Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 000-30603
HIV-VAC, INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0876846
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Laurel Blvd,
Collingwood, Ontario Canada L9Y 5A8
-----------------------------------
(Address of principal executive offices, Including zip code)
(705) 446-7242
--------------
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 preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |_| No |X|
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 (Section
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, as
defined by Rule 12b-2 of the Exchange Act: (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by a check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act. Yes |_| No |X|
The number of shares of Common Stock outstanding was 10,430,652 as of August 5,
2011.
HIV-VAC, INC.
(A Development Stage Company)
INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET AS OF MARCH 31, 2004 (UNAUDITED) 3
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003 AND
SIX MONTHS ENDED MARCH 31, 2004 AND 2003 AND
PERIOD FROM JANUARY 10, 1997 (DATE OF INCEPTION) TO
MARCH 31, 2004 (UNAUDITED) 4
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2004 AND 2003 AND
PERIOD FROM JANUARY 10, 1997 (DATE OF INCEPTION) TO
MARCH 31, 2004 (UNAUDITED) 5-6
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 7-12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 13-14
AND RESULTS OF OPERATIONS
ITEM 3. QUANTATIVE AND QUALATIVE DISCLOSURE ABOUT MARKET RISK 15
ITEM 4. CONTROLS AND PROCEDURES 15
PART II-- OTHER INFORMATION 16
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 1A. RISK FACTORS 16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. REMOVED OR RESERVED 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS 16
Exhibit 31.1
Exhibit 32.1
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HIV-VAC, INC.
(A Development Stage Company)
BALANCE SHEETS (Unaudited)
ASSETS
March 31, September 30,
2004 2003
------------ ------------
Current Assets
Cash and equivalents $ 2,614 $ 3,706
Prepaid expenditure 67,133 19,972
------------ ------------
Total current assets 69,747 23,678
------------ ------------
Furniture and equipment, net 12,034 16,634
------------ ------------
Other Assets
Intangible assets, net 107,919 115,627
------------ ------------
Total assets $ 189,700 $ 155,939
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accrued liabilities:
Accounts payable 321,457 200,659
Accrued Liabilities 32,000 14,000
Related parties 474,387 431,064
------------ ------------
Total Current Liabilities 827,844 645,723
------------ ------------
Stockholders' Equity (Deficit)
Preferred stock, $0.01 par value;
10,000,000 shares authorized Series A,
non-preferential; 10,000 issued and
Outstanding 100 100
Series B, convertible, non-preferential;
1,000,000 and -0- shares issued and
outstanding, respectively 10,000 10,000
Common stock, $0.001 par value;
500,000,000 shares authorized;
9,831,669 and 9,406,669 shares issued
and outstanding, respectively 9,832 9,407
Additional paid in capital 6,435,925 6,393,851
Deficit accumulated during
the development stage (7,039,109) (6,870,884)
Treasury stock, at cost; 1,016 common stock
and 700,000 Preferred Stock, Series B (8,767) (8,767)
Accumulated other comprehensive loss
(46,125) (23,491)
------------ ------------
Total stockholders' equity (deficit) (638,144) (489,784)
------------ ------------
Total liabilities and stockholders'
equity (deficit) $ 189,700 $ 155,939
============ ============
See accompanying notes to unaudited condensed financial statements.
