As filed with the Securities and Exchange Commission on February 4, 2008
Registration No. 333-______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ENOX BIOPHARMA, INC.
(Name of small business issuer in its charter)
NEVADA 3841 26-0477124
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
27 Havradim St.
Yehud-Monosson 56275, Israel
Tel: + 972 (54) 5724643
Fax: +1 (888) 224-7259
(Address and telephone number of principal executive offices).
EastBiz.com, Inc.
5348 Vegas Dr.
Las Vegas, NV 89108
Phone: (702) 871-8678
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
SRK Law Offices
Rabin Science Park
Rehovot, Israel
Telephone No.: (718) 360-5351
Facsimile No.: (011) (972) 8-936-6000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any securities being registered on this form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933. [X]
If this Form is filed to register additional securities for an Offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities To Be Amount To Be Offering Price Aggregate Offering Registration
Registered (1) Registered Per Share(2) Price Fee(2)
- ----------------------------------------------------------------------------------------------------------
Common Stock to be 3,819,227 shares $0.0615 per share $234,882.50 $ 9.23
offered for resale by
selling stockholders
- ----------------------------------------------------------------------------------------------------------
Common Stock to be 3,819,227 shares(3) $0.20 per share $763,845.40 $30.02
offered for resale by
selling stockholders
upon exercise of
Series A Warrants
- ----------------------------------------------------------------------------------------------------------
Total Registration Fee $39.25
==========================================================================================================
(1) An indeterminate number of additional shares of common stock shall be
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends or similar transactions and in such an event the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) under the Securities Act.
(3) Represents 3,819,227 shares of common stock that may be issued upon
exercise of Series A Warrants at any time until December 28, 2009.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
SUBJECT TO COMPLETION DATED FEBRUARY 1, 2008
PROSPECTUS
ENOX BIOPHARMA, INC.
A NEVADA CORPORATION
7,639,578 SHARES OF
COMMON STOCK
The prospectus relates solely to the resale by certain selling stockholders of
Enox Biopharma, Inc. of:
- Up to 3,819,227 shares of our common stock issued in a private
placement on December 28, 2007; and
- Up to 3,819,227 shares of our common stock which may be issued upon
the exercise of Series A Warrants issued in connection with the
private placement on December 28, 2007.
Each Series A Warrant entitles the holder to purchase one additional share of
our common stock at an exercise price of $0.20 for a period of two years from
December 28, 2007, the closing date of the private placement.
The shares were acquired by the selling stockholders (which term as used herein
includes their pledges, donees, transferees or other successors-in-interest)
directly from our company in private transactions that were exempt from the
registration requirements of the Securities Act of 1933. The selling
stockholders will sell their shares of our common stock at a price of $0.0615
per share until shares of our common stock are quoted on the OTC Bulletin Board,
and thereafter at prevailing market prices or privately negotiated prices. Our
common stock is presently not traded on any market or securities exchange, and
we have not applied for listing or quotation on any public market. Further,
there is no assurance that our common stock will ever trade on any market or
securities exchange.
We will not receive any proceeds from the resale of shares of common stock by
the selling stockholders, although we may receive proceeds of up to $763,958 if
all of the Series A Warrants are exercised. We have agreed to bear all of the
expenses incurred in connection with the registration of these shares. The
selling stockholders will pay any brokerage commissions and/or similar charges
incurred for the sale of these shares of our common stock.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR COMMON STOCK WILL
ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD INVEST IN OUR COMMON STOCK ONLY
IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CAREFULLY CONSIDER
THE VARIOUS RISK FACTORS DESCRIBED BEGINNING ON PAGE 6 BEFORE INVESTING IN OUR
COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _____, 2008.
You should rely only on the information included in or incorporated by reference
into this prospectus or information we have referred to in this prospectus. We
have not authorized anyone to provide you with information that is different.
This prospectus may only be used where it is legal to sell these securities.
This prospectus is not an offer to sell, or a solicitation of an offer to buy,
in any state where the offer or sale is prohibited. The information in this
prospectus is accurate on the date of this prospectus and may become obsolete
later. Neither the delivery of this prospectus, nor any sale made under this
prospectus will, under any circumstances, imply that the information in this
prospectus is correct as of any date after the date of this prospectus.
References to "Enox Biopharma, Inc.," "Enox," "we", "us" or "our" refer to Enox
Biopharma, Inc.
TABLE OF CONTENTS
Page No.
--------
Prospectus Summary and Risk Factors 3
Use of Proceeds 15
Determination of Offering Price 15
Selling Security Holders 15
Plan of Distribution 17
Legal Proceedings 19
Directors, Executive Officers, Promoters and Control Persons 19
Security Ownership of Certain Beneficial Owners and Management 21
Description of Securities 23
Interest of Named Experts and Counsel 23
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities 24
Organization within Last Five Years 24
Description of Business 24
Management's Discussion and Analysis or Plan of Operation 30
Description of Property 32
Certain Relationships and Related Transactions 33
Market for Common Equity and Related Stockholder Matters 34
Executive Compensation 35
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 36
Financial Statements 37
2
PROSPECTUS SUMMARYAND RISK FACTORS
THE COMPANY
Enox Biopharma, Inc. was incorporated on June 28, 2007, in the State of Nevada.
Our principal executive offices are located at 27 Havradim St., Yehud-Monosson,
56275, Israel. Our telephone number is 972 (54) 5724643 as of the date of this
prospectus. We are a development stage company with no revenue and limited
operations to date.
Subsequent to our incorporation, we have been in the process of establishing
ourselves as a company that will focus its operations on developing a novel
treatment for acute ear infections in children. We have identified a medical
device with unique drug eluting technology suitable for the treatment of acute
and antibiotic-resistant ear infections in children, and have filed a
provisional patent application to protect our technology.
Our device is intended to be a unique tympanostomy tube capable of repelling
infections. Following full development and receipt of applicable regulatory
approval, we intend to generate revenue through the promotion, marketing, and
sale of the unique tympanostomy tube either through independent marketing and
sales to health providers or through the sale or licensing of our proposed
product to one of the major pharmaceutical companies. To date we have not
identified any such companies.
On December 28, 2007, we raised $234,883 through the issuance of 3,819,227 units
to 43 investors (the selling stockholders listed herein), at a price of $0.0615
per unit, with each unit being comprised of one share of our common stock and
one Series A share purchase warrant (the "Private Placement"). Each Series A
share purchase warrant entitles the holder to purchase one additional share of
our common stock at a price of $0.20 per share for a period of two years from
December 28, 2007 ("Series A Warrants"). This Private Placement was an offshore
transaction pursuant to Regulation S of the Securities Act. We intend to use the
proceeds from the Private Placement to execute our business plan.
Since incorporation, we have not made any significant purchase or sale of
assets, nor have we been involved in any merger, acquisition or consolidation.
We have never declared bankruptcy or been in receivership, and have never been
involved in any legal action or proceedings.
NUMBER OF SHARES BEING OFFERED
This prospectus covers the resale by the selling stockholders of Enox Biopharma,
Inc. of:
- Up to 3,819,227 shares of our common stock issued in the Private
Placement; and
- Up to 3,819,227 shares of our common stock which may be issued upon
the exercise of Series A Warrants issued in connection with the
Private Placement.
NUMBER OF SHARES OUTSTANDING
There were 10,569,227 shares of our common stock issued and outstanding at
December 31, 2007.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common stock
by the selling stockholders. We will receive proceeds of $763,958 if and when
all of the share purchase warrants (assuming all share purchase warrants are
exercised at their current respective exercise prices prior to expiry) are
exercised. Since we cannot predict when the warrants will be exercised, if ever,
we have not earmarked these proceeds for any particular purpose, and we
anticipate that any proceeds that we do receive will be added to our general
working capital for application to our ongoing operations.
3
SUMMARY OF FINANCIAL INFORMATION
The summarized consolidated financial data presented below is derived from and
should be read in conjunction with our audited financial statements from June
28, 2007 (date of inception) to December 31, 2007, including the notes to those
financial statements which are included elsewhere in this prospectus, and with
the section entitled "Management's Discussion and Analysis or Plan of Operation"
beginning on page 29 of this prospectus.
As of
December 31, 2007
-----------------
Current Assets $143,399
Current Liabilities 100
Shareholders' Equity $143,732
From June 28, 2007 to
December 31, 2007
-----------------
Revenue $ --
Net Loss $(90,835)
We have recently commenced our operations and are currently without revenue. Our
company has no employees at the present time. As of December 31, 2007, our net
loss was $90,835. We anticipate that we will operate in a deficit position, and
will continue to sustain net losses for the foreseeable future.
4
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus contain forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. Forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many factors mentioned in this prospectus, for example
governmental regulation and competition in our industry, will be important in
determining future results. No forward-looking statement can be guaranteed, and
actual results may vary materially from those anticipated in any forward-looking
statement.
You can identify forward-looking statements by the fact that they do not relate
strictly to historical or current events. They use words such as "anticipate,"
"estimate," "expect" "will," "may," "intent," "plan," "believe," and similar
expressions in connection with discussion of future operating or financial
performance. These include statements relating to future actions, prospective
products or product approvals, future performance or results of anticipated
products, expenses, financial results or contingencies.
Although we believe that our plans, intentions and expectations reflected in
these forward-looking statements are reasonable, we may not achieve these plans
or expectations. Forward-looking statements in this prospectus will be affected
by the following factors: the ability of the Company to raise sufficient capital
to finance its planned activities, receiving approvals from the United States
Food and Drug Administration (the "FDA") to conduct clinical trials of the
Company's planned products, the ability of the Company to commercialize its
planned products (alone or in cooperation with others), the ability of the
Company to successfully manufacture its planned products using contract
manufacturers, market acceptance of the Company's planned products, the
Company's ability to successfully develop its proposed product into commercial
products, the ability of the Company to successfully prosecute and protect its
intellectual property, and the Company's ability to hire, manage and retain
qualified personnel. The aforementioned factors do not represent an all
inclusive list. Actual results, performance or achievements could differ
materially from those contemplated, expressed or implied by the forward-looking
statements contained in this prospectus. In particular, this prospectus sets
forth important factors that could cause actual results to differ materially
from our forward-looking statements. These and other factors, including general
economic factors, business strategies, the state of capital markets, regulatory
conditions, and other factors not currently known to us, may be significant, now
or in the future, and the factors set forth in this prospectus may affect us to
a greater extent than indicated. All forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth in this prospectus and in other documents
that we file from time to time with the Securities and Exchange Commission
including Quarterly Reports on Form 10-QSB, Annual Reports on Form 10-KSB and
Current Reports on Form 8-K. Except as required by law, we do not undertake any
obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise.
5
RISK FACTORS
The securities offered hereby are highly speculative and should be purchased
only by persons who can afford to lose their entire investment. Each prospective
investor should carefully consider the following risk factors, as well as all
other information set forth elsewhere in this prospectus, before purchasing any
of the shares of our common stock.
RISKS RELATED TO OUR BUSINESS, STRATEGY, AND INDUSTRY
1. WE HAVE NO OPERATING HISTORY AND HAVE MAINTAINED LOSSES SINCE INCEPTION,
WHICH WE EXPECT TO CONTINUE INTO THE FUTURE.
We were incorporated on June 28, 2007, and have limited operations. We have not
realized any revenues to date. Our product is under development and will not be
ready for commercial sale until we have completed development, conducted
clinical trials, and received all regulatory approvals. We have no operating
history at all upon which an evaluation of our future success or failure can be
made. Our net loss from inception to December 31, 2007 is $90,835. Based upon
our proposed plans, we expect to incur operating losses in future periods. This
will happen because there are substantial costs and expenses associated with the
development of our product. We may fail to generate revenues in the future. If
we cannot attract a significant number of customers, we will not be able to
generate any significant revenues or income. Failure to generate revenues will
cause us to either change our line of business or to go out of business because
we will not have the money to pay our ongoing expenses.
2. OUR INDEPENDENT AUDITORS' REPORT STATES THAT THERE IS A SUBSTANTIAL DOUBT
THAT WE WILL BE ABLE TO CONTINUE AS A GOING CONCERN.
Our independent auditors, Moore and Associates, Chartered, state in their audit
report, dated February 1, 2008 and included with this prospectus, that since we
are a development stage company, have no established source of revenue, and are
dependent on our ability to raise capital from shareholders or other sources to
sustain operations, there is a substantial doubt that we will be able to
continue as a going concern.
This qualification clearly highlights that we will, in all likelihood, continue
to incur expenses without significant revenues into the foreseeable future until
the development of our product is completed and our product gains significant
popularity. Our only source of funds to date has been the sale of our common
stock. Because we cannot assure anyone at this stage that we will be able to
generate interest in our product or that we will be able to generate any
significant revenues or income, the identification of new sources of equity
financing will be difficult. If we are successful in closing on any new
financing, existing investors will experience substantial dilution. Our ability
to obtain debt financing is also severely impacted by our financial condition,
and likely not even feasible, given that we do not have revenues or profits to
pay interest or repay principal.
As a result, if we are unable to obtain additional financing at this stage in
our operations, our business will fail and you may lose some or all of your
investment in our common stock.
3. OUR CURRENT CASH WILL FUND OUR BUSINESS UNTIL APPROXIMATELY THE END OF
JANUARY 2009. IF WE ARE UNABLE TO OBTAIN THE NECESSARY ADDITIONAL FINANCING TO
IMPLEMENT OUR BUSINESS PLAN, WE WILL NOT HAVE THE MONEY TO PAY OUR ONGOING
EXPENSES AND WE MAY GO OUT OF BUSINESS.
At December 31, 2007, we had $143,399 in cash. As of the date hereof, we have
approximately $136,840 of which we anticipate needing approximately $160,632 for
expenses associated with our budgeted expenditures for the next twelve months.
Therefore, we presently have a budgeted shortfall of approximately $23,792. We
anticipate our existing cash balances will be depleted by January 2009.
Our ability to successfully develop our product and to eventually produce and
sell it to generate operating revenues also depends on our ability to obtain the
necessary financing to implement our business plan. Given that we have no
operating history, no revenues, and only losses to date, we may not be able to
achieve this goal, and if this occurs we will not be able to pay our development
costs and we may go out of business. We may need to issue additional equity
securities in the future to raise the necessary funds. We do not currently have
any arrangements for additional financing and we can provide no assurance to
investors we will be able to find such financing if further funding is required.
Obtaining additional financing would be subject to a number of factors,
including investor acceptance of our product and our business model. The
6
issuance of additional equity securities by us would result in a significant
dilution in the equity interests of our current stockholders. The resale of
shares by our existing shareholders pursuant to this prospectus may result in
significant downward pressure on the price of our common stock and negatively
impact our ability to sell additional equity securities. Obtaining loans will
increase our liabilities and future cash commitments, and there can be no
assurance that we will have sufficient funds to repay any future indebtedness or
that we will not default on our future debts if we are able to obtain loans.
