Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 000-30603
HIV-VAC, INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0876846
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Laurel Blvd,
Collingwood, Ontario Canada L9Y 5A8
-----------------------------------
(Address of principal executive offices, Including zip code)
(705) 446-7242
--------------
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 90 days. Yes |_| No |X|
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 (Section
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, as
defined by Rule 12b-2 of the Exchange Act: (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by a check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act. Yes |_| No |X|
The number of shares of Common Stock outstanding was 10,430,652 as of September
2, 2010.
HIV-VAC INC.
(A Development Stage Company)
INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET AS OF DECEMBER 31, 2004 (UNAUDITED) 3
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003
PERIOD FROM JANUARY 10, 1997 (DATE OF INCEPTION) TO
DECEMBER 31, 2004 (UNAUDITED) 4
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 AND
PERIOD FROM JANUARY 10, 1997 (DATE OF INCEPTION) TO
DECEMBER 31, 2004 (UNAUDITED) 5-6
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 7-11
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTATIVE AND QUALATIVE DISCLOSURE ABOUT MARKET RISK 13
ITEM 4. CONTROLS AND PROCEDURES 13
PART II-- OTHER INFORMATION 15
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 1A RISK FACTORS 15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. REMOVED OR RESERVED 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS 15
Exhibit 31.1
Exhibit 32.1
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HIV-VAC, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
ASSETS
December 31, September 30,
2004 2003
------------- -------------
Current Assets
Cash and equivalents $ 2,625 $ 2,609
Prepaid expenditure -- 22,105
------------- -------------
Total current assets 2,625 24,714
------------- -------------
Furniture and equipment, net 7,193 7,434
------------- -------------
Other Assets
Intangible assets, net 96,357 100,211
------------- -------------
Total assets $ 106,175 $ 132,359
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accrued liabilities:
Accounts Payable 337,127 317,137
Accrued Liabilities 53,500 47,000
Advances from related parties 520,413 515,094
------------- -------------
Total Current Liabilities 911,040 879,231
------------- -------------
Stockholders' Equity (Deficit)
Preferred stock, $0.01 par value;
10,000,000 shares authorized Series A,
non-preferential; 10,000 issued and
Outstanding 100 100
Series B, convertible, non-preferential;
1,000,000 and -0- shares issued and
outstanding, respectively 10,000 10,000
Common stock, $0.001 par value;
500,000,000 shares authorized;
9,831,669 and 9,831,669 shares issued
and outstanding, respectively 9,832 9,832
Additional paid in capital 6,435,926 6,435,926
Deficit accumulated during the
development stage (7,192,018) (7,153,064)
Treasury stock, at cost; 1,016 common stock
and 700,000 Preferred Stock, Series B (8,767) (8,767)
Accumulated other comprehensive loss (59,938) (40,899)
------------- -------------
Total stockholders' equity (deficit) (804,505) (746,872)
------------- -------------
Total liabilities and
stockholders' equity (deficit) $ 106,175 $ 132,359
============= =============
See accompanying notes to unaudited condensed financial statements.
