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| MLPH.PK > SEC Filings for MLPH.PK > Form 10-K/A on 21-Aug-2009 | All Recent SEC Filings |
21-Aug-2009
Annual Report
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY FOR THE YEAR ENDED JUNE 30, 2008, SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THE FORM 10-KSB
Overview
We were incorporated in the state of Nevada on May 1, 2002. Up until the fall of 2005, Molecular USA was in the business of mineral exploration and development of a mineral property.
On October 13, 2005, Molecular USA entered into a distribution and supply agreement with Molecular Pharmacology Limited ("MPLA"). MPLA is incorporated under the laws of Australia and is a wholly owned subsidiary company of PharmaNet, an Australian company listed on the Australian Stock Exchange. Under the terms of the distribution and supply agreement, Molecular USA has the exclusive distribution rights to distribute, market, promote, detail, advertise and sell certain "Licensed Products", as defined in the agreement, with metallo-polypeptide analgesic as an active ingredient, in the United States (excluding its territories and possessions).
Molecular USA entered into a share purchase agreement dated November 25, 2005, to acquire all of the shares of MPLA from PharmaNet (the "Purchase Agreement"). The transaction between the parties closed in escrow with an effective closing date of May 8, 2006. Molecular USA, in exchange for 100% of the issued and outstanding shares of MPLA, issued PharmaNet an aggregate total of 88,000,000 shares of its common stock of Molecular USA on closing of the transaction. PharmaNet now holds approximately 79% of Molecular USA's issued and outstanding common shares. The business of MPLA is now the business of Molecular USA.
On March 29, 2007, we changed our year end from October 31st of each calendar year to June 30th of each calendar year. This action was taken to harmonize our year end with PharmaNet which holds 79% of issued and outstanding shares.
2008 Activities and Developments
For the year ended June 30, 2008, our net income was $62,296 ($0.001 per share). The earnings per share was based on a weighted average of 111,553,740 common shares outstanding. For the eight month period ended June 30, 2007, our net loss was $377,131 ($0.003 per share) based on a weighted average of 131,553,740 common shares outstanding. For the year ended October 31, 2006, our net loss was $509,018 ($0.005 per share) based on a weighted average of 99,357,420 common shares outstanding. For the period from inception on July 14, 2004 to June 30, 2008 Molecular USA has an accumulated net loss of $1,339,250. Molecular has working capital of $4,620 at June 30, 2008 (June 30, 2007 - working capital deficit of $23,913). As a result our auditors have qualified their opinion as having substantial doubt about our ability to continue as a going concern unless we are able to generate sufficient cash flows to meet our obligations and sustain our operations.
To achieve our goals and objectives for the next 12 months, we plan to raise additional capital through private placements of our equity securities, proceeds received from the exercise of outstanding options, future financing from our new majority shareholder PharmaNet and, if available on satisfactory terms, debt financing.
If we are unsuccessful in obtaining new capital, our ability to seek and consummate strategic acquisitions to build our company internationally and to expand of our business development and marketing programs could be adversely affected.
Results of Operation
For the year ended June 30, 2008, eight month period ended June 30, 2007 and the period from July 14, 2004 (inception) to June 30, 2008:
REVENUE - Molecular USA has net income of $62,296 for the year ended June 30, 2008 (eight month period ended June 30, 2007 - loss of $377,131; year ended October 31, 2006 - loss $509,018) and a loss of $1,339,250 for the period from inception to June 30, 2008. To date, we have generated limited revenues from our business operations.
LOANS - As of June 30, 2008, PharmaNet has loaned Molecular USA a total of $1,411,131 for working capital (eight month period ended June 30, 2007 - $1,138,943; year ended October 31, 2006 - $725,817). The advance does not carry an interest rate, is unsecured and has no fixed terms of repayment.
COMMON STOCK - Net cash provided by financing activities during the year ended June 30, 2008 was $0.00 (eight month period ended June 30, 2007 - $0.00; year ended October 31, 2006 - $0.00).
EXPENSES
SUMMARY - Total expenses were $198,311 for the year ended June 30, 2008. Expenses have decreased in the year ended June 30, 2008 by $178,820 from $377,131 in the previous eight month period ended June 30, 2007. A total of $1,600,615 in expenses has been incurred by Molecular USA since inception on July 14, 2004through to June 30, 2008. The decrease in costs over the past year has occurred as the result of Molecular USA's wholly owned subsidiary reducing its involvement in research projects resulting in a decrease in consulting fees and expenses. The costs can be subdivided into the following categories.
