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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
|
|
|
|
For the quarter period ended
March 31, 2011
|
|
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or
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|
|
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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
|
(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)
|
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 of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
|
|
Yes
x
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No
o
|
|
|
|
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 (S232.405 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
|
Yes
o
|
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.
i
|
|
Large Accelerated
Filer
o
|
|
Accelerated Filer
|
|
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
|
No
x
|
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
|
No
x
|
|
|
|
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.
|
111,553,740 common shares issued and outstanding as of April
21, 2011.
|
ii
MOLECULAR PHARMACOLOGY (USA) LIMITED
Form 10-Q
March 31, 2011
Table of Contents
PART I -
FINANCIAL INFORMATION
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|
Item 1.
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Interim
Consolidated Financial Statements
|
1
|
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
|
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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|
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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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(Removed and Reserved)
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30
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Item 5.
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Other
Information
|
30
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Item 6.
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Exhibits
|
31
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|
SIGNATURES
|
31
|
iii
PART 1 - FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements
.
The information in this report for the nine months ended March 31, 2011, 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, 2010, in the Form 10K filed with the SEC on September 24, 2010.
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 2011
2
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited)
|
|
As at
31 March
2011
|
|
As at
30 June
2010
(Audited)
|
|
|
$
|
|
$
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
Cash and cash equivalents
|
|
10,594
|
|
7,975
|
Amounts receivable
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5,320
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|
1,480
|
|
|
|
|
|
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15,914
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9,455
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|
|
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Equipment
(Note 3)
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1,766
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|
2,197
|
|
|
|
|
|
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17,680
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11,652
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Liabilities
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Current
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|
|
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Accounts payable and accrued
liabilities (Note 4)
|
|
6,899
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|
20,811
|
|
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Due to related parties
(Note 5)
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1,887,680
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1,477,711
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|
|
|
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1,894,579
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1,498,522
|
|
|
|
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Stockholders' deficiency
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|
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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
|
|
|
|
|
31 March 2011 -
111,553,740 common shares, par value $0.001
|
|
|
|
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30 June 2010 - 111,553,740 common shares, par value $0.001
|
|
111,554
|
|
111,554
|
Additional paid-in capital
|
|
106,707
|
|
106,707
|
Cumulative translation
adjustment
|
|
(460,500)
|
|
(154,325)
|
Deficit, accumulated during
the development stage
|
|
(1,634,660)
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|
(1,550,806)
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|
|
|
|
|
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(1,876,899)
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|
(1,486,870)
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|
|
|
|
|
|
|
17,680
|
|
11,652
|
Nature and Continuance of Operations
(Note 1),
Commitment
(Note
8),
Contingency
(Note 11) and
Subsequent Event
(Note 13)
On behalf of the Board:
/s/ Jeffrey 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