3
HIV-VAC, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED DECEMBER 31, 2004, 2003 AND FOR THE PERIOD FROM
JANUARY 10, 1997 (INCEPTION) TO DECEMBER 31, 2004
Period from
January 10,
1997
Quarter Quarter (Inception)
Ended Ended to
December 31, December 31, December 31,
2004 2003 2004
------------ ------------ ------------
Expenses
Research and development costs 5,934 24,280 1,710,221
Royalty Fees 22,105 19,971 1,762,013
General and administrative 6,821 40,720 724,626
Depreciation and amortization 4,094 6,154 129,866
Legal Fees -- -- 1,500,028
Licensing Fees -- -- 635,500
Loss from disposal of assets -- -- 30,195
------------ ------------ ------------
38,954 105,625 6,492,449
------------ ------------ ------------
Loss from operations (38,954) (105,625) (6,492,449)
------------ ------------ ------------
Other Income (Expense)
Other expenses -- -- (261,162)
Interest income -- -- 3,774
------------ ------------ ------------
Total other income (expense) -- -- (257,388)
------------ ------------ ------------
Loss from continuing operations (38,954) (105,625) (6,749,837)
Loss from discontinued operations -- -- (432,181)
------------ ------------ ------------
Net loss (38,954) (105,625) (7,182,018)
============ ============ ============
Foreign Currency
Translation Adjustment (19,039) (13,611) (59,938)
------------ ------------ ------------
Comprehensive Loss 57,993 119,236 7,241,956
============ ============ ============
Loss per weighted number
of outstanding shares -
basic and diluted $ (0.00) $ (0.01)
============ ============
Weighted average number of
common shares outstanding
during period - basic and diluted 9,831,669 9,674,604
============ ============
See accompanying notes to unaudited condensed financial statements.
4
HIV-VAC, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 30, 2004 AND 2003 AND FOR THE PERIOD
FROM JANUARY 10, 1997 (INCEPTION) TO DECEMBER 31, 2004 (UNAUDITED)
Period from
January 10,
1997
(Inception) For the Three Months Ended
to ----------------------------
December 31, December 31, December 31,
2004 2004 2003
------------ ------------ ------------
Cash Flows From Operating Activities:
Net loss $ (7,182,018) $ (38,954) $ (105,625)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation 129,866 4,094 6,154
Officers' compensation capitalized 100,000 -- --
Other expenses relating to Noveaux and
LifePlan acquisitions 261,163 -- --
Issuance of stock for licensing fees 2,135,500 -- --
Issuance of stock for directors and
officers compensation 110,100 -- --
Issuance of stock for fees and current debt 2,439,300 -- 42,500
Issuance of stock for note payable 140,000 -- --
Decrease in prepaid expenditure -- 22,105 19,972
(Decrease) in notes payable (140,000) -- --
Increase in accounts payable 263,712 951 --
Increase in accrued liabilities 53,500 6,500 14,297
------------ ------------ ------------
Net Cash Used in Operating Activities (1,688,877) (5,304) (22,702)
------------ ------------ ------------
Cash Flow From Investing Activities:
Purchase of patent rights (85,000) -- --
Purchase of furniture and equipment (48,416) -- --
Purchase of treasury stock (11,767) -- --
Cash acquired in acquisition 120,272 -- --
------------ ------------ ------------
Net Cash Used in Investing Activities (24,911) -- --
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from issue of
preferred stock series B 10,000 -- --
Proceeds from issuance of common stock 689,164 -- --
Purchase of treasury stock (11,767) -- --
Proceeds from notes payable 140,000 -- --
Proceeds from sale of treasury
stock and warrants 15,000 -- --
Proceed from advances from related parties 525,093 5,320 --
Payment of stockholder's loan (272) -- --
Proceeds from additional paid in capital 342,108 -- --
------------ ------------ ------------
Net Cash Provided by Financing Activities 1,716,413 5,320 21,601
------------ ------------ ------------
Net increase (decrease) in cash 2,625 16 (1,101)
Cash and equivalents at beginning of period -- 2,609 3,706
------------ ------------ ------------
Cash and equivalents at end of period $ 2,625 $ 2,625 $ 2,605
============ ============ ============
5
HIV-VAC, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 30, 2004 AND 2003 AND FOR THE PERIOD
FROM JANUARY 10, 1997 (INCEPTION) TO DECEMBER 31, 2004 (UNAUDITED)
Period from
January 10,
1997
(Inception) For the Three Months Ended
to ----------------------------
December 31, December 31, December 31,
2004 2004 2003
------------ ------------ ------------
Supplemental Disclosure of Cash Flow Information:
Issuance of common shares for Noveaux merger $ 106,525 $ -- $ --
============ ============ ============
Issuance of common shares for LifePlan merger $ 50,000 $ -- $ --
============ ============ ============
Preferred B stock dividend $ 10,000 $ -- $ --
============ ============ ============
Forgiveness of stockholder debt $ 7,227 $ -- $ --
============ ============ ============
See accompanying notes to unaudited condensed financial statements.
