Attached files
file | filename |
---|---|
EX-31.1 - SignPath Pharma, Inc. | v185118_ex31-1.htm |
EX-32.1 - SignPath Pharma, Inc. | v185118_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended: MARCH
31,
2010
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from _________ to __________
Commission
file number: 333-158474
SIGNPATH
PHARMA INC.
(Exact
name of Registrant as specified in its charter)
Delaware
|
20-5079533
|
(State
or other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization)
|
Identification
No.)
|
1375
California Road
Quakertown,
PA 18951
(Address
of principal executive offices)
(215)
538-9996
(Registrant’s
telephone number, including Area Code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. x Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). x Yes ¨ No The
Registrant has not yet transitioned into this requirement.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated file” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do not check if a smaller
reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ¨ Yes x No
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by Sections
12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. x
Yes ¨
No
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of May 14, 2010, the Company had
authorized 45,000,000 shares, $.001 par value, common stock, of which 11,340,000
shares of common stock were issued and outstanding.
SignPath
Pharma Inc.
Quarterly
Report on Form 10-Q
Period
Ended March 10, 2010
Table
of Contents
Page
|
||
PART
I . FINANCIAL INFORMATION
|
||
Item
1. Financial Statements:
|
||
Condensed
Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009
(audited)
|
3
|
|
Condensed
Statements of Operations for the three months ended March 31, 2010 and
2009 and for the period from Inception on May 15, 2006 through March 31,
2010 (unaudited)
|
4
|
|
Condensed
Statements of Stockholders’ Equity for the period from Inception on May
15, 2006 through March 31, 2010 (unaudited)
|
6
|
|
Condensed
Statements of Cash Flows for the three months ended March 31, 2010 and
2009 and for the period from Inception on May 15, 2006 through March 31,
2010 (unaudited)
|
5
|
|
Notes
to Condensed Financial Statements (unaudited)
|
7-9
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
10-16
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
16
|
|
Item
4T. Evaluation of Disclosure Controls and
Procedures
|
17
|
|
PART
II . OTHER INFORMATION
|
||
Item
1. Legal Proceedings
|
17
|
|
Item
1A. Risk Factors – Not Applicable
|
17
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
17
|
|
Item
3. Defaults Upon Senior Securities
|
18
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
18
|
|
Item
5. Other Information
|
18
|
|
Item
6. Exhibits
|
18
|
|
SIGNATURES
|
20
|
|
EXHIBIT
INDEX
|
21
|
2
SIGNPATH
PHARMA, INC
Balance
Sheets
(A
Development Stage Company)
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
(audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 263,408 | $ | 295,418 | ||||
Total
Current Assets
|
263,408 | 295,418 | ||||||
EQUIPMENT,
net
|
2,200 | 2,400 | ||||||
TOTAL
ASSETS
|
$ | 265,608 | $ | 297,818 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 141,179 | $ | 117,967 | ||||
Total
Current Liabilities
|
141,179 | 117,967 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock; $0.10 par value, 5,000,000 shares authorized 2,287
and 2,262 shares issued and outstanding,
respectively
|
229 | 226 | ||||||
Common
stock; $0.001 par value, 45,000,000 shares authorized; 11,340,000 and
11,340,000 shares issued and outstanding, respectively
|
11,341 | 11,341 | ||||||
Additional
paid-in capital
|
2,979,454 | 2,962,207 | ||||||
Deficit
accumulated during the development stage
|
(2,866,595 | ) | (2,793,923 | ) | ||||
Total
Stockholders' Equity
|
124,429 | 179,851 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 265,608 | $ | 297,818 |
The
accompanying notes are an integral part of these financial
statements.
