VGLS VG Life Sciences Inc (PK)

Issued Patents

Patent Applications

Issued Patents

In exchange for an exclusive license to these patents, we are required to pay a one-time license fee of $150,000 and the following royalties to the University of Colorado as specified below:

Minimum Annual Royalty

Earned Royalty

Milestone Events

If we are required to enter into a license agreement with a third party in order to make, use or sell a product that is covered under this agreement requiring us to pay a royalty to the third party, then our royalty fee to the University of Colorado shall be reduced by 50% of the royalty paid to the third party, unless such amount would be less than half of what would otherwise be owed to the University of Colorado.

Under the agreement, we may sublicense the technology to third parties. However, if we do, we must pay additional sublicense royalties based on when we enter into the sublicense, as specified below:

This agreement expires upon the date that the last patent covered by it expires.

Scott & White Healthcare License

On July 18, 2013, we entered into a worldwide exclusive license agreement with Scott & White Healthcare granting us rights to patents, patent applications, and technologies developed by Dr. Newell Rogers and owned by Texas A&M University and Scott & White Healthcare. The license gives us rights to9 pending U.S. and foreign patent applications, as specified below:

(1) The Patent Cooperation Treaty provides for unified filing of patent applications in order to protect inventions in each of the treaty’s contracting countries. Once a patent has been reviewed by a regional office, the standard application is then granted or rejected according to each country’s law. There are 148 countries that are parties to the treaty.

(2) A European Patent refers to patents granted under the European Patent Convention. The European Patent Convention allows for unified filing of a patent application with the European Patent Office. The applicant may designate any of the countries who are a party to the convention that it seeks protection in. There are 38 countries that are parties to the European Patent Convention. Each of the designated countries must confirm the patent. Once granted, a European patent comes into existence as a group of national patents in each of the designated countries.

In exchange for an exclusive license to these patents, we are required to pay a one-time license fee of $50,000 and the following annual, earned, and milestone royalties to the Scott & White Healthcare as specified below:

Minimum Annual Royalty

Earned Royalty

Milestone Events

If we are required to enter into a license agreement with a third party in order to make use or sell a product that is covered under this agreement requiring us to pay a royalty to the third party, then our royalty fee to Scott & White Healthcare shall be reduced as follows:

After the third year 20% to third-party and 15 % to Scott & White Healthcare

Under the agreement, we may sublicense the technology to third parties. However, if we do, we must pay additional sublicense royalties based on when we enter into the sublicense, as specified below:

This agreement expires upon the date that the last patent covered by it expires.

Other Royalty Agreements

Under two consulting agreements effective January 1, 2011 and terminating December 31, 2015 with Dr. M. Karen Newell Rogers and Dr. Evan Newell, we are obligated to pay certain royalties upon the commercialization of products developed from their work.

These royalties are the same for both Dr. M. Karen Newell Rogers and Dr. Evan Newell. Each individual is entitled to three fourths of one percent, or 0.75%, of net sales from sales in developed countries, and one half of one percent, or 0.50%, from sales in undeveloped countries.

Under the exclusive license agreements, in general, we are obligated to fund the costs of any patents, even if such work would be outside a field of use for which we currently have exclusive rights. We are continually evaluating whether additional applications may be appropriate to protect extensions and variations of our products, and expect to file additional and new applications related thereto. Under international agreements, in recent years, global protection of intellectual property rights is improving. The General Agreement on Tariffs and Trade requires participant countries to amend their intellectual property laws to provide patent protection for pharmaceutical products by the end of a ten-year transition period. A number of countries are following suit. Patent protection in other countries where we have obtained patents and filed patent applications, including the European Patent Office, the Eurasian Patent Organization, New Zealand, Australia, and Israel, extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country.

The expiration of a product patent or loss of patent protection resulting from a legal challenge would be expected to result in significant competition from generic products against the covered product and, particularly in the U.S., could result in a significant reduction in sales of the pioneering product. If we were to lose patent protection, we may be able to continue to obtain commercial benefits from product manufacturing trade secrets, patents on use of our product, and patents on processes and intermediates for the economical manufacture of the active ingredients. The effect of product patent expiration or loss also depends upon the nature of the market and the position of the product in it, the growth of the market, the complexities and economics of manufacture of the product, and the requirements of generic drug laws.

With respect to proprietary know-how and products and processes for which patents are of questionable value or are difficult or impossible to obtain or enforce, we rely on confidentiality agreements and other trade secret protection measures to protect our interests. We take measures to protect our proprietary know-how, technologies, and confidential data, including requiring all employees, consultants and customers to enter into confidentiality agreements. In arrangements with our customers or suppliers that require the sharing of processes and data, our policy is to make available only such data as is relevant to our agreements with such customers and suppliers, subject to appropriate contractual restrictions, including requirements for them to maintain confidentiality and use such processes and data solely for our benefit. However, such measures may not adequately protect our data.

Manufacturing and Supply

TPT compounds used for preclinical studies or clinical trials in our drug research programs are produced by external production facilities. Acquisition of drugs used in concert with our MDT compounds can present challenges given that the manufacturer or drug developer generally must agree to the use of the compounds in a research setting. This can involve more detailed communication and negotiation with the manufacturer rather than simply purchasing product. The production of larger batches of products for commercial sale after FDA approval would require construction of our own facility or a long-term contracting relationship with a manufacturer with sufficient capacity. We have sourced a manufacturer for TPT compounds that we believe will be able to meet long-term production demands throughout the development period and beyond.

At present, we obtain MDT compounds for the biofuel program from outside suppliers. We recently sourced a manufacturer for our VG1177 and are now capable of procuring Good Manufacturing Practices grade compound, which is required for human clinical trials. We do not expect any significant issues in connection with manufacturing for the foreseeable future.

Sales and Marketing/Commercialization

Our lead drug candidate, VG1177, is intended to address a variety of market segments, some of which are large healthcare markets. We do not currently have a commercialization organization capable of marketing, selling, or distributing VG1177. We have commenced discussions and may establish partnerships with pharmaceutical, biotechnology and other organizations that have the existing organization experience and resources to bring our initial, and potentially future, product candidates to market. In some cases, we may collaborate with third parties during the development stage of a product candidate to further benefit from their financial support as well as clinical development, regulatory, market research, pre-marketing and other expertise. For commercialization outside of the United States, we may enter into joint ventures, license arrangements or distribution agreements, as appropriate, depending on the particular requirements of the market and the potential partner’s core competencies to assist us with such requirements. Pending FDA approval of our products, we may establish or contract with a specialty sales force with expertise in marketing and selling to various healthcare markets. We may also establish or contract for other complementary capabilities related to marketing and selling our potential pharmaceutical products.

Competition

Competition is intense in the pharmaceutical business and includes many large and small competitors. Technological innovations affecting efficacy, safety, patient ease-of-use, and cost-effectiveness by other pharmaceutical companies with greater financial and research resources working on competitive products could result in products that offer the same or similar benefits as our products. We intend to compete with existing products on the basis of product quality and efficacy, product safety, economic benefit, and/or promotion, however our MDT oncology therapies are designed to function as an adjunct or add-on to current treatments and so our therapies do not directly compete with those current treatments.

However, our MDT oncological combination therapies may compete directly with other adjunct therapies. As there are over 200 million possible combinations of approved and development-stage oncological drugs, not including the hundreds of MDT oncological agents patented (Nature Biotechnology, Vol. 30 No 7 July 2012), it is more relevant to discuss the competition that may be faced by the sorafenib/hydroxychloroquine, or HCQ, treatment in a FDA phase I study.

Currently, there are over 350 clinical trials, initiated, ongoing, and completed, involving a sorafenib combination treatment. Not all of these trials are sponsored by industry groups, and not all of these trials will advance further in clinical development. Furthermore, this number does not include other multikinase or angiogenesis inhibitors, and it is possible that our sorafenib/HCQ treatment may face other successful sorafenib or sorafenib-like combination therapies.

The key detail needed to evaluate competition will be the oncological indication chosen for the sorafenib/HCQ therapy, as cancer treatments must be approved for discrete types of cancer.