6
HIV-VAC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 2004.
(UNAUDITED)
The unaudited condensed financial statements of HIV-VAC, Inc. included herein
have been prepared by HIV-VAC pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information or 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 rules and regulations. In the opinion of
HIV-VAC's management, the accompanying unaudited condensed financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial information included herein. These
financial statements should be read in conjunction with HIV-VAC's audited
financial statements contained in its Annual Report on Form 10-K for the year
ended September 30, 2004.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations: HIV-VAC, Inc. (the "Company"), formerly known as
Personna Records, Inc. (Personna) was incorporated on January 10,1997 in the
State of Nevada. Personna (originally known as Sonic Records, Inc.) was engaged
in the production and distribution of musical records. In April 1998, Personna
merged with Nouveaux Corporation whereby Personna became the surviving
corporation. The Company changed its name to Grupo International Inc. on
September 2, 2010.
Development Stage Enterprise: HIV-VAC Inc reverted to a development stage
enterprise when it disposed of its music recording assets (March 1999) and
commenced the research and development of its HIV vaccine. The Company's
principal activities since March 1999 have included defining and conducting
research programs, conducting animal clinical trials, raising capital and
researching ways to enhance the company's intellectual property. The Company has
not yet commenced human trials.
Going Concern: The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has experienced
recurring losses since inception and has negative net working capital and cash
flows from operations. For the years ended September 30, 2004 and 2003, the
Company experienced a net loss of $282,180 and $510,450, respectively.
The Company's ability to continue as a going concern is contingent upon its
ability to secure additional financing, initiate sale of its product, and attain
profitable operations.
Management is pursuing various sources of equity financing. Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will be able to secure financing or obtain financing on terms beneficial to the
Company.
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 possible inability of
the Company to continue as a going concern.
Fixed Assets: Fixed assets are stated at cost. Maintenance and repairs are
expensed in the period incurred; major renewals and betterments are capitalized.
When items of property are sold or retired, the related costs are removed from
the accounts and any gain or loss is included in income. Depreciation for 2002
is computed using the diminishing balance method with an amortization rates of
15% for equipment and 10% for furniture. Depreciation for 2003 was using the
straight line method with an asset life of 5 to 7 years. The change in the
method of amortization was implemented in order to better reflect the value of
the assets.
Intangible Assets: Intangible assets consist of licensing rights. The licensing
rights are being amortized using the straight-line method over the remaining
estimated economic useful life of 12 years commencing April 1999. The Company
reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition
are less than its carrying amount.
7
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents: For purposes of the cash flow statement, the Company
considers all highly liquid investments with maturities of three months or less
at the time of purchase to be cash equivalents
Fair Value of Financial Instruments: The carrying amounts reported in the
balance sheets for cash and cash equivalents, accounts receivable, and accounts
payable approximate fair value because of the immediate or short-term maturity
of these financial instruments.
Income Taxes: The Company accounts for income taxes under Financial Accounting
Standards Board of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. No current or deferred income tax expense or benefit were recognized due
to the Company not having any material operations for the periods ended December
31, 2004 and 2003.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the finical statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Net Loss Per Common Share: Basic and diluted net loss per common share for the
periods ended December 31 2004, and 2003 are computed based on the weighted
average common shares outstanding as defined by Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Common stock equivalents
have not been included in the computation of diluted loss per share since the
effect would be anti-dilutive.
Foreign Currency: Assets and liabilities recorded in foreign currencies are
translated at the exchange rate on the balance sheet date. Revenue and expenses
are translated at average rates of exchange prevailing during the year.
Translation adjustments resulting from this process are charged or credited to
other comprehensive income.
