OMB
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
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X
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QUARTERLY
REPORT PURUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarter period ended
March 31, 2012
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or
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition
period from___________ to __________
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Commission file number
000-50156
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MOLECULAR PHARMACOLOGY (USA) LIMITED
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(Exact name of registrant as specified in its charter)
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NEVADA
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71-0900799
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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Drug
Discovery Centre
284 Oxford Street, Leederville 6007 Perth, Western Australia
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(Address of principal
executive offices)
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(Zip Code)
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011-61-8-9443-3011
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(Registrant's telephone number, including area
code)
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Not Applicable
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(Former name, former address and formal fiscal year,
if changed since last report)
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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 of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
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Yes
x
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No
o
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Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
|
Not applicable - Issuer does not have a web site
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Yes
o
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No
o
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|
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.
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i
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Large Accelerated Filer
o
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Accelerated Filer
o
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Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
|
|
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
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No
x
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APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
|
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
o
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No
x
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APPLICABLE
ONLY TO CORPORATE ISSUERS:
|
Indicate the number of shares outstanding of
each of the issuer's classes of common stock as of the latest
practicable date.
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111,553,740 common shares
issued and outstanding as of April 18, 2012.
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ii
MOLECULAR
PHARMACOLOGY (USA) LIMITED
Form 10-Q
March 31, 2012
Table of Contents
PART I - FINANCIAL
INFORMATION
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Item 1.
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Interim Consolidated Financial Statements
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1
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Item 2.
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Management's Discussion and Analysis of
Financial Condition and Results of Operations
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19
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Item 3.
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Quantitative and Qualitative Disclosures About Market
Risk
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28
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Item 4.
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Controls and Procedures
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28
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PART II - OTHER
INFORMATION
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Item 1.
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Legal Proceedings
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30
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Item 1A.
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Risk Factors
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30
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Item 2.
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Unregistered Sales of Equity Securities and Use of
Proceeds
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30
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Item 3.
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Defaults Upon Senior Securities
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30
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Item 4.
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Mine Safety Disclosures
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30
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Item 5.
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Other Information
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30
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Item 6.
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Exhibits
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31
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SIGNATURES
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31
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iii
PART 1 - FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial
Statements
.
The information in this report
for the nine months ended March 31, 2012, 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' deficiency and cash flows for those
periods.
The interim consolidated financial
statements should be read in conjunction with Molecular USA's consolidated
financial statements and the notes thereto contained in Molecular USA's Audited
Financial Statements for the year ended June 30, 2011, in the Form 10-K filed
with the SEC on September 30, 2011.
Interim results are not
necessarily indicative of results for the full fiscal year.
The unaudited interim
consolidated 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)
(Unaudited)
31 March 2012
2
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
|
|
As at
31 March
2012
(Unaudited)
|
|
As at
30 June
2011
(Audited)
|
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$
|
|
$
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Assets
|
|
|
|
|
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Current
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|
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Cash and cash equivalents
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13,465
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8,675
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Amounts receivable
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4,793
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6,606
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Prepaid expenses
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500
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-
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18,758
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15,281
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Equipment
(Note 3)
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1,269
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1,608
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20,027
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16,889
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Liabilities
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Current
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Accounts payable and accrued liabilities
(Note 4)
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7,585
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20,052
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Due to related parties
(Note 5)
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2,050,487
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1,963,529
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2,058,072
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1,983,581
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Stockholders' deficiency
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Capital stock
(Note 6)
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Authorized
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300,000,000 common shares, par value $0.001
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Issued and outstanding
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31 March 2012 - 111,553,740 common shares,
par value $0.001
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30 June
2011 - 111,553,740 common shares, par value $0.001
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111,554
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111,554
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Additional paid-in capital
|
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106,707
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106,707
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Cumulative translation adjustment
|
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(471,086)
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(512,287)
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Deficit, accumulated during the development
stage
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(1,785,220)
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(1,672,666)
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(2,038,045)
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(1,966,692)
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20,027
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16,889
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Nature and Continuance of Operations
(Note 1)
and
Subsequent Events
(Note 12)
On behalf of the Board:
/s/ Jeff Edwards
Director
Jeffrey Edwards
The accompanying notes are an integral part of
these interim consolidated financial statements.
