                                                       |  | 4  6   
|                                                                                                                                                                
|Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                   |  | 7  12  
|                                                                                                                                                                
|Item 3  Quantitative and Qualitative Disclosures about Market Risk                                                                                              |  | 12      
|                                                                                                                                                                
|Item 4  Controls and Procedures                                                                                                                                 |  | 12      
|                                                                                                                                                                
|Part II  Other Information                                                                                                                                      |  |         
|                                                                                                                                                                
|Item 1  Legal Proceedings                                                                                                                                       |  | 13      
|                                                                                                                                                                
|Item 2  Changes in Securities                                                                                                                                   |  | 13      
|                                                                                                                                                                
|Item 3  Defaults Upon Senior Securities                                                                                                                         |  | 13      
|                                                                                                                                                                
|Item 4  Submission of Matters to a Vote of Security Holders                                                                                                     |  | 13      
|                                                                                                                                                                
|Item 5  Other Information                                                                                                                                       |  | 13      
|                                                                                                                                                                
|Item 6  Exhibits and Reports on Form 8-K                                                                                                                        |  | 13      
|                                                                                                                                                                
|Signatures                                                                                                                                                       |  | 14      
|                                                                                                                                                                
|Certifications                                                                                                                                                   |  | 15  16 





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##### Table of Contents



Part I  Financial
Information



Item 1  Financial Statements



Boston Life Sciences, Inc.

(A Development Stage Enterprise)



Consolidated Balance Sheets

(Unaudited)



|                                                                                                                                                                          |  | March 31, 2003 |             |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|                                                                                                                                                                          |  |                |             |   |                   |  
|Assets                                                                                                                                                                    |  |                |             |   |                   |  
|Current assets:                                                                                                                                                           |  |                |             |   |                   |  
|Cash and cash equivalents                                                                                                                                                 |  | $              | 9,218,932   |   |                   | $
|Short-term investments                                                                                                                                                    |  |                | 5,484,282   |   |                   |  
|Other current assets                                                                                                                                                      |  |                | 430,397     |   |                   |  
|                                                                                                                                                                          |  |                |             |   |                   |  
|Total current assets                                                                                                                                                      |  |                | 15,133,611  |   |                   |  
|Fixed assets, net                                                                                                                                                         |  |                | 738,979     |   |                   |  
|Other assets                                                                                                                                                              |  |                | 341,585     |   |                   |  
|                                                                                                                                                                          |  |                |             |   |                   |  
|Total assets                                                                                                                                                              |  | $              | 16,214,175  |   |                   | $
|                                                                                                                                                                          |  |                |             |   |                   |  
|Liabilities and Stockholders
Equity                                                                                                                                      |  |                |             |   |                   |  
|Current liabilities:                                                                                                                                                      |  |                |             |   |                   |  
|Accounts payable and accrued expenses                                                                                                                                     |  | $              | 1,840,947   |   |                   | $
|Non-current liabilities:                                                                                                                                                  |  |                |             |   |                   |  
|10% convertible senior secured promissory notes                                                                                                                           |  |                | 3,612,891   |   |                   |  
|Stockholders equity:                                                                                                                                                     |  |                |             |   |                   |  
|Convertible preferred stock, $.01 par value; 1,000,000 shares authorized; 525,000 shares
designated; no shares issued and outstanding                                     |  |                |            |   |                   |  
|Common stock, $.01 par value; 50,000,000 shares authorized; 32,469,588 and 22,374,210
shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |  |                | 324,696     |   |                   |  
|Additional paid-in capital                                                                                                                                                |  |                | 98,792,648  |   |                   |  
|Accumulated other comprehensive income                                                                                                                                    |  |                | 24,564      |   |                   |  
|Deficit accumulated during development stage                                                                                                                              |  |                | (88,381,571 | ) |                   |  
|                                                                                                                                                                          |  |                |             |   |                   |  
|Total stockholders equity                                                                                                                                                |  |                | 10,760,337  |   |                   |  
|                                                                                                                                                                          |  |                |             |   |                   |  
|Total liabilities and stockholders equity                                                                                                                                |  | $              | 16,214,175  |   |                   | $
|                                                                                                                                                                          |  |                |             |   |                   |  



The
accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents



Boston Life
Sciences, Inc.