Government Regulation

Our current and contemplated activities, and the products and processes that will result from such activities, are subject to substantial government regulation.

U.S.—FDA Drug Approval Process

Pre-Clinical Testing: Before beginning testing of any compounds with potential therapeutic value in human subjects in the United States, stringent government requirements for pre-clinical data must be satisfied. Pre-clinical testing includes both in vitro , or in an artificial environment outside of a living organism, and in vivo , or within a living organism, laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. We perform pre-clinical testing on all of our drug candidates before initiating human trials.

Investigational New Drug, IND, Applications: Pre-clinical testing results obtained from in vivo studies in several animal species, as well as from in vitro studies, are submitted to the FDA, or an international equivalent, as part of an IND or equivalent, and are reviewed by the FDA prior to the commencement of human clinical trials. The pre-clinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical studies in human volunteers.

Clinical Trials: Clinical trials involve the administration of the drug to healthy human volunteers or to patients under the supervision of a qualified investigator pursuant to an FDA-reviewed protocol. Human clinical trials typically are conducted in three sequential phases, although the phases may overlap with one another. Clinical trials must be conducted under protocols that detail the objectives of the study, the parameters to be used to monitor safety, and the efficacy criteria, if any, to be evaluated. Each protocol must be submitted to the FDA as part of the IND.

Good Clinical Practices : All of the phases of clinical studies must be conducted in conformance with the FDA's bioresearch monitoring regulations and Good Clinical Practices, which are ethical and scientific quality standards for conducting, recording, and reporting clinical trials to assure that the data and reported results are credible and accurate, and that the rights, safety, and well-being of trial participants are protected.

Our Employees

As of January 30, 2014, we have a total of six employees, three of which are full-time. We are not a party to any collective bargaining agreements. We believe our relations with our employees are good.

Key Consultants

We also rely on the services of consultants. We have ongoing arrangements with Dr. Newell Rogers, Dr. Evan Newell and Dr. Brett Mitchell, all of whom are engaged in biomedical research related to our products and product candidates. Under these consulting agreements, each consultant has agreed to assist us with the research, analysis and development of our products and product candidates, including assisting us with obtaining government approvals and securing intellectual property protections for our products and product candidates. In exchange, we have agreed to compensate each consultant as specified below:

Dr. Newell Rogers

Dr. Brett Mitchell

Dr. Evan Newell

We believe our relations with our consultants are good.

Available Information

Our website is located at www.vglifesciences.com. We are not currently required to deliver an annual report to security holders or to file reports with the Securities and Exchange Commission. However, we intend to become a reporting company and to make available on our website, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as applicable and as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission. Our website and the information contained therein or connected thereto are not intended to be incorporated into this registration statement.

Once we become a fully reporting company with the SEC, you may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. 

Item 1A. Risk Factors.

Risks Related to Our Business

We are a development stage company with no commercial products.

We are developing two drug candidates: VG1177, our lead pre-clinical drug candidate, initially for HIV/AIDS application, and MDT, our clinical drug candidate, initially for a cancer application. Currently, we have no product candidates in our clinical development pipeline other than VG1177 for HIV/AIDS and MDT for a cancer application, and we have no products approved for sale. We plan to update our VG177 pre-IND application with the FDA after completion of the animal toxicity studies. Thereafter, we expect to commence our initial clinical trials for VG1177. Although we have begun pre-clinical and in vitro studies, we have not yet begun human clinical trials, and therefore, we are still many years from beginning to commercialize and market VG1177 or any other product candidate, if ever. We expect the clinical development of VG1177 will require significant additional effort, resources, time, and expenses prior to seeking FDA approval. VG1177 is not expected to be commercially available in the United States or outside the United States for several years, if ever. If we are unable to make VG1177 commercially available, we may not be able to fund future operations, including developing, testing and obtaining regulatory approval for new product candidates.

We have a history of operating losses. We expect to incur net losses and we may never achieve or maintain profitability.

We have not been profitable since our inception. We reported net losses of approximately $7.4 million and $6.9 million for the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013, we had an accumulated deficit of approximately $100 million. We have not generated any revenue from product sales or royalties from product sales to date, and it is possible that we will never have significant product sales revenue or royalty revenue. We expect to continue to incur losses for at least the next several years as we and our collaborators pursue clinical trials and research and development efforts. To become profitable, we, either alone, or with our collaborators, must successfully develop, manufacture, and market our current product candidates, particularly VG1177 or our MDT compound, as well as continue to identify, develop, manufacture, and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates.

We will need additional financing, but our access to capital funding is uncertain.

Our current and anticipated operations, particularly our product development and commercialization programs, require substantial capital, which we have not yet obtained in lump sum. We are continually seeking funding for our ongoing operations, and we have funded operations through a series of private placements and support from stockholders. Until we are able to secure long-term financial support or financing in a sufficiently large quantity to fund operations for at least 18-24 months, our ability to operate is uncertain and a significant portion of our management’s time is devoted to fund-raising. However, these and future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing, and establish new, collaborations, the terms of those collaborations, the success of our collaborators in the future to develop and market products under their respective collaborations with us, our success in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, and the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to:

If funding is insufficient at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures.

We are heavily dependent on the success of our lead drug candidate, and we cannot provide any assurance that our lead drug candidate or other product candidates we may have in the future will be commercialized.

We intend to invest the vast majority of our time and financial resources in the development and commercialization of our lead drug candidate, VG1177, which is currently in pre-clinical development. We plan to update our file for our HIV/AIDS, pre-IND for VG1177 with the FDA in late 2014. We expect to commence patient enrollment for our Phase I-clinical trial thereafter. Our future success depends heavily on our ability to successfully develop, obtain regulatory approval for, and commercialize our lead drug candidate, which may never occur. We currently generate no revenues and incur substantial losses, and we may never be able to develop or commercialize a marketable drug. Our MDT candidate is our secondary candidate, nearing completion of a Phase I-Physician’s IND.

Before we generate any revenues from product sales, we must complete preclinical studies and clinical trials for VG1177, establish manufacturing capabilities that comply with the FDA’s current Good Manufacturing Practices requirements for manufacturing sterile drugs, receive approval from the FDA in the United States and other regulatory agencies in foreign jurisdictions, build a commercial organization, make substantial investments and undertake significant marketing efforts ourselves or in partnership with others. We will not be permitted to market or promote VG1177, MDT, or any other product candidates we may have in the future, before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for VG1177, MDT or any of our other product candidates.

We have not previously submitted a biologics license application, or a new drug application, or NDA, to the FDA, or similar drug approval filings to comparable foreign authorities, for VG1177. We cannot be certain that our lead drug candidate or any other product candidate will be successful in clinical trials or receive regulatory approval. Further, our lead drug candidate or any other product candidate may not receive regulatory approval even if our clinical trials are successful. If we do not receive regulatory approvals for our lead drug candidate or any other product candidate, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market our lead drug candidate or any other product candidate, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

VG1177, MDT and any future product candidate that we pursue will be subject to extensive regulation by the FDA in the United States and by other regulatory agencies in foreign jurisdictions, including activities related to preclinical studies, human clinical trials, manufacturing, labeling, packaging and sterilization, storage, recordkeeping, advertising, promotion, export, import, marketing and distribution and other possible activities.

Our lead drug candidate, VG1177, is a proprietary, computationally designed anti-inflammatory peptide. We expect to pursue FDA drug approval for VG1177 as a new chemical entity. There may be other similar drug candidates in development by other companies and these candidates may gain FDA drug approval prior to VG1177. We are conducting pre-clinical testing to support our IND for VG1177 and we have received feedback from the FDA regarding our proposed trial. Based on the feedback we received from the FDA, we hope to submit the IND to the FDA in 2014 and commence patient enrollment in our Phase I-clinical trial thereafter. As we move through the regulatory process, the FDA may make other suggestions that may impact our ability to complete our clinical trials within the timeframe or budget that we are anticipating, which could impact investors’ interest in our business and our stock price.

