Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
Or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
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000-54936
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Commission file number
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Zenosense, Inc.
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(Exact name of small business issuer as specified in its charter)
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Nevada
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26-3257291
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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Avda Cortes Valencianas 58, Planta 5, 46015 Valencia, Spain
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(Address of principal executive offices)
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001 (34) 960454202
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(Issuer’s telephone number)
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Not Applicable
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(Former name, former address and former fiscal year, if changed since last report)
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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 [X] No [ ]
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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 [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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[ X ]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 16,677,451 common shares issued and outstanding as of November 11, 2016
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ZENOSENSE, INC.
TABLE OF CONTENTS
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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3
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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4
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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8
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Item 4.
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Controls and Procedures
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8
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PART II – OTHER INFORMATION
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Item 1.
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Legal Proceedings
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9
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Item 1A.
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Risk Factors
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9
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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9
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Item 3.
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Defaults Upon Senior Securities
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9
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Item 4.
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Mine Safety Disclosures
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9
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Item 5.
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Other Information
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9
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Item 6.
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Exhibits
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12
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SIGNATURES
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12
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2
FINANCIAL STATEMENTS
As of September 30, 2016 and December 31, 2015 and
For the Three and Nine Months Ended September 30, 2016 and 2015
TABLE OF CONTENTS
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Page
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Balance Sheets (Unaudited)
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F-1
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Statements of Operations (Unaudited)
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F-2
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Statements of Cash Flows (Unaudited)
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F-3
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Notes to Financial Statements (Unaudited)
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F-4 to F-8
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3
ZENOSENSE, INC.
Balance Sheets
(Unaudited)
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September 30, 2016
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December 31, 2015
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Assets
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Current Assets
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Cash
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$ | 23,875 | $ | 989 | ||||
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Investment in equity method joint venture
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158,290 | - | ||||||
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Prepaid expense
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- | 4,167 | ||||||
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Total assets
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$ | 182,165 | $ | 5,156 | ||||
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Liabilities and Stockholders’ Deficit
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Current liabilities:
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Accounts payable and accrued expense
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$ | 24,394 | $ | 33,850 | ||||
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Accounts payable and accrued expense – related party
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85,671 | 49,951 | ||||||
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Loan payable
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- | 110,000 | ||||||
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Convertible notes, net of discount
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246,280 | - | ||||||
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Stock payable
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67,500 | 67,500 | ||||||
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Total liabilities
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423,845 | 261,301 | ||||||
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Stockholders’ Deficit:
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Common stock 500,000,000 common stock authorized shares, $0.001 par value issued and outstanding 16,677,451 and 7,087,919 respectively
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16,677 | 7,088 | ||||||
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Additional paid in capital
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1,188,208 | 1,047,797 | ||||||
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Accumulated deficit
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(1,446,565 | ) | (1,311,030 | ) | ||||
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Total stockholders’ deficit
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(241,680 | ) | (256,145 | ) | ||||
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Total Liabilities and Stockholders’ deficit
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$ | 182,165 | $ | 5,156 | ||||
See accompanying notes to these unaudited financial statements.
F-1
ZENOSENSE, INC.
Statements of Operations
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
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Three Months ended September
30, 2016
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Three Months ended September 30, 2015
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Nine Months ended September
30, 2016
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Nine Months ended September
30, 2015
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Revenues
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$ | - | $ | - | $ | - | $ | - | ||||||||
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Expense
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Research and development expense
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$ | - | $ | 32,215 | $ | - | $ | 32,215 | ||||||||
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General and administrative expense
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27,627 | 30,003 | 98,094 | 100,243 | ||||||||||||
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Total expenses
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27,627 | 62,218 | 98,094 | 132,458 | ||||||||||||
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Loss from operations
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(27,627 | ) | (62,218 | ) | (98,094 | ) | (132,458 | ) | ||||||||
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Other income/(expense)
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Interest expense
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(31,450 | ) | (1,317 | ) | (35,731 | ) | (2,317 | ) | ||||||||
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Loss in equity method investment
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(1,710 | ) | - | (1,710 | ) | - | ||||||||||
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Total other expense
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(33,160 | ) | (1,317 | ) | (37,441 | ) | (2,317 | ) | ||||||||
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Net loss
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$ | (60,787 | ) | $ | (63,535 | ) | $ | (135,535 | ) | $ | (134,775 | ) | ||||
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Net loss per common share:
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Basic and diluted
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$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||
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Weighted average common shares outstanding:
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Basic and diluted
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16,677,451 | 7,087,828 | 11,182,619 | 7,087,828 | ||||||||||||
See accompanying notes to these unaudited financial statements.
F-2
ZENOSENSE, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 2016 and 2015
(Unaudited)
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September 30, 2016
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September 30, 2015
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Operating Activities
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Net loss
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$ | (135,535 | ) | $ | (134,775 | ) | ||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Amortization of debt discount
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30,536 | - | ||||||
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Loss in equity method investment
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1,710 | - | ||||||
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Changes in operating assets and liabilities:
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Prepaid expense
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4,167 | (6,667 | ) | |||||
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Accounts payable and accrued expense
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(3,712 | ) | 19,377 | |||||
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Accounts payable and accrued expense – related party
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35,720 | 29,595 | ||||||
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Cash used in operating activities
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(67,114 | ) | (92,470 | ) | ||||
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Investing activities
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Investment in joint venture
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(160,000 | ) | - | |||||
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Cash used in investing activities
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(160,000 | ) | - | |||||
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Financing activities
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Proceeds from third party loan
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- | 90,000 | ||||||
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Proceeds from sales of common stock
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150,000 | - | ||||||
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Proceeds from convertible notes payable
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100,000 | - | ||||||
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Cash provided by financing activities
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250,000 | 90,000 | ||||||
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Net increase (decrease) in cash
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22,886 | (2,470 | ) | |||||
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Cash, beginning of period
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989 | 4,423 | ||||||
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Cash, end of period
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$ | 23,875 | $ | 1,953 | ||||
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Supplemental disclosure of cash flow information
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Cash paid for income taxes
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$ | - | $ | - | ||||
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Cash paid for interest
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$ | - | $ | - | ||||
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Non-cash investing and financing activities:
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Conversion from loans payable and accrued interest to convertible notes
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$ | 115,744 | $ | - | ||||
See accompanying notes to these unaudited financial statements.
