UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 333-107179
CANCER DETECTION CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
XPENTION GENETICS, INC.
-----------------------
(Former name of registrant)
Nevada 98-0380519
(State of Incorporation) (IRS Employer ID Number)
10965 Elizabeth Drive, Conifer, CO 80433
----------------------------------------
(Address of principal executive offices)
(303) 908-4900
(Registrant's Telephone number)
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 past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, 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 Exchange Act). Yes [_] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,828,124 shares of $0.001 par
value common stock outstanding as of October 20, 2008.
CANCER DETECTION CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets - August 31, 2008 (unaudited) and May 31, 2008 3
Consolidated Statements of Operations - Three months ended August 31, 2008
and 2007 and for the Period from Inception (October 13, 2004) to
August 31, 2008 (unaudited) 4
Consolidated Statements of Cash Flows - Three months ended August 31, 2008
and 2007 and for the Period from Inception (October 13, 2004) to
August 31, 2008 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 14
Item 4T. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 17
2
PART I
ITEM 1. FINANCIAL STATEMENTS
CANCER DETECTION CORPORATION
(formerly Xpention Genetics, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
August 31, May 31,
2008 2008
---------------- ----------------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 155 $ 50
Prepaid expenses 9,994 -
---------------- ----------------
Total assets $ 10,149 $ 50
================ ================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities
Accounts payable and accrued expenses $ 158,069 $ 149,664
Accrued compensation 368,000 344,000
Accrued interest 2,010 17,344
Advances from related parties 43,750 15,000
Notes payable, related party - 113,600
Convertible debt 22,500 30,000
---------------- ----------------
Total current liabilities 594,329 669,608
---------------- ----------------
Stockholders' (deficit)
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
none issued or outstanding - -
Common stock, $0.001 par value, 100,000,000 shares authorized,
4,828,124 and 2,998,826 shares issued and outstanding
at August 31, 2008 and May 31, 2008, respectively 4,828 2,999
Additional paid-in capital 1,104,323 978,101
(Deficit) accumulated during the development stage (1,693,331) (1,650,658)
---------------- ----------------
Total stockholders' (deficit) (584,180) (669,558)
---------------- ----------------
Total liabilities and stockholders' (deficit) $ 10,149 $ 50
================ ================
The accompanying notes are an integral part of these consolidated financial statements.
3
CANCER DETECTION CORPORATION
(formerly Xpention Genetics, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended August 31, 2008 and 2007,
and for the period from Inception (October 13, 2004) to August 31, 2008
October 13, 2004
(Inception) to
2008 2007 August 31, 2008
--------------------- ---------------------- ----------------------
Revenues $ - $ - $ -
--------------------- ---------------------- ----------------------
Expenses
Research and development 1,580 28,065 939,181
General and administrative 40,053 38,874 596,166
--------------------- ---------------------- ----------------------
Total expenses 41,633 66,939 1,535,347
--------------------- ---------------------- ----------------------
Operating (loss) (41,633) (66,939) (1,535,347)
--------------------- ---------------------- ----------------------
Other (expense)
Interest expense (1,040) (1,950) (23,384)
Amortization of debt discount - (5,293) (134,600)
--------------------- ---------------------- ----------------------
Total other (expense) (1,040) (7,243) (157,984)
--------------------- ---------------------- ----------------------
Net (loss) $ (42,673) $ (74,182) $ (1,693,331)
===================== ====================== ======================
Basic and diluted:
(Loss) per share $ (0.01) $ (0.02)
===================== ======================
Weighted average shares outstanding 4,231,614 2,998,826
===================== ======================
The accompanying notes are an integral part of these consolidated financial statements.
