Item 2.01
Completion of Acquisition or Disposition of Assets.
As used in this Current Report: (i) the terms the Company,
our company, we, us, our and NextGen refer to NextGen Bioscience Inc.,
(formerly InfraBlue (US) Inc.), a Nevada corporation, and its subsidiaries,
unless the context requires otherwise; and (ii) all dollar amounts refer to
United States dollars unless otherwise indicated.
OUR BUSINESS
We are the owner of certain proprietary technology comprised of
a suite of software programs and a computer peripheral device known as the IRMA
device, which provides for the delivery of high-quality color presentations
stored on mobile smart phones and PDAs. On November 27, 2007, we purchased
certain intellectual property assets and undertakings of Oxon Life Science
Limited (Oxon) relating to the development of therapies for the treatment of
certain types of cancer. This acquisition constituted a change in our principal
business to a biotechnology company focused on the development and
commercialization of novel therapeutic proteins that disrupt the advance of
life-threatening cancers with a focus on prostate and breast cancer. Upon
completion of the acquisition of these assets, two directors from Oxon were
appointed as directors of our company and our former director and officer,
Mitchell Johnson, resigned from the Company. Our current board has determined to
pursue our biotechnology business and is currently evaluating the sale or
abandonment of our technology business as we have not been successful in
exploiting the technology.
Our Corporate Organization
We were incorporated on April 5, 2005 under the laws of the
State of Nevada. On the date of our incorporation, Rebecca Poncini was appointed
as our president, secretary, treasurer and sole director. Ms. Poncini
participated in the initial private placement of our securities on April 8,
2005, purchasing 500,000 shares at a price of $0.001 per share.
Acquisition of InfraBlue U.K.
We entered into a letter of intent to acquire all of the issued
and outstanding shares of InfraBlue Ltd. (InfraBlue UK) on April 18, 2005. The
letter of intent contemplated our acquisition of InfraBlue UK subject to our
raising a minimum of $200,000 (subsequently reduced by amendment to $125,000).
In furtherance of this requirement and in order to enable us to negotiate a
definitive share purchase agreement, we completed a private placement of
4,500,000 shares of our common stock at a price of $0.01 per share for proceeds
of $45,000 on May 31, 2005.
On May 23, 2005, we entered into a definitive share exchange
agreement with InfraBlue UK and the founding shareholders of InfraBlue UK:
InfraBlue Inc. (formerly PublicLock Inc.), Outlander Management Ltd. and
Mitchell Johnson. The share exchange agreement originally contemplated a closing
date of June 30, 2005. The closing date was extended to August 31, 2005 by
agreement in order to provide InfraBlue UK with more time to obtain necessary
corporate approvals and to provide us with more time to raise the required
financing.
We acquired all of the issued and outstanding shares of
InfraBlue UK pursuant to the share exchange agreement on August 31, 2005. We
issued an aggregate of 12,000,000 shares of our common stock to the shareholders
of InfraBlue UK on closing of the acquisition. Mr. Johnson was issued 1,416,867
shares of our common stock in exchange for his shares in InfraBlue UK, InfraBlue
Inc., one of our major shareholders, was issued 10,004,820 shares of our common
stock in exchange for its shares, and
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Outlander Management was issued 578,313 shares of our common
stock in exchange for its shares. Concurrent with closing, InfraBlue UKs
managing director, Mitchell Johnson, was appointed as our sole executive officer
and director to replace Ms. Poncini.
We completed an offering of 705,800 shares of our common stock
at a price of $0.05 per share on August 31, 2005 for total proceeds of $35,290.
We acquired the InfraBlue Technology on November 30, 2005
pursuant to an asset purchase agreement between us and InfraBlue Inc. We issued
10,000,000 shares of our common stock to InfraBlue Inc. upon completion of the
acquisition of this intellectual property. InfraBlue Inc. paid as consideration
10,000,000 shares of our common stock to the Keydata Technology Partnership 3
LLP as part of its arrangement to acquire a subsidiary of Keydata Technology
Partnership 3 LLP, which owned the InfraBlue Technology.
We entered into convertible loan subscription agreements with
two investors in March 2006 pursuant to which the investors have advanced a
total of $100,500 as convertible loans. The convertible loans are evidenced by
convertible promissory notes that we have issued to the investors. Each
convertible loan is repayable on the two year anniversary of the date of advance
and will bear interest at an interest rate equal to the prime rate of interest
for U.S. banks as published in Money Rates Column of the Money and Investing
Section of The Wall Street Journal from time to time. Each investor has the
right at any time commencing on the date of the quotation of our common stock on
the NASD Over-the-Counter Bulletin Board and ending on the maturity date to
convert the outstanding principal and accrued interest on their respective loan
into units at a conversion rate of $0.25 US per unit. Each unit to be issued
upon conversion will be comprised of one share of our common stock and one
warrant to purchase one additional share of our common stock. We have agreed to
use our best efforts to prepare and file with the SEC, as early as possible
following the quotation of our common stock on the NASD Over-the-Counter
Bulletin Board in the United States, and in no event later than one hundred and
eighty (180) days following the date of advance of the convertible loan, a
registration statement under the Securities Act covering the resale of shares
issuable to the investors upon conversion of the convertible notes and the
warrant shares issuable upon exercise of the warrants.
Th
e
Acquisition of the Oxon Assets
On November 27, 2007, pursuant to an asset purchase agreement
(the Asset Purchase Agreement) among the Company, NextGen Bioscience Inc., a
former wholly-owned subsidiary of the Company, and Oxon Life Science Limited
(Oxon) dated October 12, 2007, we completed the acquisition of certain
intellectual property from Oxon. A copy of the Asset Purchase Agreement is
attached as
Exhibit 10.1
to our Current Report on Form 8-K filed October
17, 2007.
Under the Asset Purchase Agreement, we purchased certain
intellectual property assets and undertakings of Oxon relating to the
development of therapies for treatment of certain types of cancer (the Assets)
in consideration for 14,000,000 post-split (3,500,000 pre-split) shares of our
common stock. Under the terms of the Asset Purchase Agreement, we agreed to
complete a forward stock split of our outstanding shares on a four new shares
for one old share basis (and a corresponding increase to the authorized capital
of the Company), as well as to change our name to NextGen Bioscience Inc., which
we completed effective October 26, 2007. In addition, we agreed to add two
nominees of Oxon to our board of directors upon completion of the acquisition of
the Assets of Oxon.
Oxon holds approximately 11% of our outstanding shares. The
acquisition of the Assets constitutes a change in the principal business of the
Company to a biotechnology company focused on the development and
commercialization of novel therapeutic proteins that disrupt the advance of
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life-threatening cancers with a focus on prostate and breast
cancer. Upon completion of the acquisition of the Assets, we added two directors
from Oxon to our board of directors.
Name Change
Pursuant to the terms of the Asset Purchase Agreement, we
merged with our wholly-owned subsidiary, NextGen Bioscience Inc., a company
incorporated pursuant to the laws of the State of Nevada, pursuant to Articles
of Merger filed by the Company with the Nevada Secretary of State, to effect a
name change of the Company to NextGen Bioscience Inc. to reflect the change in
our principal business to a company focused in the biotechnology industry, as
disclosed in our Current Report on Form 8-K filed October 17, 2007 with the
Securities and Exchange Commission. The merger was in the form of a
parent/subsidiary merger, with the Company as the surviving corporation.
Pursuant to the Nevada Revised Statutes, shareholder approval of the merger was
not required. Upon completion of the merger, our name was changed from
InfraBlue (US) Inc. to NextGen Bioscience Inc. and our Articles of
Incorporation have been amended to reflect this name change.
Forward Stock Split
Effective October 26, 2007 and with a distribution date of
October 30, 2007, we increased our authorized and issued and outstanding share
capital on a four new shares for one old share basis (the Forward Stock
Split).
As a result, our authorized common stock capital was increased
from 100,000,000 shares to 400,000,000 shares of common stock and our issued and
outstanding common stock was increased from 28,724,392 shares to 114,897,568
shares of common stock as of October 26, 2007. The par value of our shares of
common stock of $0.001 per share was not affected. We filed a Certificate of
Change to our Articles of Incorporation with the Nevada Secretary of State to
reflect the Forward Stock Split.
Board of Directors
Upon the Closing of the Acquisition of the Assets of Oxon, the
following persons held the following positions with our Company:
Name
|
Position with the
Company
|
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Konstantinos Kardiasmenos
|
Chief Executive
Officer, Chief Financial Officer and a director
|
|
|
David Cooper
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Chairman and a
director
|
The 14,000,000 post-split shares of our common stock issued
pursuant to the Asset Purchase Agreement to Oxon were issued in offshore
transactions (as defined in Rule 902 under Regulation S under the Securities
Act) in reliance on Regulation S under the Securities Act, based upon
representations made by the purchaser.
Our Biotechnology Business
General
Our biotechnology business is focused on the discovery,
development and commercialization of novel therapeutics to fight cancer, in
particular prostate and breast cancer. We currently own two compounds for which
we have made patent applications in Europe: (i) prostagnin for the treatment of
prostate cancer
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and (ii) tetalonic acid for the treatment of breast cancer. We
plan to acquire other new technologies in the future.
We currently do not have any business operations. We have not
conducted any clinical trials and are in the beginning stages of our business
plan. There can be no assurance that we will be successful in obtaining the
patents we have applied for.
Our business plan is to conduct clinical trials of our
products, apply for regulatory approvals in the United States and Europe and
develop our technology for subsequent out-licensing and sale.
Traditionally, biotechnology companies develop new technology
from scratch and typically have a preference for undertaking the majority of
tasks in-house. Our business model is to identify and evaluate promising
early-stage, or already patented, discovery projects, which are available for
in-licensing from academic laboratories and smaller biotech companies. We
believe we can deliver a faster track for the transfer of intellectual property
into pharmaceutical development projects by bridging the gap between academic
research groups and smaller biotech companies.
Over the past five years, the majority of the patents related
to cancer were filed by Universities and small biotech companies (with only a
minority of patents filed by big pharmaceutical companies). We believe this
provides us with the opportunity to acquire intellectual property at a lower
cost than developing it ourselves, which we believe, allows for quicker
development through multiple projects.
We plan to establish a Scientific Advisory Board (SAB)
consisting of members that have international experience stretching from western
countries to the Far East within academia, biotechnology research companies,
patent offices, corporate/investment banking and sales/marketing for big
pharmaceutical companies.
We plan to hire a small, but highly efficient core staff
comprised of specialists capable of project identification, evaluation and
selection, project management and clinical trials. We believe they will add
value in our operations, resulting in interest from potential in-licensing
parties.
We believe there is currently a surplus of lab capacity and
skilled staff, including in India, which in combination with average acquisition
prices below actual development cost, provides a significant cost advantage
without compromising quality and efficiency. We plan to exploit this market
situation through outsourcing the research to time- and cost-efficient labs in
Europe and India. Subject to the specific tasks at hand, different contract
research organisations (CROs) will be selected. In India, salaries and other
expenses are significantly below those of Europe and thus provide a cost
advantage. Our SAB will be able to advise on the specific tasks at hand and
point to the best suited CROs.
Initially, we plan to conduct pre-clinical work on prostaganin
and tetanolic. The pre-clinical work will be outsourced to CROs in Europe and
India. For this purpose, a Master CRO will be employed. This is a specialist
company in sourcing the right CROs. Subsequent to the pre-clinical work, a Phase
1 clinical study to explore toxicity will be initiated. Subject to success in
the Phase 1 clinical study, a Phase 2a study will commence. Subsequently, the
intention is to out-license the further research to a third party, such as a
major pharmaceutical company.
Our Strategy
Our goal is to create a leading biotechnology company that
discovers, develops and commercializes novel cancer drugs. Key elements of our
strategy are to:
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Focus on oncology
. Despite recent advances in the treatment of
cancer, there continue to be areas of significant unmet medical need. New
approaches to cancer treatment such as targeted therapies provide companies
such as ours an opportunity to advance our pipeline through preclinical and
clinical development. Furthermore, we consider drug development for the cancer
markets attractive because relatively small clinical trials of short duration
can provide meaningful data on patient outcomes.
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Advance development candidates and commercialize product candidates
.
Our goal is to progress our product candidates through preclinical and
clinical development, and ultimately to commercialization, while utilizing
strategic partnering as appropriate.
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Access capabilities and generate revenue through strategic
partnering
. Revenue generation from strategic partnering will be important
to us in the near term by providing funds for reinvestment in internal drug
discovery and development. Our business development activities will involve
strategic partnering of certain of our oncology programs. Oncology
partnerships will be sought with organizations that provide complementary
capabilities to allow rapid progression of our product candidates to the
market.
Our Business Plan
Our business plan includes the following:
1.
|
further expand search, evaluation and acquisition
activity to identify targets;
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|
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2.
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expand our pipeline infrastructure, including
establishing contractual relationships with universities;
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3.
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commercialize the targets/research projects and
proprietary intellectual property belonging to us;
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4.
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expand our organization, including our Strategic Advisory
Board; and
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|
5.
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in-license and acquire new
targets.
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International Collaboration
We collaborate and plan to expand our collaboration efforts
with universities, scientists, biotechnology companies and CROs from around the
world, including in the UK, Germany, India, Spain, France, and Scandinavia.
We intend to sign up five SAB members drawn from a pool of the
leading scientists and cancer specialists from around the globe. We intend to
sign up CRO agreements with a Master CRO to advise on the outsourcing to CROs.
We intend to outsource part of the pre-clinical work to two to four European
universities, possibly in the Scotland, England, Spain and Denmark. We intend to
employ CROs for the Phase one and Phase two studies from countries including,
but not limited to, India, Germany, Switzerland, Denmark, France and Spain. We
intend to explore in-licensing and target acquisitions opportunities from
universities, hospitals, and small biotechnology companies in countries in the
U.K., Germany, Scandinavia, and Spain.
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Prostate Cancer
Prostate cancer is the most common type of cancer found in
American men, other than skin cancer. The American Cancer Society estimates that
there are about 200,000 new cases of prostate cancer in the United States each
year, and about 30,000 men will die of this disease.
Cancer occurs when cells in the body grow out of control.
Prostate cancer is a group of abnormal cells in the prostate. Prostate cancer
can be aggressive, which means it can grow quickly and spread to other parts of
the body. When cancer spreads, doctors say the cancer has metastasized. Or it
may be slow growing and stay in the prostate, causing few if any problems. Three
out of four cases of prostate cancer are of the slow-growing type that is
relatively harmless.
Prostate cancer is quite rare in men under 50. Nearly 2 out of
3 cases (63%) are in men aged 70 and over. Age is the most significant risk
factor of all for prostate cancer. The older you are, the greater the risk.
There are some studies, based on post mortem findings, estimating that all men
would have prostate cancer if they lived to over a hundred.
The American Cancer Society estimates that there are about
200,000 new cases of prostate cancer in the United States each year. In men in
the United States, prostate cancer is the most common cancer and the second
leading cause of cancer deaths. Prostate cancer strikes about one out of every
11 white men, and one out of every nine African-American men. About 180,000 new
cases of prostate cancer are diagnosed each year in the United States. Because
the majority of prostate cancers are small, are confined to the prostate and do
not cause symptoms, an additional nine million American men may have prostate
cancer without knowing it.
Breast Cancer
Breast cancer is a cancer of the glandular breast tissue. The
cancer forms in tissues of the breast, usually the ducts (tubes that carry milk
to the nipple) and lobules (glands that make milk).
Worldwide, breast cancer is the fifth most common cause of
cancer death (after lung cancer, stomach cancer, liver cancer, and colon
cancer). In 2005, breast cancer caused 502,000 deaths (7% of cancer deaths;
almost 1% of all deaths) worldwide. Among women worldwide, breast cancer is the
most common cancer and the most common cause of cancer death. More than 2.8
million women are living with breast cancer in America, one million of whom have
yet to be diagnosed.
In the United States, breast cancer is the third most common
cause of cancer death (after lung cancer and colon cancer).
In 2007, breast cancer is expected to cause 40,910 deaths (7%
of cancer deaths; almost 2% of all deaths) in the U.S. Among women in the U.S.,
breast cancer is the most common cancer and the second most common cause of
cancer death (after lung cancer). Women in the U.S. have a one in eight lifetime
chance of developing invasive breast cancer and a one in 33 chance of breast
cancer causing their death.
Because the breast is composed of identical tissues in males
and females, breast cancer also occurs in males, though it is less common.
However, though breast cancer in men is rare, the incidence in males has
increased 1 percent a year between 1975 and 2004. The cause is not known.