Our MDT combination with other cancer drugs to treat late stage cancers is a proprietary use. There may be other similar drug candidates in development by other companies and these candidates may gain FDA drug approval prior to our MDT compound. We are conducting phase I-clinical testing to support our MDT compound in combination with Nexavar® for treatment of late-stage ovarian cancer, and the trial has been expanded to encompass solid tumors, including breast, colon, lung, liver, and pancreatic cancers. As of December 2013, the trial has progressed to include the third cohort of patients with disease stabilization in a patient with metastatic ovarian cancer for four months and disease stabilization going into its fifth month in a patient with triple negative breast cancer. We believe our Phase I Physician’s IND study utilizing MDT as a combination therapy will be completed in mid-2014. As we move through the regulatory process, the FDA may make other suggestions that may impact our ability to complete our clinical trials within the timeframe or budget that we are anticipating, which could impact investors’ interest in our business and our stock price.

The results of preclinical studies and clinical trials of previously published similar products may not necessarily be indicative of the results of our future clinical trials. Preliminary results may not be confirmed upon full analysis of the detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and efficacy sufficient to support intended use claims despite having progressed through initial clinical trials. The data collected from clinical trials of our product candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere. Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if, or when, we may have an approved product for commercialization or whether we will ever achieve sales or profits of VG1177 or other product candidates we may pursue in the future.

If our products do not gain market acceptance, our business will suffer because we might not be able to fund future operations.

A number of factors may affect the market acceptance of our products or any other products we develop or acquire, including, among others:

If our products do not gain market acceptance, we may not be able to fund future operations, including developing, testing and obtaining regulatory approval for new product candidates and expanding our sales and marketing efforts for our approved products, which would cause our business to suffer.

Our research and development program for drug candidates other than VG1177 and MDT is at an early stage, and we cannot be certain our program will result in the commercialization of any drug.

Except for our development program for VG1177 and MDT, our research and development program targeting all other disease applications is at an early stage and, to date, we have not developed any other product candidates generated in our TPT research program. Any product candidates we develop will require significant additional research and development efforts prior to commercial sale, including extensive pre-clinical and clinical testing and regulatory approval. This may require increases in spending on internal projects, the acquisition of third party technologies or products, and other types of investments. We cannot be sure that our approach to drug discovery, acting independently or with partners, will be effective or will result in the development of any drug. We cannot expect that any drug candidates that do result from our research and development efforts will be commercially available for many years.

We have limited experience in conducting pre-clinical testing and clinical trials. Even if we receive initially positive clinical trial results, those results will not guaranty that similar results will be obtained in the later stages of drug development. Our current lead drug candidate and all of our potential drug candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility that none of our drug candidates will be:

If we cannot commercialize any of our drugs, we may not generate revenues and our Company may fail.

We may be unable to maintain sufficient clinical trial liability insurance.

Our inability to obtain and retain sufficient clinical trial liability insurance at an acceptable cost to protect against potential liability claims could prevent or inhibit our ability to conduct clinical trials for product candidates we develop. We currently do not have clinical trial liability insurance for VG1177 and would need to secure coverage before commencing patient enrollment for our Phase I/II clinical trials in the United States. Any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. We expect we will supplement our clinical trial coverage with product liability coverage in connection with the commercial launch of our first product candidate; however, we may be unable to obtain such increased coverage on acceptable terms or at all. If we are found liable in a clinical trial lawsuit or a product liability lawsuit in the future, we will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

If product liability claims are brought against us or we are unable to obtain or maintain product liability insurance, we may incur substantial liabilities that could reduce our financial resources.

The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have, in the past, obtained limited product liability insurance coverage for some of our clinical trials on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to plaintiffs. Additionally, if we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected.

If we are unable to develop satisfactory sales and marketing capabilities, we may not succeed in commercializing VG1177 or any other product candidate.

We have no experience in marketing and selling drug products. We have not entered into arrangements for the sale and marketing of VG1177 or any other product. We are developing VG1177 for large patient populations served by physicians. These patient populations may number in the millions. Typically, pharmaceutical companies would employ groups of sales representatives and associated sales and marketing staff numbering in the hundreds to thousands of individuals to call on this large number of physicians and hospitals. We may seek to collaborate with a third party to market our drugs or may seek to market and sell our drugs by ourselves. If we seek to collaborate with a third party, we cannot be sure that a collaborative agreement can be reached on terms acceptable to us. If we seek to market and sell our drugs directly, we will need to hire additional personnel skilled in marketing and sales. We cannot be sure that we will be able to acquire, or establish third party relationships to provide, any or all of these marketing and sales capabilities. The establishment of a direct sales force or a contract sales force or a combination direct and contract sales force to market our products will be expensive and time-consuming and could delay any product launch.

Further, we can give no assurances that we may be able to maintain a direct and/or contract sales force for any period of time or that our sales efforts will be sufficient to grow our revenues or that our sales efforts will ever lead to profits.

Even if we obtain regulatory approvals to commercialize VG1177 or any other drug, our drug candidates may not be accepted by physicians or the medical community in general.

There can be no assurance that VG1177 or any other product candidate successfully developed by us, independently or with partners, will be accepted by physicians, hospitals and other healthcare facilities. VG1177 and any future product candidates we develop will compete with a number of similar drugs and products manufactured and marketed by major pharmaceutical and medical technology companies. The degree of market acceptance of any drugs we develop depends on a number of factors, including:

Significant uncertainty exists as to the coverage and reimbursement status of any product candidate for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care providers, private health insurers and other organizations.

Our failure to successfully acquire, develop and market additional drug candidates or approved drug products could impair our ability to grow.

As part of our growth strategy, we may evaluate, acquire, license, develop and/or market additional product candidates and technologies. These investments will not constitute a significant portion of our business. However, because our internal research capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us. The success of this strategy depends partly upon our ability to identify, select and acquire promising pharmaceutical product candidates and products. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or licensing of third party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.

In addition, future acquisitions may entail numerous operational and financial risks, including:

Any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot provide assurance that any products that we develop or approved products that we acquire will be manufactured profitably or achieve market acceptance.

If we do not have the resources necessary to manage growth effectively, then our business, operating results and financial condition could be materially adversely effected.

We believe that as our business plan is more fully realized, we may experience a period of rapid growth that will result in new and increased responsibilities for management personnel and will place a significant strain upon our management, operating and financial systems and resources. To accommodate any rapid growth and to compete effectively and manage future growth, if any, we will be required to implement and improve our operational, financial and management information systems, procedures and controls on a timely basis and to expand, train, motivate and manage our workforce. Our personnel, systems, procedures and controls might not be adequate to support our existing and future operations. Any failure to implement and improve our operational, financial and management systems or to expand, train, motivate or manage employees could have a materially adverse effect on our business, operating results and financial condition.

We may be unable to obtain patents to protect our technologies from other companies with competitive products, and patents of other companies could prevent us from manufacturing, developing or marketing our products.

The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the United States and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued and/or narrowed in a patent re-examination. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions.

Our commercial success depends in part on our ability to maintain and enforce our proprietary rights.

If third-parties engage in activities that infringe our proprietary rights, our management's focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that a third- party is not infringing, either of which would harm our competitive position. In addition, there can be no assurance that others will not design around our patented technology.

Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain.

We also rely on trade secrets, know-how and confidentially provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property.

We rely on trade secrets and know how to protect our intellectual property. During the course of our business, our employees, consultants and collaborators may be exposed to trade secrets and know-how, the disclosure of which would adversely affect our business. Such parties have signed non-disclosure agreements with us, however these parties may not comply with the terms of their agreements with us. If such parties violate these confidentiality provisions, we might be unable to adequately enforce our rights against these parties or to obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Furthermore, our trade secrets or those of our collaborators may become known or may be independently discovered by others.

Our success also depends on avoiding infringement of the proprietary technologies of others.

In particular, there may be certain issued patents and patent applications claiming subject matter that we or our collaborators may be required to license in order to research, develop or commercialize our product candidates. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities to third-parties, require disputed rights to be licensed from third-parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another's proprietary technology.

