Medisun Precision Medicine (MPME) 10-Q 2014 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014.

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:  000-54907

ACCUREXA INC.

(Exact name of registrant as specified in its charter)

Delaware	47-2258116
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
201 Spear St, Suite 1100 San Francisco, CA 94105
(Address of principal executive offices, including Zip Code)
(415) 494-7850 (Registrant’s telephone number, including area code)

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. [X] Yes     [   ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   [X] Yes     [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   [   ]                                                                      Accelerated filer   [   ]

Non-accelerated filer   [   ] (Do not check if a smaller reporting company)   Smaller reporting company   [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

[   ] Yes       [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of November 10, 2014
Common stock, $0.0001 par value	5,786,816

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TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	11
PART II – OTHER INFORMATION		14
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Exhibits	14
SIGNATURES		15

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCUREXA INC.
INDEX TO  INTERIM FINANCIAL STATEMENTS
	Page
Index to Interim Financial Statements	1
Condensed Interim Balance Sheets at September 30, 2014 and December 31, 2013	2
Condensed Interim Statements of Operations for the three and nine months ended September 30, 2014 and 2013	3
Condensed Interim Statements of Cash Flows for the nine months ended September 30, 2014 and 2013	4
Notes to Condensed Interim Financial Statements	5

1

ACCUREXA INC.
(A Development Stage Company)
Condensed Interim Balance Sheets
(Unaudited)
				September 30, 2014		December 31, 2013
ASSETS
Current assets
	Cash and cash equivalents		$	748,070	$	818,070
	Total current assets			748,070		818,070
Patent rights, net				89,188		94,251
Prepaid Assets				861,685		-
Fixed Assets, net				4,289,094		-
	Total assets		$	5,988,036	$	912,321
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable and other accruals, including related party liabilities of $90,000 as of September 30, 2014 and $45,000 as of December 31, 2013		$	240,929	$	209,679
	Total current liabilities			240,929		209,679
	Convertible Notes, net of unamortized debt discount of $18,607			351,393		350,000
	Total liabilities			592,322		559,679
Commitments and contingencies
STOCKHOLDERS' EQUITY
	Common stock
		Authorized 20,000,000 shares at par value of $ 0.0001 each
		Issued and outstanding 5,786,816 shares as of September 30, 2014 and 3,162,316 shares as of December 31, 2013		579		316
	Common Stock Issuable			2,000		-
	Additional paid-in capital			6,425,151		1,161,960
	Accumulated deficit			(1,032,017)		(809,634)
		Total stockholders' deficit		5,395,713		352,642
	Total liabilities and stockholders' deficit		$	5,988,036	$	912,321
The accompanying notes are an integral part of these financial statements.

2

ACCUREXA INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
(Unaudited)
			Three Months Ended September 30, 2014		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2014		Nine Months Ended September 30, 2013		From Inception on August 29, 2012 to September 30, 2014
Revenue		$	-	$	-	$	-	$	-	$	-
Operating Expenses
	Amortization Expense		12,594		3,376		15,970		10,129		124,290
	Research & Development		53,315		187,570		93,827		491,422		631,701
	General and Administrative		23,230		26,378		85,063		92,040		237,525
Total Operating Expenses			89,139		217,324		194,861		593,590		993,515
Loss from Operations			(89,139)		(217,324)		(194,861)		(593,590)		(993,515)
Interest Income (Expense)			(10,106)		(4,431)		(27,522)		(683)		(35,886)
Realized Income (Loss)			-		-		-		-		(2,615)
Loss before provisions for income taxes			(99,245)		(221,754)		(222,382)		(594,274)		(1,032,017)
Provision for income taxes			-		-		-		-		-
Net Loss		$	(99,245)	$	(221,754)		(222,382)		(594,274)	$	(1,032,017)
Unrealized Income (Loss)			-		(797)		-		(2,389)		-
Comprehensive Income (Loss)		$	(99,245)	$	(222,551)		(222,382)		(596,662)	$	(1,032,017)
Loss per common share - basic and fully diluted:		$	(0.03)	$	(0.07)		(0.07)		(0.19)	$	(0.36)
Weighted average number of basic and fully diluted common shares outstanding			3,740,294		3,162,316		3,363,682		3,145,220		2,845,637
The accompanying notes are an integral part of these financial statements.

