Attached files
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EX-31.2 - EXHIBIT 31.2 - BIOFIELD CORP \DE\ | c92895exv31w2.htm |
EX-32.1 - EXHIBIT 32.1 - BIOFIELD CORP \DE\ | c92895exv32w1.htm |
EX-32.2 - EXHIBIT 32.2 - BIOFIELD CORP \DE\ | c92895exv32w2.htm |
EX-31.1 - EXHIBIT 31.1 - BIOFIELD CORP \DE\ | c92895exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
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 September 30, 2009
Commission
File No: 0-27848
BIOFIELD CORP.
(Name of registrant in its charter)
Delaware | 13-3703450 | |
(State of other jurisdiction of Incorporation or Organization) | (Employer Identification Number) | |
175 Strafford Avenue Suite One Wayne, PA (Address of principal executive offices) |
19087 (Zip Code) |
(215) 972-1717
(Registrants telephone number, including area code)
(Registrants 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 þ No o
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
o No
þ
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 o | Accelerated Filer o | Non-Accelerated Filer o | Smaller Reporting Company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act. Yes o No þ
AS OF NOVEMBER 13, 2009, THERE WERE 36,261,833 SHARES OF COMMON STOCK OUTSTANDING AND 12,300,000
SHARES OF VOTING PREFERRED STOCK OUTSTANDING.
TABLE OF CONTENTS
Table of Contents
PART IFINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
BIOFIELD CORP.
(A Development Stage Company)
(A Development Stage Company)
BALANCE SHEETS
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | | $ | | ||||
Total current assets |
| | ||||||
PROPERTY AND EQUIPMENT Net |
4,169 | 5,211 | ||||||
TOTAL ASSETS |
$ | 4,169 | $ | 5,211 | ||||
LIABILITIES AND STOCKHOLDERS DEFICIT |
||||||||
CURRENT LIABILITIES: |
||||||||
Bank overdraft |
$ | 14,659 | $ | 9,912 | ||||
Accounts payable |
1,402,514 | 1,402,514 | ||||||
Accrued interest |
1,202,470 | 991,849 | ||||||
Accrued expenses |
828,822 | 2,058,823 | ||||||
Due to affiliate |
329,686 | 329,686 | ||||||
Advances from stockholder |
2,557,396 | 2,378,973 | ||||||
Notes payable |
2,471,580 | 2,410,951 | ||||||
Line of credit |
418,920 | 418,920 | ||||||
Total current liabilities |
9,226,046 | 10,001,628 | ||||||
Commitments
and contingencies |
||||||||
STOCKHOLDERS DEFICIT: |
||||||||
Preferred stock, $.001 par value, 12,300,000 shares authorized,
12,300,000 shares issued and outstanding at September 30,
2009 and
December 31, 2008, respectively |
12,300 | 12,300 | ||||||
Common stock, $.01 par value, 60,000,000 shares authorized,
37,386,833 and 24,793,500 shares issued at September 30,
2009 and
December 31, 2008, respectively |
373,868 | 247,935 | ||||||
Treasury stock - 2,306,131 shares |
(3,100 | ) | (3,100 | ) | ||||
Stock subscriptions |
3,849 | 3,849 | ||||||
Additional paid-in capital |
76,219,621 | 74,935,552 | ||||||
Accumulated deficit during development stage |
(85,828,416 | ) | (85,192,953 | ) | ||||
Total stockholders deficit |
(9,221,878 | ) | (9,996,417 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |
$ | 4,169 | $ | 5,211 | ||||
See notes to financial statements.
1
Table of Contents
BIOFIELD CORP.