2011
|
For the
three month
period
ended
31 March
2011
|
For the
three month
period
ended
31 March
2010
|
For the
nine month
period
ended
31 March
2011
|
For the
nine month
period
ended
31 March
2010
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Advertising
and promotion
|
|
23,739
|
|
-
|
|
-
|
|
-
|
|
-
|
Amortization
(Note 3)
|
|
6,084
|
|
148
|
|
183
|
|
431
|
|
544
|
Analysis
|
|
33,947
|
|
-
|
|
-
|
|
-
|
|
-
|
Consulting
(Note 5)
|
|
1,176,811
|
|
13,667
|
|
8,389
|
|
39,984
|
|
34,323
|
Office and
miscellaneous (Note 5)
|
|
190,751
|
|
5,805
|
|
3,781
|
|
19,596
|
|
18,356
|
Professional
fees
|
|
291,563
|
|
7,339
|
|
3,772
|
|
22,729
|
|
22,134
|
Public
relations
|
|
3,656
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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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Salaries and
benefits
|
|
44,464
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|
-
|
|
-
|
|
-
|
|
-
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Transfer agent
and filing fees
|
|
16,608
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|
-
|
|
587
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|
1,114
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|
5,302
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Travel
|
|
104,249
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|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
before other items
|
|
(1,919,631)
|
|
(26,959)
|
|
(16,712)
|
|
(83,854)
|
|
(80,659)
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
Export market
development grants
|
|
69,629
|
|
-
|
|
-
|
|
-
|
|
-
|
Interest
income
|
|
2,322
|
|
-
|
|
-
|
|
-
|
|
-
|
Research and development tax refund
|
213,020
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
for the period
|
|
(1,634,660)
|
|
(26,959)
|
|
(16,712)
|
|
(83,854)
|
|
(80,659)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
|
(0.001)
|
|
(0.001)
|
|
(0.001)
|
|
(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
|
|
(1,634,660)
|
|
(26,959)
|
|
(16,712)
|
|
(83,854)
|
|
(80,659)
|
Foreign
currency translation adjustment
|
|
(460,500)
|
|
(27,345)
|
|
(44,131)
|
|
(306,175)
|
|
(184,823)
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the period
|
|
(2,095,160)
|
|
(54,304)
|
|
(60,843)
|
|
(390,029)
|
|
(265,482)
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss per common share
|
|
(0.001)
|
|
(0.001)
|
|
(0.003)
|
|
(0.002)
|
|
|
|
|
|
|
|
|
|
|
|
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
2011
|
For the
three month
period
ended
31 March
2011
|
For the
three month
period
ended
31 March
2010
|
For the
nine month
period
ended
31 March
2011
|
For the
nine month
period
ended
31 March
2010
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in
operating activities
|
|
|
|
|
|
|
|
|
Net loss
for the period
|
|
(1,634,660)
|
|
(26,959)
|
|
(16,712)
|
|
(83,854)
|
|
(80,659)
|
Adjustments to reconcile loss to net cash used by
operating activities
|
|
|
|
|
|
|
|
|
|
|
Amortization
(Note 3)
|
|
6,084
|
|
148
|
|
183
|
|
431
|
|
544
|
Write-down of
intangible assets
|
|
1,278
|
|
-
|
|
-
|
|
-
|
|
-
|
Changes in
operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Increase in amounts receivable
|
(3,094)
|
|
(1,293)
|
|
(269)
|
|
(3,840)
|
|
(3,786)
|
Decrease in accounts payable and accrued liabilities (Note 4)
|
(40,518)
|
|
(1,044)
|
|
(18,940)
|
|
(13,912)
|
|
(27,529)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,670,910)
|
|
(29,148)
|
|
(35,738)
|
|
(101,175)
|
|
(111,430)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of
property, plant and equipment (Note 3)
|
|
(7,850)
|
|
-
|
|
-
|
|
-
|
|
-
|
Purchase of
intangible assets
|
|
(1,278)
|
|
-
|
|
-
|
|
-
|
|
-
|
Cash acquired
on the purchase of Molecular Pharmacology (USA) Limited (Note 1)
|
|
37,163
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,035
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Common shares
issued for cash
(Note 6)
|
|
234,497
|
|
-
|
|
-
|
|
-
|
|
-
|
Increase in
due to related parties
(Note 5)
|
|
1,879,472
|
|
62,459
|
|
78,556
|
|
409,969
|
|
293,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,113,969
|
|
62,459
|
|
78,556
|
|
409,969
|
|
293,092
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash
|
|
(460,500)
|
|
(27,345)
|
|
(44,131)
|
|
(306,175)
|
|
(184,823)
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
10,594
|
|
5,966
|
|
(1,313)
|
|
2,619
|
|
(3,161)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, beginning of period
|
|
-
|
|
4,628
|
|
5,695
|
|
7,975
|
|
7,543
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period
|
|
10,594
|
|
10,594
|
|
4,382
|
|
10,594
|
|
4,382
|
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 period
|
-
|
|
-
|
|
-
|
|
(83,854)
|
|
-
|
|
(83,854)
|
Cumulative translation
adjustment
|
-
|
|
-
|
|
-
|
|
-
|
|
(306,175)
|
|
(306,175)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2011
|
111,553,740
|
|
111,554
|
|
106,707
|
|
(1,634,660)
|
|
(460,500)
|
|
(1,876,899)
|
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 2011
-
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 entered into a distribution and supply
agreement (the "Distribution Agreement") with Molecular Pharmacology Pty. Ltd.
