UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended September 30, 2009
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 000-53486
ENOX BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-0477124
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3849 West 13th Avenue, Vancouver BC
V6R2S9 Canada
(Address of principal executive offices)(Zip code)
Tel: + (604) 637-9744
Fax: +1 (888) 224-7259
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The issuer has 11,763,702 shares of common stock outstanding as of November 16,
2009.
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
Financial Statements-
Balance Sheets as of September 30, 2009 and December 31, 2008.............. 3
Statements of Operations for the Three Months and Nine Months
Ended September 30, 2009 and 2008, and Cumulative from Inception.......... 4
Statements of Changes in Stockholders' Equity for the Period from
Inception through September 30, 2009....................................... 5
Statements of Cash Flows for the Nine Months Ended
September 30, 2009 and 2008, and Cumulative from Inception................ 6
Notes to Financial Statements September 30, 2009............................ 7
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF SEPTEMBER 30, 2009, AND DECEMBER 31, 2008
September 30, December 31,
2009 2008
--------- ---------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash in bank $ 53,862 $ 103,730
Prepaid expenses 25,493 41,843
--------- ---------
Total current assets 79,355 145,573
OTHER ASSETS:
Patent pending 35,022 17,218
Property and equipment, net 826 1,643
--------- ---------
Total other assets 35,848 18,861
--------- ---------
TOTAL ASSETS $ 115,203 $ 164,434
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 4,706 $ 11,525
--------- ---------
Total current liabilities 4,706 11,525
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001per share,
50,000,000 shares authorized, none outstanding -- --
Common stock, par value $0.0001 per share, 100,000,000 shares
authorized; 11,763,702 and 11,199,417 shares issued and
outstanding, respectively 1,176 1,120
Warrants and options 276,643 276,643
Additional paid-in capital 344,443 166,999
(Deficit) accumulated during the development stage (511,765) (291,853)
--------- ---------
Total stockholders' equity 110,497 152,909
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 115,203 $ 164,434
========= =========
The accompanying notes to financial statements are an
integral part of these statements.
3
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEBMER 30, 2009
AND 2008, AND CUMULATIVE FROM INCEPTION (JUNE 28, 2007)
THROUGH SEPTEMBER 30, 2009
(Unaudited)
Cumulative
Three Months Ended Nine Months Ended From
September 30, September 30, Inception
------------------------------ ----------------------------- (June 28,
2009 2008 2009 2008 2007)
------------ ------------ ------------ ------------ ------------
REVENUES $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
EXPENSES:
Research and development 30,500 31,500 78,537 111,455 293,017
General and administrative 16,208 12,190 30,330 25,108 65,369
Professional fees 7,500 15,500 17,156 20,638 50,745
Consulting 71,024 -- 93,073 -- 99,536
Organization costs -- -- -- -- 683
Depreciation and amortization 272 226 816 677 2,424
------------ ------------ ------------ ------------ ------------
Total general and administrative expenses 125,504 59,416 219,912 157,878 511,774
------------ ------------ ------------ ------------ ------------
(LOSS) FROM OPERATIONS (125,504) (59,416) (219,912) (157,878) (511,774)
OTHER INCOME (EXPENSE) -- -- -- -- 9
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES (125,504) (59,416) (219,912) (157,878) (511,765)
PROVISION FOR INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET (LOSS) $ (125,504) $ (59,416) $ (219,912) $ (157,878) $ (511,765)
============ ============ ============ ============ ============
(LOSS) PER COMMON SHARE:
(Loss) per common share - Basic and Diluted $ (0.01) $ (0.01) $ (0.02) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 11,491,963 10,972,173 11,298,004 10,704,523
============ ============ ============ ============
The accompanying notes to financial statements are an
integral part of these statements.
