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|
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|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
|
|
X
|
|
QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the quarter
period ended
September 30, 2008
|
|
|
|
TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period
from___________ to __________
|
|
Commission file number
000-52331
|
MOLECULAR
PHARMACOLOGY (USA) LIMITED
|
(Exact name of registrant
as specified in its charter)
|
NEVADA
|
|
71-0900799
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Drug Discovery Centre
28 Oxford Street, Leederville 6007 Perth, Western Australia
|
(Address of principal
executive offices)
|
011-61-9443-3011
|
(Registrant's
telephone number including area code)
|
Not Applicable
|
(Former name, former
address and formal fiscal year, if changed since last report)
|
|
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
|
Yes
x
|
No
o
|
|
Indicate by check mark whether the registrant is
large accelerated filer, an accelerated filer, a non accelerated filer, or a
small reporting company. See the definitions of “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
|
Large Accelerated Filer
o
|
Accelerated Filer
|
Non-Accelerated Filer
o
|
Smaller Reporting Company
x
|
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act)
|
Yes
o
|
No
o
|
Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Section 12, 13 and
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court
|
|
Yes
x
|
No
o
|
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
|
|
|
|
|
|
|
|
|
|
|
|
|
111,553,740
common shares issued and outstanding as of November 13, 2008.
|
i
MOLECULAR PHARMACOLOGY (USA)
LIMITED
Form 10-Q
September 30, 2008
Table of
Contents
PART
I – FINANCIAL INFORMATION
|
|
Item 1.
|
Financial
Statements
|
1
|
Item 2.
|
Management
Discussion and Analysis or Plan of Operating
|
19
|
Item 3.
|
Quantitative and
Quantitative Disclosures About Market Risk
|
28
|
Item 4.
|
Controls and
Procedures
|
29
|
|
|
|
PART
II – OTHER INFORMATION
|
|
|
|
|
Item 1.
|
Legal Proceedings
|
31
|
Item 1A.
|
Risk Factors
|
31
|
Item 2.
|
Unregistered Sales
of Equity Securities and Use of Proceeds
|
31
|
Item 3.
|
Defaults Upon
Senior Securities
|
31
|
Item 4.
|
Submission of
Matters to a Vote of Security Holders
|
31
|
Item 5.
|
Other Information
|
31
|
Item 6.
|
Exhibits and
Reports on Form 8-K
|
31
|
|
|
|
SIGNATURES
|
32
|
ii
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The information in this report for the three months ended September 30,
2008, is unaudited but includes all adjustments (consisting only of normal
recurring accruals, unless otherwise indicated) which Molecular Pharmacology
(USA) Limited ("
Molecular USA
"
or the "
Company
") considers necessary
for a fair presentation of the financial position, results of operations,
changes in stockholders' equity and cash flows for those periods.
The financial statements should be read in conjunction with Molecular
USA's financial statements and the notes thereto contained in Molecular
USA's Audited Financial Statements for the year ended June 30, 2008, in the
Form 10KSB filed with the SEC on October 2, 2008.
Interim results are not necessarily indicative of results for the full
fiscal year.
The unaudited financial statements start on the next page.
1
Molecular Pharmacology
(USA) Limited
(A Development Stage Company)
Interim Consolidated Financial
Statements
(Expressed
in U.S. Dollars)
30 September 2008
(Unaudited)
2
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited)
|
|
As at
30 September
2008
|
|
As at
30 June
2008
(audited)
|
|
|
$
|
|
$
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
Cash and cash
equivalents
|
|
8,542
|
|
21,490
|
Amounts
receivable
|
|
2,659
|
|
9,396
|
|
|
|
|
|
|
|
11,201
|
|
30,886
|
|
|
|
|
|
Property,
plant and equipment
(Note 3)
|
|
3,611
|
|
3,712
|
|
|
|
|
|
|
|
14,812
|
|
34,598
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
Accounts payable and
accrued liabilities (Note 4)
|
|
19,502
|
|
26,266
|
|
|
|
|
|
|
|
19,502
|
|
26,266
|
|
|
|
|
|
Due
to related parties
(Note 5)
|
|
1,233,950
|
|
1,424,159
|
|
|
|
|
|
|
|
1,253,452
|
|
1,450,425
|
|
|
|
|
|
Stockholders'
deficiency
|
|
|
|
|
Capital
stock
(Note 6)
|
|
|
|
|
Authorized
|
|
|
|
|
300,000,000 of
common shares, par value $0.001
|
|
|
|
|
Issued and
outstanding
|
|
|
|
|
30 September 2008
– 111,553,740 common shares, par value $0.001
|
|
|
|
|
30 June 2008 – 111,553,740 common
shares, par value $0.001
|
|
111,554
|
|
111,554
|
Additional
paid-in capital
|
|
106,707
|
|
106,707
|
Cumulative
translation adjustment
|
|
(89,099)
|
|
(294,838)
|
Deficit,
accumulated during the development stage
|
|
(1,367,802)
|
|
(1,339,250)
|
|
|
|
|
|
|
|
(1,238,640)
|
|
(1,415,827)
|
|
|
|
|
|
|
|
14,812
|
|
34,598
|
Nature
and Continuance of Operations
(Note
1) and
Commitment
(Note 8)
On behalf of the Board:
/s/ Jeffrey Edwards
Director
Jeffrey Edwards
The
accompanying notes are an integral part of these consolidated financial
statements
3
Molecular
Pharmacology (USA) Limited
(A Development Stage
Company)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
|
|
|
For the
period
from
the
date of
inception on
14 July
2004
to
30
September
2008
|
For the
three
month
period
ended
30
September
2008
|
For the
three
month
period
ended
30
September
2007
|
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Advertising and promotion
|
|
|
|
|
|
23,739
|
|
-
|
|
-
|
Analysis
|
|
|
|
|
|
33,947
|
|
-
|
|
-
|
Consulting (Note 5)
|
|
|
|
|
|
1,068,025
|
|
8,332
|
|
32,597
|
Depreciation
|
|
|
|
|
|
4,292
|
|
268
|
|
347
|
Office and miscellaneous (Note 5)
|
|
|
|
|
|
132,923
|
|
9,270
|
|
10,376
|
Professional fees
|
|
|
|
|
|
180,254
|
|
8,572
|
|
13,027
|
Public relations
|
|
|
|
|
|
3,656
|
|
-
|
|
565
|
Rent (Note 5)
|
|
|
|
|
|
27,759
|
|
-
|
|
-
|
Salaries and
benefits
|
|
|
|
|
|
44,464
|
|
-
|
|
-
|
Transfer agent and
filing fees
|
|
|
|
|
|
5,536
|
|
104
|
|
50
|
Travel
|
|
|
|
|
|
104,572
|
|
2,006
|
|
3,813
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before other items
|
|
|
|
|
|
(1,629,167)
|
|
(28,552)
|
|
(60,775)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
Export market development grants
|
|
|
|
|
|
63,174
|
|
-
|
|
-
|
Interest income
|
|
|
|
|
|
2,322
|
|
-
|
|
-
|
Research and development tax refund
|
|
|
|
|
|
195,869
|
|
-
|
|
66,465
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
|
|
|
|
(1,367,802)
|
|
(28,552)
|
|
5,690
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per common share
|
|
|
|
|
|
(0.012)
|
|
(0.001)
|
|
0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in
per share calculations
|
|
|
|
|
|
111,553,740
|
|
111,553,740
|
|
111,553,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
|
|
|
|
(1,367,802)
|
|
(28,552)
|
|
5,690
|
Foreign currency translation adjustment
|
|
|
|
|
|
(
89,099)
|
|
205,739
|
|
(59,013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for the period
|
|
|
|
|
|
(1,456,901)
|
|
177,187
|
|
(53,323)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) per common share
|
|
|
|
|
|
(0.013)
|
|
0.002
|
|
(0.001)
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
4
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Interim
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
|
For the
period
from
the
date of
inception on 14
July 2004 to 30
September
2008
|
For the
three
month
period
ended 30
September
2008
|
For the
three
month
period
ended 30
September
2007
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Cash
flows from (used in) operating activities
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
(1,367,802)
|
|
(28,552)
|
|
5,690
|
Adjustments to reconcile income (loss) to net cash
used by operating activities
|
|
|
|
|
|
|
Depreciation
(Note 3)
|
|
4,292
|
|
268
|
|
347
|
Write-down of
intangible assets
|
|
1,278
|
|
-
|
|
-
|
Changes in
operating assets and liabilities
|
|
|
|
|
|
|
(Increase) decrease in amounts receivable
|
|
(433)
|
|
6,737
|
|
1,787
|
Decrease in accounts payable and accrued liabilities
(Note 4)
|
|
(35,123)
|
|
(6,764)
|
|
(7,514)
|
|
|
|
|
|
|
|
|
|
(1,397,788)
|
|
(28,311)
|
|
310
|
|
|
|
|
|
|
|
Cash
flows from (used in) investing activities
|
|
|
|
|
|
|
Purchase of property, plant and equipment (Note 3)
|
|
(7,903)
|
|
(167)
|
|
17
|
Purchase of
intangible assets
|
|
(1,278)
|
|
-
|
|
-
|
Cash acquired on
the purchase of Molecular Pharmacology (USA) Limited (Note 1)
|
|
37,163
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
27,982
|
|
(167)
|
|
17
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Common shares issued for cash (Note 6)
|
|
234,497
|
|
-
|
|
-
|
Increase (decrease) in due to related parties (Note
5)
|
|
1,232,950
|
|
(190,209)
|
|
2,778
|
|
|
|
|
|
|
|
|
|
1,467,447
|
|
(190,209)
|
|
2,778
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
|
|
(89,099)
|
|
205,739
|
|
(59,013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
8,542
|
|
(12,948)
|
|
(55,908)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
-
|
|
21,490
|
|
20,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
8,542
|
|
8,542
|
|
(34,914)
|
Supplemental
Disclosures with Respect to Cash Flows
(Note
9)
The accompanying notes are an
