Item
1. Financial Statements
EnzymeBioSystems
Condensed
Interim Balance Sheets
|
|
December
31, 2017
(Unaudited)
|
|
|
June
30, 2017
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
427,155
|
|
|
$
|
41,249
|
|
Prepaid
expense
|
|
|
6,000
|
|
|
|
3,000
|
|
Total
current assets
|
|
|
433,155
|
|
|
|
44,249
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
433,155
|
|
|
$
|
44,249
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
6,600
|
|
|
$
|
100
|
|
Accrued
expenses
|
|
|
4,000
|
|
|
|
4,000
|
|
Total
current liabilities
|
|
|
10,600
|
|
|
|
4,100
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
10,600
|
|
|
|
4,100
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, 2,125,000 and 125,000 shares of Series A Preferred Stock issued and
outstanding as of December 31, 2017 and June 30, 2017, respectively
|
|
|
2,125
|
|
|
|
125
|
|
Common
stock, $0.001 par value, 195,000,000 shares authorized, 5,592,010 and 832,235 shares issued and outstanding as of December
31, 2017 and
June 30, 2017, respectively
|
|
|
5,592
|
|
|
|
832
|
|
Additional
paid-in capital
|
|
|
2,208,738
|
|
|
|
1,261,543
|
|
Accumulated
deficit
|
|
|
(1,793,900
|
)
|
|
|
(1,222,351
|
)
|
Total
stockholders’ equity
|
|
|
(422,555
|
)
|
|
|
40,149
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
433,155
|
|
|
$
|
44,249
|
|
The
accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Condensed
Interim Statements of Operations
(Unaudited)
|
|
For
the three months ended
December 31, 2017
|
|
|
For
the three months ended
December 31, 2016
|
|
|
For
the six months ended
December 31, 2017
|
|
|
For
the six months ended
December 31, 2016
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers’
compensation (including stock- based compensation of $398,000, $0, $398,000 and $0 respectively)
|
|
|
422,500
|
|
|
|
18,000
|
|
|
|
439,000
|
|
|
|
36,000
|
|
Professional
Fees
|
|
|
14,830
|
|
|
|
10,000
|
|
|
|
22,330
|
|
|
|
17,500
|
|
Investor
Relations
|
|
|
99,200
|
|
|
|
-
|
|
|
|
99,200
|
|
|
|
-
|
|
Other
|
|
|
9,874
|
|
|
|
1,082
|
|
|
|
11,719
|
|
|
|
3,084
|
|
Total
operating expenses
|
|
|
546,404
|
|
|
|
29,082
|
|
|
|
572,249
|
|
|
|
56,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(546,404
|
)
|
|
|
(29,082
|
)
|
|
|
(572,249
|
)
|
|
|
(56,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income-(loss)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Restitution
from former officer
|
|
|
300
|
|
|
|
-
|
|
|
|
700
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (loss)- net
|
|
|
300
|
|
|
|
-
|
|
|
|
700
|
|
|
|
-
|
|
Net
(Loss)
|
|
$
|
(546,104
|
)
|
|
$
|
(29,082
|
)
|
|
$
|
(571,549
|
)
|
|
$
|
(56,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and diluted
|
|
|
3,636,465
|
|
|
|
832,235
|
|
|
|
2,300,049
|
|
|
|
832,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.07
|
)
|
The
accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Condensed
Interim Statements of Cash Flows
(Unaudited)
|
|
For
the six months ended
December 31, 2017
|
|
|
For
the six months ended
December 31, 2016
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(571,549
|
)
|
|
$
|
(56,584
|
)
|
Adjustments
to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
398,000
|
|
|
|
-
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(3,000
|
)
|
|
|
(6,028
|
)
|
Accounts
payable
|
|
|
6,500
|
|
|
|
200
|
|
Accrued
expenses
|
|
|
-
|
|
|
|
-
|
|
Cash
(used) by operating activities
|
|
|
(170,049
|
)
|
|
|
(62,412
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of Units
|
|
|
551,955
|
|
|
|
-
|
|
Proceeds
from sale of common stock to former chief
executive officer
|
|
|
2,000
|
|
|
|
-
|
|
Proceeds
from sale of Class A Preferred Stock to
Berkeley Clinic, L.C.