3
SIGNPATH
PHARMA, INC
Statements
of Operations
(A
Development Stage Company)
(unaudited)
From
Inception
on
May 15, 2006
|
||||||||||||
For
the Three Months Ended
|
Through
|
|||||||||||
March
31,
|
March
31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
REVENUES
|
$ | - | $ | - | $ | - | ||||||
OPERATING
EXPENSES
|
||||||||||||
General
and administrative
|
46,327 | 54,269 | 507,738 | |||||||||
Consulting
expense
|
776 | - | 83,039 | |||||||||
Financing
expense
|
- | - | 1,063,401 | |||||||||
Legal
and professional expenses
|
4,440 | 14,511 | 242,487 | |||||||||
Licensing
expense
|
600 | 10,000 | 178,039 | |||||||||
Advertising
expense
|
- | - | 49,175 | |||||||||
Research
and development, net
|
61,313 | 78,815 | 760,278 | |||||||||
Total
Operating Expenses
|
113,456 | 157,595 | 2,884,157 | |||||||||
OPERATING
LOSS
|
(113,456 | ) | (157,595 | ) | (2,884,157 | ) | ||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Grant
income
|
40,784 | - | 81,557 | |||||||||
Interest
expense
|
- | - | (63,995 | ) | ||||||||
Total
Other Income (Expense)
|
40,784 | - | 17,562 | |||||||||
NET
LOSS BEFORE INCOME TAXES
|
(72,672 | ) | (157,595 | ) | (2,866,595 | ) | ||||||
PROVISION
FOR INCOME TAXES
|
- | - | - | |||||||||
NET
LOSS
|
$ | (72,672 | ) | $ | (157,595 | ) | $ | (2,866,595 | ) | |||
BASIC
AND DILUTED LOSS PER SHARE
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
WEIGHTED
AVERAGE NUMBER NUMBER OF SHARES OUTSTANDING
|
11,340,000 | 11,340,000 |
The
accompanying notes are an integral part of these financial
statements.
4
SIGNPATH
PHARMA, INC.
Statements
of Cash Flows
(A
Development Stage Company)
(unaudited)
From
Inception
|
||||||||||||
on
May 15, 2006
|
||||||||||||
For
the Three Months Ended
|
Through
|
|||||||||||
March
31,
|
March
31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
OPERATING
ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (72,672 | ) | $ | (157,595 | ) | $ | (2,866,595 | ) | |||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||||||
Common
stock issued with bridge financing
|
- | - | 1,139,001 | |||||||||
Depreciation
expense
|
200 | 200 | 1,800 | |||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Accounts
payable and accrued expenses
|
23,212 | - | 141,179 | |||||||||
Net
Cash Used in Operating Activities
|
(49,260 | ) | (157,395 | ) | (1,584,615 | ) | ||||||
INVESTING
ACTIVITIES
|
||||||||||||
Purchase
of equipment
|
- | - | (4,000 | ) | ||||||||
Net
Cash Used in Investing Activities
|
- | - | (4,000 | ) | ||||||||
FINANCING
ACTIVITIES
|
||||||||||||
Proceeds
from notes payable
|
- | - | 889,875 | |||||||||
Stock
offering costs paid
|
(7,750 | ) | (46,304 | ) | (444,852 | ) | ||||||
Preferred
stock issued for cash
|
25,000 | 295,000 | 1,397,000 | |||||||||
Common
stock issued for cash
|
- | - | 10,000 | |||||||||
Net
Cash Provided by Financing Activities
|
17,250 | 248,696 | 1,852,023 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
(32,010 | ) | 91,301 | 263,408 | ||||||||
CASH
AT BEGINNING OF PERIOD
|
295,418 | 181,127 | - | |||||||||
CASH
AT END OF PERIOD
|
$ | 263,408 | $ | 272,428 | $ | 263,408 | ||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||
CASH
PAID FOR:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - | ||||||
NON
CASH FINANCING ACTIVITIES:
|
||||||||||||
Preferred
stock issued for bridge financing
|
$ | $ | - | $ | 889,875 |
The
accompanying notes are an integral part of these financial
statements.
5
SIGNPATH
PHARMA, INC
Statement
of Stockholders' Equity
(A
Development Stage Company)
Deficit
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
During
the
|
Total
|
||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Development
|
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Equity
|
||||||||||||||||||||||
Balance,
Inception May 15, 2006
|
- | $ | - | - | $ | - | $ | - | $ | - | - | |||||||||||||||||
Common
stock issued to founders for cash at $0.001 per share
|
- | - | 10,000,000 | 10,000 | - | - | $ | 10,000 | ||||||||||||||||||||
Net
loss for the year ended December 31, 2006
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Balance,
December 31, 2006
|
- | - | 10,000,000 | 10,000 | - | - | 10,000 | |||||||||||||||||||||
Common
stock issued for bridge debt at $0.85 per share
|
- | - | 257,500 | 258 | 218,617 | - | 218,875 | |||||||||||||||||||||
Net
loss for the year ended December 31, 2007
|
- | - | - | - | - | (526,833 | ) | (526,833 | ) | |||||||||||||||||||
Balance,
December 31, 2007
|
- | - | 10,257,500 | 10,258 | 218,617 | (526,833 | ) | (297,958 | ) | |||||||||||||||||||
Preferred
stock issued for bridge debt at $1,000 per share
|
890 | 89 | - | - | 889,786 | - | 889,875 | |||||||||||||||||||||
Preferred