integral part of these consolidated financial statements
5
Molecular Pharmacology (USA) Limited
(A Development Stage
Company)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
(Expressed in U.S. Dollars)
(Unaudited)
|
Number
of
common shares
issued
|
Capital stock
|
Additional
paid-in capital
|
Deficit,
accumulated
during the
development
stage
|
Cumulative
translation
adjustment
|
Stockholders'
deficiency
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
Balance at 14 July 2004 (inception)
|
|
294
|
|
-
|
|
1
|
|
-
|
|
-
|
|
1
|
Net loss for the
period
|
|
-
|
|
-
|
|
-
|
|
(128,488)
|
|
-
|
|
(128,488)
|
Cumulative
translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,536)
|
|
(6,536)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 October 2004
|
|
294
|
|
-
|
|
1
|
|
(128,488)
|
|
(6,536)
|
|
(135,023)
|
Common shares
issued for cash – January 2005
|
|
87,999,706
|
|
88,000
|
|
146,496
|
|
-
|
|
-
|
|
234,496
|
Net loss for the
year
|
|
-
|
|
-
|
|
-
|
|
(387,667)
|
|
-
|
|
(387,667)
|
Cumulative
translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(161)
|
|
(161)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 October 2005
|
|
88,000,000
|
|
88,000
|
|
146,497
|
|
(516,155)
|
|
(6,697)
|
|
(288,355)
|
Acquisition of Molecular
Pharmacology (USA) Limited – Recapitalization May 2006
|
|
43,553,740
|
|
43,554
|
|
(59,790)
|
|
-
|
|
-
|
|
(16,236)
|
Cancellation of common
shares – July 2006 (Note 6)
|
|
(20,000,000)
|
|
(20,000)
|
|
20,000
|
|
-
|
|
-
|
|
-
|
Net loss for the year
|
|
-
|
|
-
|
|
-
|
|
(508,260)
|
|
-
|
|
(508,260)
|
Cumulative translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(16,222)
|
|
(16,222)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 October 2006
|
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,024,415)
|
|
(22,919)
|
|
(829,073)
|
Net loss for the period
|
|
-
|
|
-
|
|
-
|
|
(377,131)
|
|
-
|
|
(377,131)
|
Cumulative translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(105,436)
|
|
(105,436)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2007
|
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,401,546)
|
|
(128,355)
|
|
(1,311,640)
|
Net income for the year
|
|
-
|
|
-
|
|
-
|
|
62,296
|
|
-
|
|
62,296
|
Cumulative translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(166,483)
|
|
(166,483)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2008
|
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,339,250)
|
|
(294,838)
|
|
(1,415,827)
|
Net loss for the
period
|
|
-
|
|
-
|
|
-
|
|
(28,552)
|
|
-
|
|
(28,552)
|
Cumulative
translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
205,739
|
|
205,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2008
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,367,802)
|
|
(89,099)
|
|
(1,238,640)
|
The accompanying notes are an integral part of these consolidated
financial statements
6
Molecular
Pharmacology (USA) Limited
(A
Development Stage Company)
Notes to Interim Consolidated
Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
30 September 2008
1. Nature and Continuance
of Operations
Molecular Pharmacology (USA) Limited (the “Company”) was
incorporated in the State of Nevada on 1 May 2002 under the name Blue Hawk
Ventures, Inc. The Company changed
its name to Molecular Pharmacology (USA) Limited on 29 August 2005. At the same time, the Company completed
a four for one forward split of its issued and outstanding share capital and
altered its share capital to 300,000,000 shares of common stock with a par
value of $0.001 per share.
The Company is a development stage enterprise, as defined in Statements
of Financial Accounting Standards (“SFAS”) No. 7, “
Accounting and Reporting by Development Stage Enterprises
”. The Company is devoting all of its
present efforts to securing and establishing a new business and its current planned
principle operations have not commenced.
Accordingly, no revenue has been derived during the organization period.
Up until the fall of 2005, the Company was in the business of mineral
exploration and development of a mineral property. The Company allowed the option on its
mineral claim to lapse in the fall of 2005.
On 13 October 2005, the Company entered into a distribution and supply
agreement (the “Distribution Agreement”) with Molecular
Pharmacology Limited (“MPLA”).
MPLA is incorporated under the laws of Australia and is a wholly owned
subsidiary company of PharmaNet Group Limited (“PharmaNet”), an Australian company listed on the Australian
Stock Exchange. Under the terms of
the distribution and supply agreement, the Company has the exclusive
distribution rights to distribute, market, promote, detail, advertise and sell
certain “Licensed Products”, as defined in the agreement (Note 8).
Since signing the Distribution Agreement with MPLA, the Company has
engaged in organizational and start up activities, including developing a new
business plan, recruiting new directors, scientific advisors and key
scientists, making arrangements for laboratory facilities and office space and
raising additional capital. The
Company has generated no revenue from product sales. The Company does not have any
pharmaceutical products currently available for sale, and none are expected to
be commercially available for some time, if at all. The Licensed Products must first undergo
pre-clinical and human clinical testing in the United States before they may be
sold commercially.
The Company completed a share purchase agreement on 8 May 2006 with
PharmaNet. Under the terms of the
agreement the Company acquired 100% of the issued and outstanding shares of
MPLA (the “Purchase Agreement”). The Company, in exchange for 100% of the
issued and outstanding shares of MPLA, issued PharmaNet an aggregate total of
88,000,000 shares of its common shares of the Company on the closing of the
transaction. The issuance of
88,000,000 common shares of the Company constituted an acquisition of control
of the Company by PharmaNet. The
transaction has been accounted for as a recapitalization of the Company (Note
2).
MPLA was incorporated on 14 July 2004 under the laws of Australia. The accompanying financial statements
are the historical financial statements of MPLA.
7
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
On 15 March 2007, the Board of Directors approved a change in the
Company's financial year end from 31 October to 30 June. The decision to
change the fiscal year end was intended to assist the financial community in
its analysis of the business and in comparing the Company's financial results to
others in the industry, and to synchronize the Company's
fiscal reporting with MPLA.
The Company's interim
consolidated financial statements as at 30 September 2008 and for the three
month period then ended have been prepared on a going concern basis, which
contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. The Company has a net loss of $28,552
for the three month period ended 30 September 2008 (three month period ended 30
September 2007 – net income of $
5,690) and has a working
capital deficit of $8,301 at 30 September 2008 (30 June 2008 – working
capital of $4,620).
Management cannot provide assurance that the Company will ultimately
achieve profitable operations or become cash flow positive, or raise additional
debt and/or equity capital.
Management believes that the Company's capital resources should be
adequate to continue operating and maintaining its business strategy during the
fiscal year ending 30 June 2009.
However, if the Company is unable to raise additional capital in the
near future, due to the Company's liquidity problems, management expects
that the Company will need to curtail operations, liquidate assets, seek additional
capital on less favorable terms and/or pursue other remedial measures. These interim consolidated financial
statements do not include any adjustments related to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
At 30 September 2008, the Company has suffered losses from development
stage activities to date. Although
management is currently attempting to implement its business plan, and is
seeking additional sources of equity or debt financing, there is no assurance
these activities will be successful.
These factors raise substantial doubt about the ability of the Company
to continue as a going concern. The
interim consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
2 Significant
Accounting Policies
The following is a summary of significant
accounting policies used in the preparation of these interim consolidated financial
statements.
Basis of presentation
These interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States
of America (“U.S. GAAP”) applicable for a developmental stage
company for financial information and are expressed in U.S. dollars.
Basis of consolidation
These interim consolidated financial statements include the accounts of
MPLA since its incorporation on 14 July 2004 and MPLA USA since the reverse
acquisition on 8 May 2006 (Note 1).
All intercompany balances and transactions have been eliminated.
8
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
Cash and cash equivalents
Cash and cash equivalents include highly liquid
investments with original maturities of three months or less.