F-3
1. Nature of operations
Zenosense, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on August 11, 2008, for the purpose of acquiring and developing mineral properties. In May 2013, the Company terminated its mineral development business.
On November 22, 2013, the Company filed a certificate of amendment with the State of Nevada to change its name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and to increase the Company’s authorized shares of common stock from 50,000,000 to 500,000,000, par value $0.001 per share.
Effective December 4, 2013, the Company entered into a development and exclusive license agreement (“License Agreement”) whereby the Company will provide a third party with capital for the development of the sensory technology for a methicillin resistant Staphylococcus aureus / Staphylococcus aureus (“MRSA/SA”) detection device and other improvements and variations to the products based on that technology (the “Sgenia Products”) to be used in the hospital and health care environments, in exchange for a worldwide, exclusive license to manufacture, market and sell the resulting Sgenia Products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement was modified in April 2014 and July 2014 to extend it to cancer sensory products and to modify and extend the development schedule and change the research funding budget to accommodate a lung cancer product as well as the MRSA/SA product.
On June 20, 2016, the Company entered into a joint venture arrangement by way of a Subscription and Shareholders’ Agreement (“MML SSA”) with a third party medical detection device developer (“Partner”) utilizing a joint venture vehicle, MIDS Medical Ltd (“MML”), a UK Limited company. As of July 1, 2016, the Company owns a 40% interest in MML in exchange for providing funding to MML during a Phase 1 and prospectively during a Phase 2 development of a universal immunoassay detection technology platform (“MIDS”) with an initial focus on the development of a novel Point of Care (“POC”) cardiac device (“MIDS Cardiac™”). MML will have the right, under license from the Partner, to use the MIDS Intellectual Property (“MIDS IP”) during the development and the MIDS IP will be transferred to MML in the event MML concludes a commercial deal for MIDS with a third party.
The MIDS technology will incorporate what we believe to be a novel microfluidic strip design, magnetic nanoparticle manipulation, and a unique double detection technique using bespoke ‘Hall Effect’ sensors and a bespoke optical sensor which, when combined, will increase significantly the sensitivity and accuracy of the result.
The MIDS technology platform has the potential to be adaptable to a large array of other POC immunoassay tests, taking them to a whole new level of accuracy, lower cost, ease of use, and speed of testing. We believe that such a multi-capability POC device, with laboratory gold standard accuracy, could be used to test for conditions such as Chlamydia, prostate, colorectal and other cancers, stroke, sports anti-doping, drugs of abuse, insulin levels, H. Pylori, inflammatory & autoimmune disease, influenza, Legionella, osteoporosis, endocrine levels, respiratory viruses, pneumonia, blood infections, streptococcus, meningitis, rheumatism, hepatitis, HIV, Viral infection, among others.
2. Basis of presentation
The accompanying unaudited interim consolidated financial statements of Zenosense, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on May 23, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2015, as reported on Form 10-K, have been omitted.
3. Going Concern
The financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for 12 months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2016, the Company had not yet achieved profitable operations, had accumulated losses of $1,446,565 since its inception and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company expects to continue to incur substantial losses as it executes its business plan and pursue its investment in MML and does not expect to attain profitability in the near future. Since its inception, the Company has funded its operations through short-term borrowings, advances, and equity investments. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to be able to meet its business objectives, including its anticipated cash needs for working capital for the next fiscal year. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the pursuing its currently planned business operations, or if obtained, whether the funding will be on terms acceptable and/or favorable to the Company.
F-4
4. Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments with an original maturity of ninety days or less. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Investments in unconsolidated Affiliates
We apply the equity method of accounting where we can exert significant influence over, but do not control or direct, the policies, decisions or activities of the entity. We use the cost method of accounting where we are unable to exert significant influence over the entity. Entities are required to periodically review their equity and cost method investments to determine whether current events or circumstances indicate that the carrying value of the investments may be impaired. We evaluate our cost method investment for impairment when there are indicators of impairment. If indicators suggest impairment we will perform an impairment test to assess whether an adjustment is necessary. The impairment test considers whether the fair value of our cost method investment has declined and if any such decline is other than temporary. If a decline in fair value is determined to be other than temporary, the investment’s carrying value is written down to fair value.
Research and development
Research and development costs are expensed as incurred.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. 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.
Loss per common share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Subsequent events
The Company evaluated all events or transactions that occurred after September 30, 2016, up through the date these financial statements were issued and no subsequent events occurred that required disclosure in the accompanying financial statements.
Recently Adopted Accounting Standards
The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.
F-5
5. Equity Method Investment
On June 20, 2016, the Company entered into a joint venture arrangement with the Partner, using the joint venture vehicle, MML, a UK limited company. The Company owns a 40% interest in MML. MML is developing the Partner’s MIDS universal immunoassay detection technology with an initial focus on developing a novel POC cardiac device that would be a hand held device able to support high sensitivity tests of various cardiac biomarkers to definitively identify or discount AMI, with accuracy equal or better than gold standard laboratory tests, within minutes.
The Company accounts for its investment in MML using equity method of accounting
The Company evaluated its relationship with MML to determine if it was a variable interest entity (“VIE”) as defined in ASC 810-10 and whether the Company was the primary beneficiary of MML, in which case consolidation with the Company would be required. The Company determined that MML qualifies as a VIE but the Company is not considered as the primary beneficiary. The Company’s investment in MML qualifies for the equity method of accounting since the Company has the ability to exert significant influence over MML through common ownership and management
Through September 30, 2016, the Company has invested $160,000 in MML. For the nine months ended September 30, 2016, the Company recognized $1,710 loss in its equity method investment in MML.
6. Loans Payable
On November 2, 2015, four promissory notes (the “Prior Notes”) previously owed to a third party were assigned to a new party (the “Note Holder”) for a total of $110,000 in principal, plus accrued interest of $3,647 as of that date. The Prior Notes bear interest of 5% and are due on demand. At May 17, 2016, the Company had accrued interest of $5,744 in connection with the Prior Notes.