stock issued for cash at $1,000 per share
|
562 | 56 | - | - | 561,944 | - | 562,000 | |||||||||||||||||||||
Common
stock issued for bridge debt at $0.85 per share
|
- | - | 1,082,500 | 1,083 | 919,043 | - | 920,126 | |||||||||||||||||||||
Stock
offering costs
|
- | - | - | - | (270,948 | ) | - | (270,948 | ) | |||||||||||||||||||
Net
loss for the year ended December 31, 2008
|
- | - | - | - | - | (1,695,766 | ) | (1,695,766 | ) | |||||||||||||||||||
Balance,
December 31, 2008
|
1,452 | 145 | 11,340,000 | 11,341 | 2,318,442 | (2,222,599 | ) | 107,329 | ||||||||||||||||||||
Preferred
stock issued for cash at $1,000 per share
|
810 | 81 | - | - | 809,919 | - | 810,000 | |||||||||||||||||||||
Stock
offering cost
|
- | - | - | - | (166,154 | ) | - | (166,154 | ) | |||||||||||||||||||
Net
loss for the year ended
|
||||||||||||||||||||||||||||
December
31, 2009
|
- | - | - | - | - | (571,324 | ) | (571,324 | ) | |||||||||||||||||||
Balance,
December 31, 2009
|
2,262 | 226 | 11,340,000 | 11,341 | 2,962,207 | (2,793,923 | ) | 179,851 | ||||||||||||||||||||
Preferred
stock issued for cash at $1,000 per share (unaudited)
|
25 | 3 | - | - | 24,997 | - | 25,000 | |||||||||||||||||||||
Stock
offering cost (unaudited)
|
- | - | - | - | (7,750 | ) | - | (7,750 | ) | |||||||||||||||||||
Net
loss for the three months ended March 31, 2010 (unaudited)
|
- | - | - | - | - | (72,672 | ) | (72,672 | ) | |||||||||||||||||||
Balance,
March 31, 2010 (unaudited)
|
2,287 | $ | 229 | 11,340,000 | $ | 11,341 | $ | 2,979,454 | $ | (2,866,595 | ) | $ | 124,429 |
The
accompanying notes are an integral part of these financial
statements.
6
SIGNPATH
PHARMA, INC.
(A
Development Stage Company)
Notes to
the Financial Statements
March 31,
2010 and December 31, 2009
NOTE
1 - CONDENSED FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at March 31, 2010, and for all
periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's December
31, 2009 audited financial statements. The results of operations for
the period ended March 31, 2010 is not necessarily indicative of the operating
results for the full year.
NOTE
2 - GOING CONCERN
The
Company's financial statements are prepared using generally accepted accounting
principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and allow it to continue as
a going concern. The ability of the Company to continue as a going concern is
dependent on the Company obtaining adequate capital to fund operating losses
until it becomes profitable. If the Company is unable to obtain adequate
capital, it could be forced to cease operations.
In order
to continue as a going concern, the Company will need, among other things,
additional capital resources. Management's plan is to obtain such resources for
the Company by obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses and seeking equity and/or debt
financing. However management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Recent Accounting
Pronouncements
In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset de-recognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts FAS 160 (now included in
Subtopic 810-10). For those entities that have already adopted this standard,
the amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted the standard.
The Company does not expect the provisions of ASU 2010-02 to have a material
effect on the financial position, results of operations or cash flows of the
Company.
7
SIGNPATH
PHARMA, INC.
(A
Development Stage Company)
Notes to
the Financial Statements
March 31,
2010 and December 31, 2009
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements
(continued)
In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis. The Company
does not expect the provisions of ASU 2010-01 to have a material effect on the
financial position, results of operations or cash flows of the
Company.
NOTE
4 – CAPITAL STOCK
On
February 11, 2010, the Company issued 25 shares of its par value $0.10
convertible preferred stock for cash at $1,000 per share. Stock
offering costs paid in connection with this issuance totaled
$7,750.
Attached
to the 25 units of convertible preferred stock sold was a warrant, giving the
owners rights to purchase up to a total of 29,425 (or 1,177 common shares per
warrant) shares of the Company’s common stock at strike price of
$1.27 per share for a five year period.
The
warrants were valued using the Black Scholes model using the following
assumptions: stock price at valuation, $0.85; strike price, $1.27;
risk free rate 0.91%; 5 year term; and volatility of 104%. The
Company attributed $10,384 of the total $24,997 of Additional Paid-in Capital
associated with the transaction to the warrants based on the relative fair value
of the warrants.