There can be no assurance that capital will continue to be available if
necessary to meet future funding needs or, if the capital is available, that it
will be on terms acceptable to us. If we are unable to obtain financing in the
amounts and on terms deemed acceptable to us, we may be forced to scale back or
cease operations, which might result in the loss of some or all of your
investment in our common stock.
4. IF OUR ESTIMATES RELATED TO EXPENDITURES ARE ERRONEOUS, OUR BUSINESS MAY FAIL
AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
Our success is dependent, in part, upon the accuracy of our management's
estimates of expenditures, which are currently budgeted at $243,000 for the next
12 months. We have prepaid $82,368 of these budgeted expenditures. If such
estimates are erroneous or inaccurate, we may not be able to carry out our
business plan, which could, in a worst-case scenario, result in the failure of
our business and your losing your entire investment.
5. OUR INABILITY TO COMPLETE OUR PRODUCT DEVELOPMENT ACTIVITIES SUCCESSFULLY MAY
SEVERELY LIMIT OUR ABILITY TO OPERATE AND FINANCE OPERATIONS.
Commercialization of our core technology will require significant additional
research and development as well as substantial clinical trials. We believe that
the United States will be the principal market for our technology, although we
may elect to expand into Europe and the Middle East. We may not be able to
successfully complete development of our core technology, or successfully market
our technology. We, and any of our potential collaborators, may encounter
problems and delays relating to research and development, regulatory approval,
and the commercialization of our technology. Our research and development
programs may not be successful. Our core technology may not prove to be safe and
efficacious in clinical trials, and we may not obtain the necessary regulatory
approvals for our core technology. Whether or not any of these events occur, we
may not have adequate resources to continue operations for the period required
to resolve any issues delaying commercialization, and we may not be able to
raise capital to finance our continued operation during the period required for
resolution of these issues.
6. IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY, OUR
COMPANY WILL SUFFER A MATERIAL ADVERSE EFFECT.
Our ability to compete successfully and achieve any revenue will depend, in
part, on our ability to protect our proprietary technology and operate without
infringing upon the rights of others. We currently have one provisional patent
application for our technologies. We currently rely on the provisional patent
application and trade secret laws to protect our proprietary intellectual
property. This, however, may not be adequate to prevent the unauthorized use of
our proprietary technology and our other intellectual property rights. Further,
the laws of foreign countries may provide inadequate protection of such
intellectual property rights.
In addition, the departure of any of our management or any significant technical
personnel or consultants we hire in the future, the breach of their
confidentiality and non-disclosure obligations, or the failure to achieve our
intellectual property objectives may have a material adverse effect on our
business, financial condition, and results of operations. We believe our success
depends upon the knowledge and experience of our management and our ability to
market our existing technology and to develop new technologies.
We may not be able to successfully protect our proprietary technology, and our
proprietary technology may otherwise become known or similar technology may be
independently developed by competitors. While we believe that we have adequately
protected our proprietary technology, and we intend to take all appropriate and
reasonable legal measures to protect it in the future, the use of our technology
by a competitor could have a material adverse effect on our business, financial
condition, and results of operations. In addition, competitors may discover
novel uses, develop similar or more marketable technologies, or offer services
similar to our company at lower prices. If we are unsuccessful in addressing the
risks related to protecting our proprietary technology, our business will most
likely fail.
7
7. WE CAN PROVIDE NO ASSURANCES THAT WE WILL BE SUCCESSFUL IN OBTAINING AN
APPROVED PATENT AND IF WE DO NOT RECEIVE SUCH A PATENT THE VALUE OF OUR
TECHNOLOGY AND DEVICES MAY BE ADVERSELY AFFECTED.
We intend to protect our intellectual property position by filing trademark
applications and U.S., foreign and international patent applications related to
our proprietary technology, inventions and improvements that are important to
the development of our business.
As of December 31, 2007, we have one provisional patent application for our
technologies. We may fail to receive any patent, for which we apply, and any
patent issued to us could be circumvented, challenged, invalidated, or held to
be unenforceable, or rights granted thereunder may not adequately protect our
technology or provide a competitive advantage to us.
8. IF WE ARE UNABLE TO COMPLETE THE PRODUCTION OF OUR TYMPANOSTOMY TUBES, WE
WILL NOT BE ABLE TO GENERATE REVENUES AND YOU WILL LOSE YOUR INVESTMENT.
We have not completed development of our tympanostomy tubes. The success of our
proposed business will depend on completion of development and the acceptance of
our product by end user consumers in our target market. Achieving such
acceptance will require significant marketing investment and the creation of
perceived value in our product by consumers. Our product, once developed and
tested, may not be accepted by our customers at sufficient levels to support our
operations and build our business. If the tympanostomy tubes that we develop are
not accepted at sufficient levels, our business will likely fail.
9. WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT LITIGATION, WHICH MAY
BE TIME-CONSUMING AND COSTLY.
We may need to bring legal claims to enforce or protect our intellectual
property rights. Any litigation, whether successful or unsuccessful, may result
in substantial costs and a diversion of our company's resources. In addition,
notwithstanding our rights to our intellectual property, other persons may bring
claims against us alleging that we have infringed on their intellectual property
rights or claims that our intellectual property rights are not valid. Any claims
against us, with or without merit, could be time consuming and costly to defend
or litigate, divert our attention and resources, result in the loss of goodwill
associated with our business or require us to make changes to our technology.
10. CLINICAL TRIALS ARE EXPENSIVE, TIME CONSUMING, AND DIFFICULT TO DESIGN AND
IMPLEMENT, AND IT IS UNCLEAR WHETHER THE RESULTS OF SUCH CLINICAL TRIALS WILL BE
FAVORABLE.
We have not commenced clinical trials of our proposed products. Any clinical
trials will be expensive and may be difficult to implement due to the number of
patients and testing sites that may be required, and could be subject to delay
or failure at any stage of the trials. We expect our current funding will be
sufficient only to enable us to continue our operations as currently planned
until approximately the end of January 2009. Accordingly, we will require
additional funds to conduct clinical trials, obtain the necessary FDA approvals,
and market our products. Any delay or failure of, or adverse results from,
clinical trials will likely require us to obtain even further funding in order
to address such delays or failures or to refocus our efforts on other product
candidates and such delay, failure, or adverse results could make it much more
difficult or expensive for us to obtain funding. Similarly, human clinical
trials for our products will be expensive and difficult to design and implement,
in part because they will be subject to rigorous regulatory requirements. The
clinical trial process is also time-consuming. We estimate that clinical trials
of our proposed products will take at least several years to complete once
initiated. Furthermore, we may encounter problems that could cause us to abandon
or repeat clinical trials, further delaying or preventing the completion of such
trials. The commencement and completion of clinical trials may be delayed by
several factors, including:
* unforeseen safety issues;
* determination of dosing issues;
* lack of effectiveness during clinical trials;
* slower than expected rates of patient recruitment;
* inability to monitor patients adequately during or after treatment;
and
* inability or unwillingness of medical investigators to follow our
clinical protocols.
8
In addition, we or the FDA may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or if the
FDA finds deficiencies in our submissions or the conduct of these trials.
11. THE RESULTS OF OUR CLINICAL TRIALS MAY NOT SUPPORT OUR PRODUCT CLAIMS.
Even if our clinical trials are completed as planned, we cannot be certain that
their results will support our product claims. Even if pre-clinical testing and
early clinical trials for a product are successful, this does not ensure that
later clinical trials will be successful, and we cannot be sure that the results
of later clinical trials will replicate the results of prior clinical trials and
pre-clinical testing or meet our expectations. The clinical trial process may
fail to demonstrate that our products are safe for humans or effective for
indicated uses. Any such failure would likely cause us to abandon the product
and may delay development of other product candidates. Any delay in, or
termination of, our clinical trials will delay or preclude the filing of our
NDAs with the FDA and, ultimately, our ability to commercialize our products and
generate product revenues.
12. OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATIONS AND APPROVALS WHICH MAY
DELAY OR PREVENT THE MARKETING OF POTENTIAL PRODUCTS AND IMPOSE COSTLY
PROCEDURES UPON OUR ACTIVITIES
The FDA and comparable agencies in state and local jurisdictions and in foreign
countries impose substantial requirements upon preclinical and clinical testing,
manufacturing and marketing of pharmaceutical products. Lengthy and detailed
preclinical and clinical testing, validation of manufacturing and quality
control processes, and other costly and time-consuming procedures are required.
Satisfaction of these requirements typically takes several years and the time
needed to satisfy them may vary substantially, based on the type, complexity and
novelty of the pharmaceutical product. The effect of government regulation may
be to delay or to prevent marketing of potential products for a considerable
period of time and to impose costly procedures upon our activities. The FDA or
any other regulatory agency may not grant approval on a timely basis, or at all,
for any product we develop. Success in preclinical or early stage clinical
trials does not assure success in later stage clinical trials. Data obtained
from preclinical and clinical activities are susceptible to varying
interpretations that could delay, limit, or prevent regulatory approval. If
regulatory approval of a product is granted, such approval may impose
limitations on the indicated uses for which a product may be marketed. Further,
even after we have obtained regulatory approval, later discovery of previously
unknown problems with a product may result in restrictions on the product,
including withdrawal of the product from the market. Moreover, the FDA has
recently reduced previous restrictions on the marketing, sale and prescription
of products for indications other than those specifically approved by the FDA.
Accordingly, if we receive FDA approval of our product for certain indicated
uses, our competitors, including our collaborators, could market their
pre-existing products for such indications even if such products have not been
specifically approved for such indications. Delay in obtaining or failure to
obtain regulatory approvals would make it difficult or impossible to market our
products and would harm our business.
13. BECAUSE WE ARE IN AN EARLY STAGE OF DEVELOPMENT AND OUR TECHNOLOGY IS
UNTESTED, WE ARE SUBJECT TO RISKS THAT ARE INHERENT TO PRODUCTS BASED ON NEW
TECHNOLOGIES.
We are in an early stage of developing our business. All of our products will be
subject to risks that are inherent to products based upon new technologies.
These risks include the risks that our products:
* are found to be unsafe or ineffective;
* fail to receive necessary marketing clearance from regulatory
authorities;
* even if safe and effective, are too difficult or expensive to
manufacture or market;
* are unmarketable due to the proprietary rights of third parties; or
* are not able to compete with superior, equivalent, more cost-effective
or more effectively promoted products offered by competitors.
Therefore, our research and development activities with respect to our
tympanostomy tubes may not result in any commercially viable products.
9
14. OUR STRATEGY FOR RESEARCH, DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS
REQUIRES US TO ENTER INTO VARIOUS ARRANGEMENTS WITH CORPORATE AND ACADEMIC
COLLABORATORS, LICENSORS, LICENSEES AND OTHERS; FURTHERMORE, WE ARE DEPENDENT ON
THE DILIGENT EFFORTS AND SUBSEQUENT SUCCESS OF THESE OUTSIDE PARTIES IN
PERFORMING THEIR RESPONSIBILITIES
We rely on third party independent consultants and contractors for the
development, testing, marketing, and sale of our products. These partners may
not dedicate sufficient resources or give sufficient priority to our needs. In
addition, they may terminate their relationships with us. We may not be able to
conclude arrangements with other companies to support the commercialization of
our products on acceptable terms, or at all. Moreover, our current financial
condition may make us a less attractive partner to potential collaborators. In
addition, our collaborators may take the position that they are free to compete
using our technology without compensating or entering into agreements with us.
Furthermore, our collaborators may pursue alternative technologies or develop
alternative products either on their own or in collaboration with others,
including our competitors, as a means for developing treatments for the diseases
or disorders targeted by these collaborative programs. If we are unsuccessful in
addressing these risks, our business will most likely fail.
15. THE TESTING AND COMMERCIALIZATION OF OUR TECHNOLOGY WILL EXPOSE US TO
POTENTIAL PRODUCT LIABILITY CLAIMS WHICH MAY AFFECT OUR EARNINGS AND FINANCIAL
CONDITION.
We face an inherent business risk of exposure to product liability claims in the
event that the use of our core technology during research and development
efforts, including clinical trials, or after commercialization, results in
adverse effects. As a result, we may incur significant product liability
exposure, which may exceed any insurance coverage that we obtain in the future.
Even if we elect to purchase such insurance in the future, we may not be able to
maintain adequate levels of insurance at reasonable cost and/or reasonable
terms. Excessive insurance costs or uninsured claims may increase our operating
loss and affect our financial condition.
16. OUR BUSINESS IS SUBJECT TO COMPREHENSIVE GOVERNMENT REGULATION AND ANY
CHANGE IN SUCH REGULATION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR COMPANY.
There is no assurance that the laws, regulations, policies or current
administrative practices of any government body, organization or regulatory
agency in the United States or any other jurisdiction, will not be changed,
applied or interpreted in a manner which will fundamentally alter the ability of
our company to carry on our business. The actions, policies or regulations, or
changes thereto, of any government body or regulatory agency, or other special
interest groups, may have a detrimental effect on our company. Any or all of
these situations may have a negative impact on our operations.
17. FAILURE TO OBTAIN AND MAINTAIN REQUIRED REGULATORY APPROVALS WILL SEVERELY
LIMIT OUR ABILITY TO COMMERCIALIZE OUR TECHNOLOGY.
We are required to obtain the approval of the Food and Drug Administration in
the United States (FDA) before we commence commercialization of our technology
in the United States, the principal market for our technology. We may also be
required to obtain additional approvals from foreign regulatory authorities to
apply for any sales activities we may carry out in those jurisdictions. If we
cannot demonstrate the safety, reliability and efficacy of our technology, the
FDA or other regulatory authorities could delay or withhold regulatory approval
of our technology.
Even if we obtain regulatory approval of our technology, that approval may be
subject to limitations on the indicated uses for which it may be marketed. Even
after granting regulatory approval, the FDA and other regulatory agencies and
governments in other countries will continue to review and inspect any future
marketed products as well as any manufacturing facilities that we may establish
in the future. Later discovery of previously unknown problems with a product or
facility may result in restrictions on the product, including a withdrawal of
the product from the market. Further, governmental regulatory agencies may
establish additional regulations which could prevent or delay regulatory
approval of our technology.
18. EVEN IF WE OBTAIN REGULATORY APPROVAL TO COMMERCIALIZE OUR TECHNOLOGY, LACK
OF COMMERCIAL ACCEPTANCE MAY IMPAIR OUR BUSINESS.
Our product development efforts are primarily directed toward obtaining
regulatory approval to market our tympanostomy tubes. Although tympanostomy
tubes have been widely available for a number of years, our technology may not
10
be accepted by the marketplace as readily as these or other competing products,
processes and methodologies. Additionally, our technology may not be employed in
all potential applications being investigated, and any reduction in applications
may limit the market acceptance of our technology and our potential revenues. As
a result, even if our technology is developed into a marketable technology and
we obtain all required regulatory approvals, we cannot be certain that our
technology will be adopted at a level that would allow us to operate profitably.
