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UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
, D.C.
20549
FORM
10-KSB
[X]
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year
ended:
June 30
, 2008
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[ ]
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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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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(Name of small
business issuer in its charter)
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Nevada
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71-0900799
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(State of other
jurisdiction of incorporation or organization)
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(I.R.S. Employer
I.D. No.)
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Drug
Discovery Centre
28 Oxford Street, Leederville 6007 Perth, Western Australia
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00000
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(Address of
principal executive offices)
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(Zip Code)
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Issuer's
telephone number
011-61-8-9443-3011
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N/A
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(Former names,
former address and former fiscal year, if changed since last report)
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Securities registered under section 12(b) of the Exchange Act:
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Title of each Class
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Name of each exchange on which registered
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None
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Not Applicable
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Securities registered under Section 12(g) of the Exchange Act:
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Common
Shares with a par value of $0.001 per share
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(Title of Class)
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i
Check whether
the issuer (1) has filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
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Yes
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X
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No
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Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
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Yes
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No
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X
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Indicate by
check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
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Yes
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No
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State issuer's
revenues for its most recent fiscal year:
$0.00
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State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
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As
of September 29, 2008, the aggregate market value of equity shares held by
non-affiliates was
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$
942,150
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(1) Last close price on September 29, 2008
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(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
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State the number
of shares outstanding of each of the issuer's classes of common equity, as of
the latest practicable date.
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111,553,740
common shares issued and
outstanding as of September 29, 2008
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DOCUMENTS INCORPORATED BY
REFERENCE
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None
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Transitional Small Business Disclosure Format (Check
one):
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Yes
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No
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X
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ii
TABLE OF CONTENTS
iii
iv
FORWARD LOOKING INFORMATION
This annual report contains forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. These statements
relate to future events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans",
"anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors, including
the risks in the section entitled "Risk Factors", that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United
States Dollars (US$) and are prepared in accordance with United States
Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts
are expressed in United States Dollars.
All references to CDN$
refer to Canadian Dollars.
As used in this annual report, the terms "
we
", "
us
",
"
our
", "
Corporation
"
and "
Molecular USA
" mean Molecular
Pharmacology (USA) Limited unless otherwise indicated.
PART I
Item
1. Description of Business
Business Development - Formation and Reorganization
Molecular USA was incorporated in the state of Nevada on
May 1, 2002 under the name "
Blue Hawk Ventures,
Inc
."
Molecular USA changed its name to "Molecular Pharmacology (USA) Limited"
on August 29, 2005. At this
same time Molecular USA completed a four for one forward split of its issued
and outstanding share capital and altered its share capital to 300,000,000
shares of common stock with a par value of $0.001 per share.
Molecular USA has not been involved in any
bankruptcy, receivership or similar proceeding nor has there been any material
reclassification or merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of business other than as disclosed
herein.
Up until the fall of 2005, Molecular USA was in
the business of mineral exploration and development of a mineral property.
On October 13, 2005, Molecular USA entered into a
distribution and supply agreement with Molecular Pharmacology Limited ("
MPLA
"). MPLA is incorporated under the laws of
Australia and at the time was a wholly owned subsidiary company of PharmaNet
Group Limited ("PharmaNet"), 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, 2005. As a result of the transaction,
PharmaNet, the former parent company of MPLA, now
1
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
The acquisition of MPLA provided Molecular
USA an immediate and solid
international foundation which management believes will allow it to grow its
business into all major geographical markets. The assets and resources of the
Australian company and its existing teams and development programs has
augmented Molecular USA's
plan to develop safe and effective pain and inflammation management products.
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 localised pain are based on
non-steroidal anti-inflammatory drugs or NSAIDs. The majority of such products
are slow acting and provide only mild pain relief.
The NSAID group has come under additional pressure and increasing
medical alarm, as many drugs in this class have been found to set-back the
recovery of certain conditions and treatments for which they were marketed.
Moreover, NSAIDs are associated with severe gastro-intestinal side-effects.
This has left a niche in an industry under-served by new products and
ingredients.
MPLA's business strategy is to exploit the fast and locally acting, low
side effects, and recovery-enhancing properties of its new drug group and to
market this as a new ingredient, enabling pharmaceutical companies to develop
and market effective and safer products suited to a broad range of common
everyday pain.
Licensed Products
Molecular USA has exclusive distribution
rights to distribute, market, promote, detail, advertise and sell certain
"Licensed Products", with metallo-polypeptide analgesic and
anti-inflammatory activity as an active ingredient, in the United States
(excluding its territories and possessions) from its wholly owned subsidiary
company MPLA.
The Licensed Products include all products in
all dosage forms, formulations, line extensions and package configurations
using or otherwise incorporating any aspect or production method of
metallo-polypeptide analgesic and anti-inflammatory activity as an active
ingredient marketed by MPLA or its affiliates under the tradename Tripeptafen
or any other trade names or 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 holding company of MPLA.
All Licensed Products must first obtain
regulatory clearance in the United
States before they may be marketed and sold
by Molecular USA in that territory. Clinical programs are currently planned by
MPLA for Europe, USA and Australia.
The clinical trial program is expected to be expanded with follow-up trials.
Regulatory approval, commencement of the Master Drug File (MDF) and market
approval are the focus of an ongoing program expected to continue over the next
18 to 24 months.
2
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, namely "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. These patent applications embody
all the current Analgesic and Anti-inflammatory assets. MPLA will also rely on
the exclusive nature of its license, trademark and copyright law, trade secret
protection, confidentiality agreements and other contractual arrangements as it
may execute from time to time.
Management of Molecular USA and MPLA believes
that MPLA's products, trademarks, and other proprietary rights do not infringe
on the proprietary rights of third parties.
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 Good
Manufacturing Practice ("GMP") certified formulation and
manufacturers 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,
3
and current good manufacturing practices or cGMPs,
enforced by the Food and Drug Administration ("FDA"). Molecular USA
plans to continue MPLA's practice to outsource formulation and
manufacturing for its clinical trials and potential commercialization after the
acquisition of MPLA by Molecular USA.
Molecular USA has not entered into any supply
agreements.
Competition
Molecular USA
and MPLA compete in the segment of the pharmaceutical market that treats pain
and inflammation, which is highly competitive. We face significant competition
from most pharmaceutical companies as well as biotechnology companies that are
also researching and selling products designed to treat pain and inflammation.
Many of our competitors have significantly greater financial, manufacturing,
marketing and product development resources than we do. Large pharmaceutical
companies in particular have extensive experience in clinical testing and in
obtaining regulatory approvals for drugs. These companies also have
significantly greater research capabilities than we do. In addition, many
universities and private and public research institutes are active in
neurological research, some in direct competition with us. These companies, as
well as academic institutions, governmental agencies and other public and
private organizations conducting research, also compete with Molecular USA and
MPLA in recruiting and retaining highly qualified scientific personnel and
consultants and may establish collaborative arrangements with competitors of
Molecular USA.
Molecular USA's
competition will be determined in part by the potential indications for which
the MPLA's products are developed and ultimately approved by regulatory
authorities.
Molecular USA
knows of other companies and institutions dedicated to the development of
anti-pain and anti-inflammatory pharmaceuticals similar to those being
developed by MPLA and licensed to Molecular USA. Many of Molecular USA's
competitors, existing or potential, have substantially greater financial and
technical resources and therefore may be in a better position to develop,
manufacture and market pharmaceutical products. Many of these competitors are
also more experienced with regard to preclinical testing, human clinical trials
and obtaining regulatory approvals. The current or future existence of
competitive products may also adversely affect the marketability of Molecular
USA's products.
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.
4
Typically, human clinical trials are conducted in three phases that may
overlap. In Phase 1, clinical trials are conducted with a small number of
subjects to determine the early safety profile and pharmacology of the new
therapy. In Phase 2, clinical trials are conducted with groups of patients
afflicted with a specific disease in order to determine preliminary efficacy,
optimal dosages and expanded evidence of safety. In Phase 3, large scale,
multicenter, comparative clinical trials are conducted with patients afflicted
with a target disease in order to provide enough data for the statistical proof
of efficacy and safety required by the FDA and others.
The results of the pre-clinical and clinical testing, together with
chemistry and manufacturing information, are submitted to the FDA in the form
of an NDA for a pharmaceutical product in order to obtain approval to commence
commercial sales. In responding to an NDA, the FDA may grant marketing
approvals, request additional information or further research, or deny the
application if it determines that the application does not satisfy its
regulatory approval criteria. Patient-specific therapies may be subject to
additional risk with respect to the regulatory review process. FDA approval for
a pharmaceutical product may not be granted on a timely basis, if at all, or if
granted may not cover all the clinical indications for which approval is sought
or may contain significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use.
Satisfaction of FDA premarket approval requirements for new drugs
typically takes several years, and the actual time required may vary
substantially based upon the type, complexity and novelty of the product or
targeted disease. Government regulation may delay or prevent marketing of
potential products for a considerable period of time and impose costly
procedures upon our activities. Success in early stage clinical trials or with
prior versions of products does not assure success in later stage clinical
trials. Data obtained from clinical activities are not always conclusive and
may be susceptible to varying interpretations that could delay, limit or
prevent regulatory approval.
Once approved, the FDA may withdraw the product approval if compliance
with pre- and post-marketing regulatory standards is not maintained or if
problems occur after the product reaches the marketplace. In addition, the FDA
may require post-marketing studies, referred to as Phase 4 studies, to monitor
the effect of an approved product, and may limit further marketing of the
product based on the results of these post-market studies. The FDA has broad
post-market regulatory and enforcement powers, including the ability to levy
fines and civil penalties, suspend or delay issuance of approvals, seize or
recall products, or withdraw approvals.
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.
5
Other Government Regulations
. In addition to laws and regulations enforced
by the FDA, research of Molecular USA's products in the United States are
subject to regulation under National Institutes of Health guidelines, as well
as under the Controlled Substances Act, the Occupational Safety and Health Act,
the Environmental Protection Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act and other present and potential future
federal, state or local laws and regulations, as research and development of
its products involves the controlled use of hazardous materials, chemicals,
viruses and various radioactive compounds.