On March 29, 2016, the Note Holder gave notice that it demanded repayment of all principal amounts and accrued interest outstanding on the Prior Notes, due within 90 days of the demand notice. No further action was taken in respect of the demand; however, on May 17, 2016, the Note Holder agreed to exchange the Prior Notes and accrued interest then totaling $115,744 for two new convertible notes.
7. Convertible Debt
On April 20, 2016, the Note Holder agreed to a loan of $40,000, and the Company issued a convertible note in a principal amount of $40,000 (the “April 2016 Note”). The April 2016 Note bears interest at 5% per annum and is due on April 19, 2018. The April 2016 Note may not be prepaid. As of September 20, 2016, the April 2016 Note became convertible into shares of common stock (the “Conversion”) of the Company, at the discretion of the holder, at a price of $0.007 per share, subject to a blocker provision that limits the amount of common stock that may be issued at any time to 4.99% of the then outstanding shares of common stock. The Company has initially reserved 5,714,286 shares of Common Stock issuable upon the conversion feature.
On May 17, 2016, the Note Holder agreed to exchange the Prior Notes (see note 6) for two new convertible notes (the “May 2016 Notes”) under two separate Securities Exchange Agreements. One note is for the principal amount of $53,197 and the other for the principal amount of $62,547, for a combined aggregate principal amount of $115,744. The May 2016 Notes bear interest at 5% per annum, are due on May 16, 2018 and may not be prepaid by the Company. The May 2016 Notes can be converted into shares of common stock of the Company at the discretion of the holder, at a price of $0.007 per share, subject to a blocker provision that limits the amount of common stock that may be issued at any time to 4.99% percent of the outstanding shares of common stock. The Company has initially reserved 16,534,857 shares of Common Stock issuable upon the conversion feature.
At September 30, 2016, the Company had accrued interest of $3,230 in connection with the April 2016 and the May 2016 Notes.
The April 2016 and May 2016 Notes have a beneficial conversion feature with a combined intrinsic value of $155,744 for the three notes as of September 30, 2016. The intrinsic value is based upon the difference between the market price of Zenosense’s common stock on the date of issuance and the conversion price of $0.007 The discount is being amortized through an interest expense using the straight line method over the term of the notes. For the three and nine months ended September 30, 2016, the Company recorded amortization of $30,495 on the debt discount.
On September 29, 2016, the Company issued an unsecured convertible note (the “October 2016 Note”) in the principal amount of $60,000, to the Note Holder in exchange of a loan of $60,000. Under the October 2016 Note, the Company also granted an option to the Note Holder to provide four additional unsecured convertible loans to the Company (the “Option Loans”), in the following amounts: (a) on or before October 31, 2016, an amount of $140,000; (b) on or before November 30, 2016, an amount of $170,000 (c) on or before January 31, 2017, an amount of $180,000; and (d) on or before March 31, 2017, an amount of $100,000.
The terms and conditions of certain commitment loans (see Note 8 below), the Option Loans and the October 2016 Note (collectively the “New Loans”) are the same (conversion and floor prices having been adjusted in line with the terms of the commitment loans at the time of the reverse stock split completed on August 4, 2016), and bear an interest rate of 10% per annum, based on a 360 day year, and are due four years from the issuance date (the “Maturity Date”). The Company may, at any time prior to the Maturity Date, prepay any unconverted amount of the New Loans in full or in part. The Note Holder may, at any time prior to the Maturity Date convert any or all of the New Loans into shares of common stock of the Company (the “Common Stock”) at either (a) $0.07 per share (subject to adjustment), or (b) a 15% discount to the 10-day Volume Weighted Average Price per share, provided that any such conversion is not at a price of less than $0.035 per share (subject to adjustment). In either scenario the total number of shares of Common Stock issued on conversion may not cause the total beneficial ownership held by the Investor and its affiliates, or the Note Holder and its affiliates to exceed 4.99% of the outstanding shares of Common Stock. On the Maturity Date of each of the New Loans any outstanding amount shall automatically and mandatorily convert into Common Stock at a price of $0.07 per share (subject to adjustment). The New Loans also contain standard anti-dilution provisions.
The Company evaluated the October 2016 Note to have a beneficial conversion features with an intrinsic value of $53,486. The intrinsic value is based upon the difference between the market price of Zenosense’s common stock on the date of issuance and the conversion price of $0.07. The discount is being amortized through an interest expense using the straight line method over the term of the notes. For the three months ended September 30, 2016, the Company recorded amortization of $41 on the debt discount.
F-6
8. Common Stock
On June 6, 2016, the Company entered into a Securities Purchase Agreement (the “SPA”) with an accredited investor (the “Investor”). The transaction closed on June 8, 2016.
Under the terms of the SPA; the Investor purchased 9,589,512 shares of the Company’s common stock, par value $0.001 per share, for a purchase price of $150,000 and a commitment by the Investor to provide a series of unsecured convertible loans (the “Commitment Loans”) in an aggregate loan amount of $640,000, payable in four individual amounts, the first payment due by September 20, 2016, the Note Holder retaining the right of first refusal on the Commitment Loans. The first Commitment Loan was not entered into due to the capital requirements of the Company being less than anticipated, primarily due to lower than expected MML development costs during the quarter, which allowed for an amendment to the MML funding obligations of the Company. Consequently, the Company issued the October 2016 Note in the amount of $60,000 rather than draw upon the Commitment Loans.
On September 29, 2016, the Investor, the Company and the Note Holder entered into an amendment to the SPA pursuant to which the Investor, the Note Holder and the Company agreed that should the Note Holder elect to provide the Option Loans, the Investor will not be required to, or will it be permitted to, provide the Commitment Loans. In the event the Note Holder does not provide the Option Loans, the Investor will be required to provide the Commitment Loans in an amended aggregate amount of $580,000, on dates and in amounts to be agreed between the Investor and the Company.
After the close of the stock market on August 3, 2016, the Company implemented a 1-for-7 reverse split of its common stock. All share and per share data in these financial statements and footnotes have been retrospectively adjusted to account for this reverse stock split.
