UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

 

☑

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

☐

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 incorporation or organization)	(I.R.S. Employer 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 ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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 ☑

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 281,965,151 shares outstanding as of August 14, 2012.

 

 

Explanatory Note

 

BioCurex, Inc. is filing this Amendment No. 1 to the Quarterly Report on Form 10-Q (the “Form 10-Q/A”) to amend its Quarterly Report on Form 10-Q for the period ended June 30, 2012, which was filed with the Securities and Exchange Commission on August 14, 2012. This Form 10-Q/A is being filed for the sole purpose of including the Balance Sheet Parenthetical data in Exhibit 101, the XBRL (eXtensible Business Reporting Language) report. No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

 

BIOCUREX, INC.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

June 30, 2012

 

 

INDEX

 

Consolidated Balance Sheets	F-1
Consolidated Statements of Comprehensive Loss	F-2
Consolidated Statements of Cash Flows	F-3
Notes to the Consolidated Financial Statements	F-4

 

BIOCUREX, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars)

 

 

			June 30,	December 31,
ASSETS			2012 (Unaudited)	2011
			$	$
Current Assets
	Cash		47,274	189,148
	Prepaid expenses and other		40,535	19,371
Total Current Assets			87,809	208,519
Debt issue costs (Notes 4(a), 6(b) and (c) and 7(i))			25,983	28,084
Patents (Note 3)			415,757	438,540
Property and equipment (Note 2)			8,415	9,467
Total Assets			537,964	684,610
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
	Accounts payable		125,356	86,027
	Derivative liability (Note 12)		39,733	15,862
	Accrued liabilities		365,507	361,281
	Loans payable (Note 4)		299,735	33,884
	Due to related parties (Note 5)		445,162	647,364
	Convertible notes payable to related party (Note 6(a))		33,885	33,885
	Convertible debt (Notes 6(b) and (c))		574,616	477,640
			1,883,994	1,655,943
Loans payable (Note 4(a))			-	103,929
Convertible debt (Note 6(c))			-	78,500
			1,883,994	1,838,372
Going Concern (Note 1) Commitments and Contingencies (Note 13)
Subsequent Event (Note 14)
Stockholders' Equity (Deficit)
	Common stock (Note 7)
		Authorized: 450,000,000 shares, par value $0.001
		Issued and outstanding: 283,363,484 and 281,965,151 (December 31, 2011 – 180,423,597 and 179,025,264)	281,966	179,025
	Additional paid-in capital		25,802,984	25,173,736
	Accumulated deficit		(114,175)	(114,175)
	Deficit accumulated during the development stage		(27,316,805)	(26,392,348)
Stockholders' Equity (Deficit)			(1,346,030)	(1,153,762)
Total Liabilities and Stockholders' Equity (Deficit)			537,964	684,610

The accompanying notes are an integral part of these consolidated financial statements

BIOCUREX, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in U.S. dollars)

(Unaudited)

 

						Accumulated During the
						Development Stage
		Three Months Ended		Six Months Ended		January 1, 2001
		June 30,		June 30,		to June 30,
		2012	2011	2012	2011	2012
		$	$	$	$	$
Revenue		8,826		22,875	-	1,494,229
Operating Expenses
	Amortization of patents and equipment (Notes 2 and 3)	28,654	27,832	56,089	54,344	492,478
	General and administrative (Notes 5(a) & 8)	167,504	382,741	335,448	548,798	9,790,458
	Impairment of patents	-	-	-	-	67,620
	Professional and consulting fees	112,343	133,890	166,155	293,559	6,237,375
	Research and development (Note 5(a))	106,793	189,435	224,164	379,643	5,749,606
Total Operating Expenses		415,294	733,898	781,856	1,276,344	22,337,537
Loss From Operations		(406,468)	(733,898)	(758,981)	(1,276,344)	(20,843,308)
Other Income (Expense)
	Accretion of discounts on debt	(22,632)	(18,909)	(44,419)	(36,953)	(4,049,728)
	Amortization of debt issue costs	(8,550)	(6,050)	(14,600)	(12,034)	(825,174)
	Gain (loss) on derivative liability	(24,352)	23,683	(29,747)	78,678	96,903
	Loss on extinguishments of convertible debt	-	-	-	-	(374,909)
	Gain on sale of equity investment securities	-	-	-	-	147,991
	Gain on settlement of accounts payable	-	-		-	102,937
	Loss on sale of assets					(5,679)
	Interest expense	(58,978)	(13,932)	(76,710)	(27,951)	(1,949,517)
	Interest income	-	-	-	-	383,679
Total Other Income (Expense)		(114,512)	(15,208)	(165,476)	1,740	(6,473,497)
Net Loss and Comprehensive Loss		(520,980)	(749,106)	(924,457)	(1,274,604)	(27,316,805)
Net Loss Per Share - Basic and Diluted		(0.00)	(0.00)	(0.00)	(0.01)
Weighted Average Shares Outstanding		212,159,500	171,686,000	196,662,100	170,171,000

