UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2011
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to ____________
Commission file number
333-141131
MABCURE INC.
(Exact name
of Registrant as specified in its charter)
|
Nevada
|
20-4907813
|
|
(State or other jurisdiction of incorporation or
|
(IRS Employer Identification No.)
|
|
organization)
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|
760 Parkside Avenue #208, Brooklyn, New York 11226
(Address of principal executive offices) (zip code)
(914) 595-6342
(Registrant’s telephone number,
including area code)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
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 [ ]
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 smaller
reporting company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
|
Large accelerated filer [ ]
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Accelerated filer [ ]
|
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Non-accelerated filer [ ]
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Smaller reporting company [ x ]
|
|
(Do not check if a smaller reporting company)
|
|
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [ x ]
State the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date:
As of November 15, 2011, there were 63,915,065 shares of the
Registrant's common stock issued and outstanding.
|
MABCURE, INC.
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|
TABLE OF CONTENTS
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|
Part I—Financial Information
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PART I - FINANCIAL INFORMATION
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|
Item 1. Financial Statements – (Unaudited)
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MABCUREINC. AND SUBSIDIARY
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|
(A DEVELOPMENT STAGECOMPANY)
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CONSOLIDATED BALANCESHEETS
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|
|
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September 30,
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|
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December 31,
|
|
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2011
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|
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2010
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|
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(unaudited)
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ASSETS
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Current Assets:
|
|
|
|
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Cash and cash equivalents
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$
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13,923
|
|
$
|
3,415
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|
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Accounts receivable - Other
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19,394
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44,923
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|
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Prepaid expenses
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10,186
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|
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7,890
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|
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Total current assets
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43,503
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56,228
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|
|
|
|
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|
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Property and Equipment:
|
|
|
|
|
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Computer and office equipment
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11,946
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|
|
11,733
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Furniture and fixtures
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8,314
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8,244
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Laboratory equipment
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51,532
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118,625
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Vehicles
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68,272
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66,544
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Website development costs
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3,640
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3,640
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|
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143,704
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|
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208,786
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Less: Accumulated depreciation and amortization
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(80,338
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)
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|
(84,867
|
)
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Net property and
equipment
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|
63,366
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|
|
123,919
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|
|
|
|
|
|
|
|
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Other Assets:
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|
|
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Intellectual property
|
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16,000,000
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16,000,000
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|
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Patent pending
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|
4,675
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|
|
4,675
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Deposits and other
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7,463
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1,988
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|
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Deferred offering costs
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-
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20,663
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Total other assets
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16,012,138
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|
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16,027,326
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Total Assets
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$
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16,119,007
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$
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16,207,473
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|
|
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
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|
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Accounts payable and accrued
liabilities
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$
|
706,017
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$
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286,044
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Due to related parties - Directors and officers
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57,153
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10,629
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Current portion of capital lease
obligations
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16,167
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36,308
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|
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Loans payable - net of debt discount of $49,153 and
$0
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247,605
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133,258
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Unearned license fees
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100,000
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-
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Total current liabilities
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1,126,942
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466,239
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Long-Term Debt, less current portion:
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Capital lease obligations
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7,953
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16,275
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Total liabilities
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|
1,134,895
|
|
|
482,514
|
|
|
|
|
|
|
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Commitments and Contingencies
|
|
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Stockholders' equity:
|
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Common stock, $0.001 par value;
1,500,000,000 shares authorized; 63,565,065
and 62,399,725 shares
issued and outstanding in 2011 and 2010, respectively
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63,565
|
|
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62,400
|
|
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Additional paid-in capital
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19,263,639
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18,924,500
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Donated capital
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13,000
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13,000
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Accumulated other comprehensive loss
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(30,532
|
)
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(31,816
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)
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Deficit accumulated during the development
stage
|
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(4,325,560
|
)
|
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(3,243,125
|
)
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Total stockholders’ equity
|
|
14,984,112
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|
|
15,724,959
|
|
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Total Liabilities and Stockholders'
Equity
|
$
|
16,119,007
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|
$
|
16,207,473
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
3
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MABCUREINC. AND SUBSIDIARY
|
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(A DEVELOPMENT STAGECOMPANY)
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CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVELOSS
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FOR THETHREEAND NINEMONTHS ENDED SEPTEMBER 30, 2011,
AND 2010, AND
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CUMULATIVEFROM INCEPTION (MAY 8, 2006) THROUGH