Recent Accounting Announcements: The Company has reviewed all recent accounting
announcements and has determined that there are no recent announcements that are
likely to have a material effect on our financial statements
Stock Issued For Services: The company enters into transactions in which goods
or services are the consideration received for the issue of equity instruments.
The value of these transactions are measured and accounted for, based on the
fair value of the equity instrument issued or the value of the services,
whichever is more reliably measurable. The services are expensed in the periods
that they are rendered.
8
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - FIXED ASSETS
Fixed Assets consisted of the following:
December 31, September 30,
2004 2003
------------- -------------
Furniture $ 936 $ 936
Equipment 47,480 47,840
------------- -------------
48,416 48,416
Less accumulated depreciation (41,223) (40,982)
------------- -------------
Net $ 7,193 $ 7,434
============= =============
Depreciation expense for the three months ended December 31, 2004 and the year
ended September 30, 2003, was $241 and $9,200 respectively
NOTE 3 - INTANGIBLE ASSETS Intangible Assets consisted of the following:
December 31, September 30,
2004 2003
------------- -------------
Licensing Rights $ 185,000 $ 185,000
Less accumulated amortization (88,643) (84,789)
------------- -------------
Net $ 96,357 $ 100,211
============= =============
Amortization expense for the three months ended December 31, 2004 and the year
ended September 30, 2003, was $3,854 and $15,418 respectively.
NOTE 4 - LICENSING AGREEMENT
On March 15, 1999, the Company entered into an agreement with Intracell Vaccines
Limited (Intracell) whereby the Company issued 57,500 shares of Common Stock,
10,000 Preferred Stock and $85,000 for an aggregate amount of $185,000 in
exchange for the worldwide licensing rights to an AIDS/HIV vaccine developed by
The University of Birmingham, UK. The company also issued stock options to the
shareholders of Intracell to purchase a total of 300,000 shares of the Company's
Common Stock, conditional on the outcome of three separate events.(See
Commitments and Contingencies). The options have not been valued because they
are subject to contingencies. The Company also agreed to make advance minimum
royalty payments of $80,500 to the University of Birmingham Research and
Development Limited commencing January 1, 2002. The minimum payments are for the
duration of the patents. The Company had not made any payments as at the date of
this report.
In April 6, 1999, this agreement was amended to include an anti-dilution clause
which provided for Intracell and its shareholders to maintain an equity position
of 60% of the common shares of the Company until the company had raised $5
million. Specifically, when the Company issues stock to others, the
anti-dilution clause requires the Company to issue additional stock to Intracell
so that Intracell maintains its 60% interest in the Company.
9
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The Company failed to attract financing as agreed under the agreement with
Intracell Vaccine Ltd, and on August 7, 2001 the Company amended the agreement
with Intracell , whereby Intracell agreed to waive its right to terminate the
assignment of license agreement provided that the Company issue an additional
3,000,000 of its common shares to Intracell and 7,500,000 options to purchase
shares of common stock of the Company. Such options vest in blocks of 2,500,000
upon the occurrence of certain events.(See Commitments and Contingencies). The
market value of the shares issued to Intracell which amounted to $1.5 million
was expensed to patent fees.
NOTE 5 - STOCKHOLDERS' EQUITY
On November 3, 2003, the Company issued 425,000 shares of common stock as
compensation for legal and consulting services valued at $42,500. The issuance
of these shares were made in reliance upon an exemption pursuant to Section 4(2)
of the Act.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
a) Operating lease. On April 1, 2004, the Company entered into a lease
agreement for office facility expiring on April 30, 2005. Rent payable
under the lease is approximately $900 per quarter.
b) Stock Options.
On August 7, 2001, the Company provided Intracell with three options
to acquire a total of of 7,500,000 shares as follows:
1. 2,500,000 shares of common stock at $0.50 per share when Phase I
human trials begin.
2. 2,500,000 shares of common stock at $1.00 per share when Phase 3
human trials begin.