(A Development Stage Enterprise)



Consolidated Statements of Operations

(Unaudited)



|                                              |  | Three Months Ended March 31, |            |   | From Inception (October 16, 1992) to March 31, 2003 |  
|--------------------------------------------- |  | ---------------------------- | ---------- | - | --------------------------------------------------- | -
|                                              |  | 2003                         |            |   | 2002                                                |  
|Revenues                                      |  | $                            |           |   |                                                     | $
|Operating expenses:                           |  |                              |            |   |                                                     |  
|Research and development                      |  |                              | 1,364,466  |   |                                                     |  
|General and administrative                    |  |                              | 971,196    |   |                                                     |  
|Purchased in-process research and development |  |                              |           |   |                                                     |  
|                                              |  |                              |            |   |                                                     |  
|Total operating expenses                      |  |                              | 2,335,662  |   |                                                     |  
|                                              |  |                              |            |   |                                                     |  
|Loss from operations                          |  |                              | (2,335,662 | ) |                                                     |  
|Other expenses                                |  |                              |           |   |                                                     |  
|Interest expense                              |  |                              | (144,401   | ) |                                                     |  
|Investment income                             |  |                              | 126,465    |   |                                                     |  
|                                              |  |                              |            |   |                                                     |  
|Net loss                                      |  | $                            | (2,353,598 | ) |                                                     | $
|                                              |  |                              |            |   |                                                     |  
|Basic and diluted net loss per share          |  | $                            | (0.10      | ) |                                                     | $
|                                              |  |                              |            |   |                                                     |  
|Weighted average shares outstanding           |  |                              | 24,612,329 |   |                                                     |  
|                                              |  |                              |            |   |                                                     |  



The
accompanying notes are an integral part of the consolidated financial statements.



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Boston Life
Sciences, Inc.

(A Development Stage Enterprise)



Consolidated Statements of Cash Flows

(Unaudited)

|
|

|                                                                             |  | Three Months Ended March 31, |            |   | From Inception (October 16, 1992) to March 31, 2003 |  
|---------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | --------------------------------------------------- | -
|                                                                             |  | 2003                         |            |   | 2002                                                |  
|                                                                             |  |                              |            |   |                                                     |  
|Cash flows from operating activities:                                        |  |                              |            |   |                                                     |  
|Net loss                                                                     |  | $                            | (2,353,598 | ) |                                                     | $
|Adjustments to reconcile net loss to net cash used for operating
activities: |  |                              |            |   |                                                     |  
|Purchased in-process research and development                                |  |                              |           |   |                                                     |  
|Write-off of acquired technology                                             |  |                              |           |   |                                                     |  
|Conversion of accrued interest into notes payable                            |  |                              |           |   |                                                     |  
|Non-cash interest expense                                                    |  |                              | 32,019     |   |                                                     |  
|Non-cash charges related to options, warrants and common stock               |  |                              | 162,849    |   |                                                     |  
|Amortization and depreciation                                                |  |                              | 62,974     |   |                                                     |  
|Changes in current assets and liabilities:                                   |  |                              |            |   |                                                     |  
|(Increase) decrease in other current assets                                  |  |                              | (8,644     | ) |                                                     |  
|Increase in accounts payable and accrued expenses                            |  |                              | 5,779      |   |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|Net cash used for operating activities                                       |  |                              | (2,098,621 | ) |                                                     |  
|Cash flows from investing activities:                                        |  |                              |            |   |                                                     |  
|Cash acquired through Merger                                                 |  |                              |           |   |                                                     |  
|Purchases of fixed assets                                                    |  |                              | (8,258     | ) |                                                     |  
|Increase in other assets                                                     |  |                              | (1,246     | ) |                                                     |  
|Purchases of short-term investments                                          |  |                              | (2,262,291 | ) |                                                     |  
|Sales and maturities of short-term investments                               |  |                              | 2,864,878  |   |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|Net cash provided by (used for) investing activities                         |  |                              | 593,083    |   |                                                     |  
|Cash flows from financing activities:                                        |  |                              |            |   |                                                     |  
|Proceeds from issuance of common stock                                       |  |                              | 10,000,000 |   |                                                     |  
|Proceeds from issuance of preferred stock                                    |  |                              |           |   |                                                     |  
|Preferred stock conversion inducement                                        |  |                              |           |   |                                                     |  
|Proceeds from issuance of notes payable                                      |  |                              |           |   |                                                     |  
|Proceeds from issuance of convertible debentures                             |  |                              |           |   |                                                     |  
|Principal payments of notes payable                                          |  |                              |           |   |                                                     |  
|Payments of financing costs                                                  |  |                              | (69,931    | ) |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|Net cash provided by financing activities                                    |  |                              | 9,930,069  |   |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|Net increase in cash and cash equivalents                                    |  |                              | 8,424,531  |   |                                                     |  
|Cash and cash equivalents, beginning of period                               |  |                              | 794,401    |   |                                                     |  
|                                                                             |  |                              |            |   |                                                     |  
|Cash and cash equivalents, end of period                                     |  | $                            | 9,218,932  |   |                                                     | $
|                                                                             |  |                              |            |   |                                                     |  
|Supplemental cash flow disclosures:                                          |  |                              |            |   |                                                     |  
|Non-cash transactions (see note 5)                                           |  |                              |            |   |                                                     |  



The
accompanying notes are an integral part of the consolidated financial statements.