Financial instruments
The carrying value of cash and cash equivalents,
amounts receivable, accounts payable and accrued liabilities and due to related
parties approximates their fair value because of the short maturity of these
instruments. The Company's operations are in Australia and virtually all
of its assets and liabilities give rise to significant exposure to market risks
from changes in foreign currency rates. The Company's financial risk is
the risk that arises from fluctuations in foreign exchange rates and the degree
of volatility of these rates. Currently, the Company does not use
derivative instruments to reduce its exposure to foreign currency risk.
Foreign currency translation
The interim consolidated financial statements of the Company are
translated to U.S. dollars in accordance with SFAS No. 52, “
Foreign Currency Translation
”. Assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Revenue and
expenses are translated at average rates of exchange prevailing during the
year. Translation adjustments resulting from this process are charged or
credited to Other Comprehensive Income
.
The
Company has not, to the date of these interim consolidated financial
statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.
Derivative financial instruments
The Company has not, to the date of these interim consolidated
financial statements, entered into derivative instruments to offset the impact
of foreign currency fluctuations.
Property, plant and equipment
Property, plant and equipment are recorded at
cost and depreciation is provided over their estimated economic lives at the
following rates:
Office
equipment
|
15%
declining balance
|
Income taxes
Deferred income taxes are reported for timing differences between items
of income or expense reported in the financial statements and those reported
for income tax purposes in accordance with SFAS No. 109, “
Accounting for Income Taxes
”, which requires the use
of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax loss and credit carry
forwards.
9
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
30 September 2008
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company provides for deferred taxes
for the estimated future tax effects attributable to temporary differences and
carry-forwards when realization is more likely than not.
Comprehensive loss
SFAS No. 130, “
Reporting
Comprehensive Income
”,
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements. As at 30 September 2008, the Company has
items that represent a comprehensive loss and, therefore, has included a
schedule of comprehensive loss in the interim consolidated financial
statements.
Basic and diluted net loss per share
The Company computes net loss per share in accordance with SFAS No.
128, “
Earnings per Share
”. SFAS No. 128 requires presentation of
both basic and diluted earnings per share (“EPS”) on the face of
the income statement. Basic EPS is
computed by dividing net loss available to common shareholders (numerator) by
the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to
all potentially dilutive common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS,
the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all
potentially dilutive shares if their effect is anti-dilutive.
Stock-based compensation
Effective 1 February 2006, the Company adopted the provisions
of SFAS No. 123(R), “
Share-Based Payment
”,
which establishes accounting for equity instruments exchanged for employee
services. Under the provisions of
SFAS 123(R), stock-based compensation cost is measured at the grant date, based
on the calculated fair value of the award, and is recognized as an expense over
the employees' requisite service period (generally the vesting period of
the equity grant). Before 1 February 2006,
the Company accounted for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion No. 25, “
Accounting for Stock Issued to Employees
”, and complied
with the disclosure requirements of SFAS No. 123, “
Accounting for Stock-Based Compensation
”. The
Company adopted SFAS 123(R) using the modified prospective method, which
requires the Company to record compensation expense over the vesting period for
all awards granted after the date of adoption, and for the unvested portion of
previously granted awards that remain outstanding at the date of adoption. Accordingly, financial statements for
the periods prior to 1 February 2006 have not been restated to reflect the fair
value method of expensing share-based compensation. Adoption of SFAS No. 123(R) does
not change the way the Company accounts for share-based payments to
non-employees, with guidance provided by SFAS 123 (as originally issued) and
Emerging Issues Task Force Issue No. 96-18, “
Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services
”.
10
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
Recent accounting pronouncements
In
May 2008, the
Financial
Accounting Standards Board (the “FASB”) issued SFAS No. 163,
“Accounting for Financial Guarantee Insurance Contracts –
an interpretation of FASB Statement No. 60”
(“SFAS No.
163”). SFAS No. 163 provides
enhanced guidance on the recognition and measurement to be used to account for
premium revenue and claim liabilities and related disclosures and is limited to
financial guarantee insurance (and reinsurance) contracts, issued by
enterprises included within the scope of FASB Statement No. 60,
“Accounting and Reporting by Insurance Enterprises.”
SFAS No. 163 also requires that an
insurance enterprise recognize a claim liability prior to an event of default
when there is evidence that credit deterioration has occurred in an insured
financial obligation. SFAS No. 163
is effective for financial statements issued for fiscal years and interim
periods beginning after 15 December 2008, with early application not
permitted. The Company does not
expect SFAS No. 163 to have an impact on its consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162,
“The
Hierarchy of Generally Accepted Accounting Principles”
(“SFAS No. 162”). SFAS
No. 162 is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
Generally Accepted Accounting Principles (“GAAP”) for
nongovernmental entities. Prior to
the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
Institute of Certified Public Accountants (“AICPA”) Statement on
Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles (“SAS No. 69”). SAS No. 69 has been criticized because
it is directed to the auditor rather than the entity. SFAS No. 162 addresses these issues by
establishing that the GAAP hierarchy should be directed to entities because it
is the entity, not its auditor, that is responsible for selecting accounting
principles for financial statements that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days
following the SEC's approval of the Public Company Accounting Oversight
Board Auditing amendments to AU Section 411,
“The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.”
The
Company does not expect SFAS No. 162 to have a material effect on its
consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161,
“Disclosures
about Derivative Instruments and Hedging Activities – an amendment of
FASB Statement No. 133”
(“SFAS No. 161”). SFAS No. 161 is intended to improve
transparency in financial reporting by requiring enhanced disclosures of an
entity's derivative instruments and hedging activities and their effects
on the entity's financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivate
instruments within the scope of SFAS No. 133,
“Accounting
for Derivative Instruments and Hedging Activities”
(“SFAS No. 133”). It
also applies to non-derivative hedging instruments and all hedged items
designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 is effective prospectively
for financial statements issued for fiscal years beginning after 15 November
2008, with early application encouraged.
The Company is currently evaluating the new disclosure requirements of
SFAS No. 161 and the potential impact on the Company's consolidated
financial statements.
11
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
In December 2007,
the FASB
issued SFAS No. 141 (revised 2007),
“Business Combinations”
(“SFAS No.
141(R)”). SFAS No. 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS No. 141(R) is effective for
fiscal years beginning after 15 December 2008. The Company is currently evaluating the
potential impact, if any, of the adoption of SFAS No. 141(R) on its
consolidated results of operation and financial condition.
In
December 2007, the FASB issued SFAS No. 160,
“Noncontrolling
Interests in Consolidated Financial Statements – an amendment of
Accounting Research Bulletin No. 51”
(“SFAS No.
160”). SFAS No. 160
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable and to the noncontrolling interest, changes in a
parent's ownership interest, and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal
years beginning after 15 December 2008.
The Company is currently evaluating the potential impact, if any, of the
adoption of SFAS No. 160 on its consolidated results of operation and financial
condition.
In February
2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities”
(“SFAS No. 159”). SFAS 159
allows the company to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which
the fair value option has been elected are reported in earnings. SFAS 159
is effective for fiscal years beginning after November 15, 2007. The
Company is currently evaluating the requirements of SFAS No. 159 and the
potential impact on the Company's consolidated financial statements.
In September 2006, the FASB
issued SFAS No. 157,
“Fair Value
Measurement”
(“SFAS No. 157”). The Statement
provides guidance for using fair value to measure assets and liabilities. The
Statement also expands disclosures about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurement on earnings. This Statement
applies under other accounting pronouncements that require or permit fair value
measurements. This Statement does not expand the use of fair value measurements
in any new circumstances. Under this Statement, fair value refers to the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in which the
entity transacts. SFAS No. 157 is effective for the Company for fair value
measurements and disclosures made by the Company in its fiscal year beginning
on 1 July 2008. The Company is currently reviewing the impact of this
statement.
12
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
3. Property,
Plant and Equipment
|
|
|
Accumulated depreciation
|
|
Net Book Value
|
|
|
Cost
|
|
As at
30 September
2008
|
|
As at
30 June
2008
(audit)
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
7,891
|
|
4,280
|
|
3,611
|
|
3,712
|
During the
three month period ended 30 September 2008 the total additions to property, plant
and equipment were $167 (30 June 2008 – $Nil).
4. Accounts
Payable and Accrued Liabilities
Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.
5. Due
to Related Parties and Related Party Transactions
As at 30 September 2008, the amount due
to related parties includes $1,000 payable to a director of the Company (30
June 2008
–
$1,000). This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at 30 September 2008, the amount due
to related parties includes $18,071 payable to a company owned by a director of
the Company or an officer of PharmaNet (30 June 2008
–
$10,751). This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at 30 September 2008, the amount due
to related parties includes $1,503 payable to a company owned by a director of
the Company or an officer of PharmaNet (30 June 2008
–
$1,277). This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at 30 September 2008, the amount due
to related parties includes $1,213,376 payable to PharmaNet (30 June 2008
–
$1,411,131). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
During the three month period ended 30
September 2008, a director of the Company or an officer of PharmaNet, and their
controlled entities were paid or accrued consulting fees expenses of $
8,332
(year ended 30 June
2008 – $79,118, cumulative – $705,029) by the Company.