3
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
|
For the
period from
the date of
inception on
14 July 2004
to
31 March
2012
|
For the
three
month
period
ended
31 March
2012
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For the
three
month
period
ended
31 March
2011
|
For the
nine
month
period
ended
31 March
2012
|
For the
nine
month
period
ended
31 March
2011
|
|
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$
|
|
$
|
|
$
|
|
$
|
|
$
|
Expenses
|
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Advertising and promotion
|
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23,739
|
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-
|
|
-
|
|
-
|
|
-
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Amortization
(Note 3)
|
|
6,581
|
|
114
|
|
148
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|
339
|
|
431
|
Analysis
|
|
33,947
|
|
-
|
|
-
|
|
-
|
|
-
|
Consulting
(Note
5)
|
|
1,258,776
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|
9,126
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|
13,667
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|
69,259
|
|
39,984
|
Office and
miscellaneous
(Note 5)
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|
212,160
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5,671
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|
5,805
|
|
16,244
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|
19,596
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Professional fees
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337,688
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15,899
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7,339
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26,712
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22,729
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Public relations
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3,656
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-
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-
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-
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-
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Rent
(Note 5)
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27,759
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-
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-
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-
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-
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Salaries and
benefits
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44,464
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-
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-
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-
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-
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Transfer agent
and filing fees
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17,172
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-
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-
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-
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1,114
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Travel
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104,249
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-
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-
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|
-
|
|
-
|
|
|
|
|
|
|
|
|
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Net
loss before other items
|
|
(2,070,191)
|
|
(30,810)
|
|
(26,959)
|
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(112,554)
|
|
(83,854)
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|
|
|
|
|
|
|
|
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Other
items
|
|
|
|
|
|
|
|
|
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Export market development grants
|
|
69,629
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|
-
|
|
-
|
|
-
|
|
-
|
Interest income
|
|
2,322
|
|
-
|
|
-
|
|
-
|
|
-
|
Research and development tax refund
|
213,020
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
(1,785,220)
|
|
(30,810)
|
|
(26,959)
|
|
(112,554)
|
|
(83,854)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
(0.001)
|
|
(0.001)
|
|
(0.001)
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|
(0.001)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in per share calculations
|
|
111,553,740
|
|
111,553,740
|
|
111,553,740
|
|
111,553,740
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(1,785,220)
|
|
(30,810)
|
|
(26,959)
|
|
(112,554)
|
|
(83,854)
|
Foreign currency
translation adjustment
|
|
(471,086)
|
|
(22,403)
|
|
(27,345)
|
|
41,201
|
|
(306,175)
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
loss for the period
|
|
(2,256,306)
|
|
(53,213)
|
|
(54,304)
|
|
(71,353)
|
|
(390,029)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted comprehensive loss per common share
|
|
(0.001)
|
|
(0.001)
|
|
(0.001)
|
|
(0.003)
|
The accompanying notes are an integral part of
these interim 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
31
March
2012
|
For the
three
month
period
ended
31
March
2012
|
For the
three
month
period
ended
31
March
2011
|
For the
nine
month
period
ended
31
March
2012
|
For the
nine
month
period
ended
31
March
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
Cash flows used in operating activities
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(1,785,220)
|
|
(30,810)
|
|
(26,959)
|
|
(112,554)
|
|
(83,854)
|
Adjustments
to reconcile loss to net
cash used by operating activities
|
|
|
|
|
|
|
|
|
Amortization
|
6,581
|
|
114
|
|
148
|
|
339
|
|
431
|