(A Development Stage Company)
(A Development Stage Company)
STATEMENTS OF OPERATIONS (Unaudited)
Period October 16, | ||||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | 1987 (Date of | ||||||||||||||||||
September 30, | September 30, | Inception) Through | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | September 30, 2009 | ||||||||||||||||
REVENUE |
$ | | $ | | $ | | $ | | $ | 244,522 | ||||||||||
COST OF SALES |
||||||||||||||||||||
Cost of goods sold |
| | | 8,172 | 95,111 | |||||||||||||||
Loss on write down of inventory |
| | | | 693,500 | |||||||||||||||
GROSS PROFIT |
| | | 8,172 | (544,089 | ) | ||||||||||||||
OPERATING EXPENSES: |
||||||||||||||||||||
Research and development |
| | | | 40,481,889 | |||||||||||||||
Selling, general, and
administrative |
26,348 | 8,637,305 | 185,789 | 8,898,838 | 42,827,773 | |||||||||||||||
Impairment of intangible assets |
| | | | 194,268 | |||||||||||||||
Gain on disposition of fixed assets |
| | | | (8,084 | ) | ||||||||||||||
Total operating expenses |
26,348 | 8,637,305 | 185,789 | 8,898,838 | 83,495,846 | |||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||
Interest income |
| | | 88 | 2,476,722 | |||||||||||||||
Interest expense |
(149,891 | ) | (130,962 | ) | (449,674 | ) | (417,965 | ) | (4,054,885 | ) | ||||||||||
Finance costs |
| | | | (405,523 | ) | ||||||||||||||
Other |
| | | | 214,867 | |||||||||||||||
Net other expense |
(149,891 | ) | (130,962 | ) | (449,674 | ) | (417,877 | ) | (1,768,819 | ) | ||||||||||
LOSS BEFORE INCOME TAXES |
(176,239 | ) | (8,768,267 | ) | (635,463 | ) | (9,324,887 | ) | (85,808,754 | ) | ||||||||||
PROVISION FOR INCOME TAXES |
| | | | (19,749 | ) | ||||||||||||||
NET LOSS |
$ | (176,239 | ) | $ | (8,768,267 | ) | $ | (635,463 | ) | $ | (9,324,887 | ) | $ | (85,828,503 | ) | |||||
NET LOSS PER SHARE: |
||||||||||||||||||||
Basic and Diluted |
$ | (0.00 | ) | $ | (0.47 | ) | $ | (0.02 | ) | $ | (0.95 | ) | ||||||||
WEIGHTED-AVERAGE SHARES: |
||||||||||||||||||||
Basic and Diluted |
37,049,876 | 18,459,992 | 31,495,722 | 9,844,856 | ||||||||||||||||
See notes to financial statements.
2
Table of Contents
BIOFIELD CORP.
(A Development Stage Company)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Unaudited)
Period October 16, | ||||||||||||
For the Nine Months Ended | 1987 (Date of | |||||||||||
September 30, | Inception) Through | |||||||||||
2009 | 2008 | September 30, 2009 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net loss |
$ | (635,463 | ) | $ | (9,324,887 | ) | $ | (85,828,416.00 | ) | |||
Adjustments to reconcile net loss to net cash used in operating
activities: |
||||||||||||
Depreciation and amortization |
1,042 | 1,042 | 2,763,638 | |||||||||
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 |
| | 3,533,451 | |||||||||
Gain from disposition of fixed assets |
| | (159,473 | ) | ||||||||
Interest paid in common stock |
| | 575,260 | |||||||||
Commissions and discounts on sale of common stock |
| | 96,919 | |||||||||
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 |
| 8,667,010 | 8,667,010 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Notes receivable |
| 9,912 | 11,004 | |||||||||
Inventories |
| | (693,500 | ) | ||||||||
Prepaids |
| | (131,816 | ) | ||||||||
Due to affiliate |
| | 329,687 | |||||||||
Accounts payable and accrued liabilities |
210,622 | 298,388 | 5,489,383 | |||||||||
Net cash used in operating activities |
(423,799 | ) | (348,535 | ) | (61,110,883 | ) | ||||||
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 | | 14,659 | |||||||||
Repayments of capitalized lease obligations |
| | (82,234 | ) | ||||||||
Proceeds from issuance of preferred stock net |
| | 22,341,892 | |||||||||
Proceeds from common stock subscriptions |
110,000 | | 35,313,258 | |||||||||
Proceeds from exercise of common stock |
70,000 | | 368,546 | |||||||||
Proceeds from issuance of notes payable |
| 96,265 | 1,676,058 | |||||||||
Proceeds from borrowings on line of credit |
| 76,740 | 76,740 | |||||||||
Financing costs for notes payable |
60,629 | | 322,706 | |||||||||
Advances from stockholder and related party |
178,423 | 162,202 | 3,671,579 | |||||||||
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 |
| | 2,546,533 | |||||||||
Net cash provided by financing activities |
423,799 | 335,207 | 64,371,909 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| (13,328 | ) | 92,296 | ||||||||
EFFECT OF EXCHANGE RATE CHANGES |
| | (77,637 | ) | ||||||||
BEGINNING OF PERIOD |
| 13,328 | | |||||||||
END OF PERIOD |
$ | | $ | | $ | 14,659 | ||||||
See notes to financial statements.