The accompanying notes are an integral part of these consolidated financial statements

BIOCUREX, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

(Unaudited)

 

				Accumulated During
		Six Months Ended		The Development Stage
		June 30,		January 1, 2001
		2012	2011	to June 30, 2012
		$	$	$
Operating Activities:
Net loss for the period		(924,457)	(1,274,604)	(27,316,805)
Adjustments to reconcile net loss to net cash
used in operating activities:
	Accretion of discounts on debt	44,419	36,953	4,055,102
	Allowance for uncollectible notes receivable	-	-	98,129
	Amortization of patents & equipment	56,089	54,344	493,530
	Amortization of debt issue costs	14,600	12,034	825,174
	Loss on extinguishments of debt	-	-	374,909
	Loss on sale of assets			5,679
	Gain on write off accounts payable	-	-	(102,937)
	Gain on sale of investment securities	-	-	(253,065)
	Loss from impairment of patents	-	-	67,620
	Loss (gain) on derivative liability	29,747	(78,678)	(96,903)
	Stock-based compensation	17,317	196,654	8,276,652
Changes in operating assets and liabilities:
	Notes and interest receivable	-	-	(6,296)
	Prepaid expenses and other	(21,164)	(50,891)	(4,840)
	Accounts payable & accrued liabilities	148,854	136,711	1,952,494
	Due to related party	396,175	12,540	574,521
	Deferred revenue	-	-	(162,000)
	Subscriptions receivable		-	(100,683)
Net Cash Used in Operating Activities		(238,420)	(954,937)	(11,319,719)
Investing Activities:
	Net proceeds from notes receivable	-	-	1,171
	Patent costs	(32,254)	(35,263)	(770,335)
	Proceeds from sale of investment securities	-	-	451,123
	Proceeds from sale / purchase of equipment, net	-		(16,195)
Net Cash Provided by (Used in) Investing Activities		(32,254)	(35,263)	(334,236)
Financing Activities:
	Due to related parties	-	-	552,281
	Proceeds from loans payable	150,000	-	757,549
	Repurchase of shares		-	(20,000)
	Repayment on loans payable	-	-	(450,000)
	Proceeds from convertible debt	75,000	-	3,793,243
	Repayment on convertible debt	(88,700)	-	(2,508,491)
	Deferred financing costs	-	-	(769,487)
	Debt issue costs	(7,500)	-	(100,444)
	Proceeds from shares issued of common stock	-	-	9,962,872
	Proceeds from the exercise of stock options and warrants	-	2,288	1,150,204
	Share issuance costs	-	-	(909,049)
Net Cash Provided by Financing Activities		128,800	2,288	11,458,678
Net Increase (Decrease) in Cash		(141,874)	(987,912)	(195,277)
Cash - Beginning of Period		189,148	1,770,194	242,551
Cash - End of Period		47,274	782,282	47,274
Non-cash Investing and Financing Activities:
	Share issued to settle debt	714,197	140,500	1,998,874
	Units issued as share issuance costs	-	-	939,771
	Shares acquired for note receivable	-	-	20,000
	Note payable converted into common shares	-	-	1,594,021
Supplemental Disclosures:
	Interest paid	72,209	27,112	832,807
	Income taxes	-	-	-

 

The accompanying notes are an integral part of these consolidated financial statements

1. NATURE OF BUSINESS AND GOING CONCERN

BioCurex, Inc. (the “Company”) was incorporated on December 8, 1997, under the laws of the State of Texas. 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 China Co., Ltd. (“Biocurex China”), a wholly-owned subsidiary in China. On December 8, 2009, the Company incorporated OncoPet Diagnostics Inc., a wholly-owned subsidiary under the laws of the State of Colorado.

 

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company 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 June 30, 2012, the Company has a working capital deficit of $1,796,185 and accumulated losses of $27,316,805 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 United States, and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, BioCurex China 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, 2011, included in the Company's Annual Report on Form 10-K filed on March 29, 2012 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 June 30, 2012, and the consolidated results of operations and the consolidated statements of cash flows for the six months ended June 30, 2012 and 2011. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results to be expected for future interim periods or for the entire fiscal year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated to United 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 collectability 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™ technology.