|
|
|
2,000
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
555,955
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
385,906
|
|
|
|
(62,412
|
)
|
CASH
- BEGINNING OF THE PERIOD
|
|
|
41,249
|
|
|
|
140,042
|
|
CASH
- END OF THE PERIOD
|
|
$
|
427,155
|
|
|
$
|
77,630
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
-
|
|
|
|
-
|
|
Income
taxes paid
|
|
|
-
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Notes
to the Condensed Interim Financial Statements
December
31, 2017
(Unaudited)
NOTE
1 - CONDENSED INTERIM FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and
cash flows at December 31, 2017 and for all periods presented have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2017
audited financial statements. The results of operations for the period ended December 31, 2017 are not necessarily indicative
of the operating results for the full year.
Basis
of Presentation
In
the opinion of management, the accompanying balance sheets and related interim statements of operations and cash flows include
all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting
principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires
management to make estimates and assumptions the affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results and outcomes may differ from management’s estimates and assumptions.
Interim
results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in
conjunction with information included in the Form 10-K.
Reverse
Stock Split
Effective
October 19, 2017, the Company effected a 1-for-20 reverse stock split of its common stock (which reduced the issued and outstanding
shares of common stock from 16,641,822 shares to 832,235 shares) and its Series A Preferred Stock (which reduced the issued and
outstanding shares of Series A Preferred Stock from 2,500,000 shares to 125,000 shares). The accompanying financial statements
retroactively reflect this reverse stock split.
EnzymeBioSystems
Notes
to the Condensed Interim Financial Statements
December
31, 2017
(Unaudited)
NOTE
2 - GOING CONCERN
These
condensed financial statements have been prepared in accordance with generally accepted accounting principles applicable to a
going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course
of business. As of December 31, 2017, the Company has not recognized any revenues and has accumulated losses of approximately
$(1,793,900) since inception. The Company’s ability to continue as a going concern is contingent upon the successful completion
of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise
equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used to further develop
the Company’s products, to provide financing for marketing and promotion, to secure property and equipment, and for other
working capital purposes. While the Company is putting forth its best efforts to achieve the above plans, there is no assurance
that any such activity will generate sufficient funds necessary to continue operations.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments that might arise from the outcome of this uncertainty.
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue
recognition
The
Company will apply the provisions of ASC 605, Revenue Recognition (“ASC 605”). ASC 605 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize
revenue and provides guidance for the disclosure of revenue recognition policies. The Company will recognize revenue related to
product sales when (i) persuasive evidence of the arrangement exists, (ii) shipment has occurred, (iii) the fee is fixed or determinable,
and (iv) collectability is reasonably assured. For the period from June 26, 2009 (inception) to December 31, 2017, the Company
has not recognized any revenues.
EnzymeBioSystems
Notes
to the Condensed Interim Financial Statements
December
31, 2017
(Unaudited)
Recent
accounting pronouncements
On
July 13, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2017-11.
Among other things, ASU 2017-11 provides guidance that eliminates the requirement to consider “down round” features
when determining whether certain financial instruments or embedded features are indexed to an entity’s stock and need to
be classified as liabilities. ASU 2017-11 provides for entities to recognize the effect of a down round feature only when it is
triggered and then as a dividend and a reduction to income available to common stockholders in basic earnings per share. The guidance
is effective for annual periods beginning after December 15, 2018; early adoption is permitted.
The
Company has early adopted ASU 2017-11. As a result, we have not recognized the fair value of the warrants containing down round
features that were issued in the Private Offering from September 2017 to December 2017 (see Note 4) as liabilities.