3. 2,500,000 shares of common stock at $2.00 per share when the
Company receives a product licence from any recognized
government.
None of the contingencies had been met at December 31, 2004. The
options expire on September 1, 2007.
Warrants - On July 29, 2002, the Company issued stock warrants to acquire
3,000,000 shares of the Company's common stock at $1.50 per share. The warrants
expired on December 2003 without being exercised..
Stock Options - On September 2, 2002, the Company provided Trinity Funding, an
option to purchase 800,000 common shares, in settlement of the note payable of
$140,000 to Trinity Funding. The exercise price of the option was determined to
be the average market price of common shares over the 20 trading days prior to
exercise, less a discount of 35% or $.50 per share, whichever is higher. The
options expired on December 31, 2003 without being exercised.
Royalty Payments under Licensing Agreement - The Company has committed to make
minimum royalty payments of (pound)50,000 ($80,500) per annum, in advance to the
University of Birmingham Research and Development Limited, commencing January 1,
2002. The minimum payments will remain in effect for the duration of the
utilisation of the patents. As of the date of this report, the Company had not
made the above payments.
10
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Consulting Agreement - Pursuant to the consulting agreement with Intracell
Vaccines, the Company is committed to pay Intracell Vaccines a consulting fee of
$5,000 per quarter. Intracell Vaccines has the right, due to the companies
failure to make these payments, to terminate the consulting agreement.
NOTE 7 - INCOME TAXES
Due to net operating losses and the uncertainty of realization, no tax benefit
has been recognized for operating losses. At December 31, 2004, net operating
losses of approximately $5,883,000 are available for carry forward against
future years' taxable income and begin expiring in the year 2014. The Company's
ability to utilize its net operating loss carry forwards is uncertain and thus
no valuation reserve has been provided against the Company's net deferred tax
assets.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company incurred consulting fees to certain controlling stockholders in the
amounts of $5,000 for of the three month period ended December 31, 2004 and
$20,000 for the three month period December 31, 2003. As of December 31, 2004
and September 30, 2003, the balance due to related party stockholders arising
from the normal course of business was $520,803 and $515,094 respectively.
NOTE 9 - SUBSEQUENT EVENTS
a) The License Agreement was terminated effective December 1, 2007. Under
the termination agreement, the $566,005 in outstanding royalty
payments were forgiven.
b) On August 23, 2010, the Company entered into an irrevocable agreement
to acquire 80% of the issued and outstanding share capital of Richard
Y Lange, a Mexican corporation, through the issue of 8,000,000 of the
Company's common shares valued at $0.25 per common share. Under the
agreement, Richard Y Lange warrants that shareholders equity in
Richard Y Lange will not be less than 70,000,000 pesos ($5,995,000).
Richard Y Lange is involved in construction, property development and
product distribution. It also owns a block plant and a sand pit. The
agreement will close as soon as Richard Y Lange has verified its
assets through audit or as agreed to by the parties. The Company had
two classes of stock, with 10,432,652 common shares and 300,000
Preferred "B" shares outstanding as of September 2, 2010. Thus the
Company has agreed to reduce their common shares by 8,736 shares.
c) The Company changed its name to Grupo International Inc. on September
2, 2010.