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.

 

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 June 30, 2012, the Company had approximately 161,604,152 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.

 

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.

 

Property and Equipment

 

Property and equipment are recorded at cost less amortization, whereby in the year of acquisition only half a year of amortization is applied. Property and equipment consists of lab equipment with a cost of $10,519 less amortization of $2,104 (5 years straight-line), for an ending net book value of $8,415.

 

Reclassifications

 

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

 

Recent Accounting Pronouncements

 

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.

 

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 June 30, 2012, the Company had received patent approval from five countries and the European patent office. Additions made after June 30, 2012 will have a remaining life of approximately three years. The Company intends to apply for extensions in the near future.

 

A schedule of the patents is as follows:

		June 30, 2012 $		December 31, 2011 $
Patents		898,433		866,178
Less:
Accumulated amortization		(482,676)		(427,638)
Net Carrying Value		415,757		438,540

 

Amortization expense totaled $55,038 and $54,344 for the six months ended June 30, 2012 and 2011, respectively.

 

The estimated future amortization expense is as follows:

 

	$
2012	55,037
2013	110,074
2014	250,646
	415,757

 

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 six months end of June 30, 2012, the Company paid interest in the amount of $6,233 (2011 - $6,199) and recorded $12,243 (2011 – $8,742) as the accretion expense related to these promissory notes. As at June 30, 2012, the carrying value of these notes was $116,172 (December 31, 2011 - $103,929).

 

During the six months end of June 30, 2012, the Company expensed $1,518 (2011 - $1,518) of the debt issue costs related to promissory notes, and at June 30, 2012, the balance of debt issue costs was $1,785 (December 31, 2011 - $3,303).

 

b)

As of June 30, 2012, the Company has received a net advance of 213,244 RMB (US $33,563) (December 31, 2011 – 213,244 RMB (US $33,884)) from BioCurex China’s Agent. The advance is non-interest bearing, unsecured and due on demand.

 

c)

On June 13, 2012, the Company has received a term loan in an amount of $150,000 from an investment company. This loan bears interest at a rate of 30% per annum and is unsecured. Both interest and principal are payable on June 15, 2013.

 

 

5. RELATED PARTY TRANSACTIONS AND BALANCES

 

	June 30, 2012 $		December 31, 2011 $
Due to Pacific BioSciences Research Centre Inc. and Company’s President (a)	313,906		595,548
Due to Company’s Chairman (b)	79,660		29,386
Due to a former officer (c)	4,930		4,930
Due to Company’s Director (d)	46,666		17,500
	445,162		647,364

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 CEO of the Company. During the six months ended June 30, 2012 and 2011, Pacific performed research and development for the Company valued at $199,247 and $345,067, respectively.

Pacific also provided administrative services during the six months ended June 30, 2012 and 2011, valued at $106,593 and $104,284, respectively. During the six months ended June 30, 2012, and 2011, Pacific charged interest of $7,643 and $3,881, respectively, calculated at the bank prime rate on the monthly balance owed. In the past six months, the Company issued 10,080,272 shares of common stock to the employees of Pacific to settle $91,897 of the related party balance owing to Pacific. On June 6, 2012, the Company settled $480,000 of its debt to Pacific by issuing 80,000,000 shares with an estimated fair value of $480,000. As at June 30, 2012 and December 31, 2011, the amount due to Pacific was $127,080 and $533,048, respectively, and is unsecured and due on demand.

On September 15, 2009, the Company entered into an agreement with the Company’s CEO to provide management services for a fee of $250,000 per annum. During six months ended June 30, 2012, the Company incurred $125,000 (2011 - $62,500) for the management services of which the unpaid balance was $186,826 (December 31, 2011 - $62,500).

 

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 six months ended June 30, 2012, the Company incurred $50,000 (2011 - $49,998) for management services. As at June 30, 2012, the Company is indebted to the Company’s Chairman for $79,660 (December 31, 2011 - $29,386) of management fees and miscellaneous expense.

 

c)

As at June 30, 2012 and December 31, 2011, the Company owed $4,930 to a former officer which is unsecured, non-interest bearing and due on demand.

 

d)

During the six months ended June 30, 2012, Company incurred $35,000 in consulting fees to a director of the Company (2011 - $17,500), of which $46,666 was outstanding at June 30, 2012 (December 31, 2011 - $17,500).

