UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended November 30, 2003
EVOLVE ONCOLOGY INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-4047693
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
151 South Ferry Quay
Liverpool, Merseyside L3 4EW
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number +44 (0) 151 707 7898
Check here whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes |X| No |_|
As of November 30, 2003, the following shares of the Registrant's common stock
were issued and outstanding:
16,931,492 shares of voting common stock
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
STATEMENT OF CASH FLOWS
Note 1. NATURE OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES
Note 2. RECENT ACCOUNTING PRONOUNCMENTS
Note 3. BASIS OF PRESENTATION
Note 4. REALIZATION OF ASSETS
Note 5. ACQUISITION
Note 6. DISPOSAL
Item 2. Management's Discussion And Analysis or Plan of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
i
ITEM 1
Financial Statements
EVOLVE ONCOLOGY INC.
CONSOLIDATED BALANCE SHEETS
As Of As Of
November 30, 2003 February 28,2003
----------------- ----------------
ASSETS $ $
Current assets - cash 327 0
Accounts receivable 0 1,497,531
Inventories 0 3,825
Prepaid expenses and other assets 0 130,192
---------- ----------
Total current assets 327 1,631,548
Property and equipment - net 0 31,237
Intangible assets 1,681,464 739990
---------- ----------
TOTAL ASSETS 1,681,791 2,402,775
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft 0 1,081,732
Short term debt 0 154,430
Accounts payable 527,451 470,077
Accrued expenses and other liabilities 25 295,162
Factored receivables 968,585
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Total Current Liabilities 527,476 2,001,401
OTHER LIABILITIES
Long term debt 0 2,223,243
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TOTAL Liabilities 527,476 4,224,644
STOCKHOLDERS' EQUITY
Common stock, authorized 25,000,000
shares of $0.001 par value;
Issued and outstanding 16,931,492 shares 16,931 15,687
Accumulated other comprehensive income/loss (8,133) (126,676)
Additional paid-in capital 1,740,326 2,643,951
Accumulated deficit (594,809) (4,354,831)
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Total stockholders' deficit/surplus 1,154,315 1,821,869
---------- ----------
Total liabilities and stockholders' equity 1,681,791 (2,402,775)
========== ==========
The accompanying notes are an integral part of these financial statements
1
EVOLVE ONCOLOGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the 3 For the 3
months ended months ended
November 30, 2003 November 30, 2002
----------------- -----------------
Net Sales $ 0 $ 1,385,178
Cost of goods sold 0 808,859
------------ ------------
Gross Profit 0 576,319
Operating Expenses
Sales and Marketing 99,958
Research & Development 0
General and Administrative 321,900 644,318
Depreciation and amortization 0 45,138
------------ ------------
Total Operating Expenses 321,900 789,414
------------ ------------
Operating Loss (321,900) (213,095)
Interest Expense 0 (86,418)
------------ ------------
Net Profit/(Loss) $ (321,900) $ (299,513)
============ ============
Income expense 0
Minority interest 0 (1,134)
Net Profit/(Loss) attributable
to common shares $ (321,900) $ (298,379)
============ ============
Net Profit/(Loss) per common share
Basic and diluted $ (0.02) $ (0.02)
============ ============
Weighted average
common shares outstanding 16,756,492 15,686,920
============ ============
The accompanying notes are an integral part of these financial statements.