(formerly Molecular Pharmacology Limited) ("MPLA"). 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. Under the terms
of the Distribution 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 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 2011
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 2011
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 $83,854 for the nine month period ended 31 March 2011 (31 March
2010 - $80,659) and has working capital of $9,015 at 31 March 2011 (30 June
2010 - working capital deficit of $11,356).
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 2011. 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 2011, 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.
-
Significant Accounting Policies
The following is a summary of significant accounting policies used in the
preparation of these interim consolidated financial statements.
The Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 168,
"The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles - a replacement of FASB Statement No. 162"
. The
Codification reorganized existing U.S. accounting and reporting standards
issued by the FASB and other related private sector standard setters into a
single source of authoritative accounting principles arranged by topic. The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission ("SEC") guidance for publicly-traded companies) is
considered non-authoritative. The Codification was effective on a prospective
basis for any annual reporting periods ending after 15 September 2009. The
adoption of the Codification changed the Company's references to United Stated
generally accepted accounting principle ("U.S. GAAP") accounting standards, but
did not impact the Company's results of operations, financial position or
liquidity.
8
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
Basis of presentation
These interim consolidated financial statements have been prepared in
accordance with 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.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
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
". 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.
Equipment
Equipment is recorded at cost and amortization is provided over their
estimated economic lives 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 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)
31 March 2011
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 income (loss)
ASC 220, "
Comprehensive Income
", establishes standards for the
reporting and display of comprehensive income (loss) and its components in the
financial statements. As at 31 March 2011, 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 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 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
".
10
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
Changes in accounting policies
Effective 1 January 2011, the Company adopted Accounting Standards Update
("ASU") 2010-06,
"Improving Disclosures about Fair Value Measurements."
This update requires additional disclosure within the roll forward of activity
for assets and liabilities measured at fair value on a recurring basis,
including transfers of assets and liabilities between Level 1 and Level 2 of
the fair value hierarchy and the separate presentation of purchases, sales,
issuances and settlements of assets and liabilities within Level 3 of the fair
value hierarchy. In addition, the update requires enhanced disclosures of the
valuation techniques and inputs used in the fair value measurements within
Levels 2 and 3. The new disclosure requirements are effective for interim and
annual periods beginning after 15 December 2009, except for the disclosure of
purchases, sales, issuances and settlements of Level 3 measurements. Those
disclosures are effective for fiscal years beginning after 15 December 2010. As
ASU 2010-06 only requires enhanced disclosures, the adoption of this update did
not have any material impacts on its interim consolidated financial statements.
Effective 1 January 2011, the Company adopted ASU No. 2010-09,
"Amendments to Certain Recognition and Disclosure Requirements"
, which
eliminates the requirement for SEC filers to disclose the date through which an
entity has evaluated subsequent events. ASU No. 2010-09 is effective for
fiscal quarters beginning after 15 December 2010. The adoption of ASU No.
2010-09 did not have any material impacts on the Company's interim consolidated
financial statements.
-
Equipment
|
|
|
Accumulated amortization
|
|
Net Book Value
|
|
|
Cost
|
|
As at
31 March
2011
|
|
As at
30 June
2010
(Audited)
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Office
equipment
|
|
7,840
|
|
6,074
|
|
1,766
|
|
2,197
|
During the nine month period ended 31 March 2011, the total additions to
equipment were $Nil (31 March 2010 - $Nil).
-
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are non-interest bearing, unsecured
and have settlement dates within one year.
-
Due to Related Parties and Related Party Transactions
As at 31 March 2011, the amount due to related parties includes $1,000
payable to a director of the Company (30 June 2010 - $1,000). This balance is
non-interest bearing, unsecured and has no fixed terms of repayment.
11
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
As at 31 March 2011, the amount due to related parties includes $50,058
payable to a company owned by a director of the Company or an officer of
PharmaNet (30 June 2010
-
$11,030). This balance is non-interest bearing, unsecured and has no fixed
terms of repayment.
As at 31 March 2011, the amount due to related parties includes $2,040
payable to a company owned by a director of the Company or an officer of
PharmaNet (30 June 2010
-
$679).
This balance is non-interest bearing, unsecured and has no fixed terms of
repayment.
