Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _______
Commission File Number: 000-26947
BIOCUREX, INC.
--------------------------------
(Exact Name of Registrant as Specified in its Charter)
Texas 75-2742601
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7080 River Road, Suite 215
Richmond, British Columbia V6X 1X5
----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (866) 884-8669
N/A
----------------------------------------------------------------
Former name, former address, and former fiscal year, if
changed since last report
Indicate by check mark whether the registrant (1) 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 (ss.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 [ X]
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 "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Larger accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 171,627,131 shares outstanding
as of May 10, 2011.
)
BIOCUREX, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
March 31, 2011
INDEX
Consolidated Balance Sheets F-1
Consolidated Statements of Operations F-2
Consolidated Statements of Cash Flows F-3
Notes to the Consolidated Financial Statements F-4
F-1
BIOCUREX, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
March 31, December 31,
ASSETS 2011 2010
$ $
(unaudited)
Current Assets
Cash 1,351,987 1,770,194
Prepaid expenses and other - 4,623
------------------------------
Total Current Assets 1,351,987 1,774,817
Debt issue costs (Note 4 (a) and 6 (b)) 42,867 48,851
Patents (Note 3) 490,688 498,500
------------------------------
Total Assets 1,885,542 2,322,168
------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 121,805 90,022
Derivative liability (Note 12) 89,443 145,159
Accrued liabilities 374,283 359,322
Loans payable (Note 4 (b)) 31,681 32,550
Due to related parties (Note 5) 446,893 434,718
Convertible notes payable (Note 6 (a)) 33,885 33,885
------------------------------
1,097,990 1,095,656
Loans payable (Note 4 (a)) 85,537 81,301
Convertible debt (Note 6 (b)) 451,543 437,735
------------------------------
1,635,070 1,614,692
Commitments and Contingencies (Notes 1 and 13)
Subsequent Events (Note 14)
Stockholders' Equity
Common stock
Authorized: 450,000,000 shares, par
value $0.001
Issued and outstanding: 169,188,974
(December 31, 2010 - 168,188,974) 169,189 168,189
Additional paid-in capital 24,546,469 24,474,411
Commitment to purchase shares 2,288 -
Accumulated deficit (114,175) (114,175)
Deficit accumulated during the development
stage (24,353,299) (23,820,949)
------------------------------
Stockholders' Equity 250,472 707,476
------------------------------
Total Liabilities and Stockholders' Equity 1,885,542 2,322,168
------------------------------
The accompanying notes are an integral part of these consolidated
financial statements
F-2
BIOCUREX, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
(Unaudited)
Accumulated
During the
Development Stage
Three months Ended January 1, 2001
March 31, to March 31,
2011 2010 2011
$ $ $
Revenue - - 1,464,456
-----------------------------------------------
Operating Expenses
Amortization of patents (Note 3) 26,512 10,691 354,214
General and administrative (Note
5(a) & 8) 172,908 944,505 8,519,386
Impairment of patents - - 67,620
Professional and consulting fees 159,668 101,569 5,759,277
Research and development (Note 5(a)) 190,210 116,253 4,969,404
-----------------------------------------------
Total Operating Expenses 549,298 1,173,018
-----------------------------------------------
Loss From Operations (549,298) (1,173,018) (18,205,445)
-----------------------------------------------
Other Income (Expense)
Accretion of discounts on debt (18,044) (414,172) (3,946,019)
Amortization of debt issue costs (5,984) (76,793) (792,291)
Gain (loss) on derivative 54,996 (13,496) 156,272
Gain on sale of equity investment
securities - - 147,991
Gain on settlement of accounts
payable - 44,655 102,937
Loss on extinguishments of
convertible debt - - (374,909)
Interest expense (14,020) (21,958) (1,825,514)
Interest income - - 383,679
-----------------------------------------------
Total Other Income (Expense) 16,948 (481,764) (6,147,854)
-----------------------------------------------
Net Loss and Comprehensive loss for the
Period (532,350) (1,654,782) (24,353,299)
-----------------------------------------------
Net Loss Per Share - Basic and Diluted (0.00) (0.01)
--------------------------
Weighted Average Shares Outstanding 168,645,000 136,775,000
--------------------------
The accompanying notes are an integral part of these consolidated financial
statements
F-3
BIOCUREX, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(Unaudited)
Accumulated
During
The Development
Three months Ended Stage
March 31, January 1, 2001
to March 31,
2011 2010 2011
------------------------------------------
$ $ $
Operating Activities:
Net loss for the period (532,350) (1,654,782) (24,353,299)
Adjustments to reconcile net loss to net cash
used in operating activities:
Accretion of discounts on debt 18,044 414,172 3,946,019
Allowance for uncollectible notes
receivable - - 98,129
Amortization of patents 26,512 10,691 354,214
Amortization of debt issue costs - 76,793 786,307
Debt issue costs 5,984 - (83,460)
Gain (loss) on derivative liability (54,996) 13,496 (156,272)
Gain on extinguishments of debt - - 374,909
Gain on write off accounts payable - (44,655) (102,937)
Gain on sale of investment securities - - (253,065)
Loss from impairment of patents - - 67,620
Stock-based compensation 73,058 802,901 7,815,817
Unrealized foreign exchange gain (869) - (869)
Changes in operating assets and liabilities:
Notes and interest receivable - - (6,296)
Prepaid expenses and other 4,623 (20,936) 35,695
Accounts payable & accrued liabilities 46,024 (409,677) 1,761,440
Increase (Decrease) in related party 12,175 (149,522) (39,237)
Deferred revenue - - (162,000)
Subscriptions receivable - - (100,682)
------------------------------------------
Net Cash Used in Operating Activities (401,795) (961,519) (10,017,967)
------------------------------------------
Investing Activities:
Net proceeds from notes receivable - - 1,171
Patent costs (18,700) (15,889) (708,053)
Proceeds from sale of investment
securities - - 451,123
------------------------------------------
Net Cash Used in Investing Activities (18,700) (15,889) (255,759)
------------------------------------------
Financing Activities:
Due to related parties - - 552,281
Proceeds from loans payable - - 607,549
Repayment on loans payable - (450,000) (450,000)
Proceeds from convertible debt - - 3,639,743
Repayment on convertible debt - (1,186,700) (2,400,951)
Deferred financing costs - (94,850) (769,487)
Proceeds from shares issued of common
stock - 6,461,400 9,962,872
Proceeds from the exercise of stock
options and warrants 2,288 1,204 1,150,204
Share issuance costs - (761,526) (909,049)
------------------------------------------
Net Cash Provided by Financing Activities 2,288 3,969,528 11,383,162
------------------------------------------
Net (Decrease) Increase in Cash (418,207) 2,992,120 1,109,436
Cash - Beginning of period 1,770,194 126,605 242,551
------------------------------------------
Cash - End of period 1,351,987 3,118,725 1,351,987
------------------------------------------
Non-cash Investing and Financing Activities:
Share issued to settle debt and services 70,000 81,000 1,179,881
Units issued as share issuance costs - 939,771 939,771
Note payable converted into common shares - - 1,594,021
------------------------------------------
Supplemental Disclosures:
Interest paid 13,602 21,880 718,889
Income taxes - - -
------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements
BIOCUREX, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Unaudited)
1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
BioCurex, Inc. (the "Company") was incorporated on December 8, 1997, under
the laws of the State of StateplaceTexas. During the first quarter of 2001,
the Company ceased its business activities relating to the acquisition and
sale of thoroughbred racehorses when a change of majority control occurred.