2
EVOLVE ONCOLOGY INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the 3 For the 3
months ended months ended
November 30, 2003 November 30, 2002
----------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Profit/(Loss) $ (321,900) $ (298,379)
Adjustment to reconcile net loss
To net cash used in operations
Minority interest 1,134
Depreciation and amortisation 0 45,138
Profit on sale of property & equipment 0
Gain ob disposal of subsidiary 0
Changes in Operating Assets
and Liabilities
Cash and Cashflows 0 (119,967)
Accounts Receivable 0 (1,656,372)
Inventories 0 (1,722)
Other Current Assets 0 (8,333)
Deferred Income 0 755,843
Accounts Payable 59,400 62,849
Accrued Expenses 0 581,581
Increase in short term debt 0 1,320
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Total Adjustments 59,400 (338,529)
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Net Cash provided by Operating
Activities (0) (636,908)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Minority interest 1,134
Bank Overdraft 0 (13,254)
Repayments on obligations for
Capital leases 0 0
Net receipts on factored receivables 0 531,329
----------- -----------
Net Cash raised
by Financing Activities 262,500 516,941
Net Change in Cash 0 (119,967)
Cash at Beginning of Period 327 119,967
----------- -----------
Cash at End of Period $ 327 $ 0
=========== ===========
Supplemental Disclosure of
Cash Flow Information
Cash Paid During the Period for
Interest Expense $ 0 $ 49,854
Shares issued for acquisition $ 0 $ 1,788,912
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
NOTES TO FINANCIAL STATEMENTS
November 30, 2003
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
During the quarter to 30 November 2003, Evolve Oncology Inc. ("the Company")
conducted its operations through its wholly owned subsidiary, EU Laboratories
Limited, a UK Corporation. The Company is in the business of developing and
commercializing pharmaceutical products.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, EU Laboratories Limited.
On March 1, 2003, the Company, disposed of Corspan Limited, New Media North
Limited, High Low Global Systems Inc, and Total Print Solutions Limited to the
shareholders of the Company. The Company then acquired 100% of EU Laboratories
Limited. ("the Acquisition") after conducting a 10 for 1 reverse split of the
then issued and outstanding common stock.
The basic structure and terms of the Acquisition, together with the applicable
effects were that the Company acquired all of the outstanding shares of common
stock of EU Laboratories Limited in exchange for 15,000,000 shares of newly
issued common stock of the Company.
Under accounting principles generally accepted in the United States of America,
the Acquisition is considered to be a business combination. That is, the results
of EU Laboratories Limited have been included in the consolidated financial
statements since the acquisition. Goodwill arising on the acquisition is
recorded at the fair value of the newly issued common stock of the Company less
the fair value of the net assets acquired.
C. REVENUE RECOGNITION
The Company recognizes income when products are shipped.
D. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management of the
Company to make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as revenues and expenses during
the reporting period. The amounts estimated could differ from actual results.
Significant estimates in the financial statements include the assumption that
the Company will continue as a going concern (Note B).
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
On June 29, 2001, the Financial Accounting Standards Board (FASB) approved for
issuance Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. Major provisions of
these Statements are as follows: all business combinations initiated after June
30, 2001 must use the purchase method of accounting; the pooling of interest
method of accounting is prohibited except for transactions initiated before July
1, 2001; intangible assets acquired in a business combination must recorded
separately from goodwill if they arise from contractual or other legal rights or
are separable from the acquired entity and can be sold, transferred, licensed,
rented or exchanged, either individually or as part of a related contract, asset
or liability; goodwill and intangible assets with indefinite lives are not
amortized but are tested for impairment annually, except in certain
circumstances, and whenever there is an impairment indicator; all acquired
goodwill must be assigned to reporting units for purposes of impairment testing
and segment reporting; effective January 1, 2002, goodwill will no longer be
subject to amortization.
As permitted the Company has adopted SFAS 141, therefore the goodwill generated
on the acquisition of EU laboratories Ltd will not be amortized in future
periods but tested for impairment annually.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 "Accounting for Asset Retirement Obligations" (Statement 143). Statement 143
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. We are required to adopt Statement 143, for the year
beginning March 1, 2002. The adoption of Statement 143 did not have a material
effect on our consolidated financial position or results of operations.
4
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," in August 2001. SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supersedes SFAS No. 121 and is effective
for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144
on March 1, 2002 did not have a material effect on our consolidated financial
position or results of operations.