4
CANCER DETECTION CORPORATION
(formerly Xpention Genetics, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended August 31, 2008 and 2007,
and for the period from Inception (October 13, 2004) to August 31, 2008
October 13, 2004
(Inception) to
2008 2007 August 31, 2008
--------------- ---------------- -----------------
Cash flows from operating activities:
Net (loss) $ (42,673) $ (74,182) $ (1,693,331)
--------------- ---------------- -----------------
Adjustments to reconcile net (loss) to
net cash used in operating activities:
Stock based compensation - - 371,400
Amortization of debt discount - 5,293 134,600
Changes in operating assets and liabilities:
Increase in Prepaid expenses (9,994) (14,343) (9,994)
Increase in Accounts payable and accrued
expenses 31,522 58,982 542,530
--------------- ---------------- -----------------
Total adjustments 21,528 49,932 1,038,536
--------------- ---------------- -----------------
Cash flows (used in) operating activities (21,145) (24,250) (654,795)
--------------- ---------------- -----------------
Cash flows from financing activities:
Proceeds from note payable - - 113,600
Proceeds from convertible debt - - 30,000
Principal payments on convertible debt (7,500) - (7,500)
Advances from related parties, net 28,750 - 43,750
Proceeds from issuance of common stock - - 475,100
--------------- ---------------- -----------------
Cash flows provided by financing activities 21,250 - 654,950
--------------- ---------------- -----------------
Net increase (decrease) in cash and equivalents 105 (24,250) 155
Cash and cash equivalents, beginning of period 50 24,707 -
--------------- ---------------- -----------------
Cash and cash equivalents, end of period $ 155 $ 457 $ 155
=============== ================ =================
Supplemental cash flow information:
Income taxes paid $ - $ - $ -
=============== ================ =================
Interest paid $ 1,923 $ - $ 6,923
=============== ================ =================
Non-cash investing and financing activities:
Conversion of convertible debt and accrued
interest to common shares $ 128,051 $ - $ 128,051
=============== ================ =================
The accompanying notes are an integral part of these consolidated financial statements.
5
CANCER DETECTION CORPORATION
(Formerly Xpention Genetics, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)
NOTE 1. ORGANIZATION, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Interim Financial Information
The interim consolidated financial statements included herein have been prepared
by the Company, without audit, in accordance with the rules and regulations of
the Securities and Exchange Commission ("SEC") pursuant to Item 210 of
Regulation S-X. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP") have been
condensed or omitted pursuant to such SEC rules and regulations, although the
Company believes that the disclosures included are adequate to make the
information presented not misleading.
In management's opinion, the consolidated balance sheets as of August 31, 2008
(unaudited) and May 31, 2008, the unaudited consolidated statements of
operations for the three month periods ended August 31, 2008 and 2007, and the
unaudited consolidated statements of cash flows for the three month periods
ended August 31, 2008 and 2007, contained herein, reflect all adjustments,
consisting solely of normal recurring items, which are necessary for the fair
presentation of our financial position, results of operations, and cash flows on
a basis consistent with that of our prior audited consolidated financial
statements. However, the results of operations for interim periods may not be
indicative of results to be expected for the full fiscal year. Therefore, these
financial statements should be read in conjunction with the audited financial
statements and notes thereto and summary of significant accounting policies
included in the Company's Form 10-KSB for the year ended May 31, 2008.
Reverse Stock Split and Name Change
On September 10, 2008, the Board of Directors of the Company approved a reverse
stock split of the common stock in the ratio of 1:20 and the name change from
Xpention Genetics, Inc. to Cancer Detection Corporation. The resolutions became
effective September 17, 2008, when the State of Nevada issued a Certificate of
Amendment to the Company's Articles of Incorporation. The majority stockholders
had approved the reverse split and the name change amendment on July 25, 2008,
by written consent in lieu of a meeting of stockholders.
Organization
Cancer Detection Corporation (the "Company") (formerly Xpention Genetics, Inc.)
is a Nevada corporation that resulted from the business combination between
Xpention, Inc. and Bayview Corporation that occurred in March, 2005. For
accounting purposes, the date of inception for the Company is October 13, 2004,
the date that Xpention, Inc. was incorporated. The Company has been in the
development stage since its formation and has not yet realized any revenues from
its planned operations. It is engaged in the biotechnology industry to develop
both immunological and molecular tests for cancer detection in animals and
humans as well as therapeutic vaccines and other treatment methods for both
canine and human cancers. The Company's fiscal year ends on May 31.