During the three month period ended 30
September 2008, a company controlled by an individual related to a director or
officer of the Company was paid or accrued office expenses of $7,001 (year
ended 30 June 2008 - $29,355, cumulative - $36,356) by the Company.
13
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
During the three month period ended 30 September 2008, a director of the
Company or an officer of PharmaNet, and their controlled entities were paid or
accrued rental fees of $Nil by the Company (year ended 30 June 2008 –
$Nil,
cumulative – $12,987).
Transactions comprising the amount due
to PharmaNet are as follows:
|
|
For the
three
month period ended 30 September
2008
|
|
For the
year ended
30 June
2008
(audit)
|
|
|
$
|
|
$
|
|
|
|
|
|
Opening balance, beginning of period
|
|
1,411,131
|
|
1,138,943
|
Funds
transferred to the Company by PharmaNet
|
|
8,211
|
|
319,726
|
Funds transferred to PharmaNet by the Company
|
|
-
|
|
(215,437)
|
Expenses paid by PharmaNet on behalf of the
Company
|
|
89
|
|
690
|
Foreign
currency translation adjustment
|
|
(206,055)
|
|
167,209
|
|
|
|
|
|
Balance as at 30 September 2008 and 30 June 2008
|
|
1,213,376
|
|
1,411,131
|
The average amount due to PharmaNet for
the three month period ended 30 September 2008 was $1,286,122 (for the year ended
30 June 2008
–
$1,285,705).
6. Capital Stock
Authorized
The
total authorized capital is 300,000,000 common shares with a par value of
$0.001 per common share.
On 29
August 2005, the Company altered its authorized capital by increasing
authorized common shares with a par value of $0.001 from 25,000,000 to
300,000,000 common shares.
Issued
and outstanding
The
total issued and outstanding capital stock is 111,553,740 common shares with a
par value of $0.001 per common share.
i.
On 10 November 2005, the Company completed a private placement of
1,500,000 units for proceeds of $150,000.
Each unit consists of one common share and two share purchase
warrants. Each share purchase
warrant entitles the holder to purchase one additional common share of the
Company for $0.50 per share anytime on or before two years from the date of the
acquisition of the units.
ii.
On 21 July 2006, a former director of the Company returned 20,000,000
common shares of the Company to treasury.
These common shares were cancelled on 21 July 2006.
14
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
7. Income Taxes
Income tax expense differs from the amount that would result from
applying the federal income tax rate to earnings before income taxes. These differences result from the following
items:
|
|
For the
three
month
period
ended
30
September
2008
|
|
For the
year
ended
30 June
2008
(audit)
|
|
|
$
|
|
$
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
(28,552)
|
|
62,296
|
|
|
|
|
|
Federal income tax rates
|
|
34.0%
|
|
34.0%
|
|
|
|
|
|
Income
tax recovery based on the above rates
|
|
(9,707)
|
|
21,180
|
|
|
|
|
|
Increase
(decrease) due to:
|
|
|
|
|
Non-deductible
expenses
|
|
-
|
|
364
|
Difference
between US and foreign tax rates
|
|
795
|
|
(5,553)
|
Change in
valuation allowance
|
|
(34,250)
|
|
50,918
|
Research and
development tax refund not subject to tax
|
|
-
|
|
(58,761)
|
Foreign
exchange and other
|
|
43,162
|
|
(8,148)
|
|
|
|
|
|
Income tax expense (recovery)
|
|
-
|
|
-
|
The composition of the Company's deferred tax assets as at 30
September 2008 and 30 June 2008 are as follows:
|
|
As at
30 September
2008
|
|
As at
30 June 2008
(audit)
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax operating loss
carryforward
|
|
1,426,227
|
|
1,541,549
|
|
|
|
|
|
Deferred
tax assets
|
|
450,504
|
|
484,754
|
Less:
Valuation allowance
|
|
(450,504)
|
|
(484,754)
|
|
|
|
|
|
Net
deferred tax asset
|
|
-
|
|
-
|
15
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
The Company has non-capital loss carry-forwards of approximately
$1,426,227 that may be available for tax purposes. The loss carry-forwards are all in
respect of US and Australian operations and expire as follows:
2022
|
20,402
|
2023
|
46,992
|
2024
|
27,717
|
2025
|
14,187
|
2026
|
261,311
|
2027
|
111,155
|
2028
|
75,463
|
2029
|
8,676
|
No expiry
|
860,324
|
|
|
|
1,426,227
|
A full valuation allowance has been recorded
against the potential deferred tax assets associated with all the loss
carry-forwards as their utilization is not considered more likely than not at
this time.
8. Commitment
On 13 October 2005, t
he Company entered into a distribution and supply
agreement with MPLA (the “Distribution Agreement”) (Note 1).
The basic terms of the
Distribution Agreement are as follows:
i.
MPLA has granted exclusive distribution rights to the Company to
distribute, market, promote, detail, advertise and sell certain “Licensed
Products”, as defined in the Distribution Agreement, with metallo-polypeptide
analgesic as an active ingredient, in the United States (excluding its
territories and possessions);
ii.
The Company paid MPLA $1,000 upon the date of execution of the
Distribution Agreement and is required to pay $100,000 six months from the date
of execution of the Distribution Agreement or the date that any Licensed
Product is available and ready for distribution and sale in commercial
quantities in the United States under the terms of the Distribution Agreement
(the “Commencement Date”), whichever occurs first;
iii.
The Company is also required to pay MPLA a royalty of 5% as set out in
the Distribution Agreement;
iv.
MPLA will supply all Licensed Products to the Company under the
Distribution Agreement;
16
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
v.
MPLA is responsible for obtaining all necessary regulatory approvals
for the licensed product in the
United States; and
vi.
The Distribution Agreement is for a one year term from the “Commencement
Date” and may be automatically extended by successive one-year periods,
unless at least three months prior to the renewal date, as defined in the
Distribution Agreement, either party advises the other party that it elects not
to permit the extension of the term.
The $100,000 payment to MLPA according to the
terms of the Distribution Agreement has not yet been made and the Company is
currently renegotiating the terms of the Distribution Agreement.
9. Supplemental
Disclosures with Respect to Cash Flows
|
For the period from the
date of inception on 14 July
2004
to
30 September
2008
|
|
For the
three month
period
ended
30 September
2008
|
|
For the
year
ended
30 June
2008
(audit)
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
Cash paid during the
year for interest
|
-
|
|
-
|
|
-
|
Cash paid during the
year for income taxes
|
-
|
|
-
|
|
-
|
Common shares issued
on acquisition of MPLA
|
16,236
|
|
-
|
|
-
|
Amounts receivable
acquired on recapitalization of the Company
|
2,226
|
|
-
|
|
-
|
Accounts payable
assumed on recapitalization of the Company
|
54,624
|
|
-
|
|
-
|
Due to related party
assumed on recapitalization of the Company
|
1,000
|
|
-
|
|
-
|
17
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 September 2008
10. Segmented
Information
Details on a geographic basis as at
30 September 2008 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
311,467
|
|
(296,655)
|
|
14,812
|
Loss for the period
|
|
(19,876)
|
|
(8,676)
|
|
(28,552)
|
Details on a geographic basis as at
30 June 2008 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
318,283
|
|
(283,685)
|
|
34,598
|
Income (loss) for the year
|
|
138,829
|
|
(76,533)
|
|
62,296
|
18
Item 2. Management's
Discussion and Analysis
of Financial
Condition and Results of Operations.
THE FOLLOWING ANALYSIS OF THE RESULTS OF
OPERATIONS AND FINANCIAL CONDITION OF MOLECULAR USA FOR THE FIRST QUARTER
PERIOD ENDED SEPTEMBER 30, 2008 AND SHOULD BE READ IN CONJUNCTION WITH
MOLECULAR USA'S FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO
CONTAINED ELSEWHERE IN THE FORM 10-KSB.
Our consolidated financial statements are
stated in United States Dollars and are prepared in accordance with United
States Generally Accepted Accounting Principles.
Overview
We were incorporated in the state of Nevada
on May 01, 2002. Up until the fall of 2005, Molecular USA was in the business
of mineral exploration and development of a mineral property.
On October
13, 2005, Molecular USA entered into a distribution and supply agreement with
Molecular Pharmacology Limited ("
MPLA
").
MPLA is incorporated under the laws of Australia and at the time was a wholly
owned subsidiary company of PharmaNet Group Limited, an Australian company
listed on the Australian Stock Exchange. Under the terms of the
distribution and supply agreement, Molecular USA received the exclusive
distribution rights to distribute, market, promote, detail, advertise and sell
certain "
Licensed Products
", as
defined in the agreement, with metallo-polypeptide analgesic as an active
ingredient, in the United States (excluding its territories and
possessions).