Write-down of
intangible
assets
|
1,278
|
|
-
|
|
-
|
|
-
|
|
-
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Decrease (increase)
in amounts receivable
|
(2,567)
|
|
4,240
|
|
(1,293)
|
|
1,813
|
|
(3,840)
|
Decrease (increase) in prepaid expenses
|
(500)
|
|
876
|
|
-
|
|
(500)
|
|
-
|
Decrease in accounts payable and accrued liabilities
|
(39,832)
|
|
(5,805)
|
|
(1,044)
|
|
(12,467)
|
|
(13,912)
|
|
|
(1,820,260)
|
|
(31,385)
|
|
(29,148)
|
|
(123,369)
|
|
(101,175)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) investing activities
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
(7,850)
|
|
-
|
|
-
|
|
-
|
|
-
|
Purchase of intangible assets
|
(1,278)
|
|
-
|
|
-
|
|
-
|
|
-
|
Cash acquired on the purchase of
Molecular Pharmacology (USA) Limited
|
37,163
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
28,035
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
Common shares issued for cash
|
234,497
|
|
-
|
|
-
|
|
-
|
|
-
|
Increase in due to related parties
|
2,042,279
|
|
57,219
|
|
62,459
|
|
86,958
|
|
409,969
|
|
|
2,276,776
|
|
57,219
|
|
62,459
|
|
86,958
|
|
409,969
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(471,086)
|
|
(22,403)
|
|
(27,345)
|
|
41,201
|
|
(306,175)
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
13,465
|
|
3,431
|
|
5,966
|
|
4,790
|
|
2,619
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
-
|
|
10,034
|
|
4,628
|
|
8,675
|
|
7,975
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
13,465
|
|
13,465
|
|
10,594
|
|
13,465
|
|
10,594
|
Supplemental
Disclosures with Respect to Cash Flows
(Note 9)
The accompanying notes are an integral part of
these interim 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
|
|
(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
year
|
|
-
|
|
-
|
|
-
|
|
(94,336)
|
|
-
|
|
(94,336)
|
Cumulative
translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
219,034
|
|
219,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2009
|
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,433,586)
|
|
(75,804)
|
|
(1,291,129)
|
Net
loss for the year
|
|
-
|
|
-
|
|
-
|
|
(117,220)
|
|
-
|
|
(117,220)
|
Cumulative
translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(78,521)
|
|
(78,521)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2010
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,550,806)
|
|
(154,325)
|
|
(1,486,870)
|
Net
loss for the year
|
-
|
|
-
|
|
-
|
|
(121,860)
|
|
-
|
|
(121,860)
|
Cumulative
translation
adjustment
|
-
|
|
-
|
|
-
|
|
-
|
|
(357,962)
|
|
(357,962)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2011
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,672,666)
|
|
(512,287)
|
|
(1,966,692)
|
Net
loss for the period
|
-
|
|
-
|
|
-
|
|
(112,554)
|
|
-
|
|
(112,554)
|
Cumulative
translation
adjustment
|
-
|
|
-
|
|
-
|
|
-
|
|
41,201
|
|
41,201
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2012
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,785,220)
|
|
(471,086)
|
|
(2,038,045)
|
The accompanying notes are an integral part of
these interim consolidated financial statements.
6
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
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 authorized 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
Accounting Standards Codification
(the
"Codification" or "ASC") 915-10, "
Development Stage Entities
".
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 acquired the exclusive distribution rights to distribute,
market, promote, detail, advertise and sell certain "Licensed Products" through
Molecular Pharmacology Pty. Ltd. (formerly Molecular Pharmacology Limited) ("MPLA") (Note 8). MPLA was incorporated under the laws of
Australia and converted to a proprietary company on 29 October 2009. MPLA is a wholly owned subsidiary
company of PharmaNet Group Limited ("PharmaNet"), an Australian company listed on the Australian
Stock Exchange.
Since then, 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 (the
"Purchase Agreement").
Under the terms of the Purchase Agreement the Company acquired 100% of
the issued and outstanding shares of MPLA.
The Company, in exchange for 100% of the issued and outstanding shares
of MPLA, issued PharmaNet an aggregate total of 88,000,000 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 interim consolidated
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)
31 March
2012
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 31 March 2012 and for the nine 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 $112,554 for the nine month period ended 31 March 2012 (31 March 2011
- $83,854) and has working capital of $11,173 at 31 March 2012 (30 June 2011 -
working capital deficit of $4,771).
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
2012. 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 31 March 2012,
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
accounting principles generally accepted in the United States of America
("U.S. GAAP") applicable for a development stage company for
financial information and are expressed in U.S. dollars.
Principles
of consolidation
These interim
consolidated financial statements include the accounts of MPLA since its
incorporation on 14 July 2004 and the Company 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)
31 March
2012
Cash
and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Segments of an enterprise and related information
ASC
280, "
Segment Reporting
"
establishes guidance for the way that public companies report
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. ASC 280 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
Foreign
currency translation
The Company's functional and reporting currency is U.S.
dollars.