3
Table of Contents
BIOFIELD CORP.
(A Development Stage Company)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Unaudited) (continued)
As for the Nine Months | Period October 16, | |||||||||||
Ended | 1987 (Date of | |||||||||||
September 30, | Inception) Through | |||||||||||
2009 | 2008 | September 30, 2009 | ||||||||||
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 | ||||||
Issuance of common stock for accrued liabilities |
$ | 1,230,002 | $ | | $ | 1,330,002 | ||||||
See notes to financial statements.
4
Table of Contents
BIOFIELD CORP.
A DEVELOPMENT STAGE COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
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. 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
Companys ability to continue as a going concern as such continuance is dependent upon the
Companys ability to raise sufficient capital.
The accompanying interim unaudited financial information has been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (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 rules and regulations. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 2009 and the related operating results and cash flows for the interim
period presented have been made. The results of operations of such interim periods are not
necessarily indicative of the results of the full year. This financial information should be read
in conjunction with the Financial Statements and Notes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2008. There have been no changes in significant
accounting policies since December 31, 2008.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statement and the reported amounts
of revenues and expenses during the reporting period. Estimates that are critical to the
accompanying financial statements arise from the determination of the fair value of the Companys
investment. Because such determination involves subjective judgment, it is at least reasonably
possible that the Companys estimates could change in the near term with respect to this matter.
Revenue Recognition
The Company has adopted and follows the guidance provided in the SECs Staff Accounting Bulletin
(SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue
in the financial statements.
Reclassification
Certain amounts in the prior year financial statements have been reclassified for comparative
purposes to conform to the presentation in the current year financial statements.
5
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NOTE 3 ACCOUNTING STANDARDS UPDATES
In June 2009, the Financial Accounting Standards Board (FASB) issued its final Statement of
Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement No. 162.
SFAS No. 168 made the FASB Accounting Standards Codification (the Codification) the single source
of U.S. GAAP used by nongovernmental entities in the preparation of financial statements, except
for rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority
of federal securities laws, which are sources of authoritative accounting guidance for SEC
registrants. The Codification is meant to simplify user access to all authoritative accounting
guidance by reorganizing U.S. GAAP pronouncements into roughly 90 accounting topics within a
consistent structure; its purpose is not to create new accounting and reporting guidance. The
Codification supersedes all existing non-SEC accounting and reporting standards and was effective
for the Company beginning July 1, 2009. Following SFAS No. 168, the Board will not issue new
standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead, it will issue Accounting Standards Updates (ASU). The FASB will not consider ASUs as
authoritative in their own right; these updates will serve only to update the Codification, provide
background information about the guidance, and provide the bases for conclusions on the change(s)
in the Codification. The adoption of this standard did not have a material impact on the Companys
financial position and results of operations.
In August 2009, the FASB issued ASU 2009-05 which includes amendments to Subtopic 820-10, Fair
Value Measurements and DisclosuresOverall. The update provides clarification that in
circumstances, in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or more of the techniques
provided for in this update. The amendments in this ASU clarify that a reporting entity is not
required to include a separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of the liability and also clarifies that both a quoted
price in an active market for the identical liability at the measurement date and the quoted price
for the identical liability when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements. The guidance provided
in this ASU is effective for the first reporting period, including interim periods, beginning after
issuance. The adoption of this standard did not have a material impact on the Companys financial
position and results of operations.