SEPTEMBER 30, 2011
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(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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Cumulative
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2011
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2010
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2011
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2010
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|
from
inception
|
|
|
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Revenues
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$
|
-
|
|
$
|
-
|
|
$
|
-
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|
$
|
-
|
|
$
|
-
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Expenses:
|
|
|
|
|
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|
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Research and development
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97,600
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123,264
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314,590
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366,215
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1,124,985
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|
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General and administrative
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|
169,025
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|
145,102
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|
|
621,718
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|
|
412,237
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2,840,545
|
|
|
Total expenses
|
|
266,625
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|
|
268,366
|
|
|
936,308
|
|
|
778,452
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3,965,530
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|
|
|
|
|
|
|
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|
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Loss from operations
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(266,625
|
)
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|
(268,366
|
)
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|
(936,308
|
)
|
|
(778,452
|
)
|
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(3,965,530
|
)
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Other Income (Expense):
|
|
|
|
|
|
|
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|
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|
|
|
|
|
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Interest income
|
|
-
|
|
|
101
|
|
|
19
|
|
|
470
|
|
|
10,637
|
|
|
Interest expense
|
|
(8,944
|
)
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|
(196,977
|
)
|
|
(174,143
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)
|
|
(204,726
|
)
|
|
(398,664
|
)
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|
Gain on derivative liability
|
|
-
|
|
|
-
|
|
|
26,769
|
|
|
-
|
|
|
26,769
|
|
|
Other income
|
|
-
|
|
|
-
|
|
|
1,228
|
|
|
-
|
|
|
1,228
|
|
|
Total other
income (expense)
|
|
(8,944
|
)
|
|
(196,876
|
)
|
|
(146,127
|
)
|
|
(204,256
|
)
|
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(360,030
|
)
|
|
Loss before income taxes
|
|
(275,569
|
)
|
|
(465,242
|
)
|
|
(1,082,435
|
)
|
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(982,708
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)
|
|
(4,325,560
|
)
|
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
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Net loss
|
$
|
(275,569
|
)
|
$
|
(465,242
|
)
|
$
|
(1,082,435
|
)
|
$
|
(982,708
|
)
|
$
|
(4,325,560
|
)
|
|
Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
(1,371
|
)
|
|
7,843
|
|
|
1,284
|
|
|
(10,908
|
)
|
|
(30,532
|
)
|
|
Total Comprehensive Loss
|
$
|
(276,940
|
)
|
$
|
(457,399
|
)
|
$
|
(1,081,151
|
)
|
$
|
(993,616
|
)
|
$
|
(4,356,092
|
)
|
|
Basic and diluted loss per share
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
Weighted average number of shares
outstanding - basic and diluted
|
|
63,465,065
|
|
|
62,399,725
|
|
|
63,146,229
|
|
|
61,938,187
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
4
|
MABCUREINC. AND SUBSIDIARY
|
|
(A DEVELOPMENT STAGECOMPANY)
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
FOR THENINEMONTHS ENDED SEPTEMBER 30, 2011, AND 2010,
AND
|
|
CUMULATIVEFROM INCEPTION (MAY 8, 2006) THROUGH
SEPTEMBER 30, 2011
|
|
(Unaudited)
|
|
|
|
Nine Months Ended September 30,
|
|
|
Cumulative
|
|
|
|
|
2011
|
|
|
2010
|
|
|
from
inception
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,082,435
|
)
|
$
|
(982,708
|
)
|
$
|
(4,325,560
|
)
|
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Gain on derivative liability
|
|
(26,769
|
)
|
|
-
|
|
|
(26,769
|
)
|
|
Financing costs
|
|
156,474
|
|
|
-
|
|
|
156,474
|
|
|
Depreciation and amortization
|
|
28,207
|
|
|
32,672
|
|
|
114,936
|
|
|
Amortization of debt discount
|
|
4,468
|
|
|
-
|
|
|
4,468
|
|
|
Donated services
|
|
-
|
|
|
-
|
|
|
13,000
|
|
|
Stock-based compensation
|
|
142,052
|
|
|
99,471
|
|
|
521,869
|
|
|
Common stock issued for investor relations services
|
|
-
|
|
|
-
|
|
|
45,001
|
|
|
Common stock issued for consulting
services
|
|
36,000
|
|
|
-
|
|
|
36,000
|
|
|
Increase in value of warrants due to amendment of
term
|
|
-
|
|
|
195,671
|
|
|
195,671
|
|
|
Gain on sale of fixed assets
|
|
(1,224
|
)
|
|
-
|
|
|
(1,224
|
)
|
|
Changes in net assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in
accounts receivable - other
|
|
27,791
|
|
|
(11,840
|
)
|
|
(19,419
|
)
|
|
Decrease (increase) in prepaid expenses and
other current assets
|
|
(2,296
|
)
|
|
21,292
|
|
|
(10,133
|
)
|
|
Decrease (increase) in
deposits and other
|
|
(5,423
|
)
|
|
-
|
|
|
(7,686
|
)
|
|
Increase in accounts payable and accrued
liabilities
|
|
416,518
|
|
|
45,985
|
|
|
721,328
|
|
|
Increase in unearned license
fees
|
|
100,000
|
|
|
-
|
|
|
100,000
|
|
|
Net cash used in operating activities
|
|
(206,637
|
)
|
|
(599,457
|
)
|
|
(2,482,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
-
|
|
|
(9,237
|
)
|
|
(65,569
|
)
|
|
Proceeds from sale of property and equipment
|
|
39,662
|
|
|
-
|
|
|
39,662
|
|
|
Patent pending
|
|
-
|
|
|
(4,675
|
)
|
|
(4,675
|
)
|
|
Net cash provided by (used in) investing activities
|
|
39,662
|
|
|
(13,912
|
)
|
|
(30,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loan payable
|
|
163,500
|
|
|
-
|
|
|
831,813
|
|
|
Payments on loan payable
|
|
-
|
|
|
-
|
|
|
(35,055
|
)
|
|
Payments of principal on capital
lease obligations
|
|
(30,617
|
)
|
|
(24,821
|
)
|
|
(124,128
|
)
|
|
Proceeds (repayments) from loans from related parties
|
|
46,578
|
|
|
(18,525
|
)
|
|
57,783
|
|
|
Issuance of common stock for cash
|
|
10,829
|
|
|
500,000
|
|
|
1,861,829
|
|
|
Deferred offering costs
|
|
(11,241
|
)
|
|
-
|
|
|
(31,904
|
)
|
|
Net cash provided by financing
activities
|
|
179,049
|
|
|
456,654
|
|
|
2,560,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash
and cash
equivalents
|
|
(1,566
|
)
|
|
(10,512
|
)
|
|
(33,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase during period
|
|
10,508
|
|
|
(167,227
|
)
|
|
13,923
|
|
|
Cash and cash equivalents at beginning of period
|
|
3,415
|
|
|
214,480
|
|
|
-
|
|
|
Cash and cash equivalents at end of
period
|
$
|
13,923
|
|
$
|
47,253
|
|
$
|
13,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
1,958
|
|
$
|
3,473
|
|
$
|
14,406
|
|
|
Income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Supplemental Information of Noncash Investing and Financing
Activities:
On July 7, 2008, MabCure issued 32,048,400 shares of common
stock for the purchase of intellectual property valued at
On March 5, 2010,
MabCure entered into a conversion agreement wherein the Company exchanged
$500,000 in outstanding
On February 24, 2011, the Company issued 100,000
shares of common stock, valued at $36,000, for consulting services
The accompanying notes are an integral part of these
consolidated financial statements.
5
|
MABCURE INC. AND SUBSIDIARY
|
|
(A DEVELOPMENT STAGE COMPANY)
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(Unaudited)
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(1)
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Summary of Significant Accounting
Policies
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Basis of Presentation and Organization
MabCure Inc. (“MabCure” or the “Company”) was incorporated in
the State of Nevada on May 8, 2006, under the name of Smartec Holdings, Inc. The
Company originally was in the business of developing a detergent for removing
pesticides from fruits and vegetables. Because the Company was not successful in
implementing its business plan, it considered various alternatives to ensure the
viability and solvency of the Company. On January 10, 2008, the Company changed
its name to MabCure Inc. to better reflect its new business plan. On January 10,
2008, MabCure entered into an asset purchase agreement with Indigoleaf
Associates Ltd. (“Indigoleaf”) and Dr. Amnon Gonenne pursuant to which the
Company agreed to purchase all of Indigoleaf’s interest and rights to a
proprietary technology for the rapid and efficient generation of monoclonal
antibodies against desired antigens such as cancer markers, including, but not
limited to, the know-how, secrets, inventions, practices, methods, knowledge and
data owned by Indigoleaf. The Company purchased this proprietary technology
pursuant to an intellectual property transfer agreement and consummated the
other transactions contemplated by the asset purchase agreement on July 7, 2008.
Pursuant to the asset purchase agreement, as amended on April 2, 2009, the
Company issued 25,638,400 shares of its common stock to Indigoleaf in
consideration for the purchase of Indigoleaf’s proprietary technology, and the
Company issued 6,409,600 shares of common stock to Dr. Gonenne in consideration
for being one of the founders of the Company’s cancer therapy and detection
business.
On October 30, 2008, the Company established MabCure, N.V., a
wholly-owned subsidiary in Belgium. The Belgian subsidiary was established in
order to accelerate the development and commercialization of MabCure’s
proprietary products for the early detection of cancer with specific antibodies
and for the creation of highly specific therapeutics (antibodies and novel
drugs) against cancer.
In the opinion of management, the accompanying unaudited
interim consolidated financial statements contain all necessary adjustments,
consisting only of those of a recurring nature, and disclosures to present
fairly the Company's financial position and the results of its operations and
cash flows for the periods presented. The balance sheet at December 31, 2010 was
derived from the audited financial statements, but does not include all of the
disclosures required by accounting principles generally accepted in the United
States of America. These unaudited interim condensed consolidated financial
statements should be read in conjunction with the financial statements and the
related notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2010 (the “Form 10-K”), filed on April 15,
2011.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned Belgian subsidiary, MabCure, N.V.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all cash on hand, cash accounts not
subject to withdrawal restrictions or penalties, and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash and
cash equivalents.