3
HIV-VAC, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Period from
January 10,
1997
Three Months Ended Six Months Ending (Inception)
------------------------ ------------------------ to
March 31, March 31, March 31, March 31, March 31,
2004 2003 2004 2003 2004
---------- ---------- ---------- ---------- ----------
Expenses
Research and development costs 24,898 73,789 79,176 147,652 1,683,923
General and administrative 7,673 19,112 18,393 81,030 684,051
Legal fees 1.500 15,000 16,000 20,000 1,497,528
Licensing fees 635,500
Patent fees 22,377 19,969 42,348 38,023 1,694,879
Depreciation and amortization 6,154 6,154 12,308 12,308 113,464
Loss from disposal of assets -- -- -- -- 30,195
---------- ---------- ---------- ---------- ----------
62,602 134,024 168,225 299,013 6,339,540
---------- ---------- ---------- ---------- ----------
Loss from operations (62,602) (134,024) (168,225) (299,013) (6,339,540)
---------- ---------- ---------- ---------- ----------
Other Income (Expense)
Other expenses -- -- -- -- (261,162)
Interest income -- -- -- -- 3,774
---------- ---------- ---------- ---------- ----------
Total other income (expense) -- -- -- -- (257,388)
---------- ---------- ---------- ---------- ----------
Loss from continuing operations (62,062) (134,023) (168,225) (299,013) (6,727,716)
Loss from discontinued operations -- -- -- -- --
Loss from Discontinued Operations -- -- -- -- (432,181)
---------- ---------- ---------- ---------- ----------
Net loss (62,062) (134,023) (168,225) (299,013) (7,029,109)
========== ========== ========== ========== ==========
Foreign Currency Translation Adjustment (9,022) 1,975 (22,633) (5,766) (46,125)
---------- ---------- ---------- ---------- ----------
Comprehensive Loss (71,084) (132,048) (190,858) (304,779) (7,075,234)
========== ========== ========== ========== ==========
Loss per weighted average number of
Shares outstanding - basic and diluted 0.01 0.01 0.02 0.03
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding during period -
basic and diluted 9,831,669 9,266,669 9,753,136 9,030,642
========== ========== ========== ==========
See accompanying notes to unaudited condensed financial statements.
4
HIV-VAC, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003 AND FOR THE PERIOD
FROM JANUARY 10, 1997 (INCEPTION) TO MARCH 31, 2004 (UNAUDITED)
Period from
January 10,
1997
(Inception) For the Six Months Ended
to --------------------------
March 31, March 31, March 31,
2004 2004 2003
----------- ----------- -----------
Cash Flows From Operating Activities:
Net loss $(7,029,109) $ (168,225) $ (299,013)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation 113,464 12,308 12,308
Officers' compensation capitalized 100,000 -- --
Other expenses relating to Noveaux and
LifePlan acquisitions 261,163 -- --
Issuance of stock for services 1,424,500 -- --
Issuance of stock for licensing fees 635,500 -- --
Issuance of stock for directors and
officers compensation 110,100 -- 50,100
Issuance of stock for patent fees 1,500,000 -- --
Issuance of stock for fees and current debt 1,014,800 42,500 195,500
Issuance of stock for note payable 140,000 -- --
Decrease in prepaid expenditure (67,132) (47,161) (41,852)
(Decrease) in notes payable (140,000) -- --
Increase in payable and accrued liabilities 294,030 116,161 (72,780)
----------- ----------- -----------
Net Cash Used in Operating Activities (1,642,864) (44,417) (155,737)
----------- ----------- -----------
Cash Flow From Investing Activities:
Purchase of patent rights (85,000) -- --
Purchase of furniture and equipment (48,416) -- --
Purchase of treasury stock (11,767) -- --
Cash acquired in acquisition 120,272 -- --
----------- ----------- -----------
Net Cash Used in Investing Activities (24,911) -- --
----------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from issue of preferred stock series B 10,000 -- --
Proceeds from issuance of common stock 689,164 -- --
Preferred dividends paid -- -- --
Proceeds from notes payable 140,000 -- --
Proceeds from advances from related parties 474,389 43,325 140,000
Proceeds from sale of treasury stock and
warrants 15,000 -- --
Payment of stockholder's loan (272) -- --
Proceeds from additional paid in capital 342,108 -- --
----------- ----------- -----------
Net Cash Provided by Financing Activities 1,670,389 43,325 140,000
----------- ----------- -----------
Net increase (decrease) in cash 2,614 (1,092) (15,737)
Cash and equivalents at beginning of period -- 3,706 18,577
----------- ----------- -----------
Cash and equivalents at end of period $ 2,614 $ 2,614 $ 2,840
=========== =========== ===========
5
HIV-VAC, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003 AND FOR THE PERIOD
FROM JANUARY 10, 1997 (INCEPTION) TO MARCH 31, 2004 (UNAUDITED)
Period from
January 10,
1997
(Inception) For the Six Months Ended
to --------------------------
March 31, March 31, March 31,
2004 2004 2003
----------- ----------- -----------
Supplemental Disclosure of Cash Flow Information:
Issuance of common shares for Noveaux merger $ 106,525 $ -- $ --
=========== =========== ===========
Issuance of common shares for LifePlan merger $ 50,000 $ -- $ --
=========== =========== ===========
Preferred B stock dividend $ 10,000 $ -- $ --
=========== =========== ===========
Forgiveness of stockholder debt $ 7,227 $ -- $ --
=========== =========== ===========
See accompanying notes to unaudited condensed financial statements.