In addition to regulations in the United States, Molecular
USA's products are subject to a variety of foreign regulations governing
clinical trials and commercial sales and distribution of its Licensed Products.
Whether or not Molecular USA obtains FDA approval for a product, Molecular USA
or its subsidiaries must obtain approval of a product by the comparable
regulatory authorities of foreign countries before it can commence clinical
trials or marketing of the product in those countries. The approval process
varies from country to country, and the time may be longer or shorter than that
required for FDA approval. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly from country
to country.
Sarbanes-Oxley Act of 2002
. On July 30, 2002, President Bush signed into law the
Sarbanes-Oxley Act of 2002, or the SOA. SOA imposes a wide variety of new
requirements on both U.S.
and non-U.S. companies, that file or are required to file periodic reports with
the Securities and Exchange Commission (the "
SEC
") under the Securities Exchange
Act of 1934. Many of these new requirements will affect Molecular USA and its
board of directors. For instance, under SOA Molecular USA is required to:
-
form an audit committees in compliance with SOA;
-
have Molecular USA's chief executive officer and chief financial
officer certify its financial statements;
-
ensure Molecular USA's directors and senior officers are required
to forfeit all bonuses or other incentive-based compensation and profits
received from the sale of Molecular USA's securities in the twelve month
period following initial publication of any of Molecular USA's financial
statements that later require restatement;
-
disclose any off-balance sheet transactions as required by SOA;
-
prohibit all personal loans to directors and officers;
-
insure directors, officers and 10% holders file their Forms 4's within
two days of a transaction;
-
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.
6
Employees
In the year ended June 30, 2008, Molecular
USA did not have any employees and do not intend to hire any employees in the
upcoming year. We rely heavily on
outside contractors to conduct our business.
Immediate
Business Plans
Over the next 12 to 24 months, Molecular USA, 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 continue to 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.
Reports to Securities
Holders
We are required to file annual reports on Form
10-KSB and quarterly reports on Form 10-QSB with the Securities Exchange
Commission on a regular basis, and will be required to timely disclose certain
material events (e.g., changes in corporate control; acquisitions or
dispositions of a significant amount of assets other than in the ordinary
course of business; and bankruptcy) in a current report on Form 8-K.
Although our Internet site www.mpl-usa.com does
not contain our reports, you may read and copy any materials we file with the
Securities and Exchange Commission at their Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Additionally, the SEC maintains an
Internet site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the SEC.
Item
2. Description of Property
Molecular USA's office space is located
at Drug Discovery Centre, 28 Oxford Street, Leederville 6007 Perth, Western
Australia. This office space was
provided free of charge during the year ended June 30, 3008, from a company
controlled by an officer of PharmaNet.
Item
3. 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
4. Submissions of Matters to a Vote of Security Holders
No matters were submitted to our stockholders
during this period.
7
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters Market Information
.
Our common shares are quoted on the PinkSheets
under the symbol "
MLPH
".
The following quotations reflect the high and low bids for our common stock
based on inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions. The high and low bid prices for our
common shares (obtained from www.otcbb.com) for each full financial quarter for
the two most recent full fiscal years were as follows:
Quarter Ended
(1) (2)
|
High
|
Low
|
June 30, 2008
|
$0.04
|
$0.03
|
March 31, 2008
|
$0.05
|
$0.03
|
December 31, 2007
|
$0.09
|
$0.03
|
September 30, 2007
|
$0.11
|
$0.06
|
June 30, 2007
|
$0.17
|
$0.13
|
March 31, 2007
|
$0.06
|
$0.04
|
December 31, 2006
|
$0.08
|
$0.03
|
September 30, 2006
|
$0.16
|
$0.06
|
June 30, 2006
|
$0.60
|
$0.12
|
|
|
|
|
|
|
|
Note
s:
|
|
(1)
|
The quotations above reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
|
|
(2)
|
Molecular USA was originally first quoted on the
OTCBB on May 13, 2005 under the symbol "BHWV". Its symbol was changed to
"MLPH" on August 29, 2005. On November 26, 2007, the stock was
moved to the PinkSheet quotation system for failure to comply with NASD 6530. The shares of Molecular USA will be
eligible to be quoted once again on the OTCBB on November 26, 2008 on
application request by a market maker of the common stock of Molecular USA.
|
Holders
of Common Stock
As of September 29, 2008, there were 16 registered
shareholders of Molecular USA's common stock.
Dividends
Molecular
USA
has never declared nor paid any cash dividends on its capital stock and does
not anticipate paying cash dividends in the foreseeable future. Molecular USA's
current policy is to retain any earnings in order to finance the expansion of
its operations. Molecular USA's board of directors will determine future
declaration and payment of dividends, if any, in light of the then-current
conditions they deem relevant and in accordance with the
Nevada
Revised Statutes
.
Recent Sales of Unregistered Securities
Not Applicable
Item
6. Management Discussion and Analysis
THE FOLLOWING ANALYSIS OF THE RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OF
THE COMPANY FOR THE YEAR ENDED
JUNE 30, 2008,
SHOULD BE READ IN CONJUNCTION WITH
THE
COMPANY
'S
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED
ELSEWHERE IN THE FORM 10-KSB
8
Our consolidated financial statements
are stated in United States Dollars and are prepared in accordance with United
States Generally Accepted Accounting Principles.
Overview
We
were incorporated in the state of Nevada on May 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 Limited ("
MPLA
").
MPLA is incorporated under the laws of Australia and is a wholly owned
subsidiary company of PharmaNet, an Australian company listed on the Australian
Stock Exchange. Under the terms of the distribution and supply agreement,
Molecular USA has 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).
Molecular
USA entered into a share purchase agreement dated November 25, 2005, to acquire
all of the shares of MPLA from PharmaNet (the "
Purchase
Agreement
").
The transaction between the parties closed in escrow with an effective
closing date of May 8, 2006. Molecular USA, in exchange for 100% of the
issued and outstanding shares of MPLA, issued PharmaNet an aggregate total of
88,000,000 shares of its common stock of Molecular USA on closing of the
transaction. PharmaNet now holds approximately 79% of Molecular USA's issued
and outstanding common shares. The
business of MPLA is now the business of Molecular USA.
On
March 29, 2007, we changed our year end from October 31
st
of each
calendar year to June 30
th
of each calendar year. This action was taken to harmonize our
year end with PharmaNet which holds 79% of issued and outstanding shares.
2008 Activities
and Developments
For the year ended June 30, 2008, our net income was $62,296 ($0.001
per share). The earnings per share was based on a weighted average of
111,553,740
common
shares outstanding. For the eight month period ended June 30, 2007, the loss was $377,131 ($0.003 per share)
based on a weighted average of 131,553,740 common shares outstanding. For the period from inception on July 14, 2004 to June 30, 2008 Molecular USA
has an accumulated net loss of $1,339,250.
Molecular has working capital of $4,620 at June 30, 2008 (June 30, 2007
- working capital deficit of $23,913). As a result our auditors have qualified
their opinion as having substantial doubt about our ability to continue as a
going concern unless we are able to generate sufficient cash flows to meet our
obligations and sustain our operations.
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 new majority shareholder PharmaNet and, if
available on satisfactory terms, debt financing.
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.
Results of
Operation
For
the year ended June 30, 2008,
eight month period ended June 30, 2007 and the period from July
14, 2004
(inception)
to
June 30, 2008
:
9
REVENUES
REVENUE - Molecular USA has net income of $62,296 for the year ended June 30,
2008 (eight month period ended June 30, 2007 - loss of $377,131) and a loss of
$1,339,250 for the period from inception to June
30, 2008
.
To date, we have generated limited revenues from our business operations.
LOANS
- As of June 30, 2008, PharmaNet
has loaned Molecular USA a total of $1,411,131 for working capital (eight month
period ended June 30, 2007 - $1,138,943). The advance does not carry an
interest rate, is unsecured and has no fixed terms of repayment.
COMMON STOCK
- Net cash provided
by financing activities during the year ended June 30, 2008 was $0.00 (eight month period ended
June 30, 2007 - $0.00).
EXPENSES
SUMMARY
- Total
expenses were $198,311 for the year ended June 30, 2008. Expenses have decreased in the year ended
June 30, 2008 by $178,820 from $377,131 in the previous eight month period
ended
June 30, 2007
. A total of $1,600,615
in expenses has been incurred by Molecular USA since inception on
July
14, 2004
through to June 30, 2008. The decrease
in costs over the past year has occurred as the result of Molecular USA's
wholly owned subsidiary reducing its involvement in research projects resulting
in a decrease in consulting fees and expenses. The costs can be subdivided into the
following categories.
-
Office Expenses
: $33,079 in office expenses (includes rent
and administrative costs) were incurred for the year ended
June 30, 2008
as compared to $43,120 for the eight
month period ended
June
30, 2008
while a
total of $151,412 was incurred in the period from inception on
July 14, 2004
to
June 30, 200
8. 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 year ended June 30, 2008, $88,322
in consulting and analysis expenses were incurred as compared to $227,844 for
the eight month period ended
June 30, 2007.
We have incurred a total of $1,093,640 in the period from inception
on
July 14, 2004
to
June 30, 2008
.
-
Advertising, Public Relations and Promotion
Fees
: Molecular
USA has spent a nominal amount in this area. During the year ended
June
30, 2008
we spent $0.00
on advertising and public relations while for the eight month period ended
June 30, 2007 we spent $1,430 in this area. We have incurred a total of
$27,395 in the period from inception on
July 14, 2004
to
June 30, 2008.
-
Professional Fees
: Molecular USA incurred $64,236 in
professional fees for the year ended on
June 30, 2008
as compared to $55,989 for the eight
month period ended June 30, 2007. From inception to
June 30, 2008
, we have incurred a total of $171,682
in professional fees mainly spent on legal and accounting matters.
-
Travel Costs
: Molecular USA incurred $8,968 in
travel costs for the year ended on
June 30, 2008
as compared to $31,615 for the eight
month period ended
June 30, 2007
.
This decrease can largely be attributed to our attendance at a
limited number of pharmacology trade shows and restricting the expense of
visiting various research facilities.