4
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FORM INCEPTION (JUNE 28, 2007)
THROUGH SEPTEMBER 30, 2009
(UNAUDITED)
(Deficit)
Accumulated
Common Stock Additional Warrants During the
------------------ Paid-in and Development
Shares Amount Capital Options Stage Totals
------ ------ ------- ------- ----- ------
BALANCE - JUNE 28, 2007 -- $ -- $ -- $ -- $ -- $ --
Common stock issued for cash
to founders and consultants
on June 28, 2007 (Inception) @ 0.0001 6,750,000 675 8 -- -- 683
Common stock and warrants issued for
cash on December 28, 2007 @ 0.0615 3,819,227 382 81,732 152,769 -- 234,883
Net (loss) for the period -- -- -- -- (90,834) (90,834)
---------- ------ -------- -------- --------- ---------
BALANCE - DECEMBER 31, 2007 10,569,227 $1,057 $ 81,740 $152,769 $ (90,834) $ 144,732
Common stock and warrants issued for
cash on July 15, 2008 @ 0.25 304,000 30 38,626 37,344 -- 76,000
Common stock and warrants issued for
cash on July 20, 2008 @ 0.30 183,333 18 32,463 22,519 -- 55,000
Common stock and warrants issued for
cash on December 25, 2008 @ 0.35 142,857 14 14,171 35,815 -- 50,000
Options granted to a consultant -- -- -- 28,196 -- 28,196
Net (loss) for the year -- -- -- -- (201,019) (201,019)
---------- ------ -------- -------- --------- ---------
BALANCE - DECEMBER 31, 2008 11,199,417 $1,120 $166,999 $276,643 $(291,853) $ 152,909
Common stock and warrants issued
for cash on July 2, 2009 @ 0.35 14,285 1 4,999 -- -- 5,000
Warrants exercised on July 10, 2009
@ 0.20 50,000 5 9,995 -- -- 10,000
Common stock and warrants issued for
cash on July 22, 2009 @ 0.35 57,143 6 19,994 -- -- 20,000
Common stock and warrants issued for
cash on July 28, 2009 @ 0.30 250,000 25 74,975 -- -- 75,000
Common stock issued persuant to
consulting agreement on
September 25, 2009 @ $0.35 192,857 19 67,481 -- -- 67,500
Net (loss) for the period -- -- -- -- (219,912) (219,912)
---------- ------ -------- -------- --------- ---------
BALANCE - SEPTEMBER 30, 2009 11,763,702 $1,176 $344,443 $276,643 $(511,765) $ 110,497
========== ====== ======== ======== ========= =========
The accompanying notes to financial statements are an
integral part of these statements
5
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008,
AND CUMULATIVE FROM INCEPTION (JUNE 28, 2007)
THROUGH SEPTEMBER 30, 2009
(UNAUDITED)
Cumulative
Nine Months Ended From
September 30, Inception
----------------------------- (June 28,
2009 2008 2007)
--------- --------- ---------
OPERATING ACTIVITIES:
Net (loss) $(219,912) $(157,878) $(511,765)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Options granted to a consultant -- -- 28,196
Common stock issued persuant to consulting agreement 67,500 -- 67,500
Depreciation and amortization 816 677 2,424
Changes in net assets and liabilities-
Prepaid expenses 16,351 (14,000) (25,493)
Accounts payable and accrued liabilities (6,819) 10,871 4,706
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (142,064) (160,330) (434,432)
--------- --------- ---------
INVESTING ACTIVITIES:
Patent pending costs (17,804) (7,800) (35,022)
Purchase of property and equipment -- (1,112) (3,250)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (17,804) (8,912) (38,272)
--------- --------- ---------
FINANCING ACTIVITIES:
Issuance of common stock and warrants 110,000 131,000 526,566
Loans from directors and stockholders -- (100) --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 110,000 130,900 526,566
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH (49,868) (38,342) 53,862
CASH - BEGINNING OF PERIOD 103,730 143,399 --
--------- --------- ---------
CASH - END OF PERIOD $ 53,862 $ 105,057 $ 53,862
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ -- $ --
========= ========= =========
Income taxes $ -- $ -- $ --
========= ========= =========
The accompanying notes to financial statements are an
integral part of these statements.
6
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND ORGANIZATION
Enox Biopharma, Inc. (the "Company" or "Enox") was organized and incorporated
under the laws of the State of Nevada on June 28, 2007. The business plan of the
Company is to develop a novel treatment for acute ear infections in children.
The Company has identified a medical device with unique drug eluting technology
suitable for the treatment of acute and antibiotic-resistant ear infections in
children, and has filed a provisional patent application to protect the
Company's technology. The accompanying financial statements of the Company were
prepared from the accounts of the Company under the accrual basis of accounting.
On October 27, 2008 the Company submitted a Registration Statement on Form S-1
to the Securities and Exchange Commission ("SEC") to register up to 4,306,560 of
its outstanding shares of common stock on behalf of selling stockholders and
4,793,893 of common stock on behalf of selling stockholders upon exercise of
warrants. The Company will not receive any of the proceeds of this registration
activity once the shares of common stock are sold, although the Company may
receive proceeds of up to $1,123,312 if all of the warrants are exercised. The
Registration Statement on Form S-1 was declared effective on October 31, 2008.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial statements of the Company as of September 30, 2009, and
for the period then ended, and cumulative from inception, are unaudited.
However, in the opinion of management, the interim financial statements include
all adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of September 30, 2009, and
the results of its operations and its cash flows for the periods ended September
30, 2009, and cumulative from inception. These results are not necessarily
indicative of the results expected for the calendar year ending December 31,
2009. The accompanying financial statements and notes thereto do not reflect all
disclosures required under accounting principles generally accepted in the
United States. Refer to the Company's audited financial statements as of
December 31, 2008, filed with the SEC, for additional information, including
significant accounting policies.
CASH AND CASH EQUIVALENTS
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
REVENUE RECOGNITION
The Company is in the development stage and has yet to realize revenues from
planned operations. It plans to realize revenues from licensing, selling,
research and development, and royalty activities. Revenues will be recognized by
major categories under the following policies:
For licensing activities, revenue from such agreements will be realized over the
term and under the conditions of each specific license once all contract
conditions have been met. Payments for licensing fees are generally received at
the time the license agreements are executed, unless other terms for delayed
payment are documented and agreed to between the parties.