Property and equipment
Depreciation expense for the three months ended September 30,
2011 and 2010 totaled $7,643 and $10,545, respectively. Depreciation expense for
the nine months ended September 30, 2011 and 2010 totaled $28,207 and $31,868,
respectively.
Deferred Offering Costs
The Company defers the direct incremental costs of raising
capital until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital raised.
Should the offering be terminated, deferred offering costs are charged to
operations during the period in which the offering is terminated. See Note 4 for
additional information.
Impairment of Intellectual Property
The purchase of intellectual property from Indigoleaf was
accounted for under Accounting Standards Codification (“ASC”) Topic 350. We
believe that there are no legal, regulatory, contractual, competitive, or
economic factors that limit the useful life of this intangible asset. Consequently, we consider the useful life of
this asset to be indefinite and we have recorded no amortization expense. In
accordance with ASC Topic 350, we perform, at least annually, impairment testing
in the last quarter of the year. See Note 3 below for a further discussion.
6
Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets
and the related estimated remaining lives at each balance sheet date. The
Company records an impairment or change in useful life whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable or the useful life has changed. For the nine months ended September
30, 2011 and for the year ended December 31, 2010, no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was
required.
Derivative Instruments
In connection with the sale of debt or equity instruments, we
may sell options or warrants to purchase our common stock. In certain
circumstances, these options or warrants may be classified as derivative
liabilities, rather than as equity. Additionally, the debt or equity instruments
may contain embedded derivative instruments, such as conversion options, which
in certain circumstances may be required to be bifurcated from the associated
host instrument and accounted for separately as a derivative instrument asset or
liability.
Derivative instruments are re-valued at the end of each
reporting period, with changes in the fair value recorded as charges or credits
to income, in the period in which the changes occur. We determine the fair value
of these instruments using the Black-Scholes option pricing model. That model
requires assumptions related to the remaining term of the instruments and
risk-free rates of return, our current common stock price and expected dividend
yield, and the expected volatility of our common stock price over the life of
the option. The identification of, and accounting for, derivative instruments
and the assumptions used to value them can significantly affect our financial
statements.
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments
using the available market information and valuation methods. Considerable
judgment is required in estimating fair value. Accordingly, the estimates of
fair value may not be indicative of the amounts the Company could realize in a
current market exchange. As of September 30, 2011 and December 31, 2010, the
carrying value of the Company’s financial instruments approximated fair value
due to the short-term maturity of these instruments.
Foreign Currency Translation
MabCure accounts for foreign currency translation pursuant to
ASC Topic 830. The functional currency of the Company’s Belgian subsidiary is
the euro. Under ASC Topic 830, all assets and liabilities are translated into
United States dollars using the current exchange rate at the end of each fiscal
period. Revenues and expenses are translated using the average exchange rates
prevailing throughout the respective periods. Translation adjustments are
included in other comprehensive income (loss) for the period. Certain
transactions of the Company’s Belgian subsidiary are denominated in United
States dollars. Translation gains or losses related to such transactions are
recognized for each reporting period in the related interim consolidated
statements of operations and comprehensive (loss).
Basic and Diluted Loss per Share
In accordance with ASC Topic 260, 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 common
share is computed similarly to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. Due to net losses for the three
and nine months ended September 30, 2011and 2010, diluted loss per share is
calculated using the weighted average number of common shares outstanding and
excludes the effects of potential common stock shares that are anti-dilutive.
The potential shares of common stock that have been excluded from the diluted
loss per share calculation above for the three and nine months ended September
30, 2011 and 2010 were as follows:
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Three months ended September 30,
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Nine months ended September 30,
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2011
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2010
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2011
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2010
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Stock options
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3,010,000
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660,000
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3,010,000
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660,000
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Warrants
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5,588,636
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5,300,000
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5,588,636
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5,300,000
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7
Stock-based Compensation
The Company accounts for stock-based compensation in accordance
with ASC Topics 505 and 718. Stock-based compensation for stock options is
measured based on the estimated fair value of each award on the date of grant
using the Black-Scholes valuation model. Stock-based compensation for restricted
shares is measured based on the closing fair market value of the Company's
common stock price on the date of grate. The Company recognizes stock-based
compensation costs as expense ratably on a straight-line basis over the
requisite service period.
The allocation of stock-based compensation expense by
functional area for the three and nine months ended September 30, 2011 and 2010
was as follows:
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Three months ended September 30,
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Nine months ended September 30,
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2011
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2010
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2011
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2010
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Research and development
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$
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12,960
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$
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6,356
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$
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28,615
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$
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19,066
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General and administrative
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49,064
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13,079
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113,437
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81,444
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Total
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$
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62,024
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$
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19,435
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$
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142,052
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$
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100,510
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The Company accounts for equity instruments issued in exchange
for the receipt of goods or services from other than employees in accordance
with ASC Topic 505. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earlier of a performance commitment or completion of performance by the provider
of goods or services as defined by ASC Topic 505.
Reclassification
Certain 2010 amounts have been reclassified to conform to the
2011 presentation.
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(2)
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Development Stage Activities and Going
Concern
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The Company is currently in the development stage. The original
business plan of the Company was to develop a detergent for removing pesticides
from fruits and vegetables. However, the Company has changed its business plan
to develop and commercialize its proprietary antibody technology for the early
detection of cancer and for the creation of highly specific therapeutics
(antibodies and novel drugs) against cancer.
Given the current pace of clinical development of our products,
and until the Company can draw sufficient funds from its equity funding
facility, the Company estimates that it has sufficient cash on hand to fund
clinical development only through the first quarter of 2012. Management of the
Company is making efforts to raise additional funding by obtaining bridge
financing in the form of convertible debt.
While management of the Company believes that it will be
successful in its capital formation and planned operating activities, there can
be no assurance that the Company will be able to raise additional equity
capital, or be successful in the development and commercialization of its
proprietary antibody technology for the early detection of cancer or for the
creation of highly specific therapeutics (antibodies and novel drugs) against
cancer that will generate sufficient revenues to sustain the operations of the
Company.
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern. The Company has not established any source of revenues to cover
its operating costs, and as such, has incurred an operating loss since
inception. Further, as of September 30, 2011, the cash resources of the Company
were insufficient to meet its current business plan. These and other factors
raise substantial doubt about the Company’s ability to continue as a going
concern. The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
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(3)
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Purchase of Intellectual Property and Stock Issuance
to Founder
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On January 10, 2008, MabCure entered into an asset purchase
agreement with Indigoleaf and Dr. Amnon Gonenne pursuant to which the Company agreed to purchase all of Indigoleaf’s interest and
rights to a proprietary technology for the rapid and efficient generation of
monoclonal antibodies against desired antigens such as cancer markers,
including, but not limited to, the know-how, secrets, inventions, practices,
methods, knowledge and data owned by Indigoleaf. The Company purchased this
proprietary technology pursuant to an intellectual property transfer agreement
and consummated the other transactions contemplated by the asset purchase
agreement on July 7, 2008. Pursuant to the asset purchase agreement, as amended
on April 2, 2009, the Company issued 25,638,400 shares of its common stock to
Indigoleaf in consideration for the purchase of Indigoleaf’s proprietary
technology, and issued 6,409,600 shares of common stock to Dr. Gonenne in
consideration for being one of the founders of the Company’s cancer therapy and
detection business. The shares issued were valued at $16,000,000.