On February 21, 2001, the Company acquired intellectual properties and
patents relating to cancer diagnostics and therapeutics. The Company is now
in the business of developing, producing, marketing and licensing products
based on patented and proprietary technology in the area of cancer
diagnostics. The Company is considered a development stage enterprise as
defined by Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") 915, Development Stage Entities. On October 31, 2008,
the Company incorporated BioCurex country-regionChina Co., Ltd. ("Biocurex
country-regionChina"), a wholly-owned subsidiary in country-regionplaceChina.
On December 8, 2009, the Company incorporated OncoPet Diagnostics Inc., a
wholly-owned subsidiary under the laws of the State of StateplaceColorado.
The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the country-regionplaceUnited
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 does not have sufficient cash nor does it have an
established source of revenue to cover its ongoing costs of operations for
the next twelve months. Management plans to obtain additional funds through
the sale of its securities. However there is no assurance of additional
funding being available. As at March 31, 2011, the Company has accumulated
losses of $24,353,299 since the inception of the development stage. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements and related notes are presented in
accordance with accounting principles generally accepted in the
country-regionplaceUnited States, and are expressed in U.S. dollars. These
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, BioCurex country-regionplaceChina and OncoPet
Diagnostics Inc. The Company's fiscal year-end is December 31.
Interim Financial Statements
The interim unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for
interim financial information and with the instructions for Securities and
Exchange Commission ("SEC") Form 10-Q and they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Therefore, these financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto for the year ended December 31, 2010, included
in the Company's Annual Report on Form 10-K/A filed on April 1, 2011 with the
SEC.
In the opinion of the Company's management, these consolidated financial
statements reflect all adjustments necessary to present fairly the Company's
consolidated financial position at March 31, 2011, and the consolidated
results of operations and the consolidated statements of cash flows for the
three months ended March 31, 2011 and 2010. The results of operations for the
three months ended March 31, 2011 are not necessarily indicative of the
results to be expected for the entire fiscal year.
F-4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the country-regionplaceUnited States
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 periods. The Company
regularly evaluates estimates and assumptions related to valuation of patent
costs, stock-based compensation, financial instrument valuations, and
deferred income tax asset valuation allowances. The Company bases its
estimates and assumptions on current facts, historical experience and various
other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that
are not readily apparent from other sources. The actual results experienced
by the Company may differ materially and adversely from the Company's
estimates. To the extent there are material differences between the estimates
and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
Registration Payment Arrangements
The Company accounts for registration rights arrangements and related
liquidated damages provisions under FASB ASC 815-40, Derivatives and Hedging
- Contracts in Entity's own Entity, which addresses an issuer's accounting
for registration payment arrangements. ASC 815-40 defines a registration
payment arrangement as an arrangement where the issuer i) will endeavor to
file a registration statement for the resale of financial instruments, have
the registration statement declared effective, or maintain its effectiveness
and ii) transfer consideration to the counterparty if the registration
statement is not declared effective or its effectiveness is not maintained.
ASC 815-40 requires the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a
financial instrument or other agreement, to be separately recognized and
measured in accordance with ASC 450, Contingencies.
Research and Development Costs
Research and development costs are charged to operations as incurred.
Foreign Currency Translation
The Company's functional and reporting currency is the
country-regionplaceUnited States dollar. Monetary assets and liabilities
denominated in foreign currencies are translated to country-regionplaceUnited
States dollars in accordance with ASC 830, Foreign Currency Translation
Matters using the exchange rate prevailing at the balance sheet date. Gains
and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of
income. Foreign currency transactions are primarily undertaken in Canadian
dollars and Chinese Renminbi.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605 Revenue
Recognition, Revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the service is
performed, and collectibility is reasonably assured. The Company's revenue
since the inception of the development stage consisted of license fees
related to the licensing of its RECAF(TM) technology.
F-5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-lived Assets
In accordance with ASC 360, Property Plant and Equipment, the Company tests
long-lived assets or asset groups for recoverability when events or changes
in circumstances indicate that their carrying amount may not be recoverable.
Circumstances which could trigger a review include, but are not limited to:
significant decreases in the market price of the asset; significant adverse
changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition
or construction of the asset; current period cash flow or operating losses
combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and current expectation that the asset
will more likely than not be sold or disposed significantly before the end of
its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and its
fair value which is generally determined based on the sum of the undiscounted
cash flows expected to result from the use and the eventual disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss
is recognized when the carrying amount is not recoverable and exceeds fair
value.