-
Salaries and Benefit Costs
: Molecular USA and its subsidiary relies
primarily on outside consultants and not salaried employees. As a result, Molecular USA incurred
$0.00 in salaries and benefits for the year ended June 30, 2008 and $16,008
was incurred for the eight month period ended
June 30, 2007
. For the period
July
14, 2004
(inception) through
June 30, 2008
, Molecular USA has spent a total of $44,464
on salaries and benefits.
Molecular USA continues to carefully control
its expenses and overall costs as it moves forward with the development of its
new business plan. Molecular USA does not have any employees and engages
personnel through outside consulting
contracts
or agreements or other such
arrangements.
INCOME TAX PROVISION
: We have losses carried forward for income tax purpose to June 30,
2008. There are no current or deferred tax expenses for the year ended
June 30, 2008, due to our loss position. We have
10
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.
Off-Balance Sheet
Arrangement
As of June 30, 2008, we have had no off-balance
sheet arrangements.
Research and
Development
Since the acquisition of MPLA, Molecular USA
has adopted 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.
On April 19, 2006, Molecular USA, announced the filing of a
new patent, Tissue Disruption Treatment and Composition for Use (US Patent
number 11218382). The patent
describes a proprietary process for the manufacture of topical biological
secondary injury mediators (B-SIMs) that should have local, rather than
systemic, effects and may be significantly less expensive to manufacture than
conventional B-SIMs. MPLA is
developing its B-SIMs to stop the tissue disruption that occurs after injury by
suppressing the body's reactions, such as inflammation and damage/death
of otherwise uninjured cells that are triggered in response to primary injury.
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 year ended June 30, 2008 amounted to
$0.00 ($732
for the eight month period ended June 30, 2007) Molecular
USA does not anticipate any significant purchase or sale of equipment over the
next 12 months.
11
Strategic Acquisitions
On November 25,
2005, Molecular USA entered into a share purchase
agreement dated November 25, 2005 with PharmaNet to acquire 100% of the issued
and outstanding shares of MPLA. Molecular
USA issued a total of 88,000,000 shares of its common stock to PharmaNet the
parent company of MPLA.
Accordingly, PharmaNet
controls approximately 79% of Molecular USA's issued and outstanding
shares of common stock.
Recent
Accounting Pronouncements
In May 2008, the Financial Accounting
Standards Board (the "FASB") issued Statements of Financial Accounting Standards
("SFAS") No. 163, Accounting for Financial Guarantee Insurance Contracts - an
interpretation of FASB Statement No. 60 ("SFAS No. 163"). SFAS
No. 163 provides enhanced guidance on the recognition and measurement to be
used to account for premium revenue and claim liabilities and related
disclosures and is limited to financial guarantee insurance (and reinsurance)
contracts, issued by enterprises included within the scope of FASB Statement
No. 60, Accounting and Reporting by Insurance Enterprises. SFAS No. 163 also requires that an
insurance enterprise recognize a claim liability prior to an event of default
when there is evidence that credit deterioration has occurred in an insured
financial obligation. SFAS No. 163
is effective for financial statements issued for fiscal years and interim
periods beginning after 15 December 2008, with early application not
permitted. Molecular USA does not
expect SFAS No. 163 to have an impact on its consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles ("SFAS No.
162"). SFAS No. 162 is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements that are presented in
conformity with U.S. Generally Accepted Accounting Principles ("GAAP") for nongovernmental entities. Prior to the issuance of SFAS No. 162,
GAAP hierarchy was defined in the American Institute of Certified Public
Accountants ("AICPA") Statement on Auditing Standards No. 69, The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles ("SAS No. 69").
SAS No. 69 has been criticized because it is directed to the auditor
rather than the entity. SFAS No.
162 addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity, not its auditor, that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.
SFAS No. 162 is effective 60 days following the SEC's approval of
the Public Company Accounting Oversight Board Auditing amendments to AU Section
411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. Molecular USA
does not expect SFAS No. 162 to have a material effect on its consolidated
financial statements.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities - an amendment
of FASB Statement No. 133 ("SFAS No. 161"). SFAS No. 161 is intended to improve transparency
in financial reporting by requiring enhanced disclosures of an entity's
derivative instruments and hedging activities and their effects on the
entity's financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivate instruments
within the scope of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities ("SFAS No. 133"). It also applies to non-derivative
hedging instruments and all hedged items designated and qualifying as hedges
under SFAS No. 133. SFAS No. 161 is
effective prospectively for financial statements issued for fiscal years
beginning after 15 November 2008, with early application encouraged. Molecular USA is currently evaluating
the new disclosure requirements of SFAS No. 161 and the potential impact on
Molecular USA's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations ("SFAS No. 141(R)"). SFAS
No. 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS No. 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of
the business combination. SFAS No. 141(R) is effective for fiscal
12
years beginning after 15 December 2008. Molecular USA is currently evaluating
the potential impact, if any, of the adoption of SFAS No. 141(R) on its
consolidated results of operation and financial condition.
In December 2007, the FASB issued SFAS No.
160, Noncontrolling Interests in Consolidated Financial Statements - an
amendment of Accounting Research Bulletin No. 51 ("SFAS No.
160"). SFAS No. 160
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable and to the noncontrolling interest, changes in a
parent's ownership interest, and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal
years beginning after 15 December 2008.
Molecular USA is currently evaluating the potential impact, if any, of
the adoption of SFAS No. 160 on its consolidated results of operation and
financial condition.
In February 2007, the FASB issued SFAS No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS 159 allows a company to choose to
measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007.
Molecular USA is currently evaluating the requirements of SFAS No. 159
and the potential impact on Molecular USA's consolidated financial
statements.
In September 2006, the FASB issued SFAS No.
158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS 158"). SFAS 158 requires an employer that
sponsors one or more single-employer defined benefit plans to (a) recognize the
overfunded or underfunded status of a benefit plan in its statement of
financial position, (b) recognize as a component of other comprehensive income,
net of tax, the gains or losses and prior service costs or credits that arise
during the period but are not recognized as components of net periodic benefit
cost pursuant to SFAS 87, "Employers' Accounting for
Pensions", or SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", (c) measure defined benefit
plan assets and obligations as of the date of the employer's fiscal
year-end, and (d) disclose in the notes to financial statements additional
information about certain effects on net periodic benefit cost for the next
fiscal year that arise from delayed recognition of the gains or losses, prior
service costs or credits, and transition asset or obligation. SFAS 158 is
effective for Molecular USA's fiscal year ending June 30, 2008. The adoption of SFAS
No. 158 is not expected to have a material impact on Molecular USA's financial position,
results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157,
"Fair Value Measurement" ("SFAS No. 157"). The Statement
provides guidance for using fair value to measure assets and liabilities. The
Statement also expands disclosures about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurement on earnings. This Statement
applies under other accounting pronouncements that require or permit fair value
measurements. This Statement does not expand the use of fair value measurements
in any new circumstances. Under this Statement, fair value refers to the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in which the
entity transacts. SFAS No. 157 is effective for Molecular USA for fair value
measurements and disclosures made by Molecular USA in its fiscal year beginning
on July 1, 2008. Molecular USA is currently reviewing the impact of this
statement.
Critical Accounting Policies and Estimates
Our audited 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 consolidated financial statements is critical to an understanding of our
financials.
13
Stock-based
compensation
On February 1, 2006, we adopted the
provisions of SFAS No. 123(R), "
Share-Based Payment
",
which establishes accounting for equity instruments exchanged for employee
services. Under the provisions of SFAS No. 123(R), stock-based compensation cost is measured at the grant date,
based on the calculated fair value of the award, and is recognized as an
expense over the employees' requisite service period (generally the vesting
period of the equity grant). Before February 1, 2006, we accounted for
stock-based compensation to employees in accordance with Accounting Principles
Board Opinion No. 25, "
Accounting for Stock
Issued to Employees
", and complied with the disclosure
requirements of SFAS No. 123, "
Accounting for Stock-Based
Compensation
". We adopted SFAS No. 123(R) using the
modified prospective method, which requires us to record compensation expense
over the vesting period for all awards granted after the date of adoption, and
for the unvested portion of previously granted awards that remain outstanding
at the date of adoption.
Accordingly, financial statements for the periods prior to February 1,
2006 have not been restated to reflect the fair value method of expensing
share-based compensation. Adoption
of SFAS No. 123(R) does not change the way we account for share-based
payments to non-employees, with guidance provided by SFAS No. 123 (as originally
issued) and Emerging Issues Task Force Issue No. 96-18, "
Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services
".
Item 7. Financial Statements
Auditors' Report dated August 20, 2008.
Consolidated Balance Sheets as at June 30, 2008
and June 30, 2007.
Consolidated Statements of Operations for the year
ended June 30, 2008 and for the eight month period ended June 30, 2007.
Consolidated Statement of Change in Stockholders'
Deficiency
for the year ended June 30, 2008 and for the eight month period ended June 30,
2007.
Consolidated Statements of Cash Flows for the
year ended June 30, 2008 and for the eight month period ended June 30, 2007.
Notes to Consolidated Financial Statements
14
James Stafford
|
|
|
James
Stafford
Chartered
Accountants*
Suite 350 - 1111 Melville Street
Vancouver, British Columbia
Canada V6E 3V6
Telephone +1 604 669 0711
Facsimile +1 604 669 0754
*Incorporated professional, James Stafford Inc.
|
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
We have audited the consolidated balance sheets of
Molecular Pharmacology
(USA) Limited
as at 30 June 2008 and 2007 and the related consolidated
statements of operations, cash flows and changes in stockholders' deficiency for
the year ended 30 June 2008 and the eight month period ended 30 June 2007. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of 30
June 2008 and 2007 and the results of its operations, its cash flows and its
changes in stockholders' deficiency for the year ended 30 June 2008 and the
eight month period ended 30 June 2007 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, conditions exist which raise substantial
doubt about the Company's ability to continue as a going concern unless it is
able to generate sufficient cash flows to meet its obligations and sustain its
operations. Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
|
/s/
"James Stafford"
|
Vancouver, Canada
|
Chartered Accountants
|
|
|
20 August 2008
|
15
Molecular Pharmacology (USA) Limited
(A
Development Stage Company)
Consolidated Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
16
Molecular Pharmacology (
USA
) Limited
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in U.S.