8
The purchase of intellectual property from Indigoleaf was
accounted for under ASC Topic 350. We believe that there are no legal,
regulatory, contractual, competitive, or economic factors that limit the useful
life of this intangible asset. Consequently, we consider the useful life of this
asset to be indefinite. As such, we have recorded no amortization expense.
In accordance with ASC Topic 350, we perform, at least
annually, impairment testing in the last quarter of the year. The Company did
not record an impairment charge at September 30, 2011 and December 31, 2010.
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(4)
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Loans Payable and Lease
Obligations
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Leases:
Capital Leases
The Company currently has capital lease commitments for
laboratory equipment and vehicles. Amortization of the capital lease costs for
items used in research and development is included in research and development
expenses. Amortization of the capital lease costs for items not used in research
and development is included in depreciation and amortization expense.
Operating Lease
As of April 1, 2011, the Company relocated its principal
executive offices and laboratory to Brooklyn, New York. The Company is leasing
its new facilities under a lease that expires in March 2012.
Loans Payable and Equity Funding Facility
On October 25, 2011, MabCure entered into a $100,000 senior
secured convertible debenture (the “New Debenture”) with Biotech Investment
Corp. ("Biotech"), the funds from which were used to pay off MabCure's previous
senior secured convertible debenture (the “Old Debenture”) which was due October
18, 2011. The New Debenture matures on October 20, 2012 and bears interest at
the rate of 8% per annum. The New Debenture is convertible into shares of the
Company’s common stock at any time prior to maturity, at a price equal to $0.10
per share. As part of the New Debenture agreement, the Company issued 350,000
shares to Biotech. The value of these shares will be recorded in the fourth
quarter.
The New Debenture includes a security interest on all of the
Company’s assets that shall be automatically released following the date that
the shares issuable upon conversion of the debenture can be resold without
restriction under Rule 144, and 15% of the aggregate volume accrues to the
debenture amount.
On June 28, 2011, the Company entered into a one-year working
capital agreement with a third party lender for a $63,500 convertible debenture,
carrying an interest rate of 14% per annum. The debenture is convertible into
shares of common stock beginning December 26, 2011 which is 180 days after the
execution of the debenture agreement. Following the 180
th
day and
until the 240
th
day, the lender may convert the loan at the higher of
$0.11 or 50% discount to the “market price”. The agreement defines the “market
price” as the average of the three lowest closing bid prices for the Company’s
common stock during the 10 trading day period ending one trading day prior to
the date the conversion notice is sent by the lender. Following the
240
th
day, the lender may convert the loan at the lesser of $0.11 or
39% discount to the “market price” as defined above. The Company has the option
to prepay the loan at anytime with varying degrees of prepayment penalty. During
the two-day period ending on and including the 240
th
day following
the executing of this agreement, the Company may prepay the loan without
incurring any prepayment penalties. In connection with this loan, the Company
issued 288,636 warrants to purchase the Company’s common stock at an exercise
price of $0.11 per share for a term of three years from date of issuance.
Proceeds from this loan were received by the Company on July 6, 2011.
For financial reporting purposes, the Company recorded a
discount of $53,621 to reflect the value of the warrants issued. The
estimated value of the warrants was determined using the Black-Scholes option
pricing model under the following assumptions: life of 3 years, risk free
interest rate of 0.75%, a dividend yield of 0% and volatility of 190.96%.
Expected volatility is based on the historical volatility of the stock prices of
several companies in the Company’s industry. The discount is being amortized to
the date of maturity unless repaid or converted earlier. In addition, the Company
has determined that the conversion feature of the debenture is considered to be
a derivative financial instrument. Such derivative will be recorded at its fair
value on December 26, 2011, the date at which the debenture can first be
converted and then marked-to-market at the end of each reporting period.
9
On January 18, 2011, the Company entered into an investment
agreement (“Investment Agreement”) with Centurion Private Equity, LLC (the
“Investor”), an affiliate of Roswell Capital Partners, for the provision of an
equity line funding facility of up to the amount of $10 million. Pursuant to the
terms and conditions of the Investment Agreement, the Company may sell newly
issued shares of its common stock (the “Put Shares”) to the Investor (each such
sale, a “Put”) from time to time at a price equal to the lesser of (i) 97% of
the “Market Price” (as defined below) of its common stock or (ii) the Market
Price of its common stock minus $0.01, subject to certain dollar and share
volume limitations for each Put, until the earlier of (a) 24 months from the
date its registration statement is declared effective, (b) 30 months from the
date of the Investment Agreement, or (c) until all Puts under the Investment
Agreement have reached an aggregate gross sales price equal to $10 million. The
Investment Agreement provides that prior to exercising any Put, the Company must
have a registration statement declared effective with the SEC with respect to
the Put Shares. Such registration has been declared effective by the SEC on June
27, 2011. “Market Price” means the average of the three lowest daily volume
weighted average prices published daily by Bloomberg LP for the Company’s common
stock during the fifteen consecutive trading day period immediately following
the date specified by the Company on which it intends to exercise the applicable
Put. As consideration for the provision of the equity funding facility, the
Company issued to the Investor 465,224 commitment shares and 34,892 fee shares
to cover the Investor’s transaction fees.
Concurrent with the closing of the Investment Agreement, the
Investor purchased a $100,000 senior secured convertible debenture (the "Old
Debenture"). The Old Debenture matured on October 18, 2011 and bore interest at
the rate of 8% per annum which was payable to the Investor. The Old Debenture
was originally convertible into shares of the Company’s common stock at any time
prior to maturity, at a price equal to the lesser of (i) a price equal to 90% of
the “Conversion Market Price” (as defined below) on the date of the initial
issuance of the Old Debenture or (ii) 90% of the Conversion Market Price of the
Company’s common stock on the applicable conversion date. “Conversion Market
Price” was defined as the average of the three lowest daily volume weighted
average prices published daily by Bloomberg, LP for the Company’s common stock
over the fifteen consecutive trading day period immediately preceding the date
in question.
On June 6, 2011, the Company entered into an amendment to the
Old Debenture, pursuant to which the conversion price of the Old Debenture was
fixed at $0.165 per share. In addition, the Company entered into an amendment to
the Investment Agreement with the Investor pursuant to which the Company issued
to the Investor an additional 465,224 commitment shares. The value of the shares
issued, totaling $97,697, was recorded as financing costs and is included in
interest expense on the consolidated statement of operations.
The Old Debenture included a security interest on all of the
Company’s. As discussed above, on October 25, 2011, the Company repaid the Old
Debenture using funds received from the New Debenture. As of September 30, 2011,
the principle due was $100,000 plus $5,618 of accrued interest.
As described above, as of June 6, 2011, the Old Debenture
ceased to contain a conversion option that was considered to be a derivative
financial instrument. The Company removed the derivative liability from its
consolidated balance sheet as of June 6, 2011 and the fair value of the warrants
was reclassified to additional paid-in capital. For the three and nine months
ended September 30, 2011, gain on derivative liability amounted to $0 and
$26,769, respectively.
In addition, the Company determined that the change in terms of
the conversion option to be substantially different and account for the
amendment as a debt extinguishment. The Company determined that the effect of
the amendment not to be material.