NOTE
5 – ACCRUED LIABILITIES
Pursuant
to the applicable Codification literature, the Company has concluded it is
probable that it will pay $85,738 in liquidated damages pursuant to the
registration rights clause in certain of the securities sold in the fiscal years
2008 and 2009, the Company was required to file a registration statement by
January 27, 2009. The Company failed to do so until April 7, 2009,
resulting in liquidated damages of 2% per month of the gross proceeds, which
approximated $1.8 million as of that date. During the year ended
December 31, 2009, the Company’s registration statement covering the securities
was declared effective by the SEC. Each holder is entitled to $47.32
per share owned. The Company has resolved to pay the liquidated
damages in shares of Common Stock valued at $1.00 per share, pursuant to the
terms and provisions of the Certificate of Designation, Preferences and Rights
of Series A Convertible Preferred Stock.
8
SIGNPATH
PHARMA, INC.
(A
Development Stage Company)
Notes to
the Financial Statements
March 31,
2010 and December 31, 2009
NOTE
6 – WARRANTS
A summary
of the status of the Company's warrants as of March 31, 2010
and changes during the periods ended March 31, 2010 and December 31, 2009 and
2008 is presented below:
Date of
|
Warrant
|
Exercise
|
Value if
|
Expiration
|
||||||
Issuance
|
Shares
|
Price
|
Exercised
|
Date
|
||||||
11/25/2008
|
1,259,639
|
1.27
|
1,599,742
|
11/25/2013
|
||||||
11/26/2008
|
449,220
|
1.27
|
570,509
|
11/25/2013
|
||||||
12/31/2008
|
1,708,859
|
2,170,251
|
||||||||
3/5/2009
|
29,425
|
1.27
|
37,370
|
3/5/2014
|
||||||
3/5/2009
|
58,850
|
1.27
|
74,740
|
3/5/2014
|
||||||
3/5/2009
|
70,620
|
1.27
|
89,687
|
3/5/2014
|
||||||
3/5/2009
|
88,275
|
1.27
|
112,109
|
3/5/2014
|
||||||
3/5/2009
|
58,850
|
1.27
|
74,740
|
3/5/2014
|
||||||
3/5/2009
|
41,195
|
1.27
|
52,318
|
3/5/2014
|
||||||
4/1/2009
|
17,655
|
1.27
|
22,422
|
4/1/2014
|
||||||
6/17/2009
|
29,425
|
1.27
|
37,370
|
*
|
||||||
6/17/2009
|
29,425
|
1.27
|
37,370
|
*
|
||||||
6/17/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||
6/17/2009
|
117,700
|
1.27
|
149,479
|
*
|
||||||
7/23/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||
8/20/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||
9/9/2009
|
235,400
|
1.27
|
298,958
|
*
|
||||||
12/31/2009
|
2,662,229
|
3,381,034
|
||||||||
2/11/2010
|
29,425
|
1.27
|
37,370
|
*
|
||||||
3/31/2010
|
2,691,654
|
3,418,404
|
||||||||
*
Fifth anniversary date of the next registration statement to be
filed.
|
The
warrants were issued in connection with the Preferred Stock Offering and were
valued using the Black-Scholes model using the following
assumptions: stock price at valuation, $0.85; strike price, $1.27;
risk free rate 0.90% to 1.48%, depending on date of issuance; 5 year term; and
volatility of 104% to 115%, depending on date of
issuance.
NOTE
7 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10 Company management reviewed all material events
through the date this report was filed and there are no subsequent events to
report.
9
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Forward-Looking
Statements
Statements
contained in this Item 2. “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations” and elsewhere in this report that are not
historical or current facts may constitute “forward-looking statements” within
the meaning of such term in Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These statements relate to
future events or future predictions, including events or predictions relating to
our future financial performance, and are generally identifiable by use of the
words "may," "will," "should," "expect," "plan," "anticipate," "believe,"
"feel," "confident," "estimate," "intend," "predict," "potential" or "continue"
or the negative of such terms or other variations on these words or comparable
terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause the Company's
or its industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. Important factors to consider and
evaluate that could cause actual results to differ materially from those
predicted in any such forward-looking statements include: (i) the general
economic recession and changes in the external competitive market factors which
might impact the Company's results of operations; (ii) unanticipated working
capital or other cash requirements including those created by the failure of the
Company to adequately anticipate the costs associated with clinical trials,
manufacturing and other critical activities; (iii) changes in the Company's
business strategy or an inability to execute its strategy due to unanticipated
changes in the therapeutic drug industry; (iv) the inability or failure of the
Company's management to devote sufficient time and energy to the Company's
business; and (v) the failure of the Company to complete any or all of the
transactions described herein on the terms currently contemplated. In
light of these risks and uncertainties, many of which are described in greater
detail in the Risk Factors discussion contained in our registration statement
filed with the Securities and Exchange Commission (“SEC”), there can be no
assurance that the forward-looking statements contained in this prospectus will
in fact transpire.
