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 March 31, 2010
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.)
303-1687 W. Broadway, Vancouver BC
V6J 1X2 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 12,829,587 shares of common stock outstanding as of May 17, 2010.
ENOX BIOPHARMA, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
MARCH 31, 2010
Page
----
Balance Sheets as of March 31, 2010 (Unaudited) and
December 31, 2009 (Audited) 3
Statements of Operations for the Three Months Ended
March 31, 2010 and 2009, and from June 28, 2007 (inception)
to March 31, 2010 (Unaudited) 4
Statement of Stockholders' Equity from June 28, 2007 (inception)
to March 31, 2010 (Unaudited) 5
Statements of Cash Flows for the Three Months Ended
March 31, 2010 and 2009, and from June 28, 2007 (inception)
to March 31, 2010 (Unaudited) 6
Notes to the Financial Statements 7
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Enox Biopharma, Inc.
(A Development Stage Company)
Balance Sheets
March 31, 2010 December 31, 2009
-------------- -----------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash $ 151,526 $ 234,076
Deposit 9,880 --
Prepaid expenses 12,333 16,333
--------- ---------
TOTAL CURRENT ASSETS 173,739 250,409
EQUIPMENT, NET 1,001 1,143
--------- ---------
TOTAL ASSETS $ 174,740 $ 251,553
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accrued liability $ 14,917 $ --
Accounts payable 1,820 1,400
--------- ---------
TOTAL CURRENT LIABILITIES 16,737 1,400
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, ($0.0001 par value, 50,000,000 shares authorized,
no shares outstanding) -- --
Common stock, ($0.0001 par value, 100,000,000 shares authorized,
12,829,587 and 12,829,587 issued and outstanding) 1,283 1,283
Additional paid in capital 960,379 844,898
Deficit accumulated during the development stage (803,659) (596,029)
--------- ---------
Total Stockholders' Equity 158,003 250,152
--------- ---------
Total Liabilities and Stockholders' Equity $ 174,740 $ 251,552
========= =========
See accompanying notes to financial statements
3
Enox Biopharma, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
June 28, 2007
(Inception) to
For the three months Ended March 31, March 31,
2010 2009 2010
------------ ------------ ------------
OPERATING EXPENSES:
General and administrative expenses $ 168,352 $ 22,449 $ 372,999
Research and development 39,278 19,167 430,660
------------ ------------ ------------
TOTAL OPERATING EXPENSES 207,630 41,616 803,659
------------ ------------ ------------
NET LOSS $ (207,630) $ (41,616) $ (803,659)
============ ============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.02) $ (0.00) $ (0.08)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
DURING THE PERIOD - BASIC AND DILUTED 12,829,587 11,199,417 10,487,373
============ ============ ============
See accompanying notes to financial statements
4
Enox Biopharma, Inc.
Statement of Changes in Stockholders' Equity (Deficit)
For the Years Ended December 31, 2009 and 2008 and from
June 28, 2007 (Inception) to March 31, 2010
(Unaudited)
Common Stock,
$0.0001 Par Value Additional Total
-------------------- Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
Common stock issued to founder and
consultants for cash ($0.0001/share) 6,750,000 $ 675 $ 8 $ -- $ 683
Common stock and warrants issued for
cash ($0.06/share) 3,819,227 382 234,501 -- 234,883
Net loss for the period from inception
to December 31, 2007 -- -- -- (90,834) (90,834)
---------- ------ -------- --------- ---------
Balance, December 31, 2007 10,569,227 1,057 234,509 (90,834) 144,732
Common stock and warrants issued for
cash ($0.25/share) 304,000 30 75,970 -- 76,000
Common stock and warrants issued for
cash ($0.30/share) 183,333 18 54,982 -- 55,000
Common stock and warrants issued for
cash ($0.35/share) 142,857 14 49,986 -- 50,000
Options granted to consultant for services -- -- 14,363 -- 14,363
Net loss, 2008 -- -- -- (232,138) (232,138)
---------- ------ -------- --------- ---------
Balance, December 31, 2008 11,199,417 1,120 429,810 (322,972) 107,958
Common stock and warrants issued for
cash ($0.30/share) 250,000 25 74,975 -- 75,000
Common stock and warrants issued for
cash ($0.35/share) 71,428 7 24,993 -- 25,000
Common stock and warrants issued for
cash ($0.45/share) 222,222 22 99,978 -- 100,000
Warrants exercised for cash ($0.20/share) 893,663 89 178,643 -- 178,732
Common stock issued in connection with
cashless exercise of stock options 192,857 19 (19) -- --
Options granted to consultant for services -- -- 36,519 -- 36,519
Net loss, 2009 -- -- -- (273,057) (273,057)
---------- ------ -------- --------- ---------
Balance, December 31, 2009 12,829,587 1,283 844,898 (596,029) 250,152
Options granted to consultant for services
rendered -- -- 115,481 -- 115,481
Net loss, 2010 -- -- -- (207,630) (207,630)
---------- ------ -------- --------- ---------
BALANCE, MARCH 31, 2010 12,829,587 $1,283 $960,379 $(803,659) $ 158,003
========== ====== ======== ========= =========
See accompanying notes to financial statements
5
Enox Biopharma, Inc.