19. IF WE DO NOT KEEP PACE WITH OUR COMPETITORS, TECHNOLOGICAL ADVANCEMENTS AND
MARKET CHANGES, OUR TECHNOLOGY MAY BECOME OBSOLETE AND OUR BUSINESS MAY SUFFER.
The market for our technology is highly competitive, is subject to rapid
technological changes, and varies for different individual products. We believe
that there are potentially many competitive approaches being pursued that
compete with our technology, including some by private companies for which
information is difficult to obtain.
Many of our competitors have significantly greater resources and have developed
products and processes that directly compete with our technology. Our
competitors may develop, or may in the future develop, new technologies that
directly compete with our technology or even render our technology obsolete.
Even if we are able to demonstrate that our technology provides improved or
equivalent results in comparison with other products, researchers and
practitioners may not use our technology and we may suffer a competitive
disadvantage. Finally, to the extent that others develop new technologies that
address the targeted application for our current technology, our business will
suffer.
20. OUR ABILITY TO HIRE AND RETAIN KEY PERSONNEL WILL BE AN IMPORTANT FACTOR IN
THE SUCCESS OF OUR BUSINESS AND A FAILURE TO HIRE AND RETAIN KEY PERSONNEL MAY
RESULT IN OUR INABILITY TO MANAGE AND IMPLEMENT OUR BUSINESS PLAN.
We are highly dependent upon our management personnel, especially Prof. Av-Gay
and Dr. Greenberg, because of their experience in pre-clinical and clinical drug
development. The loss of the services of one or more of these individuals may
impair management's ability to operate our company. We have not purchased key
man insurance on any of these individuals, which insurance would provide us with
insurance proceeds in the event of their death. Without key man insurance, we
may not have the financial resources to develop or maintain our business until
we could replace the individual or to replace any business lost by the death of
that person. The competition for qualified personnel in the markets in which we
operate is intense. In addition, in order to manage growth effectively, we must
implement management systems and recruit and train new employees. We may not be
able to attract and retain the necessary qualified personnel. If we are unable
to retain or to hire qualified personnel as required, we may not be able to
adequately manage and implement our business.
21. OUR OFFICERS AND DIRECTORS ARE ENGAGED IN OTHER ACTIVITIES AND MAY NOT
DEVOTE SUFFICIENT TIME TO OUR AFFAIRS, WHICH MAY AFFECT OUR ABILITY TO CONDUCT
OPERATIONS AND GENERATE REVENUES.
Our officers and Directors are not required to work exclusively for us, and they
do not devote all of their time to our operations. Therefore, it is possible
that their pursuit of other activities may slow our operations and reduce our
financial results because of the slowdown in operations. It is expected that our
officers and Directors will devote approximately 35 hours per month to our
operations on an ongoing basis, and will devote whole days and even multiple
days at a stretch when required.
22. MOST OF OUR ASSETS AND SEVERAL OF OUR DIRECTORS AND OFFICERS ARE LOCATED
OUTSIDE THE UNITED STATES, WITH THE RESULT THAT IT MAY BE DIFFICULT FOR
INVESTORS TO ENFORCE WITHIN THE UNITED STATES ANY JUDGMENTS OBTAINED AGAINST US
OR ANY OF OUR DIRECTORS OR OFFICERS.
Although we are organized under the laws of the State of Nevada, United States,
our principal business office is located in Yehud-Monosson, Israel. It may be
difficult for investors to enforce judgments against us that are obtained in the
United States in any action, including actions predicated upon civil liability
provisions of federal securities laws. In addition, several of our Directors and
officers reside outside the United States, and nearly all of the assets of these
non-US persons and our company's assets are located outside of the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon such persons or to enforce against us or
such persons judgments predicated upon the liability provisions of United States
11
securities laws. There is substantial doubt as to the enforceability against us
or any of our non-US Directors and officers in original actions or in actions of
enforcement of judgments of United States courts or liabilities predicated on
the civil liability provisions of United States federal securities laws. In
addition, as the majority of our assets are located outside of the United
States, it may be difficult to enforce United States bankruptcy proceedings
against us. Under bankruptcy laws in the United States, courts typically have
jurisdiction over a debtor's property, wherever it is located, including
property situated in other countries. Courts outside of the United States may
not recognize the United States bankruptcy court's jurisdiction. Accordingly,
you may have trouble administering a United States bankruptcy case involving a
Nevada company as debtor with most of its property located outside the United
States. Any orders or judgments of a bankruptcy court obtained by you in the
United States may not be enforceable.
23. INVESTORS WILL HAVE LITTLE VOICE REGARDING OUR MANAGEMENT DUE TO THE LARGE
OWNERSHIP POSITION HELD BY OUR EXISTING MANAGEMENT AND THUS IT WOULD BE
DIFFICULT FOR NEW INVESTORS TO MAKE CHANGES IN OUR OPERATIONS OR MANAGEMENT, AND
THEREFORE, SHAREHOLDERS WOULD BE SUBJECT TO DECISIONS MADE BY MANAGEMENT AND THE
MAJORITY SHAREHOLDERS, INCLUDING THE ELECTION OF DIRECTORS.
Our officers and Directors directly own 6,350,000 shares of the total of
10,169,227 issued and outstanding shares of our common stock and are in a
position to continue to control us. Of these 10,169,227 shares, Prof. Av-Gay,
our President, owns 5,275,000 shares, Mr. Mizrahi, our Secretary, Treasurer, and
CFO, owns 675,000 shares, and Dr. Greenberg, our Director, owns 400,000 shares.
Collectively, they own 63% of our total outstanding common shares. Such control
may be risky to an investor because all important decisions relating to the
direction and operations of the company may be made without the input of the
company's investors. Moreover, investors will not be able to effect a change in
the company's Board of Directors, business, or management.
RISKS RELATED TO OUR COMMON STOCK
24. THE MARKET PRICE FOR SECURITIES OF BIOPHARMACEUTICAL AND BIOTECHNOLOGY
COMPANIES SUCH AS OURS HAVE BEEN AND ARE LIKELY TO CONTINUE TO BE HIGHLY
VOLATILE DUE TO REASONS THAT ARE RELATED AND UNRELATED TO OUR OPERATING
PERFORMANCE AND PROGRESS
The market prices for securities of biopharmaceutical and biotechnology
companies have been highly volatile. The market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. In addition, future announcements
and circumstances, such as our current financial condition, our ability to
obtain new financing, the status of our relationships or proposed relationships
with third-party collaborators, the terms of any financing we are able to raise,
the results of testing and clinical trials, developments in patent or other
proprietary rights of us or our competitors, litigation regarding the same,
technological innovations or new therapeutic products, governmental regulation,
or public concern as to the safety of products developed by us or others and
general market conditions, concerning us, our competitors or other
biopharmaceutical companies, may have a significant effect on the market price
of our shares of common stock.
Moreover, the exercise of outstanding warrants and the sale of the shares of our
common stock issuable upon exercise of those outstanding warrants could result
in dilution to our current holders of common stock and cause a significant
decline in the market price for our common stock. We have not paid any cash
dividends on our common stock, and we do not anticipate paying any dividends on
our common stock in the foreseeable future.
In addition, terrorist attacks in the U.S. and abroad, U.S. retaliation for
these attacks, the war in Iraq and continued worldwide economic weakness and a
related decline in consumer confidence, have had, and may continue to have, an
adverse impact on the U.S. and world economy. These and similar events, as well
as fluctuations in our operating results and market conditions for
biopharmaceutical and biotechnology stocks in general, could have a significant
effect on the volatility of the market price for our common stock, the future
price of our common stock and on our ability to raise additional financing.
25. OUR STOCKHOLDERS MAY HAVE DIFFICULTY RESELLING THEIR STOCK DUE TO THE
ABSENCE OF A PUBLIC TRADING MARKET.
There is presently no public trading market for our common stock, we have not
applied for a trading symbol or quotation, and it is unlikely that an active
public trading market can be established or sustained in the foreseeable future.
We intend to seek out a market maker to apply to have our common stock quoted on
12
the OTC Bulletin Board upon effectiveness of this Form SB-2. However, there can
be no assurance that our shares will be quoted on the OTC Bulletin Board. Until
there is an established trading market, holders of our common stock may find it
difficult to sell their stock or to obtain accurate quotations for the price of
the common stock. If a market for our common stock does develop, our stock price
may be volatile.
26. BROKER-DEALERS MAY BE DISCOURAGED FROM EFFECTING TRANSACTIONS IN OUR SHARES
BECAUSE THEY ARE CONSIDERED PENNY STOCKS AND ARE SUBJECT TO THE PENNY STOCK
RULES.
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934
impose sales practice and disclosure requirements on NASD broker-dealers who
make a market in "penny stocks". A penny stock generally includes any non-Nasdaq
equity security that has a market price of less than $5.00 per share. Our shares
currently are not traded on Nasdaq nor on any other exchange nor are they quoted
on the OTC/Bulletin Board or "OTC/BB". Following the date that the registration
statement, in which this prospectus is included, becomes effective we hope to
find a broker-dealer to act as a market maker for our stock and file on our
behalf with the NASD an application on Form 15c(2)(11) for approval for our
shares to be quoted on the OTC/BB. As of the date of this prospectus, we have
not attempted to find a market maker to file such application for us. If we are
successful in finding such a market maker and successful in applying for
quotation on the OTC/BB, it is very likely that our stock will be considered a
"penny stock". In that case, purchases and sales of our shares will be generally
facilitated by NASD broker-dealers who act as market makers for our shares. The
additional sales practice and disclosure requirements imposed upon
broker-dealers may discourage broker-dealers from effecting transactions in our
shares, which could severely limit the market liquidity of the shares and impede
the sale of our shares in the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt.
In addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the Commission relating to the penny stock market, unless the broker-dealer
or the transaction is otherwise exempt. A broker-dealer is also required to
disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customer's account and
information with respect to the limited market in penny stocks.
27. WE INTEND TO BECOME SUBJECT TO THE PERIODIC REPORTING REQUIREMENTS OF THE
SECURITIES EXCHANGE ACT OF 1934, WHICH WILL REQUIRE US TO INCUR AUDIT FEES AND
LEGAL FEES IN CONNECTION WITH THE PREPARATION OF SUCH REPORTS. THESE ADDITIONAL
COSTS WILL NEGATIVELY AFFECT OUR ABILITY TO EARN A PROFIT.
Following the effective date of the registration statement in which this
prospectus is included, we will be required to file periodic reports with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 and the rules and regulations thereunder. In order to comply with such
requirements, our independent registered auditors will have to review our
financial statements on a quarterly basis and audit our financial statements on
an annual basis. Moreover, our legal counsel will have to review and assist in
the preparation of such reports. The fees charged by these professionals for
such services cannot be accurately predicted at this time because factors such
as the number and type of transactions that we engage in and the complexity of
our reports cannot be determined at this time and will have a major effect on
the amount of time to be spent by our auditors and attorneys. However, the
incurrence of such costs will be an expense to our operations and thus have a
negative effect on our ability to meet our overhead requirements and earn a
profit.
28. INVESTORS THAT NEED TO RELY ON DIVIDEND INCOME OR LIQUIDITY SHOULD NOT
PURCHASE SHARES OF OUR COMMON STOCK.
We have not declared or paid any dividends on our common stock since our
inception, and we do not anticipate paying any such dividends for the
foreseeable future. Investors that need to rely on dividend income should not
13
invest in our common stock, as any income would only come from any rise in the
market price of our common stock, which is uncertain and unpredictable.
Investors that require liquidity should also not invest in our common stock.
There is no established trading market, and should one develop, it will likely
be volatile and subject to minimal trading volumes.
29. BECAUSE WE CAN ISSUE ADDITIONAL SHARES OF COMMON STOCK, PURCHASERS OF OUR
COMMON STOCK MAY INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
We are authorized to issue up to 150,000,000 shares of common stock. At present,
there are 10,169,227 common shares issued and outstanding. Our Board of
Directors has the authority to cause us to issue additional shares of common
stock without consent of any of our stockholders. Consequently, our stockholders
may experience in the future more dilution in their percentage of ownership.
30. SINCE OUR OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE OF OUR ISSUED
AND OUTSTANDING COMMON STOCK, ANY FUTURE SALES OF THEIR SHARES MAY RESULT IN A
DECREASE IN THE PRICE OF OUR COMMON STOCK AND THE VALUE OF OUR STOCKHOLDER'S
INVESTMENT.
Our officers and Directors currently own 6,350,000 shares of the total
10,569,227 issued and outstanding shares of our common stock. Collectively they
own 60% of our total outstanding common shares. These shares will be available
for resale to the public in accordance with Rule 144 of the Act and their resale
may result in a decrease in the price of our common stock and the value of your
investment.
The possibility of future sales of significant amounts of shares held by them
could decrease the market price of our common stock if the marketplace does not
orderly adjust to the increase in shares in the market. In such case, the value
of your investment in us will decrease.
RISKS RELATED TO OUR OPERATIONS IN ISRAEL
31. WE CONDUCT PART OF OUR OPERATIONS IN ISRAEL AND THEREFORE OUR RESULTS MAY BE
ADVERSELY AFFECTED BY POLITICAL, ECONOMIC, AND MILITARY INSTABILITY IN ISRAEL
Some of our operations and our officers and Directors are located in Israel.
Accordingly, political, economic and military conditions in Israel may directly
affect our business. Since the establishment of the State of Israel in 1948, a
number of armed conflicts have taken place between Israel and its Arab
neighbors. Any hostilities involving Israel or the interruption or curtailment
of trade within Israel or between Israel and its trading partners could
adversely affect our operations and could make it more difficult for us to raise
capital. Since September 2000, terrorist violence in Israel has increased
significantly and negotiations between Israel and Palestinian representatives
have not advanced. The establishment in 2006 of a government in the Palestinian
Authority by representatives of the Hamas militant group has created additional
unrest and uncertainty in the region.
Further, in the summer of 2006, Israel was engaged in an armed conflict with
Hezbollah, a Lebanese Islamist Shiite militia group, which involved thousands of
missile strikes and disrupted most day-to-day civilian activity in northern
Israel. In addition, Israel is currently engaged in ongoing hostilities with
Hamas, which has imposed its rule over the Gaza Strip. Any armed conflicts,
terrorist activities or political instability in the region would likely
negatively affect business conditions and could harm our results of operations.
SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE
Any member of the public may read and copy any materials filed by us with the
Securities and Exchange Commission (the "SEC") at the SEC's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet website (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
14
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the account
of the selling stockholders named in this prospectus. As a result, all proceeds
from the sales of the common stock will go to the respective selling
stockholders and we will not receive any proceeds from the resale of the common
stock by the selling stockholders. We have agreed to bear all of the expenses
incurred in connection with the registration of these shares.