Although
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance or achievements. Moreover, neither the
Company nor any other person assumes responsibility for the accuracy and
completeness of such statements. We do not undertake any duty to
update any of the forward-looking statements after the date of this report to
conform such statements to actual results or changes in our
expectations.
General
The
following discussion should be read in conjunction with the financial statements
and notes thereto included in this report. Except for the historical information
contained herein, the discussion in this report contains certain forward-looking
statements that involve risk and uncertainties, such as statements of the
Company’s plans, objectives, expectations and intentions as of the date of this
filing. The cautionary statements made above should be read as being applicable
to all related forward-looking statements wherever they appear in this
document.
10
Material
Changes in Financial Condition
March
31, 2010 as Compared With December 31, 2009
As of
March 31, 2010 and December 31, 2009, the Company had $263,408 and $295,418,
respectively, of cash on hand. The Company’s working capital
decreased from December 31, 2009, to March 31, 2010, as a result of the
Company’s net loss of $72,672 during the three months ended March 31, 2010
(“2010 Period”). The Company is a development stage company with a
limited operating history. SignPath had a deficit accumulated during
the development stage of $2,866,595, as of March 31, 2010.
Between
August 2007 and April 2008, Sign Path completed a Bridge Financing with 15
accredited investors pursuant to which it received gross proceeds of $847,500
from the sale of 10% promissory notes together with an aggregate of 1,307,500
shares of Common Stock (the “Bridge Shares”).
As of
March 31, 2010 SignPath sold 2,287 units (“Units”) of its securities at a price
of $1,000 per Unit (“Private Placement”). Each Unit consists of (i)
one share of 6.5% Series A Convertible Preferred Stock convertible into 1,177
shares of common stock (equivalent to $.85 per share of common stock) following
the August 10, 2009 effective date of its Registration Statement (the “Effective
Date”) subject to adjustment, and (ii) one Warrant to purchase 1,177 shares of
common stock at $1.27 per share for a five-year period following the Effective
Date. The Company received gross proceeds of $2,286,875 in the
Private Placement and incurred stock offering costs of $444,852 related to the
offering. As part of that offering, the Company attributed $747,968
of the total $2,286,646 of additional paid-in capital associated with the
transaction to the warrants based on the relative fair value of the
warrants.
The
Company had net cash used in operating activities of $49,260 during three months
ended March 31, 2010 primarily as a result of a net loss of $72,672 offset, in
part, by an increase in accounts payable and accrued expenses of
$23,212. The Company had net cash used in operating activities of
$157,395 during the three months ended March 31, 2009 (“2009 Period”) primarily
as a result of a net loss of $157,595.
The
Company had net cash provided by financing activities of $17,250 during the 2010
Period as a result of the receipt of $25,000 of gross proceeds from the sale of
Preferred Stock in the Private Placement, as compared with $248,696 of net
proceeds during the 2009 Period as a result of the sale of $295,000 of Preferred
Stock in the Private Placement.
As a
result of the foregoing, the Company’s cash at March 31, 2010 decreased by
$32,010.
11
The
Company has no agreements, arrangements or understandings with any officer,
director or shareholder as to any future financing, either equity or
debt. The Company expects to continue to incur losses for the
foreseeable future and it is possible the Company may never reach
profitability. Therefore, the Company will require additional capital
resources and financing to implement its business plan and continue its
operations. The Company’s current burn rate for salaries, research
programs and professional fees averages about $15,000 per
month. Thus, it is expected that the Company currently has sufficient
cash on hand to operate for at least one year from the August 10, 2009 Effective
Date of its registration statement. Management believes it has enough
funds to complete its pre-clinical trials. If the Company receives
favorable results, Management believes it will have the ability to raise
additional funds to complete INDs. In view of general economic
conditions, there can be no assurance that any additional financing will be
available to us, that any affiliate will provide additional investments in the
Company or that adequate funds for our operations will otherwise be available
when needed or on terms acceptable to us.
The
financial statements included in this prospectus have been prepared in
conformity with generally accepted accounting principles that contemplate our
continuance as a going concern. The Company has had no revenues and
has generated losses from operation. As set forth in Note 1 to the
audited Financial Statements, the continuation of the Company as a going concern
is dependant upon the continued financial support from its shareholders, the
ability to raise equity or debt financing, and the attainment of profitable
operations for the Company’s planned business. The financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
Material
Changes in Results of Operations
Three
Months Ended March 31, 2010, as Compared with the Three Months Ended March 31,
2009.