Statements of Cash Flows
(Unaudited)
June 28, 2007
(Inception) to
For the three months Ended March 31, March 31,
2010 2009 2010
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (207,630) $ (41,616) $ (803,659)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 142 272 (1,001)
Share based payment 115,481 -- 166,363
Changes in operating assets and liabilities:
Deposit (9,880) -- (9,880)
Accrued Liability 14,917 (9,525) 14,917
Prepaid expenses 4,000 (7,223) (12,333)
Accounts payable 420 415 1,820
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (82,551) (57,677) (643,774)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants -- -- 616,567
Proceeds from exercise of warrants -- -- 178,732
Proceeds from loan payable - related party -- -- 100
Repayment of loan payable - related party -- -- (100)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 795,299
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (82,551) (57,677) 151,525
CASH - BEGINNING OF PERIOD 234,076 103,730 --
---------- ---------- ----------
CASH - END OF PERIOD $ 151,526 $ 46,053 $ 151,525
========== ========== ==========
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ -- $ -- $ --
========== ========== ==========
Interest $ -- $ -- $ --
========== ========== ==========
See accompanying notes to financial statements
6
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
NOTE 1 NATURE OF OPERATIONS
Enox Biopharma, Inc. (the "Company" or "Enox") was organized and incorporated
under the laws of the State of Nevada on June 28, 2007. The Company is focusing
on the development and commercialization of advanced Nitric Oxide technologies
for a variety of medical uses. Enox's patented platform technology can be
utilized across a wide spectrum of applications ranging from the treatment of
upper respiratory tract infections, prevention of hospital acquired infections,
innovative solutions to assist in the prevention of the common cold and to
protect people from a diverse array of life threatening and drug resistant
infections.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE
The Company's financial statements are presented as those of a development stage
enterprise. Activities during the development stage primarily include equity
based financing and further implementation of the business plan.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Such estimates and assumptions impact, among
others, the following: the fair value of options granted as compensation,
estimates of the probability and potential magnitude of contingent liabilities
and the valuation allowance for deferred tax assets due to continuing operating
losses.
Making estimates requires management to exercise significant judgment. It is at
least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the consolidated
financial statements, which management considered in formulating its estimate
could change in the near term due to one or more future confirming events.
Accordingly, the actual results could differ significantly from our estimates.
RISKS AND UNCERTAINTIES
The Company's operations are subject to significant risk and uncertainties
including financial, operational, technological, and regulatory risks including
the potential risk of business failure. Also see Note 3 regarding going concern
matters.
RESEARCH AND DEVELOPMENT
Research and development is expensed as incurred.
7
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
SHARE-BASED PAYMENTS
Generally, all forms of share-based payments, including stock option grants,
restricted stock grants and stock appreciation rights are measured at their fair
value on the awards' grant date, based on the estimated number of awards that
are ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The expense resulting from share-based payments are
recorded in cost of goods sold or general and administrative expense in the
consolidated statement of operations, depending on the nature of the services
provided.