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NOTE
4 - STOCKHOLDERS’ EQUITY
The
Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 195,000,000 shares of
its $0.001 par value common stock.
The
shares of Series A Preferred Stock carry a voting weight equal to 10 shares of common stock per share of Series A Preferred Stock,
are not redeemable, and cannot be converted into Common Shares unless it is approved by the Board of Directors and agreed upon
by the Series A Preferred Shareholders. The shares of Series A Preferred stock have no dividend rights but have a liquidation
preference for funds paid for the Series A Preferred Stock shares.
From
September 2017 to December 2017, the Company conducted a Private Offering with accredited investors to help fund the Company.
The Company offered up to 3,750,000 Common Units at a price of $0.20 per Unit. Each Unit consists of one share of post reverse
stock split common stock, one Class A warrant exercisable at $0.30 per share of post reverse stock split common stock, one Class
B warrant exercisable at $0.40 per share of post reverse stock split common stock and one Class C warrant exercisable at $0.60
per share of post reverse stock split common stock. The Offering provided that Berkeley Clinic, L.C. (“Berkeley”)
(holder of 75,000 shares of Common Stock and 125,000 shares of Series A Preferred Stock prior to Berkeley’s purchase of
2,000,000 shares of Series A Preferred Stock discussed in the fourth succeeding paragraph below) would maintain the same 63.6%
voting control of the Company that it held prior to the Offering. The offering and sale of the Units in the Offering were exempt
from registration under the Act by virtue of Section 4(2) of the Act, and Rule 506. From September 6, 2017 to December 12, 2017,
we sold a total of 2,759,775 Common Units to 16 investors at a price of $0.20 per Unit for gross proceeds of $551,955.
EnzymeBioSystems
Notes
to the Condensed Interim Financial Statements
December
31, 2017
(Unaudited)
NOTE
4 - STOCKHOLDERS’ EQUITY (Continued)
The
Class A, Class B and Class C warrants all expire August 31, 2022, and all provide for the reduction of their exercise prices if
we directly or indirectly sell or grant any right with respect to our common stock or common stock equivalents at an effective
price lower than the current exercise price of any of the Class A warrants.
Holders
that exercise Class C warrants will receive Class D cashless warrants to receive additional shares of common stock at no cost
in the event that the closing price of the common stock on the business day immediately prior to the date of exercise exceeds
$0.40 per share.
On
November 29, 2017, Gary Rojewski, the former CEO of the Company from June 2, 2014 to December 27, 2017, purchased 2,000,000 shares
of unregistered restricted common stock in exchange for $2,000 cash. Mr. Rojewski was entitled to purchase these shares based
on past services rendered the Company. The Company recognized officers’ compensation expense in the amount of $398,000,
which represents the excess of the $400,000 estimated fair value of the 2,000,000 shares of common stock (using the $0.20 per
share price used in the Private Offering) over the $2,000 purchase price.
On
December 29, 2017, Berkeley Clinic, L.C. purchased 2,000,000 Shares of Series A Preferred Stock for $2,000, to maintain voting
control of the Company, as was required pursuant to the Private Offering discussed in the fourth preceding paragraph above.
NOTE
5 - RELATED PARTY TRANSACTIONS
On
September 17, 2017, the Company organized a Nevada corporation named LCNS as a subsidiary of the Company. On September 29, 2017,
LCNS sold 2,000,000 restricted shares of LCNS common stock to T. J. Jesky (1,000,000 shares) and Mark DeStefano (1,000,000 shares)
at a price of $.005 per share and $10,000 was deposited in LCNS’s attorney’s client trust account. Jesky and DeStefano
are members of Berkeley Clinic, L.C. (See Note 4).