For research and development activities, revenues from such agreements will be
realized as contracted services are performed or when milestones are achieved,
in accordance with the terms of specific agreements. Advance payments for the
use of technology in which further services are to be provided or fees received
on the signing of research agreements are recognized over the period of
performance of the related activities. Amounts received in advance of
recognition will be considered as deferred revenues by the Company.
7
For royalty activities, revenues will be realized once performance requirements
of the Company have been completed, and collection is reasonably assured.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date. The Company records an
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed. For the period ended September 30, 2009, no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was
required.
LOSS PER COMMON SHARE
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is computed similar to
basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no dilutive financial instruments issued or outstanding for
the period ended September 30, 2009.
INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109, "ACCOUNTING FOR
INCOME TAXES" ("SFAS No. 109"). Under SFAS No. 109, deferred tax assets and
liabilities are determined based on temporary differences between the basis of
certain assets and liabilities for income tax and financial reporting purposes.
The deferred tax assets and liabilities are classified according to the
financial statement classification of the assets and liabilities generating the
differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration the
Company's financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the federal tax
laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
PATENT AND INTELLECTUAL PROPERTY
The Company capitalizes the costs associated with obtaining a patent or other
intellectual property associated with its intended business plan. Such costs are
amortized over the estimated useful lives of the related assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of September 30, 2009, the carrying value of the Company's
financial instruments approximated fair value due to their short-term nature and
maturity.
ESTIMATES
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of September 30, 2009, and revenues and expenses for
the periods ended September 30, 2009, and 2008, and cumulative from inception.
Actual results could differ from those estimates made by management.
RECENT ACCOUNTING PRONOUNCEMENTS
June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial
Assets--an amendment of FASB Statement No. 140" ("SFAS 166"). The provisions of
8
SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140,
eliminate the exemption from consolidation for qualifying special-purpose
entities and require additional disclosures. SFAS 166 is effective for financial
asset transfers occurring after the beginning of an entity's first fiscal year
that begins after November 15, 2009. The Company does not expect the provisions
of SFAS 166 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation
No. 46(R) ("SFAS 167"). SFAS 167 amends the consolidation guidance applicable to
variable interest entities. The rovisions of SFAS 167 significantly affect the
overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is
effective as of the beginning of the first fiscal year that begins after
November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010.
The Company does not expect the provisions of SFAS 167 to have a material effect
on the financial position, results of operations or cash flows of the Company.
In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162" ("SFAS No. 168"). Under SFAS No. 168 the
"FASB Accounting Standards Codification" ("Codification") will become the source
of authoritative U. S. GAAP to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission ("SEC") under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. SFAS No. 168 is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. On the effective
date, the Codification will supersede all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC accounting literature
not included in the Codification will become non-authoritative. SFAS No. 168 is
effective for the Company's interim quarterly period beginning July 1, 2009. The
Company does not expect the adoption of SFAS No. 168 to have an impact on the
financial statements.
In June 2009, the Securities and Exchange Commission's Office of the Chief
Accountant and Division of Corporation Finance announced the release of Staff
Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or
rescinds portions of the interpretive guidance included in the Staff Accounting
Bulletin Series in order to make the relevant interpretive guidance consistent
with current authoritative accounting and auditing guidance and Securities and
Exchange Commission rules and regulations. Specifically, the staff is updating
the Series in order to bring existing guidance into conformity with recent
pronouncements by the Financial Accounting Standards Board, namely, Statement of
Financial Accounting Standards No. 141 (revised 2007), Business Combinations,
and Statement of Financial Accounting Standards No. 160, Non-controlling
Interests in Consolidated Financial Statements. The statements in staff
accounting bulletins are not rules or interpretations of the Commission, nor are
they published as bearing the Commission's official approval. They represent
interpretations and practices followed by the Division of Corporation Finance
and the Office of the Chief Accountant in administering the disclosure
requirements of the Federal securities laws.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP amends FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments, to
require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial
statements. This FSP also amends APB Opinion No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial information at
interim reporting periods. This FSP shall be effective for interim reporting
periods ending after June 15, 2009. The Company does not have any fair value of
financial instruments to disclose.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. The FSP does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities. The FSP shall be effective for interim and annual reporting periods
ending after June 15, 2009. The Company currently does not have any financial
assets that are other-than-temporarily impaired.
In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies, to address some of the application issues under SFAS 141(R). The
9
FSP deals with the initial recognition and measurement of an asset acquired or a
liability assumed in a business combination that arises from a contingency
provided the asset or liability's fair value on the date of acquisition can be
determined. When the fair value can-not be determined, the FSP requires using
the guidance under SFAS No. 5, Accounting for Contingencies, and FASB
Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss. This
FSP was effective for assets or liabilities arising from contingencies in
business combinations for which the acquisition date is on or after January 1,
2009. The adoption of this FSP has not had a material impact on our financial
position, results of operations, or cash flows.
