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NVLX > SEC Filings for NVLX > Form 10-Q on 26-Mar-2013All Recent SEC Filings

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Form 10-Q for NUVILEX, INC.


26-Mar-2013

Quarterly Report


NOTE 2 - GOING CONCERN AND MANAGEMENT'S PLANS

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America, better known as Generally Accepted Accounting Principles (US GAAP or GAAP) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Accordingly, the Company has not yet established an regular source of revenue sufficient to maintain its operating costs and allow it to continue as a going concern. As of January 31, 2013, the Company had an accumulated deficit of $41,118,934, incurred a net loss for the period ended January 31, 2013 of $1,270,929 and had negative working capital of $2,186,107.

Funding has been provided by management and investors and it is the intent of management to use that funding to make it possible to maintain and expand Nuvilex; in particular its subsidiary Austrianova Singapore Private Limited ("Austrianova Singapore" or ASPL) located in Singapore.

Although the Company's current business plan that includes funding requirements beyond its anticipated cash flow needs, we continue to acquire additional funds from management and outside investors and are still driving toward the goal of providing a new pancreatic cancer treatment that will increase the median survival and number of survivors of pancreatic cancer. In addition, we are utilizing the funding to cover the general financial requirements of the Company. We continue to assess opportunities currently brought before the Company.

It is important to note that due to the inherent challenges of obtaining funding in the present economic environment, doubt still exists as to the Company's ability to continue as a going concern. Irrespective of this, all of us at Nuvilex are actively undertaking the necessary steps to succeed and are committed to working with many different entities and interested investors to ensure success.
Strategy
Since the beginning of Nuvilex, products have been added and efforts have been made to ensure they be placed into use. Some have become recognized brands, including Cinnergen and Talsyn, yet the challenge remains to not only make products well recognized, useful,


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important, and valuable enough everyday consumers use them, but to maintain the market once after it has been created. As a result, Nuvilex has changed in many ways over the years and continues to grow and develop today. On a daily basis, the Company receives inquiries for our legacy products, indicating their inherent value. It is an important part of our business to continue to take care of these consumers and their need for our products. From those humble beginnings we strive to move this Company forward with clarity, vision, and an ability to take care of consumers we have had for years and patients we aim to provide innovative therapies for in the future.
In order to maintain the company with the limited capital available and working toward the completion of the acquisition of Austrianova Singapore, which is still pending, Nuvilex management determined that for at least the time being, Nuvilex products would not be available for sale and continue to follow this course.
Nonetheless, funding that has been provided for Nuvilex operations and by Nuvilex to ASPL for their's, has enabled our companies to work on specific areas nonetheless. Our teams have been working for more than a year across a number of important development areas for our company, most of which have been related to researching, testing, developing, coordinating and planning for the Company's future. As a result, and in conjunction with maintenance of the Parent Company, the substantial funding provided to ASPL and its personnel have been to ensure ASPL's functionality and maintain its ability to complete goals over the past year. It is clear that management and staff of ASPL are extremely qualified and dedicated to achieving their mission. Thus, our combined first vision and successful accomplishment was the acquisition of ASPL as our newest subsidiary in June 2012 and is seen as one of the most valuable advances for this company over the past year, clearly establishing the creation of Nuvilex as a biotechnology/life technology/pharmaceutical company.
Thus, through the funding and our combined efforts, Nuvilex exists today as a Biotechnology Company with a broad company base, much like that of larger biotechnology or pharmaceutical companies after years of advances and purchasing of products from other companies. In addition, great advances were afforded to Nuvilex over the past year by companies supportive of the Nuvilex vision through elimination of debt remaining on its books, thereby stabilizing its financial condition, for which Nuvilex is grateful. Thus, with an overall strategy and goal of long-term growth, Nuvilex is poised to be thrust into a new position. Management believes its vision to become an important industry-leading Biotechnology company, with a multi-part strategy like those of larger pharmaceutical companies, will strengthen the Company's position in both the short and long term. Notwithstanding and as financial experts indicate, Nuvilex may seek capital to fund growth and provide its working capital needs as the vision of the company is executed. The Company's efforts to achieve financial stability and enable the strategy of the company to be seen to fruition include several primary components:
1. Acquire sufficient capital to complete the acquisition of Austrianova Singapore.