Dollars)
|
|
As at
30 June
2008
|
|
As at
30 June
2007
|
|
|
$
|
|
$
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
Cash and cash equivalents (Note 3)
|
|
21,490
|
|
20,994
|
Amounts receivable
|
|
9,396
|
|
21,302
|
|
|
|
|
|
|
|
30,886
|
|
42,296
|
|
|
|
|
|
Property, plant and equipment
(Note 4)
|
|
3,712
|
|
5,169
|
|
|
|
|
|
|
|
34,598
|
|
47,465
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
Accounts payable and accrued liabilities (Note 5)
|
|
26,266
|
|
66,209
|
|
|
|
|
|
|
|
26,266
|
|
66,209
|
|
|
|
|
|
Due to related parties
(Note 6)
|
|
1,424,159
|
|
1,292,896
|
|
|
|
|
|
|
|
1,450,425
|
|
1,359,105
|
|
|
|
|
|
Stockholders' deficiency
|
|
|
|
|
Capital stock
(Note 7)
|
|
|
|
|
Authorized
|
|
|
|
|
300,000,000 of common shares,
par value $0.001
|
|
|
|
|
Issued and outstanding
|
|
|
|
|
30 June 2008 -
111,553,740 common shares, par value $0.001
|
|
|
|
|
30 June 2007 -
111,553,740 common shares, par value $0.001
|
|
111,554
|
|
111,554
|
Additional paid-in capital
|
|
106,707
|
|
106,707
|
Cumulative translation
adjustment
|
|
(
294,838)
|
|
(128,355)
|
Deficit, accumulated during the
development stage
|
|
(1,339,250)
|
|
(1,401,546)
|
|
|
|
|
|
|
|
(1,415,827)
|
|
(1,311,640)
|
|
|
|
|
|
|
|
34,598
|
|
47,465
|
Nature and Continuance of
Operations
(Note
1) and
Commitment
(Note 9)
On
behalf of the Board:
/s/ Jeffery Edwards
Director
Jeffrey
Edwards
The accompanying notes are an integral part of these consolidated financial
statements
17
Molecular Pharmacology (USA) Limited
A Development Stage Company)
Consolidated Statements of Operations
(Expressed in U.S.
Dollars)
|
|
|
For the
period from
the date of
inception on
14 July 2004
to 30 June
2008
|
For the
year
ended
30 June
2008
|
For the
eight month
period
ended
30 June
2007
|
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Advertising and promotion
|
|
|
|
|
|
23,739
|
|
-
|
|
-
|
Analysis
|
|
|
|
|
|
33,947
|
|
-
|
|
-
|
Consulting (Note 6)
|
|
|
|
|
|
1,059,693
|
|
88,332
|
|
227,844
|
Depreciation
|
|
|
|
|
|
4,024
|
|
1,457
|
|
1,025
|
Office and miscellaneous (Note 6)
|
|
|
|
|
|
123,653
|
|
33,079
|
|
29,788
|
Professional fees
|
|
|
|
|
|
171,682
|
|
64,236
|
|
55,989
|
Public relations
|
|
|
|
|
|
3,656
|
|
-
|
|
1,430
|
Rent
|
|
|
|
|
|
27,759
|
|
-
|
|
13,332
|
Salaries and benefits
|
|
|
|
|
|
44,464
|
|
-
|
|
16,008
|
Transfer agent and filing fees
|
|
|
|
|
|
5,432
|
|
2,239
|
|
100
|
Travel
|
|
|
|
|
|
102,566
|
|
8,968
|
|
31,615
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before other items
|
|
|
|
|
|
(1,600,615)
|
|
(198,311)
|
|
(377,131)
|
|
|
|
|
|
|
|
|
|
|
|
Other
items
|
|
|
|
|
|
|
|
|
|
|
Export market development grants
|
|
|
|
|
|
63,174
|
|
63,174
|
|
-
|
Interest income
|
|
|
|
|
|
2,322
|
|
1,564
|
|
-
|
Research and development tax refund
|
|
|
|
|
|
195,869
|
|
195,869
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for the period
|
|
|
|
|
|
(1,339,250)
|
|
62,296
|
|
(377,131)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per common share
|
|
|
|
|
|
(0.012)
|
|
0.001
|
|
(0.003)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in per share calculations
|
|
|
|
|
|
111,553,740
|
|
111,553,740
|
|
131,553,740
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for the period
|
|
|
|
|
|
(1,339,250)
|
|
62,296
|
|
(377,131)
|
Foreign
currency translation adjustment
|
|
|
|
|
|
(
294,838)
|
|
(166,483)
|
|
(105,436)
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the period
|
|
|
|
|
|
(1,634,088)
|
|
(104,187)
|
|
(482,567)
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss per common share
|
|
|
|
|
|
(0.015)
|
|
(0.001)
|
|
(0.004)
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
18
Molecular
Pharmacology (USA)
Limited
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in U.S.
Dollars)
|
For the
period from
the date of
inception on 14
July 2004
to
30 June
2008
|
For the
year
ended
30 June
2008
|
For the
eight
month
period
ended
30 June
2007
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Cash flows from (used in)
operating activities
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
(1,339,250)
|
|
62,296
|
|
(377,131)
|
Adjustments to reconcile loss to net cash used by operating activities
|
|
|
|
|
|
|
Depreciation (Note 4)
|
|
4,024
|
|
1,457
|
|
1,025
|
Write-down of intangible assets
|
|
1,278
|
|
-
|
|
-
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
(Increase) decrease in amounts receivable
|
|
(7,170)
|
|
11,906
|
|
(9,661)
|
Decrease in accounts payable and accrued liabilities (Note 5)
|
|
(28,359)
|
|
(39,943)
|
|
(73,472)
|
|
|
|
|
|
|
|
|
|
(1,369,477)
|
|
35,716
|
|
(459,239)
|
|
|
|
|
|
|
|
Cash flows from (used in)
investing activities
|
|
|
|
|
|
|
Purchase of property, plant and equipment (Note 4)
|
|
(7,736)
|
|
-
|
|
(732)
|
Purchase of intangible assets
|
|
(1,278)
|
|
-
|
|
-
|
Cash acquired on the purchase of Molecular Pharmacology (USA) Limited
(Note 1)
|
|
37,163
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
28,149
|
|
-
|
|
(732)
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
Common shares issued for cash (Note 7)
|
|
234,497
|
|
-
|
|
-
|
Increase in due to related parties (Note 6)
|
|
1,423,159
|
|
131,263
|
|
566,079
|
|
|
|
|
|
|
|
|
|
1,657,656
|
|
131,263
|
|
566,079
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
(294,838)
|
|
(166,483)
|
|
(105,436)
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
21,490
|
|
496
|
|
672
|
|
|
|
|
|
|
|
Cash and cash equivalents,
beginning of period
|
|
-
|
|
20,994
|
|
20,322
|
|
|
|
|
|
|
|
Cash and cash equivalents, end
of period
|
|
21,490
|
|
21,490
|
|
20,994
|
Supplemental Disclosures with
Respect to Cash Flows
(Note 10)
The
accompanying notes are an integral part of these consolidated financial
statements
19
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Consolidated Statements of
Changes in Stockholders' Deficiency
(Expressed in U.S.
Dollars)
|
Number of common shares issued
|
Capital stock
|
Additional
paid-in capital
|
Deficit,
accumulated during the development stage
|
Cumulative
translation adjustment
|
Stockholders'
deficiency
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
Balance at 14 July 2004 (inception)
|
|
294
|
|
-
|
|
1
|
|
-
|
|
-
|
|
1
|
Net loss for the period
|
|
-
|
|
-
|
|
-
|
|
(128,488)
|
|
-
|
|
(128,488)
|
Cumulative translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,536)
|
|
(6,536)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 October 2004
|
|
294
|
|
-
|
|
1
|
|
(128,488)
|
|
(6,536)
|
|
(135,023)
|
Common shares issued for cash
- January 2005
|
|
87,999,706
|
|
88,000
|
|
146,496
|
|
-
|
|
-
|
|
234,496
|
Net loss for the year
|
|
-
|
|
-
|
|
-
|
|
(387,667)
|
|
-
|
|
(387,667)
|
Cumulative translation
adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(161)
|
|
(161)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 October 2005
|
|
88,000,000
|
|
88,000
|
|
146,497
|
|
(516,155)
|
|
(6,697)
|
|
(288,355)
|
Acquisition of Molecular Pharmacology (USA)
Limited - Recapitalization May 2006
|
|
43,553,740
|
|
43,554
|
|
(59,790)
|
|
-
|
|
-
|
|
(16,236)
|
Cancellation of common shares - July
2006 (Note 7)
|
|
(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)
|
The accompanying notes are an integral part of these consolidated
financial statements
20
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to
Consolidated Financial Statements
(Expressed in
U.S. Dollars)
30
June 2008
1.
Nature and Continuance of
Operations
Molecular Pharmacology (USA)
Limited (the "Company") was incorporated in the state of Nevada on 1 May 2002
under the name Blue Hawk Ventures, Inc.
The Company changed its name to Molecular Pharmacology (USA) Limited on
29 August 2005. At the same time,
the Company completed a four for one forward split of its issued and
outstanding share capital and altered its share capital to 300,000,000 shares
of common stock with a par value of $0.001 per share.
The Company is a development stage enterprise, as defined in Statements of
Financial Accounting Standards ("SFAS") No. 7, "
Accounting and Reporting
by Development Stage Enterprises
". The Company is devoting all of its
present efforts to securing and establishing a new business and its current
planned principle operations have not commenced. Accordingly, no revenue has been derived
during the organization period.
Up until the fall of 2005, the
Company was in the business of mineral exploration and development of a mineral
property. The Company allowed the
option on its mineral claim to lapse in the fall of 2005.