In September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740), Implementation
Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic
Entities, which provides implementation guidance on accounting for uncertainty in income taxes, as
well as eliminates certain disclosure requirements for nonpublic entities. For entities that are
currently applying the standards for accounting for uncertainty in income taxes, this update shall
be effective for interim and annual periods ending after September 15, 2009. For those entities
that have deferred the application of accounting for uncertainty in income taxes in accordance with
paragraph 740-10-65-1(e), this update shall be effective upon adoption of those standards. The
adoption of this standard is not expected to have an impact on the Companys financial position and
results of operations since this accounting standard update provides only implementation and
disclosure amendments.
In September 2009, the FASB published ASU No. 2009-12, Fair Value Measurements and Disclosures
(Topic 820) Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent). This ASU amends Subtopic 820-10, Fair Value Measurements and Disclosures Overall,
to permit a reporting entity to measure the fair value of certain investments on the basis of the
net asset value per share of the investment (or its equivalent). This ASU also requires new
disclosures, by major category of investments including the attributes of investments within the
scope of this amendment to the Codification. The guidance in this Update is effective for interim
and annual periods ending after December 15, 2009. Early application is permitted. The adoption
of this standard is not expected to have an impact on the Companys financial position and results
of operations since this accounting standard update provides only implementation and disclosure
amendments.
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Table of Contents
In October 2009, the FASB published ASU 2009-13, Revenue Recognition (Topic 605)-Multiple
Deliverable Revenue Arrangements, which addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services (deliverables) separately rather
than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25,
Revenue Recognition-Multiple-Element Arrangements, for separating consideration in
multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for
determining the selling price of a deliverable, which is based on: (a) vendor-specific objective
evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual
method of allocation and requires that arrangement consideration be allocated at the inception of
the arrangement to all deliverables using the relative selling price method and also requires
expanded disclosures. The guidance in this update is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15,
2010. Early adoption is permitted. The adoption of this standard is not expected to have an impact
on the Companys financial position and results of operations since this accounting standard update
provides only implementation and disclosure amendments.
In October 2009, the FASB published ASU 2009-14, Software (Topic 985)-Certain Revenue Arrangements
that Include Software Elements and changes the accounting model for revenue arrangements that
include both tangible products and software elements. Under this guidance, tangible products
containing software components and nonsoftware components that function together to deliver the
tangible products essential functionality are excluded from the software revenue guidance in
Subtopic 985-605, Software-Revenue Recognition. In addition, hardware components of a tangible
product containing software components are always excluded from the software revenue guidance. The
guidance in this ASU is effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The
adoption of this standard is not expected to have an impact on the Companys financial position and
results of operations since this accounting standard update provides only implementation and
disclosure amendments.
Other ASUs not effective until after September 30, 2009, are not expected to have a significant
effect on the Companys financial position or results of operations.
NOTE 4 EQUITY
During the nine months ended September 30, 2009, the Company issued a total of 12,593,333 shares of common stocks. In first quarter of 2009 the Company issued for cash 3,693,333 shares of common stock for $110,000. In the second and third quarters of 2009 the Company issued 8,900,000 shares of common stock in settlement of accrued liabilities. The value of the common shares issued was $1,230,002.
NOTE 5 SUBSEQUENT EVENTS
ValiRx Plc
On December 11, 2008, Biofield Corp. (the Corporation) entered into a Sale of Shares
Agreement (the Stock Purchase Agreement) with Valirix, plc, to acquire a minority interest in
Valibio, SA and contemporaneously entered into an Exclusive Distribution Agreement (the
Distribution Agreement) with Valibio, SA which granted Biofield exclusive distribution rights
worldwide (excluding Belgium) for ValiRx plcs Human Papilloma Virus (HPV) diagnostic test for
cervical cancer, ValioRxs Hypergenomics and Nucleosomics cancer diagnostics products, and any
other cancer diagnostic products developed during the term of the Distribution Agreement.
On May 13, 2009, ValiRx Plc and the Corporation entered into a letter agreement amending the Stock
Purchase Agreement (the Amendment) whereby Biofield agreed to make payments towards the 660,000
Euro purchase price (the Purchase Price) prior to certain dates which, to date, had not been
made.