On December 7, 2010, the Company entered into a loan agreement
to obtain a bridge loan of $75,000 from a stockholder. The loan amount bears
interest at a rate of ten percent per annum, is unsecured, and is due upon
demand. The accrued interest will be payable on the repayment of the loan. The
loan amount will be used for ordinary working capital needs. As of September 30,
2011, the principle due was $75,000 plus $6,616 of accrued interest.
The Company received loans from a third-party that were
provided for working capital purposes. The loans are non-interest bearing,
unsecured, and have no terms for repayment. As of September 30, 2011 and
December 31, 2010, the amount due was $58,258.
Loans payable, net of debt discounts, amounted to $247,605 at
September 30, 2011 and $133,258 at December 31, 2010.
10
Common stock
The Company is authorized to issue 1,500,000,000 shares of
$0.001 par value common stock. All common stock shares have equal voting rights,
are non-assessable, have one vote per share, and entitle stockholders to receive
dividends. Upon liquidation or wind-up, stockholders are entitled to participate
equally with respect to any distribution of net assets or any dividends which
may be declared. Voting rights are not cumulative and, therefore, the holders of
more than 50 percent of the common stock could, if they choose to do so, elect
all of the Directors of the Company.
On October 26, 2011, the Company issued 350,000 shares to
Biotech in connection with the New Debenture entered into on October 25, 2011,
which transaction is discussed in more detail in Note 4 to the Consolidated
Financial Statements.
On June 29, 2011, the Company issued 100,000 shares in
connection with its first Put notice under the Equity Funding Facility outlined
in Note 4. Under this first Put, the Company received proceeds of $10,829 on
July 27, 2011.
On June 6, 2011, the Company issued 465,224 shares of common
stock in connection with the change of terms of the Old Debenture, as outlined
in the previous note.
On February 24, 2011, the Company issued 100,000 shares of
common stock, valued at $36,000, to a third party provider of consulting
services to raise financing pursuant to a six-month agreement dated February 24,
2011. The value of the stock issuance was recognized as deferred compensation
and was amortized over the six-month term of the agreement. Stock compensation
amounted to $12,000 and $36,000 for the three and nine months ended September
30, 2011 and is included in general and administrative expenses.
Stock options
On August 4, 2009, as part of the Company’s Annual Meeting of
Shareholders, the shareholders of the Company approved the adoption of the
MabCure, Inc. 2009 Stock Option Plan (the “Plan”). The purpose of this Plan is
to retain the services of valued key employees and consultants of the Company
and to encourage such persons to acquire a greater proprietary interest in the
Company, thereby strengthening their incentive to achieve the objectives of the
shareholders of the Company, and to serve as an aid and inducement in the hiring
of new employees and to provide an equity incentive to consultants and other
persons selected by the Company. The Company has reserved 6,034,800 shares of
common stock, par value $0.001 per share, for issuance under the Plan, subject
to adjustment to protect against dilution in the event of certain changes in the
Company’s capitalization.
The following is a summary of stock option grants issued under
the Plan during 2011:
On May 19, 2011, the Company granted stock options to certain
employees, members of the Company Board of Directors, and certain consultants of
the Company to purchase a total of 2,350,000 shares of its common stock at an
exercise price of $0.50 per share. The terms of the options include the
following:
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1.
|
Options for 950,000 shares of common stock vest over
periods of one to three years and expire five years from the date of
vesting.
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2.
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Options for 1,400,000 shares of common stock vest upon
the completion of qualified financing (as defined) and expire five years
from the date of such qualified financing.
|
Warrants
A summary of the warrants outstanding at September 30, 2011 is
as follows:
|
Warrants
|
Exercise
|
Expiration
|
|
|
Price
|
Date
|
|
1,300,000
|
$0.50
|
June 2012
|
|
2,000,000
|
$0.60
|
February 2012
|
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2,000,000
|
$0.70
|
February 2012
|
|
288,636
|
$0.11
|
June 2014
|
|
5,588,636
|
|
|
11
|
(6)
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Related Party Transactions
|
As of September 30, 2011 and December 31, 2010, the Company
owed to directors and officers of the Company a total of $57,153 and $10,629,
respectively, for various working capital loans received by the Company. The
loans are unsecured, non-interest bearing, and have no terms for repayment.
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(7)
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Commitments and
Contingencies
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Commitments
The Company is subject to various commitments under contractual
and other commercial obligations.
Contingencies
On January 10, 2011, the Company received a letter from counsel
to Dr. Elisha Orr, the Company’s former Chief Scientific Officer, demanding
payment of approximately $160,000 for unpaid management services fees, including
payment for a three-month notice period, and for the reimbursement of certain
expenses. In the Company’s response to Dr. Orr’s counsel, the Company has
refuted the claims presented in the letter primarily because Dr. Orr was
dismissed for breach and therefore was not entitled to three months’ notice, and
because the Company fully reimbursed Dr. Orr for all reimbursable expenses. Upon
Dr. Orr’s return of certain Company property in his possession, the Company
intends to reconcile all amounts and pay Dr. Orr the amounts that are owed to
him, which include amounts related to unpaid salaries and management service
fees totaling $103,429 as of September 30, 2011 and December 31, 2010, and which
have been recorded under accounts payable and accrued liabilities.
|
(8)
|
Recent Accounting
Pronouncements
|
On January 1, 2011, the Company adopted Accounting Standards
Update (“ASU”) 2010-13, “Compensation—Stock Compensation (Topic 718): Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency
of the Market in Which the Underlying Equity Security Trades,” or ASU 2010-13.
ASU 2010-13 provides amendments to ASC Topic 718 to clarify that an employee
share-based payment award with an exercise price denominated in currency of a
market in which a substantial portion of the entity’s equity securities trades
should not be considered to contain a condition that is not a market,
performance, or service condition. Therefore, an entity would not classify such
an award as a liability if it otherwise qualifies as equity. The adoption of ASU
2010-13 did not have a significant impact on its consolidated financial
statements.
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive
Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”). ASU
2011-05 provides that an entity that reports items of other comprehensive income
has the option to present comprehensive income in either one continuous
financial statement or two consecutive financial statements. ASU 2011-05 is
effective for annual periods beginning after December 15, 2011. We do not expect
ASU 2011-05 to have any impact on our financial position and results of
operations
Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA, and the SEC did not, or
are not believed by management to, have a material impact on the Company’s
present or future consolidated financial statements.
|
(9)
|
Transactions with Biotech Investment
Corp.
|
On November 15, 2011, we entered into a license agreement with
Biotech Investment Corp. ("Biotech") pursuant to which MabCure granted to
Biotech an exclusive worldwide license to certain MabCure hybridoma clones
producing antibodies against prostate cancer and certain MabCure developed
anti-PROSCA monoclonal antibodies against prostate cancer to conduct research,
development, and commercialization efforts in the field of diagnosis, imaging,
and therapy of prostate cancer. In consideration for the grant of the exclusive
license, Biotech agreed to (a) pay MabCure a one-time license fee in the amount
of $500,000, of which $100,000 was advanced to the Company in August 2011
(reflected as unearned license fees in the balance sheet), and a royalty on the
sale or sublicensing of any products based on or embodying the licensed
technology in an amount equal to 12.5%; and (b) issue to MabCure shares of
Biotech amounting to 15% of the outstanding shares of Biotech on a fully diluted
basis. Of the $500,000 one-time license fee, $350,000 shall be used by the
Company for the payment of operating costs and expenses to enable the Company to
conduct clinical trials and research and development relating to ovarian cancer.