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Boston Life
Sciences, Inc.

(A Development Stage Enterprise)



Notes to Consolidated Financial Statements (Unaudited)

March 31, 2003



1. Basis of Presentation



The accompanying unaudited consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these
financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.



The interim unaudited consolidated financial statements
contained herein include, in managements opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The
results of operations for the interim period shown on this report are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the Companys consolidated financial statements and notes
for the year ended December 31, 2002 included in the Companys Annual Report on Form 10-K.



2. Net Loss Per Share



Basic and diluted net loss per share available to common stockholders has been calculated by dividing net loss by the weighted average number of common shares outstanding during the period. All
potentially dilutive common shares have been excluded from the calculation of weighted average common shares outstanding since their inclusion would be anti-dilutive.



Stock options and warrants to purchase approximately 10.8 million and 9.2 million shares of common stock were
outstanding at March 31, 2003 and 2002, respectively, but were not included in the computation of diluted net loss per common share because they were anti-dilutive. The exercise of those stock options and warrants outstanding at March 31, 2003,
which could generate proceeds to the Company of up to $39 million, could potentially dilute earnings per share in the future. At March 31, 2003, outstanding promissory notes which are convertible into 4,143,333 shares of common stock were not
included in the computation of diluted net loss per common share because they were anti-dilutive.



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Boston Life
Sciences, Inc.

(A Development Stage Enterprise)



Notes to Consolidated Financial Statements (Unaudited)



|3. |  | Comprehensive Loss
|-- |  | ------------------



The Company had total comprehensive loss of $2,444,434 and $3,096,032 for the three months ended March 31, 2003 and 2002, respectively.



|4. |  | Accounting for Stock-Based Compensation
|-- |  | ---------------------------------------



The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25) and related interpretations, in accounting for its employee stock-based compensation plans and related equity issuances, rather than the alternative fair value accounting method provided for under SFAS No. 123, Accounting
for Stock-Based Compensation, (SFAS No. 123). Under APB 25, when the exercise price of options granted under these plans equals the market price of the underlying stock on the date of grant, provided other criteria are met, no
compensation expense is recognized. All stock-based awards to non-employees are accounted for in accordance with SFAS No. 123 and Emerging Issues Task Force 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for
Acquiring or in Conjunction with Selling, Goods or Services.



The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:



|                                                                                                                 |  | Three Months Ended March 31, |           
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                                                                 |  | 2003                         |           
|Net loss, as reported                                                                                            |  | $                            | (2,353,598
|Add: Stock-based employee compensation expense recognized                                                        |  |                              |          
|Deduct: Total stock-based employee compensation expense determined under fair value
based methods for all awards |  |                              | (181,476  
|                                                                                                                 |  |                              |           
|Pro forma net loss                                                                                               |  | $                            | (2,535,074
|                                                                                                                 |  |                              |           
|Basic and diluted loss per share                                                                                 |  |                              |           
|As reported                                                                                                      |  | $                            | (0.10     
|Pro forma                                                                                                        |  | $                            | (0.10     



The fair
value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of zero percent; expected volatility of 100%; risk-free interest rates, based on the date
of grant, ranging from 5.00% to 6.00%; and expected lives ranging from three to five years.



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Boston Life
Sciences, Inc.

(A Development Stage Enterprise)



Notes to Consolidated Financial Statements (Unaudited)



5. Stockholders Equity



On March 12, 2003, the Company issued and sold an aggregate of
10,000,000 shares of its common stock at a purchase price of $1.00 per share in a private placement. The investors in the private placement included Robert L. Gipson, partners and employees of Ingalls & Snyder LLC, Thomas O. Boucher, Jr. and
other individual investors. The Company and the purchasers are relying on Regulation D under the Securities Act to exempt the sale from registration under the Securities Act. The Company is obligated to file a registration statement covering the
resale of the shares if requested by the investors and may be required to include the shares in future registrations of securities by the Company.