The
sole officer and director of the Company is involved in other business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between
the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE
6 – PROVISION FOR INCOME TAXES
The
provision for (benefit from) income taxes differs from the amount computed by applying the statutory federal income tax rate to
income (loss) before provision for income taxes. The sources and tax effects of the differences are as follows:
|
|
Six Months Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Expected tax at 35%
|
|
$
|
(200,042
|
)
|
|
$
|
(19,804
|
)
|
Non-deductible stock based compensation
|
|
|
139,300
|
|
|
|
-
|
|
Increase in valuation allowance
|
|
|
60,742
|
|
|
|
19,804
|
|
Provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
tax assets as of December 31, 2017 and June 30, 2017 are calculated as follows:
|
|
December 31, 2017
|
|
|
June 30, 2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
293,139
|
|
|
$
|
427,823
|
|
Less: valuation allowance
|
|
|
(293,139
|
)
|
|
|
(427,823
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
During
the six months ended December 31, 2017, the Company recorded an increase in the deferred tax asset and the valuation allowance
of $60,742 to recognize the tax effect of the $173,549 taxable loss (using a 35% effective ax rate) incurred in this period which
management, as is the case with the entire $1,395,900 net operating loss carryforward at December 31, 2017, believes is not more
likely than not will be realized. Also, the Company recorded a decrease in the deferred tax asset and the valuation allowance
of $195,426 (from $488,565 to $293,139) to reflect the reduction of the United States corporate income tax rate from 35% to 21%
effective January 1, 2018 resulting from The Tax Cuts and Jobs Act enacted on December 22, 2017. Realization of deferred tax assets
is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are
expected to be available to reduce taxable income.
The
net operating loss carryforward of approximately $1,395,900 at December 31, 2017 and approximately $1,222,351 at June 30, 2017
expires commencing in year 2029.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting
purposes are subject to annual limitations. Should a significant change in ownership occur, net operating loss carryforwards may
be limited as to use in the future.
The
Company has no tax positions. All tax years remain subject to examination by taxing jurisdictions.
NOTE
7 – SUBSEQUENT EVENT
On February
16, 2018, the Securities and Exchange Commission announced the temporary suspension of trading in the Company’s securities
from February 20, 2018 to March 5, 2018 because of questions regarding the accuracy of information in filings with the Commission,
including a Form S-1 filed on January 11, 2018, a Form 8-K filed on January 4, 2018, and forms 10-K filed on September 20, 2016
and October 13, 2017 for the fiscal years ended June 30, 2016 and 2017, respectively, concerning, among other things, the company’s
business operations and the identity of its officers.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item
2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Information
This
Quarterly Report on Form 10-Q contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words
“anticipate,” “believe,” “estimate,” “will,” “plan,” “seeks,”
“intend,” and “expect” and similar expressions identify forward-looking statements. Although we believe
that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions,
or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated,
expressed, or implied, by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that
could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on
Form 10-Q All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by the cautionary statements set forth in this Quarterly Report on Form 10-Q. Except as required by federal securities laws, we
are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
Critical
Accounting Policies
There
have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for
the fiscal year ended June 30, 2017.
Results
of Operations
Overview
of Current Operations
History
and Organization
The
Company was organized June 26, 2009 (Date of Inception) under the laws of the State of Nevada, as EnzymeBioSystems. On September
17, 2017, the Company incorporated LCNS in Nevada as a wholly owned subsidiary to conduct different business operations than the
Company.
Our
Business
EnzymeBioSystems
researches specialty enzymes and enzyme related products. We utilize enzyme technologies to develop solutions for a broad range
of applications within the specialty chemical industry. These markets are largely served by a small number of large, well-established
businesses and research university centers. We plan to work collaboratively with those industrial companies to develop differentiated,
high performance enzyme solutions for their target markets, and to leverage their well-developed distribution capabilities to
better exploit commercial opportunities. Our enzyme technology will tie-in with development of new commercial biological active
compounds. We hope we can develop specialty enzymes to eliminate the side effects and toxicity of the new commercially developed
products.
