Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Oct. 31, 2015 | Jul. 21, 2016 | Apr. 30, 2015 | |
Document and Entity Information: | |||
Entity Registrant Name | ARROGENE, INC | ||
Document Type | 10-K | ||
Document Period End Date | Oct. 31, 2015 | ||
Trading Symbol | skrp | ||
Amendment Flag | false | ||
Entity Central Index Key | 1,403,792 | ||
Current Fiscal Year End Date | --10-31 | ||
Entity Common Stock, Shares Outstanding | 22,215,860 | ||
Entity Public Float | $ 0 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY | ||
Entity Incorporation, State Country Name | Delaware | ||
Entity Incorporation, Date of Incorporation | Dec. 7, 2006 | ||
Entity Information, Date to Change Former Legal or Registered Name | Sep. 4, 2012 | ||
Entity Information, Former Legal or Registered Name | SRKP 16, Inc. |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Oct. 31, 2015 | Oct. 31, 2014 | |||
Current assets: | |||||
Cash and cash equivalents | $ 35,204 | $ 37,007 | |||
Prepaid expenses and deposit | 8,250 | 13,592 | |||
Debt offering costs | 19,659 | 65,244 | |||
Total current assets | 63,113 | 115,843 | |||
Property and equipment, net | [1] | 686 | [2] | ||
Total assets | 63,113 | 116,529 | |||
Current liabilities: | |||||
Accrued compensation | 380,249 | 244,990 | |||
Payable to CSMC | 53,506 | 158,391 | |||
Bridge notes | 1,014,300 | [3] | 600,670 | [4] | |
Accrued legal fees | 80,370 | 93,998 | |||
Related party payables | 49,001 | 49,000 | |||
Common stock payable | 246,400 | 246,400 | |||
Accrued interest | 137,250 | 40,583 | |||
Other accrued liabilities | 137,690 | 149,094 | |||
Convertible notes | 10,000 | 10,000 | |||
Total current liabilities | 2,108,766 | 1,593,126 | |||
Total liabilities | 2,108,766 | 1,593,126 | |||
STOCKHOLDERS' EQUITY (DEFICIT): | |||||
Preferred stock | [5] | ||||
Common stock | 2,222 | [6] | 2,138 | ||
Additional paid-in capital | 5,344,298 | 4,906,008 | |||
Accumulated deficit | (7,392,173) | (6,384,743) | |||
Total stockholders' equity (deficit) | (2,045,653) | (1,476,597) | |||
Total liabilities and stockholders' equity (deficit) | $ 63,113 | $ 116,529 | |||
[1] | Net of accumulated depreciation of $4,697. | ||||
[2] | Net of accumulated depreciation of $4,011. | ||||
[3] | Less discount of $35,700. | ||||
[4] | Less discount of $99,330. | ||||
[5] | Common stock, $.0001 par value; 100,000,000 shares authorized; 22,215,860 shares issued and outstanding. | ||||
[6] | Common stock, $.0001 par value; 100,000,000 shares authorized; 21,375,860 shares issued and outstanding. |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets - Parenthetical - USD ($) | Oct. 31, 2015 | Oct. 31, 2014 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Bridge notes discount | $ 35,700 | $ 99,330 |
Accumulated depreciation | $ 4,697 | $ 4,011 |
Preferred Stock, Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Common Stock, Par Value | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares Issued | 22,215,860 | 21,375,860 |
Common Stock, Shares Outstanding | 22,215,860 | 21,375,860 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
OPERATING EXPENSES: | ||
General and administrative | $ 477,405 | $ 1,135,519 |
Research and development | 136,110 | 285,741 |
Operating expenses | 613,515 | 1,421,260 |
Income (Loss) from operations | (613,515) | (1,421,260) |
OTHER INCOME (EXPENSE): | ||
Interest | (393,915) | (211,644) |
Other income (expense) | (393,915) | (211,644) |
Net income (loss) | $ (1,007,430) | $ (1,632,904) |
Weighted average shares outstanding, basic and diluted | 21,380,463 | 21,371,819 |
Loss per share, basic and diluted | $ (0.05) | $ (0.08) |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Stockholders' Equity (Deficit) - (Unaudited) - USD ($) | Common Stock | APIC | Accumulated Deficit | Total |
Balances, Value at Oct. 31, 2013 | $ 2,135 | $ 4,287,289 | $ (4,751,839) | $ (462,415) |
Balances, Shares at Oct. 31, 2013 | 21,350,860 | |||
Sale of Units at $1.00 per Unit, Value | $ 3 | 24,953 | $ 24,956 | |
Sale of Units at $1.00 per Unit, Shares | 25,000 | 25,000 | ||
Stock option compensation expense | 217,266 | $ 217,266 | ||
Bridge Note Warrants | 205,800 | 205,800 | ||
Placement Agent warrants | 35,700 | 35,700 | ||
Contributed services | 135,000 | 135,000 | ||
Net income (loss) | (1,632,904) | (1,632,904) | ||
Balances, Value at Oct. 31, 2014 | $ 2,138 | 4,906,008 | (6,384,743) | (1,476,597) |
Balances, Shares at Oct. 31, 2014 | 21,375,860 | |||
Stock option compensation expense | 75,883 | 75,883 | ||
Bridge Note Warrants | 102,900 | 102,900 | ||
Placement Agent warrants | 17,850 | 17,850 | ||
Contributed services | 240,901 | 240,901 | ||
Exercise of warrants, Value | $ 84 | 756 | 840 | |
Exercise of warrants, Shares | 840,000 | |||
Net income (loss) | (1,007,430) | (1,007,430) | ||
Balances, Value at Oct. 31, 2015 | $ 2,222 | $ 5,344,298 | $ (7,392,173) | $ (2,045,653) |
Balances, Shares at Oct. 31, 2015 | 22,215,860 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (1,007,430) | $ (1,632,904) |
Adjustments to reconcile Net Income (Loss) to net cash used in operating activities: | ||
Amortization of debt placement costs and debt discount | 296,289 | 170,609 |
Share-based payment expense | 75,883 | 403,933 |
Contributed services | 240,901 | 135,000 |
Depreciation expense | 686 | 1,019 |
(Increase) decrease in prepaids and deposit | 5,342 | 117 |
Increase (decrease) in payables and accrued liabilities | 127,011 | 350,637 |
Net cash used in operating activities | (261,318) | (571,589) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net proceeds from sale of Units | 24,956 | |
Proceeds from exercise of warrants | 840 | |
Net proceeds from sale of Bridge Notes | 258,675 | 569,818 |
Net cash provided by financing activities | 259,515 | 594,774 |
Net increase (decrease) in cash | (1,803) | 23,185 |
Cash and cash equivalents at the beginning of period | 37,007 | 13,822 |
Cash and cash equivalents at the end of period | $ 35,204 | $ 37,007 |
Business, Overview, Basis of Pr
Business, Overview, Basis of Presentation and Consolidation | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Business, Overview, Basis of Presentation and Consolidation | (1) BUSINESS, OVERVIEW, BASIS OF PRESENTATION AND CONSOLIDATION Arrogene, Inc. (Arrogene f/k/a SRKP 16, Inc.), was incorporated under the laws of the State of Delaware on December 7, 2006 . On January 11, 2012 , we consummated a reverse merger transaction (the Reverse Merger) with Arrogene Nanotechnology, Inc. (ANI) , a company focused on oncology . Hereafter, SRKP 16, Inc., Arrogene and ANI are collectively referred to as the Company. Effective September 4, 2012 , SRKP 16, Inc. officially changed its name to Arrogene, Inc. The Company was founded to commercialize both new cancer treatments and imaging targeting technology as well as a proprietary molecular delivery platform that interferes with those targets in order to inhibit and finally eradicate tumor progression. The Company is the exclusive licensee to certain intellectual property rights owned by Cedars Sinai Medical Center (CSMC) in Los Angeles, one of the nations premiere research institutions (the License). The licensed technology consists of a family of related nano-biopolymers conjugates (collectively referred to here as Polycefin ), believed capable of acting as a drug delivery and targeting platform for cancer therapy and imaging. We also have developed important related intellectual properties surrounding tumor biomarker Laminin 411. Laminins are the major components of basement membranes that are orderly sheet-like structures secreted by cells to separate several cell types from one another. Laminins play key roles in cell adhesion, polarity, movement and differentiation. Our strategy is to develop Polycefin and Laminin 411 into both a diagnostic/prognostic product line as well as therapeutics with both product lines targeting tumors, with an initial focus on brain, breast and lung cancers including the metastatic forms of the latter two. Based on the pre-clinical scientific results from these initial indications, we might expand our indications to other types of cancer indications as well as other diseases that could benefit from Polycefins ability to target disease cells or pass through the Brain Tumor Barrier. Our product development plan focuses on delivering a diagnostic product line first, due to the relatively shorter regulatory approval process associated with diagnostic imaging agents in comparison to therapeutics. Our planned products will require approval or marketing clearance from the United States Food and Drug Administration (the FDA). To date we have not filed any applications with the FDA, but we have begun the process of validating our Laboratory Development Test (LDT) with applicable regulators. The accompanying consolidated financial statements include the accounts of Arrogene and its wholly owned subsidiary ANI. All intercompany transactions have been eliminated in consolidation. |
