As filed
with the Securities and Exchange Commission on June 8, 2010
Registration
No. 000–________
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10
GENERAL
FORM FOR REGISTRANTS OF SECURITIES
Pursuant
to Section 12(b) or (g) of the Securities Exchange Act of 1934
Protect
Pharmaceutical Corporation
(Exact
name of registrant as specified in its charter)
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Nevada
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27-1877179
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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759
Bloomfield Ave, Suite 411, West Caldwell, New Jersey 07006
(Address
of principal executive officers) (Zip Code)
Registrant’s
telephone number, including area code:
(973) 568-1617
Securities
to be registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which
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to
be so registered
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each
class is to be registered
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N/A
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N/A
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Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.005 par value
(Title of
Class)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
(Check
one)
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Large
accelerated filer
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¨
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Accelerated
filer
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¨
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Non-accelerated
filer
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x
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Smaller
reporting company
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(Do not
check if a smaller reporting company)
Protect
Pharmaceutical Corporation
FORM
10
TABLE
OF CONTENTS
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PAGE
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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14
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Item
2.
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Financial
Information
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24
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Item
3.
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Properties
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27
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Item
4.
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Security
Ownership of Certain Beneficial Owners and Management
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27
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Item
5.
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Directors
and Executive Officers
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28
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Item
6.
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Executive
Compensation
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29
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Item
7.
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Certain
Relationships and Related Transactions and Director
Independence
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29
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Item
8.
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Legal
Proceedings
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30
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Item
9.
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Market
Price of and Dividends on the Registrant’s Common Equity and Related
Stockholder Matters
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30
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Item
10.
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Recent
Sales of Unregistered Securities
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32
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Item
11.
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Description
of Registrant’s Securities to be Registered
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32
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Item
12.
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Indemnification
of Directors and Officers
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32
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Item
13.
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Financial
Statements and Supplementary Data
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33
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Item
14.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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33
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Item
15.
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Financial
Statements and Exhibits
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34
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Signatures
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S-1
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EXPLANATORY
NOTE
You should rely only on the information
contained in this registration statement or in a document referenced
herein. We have not authorized anyone to provide you with any other
information that is different. You should assume that the information
contained in this registration statement is accurate only as of the date hereof
except where a different specific date is set forth.
To simplify the language in this
registration statement, Protect Pharmaceutical Corporation, a Nevada
corporation, is also referred to herein as “Protect”, the “company”, “we,”,
“our”, “us” or similar terms.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement contains
forward-looking statements that involve substantial risks and
uncertainties. These forward-looking statements are not historical
facts, but rather are based on current expectations, estimates and projections
about us, our industry, our beliefs and assumptions. Words such as
“anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”
“would,” “should,” “scheduled,” “projects,” and variations of these words and
similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance
and are subject to risks, uncertainties, and other factors, some of which are
beyond our control and difficult to predict and which could cause actual results
to differ materially from those expressed or forecasted in the forward-looking
statements.
Forward-looking statements speak only
as of the date hereof and caution should be taken not to place undue reliance on
any such statements. Forward-looking statements are subject to certain events,
risks and uncertainties that may be beyond our control. When
considering forward-looking statements, you should carefully review the risks,
uncertainties and other cautionary statements in this registration statement as
they identify certain important factors that could cause actual results to
differ materially from those expressed in or implied by the forward-looking
statements. These factors include, among others, risks described
under Item 1A and elsewhere in this registration statement.
Information regarding market and
industry statistics contained in this registration statement is included based
on information available to us which we believe is accurate. We cannot assure
the accuracy or completeness of such data included in this registration
statement.
WHERE
YOU CAN FIND MORE INFORMATION ABOUT US
When this registration statement
becomes effective, we will begin to file reports, proxy statements, information
statements and other information with the United States Securities and Exchange
Commission (“
SEC
”). You
may read and copy this information, for a copying fee, at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for more information on its Public Reference
Room. Our SEC filings will also be available to the public from
commercial document retrieval services and at the Website maintained by the SEC
at
http://www.sec.gov
.