As at 31 March 2011, the amount due to related parties includes $1,834,582
payable to PharmaNet (30 June 2010 - $1,465,002). This balance is non-interest
bearing, unsecured and has no fixed terms of repayment.
During the nine month period
ended 31 March 2011, a director of the Company or an officer of PharmaNet, and
their controlled entities were paid or accrued consulting fees of $31,298 (31
March 2010 - $34,323, cumulative - $803,792) by the Company.
During the nine month period ended 31 March 2011, a director of the Company
or an officer of PharmaNet, and their controlled entities were paid or accrued
consulting fees of $8,686 (31 March 2010 - $Nil, cumulative - $8,686) by the
Company.
During the nine month period ended 31 March 2011, a director of the Company
or an officer of PharmaNet, and their controlled entities were paid or accrued
office and miscellaneous expenses of $18,393 (31 March 2010
-
$16,779, cumulative
-
$103,342) by the Company.
During the nine month period ended 31 March 2011, a director of the Company
or an officer of PharmaNet, and their controlled entities were paid or accrued
rental fees of $Nil (31 March 2010 - $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
2011
|
|
For the
year
ended
30 June
2010
(Audited)
|
|
|
$
|
|
$
|
|
|
|
|
|
Opening
balance, beginning of period
|
|
1,465,002
|
|
1,246,058
|
Funds transferred to the Company
by PharmaNet
|
|
60,350
|
|
144,667
|
Expenses paid by PharmaNet on
behalf of the Company
|
|
9,334
|
|
1,557
|
Foreign currency translation
adjustment
|
|
299,896
|
|
72,720
|
|
|
|
|
|
Balances as at 31 March 2011 and
30 June 2010
|
|
1,834,582
|
|
1,465,002
|
The average amount due to PharmaNet for the nine month period ended 31
March 2011 was $1,650,581
(30 June 2010 - $1,540,053).
12
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
-
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.
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
2011
|
|
For the
nine month
period
ended
31 March
2010
|
|
|
|
$
|
|
$
|
|
|
|
|
|
|
Loss before
income taxes
|
|
|
(83,854)
|
|
(80,659)
|
|
|
|
|
|
|
Federal income tax rates
|
|
|
34.0%
|
|
34.0%
|
|
|
|
|
|
|
Income tax recovery based on the
above rates
|
|
|
(28,510)
|
|
(27,424)
|
|
|
|
|
|
|
Increase (decrease) due to:
|
|
|
|
|
|
Difference between US and foreign
tax rates
|
|
|
2,400
|
|
2,226
|
Change in valuation allowance
|
|
|
87,514
|
|
62,825
|
Foreign exchange and other
|
|
|
(61,404)
|
|
(37,627)
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
-
|
13
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
The composition of the Company's deferred tax assets as at 31 March 2011
and 30 June 2010 are as follows:
|
|
As at
31 March
2011
|
|
As at
30 June
2010
(Audited)
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax
operating loss carryforward
|
|
1,939,353
|
|
1,650,819
|
|
|
|
|
|
Deferred tax assets
|
|
609,382
|
|
521,868
|
Less: Valuation
allowance
|
|
(609,382)
|
|
(521,868)
|
|
|
|
|
|
Net deferred tax asset
|
|
-
|
|
-
|
The Company has non-capital loss carry-forwards of approximately $1,939,353
that may be available for tax purposes. The loss carry-forwards are all in
respect to 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
|
77,128
|
2029
|
57,881
|
2030
|
48,766
|
2031
|
23,858
|
No expiry
|
1,249,956
|
|
|
|
1,939,353
|
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.
14
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
-
Commitment
On 13 October 2005, the
Company entered into the Distribution Agreement with MPLA (Note 1).
The basic terms of the Distribution Agreement are as follows:
-
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);
-
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;
-
The Company is also required to pay MPLA a royalty of 5% as set out in the
Distribution Agreement;
-
MPLA will supply all Licensed Products to the Company under the
Distribution Agreement;
-
MPLA is responsible for obtaining all necessary regulatory approvals for
the licensed product in the United States; and
-
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 MPLA 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 (Note 11).