According to the report, Breast Cancer Facts & Figures
2007-2008 (published every two years since 1996) aside from skin cancer, breast
cancer is the most frequently diagnosed cancer among U.S. women, accounting for
more than one in four malignancies detected in women.
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Our Products
Our business model concentrates on recent discoveries
supporting that most tumors are derived from a single cancer-initiating cell
having stem cell properties, a cancer stem cell (CSC). The cancer stem cells are
not simply the malignant counterparts of normal stem cells. Instead, they arise
from powerful mother cells that in certain environments create and accumulate
mutations and epigenetic changes in genes that otherwise regulate normal cell
growth and differentiation. Once the genes of such cancerous stem cells have
been changed, they play a crucial role in tumor initiation and progression.
Unfortunately, cancer initiating cells have the capacity to
renew themselves and give rise to a copy of the stem cell as well as to a new
aggressive mother cell that generates the various cancer cells forming the bulk
of the pathological process.
So far, cancer stem cells have been described as originators of
malignant diseases as diverse as leukemia, breast, brain, bone, lung, melanoma,
gastrointestinal, and prostate cancer. However, specific characteristics
enabling scientists to separate malignant stem cells from healthy are at present
largely unknown.
We plan to concentrate on identification of cell specific
characteristics making it possible to identify prostate cancer and early stage
lesions of breast tumors. Both prostate and breast tumors come in various forms
with markedly different patterns of protein expression and hence functionality.
Therefore, we plan to focus on establishing approaches that will enable a more
comprehensive classification of malignant tumors for patient stratification. We
believe this will provide for the development of tailor-made personal
treatment strategies aiming at eradicating the cancer.
When examining the gene expression profiles in tissue biopsies
from lumps of cancer tumors it is like screening a mixed bag of cells. Both
healthy cells making the majority of the biopsied cell population, but also
malignant cells are taken out for further scrutiny. The problem is that the
healthy tissue overshadows rare cell types and therefore makes it difficult to
focus on and understand the characteristics of the newly formed malignant
cells.
This limitation is particularly troublesome in the case of
breast cancer given the increasing amount of data suggesting that essentially
all breast tumors derive from a single cancer-initiating cell with stem cell
properties. In contrast to normal stem cells which produce healthy new cells of
the breast, there are only very few tumor stem cells. However, malignant stem
cells appear to be able to divide repeatedly and uncontrolled thereby giving
rise to wealth of novel tumors with variable characteristics.
Modern molecular biological tools have enabled cancer
scientists to profile individual cells by their pattern of protein expression.
Had it not been for such tools, the cancer stem cell would have remained the
needle in the haystack. However, it has now become possible not only to find the
cancer stem cell but also to conduct a full fingerprinting profile which enables
development of cell specific cytotoxic treatments.
The right treatment can, for instance, help women keep their
breasts. Our new stem cell techniques make it possible to identify the original
healthy stem cells and then develop, inject and nurture these benign stem cells
to overcome and replace the malignant cancer cells and thereby inhibit their
growth. Eventually, we believe the healthy stem cells will overcome the sick
cancer cells and leave the patient cured.
We believe this type of treatment is superior to existing
cancer therapies as it leaves healthy tissue intact whilst all malignant cells
are eradicated and surgery will no longer be necessary so that women can keep
their breasts and men can survive prostate cancer.
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Product Descriptions
Prostaganin novel peptide for prostate cancer treatment
The disease prostate carcinoma (prostate cancer) is considered
the most common nonskin cancer in America. It accounts for 30% of all the major
cancers in men, more than twice the next most common cancer. Prostate carcinoma
is also the cancer with the largest expected increase in the next decade. Hence
the annual incidence is expected to rise to 300,000 cases and the number of
deaths will reach 50,000 by 2015, according to the Prostate Cancer
Foundation.
Current treatment approaches outmoded and
unsatisfactory
The approaches used currently to combat prostate carcinoma are
surgery, irradiation, or chemotherapic. Chemotherapeutic drugs damage cancer
cells by a variety of mechanisms such as cleavage of the DNA, severe disruption
of the DNA structure and creation of free radicals, eventually causing cell
death. However, prostate carcinoma, in contrast to several other cancers, does
not respond well to single or multiple drug regimens, especially in the case of
androgen-independent cancer.
Conventional treatments damages your body
The number of target specific therapeutic drugs against cancer
is limited. This is mainly due to the complexity of the transformation process,
which differs greatly between difference cancer types. When we cannot target the
cancer specifically, we have until now been forced to resort to conventional
treatments, e.g., surgery, radiation and chemotherapy, as in the case of
prostate cancer. The problem is even more acute once metastases form. At this
stage chemotherapy is currently the preferred solution.
Normal reaction in the cells reduces the effect of
chemotherapy
Unfortunately, most chemotherapeutic agents also affect normal
cells and consequently cause severe side effects. In addition, these compounds
need to penetrate the target cell to exert their function. However, to a certain
degree, the compounds are stopped by multi-drug resistance proteins (MDR) which
is a normal reaction taking place in the cells. This is why there is an urgent
need to develop a new class of anticancer drugs which can target cancer cells
and overcome MDR.
Need for new drugs with new modes of action
This has stimulated the search for new drugs with new modes of
action and a potential to overcome the inherent resistance. Examples include the
development of polypeptides that prevent cell death, or alternatively, peptides
that deliberately destroy cancer cells. Indeed, cell destruction peptides have
been shown to act against different types of cancer cells. These peptides have a
central role in the innate immunity of all organisms, including insects,
amphibians, and mammals. The peptides preferentially bind and disrupt certain
negatively charged components of the cancer cell membrane. However, it is not
clear why some of the peptides bind better and kill cancer cells instead of
normal cells.
This invention relates to our novel prostate cancer peptide
called Prostaganin. Prostaganin is a 21-amino compound which is highly active
toward both androgen-dependent and androgen-independent human prostate cancer
cells. Hence, Prostaganin can specifically target prostate cancer cells and
accordingly, Prostaganin has the potential to cure both primary and methastatic
tumors.
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Tetanolic acid a novel lipid for breast cancer treatment
New approach called membrane-lipid therapy
Although most drugs bind to proteins and regulate their
activity, some drugs act through a new therapeutic approach called
membrane-lipid therapy. They bind to lipids and thereby modulate the structure
of membranes. Most cellular functions are highly dependent on the lipid
environment because they are controlled by proteins in or around membranes. The
wide variety of cell and organelle membranes and the existence of special lipid
regions and domains support the possibility of designing specific lipid
therapies.
Lipid therapy a potential treatment of a wide range of
diseases
Indeed, recent evidence suggests that lipid therapy might have
potential for the treatment of cancer, cardiovascular pathologies,
neurodegenerative processes, obesity, metabolic disorders, inflammation, and
infectious and autoimmune diseases.
Membrane-targeted anticancer drug disturbs cancerous activity
The development of new membrane-targeted anticancer drugs is
based on the knowledge that: (i) the anthracyclines (chemotherapy drug) exert
their cell-killing activity solely through interaction with the plasma membrane;
and (ii) anthracyclines modify the signaling in cancer cells by regulating
membrane structure.
Similarly, the antitumoral drugs hexamethylene bisacetamide and
minerval also regulate membrane-phase structure and PKC activity in the cells.
Interestingly, a higher oleic acid (i.e. olive oil) intake has been associated
with a reduced risk of cancer in humans. Lipid analogs of conventional
antitumoral drugs have recently been developed. One example is NEO6002, a less
toxic anticancer agent with ability to bind to membranes and overcome resistance
to the anticancer agent citarabine in cancer cells.
Lipids can eliminate anticancer drug
resistance
In fact, the use of lipids as targets to overcome anticancer
drug resistance has been highlighted recently. Moreover, novel lipid derivatives
of drugs that were developed initially for other purposes are currently being
investigated for their potential use as antitumoral agents.
This invention relates to a novel lipid designated Tetanolic
acid which induces the start of cell death and stops the cell cycle progression
in breast tumor cells. Thus, Tetanolic acid shows the potential for curing
breast cancer by stopping cell growth at a very early time point after detection
of cancerous breast cells.
Intellectual Property
Our prostate cancer target, Prostaganin, is unique because it
is a novel peptide molecule that both targets very early stage human prostate
cancers and also advanced prostate cancers. We believe it will be more
efficacious than what is currently in the market because it is highly selective
molecule which only targets prostate tumour cells and does not affect non-tumour
cells thereby minimizing adverse side effects.
We believe our breast cancer target, Tetanolic, is unique
because it is based on naturally occurring plant lipids. The first generation
compounds were found to be efficacious to combat brain tumors and lung cancers,
however, Tetanolic acid is a novel improved lipid which has been engineered to
selectively target breast cancers. We believe it will be more efficacious than
what is currently in the market because it not
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only normalizes breast microtubule arrangement, but also binds
to receptors on the tumor cell surface and stops the tumor cells from growing
and dividing.
We seek to protect our novel compounds, drug discovery programs
and proprietary technologies by filing appropriate patent applications. We have
filed patent applications for prostaganin and tetanolic in the United Kingdom
and intend to apply for U.S. patents for these compounds. We intend to continue
to file patent applications to protect our intellectual property.
There can be no assurance that any of our patent applications
will issue in any jurisdiction. Moreover, we cannot predict the breadth of
claims that may be allowed or the actual enforceable scope of our patents. In
the United States, we may lose our patent rights if we were not the first to
invent the subject matter covered by each of our issued patents or pending
patent applications. We cannot be certain that our patents will be found valid
and enforceable, or that we will not be found to infringe issued patent claims
of any third party or that third parties will be found to infringe any of our
issued patent claims.
Although we have taken steps to protect our trade secrets and
unpatented know-how, including entering into confidentiality agreements with
third parties, and confidential information and inventions agreements with
officers, consultants and advisors, third parties may still obtain this
information or we may be unable to protect our rights. Enforcing a claim that a
third party illegally obtained and is using our trade secrets or unpatented
know-how is expensive and time consuming, and the outcome is unpredictable. In
addition, courts outside the United States may be less willing to protect trade
secret information. Moreover, our competitors may independently develop
equivalent knowledge, methods and know-how, and we would not be able to prevent
their use.
Numerous U.S. and foreign issued patents and pending patent
applications, which are owned by third parties, exist in the fields in which we
and our collaborators are developing products. Because patent applications can
take many years to issue, there may be currently pending applications, unknown
to us, which may later result in issued patents that our product candidates or
proprietary technologies may infringe.
We may be exposed to, or threatened with, future litigation by
third parties having patent or other intellectual property rights alleging that
our product candidates and/or proprietary technologies infringe their
intellectual property rights. If one of these patents was found to cover our
product candidates, proprietary technologies or their uses, we or our
collaborators could be required to pay damages and could be restricted from
commercializing our product candidates or using our proprietary technologies
unless we or they obtain a license to the patent. A license may not be available
to us or our collaborators on acceptable terms, if at all. In addition, during
litigation, the patent holder could obtain a preliminary injunction or other
equitable right, which could prohibit us from making, using or selling our
products, technologies or methods.
There is a substantial amount of litigation involving patent
and other intellectual property rights in the biotechnology and
biopharmaceutical industries generally. If a third party claims that we or our
collaborators infringe its intellectual property rights, we may face a number of
issues, including but not limited to:
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infringement and other intellectual property claims which, with or without
merit, may be expensive and time-consuming to litigate and may divert our
managements attention from our core business;
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substantial damages for infringement, including treble damages and
attorneys fees, which we may have to pay if a court decides that the product
or proprietary technology at issue infringes on or violates the third partys
rights;
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a court prohibiting us from selling or licensing the product or using the
proprietary technology unless the third party licenses its technology to us,
which it is not required to do;
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if a license is available from the third party, we may have to pay
substantial royalties, fees and/or grant cross licenses to our technology; and
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redesigning our products or processes so they do not infringe, which may
not be possible or may require substantial funds and time.
We have not conducted an extensive search of patents issued to
third parties, and no assurance can be given that such patents do not exist,
have not been filed, or could not be filed or issued, which contain claims
covering our product candidates, technology or methods. Because of the number of
patents issued and patent applications filed in our technical areas or fields,
we believe there is a significant risk that third parties may allege they have
patent rights encompassing our product candidates, technology or methods.
Sales and Marketing
We currently do not conduct sales and marketing activities, but
plan to develop such capabilities in the future. If we do advance any of our
product candidates into and through clinical development, we will need to build
a sales and marketing infrastructure. We may also pursue strategic
collaborations, as appropriate, to commercialize our product candidates on a
world-wide basis.
Competition
We operate in highly competitive segments of the biotechnology
and biopharmaceutical markets. We face competition from many different sources,
including commercial pharmaceutical and biotechnology enterprises, academic
institutions, government agencies, and private and public research institutions.
There is also intense competition for fragment-based lead discovery
collaborations. Many of our competitors have significantly greater financial,
product development, manufacturing and marketing resources than us. Large
pharmaceutical companies have extensive experience in clinical testing and
obtaining regulatory approval for drugs. These companies also have significantly
greater research capabilities than us. In addition, many universities and
private and public research institutes are active in cancer research, some in
direct competition with us. We also compete with these organizations to recruit
scientists and clinical development personnel. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies.
Each cancer indication for which we are developing products has
a number of established therapies with which our candidates will compete. Most
major pharmaceutical companies and many biotechnology companies are aggressively
pursuing new cancer development programs, including both therapies with
traditional, as well as novel, mechanisms of action.
We are aware of competitive products and technologies in each
of the markets we target. The competitive products include approved and marketed
products as well as products in development.
In each of our development programs addressing indications for
which there are therapies available, we intend to complete clinical trials
designed to evaluate the potential advantages of our drug candidates as compared
to or in conjunction with the current standard of care. Key differentiating
elements affecting the success of all of our drug candidates are likely to be
their efficacy, safety and side-effect profile compared to commonly used
therapies.
- 12 -
Government Regulation and Product Approvals
The clinical development, manufacturing and future marketing of
our products are subject to regulation by various authorities in the United
States, the E.U., and other countries. The Federal Food, Drug, and Cosmetic Act,
or FD&C Act, and the Public Health Service Act in the United States, and
numerous directives, regulations, local laws, and guidelines in the E.U. govern
the testing, manufacture, safety, efficacy, labeling, storage, record keeping,
approval, advertising and promotion of pharmaceutical products. Product
development and approval within these regulatory frameworks takes a number of
years, and involves the expenditure of substantial resources.
Regulatory approval to conduct clinical trials will be required
in any territories in which we, or our licensors, seek to test our development
products. Prior to human testing, such approval requires evaluation of product
quality as well as animal data relating to safety and, where relevant, efficacy.
In general, new chemical entities are tested in animals to determine whether the
product is reasonably safe for initial human testing. Clinical trials for new
products are typically conducted in three sequential phases that may overlap.
Within oncology, Phase I trials typically involve the initial introduction of
the pharmaceutical into patients with advanced malignancy and the emphasis is on
testing for safety, dosage tolerance, metabolism, distribution, excretion and
clinical pharmacology. Phase II trials involve the evaluation of effectiveness
of the drug for a particular indication in patients with the disease under
study, and to determine the common short-term side effects and risks associated
with the drug. Phase II trials are typically closely monitored and conducted in
a relatively small number of patients, usually involving no more than fifty to
one hundred subjects. Phase III trials are generally expanded, well-controlled
clinical trials. They are performed after preliminary evidence suggesting
effectiveness of the drug has been obtained, and are intended to gather the
additional information about safety and effectiveness needed to evaluate the
overall risk-benefit relationship of the drug and to provide an adequate basis
for product labeling.
In the United States an Investigational New Drug application,
or IND, must be submitted to the FDA prior to the initiation of human studies.
Absent an objection from the FDA, the application will become effective 30 days
following receipt by the FDA. Prior regulatory approval to initiate human
studies is also required in member states of the E.U. Additional requirements
designed to protect the rights of participating patients also exist. Approval by
an appropriately constituted Institutional Review Boards (IRB) in the United
States or an equivalent Ethics Committee in other territories (EC) is also
required prior to the commencement of any clinical trial. The ongoing conduct of
the study is monitored on a periodic basis by the sponsor, institutional
committees, as well as regulatory authorities. The submission of relevant safety
data on both an episodic and periodic basis to such parties is required, as well
as well-defined processes to support this activity. Authorities could demand
discontinuation of studies at any time if significant safety issues arise. In
all cases, it is our responsibility to ensure that we conduct our business in
accordance with the regulations of each relevant territory.
In order to gain marketing approval, we must submit a dossier
to the relevant authority for review, which is known in the United States as a
new drug application (NDA) and in the E.U. as a marketing authorization
application (MAA). The format of a marketing application has recently been
standardized and includes information specified by each authority, and requires
information on the quality of the chemistry, manufacturing and pharmaceutical
aspects of the product, as well as non-clinical and clinical data. Failure to
adequately demonstrate the quality, safety and efficacy of a therapeutic drug
under development would delay or prevent regulatory approval of the product.