Enzyme
Industry
Enzymes
can be categorized as “enzyme inhibitors” and “enzyme activators.” Enzyme inhibitors are molecules that
bind to enzymes and decrease their activity. Since blocking an enzyme’s activity can kill a pathogen or correct a metabolic
imbalance, many drugs are enzyme inhibitors. Enzyme activators are molecules that bind to enzymes and increase their activity.
These molecules are often involved in the allosteric [defined as having to do with a protein with a structure that is altered
reversibly by a small molecule so that its original function is modified] regulation of enzymes in the control of metabolism.
Both enzyme inhibitors and enzyme activators are currently used by many pharmaceutical and biotechnology companies in research
and development of new drug compounds.
Enzymes
also can be used as pharmaceutical products. Enzymes as pharmaceuticals have two important features that distinguish them from
all other types of pharmaceutical products. First, enzymes often bind and act on their targets with great affinity and specificity.
Second, enzymes are catalytic and convert multiple target molecules to the desired products. These two features make for what
are considered specialized enzymes that can accomplish therapeutic biochemistry in the body that small molecules cannot. These
characteristics have resulted in the development of many enzyme drugs for a wide range of disorders, e.g. insulin and interferon.
Business
Strategy
We
foresee our two areas of business opportunity, that include: 1) buying raw materials to produce specialty enzymes in our lab facility
and offer these products for sale to research facilities and pharmaceutical companies; and 2) become a specialty contract manufacture
for research universities and pharmaceutical companies that utilize enzymes in their research programs.
We
plan to deploy our enzyme technologies across diverse markets that represent commercial opportunities in helping us build visibility
for EnzymeBioSystems. We plan to use enzyme technologies to develop commercial solutions for a broad range of applications within
the specialty chemical industry.
We
currently have only limited resources and capability to develop, manufacture, market, sell, or distribute specialty enzyme products
on a commercial scale. We will determine which specialty enzyme products to pursue independently based on various criteria, including:
investment required, estimated time to market, regulatory hurdles, infrastructure requirements, and industry-specific expertise
necessary for successful commercialization. At any time, we may modify our strategy and pursue collaborations for the development
and commercialization of some specialty enzyme products that we had intended to pursue independently. In order for us to commercialize
more specialty enzyme products directly, we plan to establish or obtain through outsourcing arrangements additional capability
to develop, manufacture, market, sell, and distribute such products.
Marketing
Strategy
Through
our future independent and collaborative research and development programs, we plan to develop commercial enzyme products across
multiple markets. In addition, we plan to develop a pipeline of enzyme product candidates that we expect to launch independently
and/or in collaboration with strategic partners.
Competition
Our
competitors have substantially greater financial, technical, and marketing resources than we do and may succeed in developing
products that would render our products obsolete or noncompetitive. In addition, many of these competitors have significantly
greater experience than we do in their respective fields. Our ability to compete successfully will depend on our ability to develop
proprietary products that reach the market in a timely manner and are technologically superior to, and/or are less expensive than,
other products on the market. Current competitors or other companies may develop technologies and products that are more effective
than ours. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different
approaches developed by one or more of our competitors. The existing approaches of our competitors or new approaches or technology
developed by our competitors may be more effective than those developed by us.
Any
enzyme products that we develop will compete in multiple, highly competitive markets. For example, Codexis, Maxygen, Inc., Evotec,
and Xencor have alternative evolution technologies. Integrated Genomics Inc., Myriad Genetics, Inc., and ArQule, Inc. perform
screening, sequencing, and/or bioinformatics services. Novozymes A/S, Verenium Corporation, Genencor International Inc. and MPBiomedicals
are involved in development, overexpression, fermentation, and purification of enzymes. Many of these competitors have significantly
greater financial and human resources than we do. We believe that the principal competitive factors in our market are access to
genetic material, technological experience and expertise, and proprietary position.
Our
Current Business Strategy
Management
is evaluating an enzyme compound which it believes has a specific therapeutic value in fighting tumors, specifically breast tumors.