Income Taxes
The Company accounts for income taxes using the asset and liability method in
accordance with ASC 740, Income Taxes. The asset and liability method
provides that deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities, and for
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using the currently enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce deferred tax assets to the amount
that is believed more likely than not to be realized.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718,
Compensation - Stock Compensation, and ASC 505-50, Equity-Based Payments to
Non-Employees using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more
reliably measurable.
F-6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260 Earnings
Per Share which requires presentation of basic earnings per share and diluted
earnings per share. The computation of basic earnings per share is computed
by dividing income available to common stockholders by the weighted-average
number of outstanding common shares during the period. Diluted earnings per
share gives effect to all potentially dilutive common shares outstanding
during the period. The computation of diluted EPS does not assume conversion,
exercise or contingent exercise of securities that would have an
anti-dilutive effect on earnings. As of March 31, 2011, the Company had
approximately 156,247,655 of potentially dilutive securities, including
options, warrants and equity instruments related to convertible notes payable
and convertible debt, all of which were anti-dilutive since the Company
incurred losses during these periods.
Comprehensive Loss
ASC 220, Comprehensive Income, establishes standards for the reporting and
display of comprehensive loss and its components in the financial statements.
During the three months ended March 31, 2011 and 2010, the Company has no
items that represent other comprehensive loss and, therefore, has not
included a schedule of other comprehensive loss in the financial statements.
Patents
Patents are stated at cost and have a definite life. Once the Company
receives patent approval, amortization is calculated using the straight-line
method over the remaining life of the patents.
Reclassifications
Certain reclassifications have been made to the prior period's financial
statements to conform to the current period's presentation.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update (ASU) No.
2010-06, Improving Disclosures about Fair Value Measurements, which amends
the ASC Topic 820, Fair Value Measures and Disclosures. ASU No. 2010-06
amends the ASC to require disclosure of transfers into and out of Level 1 and
Level 2 fair value measurements, and also requires more detailed disclosure
about the activity within Level 3 fair value measurements. The new
disclosures and clarifications of existing disclosures were effective for
interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures concerning purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures were effective for fiscal years beginning
after December 15, 2010, and for interim periods within those fiscal years.
This guidance requires expanded disclosures only, and did not have a material
impact on the Company's financial statements.
The Company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the
financial statements unless otherwise disclosed, and the Company does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results
of operations.
F-7
3. PATENTS
Patents relate to developing the method for diagnostic and treatment of
cancer using a new cancer marker called "RECAF." The Company has filed patent
applications in 23 countries with ongoing applications currently being
prepared. As of March 31, 2011, the Company had received patent approval from
five countries and the European patent office. Additions made after March 31,
2011 will have a remaining life of approximately four years. The Company
intends to apply for extensions in the near future.
A schedule of the patents is as follows:
March 31, December 31,
2011 2010
$ $
Patents 836,151 817,451
Less:
Accumulated amortization (345,463) (318,951)
----------------------------------------------------------------------------
Net Carrying Value 490,688 498,500
----------------------------------------------------------------------------
Amortization expense totaled $26,512 and $10,691 for the three months ended
March 31, 2011 and 2010, respectively.
The estimated future amortization expense is as follows:
$
2011 79,536
2012 106,047
2013 106,047
2014 106,047
Thereafter 93,011
--------------
490,688
--------------
F-8
4. LOANS PAYABLE
a) On September 21, 2009, the Company completed a private placement in which
it sold three promissory notes in the aggregate principal amount of
$125,000 and 1,785,715 shares of its common stock for an aggregate
purchase price of $125,000.
The promissory notes bear interest at a rate of 10% per annum. Both
interest and principal are payable on January 31, 2013.
The aggregate purchase price for the units was allocated equally between
the notes and shares contained in each Unit based on their relative fair
value. The relative fair value assigned to the shares totaled $62,500.
These amounts were recorded as a notes discount and will be amortized as
interest expense over the term of the promissory notes.
During the three months ended of March 31, 2011, the Company paid interest
in the amount of $3,082 (2010 - $ 3,082) and recorded $4,236 (2010 -
$6,912) as the accretion expense related to these promissory notes. As at
March 31, 2011, the carrying value of these notes was $85,537 (December
2010 - $81,301).
The Company incurred $9,391 in debt issue costs for the promissory notes
described above. The debt issue costs are being expensed over the term of
the promissory notes.
During three months ended March 31, 2011, the Company expensed $751 (2010
- $751) of the debt issue costs related to promissory notes, and at March
31, 2011, the balance of debt issue costs was $5,596 (December 2010 -
$6,347).
b) During the year ended December 31, 2010, the Company received a net
advance of 207,325 RMB (March 31, 2011- US$31,681; December 31, 2010 -
US$32,550) from BioCurex placecountry-regionChina's Agent. The advance is
non interest bearing, unsecured and due on demand. The balance remains
unchanged at March 31, 2011
5. RELATED PARTY TRANSACTIONS AND BALANCES
March 31, December 31,
2011 2010
$ $
Due to Pacific BioSciences Research Centre Inc.
and Company's President (a) 429,909 417,734
Due to Company's Chairman (b) 12,054 12,054
Due to a former officer (c) 4,930 4,930
-----------------------------------------------------------------------------
446,893 434,718
-----------------------------------------------------------------------------
F-9
5. RELATED PARTY TRANSACTIONS AND BALANCES (continued)
a) The Company's research and development is performed by Pacific BioSciences
Research Centre ("Pacific"). Pacific is 100% owned by the President of the
Company. During the three months ended March 31, 2011 and 2010, Pacific
performed research and development for the Company valued at $165,949 and
$96,332, respectively.