The interim consolidated financial statements of the Company are
translated to U.S. dollars in
accordance with ASC 830, "
Foreign Currency Matters
". Monetary 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.
Equipment
Equipment is recorded at cost and amortization is provided over its
estimated economic life at the rate of
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 ASC 740,
"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 losses and credit
carry-forwards. 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.
9
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
Comprehensive income (loss)
ASC
220, "
Comprehensive Income
", establishes
standards for the reporting and disclosure of comprehensive income (loss) and
its components in the financial statements. As at 31 March 2012, 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 income (loss) per share
The Company
computes net income (loss) per share in accordance with ASC 260, "
Earnings per Share
". ASC 260 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 income (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
January 2006, the Company adopted the provisions of ASC 718, "
Compensation - Stock Compensation
", which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of ASC 718, 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). The Company adopted ASC 718
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, the
financial statements for the periods prior to 1 January 2006 have not been
restated to reflect the fair value method of expensing share-based
compensation. The adoption of ASC 718 does not change the way the Company
accounts for share-based payments to non-employees, with guidance provided by
ASC 505-50, "
Equity-Based Payments to
Non-Employees
".
Comparative
figures
Certain
comparative figures have been adjusted to conform to the current period's
presentation.
10
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
3.
Equipment
|
|
|
Accumulated
amortization
|
|
Net
Book Value
|
|
|
Cost
|
|
As at
31
March
2012
|
|
As at
30
June
2011
(Audited)
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
7,850
|
|
6,581
|
|
1,269
|
|
1,608
|
During
the nine month period ended 31 March 2012, the total additions to equipment
were $Nil (31 March 2011 - $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 31 March 2012, the amount due to related parties
includes $1,000 payable to a director of the Company (30 June 2011
-
$1,000). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 31 March 2012, the amount due to related parties
includes $12,068 payable to a company owned by a director of the Company or an
officer of PharmaNet (30 June 2011
-
$65,231). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 31 March 2012, the amount due to related parties
includes $1,368 payable to a company owned by a director of the Company or an
officer of PharmaNet (30 June 2011
-
$673). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 31 March 2012, the amount due to related parties
includes $2,036,051 payable to PharmaNet (30 June 2011
-
$1,896,625). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
During
the nine month period ended 31 March 2012, a director of the Company or an
officer of PharmaNet, and their controlled entities were paid or accrued
consulting fees of $35,999 (
31 March 2011
- $31,298; cumulative
- $852,279) by the Company.
During the nine month period ended 31 March 2012, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued consulting and/or office and miscellaneous expenses
of $15,172 (
31 March 2011
-
$18,393; cumulative
-
$42,550) by the Company.
During the nine month period ended 31 March 2012, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued consulting fees of $33,260 (31 March 2011 -
$8,686; cumulative - $42,164) by the Company.
11
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
During the nine month period ended 31 March 2012, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued office and miscellaneous expenses of $Nil (
31 March 2011
-
$Nil; cumulative
-
$80,468) by the Company.
During the nine month period ended 31 March 2012, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued rental fees of $Nil (
31 March 2011
- $Nil; cumulative - $12,987) by the Company.
Transactions comprising the amount due to PharmaNet are as
follows:
|
|
For the
nine month
period ended
31 March
2012
|
|
For the
year
ended
30 June
2011
(Audited)
|
|
|
$
|
|
$
|
|
|
|
|
|
Opening balance, beginning of period
|
|
1,896,625
|
|
1,465,002
|
Funds transferred to the Company by PharmaNet
|
|
145,201
|
|
70,947
|
Expenses paid by PharmaNet on behalf of the
Company
|
|
33,003
|
|
9,894
|
Foreign currency translation adjustment
|
|
(38,778)
|
|
350,782
|
|
|
|
|
|
Balances, end of period
|
|
2,036,051
|
|
1,896,625
|
The average amount due to PharmaNet for the nine month
period ended 31 March 2012 was $1,791,574 (30 June 2011 - $1,660,885).
6.
Capital Stock
Authorized
The total authorized capital is 300,000,000 common
shares with a par value of $0.001 per common share.
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.
