FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2006
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _____________
COMMISSION FILE NUMBER: 033-05384
IR BIOSCIENCES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3301899
------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4021 N. 75th Street, Suite 201, Scottsdale, Arizona 85251
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (480) 922-3926
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether 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 twelve 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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
The number of shares outstanding of Registrant's common stock as of October 26,
2006 was 73,775,649.
Transitional Small Business Disclosure Format (check one): Yes No X
----- -----
IR BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet as of
September 30, 2006 (unaudited) ..............................F-1
Condensed Consolidated Statement of Losses for the
three and nine months ended September 30, 2006 and 2005,
and for the period of inception (October 30, 2002) to
September 30, 2006 (unaudited)...............................F-2
Condensed Consolidated Statement of Stockholders' Equity
(Deficit)from date of inception (October 30,
2002) to September 30, 2006 (unaudited)...............F-3 to F-6
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 2006 and 2005, and
for the period of inception (October 30, 2002) to
September 30, 2006 (unaudited) ......................F-7 to F-8
Notes to Consolidated Financial Statements ................F-9
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation ................................3
Item 3. Controls and Procedures .........................................11
PART II OTHER INFORMATION
Item 1. Legal Proceedings ...............................................12
Item 2. Unregistered Sale of Equity Securities
and Use of Proceeds ........................................12
Item 3. Defaults Upon Senior Securities .................................13
Item 4. Submission of Matters to a Vote of
Securities Holders ...........................................13
Item 5. Other Information ...............................................14
Item 6. Exhibits ........................................................15
Signatures .....................................................16
2
ITEM 1. FINANCIAL INFORMATION
IR BioSciences Holdings, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Balance Sheet as of September 30, 2006
(Unaudited)
September 30,
2006
------------
Assets
Current assets
Prepaid services and other current assets (note 1) $ 11,459
------------
Total current assets 11,459
Deposits and other assets (note 1) 2,260
Furniture and equipment, net of
accumulated depreciation of $9,747 20,928
------------
Total assets $ 34,647
============
Liabilities and Deficiency in Stockholders' Equity
Current liabilities
Cash overdraft $ 9,681
Accounts payable and accrued liabilities (note 3) 1,026,823
Notes payable (note 5) 829,750
------------
Total current liabilities 1,866,254
Commitments and Contingencies
Deficiency in Stockholders' Equity
Preferred stock, 0.001 par value:
10,000,000 shares authorized,
no shares issued and outstanding --
Common stock, $0.001 par value; 250,000,000 shares
authorized; 73,775,649 shares issued and outstanding
at September 30, 2006 (note 7) 73,773
Additional paid-in capital (note 7) 11,386,256
Deferred Compensation (691,939)
Deficit Accumulated during the Development Stage (12,599,697)
------------
Total deficiency in stockholders' equity (1,831,607)
------------
Total liabilities and deficiency in stockholders' equity $ 34,647
============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-1
IR BioSciences Holdings, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Losses
For the three months and nine months
ended September 30, 2006 and 2005,
And for the period of inception
(October 30, 2002) to September 30, 2006
(Unaudited)
For the For the
Three Three Cumulative from
Months Months For the Nine For the Nine Inception (October
Ended Sept Ended Sept Months Ended Months Ended 30, 2002) to
30, 2006 30, 2005 Sept 30, 2006 Sept 30, 2005 Sept 30, 2006
------------ ------------ ------------ ------------ ------------
Revenues $ -- $ -- $ -- $ -- $ --
Operating expenses:
Selling, general and
administrative expenses 598,045 507,445 1,761,161 1,939,800 9,885,462
Merger fees and costs -- -- -- -- 350,000
Financing cost -- 579,575 -- 2,072,831 90,000
Impairment of intangible
asset costs -- -- -- -- 6,393
------------ ------------ ------------ ------------ ------------
Total operating expenses 598,045 1,087,020 1,761,161 4,012,631 10,331,855
Operating loss (598,045) (1,087,020) (1,761,161) (4,012,631) (10,331,855)
Other expense:
Cost of penalty for late
registration of shares -- -- (438,601) -- 2,192,160
(Gain) loss from marking to
market - warrant portion of
penalty for late registration
of shares (76,750) -- (123,505) -- (378,198)
(Gain) loss from marking to
market - stock portion of
penalty for late registration
of shares (373,572) -- (445,673) -- (760,058)
Interest (income) expense 32,290 (5,925) 47,181 (4,607) 1,213,938
------------ ------------ ------------ ------------ ------------
Total other (income) expense (418,032) (5,925) (960,598) (4,607) 2,267,842
Income (loss) before income taxes (180,013) (1,081,095) (800,563) (4,008,024) (12,599,697)
Provision for income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (180,013) $ (1,081,095) $ (800,563) $ (4,008,024) $(12,599,697)
============ ============ ============ ============ ============
Net income (loss) per share -
basic and diluted $ (0.003) $ (0.02) $ (0.01) $ (0.06) $ (0.28)
============ ============ ============ ============ ============
Weighted average shares outstanding
basic and diluted 71,429,544 69,337,210 70,165,289 67,103,634 44,892,577
============ ============ ============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-2
IR Biosciences Holding, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
From date of inception (October 30, 2002) to September 30, 2006
(Unaudited)
Common Stock Additional
------------------------ Paid-In Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- ----------- ----------- ------------ ----------- -----------
Balance at October 30, 2002 (date of inception) -- $ -- $ -- -- $ -- $ --
Shares of common stock issued at $0.0006
per share to founders for license of
proprietary right in December 2002 16,612,276 16,612 (7,362) -- -- 9,250
Shares of common stock issued at $0.0006 per
share to founders for services rendered in
December 2002 1,405,310 1,405 (623) -- -- 782
Shares of common stock issued at $0.1671 per
share to consultants for services rendered
in December 2002 53,878 54 8,946 (9,000) -- --
Sale of common stock for cash at $0.1671 per
share in December 2002 185,578 186 30,815 -- -- 31,001
Net loss for the period from inception
(October 30, 2002) to December 31, 2002 -- -- -- -- (45,918) (45,918)
----------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 2002 (reflective of
stock splits) 18,257,042 18,257 31,776 (9,000) (45,918) (4,885)
Shares granted to consultants at $0.1392 per
share for services rendered in January 2003 98,776 99 13,651 -- -- 13,750
Sale of shares of common stock for cash at
$0.1517 per share in January 2003 329,552 330 49,670 -- -- 50,000
Shares granted to consultants at $0.1392 per
share for services rendered in March 2003 154,450 154 21,346 -- -- 21,500
Conversion of notes payable to common stock
at $0.1392 per share in April 2003 1,436,736 1,437 198,563 -- -- 200,000
Shares granted to consultants at $0.1413 per
share for services rendered in April 2003 14,368 14 2,016 -- -- 2,030
Sale of shares of common stock for cash at
$0.2784 per share in May 2003 17,960 18 4,982 -- -- 5,000
Sales of shares of common stock for cash at
$0.2784 per share in June 2003 35,918 36 9,964 -- -- 10,000
Conversion of notes payable to common stock
at $0.1392 per share in June 2003 718,368 718 99,282 -- -- 100,000
Beneficial conversion feature associated with
notes issued in June 2003 -- -- 60,560 -- -- 60,560
Amortization of deferred compensation -- -- -- 9,000 -- 9,000
Costs of GPN Merger in July 2003 2,368,130 2,368 (123,168) -- -- (120,799)
Value of warrants issued with extended notes
payable in October 2003 -- -- 189,937 -- -- 189,937
Value of Company warrants issued in
conjunction with fourth quarter notes
payable issued October through December 2003 -- -- 207,457 -- -- 207,457
Value of warrants contributed by founders in
conjunction with fourth quarter notes payable
issued October through December 2003 -- -- 183,543 -- -- 183,543
Value of warrants issued for services in
October through December 2003 -- -- 85,861 -- -- 85,861
Net loss for the year ended
December 31, 2003 -- -- -- -- (1,856,702) (1,856,702)
----------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 2003 23,431,300 $ 23,431 $ 1,035,441 -- $(1,902,620) $ (843,748)
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-3
IR Biosciences Holding, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
From date of inception (October 30, 2002) to September 30, 2006
(Unaudited)
Common Stock Additional
------------------------ Paid-In Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- ----------- ----------- ------------ ----------- -----------
Shares granted at $1.00 per share pursuant to
the Senior Note Agreement in January 2004 600,000 600 599,400 (600,000) -- --
Shares issued at $1.00 per share to a
consultant for services rendered in
January 2004 800,000 800 799,200 (800,000) -- --
Shares issued to a consultant at $0.62
per share for services rendered in
February 2004 40,000 40 24,760 (24,800) -- --
Shares issued to a consultant at $0.40 per
share for services rendered in March 2004 1,051,600 1,051 419,589 (420,640) -- --
Shares issued to a consultant at $0.50 per
share for services rendered in March 2004 500,000 500 249,500 (250,000) -- --
Shares sold for cash at $0.15 per share
in March, 2004 8,000 8 1,192 -- -- 1,200
Shares issued at $0.50 per share to
consultants for services rendered in
March 2004 20,000 20 9,980 -- -- 10,000
Shares issued to a consultant at $0.40 per
share for services rendered in March 2004 2,000 2 798 -- -- 800
Shares issued to consultants at $0.32 per
share for services rendered in March 2004 91,600 92 29,220 -- -- 29,312
Shares to be issued to consultant at $0.41 per
share in April 2004 for services to be
rendered through March 2005 -- -- -- (82,000) -- (82,000)
Shares granted pursuant to the New Senior Note
Agreement in April 2004 600,000 600 149,400 (150,000) -- --
Shares issued to officer at $0.32 per share for
services rendered in April 2004 200,000 200 63,800 -- -- 64,000
Conversion of note payable to common stock at
$0.10 per share in May 2004 350,000 350 34,650 -- -- 35,000
Beneficial Conversion Feature associated with
note payable in May 2004 -- -- 35,000 -- -- 35,000
Issuance of warrants to officers and founder
for services rendered in May 2004 -- -- 269,208 -- -- 269,208
Shares to a consultant at $0.20 per share as a
due diligence fee in May 2004 125,000 125 24,875 -- -- 25,000
Shares issued to a consultant at $1.00 per
share for services to be rendered over
twelve months beginning May 2004 500,000 500 499,500 (500,000) -- --
Beneficial Conversion Feature associated with
notes payable issued in June 2004 -- -- 3,000 -- -- 3,000
Issuance of warrants to note holders in April,
May, and June 2004 -- -- 17,915 -- -- 17,915
Issuance of warrants to employees and
consultants for services rendered in
April through June 2004 -- -- 8,318 -- -- 8,318
Shares issued in July to a consultant at
$0.10 for services to be rendered through
July 2005 250,000 250 24,750 (25,000) -- --
Shares issued to a consultant in July and
September at $0.41 per share for services
to be rendered through April 2005 200,000 200 81,800 -- -- 82,000
Shares issued to a consultant in September at
$0.12 to $0.22 for services rendered
through September 2004 127,276 127 16,782 -- -- 16,909
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-4
IR Biosciences Holding, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
From date of inception (October 30, 2002) to September 30, 2006
(Unaudited)
Common Stock Additional
------------------------ Paid-In Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- ----------- ----------- ------------ ----------- -----------
Shares issued in July to September 2004 as
interest on note payable 300,000 300 35,700 -- -- 36,000
Issuance of warrants with notes payable in
July and August 2004 -- -- 72,252 -- -- 72,252
Accrued deferred compensation in August 2004
to a consultant for 100,000 shares at $0.10
per share, committed but unissued -- -- -- (10,000) -- (10,000)
Shares issued in August 2004 at $0.14 to a
consultant for services to be performed
through October 2004 100,000 100 13,900 (14,000) -- --
Shares issued in August 2004 at $0.125 per
share for conversion of $30,000 demand loan 240,000 240 29,760 -- -- 30,000
Shares issued in August 2004 at $0.16 per
share to a consultant for services provided 125,000 125 19,875 -- -- 20,000
Shares issued in October 2004 to employees at