Pacific also provided administrative services during the three months
ended March 31, 2011 and 2010, valued at $49,720 and $53,457,
respectively. During the three months ended March 31, 2011, and 2010,
Pacific charged interest of $2,031 and $2,345, respectively, calculated at
the bank prime rate on the monthly balance owed. As at March 31, 2011 and
December 31, 2010, the amount due to Pacific was $422,337 and $405,688,
respectively, and is unsecured and due on demand.
On September 15, 2009, the Company entered into an agreement with the
Company's President to provide management services for a fee of $250,000
per annum. During three months ended March 31, 2011, the Company incurred
$62,500 (2010 - $62,500) for the management services of which $7,572
remains unpaid as of March 31, 2011 (December 31, 2010 - $12,046).
b) On September 15, 2009, the Company entered into an agreement with the
Company's Chairman to provide management services for a fee of $100,000
per annum based on 40 hours per month. During the three months ended March
31, 2011, the Company incurred $36,000 (2010 - $32,333) for management
services. As at March 31, 2011, the Company is indebted to the Company's
Chairman for $12,054 of March management fees and miscellaneous expense
(December 31, 2010- $12,054).
c) The balance represents $4,930 owing to a former officer which is
unsecured, non-interest bearing and due on demand.
6. CONVERTIBLE NOTES AND DEBT
a) The Company received funds during 2003 relating to ten convertible notes
payable totaling $529,743, bearing interest at 5% and due on demand. Under
the convertibility terms of the notes payable, the principal, plus accrued
interest, can be converted immediately, at the option of the holder,
either in whole, or in part, into fully paid common shares of the Company.
The conversion price per share is equal to the lesser of the stated price
(ranging between $0.05 and $0.23) or 75% of the average closing bid prices
for the five trading days ending on the trading day immediately before the
date of the conversion. In conjunction with the issuance of the notes, the
Company issued 2,434,088 warrants to the note holders entitling them to
purchase 2,434,088 shares of common stock at exercise prices between $0.08
and $0.38. The warrants expired two years after the issuance date.
In accordance with ASC 470-20, Debt - Debt with Conversion and Other
Options, the proceeds were allocated between the debt and warrants based
on their relative fair values. The value assigned to the warrants totaled
$274,601 and was expensed immediately due to the notes being due on
demand. In addition to the shares to be received upon conversion, the note
holder will also receive an equal number of warrants to purchase shares at
110% of the conversion price amount.
The beneficial conversion feature was calculated under ASC 470-20, and
equaled $255,142. Due to the notes being due on demand, the discount was
expensed in fiscal 2003.
As of March 31, 2011, one $33,885 (2010 - $33,885) convertible note
remained outstanding which is payable to a related party.
F-10
6. CONVERTIBLE NOTES AND DEBT (continued)
b) In August 2009, the Company sold Convertible Notes (the "Notes") in the
principal amount of $2,150,000. The Notes bear interest at an annual rate
of prime (as adjusted monthly on the first business day of each month)
plus 2.75% per year, payable in arrears on the first day of each month.
The Notes are due and payable on December 31, 2012 and are secured by
substantially all of the Company's assets. At the holders' option, the
Notes are convertible into shares of the Company's common stock at a
conversion price of $0.14 per share. The embedded conversion option
contains a reset provision that can cause an adjustment to the conversion
price if the Company issues an equity instrument that does not qualify as
an Exempt Issuance at a price lower than the initial conversion price. An
Exempt Issuance is defined as:
i. shares or options issued to employees of Biocurex for services
rendered pursuant to any stock or option plan adopted by the
Directors of Biocurex, not to exceed 500,000 shares or options in
any year;
ii. options issued to officers or directors of Biocurex, provided
that the number of options issued during any twelve-month period
may not exceed 500,000;
iii. shares or options issued at fair market value for services
rendered to independent consultants, limited to 500,000 shares or
options in any year;
iv. restricted equity securities sold for cash, provided that no more
than 500,000 restricted equity securities can be sold in any
year, the restricted equity securities cannot be registered for
public sale, and the restricted equity securities, and the
exercise price of any warrants, cannot be less than 75% of the
market price of Biocurex's common stock;
v. shares issued to any note holder in payment of principal or
interest;
vi. shares sold to any note holder;
vii. securities issued upon the conversion of the Notes or the
exercise of the Warrants;
viii. securities issued upon the conversion of notes or the exercise
of options or warrants issued and outstanding on June 25, 2007,
provided that the securities have not been amended to increase
the number of such securities or to decrease the exercise,
exchange or conversion price of the securities.
Due to this provision, the embedded conversion option qualifies for
derivative accounting under ASC 815-15 (See Note 12)
F-11
6. CONVERTIBLE NOTES AND DEBT (continued)
The following table summarizes the changes in the Notes during the three
months ended March 31, 2011:
Carrying
Principal Discount Value
$ $ $
--------------------------------
Balance, December 31, 2010 563,300 (125,565) 437,735
Accretion of discount on convertible
debt - 13,808 13,808
--------------------------------
Balance, March 31, 2011 563,300 (111,757) 451,543
--------------------------------
During the three months ended March 31, 2011, the Company expensed
$5,233 (2010 - $5,233) of the debt issue costs related to these
convertible notes. The balance of debt issue costs at March 31, 2011 is
$37,271 (December 31, 2010 - $42,504).
7. COMMON STOCK
For the three months ended March 31, 2011:
a) In January 2011, the Company issued 500,000 shares of common stock to
a vendor to settle accounts payable of $35,000.
b) In January 2011, the Company entered into a consulting agreement for
investor relation consulting services ending May 31, 2011. The Company
issued 500,000 restricted common shares with a fair value of $35,000.
8. STOCK-BASED COMPENSATION
Stock Bonus Plan
Under the Company's Stock Bonus Plan, employees, directors, officers,
consultants and advisors are eligible to receive a grant of the Company's
shares, provided that bona fide services are rendered by consultants or
advisors and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction. On November 30, 2010, the
Company increased the number of shares issuable pursuant to this plan from
10,500,000 shares to 20,000,000 shares with 9,479,132 common shares available
for future issuance as of March 31, 2011.