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" ("FSP FAS 157-4").
FSP FAS 157-4 provides guidance on estimating fair value when market activity
has decreased and on identifying transactions that are not orderly.
Additionally, entities are required to disclose in interim and annual periods
the inputs and valuation techniques used to measure fair value. This FSP is
effective for interim and annual periods ending after June 15, 2009. The Company
does not expect the adoption of FSP FAS 157-4 will have a material impact on its
financial condition or results of operation.
In October 2008, the FASB issued FSP No. FAS 157-3, "Determining the Fair Value
of a Financial Asset When the Market for That Asset is Not Active," ("FSP FAS
157-3"), which clarifies application of SFAS 157 in a market that is not active.
FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements have not been issued. The adoption of FSP FAS 157-3 had no
impact on the Company's results of operations, financial condition or cash
flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8,
"Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities." This disclosure-only FSP
improves the transparency of transfers of financial assets and an enterprise's
involvement with variable interest entities, including qualifying
special-purpose entities. This FSP is effective for the first reporting period
(interim or annual) ending after December 15, 2008, with earlier application
encouraged. The Company adopted this FSP effective January 1, 2009. The adoption
of the FSP had no impact on the Company's results of operations, financial
condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers' Disclosures
about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-1"). FSP FAS 132(R)-1
requires additional fair value disclosures about employers' pension and
postretirement benefit plan assets consistent with guidance contained in SFAS
157. Specifically, employers will be required to disclose information about how
investment allocation decisions are made, the fair value of each major category
of plan assets and information about the inputs and valuation techniques used to
develop the fair value measurements of plan assets. This FSP is effective for
fiscal years ending after December 15, 2009. The Company does not expect the
adoption of FSP FAS 132(R)-1 will have a material impact on its financial
condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
and FASB Interpretation 46 (revised December 2003), "Consolidation of Variable
Interest Entities - an interpretation of ARB No. 51," as well as other
modifications. While the proposed revised pronouncements have not been finalized
and the proposals are subject to further public comment, the Company anticipates
the changes will not have a significant impact on the Company's financial
statements. The changes would be effective March 1, 2010, on a prospective
basis.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have material effect on our consolidated financial position and
results of operations if adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
10
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. SFAS No. 161, has no
effect on the Company's financial position, statements of operations, or cash
flows at this time.
(2) GOING CONCERN
The Company is currently in the development stage. While management of the
Company believes that the Company will be successful in its planned operating
activities, there can be no assurance that the Company will be successful in the
development of a product and sale of its planned product, technology, or
services to generate sufficient revenues to sustain the operations of the
Company. The Company also intends to conduct additional capital formation
activities through the issuance of its common stock and to commence operations.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has
incurred an operating loss since inception and the cash resources of the Company
were insufficient to meet its planned business objectives. These and other
factors raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
(3) PATENT PENDING
On April 9, 2008, the Company filed a provisional patent application with the
U.S. Patent Office. The cost of filing for the provisional patent has been
capitalized by the Company, and amounted to $7,800. The provisional patent
automatically expires twelve months after the day of filing. If the Company
files a non-provisional patent and the patent is granted to the Company, the
historical cost of the patent will be amortized over its useful life, which is
estimated to be 20 years.
As of September 30, 2009, the Company has capitalized legal fees of $27,221 for
preparing a PCT application.
(4) PROPERTY AND EQUIPMENT
Cost:
Office and computer equipment $3,250
Less: Accumulated depreciation and amortization 2,424
------
Property and Equipment, net $ 826
======
The company depreciates all of its property and equipment on a straight line
basis over 3 years.
(5) COMMON STOCK
On June 28, 2007 (inception), the Company issued 6,750,000 shares of its common
stock for cash of $683, of which 6,350,000 of these shares were issued to
Directors of the Company.
11
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 $0.20 for a
two-year period expiring December 28, 2009.
On July 15, 2008, the Company sold 304,000 units for a total of $76,000. Each
Unit consisted of one share of common stock and two warrants. One warrant
entitles the holder thereof to purchase one share of common stock at an exercise
price of $0.30 per share, expiring one year from the date of purchase. The
second warrant entitles the holder thereof to purchase one share of common stock
at an exercise price of $0.40 per share, expiring two years from the date of
purchase. The consideration was allocated to the shares and warrants issued
based upon the relative fair value.
On July 20, 2008, the Company sold 183,333 units for a total of $55,000. Each
Unit consisted of one share of common stock and two warrants. One warrant
entitles the holder thereof to purchase one share of common stock at an exercise
price of $0.35 per share, expiring one year from the date of purchase. The
second warrant entitles the holder thereof to purchase one share of common stock
at an exercise price of $0.45 per share, expiring two years from the date of
purchase. The consideration was allocated to the shares and warrants issued
based upon the relative fair value.