6
CANCER DETECTION CORPORATION
(Formerly Xpention Genetics, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)
Basis of Presentation
Cancer Detection Corporation represents the result of a merger between Bayview
Corporation ("Bayview"), a public company, and Xpention, Inc., a private
company. During March 2005, Bayview issued 715,000 shares of its common stock to
the sole shareholder of Xpention, Inc. in exchange for all of the issued and
outstanding common shares of Xpention, Inc. pursuant to an Agreement and Plan of
Reorganization (the "Merger"). In addition, concurrent with the exchange of
shares, Bayview changed its name to Xpention Genetics, Inc., whose name has
subsequently been changed to Cancer Detection Corporation as described above.
For accounting purposes, this acquisition of Xpention, Inc. by Bayview, a
non-operating entity, represents a reverse acquisition under which Xpention,
Inc. is recognized as the accounting acquirer. In substance, the Merger was
recorded as a capital transaction by the issuance of 2,127,159 shares of common
stock by the Company for all of the issued and outstanding common shares of
Bayview. No goodwill or other intangible assets were recorded and the historical
financial statements as of and prior to the acquisition date represent the
operations of Xpention, Inc.
Xpention, Inc. (a wholly-owned subsidiary of the Company) was incorporated in
the State of Colorado on October 13, 2004. Since its inception, Xpention, Inc.
has participated in the biotechnology industry to develop both immunological and
molecular tests for cancer detection in animals and humans as well as
therapeutic vaccines and other treatment methods for both canine and human
cancers.
Bayview was incorporated in the State of Nevada, on September 5, 2002. From
inception until February 28, 2005, Bayview was primarily engaged in the
acquisition and exploration of mining properties, but had ceased operations by
February 28, 2005. As of the date of the Merger, Bayview had no assets and no
operations and has been treated as the acquired company for accounting purposes.
Development Stage Company
The Company presents its financial statements in conformity with the accounting
principles generally accepted in the United States of America that apply to
enterprises that are establishing their operations. As a development stage
enterprise, the Company must utilize accounting principles consistent with those
required of an established enterprise, and, in addition, must disclose the
deficit accumulated during the development stage and the cumulative statements
of operations and cash flows from commencement of development stage to the
current balance sheet date.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Xpention, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation.
7
CANCER DETECTION CORPORATION
(Formerly Xpention Genetics, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)
Use of Estimates
The preparation of the Company's financial statements in conformity with US GAAP
requires the Company's management to make estimates and assumptions that affect
the amounts of assets and liabilities, the identification and disclosure of
impaired assets and contingent 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.
Per Share Amounts
SFAS 128, "Earnings Per Share," provides for the calculation of "Basic" and
"Diluted" earnings per share. Basic earnings per share includes no dilution and
is computed by dividing net income (or loss) by the weighted-average number of
shares outstanding during the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of the
Company, assuming the issuance of an equivalent number of common shares pursuant
to options, warrants, or convertible debt arrangements. Diluted earnings per
share is not shown for periods in which the Company incurs a loss because it
would be anti-dilutive. Similarly, potential common stock equivalents are not
included in the calculation if the effect would be anti-dilutive.
All per share amounts presented herein have been restated to reflect the effect
of the 1 for 20 reverse stock split approved on September 10, 2008.
Recent Accounting Pronouncements
There were no accounting standards and interpretations issued recently which are
expected to a have a material impact on the Company's financial position,
operations or cash flows.
NOTE 2. GOING CONCERN
The accompanying consolidated financial statements have been prepared in
conformity with US GAAP, which contemplates continuation of the Company as a
going concern.
The Company is in its development stage and has not yet generated revenues from
operations. It has experienced losses from operations as a result of its
investment necessary to achieve its operating plan, which is long-range in
nature. For the three months ended August 31, 2008, the Company incurred a net
loss of $42,673, and has incurred a cumulative net loss since inception of
$1,693,331. At August 31, 2008, the Company had a working capital deficit and
stockholders' deficit of $584,180. These conditions raise substantial doubt
about the ability of the Company to continue as a going concern.
Management does not believe that the Company's current capital resources will be
sufficient to fund its operating activity and other capital resource demands
during fiscal year 2009 and is currently seeking additional resources. The
Company's ability to continue as a going concern is contingent upon its ability
to obtain capital through the sale of equity or issuance of debt, joint venture
or sale of its assets, and ultimately attaining profitable operations.