F-12
8. STOCK-BASED COMPENSATION (continued)
Non-Qualified Stock Option Plan
The Company's Non-Qualified Stock Option Plan authorizes the issuance of
common shares to persons that exercise stock options granted. The Company's
employees, directors, officers, consultants and advisors are eligible to be
granted stock options pursuant to this plan, provided that bona fide services
are rendered by such consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction. The stock option exercise price is determined by a committee and
cannot be less than $0.001.
On November 30, 2010, the Company increased the number of shares issuable
pursuant to this plan from 17,500,000 shares to 22,500,000 shares with
8,870,666 common shares available for future issuance as of March 31, 2011.
Management stock options
During the year ended December 31, 2010, the Company granted 28,500,000 stock
options with a grant date value of $1,613,263 to five directors and one
officer at an exercise price of $0.0714 per share. The stock options expire
on December 31, 2020. These options were revalued at March 31, 2011 to be
$1,804,427. Holders of the management stock options may exercise the options
by paying the exercise price to the Company or on a cashless basis upon the
approval of the Company's board of directors. Should the options be exercised
on a cashless basis, the Company will issue common shares of the Company with
a market value equal to the intrinsic value of the options at the close of
trading on the date of exercise. The management stock options were not issued
under the Company's Non-Qualified Stock Option Plan and as at July 1, 2010,
the Company filed a registration statement under the Securities Act of 1933
to register the underlying shares. Accordingly, any shares issuable upon the
exercise of these options will be free trading securities.
The fair value for stock options granted was estimated at the date of grant
and revalued on March 31, 2011 using the Black-Scholes option-pricing model
and the weighted average fair value of stock options granted during the three
months ended March 31, 2011 and 2010 was $0.06 and $0.07 per share,
respectively.
The weighted average assumptions used are as follows:
Three Months Ended March 31,
----------------------------
2011 2010
---- ----
Expected dividend yield 0% 0%
Risk-free interest rate 3.42% 3.7%
Expected volatility 243% 255%
Expected option life (in years) 8.93 10
F-13
8. STOCK-BASED COMPENSATION (continued)
A summary of the changes in the Company's stock options is presented below:
Weighted Weighted
Average Average Aggregate
Exercise Remaining Intrinsic
Number of Price Contractual Value
Shares $ Life (Years) $
-----------------------------------------------------------------------------
Outstanding, December 31, 2010 33,094,757 0.062 7.98 294,064
Exercised (2,288,157) 0.001
-----------------------------------------------------------------------------
Outstanding, March 31, 2011 30,806,600 0.066 8.31 113,023
-----------------------------------------------------------------------------
Exercisable, March 31, 2011 21,306,600 0.064 8.09 113,023
-----------------------------------------------------------------------------
As at March 31, 2011, there was $191,165 of unrecognized compensation costs
related to non-vested share-based compensation arrangements granted which are
expected to be recognized within a year. The total compensation cost of
shares vested during the three months ended March 31, 2011 and 2010 were
$3,057 and $765,525, respectively, which has been included in general and
administration expense in the statement of operations.
A summary of the status of the Company's non-vested options as of March 31,
2011, and changes during the three months end of March 31, 2011, is presented
below:
Number of Weighted Average
Non-vested Options Exercise Price
----------- ------- --------------
Non-vested at December 31, 2010 19,000,000 0.0714
Vested (9,500,000) 0.0714
---------------------------------------------------------------------------
Non-vested at March 31, 2011 9,500,000 0.0714
===========================================================================
9. SHARE PURCHASE WARRANTS
A summary of the changes in the Company's share purchase warrants is
presented below:
Weighted Average
Number of shares Exercise Price
-------------------------------------------------------------------------
Balance, December 31, 2009 16,952,811 0.14
Issued 90,459,600 0.107
Exercised (1,275,000) 0.08(1)
Expired (1,945,277) 0.19
-------------------------------------------------------------------------
Balance, December 31, 2010 104,192,134 0.134
Expired (307,692) 0.17
-------------------------------------------------------------------------
Balance, March 31, 2011 103,884,442 0.13
-------------------------------------------------------------------------
(1) In February 2010, the Company issued 347,727 shares of common stock
pursuant to the cashless exercise of 1,275,000 warrants by a prior
director of the Company. This exercise is in accordance with the
cashless exercise provision of the stock purchase warrant. (see note
7(e) and note 8)
F-14
9. SHARE PURCHASE WARRANTS (continued)
As at March 31, 2011, the following share purchase warrants were
outstanding:
Warrants Exercise Price Expiration Date
-------- -------------- ---------------
233,092 $0.06 7-Jul-2011
252,278 $0.05 31-Dec-2011(1)
343,833 $0.20 7-Jul-2011
400,000 $0.11 18-Aug-2011
500,000 $0.11 17-Aug-2011
500,000 $0.11 3-Sep-2011
590,909 $0.12 19-Jul-2011
900,000 $0.11 5-Apr-2011
1,000,000 $0.11 15-Jun-2011
1,000,000 $0.25 30-Apr-2012
2,000,000 $0.11 1-Apr-2012
2,204,730 $0.08 26-Aug-2014
3,500,000 $0.14 27-Jun-2012
90,459,600 $0.11 19-Jan-2015(2)
----------------------
103,884,442
----------------------
(1) The warrants can be exercised by paying in cash or on a cashless
basis.
(2) The public warrants are exercisable at any time before January 19,
2015. The Company may redeem some or all of the public warrants at a
price of $0.003 per warrant by giving the holders not less than 30
days' notice at any time the common stock closes, as quoted on the
Bulletin Board, at or above $0.143 per share for five consecutive
trading days.