$0.16 to $0.25 per share 48,804 49 8,335 -- -- 8,384
Commitment to issue 100,000 shares of stock to
a consultant at $0.23 per share for services
to be provided through September 2005 -- -- -- (23,000) -- (23,000)
Sale of stock for cash in October at $0.125 per
share, net of costs of $298,155 18,160,000 18,160 1,345,763 -- -- 1,363,923
Value of warrants issued with sale of common
stock in October, net of costs -- -- 607,922 -- -- 607,922
Issuance of warrant to officer in October, 2004 -- -- 112,697 -- -- 112,697
Issuance of stock to investment bankers in
October 2004 for commissions earned 4,900,000 4,900 (4,900) -- -- --
Conversion of accounts payable to stock in
October at $0.125 per share 1,257,746 1,258 107,382 -- -- 108,640
Value of warrants issued with accounts
payable conversions -- -- 48,579 -- -- 48,579
Conversion of demand loan to stock in October
at $0.11 per share 93,300 93 10,170 -- -- 10,263
Forgiveness of notes payable in October 2004 -- -- 36,785 -- -- 36,785
Issuance of stock to officer and director at
$0.125 per share in October for conversion
of liability 1,440,000 1,440 122,493 -- -- 123,933
Value of warrants issued with officer and
director conversion of liabilities -- -- 56,067 -- -- 56,047
Conversion of debt and accrued interest to
common stock at $0.075 to $0.125 per share 6,703,151 6,703 417,514 -- -- 424,217
Value of warrants issued with conversion
of debt -- -- 191,111 -- -- 191,111
Conversion of note payable in October into
common stock at $0.075 per share 67,613 68 4,932 -- -- 5,000
Issuance of warrants to note holders in
October 2004 -- -- 112,562 -- -- 112,562
Value of shares issued to CFO as compensation 100,000 100 34,900 -- -- 35,000
Value of warrants issued to members of
advisory committees in November
and December -- -- 16,348 -- -- 16,348
Beneficial conversion feature associated with
notes payable -- -- 124,709 -- -- 124,709
Shares issued in error to be cancelled (9,002) (9) 9 -- -- --
Amortization of deferred compensation through
December 31, 2004 -- -- -- 2,729,454 -- 2,729,454
Loss for the year ended
December 31, 2004 -- -- -- -- (5,305,407) (5,305,407)
------------ ----------- ----------- ------------ ----------- -----------
Balance at December 31, 2004 62,423,388 62,423 7,922,943 (169,986) (7,208,027) 607,353
------------ ----------- ----------- ------------ ----------- -----------
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-5
IR Biosciences Holding, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
From date of inception (October 30, 2002) to September 30, 2006
(Unaudited)
Common Stock Additional
------------------------ Paid-In Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- ----------- ----------- ------------ ----------- -----------
Sale of shares of common stock for cash at
$0.20 per share in Mar 2005 for warrant
exercise, net of costs 6,600,778 6,600 1,184,256 -- -- 1,190,856
Value of warrants issued to members
of advisory committees in March 2005 -- -- 137,049 -- -- 137,049
Deferred compensation in Feb 2005 to a
consultant for 50,000 shares of stock at
$0.65 per share. -- -- -- (32,500) -- (32,500)
Warrants exercised at $0.05 per share
in June 2003 80,000 80 3,920 -- -- 4,000
Value of warrants issued to members of
advisory committee in June 2005 -- -- 70,781 -- -- 70,781
Value of warrants issued to investors and
service providers in June 2005 -- -- 32,991 -- -- 32,991
Issuance of 232,153 shares of common
stock in July 2005 for conversion of
notes payable 232,153 232 64,771 -- -- 65,003
Issuance of 100,000 shares of common stock
in August 2005 to a consultant for
services provided 100,000 100 9,900 -- -- 10,000
Value of warrants issued to advisory
committee in September 2005 for services -- -- 20,491 -- -- 20,491
Amortization of deferred comp for the
twelve months ended December, 2005 -- -- -- 199,726 -- 199,726
Value of warrants issued in October
and December 2005 to investors and
service providers -- -- 18,399 -- -- 18,399
Loss for the year ended
December 31, 2005 -- -- -- -- (4,591,107) (4,591,107)
------------ ----------- ----------- ------------ ----------- -----------
Balance at December 31, 2005 69,436,319 69,435 9,465,501 (2,760) (11,799,134) (2,266,958)
------------ ----------- ----------- ------------ ----------- -----------
Issuance of 100,000 shares of common stock
in March 2006 to an officer,
previously accrued 100,000 100 41,316 -- -- 41,416
Value of warrants issued to advisory
committee in March 2006 for services -- -- 8,399 -- -- 8,399
Amortization of deferred comp for the
three months ended March 31, 2006 -- -- -- 2,760 -- 2,760
Loss for the three months ended
March 31, 2006 -- -- -- -- (1,162,506) (1,162,506)
------------ ----------- ----------- ------------ ----------- -----------
Balance at March 31, 2006 69,536,319 69,535 9,515,216 -- (12,961,640) (3,376,889)
------------ ----------- ----------- ------------ ----------- -----------
Issuance of common stock in May 2006
To a consultant for services provided 34,464 34 16,164 -- -- 16,198
Conversion of accrued interest to common
Stock at $0.125 per share in May 2006 19,288 19 2,392 -- -- 2,411
Conversion of accrued interest to common
Stock at $0.125 per share in May 2006 16,324 16 2,025 -- -- 2,041
Conversion of accrued interest to common
Stock at $0.10 per share in May 2006 13,456 13 1,342 -- -- 1,355
Common stock issued pursuant to the exercise
Of warrants at $0.09 per share in June 2006 5,000 5 445 -- -- 450
Value of warrants issued to members of
Advisory committee in June 2006 -- -- 8,819 -- -- 8,819
Income for three months ended June 30, 2006 -- -- -- -- 541,956 541,956
------------ ----------- ----------- ------------ ----------- -----------
Balance at June 30, 2006 69,624,851 69,622 9,546,403 -- (12,419,684) (2,803,659)
------------ ----------- ----------- ------------ ----------- -----------
Issuance of penalty Common Stock,
previously accrued 4,150,798 4,151 867,517 -- -- 871,668
Issuance of penalty warrants, previously
accrued -- -- 182,236 -- -- 182,236
Value of warrants issued to officers -- -- 50,874 -- -- 50,874
Value of options issued to officer -- -- 735,731 (735,731) -- --
Amortization of options to Chief Executive
Officer -- -- -- 43,792 -- 43,792
Value of warrants issued to members of
Advisory committee in September 2006 -- -- 3,495 -- -- 3,495
Loss for the three months ended
September 30, 2006 -- -- -- -- (180,013) (180,013)
------------ ----------- ----------- ------------ ----------- -----------
Balance at September 30, 2006 73,775,649 73,773 11,386,256 (691,939) (12,599,697) (1,831,607)
------------ ----------- ----------- ------------ ----------- -----------
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-6
IR BioSciences Holdings, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows For the nine
months ended September 30, 2006 and 2005,
and for the period of inception (October 30, 2002)
to September 30, 2006
(Unaudited)
Cumulative from
Inception
For the Nine For the Nine (October 30,
Months Ended Months Ended 2002) to Sept 30,
Sept 30, 2006 Sept 30, 2005 2006
---------------- --------------- -------------------
Cash flows from operating activities:
Net loss $ (800,563) $ (4,008,024) $ (12,599,697)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-cash compensation 144,087 462,773 4,064,940
Cost of penalty for late registration of shares -
stock portion (360,197) -- 1,631,726
Cost of penalty for late registration of shares -
warrant portion (78,404) -- 560,434
(Gain) loss from marking to market - stock portion
of penalty for late registration of shares (445,673) -- (760,058)
(Gain) loss from marking to market - warrant portion
of penalty for late registration of shares (123,505) -- (378,198)
Legal fees for note payable 20,125 -- 20,125
Placement fees for note payable 65,000 -- 65,000
Impairment of intangible asset -- -- 6,393
Interest expense -- 4,007 156,407
Amortization of discount on notes payable -- -- 1,006,935
Depreciation and amortization 5,885 2,401 35,103
Changes in operating assets and liabilities:
Prepaid services and other assets 28,048 (9,000) 31,282
Accounts payable and accrued expenses 571,918 2,064,910 1,227,871
----------------- ----------------- ------------------
Net cash used in operating activities (973,279) (1,482,933) (4,931,737)
Cash flows from investing activities:
Acquisition of property and equipment (22,587) -- (30,674)
----------------- ----------------- ------------------
Net cash used in investing activities (22,587) -- (30,674)
Cash flows from financing activities:
Proceeds from notes payable and cash advances 719,875 -- 1,953,375
Principal payments on notes payable and demand loans -- (14,997) (264,997)
Shares of stock sold for cash -- 1,190,857 3,259,902
Proceeds from exercise of warrant 450 4,000 4,450
Officer repayment of amounts paid on his behalf -- -- 19,880
Cash paid on behalf of officer -- -- (19,880)
----------------- ----------------- ------------------
Net cash provided by financing activities 720,325 1,179,860 4,952,730
Net increase (decrease) in cash and cash equivalents (275,541) (303,703) (9,681)
Cash and cash equivalents at beginning of period 265,860 970,114 --
----------------- ----------------- ------------------
Cash and cash equivalents at end of period $ (9,681) $ 667,041 $ (9,681)
================= ================= ==================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-7
IR BioSciences Holdings, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows For the nine
months ended September 30, 2006 and 2005,
and for the period of inception (October 30, 2002)
to September 30, 2006
(Unaudited)
Cumulative from
Inception
For the Nine For the Nine (October 30,
Months Ended Months Ended 2002) to Sept 30,
Sept 30,2006 Sept 30,2005 2006
------------ ------------ ------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,027 $ 1,486 $ 44,580
============ ============ ============
Taxes $ -- $ -- $ --
============ ============ ============
Acquisition and capital restructure:
Assets acquired -- -- --
Liabilities assumed -- -- (120,799)
Common stock retained -- -- (2,369)
Adjustment to additional paid-in capital -- -- 123,168
Organization costs -- -- 350,000
------------ ------------ ------------
Total consideration paid $ -- $ -- $ 350,000
============ ============ ============
Common stock issued in exchange for proprietary rights $ -- $ -- $ 9,250
============ ============ ============
Common stock issued in exchange for services $ 16,198 $ 10,000 $ 2,941,484
============ ============ ============
Common stock issued in exchange for previously incurred
debt and accrued interest $ 5,807 $ 65,003 $ 1,066,401
============ ============ ============
Common stock issued in exchange as interest $ -- $ -- $ 36,000
============ ============ ============
Amortization of beneficial conversion feature $ -- $ -- $ 223,269
============ ============ ============
Stock options and warrants issued in exchange for
services rendered $ 786,605 $ 261,312 $ 1,558,986
============ ============ ============
Debt and accrued interest forgiveness from note holders $ -- $ -- $ 36,785
============ ============ ============
Common stock issued in satisfaction of amounts due
to an Officer and a Director $ -- $ -- $ 180,000
============ ============ ============
Common stock issued in satisfaction of accounts payable $ -- $ -- $ 157,219
============ ============ ============
Deferred compensation to a consultant accrued
in March 2005 $ -- $ -- $ 2,630,761
============ ============ ============
Amortization of deferred compensation $ 46,552 $ 187,627 $ 246,278
============ ============ ============
Fair Value of common stock and warrants payable in
connection with late filing of registration statement $ 1,053,904 $ 2,072,831 $ 5,757,496
============ ============ ============
Gaining from marking to market - stock portion of
penalty for late registration of shares $ (805,870) $ -- $ (1,124,255)
============ ============ ============
Gaining from marking to market - warrant portion of
penalty for late registration of shares $ (201,910) $ -- $ (456,603)
============ ============ ============
Impairment of intangible asset $ -- $ -- $ 6,393
============ ============ ============
Issuance of stock to Officer, previously accrued $ 41,416 $ -- $ 41,416
============ ============ ============
Value of warrants issued to members of advisory boards $ 20,714 $ -- $ 20,714
============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-8
IR BIOSCIENCES HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2006
(Unaudited)
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB, and therefore, do
not include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States of America for a complete set
of financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
results from operations for the three-month and nine-month periods ended
September 30, 2006 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2006. The unaudited condensed
consolidated financial statements should be read in conjunction with the
December 31, 2005 financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB filed with the Securities and Exchange
Commission on March 28, 2006 and Form 10-KSB/A filed with the Securities and
Exchange Commission on March 31, 2006.