6
HIV-VAC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004.
(UNAUDITED)
The unaudited condensed financial statements of HIV-VAC, Inc. included herein
have been prepared by HIV-VAC pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
HIV-VAC's management, the accompanying unaudited condensed financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial information included herein. These
financial statements should be read in conjunction with HIV-VAC's audited
financial statements contained in its Annual Report on Form 10-K for the year
ended September 30, 2003.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations: HIV-VAC, Inc. (the "Company"), formerly known as
Personna Records, Inc. (Personna) was incorporated on January 10,1997 in the
State of Nevada. Personna (originally known as Sonic Records, Inc.) was engaged
in the production and distribution of musical records. In April 1998, Personna
merged with Nouveaux Corporation whereby Personna became the surviving
corporation.
Development Stage Enterprise: HIV-VAC Inc reverted to a development stage
enterprise when it disposed of its music recording assets (March 1999) and
commenced the research and development of its HIV vaccine. The Company's
principal activities since March 1999 have included defining and conducting
research programs, conducting animal clinical trials, raising capital and
researching ways to enhance the company's intellectual property. The Company has
not yet commenced human trials.
Going Concern: The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has experienced
recurring losses since inception and has negative net working capital and cash
flows from operations. For the years ended September 30, 2003 and 2002, the
Company experienced a net loss of $510,450 and $806,523, respectively.
The Company's ability to continue as a going concern is contingent upon its
ability to secure additional financing, initiate sale of its product, and attain
profitable operations. Management is pursuing various sources of equity
financing. Although the Company plans to pursue additional financing, there can
be no assurance that the Company will be able to secure financing or obtain
financing on terms beneficial to the Company.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Fixed Assets: Fixed assets are stated at cost. Maintenance and repairs are
expensed in the period incurred; major renewals and betterments are capitalized.
When items of property are sold or retired, the related costs are removed from
the accounts and any gain or loss is included in income. Depreciation is
computed using the straight-line method over the estimated economic useful lives
of 5 years for office equipment and 7 years for office furniture.
Intangible Assets: Intangible assets consist of licensing rights. The licensing
rights are being amortized using the straight-line method over the remaining
estimated economic useful life of 12 years commencing April 1999. The Company
reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition
are less than its carrying amount.
Cash and Cash Equivalents: For purposes of the cash flow statement, the Company
considers all highly liquid investments with maturities of three months or less
at the time of purchase to be cash equivalents
7
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Fair Value of Financial Instruments: The carrying amounts reported in the
balance sheets for cash and cash equivalents, accounts receivable, and accounts
payable approximate fair value because of the immediate or short-term maturity
of these financial instruments.
Income Taxes: The Company accounts for income taxes under Financial Accounting
Standards Board of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. No current or deferred income tax expense or benefit were recognized due
to the Company not having any material operations for the periods ended March
31, 2004 and 2003.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the finical statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Net Loss Per Common Share: Basic and diluted net loss per common share for the
periods ended March 31 2004, and 2003 are computed based on the weighted average
common shares outstanding as defined by Statement of Financial Accounting
Standards No. 128, "Earnings Per Share". Common stock equivalents have not been
included in the computation of diluted loss per share since the effect would be
anti-dilutive.
Foreign Currency: Assets and liabilities recorded in foreign currencies are
translated at the exchange rate on the balance sheet date. Revenue and expenses
are translated at average rates of exchange prevailing during the year.
Translation adjustments resulting from this process are charged or credited to
other comprehensive income.
Recent Accounting Announcements: The Company has determined that there are no
recent accounting pronouncements that will have any material effect on the
Company's financial statements.
Stock Issued For Services: The company enters into transactions in which goods
or services are the consideration received for the issue of equity instruments.
