Attached files
| file | filename |
|---|---|
| EX-31.2 - PROTECT PHARMACEUTICAL Corp | v222529_ex31-2.htm |
| EX-32.1 - PROTECT PHARMACEUTICAL Corp | v222529_ex32-1.htm |
| EX-32.2 - PROTECT PHARMACEUTICAL Corp | v222529_ex32-2.htm |
| EX-31.1 - PROTECT PHARMACEUTICAL Corp | v222529_ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter Ended March 31, 2011
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number 000-54001
PROTECT PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
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Nevada
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27-1877179
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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759 Bloomfield Avenue, Suite 411, West Caldwell, New Jersey 07006
(Address of principal executive offices)
(973) 568-1617
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
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Class
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Outstanding as of May 13, 2011
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Common Stock, $0.005 par value
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43,428,012
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TABLE OF CONTENTS
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Heading
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Page
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PART I— FINANCIAL INFORMATION
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||||
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Item 1.
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Unaudited Financial Statements
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3
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||
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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13
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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15
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Item 4(T).
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Controls and Procedures
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15
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PART II— OTHER INFORMATION
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||||
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Item 1.
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Legal Proceedings
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15
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Item 1A.
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Risk Factors
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15
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 3.
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Defaults Upon Senior Securities
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16
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Item 4.
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(Removed and Reserved)
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16
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Item 5.
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Other Information
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16
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Item 6.
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Exhibits
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16
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Signatures
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17
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2
PART I — FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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The accompanying unaudited balance sheets of Protect Pharmaceutical Corporation at March 31, 2011 and related unaudited statements of operations, stockholders' equity (deficit) and cash flows for the three months ended March 31, 2011, have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the December 31, 2010 audited financial statements included in our registration statement on Form 10. Operating results for the period ended March 31, 2011, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2011 or any other subsequent period.
3
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Balance Sheets
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March 31,
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December 31,
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|||||||
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2011
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2010
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
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CURRENT ASSETS
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||||||||
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Cash
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$ | 298,241 | $ | - | ||||
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Total Current Assets
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298,241 | - | ||||||
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TOTAL ASSETS
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$ | 298,241 | $ | - | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
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CURRENT LIABILITIES
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||||||||
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Accounts payable and accrued expenses
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$ | 77,038 | $ | 84,545 | ||||
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Accounts payable - related parties
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250 | 150,000 | ||||||
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Accrued officer salaries
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251,895 | 224,658 | ||||||
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Total Current Liabilities
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329,183 | 459,203 | ||||||
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TOTAL LIABILITIES
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329,183 | 459,203 | ||||||
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STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
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Common stock; 50,000,000 shares authorized, at $0.005 par value, 43,368,012 shares issued and outstanding, respectively
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216,840 | 216,840 | ||||||
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Additional paid-in capital
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7,122,909 | 7,122,909 | ||||||
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Deficit accumulated during the development stage
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(7,370,691 | ) | (7,798,952 | ) | ||||
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Total Stockholders' Equity (Deficit)
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(30,942 | ) | (459,203 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$ | 298,241 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
4
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
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From Inception
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||||||||||||
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on August 5,
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||||||||||||
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For the Three Months Ended
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1987 Through
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|||||||||||
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March 31,
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March 31,
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|||||||||||
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2011
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2010
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2011
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||||||||||||
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REVENUES
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$ | - | $ | - | $ | - | ||||||
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EXPENSES
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||||||||||||
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Research and development
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123,192 | 1,250,000 | 1,376,212 | |||||||||
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Executive compensation
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68,904 | - | 5,449,662 | |||||||||
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General and administrative
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19,643 | 1,665 | 565,976 | |||||||||
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LOSS FROM OPERATIONS
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(211,739 | ) | (1,251,665 | ) | (7,391,850 | ) | ||||||
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OTHER INCOME (EXPENSES)
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||||||||||||
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Gain on sale of patents
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640,000 | - | 640,000 | |||||||||
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INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS
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428,261 | (1,251,665 | ) | (6,751,850 | ) | |||||||
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LOSS FROM DISCONTINUED OPERATIONS
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- | - | (4,340,551 | ) | ||||||||
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Income Taxes
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- | - | - | |||||||||
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NET INCOME (LOSS)
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$ | 428,261 | $ | (1,251,665 | ) | $ | (11,092,401 | ) | ||||
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BASIC AND DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK
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$ | 0.01 | $ | (0.03 | ) | |||||||
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
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43,368,012 | 35,829,679 | ||||||||||
The accompanying notes are an integral part of these financial statements.