On May 9, 2006, Molecular USA announced that
it has acquired 100% of the issued and outstanding share capital of MPLA. The transaction was originally announced
by Molecular USA in a press release dated November 29, 2005 and was
subsequently approved by a majority of the stockholders of the Company at a
stockholders meeting held on April 21, 2006. As a result of the transaction,
PharmaNet Group Limited (“
PharmaNet
”),
the former parent company of MPLA, now controls approximately 79% of Molecular
USA 's issued and outstanding share capital. The transaction between the
parties closed in escrow with an effective closing date of May 8, 2006. The
business of MPLA is now the business of Molecular USA.
Our Current Business
Molecular USA through its wholly owned
subsidiary MPLA is in the business of developing and commercialising a new
analgesic and anti-inflammatory molecule known as Tripeptofen. Tripeptofen is
likely to appear in a new group of products suitable for the treatment of
common every-day pain. As an analgesic and anti-inflammatory drug, Tripeptofen
is unusual due to its rapid speed of action and its topical or rub-on
application.
The majority of over-the-counter anti-pain
and anti-inflammatory products sold for the treatment of acute localised pain
are based on non-steroidal anti-inflammatory drugs or NSAIDs. The majority of
such products are slow acting and provide only mild pain relief.
The NSAID group has come under additional
pressure and increasing medical alarm, as many drugs in this class have been
found to set-back the recovery of certain conditions and treatments for which
they were marketed. Moreover, NSAIDs are associated with severe
gastro-intestinal side-effects. This has left a niche in an industry under-served
by new products and ingredients.
MPLA's business strategy is to exploit the fast and
locally acting, low side effects, and recovery-enhancing properties of its new
drug group and to market this as a new ingredient, enabling pharmaceutical
companies to develop and market effective and safer products suited to a broad
range of common everyday pain.
19
Licensed Products
Molecular USA has exclusive distribution
rights to distribute, market, promote, detail, advertise and sell certain
"Licensed Products", with metallo-polypeptide analgesic and
anti-inflammatory activity as an active ingredient, in the United States
(excluding its territories and possessions) from its wholly owned subsidiary
company MPLA.
The Licensed Products include all products in
all dosage forms, formulations, line extensions and package configurations
using or otherwise incorporating any aspect or production method of
metallo-polypeptide analgesic and anti-inflammatory activity as an active
ingredient marketed by MPLA or its affiliates under the tradename Tripeptafen
or any other trade names or trade marks used by MPLA relating to the product
and any improvements to such formulations or dosages as may hereafter be
distributed by MPLA or its affiliates in the territory during the term of the
distribution and supply agreement between Molecular USA and MPLA for the
topical application for human use only, and specifically excludes:
-
dermatological
or cosmetic use, or tissue repair or tissue regeneration effect;
-
any use or application of the Licensed Product in
non-human groups or species; and
-
Thermalife
cream, presently owned by PharmaNet, the holding company of MPLA.
All Licensed Products must first obtain
regulatory clearance in the United States before they may be marketed and sold
by Molecular USA in that territory. Clinical programs are currently planned by
MPLA for Europe, USA and Australia. The clinical trial program is expected to
be expanded with follow-up trials. Regulatory approval, commencement of the
Master Drug File (MDF) and market approval are the focus of an ongoing program
expected to continue over the next 18 to 24 months.
MPLA has an exclusive license from Cambridge
Scientific Pty Ltd of Australia. This license is restricted to a "field of
use" defined in the license documentation. Cambridge Scientific may grant
other licenses to third parties outside the "field of use" the
subject of the licenses granted to MPLA.
Patents &
Trademarks
Molecular USA and its subsidiary MPLA, regard
their intellectual property rights, such as copyrights, trademarks, trade
secrets, practices and tools, as important to the success of their company. To
protect their intellectual property rights, Molecular USA relies on a
combination of patent, trademark and copyright law, trade secret protection,
confidentiality agreements and other contractual arrangements with their
employees, affiliates, clients, strategic partners, acquisition targets and
others. Effective patent, trademark, copyright and trade secret protection may
not be available in every country in which the combined company intends to
offer its products. The steps taken by Molecular USA and MPLA to protect their
intellectual property rights may not be adequate. Third parties may infringe or
misappropriate the combined company's intellectual property rights or the
combined company may not be able to detect unauthorized use and take
appropriate steps to enforce its rights. In addition, other parties may assert
infringement claims against the combined company. Such claims, regardless of
merit, could result in the expenditure of significant financial and managerial
resources. Further, an increasing number of patents are being issued to third
parties regarding these processes. Future patents may limit the combined
company's ability to use processes covered by such patents or expose the
combined company to claims of patent infringement or otherwise require the
combined company to seek to obtain related licenses. Such licenses may not be
available on acceptable terms. The failure to obtain such licenses on
acceptable terms could have a negative effect on the combined company's
business.
To protect their intellectual property rights, MPLA relies on a
combination of license and patent applications held by Cambridge Scientific Pty
Ltd
which includes
"Analgesic and
Anti-Inflammatory Composition" comprising USA patent application in
completion plus PCT Provisional Specification having the same name designated
as Serial No. 11/059580
, Cytokine Mediation Composition PCT/AU2007/000554, Tissue Disruption Treatment And
Composition For Use Thereof United States Of America Patent Application No.
11/218382 and International Patent Application No. PCT/AU2006/001288 and COX 2 Inhibitor Application Number WO/2006902207.
20
Marketing
Molecular USA plans to market its Licensed
Products, when approved, through existing pharmaceutical distributors and by
collaborative dealings with major companies active in the United States and
Europe.
In addition, Molecular USA plans to explore
opportunities for direct sales, out-licensing and the integration of the
company's proprietary anti-inflammatory and analgesic components in
products already distributed through various international markets.
Molecular USA expects that these activities
may even help fund the development costs of the Licensed Products in the United
States.
Manufacturing &
Supply
Molecular USA and MPLA have no manufacturing
facilities. MPLA is required to supply Molecular USA with all Licensed Products
under the distribution and supply agreement entered into by the parties in
October 2005. It is likely MPLA will enter into arrangements with various
certified formulation and manufacturers (GMP) of the Licensed Products for
clinical trial and sales purposes. These formulations and the manufacturing
facilities must comply with regulations and current good laboratory practices
or cGLPs, and current good manufacturing practices or cGMPs, enforced by the Food
and Drug Administration (“FDA”). Molecular USA plans to continue
MPLA's practice to outsource formulation and manufacturing for its
clinical trials and potential commercialization after the acquisition of MPLA
by Molecular USA.
Molecular USA has not entered into any supply
agreements.
Competition
Molecular USA and MPLA compete in the segment
of the pharmaceutical market that treats pain and inflammation, which is highly
competitive. We face significant competition from most pharmaceutical companies
as well as biotechnology companies that are also researching and selling
products designed to treat pain and inflammation. Many of our competitors have
significantly greater financial, manufacturing, marketing and product
development resources than we do. Large pharmaceutical companies in particular
have extensive experience in clinical testing and in obtaining regulatory
approvals for drugs. These companies also have significantly greater research
capabilities than we do. In addition, many universities and private and public
research institutes are active in neurological research, some in direct
competition with us. These companies, as well as academic institutions,
governmental agencies and other public and private organizations conducting
research, also compete with Molecular USA and MPLA in recruiting and retaining
highly qualified scientific personnel and consultants and may establish
collaborative arrangements with competitors of Molecular USA.
Molecular
USA's competition will be determined in part by the potential indications for
which the MPLA's products are developed and ultimately approved by regulatory
authorities.
Molecular
USA knows of other companies and institutions dedicated to the development of
anti-pain and anti-inflammatory pharmaceuticals similar to those being
developed by MPLA and licensed to Molecular USA. Many of Molecular USA's
competitors, existing or potential, have substantially greater financial and
technical resources and therefore may be in a better position to develop,
manufacture and market pharmaceutical products. Many of these competitors are
also more experienced with regard to preclinical testing, human clinical trials
and obtaining regulatory approvals. The current or future existence of
competitive products may also adversely affect the marketability of Molecular
USA's products.
21
Governmental
Regulation
FDA Regulation
.
Pharmaceutical products are subject to extensive pre- and post-marketing
regulation by the Food and Drug
Administration (“FDA”), including regulations that govern
the testing, manufacturing, safety, efficacy, labeling, storage, record-keeping,
advertising and promotion of the products under the Federal Food, Drug and
Cosmetic Act and the Public Health Services Act, and by comparable agencies in
most foreign countries. The process required by the FDA before a new drug may
be marketed in the U.S. generally involves the following: completion of
pre-clinical laboratory and animal testing; submission of an investigational
new drug application, or IND, which must become effective before clinical
trials may begin; performance of adequate and well controlled human clinical
trials to establish the safety and efficacy of the proposed drug's
intended use; and approval by the FDA of a New Drug Application, or NDA.