We will receive proceeds of $763,958 if and when all of the share purchase
warrants (assuming all share purchase warrants are exercised at their current
respective exercise prices prior to expiry) are exercised. Since we cannot
predict when the warrants will be exercised, if ever, we have not earmarked
these proceeds for any particular purpose, and we anticipate that any proceeds
that we do receive will be added to our general working capital for application
to our ongoing operations.
DETERMINATION OF OFFERING PRICE
The selling stockholders may sell their shares of our common stock at a price of
$0.0615 per share until shares of our common stock are quoted on the OTC
Bulletin Board, and thereafter at prevailing market prices or privately
negotiated prices. There can be no assurance that we will be able to obtain an
OTCBB listing. The offering price of $0.0615 per share for the currently issued
shares, and of $0.20 per share for the shares to be issued upon exercise of the
Series A warrants, is based on the last sales price of our common stock under
our Private Placement, which we closed on December 28, 2007, and does not have
any relationship to any established criteria of value, such as book value or
earnings per share. Additionally, because we have no significant operating
history and have not generated any material revenues to date, the price of our
common stock is not based on past earnings, nor is the price of our common stock
indicative of the current market value of the assets owned by us. No valuation
or appraisal has been prepared for our business and potential business
expansion. Our common stock is presently not traded on any market or securities
exchange and we have not applied for listing or quotation on any public market.
SELLING SECURITY HOLDERS
The following table sets forth the number of shares beneficially owned by the
selling stockholders and certain other information regarding such stockholders,
as of December 31, 2007. The shares offered by this prospectus may be offered
from time to time by the selling stockholders. The following table assumes that
the selling stockholders will sell all of the shares being offered for their
respective accounts by this prospectus. However, the selling stockholders may
sell some, all or none of their shares of our common stock offered by this
prospectus and we are unable to determine the exact number of shares that
actually will be sold. We do not know how long the selling stockholders will
hold the shares of our common stock before selling them, and we currently have
no agreements, arrangements or understandings with any of the selling
stockholders regarding the sale of any of the shares of our common stock. The
information in the table below is current only as of the date of this
prospectus.
In the following table, except as noted below, we have determined the number and
percentage of shares beneficially owned in accordance with Rule 13d-3 of the
Exchange Act, and this information does not necessarily indicate beneficial
ownership for any other purpose. Except as otherwise indicated in the footnotes
below, we believe that each of the selling stockholders named in this table has
sole voting and investment power over the shares of our common stock indicated.
In determining the number of shares of our common stock beneficially owned by a
person and the percentage ownership of that person, we include any shares as to
which the person has sole or shared voting power or investment power, as well as
any shares registered hereby that are subject to outstanding warrants held by
that person and any shares subject to outstanding warrants or options that are
currently exercisable or exercisable within 60 days after December 31, 2007.
Applicable percentages are based on 10,569,227 shares of our common stock
outstanding on December 31, 2007.
15
Beneficial Ownership Prior Beneficial Ownership
to this Offering(1) After Offering
------------------------------ -------------------------
Number of
Shares
Issuable Number of
Name of Number of Upon Exercise Shares Being Number of
Selling Stockholder Shares of Warrants Offered(2) Shares Percent(**)
- ------------------- ------ ----------- ---------- ------ -----------
Shlomo Wachtel 4,065 4,065 8,130 0 0
Dina Wachtel 4,065 4,065 8,130 0 0
Moshe Ben-Shlomo 4,065 4,065 8,130 0 0
Hava Ben-Shlomo 4,065 4,065 8,130 0 0
Gilly Regev Shoshani 3,008 3,008 6,016 0 0
Livia Mahler 32,520 32,520 65,040 0 0
Zakaria Hmama 81,057 81,057 162,114 0 0
Tuvi Zabari 40,650 40,650 81,300 0 0
Hagit Berrios 81,301 81,301 162,602 0 0
Uzi Rehavi 80,846 80,846 161,692 0 0
Solomon Friedman 487,561 487,561 975,122 0 0
Shifra Wanden 40,650 40,650 81,300 0 0
Brian Wanden 40,650 40,650 81,300 0 0
Itamar David 406,504 406,504 813,008 0 0
Hadas David 406,179 406,179 812,358 0 0
Shay Hershkovic 64,561 64,561 129,122 0 0
Ohad David 81,301 81,301 162,602 0 0
Daniel Friedman 487,805 487,805 975,610 0 0
Alnoor Versi 406,504 406,504 813,008 0 0
David Primack 81,301 81,301 162,602 0 0
Stephanie Rebick 162,602 162,602 325,204 0 0
Israel Basson 80,862 80,862 161,724 0 0
Yorav Krief 31,593 31,593 63,186 0 0
Tova Krief 15,675 15,675 31,350 0 0
Natalie Basson 80,862 80,862 161,724 0 0
Niv Ben Shlomo 16,138 16,138 32,276 0 0
Shir Ben Shlomo 16,138 16,138 32,276 0 0
Gary Bloomberg 130,081 130,081 260,162 0 0
Judy Black 20,000 20,000 40,000 0 0
Gary Black 20,000 20,000 40,000 0 0
Rene` Van Haren 81,301 81,301 162,602 0 0
16
Karin Van Haren 8,130 8,130 16,260 0 0
Benjamin Friedman 4,065 4,065 8,130 0 0
Shmuel Yeshayahu 4,065 4,065 8,130 0 0
Errol Lipschitz 4,065 4,065 8,130 0 0
Derek Hamill 4,065 4,065 8,130 0 0
Meir Levi 199,756 199,756 399,512 0 0
David Van Haren 4,065 4,065 8,130 0 0
Ryan Van Haren 4,065 4,065 8,130 0 0
Ilana Leviton 4,065 4,065 8,130 0 0
Darlene Hayne 4,065 4,065 8,130 0 0
Alexander Hayne 4,065 4,065 8,130 0 0
Gila Hanan 80,846 80,846 161,692 0 0
TOTAL 3,819,227 3,819,227 7,639,578 NIL *
- ----------
* Less than one percent.
** These figures assume that the selling stockholders will sell all of their
shares available for sale during the effectiveness of the registration
statement that includes this prospectus. The selling shareholders are not
required to sell their shares.
(1) "Prior to this Offering" means prior to the offering by the selling
stockholders of the securities registered under this prospectus for resale.
(2) Each of the Selling Stockholders number of shares being offered includes an
equivalent amount of common stock and warrants to purchase common stock at
a price per share of $0.20 per share for a period of two years from
December 28, 2007.
PLAN OF DISTRIBUTION
The 7,639,578 shares of our common stock covered by the registration statement,
of which this prospectus is a part, are being offered on behalf of the selling
stockholders, which as used herein includes donees, pledgees, transferees or
other successors-in-interest disposing of shares of our common stock or
interests therein received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer. Of
such shares of common stock, 3,819,227 are, prior to their resale pursuant to
this prospectus, issuable upon exercise of warrants issued in our Private
Placement. If the warrants are exercised, we will receive cash for the exercise
price, which is $0.20 for each share of common stock issued upon the exercise of
the warrants. If all of the warrants issued in our Private Placement are
exercised, we would receive an aggregate of $763,845 in cash. The shares of our
common stock or interests therein may be sold from time to time by the selling
stockholders directly to one or more purchasers (including pledgees) or through
brokers, dealers or underwriters who may act solely as agents or who may acquire
shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. The shares of our common stock may be sold by one
or more of, or a combination of, the following methods, to the extent permitted
by applicable law:
* a block trade in which the selling stockholder's broker or dealer will
attempt to sell the shares as agent, but may position and resell all
or a portion of the block as a principal to facilitate the
transaction;
* a broker or dealer may purchase the common stock as a principal and
then resell the common stock for its own account pursuant to this
prospectus;
* an exchange distribution in accordance with the rules of the
applicable exchange;
* ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
17
* privately negotiated transactions;
* by pledge to secure debts or other obligations;
* put or call transactions;
* to cover hedging transactions;
* underwritten offerings; or
* any other legally available means.
To the extent required, this prospectus may be amended or supplemented from time
to time to describe a specific plan of distribution. If the plan of distribution
involves an arrangement with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, the supplement will disclose:
* the name of the selling stockholder and of the participating
broker-dealer(s);
* the number of shares involved;
* the price at which the shares were sold;
* the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
* that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
* other facts material to the transaction.
In effecting sales, broker-dealers engaged by the selling stockholder may
arrange for other broker-dealers to participate in the resales.
The selling stockholder may enter into hedging transactions with broker-dealers
in connection with distributions of the shares or otherwise. In these
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholder. The
selling stockholder may also sell shares short and redeliver the shares to close
out such short positions. The selling stockholder may enter into options or
other transactions with broker-dealers that require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling stockholder also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon default, the broker-dealer may sell the pledged shares
pursuant to this prospectus.
Under the subscription agreements entered into between us and the selling
stockholders who were investors in our Private Placement, such selling
stockholders have agreed that during the period from the date that such selling
stockholders were first contacted with respect to such private placement through
the date upon which this registration statement is declared effective, such
selling stockholders would not directly or indirectly, through related parties,
affiliates or otherwise sell "short" or "short against the box" any of our
equity securities.
Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholder. Broker-dealers or agents
may also receive compensation from the purchasers of the shares for whom they
act as agents or to whom they sell as principal, or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be negotiated in connection with the sale.
The selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders on
the resales of the securities may be deemed to be underwriting commissions or
discounts under the Securities Act. If the selling stockholders are deemed to be
underwriters, the selling stockholders may be subject to certain statutory and
regulatory liabilities, including liabilities imposed pursuant to Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. In
addition, because the selling stockholder may be deemed an "underwriter" within
the meaning of Section 2(11) of the Securities Act, the selling stockholder will
be subject to the prospectus delivery requirements of the Securities Act.
18
Any shares covered by the registration statement that qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The shares will be sold only through registered or
licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states the shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
We will bear all costs, expenses and fees in connection with the registration of
the shares. The selling stockholder will bear all commissions and discounts, if
any, attributable to the sale of the shares. The selling stockholder may agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act. We have agreed to indemnify the selling
stockholders against specified liabilities, including specified liabilities
under the Securities Act, and such selling stockholders agreed to indemnify us
against certain liabilities, including liabilities under the Securities Act. We
also agreed to maintain the effectiveness of this registration statement,
subject to certain exceptions, until the earlier of (1) the date on which all
shares covered by the registration statement of which this prospectus is a part
have been sold or otherwise disposed of pursuant to this prospectus or (2) the
date on which the shares may be resold by the selling stockholders and their
affiliates without registration by reason of Rule 144(k) under the Securities
Act or any other rule of similar effect. The selling stockholders may sell all,
some or none of the shares offered by this prospectus or interests therein.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Holladay Stock
Transfer, Inc., 2939 North 67th Place, Suite C, Scottsdale, AZ 85251, tel. (480)
481-3940, fax (480) 481-3941.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, nor are we aware of any
governmental authority contemplating any legal proceeding against us.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All Directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified. The
officers of our company are appointed by our Board of Directors and hold office
until their death, resignation or removal from office. Our Directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
Date First Elected
Name Position Held with the Company Age or Appointed
---- ------------------------------ --- ------------
Prof. Yossef Av-Gay President, CEO and Director 46 June 28, 2007
Dr. David Greenberg Chief Medical Officer and Director 48 June 28, 2007
Mr. Razi Mizrahi Secretary, Treasurer and Director 43 June 28, 2007
BUSINESS EXPERIENCE
PROF. YOSSEF AV-GAY, PRESIDENT, CEO, MEMBER OF THE BOARD OF DIRECTORS
Prof. Yossef Av-Gay has served as our President and a member of our Board of
Directors since June 28, 2007. The term of his office is for one year and is
renewable on an annual basis. Since December 1994, Prof. Yossef Av-Gay has been
employed by the University of British Columbia and his current position is
Associate Professor of Microbiology in the Department of Medicine.
He is a microbiologist engaged in antimicrobial drug development. He is a full
time faculty member of the Department of Medicine at the University of British
Columbia, Vancouver, Canada. His research focuses on understanding unique
19
mycobacterial metabolic pathways, identifying potential virulence genes, and
validating these pathways as candidates for Tuberculosis drug development as
well as preclinical tests of lead compounds. Prof. Av-Gay has authored 45 peer
review scientific publications, three review articles, two book chapters, and 8
patents. He serves on scientific advisory boards and is a consultant to several
Biotech companies. Prof. Av-Gay is a member of the scientific review panel of
the Canadian Institute of Health Research, and the European Commission panels
for Diseases related to Poverty (Malaria, TB and AIDS), and for Life Sciences,
Genomics and Biotechnology for Health.
He currently devotes approximately 25 hours a month of his time to our company.
He is not an officer or Director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
DR. DAVID GREENBERG, CHIEF MEDICAL OFFICER, MEMBER OF THE BOARD OF DIRECTORS
Dr. David Greenberg has served as our Chief Medical Officer and a member of our
Board of Directors since June 28, 2007. The term of his office is for one year
and is renewable on an annual basis. Since 1999, Dr. Greenberg has been employed
by Ben-Gurion University in the position of medical doctor specializing in
pediatric infectious diseases.
Dr. Greenberg obtained his MD from Ben-Gurion University of the Negev in
Beer-Sheva, Israel in 1991, was Board certified in Pediatrics in 1996, and did
his fellowship in Pediatric Infectious Diseases at "The Children's Hospital" in
Vancouver, Canada, from 1997 to 1999. He was Board certified in Infectious
Diseases in Israel in 2000. He joined the Department of Pediatrics and the
Pediatric Infectious Disease Unit of Soroka University Medical Center as a
pediatrician and a senior consultant in Pediatric Infectious Diseases in 1999.
He is also the Head of the Clinical Service for Pediatric Oncology patients. In
collaboration with various researchers from several universities worldwide, Dr.
Greenberg was a member World Health Organization Pneumonia Vaccine Trial
Investigators' Group and of the Pneumococcal Molecular Epidemiology Network
(PMEN). Dr. Greenberg is an Associated Professor at the Faculty of Health
Sciences of the Ben-Gurion University of the Negev. He currently serves as the
Chairman of the Israeli Clinical Pediatric Society. Dr. Greenberg's research
activities focus on respiratory infections, such as pneumonia and otitis media,
on vaccines, such as the pneumococcal conjugated vaccines, and on invasive
infections, such as bacteremia and meningitis mostly caused by Streptococcus
pneumoniae. He is particularly interested in epidemiology, molecular
epidemiology and carriage of S. pneumoniae, as well as in the spread of
antibiotic resistant pneumococci in the community. He is the author or co-author
of over 75 peer review scientific publications, 8 review articles, two book
chapters, and 1 patent.
Dr. Greenberg currently devotes approximately 5 hours a month of his time to our
company.