12
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2012
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
nine month
period ended
31 March
2012
|
|
For the
nine month
period ended
31 March
2011
|
|
|
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
(112,554)
|
|
(83,854)
|
|
|
|
|
|
|
|
Federal income tax rates
|
|
|
|
34.0%
|
|
34.0%
|
|
|
|
|
|
|
|
Income tax recovery based on the above rates
|
|
|
|
(38,268)
|
|
(28,510)
|
|
|
|
|
|
|
|
Increase (decrease) due to:
|
|
|
|
|
|
|
Difference
between U.S. and foreign tax rates
|
|
|
|
3,440
|
|
2,400
|
Change
in valuation allowance
|
|
|
|
26,490
|
|
87,514
|
Foreign
exchange and other
|
|
|
|
8,338
|
|
(61,404)
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
-
|
|
-
|
The composition of the Company's deferred tax assets as at 31 March 2012
and 30 June 2011 are as follows:
|
|
As at
31 March
2012
|
|
As at
30 June
2011
(Audited)
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax operating loss
carryforward
|
|
2,061,237
|
|
1,976,478
|
|
|
|
|
|
Deferred tax assets
|
|
647,742
|
|
621,252
|
Less:
Valuation allowance
|
|
(647,742)
|
|
(621,252)
|
|
|
|
|
|
Net deferred tax asset
|
|
-
|
|
-
|
13
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
The Company has
non-capital loss carry-forwards of approximately $2,061,237 that may be
available for tax purposes. The
loss carry-forwards are all in respect to U.S. 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
|
57,882
|
2030
|
48,765
|
2031
|
43,836
|
2032
|
26,554
|
No expiry
|
1,326,973
|
|
|
|
2,061,237
|
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.
Distribution Agreement
The Company has the
exclusive distribution rights, through MPLA, to distribute, market, promote,
detail, advertise and sell certain Licensed Products, with metallo-polypeptide
analgesic as an active ingredient, in the United States (excluding its territories
and possessions) (Note 1).
The Company will obtain all necessary
regulatory approvals for the Licensed Products and incorporate the Licensed
Products in the United States.
14
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
9.
Supplemental Disclosures
with Respect to Cash Flows
|
|
For the
period from
the date of
inception on
14 July 2004
to
31 March
2012
|
For the
three
month
period
ended
31 March
2012
|
For the
three
month
period
ended
31 March
2011
|
For the
nine
month
period
ended
31 March
2012
|
For the
nine
month
period
ended
31 March
2011
|
|
|
|
$
|
|
$
|
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period
for interest
|
|
|
-
|
|
-
|
|
-
|
-
|
-
|
Cash paid during the period
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
|
|
-
|
|
-
|
-
|
-
|
15
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
10.
Segmented Information
Details on a geographic basis as at and for the nine
month period ended 31 March 2012 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
19,527
|
|
500
|
|
20,027
|
|
|
|
|
|
|
|
Loss
for the period
|
|
(86,000)
|
|
(26,554)
|
|
(112,554)
|
Details on a geographic basis as at and for the year
ended 30 June 2011 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
16,889
|
|
-
|
|
16,889
|
|
|
|
|
|
|
|
Loss for the year
|
|
(78,024)
|
|
(43,836)
|
|
(121,860)
|
Details on a geographic basis as at and for the nine
month period ended 31 March 2011 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
17,680
|
|
-
|
|
17,680
|
|
|
|
|
|
|
|
Loss
for the period
|
|
(59,996)
|
|
(23,858)
|
|
(83,854)
|
11.
Financial
Instruments
The carrying values of cash and cash equivalents, amounts receivable and
accounts payable approximate fair value due to the short term maturity of these
financial instruments.
Credit Risk
Financial instruments that potentially subject the Company to credit
risk consist of cash and cash equivalents and amounts receivable. The Company
deposits cash and cash equivalents with high credit quality financial
institutions as determined by rating agencies. As at 31 March 2012, amounts receivable
consist of Goods and Services Tax receivable of $2,535 (30 June 2011 - $6,606)
and other receivables of $2,258 (30 June 2011 - $Nil). As a result, credit risk is considered
insignificant.
16
Molecular Pharmacology (USA)
Limited
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March
2012
Currency Risk
The Company's subsidiary is located in Australia. As a result, a
significant portion of the Company's assets, liabilities and expenses
were denominated in the Australian dollar and were therefore subject to
fluctuation in exchange rates.