.
Item 1. Business
Business
Development
History
Protect Pharmaceutical Corporation was
originally incorporated in the state of Idaho on August 5, 1987, under the name
of Interstate Mining and Development Properties, Inc. for the purpose of
engaging in the acquisition and development of mining prospects. The
company staked certain gold placer mining claims, however the claims did not
yield a sufficient amount of ore and the company never became
profitable. Operational activities were halted in approximately
1989.
The company remained inactive until
January 9, 1996 when it was reinstated in the State of Idaho. On
August 2, 1996, the company changed its name to Interstate Development, Inc.
During that same month H. Deworth Williams and Geoff Williams acquired
controlling interest of the company through the purchase of common stock from
the company’s two largest shareholders. The company then
became engaged in the search for and evaluation of prospective
business opportunities and, if justified, potentially to acquire and/or merge
with one or more businesses or business opportunities.
On July 3, 2006 at a special meeting of
stockholders, the stockholders approve the change of the corporation’s domicile
from Idaho to Nevada. Stockholders also approved the acquisition of
Nanolution Technologies, Inc., a Delaware corporation focused on developing
technologies for medical devices, device coatings, and pharmaceutical dosage
forms to repurpose drugs and develop novel, improved drug delivery methods for
existing, approved drugs. However, the acquisition was never
finalized and was abandoned.
On December 14, 2006, the change of
domicile to Nevada was finalized by way of merging with and into Interstate
Acquisition, Inc. (incorporated in Nevada on June 15, 2006) for the sole purpose
of changing domicile. The Idaho entity was then
dissolved. On December 15, 2006, we changed the name of the Nevada
entity to Pro-Tect, Inc. and continued to explore possible business
opportunities.
In January 2008, we began preliminary
discussions with Medvices Corporation concerning the possible acquisition of
certain technology and related proprietary, manufacturing, marketing and
distribution rights related to the technology. An agreement to
acquire the technology was reached in January 2009. The Medvices
technology related to certain processes and equipment of a selected algae
cultivation used for production of health products and
cosmetics. However, no operations were conducted in connection with
the technology and the acquisition was abandoned later in 2009.
On February 12, 2010, we entered into a
Patent Acquisition Agreement with Nectid, Inc., a privately held Princeton, New
Jersey based company, whereby we acquired from Nectid a portfolio of pending
patent applications relating to three drug delivery technologies:
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A
gastro-retentive platform for drugs that otherwise have short time windows
for absorption:
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An
abuse deterrent platform for prescription drugs that are prone to abuse,
especially narcotic pain-killers;
and
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A
once-daily platform that allows two or more drugs commonly taken in
combination to be delivered via a single dose with fewer side
effects.
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Ramesha
Sesha, President of Nectid and the inventor of all the acquired technology, has
joined the company as Chief Operating Officer and Chief Scientific
Officer.
Consideration for the acquired patent
applications consisted of 7,000,000 shares of Protect common stock, 5,000,000
shares issuable upon the closing and 2,000,000 shares upon realizing financing
of $2.0 million. As a result of the acquisition, we are proceeding
with a comprehensive program to develop and commercialize the acquired drugs and
related technologies. In March 2010 we relocated our principal
offices to West Caldwell, New Jersey and installed a new Board of Directors
consisting of Bill Abajian, Ramesha Sesha, Anna Gluskin and Anthony
Pichelli. Mr. Pichelli resigned in May 2010 for personal reasons and
was replaced by Dr. Gerald Bernstein.
On March 25, 2010, in order to reflect
our current business our board of directors unanimously agreed to change the
corporate name to Protect Pharmaceutical Corporation. The name change
was approved by the written consent a majority of the outstanding
shares of common stock. A Certificate of Amendment was filed with the
State of Nevada on April 26, 2010 to reflect the change.
Our principal offices are currently
located at 759 Bloomfield Ave, Suite 411, West Caldwell, New Jersey 07006 and
our telephone number is(973) 568-1617. We also maintain a Website at
http://www.protectpharma.com
.