Business and basis of presentation
----------------------------------
IR BioSciences Holdings, Inc. (the "Company," "we," or "us") formerly GPN
Network, Inc. ("GPN") is currently a development stage company under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 7. The
Company, which was incorporated under the laws of the State of Delaware on
October 30, 2002, is a development-stage biopharmaceutical company. Through our
wholly owned subsidiary, ImmuneRegen BioSciences, Inc., we are engaged in the
research and development of potential drugs. Our goal is to develop therapeutics
to be used for the protection of the body from exposure to harmful agents such
as toxic chemicals and radiation, as well as, biological agents, including
influenza and anthrax. Our research and development efforts are at a very early
stage and Radilex and Viprovex have only undergone pre-clinical testing in mice.
From its inception through the date of these financial statements, the Company
has recognized no revenues and has incurred significant operating expenses.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, ImmuneRegen BioSciences, Inc. Significant
inter-company transactions have been eliminated in consolidation.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
F-9
Stock based compensation
------------------------
Effective January 1, 2006, the Company adopted SFAS No. 123 (revised),
"Share-Based Payment" (SFAS 123(R)) utilizing the modified prospective approach.
Prior to the adoption of SFAS 123(R) we accounted for stock option grant in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees"
(the intrinsic value method), and accordingly, recognized compensation expense
for stock option grants.
Under the modified prospective approach, SFAS 123(R) applies to new awards and
to awards that were outstanding on January 1, 2006 that are subsequently
modified, repurchased or cancelled. Under the modified prospective approach,
compensation cost recognized in the nine months of fiscal 2006 includes
compensation cost for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123, and compensation cost for
all share-based payments granted subsequent to January 1, 2006 based on the
grant-date fair value estimated in accordance with the provisions of SFAS
123(R). Prior periods were not restated to reflect the impact of adopting the
new standard.
A summary of option activity under the Plan as of September 30, 2006, and
changes during the period ended are presented below:
Weighted
Average
Exercise
Options Price
--------- ---------
Outstanding at December 31, 2005 317,242 $ 5.30
Issued 5,396,970 $ 0.22
Exercised -- --
Forfeited or expired -- --
--------- ---------
Outstanding at September 30, 2006 5,714,212 $ 0.51
Non-vested at September 30, 2006 5,396,970 $ 0.22
Exercisable at September 30, 2006 317,242 $ 5.30
Aggregate intrinsic value of options outstanding and exercisable at September
30, 2006 was $0. Aggregate intrinsic value represents the difference between the
Company's closing stock price on the last trading day of the fiscal period,
which was $0.22 as of September 29, 2006, and the exercise price multiplied by
the number of options outstanding. As of September 30, 2006, total unrecognized
stock-based compensation expense related to stock options was $691,939. The
total fair value of options vested during the three months ended September 30,
2006 was $0.
Interim financial statements
----------------------------
The accompanying balance sheet as of September 30, 2006, the statements of
operations for the three months ended September 30, 2006 and 2005, and for the
period of inception (October 30, 2002) to September 30, 2006, and the statements
of cash flows for three and nine months ended September 30, 2006 and 2005, and
from the period of inception (October 30, 2002) to September 30, 2006 are
unaudited. These unaudited interim financial statements include all adjustments
(consisting of normal recurring accruals), which, in the opinion of management,
are necessary for a fair presentation of the results of operations for the
periods presented. Interim results are not necessarily indicative of the results
to be expected for a full year.
Use of estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 reported periods. Actual results could materially differ from those
estimates.
F-10
Long-lived assets
-----------------
The Company accounts for its long-lived assets under the provision of Statements
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The Company's
long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Events relating to recoverability may include significant
unfavorable changes in business conditions, recurring losses, or a forecasted
Inability to achieve break-even operating results over an extended period. The
Company evaluates the recoverability of long-lived assets based upon forecasted
undiscounted cash flows. Should an impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset.
Prepaid services and other current assets
------------------------------------------
Prepaid services and other current assets at September 30, 2006 consist of the
following:
Prepaid interest $ 9,452
Prepaid insurance 2,007
-------
$11,459
=======
Deposits and other assets
-------------------------
Deposits and other assets consist of a deposit on leased office space in the
amount of $2,260.
Furniture and equipment
-----------------------
Furniture and equipment are valued at cost. Depreciation and amortization are
provided over the estimated useful lives up to seven years using the
straight-line method. The estimated service lives of property and equipment are
as follows:
Computer equipment 3 years
Laboratory equipment 3 years
Furniture 7 years
The amounts depreciated for the three months ended September 30, 2006 and 2005
were $2,003 and $967, respectively. Depreciation expense for the nine months
ended September 30, 2006 and 2005 was $5,885 and $1,705, respectively. The
amount depreciated from the date of inception (October 30, 2002) through
September 30, 2006 was $9,747.
F-11
NOTE 2 - RELATED PARTY TRANSACTIONS
Cash Advances
-------------
In March 2006, the Company received a cash advance from a director in the amount
of $50,000. This advance bears interest at the rate of 12% per annum. The
Company converted this advance to a note payable during the quarter ending
September 30, 2006.
In July 2006, the Company received a cash advance from a director in the amount
of $25,000. This advance bears interest at the rate of 12% per annum. The
Company repaid this cash advance on August 30, 2006 plus accrued interest in the
amount of $370.
Credit Cards
-----------
The Company has a line of credit with Bank of America for $25,000. Our Chief
Executive Officer Michael Wilhelm co-signs this line of credit. At month-end
September 30, 2006 the Company had an outstanding balance on the credit card of
$20,587
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
-------------------------------------------------
Accounts payable and accrued liabilities consisted of the following at September
30, 2006:
Accounts payable and accrued liabilities $ 923,882
Accounts payable - shell company 34,926
Interest payable 44,228
Credit cards 20,587
State income tax payable 3,200
--------
$ 1,026,823
===========
F-12
NOTE 4 - CASH ADVANCES
In March 2006, the Company received a cash advance from a director in the amount
of $50,000. This advance bears interest at the rate of 12% per annum. The
Company converted this advance to a note payable in August 2006.
In June of 2006, the Company received a cash advance from an investor in the
amount of $20,000. This advance bears interest at the rate of 12% per annum. The
Company converted this advance to a note payable in August 2006.
In July 2006, the Company received a cash advance from a director in the amount
Of $25,000. This advance bears interest at the rate of 12% per annum. The
Company repaid this cash advance on August 30, 2006 plus accrued interest in the
Amount of $370.
NOTE 5 - NOTES PAYABLE
On April 13, 2006, the Company entered into an unsecured
Senior Promissory Note in the amount of $500,000. Following
the payment of commissions and expenses, the Company
received net proceeds of approximately $439,875. The
outstanding principal amount of the Note, plus interest at
the rate of 12% per annum, is payable in cash on or before
the earlier of (i) April 12, 2007 or (ii) the date upon
which the Company sells any of its equity or debt securities
in a financing transaction, or a series of financings, with
gross proceeds equal to $1,000,000; provided, however, that
a subsequent financing transaction will not include (x)
issuances of common stock to employees, (y) the exercise of
any options to purchase shares of common stock that are
outstanding as of the date hereof, or (z) the grant,
issuance or exercise of options or common stock under the
Company's stock, option, deferred stock and restricted stock
plan for the purpose of satisfying the Company's payables.
In an event of default, as defined in the note, the note
shall become immediately due and payable, and during the
continuation of an event of default, the Company must pay
interest on the note in an amount equal to 2% per month
until the event of default is cured or waived. During the
three months ended September 30, 2006, the Company accrued
interest in the amount of $15,333 on this note. $500,000
In June 2006, the Company issued a note payable in the
amount of $9,750 in exchange for consulting services. This
note bears interest at the rate of 7% per annum. During the
three months ended September 30, 2006, the Company accrued
interest in the amount of $172 on this note. 9,750
On July 27, 2006, the Company entered into an unsecured
Senior Promissory Note in the amount of $250,000. Following
the payment of commissions and expenses, the Company
received net proceeds of approximately $210,000. The
outstanding principal amount of the Note, plus interest at
the rate of 12% per annum, is payable in cash on or before
the earlier of (i) July 27, 2007 or (ii) the date upon which
the Company sells any of its equity or debt securities in a
financing transaction, or a series of financings, with gross
proceeds equal to $1,000,000; provided, however, that a
subsequent financing transaction will not include (x)
issuances of common stock to employees, (y) the exercise of
any options to purchase shares of common stock that are
outstanding as of the date hereof, or (z) the grant,
issuance or exercise of options or common stock under the
Company's stock, option, deferred stock and restricted stock
plan for the purpose of satisfying the Company's payables.
In an event of a default, as defined in the note, the note
shall become immediately due and payable, and during the
continuation of an event of default, the Company must pay
interest on the note in an amount equal to 2% per month
until the event of default is cured or waived. During the
three months ended September 30, 2006 the Company accrued
interest in the amount of $10,833 on this note. 250,000
In August 2006, the cash advance in the amount of $20,000
the Company received from an investor was converted into a
promissory note payable. This note bears interest at the
rate of 12% per annum. During the three months and nine
months ended September 30, 2006, the Company accrued
interest in the amount of $605 and $677, respectively, on
this note. 20,000
In August 2006, the cash advance in the amount of $50,000
the Company received from a director was converted into a
promissory note payable. This note bears interest at the
rate of 12% per annum. During the three months and nine
months ended September 30, 2006, the Company accrued
interest in the amount of $1,512 and $3,172, respectively,
on this note. 50,000
Total notes payable as of September 30, 2006 $ 829,750
---------
F-13
NOTE 6 - PENALTY FOR LATE REGISTRATION OF SHARES
During the three months ended March 31, 2006, the Company accrued the issuance
of 1,383,600 shares of common stock and warrants to purchase an additional
544,800 shares of common stock pursuant to a penalty calculation with regard to
the late registration of shares sold in a private placement in October 2004. The
Company charged to operations $456,588 and $105,339, respectively, during the
three months ended March 31, 2006 representing the fair value of these shares
and warrants, respectively. During the three months ended March 31, 2006, the
Company also marked to market the value of the 5,242,307 shares and warrants to
purchase an additional 2,064,187 shares which were outstanding at December 31,
2005. This resulted in a charged to operations of $52,423 and a credit to
operations of $6,868 for these previously outstanding shares and warrants,
respectively. At March 31, 2006, the Company had obligations to issue an
aggregate of 6,625,907 shares and warrants to purchase an additional 2,608,987
shares, respectively, and had charged to operations the amount of $555,973 for
the cost of issuance of shares and warrants. The Company also charged to
operations the amount of $52,423 as a loss from marking to market the
outstanding stock portion of the penalty, and recognized a gain in the amount of
$6,868 representing marking to market the outstanding warrant portion of the
penalty.