The
Company's objective in managing its foreign currency risk is to minimize
its net exposures to foreign currency cash flows by holding most of its cash
and cash equivalents in Australian dollars. The Company monitors and forecasts the
values of net foreign currency cash flow and balance sheet exposures and from
time to time could authorize the use of derivative financial instruments such
as forward foreign exchange contracts to economically hedge a portion of
foreign currency fluctuations.
If the Australian dollar had weakened (strengthened) against the U.S.
dollar, with all other variables held constant, by 100 basis points (1%) at
period end, the impact on net loss and other comprehensive loss would have been
$20,335 higher ($20,335 lower).
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.
Interest Rate Risk
The Company has non-interest paying cash balances and no
interest-bearing debt. It is management's opinion that the Company
is not exposed to significant interest risk arising from these financial
instruments.
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in
meeting obligations associated with its financial liabilities. The Company is reliant upon PharmaNet as
its sole source of cash. The
Company has received financing from PharmaNet in the past; however, there is no
assurance that it will be able to do so in the future.
12.
Subsequent Events
There are no
subsequent events for the period from the date of the nine month period ended
31 March 2012 to the date the interim consolidated financial statements were
available to be issued on 18 April 2012.
17
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 THIRD QUARTER PERIOD
ENDED MARCH 31, 2012 AND SHOULD BE READ IN CONJUNCTION WITH MOLECULAR
USA'S INTERIM CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO CONTAINED ELSEWHERE IN THE FORM 10-Q.
Our interim 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 1, 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 Pty. Ltd. (formerly 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 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.
The majority of over-the-counter anti-pain and
anti-inflammatory products sold for the treatment of acute localized 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.
18
Licensed
Products
Molecular USA has exclusive distribution rights
to distribute, market, promote, 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 trade name Tripeptofen or any other trade
names or trademarks 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 parent 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. 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 Pty Ltd.
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.
19
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 GMPs, enforced by the Food
and Drug Administration ("FDA").
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.
20
Governmental
Regulation
FDA Regulation
. Pharmaceutical products are subject to
extensive pre- and post-marketing regulation by the 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.
21
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.
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.
22
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 officer
and chief financial officer certify its financial statements;
-
ensure Molecular
USA's directors and senior officers 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;
-
adopt a code of ethics and file a Form 8-K whenever
there is a change or waiver of this code; and
-
insure Molecular USA's auditor is
independent as defined by SOA.
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.
On commercial development, MPLA will focus on
consolidating the regulatory pathway work in order to prioritize 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 March 31, 2012.
23
Rev
enues
REVENUE
- Molecular USA has
not generated any revenues for the quarter ended March 31, 2012, or since
inception.
COMMON STOCK
- Molecular USA has not
issued any shares during the most recent quarter. As of the date of April 18,
2012, Molecular USA has 111,553,740 common shares issued and outstanding.
Expenses
SUMMARY
-
Total expenses were $112,554 for the nine month period ended March 31, 2012. Expenses had increased during this past nine
month period as compared to the nine month period ended March 31, 2011 -
$83,854. A total of $2,070,191 in expenses has been incurred by Molecular USA
since inception on July 14, 2004 through to March 31, 2012. The increase in costs over this nine
month period has occurred as the result of Molecular USA's wholly owned
subsidiary increase in its consulting fees. The costs can be subdivided into the
following categories.
-
Office Expenses and Rent
: $16,244
in office expenses (for administrative costs) were incurred for the nine
month period ended March
31, 2012, as compared to $19,596 for the nine month period
ended March 31, 2011, while a total of $239,919 was incurred in the period
from inception on July
14, 2004 to March 31, 2012. 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 nine month
period ended March 31, 2012, $69,259 in consulting and analysis expenses
were incurred as compared to $39,984 during the nine month period ended
March 31, 2011. We have incurred a total of $1,292,723
in consulting and analyst fees since our inception on July 14, 2004 to March 31, 2012.
-
Advertising and Promotion
Fees
: Molecular USA has spent no money in this area
this year. During the nine
month period ended March
31, 2012, we spent $Nil on advertising and public relations
and $Nil for nine month period ended March 31, 2011. A total of $23,739 has been
incurred in this area during the period from inception on July 14, 2004 to March
31, 2012.