We are voluntarily filing this
registration statement in order to make information concerning our company more
readily available to the public. As a result of filing this
registration statement, we become obligated to file with the SEC certain interim
and periodic reports, including an annual report containing audited financial
statements.
Current Business
Protect is engaged in developing drug
delivery technologies and solutions through innovative dosing and/or
delivery. Using the portfolio of patents applications acquired from
Nectid, Inc., our goal is to develop innovative drug delivery technologies and
drugs that will improve the quality of life for people who suffer from
pain. In doing so we are focusing on the research, development, and
commercialization of drug delivery technologies that minimize the pharmaceutical
dose, frequency, and side affects.
While the oral route is the most
convenient method of drug administration, we believe there is a need to develop
advances in oral drug delivery technologies that can make significant
differences in (i) enhancing patient compliance, (ii) drug
bioavailability, (iii) preventing abuse of prescription drugs and
(iv) reducing dosages. Although there are a number of once daily
drugs and a number of combination drugs on the market, we believe that there is
not a single once daily combination drug approved for treating
pain. Similarly, one of the significant challenges in oral drug
delivery is to develop gastric retention platforms for long-term (ranging from 6
to 24 hours) delivery of drugs by oral administration. Additionally,
prescription drug abuse is a major social and medical issue and efforts to
develop abuse deterrent drug delivery design have met with limited
success.
Management believes that the
application of drug delivery platform technologies to pain drugs provides a
significant business opportunity because fewer new pain drugs are being
developed. Also, potential demand for pain drugs will be driven by
the increasing demographic segment of elderly population who often consume pain
drugs over a long period of time. Medical efforts to treat pain,
known as pain management, addresses a large market. Clinical pain is a worldwide
problem with serious health and economic consequences.
Further, although most people take
medicines only for the reasons their doctors prescribe them, prescription drug
abuse remains a serious problem in the United States and around the
world. The major abused drugs include narcotic painkillers,
sedatives and tranquilizers, and stimulants. Abuse of prescription
drugs to get high has become increasingly prevalent among teens and young
adults. Thus, there is a serious need to develop abuse deterrent
drugs and abuse deterrent drug delivery systems that can be used to minimize
prescription drug abuse.
Glossary
of Terms
To better understand the information
provided in this registration statement, we are including the following
description of some of the terms used herein.
Fibromyalgia
Syndrome (FMS)
: A complex, chronic condition that causes widespread pain
and severe fatigue. FMS is a syndrome because it is a set of signs and symptoms
that occur together, affecting muscles and their attachments to
bones.
GABA Analog
Therapy
: y-Aminobutyric acid (GABA) is the chief inhibitory
neurotransmitter in the mammalian central nervous system. It plays a role in
regulating neuronal excitability throughout the nervous system. In humans, GABA
is also directly responsible for the regulation of muscle tone. GABA Analogues
are modulators and they include gabapentin, pregabalin that binds to a
(alpha2delta) subunit of the voltage-dependent calcium channel in the central
nervous system. This reduces calcium influx into the nerve terminals thereby
reducing the neorpathic and other pain.
Naloxone
Methiodide
and
Methyl
Naltrexone
: Methylnaltrexone (MNTX, trade name Relistor) and
Naloxone Methiodide are opioid antagonists that act to reverse some of the side
effects of opioid drugs (for example Tramadol) such as constipation
without affecting analgesia or precipitating withdrawals.
Neuropathic
Pain
: Neuropathic pain results from damage to or dysfunction
of the peripheral or central nervous system, rather than stimulation of pain
receptors. Although neuropathic pain responds to opioids, treatment is often
with adjuvant drugs such as antidepressants, anticonvulsants, baclofen
and topical drugs.
Opioid
: A
chemical that works by binding to opioid receptors, which are found principally
in the central nervous system and the gastrointestinal tract. The
receptors in these organ systems mediate both the beneficial effects and the
side effects of opioids.