The
Company does not expect to receive any revenues prior to 2012. Total
operating expenses during the three months ended March 31, 2010 (the “2010
Period”) decreased to $113,456 as compared with $157,595 during the three months
ended March 31, 2009 (the “2009 Period”). General and administrative expenses
decreased from $54,269 in the 2009 Period to $46,327 in the 2010 Period
primarily as a result of a reduction in payroll expenses.
A
research grant of approximately $80,000 from the Michael J. Fox Parkinson’s
Disease Foundation to measure parenteral liposomal curcumin passage across the
blood brain barrier and focal distributions in mice/rat brains in collaboration
with D. S. Chiou at the University of Western Ontario, Canada. Data,
to date, has revealed intravenous curcumin localized in specific brain regions
associated with Parkinson’s Disease and memory processing. As of
March 31, 2010, the Company had expended $40,784 to manufacture naocurcumin for
this study and is funding animal studies with Dr. Chiou with the remaining
funds. This is reflected on the Company’s Statement of Operations as
$40,784 of grant income during the 2010 Period.
Legal and
professional expenses decreased from $14,511 in the 2009 Period to $4,440 in the
2010 Period as a result of the completion of the Company’s business plan during
the fiscal year 2008. Legal and professional expense in 2009 related
to the Company’s Registration Statement being declared effective by the
SEC.
The
Company paid $600 in licensing fees and $4,440 of legal and professional
expenses in the 2010 Period as compared with $10,000 of license fees and $14,511
of legal and professional fees in the 2009 Period.
12
The
Company paid an aggregate of $61,313 in research and development fees in the
2010 Period as compared to $78,815 in the 2009 Period. This
included $25,834 to University of Texas, MD Anderson Cancer Center (“UTMDACC”)
for non-clinical and mouse pre-clinical non-GLP studies of lipsomal
curcumin. Payments in the 2009 Period included $175 paid to Surmodics
Pharmaceuticals, Inc. (f/n/a Brookwood Pharmaceuticals, Inc.) (“Surmodics”) for
polymer for the production of nanocurcumin under the Johns Hopkins University
Agreement (the “JHU Agreement”) and for the production of clinical GMP
grade curcumin under the UTMDACC agreement.
The
Company also paid Topaz Technology, Inc. (“Topaz”) an aggregate of $8,000 during
the 2009 Period to provide FDA/EMEA Compliance and validation audits relating to
the synthetic curcumin manufacturing facility in India.
The
amount paid for research and development in the 2010 Period consisted of
payments for overhead and patent fees for non-clinical studies and pre-clinical
studies of the nanocurcumin compound and to produce polymer under the JHU
Agreement for animal studies of nanocurcumin. During the 2009 Period,
the Company paid UTMDACC for non-clinical and mouse pre-clinical non-GLP studies
of lipsomal curcumin. It also includes expenses relating to
development of depotcurcumin, a slow release
formulation. Depotcurcumin was originally made at UNT under non-GLP
conditions from circumin extract (and PLGA, a chemical surrounding the curcumin)
originally purchased from a U.S. chemical supplier, Sigma Aldrich Fine Chemicals
(“SAFC”).
As a
result of the foregoing, the Company had a net loss of $72,672 in the 2010
Period as compared with a net loss of $157,595 in the 2009
Period. This translates to a loss per share of $(0.01) in 2009
compared to $(0.01) in 2008.
We have
identified the policies outlined below as critical to our business operations
and an understanding of our results of operations. The list is not intended to
be a comprehensive list of all of our accounting policies. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with no need for
management’s judgment in their application. The impact and any associated risks
related to these policies on our business operations is discussed throughout
Management’s Discussion and Analysis of Financial Condition and Results of
Operations where such policies affect our reported and expected financial
results. Note that our preparation of the financial statements requires us to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.
Basis
of Presentation
These
consolidated financial statements and related notes are presented in accordance
with accounting principles generally accepted in the United States, and are
expressed in U.S. dollars. The Company’s fiscal year-end is December
31.
13
Use
of Estimates
The
preparation of these consolidated financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company regularly
evaluates estimates and assumptions related to valuation and amortization
policies on property and equipment and valuation allowances on deferred income
tax losses. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
Revenue
Recognition
As of the
date of this disclosure, the Company has yet to recognize
revenues. As the Company continues to develop and implement its
business plan, revenue from the performance of services or sale of products will
be recognized in accordance with FASB codification standards. Revenue
will be recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is provided, and collectability
is assured.