11
ITEM 2. MANAGAMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
We were incorporated in January of 1997, and do not have any
significant operating history or financial results. In 2000 we began our vaccine
development and marketing operations, including the pre-clinical testing in
Russia of our proposed vaccine designed to combat HIV/AIDS, building an
infrastructure and filing our periodic filings with the Securities and Exchange
Commission. To date, we have been unable to obtain the funding that we need to
move forward to a phase I trial. As a result, research and development costs for
the three months ended December 31, 2004 decreased by $18,346 from $24,280 for
the three months ended December 31, 2003 to $5,934 for the three months ended
December 31, 2004. The decrease in expenditure was due to a reduction in
consulting costs to Intracell Vaccines Ltd. Administrative expenditure decreased
by $33,899 from $40,720 for the quarter ended December 31, 2003 to $6,821 for
the quarter ended December 31, 2004. The decrease was primarily due to a
reduction in consulting fees of $30,000. We incurred a net loss of $38,954 or
$(0.01) per share based on 9,831,669 weighted average shares outstanding for the
quarter ended December 31, 2004 compared to $105,625 or $(0.011) per share based
on 9,674,604 weighted average shares outstanding for the quarter ended December
31, 2003. We did not conduct any operations of a commercial nature during the
period from January 10, 1997 (date of inception) to December 31, 2004. Through
December 31, 2004 we have relied on advances of approximately $520,413 from our
principal stockholders, trade payables of approximately $377,151, proceeds of
$1,196,272 from the sale of common stock and the issue of stock for fees and/or
services in the amount of $4,665,600 to support our limited operations. As of
December 31, 2004, we had $2,625 of cash and cash equivalents. Operations for
the three months ended December 31, 2004 have been financed through a loan from
Intracell Vaccines Limited and an increase in payables. We seek additional
equity or debt financing of up to $7 million which we plan to use to use for
working capital and to continue implementing pre-clinical and Phase I/II testing
of our proposed vaccine. If we do not get sufficient financing, we will not be
able to continue as a going concern and we may have to curtail or terminate our
operations and liquidate our business (see Note 1 to financial statements).
We cancelled our license agreement with the University of Birmingham in
2007, as we did not believe that we would be able to commercialize the vaccine
prior to the expiration of the patents in 2011. We plan to continue research and
development of the vaccine, and believe that it might be possible to establish
new patents, depending on the progress and results of our research.
Our business plan requires at least $6,000,000 to implement, and cannot
be implemented until funding for this amount has been achieved. If the funding
is achieved, we plan, in the first year, to implement a PhaseI/II trial with the
Medical Control Agency in The United Kingdom through the application for a CTX
exemption to commence a Phase I/II trial. We plan to apply for a CTX exemption
using the Clade B strain of the virus as soon as a vaccine using the local Clade
B strain is made available. The manufacture of the vaccine will be contracted
out and the Company is currently evaluating various different manufacturers in
Russia, the UK and the USA.
We also plan, subject to financing, in the future, to initiate further
trials in Russia, in conjunction with The Russia Federal Aids Center, a
department of The Central Institute of Epidemiology, Moscow, Russia. We intend
to institute studies of the efficacy of the vaccine in non-human primates in
parallel or preceding Phase I trials of the vaccine in human subjects in Moscow,
Russia. We expect the regulatory approval process to take up to six months to
complete. The proposed vaccine could be manufactured in Russia, under the
supervision and quality control of various parties within and without Russia,
including the Federal Russia AIDS Centre in Moscow and laboratories in
Birmingham and London, U.K.
12
In addition, and subject to financing, we anticipate initiating a Phase
I/II trial in Sub-Sahara Africa using the local African HIV sub-type. These
trials will be done in conjunction with local Government and would commence
after a satisfactory pre-clinical trial has completed the evaluation of toxicity
and immunogenicity of the local strain. However, we cannot initiate the
pre-clinical or Phase I/II trials until such time as we have raised at least $6
million, which is the minimum amount we anticipate we will need for these
trials. Furthermore, in addition to restrictions due to lack of funding, we also
need to manufacture a batch of the vaccine to initiate these trials. We cannot
manufacture a batch until we have an agreement in place with a country in Africa
that is prepared to work with us. It is estimated that these pre-clinical trials
would take approximately twelve months to complete once we have an agreement in
place. If these trials take place, we intend to invite the Division of AIDS of
National Institute of Allergy and Infectious Diseases to monitor the African
trials.
No trials are currently scheduled to take place in the United States.
However, it is our intention to invite the National Institute of Health (NIH)
through the offices of The Division of AIDS (DIADS) to assist in the planning
and execution of the trials and monitor the trials described above. The results
of the proposed trials in Russia and/or Africa and the UK cannot be predicted.