Postherpetic
Neuralgia
: Postherpetic neuralgia is a kind of pain involving
damage to restricted regions of the peripheral nervous system. PHN
is, therefore, a type of neuropathic pain that has a regional topographic
restriction. Current clinical practitioners use, among others,
Pregabalin, Gabapentin, anti-depressants such as Cymbalta/Nucynta, traditional
painkillers like tramadol and Oxycontin, and localized patches like lidocaine
and capsaicin.
Pregabalin/Gabapentin
: Analogues of
γ
-Aminobutyric acid (GABA), the chief inhibitory neurotransmitter in the
mammalian central nervous system.
Tapentadol/Tramadol
: Tapentadol
and Tramadol are synthetic opioid drugs, similar to morphine and Oxycodone that
occur naturally, which modulate mu-opioid and other pain receptors to reduce
pain.
Technologies
The acquired patent applications enable
three key drug delivery platform technologies: Once daily (“
Pro24™
”),
gastro-retentive (“
ProRet™
”)
and abuse-deterrent (“
ProProof™
”)
platform technologies. Our technologies are intended to deploy these
three proprietary drug delivery technologies to enable a number of
new-generation drugs with enhanced clinical benefits in multiple therapeutic
areas. Our primary focus is to develop novel and clinically efficient
drugs for chronic and acute pain.
Pro24™:
This is an innovative
technology used to develop very high potency, controlled-release tablets that
enable drug release over a 24-hour period. Pro24™ platform can be used for both
single and combination drugs where the release of one or both drugs can be
controlled over a period. The product design involves both osmotic
and non-osmotic cores that optionally involves spherical and layered active
agents whose release is protected by one or more coatings. The cores
can also include drug matrices depending on the characteristics of an active
agent.
ProRet™:
ProRet™ is
a unique gastro-retentive delivery platform to formulate drugs with a narrow
absorption window. ProRet™ gastro-retentive systems can remain in the gastric
region for several hours thus significantly prolonging the absorption window for
a number of key drugs. ProRet™ system includes both prolonged
resident osmotic cup and pouch based delivery of drugs over 24 hours. We believe
ProRet™’s prolonged gastric retention improves bioavailability, reduces drug
waste, and improves solubility for drugs that are less soluble in a high pH
environment. Its applications include those that require local drug
delivery to the stomach and proximal small intestines.
ProProof™
: ProProof™
abuse-deterrent formulations platform limits the abuse potential of drugs that
are prone for abuse. The technology uses twin methods of efficacy enhancement
and abuse neutralization to achieve its objectives. We believe
ProProof™ has the potential to reduce specific forms of prescription opioid
abuse and can be applied to a number of prescription drugs that are prone for
abuse.
According to the current understanding
of pain treatment methods, opioid painkillers produce their pain relieving
effect by activating an inhibitory pathway in the nervous
system. Inhibitory pathways inhibit the transmission of pain signals
into the brain. There are reports that opioids also stimulate an
excitatory pathway in the nervous system. The excitatory pathway partially
counteracts pain inhibition and is believed to be a major cause of adverse side
effects associated with opioid use, including the development of tolerance and
addiction. At the normal clinical doses, the activation of the
excitatory pathway was previously undetected probably due to masking by the
inhibitory pathway. We believe that the selective blockade of the
excitatory pathway promotes the pain relieving potency of opioid by blocking the
excitatory pain-enhancing effect.
We believe that the excitatory pathway
plays an important role in modulating the adverse side effects of opioid use and
low doses and that opioid antagonists can enhance the clinical efficacy of the
opioids. In the product designs enabled by the acquired patent
applications, this efficacy enhancement is combined with the abuse deterrence
using either the same or a different antagonist, either singly or in combination
with a gelling agent or an irritating agent. The design uses activity
modifiers, physical barriers to tampering, agonist-antagonist formulations and
aversion agents. It is our belief that ProProof™ has the potential to
reduce specific forms of prescription opioid abuse.