The value of these transactions are measured and accounted for, based on the
fair value of the equity instrument issued or the value of the services,
whichever is more reliably measurable. The services are expensed in the periods
that they are rendered.
8
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - FIXED ASSETS
Fixed Assets consisted of the following:
March 31, September 30,
2004 2003
------------- -------------
Furniture $ 936 $ 936
Equipment 47,480 47,480
48,416 48,416
Less accumulated depreciation (36,382) (31,782)
------------- -------------
Net $ 12,034 $ 16,634
============= =============
Depreciation expense for the six months ended March 31, 2004 and the year ended
September 30, 2003, was $4,600 and $9,200 respectively
NOTE 3 - INTANGIBLE ASSETS
Intangible Assets consisted of the following:
March 31, September 30,
2004 2003
------------- -------------
Licensing Rights $ 185,000 $ 185,000
Less accumulated amortization (77,081) (69,373)
------------- -------------
Net $ 107,919 $ 115,627
============= =============
Amortization expense for the six months ended March 31, 2004 and the year ended
September 30, 2003, was $7,708 and $15,418 respectively.
9
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - LICENSING AGREEMENT
On March 15, 1999, the Company entered into an agreement with Intracell Vaccines
Limited (Intracell) whereby the Company issued 57,500 shares of Common Stock,
10,000 Preferred Stock and $85,000 for an aggregate amount of $185,000 in
exchange for the worldwide licensing rights to an AIDS/HIV vaccine developed by
The University of Birmingham, UK. The company also issued stock options to the
shareholders of Intracell to purchase a total of 300,000 shares of the Company's
Common Stock, conditional on the outcome of three separate events.(See
Commitments and Contingencies). The options have not been valued because they
are subject to contingencies. The Company also agreed to make advance minimum
royalty payments of (pound)50,000 ( $80,500) to the University of Birmingham
Research and Development Limited commencing January 1, 2002.
The minimum payments are for the duration of the patents. The Company had been
unable to make these payments as of the date of this report.
In April 6, 1999, this agreement was amended to include an anti-dilution clause
which provided for Intracell and its shareholders to maintain an equity position
of 60% of the common shares of the Company until the company had raised $5
million. Specifically, when the Company issues stock to others, the
anti-dilution clause requires the Company to issue additional stock to Intracell
so that Intracell maintains its 60% interest in the Company.
The Company failed to attract financing as agreed under the agreement with
Intracell Vaccine Ltd, and on August 7, 2001 the Company amended the agreement
with Intracell , whereby Intracell agreed to waive its right to terminate the
assignment of license agreement provided that the Company issue an additional
3,000,000 of its common shares to Intracell and 7,500,000 options to purchase
shares of common stock of the Company. Such options vest in blocks of 2,500,000
upon the occurrence of certain events.(See Commitments and Contingencies). The
market value of the shares issued to Intracell which amounted to $1.5 million
was expensed to patent fees.
NOTE 5 - STOCKHOLDERS' EQUITY
On November 3, 2003, the Company issued 425,000 shares of common stock as
compensation for legal and consulting services valued at $42,500. The issuance
of these shares were made in reliance upon an exemption pursuant to Section 4(2)
of the Act.
10
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
a) Operating lease. On April 1, 2003, the Company entered into a lease
agreement for office facility expiring on April 30, 2004. The rent
payable under the lease is $1,800 per quarter. Rent expense for the
year ended September 30, 2003, was $18,794.
b) Stock Options.
On March 15, 1999, the Company entered into a stock option agreement
in which the Company granted to Intracell options to purchase an
aggregate of 300,000 shares under three separate conditional events.
The Company authorized the exercise of the options as follows:
1.) The option to purchase 100,000 Common Stock at $0.001 per
share when human trials of the HIV vaccine begin.
2.) The option to purchase 100,000 Common Stock at $0.001 per
share should the Company commence United States Government
Food and Drug Administration ("FDA") Phase 111 trials of its
HIV vaccine.
3.) The option to purchase 100,000 Common Stock at $0.001 per
share should the Company obtain FDA approval of its HIV
vaccine.
None of the contingencies had been met at March 31, 2004. The
options expired on April 1, 2004 without being exercised.