5
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
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Deficit
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||||||||||||||||||||
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Accumulated
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||||||||||||||||||||
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Additional
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During the
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Total
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||||||||||||||||||
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Common Stock
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Paid-In
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Development
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Stockholders'
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|||||||||||||||||
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Shares
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Amount
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Capital
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Stage
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Equity/(Deficit)
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||||||||||||||||
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Balance August 5, 1987
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- | $ | - | $ | - | $ | - | $ | - | |||||||||||
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Net loss for the period ended December 31, 1987
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1987
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Common stock issued for services rendered at $15.00 per share on January 27, 1988
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624,000 | 3,120 | 2,336,880 | - | 2,340,000 | |||||||||||||||
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Common stock issued for Midway Mining Development Corp. at $15.00 per share on January 27, 1988
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359,592 | 1,798 | 1,346,672 | - | 1,348,470 | |||||||||||||||
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Common stock issued for mining claims at predecessor cost on May 24, 1988
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19,420 | 97 | (97 | ) | - | - | ||||||||||||||
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Common stock cancelled due to the acquisition agreement on Midway Mining and Development Corp. being rescinded on July 6, 1988
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(209,112 | ) | (1,046 | ) | - | - | (1,046 | ) | ||||||||||||
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Common stock issued for services rendered at $0.00 per share on July 6, 1988
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209,112 | 1,046 | - | - | 1,046 | |||||||||||||||
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Additional capital contributed
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- | - | 33,000 | - | 33,000 | |||||||||||||||
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Net loss for the year ended December 31, 1988
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- | - | - | (3,721,500 | ) | (3,721,500 | ) | |||||||||||||
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Balance, December 31, 1988
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1,003,012 | 5,015 | 3,716,455 | (3,721,530 | ) | (60 | ) | |||||||||||||
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Net loss for the year ended December 31, 1989
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1989
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1,003,012 | $ | 5,015 | $ | 3,716,455 | $ | (3,721,560 | ) | $ | (90 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
6
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
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Deficit
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||||||||||||||||||||
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Accumulated
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||||||||||||||||||||
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Additional
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During the
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Total
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||||||||||||||||||
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Common Stock
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Paid-In
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Development
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Stockholders'
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|||||||||||||||||
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Shares
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Amount
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Capital
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Stage
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Equity/(Deficit)
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||||||||||||||||
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Balance, December 31, 1989
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1,003,012 | $ | 5,015 | $ | 3,716,455 | $ | (3,721,560 | ) | $ | (90 | ) | |||||||||
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Net loss for the year ended December 31, 1990
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1990
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1,003,012 | 5,015 | 3,716,455 | (3,721,590 | ) | (120 | ) | |||||||||||||
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Net loss for the year ended December 31, 1991
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1991