We believe our platform technologies
enable drugs that offer enhanced pain relief either at lower dosages and or
reduced tolerance/physical dependence or addiction potential as compared to many
of today’s commonly prescribed opioid painkillers. If approved by the
FDA, we believe our drugs could replace many commonly used opioid painkillers,
diabetic neuropathic pain and fibromyalgia treatments. We also believe our drugs
could be used in chronic pain cases where physicians have been reluctant to
prescribe opioid painkillers due to concerns about adverse side effects or
addiction.
Business
Development Strategies
Our business strategy is focused on the
development and commercialization of differentiated products based on our
proprietary oral drug delivery technologies acquired from Nectid. We
plan to combine known molecules with innovative proprietary technologies to
enhance the therapeutic potential of existing medications that could possibly
provide a revenue stream through licensing and royalty. Project
selection is based on a clear, unmet and under-served market, large business
potential and strong intellectual property protection with
innovation.
In the near term, we intend to proceed
with a comprehensive program to develop and commercialize once-daily drugs for
diabetic neuropathic pain, fibromyalgia, postherpetic neuralgia and
epilepsy. We also have future plans to develop and commercialize
once-daily opioid combinations as well as abuse-deterrent opioid combinations
for moderate to severe pain.
We intend to optimize the use and value
of our drug delivery technologies in three ways. First, we are seeking to
assemble a number of pharmaceutical products that can be highly differentiated
from existing versions of the compounds upon which they are
based. These unique drugs may be promoted together within a specialty
pharmaceutical field, such as pain and ER specialists.
Second, we plan to out-license product
candidates after we have increased their value through our formulation and
clinical development efforts. Third, we plan to enter into
collaborative partnerships whereby the unique capabilities of our technology can
provide value to a partner's product, particularly for non-analgesic drug
markets.
Our goal is to be a drug delivery
company focusing on developing better drugs, initially for pain and later for
therapeutic areas. Our proprietary technologies can be applied not just to pain
drugs, but across therapeutic sectors like psychiatric disorders and Alzheimer’s
disease, where better medication and compliance improves the clinical benefits
and quality of life. We intend to achieve this goal by:
Building Proprietary Drug Delivery
Platforms:
We intend to strengthen the three drug delivery technologies;
ProRet™ , ProProof™ and Pro24™ , that can be used to develop novel
and efficient drugs. While these platform technologies enable a
number of new-generation of drugs with improved clinical benefits in multiple
therapeutic areas, we are focusing initial resources to develop pain drugs, more
specifically abuse deterrent opioids, once daily drugs to treat moderate to
severe pain, diabetic neuropathic pain and fibromyalgia. We believe our drugs
will offer better clinical efficacy with enhanced pain relief and often at lower
doses compared to existing drugs. In case of its abuse deterrent
drugs, our technologies could provide reduced tolerance/physical dependence or
addiction potential without compromising the extent of pain. If
approved by the Food and Drug Administration (“
FDA
”), we
believe our proprietary drugs could replace certain existing pain drugs commonly
used to treat moderate to severe pain, diabetic neuropathic pain and
fibromyalgia.
Building a Drug Franchise in Pain
Medications:
We intend to develop drugs that we believe may
have broad use for patients with moderate to severe pain, diabetic neuropathic
pain and to treat fibromyalgia. We believe this approach may help alleviate
physicians’ current tendency to under-prescribe opioid painkillers and prescribe
off-label drugs for diabetic neuropathic pain and fibromyalgia
Focusing on Clinical Development and
Late Stage Products:
We believe that our clinical development
focus will enable us to generate product revenues earlier than if we were
discovering and developing new chemical entities. We also believe
this focus enables us to explore a wider range of product
candidates
Retaining Significant
Rights:
We currently retain worldwide commercialization rights
to all of our technology and pain management product candidates in all markets
and indications. In general, we intend to independently develop
product candidates through late-stage clinical trials. As a result, we expect to
capture a greater percentage of the profits from drug sales than we would if we
out-licensed our drugs earlier in the development process. In market
segments that require large or specialized sales forces, such as the market for
opioids or diabetic neuropathic pain products, we may seek sales and marketing
alliances with third parties. We believe that such alliances will enable us to
deploy our resources effectively and commercialize our drugs rapidly and
cost-effectively.
