Attached files
| file | filename |
|---|---|
| EX-32.1 - EX-32.1 - BIOFIELD CORP \DE\ | v194964_ex32-1.htm |
| EX-31.1 - EX-31.1 - BIOFIELD CORP \DE\ | v194964_ex31-2.htm |
| EX-32.2 - EX-32.2 - BIOFIELD CORP \DE\ | v194964_ex32-2.htm |
| EX-31.1 - EX-31.1 - BIOFIELD CORP \DE\ | v194964_ex31-1.htm |
UNITED
STATES SECURITIES AND
EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended June 30, 2010
Commission File No:
0-27848
BIOFIELD
CORP.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
13-3703450
|
|
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
|
|
175 Strafford Avenue, Suite 1, Wayne,
PA
|
19087
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(215) 972-1717
(Registrant’s
telephone number, including area code)
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 30 days:Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No
¨
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
definition of accelerated filer and large accelerated filer in Rule 12b-12 of
the Exchange Act (Check one):
|
Large Accelerated Filer
|
¨
|
Accelerated Filer
|
¨
|
|
|
Non-Accelerated
Filer
|
¨
|
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 ¨ No x
AS of
July 30, 2010, THERE WERE 40,558,699 SHARES OF COMMON STOCK OUTSTANDING AND
12,300,000 SHARES OF VOTING PREFERRED STOCK OUTSTANDING.
PART
I
ITEM
1. FINANCIAL STATEMENTS
BIOFIELD
CORP.
(A
Development Stage Company)
BALANCE
SHEETS
|
June 30,
|
December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
(UNAUDITED)
|
||||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
$ | - | $ | - | ||||
|
PROPERTY
AND EQUIPMENT - Net
|
3,127 | 3,822 | ||||||
|
TOTAL
ASSETS
|
$ | 3,127 | $ | 3,822 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 4,098,464 | $ | 3,653,615 | ||||
|
Due
to affiliate
|
329,686 | 329,686 | ||||||
|
Advances
from stockholder
|
2,616,870 | 2,616,871 | ||||||
|
Notes
payable
|
2,491,790 | 2,491,790 | ||||||
|
Line
of credit
|
418,920 | 418,920 | ||||||
|
Total
current liabilities
|
9,955,730 | 9,510,881 | ||||||
|
Commitments
and contigencies
|
||||||||
|
STOCKHOLDERS’
DEFICIT:
|
||||||||
|
Preferred
stock, $.001 par value, 12,300,000 shares authorized, 12,300,000 shares
issued and outstanding at June 30, 2010 and December 31, 2009,
respectively
|
12,300 | 12,300 | ||||||
|
Common
stock, $.01 par value, 60,000,000 shares authorized, 40,558,699 shares
issued at June 30, 2010 and December 31,
2009 respectively
|
405,587 | 405,587 | ||||||
|
Treasury
stock - 3,100,000 shares
|
(3,100 | ) | (3,100 | ) | ||||
|
Stock
subscriptions
|
3,849 | 3,849 | ||||||
|
Additional
paid-in capital
|
76,202,559 | 76,202,559 | ||||||
|
Accumulated
deficit during development stage
|
(86,573,799 | ) | (86,128,254 | ) | ||||
|
Total
stockholders’ deficit
|
(9,952,604 | ) | (9,507,059 | ) | ||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$ | 3,127 | $ | 3,822 | ||||
See
accompanying notes to financial statements.
2
BIOFIELD
CORP.