9. Commitments
Sgenia License Agreement
On December 4, 2013, the Company entered into a License Agreement with Sgenia Industrial S.L. and its subsidiaries, Sgenia Soluciones S.L and ZENON Biosystem S.L (collectively, “Sgenia”) for the development of the Sgenia Products, to be based on the Sgenia sensory technology. Pursuant to the License Agreement, the Company will obtain a worldwide exclusive license to manufacture, market and sell the resulting Sgenia Products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The Company entered into three amendments (the “Amendments”) to the License Agreement to modify and extend the Sgenia Products to include a lung cancer product and change the product development schedule and the research funding budget to accommodate the additional lung cancer product as well as the continuation of the development of the MRSA/SA product.
Additionally, the objectives of the development stages and the milestones were modified to reflect the current state of development of each of the Sgenia Products. Under the License Agreement, the Company is funding the development of the Sgenia Products pursuant to a research and development plan proposed by Sgenia and accepted by the Company. The funding will be provided on an advance basis, per month, based on agreed development stages. In return, the Company will have the exclusive right to manufacture, formulate, package, market and sell the Sgenia Products world-wide, for 40 years, subject to a limitation on the inclusion of Spain in the territory. All intellectual property developed by Sgenia at any time during the term related to manufacturing, formulating and/or packaging process shall be shared ownership and licensed to the Company on a royalty-free basis.
Sgenia will also supply to the Company, at a negotiated price based on quantity, all of the requirements for the integrated circuits on microchips that are necessary for the operation of the Sgenia Products. Sgenia and the Company will also work together to research and develop the Sgenia Products and establish written plans and reviewing committees for the management of the overall development project and commercialization of the Sgenia Products.
The Company’s funding of the MRSA/SA product development was limited to an initial approved budget of $1,256,438, of which $526,846 was advanced by the Company. As a result of the Amendment of July 2014, the revised and approved budget is approximately $1,142,143, of which $769,787 has been advanced (including the amount advanced under the prior budget) as of September 30, 2016. The Company is currently committed to advancing approximately EUR656,000 (approximately $718,000), for research and development under the revised and approved budget, and subject to Sgenia meeting certain milestones. Some of the milestones have not been met as of September 30, 2016, reflecting a slowing of the research and development of the Sgenia Products. The Company cannot determine at this time whether or not the Sgenia Products will be fully developed, which will also limit the funding obligations of the Company under the License Agreement. The aggregate of the advances paid by the Company are recorded as research and development expenses. The budget may be changed by mutual agreement from time to time.
In addition to providing the development funding, the Company will also pay royalties for completed sales of the Sgenia Products, payable 60 days after each fiscal quarter of the Company (the “Royalties”). The Royalties will be 20% of net sales, which is calculated based on gross sales of the device and the installation and training for the Sgenia Products, less various expenses, including manufacturing, components acquired from Sgenia, commissions, refunds and discounts and sales taxes. If the Sgenia Products are sold by Sgenia in Spain for original use in Spain, then the Royalties on those sales will be reduced. The Company also has the right to sublicense to other parties throughout the world, except in Spain if and when, if at all, Sgenia seeks to act as the distributor in that territory.
The Company has the option to fund the development of future proposed products based on the Sgenia intellectual property, and if funded the Company will obtain the right to manufacture, market and sell the resulting devices.
MML Funding Arrangement
The Company’s funding of MML was limited to an initial committed aggregate payment of £450,500 (approximately $650,000 at exchange rates prevailing at the time of the MML SSA) for Phase 1 of which $160,000 has been paid. In addition, the Company may be required to provide an additional £45,000 (approximately $55,000 at current exchange rates) to be available after March 31, 2017, payable within 20 days after the Company received written notice from MML.
On September 29, 2016, the MML SSA commitment was amended to provide for the total amount of $650,000, payable under an amended timetable; all the other provisions of the MML SSA remained in force. Under the amendment, the Company has made payments to MML of $130,000 on August 2, 2016 and $30,000 on October 1, 2016. Subsequent payments are expected to be made as follows; (a) on or before October 31, 2016, a payment $110,000, (b) on or before November 30, 2016, a payment of $152,500; (c) on or before January 31, 2017 a payment of $152,500; and (d) on or before March 31, 2017 a payment of $75,000.
F-7
10. Related Party Transactions
On December 5, 2013, the Company entered into a one-year service agreement with Mr. Carlos Jose Gil, through his consulting firm, Ksego Engineering S.L., under which the Company obtains his services as the Chief Executive Officer of the Company. The agreement is now on a month-to-month basis. Mr. Gil receives a base salary and additional compensation, if any, to be equal to 10% of the net sales generated from the License Agreement. On August 12, 2016, the Company amended Mr. Carlos Jose Gil’s service agreement to include additional compensation, if any, to be equal to 10% of the revenue received by Zenosense, Inc. from MML as a result of any future commercialization of the MIDS project.
During the nine months ended September 30, 2016, the Company recorded $45,539 of general and administrative expenses related to amounts paid/owed to Ksego Engineering S.L. for services rendered by Mr. Gil. As of September 30, 2016, the Company owes Mr. Gil $85,671. No additional compensation based on net sales has been earned to date.
11. Subsequent Events
On October 18, 2016, the Note Holder entered into a Debt Purchase and Assignment Agreement (the “Assignment Agreement”) with an accredited investor as defined in Rule 501(a) of the 1933 Securities Act (the “Junior Holder”), whereby the Junior Holder purchased $42,000 of the principle amount of one of the May 2016 Notes. Under the terms of the Assignment Agreement; (a) the portion of the May 2016 Note held by the Junior Holder (such portion being referred to as the “Junior Note”) will be subordinate to the portion of the May 2016 Note held by the Note Holder (such portion being referred to as the “Senior Note”) and all other debt of the Note Holder issued by the Company at all times that the Company has any obligations under the Senior Note or any other debt securities issued to the Note Holder, and all actions requiring permission from the Note Holder as set out in the May 2016 Note and the Exchange Agreement will remain in place and the Junior Note will be amended to reflect these rights; and (b) the Junior Note will be amended whereby the Junior Holder will not be permitted to convert any of the Junior Note into shares of common stock of the Company unless the trading price of the Company’s securities is equal to or greater than $0.15 per share based on the average volume weighted price of the preceding five trading days.