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1,003,012 | 5,015 | 3,716,455 | (3,721,620 | ) | (150 | ) | |||||||||||||
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Net loss for the year ended December 31, 1992
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1992
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1,003,012 | 5,015 | 3,716,455 | (3,721,650 | ) | (180 | ) | |||||||||||||
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Net loss for the year ended December 31, 1993
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1993
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1,003,012 | 5,015 | 3,716,455 | (3,721,680 | ) | (210 | ) | |||||||||||||
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Quasi - reorganization (Note 2)
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- | - | (3,721,710 | ) | 3,721,710 | - | ||||||||||||||
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Net loss for the year ended December 31, 1994
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- | - | - | (30 | ) | (30 | ) | |||||||||||||
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Balance, December 31, 1994
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1,003,012 | 5,015 | (5,255 | ) | - | (240 | ) | |||||||||||||
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Common stock issued for services rendered at $15.00 per share on June 12, 1995
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160,000 | 800 | 599,200 | - | 600,000 | |||||||||||||||
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Additional capital contributed
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- | - | 2,605 | - | 2,605 | |||||||||||||||
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Net loss for the year ended December 31, 1995
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- | - | - | (605,105 | ) | (605,105 | ) | |||||||||||||
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Balance, December 31, 1995
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1,163,012 | $ | 5,815 | $ | 596,550 | $ | (605,105 | ) | $ | (2,740 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
7
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
|
Deficit
|
||||||||||||||||||||
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Accumulated
|
||||||||||||||||||||
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Additional
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During the
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Total
|
||||||||||||||||||
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Common Stock
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Paid-In
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Development
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Stockholders'
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|||||||||||||||||
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Shares
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Amount
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Capital
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Stage
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Equity/(Deficit)
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||||||||||||||||
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Balance, December 31, 1995
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1,163,012 | $ | 5,815 | $ | 596,550 | $ | (605,105 | ) | $ | (2,740 | ) | |||||||||
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Common stock issued for expenses paid at $0.01 per share
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2,000,000 | 10,000 | 5,000 | - | 15,000 | |||||||||||||||
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Net loss for the year ended December 31, 1996
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- | - | - | (12,260 | ) | (12,260 | ) | |||||||||||||
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Balance, December 31, 1996
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3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 1997
|
- | - | - | - | - | |||||||||||||||
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Balance, December 31, 1997
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3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 1998
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- | - | - | - | - | |||||||||||||||
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Balance, December 31, 1998
|
3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 1999
|
- | - | - | - | ||||||||||||||||
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Balance, December 31, 1999
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3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 2000
|
- | - | - | - | - | |||||||||||||||
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Balance, December 31, 2000
|
3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 2001
|
- | - | - | - | - | |||||||||||||||
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Balance, December 31, 2001
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3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 2002
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- | - | - | - | - | |||||||||||||||
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Balance, December 31, 2002
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3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
|
Net loss for the year ended December 31, 2003
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 2003
|
3,163,012 | 15,815 | 601,550 | (617,365 | ) | - | ||||||||||||||
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Net loss for the year ended December 31, 2004
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 2004
|
3,163,012 | $ | 15,815 | $ | 601,550 | $ | (617,365 | ) | $ | - | ||||||||||