NOTE 3 - BASIS OF PRESENTATION
The financial statements included in this Form 10-QSB have been prepared by us,
without audit. 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,
although management believes the disclosures are adequate to make the
information presented not misleading. The results of operations for any interim
period are not necessarily indicative of results for a full year. These
statements should be read in conjunction with the financial statements and
related notes included in the Company's Annual Report on Form 10-KSB for the
period ended February 28, 2003., and the 8K/A filing filed on 30th July, 2003,
the Form 10QSB for the period ending May 31, 2003, and the Form 10QSB for the
period ending August 31, 2003.
The financial statements presented herein, for the three months ended November
30, 2003 and 2002 reflect, in the opinion of management, all material
adjustments consisting only of normal recurring adjustments necessary for a fair
presentation of the financial position, results of operations and cash flow for
the interim periods.
NOTE 4 - REALIZATION OF ASSETS
The financial statements have been prepared on a basis that contemplates the
Company's continuation as a going concern and the realization of our assets and
liquidation of our liabilities in the ordinary course of business. We have an
accumulated deficit of $594,809 at November 30, 2003, and working capital of $
(527,476) at November 30, 2003. These matters, among others, raise substantial
doubt about our ability to remain a going concern for a reasonable period of
time. The financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts and classification of
liabilities that might result from the outcome of this uncertainty. The
Company's continued existence is dependent on its ability to obtain additional
financing sufficient to allow it to meet its current obligations and to achieve
profitable operations and the Company is actively pursuing further funding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-QSB, including information set forth under
this item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). We
desire to avail ourselves of certain "safe harbor" provisions of the Act and are
therefore including this special note to enable us to do so. Forward-looking
statements included in this Form 10-QSB or hereafter included in other publicly
available documents filed with the Securities and Exchange Commission, reports
to our stockholders and other publicly available statements issued or released
by us involve unknown risks, uncertainties, and other factors which could cause
our actual results, performance (financial or operating), or achievements to
differ from the future results, performance (financial or operating), or
achievements expressed or implied by such forward looking statements. Such
future results are based upon our best estimates based upon current conditions
and the most recent results of operations.
LIQUIDITY
To date, we have incurred significant net operating losses. We anticipate that
we may continue to incur significant operating losses for some time. We have an
accumulated deficit of $594,809 at November 30,2003, and negative working
capital of $527,476 at November 30,2003. These matters, among others, raise
substantial doubt about our ability to remain a going concern.
We must immediately raise significant capital to enable us to meet our current
obligations and to fund our current operations until we are to become
profitable. Profitability is dependent upon our ability to generate sufficient
sales from second-generation services. Our existence is dependent on our ability
to obtain the necessary financing.
The financial statements do not include any adjustments relating to the
recoverability or classification of assets or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.
The company is currently seeking financing through private placements. The
company hopes to raise significant proceeds through this medium, which will be
used to fund develop of its products, the acquisition of new products and
operating expenses. The Company is actively reviewing various avenues to raise
capital and we are currently visiting with and meeting a number of potential
investors.
5
We have insufficient relevant operating history upon which an evaluation of our
performance and prospects can be made. We are still subject to all of the
business risks associated with a new enterprise, including, but not limited to,
risks of current and unforeseen capital requirements, lack of fully-developed
products, failure of market acceptance, failure to establish business
relationships, reliance on outside contractors for the manufacture and
distribution, and competitive disadvantages against larger and more established
companies. The likelihood of our success must be considered in light of the
development cycles of new products and technologies and the competitive
environment in which we operate.
Evolve Oncology Inc. is engaged in the business of developing and
commercializing pharmaceutical compounds to fight cancer.
ACQUISITION OF EU LABORATORIES LIMITED.
On March 1, 2003 Evolve Oncology Inc., acquired the total outstanding share
capital of EU Laboratories Ltd. "EU Labs". EU Labs are a UK based company that
develops products to fight cancer.
Disposal of interest in Corspan Limited, New Media North Limited, High Low
Global Sytems Inc, and Total Print Solutions Limited.