 

6. CONVERTIBLE NOTES AND DEBT

 

a)

As of June 30, 2012, one $33,885 (December 31, 2011 - $33,885) convertible note is outstanding which is payable to a related party. The note bears interest at 5% annum, is unsecured and due on demand.

 

Under the convertibility terms of the notes payable, the principal, 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 at $0.17 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.

 

b)

As of June 30, 2012, the Company has convertible notes (the “Notes”) in the principal amount of $534,260. 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 $0.09 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:

6. CONVERTIBLE NOTES AND DEBT (continued)

 

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).

The following table summarizes the changes in the Notes during the six months ended June 30, 2012:

 

	Principal $	Discount $	Carrying Value $
Balance, December 31, 2011	544,460	(66,820)	477,640
Principal repayments	(10,200)	–	(10,200)
Accretion of discount on convertible debt	–	32,176	32,176
Balance, June 30, 2012	534,260	(34,644)	499,616

 

During the six months ended June 30, 2012, the Company expensed $10,582 (2011 - $10,524) of the debt issue costs related to these convertible notes. The balance of debt issue costs at June 30, 2012 is $10,699 (December 31, 2011 - $21,281).

 

 

c)

The Company issued three convertible notes with principal amounts of $78,500, $42,500, and $32,500 respectively, to a private investor. The note with a principal amount of $78,500 was fully repaid on June 13, 2012 with interest paid in the amount of $42,227. The note with a principal amount of $42,500 is convertible commencing on August 21, 2012 and is due on February 23, 2013. The note with a principal amount of $32,500 is convertible commencing on October 20, 2012 and is due on April 26, 2013. Both notes bear interest at 8% per year and are unsecured. The number of shares to be issued upon any conversion will be determined by dividing the principal amount to be converted by the conversion price. The conversion price is 58% of the average of the lowest five Trading Prices for the Company’s common stock during the ten trading day period ending on the trading day prior to the date the note is converted. “Trading Price” means the closing bid price of the Company’s common stock on the Over-the-Counter Bulletin Board. As at June 30, 2012, the embedded conversion features have not been bifurcated and separately accounted for as they do not provide for net settlement until the notes become convertible on August 21, 2012 and October 20, 2012, respectively.

 

6. CONVERTIBLE NOTES AND DEBT (continued)

 

c)

On the issuance of the two convertible notes outstanding as of June 30, 2012, the Company incurred $5,000 in debt issuance costs. These costs were capitalized and will be amortized over the life of the notes.

 

7.

COMMON STOCK

 

a)

In February 2012, the Company issued 675,000 shares of common stock pursuant to stock options exercised at $0.001 per share.

 

b)

In February 2012, the Company issued 1,500,000 shares of common stock to a vendor with an estimated fair value of $22,500 for consulting services.

 

c)

In February 2012, the Company issued 1,141,700 shares of common stock to three employees of a related party with an estimated fair value of $22,834 for services provided by the related party.

 

d)

In March 2012, the Company issued 1,500,000 shares of common stock to a vendor with an estimated fair value of $30,000 for consulting services.

 

e)

In March 2012, the Company issued 770,850 shares of common stock to three employees of a related party with an estimated fair value of $15,417 for services provided by the related party.

 

f)

In April 2012, the Company issued 3,000,000 shares of common stock to vendors with an estimated fair value of $39,000 for legal and consulting services.

 

g)

In April 2012, the Company issued 800,000 shares of common stock to vendors with an estimated fair value of $16,000 for legal and consulting services.

 

h)

In April 2012, the Company issued 1,600,922 shares of common stock to three employees of a related party with an estimated fair value of $20,812 for services provided by the related party.

 

i)

In April 2012, the Company issued 384,615 shares of common stock to a vendor with an estimated fair value of $5,000 for future financing services. These costs were capitalized and will be amortized over the life of the future financing.

 

j)

In May 2012, the Company issued 1,000,000 shares of common stock to a service provider with an estimated fair value of $9,800 for shareholder meeting services.

 

k)

In June 2012, the Company issued 80,000,000 shares of common stock to a related party for the loan settlement with an estimated fair value of $480,000.

 

l)

In June 2012, the Company issued 6,556,800 shares of common stock to three employees of a related party with an estimated fair value of $32,834 for services provided by the related party.

 

m)

In June 2012, the Company issued 4,000,000 shares of common stock to vendor with an estimated fair value of $20,000 for legal and consulting services.