He is not an officer or Director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
MR. RAZI MIZRAHI, SECRETARY, TREASURER, MEMBER OF THE BOARD OF DIRECTORS
Mr. Mizrahi has served as our Secretary, Treasurer and a member of our Board of
Directors since June 28, 2007. The term of his office is for one year and is
renewable on an annual basis.
Mr. Mizrahi is a self employed businessman. He is the founder and President of
Summit Diamonds, Inc., where he has worked for more than 20 years. Mr. Mizrahi
has specialized in the supply of loose polished diamonds worldwide, with over 20
years experience focusing on the North American market.
Mr. Mizrahi currently devotes approximately 5 hours a month of his time to our
company.
He is not an officer or Director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
20
COMMITTEES OF THE BOARD
We do not have an audit committee or an audit committee financial expert. Our
corporate financial affairs are simple at this stage of development and each
financial transaction can be viewed by any officer or Director at will. The
policy of having no committee will change if the constitution of one such
becomes necessary as a result of growth of the Company or as mandated by public
policy.
CODE OF ETHICS
We do not currently have a Code of Ethics applicable to our principal executive,
financial and accounting officers; however, the Company plans to implement such
a code in the second quarter of 2008.
FAMILY RELATIONSHIPS
There are no family relationships between our officers and Directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our Directors, executive officers and control persons have not been involved in
any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
POTENTIAL CONFLICT OF INTEREST
Since we do not have an audit or compensation committee comprised of independent
Directors, the functions that would have been performed by such committees are
performed by our Board of Directors. Thus, there is a potential conflict of
interest in that our Directors have the authority to determine issues concerning
management compensation, in essence their own, and audit issues that may affect
management decisions. In addition, two of our directors, Prof. Yossef Av-Gay and
Dr. David Greenberg, are employed by the University of British Columbia (UBC)
and Ben-Gurion University, respectively. Enox has entered into a services
agreement with UBC, pursuant to which Prof. Av-Guy serves as UBC's Investigator
providing the services to Enox. Both Prof. Av-Gay and Dr. Greenberg reported
their relationships with Enox Biopharma to their universities. We are not aware
of any other conflicts of interest with any of our executives or Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 1, 2007, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current Directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Information relating to beneficial ownership of common
stock by our principal stockholders and management is based upon information
furnished by each person using "beneficial ownership" concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security, or
21
investment power, which includes the power to vote or direct the disposition of
the shares. The person is also deemed to be a beneficial owner of any security
of which that person has a right to acquire beneficial ownership within 60 days.
Under the Securities and Exchange Commission rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he or she may not have
any pecuniary beneficial interest.
The percentages below are calculated based on 10,569,227 shares of our common
stock issued and outstanding as of December 31, 2007. Except for the warrants
for 3,819,227 shares of our common stock, we do not have any outstanding
options, warrants or other securities exercisable for or convertible into shares
of our common stock.
Amount and
Nature of
Title of Beneficial Percent of
Class Name and Address of Beneficial Owner Ownership Class(2)
----- ------------------------------------ --------- --------
Common Prof. Yossef Av-Gay(3) 5,275,000 50%
Common Dr. David Greenberg (4) 400,000 4%
Common Mr. Razi Mizrahi (5) 675,000 6%
Common Mr. Solomon Friedman (6) 975,122 9.2%
Common Mr. Daniel Friedman (7) 975,610 9.2%
Common Mr. Itamar David (8) 813,008 7.7%
Common Mrs. Hadas David (9) 812,358 7.7%
Common Mr. Alnoor Versi (10) 813,008 7.7%
Common Directors and officers as a
group of three (1) 6,350,000 60%
- ----------
(1) Represents beneficial ownership.
(2) Based on the total of 10,569,227 outstanding common shares as of the date
hereof.
(3) Mr. Av Gay's address is 3849 West 13th Avenue, Vancouver BC V6R2S9, Canada.
(4) Mr. Greenberg's address is 39 Tamar St,. Omer 94965, Israel.
(5) Mr. Mizrahi's address is 3 Haruvim St., Pardes Hana 37000, Israel.
(6) Holds 487,805 shares of common stock and 487,805 Series A Warrants. Each
Series A Warrant entitles the holder to purchase one share of our common
stock at an exercise price of $0.20 for a period of two years from December
28, 2007. Mr. Friedman's address is 1003, 438 Seymour St., Vancouver, BC
V6B 6H4, Canada.
(7) Holds 487,561 shares of common stock and 487,561 Series A Warrants. Each
Series A Warrant entitles the holder to purchase one share of our common
stock at an exercise price of $0.20 for a period of two years from December
28, 2007. Mr. Friedman's address is 1003, 438 Seymour St., Vancouver, BC
V6B 6H4, Canada.
(8) Holds 406,504 shares of common stock and 406,504 Series A Warrants. Each
Series A Warrant entitles the holder to purchase one share of our common
stock at an exercise price of $0.20 for a period of two years from December
28, 2007. Mr. David's address is 13 Achuza St., Pardes-Hana Karkur 37075.
(9) Holds 406,179 shares of common stock and 406,179 Series A Warrants. Each
Series A Warrant entitles the holder to purchase one share of our common
stock at an exercise price of $0.20 for a period of two years from December
28, 2007. Ms. David's address is 13 Achuza St., Pardes-Hana Karkur 37075.
(10) Holds 406,504 shares of common stock and 406,504 Series A Warrants. Each
Series A Warrant entitles the holder to purchase one share of our common
stock at an exercise price of $0.20 for a period of two years from December
28, 2007. Mr. Versi's address is 806-1383 Marinaside Crescent, Vancouver
BC, Canada.
22
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 100,000,000 shares of common stock with a par value
of $0.0001 per share, and 50,000,000 shares of preferred stock, par value
$0.0001 per share. As of December 31, 2007, we had 10,569,227common shares
outstanding. Upon liquidation, dissolution or winding up of the corporation, the
holders of common stock are entitled to share ratably in all net assets
available for distribution to stockholders after payment to creditors. The
common stock is not convertible or redeemable and has no preemptive,
subscription or conversion rights. There are no conversion, redemption, sinking
fund or similar provisions regarding the common stock. Each outstanding share of
common stock is entitled to one vote on all matters submitted to a vote of
stockholders. There are no cumulative voting rights.
Each stockholder is entitled to receive the dividends as may be declared by our
Board of Directors out of funds legally available for dividends and, in the
event of liquidation, to share pro rata in any distribution of our assets after
payment of liabilities. Our Board of Directors is not obligated to declare a
dividend. Any future dividends will be subject to the discretion of our Board of
Directors and will depend upon, among other things, future earnings, the
operating and financial condition of our company, its capital requirements,
general business conditions and other pertinent factors. It is not anticipated
that dividends will be paid in the foreseeable future.
PREFERRED STOCK
The Board of Directors is authorized to determine and alter the rights,
preferences, privileges, and restrictions granted to or imposed upon any wholly
unissued series of preferred shares, and to fix the number of shares and the
designation of any series of preferred shares. The Board of Directors may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any wholly unissued series subsequent to
the issue of those shares. The rights of the holders of common stock will be
subject to and may be adversely affected by the rights of the holders of any
preferred stock that may be issued in the future. Issuance of a new series of
preferred stock could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, the outstanding shares of common stock
and make removal of the Board of Directors more difficult. No rights,
preferences or privileges have yet been determined and no shares of preferred
stock have been issued.
WARRANTS
As of December 31, 2007, there were outstanding Series A warrants to purchase
3,819,227 shares of our common stock at an exercise price of $0.20 per share,
which were issued in conjunction with the Private Placement we undertook in
December 2007. These warrants expire on December 28, 2009.
OPTIONS
There are no options to purchase our securities outstanding. We may in the
future establish an incentive stock option plan for our Directors, employees and
consultants.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, Director, officer, or employee.
SRK Law Offices, our independent legal counsel, has provided an opinion on the
validity of our common stock being offered by this prospectus.
23
The financial statements included in this prospectus and the registration
statement have been audited by Moore and Associates, Chartered., Certified
Public Accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein and in the registration statement, and are included
in reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Nevada General Corporation Law requires us to indemnify officers and
Directors for any expenses incurred by any officer or Director in connection
with any actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or Director because of his or her
status as an officer or Director, to the extent that the Director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Nevada General Corporation Law permits a corporation to
indemnify an officer or Director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or Director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of the Company
and such indemnification is authorized by the stockholders, by a quorum of
disinterested Directors, by independent legal counsel in a written opinion
authorized by a majority vote of a quorum of Directors consisting of
disinterested Directors, or by independent legal counsel in a written opinion if
a quorum of disinterested Directors cannot be obtained.
The Nevada General Corporation Law prohibits indemnification of a Director or
officer if a final adjudication establishes that the officer's or Director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law may permit an
officer or Director to apply to the court for approval of indemnification even
if the officer or Director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law.
The Nevada General Corporation Law also provides that indemnification of
Directors is not permitted for the unlawful payment of distributions, except for
those Directors registering their dissent to the payment of the distribution.
According to Article VII of our bylaws, we are authorized to indemnify our
Directors to the fullest extent authorized under Nevada Law subject to certain
specified limitations.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to Directors, officers or persons controlling the Company pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
See "Certain Relationships and Related Transactions", below.
DESCRIPTION OF BUSINESS
CORPORATE HISTORY
We were incorporated on June 28th, 2007 in the State of Nevada. We are a
development stage company that only recently commenced its business operations,
and we currently have no revenue or significant assets. We have never declared
bankruptcy or been in receivership, and have never been involved in any legal
action or proceedings. Since becoming incorporated, we have not made any
significant purchase or sale of assets, nor have we been involved in any merger,
acquisition or consolidation. We are not a blank check registrant as that term
is defined in Rule 419(a)(2) of Regulation C of the Securities Act of 1933,
since we have a specific business plan or purpose.
Neither Enox Biopharma, nor its officers, Directors, promoters or affiliates,
have had preliminary contact or discussions with, nor do we have any present
plans, proposals, arrangements or understandings with any representatives of the
owners of any business or company regarding the possibility of an acquisition or
merger.
24
OUR CURRENT BUSINESS
We are dedicated to the novel treatment and prevention of acute ear infections
in children, known in medical terms as Acute Otitis Media. We plan to execute
our novel treatment plan through a combined medical device with unique drug
eluting technologies suitable for treatment of acute and antibiotic resistant
ear infections in children. Our planned device is a unique tympanostomy tube
capable of repelling infections.
BRIEF DESCRIPTION OF OTITIS MEDIA
Otitis Media or Acute Otitis Media (AOM) is an inflammation of the middle ear,
which is located behind the eardrum, and consists of three tiny bones that
transmit sound from the eardrum to the inner ear. When bacteria or viruses enter
the ear, they travel to the middle ear, where they can cause infection. An
infection can lead to a build-up of fluid and pus behind the eardrum, which can
cause ear pain and, in severe cases, the tympanic membrane may rupture.
"Seventy-five percent of children experience at least one episode of Otitis
Media by their third birthday. Almost half of these children will have three or
more ear infections during their first 3 years. It is estimated that medical
costs and lost wages because of otitis media amount to $5 billion a year in the
United States. Although Otitis Media is primarily a disease of infants and young
children, it can also affect adults."
* Gates GA. Cost-effectiveness Considerations in Otitis Media Treatment.
Otolaryngol Head Neck Sur. April 1996. 114 (4): 525-530.
(http://www.nidcd.nih.gov/health/hearing/otitism.asp)
CAUSES
Children develop ear infections more frequently in the first 2 to 4 years of
life for several reasons:
* Their eustachian tubes are shorter and more horizontal than those of
adults, which allow bacteria and viruses to find their way into the middle
ear more easily. Their tubes are also narrower and less stiff, which makes
them more prone to blockage.
* The adenoids, which are gland-like structures located in the back of the
upper throat near the eustachian tubes, are large in children and can
interfere with the opening of the eustachian tubes.
SIGNS AND SYMPTOMS
The signs and symptoms of Acute Otitis Media may range from very mild to severe:
* The fluid in the middle ear may push on the eardrum, causing ear pain. An
older child may complain of an earache, but a younger child may tug at the
ear or simply act irritable and cry more than usual.
* Lying down, chewing, and sucking can also cause painful pressure changes in
the middle ear, so a child may eat less than the normal amount or have
trouble sleeping.
* If the pressure from the fluid buildup is high enough, it can cause the
eardrum to rupture, resulting in drainage of fluid from the ear. This
releases the pressure behind the eardrum, usually bringing on relief from
the pain.
TREATMENTS
The common way to treat Otitis Media is the use of an antibiotic (a drug that
kills bacteria) when there is an active middle ear infection. If a child is
experiencing pain, the physician may also recommend a pain reliever.
"Once the infection clears, fluid may remain in the middle ear for several
months. Middle ear fluid that is not infected often disappears after 3 to 6
weeks. Neither antihistamines nor decongestants are recommended as helpful in
the treatment of Otitis Media at any stage in the disease process. Sometimes
physicians will treat the child with an antibiotic to hasten the elimination of
the fluid. If the fluid persists for more than 3 months and is associated with a
loss of hearing, many physicians suggest the insertion of "tubes" in the
affected ears. This operation, called a myringotomy, can usually be done on an
outpatient basis by a surgeon, who is usually an otolaryngologist (a physician
who specializes in the ears, nose, and throat). While the child is asleep under
general anesthesia, the surgeon makes a small opening in the child's eardrum. A
small metal or plastic tube is placed into the opening in the eardrum. The tube
25
ventilates the middle ear and helps keep the air pressure in the middle ear
equal to the air pressure in the environment. The tube normally stays in the
eardrum for 6 to 12 months, after which time it usually comes out
spontaneously." (Source: NIDCD - National Institute on Deafness and Other
Communication Disorders. http://www.nidcd.nih.gov/health/hearing/otitism.asp).
OUR PRODUCT
We are a biotechnology company that plans to develop a novel treatment for acute
ear infections in children. More specifically, we have identified a combined
medical device with unique drug eluting technologies suitable for treatment of
acute and antibiotic resistant ear infections in children. Our planned device is
a unique tympanostomy tube that will be capable of repelling infections.
In our management's opinion, the decreasing effectiveness of antibiotics has
become a worldwide concern. It is generally acknowledged that the increase in
drug-resistant bacteria is in large measure a byproduct of inappropriate
prescription of antibiotics. Antibiotic resistance occurs when mutant bacteria
are selected out by antibiotic use. These mutant bacteria are not eradicated by
standard antibiotics. We intend that our technology will be a safe alternative
to antibiotics and as such prevent occurrence of antibiotic resistant strains.
We expect that our natural and non-antibiotic technology will enable the
tympanostomy tubes to act as bacterial and viral repellants.