(A
Development Stage Company)
UNAUDITED
STATEMENTS OF OPERATIONS
|
Period October 16,
|
||||||||||||||||||||
|
Three Months Ended
|
Six Months Ended
|
1987 (Date of
|
||||||||||||||||||
|
June 30,
|
June 30,
|
Inception) Through
|
||||||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
June 30, 2010
|
||||||||||||||||
|
REVENUE
|
$ | - | $ | - | $ | - | $ | - | $ | 244,522 | ||||||||||
|
COST
OF SALES
|
||||||||||||||||||||
|
Cost
of goods sold
|
- | - | - | - | 95,111 | |||||||||||||||
|
Loss
on write down of inventory
|
- | - | - | - | 693,500 | |||||||||||||||
|
GROSS
PROFIT
|
- | - | - | - | (544,089 | ) | ||||||||||||||
|
OPERATING
EXPENSES:
|
||||||||||||||||||||
|
Research
and development
|
- | - | - | - | 40,481,889 | |||||||||||||||
|
Selling,
general, and administrative
|
178,048 | 31,864 | 287,695 | 159,441 | 43,265,416 | |||||||||||||||
|
Impairment
of intangible assets
|
- | - | - | - | 194,268 | |||||||||||||||
|
Gain
on disposition of fixed assets
|
- | - | - | - | (8,084 | ) | ||||||||||||||
|
Total
operating expenses
|
178,048 | 31,864 | 287,695 | 159,441 | 83,933,489 | |||||||||||||||
|
OTHER
INCOME (EXPENSE):
|
||||||||||||||||||||
|
Interest
income
|
- | - | - | - | 2,476,721 | |||||||||||||||
|
Interest
expense
|
- | (149,804 | ) | (157,850 | ) | (299,783 | ) | (4,362,537 | ) | |||||||||||
|
Amortization
of shares issued to lenders and other finance costs
|
- | - | - | - | (405,523 | ) | ||||||||||||||
|
Royalty
income and other
|
- | - | - | - | 214,867 | |||||||||||||||
|
Net
other income (expense)
|
- | (149,804 | ) | (157,850 | ) | (299,783 | ) | (2,076,472 | ) | |||||||||||
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
(178,048 | ) | (181,668 | ) | (445,545 | ) | (459,224 | ) | (86,554,051 | ) | ||||||||||
|
PROVISION
FOR INCOME TAXES
|
- | - | - | - | (19,749 | ) | ||||||||||||||
|
NET
INCOME (LOSS)
|
$ | (178,048 | ) | $ | (181,668 | ) | $ | (445,545 | ) | $ | (459,224 | ) | $ | (84,669,849 | ) | |||||
|
NET
INCOME (LOSS) PER SHARE:
|
||||||||||||||||||||
|
Basic
and Diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||||||
|
WEIGHTED-AVERAGE
SHARES
|
||||||||||||||||||||
|
Basic
and Diluted
|
40,558,699 | 31,453,866 | 40,558,699 | 28,672,615 | ||||||||||||||||
See accompanying notes to financial
statements.
3
BIOFIELD
CORP. ( A DEVELOPMENT STAGE COMPANY)
UNAUDITED
STATEMENTS OF CASH FLOWS
|
Period October 16,
|
||||||||||||
|
1987 (Date of
|
||||||||||||
|
Six Months Ended
|
Inception) Through
|
|||||||||||
|
June 30,
|
June 30,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net
income (loss)
|
$ | (445,545 | ) | $ | (459,224 | ) | $ | (86,573,799 | ) | |||
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
694 | 694 | 2,764,679 | |||||||||
|
Amortization
of premiums on short-term investments
|
- | - | 156,692 | |||||||||
|
Amortization
of deferred financing costs
|
- | - | 2,129,643 | |||||||||
|
Loss
on disposal of property and equipment
|
- | - | 194,102 | |||||||||
|
Loss
on license and settlement agreements
|
- | - | 49,026 | |||||||||
|
Loss
on abandonment of patent applications
|
- | - | 303,234 | |||||||||
|
Loss
on inventory write-down
|
- | - | 693,500 | |||||||||
|
Impairment
of intangible assets
|
- | - | 194,268 | |||||||||
|
Vendor
settlements
|
- | - | (77,257 | ) | ||||||||
|
Noncash
compensation
|
- | 154,000 | 3,533,451 | |||||||||
|
Gain
from disposition of fixed assets
|
- | - | (159,473 | ) | ||||||||
|
Interest
paid in common stock
|
- | - | 575,260 | |||||||||
|
Commisions
and discounts on sale of common stock
|
- | - | 96,919 | |||||||||
|
Write
down of third party debt
|
(304,851 | ) | - | (304,851 | ) | |||||||
|
Loan
repayment default payable in shares of common stock
|
- | - | 350,000 | |||||||||
|
Consultancy
fees paid in options
|
- | - | 242,762 | |||||||||
|
Issuances
of common stock for outstanding stock obligations, services and debt
conversion
|
- | - | 10,091,669 | |||||||||
|
Changes
in assets and liabilities:
|
- | |||||||||||
|
Notes
receivable
|
- | - | 11,004 | |||||||||
|
Inventories
|
- | - | (693,500 | ) | ||||||||
|
Prepaids
|
- | - | (131,816 | ) | ||||||||
|
Due
to affiliate
|
- | - | 337,921 | |||||||||
|
Accounts
payable and accrued liabilities
|
749,702 | 140,414 | 4,793,717 | |||||||||
|
Net
cash used in operating activities
|
- | (164,116 | ) | (61,422,849 | ) | |||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Acquisitions
of property and equipment
|
- | - | (2,610,691 | ) | ||||||||
|
Costs
incurred for patents and patent applications
|
- | - | (782,527 | ) | ||||||||
|
Proceeds
from sale of property and equipment