-
Professional Fees
:
Molecular USA incurred $26,712 in professional fees for the nine month
period ended on March 31,
2012, as compared to $22,729 for the nine month period
ended March 31, 2011. From inception to March 31, 2012, we have incurred a total of $337,688
professional fees mainly spent on legal and accounting matters.
-
Travel Costs
:
Molecular USA incurred $Nil in travel costs for the nine month period ended
March 31, 2012, as compared to $Nil for the nine month period ended March
31, 2011 and $104,249
has been incurred in the period from inception on July 14, 2004 to March
31, 2012.
-
Salaries and Benefit
Costs
: Molecular USA and its subsidiary rely primarily
on outside consultants and not salaried employees. As a result, Molecular USA incurred
$Nil in salaries and benefits for the nine month period ended March 31,
2012 and $Nil in salaries and benefits during the nine month period ended March,
2011. For the period
July
14, 2004 (inception)
through March 31, 2012,
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 March 31, 2012. There are no
current or deferred tax expenses for the nine month period ended March 31, 2012,
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.
24
Liquidity and Capital Resources
During the nine month period ended March 31, 2012, Molecular USA satisfied its
working capital needs by borrowing cash from its parent company PharmaNet. As March 31, 2012, the Company had cash
and cash equivalents on hand in the amount of $13,465 ($8,675- June
30, 2011) and current payable and accrued liabilities of $7,585 ($20,052 - June
30, 2011). As March
31, 2012, Molecular USA currently owes its parent company PharmaNet, $2,036,051,
an additional $14,436 to other related parties, and $7,585 to non-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 and and future financing from our majority shareholder
PharmaNet.
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 March 31, 2012,
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 are presented in the section.
25
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 March 31, 2012, amounted to $Nil. Molecular USA does not anticipate any
significant purchase or sale of equipment over the next 12 months.
Critical Accounting Policies and Estimates
Our
quarterly interim consolidated 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 interim consolidated financial
statements is critical to an understanding of our financials.
Stock-based
compensation
Effective January 1, 2006, the Company adopted
the provisions of ASC 718,
"Compensation
-
Stock Compensation"
, which establishes accounting for
equity instruments exchanged for employee services. Under the provisions of ASC
718, 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). The Company adopted ASC 718 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, the
financial statements for the periods prior to January 1, 2006 have not been
restated to reflect the fair value method of expensing share-based
compensation. The adoption of ASC
718 does not change the way the Company accounts for share-based payments to
non-employees, with guidance provided by ASC 505-50,
"Equity-Based
Payments to Non-Employees".
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 and cash equivalents and no restricted cash, we believe that
our exposure to interest rate market risk will not significantly affect our
operations.
26
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.
Item
4. Controls and Procedures.
(a) Evaluation of Disclosure
Controls and Procedures
Disclosure controls are controls
and procedures that are designed to ensure that information required to be
disclosed in our reports filed under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow 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.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
As required by Rule 13a-15(c) promulgated under the
Exchange Act, our management, with the participation of our Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"),
evaluated the effectiveness of our internal control over financial reporting as
of March 31, 2012. Management's assessment took into consideration the size and
complexity of the company and was based on criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission in Internal Control over
Financial Reporting-Guidance for Smaller Public Companies. In performing the
assessment, management has concluded that our internal control over financial
reporting was effective as of March 31, 2012.
27
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.
Changes in Internal Controls
Based on the evaluation as of March 31, 2012, Jeffrey
Edwards, our President, Chief Executive Officer, and Chief Financial Officer has
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.
28
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 1A. Risk Factors.
As a "smaller reporting company" as
defined by Item 10 of Regulation S-K, the Company is not required to provide
information required by this Item.
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.
Mine Safety Disclosures.
Not Applicable.
Item
5. Other Information
.
No items to disclose.
29
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 our Form 10-SB Registration
Statement filed on January 23, 2003).
|
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 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
|
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.
April 23, 2012.
|
MOLECULAR PHARMACOLOGY (USA) LIMITED
|
|
BY:
|
/s/ Jeff Edwards
|
|
|
Jeff Edwards, President, Chief Executive
Officer, Chief Financial Officer and
a Member of the Board of Directors
|
|
|
|
|
30
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