Our technology enhances the adaptation of the tube to the middle ear and
prevents re-occurring bacterial and viral infections. Our technology is a safe
alternative to antibiotics and as may prevent the occurrence of antibiotic
resistant strains. Unlike conventional tubes which may get blocked as a result
of fluids generated by infection, our natural and non antibiotic technology
enables the tubes to act as bacterial and viral repellants.
Since our tympanostomy tubes do not get blocked, recalcitrant Acute Otitis Media
may be prevented, saving the costs associated with repeated doctor visits and
hospitalizations.
The company has secured its technology and intellectual property by filing a
provisional patent with the US patent office, Provisional Patent application
serial # 60/974,228 (2007).
THE MARKET
According to Pediatrics(R), "Total national expenditures for the treatment of
Otitis Media were estimated to have been approximately $4.1 billion in 1992
dollars and $5.3 billion in 1998 dollars. Over 40% of national expenditures to
treat Otitis Media in children younger than 14 years of age were incurred for
children between 1 and 3 years of age ($453 per capita in 1992 dollars over
these 2 years vs. $1027 for all years of age from 2 to 13). Nationally,
expenditures for visits remained the largest component of expenditures."
(Source: Pediatrics - Pediatric Medicaid Cohort Direct Expenditures Related to
Otitis Media Diagnoses: Extrapolations from a Pediatric Medicaid Cohort, May 10,
2007-http://www.pediatrics.org/cgi/content/full/105/6/e72).
According to NIDCD, "Seventy-five percent of children experience at least one
episode of Otitis Media by their third birthday. Almost half of these children
will have three or more ear infections during their first 3 years. It is
estimated that medical costs and lost wages because of Otitis Media amount to $5
billion a year in the United States. Although Otitis Media is primarily a
disease of infants and young children, it can also affect adults." (Source:
NIDCD - National Institute on Deafness and Other Communication Disorders.
http://www.nidcd.nih.gov/health/hearing/otitism.asp).
COMPETITION
The biotechnology and pharmaceutical industries are highly competitive. Numerous
entities in the United States and elsewhere compete with our efforts to
commercialize our technology. Our competitors include pharmaceutical,
biomedical, biotechnology and diagnostic companies, academic and research
institutions and governmental and other publicly and privately funded research
agencies. We face, and expect to continue to face, competition from these
entities to the extent that they develop products that have a function similar
or identical to the function of our technology. Because many of our competitors
have substantially greater capital resources and more experience in research and
development, manufacturing and marketing than we have, we may not succeed in
developing our proposed products and bringing them to market in a cost-effective
and timely manner.
26
We are a development stage company engaged exclusively in research and
development. We have not yet completed the development of our first product and
have no revenue from operations. As a result, we may have difficulty competing
with larger, established biomedical and pharmaceutical companies and
organizations such as Heinz Kurz GmbH (http://www.kurzmed.de/int/index.php) and
Invotec (http://www.invotec.net/otology/ventilationtubes.htm). These companies
and organizations have greater financial, technical, research, marketing, sales,
distribution, service and other resources than we have. Moreover, they offer
broader product lines and services and have greater name recognition than we do,
and may offer discounts as a competitive tactic to raise a barrier to our entry
into the marketplace.
Traditional tympanostomy tubes are prone to continuous blockage and re-infection
that occur as a result of bacterial biofilm formation on the plastic surface.
Thus, treatment of Otitis Media requires pre- and post-operation prophylactic
antibiotic treatment. Our technology prevents blockage of the tubes. Also, our
tubes are embedded with a unique alternative to antibiotics that prevents post
operation re-infection. The main advantage of our tubes is that they render
unnecessary the standard prophylactic antibiotic treatment and avert the need
for re-occurring visits to the doctor's office.
INTELLECTUAL PROPERTY
PATENT APPLICATION
The company secured its technology and intellectual property by filing a
provisional patent with the US patent office on September 21st 2007, Provisional
Patent application serial # 60/974,228 (2007), at a cost of $7,000.
DOMAIN NAME
We own and operate the following registered internet domain name:
www.enoxbiopharma.com and have launched our website. The information contained
on our website does not form part of this prospectus.
GOVERNMENTAL REGULATION
Our research and development activities and the manufacturing and marketing of
our proposed products are subject to the laws and regulations of governmental
authorities in the United States and any other countries in which our products
are ultimately marketed. In the United States, the Food and Drug Administration,
or FDA, among other activities, regulates new product approvals to establish the
safety and efficacy of the types of products and technologies our company is
currently developing. Governments in other countries have similar requirements
for testing and marketing.
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the development, manufacture and marketing
of our proposed products and in our ongoing research and development activities.
The products and technologies that we are currently researching and developing
will require regulatory approval by governmental agencies prior to
commercialization. Various federal statutes and regulations also govern or
influence the testing, manufacturing, safety, labeling, storage, record keeping,
and marketing of therapeutic products. The process of obtaining these approvals
and the subsequent compliance with applicable statutes and regulations require
the expenditure of substantial time and financial resources. Any failure by us
or our collaborators, licensors, or licensees to obtain, or any delay in
obtaining regulatory approval, could have a material adverse effect on our
business.
FDA APPROVAL
The FDA sets out guidelines for clinical trials which are conducted to obtain
FDA approval. Clinical trials are required to find effective treatments to
improve health. All clinical trials are based on a protocol which is a study
plan that describes the type of people who may participate in the trial, the
schedule of tests and procedures, and the length of the study.
Most clinical trials in the United States must be approved and monitored by an
Institutional Review Board, or IRB, to make sure the risks of the trial are as
low as possible and are worth any potential benefits. All institutions that
27
conduct or support biomedical research are required by federal regulation to
have an IRB that initially approves and periodically reviews the research.
Upon successful completion of a clinical trial validation study, an application
based on the results of the clinical trial is submitted for FDA approval. Upon
receipt of FDA approval, the medical product is ready for commercialization.
In the United States, clearance or approval to commercially distribute new
medical devices or products is received from the FDA through clearance of a
510(k) pre-market notification (or 510(k) for short), or approval of a premarket
approval application (or PMA for short). It may take from three to nine months
from submission to obtain 510(k) clearance, but may take longer or clearance may
not be obtained at all. The FDA may determine that additional information is
needed before approval to distribute the product is given.
For any products that are cleared through the 510(k) pre-market notification
process, modifications or enhancements that may significantly affect safety or
constitute a major change in the intended use of the product will require new
510(k) submissions.
A PMA application must be filed if a proposed product is not substantially
equivalent to a medical product first marketed prior to May 1976, or if
otherwise required by the FDA. The PMA approval process can be expensive,
uncertain and lengthy. A number of products for which other companies have
sought FDA approval of a PMA application were never approved for marketing in
the end. It generally takes from six to eighteen months from submission to
obtain PMA approval, but it may take longer or the submission may not be
approved at all.
In order to obtain FDA approval of a new medical product, sponsors must
generally submit proof of safety and efficacy. In some cases, such proof entails
extensive pre-clinical and clinical laboratory tests. The testing and
preparation of necessary applications and processing of those applications by
the FDA is expensive and may take several years to complete. There can be no
assurance that the FDA will act favorably or in a timely manner in reviewing
submitted applications, and we may encounter significant difficulties or costs
in our efforts to obtain FDA approval. Such circumstances may delay or preclude
us from marketing any products we may develop. The FDA may also require
post-marketing testing and surveillance of approved products, or place other
conditions on the approvals. These requirements may create difficulties for our
company to sell our proposed products and may increase the costs of such
products, which may restrict the commercial applications of such products.
Product approvals may be withdrawn if compliance with regulatory standards is
not maintained or if problems occur following initial marketing. For patented
technologies, delays imposed by the governmental approval process may materially
reduce the period during which we will have the exclusive right to exploit such
technologies.
If human clinical trials of a proposed medical product are required, the
manufacturer or distributor of the product will have to file an Investigational
Device Exemption or Investigational New Drug submission with the FDA prior to
commencing human clinical trials. The submission must be supported by data,
typically including the results of pre-clinical and laboratory testing.
Following submission of the Investigational Device Exemption or Investigational
New Drug, the FDA has 30 days to review the application and raise safety and
other clinical trial issues. If we are not notified of objections within that
period, clinical trials may be initiated, and human clinical trials may commence
at a specified number of investigational sites with the number of patients
approved by the FDA.
RESEARCH AND DEVELOPMENT
We are a development stage company and have not generated any revenues from our
technologies. We believe, however, that there are opportunities to discover and
develop effective and cost effective treatment for Otitis Media. Our current
business is primarily focused on developing a unique drug eluting technology
suitable for treatment of acute and antibiotic resistant ear infections in
children.
We have produced a series of tympanostomy tubes prototypes and are now
evaluating their advantage over currently approved tubes. For that purpose, we
have signed a service agreement with the University of British Columbia, at an
annual cost of $50,000, pursuant to which the University of British Columbia
will perform development studies aimed to calibrate our technology and adapt it
28
to various changing clinical situations. We have contracted with NRD Solutions,
at a cost of $12,000, to evaluate our tympanostomy tube device on an ongoing
basis for the next twelve months. We have plans to undertake additional research
and development activities during the next twelve months. For a detailed
description see "Plan of Operation."
SUPPLIERS
The prototype is being developed by us using materials supplied from various
commercial sources. Our company is not reliant upon any suppliers for the
research and development of our technology.
CUSTOMERS
As we are in the development stage of our business, we do not currently have any
customers for our proposed products.
EMPLOYEES
We have no employees at the present time. Our officers and Directors are
responsible for all planning, developing and operational duties, and will
continue to do so throughout the early stages of our growth.
REPORTS TO SECURITY HOLDERS
We will voluntarily make available to securities holders an annual report,
including audited financials, on Form 10-KSB. We are not currently a fully
reporting company, but upon effectiveness of this registration statement, we
will be required to file reports with the SEC pursuant to the Securities
Exchange Act of 1934; such as quarterly reports on Form 10-QSB and current
reports on Form 8-K.
The public may read and copy any materials filed by us with the Securities and
Exchange Commission at the Securities and Exchange Commission's Public Reference
Room at 100 F Street, NE, Washington DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-732-0330. We are an electronic filer. The
Securities and Exchange Commission maintains an internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Securities and Exchange Commission.
The internet address of the site is http://www.sec.gov.
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS REGISTRATION
STATEMENT. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS REGISTRATION STATEMENT, PARTICULARLY
IN THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS REGISTRATION
STATEMENT.
Our audited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
OVERVIEW
We are a development stage company. We plan on developing a unique drug eluting
technology suitable for the treatment of acute and antibiotic resistant ear
infections in children. The main treatment for Acute Otitis Media (AOM) is
surgical installment of a "tympanostomy tube". Yet, re-occurring infection and
blockage of the tube is a common phenomenon. Our technology is intended to
enhance the adaptation of the tube to the middle ear and to prevent re-occurring
bacterial and viral infections.
In our management's opinion, the decreasing effectiveness of antibiotics has
become a worldwide concern. It is generally acknowledged that the increase in
drug-resistant bacteria is in large measure a byproduct of the inappropriate
prescription of antibiotics. Antibiotic resistance occurs when mutant bacteria
are selected out by antibiotic use. These mutant bacteria are not eradicated by
standard antibiotics. We intend for our technology to be a safe alternative to
antibiotics and as such prevent the occurrence of antibiotic resistant strains.
We expect that our natural and non-antibiotic technology will enable the
tympanostomy tubes to act as bacterial and viral repellants. Thus, our
tympanostomy tubes, if developed as planned, should not get blocked. As a
result, recalcitrant Acute Otitis Media may be prevented, thus saving the costs
associated with repeated doctor visits and hospitalizations.
ACTIVITIES TO DATE
We have produced a series of tympanostomy tubes prototypes and are now
evaluating their advantages over currently approved tubes. For that purpose, we
have signed a service agreement with the University of British Columbia at an
annual cost to us of $50,000 which focuses on development studies aimed to
calibrate our technology and adapt it to various changing clinical situations.
We contracted with NRD Solutions, at a cost of $12,000, to evaluate our
tympanostomy tube device, on an ongoing basis, for the next twelve months. We
have secured its technology and intellectual property by filing a provisional
patent with the US patent office at a cost of $7,000.
We have secured the domain name "www.enoxbiopharma.com" and launched our
website.
LIQUIDITY AND CASH RESOURCES
As previously noted, we have raised $234,882 from a private placement to 43
non-affiliated investors. We have incurred $4,594 for general and administrative
expenses, $80,860 for professional and consulting fees and an expense of
$234,882 which is the fair value of the warrants issued on December 28, 2007
estimated by using the Black Scholes option-pricing model. As of December 31,
2007, we had $143,399 in cash remaining. As of the date hereof, we have
approximately $136,840 in cash. Our budgeted expenditures for the next twelve
months are $243,000. Therefore, we presently have a budgeted shortfall of
approximately $23,792.
The length of time for which we will be able to satisfy our cash requirements
with our current cash balance depends on how quickly and effectively our company
can begin to generate revenue. We estimate that our current cash balances will
be extinguished by January 2009, provided that we do not have any unanticipated
expenses.
30
We will need to raise additional funds for the future development of our
business, and to respond to unanticipated requirements or expenses. We do not
currently have any arrangements for financing and we can provide no assurance to
investors we will be able to find such financing. There can be no assurance that
additional financing will be available to us, or on terms that are acceptable.
Consequently, we may not be able to proceed with our intended business plans or
complete the development and commercialization of our product.
There are also no plans or expectations to purchase or sell any significant
equipment in the initial years of operation.
PLAN OF OPERATION
Our plan of operation is to develop a unique drug eluting technology suitable
for treatment of acute and antibiotic resistant ear infections in children.
During the next 12 months we will be focusing our attention on developing our
technology for coating tympanostomy tubes, securing our intellectual property,
obtaining experimental evidence to support the development of our device,
designing clinical studies and conducting preliminary discussions with the Food
and Drug Administration.
We intend to accomplish this through the following milestones:
MILESTONES
The following is a chronological itemization of the milestones that we hope to
achieve over the next 12 months until January 31, 2009. We are currently in the
first period of the milestones noted below.
1. ORGANIZATION: FEBRUARY 2008 THROUGH APRIL 2008
During the first 3 months, we will be focusing our attention on developing our
technology for coating tympanostomy tubes, and securing our intellectual
property and obtaining experimental evidence to support the development of our
device. Our President and Director, Prof. Yossef Av-Gay, will be responsible for
the performance of these milestones.
We have signed a service agreement with the University of British Columbia at an
annual cost to us of $50,000 which focuses on development studies aimed to
calibrate our technology and adapt it to various changing clinical situations.
We budgeted $50,000 for this purpose, of which we have prepaid $25,000 to the
University of British Columbia.
We plan to negotiate with Boston Medical Center in order to carry out a clinical
trial related to the effectiveness of our product in the treatment of Otitis
Media in animals. Our Director, Mr. David Greenberg, will be negotiating with
Boston Medial Center. We have budgeted $6,000 for the design and travel expenses
associated with the clinical trials in animals. We have budgeted $24,000 for the
first round of the clinical trials in animals.