We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market.

Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, federal laws, including the Federal Food, Drug and Cosmetic Act, require that a drug undergo rigorous testing and an extensive regulatory approval process implemented by the FDA. To receive approval, we, or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing is susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators, or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. There can be no assurance that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory schemes vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals.

Risks Related to Development and Regulatory Approval of VG1177, MDT and Our Other Product Candidates

We cannot be certain that VG1177, MDT or any of our future product candidates will receive regulatory approval, and without regulatory approval we will not be able to market our product candidates.

Our business currently depends on the successful development and commercialization of VG1177 and, to a lesser extent, on the successful development and commercialization of MDT. Our ability to generate revenue related to product sales, if ever, will depend on the successful development and regulatory approval of VG1177 and MDT for the treatment of our disease applications and our future product candidates.

We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. The development of a product candidate and issues relating to its approval and marketing are subject to extensive regulation by the FDA in the United States and similar regulatory authorities in other countries, with regulations differing from country to country. We are not permitted to market our product candidates in the United States until we receive a New Drug Application, or NDA, approval from the FDA. We have not submitted any marketing applications for any of our product candidates.

An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired indication. NDAs must also include significant information regarding the chemistry, manufacturing and controls for the product. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval. The FDA review processes can take years to complete and approval is never guaranteed. If we submit an NDA to the FDA, the FDA must decide whether to accept or reject the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA.

Regulators of other jurisdictions have their own procedures for approval of product candidates. Regulatory authorities in countries outside of the United States also have requirements for approval of drug candidates with which we must comply prior to marketing in those countries. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure that we will be able to obtain regulatory approval in any other country.

Even if a product is approved, the FDA may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. In addition, delays in approvals or rejections of marketing applications in the United States or other countries may be based upon many factors, including regulatory requests for additional analyses, reports, data, preclinical studies and clinical trials, regulatory questions regarding different interpretations of data and results, changes in regulatory policy during the period of product development and the emergence of new information regarding our product candidates or other products. Also, regulatory approval for any of our product candidates may be withdrawn.

We cannot predict whether our future trials and studies will be successful or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date. If we are unable to obtain approval from the FDA or other regulatory agencies for VG1177, MDT and our other product candidates, or if, subsequent to approval, we are unable to successfully commercialize VG1177, MDT, or our other product candidates, we will not be able to generate sufficient revenue to become profitable or to continue our operations.

Clinical trials for our product candidates are expensive, time-consuming, uncertain and susceptible to change, delay or termination.

Clinical trials are very expensive, time-consuming and difficult to design and implement. Even if the results of our clinical trials are favorable, clinical trials usually continue for several years and may take significantly longer to complete. In addition, we, the FDA, an Institutional Review Board, or other regulatory authorities, including state and local authorities, may suspend, delay or terminate our clinical trials at any time for various reasons, including:

Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

There is a high rate of failure for drug candidates proceeding through clinical trials.

Generally, there is a high rate of failure for drug candidates proceeding through clinical trials. We may suffer significant setbacks in our clinical trials similar to those experienced by a number of other companies in the pharmaceutical and biotechnology industries. Further, even if we view the results of a clinical trial to be positive, the FDA or other regulatory authorities may disagree with our interpretation of the data. In the event that we obtain negative results from the VG1177 or MDT planned clinical trials or receive poor clinical results for other product candidates, or the FDA chooses to block progress of the trials due to potential Chemistry, Manufacturing and Controls, or CMC, issues or other hurdles or does not approve our NDA for VG1177 or MDT, we may not be able to generate sufficient revenue or obtain financing to continue our operations, our ability to execute on our current business plan will be materially impaired, our reputation in the industry and in the investment community would likely be significantly damaged and the price of our stock would likely decrease significantly.

Serious adverse events or other safety risks could require us to abandon development and preclude, delay or limit approval of our product candidates, or limit the scope of any approved label or market acceptance.

If VG1177, MDT, or any of our product candidates, prior to, or after any approval for commercial sale, cause serious or unexpected side effects, a number of potentially significant negative consequences could result, including:

We may voluntarily suspend or terminate our planned clinical trials if, at any time, we believe that they present an unacceptable risk to participants or if preliminary data demonstrate that our product candidates are unlikely to receive regulatory approval or unlikely to be successfully commercialized. In addition, regulatory agencies, institutional review boards or data safety monitoring boards may, at any time, order the temporary or permanent discontinuation of our clinical trials or request that we cease using investigators in the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, or that they present an unacceptable safety risk to participants. If we elect or are forced to suspend or terminate any planned clinical trial of VG1177, MDT or any other of our product candidates, the commercial prospects for that product will be harmed and our ability to generate product revenue from that product may be delayed or eliminated. Furthermore, any of these events could prevent us, or our partners, from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our product candidates and impair our ability to generate revenue from the commercialization of these products either by us or by our strategic alliance partners.

Any failure by us to comply with existing regulations could harm our reputation and operating results.

We will be subject to extensive regulation by U.S. federal and state and foreign governments in each of the markets where we intend to sell VG1177 and MDT if, and when, they are approved. For example, we will have to adhere to all regulatory requirements including the FDA’s current Good Clinical Practices, Good Laboratory Practice and Good Manufacturing Practice requirements. If we fail to comply with applicable regulations, including FDA pre-or post-approval current Good Manufacturing Practices requirements, then the FDA or other foreign regulatory authorities could sanction us. Even if a drug is FDA-approved, regulatory authorities may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-marketing studies.

If VG1177 or MDT is approved in the United States, it will be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, including both federal and state requirements in the United States. In addition, manufacturers and manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices. As such, we and our contract manufacturers are subject to continual review and periodic inspections to assess compliance with current Good Manufacturing Practices. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have FDA approval.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of the product, a regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from VG1177, MDT and our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenue from sales of VG1177 or MDT, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and damage our reputation. We expend significant resources on compliance efforts and such expenses are unpredictable and might adversely affect our results. Changing laws, regulations and standards might also create uncertainty, higher expenses and increase insurance costs.

We are substantially dependent on our ability to successfully and timely complete clinical trials and obtain regulatory approval to market our most advanced product candidates, VG1177 and MDT. Our business will be materially harmed and our stock price adversely affected if regulatory approval is not obtained with respect to these product candidates.

We intend to file an IND with the FDA for VG1177. We are conducting laboratory testing and research to support the filing of the IND. Our success will depend, to a great degree, on our ability to obtain the requisite regulatory approval to market VG1177 overseas and in the United States. The process of obtaining regulatory approvals is costly, time consuming, uncertain, and subject to unanticipated delays. In order to obtain the necessary regulatory approval, we must demonstrate with substantial evidence from well-controlled clinical trials and to the satisfaction of the applicable regulatory reviewing agency that VG1177 is both safe and efficacious. There is no assurance that we will be able to do so and, if we do, that the applicable regulatory requirements for approval will have been met. We cannot predict the ability of third party service providers to collect the data from our trials with VG1177, analyze the data, and deliver their final reports to us. There may be significant delays in this process. Regulatory authorities may require additional testing for safety and efficacy, which would result in a substantial delay in the regulatory approval process. If we fail to successfully obtain regulatory approvals for VG1177 or we face significant delays, our business will be materially harmed and our stock price will be adversely affected.

Doctors at Scott & White Healthcare in Temple, Texas, and the Cancer Therapy and Research Center at the University of Texas at San Antonio, are conducting a Phase I Physician’s IND trial for patients with late-stage ovarian cancer utilizing an MDT compound, called hydroxychloroquine, for which we hold the use patent for combination with an existing cancer drug, called sorafenib, which is marketed as Nexavar ®. Since its inception in July 2012, the trial has been expanded to encompass solid tumors, including breast, colon, lung, liver, and pancreatic cancers. As of December 2013, the trial has progressed to include the third cohort of patients with disease stabilization in a patient with metastatic ovarian cancer for four months and disease stabilization going into its fifth month in a patient with triple negative breast cancer. We believe our Phase I Physician’s IND study utilizing MDT as a combination therapy will be completed in mid-2014. Despite these results, we cannot predict that our future clinical trials will be successful or will be approved by the FDA. If we fail to successfully obtain regulatory approval for our MDT compound or if we face significant delays, our business will be materially harmed and our stock price will be adversely affected.