Going Concern and Management's
Going Concern and Management's Plans | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Going Concern and Management's Plans | (2) GOING CONCERN AND MANAGEMENTS PLANS The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Since our inception in August 2007, we have not generated revenue, incurred operating losses, and as of October 31, 2015, had an accumulated deficit of $7,392,173. Further, as of October 31, 2015, our cash balance was only $35,204 and we had a working capital deficit of $2,045,653. These conditions raise substantial doubt about our ability to continue as a going concern. In February 2016, we commenced an offering of up to $4,000,000 in convertible promissory notes (Convertible Promissory Notes). The Convertible Promissory Notes bear interest at 10% per annum, are convertible into shares of common stock at $1.00 per share, and principal and accrued interest are due and payable five years after the initial closing of the offering. In February 2016 and April 2016, we sold $900,000 in Convertible Promissory Notes receiving $900,000 in net proceeds as there were no offering costs associated with this tranche. Management believes that these proceeds will be sufficient to meet our obligations through at least October 31, 2016. In order to fully fund our planned activities, we will require additional capital. In the event that we cannot raise sufficient capital within the required timeframes, it will have a material adverse effect on the Companys liquidity, financial condition and business prospects or force the Company out of business. The accompanying financial statements do not include adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from an inability of the Company to continue as a going concern. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Significant Accounting Policies | (3) SIGNIFICANT ACCOUNTING POLICIES Use of Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported periods. Actual results may differ from these estimates. Cash and cash equivalents We consider all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment is recorded at historical cost, and is comprised of computer equipment and software. Depreciation and amortization of property and equipment is provided in amounts sufficient to relate the cost of the related assets to operations over their estimated service lives using the straight-line method. The useful lives of the assets are three years. Depreciation and amortization expense amounted to $686 and $1,019 for the years ended October 31, 2015 and 2014, respectively. Revenue Recognition While we have not generated revenue to date, we will recognize revenue when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and we are reasonably assured of collecting the resulting receivable. Revenue arrangements that include multiple deliverables are divided into separate units of accounting if the deliverables meet certain criteria. If applicable, we will record product revenues net of revenue reserves such as sales returns and allowances. This accounting policy for revenue recognition may have a substantial impact on our reported results and relies on certain estimates that can require difficult, subjective and complex judgments on the part of management. Research and Development Costs Research and development costs are expensed as incurred. Income Taxes We account for income taxes by recognizing deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets then may be reduced by a valuation allowance for amounts that do not satisfy specified realization criteria. Accounting rules also prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We are required to recognize a liability in the financial statements for the impact of a tax position if that position is more likely than not of not being sustained on audit, based on the technical merits of the position. We currently do not have any tax positions that meet this threshold. We currently have a full valuation allowance against our net deferred tax assets and have not recognized any benefits from tax positions in earnings. We will recognize potential interest and penalties related to income tax positions as a component of the provision for income taxes on the statements of operations in any future periods in which we must record a liability. Interest and penalties totaled $0 and $0 for the years ended October 31, 2015 and 2014, respectively. We file income tax returns in the U.S. federal jurisdiction and with the State of California. We have not filed income tax returns for the years ended October 31, 2012 through 2015, however, as no taxes are due, we do not believe these non-filings will have a material impact on our financial statements. We are still subject to income tax examinations by the State of California and the IRS for all tax years since the date of inception. Since we have not recorded liabilities at October 31, 2015 and 2014, there is no impact to our effective tax rate. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. Our review of prior year tax positions using the criteria and provisions presented by the FASB did not result in a material impact on the Companys financial position or results of operations. Share-Based Payments We account for share-based payment costs at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. For stock options, the estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider various factors when estimating expected forfeitures, including historical experience. Actual results may differ substantially from these estimates. We determine the fair value of warrants and stock options using the Black-Scholes valuation model, which considers the exercise price relative to the market value of the underlying stock, the expected stock price volatility, the risk-free interest rate and the dividend yield, and the estimated period of time option grants will be outstanding before they are ultimately exercised. Significant management judgment is required in making certain of these assumptions. Earnings (Loss) Per Share Earnings (loss) per share are computed by dividing the Companys income (loss) attributable to common shareholders by the weighted average number of common shares outstanding. The impact of any potentially dilutive securities is excluded. Diluted earnings per share are computed by dividing the Companys income (loss) attributable to common shareholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. In calculating diluted earnings per share, we utilize the treasury stock method for all stock options and warrants and the if converted method for all other convertible securities. For all periods presented, the basic and diluted loss per share is the same as the impact of potential dilutive common shares is anti-dilutive. Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share are as follows: Years ended October 31, 2015 2014 Convertible debt* 766,667 766,667 Warrants 5,518,358 6,358,358 Stock Options 1,450,000 1,450,000 Common shares issuable under investor relations agreements 440,000 440,000 * Assumes Bridge Note conversion price of $1.00 per share see Note 5 for conversion price calculations. Segment Information We operate in one business segment. The determination of reportable segments is based on the way management organizes financial information for making operating decisions and assessing performances. All of our operations are located in the United States. Concentration of Credit Risk We maintain a checking account with Wells Fargo Bank (Wells). The account is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. At times our cash balance may exceed the FDIC insurance coverage. Management believes that the Company is not exposed to significant credit risk due to the financial position of Wells. Fair Value of Financial Instruments The fair value of cash, accounts payable and accrued liabilities, and notes payable approximate their carrying amounts due to the short-term maturities of these instruments. Fair Value Measurements We measure our financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, we are required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows: Level 1--Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2--Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3--Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We had no financial assets or liabilities subject to fair value measurement at October 31, 2015 or 2014. Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Years ended October 31, 2015 2014 Interest $ 959 $ 453 Income taxes -- -- Recently Issued Accounting Pronouncements In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern: Disclosures of Uncertainties about an Entitys Ability to Continue as a Going Concern. |
License Agreement
License Agreement | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
License Agreement | (4) LICENSE AGREEMENT On December 23, 2009, we entered into the License with CSMC for all underlying intellectual properties, including patents, patents pending and future patent rights related to Polycefin. Pursuant to the License, CSMC will participate in the future revenue of the Company by virtue of a 3.5% royalty on gross revenues, as defined in the License, realized by the Company directly related to the licensed intellectual properties. Further, we have the ability to enter into sub-licenses of the technology. We have also been granted certain additional rights on future derivative intellectual properties developed by CSMC. The CSMC Agreement expires on a country-by-country basis on the date that the last patent covered under the agreement expires (currently 2030). The CSMC Agreement, as amended, requires us to achieve certain other milestones in order to maintain the agreement. These include consist of the following: On or before December 31, 2018, commence a clinical trial or trials in connection with at least one intended commercial use of a product; On or before December 31, 2017, successfully negotiate a joint venture, licensing, sub-licensing or other business arrangement with a third party not an affiliate of the Company to cause the development of a product that comprises a therapeutic drug; On or before September 30, 2018, enter into an arrangement with at least one generic drug manufacturer to enhance such manufacturers generic products with a Company product; and On or before December 31, 2018, the Company shall have successfully closed an equity financing transaction of at least $5,000,000, and on or before December 31, 2020, shall have successfully closed equity financing transactions (including the previous financing requirement) totaling at least $15,000,000, pursuant to which if it will have issued a round of its preferred stock; provided, that as a condition to the continued effectiveness of the CSMC Agreement, the Company shall either (a) issue shares of such preferred stock to CSMC so as to provide CSMC with equal rights, preferences and privileges as the holders of such series of preferred stock; or (b) issue additional shares of its common stock to CSMC that equal 2% of the then total issued and outstanding shares of the Companys voting stock. Further, in the event the Company issues or sells shares of common stock, the CSMC Agreement requires that the Company issue to CSMC additional shares of common stock for no additional consideration so as to assure CSMC will own 5% of the total issued and outstanding shares of the Company until December 31, 2015. |
Bridge Notes
Bridge Notes | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Bridge Notes | (5) BRIDGE NOTES During 2015 and 2014, we sold $350,000 and $700,000, respectively, of bridge notes (the Bridge Notes), receiving net proceeds of $258,675 and $569,818, respectively, after payment of fees and offering costs. The Bridge Notes are due and payable one year after the close of the offering (the Maturity Date), bear interest at 10% per annum, and are convertible into shares of our common stock at a conversion price of either (i) 50% of the price per share of our common stock as sold through a qualified initial public offering as defined in the terms of the Bridge Notes, or (ii) in the event a Qualified IPO has not taken place prior to the Maturity Date but there has otherwise developed a public trading market for the Companys common stock, then the conversion price shall be 50% of the 30 day Volume Weighted Average Price per share as quoted on the over-the-counter market, or (iii) in the event a public trading market has not been established for our common stock prior to the Maturity Date, then the conversion price shall be $1.00 per share. Accrued and unpaid interest on the Bridge Notes will be payable in shares of common stock at the conversion price on the earlier of (i) the date of conversion of the Bridge Notes or (ii) the Maturity Date. Further, for every $1.00 of Bridge Note principal that an investor elects to convert into shares of common stock, the investor will receive one warrant (the Bridge Note Warrant). Each warrant shall be exercisable to purchase shares of common stock at a price equal to the conversion price of the Bridge Notes and shall have a life of 5 years from the close of the offering. If the investor elects not to convert their Bridge Notes prior to the Maturity Date, then the note holder will receive one warrant for every $2.00 in Bridge Note principal. We evaluated the conversion feature of the Bridge Notes within the context of ASC 815 and determined that it did not meet the definition of an embedded derivative due to the Company having no active market for its common stock. We evaluated the Bridge Note Warrants using the guidelines established by ASC 815 and determined that it did not meet the definition of a derivative due to the Company having no active market for its common stock. We valued these warrants at $308,700 using the Black-Scholes option pricing model which we recorded as debt discount with a corresponding increase to additional paid in capital using the following assumptions: expected life 5 years , risk free interest rate 1.37% and annualized volatility 78.9% . We are amortizing the debt discount over the life of the Bridge Notes. For the years ended October 31, 2015 and 2014, we amortized $166,530 and $106,470 , respectively, of debt discount which is included in interest expense on the accompanying consolidated financial statements. We are also obligated to issue to the placement agents warrants to acquire shares of common stock equal to 10% of the securities underlying the Bridge Notes and Bridge Note Warrants (the PA Bridge Note Warrants). The PA Bridge Note Warrants have a life of 5 years and are exercisable at the conversion price of the Bridge Notes and the exercise price of the Bridge Note Warrants, respectively. We evaluated the PA Bridge Note Warrants using the guidelines established by ASC 815 and determined that they did not meet the definition of a derivative due to the Company having no active trading market for its common stock. We valued the PA Bridge Note Warrants at $53,550 using the Black-Scholes pricing model using the following assumptions: expected life 5 years , risk free interest rate 1.37% and annualized volatility 78.9% . We recorded the PA Bridge Note Warrants as a debt offering cost on the accompanying consolidated balance sheet. We are amortizing the PA Bridge Note Warrants over the life of the Bridge Notes. For the years ended October 31, 2015 and 2014, we amortized $34,553 and $19,117 , respectively, of PA Bridge Note Warrants which is included in interest expense on the accompanying condensed consolidated financial statements. The effective rate of the Bridge Notes after taking into account the Bridge Note Warrants and PA Bridge Note Warrants is 44.5% . As of October 31, 2015, $700,000 of the Bridge Notes were in technical default. |