8
CANCER DETECTION CORPORATION
(Formerly Xpention Genetics, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
NOTE 3. NOTES PAYABLE, RELATED PARTY
Effective June 30, 2008, The Regency Group, LLC ("Regency Group") converted the
outstanding principal of $113,600 and accrued interest of $14,451 into 1,829,298
shares of common stock.
NOTE 4. CONVERTIBLE DEBT
Effective January 5, 2007, the Company issued convertible debentures in the
aggregate principal amount of $30,000 to two debt holders. The debentures bear
interest at 8% per annum and were originally due on January 5, 2008. The due
date was subsequently extended, as discussed below. The debenture holders may
convert the principal and accrued interest into the Company's common stock at a
rate of $0.20 per share. Regency Group holds $15,000 of the convertible debt.
Both debt holders agreed to extend the due date of the convertible debentures to
April 30, 2008. During August 2008, the Company repaid one debt holder $7,500 in
principal plus accrued interest of $1,923. In addition, the debt holder agreed
to extend the due date of the remaining principal balance of $7,500 to September
30, 2008. On October 6, 2008, the Company repaid the remaining principal balance
of $7,500 plus accrued interest of $85 to the debt holder. Regency Group agreed
to extend the due date of the $15,000 principal balance held by them to December
31, 2008.
NOTE 5. STOCKHOLDERS' (DEFICIT)
On September 10, 2008 the board of directors approved a resolution to affect a 1
for 20 reverse stock split, which became effective September 17, 2008, when the
State of Nevada issued a Certificate of Amendment to the Company's Articles of
Incorporation. One share of common stock will be issued in replacement of each
20 shares outstanding as of the July 24, 2008 record date, and the number of
authorized shares will remain the same. All of the financial information in this
report has been adjusted to reflect the effect of this 1 for 20 reverse stock
split.
Effective June 30, 2008, the Company issued 1,829,298 (post-split) shares of
common stock for the conversion of $113,600 in outstanding principal of notes
payable and the related accrued interest of $14,451.
NOTE 6. RELATED PARTY TRANSACTIONS
During the three months ended August 31, 2008, the Company received cash
advances of $28,750 from related parties. The advances do not bear interest and
are due upon demand.
9
CANCER DETECTION CORPORATION
(Formerly Xpention Genetics, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)
NOTE 7. SUBSEQUENT EVENTS
Effective September 10, 2008, the Company recorded the issuance of 25,000 shares
of its common stock for investor relations services performed in connection with
the reverse stock split and the name change. The services were valued at the
post-split share price at September 10, 2008, of $0.22 per share for a total
expense of $5,500.
Subsequent to August 31, 2008, the Company issued 3,750,000 shares of its common
stock at $0.02 per share for cash proceeds of $75,000.
On October 6, 2008, the Company repaid the remaining principal balance of $7,500
and accrued interest of $85 on a convertible debenture.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of May 31, 2008, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to the factors prompting the
explanatory paragraph are discussed below and also in Note 2 to the unaudited
interim financial statements.
Plan of Operation
The Company, through its wholly-owned subsidiary, holds the exclusive worldwide
license to a patented technology for the detection of cancer based on a tumor
marker known as "p65" which has been demonstrated to have elevated levels in the
blood of canine and human cancer conditions. The tumor marker "p65" is believed
to be a protein required in the early development of numerous cancers and
appears from early research to provide a strong indication of tumor growth in
both canines and humans. It also appears to have a direct correlation to tumor
size/mass making it a promising marker for both early detection of malignant
tumor formation as well as a useful tool for monitoring therapy and remission.
We plan to develop an immunological test as well as a molecular assay for
detection of cancer in canines. We also plan to develop both immunological and
molecular tests for detection of human cancers as well as therapeutic treatments
and vaccines.
We contract with third party research organizations to conduct our research
activities. During June 2007, we entered into an Assay Revalidation /
Redevelopment Proposal with Future Focus, an independent testing organization.