There can be no assurance that if clinical trials are completed, either we or
our collaborative partners will submit applications for required authorizations
to manufacture or market potential products, including a marketing authorization
application or an NDA, or that any such application will be reviewed and
approved by appropriate regulatory authorities in a timely manner, if at all.
- 13 -
In general, the competent regulatory authority may approve a
product if the data is considered to be of a high quality and supportive of the
indication requested. Quality of data is usually determined through regulatory
audits of the various components of the dossier, and may include site visits to
clinical trial sites and manufacturing facilities. In some circumstances,
additional data or clinical trials may be requested during the review and may
delay marketing approval and involve unbudgeted costs. Regulatory authorities
may find data to be of an unacceptable quality or not supportive of the
indication sought; in these circumstances, regulatory approval to market
products may be denied or deferred.
As a condition of marketing approval, competent regulatory
authorities also require post-marketing surveillance to monitor adverse effects,
and may also request other additional studies as deemed appropriate. After
approval for the initial indication, further clinical studies are usually
necessary to gain approval for additional indications. The terms of any
approval, including labeling content, may be more restrictive than expected and
could affect product marketability.
The FDA has implemented special programs to facilitate the
development and to expedite the review of drugs intended to treat serious and
life-threatening conditions so that this type of product can be approved and
reach the market quickly. A drug that demonstrates a meaningful therapeutic
advantage over existing treatments or shows the potential to address an unmet
medical need in a serious or life-threatening condition may be considered for
expedited approval. In some cases, where approval is granted on the basis of a
surrogate measure of benefit, further clinical trials (as post-approval
commitments) are generally required to further define the safety and efficacy of
the product. If such clinical trials fail to confirm the early benefits seen
during the accelerated approval process, the FDA may withdraw approval. A
similar set of mechanisms exist within the E.U.
The United States and the E.U. may grant orphan drug
designation to drugs intended to treat a rare disease or condition, which, in
the United States, is generally a disease or condition that affects fewer than
200,000 individuals nationwide. In the E.U., orphan drug designation can be
granted if:
-
The disease affects no more than 50 in 100,000 persons in the E.U.;
-
The drug is intended for a life-threatening, seriously debilitating, or
serious and chronic condition;
-
The medical plausibility of the proposed orphan indication;
-
Without incentives it is unlikely that the drug would generate sufficient
return to justify the necessary investment; and
-
No satisfactory method of treatment for the condition exists or, if it
does, the new drug will provide a significant benefit to those affected by the
condition.
The designation of an orphan drug status provides the company
with a limited period of market exclusivity for the indication of interest
(seven years in the United States, and ten years in the E.U.). Orphan drug
designation does not prevent competitors from developing or marketing different
drugs for an orphan indication or the same drug for a different indication.
Throughout the period of active marketing of any medicinal
product, the company retains the responsibility to periodically and
systematically review the safety profile of the marketed product. This requires
an active pharmacovigilance program, and the company is required to report
certain adverse events, safety trends, relevant literature reports and similar
data to the competent regulatory authority. Similarly, the advertising and
promotion of pharmaceutical products is also closely regulated and monitored by
regulatory agencies. Moreover, quality control and manufacturing procedures must
- 14 -
continue to conform to current Good Manufacturing Practices
(cGMPs) after approval, and the FDA periodically inspects manufacturing
facilities to assess cGMP compliance. Accordingly, manufacturers must continue
to expend resources on production, quality control and quality assurance to
maintain compliance with GMP and other regulatory requirements.
Failure to comply with applicable regulatory requirements after
obtaining regulatory approval can, among other things, result in suspension of
regulatory approval, and possible civil and criminal sanctions. Renewals of the
license in Europe may require additional data, which may result in an approval
being withdrawn. In the United States and the E.U., regulators have the
authority to revoke, suspend or withdraw approvals of previously approved
products, to prevent companies and individuals from participating in the
drug-approval process, to request recalls, to seize violative products, to
obtain injunctions to close manufacturing plants not operating in conformity
with regulatory requirements and to stop shipments of violative products. In
addition, changes in regulation could harm our financial condition and results
of operation.
Our Technology Business
Corporate Organization of Infrablue UK
Incorporation
InfraBlue UK was incorporated in the United Kingdom on February
18, 2004. The founding shareholders of InfraBlue UK were InfraBlue Inc.
(formerly PublicLock Inc.), Outlander Management Ltd. and Mitchell Johnson, the
managing director of InfraBlue UK and our director and officer. InfraBlue Inc.
is a private corporation that is now one of our principal shareholders.
Outlander Management is a private corporation that is now one of our
shareholders.
The Original InfraBlue UK Agency Agreement
The IRMA device and the InfraBlue Technology were originally
developed by Flander Oy in Finland. The intellectual property rights in the
InfraBlue Technology and the IRMA device were purchased by PublicLock in September
2003. InfraBlue Inc. granted licenses to four entities on October 6, 2003, with
each entity acquiring rights to exploit the InfraBlue Technology and commercialize
the IRMA device in a different territory. On October 13, 2003, InfraBlue Inc.
sold its rights in the InfraBlue Technology and the IRMA device to the Keydata
Partnership, subject to the four licenses.
InfraBlue UK entered into an agency agreement on March 30, 2004
with the four licensees. The agency agreement provided InfraBlue UK with a
worldwide sublicense to exploit the IRMA device and to use the intellectual
property rights to the InfraBlue Technology, including the software that is
incorporated into the IRMA devices. InfraBlue UK agreed to use its best efforts
to commercially exploit the InfraBlue Technology, in consideration of a payment
to be equal to 25% of the gross income, if any, derived from the exploitation of
the InfraBlue Technology rights (including the sale of IRMA devices). InfraBlue
UK was also required to generate from the exploitation of this technology at
least £448,000 ($819,078, based on the foreign exchange rate on March 30, 2004
of $1.8283:£1.0000) of gross income per calendar quarter over the three year
term of the agreement. InfraBlue UK was not able to fulfill this requirement.
The four licenses and the agency agreement were terminated on
November 30, 2005, upon our acquisition of the InfraBlue Technology, as
described below.
- 15 -
Acquisition of the InfraBlue Technology
InfraBlue Inc. entered into an agreement with the Keydata
Partnership dated November 1, 2005 to purchase from Keydata Partnership a
wholly-owned subsidiary that then held the intellectual rights in the InfraBlue
Technology and the IRMA device. We purchased these intellectual property rights
from InfraBlue Inc. on November 30, 2005 pursuant to an intellectual property
acquisition agreement between us and InfraBlue Inc. dated November 1, 2005. We
issued 10,000,000 shares of our common stock to InfraBlue Inc. in consideration
of these assets. InfraBlue Inc. in turn paid as consideration 10,000,000 shares
of our common stock to the Keydata Partnership in connection with its
acquisition of the Keydata Partnership subsidiary with the rights to the
InfraBlue Technology and the IRMA device.
Initial Financing of InfraBlue UK
InfraBlue UKs initial corporate activities were funded by
InfraBlue Inc. InfraBlue UK entered into a loan agreement dated October 4, 2004
with InfraBlue Inc. whereby InfraBlue Inc. agreed to extend a secured loan
facility to InfraBlue UK in the maximum amount of £150,000 ($267,405, based on
the foreign exchange rate on October 4, 2004 of $1.7827:£1.0000) . The purpose
of the loan facility was to provide InfraBlue UK with funds with which to pursue
the commercialization of the IRMA device and the InfraBlue Technology, and to
help facilitate InfraBlue UKs obligations to the licensees under the agency
agreement.
As at April 28, 2005, InfraBlue UKs outstanding debt to
InfraBlue Inc. under the secured loan facility was £83,450 ($159,065, based on a
foreign exchange rate on April 28, 2005 of $1.9061:£1.0000) . InfraBlue UK and
InfraBlue Inc. entered into a debt settlement agreement on April 28, 2005
whereby the outstanding debt was settled by the issuance to InfraBlue Inc. of
1,075,000 Ordinary A shares in the capital of InfraBlue UK at a deemed value of
£0.0776 per share. InfraBlue Inc. subsequently exchanged these shares for shares
of our common stock upon completion of the share exchange agreement on August
31, 2005. As a result, InfraBlue Inc. is now one of our principal shareholders.
Technology Overview
We are the owner of certain proprietary technology that we
refer to as the InfraBlue Technology. The InfraBlue Technology is comprised of a
suite of software programs and a computer peripheral device known as the IRMA
device. Utilizing our InfraBlue software, the IRMA device provides a simple,
fast, flexible and secure tool for the delivery of high-quality color
presentations stored on mobile smartphones and PDAs. Development of our IRMA
devices has been completed and we have achieved sales of 183 IRMA devices to
date. We consider this sales number to be a small number of initial sales in
relation to the number of sales that we anticipate needing to achieve in order
to be profitable. Our key business objective is to increase sales of our IRMA
devices through our planned marketing efforts.
Our IRMA devices are small hand-held digital presentation
devices that enable users to make Microsoft PowerPoint presentations wirelessly,
direct from the users PDA or mobile smartphone without the use of a laptop or
desk top computer. Each IRMA device is sold with proprietary software that must
be installed on the users laptop or personal computer running Microsoft
Windows. This proprietary software enables the conversion and compression of
Microsoft PowerPoint slides to Windows graphical formats and the transfer of the
compressed files to the users handheld PDA or mobile smartphone. The handheld
device then connects to the IRMA device wirelessly using the Bluetooth protocol
or infrared technology, depending on the model of the IRMA device. The IRMA
device is linked to a data projector or a computer display by a regular VGA
(video graphics array) cable. The handheld device can then be used to run the
presentation through the IRMA device, without the aid of a laptop computer. The
IRMA device can be located up to thirty feet away from the handheld device. The
Bluetooth protocol describes the set of wireless communication rules by which
all Bluetooth devices must abide in order to establish a link
- 16 -
and communicate with one another. The Bluetooth specification
is maintained by the Bluetooth Special Interest Group (SIG).
The primary target market for our IRMA devices is the mobile
professional who could benefit from highly portable presentation materials,
without the need to carry a laptop computer.
Since the incorporation of InfraBlue UK on February 18, 2004,
we have undertaken the following activities in furtherance of our business plan
to commercialize the IRMA device and our InfraBlue Technology:
(a)
|
We have expanded the number of operating software systems
on which our products function from two operating systems to seven
operating systems, and our IRMA devices are now compatible with Pocket PC
2002, Pocket PC 2003, Palm 4.x, Palm 5.x, Nokia Series 60, and Sony
Ericsson P series devices.
|
|
|
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(b)
|
We have developed manufacturing relationships, including
selecting the most cost effective components and negotiating volume
discounts, that have been necessary to enable us to commence the
manufacture of our IRMA devices.
|
|
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(c)
|
We have started marketing activity with the objective of
increasing sales of our IRMA devices and InfraBlue Technology. Activities
completed to date have included:
|
|
|
|
|
(i)
|
constructing our website at
www.InfraBlue.co.uk
providing potential customers
with a contact point with the company and a detailed description about the
product offering linking the customer to our sales channel;
|
|
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(ii)
|
meeting with prospective clients, manufacturers,
distributors and resellers in order to raise awareness of our IRMA devices
and demonstrate their effectiveness, with the objective of securing a
distribution partner who would be able to distribute our products
worldwide; and
|
|
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|
|
(iii)
|
carrying out marketing activity including press releases,
interviews, trade shows, roadshows and demonstrations. We have received
coverage in a number of industry- specific trade magazines (including
editorials and product reviews), been included in Nokia software links,
and have participated in a Hewlett Packard mobility roadshow amongst
others.
|
We have achieved only minimal revenues to date. Accordingly, we
are considered a development stage company. To date, we have only sold a minimal
number of units of our InfraBlue technology, our revenues from these sales are
substantially less than our operating costs and we have incurred significant
operating losses since inception. Accordingly, our board of directors is
currently evaluating the sale or abandonment of our InfraBlue technology.
Employees
We currently have no employees other than our executive
officers.
Subsidiaries
We currently have one subsidiary, InfraBlue Ltd.
- 17 -
Description of Property
Our executive office is located at 46 Aldgate High Street,
EC3N1AL, London, United Kingdom.
Risk Factors
You should carefully consider the following information
about these risks, together with the other information appearing elsewhere in
this report. If any of the following risks actually occur, our business,
financial condition, results of operations and future growth prospects would
likely be materially and adversely affected. In these circumstances, the market
price of our common stock could decline, and you may lose all or part of your
investment in our common stock.
Risks Related to our Biotechnology Business
We will need substantial additional funding and may be
unable to raise capital when needed, which would force us to delay, reduce or
eliminate our research and development programs or commercialization efforts.
We believe that our existing cash and working capital will be
sufficient to meet projected operating requirements for two months. Consistent
with our existing business development strategy, we anticipate establishing new
collaborations and commercial agreements. Any proceeds received in connection
with such new transactions would provide additional operating capital. However,
if we do not generate additional revenue from collaborations, commercial
agreements and grants at the levels we project, we may require additional
funding. Because we do not anticipate that we will generate significant
continuing revenues for several years, if at all, we will need to raise
substantial additional capital to finance our operations in the future. Our
additional funding requirements will depend on, and could increase significantly
as a result of, many factors, including the:
-
terms and timing of any collaborative, licensing and other arrangements
that we may establish;
-
rate of progress and cost of our preclinical studies and clinical trials,
if any, and other research and development activities;
-
scope, prioritization and number of clinical development and research
programs we pursue;
-
costs and timing of preparing regulatory submissions and obtaining
regulatory approval;
-
costs of establishing or contracting for sales and marketing capabilities;
-
costs of manufacturing;
-
extent to which we acquire or in-license new products, technologies or
businesses;
-
effect of competing technological and market developments; and
-
costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights.
Until we can generate significant continuing revenues, if ever,
we expect to satisfy our future cash needs through public or private equity
offerings, debt financings, strategic transactions, or collaborations,
- 18 -
commercial agreements and grants. We cannot be certain that
additional funding will be available on acceptable terms, or at all. If adequate
funds are not available, we may be required to delay, reduce the scope of or
abandon our business.
Raising additional funds by issuing securities or through
licensing arrangements may cause dilution to existing stockholders, restrict our
operations or require us to relinquish proprietary rights.
We may raise additional funds through public or private equity
offerings, debt financings or licensing arrangements. To the extent that we
raise additional capital by issuing equity securities, our existing stockholders
ownership will be diluted. Any debt financing we enter into may involve covenants
that restrict our operations. These restrictive covenants may include limitations
on additional borrowing, specific restrictions on the use of our assets as well
as prohibitions on our ability to create liens, pay dividends, redeem our stock
or make investments. In addition, if we raise additional funds through licensing
arrangements , it may
be necessary to relinquish potentially valuable rights to our potential products
or proprietary technologies, or grant licenses on terms that are not favorable
to us.
Our drug discovery approach and technologies are unproven
and may not allow us to establish or maintain a clinical development pipeline or
successful collaborations or result in the discovery or development of
commercially viable products.
The technologies on which we rely are unproven and may not
result in the discovery or development of commercially viable products. There
are currently no drugs on the market and no drug candidates in clinical
development that have been discovered or developed using our proprietary
technologies. The process of successfully discovering product candidates is
expensive, time-consuming and unpredictable, and the historical rate of failure
for drug candidates is extremely high. Research programs to identify product
candidates require a substantial amount of our technical, financial and human
resources even if no product candidates are identified. Data from our current
research programs may not support the clinical development of our lead compounds
or other compounds from these programs, and we may not identify any compounds
suitable for recommendation for clinical development. Moreover, there is
presently little or no clinical validation for the targets which are the focus
of the programs in our pipeline and there is no guarantee that we will be able
to successfully advance any compounds we recommend for clinical development from
these programs. If we are unable to identify new product candidates or advance
our lead compounds into clinical development, we may not be able to establish or
maintain a clinical development pipeline or generate product revenue. There is
no guarantee that we will be able to successfully advance any product candidates
in our preclinical programs into clinical trials or successfully develop any
product candidate we advance into clinical trials for commercial sale.
The results of early preclinical studies are not
necessarily predictive of the results of future preclinical studies, and there
is no guarantee that any of our drug candidates in preclinical development will
progress through to clinical development.