We depend on various suppliers to supply VG1177, our MDT compounds, and our other products.

We believe our current suppliers can produce sufficient material to support ongoing study of VG1177, our MDT cancer study, and our MDT biofuel viability studies. However, if approved and/or successful in these studies, we will have to source a manufacturer with significantly larger capacity. With regard to our drug programs and in particular the TPT programs, prior to initiation of the studies it is also required that we secure a manufacturer that will be able to meet production requirements that meet Good Manufacturing Practices and Good Laboratory Practices throughout the development process and possibly through marketing and distribution. Changing manufacturers of a drug product can involve significant regulatory delay while comparing products made at the old manufacturer with products made at the new manufacturer. Consequently, while changing manufacturers is possible, it is highly desirable to avoid doing so. There is no guarantee that we will be able to find a manufacturer that can meet our production and distribution requirements throughout the life of our drug products. If we are required to change manufacturers, there will likely be significant delays in our ability to study or, if approved, sell our drug products, which would materially harm our business and adversely affect our stock price.

With regard to our MDT compounds, which are used in combination with other existing drugs including drugs that are approved or have been deregistered by the FDA, the availability of such third-party drugs cannot be guaranteed on terms that are reasonable or at all. Disruption of the supply of these third party compounds would delay or impair our ability to study our compounds in combination with them, and would have a materially harmful effect on our business and adversely affect our stock price.

With regard to our biofuel products, unless we obtain or develop our own manufacturing capacity, which we presently do not anticipate, it is likely that we, or potential future partners, will be dependent on third-party suppliers to sell us or manufacture for us MDT compounds. Disruption of the supply of these compounds, which we cannot provide any assurance of, would have a materially harmful effect on our business and adversely affect our stock price.

Clinical trials are long, expensive and uncertain processes and overseas regulators and the FDA may ultimately not approve any of our product candidates.

We cannot assure you that data collected from pre-clinical studies and clinical trials of our product candidates will be sufficient to support approval by overseas regulators or the FDA, the failure of which could delay our profitability and adversely affect our stock price.

All of our research and development programs are at an early stage and clinical trials are long, expensive, and uncertain processes. Clinical trials may not be commenced or completed on schedule, and government regulators may not ultimately approve our product candidates for commercial sale. Further, even if the results of our pre-clinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including VG1177, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business and adversely affect our stock price.

If we fail to maintain our existing or establish new collaborative relationships, or if our collaborators do not devote adequate resources to the development and commercialization of our licensed drug candidates, we may have to reduce our rate of product development and may not see products brought to market or be able to achieve profitability.

Our primary strategy for distributing our products would be to enter into various relationships with other firms or companies overseas with the resources to pursue the process of obtaining later-stage regulatory approvals and implement marketing and distribution. We have not settled on any strategy for distribution in the United States and do not expect to formulate a strategy until an IND is approved and/or clinical trials in the United States have progressed. It is likely we will grant exclusive commercialization and marketing rights to our products to third parties, and such parties will have substantial control over the continued efforts in their territories and the resources they commit to the programs. Accordingly, the success of the commercialization of our products in some or all territories may substantially depend on the efforts of third parties and is to a degree beyond our control. For us to receive any significant revenues from sale of our products, any such collaborators must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its efforts, our ability to commercialize our products in the collaborator's territory may be significantly impaired.

Because of the uncertainty of pharmaceutical pricing, reimbursement, and healthcare reform measures, we may be unable to sell our products profitably.

The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope.

As a result of intense competition and technological change in the pharmaceutical industry, the marketplace may not accept our products, and we may not be able to complete successfully against other companies in our industry and achieve profitability.

Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than us or our collaborators. Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never achieve profitability.

If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials.

In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements that could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s current Good Manufacturing Practices and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements.

Risks Related to Our Common Stock

Trading in our common stock is limited and the price of our common stock may be subject to substantial volatility.

Our common stock is quoted on the OTC Pink Current marketplace. We expect our common stock to continue to be quoted on the OTC for the foreseeable future. Broker-dealers may decline to trade in OTC Pink stocks given the market for such securities is often limited, the stocks are more volatile and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.

Additionally, the price of our common stock may be volatile as a result of a number of factors, including, but not limited to, the following:

“Penny stock” rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our securities.

Trading in our securities is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.

The price of our common stock may fluctuate substantially.

You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this registration statement are:

In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

If an active, liquid trading market for our common stock does not develop, you may not be able to sell your shares quickly or at or above the price you paid for it.

Although our common stock is listed on OTC Pink Current, an active and liquid trading market for our common stock has not yet and may not ever develop or be sustained. You may not be able to sell your shares quickly or at or above the price you paid for our stock if trading in our stock is not active.

We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

Holders of our Series A Preferred Stock have special voting rights that allow them to out vote all common stock holders on any voting matter.

Our Series A Preferred stock may vote as common stock on all matters requiring shareholder approval. Additionally, the Series A Preferred stock has special voting rights that allow the aggregate Series A Preferred votes to be 1.01 times greater than the aggregate number of votes for the issued and outstanding common stock. This means that the Series A Preferred shareholders may out vote all the common stock shareholders on any and all matters requiring shareholder approval, which may make it difficult to complete some corporate transactions without the support of the Series A Preferred shareholders and may prevent a change in control. As of the date of this filing our Chairman of our Board and Vice President of Research and Development holds 5,573,725 or 57.4 % of the issued and outstanding Series A Preferred stock.

Our management holds significant control over our voting stock and may be able to control our Company indefinitely.

Our management has significant control over our voting stock, which may make it difficult to complete some corporate transactions without their support and may prevent a change in control. As of the date of this filing, our management owned or had the rights to acquire 65.8% of our common stock and the chairman of our Board and Vice President of Research and Development owned 57.4% of the Series A Preferred stock.

Item 2. Financial Information.

Selected Financial Data

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item includes and is intended to be read in conjunction with the “Risks Associated with Our Business” that appears at the end of the previous section and the Consolidated Financial Statements twelve months ended December 31, 2013 (audited) and the three months ended March 31, 2014 (unaudited) included elsewhere herein.

Business Overview

We are a drug discovery and development company researching two core technologies: Targeted Peptide Technology, or TPT and Metabolic Disruption Technology, or MDT. We have three drug research programs in, at, or near clinical stage: a TPT therapy for HIV/AIDS, a TPT therapy for Lyme disease, and an MDT therapy for treatment-refractory, or drug-resistant, cancer starting with ovarian cancer. We also have TPT research programs in various preclinical stages for traumatic brain injury, hypertension, preeclampsia, glioblastoma, Type I and Type II diabetes, Crohn’s disease, rheumatoid arthritis, ulcerative colitis, lymphedema, staphylococcus, streptococcus and sepsis infection, multiple sclerosis, transplant rejection, and Pediatric Autoimmune Neuropsychiatric Disorders, or PANDAS.

Our research and development programs are based on technology that Dr. M. Karen Newell Rogers developed while working at the University of Colorado, the University of Vermont, and Texas A&M University. We hold the exclusive license to this technology. We have also collaborated with a multitude of scientists and clinicians at universities throughout the country, including Stanford University, Harvard University, and the Scott & White Healthcare Center, where we test TPT in inflammatory disease applications in which we believe TPT could have a benefit.