 

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 April 19, 2012, the Company increased the number of shares issuable pursuant to this plan from 20,000,000 shares to 40,000,000 shares with 4,267,394 common shares available for future issuance as of June 30, 2012.

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 June 30, 2012.

 

Management stock options

 

In January 2010, the Company granted 28,500,000 stock options to five directors and one officer at an exercise price of $0.0714 per share. As of June 30, 2012, a total of 26,500,000 management stock options were outstanding. The stock options expire on December 31, 2020. 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.

A summary of the changes in the Company’s stock options is presented below:

 

Number of Shares

Weighted Average Exercise Price $

Weighted Average Remaining Contractual Life (Years)

Aggregate Intrinsic Value $

 

Outstanding, December 31, 2011	30,806,600	0.066	7.56	20,759
Forfeited and cancelled	(2,000,000)	0.0714
Exercised	(675,000)	0.001
Outstanding, June 30, 2012	28,131,600	0.067	7.21	10,380

 

The compensation cost of shares vested was $17,317 and 196,654 for the six months ended June 30, 2012 and 2011, respectively. Compensation cost 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 June 30, 2012, and changes during the six months ended of June 30, 2012, is presented below:

	Number of	Weighted Average
Non-vested	Options	Exercise Price
Non-vested at December 31, 2011	9,500,000	0.0714
Vested during period	(9,500,000)	0.0714
Non-vested at June 30, 2012	-	-

9. SHARE PURCHASE WARRANTS

A summary of the changes in the Company’s share purchase warrants is presented below:

	Number of shares	Weighted Average Exercise Price
Balance, December 31, 2011	99,164,330	0.11
Expired	(6,500,000)	0.15
Balance, June 30, 2012	92,664,330	0.11

 

As at June 30, 2012, the following share purchase warrants were outstanding:

 

Warrants	Exercise Price	Expiration Date
2,204,730	$0.08	26-Aug-2014
90,459,600	$0.11	19-Jan-2015(1)
92,664,330

 

 

(1)

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 that 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 June 30, 2012, 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.

 

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.

 

 

11. FAIR VALUE MEASUREMENTS (continued)

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 note payable to related party, 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 note payable to related party and convertible debt approximate fair value are based on market rates 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 June 30, 2012 as follows:

	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	For Identical		Observable		Unobservable
	Instruments		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2012
Assets:
Cash	$	47,274	$	–	$	–	$	47,274
Total assets measured at fair value	$	47,274	$	–	$	–	$	47,274
Liabilities:
Derivative liabilities	$	–	$	39,733	$	–	$	39,733
Total liabilities measured at fair value	$	–	$	39,733	$	–	$	39,733

 

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 six months ended June 30, 2012:

 

	$
Derivative liabilities at December 31, 2011	15,862
Settlement of derivative liabilities	(5,876)
Change in fair value of derivative liabilities	29,747
Derivative liabilities at June 30, 2012	39,733

 

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 June 30, 2012, 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 June 30, 2012, the Company had issued 37,500 common shares and 37,500 common shares are still owed to the consultant.

 

14.

SUBSEQUENT EVENTS

 

A special meeting of Biocurex's shareholders was held on July 31, 2012. At the meeting, proposals were approved by the shareholders to issue up to 10,000,000 shares of preferred stock and to consolidate the Company's common stock by a ratio that will be determined by the Company's Board of Directors at a later date.

 

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, Europe and elsewhere.

 

Our principal objectives for the twelve-month period ending June 30, 2013 are as follows:

 

•

grant one additional license for our cancer detection blood test;

•

commercialize veterinary applications of RECAF testing technology through our wholly-owned subsidiary, OncoPet Diagnostics;

•

finish development for our rapid, point of care cancer test; and

•

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 June 30, 2013, or at all.

 

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™ 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®.

 

To make a peptide in a laboratory, its amino acids sequence is entered into a computer and the rest of the process is automatically handled by special computer software and instrumentation. 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.

 

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™ cancer test for dogs in Europe.

 

Through a network of its own companies, agents and distributors, VetRed will market our OncoPet’s RECAF™ 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 Europe. The United States and Canada have the largest dog and cat population, with an estimated 52 million dogs and 66 million cats.

 

Currently, our wholly owned subsidiary, OncoPet(TM) Diagnostics, Inc., has entered into a further two non-exclusive distribution agreements with two prominent US veterinary suppliers for the distribution of the OncoPet Sample Collection Kit for canine cancer diagnosis.