Positive results from early preclinical studies on drug
candidates should not be relied upon as evidence that the results of further
preclinical studies will be successful or that the drug candidate will progress
into clinical studies. Drug discovery is inherently unpredictable, and the
historical rate of failure for drug candidates in preclinical testing is
extremely high. Drug candidates that have shown promising results in studies in
rodents can have negative results when evaluated further in higher species. If
negative preclinical results are seen in more than one compound from a
particular chemical series, there may be an increased likelihood that additional
compounds from that series will demonstrate the same or similar negative
results. Companies frequently suffer setbacks in preclinical studies. There is
no guarantee that any of our drug candidates will progress through preclinical
development into clinical development.
- 19 -
Because the results of preclinical studies are not
necessarily predictive of future results, any product candidate we advance into
clinical trials may not have favorable results or receive regulatory approval.
Even if any of our product candidates advance through
pre-clinical development, positive results from preclinical studies should not
be relied upon as evidence that clinical trials will succeed. We will be
required to demonstrate through clinical trials that our product candidates are
safe and effective for use in a diverse population before we can seek regulatory
approvals for their commercial sale. Success in preclinical testing does not
mean that clinical trials will be successful because product candidates in
clinical trials may fail to demonstrate sufficient safety and efficacy despite
having progressed through pre-clinical testing. Companies frequently suffer
significant setbacks in clinical trials, even after earlier clinical trials have
shown promising results. There is typically an extremely high rate of attrition
from the failure of drug candidates proceeding through clinical trials.
If any product candidate fails to demonstrate sufficient safety
and efficacy in any clinical trial we are able to undertake, we would experience
potentially significant delays in, or be required to abandon, development of
that product candidate which may cause our stock price to decline further and
may materially and adversely affect our business.
Delays in the commencement or completion of clinical
testing could result in increased costs to us and delay our ability to generate
significant revenues.
Delays in the commencement or completion of clinical testing
could significantly impact our product development costs. We do not know whether
any clinical trials that we may plan in the future will begin on time or be
completed on schedule, if at all. The commencement of clinical trials can be
delayed for a variety of reasons, including delays in:
-
identifying and selecting a suitable development candidate.
-
obtaining any required approvals from our collaborators;
-
obtaining regulatory approval to commence a clinical trial;
-
reaching agreement on acceptable terms with prospective contract research
organizations and trial sites;
-
manufacturing sufficient quantities of a product candidate;
-
obtaining institutional review board approval to conduct a clinical trial
at a prospective site; and
-
identifying, recruiting and enrolling patients to participate in a clinical
trial.
In addition, once a clinical trial has begun, patient
recruitment and enrollment may be slower than we anticipate. A clinical trial
may be suspended or terminated by us, our collaborators, the FDA or other
regulatory authorities due to a number of factors, including:
-
failure to conduct the clinical trial in accordance with regulatory
requirements or our clinical protocols;
-
inspection of the clinical trial operations or trial site by the FDA or
other regulatory authorities resulting in the imposition of a clinical hold;
- 20 -
If we experience delays in the completion of, or termination
of, any clinical trial of a product candidate, the commercial prospects for
product candidates we may develop will be harmed, and our ability to generate
product revenues from any product candidate we may develop will be delayed. In
addition, many of the factors that cause, or lead to, a delay in the
commencement or completion of clinical trials may also ultimately lead to the
denial of regulatory approval of a product candidate. Even if we are able to
ultimately commercialize product candidates, other therapies for the same
indications may have been introduced to the market during the period we have
been delayed and such therapies may have established a competitive advantage
over our products.
Any product candidates we advance into clinical trials
are subject to extensive regulation, which can be costly and time consuming,
cause unanticipated delays or prevent the receipt of the required approvals to
commercialize our product candidates.
The clinical development, manufacturing, labeling, storage,
record-keeping, advertising, promotion, export, marketing and distribution of
any other product candidates we advance into clinical trials are subject to
extensive regulation by the FDA in the United States and by comparable
governmental authorities in foreign markets. In the United States, neither we
nor our collaborators are permitted to market our product candidates until we or
our collaborators receive approval of an NDA from the FDA. The process of
obtaining NDA approval is expensive, often takes many years, and can vary
substantially based upon the type, complexity and novelty of the products
involved. Approval policies or regulations may change. In addition, as a
company, we have not previously filed an NDA with the FDA. This lack of
experience may impede our ability to obtain FDA approval in a timely manner, if
at all, for our product candidates for which development and commercialization
is our responsibility. Despite the time and expense invested, regulatory
approval is never guaranteed. The FDA or any of the applicable European,
Canadian or other regulatory bodies can delay, limit or deny approval of a
product candidate for many reasons, including:
-
a product candidate may not be safe and effective;
-
regulatory agencies may not find the data from preclinical testing and
clinical trials to be sufficient;
-
regulatory agencies may not approve of our third party manufacturers
processes or facilities; or
-
regulatory agencies may change their approval policies or adopt new
regulations
In addition, while we may seek to take advantage of various
regulatory processes intended to accelerate drug development and approval for
any product candidates that may be selected for clinical development, there is
no guarantee that the FDA will review or accept an NDA under the accelerated
approval regulations, based on our clinical trial design, the results of any
clinical trials we may conduct or other factors.
Also, recent events implicating questions about the safety of
marketed drugs, including those pertaining to the lack of adequate labeling, may
result in increased cautiousness by the FDA in reviewing new drugs based on
safety, efficacy or other regulatory considerations and may result in
significant delays in obtaining regulatory approvals. Any delay in obtaining, or
inability to obtain, applicable regulatory approvals would prevent us from
commercializing our product candidates.
- 21 -
Any product candidate we advance into clinical trials may
cause undesirable side effects that could delay or prevent its regulatory
approval or commercialization.
Undesirable side effects caused by any product candidate we
advance into clinical trials could interrupt, delay or halt clinical trials and
could result in the denial of regulatory approval by the FDA or other regulatory
authorities for any or all targeted indications. This, in turn, could prevent us
from commercializing product candidates we advance into clinical trials and
generating revenues from its sale. In addition, if any product candidate
receives marketing approval and we or others later identify undesirable side
effects caused by the product:
-
regulatory authorities may withdraw their approval of the product;
-
we may be required to change the way the product is administered, conduct
additional clinical trials or change the labeling of the product; or
-
our reputation may suffer.
Any one or a combination of these events could prevent us from
achieving or maintaining market acceptance of the affected product or could
substantially increase the costs and expenses of commercializing the product,
which in turn could delay or prevent us from generating significant revenues
from the sale of the product.
We may rely on third parties to conduct our clinical
trials. If these third parties do not successfully carry out their contractual
duties or meet expected deadlines, we may not be able to obtain regulatory
approval for or commercialize our product candidates.
We intend to rely on third parties, such as contract research
organizations, medical institutions, clinical investigators and contract
laboratories, to conduct all or a portion of any future clinical trials. We may
not be able to control the amount and timing of resources that third parties
devote to any clinical trials we may commence or the quality or timeliness of
the services performed by such third parties. In any future clinical trials, in
the event that we are unable to maintain our relationship with any clinical
trial sites, or elect to terminate the participation of any clinical trial
sites, we may experience the loss of follow-up information on patients enrolled
in such clinical trial unless we are able to transfer the care of those patients
to another qualified clinical trial site. In addition, principal investigators
for our clinical trials may serve as scientific advisors or consultants to us
from time to time and receive cash or equity compensation in connection with
such services. If these relationships and any related compensation result in
perceived or actual conflicts of interest, the integrity of the data generated
at the applicable clinical trial site may be jeopardized. If these third parties
do not successfully carry out their contractual duties or obligations or meet
expected deadlines in connection with any future clinical trials, or if the
quality or accuracy of the clinical data is compromised due to the failure to
adhere to clinical protocols or for other reasons, our clinical trials may be
extended, delayed or terminated, our reputation in the industry and in the
investment community may be significantly damaged and we may not be able to
obtain regulatory approval for or successfully commercialize our product
candidates.
Even if any product candidate we advance into clinical
trials receives regulatory approval, our product candidates may still face
future development and regulatory difficulties.
If any product candidate we advance into clinical trials
receives U.S. regulatory approval, the FDA may still impose significant
restrictions on the indicated uses or marketing of the product candidate or
impose ongoing requirements for potentially costly post-approval studies. In
addition, regulatory agencies subject a product, its manufacturer and the
manufacturers facilities to continual review and periodic inspections. If a
regulatory agency discovers previously unknown problems with a product, such as
- 22 -
adverse events of unanticipated severity or frequency, or
problems with the facility where the product is manufactured, a regulatory
agency may impose restrictions on that product, our collaborators or us,
including requiring withdrawal of the product from the market. Our product
candidates will also be subject to ongoing FDA requirements for the labeling,
packaging, storage, advertising, promotion, record-keeping and submission of
safety and other post-market information on the drug. If our product candidates
fail to comply with applicable regulatory requirements, a regulatory agency
may:
-
issue warning letters;
-
impose civil or criminal penalties;
-
withdraw regulatory approval;
-
suspend any ongoing clinical trials;
-
refuse to approve pending applications or supplements to approved
applications filed by us or our collaborators;
-
impose restrictions on operations, including costly new manufacturing
requirements; or
-
seize or detain products or require a product recall.
Moreover, in order to market any products outside of the United
States, we and our collaborators must establish and comply with numerous and
varying regulatory requirements of other countries regarding safety and
efficacy. Approval procedures vary among countries and can involve additional
product testing and additional administrative review periods. The time required
to obtain approval in other countries might differ from that required to obtain
FDA approval. The regulatory approval process in other countries may include all
of the risks described above regarding FDA approval in the United States.
Regulatory approval in one country does not ensure regulatory approval in
another, but a failure or delay in obtaining regulatory approval in one country
may negatively impact the regulatory process in others. Failure to obtain
regulatory approval in other countries or any delay or setback in obtaining such
approval could have the same adverse effects detailed above regarding FDA
approval in the United States. As described above, such effects include the risk
that our product candidates may not be approved for all indications requested,
which could limit the uses of our product candidates and adversely impact
potential royalties and product sales, and that such approval may be subject to
limitations on the indicated uses for which the product may be marketed or
require costly, post-marketing follow-up studies. If we or our collaborators
fail to comply with applicable domestic or foreign regulatory requirements, we
and our collaborators may be subject to fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.
We may become dependent on our collaborations, and events
involving these collaborations or any future collaborations could prevent us
from developing or commercializing product candidates.
The success of our business strategy and our near and long-term
viability will depend in part on our ability to successfully establish new
strategic collaborations. Since we do not currently possess the resources
necessary to independently develop and commercialize all of the product
candidates that may be discovered through our drug discovery platform, we may
need to enter into additional collaborative agreements to assist in the
development and commercialization of some of these product candidates or in
certain markets for a particular product candidate. Establishing strategic
collaborations is difficult and time-consuming. Potential collaborators may
reject collaborations based upon their assessment of our financial, regulatory
or intellectual property position. And our discussions with potential
collaborators may not lead to the establishment of new collaborations on
acceptable terms. In addition, if as a result of
- 23 -
our financial condition or other factors we enter into a
strategic collaboration while a drug candidate program is in early preclinical
development, we may not generate as much near- or longer-term revenue from such
program as we could have generated if we had the resources to further
independently develop such program.
We may have limited control over the amount and timing of
resources that any future collaborators (including collaborators resulting from
a change of control) devote to our programs or potential products. In some
instances, our collaborators, may have competing internal programs or programs
with other parties, and such collaborators may devote greater resources to their
internal or other programs than to our collaboration and any product candidates
developed under our collaboration. Our collaborators may prioritize other drug
development opportunities that they believe may have a higher likelihood of
obtaining regulatory approval or may potentially generate a greater return on
investment. These collaborators may breach or terminate their agreements with us
or otherwise fail to conduct their collaborative activities successfully and in
a timely manner. Further, our collaborators may not develop products that arise
out of our collaborative arrangements or devote sufficient resources to the
development, manufacture, marketing or sale of these products. Moreover, in the
event of termination of a collaboration agreement, termination negotiations may
result in less favorable terms than we would otherwise choose.
We and our future collaborators may fail to develop or
effectively commercialize products covered by our present and future
collaborations if:
-
we do not achieve our objectives under our collaboration agreements;
-
we or our collaborators are unable to obtain patent protection for the
product candidates or proprietary technologies we discover in our
collaborations;
-
we are unable to manage multiple simultaneous product discovery and
development collaborations;
-
our potential collaborators are less willing to expend their resources on
our programs due to their focus on other programs or as a result of general
market conditions;
-
our collaborators become competitors of ours or enter into agreements with
our competitors;
-
we or our collaborators encounter regulatory hurdles that prevent the
further development or commercialization of our product candidates; or
-
we develop products and processes or enter into additional collaborations
that conflict with the business objectives of our other collaborators.
If we or our collaborators are unable to develop or
commercialize products as a result of the occurrence of any one or a combination
of these events, we will be prevented from developing and commercializing
product candidates.
Conflicts may arise between us and our collaborators that
could delay or prevent the development or commercialization of our product
candidates.
Conflicts may arise between our collaborators and us, such as
conflicts concerning which compounds, if any, to select for pre-clinical or
clinical development, the interpretation of clinical data, the achievement of
milestones, the interpretation of financial provisions or the ownership of
intellectual property
- 24 -
developed during the collaboration. If any conflicts arise with
future collaborators, they may act in their self-interest, which may be adverse
to our best interests. Any such disagreement between us and a collaborator could
result in one or more of the following, each of which could delay or prevent the
development or commercialization of our product candidates, and in turn prevent
us from generating sufficient revenues to achieve or maintain profitability:
-
disagreements regarding the payment of research funding, milestone
payments, royalties or other payments we believe are due to us under our
collaboration agreements or from us under our licensing agreements;
-
uncertainty regarding ownership of intellectual property rights arising
from our collaborative activities, which could prevent us from entering into
additional collaborations;
-
actions taken by a collaborator inside or outside a collaboration which
could negatively impact our rights under or benefits from such collaboration;
-
unwillingness on the part of a collaborator to keep us informed regarding
the progress of its development and commercialization activities or to permit
public disclosure of the results of those activities; or
-
slowing or cessation of a collaborators development or commercialization
efforts with respect to our product candidates.
If our competitors develop drug discovery technologies
that are more advanced than ours, our ability to generate revenue from
collaborations, commercial arrangements or grants may be reduced or eliminated.
The biotechnology and biopharmaceutical industries are
characterized by rapidly advancing technologies, intense competition and a
strong emphasis on proprietary products. We face competition from many different
sources, including commercial pharmaceutical and biotechnology enterprises,
academic institutions, government agencies, and private and public research
institutions. There is also intense competition for fragment-based lead
discovery collaborations. In addition, we understand that many large
pharmaceutical companies are exploring the internal development of
fragment-based drug discovery methods. Additionally, due to the high demand for
treatments for CML and other oncology therapeutic areas, research is intense and
new technologies to enhance the rapid discovery and development of potential
treatments are being sought out and developed by our competitors. If our
competitors develop drug discovery technologies that are more advanced or more
cost efficient or effective than ours, our revenue from collaborations,
commercial arrangements and grants may be substantially reduced or eliminated.
If our competitors develop treatments for diseases that
are approved more quickly, marketed more effectively or demonstrated to be more
effective than our current or future product candidates, our ability to generate
product revenue will be reduced or eliminated.
Most cancer indications for which we are developing products
have a number of established therapies with which our candidates will compete.
Most major pharmaceutical companies and many biotechnology companies are
aggressively pursuing new cancer development programs, including both therapies
with traditional as well as novel mechanisms of action.
Many of our competitors have significantly greater financial,
product development, manufacturing and marketing resources than us. Large
pharmaceutical companies have extensive experience in clinical
- 25 -
testing and obtaining regulatory approval for drugs. These
companies also have significantly greater research capabilities than us. In
addition, many universities and private and public research institutes are
active in cancer research, some in direct competition with us. Smaller or
early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies.
Our competitors may succeed in developing products for the
treatment of diseases in oncology therapeutic areas in which our drug discovery
programs are or will be focused that are more effective, better tolerated or
less costly than any which we may offer or develop. Our competitors may succeed
in obtaining approvals from the FDA and foreign regulatory authorities for their
product candidates sooner than we do for ours. We will also face competition
from these third parties in recruiting and retaining qualified scientific and
management personnel, establishing clinical trial sites and patient registration
for clinical trials, and in acquiring and in-licensing technologies and products
complementary to our programs or advantageous to our business.
We have limited experience in identifying, acquiring or
in-licensing, and integrating third parties products, businesses and
technologies into our current infrastructure. If we determine that future
acquisition, in-licensing or other strategic opportunities are desirable and do
not successfully execute on and integrate such targets, we may incur costs and
disruptions to our business.