The project calls for third party validation of the research results presented
in the final report from the University of Texas Health Science Center at San
Antonio ("UTHSCSA") and technology transfer of the current assay plus assay
reformatting and sample analysis. On August 15, 2007, we announced that the
researchers had been unable to replicate the results obtained at UTHSCSA.
11
As a result of the revalidation results, we are reviewing our planned research
activities for the development of an immunological canine cancer detection test.
We also continue to evaluate various options for commercialization of products;
however, it is not anticipated that we will generate any revenues from
commercialization of our technology during the next twelve months.
Reverse Stock Split and Name Change
On September 10, 2008, the Board of Directors of the Company approved a reverse
stock split of the common stock in the ratio of 1:20 and the name change from
Xpention Genetics, Inc. to Cancer Detection Corporation. The resolutions became
effective September 17, 2008, when the State of Nevada issued a Certificate of
Amendment to the Company's Articles of Incorporation. The majority stockholders
had approved the reverse split and the name change amendment on July 25, 2008,
by written consent in lieu of a meeting of stockholders.
Liquidity and Capital Resources
As of August 31, 2008, our working capital deficit of $584,180 was comprised of
current assets of $10,149 and current liabilities of $594,329. This represents
an improvement in working capital of $85,378 compared to the deficit of $669,558
at fiscal year end May 31, 2008. The conversion of notes payable and accrued
interest improved our working capital position. During the three months ended
August 31, 2008, we consumed working capital while we pursued our business plan.
Management does not believe that the Company's current capital resources will be
sufficient to fund its operating activity and other capital resource demands
during fiscal year 2009. Our ability to continue as a going concern is
contingent upon our ability to obtain capital through the sale of equity or
issuance of debt, joint venture or sale of assets, and ultimately attaining
profitable operations. There is no assurance that we will be able to
successfully complete any one of these activities.
We are presently seeking additional debt and equity financing to provide
sufficient funds for payment of amounts due under research contracts as well as
accrued but unpaid professional fees and administrative expenses and to fund
ongoing research and operations.
We have never received revenue from our operations. We have historically relied
on equity and debt financings to fund our capital resource requirements. We have
experienced net losses since inception. We do not believe that we are a
candidate for conventional debt financing and we have not made arrangements to
borrow funds under a working capital line of credit. We will be dependent on
additional financing to continue our research and development efforts.
All of our investment in research and development activities has been expensed,
and does not appear as an asset on our balance sheet. From inception to August
31, 2008, we have spent $939,181 on our research and development efforts to
commercialize the "p65" technology.
All of our capital resources to date have been provided through the sale of
equity securities, proceeds from notes payable and convertible debentures, and
advances from related parties. From inception through August 31, 2008, we
received $475,100 in cash through issuance of our common stock. Since we have
not generated any cash from operations, we have relied on sale of equity and
borrowings to fund all of our capital needs.
12
Our ability to pay accounts payable and accrued expenses and repay borrowings is
dependent upon receipt of new funding from related parties, private placements
or debt financing. Certain related parties have periodically advanced funds to
us to meet our working capital needs. The related parties are under no
obligations to continue these advances. During the three months ended August 31,
2008, the related parties advanced an additional $28,750 to us. These funds are
due on demand and do not accrue interest.
Net cash used in operating activities was $21,145 during the three months ended
August 31, 2008, compared to $24,250 during the three months ended August 31,
2007, a decrease of $3,105. During the three months ended August 31, 2008 we
incurred a net loss of $42,673. This compares to a net loss of $74,182 for the
three months ended August 31, 2007. During the three months ended August 31,
2008 and 2007, the Company did not receive or use funds in its investment
activities.
Net cash provided by financing activities during the three months ended August
31, 2008, was $21,250. We received advances from related parties of $28,750 and
we repaid outstanding principal on convertible notes payable of $7,500 during
the three months ended August 31, 2008. We received no net cash from financing
activities during the three months ended August 31, 2007.