On 13 October 2005, the
Company entered into a distribution and supply agreement (the
"Distribution Agreement") with Molecular Pharmacology Limited ("MPLA"). MPLA is
incorporated under the laws of Australia
and is a wholly owned subsidiary company of PharmaNet Group Limited ("PharmaNet"), an Australian
company listed on the Australian Stock Exchange. Under the terms of the distribution and
supply agreement, the Company has the exclusive distribution rights to
distribute, market, promote, detail, advertise and sell certain "Licensed
Products", as defined in the agreement (Note 9).
Since signing the Distribution
Agreement with MPLA, the Company has engaged in organizational and start up
activities, including developing a new business plan, recruiting new directors,
scientific advisors and key scientists, making arrangements for laboratory
facilities and office space and raising additional capital. The Company has generated no revenue
from product sales. The Company
does not have any pharmaceutical products currently available for sale, and
none are expected to be commercially available for some time, if at all. The Licensed Products must first undergo
pre-clinical and human clinical testing in the United States before they may be
sold commercially.
The Company completed a share
purchase agreement on 8 May 2006 with PharmaNet. Under the terms of the agreement the
Company acquired 100% of the issued and outstanding shares of MPLA (the "Purchase Agreement"). The Company, in exchange for 100% of the
issued and outstanding shares of MPLA, issued PharmaNet an aggregate total of
88,000,000 shares of its common shares of the Company on the closing of the
transaction. The issuance of
88,000,000 common shares of the Company constituted an acquisition of control
of the Company by PharmaNet. The
transaction has been accounted for as a recapitalization of the Company (Note
2).
21
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
MPLA was incorporated on 14
July 2004 under the laws of Australia.
The accompanying financial statements are the historical financial
statements of MPLA.
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 consolidated financial statements as at 30 June 2008 and for
the year 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 net income of $62,296
for the year ended 30 June 2008 (eight month period ended 30 June 2007 -
loss of $
377,131) and has working capital
of $4,620 at 30 June 2008 (30 June 2007 - working capital deficit of
$23,913).
Management cannot provide
assurance that the Company will ultimately achieve profitable operations or
become cash flow positive, or raise additional debt and/or equity capital. Management believes that the
Company's capital resources should be adequate to continue operating and
maintaining its business strategy during the fiscal year ending 30 June 2009. However, if the Company is unable to
raise additional capital in the near future, due to the Company's
liquidity problems, management expects that the Company will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures.
These consolidated financial statements do not include any adjustments
related to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
At 30 June 2008, the Company
has suffered losses from development stage activities to date. Although management is currently
attempting to implement its business plan, and is seeking additional sources of
equity or debt financing, there is no assurance these activities will be
successful. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. The 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 consolidated financial statements.
22
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated Financial
Statements
(Expressed in U.S. Dollars)
30 June 2008
Basis
of presentation
These consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United
States of America ("U.S. GAAP")
applicable for a developmental stage company for financial information and are
expressed in U.S. dollars.
Basis of
consolidation
These consolidated financial
statements include the accounts of MPLA since its incorporation on 14 July 2004
and MPLA USA
since the reverse acquisition on 8 May 2006 (Note 1). All intercompany balances and
transactions have been eliminated.
Cash and
cash equivalents
Cash and cash equivalents include highly liquid
investments with original maturities of three months or less.
Financial
instruments
The carrying value of cash and
cash equivalents, amounts receivable, accounts payable and accrued liabilities
and due to related parties approximates their fair value because of the short
maturity of these instruments. The
Company's operations are in Australia and virtually all of its
assets and liabilities give rise to significant exposure to market risks from
changes in foreign currency rates.
The Company's financial risk is the risk that arises from
fluctuations in foreign exchange rates and the degree of volatility of these
rates. Currently, the Company does
not use derivative instruments to reduce its exposure to foreign currency risk.
Foreign
currency translation
The consolidated financial
statements of the Company are translated to U.S. dollars in accordance with
SFAS No. 52, "
Foreign Currency
Translation
". Assets
and liabilities denominated in foreign currencies are translated using the
exchange rate prevailing at the balance sheet date. Revenue and expenses are translated at
average rates of exchange prevailing during the year. Translation adjustments
resulting from this process are charged or credited to Other Comprehensive
Income
.
The Company has not, to
the date of these 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 consolidated financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
23
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
Property,
plant and equipment
Property, plant and equipment are recorded at cost and depreciation is
provided over their estimated economic lives at the following rates:
Office equipment
|
15% declining balance
|
Income
taxes
Deferred income taxes are reported for timing differences between items
of income or expense reported in the financial statements and those reported
for income tax purposes in accordance with SFAS No. 109, "
Accounting for Income Taxes
", which requires the use
of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits
are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, and for tax loss and credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company provides for deferred taxes
for the estimated future tax effects attributable to temporary differences and
carry-forwards when realization is more likely than not.
Comprehensive loss
SFAS
No. 130, "
Reporting Comprehensive Income
", establishes standards for
the reporting and display of comprehensive loss and its components in the
financial statements. As at 30 June
2008, the Company has items that represent a comprehensive loss and, therefore,
has included a schedule of comprehensive loss in the consolidated financial
statements.
Basic and
diluted net loss per share
The Company computes net loss
per share in accordance with SFAS No. 128, "
Earnings per
Share
". SFAS No.
128 requires presentation of both basic and diluted earnings per share
("EPS") on the face of the income statement. Basic EPS is computed by dividing net
loss available to common shareholders (numerator) by the weighted average number
of shares outstanding (denominator) during the period. Diluted EPS gives effect to all
potentially dilutive common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS,
the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all
potentially dilutive shares if their effect is anti-dilutive.
24
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
Stock-based compensation
Effective 1
February 2006, the Company adopted the provisions of SFAS No. 123(R), "
Share-Based Payment
", which
establishes accounting for equity instruments exchanged for employee
services. Under the provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date, based
on the calculated fair value of the award, and is recognized as an expense over
the employees' requisite service period (generally the vesting period of the
equity grant). Before 1 February 2006, the Company accounted for
stock-based compensation to employees in accordance with Accounting Principles
Board Opinion No. 25, "
Accounting for Stock Issued to Employees
",
and complied with the disclosure requirements of SFAS No. 123, "
Accounting for Stock-Based Compensation
". The
Company adopted FAS 123(R) using the modified prospective method, which
requires the Company to record compensation expense over the vesting period for
all awards granted after the date of adoption, and for the unvested portion of
previously granted awards that remain outstanding at the date of adoption. Accordingly, financial statements for
the periods prior to 1 February 2006 have not been restated to reflect the fair
value method of expensing share-based compensation. Adoption of SFAS No. 123(R) does
not change the way the Company accounts for share-based payments to
non-employees, with guidance provided by SFAS 123 (as originally issued) and
Emerging Issues Task Force Issue No. 96-18, "
Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services
".
Recent
accounting pronouncements
In May 2008, the
Financial Accounting Standards Board (the
"FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 163,
Accounting for Financial Guarantee Insurance Contracts - an interpretation of
FASB Statement No. 60 ("SFAS No.
163"). SFAS No. 163 provides
enhanced guidance on the recognition and measurement to be used to account for
premium revenue and claim liabilities and related disclosures and is limited to
financial guarantee insurance (and reinsurance) contracts, issued by
enterprises included within the scope of FASB Statement No. 60, Accounting and
Reporting by Insurance Enterprises.
SFAS No. 163 also requires that an insurance enterprise recognize a
claim liability prior to an event of default when there is evidence that credit
deterioration has occurred in an insured financial obligation. SFAS No. 163 is effective for financial
statements issued for fiscal years and interim periods beginning after 15
December 2008, with early application not permitted. The Company does not expect SFAS No. 163
to have an impact on its consolidated financial statements.
25
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
"
30 June 2008
In May 2008, the FASB issued
SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS
No. 162 is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
Generally Accepted Accounting Principles ("GAAP") for
nongovernmental entities. Prior to
the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
Institute of Certified Public Accountants ("AICPA") Statement on
Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles ("SAS No. 69"). SAS No. 69 has been criticized because
it is directed to the auditor rather than the entity. SFAS No. 162 addresses these issues by
establishing that the GAAP hierarchy should be directed to entities because it
is the entity, not its auditor, that is responsible for selecting accounting
principles for financial statements that are presented in conformity with
GAAP. SFAS No. 162 is effective 60
days following the SEC's approval of the Public Company Accounting
Oversight Board Auditing amendments to AU Section 411, The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect SFAS No. 162
to have a material effect on its consolidated financial statements.
In March 2008, the FASB issued
SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities -
an amendment of FASB Statement No. 133 ("SFAS No.
161"). SFAS No. 161 is
intended to improve transparency in financial reporting by requiring enhanced
disclosures of an entity's derivative instruments and hedging activities
and their effects on the entity's financial position, financial
performance, and cash flows. SFAS
No. 161 applies to all derivate instruments within the scope of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"). It also applies to
non-derivative hedging instruments and all hedged items designated and
qualifying as hedges under SFAS No. 133.
SFAS No. 161 is effective prospectively for financial statements issued
for fiscal years beginning after 15 November 2008, with early application
encouraged. The Company is
currently evaluating the new disclosure requirements of SFAS No. 161 and the
potential impact on the Company's consolidated financial statements.
In
December 2007,
the FASB issued SFAS No. 141 (revised 2007), Business
Combinations ("SFAS No. 141(R)"). SFAS No. 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired. SFAS No.
141(R) also establishes disclosure requirements to enable the evaluation of the
nature and financial effects of the business combination. SFAS No. 141(R) is
effective for fiscal years beginning after 15 December 2008. The Company is currently evaluating the
potential impact, if any, of the adoption of SFAS No. 141(R) on its
consolidated results of operation and financial condition.
26
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
In December 2007, the FASB
issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements - an amendment of Accounting Research Bulletin No. 51 ("SFAS No. 160"). SFAS
No. 160 establishes accounting and reporting standards for ownership interests
in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable and to the noncontrolling interest,
changes in a parent's ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal
years beginning after 15 December 2008.
The Company is currently evaluating the potential impact, if any, of the
adoption of SFAS No. 160 on its consolidated results of operation and financial
condition.
In February 2007, the FASB issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS
No. 159"). SFAS 159 allows the company to choose to measure many
financial assets and financial liabilities at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are
reported in earnings. SFAS 159 is effective for fiscal years beginning
after November 15, 2007.