An important part of our business strategy is to continue to
develop a broad pipeline of product candidates. These efforts include potential
licensing and acquisition transactions. Although we are not currently a party to
any other agreements or commitments, we may seek to expand our product pipeline
and technologies, at the appropriate time and as resources allow, by acquiring
or in-licensing products, or combining with businesses that we believe are a
strategic fit with our business and complement our existing internal drug
development efforts and product candidates, research programs and technologies.
Future transactions, however, may entail numerous operational and financial
risks including:
-
exposure to unknown liabilities;
-
disruption of our business and diversion of our managements time and
attention to the development of acquired products or technologies;
-
incurrence of substantial debt or dilutive issuances of securities to pay
for acquisitions;
-
dilution to existing stockholders in the event of an acquisition by another
entity;
-
higher than expected acquisition and integration costs;
-
increased amortization expenses;
-
difficulties in and costs of combining the operations and personnel of any
businesses with our operations and personnel;
-
impairment of relationships with key suppliers or customers of any acquired
businesses due to changes in management and ownership; and
-
inability to retain key employees.
Finally, we may devote resources to potential in-licensing
opportunities or strategic transactions that are never completed or fail to
realize the anticipated benefits of such efforts.
- 26 -
We do not have internal manufacturing capabilities, and
if we fail to develop and maintain supply relationships with collaborators or
other third party manufacturers, we may be unable to develop or commercialize
our products.
All of our manufacturing is outsourced to third parties with
oversight by our internal managers. We intend to continue this practice of
outsourcing our manufacturing services to third parties for any future clinical
trials we may conduct and for commercialization of any other product candidate
we advance into clinical trials. Our ability to develop and commercialize
products depends in part on our ability to arrange for collaborators or other
third parties to manufacture our products at a competitive cost, in accordance
with regulatory requirements and in sufficient quantities for clinical testing
and eventual commercialization.
If we are unable to establish sales and marketing
capabilities or enter into agreements with third parties to market and sell any
products we may develop, we may not be able to generate product revenue.
We do not currently have a sales organization for the sales,
marketing and distribution of pharmaceutical products. In order to commercialize
any products, we must build our sales, marketing, distribution, managerial and
other non-technical capabilities or make arrangements with third parties to
perform these services. We plan to seek third party partners for indications and
in territories, such as outside North America, which may require more extensive
sales and marketing capabilities. The establishment and development of our own
sales force to market any products we may develop in North America will be
expensive and time consuming and could delay any product launch, and we cannot
be certain that we would be able to successfully develop this capacity. If we
are unable to establish our sales and marketing capability or any other
non-technical capabilities necessary to commercialize any products we may
develop, we will need to contract with third parties to market and sell any
products we may develop in North America. If we are unable to establish adequate
sales, marketing and distribution capabilities, whether independently or with
third parties, we may not be able to generate product revenue and may not become
profitable.
The commercial success of any product that we may develop
depends upon market acceptance among physicians, patients, health care payors
and the medical community.
Even if any product we may develop obtains regulatory approval,
our products, if any, may not gain market acceptance among physicians, patients,
health care payors and the medical community. The degree of market acceptance of
any of our approved products will depend on a number of factors, including:
-
our ability to provide acceptable evidence of safety and efficacy;
-
relative convenience and ease of administration;
-
the prevalence and severity of any adverse side effects;
-
availability of alternative treatments;
-
pricing and cost effectiveness;
-
effectiveness of our or our collaborators sales and marketing strategies;
and
-
our ability to obtain sufficient third party coverage or reimbursement.
- 27 -
If any of our product candidates is approved, but does not
achieve an adequate level of acceptance by physicians, healthcare payors and
patients, we may not generate sufficient revenue from these products and we may
not become profitable.
We are subject to uncertainty relating to health care
reform measures and reimbursement policies which, if not favorable to our
product candidates, could hinder or prevent our product candidates commercial
success.
The continuing efforts of the government, insurance companies,
managed care organizations and other payors of health care costs to contain or
reduce costs of health care may adversely affect one or more of the
following:
-
our ability to set a price we believe is fair for our products;
-
our ability to generate revenues and achieve profitability;
-
the future revenues and profitability of our potential customers, suppliers
and collaborators; and
-
the availability of capital.
In certain foreign markets, the pricing of prescription drugs
is subject to government control and reimbursement may in some cases be
unavailable. In the United States, given recent federal and state government
initiatives directed at lowering the total cost of health care, Congress and
state legislatures will likely continue to focus on health care reform, the cost
of prescription drugs and the reform of the Medicare and Medicaid systems. For
example, the Medicare Prescription Drug, Improvement and Modernization Act of
2003 provided a new Medicare prescription drug benefit beginning in 2006 and
mandates other reforms. We are not yet able to assess the full impact of this
legislation and it is possible that the new Medicare prescription drug benefit,
which will be managed by private health insurers and other managed care
organizations, will result in decreased reimbursement for prescription drugs,
which may further exacerbate industry-wide pressure to reduce prescription drug
prices. This could harm our ability to market our products and generate
revenues. It is also possible that other proposals having a similar effect will
be adopted.
Our ability to commercialize successfully any product
candidates we advance into clinical trials will depend in part on the extent to
which governmental authorities, private health insurers and other organizations
establish appropriate coverage and reimbursement levels for the cost of our
products and related treatments. Third party payors are increasingly challenging
the prices charged for medical products and services. Also, the trend toward
managed health care in the United States, which could significantly influence
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may
result in lower prices for our product candidates or exclusion of our product
candidates from coverage and reimbursement programs. The cost containment
measures that health care payors and providers are instituting and the effect of
any health care reform could significantly reduce our revenues from the sale of
any approved product.
We plan to increase the size of our organization, and we
may experience difficulties in managing growth.
In the future, we plan to expand our managerial, operational,
financial and other resources in order to manage and fund our operations,
continue our research and development and collaborative activities, progress our
product candidates through clinical development and eventually commercialize any
product candidates for which we are able to obtain regulatory approval. It is
possible that our management and
- 28 -
scientific personnel, systems and facilities currently in place
may not be adequate to support this future growth. Our need to effectively
manage our operations, growth and various projects requires that we:
-
manage our internal research and development efforts effectively while
carrying out our contractual obligations to collaborators and other
third-parties;
-
continue to improve our operational, financial and management controls,
reporting systems and procedures;
-
set up marketing, sales, distribution and other commercial operations
infrastructure if any of our product candidates obtain regulatory approval;
and
-
attract and retain sufficient numbers of talented employees.
We may be unable to successfully implement these tasks on a
larger scale and, accordingly, may not achieve our research, development and
commercialization goals.
If we fail to attract and keep key management and
scientific personnel, we may be unable to successfully develop or commercialize
our product candidates.
We will need to expand and effectively manage our managerial,
operational, financial and other resources in order to successfully pursue our
research, development and commercialization efforts for any future product
candidates.
Our success depends on our continued ability to attract, retain
and motivate highly qualified management and chemists, biologists, and
preclinical and clinical personnel. The loss of the services of any of our
senior management, could delay or prevent the clinical development and potential
commercialization of our product candidates. We do not maintain key man
insurance policies on the lives of these individuals or the lives of any of our
other employees. We employ these individuals on an at-will basis and their
employment can be terminated by us or them at any time, for any reason and with
or without notice. We have scientific and clinical advisors who assist us in
formulating our research, development and clinical strategies. These advisors
are not our employees and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to us. In
addition, our advisors may have arrangements with other companies to assist
those companies in developing products or technologies that may compete with
ours.
We may not be able to attract or retain qualified management
and scientific personnel in the future due to the intense competition for
qualified personnel among biotechnology, pharmaceutical and other businesses. If
we are not able to attract and retain the necessary personnel to accomplish our
business objectives, we may experience constraints that will impede
significantly the achievement of our research and development objectives, our
ability to raise additional capital and our ability to implement our business
strategy. In particular, if we lose any members of our senior management team,
we may not be able to find suitable replacements and our business may be harmed
as a result.
We expect our net operating losses to continue for at
least several years, and we are unable to predict the extent of future losses or
when we will become profitable, if ever.
We have incurred substantial net operating losses since our
inception. We expect our annual net operating losses to continue over the next
several years as we conduct our research and development activities, and incur
preclinical and clinical development costs. Because of the numerous risks and
uncertainties associated with our research and development efforts and other
factors, we are unable to predict the extent of any future losses or when we
will become profitable, if ever. We will need to
- 29 -
commence clinical trials, obtain regulatory approval and
successfully commercialize a product candidate or product candidates before we
can generate revenues which would have the potential to lead to profitability.
We currently lack a significant continuing revenue source
and may not become profitable.
Our ability to become profitable depends upon our ability to
generate significant continuing revenues. To obtain significant continuing
revenues, we must succeed, either alone or with others, in developing, obtaining
regulatory approval for, and manufacturing and marketing product candidates with
significant market potential. However, we cannot guarantee when, if ever, our
products revenues alone will not be sufficient to lead to profitability.
Our ability to generate continuing revenues depends on a number
of factors, including:
-
obtaining new collaborations and commercial agreements;
-
performing under current and future collaborations, commercial agreements
and grants, including achieving milestones;
-
successful completion of clinical trials for any product candidate we
advance into clinical trials;
-
achievement of regulatory approval for any product candidate we advance
into clinical trials; and
-
successful sales, manufacturing, distribution and marketing of our future
products, if any.
If we are unable to generate significant continuing revenues,
we will not become profitable, and we may be unable to continue our operations.
We may incur substantial liabilities from any product
liability claims.
We face an inherent risk of product liability exposure related
to the testing of our product candidates in human clinical trials, and will face
an even greater risk if we sell our product candidates commercially. An
individual may bring a liability claim against us if one of our product
candidates causes, or merely appears to have caused, an injury. If we cannot
successfully defend ourselves against the product liability claim, we will incur
substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in any one or a combination of the following:
-
decreased demand for our product candidates;
-
injury to our reputation;
-
withdrawal of clinical trial participants;
-
costs of related litigation;
-
substantial monetary awards to patients or other claimants;
-
loss of revenues; and
-
the inability to commercialize our product candidates.
- 30 -
We plan to obtain product liability insurance. However,
insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise.
Our success depends upon our ability to protect our
intellectual property and our proprietary technologies.
Our commercial success depends on obtaining and maintaining
patent protection and trade secret protection for our product candidates,
proprietary technologies and their uses, as well as successfully defending these
patents against third party challenges. There can be no assurance that our
patent applications will result in patents being issued or that issued patents
will afford protection against competitors with similar technology, nor can
there be any assurance that the patents issued will not be infringed, designed
around, or invalidated by third parties. Even issued patents may later be found
unenforceable, or be modified or revoked in proceedings instituted by third
parties before various patent offices or in courts.
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and factual
questions for which important legal principles remain unresolved. Changes in
either the patent laws or in the interpretations of patent laws in the United
States and other countries may diminish the value of our intellectual property.
Accordingly, we cannot predict the breadth of claims that may be allowed or
enforced in our patents or in third party patents.
The degree of future protection for our proprietary rights is
uncertain. Only limited protection may be available and may not adequately
protect our rights or permit us to gain or keep any competitive advantage. For
example:
-
we might not have been the first to file patent applications for these
inventions;
-
we might not have been the first to make the inventions covered by each of
our pending patent applications and issued patents;
-
others may independently develop similar or alternative technologies or
duplicate any of our technologies;
-
the patents of others may have an adverse effect on our business;
-
it is possible that none of our pending patent applications will result in
issued patents;
-
our issued patents may not encompass commercially viable products, may not
provide us with any competitive advantages, or may be challenged by third
parties;
-
our issued patents may not be valid or enforceable; or
-
we may not develop additional proprietary technologies that are patentable.
Patent applications in the U.S. are maintained in confidence
for up to 18 months after their filing. Consequently, we cannot be certain that
we were the first to invent, or the first to file, patent applications on our
compounds or drug candidates. We may not have identified all U.S. and foreign
patents or published applications that may affect our business by blocking our
ability to commercialize any drugs for which we are able to successfully develop
and obtain regulatory approval.
- 31 -
Proprietary trade secrets and unpatented know-how are also very
important to our business. Although we have taken steps to protect our trade
secrets and unpatented know-how, including entering into confidentiality
agreements with third parties, and confidential information and inventions
agreements with officers, consultants and advisors, third parties may still
obtain this information or we may be unable to protect our rights. Enforcing a
claim that a third party illegally obtained and is using our trade secrets or
unpatented know-how is expensive and time consuming, and the outcome is
unpredictable. In addition, courts outside the United States may be less willing
to protect trade secret information. Moreover, our competitors may independently
develop equivalent knowledge, methods and know-how, and we would not be able to
prevent their use.
If we are sued for infringing intellectual property
rights of third parties, it will be costly and time consuming, and an
unfavorable outcome in that litigation would have a material adverse effect on
our business.
Our commercial success also depends upon our ability and the
ability of our collaborators to develop, manufacture, market and sell our
product candidates and use our proprietary technologies without infringing the
proprietary rights of third parties. Numerous U.S. and foreign issued patents
and pending patent applications, which are owned by third parties, exist in the
fields in which we and our collaborators are developing products. Because patent
applications can take many years to issue, there may be currently pending
applications which may later result in issued patents that our product
candidates or proprietary technologies may infringe.
We may be exposed to, or threatened with, future litigation by
third parties having patent, trademark or other intellectual property rights
alleging that we are infringing their intellectual property rights. If one of
these patents was found to cover our product candidates, research methods,
proprietary technologies or their uses, or one of these trademarks was found to
be infringed, we or our collaborators could be required to pay damages and could
be unable to commercialize our product candidates or use our proprietary
technologies unless we or they obtain a license to the patent or trademark, as
applicable. A license may not be available to us or our collaborators on
acceptable terms, if at all. In addition, during litigation, the patent or
trademark holder could obtain a preliminary injunction or other equitable right
which could prohibit us from making, using or selling our products, technologies
or methods. In addition, we or our collaborators could be required to designate
a different trademark name for our products, which could result in a delay in
selling those products.
There is a substantial amount of litigation involving patent
and other intellectual property rights in the biotechnology and
biopharmaceutical industries generally. If a third party claims that we or our
collaborators infringe its intellectual property rights, we may face a number of
issues, including, but not limited to:
-
infringement and other intellectual property claims which, with or without
merit, may be expensive and time-consuming to litigate and may divert our
managements attention from our core business;
-
substantial damages for infringement, including treble damages and
attorneys fees, which we may have to pay if a court decides that the product
or proprietary technology at issue infringes on or violates the third partys
rights;
-
a court prohibiting us from selling or licensing the product or using the
proprietary technology unless the third party licenses its technology to us,
which it is not required to do;
- 32 -
-
if a license is available from the third party, we may have to pay
substantial royalties, fees and/or grant cross licenses to our technology; and
-
redesigning our products or processes so they do not infringe, which may
not be possible or may require substantial funds and time.
There can be no assurance that third party patents containing
claims covering our product candidates, technology or methods do not exist, have
not been filed, or could not be filed or issued. Because of the number of
patents issued and patent applications filed in our areas or fields of interest,
particularly in the area of protein kinase inhibitors, we believe there is a
significant risk that third parties may allege they have patent rights
encompassing our product candidates, technology or methods. In addition, we have
not conducted an extensive search of third party trademarks, so no assurance can
be given that such third party trademarks do not exist, have not been filed,
could not be filed or issued, or could not exist under common trademark law.
Other product candidates that we may develop, either internally
or in collaboration with others, could be subject to similar risks and
uncertainties.
Risks Relating To Our Common Stock
We have not paid any dividends, and do not foresee paying
dividends in the future.
Payment of dividends on the common stock is within the
discretion of our board of directors and will depend upon our future earnings,
our capital requirements, financial condition and other relevant factors. We
have no plans to declare any dividends in the foreseeable future.
There is a limited active trading market for our common
stock, and if a market for our common stock does not further develop, our
investors will be unable to sell their shares.
There is currently a limited active trading market for our
common stock, and such a market may not further develop or be sustained. Our
common stock is quoted on the National Association of Securities Dealers Inc.s
OTC Bulletin Board, but has traded sporadically.
We cannot provide our investors with any assurance that a
public market will materialize. Further, the OTC Bulletin Board is not a listing
service or exchange, but is instead a dealer quotation service for subscribing
members. If a public market for our common stock does not develop, then
investors may not be able to resell the shares of our common stock that they
have purchased and may lose all of their investment.
Our stock price may decline significantly upon the
occurrence of events that are risks to our business and our plan of
operations.