In connection with the private placement, two existing securityholders of the Company, Ingalls & Snyder Value Partners, L.P. and
Robert L. Gipson, agreed to restrictions on the voting of any shares of common stock issued to them prior to June 1, 2005 pursuant to their conversion of exercise of certain outstanding convertible notes and warrants of the Company. These
restrictions provide that if either securityholder converts or exercises all or any portion of the convertible notes and warrants prior to June 1, 2005, such securityholder will not (a) vote the shares of common stock received upon such conversion
or exercise, (b) deposit any such common stock in a voting trust, or subject such common stock to any other arrangement or agreement with respect to voting, or (c) communicate with or seek to advise or influence any other person with respect to the
solicitation or voting of such common stock in opposition to any matter that has been recommended by the Board of Directors or in favor of any matter that has not been approved by the Board of Directors.



In recognition of these restrictions, the Company has amended
its Rights Agreement, dated as of September 11, 2001, between the Company and Continental Stock Transfer & Trust Company, as rights agent, as amended, to provide that prior to June 1, 2005, these securityholders and their affiliates will be
deemed not to beneficially own the convertible notes and warrants and any common stock issued or issuable upon their conversion or exercise for purposes of the Rights Agreement.



As a result of the private placement, the conversion price of the companys outstanding convertible
notes has been reduced to $1.00 per share in accordance with the antidilution provisions of the notes. As of March 31, 2003, the notes are convertible into 4,143,333 shares of common stock. In addition, the Company recorded a beneficial conversion
feature related to the notes as a result of the reduction in the conversion price, whereby the carrying value of the notes decreased and additional paid in capital increased by approximately $289,000. The value of the beneficial conversion feature
will be recognized as interest expense over the remaining life of the notes.



In March 2003, the Company purchased the 10% minority interest in ProCell Pharmaceuticals, one of the Companys subsidiaries for 95,378 shares of common stock which resulted in a non-cash charge
of approximately $90,000. As of March 31, 2003, the Company owns 100% of the equity of ProCell Pharmaceuticals.



In March 2002, the Company completed a private placement of 1,599,568 shares of common stock, which raised approximately $3.4 million in
gross proceeds. In connection with the financing, the Company issued warrants to the investors to purchase 399,892 shares of common stock at an exercise price equal to $2.75 per share. In connection with this financing, the Company paid $271,772 in
cash and issued a warrant to purchase 157,557 shares of common stock at an exercise price equal to $2.75 per share to the placement agent.



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Item 2
  Managements Discussion and Analysis of Financial Condition and Results of Operations



This Quarterly Report on Form 10-Q contains forward-looking statements. Specifically, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to
identify forward-looking statements. There are a number of meaningful factors that could cause the Companys actual results to differ materially from those indicated by any such forward-looking statements. These factors include, without
limitation, the duration and results of pre-clinical testing and clinical trials and their effect on the Food and Drug Administration, or FDA, regulatory process, uncertainties regarding receipt of approvals for any possible products and any
commercial acceptance of such products, possible difficulties with obtaining necessary patent protection, and uncertainties regarding the Companys reliance on outside providers for the conduct of its research and development, pre-clinical and
clinical activities. Other factors include those set forth under the caption Forward-Looking Statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2002 and the documents referred to under such
caption.



General



Description of Company



The Company is a biotechnology company engaged in the
research and development of biopharmaceutical products for the diagnosis and treatment of central nervous system, or CNS, diseases and for the treatment of some cancers and autoimmune diseases. At March 31, 2003, the Company is considered a
development stage enterprise as defined in Statement of Financial Accounting Standards No. 7.



Product Development



ALTROPANE is an imaging agent for the diagnosis of Parkinsonian Syndrome, or PS, (including Parkinsons Disease, or PD), and
Attention Deficit Hyperactivity Disorder, or ADHD. We have completed a Phase III clinical trial for the diagnosis of PS and hope to submit a New Drug Application, or NDA, with the FDA in the first half of 2003. We are currently conducting our second
Phase II trial of ALTROPANE for the diagnosis of ADHD in adults using a simplified scanning procedure and algorithm adjustments.



Inosine is a nerve growth factor which specifically promotes axon outgrowth in CNS cells. We are currently conducting pre-clinical studies
required for the filing of an Investigational New Drug, or IND. We expect to file an IND in 2004. Subsequent to filing an IND, Phase I clinical studies will commence.



Troponin I, or Troponin, is our anti-angiogenic agent under development as a potential treatment for cancer.
Troponin is presently in pre-clinical development.



Earlier stage product candidates include FLUORATEC, a second-generation imaging agent for the diagnosis of PD and ADHD and compounds for the treatment of PD and other central nervous system disorders.