10. UNIT PURCHASE WARRANTS
On January 28, 2010, the Company issued a warrant in conjunction with an
Underwriting Agreement . The warrant had an estimated fair value of $939,771
and it allows the underwriters to purchase up to 120,000 units at $6.00 per
unit for a term of five years from January 19, 2015. Each unit consists of 70
shares of common stock and 70 warrants to purchase shares of the Company's
common stock at an exercise price of $0.107 per share. As at March 31, 2011,
the 120,000 unit purchase warrants were outstanding.
11. FAIR VALUE MEASUREMENTS
ASC 825 defines fair value as the price that would be received from selling
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In determining fair value for
assets and liabilities required or permitted to be recorded at fair value,
the Company considers the principal or most advantageous market in which it
would transact and it considers assumptions that market participants would
use when pricing the asset or liability.
Fair Value Hierarchy
ASC 825 establishes a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. A financial instrument's categorization
within the fair value hierarchy is based upon the lowest level of input that
is significant to the fair value measurement. ASC 825 establishes three
levels of inputs that may be used to measure fair value.
F-15
11. FAIR VALUE MEASUREMENTS (continued)
Level 1
Level 1 applies to assets and liabilities for which there are quoted
prices in active markets for identical assets or liabilities. Valuations
are based on quoted prices that are readily and regularly available in an
active market and do not entail a significant degree of judgment.
Level 2
Level 2 applies to assets and liabilities for which there are other than
Level 1 observable inputs such as quoted prices for similar assets or
liabilities in active markets, quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions
(less active markets), or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated
by, observable market data. Level 2 instruments require more management
judgment and subjectivity as compared to Level 1 instruments.
Level 3
Level 3 applies to assets and liabilities for which there are unobservable
inputs to the valuation methodology that are significant to the
measurement of the fair value of the assets or liabilities. The
determination of fair value for Level 3 instruments requires the most
management judgment and subjectivity.
The Company's financial instruments consist principally of cash, accounts
payable, derivative liability, loans payable, convertible notes payable,
convertible debt and amounts due to related parties. The carrying value of
accounts payable and amounts due to related parties approximate fair value
due to their nature and short terms of maturity. The carrying value of loans
payable, convertible notes payable and convertible notes approximate fair
value are based on market rate for similar financial instruments.
Assets and liabilities measured at fair value on a recurring basis were
presented on the Company's consolidated balance sheet as of March 31, 2011 as
follows:
Fair Value Measurements Using
Quoted
Prices in
Active
Markets Significant
For Other Significant
Identical Observable Unobservable
Instruments Inputs Inputs Balance as of
(Level 1) (Level 2) (Level 3) March 31, 2011
-------------------------------------------------------
Assets:
Cash $ 1,351,987 $ - $ - $ 1,351,987
-----------------------------------------------------------------------------------
Total assets measured at
fair value $ 1,351,987 $ - $ - $ 1,351,987
-----------------------------------------------------------------------------------
Liabilities:
Derivative liabilities $ - $ 89,443 $ - $ 89,443
-----------------------------------------------------------------------------------
Total liabilities measured
at fair value $ - $ 89,443 $ - $ 89,443
-----------------------------------------------------------------------------------
F-16
12. DERIVATIVE LIABILITIES
The embedded conversion option in the Company's note described in Note 6(b)
contains a reset provision that can cause an adjustment to the conversion
price if the Company issues certain equity instruments at a price lower than
the initial conversion price. The fair value of these liabilities will be
re-measured at the end of every reporting period and the change in fair
value will be reported in our consolidated statement of operations as a gain
or loss on derivative financial instruments.
The following table summarizes the change in derivative liabilities for the
three months ended March 31, 2011:
$
-----------------------------------------------------------------------------
Derivative Liabilities at December 31, 2010 145,159
Change in fair value of derivative liabilities (55,716)
-----------------------------------------------------------------------------
Derivative Liabilities at March 31, 2011 89,443
-----------------------------------------------------------------------------
The Company used the Black-Scholes option pricing model to value the
embedded conversion feature using the following assumptions: number of
options as set forth in the convertible note agreements; no expected
dividend yield; expected volatility ranging from 152% - 228%; risk-free
interest rates ranging from 0.33% - 1.98% and expected terms based on the
contractual term.
13. COMMITMENTS AND CONTINGENCIES
a) On April 4, 2006, the Company entered into a consulting agreement with
a term of nine months for consideration of 75,000 common shares. As of
March 31, 2011, the Company had issued 37,500 common shares and 37,500
common shares are still owed to the consultant.
b) On April 10, 2006, the Company entered into a consulting agreement
with a term of one year for consideration of 75,000 common shares. As
of March 31, 2011, the Company had issued 37,500 common shares and
37,500 common shares are still owed to the consultant.
c) BioCurex China has entered into a lease agreement with a third party
with a term from February 15, 2009 to February 1, 2012 in
consideration of 78,200 RMB (approximately $11,885 USD) to be paid
annually.
d) In January 2011, the Company entered into a consulting agreement for
investor relation consulting services ending May 31, 2011. The Company
agreed issue 500,000 restricted common shares on the agreement date
and issue up to 4,500,000 restricted shares which will be held in
custody by the Company subject to certain performance conditions. The
Company has the option to issue cash rather than shares based on a
formula specified in the agreement. In January 2011, the Company
issued 500,000 restricted common shares with fair value of $35,000.
F-17
13. COMMITMENTS AND CONTINGENCIES (continued)
e) On January 3, 2011, the Company entered into a consulting agreement
with CaroLink Science Solutions ("CaroLink") whereby the CaroLink will
provide consulting services to the Company from January 3, 2011 to
December 31, 2011 in consideration of 417,000 common shares of the
Company to be paid through quarterly instalments on March 31, June 30,
September 30 and December 31. No shares were issued by the Company to
CaroLink at March 31, 2011. Subsequent to period end, the Company
issued 150,000 common shares of the Company to CaroLink at a fair
value of $6,000. This amount has been accrued as accounts payable at
March 31, 2011.