If a public market develops for our common stock, the market
price of our shares is likely to be highly volatile. The market price of our
common stock may decline as a result of the occurrence of any of the following
events :
-
technological innovations made or new products and services offered by our
competitors;
-
departures of our key personnel;
-
sales of our common stock by us or by our current shareholders;
- 33 -
-
our inability to integrate operations, technology, products and services;
-
our inability to execute our plan of operations;
-
our operating results being below expectations;
-
our loss of any strategic relationship;
-
industry developments that make our products redundant or reduce demand for
our products;
-
economic or other external factors that may reduce demand for our products;
or
-
our continuing to report operating losses.
Because we have a limited operating history with minimal
revenues to date, our stock price may decline significantly as a result of any
of the above listed factors.
In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may
also materially and adversely affect the market price of our common stock.
Our common stock is subject to the "Penny Stock" Rules of
the SEC, which makes transactions in our common stock cumbersome and may reduce
the value of an investment in our common stock.
Our common stock is quoted on the National Association of
Securities Dealers Inc.'s OTC Bulletin Board, which is generally considered to
be a less efficient market than markets such as NASDAQ or the national
exchanges, and which may cause difficulty in conducting trades and difficulty in
obtaining future financing. Further, our securities are subject to the penny
stock rules adopted pursuant to Section 15(g) of the
Securities Exchange Act
of 1934
, as amended. The penny stock rules apply generally to companies
whose common stock trades at less than $5.00 per share, subject to certain
limited exemptions. Such rules require, among other things, that brokers who
trade penny stock to persons other than established customers complete
certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including
a risk disclosure document and quote information under certain circumstances.
Many brokers have decided not to trade penny stock because of the requirements
of the "penny stock rules" and, as a result, the number of broker-dealers
willing to act as market makers in such securities is limited. In the event that
we remain subject to the penny stock rules for any significant period, there
may develop an adverse impact on the market, if any, for our securities. Because
our securities are subject to the penny stock rules, investors will find it
more difficult to dispose of our securities. Further, it is more difficult: (i)
to obtain accurate quotations, (ii) to obtain coverage for significant news
events because major wire services, such as the Dow Jones News Service,
generally do not publish press releases about such companies, and (iii) to
obtain needed capital.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of our financial condition, changes in
financial condition and results of operations for the year ended September 30,
2006 and nine months ended June 30, 2007 should be read in conjunction with our
audited consolidated financial statements and related notes for the year ended
September 30, 2006 and interim consolidated financial statements and related
notes for the nine months ended June 30, 2007.
- 34 -
Our Plan of Operations
Our plan of operations for the next twelve months is to:
|
(a)
|
undertake the pre-clinical studies and initiate Phase 1
Clinical tests for our two proprietary drug targets;
|
|
|
|
|
(b)
|
sign up the SAB members;
|
|
|
|
|
(c)
|
employ CROs; and
|
|
|
|
|
(d)
|
explore new in-licensing and acquisition
candidates.
|
We anticipate that we will incur an aggregate of approximately
$2 million in expenses for the next twelve months as follows:
|
(a)
|
salaries of $300,000;
|
|
|
|
|
(b)
|
overhead and travel expenses of $250,000; and
|
|
|
|
|
(c)
|
outsourced research to CROs of
$1,450,000.
|
During the next twelve months, we anticipate that we will not
generate any revenue, we had cash of $1,666 and a working capital deficit of
$376,192 at June 30, 2007. We presently do not have sufficient funds to fund our
operations for more than the next two months. Accordingly, we anticipate that we
will require additional financing to enable us to pay our planned expenses for
the next twelve months and pursue our plan of operations.
Subsequent to the 12 month period following the date of this
Current Report, we will be required to obtain additional financing in order to
continue to pursue our business plan. We believe that debt financing will not be
an alternative for funding as we do not have tangible assets to secure any debt
financing. We anticipate that additional funding will be in the form of equity
financing from the sale of our common stock. We cannot provide investors with
any assurance that we will be able to raise sufficient funding from the sale of
our common stock to fund our business plan going forward. In the absence of such
financing, our business plan will fail. Even if we are successful in obtaining
equity financing to fund our business plan, there is no assurance that we will
obtain the funding necessary to pursue our plan over the long-term.
We have achieved only minimal revenues to date. Accordingly, we
are considered a development stage company. To date, we have only sold a minimal
number of units of our InfraBlue technology, our revenues from these sales are
substantially less than our operating costs and we have incurred significant
operating losses since inception. Accordingly, our board of directors is
currently evaluating the sale or abandonment of our InfraBlue technology.
Presentation of Financial Information
Effective August 31, 2005, we acquired 100% of the issued and
outstanding shares of InfraBlue UK by issuing 12,000,000 shares of our common
stock. Notwithstanding its legal form, our acquisition of InfraBlue UK has been
accounted for as a reverse acquisition, since the acquisition resulted in the
former shareholders of InfraBlue UK owning the majority of our issued and
outstanding shares. Because Tomi Holdings Inc. (now InfraBlue (US) Inc.) was a
newly incorporated company with nominal net non-monetary assets, the acquisition
has been accounted for as an issuance of stock by InfraBlue UK
- 35 -
accompanied by a recapitalization. Under the rules governing
reverse acquisition accounting, the results of operations of InfraBlue (US) Inc.
are included in our consolidated financial statements effective August 31, 2005.
Our date of inception is the date of inception of InfraBlue UK, being February
18, 2004, and our financial statements are presented with reference to the date
of inception of InfraBlue UK. Financial information relating to periods prior to
August 31, 2005 is that of InfraBlue UK.
Critical Accounting Policies
Development Stage Company
We are a development stage company as defined by Financial Accounting
Standards No. 7. We are presently devoting all of our present efforts to establish
a new business. All losses accumulated since inception have been considered
as part of our development stage activities.
Revenue Recognition
We recognize revenue from sales of our IRMA devices when all of
the following criteria have been met: persuasive evidence for an arrangement
exists; delivery has occurred; the fee is fixed or determinable; and collection
is reasonably assured. Revenue derived from the sale of services is initially
recorded as deferred revenue on the balance sheet. The amount is recognized as
income over the term of the contract.
Revenue from time and material service contracts is recognized
as the services are provided. Revenue from fixed price, long-term service or
development contracts is recognized over the contract term based on the
percentage of services that are provided during the period compared with the
total estimated services to be provided over the entire contract. Losses on
fixed price contracts are recognized during the period in which the loss first
becomes apparent. Payment terms vary by contract.
Foreign Currency Translations
Our functional currency is pounds sterling (£). Our reporting
currency is the U.S. dollar. All transactions initiated in other currencies are
re-measured into the functional currency as follows:
|
i)
|
Monetary assets and liabilities at the rate of exchange
in effect at the balance sheet date,
|
|
|
|
|
ii)
|
Non-monetary assets and liabilities, and equity at
historical rates, and
|
|
|
|
|
iii)
|
Revenue and expense items at the average rate of exchange
prevailing during the period.
|
Gains and losses on re-measurement are included in determining
net income for the period.
Translation of balances from the functional currency into the
reporting currency is conducted as follows:
|
i)
|
Assets and liabilities at the rate of exchange in effect
at the balance sheet date,
|
|
|
|
|
ii)
|
Equity at historical rates, and
|
|
|
|
|
iii)
|
Revenue and expense items at the average rate of exchange
prevailing during the period.
|
Translation adjustments resulting from translation of balances
from functional to reporting currency are accumulated as a separate component of
shareholders equity as a component of comprehensive income or loss. Upon sale
or liquidation of the net investment in the foreign entity the amount deferred
will be recognized in income.
- 36 -
Results Of Operations Three and Nine months Ended June
30, 2007 and 2006
References to the discussion below to fiscal 2007 are to our
current fiscal year which will end on September 30, 2007. References to fiscal
2006 and fiscal 2005 are to our fiscal years ended September 30, 2006 and 2005,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation
|
|
|
|
For the Three
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
For the Nine
|
|
|
February 18,
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
2004 to
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
2991
|
|
$
|
10,731
|
|
$
|
6,044
|
|
$
|
31,630
|
|
$
|
72,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Costs
|
|
24
|
|
|
7,533
|
|
|
2,810
|
|
|
23,450
|
|
|
52,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
2,967
|
|
|
3,198
|
|
|
3,234
|
|
|
8,180
|
|
|
20,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and auditing
|
|
15,572
|
|
|
19,936
|
|
|
61,140
|
|
|
96,047
|
|
|
267,134
|
|
Consulting
|
|
67,457
|
|
|
-
|
|
|
201,076
|
|
|
2,125
|
|
|
248,139
|
|
Depreciation
|
|
314
|
|
|
318
|
|
|
1,030
|
|
|
939
|
|
|
3,680
|
|
Development
|
|
-
|
|
|
6,082
|
|
|
-
|
|
|
6,082
|
|
|
9,567
|
|
Filing
fees
|
|
-
|
|
|
1,220
|
|
|
2,155
|
|
|
6,235
|
|
|
8,785
|
|
Intellectual property
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,500,000
|
|
|
2,500,000
|
|
Interest
and bank charges
|
|
492
|
|
|
(1,403
|
)
|
|
4,006
|
|
|
1,126
|
|
|
11,361
|
|
Investor relations
|
|
-
|
|
|
-
|
|
|
11,579
|
|
|
-
|
|
|
18,250
|
|
Legal
|
|
2,106
|
|
|
17,695
|
|
|
9,156
|
|
|
41,428
|
|
|
72,806
|
|
Marketing and promotion
|
|
-
|
|
|
42
|
|
|
-
|
|
|
2,974
|
|
|
37,310
|
|
Office
and information technology
|
|
209
|
|
|
392
|
|
|
809
|
|
|
1,291
|
|
|
11,989
|
|
Rent
|
|
3,946
|
|
|
2,739
|
|
|
8,783
|
|
|
7,992
|
|
|
35,203
|
|
Salaries
and wages
|
|
45
|
|
|
(2,224
|
)
|
|
5,210
|
|
|
29,877
|
|
|
136,539
|
|
Sub-contractors
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,551
|
|
Test
equipment
|
|
-
|
|
|
186
|
|
|
-
|
|
|
1,419
|
|
|
1,439
|
|
Travel
|
|
-
|
|
|
38
|
|
|
14
|
|
|
214
|
|
|
2,492
|
|
Total General and
Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
90,141
|
|
|
45,021
|
|
|
304,958
|
|
|
2,697,749
|
|
|
3,370,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(87,174
|
)
|
|
(41,823
|
)
|
|
(301,724
|
)
|
|
(2,689,569
|
)
|
|
(3,350,054
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on forgiveness of
debt
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
869
|
|
Interest
expense
|
|
(18
|
)
|
|
(3,393
|
)
|
|
(188
|
)
|
|
(3,433
|
)
|
|
(188
|
)
|
Recovery of license fee
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,838
|
|
Foreign
exchange gain (loss)
|
|
(4,345
|
)
|
|
(187
|
)
|
|
(4,429
|
)
|
|
(785
|
)
|
|
(5,601
|
)
|
Net Loss
|
$
|
(91,537
|
)
|
$
|
(45,403
|
)
|
$
|
(306,341
|
)
|
$
|
(2,693,787
|
)
|
$
|
(3,347,136
|
)
|
Revenue
Our sales are comprised of sales of our IRMA devices.
We experienced our initial sales of our IRMA devices during
fiscal 2005. We sold 74 devices during this period.
- 37 -
We continued to earn revenues from sales of our IRMA devices
during the first nine months of fiscal 2007, although sales declined
significantly during the third quarter. We recently experienced a decline in
sales of our Infrablue products. We are now shifting our focus with the
objective of achieving sales in the United States market. Our revenues decreased
to $2,991 for the third quarter of fiscal 2007, compared to $10,731 for the
third quarter of 2006, and to $6,044 for the first nine months of 2007 from
$31,630 for the first nine months of 2006. We sold 20 IRMA devices during the
first nine months of fiscal 2007.
Cost of Sales
Cost of sales is comprised of amounts that we have paid to
Flander Oy for purchase of IRMA devices for resale.
Cost of sales decreased to $24 during the third quarter of
fiscal 2007 from $7,553 during the third quarter of fiscal 2006. Cost of sales
decreased to $2,810 for the first nine months of fiscal 2007 from $23,450 for
the first nine months of fiscal 2006. Reduced costs of sales during fiscal 2007
reflect our decreased sales during the first nine months of fiscal 2007.
Gross Profit
Our gross profit during the third quarter of fiscal 2007
declined to $2,967 compared to $3,198 during the third quarter of fiscal 2006.
Our gross profit during the first nine months of fiscal 2007 declined to $3,234
compared to $8,180 during the first nine months of fiscal 2006.
Salaries and Wages
Salaries and wages are primarily comprised of salary paid to
Mitchell Johnson, our sole executive officer and employee.
Salaries and wages decreased to $45 for the third quarter of
2007 and $5,210 during the first nine months of fiscal 2007, compared to
($2,224) for the third quarter of fiscal 2006 and $29,877 during the first nine
months of fiscal 2006, due to the agreement of Mr. Johnson to forgo his salary
commencing April 1, 2006.
Consulting
Our consulting expenses are attributable to our consulting
agreements as described below under consulting agreements.
Consulting expenses increased to $67,457 for the third quarter
of 2007 and $201,076 during the first nine months of fiscal 2007, compared to
$nil for the third quarter of fiscal 2006 and $2,125 during the first nine
months of fiscal 2006, due to increased expenses under our consulting
agreements.
Accounting and Auditing
Accounting and auditing expenses are attributable to the
preparation and audit of our financial statements.
Accounting and auditing expenses decreased during the first
three and nine months of fiscal 2007 compared to the first three and nine months
of fiscal 2006 as a result of our completing our audited annual and unaudited
interim financial statements prepared in connection with the filing of a
registration statement with the SEC during fiscal 2006. Accounting and auditing
expenses during the nine months ended June 30, 2007 have related to ongoing
continuous reporting obligations under the Securities Exchange Act of 1934.
- 38 -
Legal
Legal expenses are attributable to legal fees paid to our legal
counsel in connection with the completion of our corporate reorganization and
our filing a registration statement with the SEC and becoming a reporting
company under the Securities Exchange Act of 1934.
Legal expenses during the first three and nine months of fiscal
2007 compared to the first three and nine months of fiscal 2006 decreased as a
result of our completing our corporate reorganization and preparing and filing
of a registration statement with the SEC during fiscal 2006. Legal expenses
during the nine months ended June 30, 2007 have related to ongoing continuous
reporting obligations under the Securities Exchange Act of 1934.
Office and Information Technology
Office and information technology expenses are attributable to
purchase of products including demonstration equipment, test equipment,
competitor analysis and business machines.
Rent
Rent expense was attributable to amounts paid to Outlander
Management on account of our rent of share office premises in London, England.
This contract was replaced with our agreement with Azuracle in May 2005.
Intellectual Property
We expensed the intellectual property acquired in the first
quarter of fiscal 2006 due to our determination that the cost of the
intellectual property purchased during the current fiscal year does not meet the
criteria for capitalization as set out in SFAS No. 86.
Results of Operations Years Ended September 30, 2006
and 2005
References below to fiscal 2006 are to our fiscal year ended
September 30, 2006. References to fiscal 2005 are to our fiscal year ended
September 30, 2005.
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
Incorporation
|
|
|
|
For the Year
|
|
|
For the Year
|
|
|
(February 18,
|
|
|
|
Ended
|
|
|
Ended
|
|
|
2004) to
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Sales
|
$
|
34,857
|
|
$
|
31,958
|
|
$
|
66,815
|
|
Cost of
Sales
|
|
26,168
|
|
|
23,690
|
|
|
49,858
|
|
Gross Profit
|
|
8,689
|
|
|
8,268
|
|
|
16,957
|
|
General and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
Intellectual Property
(Note 4)
|
|
2,500,000
|
|
|
-
|
|
|
2,500,000
|
|
Accounting and auditing
|
|
144,510
|
|
|
32,061
|
|
|
205,994
|
|
Consulting
|
|
47,063
|
|
|
-
|
|
|
47,063
|
|
Legal
|
|
46,660
|
|
|
16,087
|
|
|
63,650
|
|
- 39 -
Salaries and wages
|
|
30,297
|
|
|
75,031
|
|
|
131,329
|
|
Rent
|
|
10,806
|
|
|
11,101
|
|
|
26,420
|
|
Interest expense
|
|
7,015
|
|
|
340
|
|
|
7,355
|
|
Investor relations
|
|
6,671
|
|
|
-
|
|
|
6,671
|
|
Filing fees
|
|
6,630
|
|
|
-
|
|
|
6,630
|
|
Development
|
|
6,168
|
|
|
3,399
|
|
|
9,567
|
|
Office and information
technology
|
|
1,642
|
|
|
6,895
|
|
|
11,180
|
|
Test equipment
|
|
1,439
|
|
|
-
|
|
|
1,439
|
|
Depreciation
|
|
1,234
|
|
|
1,267
|
|
|
2,650
|
|
Travel
|
|
240
|
|
|
2,238
|
|
|
2,478
|
|
Marketing and promotion
|
|
83
|
|
|
28,532
|
|
|
37,310
|
|
Sub-contractors
|
|
-
|
|
|
5,551
|
|
|
5,551
|
|
|
|
2,810,458
|
|
|
182,502
|
|
|
3,065,287
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(2,801,769
|
)
|
|
(174,234
|
)
|
|
(3,048,330
|
)
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
Foreign exchange loss
|
|
(610
|
)
|
|
(562
|
)
|
|
(1,172
|
)
|
Gain on forgiveness of debt
|
|
869
|
|
|
-
|
|
|
869
|
|
Recovery of license fees
|
|
7,838
|
|
|
-
|
|
|
7,838
|
|
Loss for the
Year
|
$
|
(2,793,672
|
)
|
$
|
(174,796
|
)
|
$
|
(3,040,795
|
)
|
Revenue
Our sales are comprised of sales of our IRMA devices.