On October 27, 2016, the Company issued an unsecured note (the “November 2016 Note”) in the principal amount of $140,000, to the Note Holder in exchange of a loan of $140,000. The November 2016 Note is the first out of the four Option Loans and the Note Holder retains the option to provide the balance of the Option Loans. The terms of the November 2016 Note are listed in note 7 above.
On November 1, 2016, after notice from the Note Holder, the Company reissued one of the May 2016 Notes (the “$62,547 May 2016 Note”) in the amounts of $42,000 and $ 21,968 (which includes the full amount of the interest due through November 1, 2016 on the $62,547 May 2016 Note) under two separate new notes. The terms of the $42,000 note were modified to make it subordinate to the note in principal amount of $21.968, but otherwise the two notes are basically the same and generally carry forward the terms of the May 2016 Notes.
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This section of this quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Respective statements concerning the development of both MIDS Cardiac™ and other devices under development have been made based on information obtained from MIDS Medical Ltd. and Zenon Biosystem, which the Company believes to be accurate, but have not been independently verified.
As used in this quarterly report, the terms “we,” “us,” “our,” “our company” and “Zenosense” mean Zenosense, Inc., unless otherwise indicated. We have no subsidiaries aside from our 40% interest in MML.
General Overview
Zenosense, Inc. was incorporated on August 11, 2008 in the State of Nevada. In December 2013, we filed an amendment to our charter to change our name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and to increase the number of our authorized shares of Common Stock from 50,000,000 shares to 500,000,000 shares par value of $0.001.
The original purpose of the company was to acquire and to develop mineral properties and to engage in the exploration for gold and other mineral properties. On May 15, 2013, our mining lease expired and we lost our right to explore the mining property. We then became a shell company, as defined under the Securities and Exchange Act of 1934, as amended, until December 4, 2013, when we entered into the transaction with Sgenia described below.
In the summer of 2013, we started to look for new business opportunities. We became interested in sensory technology devices for use in hospitals and health care environments. During the latter part of the year, we began to negotiate a license agreement with the developers of such technology (the “Sgenia Technology”), and in December 2013, we entered into a Development and Exclusive License Agreement (the “License Agreement”) with Sgenia Industrial, S.L. (“Sgenia”) and its subsidiaries Sgenia Soluciones, S.L. (“Sgenia Subsidiary”) and ZENON Biosystem, S.L. (“Zenon”), all of which were formed under the laws of Spain. The products currently being developed under the License Agreement include one to be used in the detection of methicillin resistant Staphylococcus aureus/Staphylococcus aureus (“MRSA/SA”) in the healthcare environment and another to be used to detect lung cancer in patients. Under the terms of the License Agreement, we will provide Zenon with capital for the development of the devices that utilizes the Sgenia Technology (the “Sgenia Products”), in exchange for a worldwide, exclusive license to manufacture, formulate, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement gives us additional rights to improvements and developments to the Sgenia Products and future products using the Sgenia Technology.
In June 2016, we were presented the opportunity of involvement in a joint venture complementary to our current medical device development business plan and we entered into a joint venture to develop the MIDS technology. On June 20, 2016, we entered into a joint venture by way of the MML SSA with the Partner utilizing a joint venture vehicle, MML, a UK Limited company of which we own a 40% interest as of July 1, 2016. Our interest in MML was obtained in exchange for a funding commitment to support MML during a Phase 1 and prospectively during a Phase 2 development of the Partner’s MIDS universal immunoassay detection technology platform. MML will have the right, under license, to use the MIDS IP during the development and the MIDS IP will be transferred to MML in the event MML concludes a commercial deal for MIDS with a third party.
To fund our obligations under the License Agreement and MML SSA, to date we have sold shares of common stock on a private placement basis, issued convertible debt and converted funds advanced to the Company into common shares of the Company.
Plan of Operation
Our business plan is to develop devices to be used at the POC in hospitals and other medical care centers to detect AMI, MRSA/SA and the signs of lung cancer, and where necessary, to fund the medical trials of those medical devices. Up to June 20, 2016, our principal activity since December 2013 was funding the development of the Sgenia Products. Because the development activities of the Sgenia Products has slowed, and certain milestones have not been achieved, one of which is the start of hospital testing, we have not been providing additional funding for the development of the Sgenia Products. Additionally, we have not been successful in obtaining our funding for further development of the Sgenia Products.
As a result of the our participation in MML, our primary focus since June 2016 has shifted to the funding and co-development of the MIDS technology platform to develop a hand held device, MIDS Cardiac™, to be used at the POC for the early detection of low levels of certain cardiac biomarkers, using high sensitivity cardiac assays for the diagnosis of AMI.
The MML SSA provides for a series of payments (“Phase 1 Payments”) in an aggregate amount of £450,500 (approximately $650,000 based on the rate of exchange on entering the MML SSA). The Company made a Phase 1 Payment to MML, of $130,000 (the “First Payment”), which was converted to £92,857. Subsequent Phase 1 Payments were expected to be received as follows; (a) on or before September 20, 2016, a payment £106,093, (b) on or before November 20, 2016, a payment of £100,640; (c) on or before January 20, 2017 a payment of £100,640; and (d) on or before March 20, 2017 a payment of £50,320. The MML SSA also provides for a contingency funding (the “Contingency”) to be available after March 31, 2017 in an aggregate amount of up to £45,000 (approximately $58,000) to be paid by us within 20 days of receiving a written notice from MML.
On September 29, 2016, the Company amended the MML SSA (the “Amendment”) to postpone certain anticipated Phase 1 Payments. The outstanding Phase 1 Payments have been amended to be in the following amounts on specified dates: (a) on September 30, 2016, a payment of $30,000, which has been paid; (b) on or before October 30, 2016, a payment of $110,000; (c) on or before November 30, 2016, a payment of $152,500; (d) on or before January 30, 2017 a payment of $152,500; and (e) on or before March 31, 2017, a payment of $75,000, making the aggregated Phrase 1 Payments, including the first payment of $130,000, equal to $650,000. All other provisions and terms of the MML SSA, including the Contingency, remain in force.