Thereafter, on September 22, 2009, ValiRx and the Corporation further amended the Stock Purchase
Agreement pursuant to Amendment No. 2 (Amendment No. 2), which extended the payment date of the
Purchase Price until December 31, 2009. As security for extending the payment date of the Purchase
Price until December 31, 2009, Mr. James MacKay, a shareholder of the Corporation, transferred
1,500,000 shares of preferred stock, par value $0.001 per share (the Preferred Shares), of
Biofield Corp. to ValiRx, provided Mr. MacKay retains voting control of the Preferred Shares per
the Pledge Agreement and Voting Agreement executed concurrently with Amendment No. 2. The last of
this series of documents comprising the transaction, the Pledge Agreement, was executed and
delivered by Mr. MacKay on October 2, 2009 after the close of business, thereby completing the
transaction.
7
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In the event the Purchase Price is not satisfied prior to December 31, 2009, ValiRx may elect to
either (i) convert the Preferred Shares into common stock and to apply the proceeds of any and all
eventual sales in payment and satisfaction of the Purchase Price, or (ii) collect on the Purchase
Price in full. If ValiRx chooses (i) above, any such sales of shares shall not exceed twenty
percent (20%) of the total volume of the five (5) preceding trading days, on a weekly basis;
further, if such converted shares do not cover the unpaid balance of the Purchase price, additional
shares shall be delivered to ValiRx to satisfy the obligation in full. Any shares remaining after
the purchase Price has been paid, shall be returned to Mr. MacKay.
In the event the Corporation raises capital in one or more private placements prior to December 31,
2009, Biofield shall satisfy the Purchase Price out of the use of proceeds of such raise by
applying 10% of the proceeds below $500,000, plus 15% of the proceeds above $500,000 up to the
Purchase Price.
In three separate transactions, the Company acquired additional distribution rights to products of
another ValiRx plc subsidiary, ValiMedix Limited. Subject to performance minimums, the Company has
acquired the exclusive distribution rights for Mexico, Canada and the PRC (China), to a product
line of home self check test kits. The Products are: (i) Stomach Ulcer Test; (ii) Blood Glucose
Test; (iii) Cholesterol Test; (iv) Urine Infection Test; (v) Bowel Health Test; (vi) Multi Drug
Test; (vii) Menopause Test; and (viii) Prostate Health Test. All have CE certification. The
agreements are for a five (5) year term with certain renewal rights.
Changes in Management
On November 15, 2009 the Board of Directors of the Company accepted the resignation of Dr.
Dominic Lam. Since 2008, the increasing time demands of Dr. Lams other business and charitable
ventures that predate his involvement with the Company have prevented him from devoting the time
required to carry on as a Board member of the Company. His departure was mutually amicable.
Effective
March 15, 2009, two of the Companys former officers Shepard G. Bentley and Dr. Shiva
Sharareh both agreed, in writing, to: i) the return and cancellation of all shares issued to
them (Mr. Bentley 2.5 million shares; Dr. Sharareh 2 million shares) and; ii) forfeit any right to
receive any and all accrued salary. The Company received the certificates and cancelled the
related shares in the fourth quarter of 2009. The Company reduced the accrued salaries of the two
officers by approximately $585,000.
Conversion of Debt
In late 2008, in an effort to help re-structure the Companys balance sheet and bring value to
the Noteholders, Michael and Alan Jacobs, the former principals of Capital Growth Financial, began
providing consulting services to the Company. After extensive discussions regarding the Companys
status and plans, the Capital Growth Equity Fund I LLC, of which the Jacobs are the managing
members, and which was the lead investor in the Note offering to the Noteholders, converted its
Note into Common Stock of Biofield. Thereafter, the Jacobs, on the Companys behalf, contacted the
Noteholders and encouraged them to also convert.
During the fourth quarter of 2009, the Board of Directors of the Company reached an agreement
with a number of Noteholders. Under the terms of the Exchange Agreement pursuant to which the
Company offered the Noteholders the option of converting their
outstanding Notes and all accrued
interest into Common Stock at the rate of five shares for every $1.00 face amount of their respective
Notes.
As a result, 17 Noteholders have signed the Exchange Agreement and the Company has authorized the
issuance of the exchange shares to them, thereby reducing the existing debt. At a minimum, a
reduction in debt of $2,750,000, based upon the share exchange by the current responders, will be
reflected in the Companys financial statements in the fourth quarter of 2009. Any additional
conversions by remaining Noteholders will be added to this amount and reflected in the appropriate
accounting period.