Management has undertaken research to study its synthetic Amooranin compound, which the Company has developed in-house. Some studies
of Amooranin have already been completed in rats. Further, research is required to study Amooranin in a different animal species.
Amooranin,
a triterpene acid with a novel structure isolated from the stem bark of Amoora rohituka, a tropical tree growing wild in India.
Recent studies showed that multiple breast cancer cell lines respond to Amooranin in growth suppression assays. Mechanistic studies
suggest that Amooranin suppresses growth factor signaling, induces cell cycle arrest, and promotes apoptosis. Because the anti-neoplastic
activity of the plant-derived compound of Amooranin is relatively weak.
Amooranin-Me,
our synthetic analogue was found to inhibit proliferation of several breast cancer cells with greater potency than the parent
compound of Amooranin. Preliminary screening of Amooranin-Me in in-vitro experiments revealed some potency against breast cancer
MCF-7 cells with concentrations down to the nanomolar range. All these studies indicate that Amooranin-Me is a promising drug
with potential to be used for human breast cancer prevention.
The
Company has moved further along with the process of evaluating an enzyme compound which they believe has specific therapeutic
value in fighting tumors. In an effort to evaluate this compound, management has had a series of meetings with various contract
research organizations to enlist their expertise in performing animal studies. The research will study the use of an antitumor
natural product called amooranin. Specifically, the two areas of this study will include: 1) an exam of the
in vitro
cytotoxicity
of amooranin against hepatocellular carcinoma cells, and 2) investigate the dose responsive antitumor actions of amooranin against
chemically induced hepatic tumorgenesis in rats and dogs.
Management
wants to continue its research with Amooranin that will lead to the filing of an Investigational New Drug Application (“IND”)
with the U. S. Food and Drug Administration. It is still too early to determine if this project has any potential value for the
Company, and there are no assurances that the Company will ever be able to obtain an IND for this compound.
As
of the date of this report, management of the Company has identified an independent chemical laboratory that can produce sufficient
quantities of amooranin to proceed with the required animal studies. A small preclinical batch of methyl amooranin has been manufactured
by the independent chemical laboratory. This preclinical batch is not large enough to sufficiently test in several animal studies
needed to obtain an IND.
Recent
Event
SEC
Order of Trading Suspension
On
February 16, 2018, the Securities and Exchange Commission announced the temporary suspension, pursuant to Section 12(k) of the
Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of EnzymeBioSystems at 9:30 a.m.
EST on February 20, 2018, and terminating at 11:59 p.m. EST, on March 5, 2018. The Commission temporarily suspended trading in
the securities of EnzymeBioSystems because of questions regarding the accuracy of information in filings with the Commission,
including a Form S-1 filed on January 11, 2018, a Form 8-K filed on January 4, 2018, and forms 10-K filed on September 20, 2016
and October 13, 2017 for the fiscal years ended June 30, 2016 and 2017, respectively, concerning, among other things, the company’s
business operations and the identity of its officers. See added Risk Factor, in Part II, Item 1A below.
Patent,
Trademark, License and Franchise Restrictions and Contractual Obligations and Concessions
We
do not have any trademarks. In 2012, the two founders of the Company, along with a third party, as inventors, filed Patent Application
# 14/369339 entitled “Amooranin Compounds and Analogs Thereof and Related Methods of Use.” The U.S. Patent Office
informed us that they published the aforementioned pending Patent on December 4, 2014 (Publication No. 2014-0357711A1).
On
November 28, 2017, we received from the U.S. Patent Office, Patent No. 9,828,326.
We
plan to rely on trade secrets, technical know-how, and continuing invention to develop and maintain our competitive position.