On October 27, 2008 the Company submitted a Registration Statement on Form S-1
to the Securities and Exchange Commission ("SEC") to register up to 4,306,560 of
its outstanding shares of common stock on behalf of selling stockholders and
4,793,893 of common stock on behalf of selling stockholders upon exercise of
warrants. The Company will not receive any of the proceeds of this registration
activity once the shares of common stock are sold, although the Company may
receive proceeds of up to $1,123,312 if all of the warrants are exercised. The
Registration Statement on Form S-1 was declared effective on October 31, 2008.
On December 25, 2008, 142,857 units were issued pursuant to a private placement
subscription agreement for cash consideration of $50,000 at a subscription price
of $0.35 per unit. Each unit consists of one share of common stock of the
Company and one warrant. Each warrant is exercisable into one common share at an
exercise price of $0.20 for a three-year period expiring December 25, 2011.
On July 2, 2009, 14,285 units were issued pursuant to a private placement
subscription agreement for cash consideration of $5,000 at a subscription price
of $0.35 per unit. Each unit consists of one share of common stock of the
Company and one warrant. Each warrant is exercisable into one common share at an
exercise price of $0.50 for a three-year period expiring July 2, 2012.
On July 10, 2009, a shareholder exercised warrants for 50,000 shares of common
stock at an exercise price of $0.20 per share.
On July 22, 2009, the Company issued 57,143 shares of the Company's common stock
pursuant to a private placement subscription agreement, at a purchase price of
$0.35 per share, for an aggregate purchase price of $20,000.
On July 28, 2009, 250,000 units were issued pursuant to a private placement
subscription agreement for cash consideration of $75,000 at a subscription price
of $0.30 per unit. Each Unit is comprised of one share of the Company's common
stock and one warrant to purchase one share of common stock at an exercise price
of $0.40 per share for a period of two years from the issuance date.
On September 25, 2009, 192,857 shares were issued to a consultant, pursuant to
the cashless exercise feature in their consulting agreement. The shares were
valued at $0.35 per share, for an aggregate amount of $67,500.
(6) STOCK PURCHASE WARRANTS
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 $0.20 for a
two-year period expiring December 28, 2009. 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%, and risk-free
interest rate of 3.94%.
On July 15, 2008, the Company sold 304,000 units for a total of $76,000. Each
Unit consisted of one share of common stock and two warrants. One warrant
entitles the holder thereof to purchase one share of common stock at an exercise
12
price of $0.30 per share, expiring one year from the date of purchase. The
second warrant entitles the holder thereof to purchase one share of common stock
at an exercise price of $0.40 per share, expiring two years from the date of
purchase. 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 648%, and risk-free interest rate of 3.94%.
On July 20, 2008, the Company sold 183,333 units for a total of $55,000. Each
Unit consisted of one share of common stock and two warrants. One warrant
entitles the holder thereof to purchase one share of common stock at an exercise
price of $0.35 per share, expiring one year from the date of purchase. The
second warrant entitles the holder thereof to purchase one share of common stock
at an exercise price of $0.45 per share, expiring two years from the date of
purchase. 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 648%, and risk-free interest rate of 3.94%.
On December 25, 2008, 142,857 units were issued pursuant to a private placement
subscription agreement for cash consideration of $50,000 at a subscription price
of $0.35 per unit. Each unit consists of one share of common stock of the
Company and one warrant. Each warrant is exercisable into one common share at an
exercise price of $0.20 for a three-year period expiring December 25, 2011. 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 100%, and risk-free interest rate of 3%.
On July 2, 2009, 14,285 units were issued pursuant to a private placement
subscription agreement for cash consideration of $5,000 at a subscription price
of $0.35 per unit. Each unit consists of one share of common stock of the
Company and one warrant. Each warrant is exercisable into one common share at an
exercise price of $0.50 for a three-year period expiring July 2, 2012.
On July 10, 2009, a shareholder exercised warrants for 50,000 shares of common
stock at an exercise price of $0.20 per share.
On September 25, 2009, 250,000 units were issued pursuant to a private placement
subscription agreement for cash consideration of $75,000 at a subscription price
of $0.30 per Unit. Each Unit is comprised of one share of the Company's common
stock and one warrant to purchase one share of common stock at an exercise price
of $0.40 per share for a period of two years from the issuance date.