Convertible Notes
Convertible Notes | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Convertible Notes | (6) CONVERTIBLE NOTES Commencing October 2010 through April 2011, we sold in private transactions an aggregate of $726,550 of Convertible Notes. The Convertible Notes were initially convertible into shares of our common stock at $.30 per share (the Conversion Price). The Convertible Notes do not bear interest and were originally payable on October 19, 2011 . The Convertible Notes are secured by a first lien security interest on all of our tangible and intangible assets. We did not repay the Convertible Notes by the maturity date and the notes were therefore technically in default |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Stockholders' Equity | (7) STOCKHOLDERS EQUITY Common Stock On August 29, 2013, we entered into an agreement for investor relation services that required us to issue up to 400,000 shares of common stock as a component of the consideration for the services. The shares were issuable in 100,000 increments for each quarter of service rendered. We valued these shares at $224,000 using the Black-Scholes option pricing model and recognized expense over the 12 months the services were rendered. For the year ended October 31, 2014 we recorded $186,667 of stock compensation expense which is included in general and administrative expense in the accompanying consolidated statements of operations with a corresponding entry to liabilities on the accompanying consolidated balance sheet. There was no expense under this agreement during the year ended October 31, 2015. Units During the year ended October 31, 2014 we sold 25,000 (the Units) for $1.00 per Unit, receiving net proceeds of $24,956. Each Unit consists of (i) one share of common stock, and (ii) two warrants with one warrant exercisable at $1.50 per share and one warrant exercisable at $2.00 per share. (the Unit Warrants). The Unit Warrants expire five years from the date of issuance. Warrants As of October 31, 2015, we had 5,518,358 warrants outstanding with weighted average remaining lives of 19 months and a weighted average exercise price of $1.66 . Stock Options On November 1, 2013, we issued a non-statutory stock option to acquire up to 200,000 shares of common stock with an exercise price of $1.00 per share to a consultant for providing certain services as defined in the consulting agreement. The option expires 7 years from the date of grant. The options vest as follows: (i) as to 100,000 options, vesting shall occur 1/3 on each one year anniversary date of the consulting agreement (Vesting 1) and (ii) as to 100,000 options, vesting shall occur upon the closing of certain transactions as defined in the agreement at a rate of 2 stock options for each $100 received by the Company in a deal or transaction resulting from the efforts of the consultant (Vesting 2). We valued this option at $58,400 using the Black Scholes option-pricing model using the following assumptions: option life 5 years , risk free interest rate 1.37% , and annualized volatility of 78.9% based on a peer group of publicly traded common stocks. Stock options issued to non-employees are remeasured at each reporting date and the cumulative expense is adjusted based on the remeasured grant. We are recognizing expense for this option as the underlying services are provided, ratably over 36 months for Vesting 1, and upon the occurrence of a vesting event for Vesting 2. For the years ended October 31, 2015 and 2014, we recognized $9,733 of expense for this option which is included in general and administrative expense on the accompanying consolidated statements of operations. In April 2014, we issued stock options to acquire 1,200,000 shares of common stock to certain employees and consultants with an exercise price of $1.00 per share. The options expire 7 years from the date of grant. The options vest under terms ranging from immediately to 1/3 on each anniversary date from the date of grant. We valued these options at $352,800 using the Black Scholes option-pricing model using the following assumptions: option life 5 years , risk free interest rate 1.65% , and annualized volatility of 78.9% based on a peer group of publicly traded stocks. We are recognizing expense for these options over the respective vesting periods. For the years ended October 31, 2015 and 2014, we recognized $66,150 and $185,483 , respectively, of expense for these options which is included in general and administrative expense on the accompanying consolidated statements of operations. In August 2014, we issued 75,000 stock options to a board member for his services as a director as well as certain consulting services provided. The options have an exercise price of $1.00 per share, vested immediately and expire 5 years from the date of grant. We valued these option at $22,050 using the Black Scholes option-pricing model using the following assumptions: option life 5 years , risk free interest rate 1.63% , and annualized volatility of 78.9% based on a peer group of publicly traded common stocks. For the year ended October 31, 2014, we recognized $22,050 of expense for these options which is included in general and administrative expense on the accompanying consolidated statements of operations. A summary of stock option activity for the year ended October 31, 2015 follows below: Number of Shares Avg. Weighted Exercise Price Shares outstanding, October 31, 2014 1,450,000 $ 1.00 Shares granted -- -- Shares exercised -- -- Shares forfeited -- -- Shares outstanding, October 31, 2015 1,450,000 $ 1.00 Exercisable at October 31, 2015 833,333 $ 1.00 |
Income Taxes
Income Taxes | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Income Taxes | (8) INCOME TAXES The Company did not incur any income tax expense or benefit during the years ended October 31, 2015 and 2014. A reconciliation of the statutory federal income tax rate to the effective rate is as follows for the years ended October 31, 2015 and 2014: 2015 2014 Federal income tax rate 34.00% 34.00% State income taxes, net of Federal income tax effect 4.60% 4.60% Nondeductible expenses and other (9.00)% (7.30)% Valuation allowance (29.60)% (31.30)% 0.00% 0.00% Deferred tax assets and liabilities represent the future impact of temporary differences between the financial statement and tax bases of assets and liabilities. At October 31, 2015 and 2014, the significant components of deferred income taxes relates to net operating loss carryforwards, offset by a 100% valuation allowance. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss (NOL) and tax credit carryforwards if there has been a change of ownership as described in Section 382 of the Internal Revenue Code. We have not prepared an analysis to determine if a change of ownership has occurred. Such a change of ownership may significantly limit the utilization of our net operating losses. Total deferred tax assets and the valuation allowance increased by $295,000 during 2015. As of October 31, 2015, we had an estimated NOL carryforward of approximately $5.1 million for federal income tax purposes, which is available to offset future taxable income, if any, through 2035. The ultimate realization of these assets is dependent upon the generation of future taxable income sufficient to offset the related deductions and loss carryforwards within the applicable carryforward period. All tax years since the Companys inception are still subject to examination by the State of California and the IRS. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Commitments and Contingencies | (9) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS Related Party Transactions Consulting Agreements We had an agreement with an entity controlled by our then current chief executive officer for his part-time personal services as CEO. The agreement is referred to as the Synthetica Agreement. In December 2013, the Synthetica Agreement was amended so that the compensation paid for the services of our CEO is capped at $1 per annum effective January 1, 2014. However, our chief executive may request that his compensation revert back to the original terms of the Synthetica Agreement with 30 days written notice. Under the original terms, there was no monthly retainer or minimum billing amount but the maximum that could be charged to us in any given month was $15,000. During the years ended October 31, 2015 and 2014, we were billed $1 and $20,000, respectively, under the Synthetica Agreement. At October 31, 2015 and 2014, $67,601 and $67,600 , respectively, is included in accrued compensation on the accompanying consolidated balance sheets resulting from a voluntary deferral of fees due under the agreement, agreed to by Synthetica to allow the Company to optimize its cash flow. In September 2010, we entered into a business and financial consulting agreement with an entity controlled by our then current Board chairman for operational consulting services. The agreement was for an initial term of 12 months with an automatic 12 month renewal period unless terminated by either party upon 30 days written notice. The agreement is now on a month-to-month basis. There is no monthly retainer or minimum billing amount but the maximum that can be billed to us in a given month cannot exceed $10,000. Effective January 2014, the fees for this agreement were capped at $1.00 per year. During the years ended October 31, 2015 and 2014, we were charged $1 and $10,000, respectively, under this agreement which is included in general and administrative expense on the accompanying consolidated statements of operations. At October 31, 2015 and October 31, 2014, $49,001 and $49,000 , respectively, is included in related party payables on the accompanying consolidated balance sheets resulting from a voluntary deferral of fees due under the agreement, agreed to by our Board chairman, to allow the Company to optimize its cash flow. In August 2014, we entered into a consulting agreement with a Board member to supervise an executive search to recruit a new chief executive officer under the direction and supervision of the Board. This agreement had a term of six months. Pursuant to the consulting agreement, we granted this director a stock option to acquire 25,000 shares of common stock at an exercise price of $1.00 per share. The options are for a term of 5 years and were fully vested upon grant. Additionally, conditioned upon the successful engagement of a new chief executive officer on terms acceptable to the Board during the term of the consulting agreement, the Board in its sole discretion may grant the director additional stock options to acquire 35,000 shares of common stock at an exercise price of $1.00 per share. If granted, these options would also have a life of 5 years and be fully vested upon grant. We recorded $7,350 of expense related to the options granted under this agreement during the year ended October 31, 2014, which is included in general and administrative expense on the accompanying statements of operations. See Note 7 for further discussion on the assumptions used in valuing these options. Contributed Services As discussed above, effective January 1, 2014, the Companys former chief executive officer and Board chairman began to provide their services for $1 per year. The fair value of those services has been recorded as an expense in the accompanying consolidated financial statements based on the estimated fair value for such services, with a corresponding credit to additional paid in capital. For the years ended October 31, 2015 and 2014, we recorded $240,901 and $135,000, respectively, of contributed services. CSMC Certain founders and directors of the Company are employees of CSMC. These individuals are also the inventors of the Polycefin technology and are primarily responsible for its development. As described further in Note 4 above, we have an exclusive license agreement with CSMC for this technology. The License requires royalty payments equal to 3.5% of the gross sales price and other forms of consideration (such as milestone and sublicense payments), as defined in the agreement, on all products using the licensed technology. The License also requires us to achieve certain milestones as described in Note 4. In December 2012, we entered into an agreement with CSMC to support certain research and development activities within the CSMC laboratory. For the years ended October 31, 2015 and 2014, we recorded $0 and $111,384 , respectively, under this agreement which is included in research and development expense on the accompanying consolidated statements of operations. Work under this agreement was completed by CSMC during the year ended October 31, 2014. We have deferred payments under this agreement in order to extend our cash balance. As of October 31, 2015 and 2014, $53,506 and $158,391 , respectively, is reflected as payable on the accompanying consolidated balance sheets. Commitments and Contingencies Litigation From time to time, we may become party to litigation and other claims in the ordinary course of business. To the extent that such claims and litigation arise, management would provide for them if upon the advice of counsel, losses are determined to be both probable and estimable. We are currently not party to any litigation. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Oct. 31, 2015 | |
Notes | |
Subsequent Events | (10) SUBSEQUENT EVENTS In 2016, the Board of Directors (the Board) approved a newly authorized series of preferred stock designated series A convertible preferred stock (Series A Preferred), consisting of an aggregate of 6,000,000 shares. The Series A Preferred pays no dividend or coupon but participates in dividends declared and paid on common stock. In the event of a liquidation of the Company, Series A Preferred is junior to shares of common stock. Series A Preferred votes on an as converted basis together with the common shares and is convertible into common shares on a one for one basis. In January 2016, the Company entered into a consulting agreement with an individual whereby this person was named Executive Chairman of the Company and a member of the Board. Pursuant to this agreement, we sold 2,400,000 shares of Series A Preferred to this individual for $240. There is no other compensation owed under this agreement which may be terminated upon 30 days written notice by either party. The Series A Preferred sold pursuant to this agreement is subject to the following vesting schedule: (i) 20% shall be vested upon issuance; (ii) 1.67% per month during the period of time this individual is continuously employed by the Company; (iii) All remaining unvested shares shall immediately vest upon a change in control of the Company, provided that this individual is employed during the period this change of control occurs; and (iv) All remaining unvested shares shall vest upon the Company consummating a financing of at least $2,000,000 in aggregate provided that this individual is employed during the period this financing occurs. In February and April 2016, we sold $900,000 in Convertible Promissory Notes receiving $900,000 in net proceeds as there were no offering costs associated with this tranche. In March 2016, we entered into a settlement agreement for the investor relations services previously described in Note 7. Under the terms of the settlement, the common shares to be issued were reduced from 400,000 to 75,000 and the accrued cash compensation was reduced from $80,000 to $10,000. In May 2016, we paid the past due balance owed to CSMC in full. In May 2016, we entered into a consulting agreement whereby we sold 1,698,044 shares of Series A Preferred for $169 to a firm controlled by an individual who will serve as our CEO effective June 1, 2016. The Series A Preferred sold pursuant to this agreement is subject to the following vesting schedule: (i) 20% shall be vested upon issuance; (ii) 1.67% per month during the period of time this individual is continuously employed by the Company; (iii) All remaining unvested shares shall immediately vest upon a change in control of the Company, provided that this individual is employed during the period this change of control occurs; and (iv) All remaining unvested shares shall vest upon the Company consummating a financing of at least $2,000,000 in aggregate provided that this individual is employed during the period this financing occurs. |