To date, we have not marketed, distributed or sold any
products and, with the exception of the ALTROPANE imaging agent, all of our technologies and early-stage product candidates are in pre-clinical development. Our product candidates must undergo a rigorous regulatory approval process which includes
extensive pre-clinical and clinical testing to demonstrate safety and efficacy before any resulting product can be marketed. The FDA has stringent laboratory and manufacturing standards



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which must be complied with
before we can test our product candidates in people or make them commercially available. Pre-clinical testing and clinical trials are lengthy and expensive and the historical rate of failure for product candidates is high. Clinical trials require
sufficient patient enrollment which is a function of many factors, and delays and difficulties in completing patient enrollment can result in increased costs and longer development times. The foregoing uncertainties and risks limit our ability to
estimate the timing and amount of future costs that will be required to complete the clinical development of each program. In addition, we are unable to estimate when material net cash inflows are expected to commence as a result of the successful
completion of one or more of our programs. However, we do not currently expect to generate revenues from product sales for at least the next twelve months.



The biotechnology and pharmaceutical industries are highly competitive and are dominated by larger, more experienced and better
capitalized companies. Any delays we encounter in completing our clinical trial programs may adversely impact our competitive position in the markets in which we compete. Such delays may also adversely affect our financial position and liquidity.



Critical Accounting Policies



Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements which have been prepared by us in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our estimates include those related to investments and research
contracts. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For a
complete description of our accounting policies, see Note 1 to our consolidated financial statements in our Annual Report on Form 10-K.



Investments



Our investments consist exclusively of investments in United States agency bonds and corporate debt obligations. These marketable
securities are adjusted to fair value on the consolidated balance sheet through other comprehensive income. We disclose the value of restricted investments, if any, in the notes to our consolidated financial statements. These investments are
classified as a current asset because they are highly liquid and are available, as required, to meet working capital and other operating requirements.



Research contracts



We regularly enter into contracts with third parties to perform research and development activities in connection with our scientific
technologies. Costs incurred under these contracts are recognized ratably over the term of the contract which we believe corresponds to the manner in which the work is performed.



Results of Operations



Three Months Ended March 31, 2003 and 2002



The Companys net loss was $2,353,598 during the three months ended March 31, 2003 as compared with
$3,019,791 during the three months ended March 31, 2002. Net loss per common share equaled $0.10 per share for the 2003 period as compared to $0.14 per share for the 2002 period. The decrease in net loss in the 2003 period was primarily due to lower
research and development expenses. The lower net loss per common share in the 2003 period was primarily due to a decrease in net loss in the



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2003 period and to a lesser
degree, to an increase in weighted average shares outstanding of approximately 3.5 million shares.



Research and development expenses were $1,364,466 during the three months ended March 31, 2003 as compared with $2,062,876 during the
three months ended March 31, 2002. The decrease was primarily attributable to lower manufacturing development costs for Troponin of approximately $634,000 and lower pre-clinical costs for Inosine of approximately $163,000. The decrease was partially
offset by higher costs in the 2003 period related to the preparation of the NDA for ALTROPANE for the diagnosis of PS of approximately $214,000.



General and administrative expenses were $971,196 during the three months ended March 31, 2003 as compared with $912,757 during the three
months ended March 31, 2002. The increase was primarily related to higher non-cash consulting expenses of approximately $73,000 and higher NASDAQ fees of approximately $45,000 related to the Companys transfer to the Small Cap Market in March
2003. The increase in these expenses was partially offset by lower legal fees of approximately $76,000 in connection with patent and intellectual property efforts.



Other expenses were none during the three months ended March 31, 2003 as compared with $143,500 during the
three months ended March 31, 2002. During the 2002 period, the Company entered into an agreement with a securityholder to modify the terms of certain warrants held by the securityholder. The securityholder agreed to defer the date on which the
exercise price of the warrants would be reset. In return, the Company issued additional warrants to the securityholder. The non-cash charge of $143,500 was based upon a fair value calculation of the additional warrants issued to the securityholder
as determined under the Black-Scholes pricing model.



Interest expense was $144,401 during the three months ended March 31, 2003 as compared with none during the three months ended March 31, 2002. The increase is due to the July and December 2002 issuance of $4 million and $0.1 million
of 10% convertible notes, respectively. During the 2003 period, the Company incurred approximately $103,000 in interest on the 10% coupon, $32,000 in non-cash interest associated with the accretion of the discounted carrying value of the notes and
$9,000 in amortization of debt issuance costs.



Investment income was $126,465 during the three months ended March 31, 2003 as compared with $99,342 during the three months ended March 31, 2002. The increase was primarily due to higher realized gains of approximately $70,000 in
the 2003 period, partially offset by lower average cash, cash equivalent, and short-term investment balances during the 2003 period as compared to the 2002 period.