3

ACCUREXA INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
(Unaudited)
				Nine Months Ended September 30, 2014		Nine Months Ended September 30, 2013		From Inception on August 29, 2012 to September 30, 2014
Cash flows from operations:
	Loss from continuing operations		$	(222,382)	$	(594,274)	$	(1,032,017)
	Adjustment to reconcile net loss to net cash used in operating activities:
		Amortization of licensing fees		15,970		10,129		124,290
		Amortization of non-cash R&D expenses		38,315		-		38,315
		Amortization of discount on convertible notes		1,393		-		1,393
		Realized Gain/Loss on marketable securities		-		-		2,615
	Changes in operating assets and liabilities:
		Accounts payable and other accruals		33,250		105,897		242,929
Net cash used in operations				(133,454)		(478,248)		(622,474)
Investment activities:
	Investment in patent rights			-		-		(41,255)
	Investment in marketable securities			-		(77,882)		(2,615)
Net cash used in investment activities				-		(77,882)		(43,870)
Financing activities:
	Convertible notes received			20,000		350,000		370,000
	Share subscriptions received			43,454		35,953		1,044,414
Net cash provided by financing activities				63,454		385,953		1,414,414
Net (decrease) / increase in cash				(70,000)		(170,177)		748,070
Cash, beginning of period				818,070		948,445		-
Cash, end of period			$	748,070	$	778,268	$	748,070
The accompanying notes are an integral part of these financial statements.

4

ACCUREXA INC.

(A Development Stage Company)

Notes To The Condensed Interim Financial Statements

 (Unaudited)

1 - CONDENSED INTERIM FINANCIAL STATEMENTS

The accompanying condensed financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2013 audited financial statements.  The results of operations for the period ended September 30, 2014 is not necessarily indicative of the operating results for the full year.

2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

5

ACCUREXA INC.

(A Development Stage Company)

Notes To The Condensed Interim Financial Statements

 (Unaudited)

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

4 – PREPAID ASSETS

On August 14, 2014, the Company engaged a consultant to provide development services over 36 months in exchange for 450,000 shares of the Company’s common stock. The 450,000 issued shares of common stock are valued at $2 per share, equal to the price per share paid by an investor in the most recent sale of the Company’s shares of common stock on July 15, 2014, and are capitalized in the amount of $900,000 as prepaid assets on the Company’s balance sheet.  These prepaid assets are amortized on a straight-line basis over the 36-month term of the consulting agreement.

5 – FIXED ASSETS

On September 16, 2014, in connection with entering into the UCSF License, the Company purchased a prototype from a contract manufacturer in exchange for 2,150,000 shares of the Company’s common stock. The 2,150,000 issued shares of common stock are valued at $2 per share, equal to the price per share paid by an investor in the most recent sale of the Company’s shares of common stock on July 15, 2014, and are capitalized in the amount of $4,300,000 as fixed assets on the Company’s balance sheet.  These fixed assets are amortized on a straight-line basis over the remaining 15 years of estimated patent life of the patent rights underlying the UCSF License.

6 - CONVERTIBLE NOTES

On July 25, 2013, the Company entered into a secured convertible note (“Note”) under which the Company received $350,000 from the convertible note holder (“Holder”) and is obligated to pay to the Holder the full principal amount after 36 months from the date of the Note, plus an interest at the rate of 10.0% per year payable at the end of each year from the date of the Note.  The Holder has the right to convert the Note, in whole or in part, into shares of common stock of the Company (“Common Stock”) at a fixed rate of $2.00 per share (the “Conversion Price”) at any time.  The Company may prepay the Note in whole or in part at any time for cash on 15 business days’ prior written notice, subject to the right of the Holder to convert into shares of Common Stock of the Company prior to any prepayment.  The Note agreement was filed on August 14, 2013 as an exhibit to Form 10-Q for the three months ended June 30, 2013.