8
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ITEM 2. | MANAGEMENTS 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 Managements 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 Companys last Form 10-K for 2008 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.
Overview
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
MKGs 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 Companys 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
Companys prior SECs 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 Companys debt to equity stock, and began a number of foreign
market initiatives which are discussed in Item 6 of the Companys 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 Companys controlling
stockholder, MKG, opened a sales office in Bangalore, India, 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.
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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 NeuroMeds
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 plcs Human Papilloma Virus (HPV) diagnostic test for cervical cancer, ValioRxs
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 by the end of 2009.
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 September 30, 2009, we had a working capital deficiency of $9,226,046.
Our assets totaled $4,169 at September 30, 2009. There were no cash and cash equivalents at
September 30, 2009.
Operating Activities
During the nine months ended September 30, 2009, we had a net loss of $635,463, compared to
$9,324,887 for the nine months ended September 30, 2008, a decrease of $8,689,424 or 93.2%. During
the nine months ended September 30, 2009, our net cash used in operating activities was $423,799,
compared to $348,535 for the nine months ended September 30, 2008, an increase of $75,264 or 21.6%.
The increase was primarily due to a decrease in net loss of $8,689,424 for the nine months ended
September 30, 2009, compared the same period in 2008, offset by a decrease in noncash compensation
of $8,667,010 for the nine months ended September 30, 2009.
During the nine months ended September 30, 2009 and 2008, we had depreciation and amortization in
connection with operating activities of $1,042.
Investing Activities
There were no investing activities ended September 30, 2009 and September 30, 2008.
Financing Activities
As of September 30, 2009, The Company had a cash overdraft of $14,659. There were no cash
overdrafts for the same period in 2008. We had proceeds from issuance of common stock subscription
of $110,000 for the nine months ended September 30, 2009, there were no cash proceeds from issuance
of common stock subscription for the same period in 2008. We had proceeds from issuance of common
stock of $70,000 for the nine months ended September 30, 2009, there were no cash proceeds from
issuance of common stock for the same period in 2008. During the nine months ended September 30,
2009, we had no proceeds from issuance of notes payable compared to $96,265 for the nine months
ended September 30, 2008. During the nine months ended September 30, 2009, we had no proceeds from
borrowings on line of credit compared to $76,740 for the nine months ended September 30, 2008.
Proceeds from advances from stockholders and related party was $178,423 for the nine months ended
September 30, 2009 compared to $162,202 for the same period in 2008.
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. We are currently
working on commitments for financing. There is no guarantee that we will be successful in raising
the funds required.
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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, 2008 financial statements, states that our
recurring losses raise substantial doubts about our ability to continue as a going concern.
RESULTS OF OPERATIONS
Comparison of the three month period ended September 30, 2009 with the three month period ended
September 30, 2008.
There were no sales in the three months ended September 30, 2009 and 2008.
The total operating expenses for the three months ended September 30, 2009 and 2008 were $26,348
and $8,637,305 respectively, representing a decrease of $8,610,957 or 99.7%. This decrease is due
primarily to expenses related to new management in 2008.
We did not incur any research and development expenses or impairment to intangible assets in the
fiscal quarters ending September 30, 2009 and 2008.
Interest expense for the three months ended September 30, 2009 and 2008 were $149,891 and $130,962,
representing an increase of $18,929 or 14.5%. The increase is a direct result of increased debt in
the second quarter of 2009.
As a result of the foregoing, we incurred a net loss of $176,239 for the three months ended
September 30, 2009, compared to $8,768,267 for the three months ended September 30, 2008, a
decrease of $8,592,028, or 98.0%.
Comparison of the nine month period ended September 30, 2009 with the nine month period ended
September 30, 2008.
There were no sales in the nine months ended September 30, 2009. We incurred $8,172 in costs
related to sales that did not materialize in the nine months ended September 30, 2008.
The total operating expenses for the nine months ended September 30, 2009 and September 30, 2008
were $185,789 and $8,898,838 respectively, representing a decrease of $8,713,049 or 98.0%. This
decrease is due primarily to consultants expenses in 2008. Total operating expenses for these
nine months were related to selling, general and administrative expenses.