Significant Accounting Polici17
Significant Accounting Policies: Use of Estimates and Assumptions (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported periods. Actual results may differ from these estimates. |
Significant Accounting Polici18
Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Cash and Cash Equivalents | Cash and cash equivalents We consider all investments with original maturities of three months or less to be cash equivalents. |
Significant Accounting Polici19
Significant Accounting Policies: Property and Equipment (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Property and Equipment | Property and Equipment Property and equipment is recorded at historical cost, and is comprised of computer equipment and software. Depreciation and amortization of property and equipment is provided in amounts sufficient to relate the cost of the related assets to operations over their estimated service lives using the straight-line method. The useful lives of the assets are three years. Depreciation and amortization expense amounted to $686 and $1,019 for the years ended October 31, 2015 and 2014, respectively. |
Significant Accounting Polici20
Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Revenue Recognition | Revenue Recognition While we have not generated revenue to date, we will recognize revenue when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and we are reasonably assured of collecting the resulting receivable. Revenue arrangements that include multiple deliverables are divided into separate units of accounting if the deliverables meet certain criteria. If applicable, we will record product revenues net of revenue reserves such as sales returns and allowances. This accounting policy for revenue recognition may have a substantial impact on our reported results and relies on certain estimates that can require difficult, subjective and complex judgments on the part of management. |
Significant Accounting Polici21
Significant Accounting Policies: Research and Development Costs (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Research and Development Costs | Research and Development Costs Research and development costs are expensed as incurred. |
Significant Accounting Polici22
Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Income Taxes | Income Taxes We account for income taxes by recognizing deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets then may be reduced by a valuation allowance for amounts that do not satisfy specified realization criteria. Accounting rules also prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We are required to recognize a liability in the financial statements for the impact of a tax position if that position is more likely than not of not being sustained on audit, based on the technical merits of the position. We currently do not have any tax positions that meet this threshold. We currently have a full valuation allowance against our net deferred tax assets and have not recognized any benefits from tax positions in earnings. We will recognize potential interest and penalties related to income tax positions as a component of the provision for income taxes on the statements of operations in any future periods in which we must record a liability. Interest and penalties totaled $0 and $0 for the years ended October 31, 2015 and 2014, respectively. We file income tax returns in the U.S. federal jurisdiction and with the State of California. We have not filed income tax returns for the years ended October 31, 2012 through 2015, however, as no taxes are due, we do not believe these non-filings will have a material impact on our financial statements. We are still subject to income tax examinations by the State of California and the IRS for all tax years since the date of inception. Since we have not recorded liabilities at October 31, 2015 and 2014, there is no impact to our effective tax rate. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. Our review of prior year tax positions using the criteria and provisions presented by the FASB did not result in a material impact on the Companys financial position or results of operations. |
Significant Accounting Polici23
Significant Accounting Policies: Share-based Payments (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Share-based Payments | Share-Based Payments We account for share-based payment costs at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. For stock options, the estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider various factors when estimating expected forfeitures, including historical experience. Actual results may differ substantially from these estimates. We determine the fair value of warrants and stock options using the Black-Scholes valuation model, which considers the exercise price relative to the market value of the underlying stock, the expected stock price volatility, the risk-free interest rate and the dividend yield, and the estimated period of time option grants will be outstanding before they are ultimately exercised. Significant management judgment is required in making certain of these assumptions. |
Significant Accounting Polici24
Significant Accounting Policies: Earnings (loss) Per Share (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Earnings (loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share are computed by dividing the Companys income (loss) attributable to common shareholders by the weighted average number of common shares outstanding. The impact of any potentially dilutive securities is excluded. Diluted earnings per share are computed by dividing the Companys income (loss) attributable to common shareholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. In calculating diluted earnings per share, we utilize the treasury stock method for all stock options and warrants and the if converted method for all other convertible securities. For all periods presented, the basic and diluted loss per share is the same as the impact of potential dilutive common shares is anti-dilutive. Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share are as follows: Years ended October 31, 2015 2014 Convertible debt* 766,667 766,667 Warrants 5,518,358 6,358,358 Stock Options 1,450,000 1,450,000 Common shares issuable under investor relations agreements 440,000 440,000 * Assumes Bridge Note conversion price of $1.00 per share see Note 5 for conversion price calculations. |
Significant Accounting Polici25
Significant Accounting Policies: Segment Information (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Segment Information | Segment Information We operate in one business segment. The determination of reportable segments is based on the way management organizes financial information for making operating decisions and assessing performances. All of our operations are located in the United States. |