EARNINGS PER SHARE
In accordance with accounting guidance now codified as FASB ASC Topic 260,
"EARNINGS PER SHARE," basic earnings (loss) per share is computed by dividing
net income (loss) by weighted average number of shares of common stock
outstanding during each period. Diluted earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock, common stock equivalents and potentially dilutive securities outstanding
during the period.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update No. 2010-06, "IMPROVING DISCLOSURES ABOUT FAIR VALUE
MEASUREMENTS ("ASU 2010-06"). ASU 2010-06 amends ASC 820, "FAIR VALUE
MEASUREMENTS" ("ASC 820") to require a number of additional disclosures
regarding fair value measurements. The amended guidance requires entities to
disclose the amounts of significant transfers between Level 1 and Level 2 of the
fair value hierarchy and the reasons for these transfers, the reasons for any
transfers in or out of Level 3, and information in the reconciliation of
recurring Level 3 measurements about purchases, sales, issuances and settlements
on a gross basis. The ASU also clarifies the requirement for entities to
disclose information about both the valuation techniques and inputs used in
estimating Level 2 and Level 3 fair value measurements. The amended guidance was
effective for financial periods beginning after December 15, 2009, except the
requirement to disclose Level 3 transactions on a gross basis, which becomes
effective for financial periods beginning after December 15, 2010. ASU 2010-06
did not have a significant effect on the Company's consolidated financial
position or results of operations.
8
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
NOTE 3 GOING CONCERN
As reflected in the accompanying financial statements, the Company has a net
loss of $207,630 and net cash used in operations of $82,551 for the period ended
March 31, 2010. The Company is in the development stage and has not generated
any revenues.
The ability of the Company to continue its operations is dependent on
Management's plans, which include the raising of capital through debt and/or
equity markets with some additional funding from other traditional financing
sources, including term notes, until such time that funds provided by operations
are sufficient to fund working capital requirements. The Company may need to
incur additional liabilities with certain related parties to sustain the
Company's existence.
The Company will require additional funding to finance the growth of its current
and expected future operations as well as to achieve its strategic objectives.
The Company believes its current available cash along with anticipated revenues
may be insufficient to meet its cash needs for the near future. There can be no
assurance that financing will be available in amounts or terms acceptable to the
Company, if at all.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 4 LOANS PAYABLE RELATED PARTY
In 2007, the Company's Chief Executive Officer advanced $100. The advance was
non-interest bearing, unsecured and due on demand. The $100 was repaid in 2008.
NOTE 5 STOCKHOLDERS EQUITY
I. FOUNDER SHARES, COMMON STOCK AND WARRANTS
FOR THE YEAR ENDED DECEMBER 31, 2007
On June 28, 2007 (inception), the Company issued 6,350,000 shares of common
stock to founders and 400,000 shares of common stock to consultants for a total
of $683 ($0.0001/share).
During 2007, the Company had the following private placement:
DECEMBER 28, 2007
* 3,819,227 units for $234,883 ($0.06/unit),
* Each unit consisted of one share of stock (3,819,227) and one warrant
(3,819,227 Series "A"),
* Series "A" warrants have an exercise price of $0.20/share and an expiration
date of two years, FOR THE YEAR ENDED DECEMBER 31, 2008
9
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
During 2008, the Company had the following private placements:
(A) JULY 15, 2008
* 304,000 units for $76,000 (0.25/unit),
* Each unit consisted of one share of stock (304,000) and two warrants
(304,000 Series "A") and (304,000 Series "B"),
* Series "A" warrants have an exercise price of $0.30/share and an expiration
date of one year,
* Series "B" warrants have an exercise price of $0.40/share and an expiration
date of two years.
(B) JULY 20, 2008
* 183,000 units for $55,000 ($0.30/unit),
* Each unit consisted of one share of stock (183,333) and two warrants
(183,333 Series "A") and (183,333 Series "B"),
* Series "A" warrants have an exercise price of $0.35/share and an expiration
date of one year,
* Series "B" warrants have an exercise price of $0.45/share and an expiration
date of two years.
(C) DECEMBER 25, 2008
* 142,857 units for $50,000 ($0.35/unit),
* Each unit consisted of one share of stock (142,857) and one warrant
(142,857 Series "A"),
* Series "A" warrants have an exercise price of $0.20/share and an expiration
date of three years.