In August 2006, the Company reached an agreement with the investors in the
private placement of October 2004 which limits the number of warrants and shares
which the Company is obligated to issue pursuant to the penalty calculation to
an aggregate of 18% of the number of original number of shares and warrants
issued in the October 2004 private placement. This agreement limits the number
of shares and warrants issuable pursuant to the penalty calculation to an
aggregate of 4,150,798 shares and warrants to purchase an additional 1,634,400
shares, respectively. This results in a decrease in the number of share issuable
2,475,107 (with a fair value of $816,785) and a decrease in the number of
warrant shares of 974,587 (with a fair value of $177,789). This results in a net
realized gain of $994,574 during the three months ended June 30, 2006. During
the three months ended June 30, 2006, the Company also marked to market the
value of the previously issued penalty shares and warrants, which resulted in
realized gains of $72,101 and $46,755, respectively.
In August 2006, the Company issued 4,150,798 shares and warrants to purchase
1,634,400 shares and relieved accrued liabilities in the aggregate amount of
$1,504,226. During the three months ended September 30, 2006, the Company valued
the 4,150,798 shares (with a fair value of $871,668) and 1,634,400 warrants
(with a fair value $182,236) on the date the shares were issued. This resulted
in a net realized gain of $450,323.
F-14
NOTE 7 - EQUITY
Common stock
------------
In March 2006, the Company issued 100,000 shares of common stock to its Chief
Financial Officer. These shares had been earned, and were accrued, during the
year ended December 31, 2005.
In May 2006, the Company issued 34,464 shares of S-8 common stock at $0.125 per
share to a consultant for services provided for business development.
In May 2006, the Company issued 19,288 shares of common stock at $0.125 per
share to an investor for the conversion of accrued interest.
In May 2006, the Company issued 16,324 shares of common stock at $0.125 per
share to an investor for the conversion of accrued interest.
In May 2006, the Company issued 13,456 shares of common stock at $0.10 per share
to an investor for the conversion of accrued interest.
In June 2006, the Company issued 5,000 shares of common stock at $0.09 per share
for the exercise of warrants by an investor.
In August 2006, the Company issued 4,150,798 shares of common stock for the
penalty for late registration of shares, which were previously accrued.
Warrants
--------
During the three months ended March 31, 2006, the Company issued warrants to
purchase 61,500 shares of common stock at prices ranging from $0.125 to $1.00 to
consultants for services performed. The Company valued these warrants using the
Black-Scholes valuation model, and charged the amount of $8,399 to operations
during the three months ended March 31, 2006.
During the three months ended June 30, 2006, the Company issued warrants to
purchase 84,653 shares of common stock at prices ranging from $0.20 to $1.00 to
consultants for services performed. The Company valued these warrants using the
Black-Scholes valuation model, and charged the amount of $8,819 to operations
during the three months ended June 30, 2006.
Also during the three months ended June 30, 2006, an investor exercised a
warrant to purchase 5,000 shares of the Company's common stock at a price of
$0.09 per share.
During the three months ended September 30, 2006, the Company issued warrants to
purchase 46,000 shares of common stock at prices ranging from $0.20 to $1.00 to
consultants for services performed. The Company valued these warrants using the
Black-Scholes valuation model, and charged the amount of $3,495 to operations
during the three months ended September 30, 2006.
During the three months ended September 30, 2006, the Company issued warrants to
purchase 300,000 shares of common stock at $0.25 to our Chief Executive Officer,
Michael Wilhelm. The Company valued these warrants using the Black-Scholes
valuation model, and charged the amount of $41,278 to operations during the
three months ended September 30, 2006.
Also, during the three months ended September 30, 2006, the Company issued
warrants to purchase 62,500 shares of common stock at $0.158 to our Chief
Financial Officer, John Fermanis per the terms of his employment agreement. The
Company valued these warrants using the Black-Scholes valuation model, and
charged the amount of $9,596 to operations during the three months ended
September 30, 2006.
During the three months ended September 30, 2006, the Company issued warrants to
purchase an additional 1,634,400 shares of common stock in satisfaction of the
penalty due to investors for the late registration of shares. The Company had
accrued the value of these warrants using the Black-Scholes valuation model, and
relieved the accrued liability of $258,986.
The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
non-employees of the Company. These warrants were granted in lieu of cash
compensation for services performed or financing expenses and in connection with
placement of convertible debentures.
Warrants Outstanding Warrants Exercisable
----------------------------------- --------------------------------------
Weighted Weighted
Average Weighted Average
Remaining Average Remaining
Exercise Number Contractual Exercise Number Contractual
Prices Outstanding Life (years) Price Exercisable Life (years)
-------- ----------- ------------ --------- ----------- ------------
$ .05-.10 514,780 2.63 $.05-.10 514,780 2.63
.125-.22 1,031,319 2.72 .125-.22 1,031,319 2.72
.25-.56 11,235,805 2.85 .25-.56 11,235,805 2.85
1.00 933,811 1.43 1.00 933,811 1.43
2.00 85,203 2.57 2.00 85,203 2.57
----------- ------------ ----------- -----------
13,800,918 2.73 13,800,918 2.73
=========== ============ =========== ===========
Transactions involving warrants are summarized as follows:
Number of Shares Weighted Average
(post-split) Price Per Share
(post-split)
--------------- ------------------
Outstanding at December 31, 2005 11,616,865 .46
Granted 61,500 .67
Exercised -- --
Cancelled or expired -- --
---------- ---------
Outstanding at March 31, 2006 11,678,365 .46
Granted 84,653 .67
Exercised (5,000) .09
Canceled or expired -- --
---------- --------
Outstanding at June 30, 2006 11,758,018 .46
Granted 2,042,900 .46
Exercised -- --
Cancelled or expired -- --
---------- --------
Outstanding at September 30, 2006 13,800,918 .46
========== ========
F-15
The estimated value of the compensatory warrants granted to non-employees in
exchange for services and financing expenses was determined using the
Black-Scholes pricing model and the following assumptions:
2006 2005
---- ----
Significant assumptions (weighted-average):
Risk-free interest rate at grant date 4.5% to 4.75% 3.75%
Expected stock price volatility 83% to 73% 93% to 179%
Expected dividend payout -- --
Expected option life-years (a) 3 to 5 3 to 5
Options
-------
In July 2006, the Company issued options to purchase 1,893,970 shares of common
stock to our Chief Executive Officer. The options vest 50% after ninety days of
continued employment and the balance in equal monthly installments for 12 months
thereafter.
In September 2006, the Company issued options to purchase 3,500,000 shares of
common stock to our Chief Executive Officer. The options vest 50% after thirty
days of continued employment with the balance in equal monthly installments for
one year thereafter.
The Company valued these options using the Black-Scholes valuation model, and
charged the fair value of $735,731 to deferred compensation at September 30,
2006. This amount will be charged to operations as the options become vested.
The Company charged to operations the amount of $43,792 for the value of the
options during the three months ended September 30, 2006.
The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to employees
of the Company under a non-qualified employee stock option plan.
Options Outstanding Options Exercisable
----------------------------------- --------------------------------------
Weighted Weighted
Average Weighted Average
Remaining Average Remaining
Exercise Number Contractual Exercise Number Contractual
Prices Outstanding Life (years) Price Exercisable Life (years)
-------- ----------- ------------ --------- ----------- ------------
$25.00 63,212 3.75 $25.00 63,212 3.75
0.231 1,896,970 4.79 0.231 -- --
0.22 3,500,000 4.95 0.22 -- --
0.31 1,000 4.45 0.31 1,000 4.45
0.33 103,030 4.11 0.33 103,030 4.11
0.44 150,000 3.84 0.44 150,000 3.84
------- -------
5,714,212 317,242
======= =======
Options not vested are not exercisable.
Transactions involving stock options issued to employees are summarized as
follows:
Weighted Average
Number of Shares Price Per Share
---------------- ----------------
Outstanding at December 31, 2005 317,242 $ 5.30
Granted -- --
Exercised -- --
Expired -- --
---------------- ----------------
Outstanding at March 31, 2006 317,242 $ 5.30
Granted -- --
Exercise -- --
Expired -- --
---------------- ----------------
Outstanding at June 30, 2006 317,242 $ 5.30
Granted 5,396,970 0.22
Exercise -- --
Expired -- --
--------------- ----------------
Outstanding at September 30, 2006 5,714,212 $ 0.51
================ ================
F-16
Shares and warrants issuable due to late filing of registration statement
-------------------------------------------------------------------------
During the three months ended March 31, 2006, the Company accrued the issuance
of 1,383,600 shares of common stock and warrants to purchase an additional
544,800 shares of common stock pursuant to a penalty calculation with regard to
the late registration of shares sold in a private placement in October 2004.
During the three months ending June 30, 2006, the Company accrued no additional
shares of common stock or warrants pursuant to the penalty calculation pending
the conclusion of an agreement with the investors in the private placement of
October 2004 to limit the number of shares and warrants which the Company is
obligated to issue pursuant to the penalty calculation. The Company charged to
operations $456,588 and $105,339, respectively, during the three months ended
March 31, 2006 representing the fair value of these shares and warrants,
respectively. During the three months ended March 31, 2006, the Company also
marked to market the value of the 5,242,307 shares and warrants to purchase an
additional 2,064,187 shares which were outstanding at December 31, 2005. This
resulted in a charge to operations of $52,423 and a credit to operations of
$6,868 for these previously outstanding shares and warrants, respectively. At
March 31, 2006, the Company had obligations to issue an aggregate of 6,625,907
shares and warrants to purchase an additional 2,608,987 shares, respectively,
and had charged to operations the amount of $555,973 for the cost of issuance of
shares and warrants. The Company also charged to operations the amount of
$52,423 as a loss from marking to market the outstanding stock portion of the
penalty, and recognized a gain in the amount of $6,868 representing marking to
market the outstanding warrant portion of the penalty.
In August 2006, the Company reached an agreement with the investors in the
private placement of October 2004 which limits the number of warrants and shares
which the Company is obligated to issue pursuant to the penalty calculation to
an aggregate of 18% of the number of original shares and warrants issued in the
October 2004 private placement. This agreement limits the number of shares and
warrants issuable pursuant to the penalty calculation to an aggregate of
4,150,798 shares and warrants to purchase an additional 1,634,400 shares,
respectively. This results in a decrease in the number of shares issuable of
2,475,107 (with a fair value of $816,785) and a decrease in the number of
warrant shares issuable of 974,587 (with a fair value of $177,789). This results
in a net realized gain of $994,574 during the three months ended June 30, 2006.
During the three months ended June 30, 2006, the Company also marked to market
the value of the previously issued penalty shares and warrants, which resulted
in realized gains of $72,101 and $46,755, respectively.