The activities required before a
pharmaceutical agent may be marketed in the United States begin with
pre-clinical testing. Pre-clinical
tests include laboratory evaluation of potential products and animal studies to
assess the potential safety and efficacy of the product and its formulations.
The results of these studies and other information must be submitted to the FDA
as part of an IND application, which must be reviewed and approved by the FDA
before proposed clinical testing can begin. Clinical trials involve the
administration of the investigational new drug to healthy volunteers or to patients
under the supervision of a qualified principal investigator. Clinical trials
are conducted in accordance with Good Clinical Practices under protocols that
detail the objectives of the study, the parameters to be used to monitor safety
and the efficacy criteria to be evaluated. Each protocol must be submitted to
the FDA as part of the IND application. Further, each clinical study must be
conducted under the auspices of an independent institutional review board. The
institutional review board will consider, among other things, ethical factors
and the safety of human subjects.
Typically, human clinical trials are
conducted in three phases that may overlap. In Phase 1, clinical trials are
conducted with a small number of subjects to determine the early safety profile
and pharmacology of the new therapy. In Phase 2, clinical trials are conducted
with groups of patients afflicted with a specific disease in order to determine
preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase
3, large scale, multicenter, comparative clinical trials are conducted with
patients afflicted with a target disease in order to provide enough data for
the statistical proof of efficacy and safety required by the FDA and others.
The results of the pre-clinical and clinical
testing, together with chemistry and manufacturing information, are submitted
to the FDA in the form of an NDA for a pharmaceutical product in order to
obtain approval to commence commercial sales. In responding to an NDA, the FDA
may grant marketing approvals, request additional information or further
research, or deny the application if it determines that the application does
not satisfy its regulatory approval criteria. Patient-specific therapies may be
subject to additional risk with respect to the regulatory review process. FDA
approval for a pharmaceutical product may not be granted on a timely basis, if
at all, or if granted may not cover all the clinical indications for which
approval is sought or may contain significant limitations in the form of
warnings, precautions or contraindications with respect to conditions of use.
Satisfaction of FDA premarket approval
requirements for new drugs typically takes several years, and the actual time
required may vary substantially based upon the type, complexity and novelty of
the product or targeted disease. Government regulation may delay or prevent
marketing of potential products for a considerable period of time and impose
costly procedures upon our activities. Success in early stage clinical trials
or with prior versions of products does not assure success in later stage
clinical trials. Data obtained from clinical activities are not always
conclusive and may be susceptible to varying interpretations that could delay,
limit or prevent regulatory approval.
Once approved, the FDA may withdraw the
product approval if compliance with pre- and post-marketing regulatory
standards is not maintained or if problems occur after the product reaches the
marketplace. In addition, the FDA may require post-marketing studies, referred
to as Phase 4 studies, to monitor the effect of an approved product, and may
limit further marketing of the product based on the results of these
post-market studies. The FDA has broad post-market regulatory and enforcement
powers, including the ability to levy fines and civil penalties, suspend or
delay issuance of approvals, seize or recall products, or withdraw approvals.
22
Facilities used to manufacture drugs are
subject to periodic inspection by the FDA, Drug Enforcement Agency and other
authorities where applicable, and must comply with the FDA's Current Good
Manufacturing regulations. Failure to comply with the statutory and regulatory
requirements subjects the manufacturer to possible legal or regulatory action,
such as suspension of manufacturing, seizure of product or voluntary recall of
a product. Adverse experiences with the product must be reported to the FDA and
could result in the imposition of market restriction through labeling changes
or in product removal. Product approvals may be withdrawn if compliance with
regulatory requirements is not maintained or if problems concerning safety or
efficacy of the product occur following approval.
With respect to post-market product
advertising and promotion, the FDA imposes a number of complex regulations on
entities that advertise and promote pharmaceuticals, which include, among other
things, standards and regulations relating to direct-to-consumer advertising,
off-label promotion, industry sponsored scientific and educational activities,
and promotional activities involving the Internet. The FDA has very broad
enforcement authority under the Federal Food, Drug and Cosmetic Act, and
failure to abide by these regulations can result in penalties including the
issuance of a warning letter directing the entity to correct deviations from
FDA standards, a requirement that future advertising and promotional materials
be pre-cleared by the FDA, and state and federal civil and criminal
investigations and prosecutions.
Research facilities are subject to various
laws and regulations regarding laboratory practices, the experimental use of
animals, and the use and disposal of hazardous or potentially hazardous
substances in connection with the research in question. In each of these areas, as above, the
government has broad regulatory and enforcement powers, including the ability
to levy fines and civil penalties, suspend or delay issuance of approvals,
seize or recall products, and withdraw approvals, any one or more of which could
have a material adverse effect upon us.
Other Government Regulations
. In
addition to laws and regulations enforced by the FDA, research of Molecular
USA's products in the United States are subject to regulation under
National Institutes of Health guidelines, as well as under the Controlled
Substances Act, the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local
laws and regulations, as research and development of its products involves the
controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds.
In addition to regulations in the United
States, Molecular USA's products are subject to a variety of foreign
regulations governing clinical trials and commercial sales and distribution of
its Licensed Products. Whether or not Molecular USA obtains FDA approval for a
product, Molecular USA or its subsidiaries must obtain approval of a product by
the comparable regulatory authorities of foreign countries before it can
commence clinical trials or marketing of the product in those countries. The
approval process varies from country to country, and the time may be longer or
shorter than that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary
greatly from country to country.
Sarbanes-Oxley Act of 2002
. On July 30, 2002, President Bush signed into
law the Sarbanes-Oxley Act of 2002, or the SOA. SOA imposes a wide variety of
new requirements on both U.S. and non-U.S. companies, that file or are required
to file periodic reports with the Securities and Exchange Commission (the
“SEC”) under the Securities Exchange Act of 1934. Many of these new
requirements will affect Molecular USA and its board of directors. For
instance, under SOA Molecular USA is required to:
-
form an audit committees in compliance with SOA;
-
have Molecular USA's chief executive office and chief financial
officer are required to certify its financial statements;
-
ensure Molecular USA's directors and senior officers are required
to forfeit all bonuses or other incentive-based compensation and profits
received from the sale of Molecular USA's securities in the twelve month
period following initial publication of any of Molecular USA's financial
statements that later require restatement;
-
disclose any off-balance sheet transactions as required by SOA;
-
prohibit all personal loans to directors and officers;
-
insure directors, officers and 10% holders file their Forms 4's within
two days of a transaction;
23
SOA has required us to review our current
procedures and policies to determine whether they comply with the SOA and the
new regulations promulgated thereunder. We will continue to monitor our
compliance with all future regulations that are adopted under the SOA and will
take whatever actions are necessary to ensure that we are in compliance.
Environmental Compliance
The nature of Molecular USA's and
MPLA's business does not require special environmental or local
government approval. Molecular USA
and MPLA are compliant with all environmental laws. The cost of such compliance
is minimal for the company.
Employees
Molecular USA currently has no employees and
instead relies on outside contractors.
Immediate Business
Plans
The Company, through its subsidiary MPLA,
plans to continue to pursue the various levels of the international regulatory
approval processes. Applications and product opportunities for Tripeptofen are
believed to be broad and cover a range of commercial fields, each with distinct
pre-market requirements. The international drug development team, global
resources and local know-how will allow MPLA to seek the most time and cost
effective regulatory pathways for each product and market sector.
The scientific focus of MPLA will initially
be the completion of the current isolation and identifications programs, being
run by MPLA's South East Asian and Australian teams. This work will provide
MPLA with the broadest product horizon, from which it can then select the most
commercially marketable products.
Dr Chin Joo Goh manages the South East Asian
activities while Dr Maud Eijkenboom manages the Australian activities.
On commercial development, MPLA will focus on
consolidating the regulatory pathway work in order to prioritise the path to
market. Jeff Edwards will work to set-out the strategies designed to maximize
the multi-jurisdictional capabilities of MPLA's development teams.
Results of Operation
For the Quarter ended September
30, 2008.
Rev
enues
REVENUE
- Molecular USA has not generated any revenues
for the quarter ended September 30, 2008, or since inception.
COMMON STOCK
– Molecular USA has not issued any shares during
the most recent quarter. As of the date November 14, 2008, Molecular USA has
111,553,740 common shares issued and outstanding.
Expenses
SUMMARY
–
Total expenses were $28,552 for the three month period ended September 30, 2008. Expenses had decreased during this past quarter
as compared to the three month period ended September 30, 2007 – $60,775.
A total of $1,629,167 in expenses has been incurred by Molecular USA since
inception on July 14, 2004 through to September 30, 2008.
The decrease in costs over the past three quarters has occurred as the
result of
24
Molecular USA's wholly owned subsidiary reducing its consulting and
professional fees. The costs can be
subdivided into the following categories.