|
- | - | 294,748 | |||||||||
|
Purchases
of short-term investments
|
- | - | (26,476,638 | ) | ||||||||
|
Proceeds
from sale and maturity of short-term investments
|
- | - | 26,406,378 | |||||||||
|
Net
cash used in investing activities
|
- | - | (3,168,730 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Bank
overdraft
|
- | 4,747 | 9,912 | |||||||||
|
Repayments
of capitalized lease obligations
|
- | - | (82,234 | ) | ||||||||
|
Proceeds
from issuance of preferred stock - net
|
- | - | 22,341,892 | |||||||||
|
Proceeds
from common stock subscription
|
- | - | 35,203,258 | |||||||||
|
Proceeds
from exercise of common stock
|
- | - | 298,546 | |||||||||
|
Proceeds
from issuance of notes payable
|
- | - | 1,676,058 | |||||||||
|
Proceeds
from borrowings on line of credit
|
- | - | 76,740 | |||||||||
|
Notes
financing costs
|
- | 40,420 | 342,916 | |||||||||
|
Advances
from stockholder and related party
|
- | 118,949 | 3,493,156 | |||||||||
|
Repayments
of advances from stockholder
|
- | - | (1,874,728 | ) | ||||||||
|
Repurchases
of common stock held in treasury
|
- | - | (3,100 | ) | ||||||||
|
Proceeds
from notes payable issued to stockholder and related party
|
- | - | 2,784,430 | |||||||||
|
Net
cash provided by financing activities
|
- | 164,116 | 64,266,846 | |||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
- | - | 100,530 | |||||||||
|
EFFECT
OF EXCHANGE RATE CHANGES
|
- | - | (111,497 | ) | ||||||||
|
BEGINNING
OF PERIOD
|
- | - | - | |||||||||
|
END
OF PERIOD
|
$ | - | $ | - | $ | (10,967 | ) | |||||
See
accompanying notes to financial statements.
4
BIOFIELD
CORP.
(A
Development Stage Company)
UNAUDITED
STATEMENTS OF CASH FLOWS (continued)
|
Period October 16,
|
||||||||||||
|
Six Months Ended
|
1987 (Date of
|
|||||||||||
|
June 30,
|
Inception) Through
|
|||||||||||
|
2010
|
2009
|
June 30, 2010
|
||||||||||
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||||||
|
Cash
paid for interest
|
$ | - | $ | - | $ | 857,003 | ||||||
|
Cash
paid for taxes
|
$ | - | $ | - | $ | - | ||||||
|
SUPPLEMENTAL
SCHEDULE FOR NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
|
Common
stock shares issued for penalty for non-payment of notes payable on
maturity
|
$ | - | $ | - | $ | 17,949 | ||||||
|
Repayment
of debt by shareholders
|
$ | - | $ | - | $ | 1,200,000 | ||||||
|
Write
down of old payables and debt to other income
|
$ | 1,914,950 | $ | - | $ | 1,914,950 | ||||||
|
Issuance
of common stock for services, conversion of accrued liabilities and
debt
|
$ | 3,534,584 | $ | 1,256,001 | $ | 14,956,255 | ||||||
|
Capital
contributions from forgiveness of debt by related parties
|
$ | 2,000,158 | $ | - | $ | 2,000,158 | ||||||
See
accompanying notes to financial statements.
5
BIOFIELD
CORP.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE
1 – ORGANIZATION
Organization
Biofield
Corp. (the “Company”) is a development stage medical technology company which
was incorporated to acquire interests in various business operations and assist
in their development. Since inception, the Company had engaged in several
business ventures and activities, many of which were not
consummated.
The
financial statements are presented on the basis that the Company is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties. The Company has incurred
operating losses since its inception. This condition raises substantial doubt as
to the Company’s ability to continue as a going concern as such continuance is
dependent upon the Company’s ability to raise sufficient capital. Management’s
plans regarding these matters, with the objective of improving liquidity and
sustaining profitability in future years encompass the following:
|
|
¨
|
Move
from a development stage entity to an operating
entity;
|
|
|
¨
|
Settling
legacy outstanding obligations;
|
|
|
¨
|
Continued
review of all expenditures in order to minimize
costs;
|
|
|
¨
|
Raise
additional working capital as necessary;
and
|
|
|
¨
|
Developing
a strategic business plan for successful operations in future.
.
|
In the
absence of additional financing the Company may be unable to satisfy past due
obligations. Management believes that the actions presently being taken in terms
of developing strategic business plan and raising capital provide the
opportunity to improve liquidity and generate sources to work towards achieving
revenue streams and sustain profitability. However, there are no assurances that
management’s plans will be achieved. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. Ultimately, the Company must achieve profitable operations if it is
to be a viable entity.