FOR THE YEAR ENDED DECEMBER 31, 2009
During 2009, the Company had the following private placements:
(A) JULY 2, 2009
* 14,285 units for $5,000 ($0.35/unit),
* Each unit consisted of one share of stock (14,285) and one warrant (14,285
Series "A"),
* Series "A" warrants have an exercise price of $0.50/share and an expiration
date of three years.
(B) JULY 22, 2009
* 57,143 units for $20,000 ($0.35/share)
10
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
(C) JULY 28, 2009
* 250,000 units for $75,000 ($0.30/unit),
* Each unit consisted of one share of stock (250,000) and one warrant
(250,000 Series "A"),
* Series "A" warrants have an exercise price of $0.40/share and an expiration
date of two years.
(D) NOVEMBER 23, 2009
* 111,111 units for $100,000 ($0.90/unit),
* Each unit consisted of two shares of stock (222,000) and one warrant
(111,000 Series "A"),
* Series "A" warrants have an exercise price of $0.60/share and an expiration
date of two years.
(E) DURING 2009, THE COMPANY HAD THE FOLLOWING WARRANT EXERCISES:
* July 10, 2009 - 50,000 shares at $0.20/share for $10,000.
* November 12, 2009 - 250,000 shares at $0.20/share for $50,000.
* December 28, 2009 - 593,663 shares at $0.20/share for $118,732
The following is a summary of the Company's warrants that are outstanding and
exercisable at March 31, 2010, December 31, 2009 and 2008:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Warrants Price Years Value
-------- ----- ----- -----
Balance - December 31, 2008 4,986,750 0.23 0.54
Granted 375,396 0.46
Exercised (3,462,897) --
Forfeited/Cancelled (893,663) --
----------- -----
Balance - December 31, 2008 - outstanding 1,005,586 0.40 1.18 $ --
=========== ===== =====
Balance - December 31, 2008 - exercisable 1,005,586 0.40 1.18 $ --
=========== ===== =====
Granted -- --
Exercised -- --
Forfeited/Cancelled -- --
----------- -----
Balance - March 31, 2010 - outstanding 1,005,586 0.40 0.93 $ --
=========== ===== =====
Balance - March 31, 2010 - exercisable 1,005,586 0.40 0.93 $ --
=========== ===== =====
11
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
II. STOCK OPTIONS
(A) STOCK OPTION GRANT IN 2008
On December 20, 2008, the Company granted 100,000 stock options having a fair
value of $14,363 for services rendered.
(B) STOCK OPTION GRANT AND EXERCISE IN 2009
On September 25, 2009, the Company granted 350,000 stock options having a fair
value of $36,519 for services rendered.
On September 25, 2009, the Company issued 192,857 shares of common stock in
connection with a cashless exercise provision related to all 450,000 stock
options previously granted.
(C) STOCK OPTION GRANT IN 2010
During the three months ended March 31, 2010, the Company granted 3,886,938
stock options, having a grant date fair value of $1,604,607, and recognized
$115,481 of expense associated with these share based payments as follows:
On January 1, 2010, the Company granted 800,000 stock options having a grant
date fair value of $328,521, which vest evenly over a thirty six month period,
for services rendered.
On January 9, 2010, the Company granted 1,886,938 stock options having a grant
date fair value of $783,702, which vest evenly over a thirty six month period,
for services rendered.
On February 1, 2010, the Company granted 200,000 stock options having a grant
date fair value of $82,069, which vest over a two year period, quarterly, at
50,000 shares beginning August 1, 2010 through February 1, 2012, for services
rendered.
On February 15, 2010, the Company granted 1,000,000 stock options having a grant
date fair value of $410,315, which vest evenly over a thirty six month period,
for services rendered.
The Company determined the fair value of its share based payments based upon the
following assumptions:
2010 2009 2008
---- ---- ----
Expected term 5 years 2 years 2 years
Expected volatility 150% 100% 100%
Expected dividends 0% 0% 0%
Risk free interest rate 2.35-2.69% 0.30% 0.30%
Expected forfeitures 0% 0% 0%
12
Enox Biopharma, Inc.