The parties to the MML SSA envisage a second phase of development (“Phase 2”) to follow Phase 1. This is expected to be over a similar timeframe and at a similar cost. MML may independently obtain funding for Phase 2 at MML’s option, or invite the Company to fund.
4
The MML SSA contains various provisions to govern our funding obligations: if any Phase 1 Payment is not made within 14 days of it falling due (“Default”), our shareholding in MML may be reduced to zero unless otherwise agreed with the Partner; if no Contingency is drawn during Phase 1 the Partner will be awarded an enduring 2.5% profit after tax right in MML (“Override”) which will increase to a 15% Override if we decline to fund Stage 2; if we decline to fund Phase 2 and any Contingency has been drawn, the Partner will be awarded a 15% Override decreased by 0.5% for each £7,500 tranche of Contingency drawn down during Phase 1. Any Override will convert on a ratio of 1% Override to 1% of ordinary shares in the event of a sale of MML.
At no time prior to a sale will the Company’s ownership interest in MML’s shares be less than 30% unless the Company is in Default. Provided that each Phase 1 Payment is made within 14 days of falling due, the Company also has additional investor control rights over MML, including representation on the board of directors, rights over the appointment and employment of senior management persons, incurring indebtedness, entry into major transactions, budget approval rights, accounting practices and general operational management supervisory rights.
As a condition of the MML SSA, MML has entered into Supply of Services Agreements under which it receives the services of key personnel related to the MIDS development.
At September 30, 2016, we had a working capital deficit of $241,680. Our current cash assets are not sufficient to cover our current and expected expenses, including the contractual funding obligation under the License Agreement and the MML SSA, and therefore, we will need to obtain further financing, without which we will not be able to execute our business plan.
In light of our current inability to fund our operations and fund the Sgenia license and the fact that the Sgenia research is delayed, we reviewed with Sgenia the development schedule and funding requirements for the initial products and requirements to develop the cancer sensory devices, and have agreed in principle to an alternative development schedule which would result in the lengthening of the developmental schedule for these products and an increase of the budget requirements. The schedule and funding will be finalized once we have obtained sufficient funding, for which we cannot give any assurance that we will be able to obtain. We have been attempting to secure the necessary funding to continue either the existing development schedule and corresponding budget or the alternative development schedule.
Assuming that we are able to obtain operational funding, in addition to any funding necessary to maintain our status as a public company, subject to regular review and additional assessment of requirements, currently we anticipate that we will incur the following expenses over the twelve (12) month period following funding in connection with the development of the Sgenia Products and the MIDS technology: (1) we will have to fund our obligations under the terms of the MML SSA as amended in a minimum total amount of $490,000,(2) we will have to fund the future development expenses of Sgenia in the approximate amount of 683,000 euros, (3) payment of compensation to our officers, employees, and consultants of approximately $100,000, (4) legal, audit and reporting expenses of approximately $50,000, and (5) general working capital. Additional unknown expenses may arise from time to time, which we cannot currently identify or determine a possible expense. We will need additional funding to cover our anticipated expenses mentioned above, and for future development and implementation of our business plan.
Liquidity and Capital Resources
As of September 30, 2016 and December 31, 2015, our total assets were $182,165 and $5,156, respectively, and our total current liabilities were $423,845 and $261,301 respectively. As of September 30, 2016, we had a working capital deficit of $241,680. Our financial statements report a net loss of $60,787 and $135,535 for the three and nine months ended September 30, 2016, respectively.
We have had recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. Our financial statements reflect that there is a going concern qualification.
Currently, we have only limited cash and similar assets, which do not allow us to continue with the funding obligations of the license with Sgenia or our obligations under the MML SSA. The License Agreement has not been declared in default. Further funding of the development project is not yet due as Sgenia has not completed the current stage of development terms.
In 2016, we received $40,000 on April 26, 2016 as a loan from the Note Holder. Funding obtained in 2014 and 2015, held by the Note Holder who acquired the Prior Notes, was consolidated into the May 2016 Notes. The April 2016 Note and the May 2016 Notes contain standard anti-dilution provisions and other customary representations, warranties and covenants by, among and for the benefit of the parties. These notes also include customary event of default provisions and impose penalties on the Company in certain default events. Additionally, the Note Holder has the right of first refusal in any future equity financing and impose restrictions on the Company’s ability to make distributions to its shareholder, repurchase shares of Common Stock, incur certain liabilities or sell assets. Notwithstanding the foregoing, the Company is permitted to raise additional capital relating to the Development and Exclusive License Agreement, effective December 4, 2013, as amended.
On June 6, 2016, we received a cash investment of $150,000 from the Investor in exchange for the issuance of 9,589,512 of common stock. The use of proceeds required the funds to be applied to participating in the MML project and for general working capital. The Investor was required to provide Commitment Loans in an aggregate amount of $640,000 to be applied to the Company’s ongoing obligations under the MML SSA and for general working capital. On September 29, 2016, the Company issued the October Note in the principal amount of $60,000 to the Note Holder, in exchange of a loan of $60,000. Under the October Note, the Company also granted an option to the Note Holder to provide the Option Loans to the Company: (a) on or before October 31, 2016, an amount of $140,000; (b) on or before November 30, 2016, an amount of $170,000 (c) on or before January 31, 2017, an amount of $180,000; and (d) on or before March 31, 2017, an amount of $100,000. Simultaneously the Investor, the Company and the Note Holder entered into an amendment to the SPA pursuant to which the Investor, the Note Holder and the Company agreed that should the Note Holder elect to provide the Option Loans, the Investor will not be required to, nor will it be permitted to, provide the Commitment Loans. In the event the Note Holder does not provide the Option Loans, the Investor will be required to provide the Commitment Loans in an amended aggregate amount of $580,000, on dates and in amounts to be agreed between the Investor and the Company.
13
5
Results of Operations
Overview
The following discussion of the results of operations, cash flows and changes in our financial position should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2015, which are included in our Form 10-K, filed on May 23, 2016.