On August 7, 2001, the Company provided Intracell with three options
to acquire a total of 7,500,000 shares as follows:
1. 2,500,000 shares of common stock at $0.50 per share when Phase I
human trials begin.
2. 2,500,000 shares of common stock at $1.00 per share when Phase 3
human trials begin.
3. 2,500,000 shares of common stock at $2.00 per share when the
Company receives a product licence from any recognized
government.
None of the contingencies had been met at March 31, 2004. The
options expire on September 1, 2007.
Warrants - On July 29, 2002, the Company issued stock warrants to acquire
3,000,000 shares of the Company's common stock at $1.50 per share. The warrants
expired on December 2003 without being exercised.
Stock Options - On September 2, 2002, the Company provided Trinity Funding, an
option to purchase 800,000 common shares, in settlement of the note payable of
$140,000 to Trinity Funding. The exercise price of the option was determined to
be the average market price of common shares over the 20 trading days prior to
exercise, less a discount of 35% or $.50 per share, whichever is higher. The
options expired on December 31, 2003 without being exercised.
11
HIV-VAC, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Royalty Payments under Licensing Agreement - The Company has committed to make
minimum royalty payments of (pound)50,000 ($80,500) per annum, in advance to the
University of Birmingham Research and Development Limited, commencing January 1,
2002. The minimum payments will remain in effect for the duration of the
utilization of the patents. The Company had not made the above payments.
Consulting Agreement - Pursuant to the consulting agreement with Intracell
Vaccines, the Company is committed to pay Intracell Vaccines a consulting fee of
$20,000 per quarter. Intracell Vaccines has the right, due to the company's
failure to make these payments, to terminate the consulting agreement.
NOTE 7 - INCOME TAXES
Due to net operating losses and the uncertainty of realization, no tax benefit
has been recognized for operating losses. At March 31, 2004, net operating
losses of approximately $5,831,000 are available for carry forward against
future years' taxable income and begin expiring in the year 2014. The Company's
ability to utilize its net operating loss carry forwards is uncertain and thus
no valuation reserve has been provided against the Company's net deferred tax
assets.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company incurred consulting fees to certain controlling stockholders in the
amounts of $40,000 for the six month period ended March 31, 2004 and $140,000
for the six month period ended March 31, 2003. As of March 31, 2004 and
September 30, 2003, the balance due to related party stockholders arising from
the normal course of business was $474,387 and $431,063 respectively.
NOTE 9 - SUBSEQUENT EVENTS
a) The License Agreement was terminated effective December 1, 2007. Under
the termination agreement, the $566,005 in outstanding royalty
payments were forgiven.
b) On August 23, 2010, the Company entered into an irrevocable agreement
to acquire 80% of the issued and outstanding share capital of Richard
Y Lange, a Mexican corporation, through the issue of 8,000,000 of the
Company's common shares valued at $0.25 per common share. Under the
agreement, Richard Y Lange warrants that shareholders equity in
Richard Y Lange will not be less than 70,000,000 pesos ($5,995,000).
Richard Y Lange is involved in construction, property development and
product distribution. It also owns a block plant and a sand pit. The
agreement will close as soon as Richard Y Lange has verified its
assets through audit or as agreed to by the parties. The Company
represents, at Closing, there will be 10,421,916 common shares and
300,000 Preferred "B" shares outstanding.
c) The Company changed its name to Grupo International Inc. on September
2, 2010.