On March 1, 2003 Oncthera Inc. disposed of its interest in Limited, New Media
North Limited, High Low Global Sytems Inc, and Total Print Solutions Limited to
the shareholders of Corspan Inc (Now Oncthera Inc). This was done with the
consent of the shareholders, and was felt that the company needed a new change
of direction to give the shareholders a more realistic chance of achieving
value.
There has been significant doubts as to the continuation of Corspan Limited, New
Media North Limited, High Low Global Sytems Inc, and Total Print Solutions
Limited as a print related companies, as the printing market had seen a downturn
in business and overall consumer confidence had fallen to a low.
The Directors are of the opinion that the disposal of this interest was required
to progress the Evolve Oncology Inc new strategic plan and remove day to day
operational pressures from the executives of the company allowing them to focus
on the development of the development strategy of Evolve Oncology Inc.
OVERVIEW
The company is currently operating through one wholly owned subsidiary, EU
Laboratories Limited.
EU Laboratories Limited has a limited trading history, and has a current
portfolio of four products aimed at cancer. Onca 011 is a monoclonal antibody
which targets most forms of cancer.
The global cancer market is forecast to grow from $29.4bn in 2001 to $42.8bn in
2007. In this period the innovative cancer therapy market is forecast to triple
from $4.3bn in 2001 to $12.3bn in 2007.The Company's focus on innovative
treatments should benefit from the fact that the leading pharmaceutical
companies in the oncology market will all suffer from multiple patent expiries
in the next four years with existing cytostatic and hormonal therapies. This
creates a clear market opportunity for niche drug discovery companies focusing
on innovative technologies as the large pharmaceutical companies will be looking
to enhance their existing portfolios with new products.
Management believes by focusing on innovative cancer therapies it will be
possible to develop multiple drug candidates. Innovative Oncology will take
development stage candidates which have commercial potential and take these
products through early stage clinical trials to prove efficacy and safety.
Oncthera will then look to license the products to partners who will take the
economic burden of multi center clinical trials. Oncthera will look to license
US rights whilst maintaining the European rights.
Although the US is the single most lucrative market the European market is
extremely valuable. The European market is broken down into five main
marketplaces UK, Germany, France, Italy and Spain. These five marketplaces have
a prevalent patient population of approximately 3.4mn as compared to 3.3mn in
the US (by main disease area excluding skin cancer).Innovative Oncology will
look to establish niche oncology sales forces in these markets whilst licensing
its products in other smaller European territories. Oncthera will also look to
develop niche drugs which large pharmaceutical companies will not develop as
they do not have potential blockbuster status.
6
SALES
We had no revenues for the quarter ended November 30, 2003.
GROSS PROFIT
Our gross loss for the quarter ending November 30 2003 was attributable to
Operating expenses.
RESEARCH & DEVELOPMENT
Research and Development expenses for the quarter ending November 30, 2003 were
nil, as the Company's initial R & D work screening compounds has come to an end
and data is being collated before proceeding with the development of selected
compounds. The Company expects future R & D expenses to be substantial.
GENERAL & ADMINISTRATIVE EXPENSES
During quarter ending November 30 2003 we incurred $321,900 in general and
administrative expenses.
OPERATING LOSS
The reported operating loss was by $59,400 in the three month period to 30
November 2003.
NET LOSS
The reported net loss in the period to 30 November 2003 was $321,900 (or $0.02
per share basic and undiluted).
7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The directors are not aware of any pending legal proceedings against the
Company.
ITEM 2. CHANGES IN SECURITIES
During the three month period ended 30th November 2003 the Company issued
350,000 shares to consultants on 17 October 2003 at a price of $0.75.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There has been no default in the payment of principal, interest, sinking or
purchase fund installment.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
There is no other information to report which is material to the Company's
financial condition not previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A Filing on Form 8K/A was filed on November 7, 2003 changing the Company's name
to Evolve Oncology Inc which is hereby incorporated by reference.
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
8
SIGNATURES
Pursuant to 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.
EVOLVE ONCOLOGY, INC.
(Registrant) Date: January 19, 2004
By: /s/ Ian Warwick
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President