The Company is currently evaluating the requirements of SFAS No. 159 and the
potential impact on the Company's consolidated financial statements.
In September 2006, the FASB
issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and
Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and
132(R)" ("SFAS 158"). SFAS 158 requires
an employer that sponsors one or more single-employer defined benefit plans to
(a) recognize the overfunded or underfunded status of a benefit plan in its
statement of financial position, (b) recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs
or credits that arise during the period but are not recognized as components of
net periodic benefit cost pursuant to SFAS 87, "Employers'
Accounting for Pensions", or SFAS 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions", (c) measure defined
benefit plan assets and obligations as of the date of the employer's
fiscal year-end, and (d) disclose in the notes to financial statements
additional information about certain effects on net periodic benefit cost for
the next fiscal year that arise from delayed recognition of the gains or
losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for the Company's fiscal year ending 30 June
2008. The adoption of SFAS No.
158 is not expected to have a material impact on the Company's financial
position, results of operations or cash flows.
27
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
In September 2006, the FASB
issued SFAS No. 157, "Fair Value Measurement" ("SFAS No.
157"). The Statement provides guidance for using fair value to measure
assets and liabilities. The Statement also expands disclosures about the extent
to which companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair value
measurement on earnings. This Statement applies under other accounting
pronouncements that require or permit fair value measurements. This Statement
does not expand the use of fair value measurements in any new circumstances.
Under this Statement, fair value refers to the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the market in which the entity transacts. SFAS No. 157
is effective for the Company for fair value measurements and disclosures made
by the Company in its fiscal year beginning on 1 July 2008. The Company is
currently reviewing the impact of this statement.
3.
Cash and
Cash Equivalents
The
Company's cash and cash equivalents does not include $140,000 held in
trust for PharmaNe
t.
4.
Property, Plant and Equipment
|
|
|
Accumulated
depreciation
|
|
Net
Book Value
|
|
|
Cost
|
|
As
at
30
June
2008
|
|
As
at
30
June
2007
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
7,726
|
|
4,014
|
|
3,712
|
|
5,169
|
During the year ended 30 June 2008 the total additions to property,
plant and equipment were $Nil (30 June 2007 - $900).
5.
Accounts Payable and Accrued
Liabilities
Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.
6.
Due to Related Parties and
Related Party Transactions
As at 30 June 2008, the amount due to related parties includes $1,000
payable to a director of the Company (30 June 2007
-
$1,000). This balance is
non-interest bearing, unsecured and has no fixed terms of repayment.
28
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
As at 30 June 2008, the amount due to related parties includes $10,751
payable to a company owned by a director of the Company or an officer of
PharmaNet (30 June 2007
-
$152,953). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 30 June 2008, the amount due to related parties includes $1,277
payable to a company owned by a director of the Company or an officer of
PharmaNet (30 June 2007
-
$Nil). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 30 June 2008, the amount due to related parties includes $1,411,131
payable to PharmaNet (30 June 2007
-
$1,138,943). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
During the year ended 30 June 2008, a director of the Company or an
officer of PharmaNet, and their controlled entities were paid or accrued
consulting fees and office and miscellaneous expenses of $79,118 (eight month period ended 30 June 2007
- $121,136, cumulative - $696,697) and $29,355 respectively by the
Company.
During the year ended 30 June 2008, a director of the Company or an
officer of PharmaNet, and their controlled entities were paid or accrued rental
fees of $Nil by the Company (eight month period ended 30 June 2007 -
$12,987, cumulative - $12,987).
Transactions comprising the amount due to PharmaNet are as follows:
|
|
For the
year
ended
30 June
2008
|
|
For the
eight
month
period
ended
30 June
2007
|
|
|
$
|
|
$
|
|
|
|
|
|
Opening balance, beginning of period
|
|
1,138,943
|
|
725,817
|
Funds transferred to
the Company by PharmaNet
|
|
319,726
|
|
347,316
|
Funds transferred to PharmaNet by the Company
|
|
(215,437)
|
|
-
|
Expenses paid by PharmaNet on behalf of the Company
|
|
690
|
|
2,730
|
Foreign currency
translation adjustment
|
|
167,209
|
|
63,080
|
|
|
|
|
|
Balance as at 30 June 2008 and 30 June 2007
|
|
1,411,131
|
|
1,138,943
|
The average amount due to PharmaNet
for the year ended 30 June 2008 was $1,285,705 (for the eight month period ended
30 June 2007 -
$895,415).
29
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
"
30 June 2008
7.
Capital
Stock
Authorized
The
total authorized capital is 300,000,000 common shares with a par value of
$0.001 per common share.
On
29 August 2005, the Company altered its authorized capital by increasing
authorized common shares with a par value of $0.001 from 25,000,000 to
300,000,000 common shares.
Issued
and outstanding
The
total issued and outstanding capital stock is 111,553,740 common shares with a
par value of $0.001 per common share.
i.
On 10 November 2005, the Company completed a
private placement of 1,500,000 units for proceeds of $150,000. Each unit consists of one common share
and two share purchase warrants.
Each share purchase warrant entitles the holder to purchase one
additional common share of the Company for $0.50 per share anytime on or before
two years from the date of the acquisition of the units.
ii.
On 21 July 2006, a former director of the Company
returned 20,000,000 common shares of the Company to treasury. These common shares were cancelled on 21
July 2006.
Warrants
The following is a summary of warrant activities during
the period ended 30 June 2008:
|
|
Number of warrants
|
|
Weighted average exercise
price
|
|
|
|
|
$
|
|
|
|
|
|
Outstanding and exercisable at 30 June 2007
|
|
3,000,000
|
|
0.50
|
|
|
|
|
|
Granted
|
|
-
|
|
-
|
Exercised
|
|
-
|
|
-
|
Expired
|
|
(3,000,000)
|
|
0.50
|
|
|
|
|
|
Outstanding and exercisable at 30 June 2008
|
|
-
|
|
-
|
All of the above purchase
warrants were issued during the year ended 31 October 2006 and expired on 10 November 2007.
30
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
8.
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
year
ended
30 June
2008
|
|
For the
eight
month
period
ended
30 June
2007
|
|
|
$
|
|
$
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
62,296
|
|
(377,131)
|
|
|
|
|
|
Federal income tax rates
|
|
34.0%
|
|
34.0%
|
|
|
|
|
|
Income tax recovery
based on the above rates
|
|
21,180
|
|
(128,224)
|
|
|
|
|
|
Increase (decrease)
due to:
|
|
|
|
|
Non-deductible expenses
|
|
364
|
|
-
|
Difference between US and
foreign tax rates
|
|
(5,553)
|
|
10,579
|
Change in valuation
allowance
|
|
50,918
|
|
122,389
|
Research and development
tax refund not subject to tax
|
|
(58,761)
|
|
-
|
Foreign exchange and other
|
|
(8,148)
|
|
(4,744)
|
|
|
|
|
|
Income
tax expense (recovery)
|
|
-
|
|
-
|
The composition of the
Company's deferred tax assets as at 30 June 2008 and 2007 are as follows:
|
|
As at
30 June
2008
|
|
As at
30 June
2007
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax operating loss
carryforward
|
|
1,541,549
|
|
1,401,546
|
|
|
|
|
|
Deferred tax assets
|
|
484,754
|
|
433,836
|
Less:
Valuation allowance
|
|
(484,754)
|
|
(433,836)
|
|
|
|
|
|
Net deferred tax
asset
|
|
-
|
|
-
|
31
Molecular
Pharmacology (USA)
Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
The Company has non-capital
loss carry-forwards of approximately $1,541,549 that may be available for tax
purposes. The loss carry-forwards
are all in respect of US and Australian operations and expire as follows:
2022
|
20,402
|
2023
|
46,992
|
2024
|
27,717
|
2025
|
14,187
|
2026
|
261,311
|
2027
|
111,155
|
2028
|
75,463
|
No
expiry
|
984,322
|
|
|
|
1,541,549
|
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.
9.
Commitment
On 13 October 2005, t
he Company entered into a distribution and supply
agreement with MPLA (the "Distribution Agreement") (Note 1).
The
basic terms of the Distribution Agreement are as follows:
i.
MPLA has granted exclusive distribution rights to
the Company to distribute, market, promote, detail, advertise and sell certain
"Licensed Products", as defined in the Distribution Agreement, with metallo-polypeptide analgesic as an active ingredient, in the United States
(excluding its territories and possessions);
ii.
The Company paid MPLA $1,000 upon the date of
execution of the Distribution Agreement and is required to pay $100,000 six
months from the date of execution of the Distribution Agreement or the date
that any Licensed Product is available and ready for distribution and sale in
commercial quantities in the United States under the terms of the Distribution
Agreement (the "Commencement Date"), whichever occurs first;
iii.
The Company is also required to pay MPLA a
royalty of 5% as set out in the Distribution Agreement;
iv.
MPLA will supply all Licensed Products to the
Company under the Distribution Agreement;
32
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
v.
MPLA is responsible for obtaining all necessary
regulatory approvals for the licensed product in the United States; and
vi.
The Distribution Agreement is for a one year term
from the "Commencement Date" and may be automatically extended by
successive one-year periods, unless at least three months prior to the renewal
date, as defined in the Distribution Agreement, either party advises the other
party that it elects not to permit the extension of the term.
The $100,000 payment to MLPA according to the
terms of the Distribution Agreement has not yet been made and the Company is
currently renegotiating the terms of the Distribution Agreement.
10.
Supplemental Disclosures with
Respect to Cash Flows
|
For
the
period
from
the date
of inception
on 14 July
2004
to
30
June
2008
|
|
For
the
year
ended
30
June
2008
|
|
For
the
eight
month
period
ended
30
June
2007
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
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
|
|
-
|
|
-
|
11.
Segmented Information
Details
on a geographic basis as at 30 June 2008 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
318,283
|
|
(283,685)
|
|
34,598
|
Income (loss) for the year
|
|
138,829
|
|
(76,533)
|
|
62,296
|
33
Molecular
Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars)
30 June 2008
Details
on a geographic basis as at 30 June 2007 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
44,526
|
|
2,939
|
|
47,465
|
Loss for the year
|
|
(264,483)
|
|
(112,648)
|
|
(377,131)
|
12.