The accompanying notes are an integral part of these financial statements.
8
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
|
Deficit
|
||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||
|
Additional
|
During the
|
Total
|
||||||||||||||||||
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Common Stock
|
Paid-In
|
Development
|
Stockholders'
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stage
|
Equity/(Deficit)
|
||||||||||||||||
|
Balance, December 31, 2004
|
3,163,012 | $ | 15,815 | $ | 601,550 | $ | (617,365 | ) | $ | - | ||||||||||
|
Net loss for the year ended December 31, 2005
|
- | - | - | (1,476 | ) | (1,476 | ) | |||||||||||||
|
Balance, December 31, 2005
|
3,163,012 | 15,815 | 601,550 | (618,841 | ) | (1,476 | ) | |||||||||||||
|
Net loss for the year ended December 31, 2006
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 2006
|
3,163,012 | 15,815 | 601,550 | (618,841 | ) | (1,476 | ) | |||||||||||||
|
Common stock issued for services at $0.005 per share on May 9, 2007
|
30,000,000 | 150,000 | - | - | 150,000 | |||||||||||||||
|
Net loss for the year ended December 31, 2007
|
- | - | - | (150,000 | ) | (150,000 | ) | |||||||||||||
|
Balance, December 31, 2007
|
33,163,012 | 165,815 | 601,550 | (768,841 | ) | (1,476 | ) | |||||||||||||
|
Net loss for the year ended December 31, 2008
|
- | - | - | (1,605 | ) | (1,605 | ) | |||||||||||||
|
Balance, December 31, 2008
|
33,163,012 | 165,815 | 601,550 | (770,446 | ) | (3,081 | ) | |||||||||||||
|
Net loss for the year ended December 31, 2009
|
- | - | - | (2,150 | ) | (2,150 | ) | |||||||||||||
|
Balance, December 31, 2009
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33,163,012 | 165,815 | 601,550 | (772,596 | ) | (5,231 | ) | |||||||||||||
|
Common stock issued for patents at $0.25 per share
|
5,000,000 | 25,000 | 1,225,000 | - | 1,250,000 | |||||||||||||||
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Common stock issued for services at $1.02 per commnon share
|
5,205,000 | 26,025 | 5,283,075 | - | 5,309,100 | |||||||||||||||
|
Contibuted capital
|
- | - | 13,284 | - | 13,284 | |||||||||||||||
|
Net loss for the year ended December 31, 2010
|
- | - | (7,026,356 | ) | (7,026,356 | ) | ||||||||||||||
|
Balance, December 31, 2010
|
43,368,012 | 216,840 | 7,122,909 | (7,798,952 | ) | (459,203 | ) | |||||||||||||
|
Net income for the three months ended March 31, 2011 (unaudited)
|
- | - | - | 428,261 | 428,261 | |||||||||||||||
|
Balance, March 31, 2011 (unaudited)
|
43,368,012 | $ | 216,840 | $ | 7,122,909 | $ | (7,370,691 | ) | $ | (30,942 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
9
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
|
From Inception
|
||||||||||||
|
on August 5,
|
||||||||||||
|
For the Three Months Ended
|
1987 Through
|
|||||||||||
|
March 31,
|
March 31,
|
|||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
OPERATING ACTIVITIES
|
||||||||||||
|
Net Income (loss)
|
$ | 428,261 | $ | (1,251,665 | ) | $ | (11,092,401 | ) | ||||
|
Adjustments to reconcile loss to cash flows from operating activities
|
||||||||||||
|
Common stock issued for services
|
- | - | 9,183,270 | |||||||||
|
Common stock issued for research and development costs
|
- | 1,250,000 | 1,250,000 | |||||||||
|
Loss from disposition of subsidiary
|
- | - | 564,300 | |||||||||
|
Expenses paid on behalf of the Company
|
- | - | 65,620 | |||||||||
|
Changes in operating assets and liabilities
|
||||||||||||
|
Accounts payable
|
(7,507 | ) | 1,665 | 77,038 | ||||||||
|
Account payable - related parties
|
(149,750 | ) | - | (1,481 | ) | |||||||
|
Increase in accrued salaries
|
27,237 | - | 251,895 | |||||||||
|
Net Cash Used in Operating Activities
|
298,241 | - | 298,241 | |||||||||
|
INVESTING ACTIVITIES
|
- | - | - | |||||||||
|
FINANCING ACTIVITIES
|
- | - | - | |||||||||
|
NET INCREASE IN CASH
|
298,241 | - | 298,241 | |||||||||
|
CASH AT BEGINNING OF PERIOD
|
- | - | - | |||||||||
|
CASH AT END OF PERIOD
|
$ | 298,241 | $ | - | $ | 298,241 | ||||||
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||||||
|
CASH PAID FOR:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Income taxes
|
$ | - | $ | - | $ | - | ||||||
The accompanying notes are an integral part of these financial statements.
10
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 2011 and December 31, 2010
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2011, and for all periods presented herein, have been made.
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. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements. The results of operations for the periods ended March 31, 2011 and 2010 are not necessarily indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet
Established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position or statements.
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PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 2011 and December 31, 2010
NOTE 4 - PAYABLE RELATED PARTY
Shareholders of the Company have advanced the corporation $250 as of March 31, 2011. The liability is non interest bearing, is unsecured and is due and payable upon demand.
NOTE 5 – SALE OF PATENTS
On January 31, 2011, Protect Pharmaceutical Corporation (the “Company”) finalized and closed a Patent Purchase Agreement (the “Agreement”) with Grünenthal GmbH (“Grünenthal”), a company organized under the laws of Germany. Pursuant to the terms of the Agreement, the Company sold to Grünenthal all of the Company’s rights title and interest in and to certain inventions described and claimed in certain patents and patent applications (collectively “the Patents”), including without limitation, all extensions, continuations, provisions, derivatives and related applications thereof. The Patents relate to Opioid Formulations and Methods of treating acute and chronic pain.