Using Our Technology to Develop
Multiple Drugs for Both Pain and Non-Pain Indications:
We are
initially focusing our efforts on developing pain drugs. However, we
believe our technology can be broadly applied to additional therapeutic areas
enabling us to target wider and deeper business opportunities.
Outsourcing Key
Functions:
We intend to outsource preclinical studies,
clinical trials, formulation and manufacturing. We believe outsourcing will
produce significant time savings and allow for more efficient deployment of our
resources.
Products
in Development
We currently have other proprietary
drug candidates in various stages of development. We use our
proprietary technologies, ProRet™, ProProof™ and Pro24™ to develop
novel drugs. We are developing a number of products to the proof of
concept stage before seeking a partner.
PRTT-100:
PRTT-100
is a synergistic combination of Pregabalin/Gabapentin with Tapentadol/Tramadol.
The product is developed using our 24-hours proprietary delivery platform,
Pro24™. We anticipate that PRTT-100 will enable significant reduction
in the dosage of Pregabalin /Gabapentin without compromising the extent of pain
relief.
PRTT-200:
PRTT-200
is a gastro-retentive once daily calcium channel inhibitor to treat diabetic
neuropathic pain and fibromyalgia. It uses Protect’s proprietary
gastro-retentive platform ProRet™ to overcome absorption window
challenges.
PRTT-300:
PRTT-300
is an abuse deterrent once daily opioid combination with antagonist that
provides significant clinical benefit over existing opioid
formulations. It uses Protect’s proprietary abuse deterrent platform
ProProof™ design. We expect that PRTT-300 will enhance analgesic
property by minimizing the side effects of nausea, vomiting, dizziness and head
ache.
Other
Product Candidates
Our acquired patent applications and
technologies also enable us to explore the possible development of other
analgesic drugs that are currently being formulated and
evaluated. These include the following:
PRTT-400:
PRTT-400
is a once daily abuse deterrent opioid formulation with a second analgesic. If
successful, it would be the first once daily and first abuse deterrent
combination of two or more drugs. Though there are number of once daily opioids
and combinations, we are not aware of a single approved once daily combination
of two analgesic drugs.
PRTT-500:
PRTT-500
is a combination of an opioid and selective peripheral opioid receptor
Antagonist such as Methyl Naltrexone or Naloxone
Methiodide. Peripheral opioid receptors are responsible for opioid
induced constipation, opioid induced respiratory depression and post operative
nausea. We believe that approximately half of opioid users are
affected by opioid induced constipation. PRTT-500 is intended to
provide a novel delivery system that is devoid of opioid induced respiratory
depression.
There is no assurance that we will
successfully complete development of any of the above projects in the near
future or than any project will result in a commercially viable
product. We do not plan to conduct significant clinical activities on
these projects until such time as we have additional funding to advance the
projects.
Research
and Development
We have not made any expenditures on
research and development activities prior to acquiring the patent applications
from Nectid. Because we have no research facilities and limited
qualified personnel, we intend to rely on collaborative agreements with other
companies to conduct our research and development activities. We
intend to rely on contractual partners to formulate, test, supply, store and
distribute drug supplies for our clinical trials. Presently, we have
not entered into any such agreements and there is no assurance that we can
secure a favorable partnership arrangement in the future.
Our near term goal is to proceed with a
comprehensive program to develop and commercialize once-daily drugs for diabetic
neuropathic pain, fibromyalgia, postherpetic neuralgia and
epilepsy. Subsequently and as capital and resources permit, we intend
to develop and commercialize once-daily opioid combinations as well as
abuse-deterrent opioid combinations for moderate to severe pain. In
order to conduct our research and development activities we will have to raise
capital, most likely through a private placement of our
securities. We estimate that research and development expenses will
be approximately $2.5 million during the next 12 months. We are
currently exploring possible funding sources, but we have no assurance that we
will be able to raise the necessary funds on terms favorable to the company, or
at all.