Basic
and Diluted Net Income (Loss) Per Share
The
Company computes net income (loss) per share in accordance with the FASB
codification standards. The standard requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing Diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted the FASB
codification regarding the required tax asset benefit computations for net
operating losses carried forward. The potential benefits of net operating losses
have not been recognized in these consolidated financial statements because the
Company cannot be assured it is more likely than not it will utilize the net
operating losses carried forward in future years.
14
Stock-Based
Compensation
The
Company records stock-based compensation in accordance with FASB codification
standards, using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. Equity instruments issued to employees and the cost of the services
received as consideration are measured and recognized based on the fair value of
the equity instruments issued.”
Plan
of Operations
The
Company’s current focus is on the manufacture and preclinical development of its
lead curcumin formulations (intravenous liposomal curcumin, oral and intravenous
nanocurcumin) with a view toward filing two IND applications with the
FDA. The Company’s product candidates are still in the pre-clinical
development phase.
The
Company believes that a novel pharmaceutical preparation with enhanced
absorption of the active compound with resistance to hepatic inactivation could
potentially have greater clinical efficacy than the oral
versions. The laboratory and oral administration studies by other
researchers to date suggest that curcumin has high potency. The
Company believes that an alternate route for administering this compound, such
as the Company’s parenteral (taken into the body other than through the
digestive canal) formulation, could be more effective at lower
dosages. SignPath intends to develop a parenteral liposomal
formulation, and a nanoparticle formulation, nanocurcumin, to overcome the
limitations of the oral form.
SignPath
believes that the dual development and comparison of liposomal curcumin and
nanocurcumin could expose potential differences in biological effects and
distribution to different tissues. The Company intends to manufactures good
manufacturing practice (GMP) grade of liposomal curcumin and
nanocurcumin. Both formulations will require outsourcing production
to one or more commercial facilities. Our initial goals are to obtain
sufficient material for in vitro and animal analysis and to develop these
formulations in order to submit INDs to the FDA. Determination of safety,
dosage, and efficacy of these formulations in a quantifiable manner will permit
us to pursue clinical registration trials for a variety of malignant diseases.
Following submission of the INDs, the Company plans to initially run Phase I
studies with both of the parenteral formulations in patients with treatment
refractory malignant disease. Subsequently, if the Phase I trials are
successful, the Company plans to seek FDA authorization to run Phase II trials
in selected malignancies.
15
Liposomal
Curcumin: The Company has agreements with contract
manufacturers for the manufacture, chemistry, and controls for supplies of the
drugs to be tested. Liposomal curcumin is manufactured by our
contract manufacturer, Polymun, Inc. Initial quantities of GMP grade
liposomal curcumin to conduct preclinical studies to corroborate previously
published data from other researchers were obtained from Sigma Aldrich Fine
Chemicals (“SAFC”) or from Sabinsa. Final production of liposmal
curcumin GMP was completed at Polymun in Vienna, Austria during
2009. Using lipocurc, anti-cancer activity without toxicity in human
colon and pancreatic cancer xenograft models was published. Following
the determination of safety and the optimum dosage and schedule in the most
sensitive of the three species, we will be able to estimate starting dosages for
Phase I trials in humans. We plan to outsource corroborative studies
of liposomal absorption, distribution, metabolism, and excretion (ADME), and
pharmacokinetics in rats with the aim of estimating optimum dosage schedules, as
well as dosage and safety in mice, rats and dogs to satisfy IND regulations to
GLP laboratories in M.D. Anderson Cancer Center in Houston, Texas.
Nanocurcumin: The
Company intends to obtain commercial volumes of purified curcumin from third
party manufacturers, SAFC and/or Sabinsa, in quantities suitable to satisfy
preclinical and clinical demands. The Company believes that the
manufacture of liposomal curcumin and nanocurcumin can also be scaled up as
necessary since these additional substances are readily available from
commercial sources utilizing established production technologies. We plan to
outsource nanocurcumin pre-clinical development to M.D. Anderson. We
will continue non-clinical non-clinical and pre-clinical analyses of
nanocurcumin at the NCI Nanocharacterization laboratory. The
nanocurcumin program will be managed by M.D. Anderson through the filing of the
Company’s IND. However, we intend to develop direct injection
nanocurc, a new clinical entity at Johns Hopkins Cancer Center for preventive
therapy of inducted curcumin in situ in rats. Nanocurc, a parenteral
formulation of nanocurcumin in human pancreatic cancer xenografts in nude mice
has demonstrated anti-cancer effects. This formulation has activity
against breast cancer-DCIS and passes the blood brain barrier. During
late 2010, we intend to conduct a European Phase I dose funding in Parkinson’s
Disease free volunteers in collaboration with Polymun, Vienna,
Austria. Upon completion, we will also continue studies of
nanocurcumin, PLGA-nanocurcumin and lipsomal curcumin against L-DOPA induced
dyskinesias in dogs. We will measure inhibiting effects of curcumin
on disease progression in Parkinson’s Disease patients at the University of
Western Ontario, Canada. Contracts with these institutions will be initiated
upon receipt of manufactured nanocurcumin.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
In
accordance with the provision of Item 305 of Regulation S-K, the Company, as a
smaller reporting company, is not required to make disclosure under this
item.