Significant Accounting Polici26
Significant Accounting Policies: Concentration of Credit Risk (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Concentration of Credit Risk | Concentration of Credit Risk We maintain a checking account with Wells Fargo Bank (Wells). The account is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. At times our cash balance may exceed the FDIC insurance coverage. Management believes that the Company is not exposed to significant credit risk due to the financial position of Wells. |
Significant Accounting Polici27
Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of cash, accounts payable and accrued liabilities, and notes payable approximate their carrying amounts due to the short-term maturities of these instruments. |
Significant Accounting Polici28
Significant Accounting Policies: Fair Value Measurements (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Fair Value Measurements | Fair Value Measurements We measure our financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, we are required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows: Level 1--Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2--Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3--Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We had no financial assets or liabilities subject to fair value measurement at October 31, 2015 or 2014. |
Significant Accounting Polici29
Significant Accounting Policies: Supplemental Disclosures of Cash Flow Information (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Supplemental Disclosures of Cash Flow Information | Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Years ended October 31, 2015 2014 Interest $ 959 $ 453 Income taxes -- -- |
Significant Accounting Polici30
Significant Accounting Policies: Recently Issued Accounting Pronouncements (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern: Disclosures of Uncertainties about an Entitys Ability to Continue as a Going Concern. |
Commitments and Contingencies_
Commitments and Contingencies: Commitments and Contingencies (Policies) | 12 Months Ended |
Oct. 31, 2015 | |
Policies | |
Commitments and Contingencies | Commitments and Contingencies Litigation From time to time, we may become party to litigation and other claims in the ordinary course of business. To the extent that such claims and litigation arise, management would provide for them if upon the advice of counsel, losses are determined to be both probable and estimable. We are currently not party to any litigation. |
Significant Accounting Polici32
Significant Accounting Policies: Earnings (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Tables) | 12 Months Ended |
Oct. 31, 2015 | |
Tables/Schedules | |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Years ended October 31, 2015 2014 Convertible debt* 766,667 766,667 Warrants 5,518,358 6,358,358 Stock Options 1,450,000 1,450,000 Common shares issuable under investor relations agreements 440,000 440,000 |
Significant Accounting Polici33
Significant Accounting Policies: Supplemental Disclosures of Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Tables) | 12 Months Ended |
Oct. 31, 2015 | |
Tables/Schedules | |
Schedule of Cash Flow, Supplemental Disclosures | Cash paid during the year for: Years ended October 31, 2015 2014 Interest $ 959 $ 453 Income taxes -- -- |
Stockholders' Equity_ Summary o
Stockholders' Equity: Summary of Stock Option Activity (Tables) | 12 Months Ended |
Oct. 31, 2015 | |
Tables/Schedules | |
Summary of Stock Option Activity | Number of Shares Avg. Weighted Exercise Price Shares outstanding, October 31, 2014 1,450,000 $ 1.00 Shares granted -- -- Shares exercised -- -- Shares forfeited -- -- Shares outstanding, October 31, 2015 1,450,000 $ 1.00 Exercisable at October 31, 2015 833,333 $ 1.00 |
Income Taxes_ Schedule of Effec
Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables) | 12 Months Ended |
Oct. 31, 2015 | |
Tables/Schedules | |
Schedule of Effective Income Tax Rate Reconciliation | 2015 2014 Federal income tax rate 34.00% 34.00% State income taxes, net of Federal income tax effect 4.60% 4.60% Nondeductible expenses and other (9.00)% (7.30)% Valuation allowance (29.60)% (31.30)% 0.00% 0.00% |
Business, Overview, Basis of 36
Business, Overview, Basis of Presentation and Consolidation (Details) | 12 Months Ended |
Oct. 31, 2015 | |
Entity Incorporation, State Country Name | Delaware |
Entity Incorporation, Date of Incorporation | Dec. 7, 2006 |
Entity Information, Date to Change Former Legal or Registered Name | Sep. 4, 2012 |
Entity Information, Former Legal or Registered Name | SRKP 16, Inc. |
Business Combination, Reason for Business Combination | The Company was founded to commercialize both new cancer treatments and imaging targeting technology as well as a proprietary molecular delivery platform that interferes with those targets in order to inhibit and finally eradicate tumor progression. The Company is the exclusive licensee to certain intellectual property rights owned by Cedars Sinai Medical Center (“CSMC”) in Los Angeles, one of the nation’s premiere research institutions (the “License”). The licensed technology consists of a family of related nano-biopolymers conjugates (collectively referred to here as Polycefin ), believed capable of acting as a drug delivery and targeting platform for cancer therapy and imaging. |
Arrogene Nanotechnology, Inc. | |
Business Acquisition, Effective Date of Acquisition | Jan. 11, 2012 |
Business Acquisition, Name of Acquired Entity | Arrogene Nanotechnology, Inc. (“ANI”) |
Business Acquisition, Description of Acquired Entity | a company focused on oncology |
Going Concern and Management'37
Going Concern and Management's Plans (Details) | 12 Months Ended |
Oct. 31, 2015 | |
Details | |
Substantial Doubt about Going Concern, Conditions or Events | Since our inception in August 2007, we have not generated revenue, incurred operating losses, and as of October 31, 2015, had an accumulated deficit of $7,392,173. Further, as of October 31, 2015, our cash balance was only $35,204 and we had a working capital deficit of $2,045,653. These conditions raise substantial doubt about our ability to continue as a going concern. |
Substantial Doubt about Going Concern, Management's Plans, Substantial Doubt Alleviated | In February 2016, we commenced an offering of up to $4,000,000 in convertible promissory notes (“Convertible Promissory Notes”). The Convertible Promissory Notes bear interest at 10% per annum, are convertible into shares of common stock at $1.00 per share, and principal and accrued interest are due and payable five years after the initial closing of the offering. In February 2016 and April 2016, we sold $900,000 in Convertible Promissory Notes receiving $900,000 in net proceeds as there were no offering costs associated with this tranche. |
Substantial Doubt about Going Concern, Management's Evaluation | Management believes that these proceeds will be sufficient to meet our obligations through at least October 31, 2016. |
Significant Accounting Polici38
Significant Accounting Policies: Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Details | ||
Depreciation, Depletion and Amortization, Nonproduction | $ 686 | $ 1,019 |
Significant Accounting Polici39
Significant Accounting Policies: Income Taxes (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Details | ||
Income Tax Examination, Penalties and Interest Expense | $ 0 | $ 0 |
Significant Accounting Polici40
Significant Accounting Policies: Earnings (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 12 Months Ended | ||
Oct. 31, 2015 | Oct. 31, 2014 | ||
Convertible Debt | |||
Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share | [1] | 766,667 | 766,667 |
Warrants | |||
Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share | 5,518,358 | 6,358,358 | |
Stock options | |||
Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share | 1,450,000 | 1,450,000 | |