The remaining $150,000 shall be used by the Company for the payment of the
Company’s existing indebtedness to the exclusion of payment or settlement of
pre-existing claims as defined. The $100,000 advance received in August has been
recorded as “unearned license fees” as of September 30, 2011.
12
As part of the licensing transaction with Biotech, on October
25, 2011, MabCure entered into a $100,000 senior secured convertible debenture
(the “New Debenture”) with Biotech, the funds from which were used to pay off
MabCure's previous senior secured convertible debenture (the “Old Debenture”)
which was due October 18, 2011. The New Debenture matures on October 20, 2012
and bears interest at the rate of 8% per annum. The New Debenture is convertible
into shares of the Company’s common stock at any time prior to maturity, at a
price equal to $0.10 per share. As part of the New Debenture agreement, the
Company issued 350,000 shares to Biotech. The value of these shares will be
recorded in the fourth quarter. The New Debenture includes a security interest
on all of the Company’s assets that shall be automatically released following
the date that the shares issuable upon conversion of the debenture can be resold
without restriction under Rule 144, and 15% of the aggregate volume accrues to
the debenture amount.
The Company has reviewed subsequent events through the date of
this filing.
13
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
Certain statements that the Company may make from time to
time, including all statements contained in this report that are not statements
of historical fact, constitute “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995 and the safe harbor
provisions set forth in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking statements may be
identified by words such as “plans,” “expects,” “believes,” “anticipates,”
“estimates,” “projects,” “will,” “should,” and other words of similar meaning
used in conjunction with, among other things, discussions of future operations,
financial performance, product development and new product launches, FDA and
other regulatory applications and approvals, market position and expenditures.
Factors that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the Company
include the following: our future product development efforts may not yield
marketable products due to results of studies or trials, failure to achieve
regulatory approvals or market acceptance, proprietary rights of others or
manufacturing issues; we face competition from several companies with greater
financial, personnel and research and development resources than ours; delays in
successfully completing any clinical trials we may conduct could jeopardize our
ability to obtain regulatory approval or market our potential product candidates
on a timely basis; biopharmaceutical product development is a long, expensive
and uncertain process and the approval requirements for many products are still
evolving; we may become subject to product liability claims, which could result
in damages that exceed our insurance coverage; we may be subject to claims that
our employees or we have wrongfully used or disclosed alleged trade secrets of
their former employers; the commercialization of our product candidates may not
be profitable; Our business could suffer if we cannot attract, retain and
motivate skilled personnel and general economic conditions. The Company assumes
no obligation to update any forward-looking statements. Additional information
concerning these and other factors which could cause differences between
forward-looking statements and future actual results is discussed under the
heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2010, as filed with the SEC on April 15, 2011.
EXECUTIVE OVERVIEW
We were incorporated in the State of Nevada on May 8, 2006. We
are a development stage company with limited operations and no revenues from our
business operations. Our registered independent public accounting firm had
issued a going concern opinion for our 2010 Annual Report.
Since 2008, we have been in the business of developing and
commercializing our proprietary antibody technology for the early detection of
cancer and for the creation of highly specific therapeutics (antibodies and
novel drugs) against cancer.
In January 2011, we entered into an investment agreement with
Centurion Private Equity, LLC (the “Investor” or “Centurion”), an affiliate of
Roswell Capital Partners, for the provision of an equity funding facility of up
to the amount of $10 million. Pursuant to the terms and conditions of the
Investment Agreement, we may sell newly issued shares of our common stock (the
“Put Shares”) to the Investor (each such sale, a “Put”) from time to time at a
price equal to the lesser of (i) 97% of the “Market Price” (as defined below) of
our common stock or (ii) the Market Price of our common stock minus $0.01,
subject to certain dollar and share volume limitations for each Put, until the
earlier of (a) 24 months from the date our registration statement is declared
effective, (b) 30 months from the date of the Investment Agreement, or (c) until
all Puts under the Investment Agreement have reached an aggregate gross sales
price equal to $10 million. The Investment Agreement provides that prior to
exercising any Put we must have a registration statement declared effective with
respect to the Put Shares. “Market Price” means the average of the
three lowest daily volume weighted average prices published daily by Bloomberg
LP for our common stock during the fifteen consecutive trading day period
immediately following the date specified by us on which we intend to exercise
the applicable Put. As consideration for the provision of the equity funding
facility, we issued to the Investor 465,224 commitment shares and 34,892 fee
shares to cover the Investor’s transaction fees. On June 29, 2011, we issued
100,000 shares in connection with our first Put notice under the Equity Funding
Facility. Under this first Put, we received proceeds of $10,829 on July 27,
2011.
Concurrent with the closing of the Investment Agreement, the
Investor purchased a $100,000 senior secured convertible debenture. The
debenture is due to mature on October 18, 2011 and bears interest at the rate of
8% per annum which is payable to the Investor at maturity. On June 6, 2011, we
entered into an amendment related to this debenture under which the investor
agreed to fix the price at which the Debenture may be converted into common
stock to $0.165 per share. In addition, on June 6, 2011, we entered into an
amendment to the Investment Agreement with the Investor pursuant to which we
issued to the Investor an additional 465,224 commitment shares.
As of April 1, 2011, we relocated our principal executive
offices and our principal place of business to 760 Parkside Avenue #208,
Brooklyn, NY 11226. Our mailing address is 228 Park Avenue South #15740, New
York, NY 10003.
14
Over the next twelve months, we plan to:
-
complete the analysis of our Asian clinical study for the diagnosis of
ovarian cancer;
-
initiate an additional clinical study for the diagnosis of ovarian cancer
in the U.S.;
-
initiate the antigen identification program in order to identify and
sequence those antigens, or cancer markers, which are recognized by our novel
MAbs; and
-
hire an additional scientist to assist in carrying out the tasks described
above.
Recent Developments
On November 15, 2011, we entered into a license agreement with
Biotech Investment Corp. ("Biotech") pursuant to which we granted to Biotech an
exclusive worldwide license to certain MabCure hybridoma clones producing
antibodies against prostate cancer and certain MabCure developed anti-PROSCA
monoclonal antibodies against prostate cancer to conduct research, development,
and commercialization efforts in the field of diagnosis, imaging, and therapy of
prostate cancer. In consideration for the grant of the exclusive license,
Biotech agreed to (a) pay MabCure a one-time license fee in the amount of
$500,000, of which $100,000 were advanced to us in August 2011, and a royalty on
the sale or sublicensing of any products based on or embodying the licensed
technology in an amount equal to 12.5%; and (b) issue to MabCure shares of
Biotech amounting to 15% of the outstanding shares of Biotech on a fully diluted
basis. Of the $500,000 one-time license fee, $350,000 shall be used by the
Company for the payment of operating costs and expenses to enable the Company to
conduct clinical trials and research and development relating to ovarian cancer.
The remaining $150,000 shall be used by the Company for the payment of the
Company’s existing indebtedness to the exclusion of payment or settlement of
pre-existing claims as defined. The $100,000 advance received in August has been
recorded as “unearned license fees” as of September 30, 2011.