As of
June 30, 2010, the Company was in the process of converting balances due under
notes payable and debt arrangements to related and third parties by exchanging
issuance of shares of common stock. Effective April 1, 2010, all
amounts due under loans and advances to third parties and related parties were
put on non-interest accrual status pursuant to the resolution of the board of
directors, as these balances have not been claimed by third parties or related
parties. Amounts due under these loans and advances are unsecured, due on demand
and do not follow any specific repayment terms.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States of America.
Significant accounting policies are as follows:
Interim Review
Reporting
The
accompanying unaudited financial statements of Biofield Corp. (the "Company")
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC). 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 pursuant to such SEC rules and regulations. Nevertheless,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 2009 Annual Report as filed on Form 10K.
6
In the
opinion of management, all adjustments, including normal recurring adjustments
necessary to present fairly the financial position of the Company with respect
to the interim financial statements and the results of its operations for the
interim period ended June 30, 2010, have been included. The results of
operations for interim periods are not necessarily indicative of the results for
a full year.
Basis of
Presentation
The
Company has not produced any significant revenue from its principal business and
has been inactive since 2007. The Company is in the process of developing a
strategic business plan to venture in to new business activities and these
financial statements have been prepared pursuant to the provisions of FASB
Accounting Standards Codification (ASC) 915 Development Stage
Entities.
Going
Concern
The
financial statements for the period ended June 30, 2010 have been prepared on a
going concern basis which contemplates the realization of assets and settlement
of liabilities and commitments in the normal course of business. The Company has
a past history of recurring losses from operations and has an accumulated
deficit of $86,573,799 and working capital deficiency of $9,955,730 as of June
30, 2010. Additionally, the Company will require additional funding
to execute its future strategic business plan. Successful business operations
and its transition to attaining profitability is dependent upon obtaining
additional financing and achieving a level of revenue adequate to support its
cost structure. The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. This basis of
accounting contemplates the recovery of the Company’s assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
7
Recent Accounting Standard
Updates
Certain
Accounting Standard Updates (ASUs) that are effective prior to or after June 30,
2010, are not expected to have a significant effect on the Company’s financial
position or results of operations.
NOTE
3 - SUBSEQUENT EVENTS
The
Company has not made provision for income taxes in the years ended December 31,
2009 and prior, since the Company has the benefit of net operating losses
carried forward in these periods.
Due to
uncertainties surrounding the Company’s ability to generate future taxable
income to realize deferred income tax assets arising as a result of net
operating losses carried forward, the Company has not recorded any deferred
income tax asset as of December 31, 2009 and prior to the year
2009.
The
Company is subject to taxation in the United States and certain state
jurisdictions. The Company’s tax years for 2002 and forward are subject to
examination by the United States and applicable state tax authorities due to the
carry forward of unutilized net operating losses.
At June
30, 2010, the Company had federal net operating loss carry-forwards totaling
approximately $84 million, which will begin expiring in years 2010 through 2029
subject to its eligibility as determined by respective tax regulating
authorities. . However, substantial portion of the net operating loss carry
forwards are not utilizable, as a result of the limitations imposed by Section
382 of the Internal Revenue Code, due to ownership changes in 1992, 1995, 1997,
1999 and 2006. To the extent that these losses and general business
credits are utilizable, they may be offset against future U.S. taxable income,
if any, during the carry forward period.
On July
27, 2010, the Company entered into an exclusive agreement for license and
transfer of intellectual property (the “IP Agreement”) with Dr. Mark L. Faupel,
Ph. D. (“Dr. Faupel”). The IP Agreement states that the Company shall pay
$5,000,000 in incremental sums over the course of five years to Dr. Faupel for
the exclusive rights in and to technology relating to electrical methods,
apparatuses, and devices for the in vivo and in vitro screening and diagnosis of
disease states (the “Licensed Technologies”). The IP Agreement provides
that the Company shall pay to Faupel $180,000 by July 30, 2011; $180,000 on or
before July 30, 2012, $240,000 on or before July 30, 2013; $2,000,000 on or
before July 30, 2014; $2,400,000 on or before July 30, 2015. Upon the
complete payment of the $5,000,000 by the Company to Faupel, Faupel shall take
all steps necessary to transfer and assign title of the Licensed Technologies
and all information relating to the development of the Licensed
Technologies.