In exchange for the Patents, Grünenthal paid the Company $1,600,000. The Company originally acquired the subject Patents sold to Grünenthal, together with other inventions and patents, in February 2010 pursuant to a Patent Acquisition Agreement with Nectid, Inc. (“Nectid”), a privately held New Jersey company. Under the terms of the Patent Acquisition Agreement and Addendum, the Company agreed that in the event the Company sold out right any of the patents acquired from Nectid without first undertaking any development of the patents, the proceeds from such sale would be divided, 60% to Nectid and 40% to the Company. Accordingly, the Company realized 40%, or $640,000 from the proceeds of the sale and the balance will be paid to Nectid. The Company retains all other inventions, patents and technologies initially acquired from Nectid.
The Company’s Chief Operating Officer and director is the inventor of all the Patents and is also a principal and former President of Nectid. The director was not affiliated with the Company at the time the Patents were initially acquired from Nectid in February 2010. Although Nectid was not a party to the Agreement with Grünenthal, it will benefit pursuant to the terms of its Patent Acquisition Agreement and Addendum with the Company.
NOTE 7 – SUBSEQUENT EVENTS
On April 11, 2011, the Board of Directors appointed a new Chief Financial Officer, effective immediately and for a term of twelve months. The Company issued 60,000 shares of its common stock to the officer as compensation for his services.
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and determined that there are no additional material subsequent events to report.
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results ofOperations
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The following information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-Looking and Cautionary Statements
This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors included in our periodic reports with the SEC. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
We are considered a development stage company with limited capital and no current revenues. We do not expect to realize any revenues until we are successful in developing, achieving approval and marketing one or more of our drug delivery technologies or solutions. We anticipate that in the near term, ongoing expenses, including the costs associated with the preparation and filing of requisite reports with the SEC, will be paid for by advances from stockholders or from the private sale of securities, either debt or equity. However, there is no assurance that we will be able to realize such funds on terms favorable to us, or at all.
Results of Operations
We did not realize revenues for the three month period ended March 31, 2011 and 2010. During the three months ended March 31, 2011 (“first quarter”), we recorded total expenses of $211,739, consisting primarily of $123,192 in research and development expenses and $68,904 in executive compensation. In the comparable period of 2010 we recorded expenses totaling $1,251,665, relating primarily to research and development. In addition, during the first quarter the Company recognized a $640,000 gain on the sale of patents. These factors resulted in net income for the first quarter in the amount of $428,261 ($0.01 per share), compared to a net loss of $1,251,665 for the three months ended March 31, 2010.
Liquidity and Capital Resources
Total assets at March 31, 2011 were $298,241, compared to $-0- at December 31, 2010. Total liabilities at March 31, 2011 were $329,183, consisting primarily of $251,895 in accrued officer salaries. At December 31, 2010, total liabilities were $459,203 consisting primarily of $150,000 in accounts payable to a related party and $224,658 in accrued officer salaries.
Because currently we have no revenues, for the immediate future we will have to rely on our existing cash reserves to continue to implement our business activities. Because we currently have no revenues, it is likely the only source of funding our operations will be through the private sale of our securities, either equity or debt. We are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of this time. If we are unable to raise the necessary funding, our research and development plans will be delayed indefinitely. There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company, or at all. At March 31, 2011, we had stockholders’ deficit of $30,942 compared to a stockholders’ deficit of $459,203 at December 31, 2010. The decreased deficit is primarily due to the net income the Company recognized for the three month period ended March 31, 2011.
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In the opinion of management, inflation has not and will not have a material effect on the ongoing operations of our company.