12
ITEM 2. MANAGAMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
We were incorporated in January of 1997, and do not have any significant
operating history or financial results. We have only recently begun our vaccine
development and marketing operations, including the pre-clinical testing in
Russia of our proposed vaccine designed to combat HIV/AIDS, AND building an
infrastructure. As a result, research and development costs for the three months
ended March 31, 2004 decreased by $48,891 from $73,789 for the three months
ended March 31, 2003 to $24,898. For the three months ended March 31, 2004 and
Administrative and overhead expenditure decreased by $22,531 from $60,235 for
the quarter ended March 31, 2003 to $37,704 for the quarter ended March 31,
2004. The reduction in expenditure was mainly due to a reduction in legal and
audit costs. The Company received no interest income during the quarters ended
March 31, 2003 and March 31, 2004. We incurred a net loss of $62,602 or $(0.006)
per share based on 9,831,669 weighted average shares outstanding for the quarter
ended March 31, 2004 compared to $134,023 or $(0.014) per share based on
9,266,666 weighted average shares outstanding for the quarter ended March 31,
2003. Research and development costs for the six months ended March 31, 2004
reduced by $68,474 from $147,652 for the six months ended March 31, 2003 to $
79,176 for the six months ended March 31, 2004. The reduction of expenditure was
a result of the company conserving cash. General Administration and overhead
expenditure decreased by $62,312 from $151,361 for the six months ended March
31, 2003 to $89,049 for the six months ended March 31, 2004. The decrease in
expenditure was mainly due to a reduction in legal and consulting fees. We did
not conduct any operations of a commercial nature during the period from January
10, 1997 (date of inception) to March 31, 2004. We have relied on advances of
approximately $474,387 from our principal stockholders, trade payables of
approximately $353,457, proceeds of $1,196,272 from the sale of common stock and
the issue of stock for fees and/or services in the amount of $4,665,600 to
support our limited operations. As of March 31, 2004, we had approximately
$2,614 of cash and cash equivalents. Operations for the six months ended March
31, 2004 have been financed through a loan from Intracell Vaccines Limited and
through the utilization of $1,092 in cash on hand. We seek additional equity or
debt financing of up to $7 million which we plan to use to use for working
capital and to continue implementing pre-clinical and Phase I/II testing of our
proposed vaccine. If we do not get sufficient financing, we may not be able to
continue as a going concern and we may have to curtail or terminate our
operations and liquidate our business (see Note 1 to financial statements).
We cancelled our license agreement with the University of Birmingham in
2007, as we did not believe that we would be able to commercialize the vaccine
prior to the expiration of the patents in 2011. We plan to continue research and
development of the vaccine, and believe that it might be possible to establish
new patents, depending on the progress and results of our research. Our business
plan requires at least $6,000,000 to implement, and cannot be implemented until
funding for this amount has been achieved. When the funding has been achieved,
we plan, in the first year, to implement a PhaseI/II trial with the Medical
Control Agency in The United Kingdom through the application for a CTX exemption
to commence a Phase I/II trial. We plan to apply for a CTX exemption using the
Clade B strain of the virus as soon as a vaccine using the local Clade B strain
is made available. The manufacture of the vaccine will be contracted out and the
Company is currently evaluating various different manufacturers in Russia, the
UK and the USA.
We also plan, subject to financing, in the future, to initiate further
trials in Russia, in conjunction with The Russia Federal Aids Center, a
department of The Central Institute of Epidemiology, Moscow, Russia. We intend
to institute studies of the efficacy of the vaccine in non-human primates in
parallel or preceding Phase I trials of the vaccine in human subjects in Moscow,
Russia. We expect the regulatory approval process to take up to six months to
complete. The proposed vaccine will be manufactured in Russia, under the
supervision and quality control of various parties within and without Russia,
including the Federal Russia AIDS Centre in Moscow and laboratories in
Birmingham and London, U.K.
13
In addition, and subject to financing, we anticipate initiating a Phase
I/II trial in Sub-Sahara Africa using the local African HIV sub-type. These
trials will be done in conjunction with local Government and would commence
after a satisfactory pre-clinical trial has completed the evaluation of toxicity
and immunogenicity of the local strain. However, we cannot initiate the
pre-clinical or Phase I/II trials until such time as we have raised at least $6
million, which is the minimum amount we anticipate we will need for these
trials. Furthermore, in addition to restrictions due to lack of funding, we also
need to manufacture a batch of the vaccine to initiate these trials. We cannot
manufacture a batch until we have an agreement in place with a country in Africa
that is prepared to work with us. It is estimated that these pre-clinical trials
would take approximately twelve months to complete once we have an agreement in
place. If these trials take place, we intend to invite the Division of AIDS of
National Institute of Allergy and Infectious Diseases to monitor the African
trials.
No trials are currently scheduled to take place in the United States.