On July 10, 2006 the Company, pursuant to Rule 477 of Regulation C of the
Securities Act of 1933, as amended, applied for an order granting the immediate
withdrawal of its Registration Statement on Form SB-2. The registration
statement was originally filed with the Securities and Exchange Commission on
November 24, 2004, and amended by pre-effective amendments no. 1, 2, 3 and 4 on
July 20, 2005, November 16, 2005, February 22, 2006 and April 7, 2006,
respectively.
During the three months ended September 30, 2006, the Company issued 4,150,798
shares of common stock and warrants to purchase an additional 1,634,400 shares
of common stock in full satisfaction of the penalty due to investors for the
late registration of shares, and relieved accrued liabilities in the aggregate
amount of $1,053,904.
NOTE 8 - SUBSEQUENT EVENTS
On October 4, 2006, IR BioSciences Holdings, Inc. effected an initial closing of
a private placement, whereby the Company sold an aggregate of $2,276,500 worth
of units ("Units") to accredited investors as defined by Rule 501 under the
Securities Act of 1933, as amended.
On October 4, 2006, the Company repaid investors in two promissory notes: The
April 13, 2006 Note for $500,000 principal plus accrued interest of $28,500 and
the July 27, 2006 Note for $250,000 principal plus accrued interest of $5,583.
On October 6, 2006, the Company repaid a promissory note to an investor in the
August 1, 2006 Note for $20,000 principal plus accrued interest of $733.
On October 12, 2006, the Company repaid a note payable in the amount of $9,750
plus accrued interest of $237. The note was made in June 2006 in exchange for
consulting services.
On October 26, 2006, the Company effected a second closing of a private
placement, whereby the Company sold an aggregate of $2,697,100 worth of Units to
accredited investors as defined by Rule 501 under the Securities Act of 1933, as
amended (this private placement and the private placement that closed on October
4, 2006 is collectively referred to herein as the "Private Placement").
Pursuant to the terms of the subscription agreement used in the Private
Placement, each Unit was sold for $25,000 and consisted of (i) 156,250 shares of
common stock of the Company; and (ii) a warrant to purchase, at any time prior
to the fifth anniversary following the final closing of the Private Placement,
78,125 shares of Common Stock at an exercise price of $0.50 per share. A total
of 14,228,125 shares and 7,114,063 warrants were sold to investors at the
initial closing of the Private Placement and a total of 16,856,875 shares and
8,428,438 warrants were sold to investors in the second closing of the Private
Placement. The Company agreed to file a registration statement, covering the
securities sold in the Private Placement, not before 180 days after the final
closing of the Private Placement and not later than 190 days after the final
closing of the Private Placement. The shares and warrants were offered and sold
to investors in reliance upon exemptions from registration pursuant to Section
4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder. In addition, the Company may elect to redeem the warrants (but not
less than all the warrants), upon certain conditions and after providing at
least thirty-days written notice to warrant holders.
In connection with the Private Placement, the Company issued an additional
2,276,500 shares of Common Stock to the placement agent or its designees, upon
the initial closing of the Private Placement. In connection with the Private
Placement, the Company issued an additional 2,697,100 shares of Common Stock to
the placement agent or its designees, upon the second closing of the Private
Placement. The shares were issued as consideration for the placement agent's
services in connection with the Private Placement. The shares were issued in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. In
addition, the placement agent received $700,399 in commission and expenses as
compensation for its services, $349,776 and $350,623 for the initial and second
closing respectively.
On October 23, 2006 we entered into an employment agreement with Hal N. Siegel,
a Director of the Company, for the position of Senior Director of Product
Development and Regulatory Affairs. Pursuant to the employment agreement with
Dr. Siegel, we will pay an annual base salary of $200,000 for the first year and
$210,000 for the second year. Mr. Siegel will also be eligible for discretionary
bonuses under the Company's stock option plan during his employment. In
addition, Mr. Siegel received options with a term of five years to purchase
200,000 shares of common stock of the Company. The options are exercisable at
$0.20 per share. The employment agreement has a term of two years, subject to
early termination provisions. Upon termination of Mr. Sigel's employment by the
Company without cause or constructive termination, as defined in the agreement,
the Company agrees to pay to Mr. Siegel the remainder of his salary for the year
or six months salary, whichever is greater, and any accrued vacation.
Pursuant to the terms of the change of control agreement, the Company agrees to
pay Mr. Siegel his salary for a period of 18 months from the date an involuntary
termination, payable in accordance with the Company's compensation practice.
Involuntary termination is defined as the termination of Mr. Siegel's employment
by Company without cause or due to constructive termination at any time within
one-year from a change of control event, as defined in the agreement.
F-17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Special Note Regarding Forward-looking Statements
Some of the statements under "Risk Factors," "Business" and elsewhere in this
Quarterly Report on Form 10-QSB constitute forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, those described under
"Risk Factors" and elsewhere in this Quarterly Report on Form 10-QSB and in the
"Risk Factors" section of our annual report on Form 10-KSB filed with the
Securities and Exchange Commission on March 28, 2006 and Form 10-KSB/A filed
with the Securities and Exchange Commission on March 30, 2006.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this report.
The following information should be read in conjunction with the financial
statements and the notes thereto. The analysis set forth below is provided
pursuant to applicable Securities and Exchange Commission regulations and is not
intended to serve as a basis for projections of future events.
Overview
--------
IR BioSciences Holdings, Inc. is a development-stage biopharmaceutical
company. Through our wholly owned subsidiary, ImmuneRegen BioSciences, Inc., we
are engaged in the research and development of potential drugs. Our goal is to
develop therapeutics to be used for the protection of the body from exposure to
harmful agents such as toxic chemicals and radiation, as well as, biological
agents, including influenza and anthrax.
Our drug development efforts are based on patents for the use of Sar9,
Met (O2)11-Substance P, an analog of the naturally occurring human neuropeptide
Substance P. We use the generic name Homspera(R) to refer to the synthetic Sar9,
Met (O2)11-Substance P peptide. All of our research and development efforts are
early, pre-clinical stage and Homspera has only undergone exploratory studies to
evaluate its biological activity in small animals.
Our current focus is on the development of two potential applications
based on the use of Sar9, Met (O2)11-Substance P, Radilex(R) and Viprovex(R). We
are developing Radilex for use as a potential treatment for acute exposure to
radiation. Viprovex is being developed for use in potential treatments of
maladies caused by exposure to toxic chemicals, such as formalin, and biological
agents, such as influenza and anthrax. To date we have sponsored seven studies
and co-sponsored three radiation studies all of which were conducted utilizing
rodents. We have sponsored three studies on the potential treatment of anthrax
exposure and three studies on avian influenza, all of which were conducted
utilizing rodents. Additionally, our co-founder, Dr. Mark Witten, has sponsored
a rodent study using Viprovex as a potential treatment for exposure to the
chemical, formalin.
We have filed patent applications and provisional patent applications,
where applicable, for the use of the active ingredient Sar9, Met
(O2)11-Substance P in applications that we are researching. We own two issued
U.S. and two issued foreign patents and two pending Patent Cooperation Treaty
(PCT) applications. We also have nine pending U.S. provisional patent
applications and 16 pending foreign provisional patent applications.
Our potential drug candidates, Radilex and Viprovex and other
technologies based on the use of Homspera, are at early stages of development
and may not be shown to be safe or effective and may never receive regulatory
approval. Neither Radilex nor Viprovex nor our technologies based on the use of
Homspera have yet been tested in large animals or humans. There is no guarantee
that regulatory authorities will ever permit large animal or human testing of
Radilex, Viprovex or any other potential products derived from Homspera. Even if
such testing is permitted, none of Radilex, Viprovex or any other potential drug
candidates, if any, derived from Homspera may be successfully developed or shown
to be safe or effective.
3
The results of our pre-clinical studies and clinical trials may not be
indicative of future clinical trial results. A commitment of substantial
resources to conduct time-consuming research, pre-clinical studies and clinical
trials will be required if we are to develop any commercial applications using
Homspera or any derivatives thereof. Delays in planned patient enrollment in our
future clinical trials may result in increased costs, program delays or both.
None of our potential applications or technologies may prove to be safe or
effective in clinical trials. Approval of the FDA, or other regulatory
approvals, including export license permissions, may not be obtained and even if
successfully developed and approved, our potential applications may not achieve
market acceptance. Any potential applications resulting from our programs may
not be successfully developed or commercially available for a number of years,
if at all.
To date, we have not obtained regulatory approval for or commercialized
any applications based on the use of Homspera or any of its derivatives. We have
incurred significant losses since our inception and we expect to incur annual
losses for at least the next three years as we continue with our drug research
and development efforts.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND
SEPTEMBER 30, 2005
Revenue
-------
We have not generated any revenues from operations from our inception.
We believe we will begin earning revenues from operations during calendar year
2009 as we transition from a development stage company.
Sales, General, and Administrative Expenses
-------------------------------------------
Sales, general, and administrative expenses ("SG&A") were $598,045 for
the three months ended September 30, 2006, an increase of $90,600 or
approximately 18% compared to SG&A of $507,445 during the three months ended
September 30, 2005. The increase is primarily due to higher costs for debt
placement fees. For the three months ended September 30, 2006, this amount
consisted primarily of officer compensation of $89,461, research and development
of $96,639, legal and accounting fees of $103,350, other consulting fees of
$85,375, payroll and related costs of $125,325, public relations and marketing
of $18,850, non-cash compensation costs of $98,161 and debt placement fees of
$26,400.
The Company expects SG&A to increase during the coming twelve months as
we continue to build out the Company's infrastructure and to develop the
Company's potential drugs and therapeutics.
Interest (Income)/Expense (net)
-------------------------------
Interest expense (net) was $32,290 for the three months ended September
30, 2006, an increase of $38,215 or approximately 645% compared to interest
income of $5,925 for the three months ended September 30, 2005. Interest
expense was increased because the Company entered into notes payable during the
three months ended September 30, 2006.
The Company expects interest expense to decrease during the coming
twelve months as the Company has paid off outstanding Notes Payable with the
proceeds from the Private Placement.
Net Loss
--------
For the reasons stated above our net loss for the three months ended
September 30, 2006 was $180,013, or $0.003 per share a decrease of $890,460 or
approximately 82% compared to a net loss of $1,081,095 for the three months
ended September 30, 2005.
Our independent certified public accountants have stated in their
report included in SEC Form 10-KSB/A that we have incurred a net loss and
negative cash flows from operations of $4,591,107 and $1,884,113, respectively,
for the year ended December 31, 2005. This loss, in addition to a lack of
operational history, raises substantial doubt about our ability to continue as a
going concern. In the absence of significant revenue and profits, and since we
do not expect to generate significant revenues in the foreseeable future, we, in
order to fund operations, will be completely dependent on additional debt and
4
equity financing arrangements. There is no assurance that any financing will be
sufficient to fund our capital expenditures, working capital and other cash
requirements for the fiscal year ending December 31, 2006. No assurance can be
given that any such additional funding will be available or that, if available,
can be obtained on terms favorable to us. If we are unable to raise needed funds
on acceptable terms, we will not be able to develop or enhance our products,
take advantage of future opportunities or respond to competitive pressures or
unanticipated requirements. A material shortage of capital will require us to
take drastic steps such as reducing our level of operations, disposing of
selected assets or seeking an acquisition partner. If cash is insufficient, we
will not be able to continue operations.
The Company expects losses to increase during the coming twelve months.
The Company does not expect to begin to generate revenue in the coming twelve
months, and our costs are likely to increase as continue our research and
development efforts on our early, pre-clinical stage products and build out our
corporate infrastructure.