Plan of Operation
We are developing new generation drug delivery technologies that we believe will enable products with improved clinical benefits. We believe our drugs will offer enhanced pain relief and reduced tolerance/physical dependence, reduced addiction potential and side effects compared to existing neuropathic and fibromyalgia drugs and opioid painkillers. We intend to conduct our research and development through collaborative programs. We anticipate relying on arrangements with third party drug developers such as contract research organizations and clinical research sites for a significant portion of our product development efforts.
We expect to incur significant operating losses for the next several years and until we are able to formulate a commercially viable product. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:
● continue to undertake formulation of novel products and subsequent preclinical and clinical trials for our product candidates;
● seek regulatory approvals for our product candidates;
● develop, formulate, manufacture and commercialize our drugs;
● implement additional internal systems and develop new infrastructure;
● acquire or in-license additional products or technologies, or expand the use of our technology;
● maintain, defend and expand the scope of our intellectual property; and
● hire additional personnel.
Product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our product candidates. In the event that our development efforts result in regulatory approval and successful commercialization of our product candidates, we will generate revenue from direct sales of our products and/or, if we license our products to future collaborators, from the receipt of license fees and royalties from licensed products.
Management estimates that our research and development expenses for the next 12 months will be approximately $2.5 million, primarily for research and pilot studies. We also estimate that other expenses, including personnel, general and administrative and miscellaneous expenses could be as much as $1.5 million during the same time period. Because we currently have no revenues, most likely the only source of funding these expenses will be through he private sale of our securities, either equity or debt. We are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of this time. If we are unable to secure the necessary funding, our research and development plans will be delayed indefinitely. There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company, or at all.
Net Operating Loss
We have accumulated approximately $471,011 of net operating loss carryforwards as of December 31, 2010. This loss carry forward may be offset against taxable income and income taxes in future years and expires starting in the year 2011 through 2031. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards which can be used. No tax benefit has been reported in the financial statements for fiscal years ended December 31, 2010 and 2009 or the three months ended March 31, 2011 because it has been fully offset by a valuation reserve. The use of future tax benefit is undeterminable because presently we have not started full operations.
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Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not required for a smaller reporting company.
Item 4(T). Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, have concluded that, as of March 31, 2011, our disclosure controls and procedures were not effective.
Changes in Internal Control Over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the first quarter of fiscal 2011. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the first quarter of fiscal 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.
Item 1A. Risk Factors
This item is not required for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
This Item is not applicable.
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Item 3. Defaults Upon Senior Securities
This Item is not applicable.
Item 4. (Removed and Reserved)
Item 5. Other Information
Mr. William D. Abajian has resigned as a director of Protect Pharmaceutical Corporation and as the company’s President, Chief Executive Officer and Treasurer, effective December 23, 2010. Mr. Abajian stated in his letter to the Board that because of certain recent events, he believed he would not be allowed to perform his duties in the manner he deemed necessary to serve the best interest of the company and its shareholders. Mr. Abajian has noted that his disagreement was with the company’s Chief Operating Officer and director, Ramesha Sesha. No replacement for Mr. Abajian has been named as of this date.
Also on December 23, 2010, Dr. Gerald Bernstein resigned his position as a director of the company for personal reason. His resignation was effective immediately. No replacement for Dr. Bernstein has been named as of this date.
On April 11, 2011, our current director Ramesha Sesha assumed the additional positions of Chief Executive Officer, Chief Scientific Officer and Chairman of the Board. Mr. Sesha retains his current offices as Chief Operating Officer and Secretary of our company. Mr. Sesha remains as our sole director, but we are actively pursuing adding one or more directors to the Board.
Also on April 11, 2011, the Board of Directors appointed Keith Elison to become and serve as our Chief Financial Officer, effective immediately and for a term of twelve months. We have issued 60,000 shares of our common stock to Mr. Elison as compensation for his services.
Item 6. Exhibits
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Exhibit 31.1
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Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 31.2
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Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.1
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Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.2
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Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PROTECT PHARMACEUTICAL CORPORATION
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Date: May 13, 2011
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By:
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/S/ Ramesha Sesha
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Ramesha Sesha
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President, C.E.O. and Director
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Date: May 13, 2011
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By:
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/S/ Keith Elison
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Keith Elison
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C.F.O., Chief Accounting Officer
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