1. Office Expenses: $33,079 in office expenses (includes rent and
administrative costs) were incurred for the year ended June 30, 2008 as
compared to $43,120 for the eight month period ended June 30, 2008 and
$37,329 for the year ended October 31, 2006, while a total of $151,412 was
incurred in the period from inception on July 14, 2004 to June 30, 2008.
All contributed expenses are reported as contributed costs with a
corresponding credit to additional paid-in capital.
2. Consulting and Analysis Costs: Molecular USA relies on consultants and
other third parties to conduct the majority of its research. For the year
ended June 30, 2008, $88,322 in consulting and analysis expenses were
incurred as compared to $227,844 for the eight month period ended June 30,
2007 and $361,696 for the year ended October 31, 2006. We have incurred a
total of $1,059,693 in the period from inception on July 14, 2004 to June
30, 2008.
3. Advertising, Public Relations and Promotion Fees: Molecular USA has spent a
nominal amount in this area. During the year ended June 30, 2008 and eight
month period ended June 30, 2007 we spent $0.00 on advertising and public
relations while for the year ended October 31, 2006 we spent $3,381 in this
area. We have incurred a total of $27,739 in the period from inception on
July 14, 2004 to June 30, 2008.
4. Professional Fees: Molecular USA incurred $64,236 in professional fees for
the year ended on June 30, 2008 as compared to $55,989 for the eight month
period ended June 30, 2007 and $51,457 for the year ended October 31, 2006.
From inception to June 30, 2008, we have incurred a total of $171,682 in
professional fees mainly spent on legal and accounting matters.
5. Travel Costs: Molecular USA incurred $8,968 in travel costs for the year
ended on June 30, 2008 as compared to $31,615 for the eight month period
ended June 30, 2007 and $45,204 for the year ended October 31, 2006. This
decrease can largely be attributed to our attendance at a limited number of
pharmacology trade shows and restricting the expense of visiting various
research facilities.
6. Salaries and Benefit Costs: Molecular USA and its subsidiary relies
primarily on outside consultants and not salaried employees. As a result,
Molecular USA incurred $0.00 in salaries and benefits for the year ended
June 30, 2008 and $16,008 was incurred for the eight month period ended
June 30, 2007 and $2,652 for the year ended October 31, 2006. For the
period July 14, 2004 (inception) through June 30, 2008, Molecular USA has
spent a total of $44,464 on salaries and benefits.
Molecular USA continues to carefully control its expenses and overall costs as it moves forward with the development of its new business plan. Molecular USA does not have any employees and engages personnel through outside consulting contracts or agreements or other such arrangements.
INCOME TAX PROVISION: We have losses carried forward for income tax purpose to June 30, 2008. There are no current or deferred tax expenses for the year ended June 30, 2008, due to our loss position. We have
Off-Balance Sheet Arrangement
As of June 30, 2008, we have had no off-balance sheet arrangements.
Research and Development
Since the acquisition of MPLA, Molecular USA has adopted MPLA's research and development program to:
º Refine and prove-up its proprietary active ingredients and to commence the
processes that will lead to the issue of a Master Drug File registration of
its products;
º Define the mode of action and potential of Tripeptofen in both in vitro,
animal and human studies;
º Gain Australian regulatory and marketing approval;
º Gain European regulatory approval; and
º Commence application for American regulatory approval.
MPLA is in the business of developing and commercializing a new analgesic and anti-inflammatory molecule known as Tripeptofen. Tripeptofen is likely to appear in a new group of products suitable for the treatment of common every-day pain. As an analgesic and anti-inflammatory drug, Tripeptofen is unusual due to its rapid speed of action and its topical or rub-on application.
On April 19, 2006, Molecular USA, announced the filing of a new patent, Tissue Disruption Treatment and Composition for Use (US Patent number 11218382). The patent describes a proprietary process for the manufacture of topical biological secondary injury mediators (B-SIMs) that should have local, rather than systemic, effects and may be significantly less expensive to manufacture than conventional B-SIMs. MPLA is developing its B-SIMs to stop the tissue disruption that occurs after injury by suppressing the body's reactions, such as inflammation and damage/death of otherwise uninjured cells that are triggered in response to primary injury.