Three Months Ended September 30, 2016 and 2015
Our operating results for the three months ended September 30, 2016 and for the three months ended September 30, 2015 are summarized as follows:
|
Three Months Ended
September 30
|
||||||||
|
2016
|
2015
|
|||||||
|
Revenue
|
-
|
-
|
||||||
|
Operating Expenses
|
$
|
27,627
|
62,218
|
|||||
|
Net (Loss)
|
$
|
(60,787)
|
(62,218
|
)
|
||||
Operating Expenses
Our operating expenses for the three months ended September 30, 2016 and 2015 are outlined in the table below:
|
Three Months Ended
|
||||||||
|
September 30
|
||||||||
|
2016
|
2015
|
|||||||
|
Research and development expenses
|
$
|
-
|
$
|
32,215
|
||||
|
General and administrative expenses
|
$
|
27,627
|
$
|
30,003
|
||||
Research and development expenses have decreased as we have not been providing additional funding for the development of the Sgenia Products
General and administrative expenses have decreased as a result of decreased consulting services and a decrease in our legal and accounting fees.
Revenues
We have earned no revenues since our inception.
We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed.
6
Nine Months Ended September 30, 2016 and 2015
Our operating results for the nine months ended September 30, 2016 and for the nine months ended September 30, 2015 are summarized as follows:
|
Nine Months Ended
September 30
|
||||||||
|
2016
|
2015
|
|||||||
|
Revenue
|
-
|
-
|
||||||
|
Operating Expenses
|
$
|
98,094
|
$
|
132,458
|
||||
|
Net (Loss)
|
$
|
(135,535)
|
$
|
(134,775
|
)
|
|||
Operating Expenses
Our operating expenses for the nine months ended September 30, 2016 and 2015 are outlined in the table below:
|
Nine Months Ended
|
||||||||
|
September 30
|
||||||||
|
2016
|
2015
|
|||||||
|
Research and development expenses
|
$
|
-
|
$
|
32,215
|
||||
|
General and administrative expenses
|
$
|
98,094
|
$
|
100,243
|
||||
Research and development expenses have decreased as we have not been providing additional funding for the development of the Sgenia Products
General and administrative expenses have decreased as a result of decreased consulting services and a decrease in our legal and accounting fees.
|
Cash Flows
|
Nine Months Ended
September 30 , 2016
|
Nine Months Ended
September 30,2015
|
||||||
|
Net Cash Used in Operating Activities
|
$
|
(67,114)
|
$
|
(92,470)
|
||||
|
Net Cash Used in Investing Activities
|
$
|
(160,000)
|
$
|
-
|
||||
|
Net Cash Provided by Financing Activities
|
$
|
250,000
|
$
|
90,000
|
||||
|
Cash increase (decrease) during the period
|
$
|
22,886
|
$
|
(2,470)
|
||||
We had cash of $23,875 and $989 as of September 30, 2016 and December 31, 2015, respectively. We had a working capital deficit of $241,680 as of September 30, 2016, compared to working capital deficit of $256,145 as of December 31, 2015.
We used cash in operations of $67,114 during the nine months ended September 30, 2016, principally for funding our corporate obligations and SEC reporting. We have not funded the Sgenia license during this three month period due to a lack of available funds and the fact that Sgenia and Zenon have not completed the preconditions for the next phase of funding.
We used cash in investing activities of $160,000 during the nine months ended September 30, 2016, due under the MML SSA.
We received $60,000 of cash proceeds from a loan during the three months ended September 30, 2016. During the nine months ended September 30, 2016, we received $100,000 of cash proceeds from two loans and $150,000 of cash proceeds from the sale of the Company’s common stock during the nine months ended September 30, 2016.
Based on our current operating plan, we will not generate revenue that is sufficient to cover our expenses for at least the next twelve (12) months. In addition, we do not have sufficient cash and cash equivalents to execute our operations for at least the next twelve (12) months. We will need to obtain additional financing to operate our business for the next twelve (12) months. We expect to raise the capital necessary to fund our company through advances or a private placement and public offering of our common stock. Additional financing, whether through public or private equity or debt financing, arrangements with stockholders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us.
Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.
7
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4 CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Under the supervision and the participation of our management, consists of our principal executive officer (who is also our principal financial officer), we conducted an evaluation as of September 30, 2016, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer, who is also our principal financial officer, concluded that our disclosure controls and procedures were not effective as of September 30, 2016, because (1) the Company lacks a functioning audit committee and there is a lack of independent directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) the Company has inadequate segregation of duties consistent with control objectives; and (3) the Company has ineffective controls over its period end financial disclosure and reporting processes. The Company operations are also ineffective due to the lack of operating funding.
Changes in internal controls over financial reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
8
None.
ITEM 1A RISK FACTORS
There have been no material changes to the risk factors previously disclosed in the Company’s annual report on Form 10-K, which was filed with the Securities and Exchange Commission on May 23,2016. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
None.
N/A.
ITEM 5 OTHER INFORMATION
Additional Information on MML
Demand is increasing for POC tests that can detect very low concentrations of a target analyte and quantify the result. Current lateral flow based immunoassays can only detect analyte at high levels of concentration. However, at low concentration levels, the assay system requires amplification either of the signal or the target, which will typically increase the complexity and the costs of the testing device. Consequently, current POC tests remain largely unreliable for targets that require quantification.
We believe there to be an opportunity to develop a universal immunoassay based POC testing system which:
|
●
|
Is capable of detecting biomarkers at a nanoparticle level, providing fully quantitative measurement of results i.e. giving a numerical value for each biomarker detected and not just an indication on whether a specified biomarker is actually present,
|
|
●
|
Is capable of multiplexing i.e. performing multiple types of test from the same sample,
|
|
●
|
Provides full connectivity and networking for collection, storage and transfer of data and results,
|
|
●
|
Displays test results in minutes (less than 8 minutes for a panel of up to 3 tests),
|
|
●
|
Requires a finger prick sample size for a single test,
|
|
●
|
Utilizes a handheld reader and single disposable cartridge designed to be operated by a minimally trained person, requiring modest manual operation, other than for sample collection,
|
|
●
|
Contains all necessary reagents and where all steps are automated into an integrated encompassing pre-treatment, analyte specific reaction, signal production, signal reaction and final result: from sample to result in one step,
|
|
●
|
Can be adapted to perform different immunoassays for testing in areas such as infectious diseases, drugs of abuse or oncology, especially where rapid diagnosis is critical, and
|
|
●
|
Has a simple system design, requiring minimal direct input costs and inline manufacturing processes to keep unit costs as low as possible.
|
The MML plan is to develop the MIDS platform initially for the cardiac marker POC testing market, these markers being measured to evaluate heart function. Cardiac markers are used in the diagnosis and risk stratification of patients with chest pain and suspected acute coronary syndrome. The detection of these markers is used to diagnose acute myocardial infarction (“AMI”) and its severity, typically Troponin (cTnI or cTnT), myoglobin and Creatine kinase MB isoenzyme (CK-MB).