Notes to Financial Statements
March 31, 2010
(Unaudited)
The following is a summary of the Company's options that are outstanding and
exercisable at March 31, 2010, December 31, 2009 and 2008:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Options Price Years Value
------- ----- ----- -----
Balance - December 31, 2008
Granted 100,000 0.20
Exercised 350,000 0.20
Forfeited/Cancelled (450,000) 0.20
---------- -----
Balance - December 31, 2009 - outstanding -- -- -- $ --
========== ===== ==========
Balance - December 31, 2009 - exercisable -- -- -- $ --
========== ===== ==========
Granted 3,886,938 0.40
Exercised -- --
Forfeited/Cancelled -- --
---------- -----
Balance - March 31, 2010 - outstanding 3,886,938 0.40 4.80 years $ --
========== ===== ==========
Balance - March 31, 2010 - exercisable 279,467 0.39 4.79 years $ --
========== ===== ==========
NOTE 6 COMMITMENTS AND CONTINGENCIES
(A) LITIGATIONS, CLAIMS AND ASSESSMENTS
From time to time, the Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm its business. The Company is
currently not aware of any such legal proceedings or claims that they believe
will have, individually or in the aggregate, a material adverse affect on its
business, financial condition or operating results.
(B) EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS
In 2010, the Company entered into agreements with individuals who will serve as
officers and directors. The terms of these agreements are as follows:
1. Chief Executive Officer (January 1, 2010)
a. Monthly fee of $6,000.
b. 800,000 stock options having a grant date fair value of $328,521,
which vest evenly over a thirty six month period.
13
2. Chairman (January 9, 2010)
a. Entitled to receive monthly cash payment based upon Company's on
hand cash resources. Currently, the Company does not have
sufficient resources to meet the agreed upon amounts.
b. 1,886,938 stock options having a grant date fair value of
$783,702, which vest evenly over a thirty six month period.
3. Consultant (February 1, 2010)
a. Annual salary - $50,000
b. 200,000 stock options having a grant date fair value of $82,069,
which vest over a two year period, quarterly, at 50,000 shares
beginning August 1, 2010 through February 1, 2012.
4. Chief Financial Officer (February 15, 2010)
a. 1,000,000 stock options having a grant date fair value of
$410,315, which vest evenly over a thirty six month period.
5. Investor Relations & Public Relations (March 15, 2010)
a. Monthly retainer of $8,000. Under the agreement until the company
has raised capital in the amount of at least $3,000,000, the
company shall pay $2,500 per month, whereas the remaining $5,500
per month shall be deferred until the Investment Threshold is
reached.
NOTE 7 SUBSEQUENT EVENTS
On April 30, 2010, the Company granted 200,000 warrants to acquire intellectual
property from two individuals. These warrants have an exercise price of $1.00,
and expire in 2 years. The fair of these warrants is $52,960. The warrants vest
immediately.
The Company determined the fair value of these share based payments based upon
the following assumptions:
Expected term 2 years
Expected volatility 150%
Expected dividends 0%
Risk free interest rate 0.97%
Expected forfeitures 0%
14
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. ("Enox", "us", "we" and "our") was incorporated on June 28,
2007 in the State of Nevada. We are a development stage biotechnology company,
and to date have not earned any revenue and currently do not have any
significant assets. Our corporate offices are located at 303-1687 W. Broadway,
Vancouver BC, V6J 1X2, Canada. Our telephone number is (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 focusing on the development and commercialization of advanced Nitric
Oxide technologies for a variety of medical uses. Enox's patented platform
technology can be utilized across a wide spectrum of applications ranging from
the treatment of upper respiratory tract infections, prevention of hospital
acquired infections (HAI), innovative solutions to assist in the prevention of
the common cold and to protect people from a diverse array of life threatening,
drug resistant, infections.
Our technology and intellectual property is currently secured by one issued U.S
patent application, two US provisional applications and one US utility patent
application which we filed with the US Patent and Trademark Office.