The first conditions targeted by MPLA will be the musculoskeletal injuries. The use of a B-SIM in these markets represents a new approach to one of the world's largest over the counter drug markets and includes indications such as joint inflammation, musculoskeletal pain, overuse and strain injuries, burns and even surgical and cosmetic procedures. MPLA's proprietary, industrially scalable peptide-ligand bond exchange (PLBE) B-SIM manufacturing process involves the disassociation of proteins, rather than the far more costly process of assembling B-SIMs one sequence at a time. The patent was lodged in the name of Cambridge Scientific Pty Ltd; however, Molecular USA holds the worldwide exclusive license to manufacture, commercialize, market and distribute topical anti-inflammatory and analgesic products based on the proprietary MPL-TL compound.
Molecular USA is still working on the projections regarding the necessary expenditure and time frame involved in pursuing this research and development program. Any such program will also be subject to Molecular USA raising the necessary funds to advance such a program.
Capital Expenditure Commitments
Capital expenditures for the year ended June 30, 2008 amounted to $0.00 ($0.00 for the eight month period ended June 30, 2007 and $0.00 for the year ended October 31, 2006). Molecular USA does not anticipate any significant purchase or sale of equipment over the next 12 months.
On November 25, 2005, Molecular USA entered into a share purchase agreement dated November 25, 2005 with PharmaNet to acquire 100% of the issued and outstanding shares of MPLA. Molecular USA issued a total of 88,000,000 shares of its common stock to PharmaNet the parent company of MPLA. Accordingly, PharmaNet controls approximately 79% of Molecular USA's issued and outstanding shares of common stock.
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (the "FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60 ("SFAS No. 163"). SFAS No. 163 provides enhanced guidance on the recognition and measurement to be used to account for premium revenue and claim liabilities and related disclosures and is limited to financial guarantee insurance (and reinsurance) contracts, issued by enterprises included within the scope of FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. SFAS No. 163 also requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS No. 163 is effective for financial statements issued for fiscal years and interim periods beginning after 15 December 2008, with early application not permitted. Molecular USA does not expect SFAS No. 163 to have an impact on its consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") for nongovernmental entities. Prior to the issuance of SFAS No. 162, GAAP hierarchy was defined in the American Institute of Certified Public Accountants ("AICPA") Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles ("SAS No. 69"). SAS No. 69 has been criticized because it is directed to the auditor rather than the entity. SFAS No. 162 addresses these issues by establishing that the GAAP hierarchy should be directed to entities because it is the entity, not its auditor, that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. Molecular USA does not expect SFAS No. 162 to have a material effect on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 ("SFAS No. 161"). SFAS No. 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivate instruments within the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 is effective prospectively for financial statements issued for fiscal years beginning after 15 November 2008, with early application encouraged. Molecular USA is currently evaluating the new disclosure requirements of SFAS No. 161 and the potential impact on Molecular USA's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS No. 141(R)"). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51 ("SFAS No. 160"). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable and to the noncontrolling interest, changes in a parent's ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after 15 December 2008. Molecular USA is currently evaluating the potential impact, if any, of the adoption of SFAS No. 160 on its consolidated results of operation and financial condition.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS 159 allows a company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Molecular USA is currently evaluating the requirements of SFAS No. 159 and the potential impact on Molecular USA's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS 158"). SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS 87, "Employers' Accounting for Pensions", or SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", (c) measure defined benefit plan assets and obligations as of the date of the employer's fiscal year-end, and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for Molecular USA's fiscal year ending June 30, 2008. The adoption of SFAS No. 158 is not expected to have a material impact on Molecular USA's financial position, results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS No. 157"). The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS No. 157 is effective for Molecular USA for fair value measurements and disclosures made by Molecular USA in its fiscal year beginning on July 1, 2008. Molecular USA is currently reviewing the impact of this statement.
Critical Accounting Policies and Estimates
Our audited consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.
On February 1, 2006, we adopted the provisions of SFAS No. 123(R), "Share-Based Payment", which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS No. 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees' requisite service period (generally the vesting period of the equity grant). Before February 1, 2006, we accounted for stock-based compensation to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and complied with the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". We adopted SFAS No. 123(R) using the modified prospective method, which requires us to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, financial statements for the periods prior to February 1, 2006 have not been restated to reflect the fair value method of expensing share-based compensation. Adoption of SFAS No. 123(R) does not change the way we account for share-based payments to non-employees, with guidance provided by SFAS No. 123 (as originally issued) and Emerging Issues Task Force Issue No. 96-18, " Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services".
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