A summary of the Company's outstanding stock purchase warrants as of September
30, 2009 is presented below:
Exercise price Remaining
Warrants per share contractual life
-------- --------- ----------------
3,769,227 $0.20 3 months
304,000 $0.40 9 months
183,333 $0.45 9 months
14,285 $0.50 2.75 years
250,000 $0.40 2 years
142,857 $0.20 2.25 years
---------
4,663,702
(7) INCOME TAXES
The provisions (benefit) for income taxes for the period ended September 30,
2009 and 2008 were as follows (using a 23% effective federal and state income
tax rate):
13
2009 2008
--------- ---------
Current Tax Provision:
Federal-
Taxable income $ -- $ --
--------- ---------
Total current tax provision $ -- $ --
========= =========
Deferred Tax Provision:
Federal-
Loss carryforwards $ 50,580 $ 36,312
Change in valuation allowance (50,580) (36,312)
--------- ---------
Total deferred tax provision $ -- $ --
========= =========
The Company had deferred income tax assets as of September 30, 2009 and December
31, 2008, as follows:
2009 2008
--------- ---------
Loss carryforwards $ 117,706 $ 67,126
Less - Valuation allowance (117,706) (67,126)
--------- ---------
Total net deferred tax assets $ -- $ --
========= =========
As of September 30, 2009, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $511,765 that may be offset
against future taxable income. The net operating loss carryforwards expire in
the year 2029. Current tax laws limit the amount of loss available to be offset
against future taxable income when a substantial change in ownership or a change
in the nature of the business occurs. Therefore, the amount available to offset
future taxable income may be limited. No tax benefit has been reported in the
financial statements for the realization of loss carryforwards, as the Company
believes there is a high probability that the carryforwards will not be utilized
in the foreseeable future. Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the same amount.
(8) RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The Company's
Directors provide 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), the Company issued 6,350,000 shares of its common
stock to Directors of the Company for a cash payment of $635.
From June 28, 2007 (inception) through September 30, 2009, the company paid
$90,303 to its President and Director, Prof. Yossef Av-Gay for services as an
independent contractor pursuant to the terms of the Consulting Agreement dated
September 1, 2007.
From June 28, 2007 (inception) through September 30, 2009, the company paid
$26,000 to its Director, Dr. David Greenberg for services as an independent
contractor pursuant to the terms of the Consulting Agreement dated August 1,
2007.
(9) COMMITMENTS
On August 1, 2008, the Company extended a consulting agreement with Dr. David
Greenberg, its Director, for a term of twelve months, pursuant to which the
consultant agreed to provide the Company 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 the
Company's behalf to potential investors, collaborators, and partners.
14
On August 1, 2008, the Company extended a consulting agreement with 0794658 B.C
Ltd., a company owned by Prof. Av-Gay, its President and Director, pursuant to
which the consultant agreed to provide the Company with management consulting
services, in exchange for payment by the Company of consulting fees in the
amount of $3,000 per month. Pursuant to an amendment the consulting fees
increased to $4,000 per month beginning in July 2009. The specific services to
be provided by the consultant include: managing the Company's activities and
operations, providing microbiology and biochemistry expertise, speaking on the
Company's behalf to potential investors, collaborators, and partners, and filing
patents with the U.S. Patent and Trademark Office. Upon expiration of the
initial term, the consulting agreement is automatically renewable for terms of
90 days.
On September 1, 2008, the Company extended a service agreement and amendment
with the University of British Columbia for a term of one year, pursuant to
which the University of British Columbia agreed to provide the Company with
research services in connection with the Company's product development. Under
the Agreement, the Company agreed to pay to University of British Columbia
$50,000 for the term of the agreement.
On September 1, 2008, the Company extended a consulting agreement with NRD
Solutions for twelve months for a fee of $12,000, pursuant to which the
consultant agreed to provide the Company with an evaluation of the Company's
tympanostomy tube device, provide an expert opinion on the Company devices and
technologies, and speak on the Company's behalf to potential investors,
collaborators and partners.
On January 7, 2008, the Company entered into a Transfer Agent Agreement with
Holladay Stock Transfer ("Holladay Stock Transfer"). Holladay Stock Transfer
will act as the Company's transfer agent and registrar. Under the Agreement, the
Company agreed to pay to Holladay Stock Transfer an initial setup fee of $450
and a minimum annual fee amounting to $400 plus transaction fees.
On December 15, 2008, the Company entered into a Consultancy Agreement pursuant
to which the consultant served as a non-exclusive business development and
company planning consultant for a period of one year. In consideration for its
services, the Company issued options to the consultant to purchase 450,000
shares of its common stock, at an exercise price of $0.20 per share for a period
of 4 years, of which 100,000 options vested immediately and the remaining
350,000 options vest upon the achievement of certain milestones. The options
also contain a cashless exercise feature. Additionally, the Company agreed to
pay the consultant a monthly consulting fee of $5,000 commencing after the
Company has secured additional financing of an aggregate of $750,000. The
agreement was terminated and the consultant elected the cashless exercise
feature pursuant to which the Company issued 192,857 shares valued at $67,500.
On February 9, 2009, the Company entered into an agreement with a venture
capital firm to raise approximately $3,000,000 through the sale of convertible
preferred stock. As of September 30, 2009 the Company paid an expense deposit of
$15,000 to the firm.
On February 4, 2009, the Company entered into a Consultancy Agreement pursuant
to which the consultant will provide regulatory consulting and clinical trial
design and management services. In consideration for these services, the Company
agreed to compensate the consultant on an hourly basis. Additionally, following
the establishment of the product development plan should the Company decide to
proceed with further services the consultant will receive a monthly retainer of
$5,000.
(10) RECLASSIFICATIONS
Certain items have been reclassified to conform to the current period
presentation.