We experienced our initial sales of our IRMA devices during
fiscal 2005. We sold 74 devices during this period.
We continued to earn revenues from sales of our IRMA devices
during the fiscal 2006. Our revenues increased to $34,857 during fiscal 2006
compared to $31,958 during fiscal 2005. We sold 109 IRMA devices during fiscal
2006.
Cost of Sales
Cost of sales is comprised of amounts that we have paid to
Flander Oy for purchase of IRMA devices for resale.
Cost of sales increased to $26,168 during fiscal 2006 from
$23,690 during fiscal 2005 and reflected our initial sales during these
periods.
Gross Profit
Our gross profit during fiscal 2006 was $8,689 or 25% of sales,
compared to $8,268 or 26% of sales during fiscal 2005. Our cumulative gross
profit from incorporation (February 18, 2004) to September 30, 2006 was $16,957.
- 40 -
Intellectual Property
We expensed the intellectual property acquired in fiscal 2006
due to our determination that the cost of the intellectual property purchased
during fiscal 2005 does not meet the criteria for capitalization as set out in
SFAS No. 86.
Accounting and Auditing
Accounting and auditing expenses are attributable to the
preparation and audit of our financial statements.
Accounting and auditing expenses increased during fiscal 2006
compared to fiscal 2005 as a result of our completing our audited annual and
unaudited interim consolidated financial statements prepared in connection with
the filing of a registration statement with the SEC and in connection with the
preparation and filing of our quarterly reports with the SEC.
Legal
Legal expenses are attributable to legal fees paid to our legal
counsel in connection with the completion of our corporate reorganization and
our filing a registration statement with the SEC and becoming a reporting
company under the Securities Exchange Act of 1934.
Legal expenses increased during fiscal 2006 compared to fiscal
2005 as a result of our completing our corporate reorganization and preparing
and filing of a registration statement with the SEC and the preparation and
filing of our quarterly reports with the SEC.
Salaries and Wages
Salaries and wages are primarily comprised of salary paid to
Mitchell Johnson, our sole executive officer and employee.
Salaries and wages decreased to $30,297 during fiscal 2006 from
$75,031 during fiscal 2005, which reflected the agreement of Mr. Johnson to
forgo his salary commencing April 1, 2006. The reduction in salaries and wages
also resulted from the fact that no shares were issued during fiscal 2006 to Mr.
Johnson under his compensation agreement, whereas compensation shares had been
issued during fiscal 2005.
Rent
Rent expense was attributable to amounts paid to Azuracle and
to Outlander Management on account of our rent of share office premises in
London, England. Our agreement with Outlander Management was replaced with our
agreement with Azuracle in May 2005.
Office and Information Technology
Office and information technology expenses are attributable to
purchase of products including demonstration equipment, test equipment,
competitor analysis and business machines.
Office and information technology expenses declined
significantly during fiscal 2006 compared to fiscal 2005 as we had completed
development of our IRMA devices and are now selling IRMA devices.
- 41 -
Loss from Operations
Our loss from operations increased during fiscal 2006 compared
to fiscal 2005 as a result of our increased business activity and our filing a
registration statement with the Securities and Exchange Commission. We also
incurred significant legal, accounting and auditing expenses during the year in
connection with the reorganization of our business. Our loss from operations in
fiscal 2006 also increased significantly from fiscal 2005 due to our
intellectual property expense realized during this period.
Liquidity and Financial Resources
We had cash of $1,666 and working capital deficit of $376,192
as at June 30, 2007, compared to cash of $679 and a working capital deficit of
$144,463 at September 30, 2006.
Plan of Operations
We estimate that our total expenditures over the next twelve
months will be approximately $2,000,000, as outlined above under the heading
Plan of Operations. We anticipate that our cash and working capital will not
be sufficient to enable us to undertake our plan of operations over the next
twelve months without our obtaining additional financing. We presently have cash
to fund our operations for the next two months. Accordingly, we will require
additional financing in order to enable us to sustain our operations for the
next twelve months, as outlined above.
Cash used in Operating Activities
We used cash of $108,313 in operating activities during the
first nine months of fiscal 2007 compared to cash used of $202,521 in operating
activities during the first nine months of fiscal 2006.
We used cash of $260,804 in operating activities during fiscal
2006 compared to cash used of $148,213 in operating activities during fiscal
2005.
We have applied cash generated from our financing activities to
fund cash used in operating activities.
Cash from Investing Activities
We did not use any cash in investing activities during the
first nine months of fiscal 2007 or during the first nine months of fiscal 2006.
We did not use any cash in investing activities during fiscal
2006 compared to cash used of $2,089 in investing activities during fiscal 2005.
We acquired cash of $135,688 upon our completion of our reverse acquisition
transaction with Tomi Holdings Inc. Cash used in investing activities during the
fiscal 2005 was attributable to purchases of equipment.
Cash from Financing Activities
We generated cash of $113,893 from financing activities during
the first nine months of fiscal 2007 compared to cash of $110,334 generated from
activities during the first nine months of fiscal 2006. Cash generated from
financing activities was primarily due to loans received during the period.
We generated cash of $141,991 from financing activities during
fiscal 2006 compared to cash of $141,831 generated from activities during fiscal
2005.
- 42 -
Cash generated from financing activities during fiscal 2006
included cash from the sale of convertible promissory notes to two investors in
the aggregate principal amount of $100,500 in March 2006. Each convertible note
is for a two year term from the date of advance and bears interest at an
interest rate equal to the prime rate of interest for U.S. banks as published in
Money Rates Column of the Money and Investing Section of The Wall Street Journal
from time to time. Each investor has the right at any time commencing on the
date of the quotation of our common stock on the NASD Over-the-Counter Bulletin
Board and ending on the maturity date to convert the outstanding principal and
accrued interest on each convertible loan into units at a conversion rate of
$0.25 US per unit. Each unit to be issued upon conversion will be comprised of
one share of our common stock and one warrant to purchase one additional share
of our common stock.
Going Concern
We have not attained profitable operations and are dependent
upon obtaining financing to pursue any extensive business activities. For these
reasons our auditors stated in their report that they have substantial doubt we
will be able to continue as a going concern.
Future Financings
We anticipate continuing to rely on equity sales of our common
shares in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing stockholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our planned activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of November 30,
2007, regarding the beneficial ownership of our common stock by:
-
each person who is known by us to beneficially own more than 5% of our
shares of common stock; and
-
each executive officer, each director and all of our directors and
executive officers as a group.
The number of shares beneficially owned and the percentage of
shares beneficially owned are based on 128,897,568 shares of common stock
outstanding as of November 30, 2007.
For the purposes of the information provided below, shares that
may be issued upon the exercise or conversion of options, warrants and other
rights to acquire shares of our common stock that are exercisable or convertible
within 60 days following November 30, 2007, are deemed to be outstanding and
beneficially owned by the holder for the purpose of computing the number of
shares and percentage ownership of that holder, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person.
- 43 -
Title of Class
|
Name and Address of Beneficial
Owner
|
Amount and Nature
of Beneficial
Owner
(1)
|
Percentage of
Common Stock
(1)
|
Directors and Officers
|
Common Stock
|
Konstantinos Kardiasmenos
(2)
4, Ptolemaion Str., Athens, Greece 11635
|
4,000,000
|
3.10%
|
Common Stock
|
David Cooper
(2)
52 Queen Anne Street,
London, England, W1G 8HL.
|
2,000,000
|
1.55%
|
Common Stock
|
All executive officers and directors as a Group
(one person)
|
6,000,000
|
4.65%
|
5% Shareholders
|
Common Stock
|
InfraBlue Inc.
(3)
PO Box 556, Main Street,
Charlestown, Island of Nevis
|
7,107,588
|
5.51%
|
Common Stock
|
Keydata Technology Partnership 3 LLP
(4)
4 Bedford Row, London England
|
40,000,000
|
31.03%
|
Common Stock
|
Oxon Life Science Limited
(5)
Donegan, Zetlands, Nevis
St. Kitts and Nevis, West Indies
|
14,000,000
|
10.86%
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. We had 128,897,568 shares of our common stock issued and
outstanding as of November 30, 2007.
|
|
|
(2)
|
This person was appointed as a director or officer of our
Company upon completion of the acquisition of the Assets.
|
|
|
(3)
|
Garth Hochong is the founder and director of InfraBlue
Inc. and exercises voting and dispositive power over the shares held by
InfraBlue Inc.
|
|
|
(4)
|
Stewart Ford is the administrating partner for KeyData
Technology Partnership 3 LLP and exercises voting and dispositive power
over the shares held by the Keydata Technology Partnership 3
LLP.
|
|
|
(5)
|
Lars Christiansen is the Director of Oxon Life Science
Limited and exercises voting and dispositive power over these shares held
by Oxon Life Science Limited.
|
We have no knowledge of any arrangements, including any pledge
by any person of our securities, the operation of which may at a subsequent date
result in a change in control of the Company.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following table sets forth information relating to our
directors and executive officers:
Name and Municipality
of Residence
|
Age
|
Current Office with our
Company
|
Director Since
|
Konstantinos Kardiasmenos
Athens, Greece
|
31
|
Chief Executive Officer, Chief
Financial Officer and a director
|
November 12, 2007
|
- 44 -
Name and Municipality
of Residence
|
Age
|
Current Office with our
Company
|
Director Since
|
David Cooper
London, UK
|
56
|
Chairman and a director
|
November 12, 2007
|
The following is a description of the business backgrounds for
our current directors and officers:
Konstantinos Kardiasmenos Chief Executive Officer, Chief
Financial Officer and a director
Konstantinos Kardiasmenos holds a Bachelor Degree in Economics
and Politics from the University of Essex, England and a DEUG (Higher Diploma)
in Langues Etrangeres Appliquees en Droit et Economie from University of
Nanterre X, Paris and passed the English FSA Exam for Futures and Options
Representative. He was registered with IMRO shortly after passing the FSA Exam.
At Titan Capital Management Ltd. (a fund management company in
London), he held the position of Investment Manager and specialized in
structured finance until 2001. At PMG SA (Athens based venture capital Company),
he was Risk Manager from 2001 until 2004, advising the board of investment
opportunities. In 2004, Mr. Kardiasmenos founded an independent business
consulting firm, which consults clients in the shipping and retail industry and
has also founded a mens clothes retail company. He is currently the Commercial
Project Manager of Coca-Cola HBC in Athens. Mr. Kardiasmenos speaks and writes
fluently in English, French, Greek, and is proficient in Spanish and Italian.
Mr. Kardiasmenos will devote approximately 60% of his time to our business.
David Cooper Chairman and a director
David Cooper has thirty years experience in business
development and corporate finance. His experience has been gained across a wide
range of transactions and client projects. Mr. Cooper has a track record of
success in the management and control of the full spectrum of business
development and corporate finance activities for both emerging and major
companies and has significant experience of both senior line and consulting
roles. He has held senior positions in, and advises, leading international
corporations, banks, holding groups and legal practices. He was the founder and
from 1974 to date, has been a principal at DCA, a London based, independent
business development and corporate finance practice focused in the new
technology industries with an international clientele. He was the co-founder and
from 2004 to date, has been a Partner at Quantum Capital Partners, which
provides strategic and financial advice to high growth companies and helps its
larger investment clients source, manage and exit investment positions. Mr.
Cooper will devote approximately 60% of his time to our business.
Significant Employees
We currently do not have any significant employees other than
our executive officers.
Term of Office
Our directors are appointed for a one-year term to hold office
until the next annual general meeting of our shareholders or until removed from
office in accordance with our Bylaws. Our officers are appointed by our Board of
Directors and hold office until removed by the board.
Family Relationships
There are no family relationships among our directors and
officers.
- 45 -
Board Committees
Our board of directors currently has not established an audit
committee, nominating committee, compensation committee or any other committee.
Accordingly, our board of directors presently performs the functions that would
customarily be undertaken by such committees. Our board of directors may
establish board committees in the future.
Involvement in Certain Legal Proceedings
None of our current or proposed directors or executive officers
have been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offences);
3.
being 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
4.
being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment or decision has
not been reversed, suspended, or vacated.
Shareholder Communications
Our shareholders are able to send communications to our board
of directors and officers at our offices set forth on the cover page of this
Information Statement.
EXECUTIVE COMPENSATION
The following table sets forth information relating to the
compensation paid to our Chief Executive Officer (who was our only executive
officer and director) during fiscal 2007, 2006 and 2005:
Summary Compensation Table
|
|
|
|
|
|
Non-
|
Non-
|
|
|
|
|
|
|
|
|
Equity
|
qualified
|
|
|
|
|
|
|
|
|
Incentive
|
Deferred
|
|
|
|
|
|
|
|
|
Plan
|
Compen-
|
All Other
|
|
Name and
|
|
|
|
Stock
|
Option
|
Compen-
|
sation
|
Compen-
|
|
Principal
|
Fiscal
|
Salary
|
Bonus
|
Awards
|
Awards
|
sation
|
Earnings
|
sation
|
Total
|
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Mitchell
|
2007
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Johnson
|
2006
|
28,018
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
28,018
|
|
2005
|
65,793
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
3,103
(1)
|
68,896
|
(1)
|
Comprised of the issuance of ordinary shares of InfraBlue
Ltd. which were subsequently exchanged for shares of our common stock upon
completion of our acquisition of InfraBlue Ltd.
|
- 46 -
Consulting Agreements
We have entered into a consulting agreement with Konstantinos
Kardiasmenos dated November 27, 2007 pursuant to which he has agreed to act as a
director and chief executive officer of our Company, and provide business
advisory services to us, for a period of two years. The agreement may be
extended for a further twelve months by mutual written agreement of the parties.
In consideration for his services, we have agreed to issue to him 4,000,000
shares of our common stock. The agreement may be terminated by either party
giving one months written notice to the other party: (i) if either party
commits any material breach of its obligations under the agreement not cured
within a reasonable period of time, or (ii) if either party commits an act of
insolvency.
We have entered into a consulting agreement dated November 27,
2007 with David Cooper, pursuant to which he has agreed to act as a director and
chairman of our board, and to provide scientific advice in connection with the
business of the evaluation, acquisition and development of patents in the field
of health care drug treatments, for a period of two years. The agreement may be
extended for a further twelve months by mutual written agreement of the parties.
In consideration for his services, we have agreed to issue to him 2,000,000
shares of our common stock. The agreement may be terminated by either party
giving one months written notice to the other party: (i) if either party
commits any material breach of its obligations under the agreement not cured
within a reasonable period of time, or (ii) if either party commits an act of
insolvency.
The foregoing description of the consulting agreements with
Messrs. Kardiasmenos and Cooper does not purport to be complete, and is
qualified in its entirety by reference to each agreement, a copy of each of
which has been attached as an exhibit hereto.
Compensation of Directors
We do not pay our directors any fees or other compensation for
acting as directors. We have not paid any fees or other compensation to any of
our directors for acting as directors to date.
Stock Option Grants
We have not in the past granted any stock options or other
equity awards to our directors or officers.
Exercises of Stock Options and Year-End Option Values
None of our directors or officers exercised any stock options
(i) during our fiscal year ended September 30, 2007, or (ii) since the end of
our fiscal year on September 30, 2007.
Outstanding Stock Options
Our directors and officers do not hold any options to purchase
any shares of our common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as described below, none of the following parties has,
since our date of incorporation, 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:
- 47 -
-
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 member of the immediate family (including spouse, parents, children,
siblings and in- laws) of any of the above persons.