15
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
-
Supplemental Disclosures with Respect to Cash Flows
|
For the
period from
the date of
inception on
14 July 2004
to 31 March
2011
|
For the
three
month
period
ended
31 March
2011
|
For the
three
month
period
ended
31 March
2010
|
For the
nine
month
period
ended
31 March
2011
|
For the
nine
month
period
ended
31 March
2010
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Segmented Information
Details on a geographic basis as at 31 March 2011 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
448,767
|
|
(431,087)
|
|
17,680
|
Loss for the period
|
|
(59,996)
|
|
(23,858)
|
|
(83,854)
|
Details on a geographic basis
as at 30 June 2010 are as follows:
|
|
Australia
(Audited)
|
|
U.S.A.
(Audited)
|
|
Total
(Audited)
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
405,152
|
|
(393,500)
|
|
11,652
|
Loss for the year
|
|
(68,454)
|
|
(48,766)
|
|
(117,220)
|
16
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
Details on a geographic basis as at 31 March 2010 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
400,536
|
|
(387,075)
|
|
13,461
|
Loss for the period
|
|
(55,646)
|
|
(25,013)
|
|
(80,659)
|
-
Contingency
The $100,000 payment to MPLA 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 (Note 8).
-
Financial Instruments
The carrying value of financial assets and liabilities as at 31 March 2011
and 30 June 2010 are as follows:
|
|
As at
31 March
2011
|
|
As at
30 June
2010
(Audited)
|
|
|
$
|
|
$
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
Held-for-trading, measured at fair value
|
|
|
|
|
Cash and cash equivalents
|
|
10,594
|
|
7,975
|
Loans and receivables, measured at
amortized cost
|
|
|
|
|
Amounts receivable
|
|
5,320
|
|
1,480
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
Other liabilities, measured at amortized
cost
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
6,899
|
|
20,811
|
Due to related parties
|
|
1,887,680
|
|
1,477,711
|
Cash and cash equivalents would be Level 1 fair value.
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 and amounts receivable consist of
Goods and Services Tax receivable of $5,320.
17
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
31 March 2011
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 US dollar,
with all other variables held constant, by 100 basis points (1%) at period end,
the impact on net loss would have been $18,105 higher ($18,105 lower). Other
comprehensive loss would have remained unchanged.
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 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.
-
Subsequent Event
There are no subsequent events for the period from the date of the nine
month period ended 31 March 2011 to the date the interim consolidated
financial statements were available to be issued on 12 April 2011.
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 THIRD QUARTER PERIOD ENDED MARCH 31, 2011 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.
19
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.
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 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.
21
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.
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,
22
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.
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:
23
-
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, 2011.
Revenues
REVENUE
- Molecular USA has not generated any revenues for the quarter
ended March 31, 2011, or since inception.
COMMON STOCK
- Molecular USA has not issued any shares during the most
recent quarter. As of the date April 21, 2011, Molecular USA has 111,553,740
common shares issued and outstanding.
24
Expenses
SUMMARY
- Total expenses were $83,854 for the nine month period ended
March 31, 2011. Expenses had increased during this past nine month period as
compared to the nine month period ended March 31, 2010 - $80,659. A total of
$1,919,631 in expenses has been incurred by Molecular USA since inception on
July 14, 2004 through to March 31, 2011. The increase in costs over this nine
month period has occurred as the result of Molecular USA's wholly owned
subsidiary increasing its office expenses and consulting fees. The costs can be
subdivided into the following categories.
-
Office Expenses and Rent
: $19,596 in office expenses (for
administrative costs) were incurred for the nine month period ended March 31,
2011, as compared to $18,356 for the nine month period ended March 31, 2010,
while a total of $218,510 was incurred in the period from inception on July 14,
2004 to March 31, 2011. 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, 2011, $39,984 in consulting and analysis expenses were
incurred as compared to $34,323 during the nine month period ended March 31,
2010. We have incurred a total of $1,210,758 in consulting and analyst fees
since our inception on July 14, 2004 to March 31, 2011.
-
Advertising and Promotion Fees
: Molecular USA has spent no money in
this area this year. During the nine month period ended March 31, 2011, we
spent $Nil on advertising and public relations and $Nil for nine month period
ended March 31, 2010. A total of $23,739 has been incurred in this area during
the period from inception on July 14, 2004 to March 31, 2011.