(11) EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
The Company evaluated events occurring between the balance sheet date and
November 16, 2009, the date the financial statements were issued.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements.
Forward-looking statements may include our statements regarding our goals,
beliefs, strategies, objectives, plans, including product and service
developments, future financial conditions, results or projections or current
expectations. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms, or other comparable terminology. Such forward-looking statements
appear in this Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and include statements regarding our
expectations regarding our short - and long-term capital requirements and our
business plan and estimated expenses for the coming 12 months. These statements
are subject to known and unknown risks, uncertainties, assumptions and other
factors that may cause actual results to be materially different from those
contemplated by the forward-looking statements. The business and operations of
Enox Biopharma, Inc. are subject to substantial risks, which increase the
uncertainty inherent in the forward-looking statements contained in this report.
We undertake no obligation to release publicly the result of any revision to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Further information on potential factors that could affect
our business is described under the heading "Risks Related To Our Business,
Strategy, And Industry" in Part I, Item 1, "Risk Factors" in our registration
statement on Form S-1 no 333-154763, which was declared effective on October 31,
2008. Readers are also urged to carefully review and consider the various
disclosures we have made in this report.
OVERVIEW
Enox Biopharma, Inc. (referred to in this Quarterly Report as "Enox", "us", "we"
and "our") was incorporated on June 28, 2007 in the State of Nevada. We are a
development stage medical device company, and to date have not earned any
revenue and currently do not have any significant assets. Our corporate offices
are located at 3849 West 13th Avenue, Vancouver BC, Canada. Our telephone number
is +1 (604) 637-9744 and our fax number is (888) 224-7259. We do not have any
subsidiaries. We have a website at www.enoxbiopharma.com, however, the
information contained on our website does not form part of this quarterly
report.
We are developing a unique drug eluting technology for preventing microbial
infections associated with certain medical devices. We utilize non-antibiotic
compounds that kill a wide range of pathogens. In light of the increasing
difficulties associated with treating multi-drug resistant infections, our
patented technology offers innovative solutions that avoid antibiotic resistance
concerns while preventing hospital and community-acquired infections. A wide
range of indwelling medical devices is being used on a daily basis to provide
critical care to millions of patients. These devices include various catheters,
tubes and blood lines that provide access to deliver life-saving drugs, fluids
and gases, as well as remove unwanted substances from the body. While the use of
such devices is vital for patients' care, the actual insertion creates a point
of entry for microbes and is often associated with high rates of infection. We
are developing antimicrobial coatings for urinary catheters, endotracheal tubes
and ear tubes. We believe these products address well-defined market needs,
including increasing resistance to antibiotics, escalating medical costs and
changing medical reimbursement policies.
We have secured our technology and intellectual property by filing two US
provisional applications and two US utility patent application with the US
Patent and Trademark Office on September 21, 2007 (US provisional applications
serial # 60/974,228 (2007)), April 9, 2008 ((US provisional applications serial
#61/043,639 (2008)), September 19, 2008 (US utility patent filed with respect to
provisional patent # 60/974,228 (2007)), and March 23, 2009 (US utility patent
filed with respect to provisional patent #61/043,639 (2008)).
During the period ended September 30, 2009 we continued the research associated
with the development of our urinary catheters. Our studies strengthened the
company technology by demonstrating adequate slow releases and prevention of
bacterial colonization associated with catheter-associated urinary infection
which is the most common hospital acquired infection, affecting over one million
people annually in the U.S. alone. An independent panel of scientists is now
reviewing the data from these experiments in consideration for publication.
16
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2008, AND NINE MONTHS ENDED SEPTEMBER 30, 2009
COMPARED TO THE SIX MONTH ENDED SEPTEMBER 30, 2008
During the three months ended September 30, 2009, we incurred operating expenses
of $125,504, an increase of $66,088 or approximately 111% from the three month
ended September 30, 2008. Operating expenses increased during the three month
ended September 30, 2009 from the comparative period due to exercised option of
the consultant. Significant elements include:
* research and development costs of $30,500, which decreased from
$31,500 during the same period in the prior year, a decrease of
approximately 3%, due to prepaid expenses for research and
development;
* professional fees of $7,500 related to accounting and legal services,
which decreased from $15,500 during the same period in the prior year,
an increase of 52%, as a result of decreased legal services;
* consulting fees of $71,024, which increased from $0 during the same
period in the prior year, an increase of 100%, as a result of
exercised option by the consultant.
* general and administrative fees of $16,208, which is an increase from
$12,190 during the same period in the prior year, an increase of
approximately 33%, due to more travel and other related expenses; and
During the nine months ended September 30, 2009, we incurred operating expenses
of $219,912, an increase of $62,034 or approximately 39% from the nine months
ended September 30, 2008. Operating expenses increased during the nine month
ended September 30, 2009 from the comparative period due to higher incurred
expenses. Significant elements include:
* research and development costs of $78,537, which decreased from
$111,455 during the same period in the prior year, a decrease of
approximately 30%, due to an end of Boston University service
agreement;
* professional fees of $17,156 related to accounting and legal services,
which decreased from $20,638 during the same period in the prior year,
a decrease of 17%, as a result of decrease accounting cost;
* consulting fees of $93,073, which increase from $0 during the same
period in the prior year, an increase of 100%, as a result of
expensing prepaid option and exercise of options by the consultant.