Plan of Operation

Current Studies

Physician’s IND Phase I study

Our physician’s Investigational New Drug, or P-IND, Phase I clinical trial on late-stage patients with solid tumors is entering its fourth cohort with maximum dosing, and we anticipate the analysis of the results of those trials by mid-2014. This trial is designed to assess the safety of a combination treatment using hydroxycholoroquine, or HCQ, and a cancer drug sorafenib. Sorafenib is currently marketed as Nexavar ^TM . The combination treatment is designed to disrupt the metabolism of the cancer cells, making them more prone to the effects of sorafenib. To date, patients in the P-IND Phase I trial have not experienced unacceptable levels of toxicity. On March 14, 2014, we reported two clinical responses in cohort 3 with disease stabilization in a patient with metastatic ovarian cancer for 4 months, and disease stabilization going into its fifth month in a patient with triple negative breast cancer. The final patient in cohort #3 has stage IV, or metastatic, adenocarcinoma of the lung. The four separate lung lesions have all regressed about 20%. VG Life Sciences Inc. holds the use patent for this combination treatment.

This study, funded in part by a grant of $1.5 million to the Scott and White Foundation, is being conducted at the Cancer Therapy and Research Center at the University of Texas Health Sciences Center at the San Antonio Institute for Drug Development, or CTRC, and Scott and White Hospital, or S&W, in Temple, Texas, under primary investigator, Dr. Tyler Curiel. The study is being carried out by physicians and scientists at the CTRC, with the close involvement of Dr. M. Karen Newell Rogers and a liaison employed by the Company to coordinate administration and communication. Also, the Institutional Review Board of the University of Texas Health Science Center San Antonio has approved further study to include all solid tumors, which include breast, colon, lung, liver, pancreatic, and other types of cancers.

VG1177

In October 2013, we contracted ITR Canada, Inc. to conduct IND-enabling animal safety studies with its patented peptide VG1177. We now expect these studies to conclude in late 2014. These animal safety studies are the next important step to move toward clinical trials.

VG1177 prevents the survival of pro-inflammatory cells under conditions where inflammation is unwanted, thereby allowing the body’s natural containment systems to provide protection from harm, which has implications for chronic inflammatory conditions and autoimmune and infectious diseases.

Plans

With the completion of the P-IND Phase I study with the combination treatment for solid carcinomas, we anticipate a Phase II trial, though we presently do not have the funds to pursue this further development.

We have authorized and funded an animal study to develop our proprietary peptide VG1177, a series of studies that we believe will be complete in late September 2014, and we intend to initiate a Phase I study using an injectable form of VG1177 thereafter.

Results of Operations

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our financial statements.

Cash and Cash Equivalents

For purposes of the statement of cash flows, we consider all highly liquid investments with original maturities of three months or less to be cash equivalents.

Impaired Asset Policy

We follow generally accepted accounting policies related to accounting for the impairment of long-lived assets. Long-lived assets are measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operation.

Research and Development

We charge research and development expenses to operations as incurred.

Reclassification and Restatements

Certain amounts from prior periods have been reclassified with respect to the years ended December 31, 2013 and 2012 to conform to the current period presentation. These reclassifications have not resulted in any material changes to our accumulated deficit or the net losses presented.

Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Basic and Diluted Net Loss Per Share

We compute loss per share in accordance with generally accepted accounting principles, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. The treasury stock method is used to determine the dilutive effects of stock options and warrants. Dilutive loss per share is equal to the basic loss per share for the years ended December 31, 2013 and 2012 because common stock equivalents would have been anti-dilutive.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. We calculate fair value based on assumptions that market participants use in pricing the asset or liability, not on assumptions specific to our Company.

We measure the fair value based on whether values are observable in the market.

These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Our financial instruments consist of cash, notes payable, accounts payable, accrued expenses, and accrued interest, convertible notes payable and various forms of convertible indebtedness. The carrying value of these financial instruments approximates their fair value based on their liquidity, their short-term nature or application of appropriate risk based discount rates to determine fair value. These financial assets and liabilities are valued using level 2 inputs, except for cash which is at level 1.

Stock-Based Compensation

We record stock-based compensation by using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Concentration of Credit Risk

We have financial instruments that are exposed to concentrations of credit risk and consist primarily of cash. We routinely maintain cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit Insurance Corporation, or FDIC, insurance limits. We believe that these financial institutions are of high quality and the risk of loss is minimal. At December 31, 2013, we had cash balances in excess of FDIC limits of approximately $500,000.

Revenue

We have not generated any revenue from product sales or royalties from product sales to date. We do not expect to earn revenues until we have received FDA approval to market our products.

Research and Development

Research and development expenses increased by 63% to $808,517 in 2013 as compared to $496,245 in 2012. It consisted principally of compensation to consultants and advisors assisting in development of our licensed science. Research and development expenses include reimbursement of certain research and development expenses related to the development of our licensed patents by the University of Texas, including fees for Dr. Newell’s services pursuant to a funding agreement with Dr. M. Karen Newell, Scott & White, a non-profit organization, and the Company. This arrangement was entered into in March 2013 for a two year period.

Through December 31, 2013, we have received $474,000 in proceeds all of which has been paid or accrued as a reimbursement to the University of Texas. Non-cash expenses consisted principally of the fair value of common stock purchase options included in 2013 approximating $247,000 in 2013 as compared to $90,000 in 2012. The increase is attributable to options granted and vested in 2013 pursuant to our 2013 Equity Incentive Plan adopted by our Board of Directors and approved by shareholders in December 2013.

General and Administrative Expenses

General and administrative expenses increased by 301% to $1,354,127 in the year ended December 31, 2013 from $337,836 in the same period in 2012. In 2013 the Company incurred a non-cash charge approximating $1,189,000 in stock based compensation related to common stock options granted in 2013 pursuant to the 2013 Equity Incentive Plan that it did not incur in the previous year. Therefore the comparable cash component of general and administrative expenses decreased to approximately $165,000 in 2013. In 2013, management conducted a review of its outstanding accounts payable liabilities and determined that a reduction in these liabilities approximating $122,000 was required. This amount is reflected as a credit in general and administrative expenses. After eliminating the effect of this credit, expenses incurred in 2013 approximated $317,000 as compared to $267,000 in 2012, an adjusted increase of $50,000 or 19%. The current year also includes the write-off of a $100,000 investment in an unconsolidated subsidiary deemed worthless by management, increases in insurance expense, and reductions in travel and entertainment, rent and other miscellaneous expenses.

Interest Expense and Interest Income

Interest expense declined 71% to $1,075,905 in 2013 from $3,758,840 in 2012 or a decrease of $2,682,935. Interest expense incurred is substantially all non-cash. The following are the principal elements of the change in interest expenses between 2013 and 2012:

Convertible Debt – Related Parties

Interest expense incurred with related parties increased to $352,000 in the year ended December 31, 2013 as compared to $42,000 in the same period in 2012. The principal item is the accretion of debt discount related to the MedBridge Venture Fund financing of $223,000 in 2013 as compared to $0 in 2012. Interest expense associated with the secured revolving credit note and convertible unsecured note when combined increased by approximately $52,000 in 2013 as compared to 2012, partially as a result of an increase in the interest rate associated with the current arrangement as compared to the prior one and other miscellaneous adjustments. Imputed interest related to convertible revolving credit notes increased by $30,000 in 2013 as compared to 2012.

Convertible Debt – Other

Interest expense incurred related to other parties decreased to $724,000 in the year ended December 31, 2013 as compared to $3,717,000 in 2012. The principal item in this category is related to the interest expense associated with the convertible debt with DMBM. We received $106,000 in funds in 2013 as compared to $762,000 in 2012. Amendments and restatements were agreed to by the parties with respect to the notes issued for proceeds approximating $850,000 in the period November 2011 to December 2012, including extending the maturity, limiting satisfaction under most circumstances to issuance of Company common stock at a discount, and the elimination of any existing defaults, accrued and future interest. Adjustments were agreed to with respect to conversion prices subsequent to our reverse stock split. The charges resulting from these modifications in 2012 of $3,453,000 included the beneficial conversion feature arising from the original note issuance and subsequent changes caused by stock price fluctuation; changes in the beneficial conversion arising from the aforementioned amendments and subsequent fluctuations in the stock price. Interest on the DMBM facility declined to $488,000 in 2013, including amortization of debt discount related to the MVF financing. In 2013 and 2012, we incurred approximately $0 and $114,000, respectively, associated with the beneficial conversion feature of unsecured notes and warrants issued to several investors. We also incurred interest aggregating $186,000 in 2013 as compared to $86,000 in 2012 related to several debt settlement arrangements.