-
Office Expenses
: $9,270 in office expenses (for rent and
administrative costs) were incurred for the three month period ended September
30, 2008 as compared to $10,376 for the three month period ended September
30, 2007; while a total of $132,923 was incurred in the
period from inception on July 14, 2004 to September 30, 2008. All contributed
expenses are reported as contributed costs with a corresponding credit to
additional paid-in capital.
-
Consulting and Analysis
Costs
: Molecular USA relies on consultants and other third parties to
conduct the majority of its research.
For the three month period ended September 30, 2008, $8,332 in
consulting and analysis expenses were incurred as compared to $32,597
during the three month period ended September 30, 2007. We have incurred a total of $1,068,025
in consulting and analyst fees since our inception on July 14,
2004 to September 30, 2008.
-
Advertising and Promotion
Fees
: Molecular USA has spent a nominal amount in this area. During the three month period ended September 30, 2008 we spent $0 on
advertising and public relations and $0 for the three month period ended September
30, 2007. A total of $23,739 has been incurred in this area
during the period from inception on July 14, 2004 to September 30, 2008.
-
Professional Fees
: Molecular USA
incurred $8,572 in professional fees for the three month period ended on September 30, 2008 as compared to $13,027
for the three month period ended September 30, 2007. From inception to September 30, 2008, we have incurred
a total of $180,254 in professional fees mainly spent on legal and accounting
matters.
-
Travel Costs
: Molecular USA
incurred $2,006 in travel costs for the three month period ended September
30, 2008 as compared to $3,813 for the three month period ended September
30, 2007 and $104,572 has been incurred in the period from inception
on July 14, 2004 to September 30, 2008. This decrease reflects limited
travel expense this quarter to our North American legal counsel in
visiting our research facilities in Australia.
-
Salaries and Benefit
Costs
: Molecular USA and its subsidiary relies primarily on outside
consultants and not salaried employees. As a result, Molecular USA incurred
$0 in salaries and benefits for the three month period ended September 30,
2008 and $0 in salaries and benefits during the three month period ended September
30, 2007. For the period July 14, 2004 (inception)
through September 30, 2008, Molecular USA has spent a total of $44,464
on salaries and benefits.
Molecular USA continues to carefully control its expenses and overall
costs as it moves forward with the development of its new business plan.
Molecular USA does not have any employees and engages personnel through outside
consulting
contracts or agreements or other such arrangements
Income Tax Provision
: We have losses carried forward for income tax purpose to September 30,
2008. There are no current or
deferred tax expenses for the period ended September 30, 2008 due to our loss
position. We have fully reserved
for any benefits of these losses.
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized as
appropriate.
Liquidity and Capital
Resources
During the three month period
ended September 30, 2008, Molecular USA satisfied its working capital needs by
borrowing cash from its parent company PharmaNet. As of September 30, 2008, the Company
had cash and cash equivalents on hand in the amount of $8,542 (as at September
30, 2007 – bank indebtedness of $34,914) and current payable and accrued
liabilities of $19,502 ($26,266 – June 30, 2008). As of September 30, 2008, Molecular USA
currently owes its parent company PharmaNet, $1,213,376 and an additional $65,449
to other related parties.
Given the proposed business activities of Molecular USA and its
subsidiary, management does not expect that the current level of cash on hand
will be sufficient to fund its operation for the next twelve month period.
To achieve our goals and objectives for the
next 12 months, we plan to raise additional capital through private placements
of our equity securities, proceeds received from the exercise of outstanding
options, future financing from our majority shareholder PharmaNet.
25
We plan to use any additional funds that we
might be successful in raising for development, as well as for strategic
acquisition of existing businesses that complement our market niche, and
general working capital purposes.
If we are unsuccessful in obtaining new
capital, our ability to seek and consummate strategic acquisitions to build our
company internationally, and to expand of our business development and
marketing programs could be adversely affected.
Off-Balance Sheet
Arrangement
As of September 30, 2008, Molecular USA did not have any off-balance
sheet arrangements.
Research and Development
Since the acquisition of MPLA, Molecular USA has maintained
MPLA's research and
development program to:
-
Refine and prove-up its proprietary active
ingredients and to commence the processes that will lead to the issue of a
Master Drug File registration of its products;
-
Define the mode of action and potential of
Tripeptofen in both in vitro, animal and human studies;
-
Gain Australian regulatory and marketing
approval;
-
Gain European regulatory approval; and
-
Commence application for American regulatory
approval.
MPLA is in the business of
developing and commercializing a new analgesic and anti-inflammatory molecule
known as Tripeptofen. Tripeptofen is likely to appear in a new group of
products suitable for the treatment of common every-day pain. As an analgesic
and anti-inflammatory drug, Tripeptofen is unusual due to its rapid speed of
action and its topical or rub-on application.
During the period Molecular
USA, continued to support MPLA and Cambridge Scientific Pty Ltd in the process
of expanding the intellectual property portfolio. Further details on the scope of these
activities is presented in the section
.
Patents & Trademarks.
The first conditions targeted by MPLA will be the
musculoskeletal injuries. The use
of a B-SIM in these markets represents a new approach to one of the
world's largest over the counter drug markets and includes indications
such as joint inflammation, musculoskeletal pain, overuse and strain injuries,
burns and even surgical and cosmetic procedures. MPLA's proprietary, industrially
scalable peptide-ligand bond exchange (PLBE) B-SIM manufacturing process
involves the disassociation of proteins, rather than the far more costly
process of assembling B-SIMs one sequence at a time. The patent was lodged in
the name of Cambridge Scientific Pty Ltd; however, Molecular USA holds the
worldwide exclusive license to manufacture, commercialize, market and
distribute topical anti-inflammatory and analgesic products based on the
proprietary MPL-TL compound.
Molecular
USA is still working on the projections regarding the necessary expenditure and
time frame involved in pursuing this research and development program. Any such program will also be subject to
Molecular USA raising the necessary funds to advance such a program.
Capital Expenditure
Commitments
Capital expenditures for the nine month
period ended September 30, 2008, amounted to $17. Molecular USA does not
anticipate any significant purchase or sale of equipment over the next 12
months.
Recent Accounting Pronouncements
In May 2008, the
Financial Accounting Standards Board (the “FASB”) issued SFAS No.
163, “Accounting for Financial Guarantee Insurance Contracts – an
interpretation of FASB Statement No. 60” (“SFAS No.
163”).
26
SFAS No. 163
provides enhanced guidance on the recognition and measurement to be used to
account for premium revenue and claim liabilities and related disclosures and
is limited to financial guarantee insurance (and reinsurance) contracts, issued
by enterprises included within the scope of FASB Statement No. 60,
“Accounting and Reporting by Insurance Enterprises.” SFAS No. 163 also requires that an
insurance enterprise recognize a claim liability prior to an event of default
when there is evidence that credit deterioration has occurred in an insured
financial obligation. SFAS No. 163
is effective for financial statements issued for fiscal years and interim
periods beginning after 15 December 2008, with early application not
permitted. Molecular USA does not
expect SFAS No. 163 to have an impact on its consolidated financial statements.
In May 2008, the
FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting
Principles” (“SFAS No. 162”). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. Generally Accepted Accounting
Principles (“GAAP”) for nongovernmental entities. Prior to the issuance of SFAS No. 162,
GAAP hierarchy was defined in the American Institute of Certified Public
Accountants (“AICPA”) Statement on Auditing Standards No. 69, The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles (“SAS No. 69”).
SAS No. 69 has been criticized because it is directed to the auditor
rather than the entity. SFAS No.
162 addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity, not its auditor, that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.
SFAS No. 162 is effective 60 days following the SEC's approval of
the Public Company Accounting Oversight Board Auditing amendments to AU Section
411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles.” Molecular
USA does not expect SFAS No. 162 to have a material effect on its consolidated
financial statements.
In March 2008, the
FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities – an amendment of FASB Statement No. 133”
(“SFAS No. 161”). SFAS
No. 161 is intended to improve transparency in financial reporting by requiring
enhanced disclosures of an entity's derivative instruments and hedging
activities and their effects on the entity's financial position,
financial performance, and cash flows.
SFAS No. 161 applies to all derivate instruments within the scope of
SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“SFAS No. 133”). It also applies to non-derivative
hedging instruments and all hedged items designated and qualifying as hedges
under SFAS No. 133. SFAS No. 161 is
effective prospectively for financial statements issued for fiscal years
beginning after 15 November 2008, with early application encouraged. Molecular USA is currently evaluating
the new disclosure requirements of SFAS No. 161 and the potential impact on Molecular
USA's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised
2007), “Business Combinations” (“SFAS No. 141(R)”).
SFAS No. 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS No. 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of
the business combination. SFAS No. 141(R) is effective for fiscal years
beginning after 15 December 2008. Molecular
USA is currently evaluating the potential impact, if any, of the adoption of
SFAS No. 141(R) on its consolidated results of operation and financial
condition.
In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements – an
amendment of Accounting Research Bulletin No. 51” (“SFAS No.