On July
27, 2010, the Company entered into an agreement for re-engineering and
manufacture of new BDS device (the “BDS Agreement”) with Guided Therapeutics,
Inc. (“GT”). Under the BDS Agreement, the Company agrees to pay between
$400,000 and $500,000, in incremental sums over the course of the work schedule,
to GT in consideration for GT’s reasonable efforts to develop a new Biofield BDS
Device (the “Work”). Payment of the initial $250,000 by the Company to GT
must be made no later than January 30, 2011. Within sixty (60) days of the
initial payment and GT’s commencement of Work, the Company shall pay an
additional $125,000 to GT. Within thirty (30) days of the scheduled
inspection, the Company shall pay the balance of the monies then due to
GT.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The
following discussion and analysis should be read in conjunction with our
Financial Statements and Notes thereto appearing elsewhere in this
document.
Certain
statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report are
forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future
financial performance. In some cases, forward-looking statements can
be identified by terminology such as "may," "will",
"should", "expect", "anticipate", "intend", "plan", "believe",
"estimate", "potential", or "continue", the negative of these terms or other
comparable terminology. These statements involve a number of
risks and uncertainties. Actual events or results may differ
materially from any forward-looking statement as a result of various factors,
including those described above and in the Company’s last Form 10-K for 2009
under "Risk Factors". We have no obligation to release publicly the
result of any revisions to any of our "forward-looking statements" to reflect
events or circumstances that occur after the date of this Report or to reflect
the occurrence of other unanticipated events.
8
Biofield
Corp. is a development-stage medical technology company which has developed an
advanced medical device and associated diagnostic system (the Biofield
Diagnostic System or “BDS”) to assist in detecting breast cancer, has secured
exclusive marketing rights to products for treatment of oral and genital herpes
and a diagnostic test for cervical cancer, and seeks to secure marketing rights
for other complimentary products.
In March
of 2006, MacKay Group Limited (“MKG”) acquired control of the
Company. Prior to the date MKG acquired control of the Company, the
Company was focused on securing approval of the BDS from the U.S. Food and Drug
Administration (“U.S. FDA”). These efforts were unsuccessful and led
to MKG’s acquisition of control of the Company. Under MKG, the
Company has focused on developing markets outside the United States with
significant populations of women, where MKG has significant industry and
government relationships, where the need for the BDS appears compelling, and
where the regulatory hurdles are not as burdensome. These markets
include China (including Hong Kong and Macau), India, the Philippines,
Indonesia, Malaysia, and other parts of Asia. The Company also
intends to develop markets in Mexico, Latin America, the Caribbean, Africa,
Europe, and the Middle East. As the Company’s resources permit, the
Company will seek U.S. FDA approval of the BDS. The Company believes its
strategy of developing foreign markets will provide additional clinical data and
research and development (including as it may pertain to screening and other
cancers) which will facilitate its efforts to secure U.S. FDA
approval.
Most of
2006 was consumed in connection with the series of transactions which resulted
in acquiring control of the Company. Unless indicated otherwise
below, any material events in 2006 related to events, which predated 2006 and
the MKG acquisition, and which were reported in detail in the Company’s prior
SEC’s filings including its Form 10-KSB for fiscal year ending December 31, 2005
filed May 30, 2006
In 2007,
the Company moved its facilities, inventory and operations from Alpharetta,
Georgia to King of Prussia, Pennsylvania and transferred and reorganized
voluminous amounts of clinical and technological data and financial records,
resumed filing annual and quarterly reports with the Securities and Exchange
Commission (“SEC”) and brought all of its filings current, converted
approximately $2 million of the Company’s debt to equity stock, and began a
number of foreign market initiatives which are discussed in Item 6 of the
Company’s Form 10-KSB for fiscal year ending December 31, 2007 filed April 15,
2008.
In 2008,
the Company recommitted its efforts to secure CE mark certification for BDS,
recruited a new management team, opened an office in Hong Kong, in conjunction
with the Company’s controlling stockholder, MKG, , moved its US offices from
King of Prussia, Pennsylvania to Philadelphia, Pennsylvania, and embarked on a
strategy to assemble a portfolio of medical technology products that can
be distributed using the same sales channels the Company intends to use to
market the BDS.
In
furtherance of its strategy to develop revenue while pursuing the CE mark for
BDS, the Company obtained exclusive, worldwide distribution rights from NeuroMed
Devices, Inc. for NeuroMed’s OraCalm device, for oral herpes, and Vira Calm
device, for genital herpes. In early 2009, the Company obtained
exclusive, worldwide distribution rights (excluding Belgium) from Valibio, SA
for ValiRx plc’s Human Papilloma Virus (HPV) diagnostic test for cervical
cancer, ValioRx’s Hypergenomics™ and Nucleosomics™ cancer diagnostics products,
and any other cancer diagnostic products developed during the term of the
Distribution Agreement The Company expects to begin marketing the OraCalm
device, for oral herpes, via direct web based/internet marketing, retail,
wholesale and through physicians and hospitals in 2009.