Liquidity and Capital Resources



Cash used in operating activities, primarily related to our net loss, totaled $2,098,621 during the three
months ended March 31, 2003 as compared with $2,215,714 during the three months ended March 31, 2002. The decrease in 2003 is primarily related to lower research and development expenses in 2003. Cash provided by investing activities totaled
$593,083 during the three months ended March 31, 2003 as compared with $1,861,786 during the three months ended March 31, 2002. The difference in investing activities principally reflects the purchase of short-term investments with the proceeds from
the private placements, described below, completed by the Company in 2003 and 2002, net of the sales of short-term investments which were subsequently used to fund operations. Cash flow from financing activities was $9,930,069 during the three
months ended March 31, 2003 as compared with $2,928,396 during the three



9



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months ended March 31, 2002.
The difference in financing activities principally reflects the effect of the private placements, described below, completed by the Company in 2003 and 2002.



As of March 31, 2003, the Company has incurred total net losses since inception of approximately $88 million. To date, the Company has
dedicated most of its financial resources to the research and development of its product candidates, preclinical compounds, general and administrative expenses and costs related to obtaining and protecting patents. Since inception, the Company has
primarily satisfied its working capital requirements from the sale of the Companys securities through private placements. These private placements have included the sale of preferred stock and common stock, as well as notes payable and
convertible debentures. A summary of financings completed during the three years ended March 31, 2003 is as follows:



|Date       |  | Net Proceeds Raised |  | Securities Issued                                           
|---------- |  | ------------------- |  | ------------------------------------------------------------
|March 2003 |  | $9.9 million        |  | Common stock                                                
|July 2002  |  | $3.9 million        |  | Convertible debentures and warrants to purchase common stock
|March 2002 |  | $2.8 million        |  | Common stock and warrants to purchase common stock          
|June 2000  |  | $9.9 million        |  | Common stock and warrants to purchase common stock          



In the
future, the Companys working capital and capital requirements will depend on numerous factors, including the progress of the Companys research and development activities, the level of resources that the Company devotes to the
developmental, clinical, and regulatory aspects of its technologies, and the extent to which the Company enters into collaborative relationships with pharmaceutical and biotechnology companies.



At March 31, 2003, the Company had available cash, cash
equivalents, and investments of approximately $14.7 million and working capital of approximately $13.3 million. The Company believes that the cash, cash equivalents, and investments available at March 31, 2003 will provide sufficient working capital
to meet its anticipated expenditures for more than the next twelve months. The Company may raise additional capital in the future through collaboration agreements with other pharmaceutical or biotechnology companies, debt financing and equity
offerings. There can be no assurance, however, that the Company will be successful or that additional funds will be available on acceptable terms, if at all.



Following is information on the direct research and development costs incurred (all amounts in thousands) on the Companys principal
scientific technology programs currently under development. These amounts do not include research and development employee and related overhead costs which total approximately $8.8 million on a cumulative basis.



|Program              |  | Period (1) |     | Year to date |   | Cumulative
|-------------------- |  | ---------- | --- | ------------ | - | ----------
|Diagnostic imaging   |  | $          | 365 |              | $ | 365       
|Anti-angiogenesis    |  |            | 49  |              |   | 49        
|CNS regeneration     |  |            | 262 |              |   | 262       
|Auto-immune diseases |  |            | 13  |              |   | 13        
|Other                |  | $          | 20  |              | $ | 20        

---

|(1) |  | three months ended March 31, 2003
|--- |  | ---------------------------------



Estimating costs and time to complete development of a specific program or technology is difficult due to the uncertainties of the
development process and the requirements of the FDA which



10



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could require additional
clinical trials or other development and testing. Results of any testing could lead to a decision to change or terminate development of a technology, in which case estimated future costs could change substantially. In the event the Company were to
enter into a licensing or other collaborative agreement with a corporate partner involving sharing or funding by such corporate partner of development costs, the estimated development costs incurred by the Company could be substantially less than
estimated. Additionally, research and development costs are extremely difficult to estimate for early-stage technologies due to the fact that there is generally less comprehensive data available for such technologies to determine the development
activities that would be required prior to the filing of an NDA. As a result, the Company cannot reasonably estimate the cost and the date of completion for any technology that is not at least in Phase III clinical development due to the uncertainty
of the number of required trials and size of such trials and the duration of development. As of March 31, 2003, the Company estimates that it will incur approximately $250,000 in additional direct research and development costs to complete the
preparation and submission of the NDA for ALTROPANE for the diagnosis of PS. This estimate does not include research and development employee and related overhead costs. Actual costs and time to complete may differ significantly from the estimates.