During the fiscal period ending March 31, 2010 we expanded our IP portfolio by
licensing additional patents and we have began negotiating with various
institutions to secure new technology licensing. We believe that our
diversification into a broader nitric oxide based IP will provide us with a
strong foundation to develop new global business opportunities. We have
increased the scope and depth of our board of directors by appointing Mr. Amir
Avniel as our Chairman of the Board and grown our business team by hiring a
business development manager.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 2009
During the three months ended March 31, 2010, we incurred operating expenses of
$207,630, an increase of $166,014 or approximately 25% from the three month
ended March 31, 2010. Operating expenses increased during the three month ended
March 31, 2010 from the comparative period due to issuing options of the
consultant. Other significant elements include:
15
* research and development costs of $39,278, which increased from
$19,167 during the same period in the prior year, an increase of
approximately 105%, due to prepaid expenses and accrued liabilities
for research and development;
* general and administrative fees of $168,352, which is an increase from
$22,449 during the same period in the prior year, an increase of
approximately 650%, due to increase in consulting, professional fess
related to accounting and legal services, increase in travel and other
related expenses;
NET LOSS
We incurred a net loss of $207,630 for the three months ended March 31, 2010,
compared to a net loss of $41,616 for the three months ended March 31, 2009.
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 March 31, 2010, we had cash of $151,526, representing a net increase in
cash of $82,551 since December 31, 2009.
There was no cash generated by financing activities during the three months
ended March 31, 2010. Cash used in operating activities amounted to $82,551
represented by a loss of $207,630 plus an increase in prepaid expenses from the
previous balance sheet of $4,000, common stock based compensation of $115,481 ,
depreciation and amortizing of $142, offset by accounts payable of $420 and
accrued liabilities of $14,917 .
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 2010, 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.
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
Not applicable.
ITEM 4/4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15/15d-15 under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), as of March 31, 2010, 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, our
President (Principal Executive Officer) and Treasurer (Principal Accounting
Officer). Based upon the results of that evaluation, our management has
concluded that, as of March 31, 2010, our Company's disclosure controls and
procedures were effective and provide reasonable assurance that material
information related to our Company required to be disclosed in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to management to allow
timely decisions on required disclosure.
16
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control system is designed to provide
reasonable assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation of financial statements
for external reporting purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those
policies and procedures that:
* Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
* Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles in the United States of
America, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and
directors of the Company; and
* Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial statements.
Management assessed the effectiveness of our internal control over financial
reporting as of March 31, 2010. In making this assessment, we used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control -- Integrated Framework.
Because of the material weaknesses described below, our management, under the
supervision of and with the participation of our Chief Executive Officer and
Chief Financial Officer, concluded that, as of March 31, 2010, our internal
control over financial reporting was not effective based on the criteria in
Internal Control -- Integrated Framework issued by the COSO.
A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim consolidated financial
statements will not be prevented or detected on a timely basis.
In our assessment of the effectiveness of internal control over financial
reporting as of March 31, 2010, we identified that our material weaknesses
derived from the small size of our Company. That small size makes the proper
identification and authorization of transactions difficult, as we have
essentially only two individuals overseeing this process, which and creates
difficulties with separation of duties for handling, approving and coding
invoices, entering transactions into the accounts, writing checks and requests
for wire transfers. Additionally, the Company's officers are also its sole board
members. This does not provide an adequate level of layers of internal controls,
which in turn make it difficult to accumulate information required to be
disclosed by our Company in the reports that it files or submits under the
Exchange Act.
This annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management's report in
this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting
identified in connection with the evaluation described above during the quarter
ended March 31, 2010 that has materially affected or is reasonably likely to
materially affect our internal controls over financial reporting.
17
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.
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
- ------ -----------
10.1 Assignment of Patent Agreement dated April 30, 2010 between Enox
Biopharma, Inc and Dr. Jon Lundberg, Dr. Eddie Weitzberg and
Nitricare, HB (incorporated herein by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K filed May 6, 2010
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
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Enox Biopharma, Inc.
By: /s/ Prof. Yossef Av-Gay
--------------------------------------------
Prof. Yossef Av-Gay, Chief Executive Officer
(Principal Executive Officer)
Dated: May 17, 2010
By: /s/ Itamar David
--------------------------------------------
Mr. Itamar David, Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: May 17, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Prof. Yossef Av-Gay
--------------------------------------------
Prof. Yossef Av-Gay, Chief Executive Officer
(Principal Executive Officer)
Dated: May 17, 2010
By: /s/ Itamar David
--------------------------------------------
Mr. Itamar David, Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: May 17, 2010
By: /s/ Amir Avniel
--------------------------------------------
Mr. Amir Avniel, Chairman of the Board of
Directors
Dated: May 17, 2010
19