We will also start negotiating with Soroka Medical Center located in Beer Sheva,
Israel regarding clinical trials.
2. RESEARCH AND DEVELOPMENT: MAY 2008 THROUGH AUGUST 2008
During the next 4 months, we plan to conduct a series of experiments to obtain
supportive evidence for the further development of our product, both in term of
the efficacy and safety of our product. These studies will include in-vitro and
in-vivo experiments testing various organisms causing Otitis Media in several
biological models. Our President and Director, Prof. Yossef Av-Gay will be
responsible for the performance of these experiments and studies.
We plan to follow up on our provisional patent application by filing a patent
with the US Patent and Trademark Office and to apply for PCT protection under
the international Patent Cooperation Treaty (PCT).
31
3. DESIGN CLINICAL STUDIES: SEPTEMBER 2008 THROUGH JANUARY 2009
During this period we will analyze the results obtained from both the in-vitro
and animal studies and establish the formulation to be examined in the clinical
trials. We expect to adapt the prototype of the device to the correct
formulation and the tubes will be examined in-vitro.
Following the above experiments and the completed patent application, we plan to
apply for investigational new drug (IND) review with the Food and Drug
Administration. For this purpose, we will initiate due diligence and
negotiations aimed to assemble a committee of experts in medicinal chemistry and
pharmacology and toxicology that will assist us with phase I clinical trials.
We have budgeted $12,000 for the recruitments and negotiation process with
leading experts. Our Director, Mr. David Greenberg, will be in charge of this
task.
ESTIMATED EXPENSES FOR THE NEXT TWELVE MONTH PERIOD
In our management's opinion, we will incur the following expenses to implement
our plan of operation over the next twelve months:
Consultant Compensation* 54,000
Service Agreements** 86,000
Business Development and Travel Expenses*** 12,000
Supplies 30,000
Technical Writing 6,000
Website Development 5,000
Professional Fees (Legal and accounting)**** 30,000
Transfer Agent 10,000
General and Administrative Expenses 10,000
--------
TOTAL $243,000
========
- ----------
* Expenses of $54,000 of which we prepaid $30,000.
** Expenses of $86,000 of which we prepaid $37,000.
*** Expenses of $12,000 of which we prepaid $2,868.
**** Expenses of $30,000 of which we prepaid $12,500.
These expenditures are described in detail in "Milestones".
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements
DESCRIPTION OF PROPERTY
We do not lease or own any real property. We currently maintain our corporate
office at 27 Havradim St. Yehud-Monosson 56275, Israel, in space provided to us
by our President. We do not pay any rental fees for use of this space. This
space is sufficient until we commence full operations.
32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the consulting agreements and stock transactions discussed below, we
have not entered into any transaction, nor are there any proposed transactions,
in which any Director, executive officer, shareholder of us, or any member of
the immediate family of any of the foregoing, had or is to have a direct or
indirect material interest.
CONSULTING AGREEMENTS
On August 1, 2007, we entered into a Consulting Agreement with Dr. David
Greenberg, our Director, for an initial term of twelve months, pursuant to which
the consultant agreed to provide us with management consulting services, in
exchange for payment of consulting fees in the amount of $1,000 per month. The
specific services to be provided by the consultant include speaking on our
behalf to potential investors, collaborators, and partners. Upon expiration of
the initial term, the Consulting Agreement is automatically renewable for
renewal terms of 90 days each.
On September 1, 2007, we entered into a Consulting Agreement with 0794658 B.C
Ltd., a company owned by Prof. Av-Gay, our President and Director, for an
initial term of twelve months, pursuant to which the consultant agreed to
provide us with management consulting services, in exchange for payment by us of
consulting fees in the amount of $3,000 per month. The specific services to be
provided by the consultant include: managing the company's activities and
operations, providing microbiology and biochemistry expertise, speaking on our
behalf to potential investors, collaborators, and partners, and filing patents
with the US Patent and Trademark Office. Upon expiration of the initial term,
the Consulting Agreement is automatically renewable for renewal terms of 90 days
each.
On September 1, 2007, we entered into a Consulting Agreement with NRD
Solutions,, for an initial term of twelve months, pursuant to which the
consultant agreed to provide us with an evaluation of our tympanostomy tube
device, provide an expert opinion on the company devices and technologies, and
speak on our behalf to potential investors, collaborators and partners.
REAL PROPERTY
We do not lease or own any real property. We currently maintain our corporate
office at 27 Havradim St., Yehud-Monosson, 56275, Israel, in space provided to
us by our President. We do not pay any rental fees for use of this space.
STOCK TRANSACTIONS
On June 28, 2007, Prof. Yossef Av-Gay, our President and Director, was issued
5,275,000 shares of our common stock in consideration for cash at a price of
$0.0001 per share. The shares were issued under Section 4(2) of the Securities
Act of 1933, as amended, and/or Regulation D promulgated by the Securities and
Exchange Commission.
On June 28, 2007, Mr. Razi Mizrahi, our Secretary, Treasurer and Director, was
issued 675,000 shares of our common stock in consideration for cash at a price
of $0.0001 per share. The shares were issued under Section 4(2) of the
Securities Act of 1933, as amended, and/or Regulation D promulgated by the
Securities and Exchange Commission.
On June 28, 2007, Dr. David Greenberg, our Director, was issued 400,000 shares
of our common stock in consideration for cash at a price of $0.0001 per share.
The shares were issued under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D promulgated by the Securities and Exchange
Commission.
On June 28, 2007, NRD Solutions, was issued 400,000 shares of our common stock
in consideration for cash at a price of $0.0001 per share. The shares were
issued under Section 4(2) of the Securities Act of 1933, as amended, and/or
Regulation D promulgated by the Securities and Exchange Commission.
OTHER TRANSACTIONS
On June 28, 2007, Prof. Yossef Av-Gay, our President and Director, loaned the
Company $100. The loan bears no interest and is payable on demand, not earlier
than 12 months from June 28, 2007.
33
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Currently, there is no public trading market for our stock, and we have not
applied to have our common stock listed. We intend to seek out a market maker to
apply to have our common stock quoted on the OTC Bulletin Board upon
effectiveness of this Form SB-2. No trading symbol has yet been assigned.
RULES GOVERNING LOW-PRICE STOCKS THAT MAY AFFECT OUR SHAREHOLDERS' ABILITY TO
RESELL SHARES OF OUR COMMON STOCK
Our stock currently is not traded on any stock exchange or quoted on any stock
quotation system. Upon the registration statement in which this prospectus is
included becoming effective, we will seek out a market maker to apply for
quotation of our common stock on the NASD's OTCBB.
Quotations on the OTCBB reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not reflect actual transactions. Our common stock
may be subject to certain rules adopted by the SEC that regulate broker-dealer
practices in connection with transactions in "penny stocks". Penny stocks
generally are securities with a price of less than $5.00, other than securities
registered on certain national exchanges or quoted on the Nasdaq system,
provided that the exchange or system provides current price and volume
information with respect to transaction in such securities. The additional sales
practice and disclosure requirements imposed upon broker-dealers may discourage
broker-dealers from effecting transactions in our shares which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.
The penny stock rules require broker-dealers, prior to a transaction in a penny
stock not otherwise exempt from the rules, to make a special suitability
determination for the purchaser to receive the purchaser's written consent to
the transaction prior to sale, to deliver standardized risk disclosure documents
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny stock.
In addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the SEC relating to the penny stock market, unless the broker-dealer or the
transaction is otherwise exempt. A broker-dealer is also required to disclose
commissions payable to the broker-dealer and the registered representative and
current quotations for the securities. Finally, a broker-dealer is required to
send monthly statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect to the
limited market in penny stocks.
HOLDERS
As of the filing of this prospectus, we have 47 stockholders of record. We are
registering 7,639,578 shares of our common stock held by 43 non-affiliated
investors under the Securities Act of 1933 for sale by the selling securities
holders named in this prospectus. This does not include the 6,350,000 shares
held by our officers and Directors.
RULE 144 SHARES.
As of December 31, 2007, there are no shares of our common stock that are
currently available for resale to the public in accordance with the volume and
trading limitations of Rule 144 of the Securities Act.
Under Rule 144, as amended, effective as of February 15, 2008, a person who is
deemed to have been our affiliate at any time during the 90 days preceding a
sale, has beneficially owned restricted shares for at least six months, and has
complied with the requirements described below, would be entitled to sell a
specified number of shares within any three-month period. That number of shares
cannot exceed one percent of the number of shares of common stock then
outstanding, which will equal approximately 101,692 immediately after this
offering. Under Rule 144, an "affiliate" of a company is a person that directly
or indirectly controls, is controlled by or is under common control with that
company.
34
Sales under Rule 144 are also restricted by manner of sale provisions, notice
requirements and the availability of current public information about us. Rule
144 provides that our affiliates who are selling shares of our common stock that
are not restricted shares must comply with the same restrictions applicable to
restricted shares with the exception of the holding period requirement. For a
person who is not deemed to have been our affiliate at any time during the three
months preceding a sale, sales of our common stock held longer than six months,
but less than one year, will be subject only to the current public information
requirement. In addition, a person who is not deemed to have been our affiliate
at any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least one year, is entitled to sell
those shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
DIVIDENDS.
As of the filing of this prospectus, we have not paid any dividends to our
shareholders. There are no restrictions which would limit our ability to pay
dividends on common equity or that are likely to do so in the future. The Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after
giving effect to the distribution of the dividend we would not be able to pay
our debts as they become due in the usual course of business or our total assets
would be less than the sum of the total liabilities plus the amount that would
be needed to satisfy the rights of shareholders who have preferential rights
superior to those receiving the distribution.
DIFFICULTY TO RESELL ENOX BIOPHARMA STOCK, AS THE COMPANY HAS NO EXPECTATIONS TO
PAY CASH DIVIDENDS IN THE NEAR FUTURE
The holders of our common stock are entitled to receive dividends when, and if,
declared by the Board of Directors. We will not be paying cash dividends in the
foreseeable future, but instead we will be retaining any and all earnings to
finance the growth of our business. To date, we have not paid cash dividends on
our common stock. This lack of an ongoing return on investment may make it
difficult to sell our common stock and if the stock is sold the seller may be
forced to sell the stock at a loss.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid by
us to our officers and Directors from our date of incorporation on June 28, 2007
to December 31, 2007.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------- ------------------------------------------------
Awards Payouts
------------------------- -------
Securities Restricted
Underlying Shares or
Options/ Restricted
Name and SARs Share LTIP
Principal Position Year(1) Salary Bonus Other Granted Units Payouts All Other
- ------------------ ------- ------ ----- ----- ------- ----- ------- ---------
Prof. Yossef 2007 Nil Nil 18,000 Nil Nil Nil Nil
Av-Gay President
and Director
Razi Mizrahi
Secretary, 2007 Nil Nil Nil Nil Nil Nil Nil
Treasurer and
Director
Dr. David 2007 Nil Nil 12,000 Nil Nil Nil Nil
Greenberg
Director
- ----------
(1) We were incorporated on June 28, 2007.
(2) Represents compensation paid as an independent contractor to the Company
35
On August 1, 2007, we entered into a Consulting Agreement with Dr. David
Greenberg, our Director, for an initial term of twelve months, pursuant to which
the consultant agreed to provide us with management consulting services, in
exchange for payment of consulting fees in the amount of $1,000 per month. The
specific services to be provided by the consultant include, speaking on our
behalf to potential investors, collaborators, and partners. Upon expiration of
the initial term, the Consulting Agreement is automatically renewable for
renewal terms of 90 days each.
On September 1, 2007, we entered into a Consulting Agreement with 0794658 B.C
Ltd., a company owned by Prof. Av-Gay, our President and Director, for an
initial term of twelve months, pursuant to which the consultant agreed to
provide us with management consulting services, in exchange for payment by us of
consulting fees in the amount of $3,000 per month. The specific services to be
provided by the consultant include: managing the company's activities and
operations, providing microbiology and biochemistry expertise, speaking on our
behalf to potential investors, collaborators, and partners, and filing patents
with the US Patent and Trademark Office. Upon expiration of the initial term,
the Consulting Agreement is automatically renewable for renewal terms of 90 days
each.
All compensation received by the officers and Directors has been disclosed.
OPTION/SAR GRANTS
There are no stock option, retirement, pension, or profit sharing plans for the
benefit of our officers and Directors.
LONG-TERM INCENTIVE PLAN AWARDS
We do not have any long-term incentive plans.
DIRECTORS COMPENSATION
We have no formal plan for compensating our Directors for their services in
their capacity as Directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our Board of Directors. The Board of Directors may
award special remuneration to any Director undertaking any special services on
behalf of Enox Biopharma other than services ordinarily required of a Director.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no changes in and/or disagreements with Moore & Associates,
Chartered on accounting and financial disclosure matters.
36
FINANCIAL STATEMENTS
INDEX
Our financial statements are stated in United States Dollars (US$) and are
prepared in conformity with generally accepted accounting principles of the
United States of America.
The following audited consolidated financial statements pertaining to Enox
Biopharma, Inc. are filed as part of this registration statement:
Report of Independent Registered Public Accounting Firm F-1
Balance Sheet as of December 31, 2007 F-2
Statement of Operations for the period from June 28, 2007 F-3
(Date of Inception) through December 31, 2007
Statement of Stockholders' Equity for the period from June 28, 2007 F-4
(Date of Inception) through December 31, 2007
Statements of Cash Flows for the period from June 28, 2007 F-5
(Date of Inception) through December 31, 2007
Notes to Financial Statements F-6
37
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Enox Biopharma Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Enox Biopharma Inc. (A
Development Stage Company) as of December 31, 2007, and the related statements
of operations, stockholders' equity and cash flows from Inception on June 28,
2007 through December 31, 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enox Biopharma Inc. (A
Development Stage Company) as of December 31, 2007 and the results of its
operations and its cash flows from inception June 28, 2007 through December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has an accumulated deficit of $90,835 as of
December 31, 2007, which raises substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are also
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
- ---------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
January 31, 2008
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7499 Fax (702) 253-7501
F-1
ENOX BIOPHARMA INC.
(A Development Stage Company)
BALANCE SHEETS
December 31,
2007
---------
ASSETS
Current Assets
Cash $ 143,399
---------
Total Current Assets $ 143,399
=========
Net property and equipment (Note 7) $ 1,432
---------
Total Assets $ 144,831
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Loan from Director (Note 5) $ 100
---------
Total Liabilities 100
---------
Stockholders' Equity (Note 4)
Preferred Stock, authorized
50,000,000 shares, par value $0.0001, none outstanding
Common Stock, authorized
100,000,000 shares, par value $0.0001
Issued and outstanding:
On December 31, 2007; is 10,569,227 Common Shares 1,057
Series A Warrants 152,769
Additional Paid in Capital 81,740
Deficit Accumulated During the Development Stage (90,835)
---------
Total Stockholders' Equity 144,731
---------
Total Liabilities and Stockholders' Equity $ 144,831
=========
The accompanying notes are an integral part of these financial statements.