Comparative Figures
Certain
comparative figures have been adjusted to conform to the current year's
presentation.
34
Item 8.
Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
Molecular USA had no disagreements on
accounting or financial disclosure matters with its independent accountants to
report under this Item 8.
Item 8A.
Controls and Procedures
(a) Evaluation
of Disclosure Controls and Procedures
Based on the management's evaluation (with the participation
of our
President and Chief Financial Officer), our President and Chief Financial
Officer have concluded that as of June 30, 2008, our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange of 1934 (the "
Exchange Act
")
are effective to provide reasonable assurance that the information required to
be disclosed in this annual report on Form 10-KSB is recorded, processed,
summarized and reported within the time period specified in Securities and
Exchange Commission rules and forms.
(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.
Under the supervision and with the participation of our management,
including Jeff Edwards, our President and Chief Executive Officer, and Simon
Watson, our Chief Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures as of June 30, 2008.
35
Based upon their evaluation of our controls, Jeff Edwards, our
President and Chief Executive Officer, and Simon Watson, our Chief Financial
Officer, has concluded that, subject to the limitations noted above, the
disclosure controls are effective providing reasonable assurance that material
information relating to us is made known to management on a timely basis during
the period when our reports are being prepared.
Attestation report of the registered public accounting firm
This annual 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 annual 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 June 30, 2008, Jeff Edwards, our President
and Chief Executive Officer, and Simon Watson, our Chief Financial Officer have
concluded that there were no significant changes in our internal controls over
financial reporting or in any other areas that could significantly affect our
internal controls subsequent to the date of his most recent evaluation,
including corrective actions with regard to significant deficiencies and
material weaknesses.
Item 8A(T)
- Controls and Procedures
See Item 8A - Controls
and Procedures above.
Item 8B. Other Information
None
PART III
Item
9. Directors and Executive Officers of the Registrant
Identification of Directors and Executive Officers
The following table sets forth the names of all
directors and executive officers of the Molecular USA as of September 29, 2008 and
June 30, 2008. These persons will serve until the next annual meeting of the
stockholders or until their successors are elected or appointed and qualified,
or their prior resignation or termination.
Name
|
Age
|
Position
|
Date Position
First Held
|
Jeffrey D. Edwards
|
57
|
President
and Chief Executive Officer Director
|
October 28, 2005
|
Simon Watson
|
66
|
Director,
Chief Financial Officer and
Corporate Secretary
|
June 7, 2006
|
36
Mr. Jeffrey D. Edwards
.
Mr. Edwards has over twenty years of experience in managing new
technological innovations in the medical device and pharmaceutical
industry. From 2002 to 2005, Mr.
Edwards as president and shareholder of International Scientific Pty Ltd.,
managed a variety of medical and technology projects. In 2002 and 2003, Mr. Edwards was
actively involved with Colltech Australia Limited, a company involved in the
production and sale of collagen.
Colltech is listed on the Australian Stock Exchange
("CAU"). From its
inception in 1995 to 2001, Mr. Edwards was the executive director of Genesis
Biomedical Limited, a pharmaceuticals & biotechnology listed on the
Australian Stock Exchange ("GBL"). While at Genesis, Mr. Edwards was
responsible for all medical and clinical activities of the company as well as
all day to day management of staff and corporate activities. Mr. Edwards currently serves as a
director of: OBJ Limited, a drug delivery company listed on the Australian
Stock Exchange ("OBJ") (2005) and Global Energy Medicine Pty Ltd., a
private therapeutic device company (2005).
He also holds the office of Chief Operations Officer of Molecular
Pharmacology Limited, a wholly owned subsidiary of Molecular USA.
Mr. Simon Watson
.
Mr. Watson has been in private practice as a barrister and solicitor in Australia
since 1971, specializing in the field of commercial law. He is a director of
PharmaNet Group Limited which is listed on the Australian Stock Exchange ("PNO") (2005), a position he has held since 15 January 1987. Mr. Watson has an LLB, B.Ec. from the
University of Western Australia.
Family
relationships
There is no family
relationship among the above officers and directors.
Significant Employees
We have no employees who are not executive
officers, but who are expected to make a significant contribution to the
Company's business.
Involvement in Certain Legal Proceedings
During the past five years, none of our
directors, or persons nominated to become a director, or executive officer,
promoter or control person:
-
was a general partner or executive officer of any
business against which any bankruptcy petition was filed, either at the time of
the bankruptcy or two years prior to that time;
-
was convicted in a criminal proceeding or named
subject to a pending criminal proceeding (excluding traffic violations and
other minor offenses);
-
was subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; or
-
as found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have
37
e.
violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended or vacated.
Audit Committee Financial Expert
We do not have a member on our Board of
Directors that has been designated as an audit committee "financial
expert." We do not believe
that the addition of such an expert would add anything meaningful to the
Company at this time. It is also
unlikely we would be able to attract an independent financial expert to serve
on our Board of Directors at this stage of our development. In order to entice such a director to
join our Board of Directors we would probably need to acquire directors'
errors and omission liability insurance and provide some form of meaningful
compensation to such a director; two things we are unable to afford at this
time.
Under the applicable SEC
standards, an audit committee financial expert means a person who has the
following attributes:
-
understanding of generally accepted accounting principles and
financial statements;
-
ability to assess the general application of such principles in
connection with the accounting for estimates, accruals and reserves;
-
experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one or more
persons engaged in such activities;
-
understanding of internal controls and procedures for financial
reporting; and
-
understanding of audit committee functions.
Audit
Committee
Molecular
USA has
a designated audit committee consisting of Messrs. Edwards and Watson. Neither of these individuals meet the
independent requirements for an audit committee member. Molecular USA's audit committee is
responsible for: (1) selection and oversight of our independent accountant; (2)
establishing procedures for the receipt, retention and treatment of complaints
regarding accounting, internal controls and auditing matters; (3) establishing
procedures for the confidential, anonymous submission by our employees of
concerns regarding accounting and auditing matters; (4) engaging outside
advisors; and, (5) funding for the outside auditory and any outside advisors
engagement by the audit committee. Molecular
USA
has adopted an audit committee charter.
Disclosure
Committee and Charter
Molecular
USA has
a disclosure committee and disclosure committee charter. Molecular USA's disclosure committee is
comprised of all of its officers and directors. The purpose of the committee is to
provide assistance to the chief executive officer and the chief financial
officer in fulfilling their responsibilities regarding the identification and
disclosure of material information about Molecular USA and the accuracy,
completeness and timeliness of Molecular USA's financial reports.
38
Compliance with Section 16(a) of the Securities
Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of
1934, as amended, requires that our executive officers and directors and
persons who own more than 10% of a registered class of our equity securities
file with the Securities and Exchange Commission initial statements of
beneficial ownership, reports of changes in ownership and annual reports
concerning their ownership of our common stock and other equity securities, on
Forms 3, 4 and 5 respectively. Executive officers, directors and greater than
10% shareholders are required by the Securities and Exchange Commission
regulations to furnish us with copies of all Section 16(a) reports they file.
To the best of our knowledge, during the fiscal year ended June 30, 2008,
all executive officers, directors and greater than 10% shareholders filed the
required reports in a timely manner, except for the late filing of the Form 3
filings for Messrs. Ian Downs and Jeffery Edwards.
Code
of Ethics
Molecular
USA has adopted a code of ethics that applies to all its executive officers and
employees, including its CEO and
CFO. A copy of Molecular USA's
adopted code of ethics is attached to this annual report. Molecular USA undertakes to provide any
person with a copy of its code of ethics free of charge. Please contact Molecular
USA at 011-61-8-9443-3011 to request a copy of Molecular USA's code
of ethics. Management believes Molecular USA's code of ethics is
reasonably designed to deter wrongdoing and promote honest and ethical conduct;
provide full, fair, accurate, timely and understandable disclosure in public
reports; comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.
CONTINUED ON NEXT PAGE
39
Item
10. Executive Compensation
Summary of Compensation of Executive Officers
The following table summarizes the compensation
paid to our President and Chief Executive Officer during the last three
complete fiscal years. No other
officer or director received annual compensation in excess of $100,000 during
the last three complete fiscal years.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
Year
|
Annual
Compensation
|
Long
Term Compensation
|
All
Other Compensation
|
|
|
Salary
|
Bonus
|
Other
Annual Compensation
|
Awards
|
Payouts
|
|
|
|
|
|
|
Securities
Under Options/ SARs Granted
|
Restricted
Shares or Restricted Share Units
|
LTIP
Payouts
|
|
John Palermo
Corporate Secretary
of PharmaNet
(4)
|
2008
2007
2006
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
$80,361
$134,123
$236,599
|
Jeffery D.
Edwards, President, CEO and Director
(1)
|
2008
2007
2006
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
$228,112
$ 53,834
$ 33,646
|
Simon
Watson, CFO, Secretary and Director
(2)
|
2008
2007
2006
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Ian Downs, CEO and Director
(3)
|
2008
2007
2006
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
N/A
N/A
Nil
|
Notes:
|
(1)
|
Mr. John Palermo is the Corporate Secretary of PharmaNet.
He is not a director or officer of Molecular USA.
Mr. Palermo or entities controlled by him were
paid or accrued consulting fees during the fiscal periods ended June 30,
2008, the eight month period ended June 30, 2007 and the fiscal year ended
October 31, 2006. Mr. Palermos or entities controlled by him also were
paid or accrued rental fees of $0.00
during the
twelve month period ended June 30, 2008.
|
(2)
|
Mr. Jeffery D. Edwards was appointed to the office of
President and Chief Executive Officer of Molecular USA on July 20, 2006.