We will take security measures to protect our trade secrets, proprietary know-how and technologies, and confidential data and
continue to explore further methods of protection. Our policy is to execute confidentiality agreements with our employees and
consultants upon the commencement of an employment or consulting arrangement with us. These agreements generally require that
all confidential information developed or made known to the individual by us during the course of the individual’s relationship
with us be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived
by the individual in the course of rendering services to us shall be our exclusive property.
Results
of Operations for the three months and six months ended December 31, 2017
During
the three month period ended December 31, 2017, the Company did not generate any revenues. In addition, the Company does not expect
to generate any profit for the next twelve months.
For
the three months ended December 31, 2017, we experienced a net loss of $(546,104) or $(0.15) per share as compared to a net loss
of $(29,082) or $(0.03) per share for the same period last year. The net loss for the three months ended December 31, 2017 was
attributed to $422,500 in officers’ compensation (including $398,000 stock-based compensation), $14,830 in professional
fees, $99,200 in Investor Relations, and $9,874 in other operating expenses.
For
the six months ended December 31, 2017, we experienced a net loss of $(571,549) or $(0.25) per share as compared to a net loss
of $(56,584) or $(0.07) per share for the same period last year. The net loss for the six months ended December 31, 2017 was attributed
to $439,000 in officers’ compensation (including $398,000 stock-based compensation), $22,330 in professional fees, $99,200
in Investor Relations, and $11,719 in other operating expenses.
Revenues
The
Company has generated no revenues since its inception. As of December 31, 2017, the Company had an accumulated deficit of $(1,793,900).
There can be no assurances that the Company can achieve or sustain profitability or that the Company’s operating losses
will not increase in the future.
Going
Concern
Our
independent auditors included an explanatory paragraph in their report on the June 30, 2017 audited financial statements regarding
concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing
the circumstances that lead to this disclosure by our independent auditors. Our ability to continue as a going concern is contingent
upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.
Therefore,
management plans to raise equity capital to finance the operating and capital requirements of the Company. While the Company is
devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will
be available for operations. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern.
Plan
of Operation
Management
does not believe that the Company will be able to generate any significant profit during the coming year. Management believes
developmental costs will most likely exceed its cash reserves for the coming year. Management is evaluating an enzyme compound,
specifically a synthetic Amooranin which it believes has a specific therapeutic value in fighting tumors. Therefore, management
will be required to seek outside funding, of at least $1,000,000.
Future
funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company’s
business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or
product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable
to the Company, or at all, and such financing, if available, might be dilutive.
Management
hopes its research will identify an enzyme compound developed by the Company that will lead to the filing of an Investigational
New Drug Application with the U. S. Food and Drug Administration. It is still too early to determine if this project has any potential
value for the Company, and there are no assurances that the Company will ever be able to obtain an IND for this compound.
Summary
of any product research and development that we will perform for the term of our plan of operation.
We
plan to deploy our enzyme technologies across diverse markets that represent commercial opportunities in helping us build visibility
for EnzymeBioSystems. We believe that this market approach might give us the ability to broadly apply our enzyme development and
manufacturing capabilities while minimizing commercial risk in that research or pharmaceutical companies might change their needs
during our development processes.
Expected
purchase or sale of plant and significant equipment.
We
have not purchased or sold any plant or significant equipment.
Significant
changes in the number of employees.
As
of December 31, 2017, we did not have any employees. We are dependent upon our one officer for our future business development.
As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact
number is not quantifiable at this time.
Liquidity
and Capital Resources
The
Company is authorized to issue 195,000,000 shares of its $0.001 par value common stock and 5,000,000 shares of its $0.001 par
value preferred stock. As of December 31, 2017, the Company has 5,592,010 shares of common stock issued and outstanding and 2,125,000
of its Series A Preferred Shares issued and outstanding. The numbers have been adjusted for a 1-for-20 reverse stock split that
took place on October 19, 2017. As of December 31, 2017, the Company had current assets of $433,155 and current liabilities of
$10,600.