Derivative Expense

Derivative expense increased to $2,495,663 in the year ended December 31, 2013 as compared to $582,362 in the year ended December 31, 2012. Derivative expense, consisting of all non-cash charges, consists principally of the fair valuation of certain discounts from market price of conversion features and the period to period changes in these amounts. These amounts have increased primarily as a result of the MedBridge Venture Fund financing and similar transactions as well as the amended and restated convertible promissory notes and modifications with DMBM.

Personnel Expenses

Management salaries, including fees, increased by 110% to $772,432 in the year ended December 31, 2013 from $367,500 in the year ended December 31, 2012 due to $339,000 in fees for services incurred in connection with the MedBridge Development Company, or MDC, arrangement and $125,000 in executive services pursuant to the MedBridge Venture Fund financing, both in 2013, partially offset by certain consulting agreements cancelled in 2012. Non-cash expenses, consisting of stock based compensation declined as a result of the aforementioned terminations.

Legal and Professional Expenses

Legal and professional fees increased by 59% to $874,133 in the year ended December 31, 2013 from $551,060 in the same period in 2012 or an increase of $323,073. This increase was principally due to increased counsel fees pursuing and registering patents and licenses of our licensed sciences. Services related to (i) intellectual property (ii) domestic and international patent protection filings regarding licensed technologies and (iii) OTC Markets filings and status, as well as other normal corporate legal matters.

Consulting Fee Expenses

Consulting fees decreased by 88% to $98,421 in the year ended December 31, 2013 from $845,871 in the previous year or a decrease of $748,450. The Company did not renew its consulting agreements with two corporate consultants who were performing fund raising, corporate communications and corporate finance services. These agreements expired December 31, 2012. This accounted for a reduction in 2013 as compared to 2012 of $570,000 in fees and approximately $177,000 in stock based compensation, partially offset by increases for services related to investor relations and other expenses.

Net Loss

Our net loss attributable to common shareholders for the year ended December 31, 2013 was $7,419,722 as compared to $6,850,634 for the comparable period of the preceding year. Operating expenses increased by 50% to $3,907,630 for the year ended December 31, 2013 as compared to $2,598,512 in the same period in 2012.

The above table shows the cash and non-cash components of each of the expense categories included in results of operations in the year ended December 31, 2013 and 2012. Any portion of employee salaries and consulting fees not paid in cash as incurred under the respective agreements are satisfied with unsecured convertible non-interest bearing notes due December 31, 2015. The holder may convert any amount of these notes prior to maturity at a 20% discount from the 20 day VWAP on the conversion date. All notes that remain outstanding on maturity are automatically convertible into common shares at a 20% discount from the 20 day VWAP upon maturity.

Revenue

We have not generated any revenue from product sales or royalties from product sales to date. We do not expect to earn revenues until we have received FDA approval to market our products.

Research and Development

Research and development expenses increased by 563% to $411,606 in the quarter ended March 31, 2014 as compared to $62,070 in the same quarter in 2013. The Company incurred $280,000 in the first quarter ended March 31, 2014 as compared to $ 0 in the same quarter in 2013 with respect to new testing being conducted for us by ITR Canada, which was not in process in the preceding year. Other expenditures consisted principally of compensation to consultants and advisors assisting in development of our licensed science. Also included were reimbursement of certain expenses related to the development of our licensed patents by the University of Texas, including fees for Dr. Newell’s services pursuant to a funding agreement with Dr. M. Karen Newell, Scott & White, a non-profit organization, and the Company. Non-cash expenses consisted of the fair value of common stock purchase options included $34,604 in 2014 as compared to $1,500 in 2013. The increase is attributable to options granted and vested in 2013 pursuant to our 2013 Equity Incentive Plan adopted by our Board of Directors and approved by shareholders in December 2013.

General and Administrative Expenses

General and administrative expenses increased by 473% to $369,620 in the quarter ended March 31, 2014 from $64,540 in the same period in 2013. In 2014 we incurred a non-cash charge of $305,080 in stock based compensation for the fair value of common stock options granted in the quarter ended March 31, 2014 pursuant to the 2013 Equity Inceptive Plan as compared to $0 in 2013. The cash component of general and administrative expenses increased to $68,995 in the 2014 quarter as compared to $64,450 in the 2013 quarter.

Interest Expense and Interest Income

Interest expense increased by 139% to $851,813 in the first quarter of 2014 from $356,490 in the same period of 2013 or an increase of $495,323. Interest expense incurred is substantially all non-cash.

Derivative Expense

Derivative expense decreased 87% to $209,017 for the quarter ended March 31, 2014 as compared to $1,589,425 for the quarter ended March 31, 2013. Derivative expense, consisting of all non-cash charges, consists principally of the fair valuation of certain discounts from market price of conversion features and the period to period changes in these amounts. These 2013 amounts were principally attributable to amended and restated convertible promissory notes and modifications with DMBM and with respect to other transactions related to satisfactions in share. In 2014 derivative expenses incurred were largely a result of MVF and similar transactions.

Personnel Expenses

Management salaries, including fees, increased by 252% to $283,125 in the first quarter of 2014 from $80,425 in the first quarter of 2013. This increase was largely due to $60,000 in fees for services incurred in connection with the MedBridge Development Company, or MDC arrangement, and $150,000 in executive services funded by the MedBridge Venture Fund financing both of which originated after the 2013 first quarter. Stock based compensation for 2014 was included in General and Administrative expenses. Stock based compensation in 2014 consisted of shares issued to an accounting consultant and to counsel for a portion of these services.

Legal and Professional Fees

Legal and professional fees increased by 320% to $550,560 in the first quarter of 2014 from $131,200 in the same period for 2013 or an increase of $419,360. This increase was principally due to increased counsel fees pursuing and registering patents and licenses of our licensed sciences; legal, accounting and auditor fees related to our undertaking to prepare a Form 10 and relist the Company. Services in 2013 related to (i) intellectual property (ii) domestic and international patent protection filings regarding licensed technologies and (iii) OTC Markets filings and status, as well as other normal corporate legal matters.

Consulting Fees

Consulting fees decreased by 37% to $36,771 in the quarter ended March 31, 2014 from $58,350 in the same quarter in 2013 or a decrease of $21,579, principally due to decreases for services related to investor relations and other expenses.

Net Loss

Our net loss attributable to common shareholders for the quarter ended March 31, 2014 was $2,703,910 as compared to $2,330,502 for the comparable period of 2013. Operating expenses increased by 316% to $1,651,682 for the quarter ended March 31, 2014 as compared to $396,585 for the comparable period of 2013.

The above table shows the cash and non-cash components of each of the expense categories included in results of operations for the quarters ended March 31, 2014 and 2013. Some portion of employee salaries and consulting fees are not paid in cash as incurred under the respective agreements are evidenced by unsecured convertible non-interest bearing notes due December 31, 2015. The holder may convert any amount of these notes prior to maturity at a 20% discount from the 20 day VWAP on the conversion date. All notes that remain outstanding on maturity are automatically convertible into common shares at a 20% discount from the 20 day VWAP upon maturity.

Liquidity and Capital Resources

We reported a net loss of $7,420,000 for the year ended December 31, 2013. At December 31, 2013, our accumulated deficit amounted to $99,779,000. We reported a net loss of $2,704,000 for the quarter ended March 31, 2014. At March 31, 2014, our accumulated deficit amounted to $102,483,000. In the future, we may raise additional capital from external sources in order to continue the longer term efforts contemplated under our business plan. We expect to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for the sale of our products and continue as a going concern. We cannot provide any assurances that we will be able to raise additional capital. Our management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means, if needed; however, we can provide no assurance that new financing will be available on commercially acceptable terms, if needed.

Sources of Liquidity

As of March 31, 2014, we had cash and cash equivalents of $148,666. Since our inception, substantially all of our operations have been financed through sales of equity securities and various loans.

Reference is made to Item 10 in this Form 10 for a complete listing of the equity and debt financing transactions that we have entered into from 2012 through the current date.