Manufacturing
Presently we have no manufacturing or
research and development facilities. We plan to enter into agreements and rely
upon qualified third parties for the formulation and manufacture of our
drugs. These supplies and the manufacturing facilities must comply
with U.S. Drug Enforcement Agency (“
DEA
”)
regulations and current good manufacturing practices enforced by the FDA and
other government agencies. Drug manufacturers are subject to ongoing
periodic, unannounced inspection by the FDA, the DEA and corresponding state and
foreign government agencies to ensure strict compliance with good manufacturing
practices and other government regulations. We plan to continue to
outsource all formulation and manufacturing and related activities.
Marketing
Currently we are engaged in the
research and development of future products. As such time as we have
finalized a commercially viable product, we intend to formulate a comprehensive
marketing plan.
Employees
As of May 31, 2010, we had
two employees. We are presently considering the possibility of
additional employees, but will add employees only as our business demands
warrant and we have the necessary available funds. We also plan to
engage consultants from time to time to perform services on a per diem or hourly
basis.
We have entered into employment
agreements with William D. Abajian, our President and Chief Executive Officer,
and Ramesha Sesha, our Chief Operating Officer. Mr. Sesha’s agreement
is for a term of three years and provides for an annual salary of $250,000 for
the first year, $300,000 for the second year and $350,000 for the third year,
subject to the company having sufficient capitalization . The
agreement is subject to review and revision annually by the board of directors
and may also be supplemented by bonus and/or stock options or warrants, also at
the discretion of the board. The agreement also provides for
customary employee benefits, insurance and expense allowance.
Mr. Abajian’s agreement is also for a
term of three years. Upon the execution of the agreement, we issued 5
million shares of our common stock to Mr. Abajian in consideration for services
in connection with the acquisition of our patents and related technology and
other services performed. The agreement also provides that Mr.
Abajian may earn additional shares of our common stock upon the company
achieving certain funding thresholds as a result of his efforts as set forth
below:
● 1.5
million shares upon the initial financing of $2,000,000; and
● 1.5
million shares of upon the closing of a “pharma deal” that involves either (i) a
licensing deal for one or more of our patents, technologies or products, or (ii)
a development deal with research and development expenses covered, the value of
either “pharma deal” to be a minimum of $3 million.
Mr. Abajian’s agreement may be
supplemented by an annual bonus in either cash and/or stock options at the
discretion of the board. The agreement also provides for customary
employee benefits, insurance and expense allowance.
Intellectual
Properties
We seek to protect our technology by,
among other methods, filing and prosecuting U.S. and foreign patents and patent
applications with respect to our technology and products and their
uses. The acquired patent applications, if successfully granted, will
not expire earlier than September 2028. We currently hold 13 patent
applications.
We plan to prosecute and defend our
patent applications, issued patents and proprietary information. Our
competitive position and potential future revenues will depend in large part
upon our ability to protect our intellectual property from challenges and to
enforce our patent rights against potential infringers. We will
continue to file new patent applications based on additional
developments. If
competitors
are able to successfully challenge the validity of our patent rights, claims,
based on the existence of prior art, tests, experiments or otherwise, they would
be able to market products that contain features and clinical benefits similar
to those of our products, and demand for our products could decline as a
result.
There can be no assurance that any
current or future patent application will result in patents being issued, or
that existing patent pending applications, or any new patents applications, if
issued, will afford meaningful protection from competitors. Also, there can be
no assurance that we will have the financial resources necessary to enforce any
patent rights we may hold. We are not aware of any claim that our patent pending
application may infringe, or will infringe any existing patent. However, in the
event such a claim is made and we are unsuccessful against such claim, we may be
required to obtain licenses to such other patents or proprietary technology in
order to develop or market our services. There can be no assurance that we will
be able to obtain such licenses on commercially reasonable terms or that the
patents underlying the licenses will be valid and enforceable.
If we are unable to secure patent
protection for our technology and products, current competitors and/or other
businesses could duplicate the same technology, products and services in direct
competition with us. Presently, we anticipate filing additional
patent applications if new and/or improved product services are
developed. We do not hold any registered trademarks.