2. Continue elimination of prior operation-associated debt from the Parent Company and all subsidiaries;

3. Advance and develop biotechnology and pharmaceutical avenues through acquisition, research and development;

4. Develop and expand use of the encapsulation biotechnology already in-house through its ASPL subsidiary;

5. Further develop uses of the technology platform through contracts, licensing, and joint ventures with other companies;

6. Complete testing, Expand, and Market existing and newly derived Company products and their uses.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Unaudited Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with US GAAP, for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited interim financial statements should be read in conjunction with the Company's annual report on Form 10-K, which contains the audited financial statements and notes thereto, together with Management's Discussion and Analysis, for the fiscal year ended April 30, 2012. The interim results for the nine months ended January 31, 2013 are not necessarily indicative of the results for the full fiscal year.
Management further acknowledges it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that transactions are recorded and valid and in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.


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Principles of Consolidation
The consolidated financial statements include the accounts of Nuvilex, Inc. and its subsidiaries: MedElite, Inc., Nuvilex GmbH, Berlin, Freedom-2 Holdings, Inc, Freedom-2, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. There were no cash equivalents as of January 31, 2013 or April 30, 2012.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost. Expenditures that increase the useful lives or capacities of the plant and equipment are capitalized. Expenditures for repairs and maintenance are charged to income as incurred. Depreciation is provided using the straight-line method over the estimated useful lives as follows:

Computer equipment/software - 3 years
Furniture and fixtures - 7 years
Machinery and equipment - 7 years
Building improvements - 15 years
Building - 40 years

Goodwill and other indefinite-lived intangibles The Company records the excess of purchase price over the fair value of the identifiable net assets acquired as goodwill and other indefinite-lived intangibles. The FASB standard on goodwill and other intangible assets, prescribes a two-step process for impairment testing of goodwill and indefinite-lived intangibles, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment, while the second step, if necessary, measures the impairment. The Company has elected to perform its annual analysis at the end of its reporting year.
Valuation of long-lived assets
The Company accounts for the valuation of long-lived assets under the FASB standard for accounting for the impairment or disposal of Long-Lived Assets. The FASB standard requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell. Basic and Diluted Earnings (Loss) per Share Basic and diluted earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock warrants, convertible notes and convertible preferred shares.
Fair value of financial instruments
For certain of the Company's non-derivative financial instruments, including cash and cash equivalents, receivables, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The


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estimated fair value of long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt.
ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
• Level 1. Observable inputs such as quoted prices in active markets;

• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following presents the gross value of assets and liabilities that were measured and recognized at fair value as of January 31, 2013 and April 30, 2012.
• Level 1: none

• Level 2: none

• Level 3: none

Effective October 1, 2008, the Company adopted Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures ("ASC 820-10") and Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10"), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on the Company's financial position, results of operations or cash flows. The carrying value of cash, accounts payable and accrued expenses, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.
As of January 31, 2013 and April 30, 2012 the Company has recorded several of its assets and liabilities at fair value. The building or "Settlement Obligation Asset" (Note 11) was written down in the last quarter of fiscal 2010 to its fair value based upon a pending sale agreement. Although the agreement was not finalized it established the current market value for the property. In Jan-March 2009, through the acquisition of another company the Company acquired certain debt. As part of the acquisition, these were evaluated by a third party and valued at fair value at the time they were recorded. As a result of this the Company is amortizing the associated discount and premium for two of the liabilities.
Recent accounting pronouncements

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles -Goodwill and Other -General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after


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September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

In September 2011 the Accounting Standards Update No. 2011-8, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for impairment. This ASU's objective is to simplify the process of performing impairment testing for Goodwill. With this update a company is allowed to asses qualitative factors, first, to determine if it is more likely than not (greater than 50%) that the FV is less than the carrying amount. This would be done, prior to performing the two-step goodwill impairment testing, as prescribed by Topic 350. Prior to this ASU, all entities were required to test, annually, their good will for impairment by Step 1 - comparing the FV to the carrying amount, and if impaired, then step 2 - calculate and recognize the impairment. Therefore, the fair value measurement is not required, until the "more likely than not" reasonableness test is concluded. Effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.
In May 2011, FASB issued Accounting Standards Update No. 2011-4, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU clarifies the board's intent of current guidance, modifies and changes certain guidance and principles, and adds additional disclosure requirements concerning the 3 levels of fair value measurements. Specific amendments are applied to FASB ASC 820-10-35, Subsequent Measurement and FASB ASC 820-10-50, Disclosures. This ASU is effective for interim and annual periods beginning after December 15, 2011. In June 2011, FASB issued Accounting Standards Update No. 2011-5, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. - ASU 2011-5. Current US GAAP allows companies to present the components of comprehensive income as a part of the statement of changes in stockholders' equity. This ASU eliminates that option. in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income This ASU is effective interim and annual periods beginning after December 15, 2011. This ASU should be applied retrospectively. There are no specific transition disclosures.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Revenue Recognition
Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. These terms are typically met upon the prepayment or invoicing and shipment of products.
Allowance for Doubtful Accounts
The Company provides an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.
Income Taxes
Deferred taxes are calculated using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
In June 2006, the FASB interpreted its standard for accounting for uncertainty in income taxes, an interpretation of accounting for income taxes. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance the minimum recognition threshold and measurement attributable to a tax position taken on a tax return is required to be met before being recognized in the financial statements.
The FASB's interpretation had no material impact on the Company's financial statements for the quarter ended January 31, 2013 or the year ended April 30, 2012. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial


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change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes the carry forwards may expire unused, although acquisition of sufficient operating capital to complete the acquisition of all of the assets of SG Austria may change this. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.
Research and Development Costs
Expenditures for research and development are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution in the form of demand deposits. Reclassifications
Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current period's presentation. These reclassifications have no effect on the previously reported income (loss).

NOTE 4 - ACCOUNTS RECEIVABLE
The Company recognized receivables predominately on sales of its Cinnergen product, which, in order to save limited capital, is presently not available for purchase. As of January 31, 2013 all receivables have either been collected or written off to bad debt expense.

NOTE 5 - ASSET PURCHASE
On June 21, 2012, Nuvilex, purchased 100% of the shares of ASPL in exchange for 100,000,000 shares of restricted Nuvilex common stock. A copy of the final Asset Purchase Agreement, dated May 26, 2011, was attached as Exhibit 2.1 on the Company's Form 10-K for the fiscal year ended April 30, 2012.
Under the terms of the Asset Purchase Agreement, the Nuvilex and ASPL shares are held in escrow until the completion of Nuvilex's financing obligations and are therefore not reflected in the number of shares issued and outstanding (see Note
9). The Asset Purchase Agreement, as amended, provides that Nuvilex will fund future ASPL operations in the amount of $2.5 million with a target date to complete the funding by December 31, 2012. Nuvilex will continue current funding of $60,000 monthly in operating capital until the overall funding is completed. Since then, Nuvilex and ASPL have agreed to continue their relationship and extended their contract through the first quarter 2013. The shares for both ASPL and Nuvilex are being held in escrow and are therefore not reflected in the financial statements. This is due to the potential unwinding of the agreement in the event that Nuvilex is unable to satisfy the Asset Purchase Agreement requirements including monthly maintenance payments or the $2.5 million minimum financing requirement.

NOTE 6 - INVENTORY
On January 31, 2013 and April 30, 2012, inventory consisted of $0 and $6,846, respectively of finished goods inventory for Cinnergen™ products. Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.

NOTE 7 - FIXED ASSETS
Fixed assets consisted of the following:

                                       14
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                                January 31,      April 30,
                                    2013           2012
Computers                      $     23,664     $  23,664
Furniture and fixtures                    -             -
Lab equipment                             -             -

Less: accumulated depreciation      (23,664 )     (23,664 )
                               $          -     $       -

Depreciation expense for the nine months ended January 31, 2013 and April 30, 2012 was $0 and $24,659, respectively.

NOTE 8 - DEBT
As of January 31, 2013, the company owed $20,000 plus accrued interest to Dr. Ryan. The note accrues interest at 8% per annum and is past due. As of January 31, 2013, the Company had an obligation to pay $400,000 in licensing fees for a licensing agreement that was terminated in 2009. The debt is presently under negotiation for settlement.
During the period ended January 31, 2012, the Company settled various accounts payable with the issuance of common stock. In total over $171,000 of debt was settled. As a result of those settlements the Company recorded a gain of $111,968.
During the year ended April 30, 2012, the Company settled various debts with a combination of cash payments and the issuance of common stock. In total over $500,000 debt was settled. As a result of those settlements the Company recorded a gain of $370,619.

NOTE 9 - COMMON STOCK TRANSACTIONS
During the year ended April 30, 2012, 23,575,000 shares of common stock were issued to officers of the Company for compensation. Shares were valued using the closing stock price on the day of issuance for a total expense of $1,160,880. During the year ended April 30, 2012, 8,550,000 shares of common stock were issued for various services. Shares were valued using the closing stock price on the day of issuance for a total expense of $409,400.
During the year ended April 30, 2012, 9,250,000 shares of common stock were issued in exchange for $600,000 in cash advances to the Company. In addition, . . .

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