14. SUBSEQUENT EVENTS
a) In April 2011, the Company issued 2,288,157 shares of common stock
pursuant to stock options exercised at $0.001 per share for common
shares subscriptions totaling $2,288 received in March 2011.
b) In April 2011, the Company issued 150,000 shares of common stock to a
scientist with a fair value of $7,500 for consulting services.
c) On April 13, 2011, the Company entered into an agreement with First
Barrington Group, Inc.("Barrington"), whereby the Company will
repurchase 800,000 shares of the Company's common stock in
consideration for $30,000. This amount was paid subsequent to period
end.
F-18
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
We are a development stage biotechnology company developing products based
on patented and proprietary technology in the area of cancer diagnostics. The
technology identifies a universal cancer marker known as RECAF. Patents have
been granted in the United States, Europe, Australia and China and are pending
in other major worldwide markets.
RECAF is a molecule that is present on cancer cells but not detected in
significant levels on healthy cells or benign tumor cells. It is the receptor
for alpha-fetoprotein and is classified as an oncofetal antigen due to its
presence on both fetal and malignant tissues. This characteristic makes RECAF a
more accurate indicator of cancer than most current tumor markers.
We are commercializing our technology through licensing arrangements with
companies that develop and market diagnostic tests for the large automated
clinical laboratory setting, through development and marketing of non-automated
clinical laboratory tests, through development of rapid, point-of-care test
formats, and through marketing of our OncoPet RECAF test for cancer in companion
animals.
Our business model is to develop internally our RECAF cancer diagnostic
platform to the stage where individual applications can be partnered or licensed
in strategic relationships for regulatory approval and commercialization. Our
objective is to receive cash from licensing fees, milestone payments, and
royalties from such partnerships which support continued development of our
cancer diagnostic portfolio. We have signed licensing agreements for its cancer
detection blood tests with Abbott Laboratories and with Inverness Medical
Innovations. In the veterinarian market where there are no regulatory hurdles,
our objective is to commercialize our technology through our subsidiary, OncoPet
Diagnostics, and with distributors in North America, placeEurope and elsewhere.
Our principal objectives for the twelve-month period ending March 31, 2012
are as follows:
o grant one additional license for our cancer detection blood test;
o commercialize veterinary applications of RECAF testing technology
through our wholly-owned subsidiary, OncoPet Diagnostics;
o finish development for our rapid, point of care cancer test; and
o commercialize other test formats through our wholly-owned subsidiary
in China, BioCurex China Co., Ltd.
Our success is dependent upon several factors, including, maintaining
sufficient levels of funding through pubic and/or private financing,
establishing the reliability of our RECAF cancer tests in screening, diagnosis,
and follow-up for cancer recurrence, securing and supporting strategic
partnerships, securing regulatory approvals where necessary, and commercializing
our technology. We may not be able to achieve these objectives by March 31,
2012, or at all.
1
Recent Developments
In October 2010 we filed a new patent within the Patent Cooperation Treaty,
which presently includes 142 countries. The subject of this patent is a
synthetic peptide that recognizes RECAF(TM) and that can replace the antibodies
used in our RECAF test. The synthetic peptide also allows for many other
applications that cannot be performed with an antibody. Our patent application
contains over 50 claims covering different applications and uses of this
peptide.
An antibody is a biological reagent that requires production under sterile
conditions in large volumes of cell culture medium. The antibodies then need to
be extracted and purified from the medium. This process is expensive and
delicate. The synthetic peptide will allow our to replace the antibodies in the
RECAF test. A peptide is a short sequence of amino acids, much like a very small
protein. Peptides are produced with an automated peptide synthesizer. A well
known small peptide is aspartame, the synthetic sweetener used in Nutrasweet(R).
To make a peptide in a laboritory, its amino acids sequence is entered into
a computer and the rest of the process is automatically handled by special
computer software. Since the peptide is synthesized chemically rather than
biologically, the batch-to-batch variability is drastically reduced and the cost
reduction is significant. Being small molecules, peptides are also more stable
than antibodies, resulting in longer shelf life and related issues.
The most important advantage of peptides over antibodies is their
flexibility: Antibodies cannot be modified unless very expensive and complex
molecular engineering processes are used. To change the specificity of an
antibody, one has to develop a new one, which is a very labor intensive and
unpredictable process. On the other hand, to modify a peptide, all that is
required is to use a different amino acid sequence on the computer. This
tremendous flexibility opens many possibilities for us, some of which are listed
below:
1) Tailoring dog, cat and other animal RECAF tests for each species
rather than relying, on the cross reactivity exhibited by anti-human
RECAF antibodies against dog RECAF.
2) Tailor-tagging of the peptide for different uses such as cancer
targeted therapy, imaging or blood diagnostic tests.
3) Attaching the peptide to liposomes for cancer targeting. Liposomes are
artificially prepared vesicles that can be filled with anti-cancer
drugs, Interference RNA or other compounds and delivered to cancer
cells. Attaching the peptide to the surface of liposomes should
increase the delivery to cancer cells since our peptide recognizes
RECAF and RECAF is on the surface of cancer cells but not on healthy
cells. Liposomes are used for delivery of a variety of formulations
from medicine to cosmetics.
4) Incorporation of a DNA sequence that encodes the peptide into the DNA
or RNA of a virus which would then express the peptide on its surface.
Since the peptide recognizes RECAF which is on cancer cells but not on
normal cells, the virus would only infect and kill the cancer cells
thus becoming an oncolytic virus.
2
In October 2010 we entered into a non-exclusive distribution agreement with
VetRed B.V. from Naarden, the Netherlands. VetRed, a private company under Dutch
law, will represent our wholly owned subsidiary OncoPet Diagnostics to
distribute our OncoPet RECAF(TM) cancer test for dogs in Europe.
Through a network of its own companies, agents and distributors, VetRed
will market our OncoPet's RECAF(TM) test to the European Union member states.