16
Item
4T. Controls and Procedures.
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, our management has
validated the effectiveness of our disclosure controls and procedures, as such
term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the
Exchange Act, as of March 31, 2010. Based on this evaluation, our
principal executive officer and principal financial officer have concluded that,
as of the end of such period, our disclosure controls and procedures were
ineffective to ensure that (i) information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules
and forms and (ii) our disclosure and controls are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. This conclusion is based on the fact
that due to limited resources, the Company is unable to maintain adequate
segregation of duties and does not have an audit committee.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the period ended March 31, 2010, that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
I. OTHER
INFORMATION
Item 1. Legal
Proceedings.
As of the
date of this Quarterly Report on Form 10-Q, we are not a party to any legal
proceedings.
Item
1A. Risk Factors
In
accordance with the requirements of Form 10-Q, the Company, as a
smaller reporting company, is not required to make disclosure under this
item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
During
the three-month period between January 1, 2010 and March 31, 2010, Registrant
sold 1 unit (the “Units”), of its securities at a price of $1,000 per Unit or
$25,000. Each Unit consists of (i) one share of 6.5% Series A
Convertible Preferred Stock convertible into 1,177 shares of common stock
(equivalent to $.85 per share of common stock) subject to adjustment, and (ii)
one Warrant to purchase 1,177 shares of common stock at $1.27 per share for a
five-year period following the Effective Date of its registration
statement. The Company received gross proceeds of $25,000 and paid
10% sales commissions of $2,500 to Meyers Associates, L.P. the Company’s
placement agent.
The Units
were sold to 1 accredited investor who was a customer of the placement
agent. The Company claimed an exemption from registration pursuant to
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder, based upon subscription agreements executed by each
investor.
17
The net
proceeds of the offering were used for working capital and research and
development towards filing an investigational new drug application to commence
clinical trials.
As
required by Rule 463 under the Securities Act, the Company has not received any
proceeds under its initial registration statement (No. 333-158474) declared
effective by the SEC on August 10, 2009.
Item
3. Defaults
Upon Senior Securities.
None.
Item
4. Submission
of Matters to a Vote of Security Holders.
None.
Item 5. Other
Information.
None.
Item 6. Exhibits.
Exhibits.
Set forth
below is a list of the exhibits to this quarterly report on Form
10-Q.
Exhibit
Number
|
Description
|
|
3.1
|
Certificate
of Incorporation of the registrant (1)
|
|
3.2
|
Certificate
of Designation, Preferences and Rights of Series A Convertible Preferred
Stock (1)
|
|
3.3
|
By-Laws
of the registrant (1)
|
|
3.4
|
Amended
and Restated Certificate of Incorporation of the registrant dated August
2, 2006 (1)
|
|
3.5
|
Certificate
of Amendment of the registrant dated May 27, 2008 (1)
|
|
4.1
|
Form
of Common Stock Certificate (1)
|
|
4.2
|
Form
of Common Stock Purchase Warrant (1)
|
|
4.3
|
Form
of Bridge Note
(1)
|
18
4.4
|
Form
of Registration Rights Agreement (1)
|
|
4.5
|
Form
of Subscription Agreement (1)
|
|
31.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
(1) Incorporated
by reference to the Company’s Registration Statement on Form S-1 (Registration
No. 333-158474, declared effective on August 10, 2009.
19
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May
14, 2010
|
SIGNPATH
PHARMA INC.
|
|
By:
|
/s/ Lawrence Helson
|
|
Dr.
Lawrence Helson, Chief Executive
Officer
and Chief Financial Officer
(Principal
Executive Officer and Principal
Financial
Officer)
|
20
SignPath
Pharma Inc.
Quarterly
Report on Form 10-Q
Quarter
Ended March 31, 2010
EXHIBITS
Exhibit
Number
|
Description
|
|
31.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
21