As part of the licensing transaction with Biotech, on October
25, 2011, we entered into a $100,000 senior secured convertible debenture (the
“New Debenture”) with Biotech, the funds from which were used to pay off our
previous senior secured convertible debenture (the “Old Debenture”) which was
due October 18, 2011. The New Debenture matures on October 20, 2012 and bears
interest at the rate of 8% per annum. The New Debenture is convertible into
shares of the Company’s common stock at any time prior to maturity, at a price
equal to $0.10 per share. As part of the New Debenture agreement, we issued
350,000 shares to Biotech. The New Debenture includes a security interest on all
of our assets that shall be automatically released following the date that the
shares issuable upon conversion of the debenture can be resold without
restriction under Rule 144, and 15% of the aggregate volume accrues to the
debenture amount.
RESULTS OF OPERATIONS
We had no revenues for the period from May 8, 2006 (date of
inception) through June 30, 2011. Beginning January 2009, we commenced our
research and development activities with the proprietary antibody technology we
acquired for the early detection of cancer and for the creation of highly
specific therapeutics (antibodies and novel drugs) against cancer.
For the three months ended September 30, 2011 and September
30, 2010
Research and development expenses were $97,600 for the three
months ended September 30, 2011, compared to $123,264 for the three months ended
September 30, 2010. Research and development expenses were lower for the three
months ended September 30, 2011, primarily due to contractual payments that were
made in the prior year in connection with our clinical trials in Bangkok,
Thailand. Research and development expenses primarily consist of salaries and
wages for our scientists.
General and administrative expenses were $169,025 for the three
months ended September 30, 2011, compared to $145,102 for the three months ended
September 30, 2010. The increase in general and administrative expenses was
primarily due to an increase in stock-based compensation expense as well as
accounting and audit fees. General and administrative expenses primarily consist
of salaries and wages, stock-based compensation, and professional fees.
Interest expense was $8,944 for the three months ended
September 30, 2011 compared to $196,977 for the three months ended September 30,
2010. Interest expense in 2010 consists primarily of a finance charge of
$195,671 incurred for the increase in the value of warrants due to amendment of
terms. Interest expense in 2011 and 2010 also includes interest on loans payable
and capital lease obligations.
Our net loss for the three months ended September 30, 2011, was
$275,569 or $0.00 per share compared to $465,242 or $0.01 per share for the
three months ended September 30, 2010. The weighted average number of shares
outstanding was 63,465,065 for the three months ended September 30, 2011,
compared to 62,399,725 for the three months ended September 30, 2010.
15
For the nine months ended September 30, 2011 and September
30, 2010
Research and development expenses were $314,590 for the nine
months ended September 30, 2011, compared to $366,215 for the nine months ended
September 30, 2010. Research and development expenses were lower for the nine
months ended September 30, 2011, primarily due to contractual payments that were
made in 2010 in connection with our clinical trials in Bangkok, Thailand.
Research and development expenses primarily consist of salaries and wages for
our scientists.
General and administrative expenses were $621,718 for the nine
months ended September 30, 2011, compared to $412,237 for the nine months ended
September 30, 2010. The increase in general and administrative expenses was due
to an increase in professional fees related to the Company’s fund raising
efforts, accounting and auditing fees, stock-based compensation, and financing
costs. General and administrative expenses primarily consist of salaries and
wages, stock-based compensation, and professional fees.
Interest expense was $174,143 for the nine months ended
September 30, 2011 compared to $204,726 for the nine months ended September 30,
2010. Interest expense for both 2011 and 2010, consists primarily of a financing
charges of $156,474 and $195,671, respectively, incurred for the issuance of
common stock for the amendment of the Investment Agreement and for the increase
in the value of warrants due to amendment of terms. Interest expense in 2011 and
2010 also includes interest on loans payable and capital lease obligations.
Our net loss for the nine months ended September 30, 2011, was
$1,082,435 or $0.02 per share compared to $982,708 or $0.02 per share for the
nine months ended September 30, 2010. The weighted average number of shares
outstanding was 63,146,229 for the nine months ended September 30, 2011,
compared to 61,938,187 for the nine months ended September 30, 2010.
LIQUIDITY AND CAPITAL RESOURCES
As outlined in the overview above, in January 2011, we entered
into an investment agreement with Centurion for the provision of an equity
funding facility of up to the amount of $10 million. Drawing funds from this
facility is at our sole discretion and will be based on our ongoing needs for
capital. We are now able to draw funds from the facility given that the SEC
declared as effective our S-1 related to this equity funding facility. The
facility will be available to us for a period of two years or 30 months from the
date of the Investment Agreement, whichever is sooner. During this time, we will
be working towards securing additional sources of capital.
As discussed above, on November 15, 2011, we entered into a
license agreement pursuant to which we granted an exclusive worldwide license to
certain of our hybridoma clones producing antibodies against prostate cancer and
certain anti-PROSCA monoclonal antibodies against prostate cancer. In
consideration, we received $500,000, of which $100,000 were advanced to us in
August 2011. In addition, we will be receiving a royalty of 12.5% on the sale or
sublicensing of any products based on or embodying the licensed technology. The
funds from the licensing agreement will be used primarily to advance our R&D
as well as for general corporate purposes.
We can give no assurance that we will be able to obtain
additional capital or that any additional capital that we are able to obtain
will be sufficient to meet our needs, which raises substantial doubt about our
ability to continue operating as a going concern. We do not have any bank credit
lines. In addition to the equity funding facility with Centurion, we currently
plan to attempt to obtain financing from additional investors through
third-party loans or convertible debentures. Furthermore, we may seek to obtain
funding through strategic alliances with larger pharmaceutical or biomedical
companies. We can give no assurances that we will be able to obtain any
additional funding from these sources, or that such funding will be available to
us on favorable terms.
Given the current pace of clinical development of our products,
and our limited financial resources, we estimate that we have sufficient cash on
hand to fund clinical development only through the first quarter of 2012. If we
are unable to raise additional capital or enter into strategic partnerships
and/or license agreements, we will be required to cease operations or curtail
our desired development activities, which will delay the development of our
products. Moreover, we will need additional financing after development of our
products until we can achieve profitability, if ever.
As of September 30, 2011
As of September 30, 2011, our cash balance was $13,923. We have
been working on various fronts to attempt to obtain additional capital to fund
our operations, including third-party loans, convertible debentures, equity
investments, and strategic alliances. During the nine months ended September 30,
2011, we were able to obtain a total of $100,000 in convertible debentures as
well as a one-year working capital convertible debenture in the amount of
$63,500. We also received an advance of $100,000 related to the license
agreement discussed above as well as advances of $57,153 from related parties.
16
For the nine months ended September 30, 2011, net cash used in
operating activities was $206,637 compared to net cash used in operating
activities of $599,457 for the quarter ended September 30, 2010. In both years,
cash used in operating activities was used to fund our losses for the respective
periods.
For the nine months ended September 30, 2011, we disposed of
various assets and received proceeds of $39,662 recorded as cash from investing
activities.
Net cash flows from financing activities for the nine months
ended September 30, 2011 were $179,049, which resulted primarily from net
proceeds of $163,500 in connection with our January 2011 and June 2011
convertible debentures and net proceeds of $46,578 from related parties. Net
cash flows from financing activities for the nine months ended September 30,
2010 was $456,654 and which resulted primarily from net proceeds of $500,000 in
connection with our March 2010 private placement.
Key Financial Transactions
On January 18, 2011, we entered into an investment agreement
with Centurion for the provision of an equity funding facility of up to the
amount of $10 million. Concurrently, we issued to Centurion a senior secured
convertible debenture in the amount of $100,000.