160”). SFAS No. 160
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable and to the noncontrolling interest, changes in a
parent's ownership interest, and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal
years beginning after 15 December 2008.
Molecular USA is currently evaluating the potential impact, if any, of
the adoption of SFAS No. 160 on its consolidated results of operation and
financial condition.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS No. 159”). SFAS 159 allows the company to choose to
measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for
which the fair value option has been
27
elected are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. Molecular
USA is currently evaluating the requirements of SFAS No. 159 and the potential
impact on Molecular USA's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurement” (“SFAS No. 157”). The
Statement provides guidance for using fair value to measure assets and
liabilities. The Statement also expands disclosures about the extent to which
companies measure assets and liabilities at fair value, the information used to
measure fair value, and the effect of fair value measurement on earnings. This
Statement applies under other accounting pronouncements that require or permit
fair value measurements. This Statement does not expand the use of fair value
measurements in any new circumstances. Under this Statement, fair value refers
to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the market
in which the entity transacts. SFAS No. 157 is effective for Molecular USA for
fair value measurements and disclosures made by Molecular USA in its fiscal
year beginning on 1 July 2008. Molecular USA is currently reviewing the impact
of this statement.
Critical Accounting Policies
and Estimates
Our quarterly
financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles used in the United States. Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, and expenses. These estimates and assumptions
are affected by management's application of accounting policies. We believe that understanding the basis
and nature of the estimates and assumptions involved with the following aspects
of our consolidated financial statements is critical to an understanding of our
financials.
Stock-based
compensation
On
February 1, 2006, we adopted the provisions of SFAS No. 123(R),
“
Share-Based Payment
”, which
establishes accounting for equity instruments exchanged for employee
services. Under the provisions of
SFAS No. 123(R), stock-based compensation cost is measured at the grant date,
based on the calculated fair value of the award, and is recognized as an
expense over the employees' requisite service period (generally the
vesting period of the equity grant).
Before February 1, 2006, we accounted for stock-based compensation
to employees in accordance with Accounting Principles Board Opinion
No. 25, “
Accounting for Stock
Issued to Employees
”, and complied with the disclosure
requirements of SFAS No. 123, “
Accounting for Stock-Based
Compensation
”. We adopted SFAS No. 123(R) using the
modified prospective method, which requires us to record compensation expense
over the vesting period for all awards granted after the date of adoption, and
for the unvested portion of previously granted awards that remain outstanding
at the date of adoption.
Accordingly, financial statements for the periods prior to February 1,
2006 have not been restated to reflect the fair value method of expensing
share-based compensation. Adoption
of SFAS No. 123(R) does not change the way we account for share-based
payments to non-employees, with guidance provided by SFAS No. 123 (as
originally issued) and Emerging Issues Task Force Issue No. 96-18, “
Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services
”.
Item 3. Quantitative and
Qualitative Disclosures about Market Risk.
Interest Rate Risk
Due to the short-term nature of our interest bearing assets, which
consist primarily of cash, cash equivalents and restricted cash, we believe
that our exposure to interest rate market risk will not significantly affect
our operations.
Foreign Currency Risk
Our head office and lab operations are based in Australia. Accordingly,
we have been subject to exposure from adverse movements in foreign currency
exchange rates. To date, the effect of changes in foreign currency exchange
rates on revenue and operating expenses has not been material as we have had no
revenue and limited operations. Operating expenses incurred by our foreign
subsidiaries were denominated in local currencies. We have not used financial
instruments to hedge these operating expenses.
28
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Based
on the management's evaluation (with the participation our President and
Chief Financial Officer), our President and Chief Financial Officer have
concluded that as of September 30, 2008, our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange of
1934 (the "
Exchange Act
") are effective
to provide reasonable assurance that the information required to be disclosed
in this quarterly report on Form 10-QSB is recorded, processed, summarized and
reported within the time period specified in Securities and Exchange Commission
rules and forms, . and that such information is accumulated and communicated to
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosure.
(b) Internal control over financial reporting
Management's
annual report on internal control over financial reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting is intended to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. GAAP. Our internal control over financial reporting should include
those policies and procedures that:
-
pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
-
provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with applicable GAAP, and that receipts and expenditures are being
made only in accordance with authorizations of management and the Board of
Directors; and
-
provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial statements.
Under
the supervision and with the participation of our management, including Jeff
Edwards, our President and Chief Executive Officer, and Simon Watson, our Chief
Financial Officer, we have evaluated the effectiveness of our internal control
over financial reporting and preparation of our quarterly financial statements
as of September 30, 2008 and believe they are effective.
Based
upon their evaluation of our controls, Jeff Edwards, our President and Chief
Executive Officer, and Simon Watson, our Chief Financial Officer, has concluded
that there were no significant changes in our internal control over financial
reporting or in other factors during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Attestation
report of the registered public accounting firm
This quarterly
report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this quarterly report.
Changes in internal control over financial
reporting
There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
29
Changes in Internal Controls
Based on the evaluation as of September 30, 2008, Jeff
Edwards, our President and Chief Executive Officer, and Simon Watson, our Chief
Financial Officer have concluded that there were no significant changes in our
internal controls over financial reporting or in any other areas that could
significantly affect our internal controls subsequent to the date of his most
recent evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
30
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, active or pending
legal proceedings against our company, nor are we involved as a plaintiff in
any material proceeding or pending litigation. There are no proceedings in
which any of our directors, officers or affiliates, or any registered or
beneficial shareholder, is an adverse party or has a material interest adverse
to our interest.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
Recent Sale of Unregistered
Securities
Not Applicable.
Use of Proceeds from
Unregistered Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of
Matters to a Vote of Security Holders
No matters were submitted to the security
holders of Molecular USA during this quarter.
Item 5. Other Information
DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;
ELECTION OF DIRECTORS: APPOINTMENT OF PRINCIPAL OFFICERS
Mr. Simon Watson has resigned
from his position as a director and officer of Molecular USA. Mr. Watson held the office of Chief
Financial Officer and Corporate Secretary.
The resignation of Mr. Watson was effective as of 5:00 P.M., UTC/GMT on
November 12, 2008. Mr. Watson did
not resign due to any disagreement with the Molecular USA on any matter related
to its operations, policies or practices.
The Board of Directors of the
Molecular USA on November 12, 2008, appointed Mr. Jeffrey Edwards to the office
of Chief Financial Officer and Secretary the Molecular USA effective as 5:00
P.M., UTC/GMT on November 5, 2008.
Mr. Edwards is a now the sole director and officer of the Molecular USA
and holds the office of
President, Chief Executive Officer,
Chief Financial Officer and Secretary.
Mr. Edwards is 57 years
old. Mr. Edwards has over twenty
years of experience in managing new technological innovations in the medical
device and pharmaceutical industry.
From 2002 to 2005, Mr. Edwards as president and shareholder of
International Scientific Pty Ltd., managed a variety of medical and technology
projects. In 2002 and 2003, Mr.
Edwards was actively involved with Colltech Australia Limited, a company
involved in the production and sale of collagen. Colltech is listed on the Australian
Stock Exchange ("CAU").
From its inception in 1995 to 2001, Mr. Edwards was the executive
director of Genesis Biomedical Limited, a pharmaceuticals & biotechnology
listed on the Australian Stock Exchange ("GBL"). While at Genesis,
Mr. Edwards was responsible for all medical and clinical activities of the
company as well as all day to day management of staff and corporate activities. Mr. Edwards currently serves as a
director of: OBJ Limited, a drug delivery company listed on the Australian
Stock Exchange ("OBJ") (2005) and Global Energy Medicine Pty Ltd., a
private therapeutic device company (2005).
He also holds the office of Chief Operations Officer of Molecular
Pharmacology Limited, a wholly owned subsidiary of Molecular USA.
31
Item 6. Exhibits
Exhibit
Number
|
Exhibit Title
|
3.1
|
Articles of Incorporation as
Amended (incorporated by reference to exhibit 3.1 to our Form 10-SB
Registration Statement filed on January 23, 2003).
|
3.2
|
Article of Amendment dated
August 29, 2005
|
3.3
|
Bylaws as Amended (incorporated
by reference to exhibit 3.2 to to our Form 10-SB Registration Statement filed
on January 23, 2003).
|
17.1
|
Resignation of Simon Watson
|
31.1
|
Certificate of CEO as Required
by Rule 13a-14(a)/15d-14
|
31.2
|
Certificate of CFO as Required
by Rule 13a-14(a)/15d-14
|
32.1
|
Certificate of CEO and CFO as
Required by Rule Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b)) and
Section 1350 of Chapter 63 of Title 18 of the United States Code
|
99.1
|
Press Release
|
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
November
14
, 2008.
|
MOLECULAR PHARMACOLOGY (USA) LIMITED
|
|
BY:
|
/s/ Jeffrey Edwards
|
|
|
Jeff Edwards, President, Chief Executive
Officer, Chief Financial Officer and
a Member of the Board of Directors
|
|
|
|
|
32
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