Per the non-exclusive distribution agreement, the suppliers will purchase vouchers for tests to be carried out in our facilities. The distributor then sells the vouchers to veterinarians, veterinary practices, veterinary hospitals and others within the United States and territories of the U.S. including Puerto Rico, Guam as well as others. The voucher includes a sample collection kit which the veterinarian will use to process the blood and ship the serum to our laboratory for testing. OncoPet then emails the results directly to the veterinarian.

 

Also, we have a distributor in Taiwan who is purchasing our cancer test for dogs on a regular basis. This distributor buys complete tests which are then used in an independent laboratory in Taiwan to test the samples collected locally.

 

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 six months ended June 30, 2012 and 2011 were as follows:

	Six Months Ended June 30,
	2012	2011
Cash used in operations	$            (238,420)	$            (954,937)
Patent costs	(32,254)	(35,263)
Proceeds from convertible debt	75,000	-
Proceeds from loans payable	150,000	-
Repayment of convertible debt	(88,700)	-
Debt issue costs	(7,500)	-

 

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 $0.09. 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 June 30, 2012 was $534,260.

 

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.

 

In December 2011 we sold a convertible note in principal amount of $78,500 to a private investor. The note bears interest at 8% per year and is payable on or before March 19, 2013. In June 2012, this note was fully repaid.

 

In February 2012 we sold a convertible note in principal amount of $42,500 to a private investor. The note bears interest at 8% per year and is payable on or before February 23, 2013. At any time after August 21, 2012 the note can be converted into shares of our common stock. The number of shares to be issued upon any conversion will be determined by dividing the principal amount to be converted by the conversion price. The conversion price is 58% of the average of the lowest five Trading Prices for our common stock during the ten trading day period ending on the trading day prior to the date the note is converted. “Trading Price” means the closing bid price of our common stock on the Over-the-Counter Bulletin Board. Based upon the closing prices of our common stock, we would be required to issue approximate of 33,307,210 shares of our common stock if the note was converted on August 8^th, 2012.

 

In April 2012 we sold a convertible note in principal amount of $32,500 to a private investor. The note bears interest at 8% per year and is payable on or before April 26, 2013. At any time after October 20, 2012 the note can be converted into shares of our common stock. The number of shares to be issued upon any conversion will be determined by dividing the principal amount to be converted by the conversion price. The conversion price is 58% of the average of the lowest five Trading Prices for our common stock during the ten trading day period ending on the trading day prior to the date the note is converted. “Trading Price” means the closing bid price of our common stock on the Over-the-Counter Bulletin Board. Based upon the closing prices of our common stock, we would be required to issue approximate 25,470,219 shares of our common stock if the note was converted on August 8^th, 2012.

 

On June 13, 2012, the Company has received a term loan in an amount of $150,000 from an investment company. This loan bears interest at a rate of 30% per annum and is unsecured. Both interest and principal are payable on June 15, 2013.

 

We anticipate that our capital requirements for the twelve-month period ending June 30, 2013 will be as follows:

 

Research, development and production of our diagnostic products	$               700,000
General and administrative expenses	700,000
Marketing and investor communications and business development	70,000
Payment of principal and interest on amended senior convertible notes and unsecured promissory notes	1,000,000
Payment of outstanding liabilities	250,000
	$            2,720,000

 

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.

 

Material changes of items in our Statement of Operations for the three and six months ended June 30, 2012, as compared to the same period in the prior year, are discussed below:

 

	Increase (I)
Item	or Decrease (D)		Reason
General and administrative	D		The decrease was primarily attributable to lower stock-based compensation expense.
Professional and Consulting Fees	D		This is the result of the expiration or termination of three consulting agreements.
Research and Development	D		The decrease was primarily attributable to less lab materials, supplies and reduction in personnel.
Interest expense	I		The Company entered into two new convertible note agreements and one loan agreement, which accrues interest at 8% and 30% respectively.
Gain (loss) on derivative liability	I		Increase primarily due to the fluctuation of the company share price in the past six months.

 

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 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 June 30, 2012 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 six months ended June 30, 2012.

With the exception of the shares described in subparagraphs (g), (j) and (k) of Note 7, we relied upon the exemption provided by Section 4(2) of the Securities Act of 1933.

 

The shares described in the remaining subparagraphs 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.

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.

 

August 14^th, 2012

By: /s/ Dr. Ricardo Moro

Dr. Ricardo Moro

Principal Executive Officer

 

 

August 14^th, 2012

By: /s/ Gladys Chan

Gladys Chan

Principal Financial and Accounting Officer