On June
22, 2010, the Company entered into a Reserve Equity Financing Agreement (the
“REF Agreement”) with AGS Capital Group, LLC (“AGS”), pursuant to which AGS committed to
purchase, from time to time over a period of two years, shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”) for cash
consideration up to $2 million, subject to certain conditions and
limitations.
The
Company is also required to pay AGS a fee of $120,000 in shares of restricted
common stock of which 3,000,000 were issued upon signing the REF Agreement and
the balance owed are issuable upon the Company increasing the authorized shares
of common stock.
For a
period of two years from the effectiveness of a registration statement filed
pursuant to the RRA Agreement, the Company may, from time to time, at its
discretion, and subject to certain conditions that it must satisfy, draw down
funds under the REF Agreement by selling shares of its Common Stock to AGS up to
an aggregate of $2 million, subject to various limitations that may reduce the
total amount available to the Company. The purchase price of these shares will
be discounted by 50% to 90% of the lowest closing bid price during the five
consecutive trading days after the Company gives AGS a notice of an advance of
funds (an “Advance”), under the REF Agreement. If the stock price is
below $.11, then the discount will be 50%. If the stock price is between
$.11 and $.19, then the discount will be 20%. If the stock price is above
$.20, then the discount will be 10%.
The
Company’s ability to require AGS to purchase its Common Stock is subject to
various conditions and limitations. The maximum amount of each Advance is equal
to the greater of $10,000 or 500% of the product of the average of the daily
trading volume of the 10 trading days immediately preceding the Advance Date
multiplied by the average of the 10 daily closing prices immediately preceding
the advance date. In addition, a minimum of five calendar days must
elapse between each notice of Advance and AGS’ ownership may not exceed 9.99% of
the then outstanding shares of common stock.
9
The REF
Agreement contains representations and warranties by us and AGS which are
typical for transactions of this type. The REF Agreement also
contains a variety of covenants by us which are typical for transactions of this
type. The REF Agreement obligates the Company to indemnify AGS for certain
losses resulting from a misrepresentation or breach of any representation or
warranty made by us or breach of any obligation of ours. AGS also indemnifies
the Company for similar matters.
LIQUIDITY
AND CAPITAL RESOURCES
We have
financed our operations since inception almost entirely by the issuance of our
securities, interest income on the then unutilized proceeds from these issuances
and with loans made directly, or guaranteed and collateralized, by Dr. David
Long and certain of his affiliates (until the MKG Acquisition) and by MKG (after
the MKG Acquisition).
At June
30, 2010, we had a working capital deficiency of $9,955,730 and accumulated
deficit of $86,573,799, respectively.
Our
assets totaled $3,127at June 30, 2010. There were no cash and cash equivalents
at June 30, 2010.
Operating
Activities
During
the six months ended June 30, 2010, we had a net loss of $445,545, compared to
net loss of $459,224 for the Six months ended June 30, 2009, a decrease of
$13,679 or 3.0%. This decrease was mainly attributable to lower interest expense
during the Six months ended June 30, 2010, offset by an increase in general and
administrative expenses. During the Six months ended June 30, 2010, there were
no cash utilized in operating activities, compared to $164,116 for the Six
months ended June 30, 2009, a decrease of $164,116 or 100%. The decrease in 2010
was primarily due to noncash compensation of $154.000 in the six months ended
June 30, 2009, offset in part by an increase in accounts payable and accrued
liabilities of $444,851 as compared to an increase of $140,414 for the same
period in 2009.
During
the six months ended June 30, 2010 and 2009, we had depreciation and
amortization in connection with operating activities of $694,
respectively.
Investing
Activities
There
were no investing activities in the six months ended June 30, 2010 and
2009.
Financing
Activities
There
were no financing activities in the six months ended June 30, 2010. During the
six months ended June 30, 2009, we had net cash provided by financing activities
of $164,116, primarily from proceeds from advances from stockholders and related
party, as well as notes financing costs.
While we
have raised capital to meet our working capital and financing needs in the past,
additional financing is required in order to meet our current and projected cash
flow deficits from operations and development. We are seeking financing in the
form of equity in order to provide the necessary working
capital. There is no guarantee that we will be successful in raising
the funds required, if we do raise funds that funds will be provided on
acceptable terms..
By
adjusting its operations and development to the level of capitalization,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next twelve months. However, if we are not successful
in generating sufficient liquidity from operations or in raising sufficient
capital resources, on terms acceptable to us, this could have a material adverse
effect on our business, results of operations, liquidity and financial
condition.