Shares and warrants issuable due to late filing of registration statement
-------------------------------------------------------------------------
During the three months ended March 31, 2006, the Company accrued the
issuance of 1,383,600 shares of common stock and warrants to purchase an
additional 544,800 shares of common stock pursuant to a penalty calculation with
regard to the late registration of shares sold in a private placement in October
2004. During the three months ending June 30, 2006, the Company accrued no
additional shares of common stock or warrants pursuant to the penalty
calculation pending the conclusion of an agreement with the investors in the
private placement of October 2004 to limit the number of shares and warrants
which the Company is obligated to issue pursuant to the penalty calculation. The
Company charged to operations $456,588 and $105,339, respectively, during the
three months ended March 31, 2006 representing the fair value of these shares
and warrants, respectively. During the three months ended March 31, 2006, the
Company also marked to market the value of the 5,242,307 shares and warrants to
purchase an additional 2,064,187 shares which were outstanding at December 31,
2005. This resulted in a charge to operations of $52,423 and a credit to
operations of $6,868 for these previously outstanding shares and warrants,
respectively. At March 31, 2006, the Company had obligations to issue an
aggregate of 6,625,907 shares and warrants to purchase an additional 2,608,987
shares, respectively, and had charged to operations the amount of $555,973 for
the cost of issuance of shares and warrants. The Company also charged to
operations the amount of $52,423 as a loss from marking to market the
outstanding stock portion of the penalty, and recognized a gain in the amount of
$6,868 representing marking to market the outstanding warrant portion of the
penalty.
In August 2006, the Company reached an agreement with the investors in
the private placement of October 2004 which limits the number of warrants and
shares which the Company is obligated to issue pursuant to the penalty
calculation to an aggregate of 18% of the number of original shares and warrants
issued in the October 2004 private placement. This agreement limits the number
of shares and warrants issuable pursuant to the penalty calculation to an
aggregate of 4,150,798 shares and warrants to purchase an additional 1,634,400
shares, respectively. This results in a decrease in the number of shares
issuable of 2,475,107 (with a fair value of $816,785) and a decrease in the
number of warrant shares issuable of 974,587 (with a fair value of $177,789).
This results in a net realized gain of $994,574 during the three months ended
June 30, 2006. During the three months ended June 30, 2006, the Company also
marked to market the value of the previously issued penalty shares and warrants,
which resulted in realized gains of $72,101 and $46,755, respectively.
On July 10, 2006 the Company withdrew its Registration Statement on
Form SB-2 that was filed to register the securities issued in the October 2004
private placement.
During the three months ended September 30, 2006, the Company issued
4,150,798 shares of common stock and warrants to purchase an additional
1,634,400 shares of common stock in full satisfaction of the penalty due to
investors for the late registration of shares, and relieved accrued liabilities
in the aggregate amount of $1,053,904.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND
SEPTEMBER 30, 2005
Revenue
-------
We have not generated any revenues from operations from our inception.
We believe we will begin earning revenues from operations during calendar year
2009 as we transition from a development stage company.
5
Selling, general and administrative expenses
--------------------------------------------
Selling, general and administrative expenses were $1,761,161 for the
nine months ended September 30, 2006 which is a decrease of $178,639 or 9%
compared to SG&A of $1,939,800 for the nine months ended September 30, 2005. The
decrease is primarily due to lower costs of non-cash compensation. This expense
is primarily comprised of non-cash compensation of $115,380, legal and
accounting fees of $462,662, payroll and related costs of $405,261, consulting
fees of $230,145, public relations and marketing costs of $63,992, research and
development costs of $254,148, officer's compensation of $279,961 and debt
placement fees of $66,400.
Interest expense (net)
----------------------
Interest expense was $47,181 for the nine months ended September 30,
2006, an increase of $51,788 or 1124% compared to interest income of $4,607 for
the nine months ended September 30, 2005. Interest expense was increased because
the Company entered into notes payable during the nine months ended September
30, 2006.
The Company expects interest expense to decrease during the coming
twelve months as the Company has paid off outstanding Notes Payable with the
proceeds from the Private Placement.
Net loss
--------
For the reasons above, primarily lower SG&A expenses and the one-time
adjustment for the late registration penalty, the net loss for the nine months
ended September 30, 2006 was $800,563, a decrease of $3,207,461 or 80% compared
to a net loss of $4,008,024 for the nine months ended September 30, 2005.
Shares and warrants issuable due to late filing of registration statement
-------------------------------------------------------------------------
During the three months ended March 31, 2006, the Company accrued the
issuance of 1,383,600 shares of common stock and warrants to purchase an
additional 544,800 shares of common stock pursuant to a penalty calculation with
regard to the late registration of shares sold in a private placement in October
2004. During the three months ending June 30, 2006, the Company accrued no
additional shares of common stock or warrants pursuant to the penalty
calculation pending the conclusion of an agreement with the investors in the
private placement of October 2004 to limit the number of shares and warrants
which the Company is obligated to issue pursuant to the penalty calculation. The
Company charged to operations $456,588 and $105,339, respectively, during the
three months ended March 31, 2006 representing the fair value of these shares
and warrants, respectively. During the three months ended March 31, 2006, the
Company also marked to market the value of the 5,242,307 shares and warrants to
purchase an additional 2,064,187 shares which were outstanding at December 31,
2005. This resulted in a charge to operations of $52,423 and a credit to
operations of $6,868 for these previously outstanding shares and warrants,
respectively. At March 31, 2006, the Company had obligations to issue an
aggregate of 6,625,907 shares and warrants to purchase an additional 2,608,987
shares, respectively, and had charged to operations the amount of $555,973 for
the cost of issuance of shares and warrants. The Company also charged to
operations the amount of $52,423 as a loss from marking to market the
outstanding stock portion of the penalty, and recognized a gain in the amount of
$6,868 representing marking to market the outstanding warrant portion of the
penalty.
In August 2006, the Company reached an agreement with the investors in
the private placement of October 2004 which limits the number of warrants and
shares which the Company is obligated to issue pursuant to the penalty
calculation to an aggregate of 18% of the number of original shares and warrants
issued in the October 2004 private placement. This agreement limits the number
of shares and warrants issuable pursuant to the penalty calculation to an
aggregate of 4,150,798 shares and warrants to purchase an additional 1,634,400
shares, respectively. This results in a decrease in the number of shares
issuable of 2,475,107 (with a fair value of $816,785) and a decrease in the
number of warrant shares issuable of 974,587 (with a fair value of $177,789).
This results in a net realized gain of $994,574 during the three months ended
June 30, 2006. During the three months ended June 30, 2006, the Company also
marked to market the value of the previously issued penalty shares and warrants,
which resulted in realized gains of $72,101 and $46,755, respectively.
On July 10, 2006 the Company withdrew its Registration Statement on
Form SB-2 that was filed to register the securities issued in the October 2004
private placement.
During the nine months ended September 30, 2006, the Company issued
4,150,798 shares of common stock and warrants to purchase an additional
1,634,400 shares of common stock in full satisfaction of the penalty due to
investors for the late registration of shares, and relieved accrued liabilities
in the aggregate amount of $1,053,904.
PLAN OF OPERATIONS
We expect to continue to incur increasing operating losses for the
foreseeable future, primarily due to our continued research and development
activities attributable to Radilex, Viprovex or any other proposed product, if
any, derived from Homspera and general and administrative activities.
6
Product Research and Development
--------------------------------
We incurred an expense of $254,148 for the nine months ended September
30, 2006 in research and development activities related to the development of
Radilex and Viprovex versus an expense of $108,439 for the nine months ended
September 30, 2005. Due to our liquidity and limited cash available, our
spending on research and development activities was limited. From our inception
in October 2002, we have spent $519,468 in research and development activities.
These costs only include the manufacture and delivery of our drug by third party
manufacturers and payments to Contract Research Organizations (CRO) for
consulting related to our studies and costs of performing such studies.
Significant costs relating to research and development, such as consulting fees
for Drs. Witten and Siegel, among others, have been classified in consulting
fees for consistency of financial reporting.
We anticipate that during the next 12 months we will increase our
research and development spending to a total of approximately $2,000,000 in an
effort to further develop Radilex and Viprovex. If we are unable to raise
additional capital, our research and development activities may be lessened. The
drug development, clinical trial and regulatory process is lengthy, expensive
and uncertain and subject to numerous risks.
The basis for our research and development efforts in regard to the
potential uses of Homspera is derived from observations made during research
funded by the Air Force Office of Scientific Research in early 1994 by our
co-founders Dr. Mark Witten and Dr. David Harris. During this research it was
observed that the exposure of animals to jet fuel (JP-8) resulted in
pathological changes in the lungs and immune systems of those exposed. Based on
the results of these studies, we believe that the administration of Homspera
prevented some of the effects of JP-8 jet fuel exposure in the lungs, as well as
having a positive effect on the immune system. However, there is no guarantee
that our interpretation of the results of these studies will prove to be
accurate after further testing.
Our initial pre-clinical applications that we are researching are in
(i) the treatment of the effects on the body caused by exposure to radiation
(Radilex) and (ii) infectious disease and exposure to toxic chemicals and
harmful biological materials (Viprovex). In addition to these two potential
applications, we continue to explore the potential capabilities of Sar9, Met
(O2)11-Substance P and strive to better understand the mechanisms of this
compound in order to further our development efforts with regard to not only our
current application research, but also potential future applications.
Research and Development for the use of Radilex in Radiological
Exposure Applications.
------------------------------------------------------------
On January 14, 2004, we received a Pre-Investigational New Drug
Application (PIND) number for the use of Radilex (PIND No. 63,255) in the
treatment of acute radiation syndrome.
To date we have sponsored seven studies and co-sponsored three
radiation studies all of which were conducted utilizing rodents to study dose
response to radiation, the impact on survival and to distinguish survival
response using different forms of drug delivery. In each of these studies mice
were exposed to varying levels of radiation. In the opinion of management, these
studies have demonstrated in C57BL/6 mouse model studies that Radilex-treated
mice exhibited survival rates of up to 50% at 90 days post-radiation exposure to
an otherwise lethal dose of whole body ionizing radiation. Additionally, we
believe the results indicated that these mice had normal immune system function
at the 90-day post-radiation time point compared to longitudinal control mice.
We believe these animal studies provide support for our continued effort to
develop Radilex to treat the effects of acute radiation syndrome. There is no
assurance that our interpretation of the results of the studies will prove to be
accurate after further testing.
Currently, we are sponsoring additional pre-clinical studies on mice in
an attempt to confirm the potential efficacy of Radilex in treating acute
radiation syndrome. In parallel with these studies we are also determining the
protocols that we hope will allow us to initiate large animal clinical trials
that will be necessary for establishing efficacy per the animal efficacy rule.
Assuming adequate funding is available to us, we expect these large animal
studies to begin within the next 12 to 18 months. In addition, we are designing
protocols for toxicology and human safety studies that will be needed to support
a New Drug Application (NDA).
Research and Development for the use of Viprovex in Chemical and
Biological Exposure Applications.
------------------------------------------------------------
On November 29, 2005 we applied for a PIND from the Department of
Health and Human Services (HHS) for the use of Viprovex in the treatment of
avian influenza. The PIND number for the use of Viprovex in treating avian flu
was issued on December 19, 2005 (PIND No. 73,709).
7
We are researching the efficacy of Viprovex as a potential treatment
for exposure to various chemical agents, including formalin, and biological
agents, including influenza and anthrax.
In addition to our early pilot studies, we have completed three studies
on anthrax and one on avian influenza. It is the opinion of management that the
results of these studies may underlie the potential ability of Viprovex to
enhance flu therapies, minimize the respiratory impact of influenza infection
and augment the capability of vaccination to induce a protective immune
response. There is no assurance that our interpretation of the results of the
studies will prove to be accurate after further testing.