Rebecca Poncini
Rebecca Poncini, our initial director and officer, acquired
500,000 shares of our common stock at a price of $0.001 per share. Rebecca
Poncini paid a total purchase price of $500 for these shares on April 8, 2005.
Mitchell Johnson
Mitchell Johnson is a former officer and director of our
Company. Prior to our acquisition of InfraBlue Ltd., Mr. Johnson was the
managing director and a shareholder of InfraBlue Ltd. Under the share exchange
agreement whereby we acquired InfraBlue Ltd. as our wholly-owned subsidiary, Mr.
Johnson received 1,416,868 shares in our company in exchange for his shares in
InfraBlue Ltd. Upon the acquisition of InfraBlue Ltd., Mr. Johnson was appointed
to replace Ms. Poncini as our sole officer and director.
Mitchell Johnson was a party to an employment agreement with
InfraBlue Ltd. dated April 1, 2004. In addition, pursuant to a letter agreement
dated April 1, 2004, as amended on July 20, 2004, InfraBlue Ltd. appointed Mr.
Johnson as a director and issued 245,000 ordinary shares to him. These shares
were exchanged for 1,416,868 shares of our common stock upon completion of our
acquisition of InfraBlue Ltd. These agreements were terminated effective
November 27, 2007.
InfraBlue Inc. (formerly PublicLock Inc.)
InfraBlue Ltd.s initial corporate activities were funded by
InfraBlue Inc. InfraBlue Ltd. entered into a loan agreement dated October 4,
2004 with InfraBlue Inc. whereby InfraBlue Inc. agreed to extend a secured loan
facility to InfraBlue Ltd. in the maximum amount of £150,000 ($267,405, based on
the foreign exchange rate on October 4, 2004 of $1.7827:£1.0000) . As at April
28, 2005, InfraBlue Ltd.s outstanding debt to InfraBlue Inc. under the secured
loan facility was £83,450 ($159,065, based on a foreign exchange rate on April
28, 2005 of $1.9061:£1.0000) . InfraBlue Ltd. and InfraBlue Inc. entered into a
debt settlement agreement on April 28, 2005 whereby the outstanding debt was
settled by the issuance to InfraBlue Inc. of 1,075,000 Ordinary A shares in the
capital of InfraBlue Ltd. at a deemed value of £0.0776 per share. InfraBlue Inc.
subsequently exchanged these shares for shares of our common stock upon
completion of the share exchange agreement on August 31, 2005.
InfraBlue Inc. received 10,004,820 shares of our common stock
on August 31, 2005 upon the completion of our acquisition of InfraBlue Ltd.
pursuant to the Share Exchange Agreement. These shares were issued by us in
exchange for InfraBlue Inc.s shares in InfraBlue Ltd.
InfraBlue Inc. had acquired the InfraBlue Technology effective
September 12, 2003 for £150,000 ($248,400, based on the foreign exchange rate on
September 12, 2003 of $1.6560:£1.0000) in cash consideration. InfraBlue Inc.
subsequently granted licenses to four entities on October 6, 2003, with each
entity acquiring rights to exploit the InfraBlue Technology and commercialize
the IRMA device in a different territory. On October 13, 2003, InfraBlue Inc.
sold its rights in the InfraBlue Technology and the IRMA device to the Keydata
Partnership, subject to the four licenses. InfraBlue Inc. entered into an
agreement with the Keydata Partnership dated November 1, 2005 to purchase from
Keydata Partnership a wholly-owned subsidiary that then held the intellectual
rights in the InfraBlue Technology and the IRMA
- 48 -
device. The wholly-owned subsidiary was a newly incorporated
company that was incorporated for the purpose of completing the sale of the
intellectual rights in the InfraBlue Technology and the IRMA device by Keydata
Partnership to InfraBlue Inc.
We purchased the InfraBlue Technology from InfraBlue Inc. on
November 30, 2005 pursuant to an intellectual property acquisition agreement
between us and InfraBlue Inc. dated November 1, 2005. This acquisition followed
the purchase by InfraBlue Inc. of the intellectual property from the Keydata
Partnership. We issued 10,000,000 shares of our common stock to InfraBlue Inc.
in consideration of these intellectual property assets. InfraBlue Inc. in turn
paid as consideration 10,000,000 shares of our common stock to the Keydata
Partnership in connection with the acquisition of the subsidiary of the Keydata
Partnership that held the InfraBlue Technology. The determination of the number
of shares issued for the intellectual property assets and subsequently
transferred to the Keydata Partnership was determined by arms-length negotiation
with the Keydata Partnership as the lowest number of shares of our common stock
that the Keydata Partnership was prepared to accept as consideration for the
transfer of the intellectual property assets. The Keydata Partnership was not
one of our shareholders at the time of the negotiation of this transaction. Mr.
Paul Carter was the representative of the Keydata Partnership in the negotiation
of this transaction. Mr. Carter is not a director, officer or shareholder of
either InfraBlue Inc. or InfraBlue.
Oxon Life Science Limited
In connection with the acquisition of the Assets of Oxon, we
issued to Oxon shares of our common stock representing approximately 11% of our
issued and outstanding shares.
Other Transactions
The following are related party transactions as of June 30,
2007:
(a)
|
The amounts due to related parties of $156,001 (September
30, 2006 - $56,135) are non-interest bearing and due on demand. Included
in due to related parties are $5,221 (September 30, 2006 - $4,879) owing
to a corporate shareholder of the Company, $33,808 (September 30, 2006 -
$15,917) owing to two separate companies with a director in common with a
corporate shareholder of the Company and $116,972 (September 30, 2006 -
$35,339) owing to a company with an officer in common with a corporate
shareholder of the Company;
|
|
|
|
(b)
|
by employment agreement dated April 1, 2004 and amended
July 20, 2004, the Company agreed to pay Mitchell Johnson, the Managing
Director, $51,618 (GBP28,000) per annum plus 236,143 common shares every
three months to a maximum of 1,416,868 shares. As at September 30, 2005,
the maximum common shares have been issued. During the period ended June
30, 2007, $5,112 (June 30, 2006 - $28,867) was paid to the Managing
Director in cash; and
|
|
|
|
(c)
|
During the period ended June 30, 2007, the Company paid
or accrued the following fees:
|
|
|
|
|
(i)
|
$8,783 (June 30, 2006 - $7,992) for rent to a company
with directors in common with a corporate shareholder of the Company;
and
|
|
|
|
|
(ii)
|
$88,884 (June 30, 2006 - $Nil) for consulting services to
a company with an officer in common with a corporate shareholder of the
Company.
|
The above transactions, occurring in the normal course of
operations, are measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
- 49 -
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 100,000,000 shares of
common stock, with a par value of $0.001 per share, and 5,000,000 shares of
preferred stock, with a par value of $0.001 per share. As of November 30, 2007,
there were 128,897,568 shares of our common stock issued and outstanding held by
112 stockholders of record. We have not issued any shares of preferred stock.
Common Stock
Our common stock is entitled to one vote per share on all
matters submitted to a vote of the stockholders, including the election of
directors. Except as otherwise required by law or as provided in any resolution
adopted by our board of directors with respect to any series of preferred stock,
the holders of our common stock will possess all voting power. Generally, all
matters to be voted on by stockholders must be approved by a majority (or, in
the case of election of directors, by a plurality) of the votes entitled to be
cast by all shares of our common stock that are present in person or represented
by proxy, subject to any voting rights granted to holders of any preferred
stock. Holders of our common stock representing one-percent (1%) of our capital
stock issued, outstanding and entitled to vote, represented in person or by
proxy, are necessary to constitute a quorum at any meeting of our stockholders.
A vote by the holders of a majority of our outstanding shares is required to
effectuate certain fundamental corporate changes such as liquidation, merger or
an amendment to our articles of incorporation. Our articles of incorporation do
not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding series of
preferred stock created by our board of directors from time to time, the holders
of shares of our common stock will be entitled to such cash dividends as may be
declared from time to time by our board of directors from funds available
therefor.
Subject to any preferential rights of any outstanding series of
preferred stock created from time to time by our board of directors, upon
liquidation, dissolution or winding up of our company, the holders of shares of
our common stock will be entitled to receive pro rata all of our assets
available for distribution to such holders.
In the event of any merger or consolidation of our company with
or into another company in connection with which shares of our common stock are
converted into or exchangeable for shares of stock, other securities or property
(including cash), all holders of our common stock will be entitled to receive
the same kind and amount of shares of stock and other securities and property
(including cash).
Holders of our common stock have no pre-emptive rights, no
conversion rights and there are no redemption provisions applicable to our
common stock.
Preferred Stock
Our board of directors is authorized by our articles of
incorporation to divide the authorized shares of our preferred stock into one or
more series, each of which shall be so designated as to distinguish the shares
of each series of preferred stock from the shares of all other series and
classes. Our board of directors is authorized, within any limitations prescribed
by law and our articles of incorporation, to fix and determine the designations,
rights, qualifications, preferences, limitations and terms of the shares of any
series of preferred stock including but not limited to the following:
(a)
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the rate of dividend, the time of payment of dividends,
whether dividends are cumulative, and the date from which any dividends
shall accrue;
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(b)
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whether shares may be redeemed, and, if so, the
redemption price and the terms and conditions of redemption;
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(c)
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the amount payable upon shares of preferred stock in the
event of voluntary or involuntary liquidation;
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(d)
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sinking fund or other provisions, if any, for the
redemption or purchase of shares of preferred stock;
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(e)
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the terms and conditions on which shares of preferred
stock may be converted, if the shares of any series are issued with the
privilege of conversion;
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(f)
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voting powers, if any, provided that if any of the
preferred stock or series thereof shall have voting rights, such preferred
stock or series shall vote only on a share for share basis with our common
stock on any matter, including but not limited to the election of
directors, for which such preferred stock or series has such rights;
and
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(g)
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subject to the above, such other terms, qualifications,
privileges, limitations, options, restrictions, and special or relative
rights and preferences, if any, of shares or such series as our board of
directors may, at the time so acting, lawfully fix and determine under the
laws of the State of Nevada.
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Dividend Policy
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain future earnings, if any, to finance the
expansion of our business. As a result, we do not anticipate paying any cash
dividends in the foreseeable future.
Warrants
As of the date hereof, there are 433,592 warrants to purchase
our securities outstanding. We may issue additional warrants in the future.
Options
As of the date hereof, there are no options to purchase our
securities outstanding. We may, however, in the future grant such options and/or
establish an incentive stock option plan for our directors, employees and
consultants.
Convertible Securities
We had issued convertible promissory notes to two investors in
the aggregate principal amount of $100,500. The convertible promissory notes
were issued in respect of an advance to us by the first investor of $50,000 on
February 22, 2006 and an advance to us by the second investor of $50,500 on
March 13, 2006. Each convertible promissory note and related interest was
converted into an aggregate of 433,592 units on February 28, 2007 at a
conversion rate of $0.25 per unit, with each unit being comprised of one share
of one common stock and one common stock purchase warrant exercisable at a price
of $0.50 per share for the first note and $0.25 per share for the second note
for one year.
Other than as provided herein, we have not issued and do not
have outstanding any securities convertible into shares of our common stock or
any rights convertible or exchangeable into shares of our common stock as of the
date hereof. We may issue such convertible or exchangeable securities in the
future.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Shares of our common stock are quoted on the OTC Bulletin Board
under the symbol NXGB. Our common stock became eligible for trading on the OTC
Bulletin Board on September 29, 2006.
There were no high and low bid prices for our common stock
during fiscal year ended September 30, 2006 and up to August 31, 2007. The
following table sets forth the high and low bid prices for our shares of common
stock for the periods indicated. These quotations reflect inter-dealer prices
without retail mark-up, mark-down or commissions and may not reflect actual
transactions.
Month Ended
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High Bid
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Low Bid
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September 2007
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$0.35
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$0.20
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October 2007
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$0.39
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$0.15
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Holders of Our Common Stock
As at November 30, 2007, we had 112 registered holders of our
common stock.
Dividends
There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:
1.
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We would not be able to pay our debts as they become due
in the usual course of business; or
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2.
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Our total assets would be less than the sum of our total
liabilities plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving the
distribution.
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We have not declared any dividends and we do not plan to
declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The 14,000,000 post-split shares of our common stock issued
pursuant to the Asset Purchase Agreement to Oxon were issued in an offshore
transaction (as defined in Rule 902 under Regulation S under the Securities Act)
in reliance on Regulation S under the Securities Act, based upon representations
made by Oxon.
Registration Rights
We have not granted registration rights with respect to any
securities we have issued and outstanding.
- 52 -
Equity Compensation Plans
We do not have any equity compensation plans as of the date of
this Current Report.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings
and, to our knowledge, none are threatened or contemplated.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Staley, Okada & Partners, Chartered Accountants (Staley,
Okada), resigned as the principal independent registered public accounting firm
of the Company effective January 16, 2007. In view of this resignation, the
Company engaged Dale Matheson Carr-Hilton LaBonte, Chartered Accountants, as its
principal independent registered public accounting firm effective January 22,
2007. The decision to change its principal independent registered public
accounting firm was approved by the Companys board of directors.
The report of Staley, Okada dated November 2, 2006 on the
consolidated balance sheets of the Company as at September 30, 2006 and 2005 and
the related consolidated statements of changes in stockholders deficiency,
operations, and cash flows for each of the years ended September 30, 2006 and
2005 and the period from incorporation (February 18, 2004) to September 30,
2006, did not contain an adverse opinion or disclaimer of opinion, nor was it
modified as to uncertainty, audit scope, or accounting principles, other than to
state that there is substantial doubt as to the ability of the Company to
continue as a going concern.
In connection with the audit of the period from incorporation
(February 18, 2004) to September 30, 2006 through to the date of their
resignation, there were no disagreements between the Company and Staley, Okada
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements if not resolved
to the satisfaction of Staley, Okada would have caused them to make reference
thereto in their report on the Companys audited consolidated financial
statements.
The Company has provided Staley, Okada with a copy of the
foregoing disclosures and requested in writing that Staley, Okada furnish it
with a letter addressed to the Securities and Exchange Commission stating
whether or not they agree with such disclosures. The Company received the
requested letter from Staley, Okada wherein they have confirmed their agreement
to the Companys disclosures. A copy of Staley, Okadas letter has been filed as
an exhibit to our Current Report on Form 8-K filed January 22, 2007.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons under Nevada law or otherwise, we have been advised that the opinion of
the Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Our officers and directors are indemnified as provided by the
Nevada Revised Statutes (the NRS) and our Bylaws.
- 53 -
Under the NRS, director immunity from liability to a company or
its shareholders for monetary liabilities applies automatically unless it is
specifically limited by a companys articles of incorporation that is not the
case with our articles of incorporation. Excepted from that immunity are:
1.
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a willful failure to deal fairly with the company or its
shareholders in connection with a matter in which the director has a
material conflict of interest;
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2.
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a violation of criminal law (unless the director had
reasonable cause to believe that his or her conduct was lawful or no
reasonable cause to believe that his or her conduct was
unlawful);
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3.
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a transaction from which the director derived an improper
personal profit; and
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4.
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willful misconduct.
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Our Bylaws provide that we will indemnify our directors and
officers to the fullest extent not prohibited by Nevada law; provided, however,
that we may modify the extent of such indemnification by individual contracts
with our directors and officers; and, provided, further, that we shall not be
required to indemnify any director or officer in connection with any proceeding
(or part thereof) initiated by such person unless:
1.
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such indemnification is expressly required to be made
bylaw;
|
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2.
|
the proceeding was authorized by our Board of
Directors;
|
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3.
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such indemnification is provided by us, in our sole
discretion, pursuant to the powers vested us under Nevada law;
or
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4.
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such indemnification is required to be made pursuant to
the bylaws.
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Our Bylaws provide that we will advance all expenses incurred
to any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was our director or officer, or is or was serving at our request as a director
or executive officer of another company, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request. This advance of expenses is to be made upon receipt of an
undertaking by or on behalf of such person to repay said amounts should it be
ultimately determined that the person was not entitled to be indemnified under
our bylaws or otherwise.
Our Bylaws also provide that no advance shall be made by us to
any officer in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made: (a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding; or (b) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision- making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to our best interests.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
against liability under the Securities Act, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
- 54 -
REPORTS TO SECURITY HOLDERS
You may read any materials filed with the Securities and Exchange
Commission (the SEC) at its principal office in Washington, D.C.
Copies of such materials may be obtained from the Public Reference Room of the
SEC, at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. The
SEC also maintains a web site at http://www.sec.gov that contains reports, proxy
statements and information regarding registrants that file electronically with
the Commission, including the Company.