The
Company has limited financial resources available, which has had an adverse impact on the Company’s liquidity, activities
and operations. In order for the Company to remain a Going Concern it will need to find additional capital or generate revenues.
Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks
or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest,
or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects
of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances
can be given that any necessary financing can be obtained on terms favorable to the Company, or at all.
EnzymeBioSystems’s
Funding Requirements
Future
funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company’s
business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or
product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable
to the Company, or at all, and such financing, if available, might be dilutive.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital
resources that is material to investors.
Critical
Accounting Policies and Estimates
Revenue
Recognition: We will recognize revenue from product sales once all of the following criteria for revenue recognition have been
met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject
to refund or adjustment; and collection of the amount due is reasonable assured.
New
Accounting Standards
The
Company’s management has evaluated all the recently issued accounting pronouncements through the filing date of these financial
statements and does not believe that any of these pronouncements will have a material impact on the Company’s financial
position and results of operations.
Item
4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Our
disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), are designed to ensure that information required to be disclosed in reports filed or submitted
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted
by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and
the Interim Accounting Officer, to allow timely decisions regarding required disclosures.
Management
has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.
Based on such evaluation, management concluded that, our disclosure controls and procedures were not effective. Our disclosure
controls and procedures were not effective because of the “material weaknesses” described below under “Management’s
report on internal control over financial reporting,” which are in the process of being remediated as described below under
“Management Plan to Remediate Material Weaknesses.”
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision
of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
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pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
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provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management
and our Board of Directors; and
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provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on our financial statements.
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Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute,
assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over
financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override.
Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting.
However,
these inherent limitations are known features of the financial reporting process, and it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in
conditions or the degree of compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making its
assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on its assessment, management has concluded that we had certain
control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As
a result, our internal control over financial reporting was not effective as of December 31, 2017.
A
“material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual
or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of management’s review of the investigation issues and results, and other internal reviews and evaluations that
were completed after the end of the year related to the preparation of management’s report on internal controls over financial
reporting required for this annual report on Form 10-K, management concluded that we had material weaknesses in our control environment
and financial reporting process which consisted of the following:
Deficiencies
Related to the Design and Operation of Certain Company-Level Controls
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Non-compliance
by the former chief financial officer with regards to unauthorized travel and entertainment expenses;
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Unauthorized
personal charges by the former chief financial officer.
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Deficiencies
Related to the Design and Operation of Certain Accounting Procedures
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Inadequate
accounting procedures responsible for processing payment requests by our former chief financial officer related to travel
and entertainment expenditures
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Lack
of clear procedures for ensuring appropriate expense controls.
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In
consultation with our board of directors and new interim accounting officer, we are implementing certain remediation measures,
and we are in the process of creating and implementing additional remediation plans for the internal control deficiencies noted
above. The remediation activities include:
Design
and Operation of Certain Company-Level Controls
Management
has conducted an internal investigation relating to the unauthorized travel and entertainment expenses, incurred by the former
chief financial officer. We have identified various expenses by the Company’s former chief financial officer since February,
2015 that were inconsistent with Company policies or that lacked sufficient documentation. On September 21, 2015, the former chief
financial officer was dismissed for cause, based on a breach of his fiduciary duties. The Board has subsequently appointed a new
interim accounting officer and corporate secretary
We
will implement a check-and-balance system to monitor all expenses.
Design
and Operation of Certain Accounting Procedures
We
expect to complete the following remediation during the remainder of 2018.
We
will adopt a new policy and procedure that authorizes and reviews the accounting oversight by persons at the appropriate levels
within the Company.
Changes
in Internal Controls over Financial Reporting
On
September 21, 2015, we replaced our former chief financial officer. We added a new interim accounting officer who has experience
related to the application of generally accepted accounting principles and U.S. Securities and Exchange Commission rules and regulations
as they pertain to financial reporting. We believe these personnel changes will strengthen our controls related to financial reporting.
Other than these changes, there have been no other changes to our internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.