-
Professional Fees
: Molecular USA incurred $22,729 in professional fees
for the nine month period ended on March 31, 2011, as compared to $22,134 for
the nine month period ended March 31, 2010. From inception to March 31, 2011,
we have incurred a total of $291,563 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, 2011, as compared to $Nil for the nine month
period ended March 31, 2010 and $104,249 has been incurred in the period from
inception on July 14, 2004 to March 31, 2011.
-
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, 2011 and $Nil in salaries and benefits during the nine month
period ended March 31, 2010. For the period July
14, 2004 (inception) through March 31, 2011, 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, 2011. There are no current or deferred tax expenses for the
nine month period ended March 31, 2011, 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 nine month period ended March 31, 2011, Molecular USA satisfied
its working capital needs by borrowing
25
cash from its parent company PharmaNet.
As March 31, 2011, the Company had cash and cash equivalents on hand in the
amount of $10,594 ($7,975 - June 30, 2010) and current payable and accrued
liabilities of $6,899 ($20,811 - June 30, 2010). As March 31, 2011, Molecular
USA currently owes its parent company PharmaNet, $1,834,582, an additional
$53,098 to other related parties, and $6,899 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, proceeds
received from the exercise of outstanding options, 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, 2011, 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;
26
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, 2011, amounted
to $Nil. Molecular USA does not anticipate any significant purchase or sale of
equipment over the next 12 months.
Recent Accounting Pronouncements
Effective January 1, 2011, the Company adopted Accounting
Standards Update ("ASU") 2010-06,
"Improving Disclosures about Fair Value
Measurements."
This update requires additional disclosure within the roll
forward of activity for assets and liabilities measured at fair value on a
recurring basis, including transfers of assets and liabilities between Level 1
and Level 2 of the fair value hierarchy and the separate presentation of
purchases, sales, issuances and settlements of assets and liabilities within
Level 3 of the fair value hierarchy. In addition, the update requires enhanced
disclosures of the valuation techniques and inputs used in the fair value
measurements within Levels 2 and 3. The new disclosure requirements are
effective for interim and annual periods beginning after December 15, 2009,
except for the disclosure of purchases, sales, issuances and settlements of
Level 3 measurements. Those disclosures are effective for fiscal years beginning
after December 15, 2010. As ASU 2010-06 only requires enhanced disclosures, the
adoption of this update did not have any material impacts on its interim
consolidated financial statements.
Effective January 1, 2011, the Company adopted ASU No.
2010-09,
"Amendments to Certain Recognition and Disclosure Requirements"
,
which eliminates the requirement for SEC filers to disclose the date through
which an entity has evaluated subsequent events. ASU No. 2010-09 is
effective for fiscal quarters beginning after December 15, 2010. The
adoption of ASU No. 2010-09 did not have any material impacts on the Company's
interim consolidated financial statements.
The Accounting Standards Codification
In July 2009, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 168,
"The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles"
. SFAS No. 168 will become the
single source of authoritative nongovernmental U.S. GAAP, superseding existing
FASB, American Institute of Certified Public Accountants (AICPA), Emerging
Issues Task Force (EIFT) and related accounting literature. SFAS No. 168
reorganizes the thousands of GAAP pronouncements into roughly 90 accounting
topics and displays them using a consistent structure. Also included is relevant
Securities and Exchange Commission guidance organized using the same topical
structure in separate sections. SFAS No. 168 will be effective for financial
statements issued for reporting periods that end after 15 September 2009. The
adoption of SFAS No. 168 did not have a material impact on the Company's interim
consolidated financial statements.
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.
27
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.
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
28
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, 2011. 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,
2011.
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, 2011, 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.
29
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.
(Removed and Reserved).
Not Applicable.
Item 5. Other Information
.
No items to disclose.
30
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 21, 2011.
|
MOLECULAR
PHARMACOLOGY (USA) LIMITED
|
|
BY:
|
/s/ Jeffrey Edwards
|
|
|
Jeffrey Edwards,
President, Chief Executive Officer, Chief Financial Officer and a Member of
the Board of Directors
|
|
|
|
|
31
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