Effective June 30, 2008, The Regency Group LLC (Regency Group) converted
$113,600 of outstanding principal on notes payable and $14,451 of related
accrued interest into 1,829,298 shares of our common stock. During the three
months ended August 31, 2008, the due date of the remaining $15,000 convertible
debt to Regency Group was extended to December 31, 2008, and the due date of the
remaining balance of $7,500 on a convertible debt was extended to September 30,
2008. The Company repaid the remaining principal balance of $7,500 and accrued
interest of $85 on October 6, 2008.
Results of Operations - Three Months Ended August 31, 2008 Compared to the Three
Months Ended August 31, 2007
We are considered a development stage company for accounting purposes, since we
have not received any revenues from operations. We are unable to predict with
any degree of accuracy when that situation will change. We expect to incur
losses until such time, if ever, as we begin generating revenue from operations.
For the three months ended August 31, 2008, we recorded a net loss of $(42,673),
or $(0.01) per share, compared to a loss of $(74,182) or $(0.02) per share for
the three months ended August 31, 2007.
Research and development costs were $1,580 for the three months ended August 31,
2008, compared to $28,065 incurred during the three months ended August 31,
2007, a decrease of $26,485. The costs incurred during the three months ended
August 31, 2007 represent third party testing to revalidate the results of the
research report from UTHSCSA. Our use of third party research and testing
partners can result in variations in the expenses reported in each period.
General and administrative expense increased to $40,053 for the three months
ended August 31, 2008, compared to $38,874 during the same period of 2007, a
difference of $1,179. These expenses continue to consist primarily of the
accrual for compensation costs, professional fees associated with our status as
a public company, and the premium costs of D&O insurance. Investor relations
expense increased from $575 to $2,617 as a result of costs associated with the
reverse stock split and name change. D&O insurance decreased by $1,395, or 29%,
as a result of obtaining a less costly policy.
13
Interest expense was $1,040 for the three months ended August 31, 2008, compared
to $7,243 for the three months ended August 31, 2007, a decrease of $6,203, or
85%. Included in interest expense in 2007 is the amortization of debt discount
in the amount of $5,293 related to the beneficial conversion feature of the
convertible debentures issued during 2007. The remainder of the decrease in
interest expense is attributable to a reduction in outstanding principal
balances of notes payable. Effective June 30, 2008, Regency Group converted
outstanding principal of $113,600 to common stock. During August 2008 the
Company paid $7,500 of outstanding principal balance on a convertible note
payable.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, our Chief Executive
Officer has concluded that our disclosure controls and procedures are effective
in timely alerting them to material information required to be included in our
periodic SEC filings and to ensure that information required to be disclosed in
our periodic SEC filings is accumulated and communicated to our management,
including our Chief Executive Officer, to allow timely decisions regarding
required disclosure as a result of the deficiency in our internal control over
financial reporting discussed below.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
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(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and directors; and
(iii)provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended August 31,
2008. We believe that internal control over financial reporting is effective. We
have not identified any, current material weaknesses considering the nature and
extent of our current operations and any risks or errors in financial reporting
under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, 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.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended August 31, 2008, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No legal proceedings are pending or threatened to the best of our knowledge.
ITEM 2. CHANGES IN SECURITIES
The Board of Directors of the Registrant on September 10, 2008, adopted a
resolution approving a one for twenty reverse split of our Common Stock to
holders of record as of July 25, 2008. The reverse stock split combines our
outstanding Common Stock on the basis of 20 outstanding shares being combined
into one outstanding share. Each shareholder's percentage ownership in the
Registrant (and relative voting power) will remain essentially unchanged as a
result of the reverse stock split.
The resolution provides that fractional shares will be rounded up so that no
shareholder will be cashed out. The reverse stock split was approved by 57.18%
of the shareholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 12, 2008, we filed a Definitive Information Statement on Schedule
14C where we informed our shareholders that a majority of our shareholders had
approved two resolutions by written consent in lieu of a shareholder meeting.
They approved a 1 for 20 reverse split of the Company's common stock. They also
approved a change of the Company's name from Xpention Genetics, Inc. to Cancer
Detection Corporation.
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ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
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SIGNATURES
In accordance with the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
CANCER DETECTION CORPORATION
Date: October 20, 2008 By: /s/ David Kittrell
---------------------------
David Kittrell
Chief Executive Officer, &
Chief Financial Officer
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