On March 5, 2010, we closed a private placement consisting of
1,000,000 units of our securities at a price of $0.50 per unit, for aggregate
proceeds of $500,000. Each unit consists of: (i) one common share; (ii) one
non-transferable share purchase warrant entitling the holder thereof to purchase
one share of common stock for a period of 24 months commencing from the closing
of the private placement agreement, at an exercise price of $0.60 per common
share; and (iii) one non-transferable share purchase warrant entitling the
holder thereof to purchase one share of common stock for a period of 24 months
commencing from the closing of the private placement agreement, at an exercise
price of $0.70 per common share.
On March 5, 2010, we entered into a conversion agreement with
the lender of a bridge loan in the amount of $500,000, pursuant to which the
loan and all accrued interest was converted into equity securities. In full
repayment of the loan and all accrued interest, we issued to the lender
1,000,000 units, with each unit consisting of: (i) one common share; (ii) one
non-transferable share purchase warrant entitling the holder thereof to purchase
one share of common stock until February 16, 2012, at a price per share of
$0.60; and (iii) one non-transferable common stock purchase warrant entitling
the holder thereof to purchase one share of common stock until February 16,
2012, at a price per share of $0.70.
Going Concern
Our registered independent auditors have included an
explanatory paragraph in their report on our consolidated financial statements
regarding our ability to continue as a going concern. Our consolidated financial
statements contain additional note disclosures describing the circumstances that
lead to this disclosure by our registered independent auditors. The consolidated
financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
We expect our current funds will be sufficient only to enable
us to continue our operations as currently planned until approximately the first
quarter of 2012. We currently estimate that we will require an additional
$2,000,000 to $5,000,000 to fund our operations for the subsequent 12 to 24
month period.
However, until we can draw sufficient funds from our equity
funding facility, there are no assurances that we will be able to obtain funds
required for our continued operation. There can be no assurance that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. If we are not able to obtain the
additional financing on a timely basis, we will not be able to meet our other
obligations as they become due and we will be forced to scale down or perhaps
even cease the operation of our business. The issuance of additional equity
securities by us could result in a significant dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash
commitments.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.
17
CRITICAL ACCOUNTING POLICIES
Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make certain estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and the related disclosures of contingent assets and liabilities
as of the date of the financial statements and during the applicable periods. We
base these estimates on historical experience and on other factors that we
believe are reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions or conditions and
could have a material impact on our financial statements.
For detailed information on our critical accounting policies
and estimates, see our financial statements and notes thereto included in this
Report and in our Annual Report on Form 10-K, for the year ended December 31,
2010. There have been no material changes to our critical accounting policies
and estimates from those disclosed in our 10-K filed on April 15, 2011.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 8 to the Consolidated Financial Statements
entitled “Recent Accounting Pronouncements” included in this Annual Report for a
discussion of recent accounting pronouncements and their impact on our Financial
Statements.
18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our president (who
is acting as our principal executive officer) and our chief financial officer
(who is acting as our principal financial officer and principal accounting
officer) to allow for timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.
As of September 30, 2011, the end of the nine-month period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management, including our president and our chief
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.
As previously described in our Annual Report on form 10-K for
the year ended December 31, 2010, the Company identified certain material
weaknesses in the Company’s internal control over financial reporting. We plan
to take steps to enhance and improve the design of our internal control over
financial reporting. During the period covered by this quarterly report on Form
10-Q, we have not been able to remediate the material weaknesses. To remediate
such weaknesses, we intend to hire on an as-needed outsourced basis, a qualified
person to address the above stated issues; however, the remediation effort is
dependent upon our securing additional financing to cover the costs of
implementing the changes required. If we are unsuccessful in securing such
funds, remediation efforts may be materially adversely affected.
There have been no significant changes in our internal controls
over financial reporting that occurred during the quarter ended September 30,
2011, that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material active or pending legal proceedings
against our Company, nor of any proceedings that a governmental authority is
contemplating against us.
We know of no material proceedings to which any of our
Directors, officers, affiliates, owner of record or beneficially of more than 5
percent of our voting securities or security holders is an adverse party or has
a material interest adverse to our interest.
On January 10, 2011, we received a letter from counsel to Dr.
Elisha Orr, our former Chief Scientific Officer, demanding payment of
approximately $160,000 for unpaid management services fees, including payment
for a three-month notice period, and for the reimbursement of certain expenses.
In our response to Dr. Orr’s counsel, we have refuted the claims presented in
the letter primarily because Dr. Orr was dismissed for breach and therefore was
not entitled to three months’ notice, and because the Company fully reimbursed
Dr. Orr for all reimbursable expenses. Upon Dr. Orr’s return of certain Company
property in his possession, we intend to reconcile all amounts and pay Dr. Orr
the amounts that are owed to him, which include amounts related to unpaid
salaries and management service fees totaling $106,122 as of December 31, 2010,
and which have been recorded under accounts payable and accrued liabilities.
Item 1A. Risk Factors.
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
During the fiscal period ended September 30, 2011, except as
included in our Annual Report on Form 10-K or in our Current Reports on Form
8-K, we have not sold any equity securities not registered under the Securities
Act.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. (Removed and Reserved).
Not applicable.
Item
5. Other Information.
On November 15, 2011, we entered into a license agreement with
Biotech Investment Corp. ("Biotech") pursuant to which MabCure granted to
Biotech an exclusive worldwide license to certain MabCure hybridoma clones
producing antibodies against prostate cancer and certain MabCure developed
anti-PROSCA monoclonal antibodies against prostate cancer to conduct research,
development, and commercialization efforts in the field of diagnosis, imaging,
and therapy of prostate cancer. In consideration for the grant of the exclusive
license, Biotech agreed to (a) pay MabCure a one-time license fee in the amount
of $500,000, and a royalty on the sale or sublicensing of any products based on
or embodying the licensed technology in an amount equal to 12.5%; and (b) issue
to MabCure shares of Biotech amounting to 15% of the outstanding shares of
Biotech on a fully diluted basis.
As part of the licensing transaction with Biotech, on October
25, 2011, we entered into a $100,000 senior secured convertible debenture (the
“New Debenture”) with Biotech, the funds from which were used to pay off our
previous senior secured convertible debenture (the “Old Debenture”) which was
due October 18, 2011. The New Debenture matures on October 20, 2012 and bears
interest at the rate of 8% per annum. The New Debenture is convertible into
shares of the Company’s common stock at any time prior to maturity, at a price
equal to $0.10 per share. As part of the New Debenture agreement, we issued
350,000 shares to Biotech. The New Debenture includes a security interest on all
of our assets that shall be automatically released following the date that the
shares issuable upon conversion of the debenture can be resold without
restriction under Rule 144, and 15% of the aggregate volume accrues to the
debenture amount.
20
Item 6. Exhibits
* Filed herewith.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 21, 2011
MABCURE INC.
|
/s/ Dr. Amnon Gonenne
|
|
Dr. Amnon Gonenne
|
|
President, Chief Executive Officer and a member of the
Board of Directors
|
|
(who also performs as the Principal Executive Officer)
|
|
November 21, 2011
|
|
|
|
|
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/s/ Ron Kalfus
|
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Ron Kalfus
|
|
Chief Financial Officer
|
|
(who also performs as Principal Financial Officer and
Principal Accounting Officer)
|
|
November 21, 2011
|
22
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