We estimate that we will require approximately $6 million to $7 million
to conduct our vaccine development activities through December 31, 2006 This
amount will be used to pay for vaccine manufacture, vaccine trial costs and
testing, equipment and corporate overhead. We are hoping to raise a minimum of
$6 million through one or more private offerings pursuant to Rule 506 or
Regulation D or through an offshore offering pursuant to Regulation S; however,
nothing in this quarterly report shall constitute an offer of any securities for
sale. Such shares if sold will not have been registered under the Act and may
not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements. In addition we are looking at other
financing methods including finding joint venture partners who might provide
substantial funding to the project or the granting of sub-licenses on payment of
upfront fees with the payment of on-going royalties on sales. We are also
looking at the possibility of acquiring other technologies which might assist in
financing.
If we are unable to raise $6 million, we will most likely cease all
activity related to our vaccine development and marketing, or at the very least,
proceed on a reduced scale. We have to date relied on a small number of
investors to provide us with financing for the commencement of our development
program, including Intracell Vaccines Limited. Amounts owed to these individuals
are payable upon demand.
Subject to financing, we expect to purchase approximately $500,000 in
equipment in the next two years to be used for research and expanding testing
laboratories. In addition, with available funding, we expect to hire an
additional fifteen employees for both research and administrative support over
the next five years.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for a smaller reporting company.
Item 4. Controls and Procedures.
During the three months ended December 31, 2004, there were no changes in our
internal controls over financial reporting (as defined in Rule 13a- 15(f) and
15d-15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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Evaluation of Disclosure Controls and Procedures:
Our chief executive officer and chief financial officer have concluded that the
disclosure controls and procedures were not effective as of Decmber 31, 2004.
These controls are meant to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms and to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the Act is
accumulated and communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
The registrant has been delinquent in its SEC filing. Management has only
recently prepared the required reports for filing. Management intends to
implement internal controls to ensure that similar situations do not occur in
the future and that required SEC filings will be timely.
Management's Annual Report on Internal Control over Financial Reporting:
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is the process designed by and under the supervision of Kevin Murray, chief
financial officer, or the persons performing similar functions, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of our financial statements for external reporting in accordance
with accounting principles generally accepted in the United States of America.
Mr. Murray has evaluated the effectiveness of our internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control over
Financial Reporting - Guidance for Smaller Public Companies.
The chief financial officer and chief executive officer has assessed the
effectiveness of our internal control over financial reporting as of December
31, 2004, and concluded that it is not effective for the reasons discussed
above.
This annual report does not include an attestation report of the registrant's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
registrant's registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the registrant to provide
only management's report in this annual report.
Evaluation of Changes in Internal Control over Financial Reporting:
Our chief executive officer and chief financial officer have evaluated changes
in our internal controls over financial reporting that occurred during the
period ended December 31, 2004. Based on that evaluation, our chief executive
officer and chief financial officer did not identify any change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Important Considerations:
The effectiveness of our disclosure controls and procedures and our internal
control over financial reporting is subject to various inherent limitations,
including cost limitations, judgments used in decision making, assumptions about
the likelihood of future events, the soundness of our systems, the possibility
of human error, and the risk of fraud. Moreover, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions and the risk that the degree
of compliance with policies or procedures may deteriorate over time. Because of
these limitations, there can be no assurance that any system of disclosure
controls and procedures or internal control over financial reporting will be
successful in preventing all errors or fraud or in making all material
information known in a timely manner to the appropriate levels of management.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently subject to any legal proceedings or claims.
ITEM 1A. RISK FACTORS
Not applicable for smaller reporting company
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. REMOVED AND RESERVED
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: Exhibits required to be attached by Item 601 of Regulation S-B are
listed below:
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
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, this 2nd day of September 2010.
HIV-VAC, INC.
/s/ Kevin W. Murray
-------------------------------
Kevin W. Murray
President and CFO
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