The Company leases certain office equipment,
office space and laboratory space under noncancelable operating leases. The Companys current corporate office lease expires in 2012 and contains provisions whereby the Company can sublet all or part of the space and fully retain any sublease
income generated. The Company also leases laboratory space that expires in May 2004 and can be renewed by the Company for an additional two-year period. Research and development commitments consists of contractual obligations with third parties.
During 2003, the Company finalized certain agreements, primarily related to Inosine, which increased its future research and development commitments. The Company also finalized an Executive Consulting and Director Agreement with its former President
under which it will make payments of $125,000 in both 2004 and 2005, which amounts are included below under Other General and Administrative. As of March 31, 2003, approximate future minimum commitments under the above leases and other contractual
obligations are as follows:



|Year Ended December 31, |  | Research and Development |           | Operating Lease |   | Other General and Administrative |  | Maturity Of Debt
|----------------------- |  | ------------------------ | --------- | --------------- | - | -------------------------------- |  | ----------------
|2003                    |  | $                        | 2,740,000 |                 | $ | 228,041                          |  |                 
|2004                    |  |                          | 200,000   |                 |   | 280,456                          |  | $               
|2005                    |  |                          |          |                 |   | 264,000                          |  |                 
|2006                    |  |                          |          |                 |   | 271,700                          |  |                 
|2007                    |  |                          |          |                 |   | 277,200                          |  |                 
|Thereafter              |  |                          |          |                 |   | 1,303,500                        |  |                 
|                        |  |                          |           |                 |   |                                  |  |                 
|                        |  | $                        | 2,940,000 |                 | $ | 2,624,897                        |  | $               
|                        |  |                          |           |                 |   |                                  |  |                 



In July
2002, the Company entered into agreements pursuant to which the Company has issued $4.0 million in principal amount of 10% convertible senior secured promissory notes to a single institutional investor in a private placement. The Notes were issued
pursuant to exemptions afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Notes mature in June 2005 and bear interest at 10% per annum, payable semi-annually on June 1 and December 1. The Company may elect to
pay interest on the Notes in either cash or, subject to certain limitations, additional Notes on the same terms. Pursuant to the Companys private placement of common stock completed in March 2003, the Notes may be converted into the
Companys common stock at the option of the holder at a conversion price of $1.00 per share, subject to anti-dilution adjustments. Among other adjustments, unless the investor consents otherwise, if the Company issues equity securities in the
future for consideration per share of common stock less than the then applicable conversion price of the Notes, the conversion price of the Notes will be reduced to equal that lower price. The Notes are secured by a first priority security interest
and continuing lien on all current and after acquired property of the Company. The Company generally may obtain a release of the security interest by providing alternative collateral in the form of either cash or a bank letter of credit. Until the
time, if any, that the Company provides alternative collateral or less than $500,000 principal amount of notes remains outstanding, the agreements also prohibit the Company, among other things, from entering into any merger, consolidation or sale of
all or substantially all of its assets, incurring additional indebtedness, encumbering its assets with any liens and redeeming or paying dividends on any of its capital stock. The Company is permitted to grant licenses or sublicenses of its
intellectual property to third parties in the ordinary course of its



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business free from the
security interest, but the holders of the notes will receive a first priority security interest and continuing lien on all amounts owing to the Company in respect of any such license or sublicense. The agreements also contain customary events of
default, including any change of control of the Company and breach by the Company of its representations and warranties and covenants contained in the agreements. If an event of default were to occur, the Companys obligations under the notes
could be accelerated and become immediately due and payable in full.



Item 3  Quantitative and Qualitative Disclosures about Market Ris
k



There have been no
material changes in the market risks reported in the Companys Annual Report on Form 10-K for the year ended December 31, 2002.



Item 4  Controls and Procedures



Evaluation of disclosure controls and procedures



The Companys principal executive and financial officers reviewed and evaluated the Companys disclosure controls and procedures (as defined in Exchange Act Rule 13a-14) as of a date within
90 days before the filing date of this Form 10-Q. Based on that evaluation, the Companys principal executive and financial officer concluded that the Companys disclosure controls and procedures are effective in enabling the Company to
identify, process and report information required to be disclosed in the reports the Company files under the Exchange Act.



Changes in internal controls



There were no significant changes in the Companys internal controls or other factors that could significantly affect those controls
subsequent to the date of the Companys evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



12



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##### Table of Contents



PART II
 OTHER INFORMATION



ITEM 1: LEGAL PROCEEDINGS.



None.



ITEM 2: CHANGES IN SECURITIES.



On March 12, 2003, the Company issued and sold an aggregate of 10,000,000 shares of its common stock at a purchase price of $1.00 per share in a private placement. The investors in the private placement included Robert L. Gipson,
partners and employees of Ingalls & Snyder LLC, Thomas O. Boucher, Jr. and other individual investors. The Company and the purchasers are relying on Regulation D under the Securities Act to exempt the sale from registration under the Securities
Act. The Company is obligated to file a registration statement covering the resale of the shares if requested by the investors and may be required to include the shares in future registrations of securities by the Company.