On July 15, 2014, the Company entered into a secured convertible note (“Note”) under which the Company received $20,000 from the convertible note holder (“Holder”) and is obligated to pay to the Holder the full principal amount after 36 months from the date of the Note.  The Holder has the right to convert the Note, in whole or in part, into shares of common stock of the Company (“Common Stock”) at a "Variable Conversion Price" of 50% multiplied by the Market Price (representing a discount rate of 50%). “Market Price” means the average of the Closing Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The

6

ACCUREXA INC.

(A Development Stage Company)

Notes To The Condensed Interim Financial Statements

 (Unaudited)

Company may prepay the Note in whole or in part at any time for cash on 15 business days’ prior written notice, subject to the right of the Holder to convert into shares of Common Stock of the Company prior to any prepayment. The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $20,000. The aggregate beneficial conversion feature was accreted and charged to interest expense in the amount of $1,393 for the quarter ending September 30, 2014.  

7 - SUBSEQUENT EVENTS

In accordance with ASC 855-10 Company management reviewed all material events through the filing date of these financial statements.  There are no material subsequent events to report.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

This quarterly report on Form 10-Q and other reports that we file with the SEC contain statements that are considered forward-looking statements.  Forward-looking statements give the Company’s current expectations, plans, objectives, assumptions or forecasts of future events.  All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and similar expressions.  These statements are based on the Company’s current plans and are subject to risks and uncertainties, and as such the Company’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements.  Any or all of the forward-looking statements in this periodic report may turn out to be inaccurate and as such, you should not place undue reliance on these forward-looking statements.  The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs.  The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions due to a number of factors, including:

·

dependence on key personnel;

·

competitive factors;

·

degree of success of clinical trials and research and development programs;

·

the operation of our business; and

·

general economic conditions in the United States and Worldwide.

These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this periodic report.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

·

“Accurexa”, “the “Company,” “we,” “us,” or “our,” are to the business of Accurexa Inc., a Delaware corporation;

·

“SEC” are to the Securities and Exchange Commission;

·

“Securities Act” are to the Securities Act of 1933, as amended;

·

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

·

 “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

You should read the following plan of operation together with our financial statements and related notes appearing elsewhere in this quarterly report and the most recent Form 10. This plan of operation contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.

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Overview

We are a development stage medical device company. We were incorporated in Delaware on August 29, 2012 to develop and commercialize medical device technologies for the early detection, capturing and targeted destruction of cancer cells. Our current device candidate named “iV3” is derived from a patent pending technology platform. We own the exclusive, global rights to iV3 under a license agreement with the University of Arkansas for Medical Sciences (UAMS) in Little Rock, Arkansas, that developed iV3 pursuant to a research and development program commencing in 2008 and funded with US$4.4 million to date by the National Health Institutes/National Cancer Institute, the Department of Defense (DoD), UAMS/Bioventures, and state grants. Effective December 15, 2012, we entered into an exclusive license, that continues until the expiration of the underlying patents, with the UAMS and the University of Arkansas to further develop and commercialize our medical device technologies. We are working towards designing and building prototype devices so that we can seek a partner to collaborate with us on further development and commercialization.

Recent Developments

On August 1, 2014, we filed a Certificate of Amendment to our Certificate of Incorporation with the Delaware Secretary of State to change the name of our Company from “Cyto Wave Technologies Inc.” to “Accurexa Inc.”. The new CUSIP number for our Company’s common stock is 00439W 100 and our trading symbol is “ACXA” on the OTCQB Markets. A copy of the Certificate of Amendment can be viewed as Appendix A to Form DEF 14C filed on August 4, 2014 and is incorporated by reference herein.