Interest expense for the nine months ended September 30, 2009 and September 30, 2008 were $449,674
and $417,965, representing an increase of $31,797 or 7.6%. The increase is a direct result of
increased debt in the nine months ended September 30, 2009.
As a result of the foregoing, we incurred a net loss of $635,463 for the nine months ended
September 30, 2009, compared to $9,324,887 for the nine months ended September 30, 2008, a decrease
of $8,689,424, or 93.2%.
OFF-BALANCE SHEET ARRANGEMENTS
None.
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable.
ITEM 4T. | CONTROLS AND PROCEDURES |
Our chief executive officer and chief financial officer (the Certifying Officers) are responsible
for establishing and maintaining disclosure controls and procedures for our company and our
subsidiary. Such officers have 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 principal executive officers as
appropriate, to allow timely decisions regarding required disclosure.
The Certifying Officers have also indicated that there were no significant changes in our internal
controls or other factors that could significantly affect such controls subsequent to the date of
his evaluation, and there were no corrective actions with regard to significant deficiencies and
material weaknesses.
Our management, including the Certifying Officers, 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 Companys Chief Executive Officer and Chief Accounting Officer,
also conducted an evaluation of Biofields internal controls over financial reporting to determine
whether any changes occurred during the fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.
During the preparation of the Companys financial statements as of and for the year ended December
31, 2008, 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.
Lack of Adequate Accounting Staff
Due to limitations in financial and management resources, the Company does not have adequate
accounting staff. As a result, the Company took steps to address its understaffed finance and
accounting team to correct this material weakness. The Company engaged an independent contractor
with extensive CFO-level management and SEC reporting experience in public companies. The Company
feels this addition to the Companys finance and accounting team will improve the quality of future
period financial reporting.
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PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
As result of the Companys arrangement with third party to help manage the Companys operations and
development of the BDS, the Company has forwarded much of what was in its King of Prussia office to
the third partys certified manufacturing and regulatory facilities near Atlanta, Georgia, and
seeks to vacate the King of Prussia office. The landlord of the Companys 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 Companys 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
Companys 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, 2008. There were no material changes from the risk factors during the three and
nine months ended September 30, 2009.
Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Submission of Matters to a Vote of Security Holders |
No matter was submitted to a vote of our securities holders during the fiscal quarter ended
September 30, 2009.
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Item 5. | Other information |
On March 15, 2009, Mr. Shepard Bentley, Mr. Steve Waszak and Dr. Shiva Sharareh advised the
Companys board of directors of their intention to resign. Notwithstanding, no signed resignations
were submitted by either of the aforementioned officers.
Subsequently, Messrs. Bentley and Waszak continued to assist the Company with regards to its SEC
filings and certain other matters. The Company believes that such persons intended to finalize
their resignations following the
filing of the Companys quarterly report on Form 10-Q for the period ended March 31, 2009 as filed
with the Securities and Exchange Commission on May 15, 2009.
However, prior to August 18, 2009 no such signed
resignations had been received by the Company despite requests for same. Accordingly, on August 18, 2009, the
Board of Directors of the Company took action removing Mr. Shepard Bentley, Mr. Steve Waszak and Dr.
Shiva Sharareh from their respective positions with the Company effective May 16, 2009, and appointed David Bruce
Hong as the Companys Chief Executive Officer and Chief Financial Officer, effective May 16, 2009, and ratified
all actions taken by the prior offices of which the Board of Directors was aware of. Mr. Bentley and Dr. Sharareh
have subsequently submitted their signed resignations to the Company. To date no signed resignation has been received by
the Company from Mr. Waszak despite requests for same.
Item 6. | Exhibits and Reports on Form 8-K |
Exhibits
31. | 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 |
||||
32. | Section 1350 Certifications |
|||
*32.1 Certification of Bruce Hong Chief Executive Officer |
||||
*32.2 Certification of Bruce Hong Chief Financial Officer |
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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.
BIOFIELD CORP. |
||||
Date: November 19, 2009 | By: | /s/ David Bruce Hong | ||
David Bruce Hong | ||||
Chief Executive Officer | ||||
/s/ David Bruce Hong | ||||
David Bruce Hong Chief Accounting Officer |
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