If product development or approval does not occur as scheduled our time
to reach market will be lengthened and our costs will substantially increase.
Additionally, we may be requested to expand our findings to gather additional
data or we may not achieve the desired results. If so, we may have to design new
protocols and conduct additional studies. This will increase our costs and delay
the time to market for Radilex for use as a possible therapeutic for exposure to
acute radiation and Viprovex for use as a the potential treatment for exposure
to chemical and biological agents. Any of these occurrences would have a
material negative impact on our business and our liquidity as it may cause us to
seek additional capital sooner than expected and allow our competitors to
successfully enter the market ahead of us.
OFF-BALANCE SHEET ARRANGEMENTS
There were no off-balance sheet arrangements as of September 30, 2006.
REVENUES
We have not generated any revenues from operations from our inception.
We believe we will begin earning revenues from operations during calendar year
2009 as we transition from a development stage company.
COSTS AND EXPENSES
From our inception through September 30, 2006, we have incurred losses
of $12,610,320. These expenses were associated principally with equity-based
compensation to employees and consultants, cost of penalty for late registration
of shares, product development costs and professional services.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2006, we had current assets of $11,459 consisting of
other current assets of $11,459. At September 30, 2006, we also had current
liabilities of $1,866,254, consisting of accounts payable and accrued
liabilities of $1,026,823, notes payable of $829,750 and cash overdraft of
$9,681. This resulted in net working capital deficit at September 30, 2006 of
$1,854,795. During the nine months ended September 30, 2006, the Company used
cash in operating activities of $973,279. From the date of inception (October
30, 2002) to September 30, 2006, the Company has had a net loss of $12,610,320
and has used cash of $4,931,737 in operating activities.
We have never generated revenue. There is no guarantee that our
business model will be successful, or that we will be able to generate
sufficient revenue to fund future operations. As a result, we expect our
operations to continue to use net cash, and that we will be required to seek
additional debt or equity financings during the coming quarters. Since
inception, we have financed our operations through debt and equity financing.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development of our product
line. We met our cash requirements from our inception through September 30, 2006
via the private placement of $3,264,352 net of costs of our common stock,
$1,195,307 of this was from the exercise of common stock purchase warrants net
of costs. An additional $1,688,378 was received from the issuance of notes
payable, net of repayments.
In July 2006, the Company received a cash advance from a Director in
the amount of $25,000 to be used as an upfront payment for a radiation study.
This advance bears interest at the rate of 12% per annum. This cash advance was
not used, as no upfront payment was required, and subsequently, principal and
interest was returned on August 30, 2006.
Effective July 25, 2006, the Company entered into an unsecured senior
promissory note in the amount of $250,000 with an accredited investor. Following
the payment of commissions and expenses, the Company received net proceeds of
approximately $210,000.
Effective August 1, 2006, we converted two cash advances into unsecured
senior promissory notes, in the respective amounts of $50,000 and $20,000, with
individual accredited investors, one of whom, Theodore E. Staahl, was a
Director. Following the payment of fees and expenses, we received net proceeds
of approximately $68,600. The outstanding principal amount of each note, plus
interest at the rate of 12% per annum, is payable in cash on or before the
earlier of (i) one year from the date of such note or (ii) the date upon which
the Company sells any of its equity or debt securities in a financing
transaction, or a series of financings, with gross proceeds equal to $1,000,000
or more; provided, however, that a subsequent financing transaction will not
include (x) issuances of common stock to employees of the Company, (y) the
exercise of any options to purchase common stock of the Company that are
outstanding as of the date hereof, or (z) the grant, issuance or exercise of
options or common stock of the Company under the Company's stock, option,
deferred stock and restricted stock plan for the purpose of satisfying the
Company's payables.
Pursuant to our employment agreement with Michael Wilhelm, our
President and Chief Executive Officer, dated December 16, 2002, we paid an
annual salary of $125,000 and $175,000 to Mr. Wilhelm during the first and
8
second years of his employment, respectively. Thereafter we paid through August
10, 2005, an annual salary of $250,000. On August 10, 2005, we entered into a
new employment agreement with Mr. Wilhelm. The new employment agreement calls
for a salary at the rate of $275,000 per annum and provides for bonus
incentives. Mr. Wilhelm's salary is payable in regular installments in
accordance with the customary payroll practices of our company.
Pursuant to our employment agreement with John N. Fermanis, our Chief
Financial Officer, dated February 15, 2005, we paid an annual salary of $60,000
until the company completed a financing of $500,000 or more. This occurred on
March 4, 2005 when the company completed a Tender Offer for warrants totaling
$1,211,000 net of fees. From March 4, 2005, until December 31, 2005, we paid an
annual salary of $85,000. Thereafter, we will pay an annual salary of $98,000
for the second year ending December 31, 2006 and an annual salary of $112,000
for the third year ending December 31, 2007. Mr. Fermanis' salary is payable in
regular installments in accordance with the customary payroll practices of our
company.
Pursuant to our employment agreement with Hal N. Siegel, our Senior
Director of Product Development and Regulatory Affairs, dated October 23, 2006,
we will pay an annual base salary of $200,000 for the first year and $210,000
for the second year. Mr. Siegel will also be eligible for discretionary bonuses
under the Company's stock option plan during his employment. In addition, Mr.
Siegel received options with a term of five years to purchase 200,000 shares of
common stock of the Company. The options are exercisable at $0.20 per share. The
employment agreement has a term of two years, subject to early termination
provisions. Upon termination of Mr. Sigel's employment by the Company without
cause or constructive termination, as defined in the agreement, the Company
agrees to pay to Mr. Siegel the remainder of his salary for the year or six
months salary, whichever is greater, and any accrued vacation.
Pursuant to the terms of the change of control agreement, the Company
agrees to pay Mr. Siegel his salary for a period of 18 months from the date an
involuntary termination, payable in accordance with the Company's compensation
practice. Involuntary termination is defined as the termination of Mr. Siegel's
employment by Company without cause or due to constructive termination at any
time within one-year from a change of control event, as defined in the
agreement.
Since our inception, we have been seeking additional third-party
funding. During such time, we have retained a number of different investment
banking firms to assist us in locating available funding; however, we have not
yet been successful in obtaining any of the long-term funding needed to make us
into a commercially viable entity. During the period from October 2004 to
September 2006, we were able to obtain financing of $3,590,136 from a series of
private placements of our securities (which resulted in net proceeds to us of
$3,264,352). In October, 2006, we obtained additional funding of $4,973,600 from
the first two closings of a private placement which resulted in net proceeds to
us of $3,401,660. Based on our current plan of operations all of our current
funding is expected to be depleted by the end of January 2007. If we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, it would have a material adverse effect on our
business, results of operations, liquidity and financial condition.
While we have successfully raised capital to meet our working capital
and financing needs in the past through debt and equity financings, additional
financing will be required in order to implement our business plan and to meet
our current and projected cash flow deficits from operations and development.
There can be no assurance that we will be able to consummate future debt or
equity financings in a timely manner on a basis favorable to us, or at all. If
we are unable to raise needed funds on acceptable terms, we will not be able to
develop or enhance our products, take advantage of future opportunities or
respond to competitive pressures or unanticipated requirements. A material
shortage of capital will require us to take drastic steps such as reducing our
level of operations, disposing of selected assets or seeking an acquisition
partner. If cash is insufficient, we will not be able to continue operations.
Until such time, if at all, as we receive adequate funding, we intend to
continue to defer payment of all of our obligations which are capable of being
deferred, which actions have resulted in some vendors demanding cash payment for
their goods and services in advance, and other vendors refusing to continue to
do business with us. In the event that we are successful in obtaining
third-party funding, we do not expect to generate a positive cash flow from our
operations for at least several years, if at all, due to anticipated
expenditures for research and development activities, administrative and
marketing activities, and working capital requirements and expect to continue to
attempt to raise further capital through one or more further private placements.
Based on our operating expenses and anticipated research and development
activities, we believe that we will require an additional $3.5 million to meet
our expenses over the next 12 months.
On October 4, 2006, the Company effected an initial closing of a
private placement, whereby the Company sold an aggregate of $2,276,500 worth of
units ("Units") to accredited investors as defined by Rule 501 under the
Securities Act of 1933, as amended (the transaction is referred to herein as the
"Private Placement").
On October 26, 2006, the Company effected a second closing of a private
placement, whereby the Company sold an aggregate of $2,697,100 worth of Units to
accredited investors as defined by Rule 501 under the Securities Act of 1933, as
amended (the transaction is referred to herein as the "Private Placement").
Pursuant to the terms of the subscription agreement, each Unit was sold
for $25,000 and consisted of (i) 156,250 shares of Common Stock of the Company;
and (ii) a warrant to purchase, at any time prior to the fifth anniversary
following the final closing of the Private Placement, 78,125 shares of Common
Stock at an exercise price of $0.50 per share. A total of 14,228,125 shares and
7,114,063 warrants were sold to investors at the initial closing of the Private
Placement. The Company agreed to file a registration statement, covering the
securities sold in the Private Placement, not before 180 days after the final
closing of the Private Placement and not later than 190 days after the final
closing of the Private Placement. The shares and warrants were offered and sold
to investors in reliance upon exemptions from registration pursuant to Section
4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder. In addition, the Company may elect to redeem the warrants (but not
less than all the warrants), upon certain conditions and after providing at
least thirty-days written noticeto warrant holders.
In connection with the Private Placement, the Company issued an
additional 2,276,500 shares of Common Stock to the placement agent or its
designees, upon the initial closing of the Private Placement. In connection with
the Private Placement, the Company issued an additional 2,697,100 shares of
Common Stock to the placement agent or its designees, upon the second closing of
the Private Placement. The shares were issued as consideration for the placement
agent's services in connection with the Private Placement. The shares were
issued in reliance upon exemptions from registration pursuant to Section 4(2)
under the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder. In addition, the placement agent received $700,399 in commission and
expenses as compensation for its services, $349,776 and $350,623 for the initial
and second closing respectively.
Acquisition or Disposition of Plant and Equipment
-------------------------------------------------
We did not dispose or acquire any significant property, plant or
equipment during the second quarter ended September 30, 2006. We do not
anticipate the sale of any significant property, plant or equipment during the
next twelve months.
Number of Employees
-------------------
From our inception through the period ended September 30, 2006, we have
relied on the services of outside consultants for services and currently have
three full-time employees. Our full-time employees are Michael K. Wilhelm, our
Chief Executive Officer; John Fermanis, our Chief Financial Officer; and, the
third serves in an administrative role. In order for us to attract and retain
quality personnel, we anticipate we will have to offer competitive salaries to
future employees. We do not anticipate our employment base will significantly
change during the next twelve months, other than the addition of two senior
level appointments, including a Senior Director of Product Development and
Regulatory Affairs.
As we continue to expand, we will incur additional costs for personnel.
This projected increase in personnel is dependent upon our generating revenues
and obtaining sources of financing. There is no guarantee that we will be
successful in raising the funds required or generating revenues sufficient to
fund the projected increase in the number of employees.
9
Trends, Risks and Uncertainties
-------------------------------
We have sought to identify what we believe to be the most significant
risks to our business, but we cannot predict whether, or to what extent, any of
such risks may be realized nor can we guarantee that we have identified all
possible risks that might arise. Investors should carefully consider all of such
risk factors before making an investment decision with respect to our Common
Stock.