However, it is our intention to invite the National Institute of Health (NIH)
through the offices of The Division of AIDS (DIADS) to assist in the planning
and execution of the trials and monitor the trials described above. If the
trials are successful, then we would hope to undertake a Phase I/II trial in the
United States within two years of the summer of 2003. There can be no assurance
that we will be able to undertake such a trial in the United States, nor can the
results of the trials in Russia and/or Zambia and the UK be predicted.
We estimate that we will require approximately $6 million to $7 million
to conduct our vaccine development activities over the next three years. This
amount will be used to pay for vaccine manufacture, vaccine trial costs and
testing, equipment and corporate overhead. We are hoping to raise a minimum of
$6 million through one or more private offerings pursuant to Rule 506 or
Regulation D or through an offshore offering pursuant to Regulation S; however,
nothing in this quarterly report shall constitute an offer of any securities for
sale. Such shares if sold will not have been registered under the Act and may
not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements. In addition we are looking at other
financing methods including finding joint venture partners who might provide
substantial funding to the project or the granting of sub-licenses on payment of
upfront fees with the payment of on-going royalties on sales. We are also
looking at the possibility of acquiring other technologies which might assist in
financing.
If we are unable to raise $6 million, we will most likely cease all
activity related to our vaccine development and marketing, or at the very least,
proceed on a reduced scale. We have to date relied on a small number of
investors to provide us with financing for the commencement of our development
program, including Intracell Vaccines Limited. Amounts owed to these individuals
are payable upon demand.
Subject to financing, we expect to purchase approximately $500,000 in
equipment in the next two years to be used for research and expanding testing
laboratories. In addition, with available funding, we expect to hire an
additional fifteen employees for both research and administrative support over
the next five years.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for a smaller reporting company.
Item 4. Controls and Procedures.
During the six months ended March 31, 2004, there were no changes in our
internal controls over financial reporting (as defined in Rule 13a- 15(f) and
15d-15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Evaluation of Disclosure Controls and Procedures:
Our chief executive officer and chief financial officer have concluded that the
disclosure controls and procedures were not effective as of March31, 2004. These
controls are meant to ensure that information required to be disclosed by the
issuer in the reports that it files or submits under the Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms and to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the Act is
accumulated and communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
The registrant has been delinquent in its SEC filing. Management has only
recently prepared the required reports for filing. Management intends to
implement internal controls to ensure that similar situations do not occur in
the future and that required SEC filings will be timely.
Management's Annual Report on Internal Control over Financial Reporting:
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is the process designed by and under the supervision of Kevin Murray, chief
financial officer, or the persons performing similar functions, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of our financial statements for external reporting in accordance
with accounting principles generally accepted in the United States of America.
Mr. Murray has evaluated the effectiveness of our internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control over
Financial Reporting - Guidance for Smaller Public Companies.
The chief financial officer and chief executive officer has assessed the
effectiveness of our internal control over financial reporting as of March 31,
2004, and concluded that it is not effective for the reasons discussed above.
This annual report does not include an attestation report of the registrant's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
registrant's registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the registrant to provide
only management's report in this annual report.
Evaluation of Changes in Internal Control over Financial Reporting:
Our chief executive officer and chief financial officer have evaluated changes
in our internal controls over financial reporting that occurred during the
period ended March 31, 2004. Based on that evaluation, our chief executive
officer and chief financial officer did not identify any change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Important Considerations:
The effectiveness of our disclosure controls and procedures and our internal
control over financial reporting is subject to various inherent limitations,
including cost limitations, judgments used in decision making, assumptions about
the likelihood of future events, the soundness of our systems, the possibility
of human error, and the risk of fraud. Moreover, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions and the risk that the degree
of compliance with policies or procedures may deteriorate over time. Because of
these limitations, there can be no assurance that any system of disclosure
controls and procedures or internal control over financial reporting will be
successful in preventing all errors or fraud or in making all material
information known in a timely manner to the appropriate levels of management.
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently subject to any legal proceedings or claims.
Item 1A. Risk Factors
Not applicable for smaller reporting company
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. REMOVED AND RESERVED
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS.
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 31st day of August 2010.
HIV-VAC, INC.
/s/ Kevin W. Murray
-------------------------------
Kevin W. Murray
President and CEO
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