Common shares issuable under investor relations agreement | |||
Shares of common stock from the exercise of warrants and convertible securities excluded from the calculation of diluted loss per share | 440,000 | 440,000 | |
[1] | Assumes Bridge Note conversion price of $1.00 per share see Note 5 for conversion price calculations. |
Significant Accounting Polici41
Significant Accounting Policies: Supplemental Disclosures of Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Details | ||
Interest Paid | $ 959 | $ 453 |
Bridge Notes (Details)
Bridge Notes (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Bridge Notes, Aggregate sold | $ 350,000 | $ 700,000 |
Bridge Notes, Net Proceeds | 258,675 | 569,818 |
Bridge Notes, Debt Discount Amortized | $ 166,530 | $ 106,470 |
Bridge Notes Effective Rate | 44.50% | |
Debt Instrument, Debt Default, Amount | $ 700,000 | |
Bridge Note Warrants | ||
Assets, Fair Value Disclosure | $ 308,700 | |
Fair Value Measurements, Valuation Techniques | Black-Scholes option pricing model | |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Risk Free Interest Rate | 1.37% | |
Fair Value Assumptions, Expected Volatility Rate | 78.90% |
Bridge Notes_ PA Bridge Note Wa
Bridge Notes: PA Bridge Note Warrants (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
PA Bridge Note Warrants, Debt Discount Amortized | $ 34,553 | $ 19,117 |
PA Bridge Note Warrants | ||
Assets, Fair Value Disclosure | $ 53,550 | |
Fair Value Measurements, Valuation Techniques | Black-Scholes pricing model | |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Risk Free Interest Rate | 1.37% | |
Fair Value Assumptions, Expected Volatility Rate | 78.90% |
Convertible Notes (Details)
Convertible Notes (Details) - Convertible Debt | 12 Months Ended |
Oct. 31, 2015USD ($)$ / shares | |
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.30 |
ConvertibleDebtOutstanding | $ 10,000 |
October2010ThroughApril2011Member | |
Proceeds from Convertible Debt | $ 726,550 |
Debt Instrument, Convertible, Terms of Conversion Feature | The Convertible Notes were initially convertible into shares of our common stock at $.30 per share (the “Conversion Price”). |
Debt Conversion, Converted Instrument, Type | shares of our common stock |
Debt Instrument, Interest Rate Terms | The Convertible Notes do not bear interest |
Debt Instrument, Payment Terms | originally payable on October 19, 2011 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Sale of Units at $1.00 per Unit, Shares | 25,000 | |
Sale of Units, price per unit | $ 1 | |
Sale of Units at $1.00 per Unit, Value | $ 24,956 | |
Common Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $ 224,000 | |
Allocated Share-based Compensation Expense | $ 0 | 186,667 |
Common Stock Purchase Warrants | ||
Class of Warrant or Right, Outstanding | 5,518,358 | |
Weighted average exercise price of warrants | $ 1.66 | |
Stock options | November 1, 2013 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $ 58,400 | |
Allocated Share-based Compensation Expense | $ 9,733 | 9,733 |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Risk Free Interest Rate | 1.37% | |
Fair Value Assumptions, Expected Volatility Rate | 78.90% | |
Stock options | April 2014 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $ 352,800 | |
Allocated Share-based Compensation Expense | $ 66,150 | 185,483 |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Risk Free Interest Rate | 1.65% | |
Fair Value Assumptions, Expected Volatility Rate | 78.90% | |
Stock options | August 2014 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $ 22,050 | |
Allocated Share-based Compensation Expense | $ 22,050 | |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Risk Free Interest Rate | 1.63% | |
Fair Value Assumptions, Expected Volatility Rate | 78.90% |
Stockholders' Equity_ Summary46
Stockholders' Equity: Summary of Stock Option Activity (Details) | Oct. 31, 2015$ / sharesshares |
Details | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance | shares | 1,450,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 1 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | shares | 1,450,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ / shares | $ 1 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | shares | 833,333 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares | $ 1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Details | ||
Income Tax Expense (Benefit) | $ 0 | $ 0 |
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount | 295,000 | |
Tax Credit Carryforward, Amount | $ 5,100,000 |
Income Taxes_ Schedule of Eff48
Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Details | ||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 34.00% | 34.00% |
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent | 4.60% | 4.60% |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Percent | (9.00%) | (7.30%) |
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Percent | (29.60%) | (31.30%) |
Effective Income Tax Rate Reconciliation, Percent | 0.00% | 0.00% |
Commitments and Contingencies49
Commitments and Contingencies: Consulting Agreements (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Related party payables | $ 49,001 | $ 49,000 |
Synthetica, Ltd | ||
AccruedCompensation | $ 67,601 | 67,600 |
Entity controlled by Board chairman | September 2010 | ||
Related Party Transaction, Description of Transaction | In September 2010, we entered into a business and financial consulting agreement with an entity controlled by our then current Board chairman for operational consulting services. | |
Related party payables | $ 49,001 | 49,000 |
Board member | August 2014 | ||
Related Party Transaction, Description of Transaction | In August 2014, we entered into a consulting agreement with a Board member to supervise an executive search to recruit a new chief executive officer under the direction and supervision of the Board. | |
Related Party Transaction, Amounts of Transaction | $ 7,350 |
Commitments and Contingencies50
Commitments and Contingencies: Contributed Services (Details) - Synthetica, Ltd Amendment - January 1, 2014 - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Related Party Transaction, Description of Transaction | As discussed above, effective January 1, 2014, the Company’s former chief executive officer and Board chairman began to provide their services for $1 per year. | |
Related Party Transaction, Amounts of Transaction | $ 240,901 | $ 135,000 |
Commitments and Contingencies51
Commitments and Contingencies: CSMC (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2015 | Oct. 31, 2014 | |
Research and development | $ 136,110 | $ 285,741 |
Payable to CSMC | 53,506 | 158,391 |
CSMCMember | ||
Research and development | 0 | 111,384 |
Payable to CSMC | $ 53,506 | $ 158,391 |
Subsequent Events (Details)
Subsequent Events (Details) | 12 Months Ended |
Oct. 31, 2015 | |
Event 1 | 2016 | |
Subsequent Event, Description | the Board of Directors (the “Board”) approved a newly authorized series of preferred stock designated series A convertible preferred stock (“Series A Preferred”), consisting of an aggregate of 6,000,000 shares |
Event 2 | January 2016 | |
Subsequent Event, Description | the Company entered into a consulting agreement with an individual whereby this person was named Executive Chairman of the Company and a member of the Board |
Event 3 | February and April 2016 | |
Subsequent Event, Description | we sold $900,000 in Convertible Promissory Notes |
Event 4 | March 2016 | |
Subsequent Event, Description | we entered into a settlement agreement for the investor relations services previously described in Note 7 |
Event 5 | May 2016 | |
Subsequent Event, Description | we paid the past due balance owed to CSMC in full |
Event 6 | Also May 2016 | |
Subsequent Event, Description | we entered into a consulting agreement whereby we sold 1,698,044 shares of Series A Preferred for $169 to a firm controlled by an individual who will serve as our CEO |