In connection with the private placement, two existing
securityholders of the Company, Ingalls & Snyder Value Partners, L.P. and Robert L. Gipson, agreed to restrictions on the voting of any shares of common stock issued to them prior to June 1, 2005 pursuant to their conversion of exercise of
certain outstanding convertible notes and warrants of the Company. These restrictions provide that if either securityholder converts or exercises all or any portion of the convertible notes and warrants prior to June 1, 2005, such securityholder
will not (a) vote the shares of common stock received upon such conversion or exercise, (b) deposit any such common stock in a voting trust, or subject such common stock to any other arrangement or agreement with respect to voting, or (c)
communicate with or seek to advise or influence any other person with respect to the solicitation or voting of such common stock in opposition to any matter that has been recommended by the Board of Directors or in favor of any matter that has not
been approved by the Board of Directors.



In
recognition of these restrictions, the Company has amended its Rights Agreement, dated as of September 11, 2001, between the Company and Continental Stock Transfer & Trust Company, as rights agent, as amended, to provide that prior to June 1,
2005, these securityholders and their affiliates will be deemed not to beneficially own the convertible notes and warrants and any common stock issued or issuable upon their conversion or exercise for purposes of the Rights Agreement.



As a result of the private placement, the conversion price of
the companys outstanding convertible notes has been reduced to $1.00 per share in accordance with the antidilution provisions of the notes. As of March 31, 2003, the notes are convertible into 4,143,333 shares of common stock. In addition, the
Company recorded a beneficial conversion feature related to the notes as a result of the reduction in the conversion price, whereby the carrying value of the notes decreased and additional paid in capital increased by approximately $289,000. The
value of the beneficial conversion feature will be recognized as interest expense over the remaining life of the notes.



The Company did not incur any placement agent fees in connection with the private placement.



For more information regarding the sale of our common stock,
see our Current Report on Form 8-K dated March 12, 2003.



In March 2003, the Company purchased the 10% minority interest in ProCell Pharmaceuticals, one of the Companys subsidiaries for 95,378 shares of common stock which resulted in a non-cash charge of approximately $90,000. As of
March 31, 2003, the Company owns 100% of the equity of ProCell Pharmaceuticals.



ITEM 3: DEFAULTS UPON SENIOR SECURITIES.



None.



ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.



None.



ITEM 5: OTHER INFORMATION.



| | (a) |  | Exhibits.
| | --- |  | ---------



None.



ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.



| | (a) |  | Exhibits.
| | --- |  | ---------



|    
|----
|99.1
|    
|99.2
|    
|99.3
|    
|99.4
|    
|99.5
|    
|99.6



(1)     Filed herewith.

(2)     Incorporated by reference
to the Companys Current Report on Form 8-K dated March 12, 2003.



| | (b) |  | Reports on Form 8-K: The Registrant filed the following reports on Form 8-K during the quarter ended March 31, 2003:
| | --- |  | --------------------------------------------------------------------------------------------------------------------



|Date of Report |  | Item Reported
|-------------- |  | -------------
|March 12, 2003 |  | 5,7          
|March 25, 2003 |  | 7,9          



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SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |  |  | BOSTON LIFE SCIENCES,
INC                   
|---------------------- |  |  |  | --------------------------------------------
|                       |  |  |  | (Registrant)                                
|                      
|DATE:     May 15, 2003 |  |  |  | /s/    ROBERT J. ROSENTHAL                  
|                       |  |  |  | Robert J. Rosenthal                         
|                       |  |  |  | President and Chief Executive Officer       
|                       |  |  |  | (Principal Executive Officer)               
|                       |  |  |  |                                             
|                       |  |  |  | /s/    JOSEPH HERNON                        
|                       |  |  |  | Joseph Hernon                               
|                       |  |  |  | Chief Financial Officer                     
|                       |  |  |  | (Principal Financial and Accounting Officer)







14



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CERTIFICATION
 PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Robert J. Rosenthal, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Boston Life Sciences, Inc.;
|-- |  | ---------------------------------------------------------------------------------



|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 officer 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 we 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 officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent function):
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 officer 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 15, 2003 |  | 
|      |  |              |  | 





15



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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Joseph Hernon, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Boston Life Sciences, Inc.;
|-- |  | ---------------------------------------------------------------------------------



|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 officer 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 we 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 officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent function):
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 officer 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 15, 2003 |  | 
|      |  |              |  | 

|
|

|
|

|
|







16