9
Standard procedure for chest pain patients is an immediate ECG, complemented by blood tests for the cardiac markers Troponin I or T, to diagnose AMI. However, the sensitivity of an ECG is recognized as only around 55%-75% accurate. And these standard Troponin tests provide only guidance; as Troponin levels rise over time and are difficult to detect during the early stages. The solution is the detection of very low levels of cardiac markers (Troponin I and T) using high sensitivity cardiac Troponin assays (biomarker detection/measurement process). Gold standard laboratory analyzers currently required to run these tests can give up to a 99.6% Negative Predictive Value (the probability of no AMI): two thirds of suspect patients might be “ruled out” and safely discharged early. However, laboratory analyzers are located centrally, extremely expensive and slow to turnaround results (typically 60 minutes).
MML intends to develop its unique technology platform into a hand-held device for use anywhere, designed to equal or exceed gold standard laboratory levels of accuracy. MML believes it can develop a cardiac device, MIDS Cardiac™ , with a number of key features; a) deliver definitive results at the POC within minutes with a single Troponin I or T test within 3 minutes and three panel test (additional cardiac biomarkers) within 8 minutes, b) accuracy equal or superior to gold standard laboratory high sensitivity assays, c) patient friendly requiring a market leading 5 microliter finger prick blood sample per tested analyte, d) automated operation suitable for use by minimally trained personnel and, e) at a fraction of the cost of laboratory analyzers and results not requiring interpretation from specialized medical personnel.
The global market for cardiac biomarker diagnostic tests is projected to reach $7.2 billion by 2018, of which $1.16 billion is expected to be served by POC devices. The POC market is in its infancy; existing POC hand held devices not accurate or reliable enough to definitively exclude AMI. MML’s ultimate goal is to match or exceed current gold standard” high-sensitivity cardiac assays, currently carried out on relatively slow, hugely expensive laboratory analyzers. One multinational diagnostic company claiming the highest levels of accuracy on the market for a POC cardiac marker device, in reality achieves a mere 65% sensitivity. This poor sensitivity comes nowhere near what MML believes the MIDS Cardiac™ can achieve. Despite the shortcomings of POC cardiac devices currently on the market, 100’s of millions of dollars per year are generated from device and strip sales which only aid the diagnosis of AMI in conjunction with ECG and clinical symptoms. Should the development of MIDS Cardiac™ be successful we believe the device will deliver unparalleled levels of accuracy, reliability, ease of use and cost savings.
MIDS IP (under license to MML)
The MIDS technology platform is protected by numerous patent applications now in the national phase in key geographic areas and already granted in China (grants in other territories expected to follow).
• PCT application number PCT/GB2011/050749
• EP application number 11724436.8
• USA application number 13809367
• China application number 201180025701.5 (Granted)
• India application number 9624/CHENP/2012
The MML technical team has world class expertise and technical know-how of the application of magnetism to medical testing. This knowledge, alongside their commercial experience of the POC market, puts MML in an excellent situation to develop and commercialise MIDS Cardiac™. The Company believes that MML is well positioned to become a leading innovator in this field. The MML development team has:
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Expertise in the field of quantitative micro-magnetic and luminescence measurement techniques and applying that specialism to measure density and behaviour of particulate markers within body fluids.
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Thirty years of experience in magnetic measurement and magnetic sensor (Hall Effect and Bio-Sensors) design and specifically in magnetic nano-particle applications within the medical and bio-engineering POC field.
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High level experience of dealing with the measurement of changes within body fluids and tissues in micro and nano environments.
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Extensive experience in the design and development of small, low cost POC measurement devices that read changes occurring on input strips, both from an engineering, physics (optics and magnetic), reader software and end user perspective.
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Clear understanding of quality standards, timescales, processes and testing rigours required in the POC healthcare area.
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Established relationships with commercial partners capable of creating licence revenue for enhancements of existing market products and to develop multiple new revenue streams from new applications.
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A broad skills base across its management team covering scientific, technical and financial expertise. Team members have experience of closing deals related to products in this sector.
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10
ITEM 6 EXHIBITS
The following documents are included herein:
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Exhibit No.
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Document Description
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10.1
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Form of Unsecured Convertible Promissory Note (adjusted as per stock split of August 3, 2016) for use in connection with the New Loans including draws under the Securities Purchase Agreement, dated June 6, 2016, and the September 2016 note for $60K, October 2016 note for $140K.
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Filed herewith
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10.2
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Amendment to Supply of Services Agreement with Mr. Carlos Jose Gil, dated December 5, 2013 (Incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on December 6, 2013).
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Filed herewith
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10.3
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Form of Convertible Subordinated Promissory Note, dated November 1, 2016, issued by the Company.
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Filed herewith
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31.1
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Certification of Principal Executive Officer who is also the Principal Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith
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32.1
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Certification of Chief Executive Officer who is also the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
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Filed herewith
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith.
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101.LAB
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XBRL Taxonomy Extension Labels Linkbase Document
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Filed herewith.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith.
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| 101.INS |
XBRL Taxonomy Extension Instance Linkbase Document
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Filed herewith. |
| 101.SCH |
XBRL Taxonomy Extension Schema Linkbase Document
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Filed herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant.
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ZENOSENSE, INC.
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Date: November 14, 2016
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By:
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/s/Carlos Jose Gil
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Name:
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Carlos Jose Gil
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Title:
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Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)
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11