DMBM, Inc.

On January 1, 2013, we entered into an Amended and Restated Amendment to Convertible Debentures with DMBM. In consideration of change in conversion prices on outstanding debentures, the right to receive interest was waived and DMBM’s relinquished its right to receive payment in cash. For advances made in 2012 or before, the debt may be converted into common stock at the lower of $0.21 per share or a 30% discount to the volume-weighted average closing price for the 14 trading days prior to conversion. For advances made in 2013, the debt may be converted into common stock at the lower of $0.05 per share or a 30% discount to the volume-weighted average closing price for the 14 trading days prior to conversion. Under terms of the underlying debentures, DMBM may not engage in any conversions of debt to shares including under the amended terms if upon receipt of such shares DMBM would beneficially own an aggregate number of shares greater than 9.99% of the total of our common stock issued and outstanding.

In September, 2013, we entered a convertible promissory note and warrant purchase agreement with DMBM pursuant to which DMBM will fund up to $220,000, of which $200,000 will be in notes in six equal monthly installments. $66,666 was received as of December 31, 2013, and the satisfaction of a vendor liability in the amount of $20,000, which obligation was satisfied in December 2013. The remainder of the funds were received subsequent to 2013. DMBM received or is entitled to receive an aggregate of 880,000 common shares and warrants, with terms as described above, to purchase 880,000 common shares of our stock.

MedBridge Venture Fund, LLC

Effective on July 13, 2013, we entered into a Convertible Promissory Note and Warrant Purchase Agreement with MedBridge Venture Fund, LLC, or MVF, pursuant to which MVF agreed to purchase $2,235,000 in notes and warrants to purchase an aggregate of 8,940,000 common shares. The notes will bear interest at 8% per annum and mature September 15, 2015, and to the extent not converted prior to maturity, the outstanding amount of the notes and accrued interest will automatically be converted into common stock at the defined conversion price. However, in the event that we are in default at maturity, the balance due under the note would be payable in cash.

Through December 31, 2013 and March 31, 2014, we have received $1,715,000 and $1,945,000, respectively, consisting of cash proceeds of $1,490,000 and $1,520,000, respectively and management services valued at $275,000 and $425,000, respectively, in exchange for which we issued convertible notes and warrants to purchase 6,860,000 and 7,780,000 common shares. Additional notes for monthly services to be provided by MVF from April 1, 2014 to January 12, 2015 valued by the parties at $310,000 and warrants to purchase an additional 1,240,000, at a monthly rate stipulated in the agreement, are to be provided. The services to be provided by MVF include a management team with a President and CEO, Chief Operating Officer, Controller, grant application coordinator, finance administrative assistant and public relations resources. Through March 31, 2014, MVF converted $120,000 in principal at a defined conversion price of $0.0588 per share and received 2,040,817 common shares. If not earlier converted at the holder’s option, common shares will be issuable on conversion of these notes in total in four equal tranches (25% each) on the following dates: December 15, 2014, March 15, 2015, June 15, 2015 and September 15, 2015. The warrants to purchase our common shares are exercisable at $0.45 per share, but not before 48 months and not after 60 months after the date of issuance. The warrants include a cashless exercise feature.

MedBridge Development Company

Effective March 18, 2013 we entered into a Strategic Collaboration Agreement, or SCA with MedBridge Development Company, LLC, or MDC, pursuant to which MDC is providing funding and services to fund continuing research and development and operations and providing administrative assistance for us through March 31, 2015. Services valued at $20,000 per month, subject to adjustment, during the term are to be provided, as well as a line of credit providing $12,500 per month during the term. At December 31, 2013 and March 31, 2014, approximately $130,000 and $190,000, respectively, in services have been provided and $127,500 and $165,000, respectively, in cash installment proceeds have been paid to us. In addition $50,000 was advanced as part of the SCA by a related party. Through March 31, 2014, MDC has converted an aggregate of $304,000 in cash advanced under the line of credit and accrued services into shares and warrants under the terms of the agreement. MDC has conversion rights within thirty days of the end of each quarter during the term of the agreement. Two principals of MDC, Mr. John Tynan and Mr. David Odell, are currently officers, directors, and our shareholders. Subsequent to March 31, 2014, we received an additional $25,000 in cash installment proceeds and $40,000 in services pursuant to the SCA. Further, MDC has the right to make an additional $200,000 available to us.

Best Investment Trust

On October 1, 2013, we entered into an unsecured note with Best Investment Trust, or BIT, formerly known as Best Investments, Inc., in the amount of $993,023, which was $577,328 at December 31, 2013, with interest at 5% per annum, due December 31, 2018. In addition, we issued an identical note in the amount of $63,375 to another individual who participated in the arrangement with BIT. This note was issued as a replacement and amendment of the secured revolving line of credit dated March 5, 2008 and subsequently assigned to BIT. All or any portion of the principal balance and accrued interest may be exchanged for Units at any time. Any unpaid principal due on the maturity date shall automatically be exchanged for Units based upon the exchange price upon maturity. BIT is controlled by our Chairman of the Board, Vice President of Research and Development and Secretary.

Recent Transactions

On January 24, 2014, we entered into a convertible promissory note and warrant purchase agreement with KED Consulting Group, or KED, pursuant to which KED is obligated to provide $270,000 in funding; $100,000 to be paid directly in satisfaction of a vendor liability of ours, which has been paid, and $170,000 in cash in six equal monthly payments of $28,333, of which $141,666 was received through May 31, 2014. KED received warrants to purchase 1,080,000 shares of common stock on execution of this agreement.

In March 2014, individuals holding $115,000 in convertible notes entered into convertible promissory notes and warrant purchase agreements replacing their original notes with us, waiving accrued interest and any other defaults that may have existed as of that date. These individuals also received warrants to purchase 460,000 shares of common stock on execution of this agreement. We also received an additional $50,000 from another investor in the 2014 period under similar terms.

On March 28, 2014, we entered into an Investment Agreement with Dutchess Opportunity Fund II L.P., or Dutchess, whereby Dutchess may purchase up to that number of common shares having an aggregate purchase price of $5,000,000. Under terms of the agreement, we may, at our sole discretion, deliver a Put Notice to Dutchess stating the dollar amount of common shares which we intend to sell to Dutchess on a closing date. The maximum amount that Dutchess can be required to purchase at any one time shall be equal to (1) 200% of the average daily volume for the three trading days immediately preceding the formal date of the notice to Dutchess or (2) $150,000, determined at our sole discretion. The share purchase price is 94% of the lowest daily volume-weighted average price of our stock for the 5 consecutive trading days beginning with the notice date and the ensuing four trading days. The agreement is for a term of three years from the date of execution, or, if earlier, the sale of $5,000,000 or written notice to Dutchess by us. We have undertaken to file a related registration statement with the Securities and Exchange Commission by August 31, 2014 in order for this agreement to be effective.

Off-Balance Sheet Transactions

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 3. Properties.

Pursuant to the Strategic Collaboration Agreement, MedBridge Development Company, LLC, or MDC, has agreed to and is currently providing us with approximately 3,000 square feet of office space in Santa Barbara, California, which serves as our principal executive offices. Under this agreement the value of this service as well as other services is convertible into shares of common stock. We do not have any lease agreements in place. We believe that our properties will be adequate to meet our needs through the first quarter of 2015.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The following tables set forth information related to the beneficial ownership, as of the close of business on May 31, 2014 of our Series A Preferred Stock and common stock by: (i) all persons we know who beneficially hold more than 5% of our securities, (ii) all of our directors, (iii) all of our executive officers and (iv) our directors and executive officer as a group. The information on beneficial ownership in the table and footnotes thereto is based upon data furnished to us by, or on behalf of, the persons listed in the table.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power as indicated with respect to all securities that they beneficially own, subject to applicable community property laws.

In computing the number of securities beneficially owned by a person and the percentage ownership of that person, we deemed outstanding the shares underlying stock options, warrants and convertible notes held by that person that are currently exercisable or exercisable within 60 days after May 31, 2014. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.