Samples will be collected and grouped prior to their dispatch to our
laboratories Canada. Europe is second in the world for its number of cats and
dogs, according to a recent survey--there are approximately 78 million dogs and
94 million cats in placeEurope. The United States and Canada have the largest
dog and cat population, with an estimated 52 million dogs and 66 million cats.
VetRed made an entrance in the veterinary diagnostic market in 2009 with
the introduction of the Pandora(R) Slide Stainer, a tabletop fully automated
unit, which stains in fully reproducible samples prior to their evaluation under
the microscope. VetRed also markets chromogenic media for rapid determination of
fungi and bacteria.
Liquidity and Capital Resources
Since January 2003, we have been able to finance our operations primarily
from equity and debt financing, the proceeds from exercise of warrants and stock
options, interest income on funds held for investment, and license fees. We do
not have lines of credit with banks or other financial institutions.
Our sources and (uses) of cash during the three months ended March 31, 2011
and 2010 were as follows:
Three Months Ended
March 31,
2011 2010
---- ----
Cash used in operations $ (401,795) $ (961,519)
Patent costs (18,700) (15,889)
Repayment of loans -- (450,000)
Repayment of convertible debt -- (1,186,700)
Proceeds from sale of common stock and
exercise of options and warrants, net of
issuance costs 2,288 5,701,078
Deferred financing costs (94,850)
3
In June 2007, we sold convertible notes, plus warrants, to private
investors for $3,000,000. The notes are due and payable on December 31, 2012 and
are secured by substantially all of our assets. At the holder's option the notes
are convertible into shares of our common stock at a conversion price of $0.13.
From the proceeds of our January 2010 public offering we repaid $1,186,700 to
the note holders. Due to principal payments and conversions, the outstanding
principal balance of the notes as of March 31, 2011 was $563,300.
In September 2009, we sold promissory notes in the principal amount of
$575,000 to twenty accredited investors. As partial consideration for lending us
the $575,000 we issued 8,214,292 shares of our common stock to the investors.
With the proceeds from our January 2010 public offering we repaid $450,000 to
the investors. The remaining balance of $125,000 bears interest at 10%, is
unsecured, and is payable on or before January 31, 2013.
In January 2010 we sold 90,459,600 shares of our common stock at a price of
$0.0714 per share in a public offering. For each share sold the investors also
received one warrant. Each warrant entitles the holder to purchase one share of
our common stock at a price of $0.107 per share at any time on or before January
2015. The net proceeds to us from the sale of the shares and warrants, after
deducting underwriting commissions and offering costs, were approximately
$5,700,000. The net cash provided from this financing after repayment of loans
and convertible debt was approximately $3,970,000.
We anticipate that our capital requirements for the twelve-month period
ending March 31, 2012 will be as follows:
Research, development and production of our
diagnostic products $ 900,000
General and administrative expenses 700,000
Marketing and investor communications 150,000
Business development 50,000
Payment of interest on amended senior
convertible notes and unsecured promissory notes 100,000
Payment of outstanding liabilities 250,000
------------
$2,150,000
Our most significant capital requirements are research and development and
general and administrative expenses. General and administrative expenses,
exclusive of depreciation, amortization and other expenses not requiring the use
of cash (such as the costs associated with issuing stock and options for
services), average approximately $60,000 per month. Our research and development
expenses vary, depending upon the scope of the programs that we undertake. As we
move further through the development process our research activities become more
mature and less capital intensive. New development projects may have additional
capital requirements which we balance with capital available for such programs.
We may not be successful in obtaining additional capital in the future. If
we are unable to raise the capital we need, our research and development
activities will be curtailed or delayed and our operations will be reduced to a
level which can be funded with the capital available to us.
4
Material changes of items in our Statement of Operations for the three
months ended March 31, 2011, as compared to the same period in the prior year,
are discussed below:
Increase
(I)
or
Decrease
Item (D) Reason
General and administrative D The decrease was primarily
attributable to lower
stock-based compensation
expense.
Professional and Consulting Fees I The Company entered into
consulting agreements to
strength the overall
marketing strategies.
Accretion of discount on D The repayment of a large
convertible debt portion of the convertible
notes in January 2010 resulted
in the decrease in accretion
of discount on the convertible
debt during the year.
Amortization of debt issue costs D A large
portion of the convertible
notes were repaid in January
2010. As a result, the debt
issue costs were less during
the current period.
Recent Accounting Pronouncements
See Note 2 to the financial statements which are included as part of this
report.
Critical Accounting Policies
Our significant accounting policies are more fully described in Note 2 to
the financial statements included as a part of this report. However, certain
accounting policies are particularly important to the portrayal of our financial
position and results of operations and require the application of significant
judgments by management. As a result, the consolidated financial statements are
subject to an inherent degree of uncertainty. In applying those policies,
management uses its judgment to determine the appropriate assumptions to be used
in the determination of certain estimates. These estimates are based on our
historical experience, terms of existing contracts, observance of trends in the
industry and information available from outside sources, as appropriate.
Item 4. Controls and Procedures
Our Principal Executive and Financial Accounting Officers have evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule
5
13a-15(e) of the Securities Exchange Act of 1934), as of the end of the period
covered by this report, and in their opinion our disclosure controls and
procedures are effective.
There were no changes in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2011 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting as discussed above.
PART II
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Note 7 to the financial statements included as part of this report lists
the shares of our common stock which were issued during the three months ended
March 31, 2011.
In connection with the issuance of the shares described in subparagraph (b)
of Note 7, we relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933.
The shares described in subparagraph (a) of Note 7 were registered by means
of a registration statement on Form S-8.
Item 6. Exhibits
Exhibits
--------
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
6
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.
BIOCUREX, INC.
May 12, 2011 By /s/ Ricardo Moro
--------------------------------------
Dr. Ricardo Moro - President, Principal
Executive Officer
May 12, 2011 By:/s/ Gladys Chan
-----------------------------------
Gladys Chan - Principal Financial and
Accounting Officer
7