On September 16, 2014 (“Effective Date”), we entered into an exclusive license agreement (“UCSF License”) with the Regents of the University of California acting through its Office of Innovation, Technology, and Alliances, University of California San Francisco (“UCSF”) in regards to the exclusive licensing of a medical stereotactic device for the delivery of therapeutics to the human brain, characterized as “Microinjection Brain Catheter” or also known as BranchPoint Radially Branched Deployment (“BranchPoint”) device. The BranchPoint device was invented in the course of research at UCSF by Drs. Daniel A. Lim, Matthew Silvestrini, and Tejal A. Desai, (collectively, the “Inventors”) and claimed in U.S. Patent Application No. PCT/US2013/052301, Microinjection Catheter; UC Case No. SF2012-063 (“Patent Rights”). The BranchPoint device was developed under funding from the California Institute for Regenerative Medicine ("CIRM") and sponsored in part by the National Institutes of Health. The UCSF License remains in effect from the Effective Date until expiration or abandonment of the Patent Rights.  We believe that the BranchPoint device will allow us to broaden our portfolio of innovative medical device technologies.  Beyond the delivery of stem cells, the platform technology of the BranchPoint device can also enable the delivery of cellular therapeutics, gene therapies, drug and drug infusions, as well as the placement of electrodes for deep brain stimulation into the human brain.

Under the UCSF License, we are obligated to develop, manufacture, market and sell the BranchPoint device, and have been granted the right to sublicense to third parties. Specifically, the UCSF License requires us to: (i) market the BranchPoint device for research use within three (3) months from the Effective Date; (ii) sell the BranchPoint device for research use within 12 months of the Effective Date; (iii) file and finalize any necessary regulatory documentation for FDA 510(k) approval within 6 months after the 510(k) application has been filed; (iv) market the BranchPoint device for clinical use within 6 months of receiving market approval from FDA or equivalent foreign regulatory agency; (v) sell the BranchPoint device for clinical use within 12  months of receiving market approval from FDA or equivalent foreign regulatory agency; (vi) within 1 year of the Effective Date, raise at least $750,000 in funding or revenue; (vii) market the BranchPoint device in the United States within 6 months of receiving approval from the FDA; and (viii) use commercially reasonable efforts to fill the market demand for the BranchPoint device following commencement of marketing. We are also required to pay UCSF 35% of our net sales or any sublicense royalty as defined therein, and a non-refundable license issue fee of $50,000.  For a full description of further payment obligations and the UCSF License itself, the license agreement can be viewed as an exhibit to Form 8-K filed on September 17, 2014 and is incorporated by reference herein.  In connection with entering into the UCSF License, we purchased a prototype from a contract manufacturer in exchange for 2,150,000 shares of our Company’s common stock.  These shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended, were exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and bear an appropriate restrictive legend.

9

Liquidity and Capital Resources and Plan of Operation

The reader is referred to our financial statements included elsewhere herein.  As of September 30, 2014 we had $748,070 in cash and cash equivalents. The current iV3 prototype requires further optimization of its parameters and testing of its performance metrics which would then be followed by the designing, building and testing of a portable, ergonomic, commercial version of the prototype for clinical trial use. Management estimates that our costs for the continued development of iV3 under FDA’s Quality System Regulation 21 CFR before clinical trial use will be approximately $550,000 to $750,000.  In addition, our BranchPoint device is finalizing its 510(k) application for submission to the FDA which could require another $250,000 to $500,000.  Therefore, we are actively seeking additional capital investment and a strategic partner for iV3.  We cannot assure you that we will have access to the necessary funding or that if available it will be available on terms that are not dilutive to our present shareholders. If the funding is not available, we may have to severely curtail or cease operations. We presently intend to raise a minimum of $500,000 and a maximum of $2,500,000 in the next twelve months, but these plans are subject to change based on many factors, including, but not limited to, the availability of funds to us. We believe that our OTCQB listing will assist us in our funding efforts.  

Results of Operations

Revenues

We had no revenues as a development stage company for the three months ended September 30, 2014 and 2013, respectively, and for the nine months ended September 30, 2014 and 2013, respectively.

Operating Expenses

Amortization Expenses:  Amortization expenses were $12,594 and $3,376 for the three months ended September 30, 2014 and 2013, respectively, and $15,970 and $10,129 for the nine months ended September 30, 2014 and 2013, respectively. They are the result of the licensing fees incurred in connection with the exclusive license agreement between the Company and the University of Arkansas for Medical Sciences (“UAMS”). In 2014, additional amortization expenses included the purchase of a prototype in connection with the UCSF License capitalized as fixed assets.