Mr. Edwards or entities controlled by him were paid or accrued
consulting fees during the fiscal period ended June 30, 2008, the eight month
period ended June 30, 2007 and the fiscal year ended October 31, 2006.
|
(3)
|
Mr. Watson was appointed to the office of Chief
Financial Officer, Secretary and director of Molecular USA on June 7, 2006
|
(4)
|
Mr. Ian Downs was appointed to the office of
President, Chief Executive Officer, Chief Financial Officer, Secretary and a
director of Molecular USA on October 13, 2005. Mr. Downs resigned
as an officer and director of Molecular USA on July 20, 2006.
|
As of the date of this annual report, we have
no compensatory plan or arrangement with respect to any officer that results or
will result in the payment of compensation in any form from the resignation,
retirement or any other termination of employment of such officer's employment
with
40
our company, from a change in control of our
company or a change in such officer's responsibilities following a change in
control.
Board of Directors Report on Executive
Compensation
The Board of Directors of Molecular USA is
responsible for reviewing and determining the annual salary and other
compensation of the executive officers and key employees of Molecular USA. The
goals of Molecular USA are to align compensation with business objectives and
performance and to enable Molecular USA to attract, retain and reward executive
officers and other key employees who contribute to the long-term success of Molecular
USA. Molecular USA
will provide base salaries to its executive officers and key employees
sufficient to provide motivation to achieve certain operating goals. Although
salaries are not specifically tied to performance, incentive bonuses are
available to certain executive officers and key employees. In the future,
executive compensation may include without limitation cash bonuses, stock
option grants and stock reward grants. In addition, Molecular USA may set up a
pension plan or similar retirement plans.
Molecular USA has no pension, health,
annuity, insurance, profit sharing or similar benefit plans.
Stock Options/SAR Grants
During
the fiscal period ended June 30, 2008 and June 30, 2007, we did not grant any
stock options or stock appreciation rights to any of our directors or officers.
There were no stock options exercised during the fiscal period ended June 30,
2008 or June 30, 2007, and there were no stock options or stock appreciation
rights outstanding on June 30, 2008 or June 30, 2007.
Long-Term Incentive Plans/
Equity
Compensation Plan
There are no arrangements or plans in which we
provide pension, retirement or similar benefits for directors or executive
officers, except that our directors and executive officers may receive stock
options at the discretion of our board of directors. We do not have any material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers, except that stock options may
be granted at the discretion of our board of directors.
We have no plans or arrangements in respect of
remuneration received or that may be received by our executive officers to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control, where the value of such compensation exceeds
$60,000 per executive officer.
Compensation of Directors
No cash compensation was paid to any of our
directors for the director's services as a director during the twelve month
period ended June 30, 2008 or since our inception. We have no standard arrangement pursuant
to which our directors are compensated for their services in their capacity as
directors except for the granting from time to time of incentive stock options. The board of directors may award special
remuneration to any director undertaking any special services on behalf of our
company other than services ordinarily required of a director. Other than indicated below, no director
received and/or accrued any compensation for his services as a director,
including committee participation and/or special assignments.
41
Stock Option Plans
Molecular
USA
has not adopted a stock option plan or long-term incentive plans at this time.
Item
11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of
Certain Beneficial Owners and Management
The following table sets forth, as at September
29, 2008, certain information with respect to the beneficial ownership of our
common stock by each shareholder known by us to be the beneficial owner of more
than five percent (5%) of our common stock, and by each of our current
directors and executive officers.
Each
person has sole voting and investment power with respect to the shares of
common stock, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of
Beneficial Owner
|
Amount and Nature of Beneficial Ownership(1)
|
Percentage of Class(1)
|
Jeffery Edwards
10 Koeppe Road, Claremont
Perth,
Australia 6010
|
0
|
0%
|
Simon Watson
17 Ord Street
West Perth, 6005
Western
Australia
|
0
|
0%
|
Directors
and Executive Officers as a Group(3)
|
0
|
0%
|
Notes:
|
|
(1)
|
Based on 111,553,740
shares of common stock issued and outstanding as of September 29, 2008.
Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed above, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is determined
in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Shares of common stock subject to options or warrants currently exercisable,
or exercisable within 60 days, are deemed outstanding for purposes of
computing the percentage ownership of the person holding such option or
warrants, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
|
|
(2)
|
Percentage is calculated assuming the options held by
the officers and directors have been exercised.
|
Changes in Control
There
are no present arrangements or pledges of the Company's securities which may
result in a change in control of the Company
Item
12. Certain Relationships and Related Transactions, and Directors Independence.
Certain
Relationships and Related Transactions
Other than as noted below, none of the following parties
has, during the fiscal year ended June 30, 2008, had any material interest,
direct or indirect, in any transaction with us or in any presently proposed
transaction that has or will materially affect us:
42
-
Any of our directors or officers;
-
Any person proposed as a nominee for
election as a director;
-
Any person who beneficially owns,
directly or indirectly, shares carrying more than 10% of the voting rights
attached to our outstanding shares of common stock;
-
Any of our promoters; or
-
Any relative or spouse of any of the foregoing persons who has the same
house as such person.
As at June 30, 2008, we owed $1,000 to Jeff Edwards, a
director and officer of Molecular USA, for monies advanced by him to us (June
30, 2007 - $1,000). The advances do not carry an interest rate and have no
fixed terms of repayment.
As of June 30, 2008, we owed $1,411,131 to
PharmaNet for loans advanced to us (June 30, 2007 - $1,138,943). PharmaNet
owns approximately 78.89% of the common stock of Molecular USA. This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at June 30, 2008 we owed $10,751 to
Jeff Edwards, a director and officer of Molecular USA, for monies advanced to
us (June 30, 2007 - $152,953).
During the fiscal year ended June 30,
2008, officers and directors of PharmaNet and companies controlled by them were
paid or accrued consulting fees of $79,118 (for the eight month period ended June 30, 2007 -
$121,136, cumulative $696,697) and
$29,355 respectively by Molecular USA.
During the fiscal year ended June 30,
2008, officer s and directors of PharmaNet or companies controlled by them were
paid or accrued rental fees of $Nil (for the eight months period ended, June
30, 2007 - $12,987, cumulative $12,987).
As at the date of this annual report, we
do not have any policies in place with respect to whether we will enter into agreements
with related parties in the future.
Director
Independence
We currently do not have any independent
directors, as the term "independent" is defined by the rules of the
NASDAQ Stock Market (Note: Our shares of common stock are not listed on NASDAQ
or any other national securities exchange and this reference is used for
definition purposes only).
Item
13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Exhibits
Exhibit Number and Exhibit Title
2.1
|
Share
Purchase Agreement dated November 25, 2005 to acquire Molecular Pharmacology
Limited (incorporated by reference from our Form 10-KSB Registration
Statement, filed January 31, 2006)
|
3.1
|
Articles
of Incorporation as Amended (incorporated by reference from our Form 10-SB
Registration Statement, filed January
23, 2003)
|
3.2
|
Certificate of Amendment to Articles of Incorporation, dated July 15, 2002
(incorporated by reference from our Form 10-SB, filed January 23, 2003)
|
43
3.3
|
Certificate of Amendment to Articles of Incorporation, dated August 29, 2005
|
3.4
|
Bylaws
(incorporated by reference from our Form 10-SB Registration Statement, filed May
2002
|
14.1
|
Code
of Ethics (incorporated by reference from our Form 10-KSB Registration
Statement, filed January 31, 2006)
|
21
|
Subsidiaries
of Molecular USA (incorporated by reference from our Form 10-KSB Registration
Statement, filed January 31, 2006)
|
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
|
Certificate of CEO and CFO as Required by Rule Rule 13a-14(b) and
Rule 15d-14(b) (17 CFR
240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States
Code
|
99.1
|
Disclosure Committee Charter (incorporated by reference from our Form
10-KSB Registration Statement, filed January 31, 2006)
|
99.2
|
Audit Committee Charter (incorporated by reference from our Form
10-KSB Registration Statement, filed January 31, 2006)
|
Item
14. Principal Accountant Fees and Services
Fees and
Services
Our principal accountant, James Stafford
Chartered Accountants, billed an aggregate of $24,261 for the fiscal year ended June 30, 2008
and for professional services rendered for the audit of the Company's
annual consolidated financial statements and review of the consolidated financial statements for the
included in its quarterly reports.
The following is an aggregate of fees billed
for each of the fiscal years periods ended June 30, 2008 and June 30, 2007 for
professional services rendered by our principal accountants:
|
Fiscal
year
ended
June 30,
2008
|
Fiscal
year
ended
June 30,
2007
|
Audit
fees*
|
$14,000
|
$18,800
|
Audit-related
fees
|
10,261
|
6,366
|
Tax
fees
|
-
|
-
|
All
other fees
|
-
|
-
|
Total
fees paid or accrued to our principal accountants
|
$24,261
|
$25,166
|
* Audit
fees consist of fees related to professional services rendered in connection
with the audit of our annual financial statements, the review of the financial
statements included in each of our quarterly reports on Form 10-QSB.
44
Pre-Approval
Policies and Procedures
Our policy is to pre-approve all audit and permissible non-audit
services performed by the independent accountants. These services may include audit
services, audit-related services, tax services and other services. Under our audit committee's policy,
pre-approval is generally provided for particular services or categories of
services, including planned services, project based services and routine
consultations. In addition, the
audit committee may also pre-approve particular services on a case-by-case
basis. We approved all services
that our independent accountants provided to us in the past two fiscal years.
45
SIGNATURES
In accordance with
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") the Registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
|
MOLECULAR
PHARMACOLOGY (USA) LIMITED
|
|
BY:
|
/s/ Jeffery D. Edwards
|
|
|
Jeffrey D.
Edwards, President and Chief Executive Officer
|
|
Date:
|
October 1, 2008
|
|
|
|
|
|
|
|
BY:
|
/s/ Simon Watson
|
|
|
Simon Watson,
Chief Financial Officer and Secretary
|
|
|
|
|
Date:
|
October 1, 2008
|
Pursuant to requirements
of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:
|
|
|
|
BY:
|
/s/ Jeffrey D. Edwards
|
|
|
Jeffrey D.
Edwards, President and Chief Executive Officer
|
|
Date:
|
October 1, 2008
|
|
|
|
|
|
|
|
BY:
|
/s/ Simon Watson
|
|
|
Simon Watson,
Chief Financial Officer and Secretary
|
|
|
|
|
Date:
|
October 1
,
2008
|
46
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