The
independent auditors report, on our December 31, 2009 financial statements,
states that our recurring losses raise substantial doubts about our ability to
continue as a going concern.
10
RESULTS
OF OPERATIONS
Comparison
of the three month period ended June 30, 2010 with the three month period ended
June 30, 2009.
There
were no sales in the three months ended June 30, 2010 and 2009.
There
were no costs of sales in the three months ended June 30, 2010 and
2009.
The total
operating expenses for the three months ended June 30, 2010 and 2009 were
$178,048 and $31,864 respectively, representing an increase of $146,184 or 459%.
This increase is due primarily to accrued expenses in 2010.
There
were no interest expense for the three months ended June 30, 2010 since all
amounts due under notes payable and other advances were put on non-interest
accrual status per resolution of the board of directors and for the same period
in 2009, there was $149,804 of interest expense recorded, representing a
change of $149,804 or 100.0%.
As a
result of the foregoing, we incurred a net loss of $178,048 for the three months
ended June 30, 2010, compared to $181,668 for the three months ended June 30,
2009, a decrease of $3,620, or 2.0%.
Comparison
of the six month period ended June 30, 2010 with the six month period ended June
30, 2009.
There
were no sales in the six months ended June 30, 2010 and 2009. There were no
costs of sales in the six months ended June 30, 2010 and 2009.
The total
operating expenses for the six months ended June 30, 2010 and June 30, 2009 were
$287,695 and $159,441 respectively, representing an increase of $128,254 or 80%.
This increase is due primarily to accrued expenses in 2010. Total
operating expenses for these six months were related to selling, general and
administrative expenses.
Interest
expense for the six months ended June 30, 2010 and June 30, 2009 were $157,850
and $299,783, representing a decrease of $141,933 or 47%. The decrease is
a result of putting amounts due under loans and advances on
non-interest accrual status effective April 1, 2010.
As a
result of the foregoing, we incurred a net loss of $445,545 for the six months
ended June 30, 2010, compared to a net loss of $459,224 for the six
months ended June 30, 2009, a decrease of $13,679 or
3.0%.
OFF-BALANCE
SHEET ARRANGEMENTS
None.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
Applicable.
ITEM
4T. CONTROLS AND PROCEDURES
Our chief
executive officer and principal financial officer (the “Certifying Officers”) is
responsible for establishing and maintaining disclosure controls and procedures
for our company. The certifying officer has concluded (based upon his evaluation
of these controls and procedures as of the end of the period covered by this
report) that our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in this report is accumulated and
communicated to management, including our certifying officer as appropriate, to
allow timely decisions regarding required disclosure.
As of
June 30, 2010, an evaluation was performed under the supervision and with the
participation of our management, including our certifying officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, our certifying officer concluded that
our disclosure controls and procedures were not effective. Specifically,
our certifying officer determined that the following control deficiencies
existed as of June 30, 2010 and management is addressing these matters
vigorously during 2010:
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·
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Policies
and Procedures for the Financial Close and Reporting Process — Currently
there are no written policies or procedures that clearly define the roles
in the financial close and reporting process. The various roles and
responsibilities related to this process should be defined, documented,
updated and communicated. Failure to have such policies and procedures in
place amounts to a material weakness to the Company’s internal controls
over its financial reporting
processes.
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11
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·
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Accounting
and Finance Personnel Weaknesses – We do not have a full-time accounting
staff due to relatively small nature of operations and we do not have the
required infrastructure of meeting the higher demands of being a U.S.
public company. Due to the limitations relating to our accounting staff,
we have limitations in the segregation of duties throughout the financial
reporting processes. Due to the pervasive nature of this issue, the lack
of segregation of duties amounts to a significant deficiency or material
weakness to the Company’s internal controls over its financial reporting
processes. This deficiency is mitigated due to the fact that the Company
was not very active since 2007 and did not have significant business
operations since then.
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In light
of the foregoing, once we have the adequate funds, management plans to develop
the following additional procedures to help address these control deficiencies.