Research and Development:  Research and development expenses were $53,315 and $187,570 for the three months ended September 30, 2014 and 2013, respectively, and $93,827 and $491,422 for the nine months ended September 30, 2014 and 2013, respectively. The decrease is due to the completion of our first human clinical trial for iV3 and resulting reduced prototype development as a strategic partner is sought.

General and Administrative:  General and administrative expenses were $23,230 and $26,378 for the three months ended September 30, 2014 and 2013, respectively, and $85,063 and $92,040 for the nine months ended September 30, 2014 and 2013, respectively. The decrease is due to the completion of our first human clinical trial for iV3 which resulted in decreased corporate expenses.

Net Losses

We had net losses of $99,245 and $221,754 for the three months ended September 30, 2014 and 2013, respectively, and $222,382 and $594,274 for the nine months ended September 30, 2014 and 2013, respectively. The decrease is due to the completion of our first human clinical trial for iV3 which reduced our expenses.   

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company” (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We conducted an evaluation, with the participation of our Chief Executive Officer who is also our Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of September 30, 2014.  Based on that evaluation, our Chief Executive Officer and Principal Financial Officer has concluded that as of September 30, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Management has identified the following two material weaknesses which have caused management to conclude that, as of September 30, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level:

1.  We do not have written documentation of our internal control policies and procedures.  Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ending September 30, 2014.  Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.  We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

11

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

1.	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
2.	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the issuer; and
3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of the end of our most recent quarter, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, as of September 30, 2014, such internal control over financial reporting was not effective.  This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal control over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties consistent with control objectives of having segregation of the initiation of transactions, the recording of transactions and the custody of assets.  The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2014.

Management believes that the material weaknesses set forth in items (1) and (2) above did not have an effect on our financial results.  However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

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This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management's report in this annual report.

Management's Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

We will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. First, we will create a position to segregate duties consistent with control objectives of having separate individuals perform (i) the initiation of transactions, (ii) the recording of transactions and (iii) the custody of assets.  Second, we will create a senior position to focus on financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness of the internal controls in preventing and detecting misstatements of accounting information.  Third, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.  Due to our small size and limited resources we could experience delays in implementation.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently a defendant in any legal proceeding or governmental proceeding nor are we currently aware of any pending legal proceeding or governmental proceeding proposed to be initiated against us. There are no proceedings in which any of our current directors, executive officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to us.

ITEM 1A. RISK FACTORS

The Company, as a “smaller reporting company” (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

On July 15, 2014, we sold 15,000 shares for $30,000 to an investor in an isolated transaction.  These shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended, were exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and bear an appropriate restrictive legend.

On August 14, 2014, we issued 450,000 shares of our Company’s common stock to a consultant to provide development services over 36 months per our consulting agreement.  These shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended, were exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and bear an appropriate restrictive legend.

In connection with entering into the UCSF License on September 16, 2014, we purchased a prototype from a contract manufacturer in exchange for 2,150,000 shares of our Company’s common stock.  These shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended, were exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and bear an appropriate restrictive legend.

There were no underwriters employed in connection with any of the transactions described above.

ITEM 3. EXHIBITS

Exhibit No.	Description
3.3	Amended Certificate of Incorporation, dated August 4, 2014 (incorporated by reference to Form DEF 14C of the Company filed on August 4, 2014)
10.14	Our UCSF License (incorporated by reference to Form 8-K filed on September 17, 2014)
31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

	ACCUREXA INC.
November 10, 2014	/s/ George Yu George Yu President and Chief Executive Officer (Principal Executive Officer)

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EXHIBIT INDEX

Exhibit No.	Description
3.3	Amended Certificate of Incorporation, dated August 4, 2014 (incorporated by reference to Form DEF 14C of the Company filed on August 4, 2014)
10.14	Our UCSF License (incorporated by reference to Form 8-K filed on September 17, 2014)
31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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