RISK FACTORS
Other than with respect to the following risk factors, which have been updated
and restated in their entirety below, there have been no material changes from
the risk factors disclosed in the "Risk Factors" section of our the "Risk
Factors" section of our annual report on Form 10-KSB filed with the Securities
and Exchange Commission on March 28, 2006 and Form 10-KSB/A filed with the
Securities and Exchange Commission on March 30, 2006.
RISKS RELATED TO OUR FINANCIAL RESULTS
WE HAVE LIMITED CASH RESOURCES, AN ACCUMULATED DEFICIT, ARE NOT CURRENTLY
PROFITABLE AND EXPECT TO INCUR SIGNIFICANT EXPENSES IN THE NEAR FUTURE.
As of September 30, 2006, we had a working capital deficit of
$1,860,195. This amount consists of current assets of $11,459, accounts payable
and accrued current liabilities of $1,032,223, including notes payable $829,750.
We have incurred a substantial net loss for the period from our inception in
October 2002 to September 30, 2006, and are currently experiencing negative cash
flow. We expect to continue to experience negative cash flow and operating
losses through at least 2009 and possibly thereafter. As a result, we will need
to generate significant revenues to achieve profitability.
WE MAY FAIL TO BECOME AND REMAIN PROFITABLE OR WE MAY BE UNABLE TO FUND OUR
CONTINUING LOSSES, IN WHICH CASE OUR BUSINESS MAY FAIL.
We are focused on product development and have not generated any
revenue to date. We do not believe we will begin earning revenues from
operations until the calendar year 2009 as we transition from a development
stage company. We have incurred operating losses since our inception. Our net
loss for the nine months ended September 30, 2006 was $1,212,493. As of
September 30, 2006, we had an accumulated deficit of $13,011,627.
WE WILL BE REQUIRED TO RAISE ADDITIONAL CAPITAL TO FUND OUR OPERATIONS. IF WE
CANNOT RAISE NEEDED ADDITIONAL CAPITAL IN THE FUTURE, WE WILL BE REQUIRED TO
CEASE OPERATIONS.
Based on our current plans, we believe our existing financial
resources, and interest earned thereon, will be sufficient to meet our operating
expenses and capital requirements through January 2007. However, changes in our
research and development plans or other events affecting our operating expenses
may result in the expenditure of such cash before that time. We estimate that we
will require approximately $2.0 million over the next 16 months in order to
finance our research and development efforts, fund operating expenses, pursue
regulatory clearances and prosecute and defend our intellectual property rights.
We may seek such additional funding through public or private financing or
through collaborative arrangements with strategic partners.
10
You should be aware that in the future:
o we may not obtain additional financial resources when necessary or
on terms favorable to us, if at all; and
o any available additional financing may not be adequate.
If we cannot raise additional funds when needed, or on acceptable
terms, we will not be able to continue our drug discovery efforts. We require
substantial working capital to fund our operations. Since we do not expect to
generate significant revenues in the foreseeable future, in order to fund
operations, we will be completely dependent on additional debt and equity
financing arrangements. There is no assurance that any financing will be
sufficient to fund our capital expenditures, working capital and other cash
requirements beyond January 2007. Our working capital deficit as of September
30, 2006 was $1,860,195. No assurance can be given that any such additional
funding will be available or that, if available, can be obtained on terms
favorable to us. If we are unable to raise needed funds on acceptable terms, we
will not be able to develop or enhance our products, take advantage of any
future opportunities or respond to competitive pressures or unanticipated
requirements. A material shortage of capital will require us to take drastic
steps such as reducing our level of operations, disposing of selected assets or
seeking an acquisition partner. If cash is insufficient, we will not be able to
continue operations.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission's
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including our principal
executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure.
As of the end of the period covered by this Quarterly Report, we
conducted an evaluation, under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, of our disclosure controls
and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange
Act). Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of September 30, 2006, such disclosure controls
and procedures were effective in ensuring that required information will be
disclosed on a timely basis in our periodic reports filed under the Exchange
Act.
(b) Changes in internal controls
There have been no changes in our internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter
ended September 30, 2006 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings. Please
refer to the Company's report on Form 10-K/A Amendment No. 1 for 2005 regarding
litigation and claims as of December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In August 2006, the Company reached an agreement with the investors in
the private placement of October 2004 which limits the number of warrants and
shares which the Company is obligated to issue pursuant to the penalty
calculation to an aggregate of 18% of the number of original number of shares
and warrants issued in the October 2004 private placement. This agreement limits
the number of shares and warrants issuable pursuant to the penalty calculation
to an aggregate of 4,150,800 shares and warrants to purchase an additional
1,634,400 shares, respectively. These shares and warrants were issued in the
three month period ended September 30, 2006. The securities were issued in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.
12
During the three months ended September 30, 2006 we have accrued the
issuance of 46,000 common stock purchase warrants to members of our Bioterrorism
Advisory Board and Scientific Advisory Board for participation during the
quarter. These warrants were issued pursuant to the terms of their respective
agreements with us. The exercise prices of these warrants range from $0.20 to
$1.00 per share. The warrants expire three years after date of issuance. The
warrants will bear a restrictive legend regarding the sale or transfer of such
or the underlying securities. The warrants were issued in reliance upon
exemptions from registration pursuant to Section 4(2) under the Securities Act
of 1933, as amended, and Rule 506 promulgated thereunder. There were less than
35 investors and each investor had such knowledge and experience in financial
and business matters that the investor was capable of evaluating the merits and
risks of investing in the warrants. No general solicitation or advertising was
undertaken in connection with the offer and sale of these shares. Each investor
was also provided with access to our Exchange Act reports including our annual
report on Form 10-KSB and our quarterly reports on Form 10-QSB.
Pursuant to the term of his employment agreement, our Chief Financial
Officer, John N. Fermanis, is to receive 62,500 warrants. The warrants expire
five years after date of issuance. The warrants were issued in reliance upon
exemptions from registration pursuant to Section 4(2) under the Securities Act
of 1933, as amended, and Rule 506 promulgated thereunder. There were less than
35 investors and each investor had such knowledge and experience in financial
and business matters that the investor was capable of evaluating the merits and
risks of investing in the warrants. Each investor was also provided with access
to our Exchange Act reports including our annual report on Form 10-KSB and our
quarterly reports on Form 10-QSB.
For collateralization of promissory notes in 2004, we issued to our
Chief Executive officer, Michael K. Wilhelm, 300,000 common stock purchase
warrants. These warrants expire five years from the date of issuance. The
warrants were issued in reliance upon exemptions from registration pursuant to
Section 4(2) under the Securities Act of 1933, as amended, and Rule 506
promulgated thereunder. There were less than 35 investors and each investor had
such knowledge and experience in financial and business matters that the
investor was capable of evaluating the merits and risks of investing in the
warrants. Each investor was also provided with access to our Exchange Act
reports including our annual report on Form 10-KSB and our quarterly reports on
Form 10-QSB.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
13
ITEM 5: OTHER INFORMATION
On July 14, 2006, pursuant to the term of his employment agreement our Board of
Directors granted a one-time nonstatutory option to purchase 1,896,970
discretionary incentive stock options to our President and Chief Executive
Officer, Michael K. Wilhelm, per his employment agreement. The options have a
per share exercise price of $0.231, 110% of the closing price on the date of the
grant, and a term of five years. The options were granted in furtherance of a
resolution by our Board on August 8, 2005 pursuant to which the options were to
be granted at such time that the Company's 2003 Stock Plan is amended to
authorize additional shares, which was effected by approval of our shareholders
on June 28, 2006.
On October 23, 2006 we entered into an employment agreement with Hal N. Siegel,
a Director of the Company, for the position of Senior Director of Product
Development and Regulatory Affairs. Pursuant to the employment agreement with
Dr. Siegel, we will pay an annual base salary of $200,000 for the first year and
$210,000 for the second year. Mr. Siegel will also be eligible for discretionary
bonuses under the Company's stock option plan during his employment. In
addition, Mr. Siegel received options with a term of five years to purchase
200,000 shares of common stock of the Company. The options are exercisable at
$0.20 per share. The employment agreement has a term of two years, subject to
early termination provisions. Upon termination of Mr. Sigel's employment by the
Company without cause or constructive termination, as defined in the agreement,
the Company agrees to pay to Mr. Siegel the remainder of his salary for the year
or six months salary, whichever is greater, and any accrued vacation.
Pursuant to the terms of the change of control agreement, the Company agrees to
pay Mr. Siegel his salary for a period of 18 months from the date an involuntary
termination, payable in accordance with the Company's compensation practice.
Involuntary termination is defined as the termination of Mr. Siegel's employment
by Company without cause or due to constructive termination at any time within
one-year from a change of control event, as defined in the agreement.
Private Placement
-----------------
On October 4, 2006, the Company effected an initial closing of a private
placement, whereby the Company sold an aggregate of $2,276,500 worth of units
("Units") to accredited investors as defined by Rule 501 under the Securities
Act of 1933, as amended (the transaction is referred to herein as the "Private
Placement").
On October 26, 2006, the Company effected a second closing of a private
placement, whereby the Company sold an aggregate of $2,697,100 worth of Units to
accredited investors as defined by Rule 501 under the Securities Act of 1933, as
amended (the transaction is referred to herein as the "Private Placement").
Pursuant to the terms of the subscription agreement, each Unit was sold for
$25,000 and consisted of (i) 156,250 shares of Common Stock of the Company; and
(ii) a warrant to purchase, at any time prior to the fifth anniversary following
the final closing of the Private Placement, 78,125 shares of Common Stock at an
exercise price of $0.50 per share. A total of 14,228,125 shares and 7,114,063
warrants were sold to investors at the initial closing of the Private Placement.
The Company agreed to file a registration statement, covering the securities
sold in the Private Placement, not before 180 days after the final closing of
the Private Placement and not later than 190 days after the final closing of the
Private Placement. The shares and warrants were offered and sold to investors in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. In
addition, the Company may elect to redeem the warrants (but not less than all
the warrants), upon certain conditions and after providing at least thirty-days
written noticeto warrant holders.
In connection with the Private Placement, the Company issued an additional
2,276,500 shares of Common Stock to the placement agent or its designees, upon
the initial closing of the Private Placement. In connection with the Private
Placement, the Company issued an additional 2,697,100 shares of Common Stock to
the placement agent or its designees, upon the second closing of the Private
Placement. The shares were issued as consideration for the placement agent's
services in connection with the Private Placement. The shares were issued in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. In
addition, the placement agent received $700,399 in commission and expenses as
compensation for its services, $349,776 and $350,623 for the initial and second
closing respectively.
14
ITEM 6. EXHIBITS
(a) Exhibits
4.1 Form of Warrant by and between the Registrant and each of the
investors who entered into the Subscription Agreements filed
as Exhibit 10.1 and 10.2 herewith.
10.1 Form of Subscription Agreement entered into as of October 4,
2006 between the Registrant and each of the Investors set
forth on the Schedule of Investors thereto.
10.2 Form of Subscription Agreement entered into as of October 26,
2006 between the Registrant and each of the Investors set
forth on the Schedule of Investors thereto.
31.1 Certification of Chief Executive Officer pursuant to Item
601(b)(31) of Regulation S-B, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Item
601(b)(31) of Regulation S-B, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certifications of Chief Executive Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
32.2 Certifications of Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
o * This exhibit shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934 or
otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or
after the date hereof and irrespective of any general
incorporation language in any filings.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 13, 2006.
IR BioSciences Holdings, Inc.
By: /s/ Michael K. Wilhelm
----------------------------------
Michael K. Wilhelm
President, Chief Executive Officer
16