* general and administrative fees of $30,330, which is an increase from
$25,108 during the same period in the prior year, a increase of
approximately 21%, due to more travel and other related expenses; and
NET LOSS
We incurred a net loss of $125,504 for the three months ended September 30,
2009, compared to a net loss of $59,416 for the three months ended September 30,
2008.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have had negative cash flows from operations and we have been
dependent on sales of our equity securities to meet our cash requirements. We
expect this situation to continue for the foreseeable future. We anticipate that
we will have negative cash flows from operations in the next twelve month
period.
As of September 30, 2009, we had cash of $53,862, representing a net decrease in
cash of $49,868 since December 31, 2008.
Cash generated by financing activities during the nine months ended September
30, 2009 was $110,000. Cash used in operating activities amounted to $142,064
represented by a loss of $219,912 plus an increase in prepaid expenses from the
previous balance sheet of $16,351, common stock issued of $67,500 , depreciation
and amortizing of $816 and offset by accounts payable and accrued liabilities
$6,819.
Because we have not generated any revenue from our business, we will need to
raise additional funds for the future development of our business and to respond
to unanticipated requirements or expenses. We believe our current cash balances
will be extinguished by the fourth quarter of 2009, provided we do not have any
unanticipated 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.
17
If we fail to generate sufficient net revenues, we will need to raise additional
capital to continue our operations thereafter. We cannot guarantee that
additional funding will be available on favorable terms, if at all. Any
shortfall will effect our ability to expand or even continue our operations. We
cannot guarantee that additional funding will be available on favorable terms,
if at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe our business is not currently subject to market risk. All of our
business is currently conducted in US dollars, which is our functional currency.
We have no debt and are not subject to any interest rate risk.
ITEM 4/4T. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities and Exchange Act of 1934, as of
September 30, 2009, we have carried out an evaluation of the effectiveness of
the design and operation of our company's disclosure controls and procedures.
This evaluation was carried out under the supervision and with the participation
of our company's management, being our company's President (Principal Executive
Officer) and Treasurer (Principal Accounting Officer). Based upon the results of
that evaluation, our company's President (Principal Executive Officer) and
Treasurer (Principal Accounting Officer) have concluded that, as of September
30, 2009, our company's disclosure controls and procedures were effective and
provide reasonable assurance that material information related to our company is
recorded, processed and reported in a timely manner.
Our company's management, with the participation of our President (Principal
Executive Officer) and Treasurer (Principal Accounting Officer), is responsible
for the design of internal controls over financial reporting. The fundamental
issue is to ensure all transactions are properly authorized, identified and
entered into a well-designed, robust and clearly understood system on a timely
basis to minimize risk of inaccuracy, failure to fairly reflect transactions,
failure to fairly record transactions necessary to present financial statements
in accordance with generally accepted account principles, unauthorized receipts
and expenditures or the inability to provide assurance that unauthorized
acquisitions or dispositions of assets can be detected. The small size of our
company makes the identification and authorization process relatively simple and
efficient and a process for reviewing internal controls over financial reporting
has been developed. To the extent possible given our company's small size, the
internal control procedures provide for separation of duties for handling,
approving and coding invoices, entering transactions into the accounts, writing
cheques and requests for wire transfers. As of September 30, 2009, our company's
President (Principal Executive Officer) and Treasurer (Principal Accounting
Officer) conclude that our company's system of internal controls is adequate and
comparable to those of issuers of a similar size and nature.
This quarterly report does not include an attestation report of our company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit our company to provide only management's report in this quarterly report.
There were no significant changes to our company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any significant deficiencies or material weaknesses
of internal controls that would require corrective action.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(a) Pursuant to Rule 601 of Regulation SK, the following exhibits are included
herein or incorporated by reference.
Exhibit Number Description
- -------------- -----------
3.1 Articles of Incorporation*
3.2 By-laws*
31.1 Certification of CEO Pursuant to 18 U.S.C. ss. 1350, Section
302
31.2 Certification of CFO Pursuant to 18 U.S.C. ss. 1350, Section
302
32.1 Certification Pursuant to 18 U.S.C. ss.1350, Section 906
32.2 Certification Pursuant to 18 U.S.C. ss. 1350, Section 906
- ----------
* Incorporated by reference to our S-1 Registration Statement, File Number
333-154763
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 16, 2009 By: /s/ Prof. Yossef Av-Gay
----------------------------------
Name: Prof. Yossef Av-Gay
Title: President
(Principal Executive Officer)
Date: November 16, 2009 By: /s/ Itamar David
----------------------------------
Name: Itamar David
Title: Principal Financial Officer
20