The Company will create and refine a structure in which critical accounting
policies and estimates are identified, and together with other complex areas,
are subject to review by other members of management as well as the Company’s
independent accountant. We also plan to enhance and test our quarter-end and
year-end financial close process. Additionally, our board of directors will
increase its review of our disclosure controls and procedures. We also intend to
develop and implement policies and procedures for the financial close and
reporting process, such as identifying the roles, responsibilities,
methodologies, and review/approval process; we also hope to implement a detailed
financial close plan and enhanced and timelier review of manual journal entries,
account reconciliations, estimates and judgments. Finally, it is our intention
to engage professionals on an as needed basis to assist the Company in the
financial reporting process. We believe these actions will remediate the control
deficiencies by focusing additional attention and resources in our internal
accounting functions. However, these control deficiencies will not be considered
remediated until the applicable remedial controls operate for a sufficient
period of time and management has concluded, through testing, that these
controls are operating effectively and even then, we cannot assure you that this
will be sufficient. We may be required to expend additional resources to
identify, assess and correct any additional weaknesses in disclosure or internal
control. The Company cannot make assurances that it will not identify additional
control deficiencies in its internal control over financial reporting in the
future.
The
presence of these control deficiencies does not mean that any misstatement has
occurred in our financial statements, but only that our present controls might
not be adequate to detect or prevent a material misstatement in a timely
manner.
The
Company believes that the financial statements in this report accurately present
the Company’s financial position and results of operations as of the date of
such unaudited financial statements.
There
have been no changes in the Company's internal controls over financial reporting
that occurred during the Company's last fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
Our
management, including the Certifying Officer, does not expect that our
disclosure controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Because of these inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As
required by Rule 13a-15(d), the certifying officer, also conducted an evaluation
of Biofield's internal controls over financial reporting to determine whether
any changes occurred during the first quarter that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting. During the preparation of the Company's financial
statements as of and for the year ended December 31, 2009, the Company concluded
that the then current system of disclosure controls and procedures needed
improvement, partly due to the transition to new management, facilities, and
auditors. As a result of this conclusion, the Company initiated changes in
internal control. It should be noted that any system of controls, however well
designed and operated, can provide only reasonable, and not absolute, assurance
that the objectives of the system will be met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
future events.
12
PART
II. OTHER
INFORMATION
Item
1. Legal
Proceedings
As result
of the Company’s arrangement with third party to help manage the Company’s
operations and development of the BDS, the Company has forwarded much of what
was in its King of Prussia office to the third party’s certified manufacturing
and regulatory facilities near Atlanta, Georgia, and seeks to vacate the King of
Prussia office. The landlord of the Company’s King of Prussia office
has subsequently filed for and obtained a judgment in
confession. Counsel, for both sides, is in discussions to work out a
settlement terminating the lease. The monthly rent is approximately
$3,500 and it is a 3 year lease. As of April 10, 2009, the Company had worked
out all remaining issues with the Landlord and final payment on the lease has
been made.
The
Company was also advised that a judgment in the amount of $16,228 has been
entered against it and its former officer, Michael Yom. The Company’s
counsel was advised of this matter only after judgment was entered and is
considering appropriate relief. The Complaint only states that this
company sued for the price of goods sold and/or services provided on a book
account, although the Company’s present management is unaware of what goods
and/or services were allegedly provided to this company.
The
Company filed an action seeking a declaratory judgment and injunctive relief
against William R. Dunavant in the Eastern District of
Pennsylvania. The Company is seeking a determination that Company has
no obligation to pay the remuneration contemplated by the consulting agreement
with Mr. Dunavant and injunctive relief to prevent Mr. Dunavant from continuing
to violate the confidentiality and restrictive covenants in the consulting
agreement.
We are
not a party to any other pending legal proceeding which is not routine
litigation incidental to our business or which involves a claim for damages
exceeding 10% of our current assets, nor are we aware of any current proceeding
concerning us that a governmental authority may be contemplating.
Item
1A. RISK FACTORS
In
addition to other information set forth in this Report, you should carefully
consider the risk factors previously disclosed in “Item 1A to Part 1” of our
Annual Report on Form 10-K for the year ended December 31,
2009. There were no material changes from the risk factors during the
six months ended June 30, 2010.
Item
2. Unregistered Sale of
Equity Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior
Securities
None.
Item
4.
Reserved
None
Item
6. Exhibits and Reports on
Form 8-K
Exhibits
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31.
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Rule
13a-14(a)/15d-14(a) Certifications
|
*31.1
Certification of David Bruce Hong Chief Executive Officer
*31.2
Certification of David Bruce Hong Chief Financial Officer
13
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32.
|
Section
1350 Certifications
|
*32.1
Certification of Bruce Hong Chief Executive Officer
*32.2
Certification of Bruce Hong Chief Financial Officer
14
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, there unto duly
authorized.
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BIOFIELD
CORP.
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Date: August
23, 2010
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By:
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/s/ David Bruce
Hong
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David
Bruce Hong
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Chief
Executive Officer (Principal Executive Officer)
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|||
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/s/ David Bruce
Hong
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|||
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David
Bruce Hong Chief Accounting Officer
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(Principal
Financial and Accounting
Officer)
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15