F-2
ENOX BIOPHARMA INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
December 31, 2007
June 28, 2007
(Inception) to
December 31,
2007
----------
Revenue $ --
Expenses
Depreciation and amortization 706
General and Administrative 4,595
Organization 683
Professional Fees 84,860
----------
Total Expenses 90,844
----------
Other Income/Expense
Other Income
Interest Earned 9
----------
Total Other Income
9
Net Other Income
Net Gain/(Loss) $ (90,835)
==========
Basic and Diluted
(Loss) per Share a
----------
Weighted Average Number of Shares 8,469,547
----------
- ----------
a = Less than ($0.01) per share
The accompanying notes are an integral part of these financial statements.
F-3
ENOX BIOPHARMA INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 2007
Common Stock
-------------------- Paid in Series A Accumulated Total
Shares Amount Capital Warrants Deficit Equity
------ ------ ------- -------- ------- ------
INCEPTION, JUNE 28, 2007 -- $ -- $ -- $ -- $ -- $ --
Common stock issued for cash
June 28, 2007 6,750,000 675 8 683
Common stock and warrants issued
for cash on December 28, 2007 3,819,227 382 81,732 152,769 234,883
(See notes)
Net Gain/(Loss) -- -- -- -- (90,835) (90,835)
---------- ------ ------- --------- -------- --------
BALANCE, DECEMBER 31, 2007 10,569,227 $1,057 $81,732 $ 152,769 $(90,835) $144,731
========== ====== ======= ========= ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
ENOX BIOPHARMA INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
December 31, 2007
June 28, 2007
(Inception) to
December 31,
2007
---------
Operating Activities
Net (Loss) $ (90,835)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities
Depreciation and amortization expense $ 706
Net Cash (Used) by Operating Activities (90,129)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment (2,138)
---------
Net cash used by investing activities
(2,138)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan from Director (Note 5) 100
Proceeds from sale of Common Stock 235,566
---------
Cash Provided by Financing Activities
235,666
---------
Net Increase in Cash 143,399
Cash, Beginning of Period --
---------
Cash, End of Period $ 143,399
=========
Supplemental Information:
Interest Paid $ --
Income Taxes Paid $ --
The accompanying notes are an integral part of these financial statements.
F-5
ENOX BIOPHARMA INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
The Company was originally incorporated under the laws of the state of Nevada on
June 28, 2007. The Company has limited operations and in accordance with
Statement of Financial Accounting Standards (SFAS) No. 7 "ACCOUNTING AND
REPORTING BY DEVELOPMENT STAGE ENTERPRISES", is considered a development stage
company, and has had no revenues from operations to date.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES IN THE US
The relevant accounting policies and procedures are listed below. The company
has adopted a Dec 31 year end.
ACCOUNTING BASIS
The basis is generally accepted accounting principles.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective its inception.
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
Basic and diluted loss per share is calculated based on the weighted average
number of shares outstanding during the period. Warrants have been excluded from
the calculation of diluted earnings per share since they are anti-dilutive.
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
F-6
ENOX BIOPHARMA INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
NOTE 2. (CONTINUED)
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has reported an accumulated
deficit of $90,835. To date, these losses have been financed principally through
capital stock and debt from related parties. Additional capital and/or
borrowings will be necessary in order for the Company to continue in existence
and attaining profitable operations.
Management has continued to develop a strategic plan to develop a management
team, maintain reporting compliance and establish contracts with clients.
Management anticipates generating revenue the promotion, marketing, and sale of
the unique tympanostomy tube either through independent marketing and sales to
health providers or through the sale or licensing of our proposed product to one
of the major pharmaceutical companies. The Company has commenced the process of
raising additional capital. Should the Company be unable to continue as a going
concern, it may be unable to realize the carrying value of its assets and to
meet its liabilities as they become due.
NOTE 4. STOCKHOLDERS' EQUITY
AUTHORIZED
The Company is authorized to issue 100,000,000 shares of $0.0001 par value
common stock and 50,000,000 shares of preferred stock, par value $0.0001 per
share. All common stock shares have equal voting rights, are non-assessable and
have one vote per share. Voting rights are not cumulative and, therefore, the
holders of more than 50% of the common stock could, if they choose to do so,
elect all of the directors of the Company.
ISSUED AND OUTSTANDING
On June 28, 2007 (inception), the Company issued 6,750,000 shares of its common
stock for cash of $683. See Note 5.
On December 28, 2007, the Company closed a private placement for 3,819,227
common shares at a price of $0.0615 per share, or an aggregate of $234,883. The
Company accepted subscription from forty-three offshore non-affiliated
investors.
On December 28, 2007, 3,819,227 units were issued pursuant to a private
placement subscription agreement for cash consideration of $234,883 at a
subscription price of $0.0615 per unit. Each unit consists of one common stock
of the Company and one non-transferable Series A warrant. Each Series A warrant
is exercisable into one common share at an exercise price of $0.2 for a two year
period expiring December 28, 2009.
F-7
ENOX BIOPHARMA INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
STOCK PURCHASE WARRANTS
On December 28, 2007, the Company closed a private placement memorandum (PPM).
In this PPM 3,819,227 units were sold at a purchase price of $0.0615 per unit
for a total of $234,883. Each unit consisted of one share of restricted common
stock and one non-transferrable Series A warrant. Each warrant is exercisable
into one common share at an exercise price of $0.20 for a two year period
expiring December 29, 2009. The consideration was allocated to the shares and
warrants issued based upon relative fair value.
Shares Allocated
And Warrants Value
------------ -----
Common Stock Issued 3,819,227 $ 82,114
Series A Warrants Issued 3,819,227 $ 152,769
--------- ---------
Total 7,638,454 $ 238,883
========= =========
The value allocated to the warrants was estimated using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%
expected volatility of 916%, risk-free interest rates of 3.94%, and expected
lives of 2 years.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company's neither owns nor leases any real or personal property. The
Company's Directors provides office space free of charge. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
On June 28, 2007 (inception), of the 6,750,000 common stock issued on inception
6,350,000 shares were issued to Directors for cash of $635. See Note 4.
Since June 28, 2007 (inception) to December 31, 2007, the company paid $18,000
to its President and Director, Prof. Yossef Av-Gay.
Since June 28, 2007 (inception) to December 31, 2007, the company paid $12,000
to its Director, Dr. David Greenberg.
On June 28, 2007, Prof. Yossef Av-Gay, our President and Director, loaned the
Company $100. The loan bears no interest and is payable on demand, not earlier
than 12 months from June 28, 2007.
F-8
ENOX BIOPHARMA INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
NOTE 6. INCOME TAXES
Net deferred tax assets are $nil. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carryforwards are expected to be available
to reduce taxable income. As the achievement of required future taxable income
is uncertain, the Company recorded a valuation allowance.
NOTE 7. PROPERTY AND EQUIPMENT
December 31, 2007
-----------------
Cost:
Office and computer equipment $2,138
------
Less: Accumulated depreciation and amortization 706
------
$1,432
======
The company depreciates all of its property and equipment on a straight line
basis over 3 years.
NOTE 8. NET OPERATING LOSSES
As of December 31, 2007, the Company has a net operating loss of $90,835.
NOTE 9. OPERATING LEASES AND OTHER COMMITMENTS:
The Company currently has no operating lease commitments or any other
commitments.
F-9
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and Directors are indemnified as provided by the Nevada Revised
Statutes and the bylaws.
Nevada corporation law provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a Director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Nevada corporation law also provides that to the extent that a Director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding, or in defense of any
claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Our Articles of Incorporation authorize our company to indemnify our Directors
and officers to the fullest extent permitted under Nevada law. Our Bylaws
require us to indemnify any present and former Directors, officers, employees,
agents, partners, trustees and each person who serves in any such capacities at
our request against all costs, expenses, judgments, penalties, fines,
liabilities and all amounts paid in settlement reasonably incurred by such
persons in connection with any threatened, pending or completed action, action,
suit or proceeding brought against such person by reason of the fact that such
person was a Director, officer, employee, agent, partner or trustees of our
company. We will only indemnify such persons if one of the groups set out below
determines that such person has conducted themselves in good faith and that such
person:
- reasonably believed that their conduct was in or not opposed to our
company's best interests; or
- with respect to criminal proceedings had no reasonable cause to
believe their conduct was unlawful.
Our Bylaws also require us to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of our company to procure a judgment in our company's
favor by reason of the fact that such person is or was a Director, trustee,
officer, employee or agent of our company or is or was serving at the request of
our company in any such capacities against all costs, expenses, judgments,
penalties, fines, liabilities and all amounts paid in settlement actually and
reasonably incurred by such person. We will only indemnify such persons if one
of the groups set out below determined that such persons have conducted
themselves in good faith and that such person reasonably believed that their
conduct was in or not opposed to our company's best interests. Unless a court
otherwise orders, we will not indemnify any such person if such person shall
have been adjudged to be liable for gross negligence or willful misconduct in
the performance of such person's duty to our company.
The determination to indemnify any such person must be made:
- by our stockholders;
- by our Board of Directors by majority vote of a quorum consisting of
Directors who were not parties to the action, suit or proceeding;
- by independent legal counsel in a written opinion; or
- by court order.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to Directors, officers and controlling persons of our company under
Nevada law or otherwise, we have been advised that the opinion of the Securities
and Exchange Commission is that such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
II-1
In the event a claim for indemnification against such liabilities (other than
payment by us for expenses incurred or paid by a Director, officer or
controlling person of our company in successful defense of any action, suit, or
proceeding) is asserted by a Director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction, the question of whether such indemnification
by it is against public policy in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have expended, or will expend fees in relation to this registration statement
as detailed below:
Expenditure Item Amount
---------------- ------
Attorney and consulting fees $12,500
Audit Fees 2,000
Transfer Agent Fees 10,000
SEC Registration 40
Other and Miscellaneous (1) 500
Printing and Filing Fees (1) 1,000
-------
TOTAL $26,040
=======
- ----------
(1) Estimates
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to the persons, as
described below. None of these transactions involved any underwriters,
underwriting discounts or commissions or any public offering, and we believe
that each transaction was exempt from the registration requirements of the
Securities Act of 1933 by virtue of Section 4(2) thereof, Regulation D or
Regulation S promulgated thereunder. All recipients had adequate access, through
their relationships with us, to information about us.
On June 28, 2007, Prof. Yossef Av-Gay, our President and Director, was issued
5,275,000 shares of our common stock in consideration for cash at a price of
$0.0001 per share. The shares were issued under Section 4(2) of the Securities
Act of 1933, as amended, and/or Regulation D promulgated by the Securities and
Exchange Commission.
On June 28, 2007, Mr. Razi Mizrahi, our Secretary, Treasurer and Director, was
issued 675,000 shares of our common stock in consideration for cash at a price
of $0.0001 per share. The shares were issued under Section 4(2) of the
Securities Act of 1933, as amended, and/or Regulation D promulgated by the
Securities and Exchange Commission.
On June 28, 2007, Dr. David Greenberg, our Director, was issued 400,000 shares
of our common stock in consideration for cash at a price of $0.0001 per share.
The shares were issued under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D promulgated by the Securities and Exchange
Commission.
On June 28, 2007, NRD Solutions was issued 400,000 shares of our common stock in
consideration for cash at a price of $0.0001 per share. The shares were issued
under Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation
D promulgated by the Securities and Exchange Commission
On December 28, 2007, we accepted subscription agreements, pursuant to which we
sold 3,819,227 common shares to the following 43 subscribers at an offering
price of $0.0615 per share for gross offering proceeds of $234,882.50. This was
an offshore transaction pursuant to Regulation S of the Securities Act. The
offering price for the offshore transactions was established on an arbitrary
basis. All of the following persons are not U.S. persons, as the term is defined
under Regulation S and the sales of our common stock to the following person are
II-2
made in offshore transactions as the term is defined under Regulation S. No
direct selling efforts were made in the United States by us, any distributor,
any of our respective affiliates, or any person acting on behalf of any of the
foregoing.
ITEM 27. EXHIBITS
Number Description
------ -----------
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Share Certificate.
5.1 Consent and Opinion re: Legality.
10.1 Consulting Agreement dated September 1, 2007 between Enox and
0794658 B.C Ltd.
10.2 Consulting Agreement dated September 1, 2007 between Enox and
Dr. David Greenberg.
10.3 Consulting Agreement dated August 1, 2007 between Enox and
NRD Solutions.
23.1 Consent of Moore & Associates, Chartered.
23.2 Consent of Legal Counsel (incorporated in Exhibit 5.1)
99 Form of Subscription Agreement with Series A Warrants for one
common share.
ITEM 28. UNDERTAKINGS
We hereby undertake the following:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the Offering of such securities
at that time shall be deemed to be the initial bona fide Offering thereof.
To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
Offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to the Directors, officers and controlling persons pursuant to the
provisions above, or otherwise, Enox Biopharma has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of the Directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of the Directors, officers, or controlling
persons in connection with the securities being registered, Enox Biopharma will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities
Act, and Enox Biopharma will be governed by the final adjudication of such
issue.
For determining liability under the Securities Act, to treat the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant under Rule 424(b) (1) or (4) or 497(h) under the Securities Act as
part of this Registration Statement as of the time the Commission declared it
effective.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Yehud-Monosson, Israel on February 1, 2008.
ENOX BIOPHARMA, INC.
By: /s/ Prof. Yossef Av-Gay
----------------------------------
Prof. Yossef Av-Gay
President and Director
(Principal Executive Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
/s/ Prof. Yossef Av-Gay
- -------------------------------------
Prof. Yossef Av-Gay
President and Director
(Principal Executive Officer)
February 1, 2008
/s/ Mr. Razi Mizrahi
- -------------------------------------
Razi Mizrahi
Secretary and Treasurer (Principal
Financial and Accounting Officer)
February 1, 2008
/s/ Dr. David Greenberg
- -------------------------------------
Dr. David Greenberg
Director
February 1, 2008
II-4
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Prof. Yossef
Av-Gay as his true and lawful attorneys-in-fact and agents, each acting alone,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement, and to sign
any registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all post-effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
Name Title Date
---- ----- ----
/s/ Prof. Yossef Av-Gay President and Director (Principal February 1, 2008
- -------------------------------- Executive Officer)
Prof. Yossef Av-Gay
/s/ Mr. Razi Mizrahi Secretary and Treasurer (Principal February 1, 2008
- -------------------------------- Financial and Accounting Officer)
Razi Mizrahi
/s/ Dr. David Greenberg Director February 1, 2008
- --------------------------------
Dr. David Greenberg
II-5