Government
Regulation
Regulation by governmental authorities
in the United States and other countries is a significant factor in the
manufacture and marketing of pharmaceuticals and in our ongoing research and
development activities.
All of our products will require
regulatory approval by governmental agencies prior to commercialization. In
particular, human therapeutic products are subject to rigorous preclinical
testing and clinical trials and other pre-marketing approval requirements by the
FDA and regulatory authorities in other countries. In the United
States, various federal and in some cases state statutes and regulations, also
govern or impact upon the manufacturing, safety, labeling, storage, record
keeping and marketing of our products. The lengthy process of seeking
required approvals and the continuing need for compliance with applicable
statutes and regulations require us to spend substantial
resources. Regulatory approval, when and if obtained, may be limited
in scope which may significantly limit the indicated uses for which our products
may be marketed. Further, approved drugs, as well as their
manufacturers, are subject to ongoing review and discovery of previously unknown
problems with such products which may result in restrictions on their
manufacture, sale or use or in their withdrawal from the market.
Applicable FDA regulations treat our
combination of opioid painkillers, once daily gastro-retentive drugs and once
daily combination drugs as new drugs and require the filing of a New Drug
Application, or NDA, and approval by the FDA prior to commercialization in the
United States. Our clinical trials will seek to demonstrate that our
formulations and designs produce greater beneficial effects than either drug
alone or against an existing drug.
The
Drug Approval Process
We will be required to complete several
activities before we can market any of our drugs for human use in the United
States, including:
● submission
to the FDA of an Investigational New Drug Application (“
IND
”),
that is a request for authorization from the FDA to administer an
investigational drug or biological product to humans, which must become
effective before human clinical trials commence;
● adequate
and well-controlled human clinical trials to establish the safety and efficacy
of the product candidate;
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submission
to the FDA of an NDA; and
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● FDA
approval of the NDA prior to any commercial sale or shipment of the
drug.
Preclinical tests include laboratory
evaluation of product chemistry and formulation, as well as animal studies to
assess the potential safety of the product. Preclinical safety tests must be
conducted by laboratories that comply with FDA regulations regarding Good
Laboratory Practice, or GLP regulations. We plan to conduct and submit the
results of preclinical tests to the FDA as part of our INDs prior to commencing
clinical trials. We may be required to conduct extensive toxicology studies
concurrently with the clinical trials.
Based on preclinical testing, an
IND is filed with the FDA to begin human testing of the drug. The IND becomes
effective if not rejected by the FDA within 30 days. The IND must indicate the
results of previous experiments, how, where and by whom the new studies will be
conducted, the chemical structure of the compound, the method by which it is
believed to work in the human body, any toxic effects of the compound found in
the animal studies and how the compound is manufactured. All clinical trials
must be conducted in accordance with good clinical practice, or GCP,
regulations. In addition, an Institutional Review Board, or IRB, generally
comprised of physicians at the hospital or clinic where the proposed studies
will be conducted, must review and approve the IND. The IRB also continues to
monitor the study. We must submit progress reports detailing the results of the
clinical trials to the FDA at least annually. In addition, the FDA may, at any
time during the 30-day period or at any time thereafter, impose a clinical hold
on proposed or ongoing clinical trials. If the FDA imposes a clinical hold,
clinical trials cannot commence or recommence without FDA authorization and then
only under terms authorized by the FDA. In some instances, the IND application
process can result in substantial delay and expense.
Clinical trials are typically conducted
in three sequential phases that may overlap. Phase I tests typically take
approximately one year to complete. The tests study a drug’s safety profile, and
may include the safe dosage range. Phase I clinical studies also
determine how a drug is absorbed, distributed, metabolized and excreted by the
body, and the duration of its action. In addition, we may, to the extent
feasible, assess pain relief in our Phase I trials. In Phase II
clinical trials, controlled studies are conducted on volunteer patients with the
targeted disease or condition. The primary purpose of these tests is to evaluate
the effectiveness of the drug on the volunteer patients as well as to determine
if there are any side effects. These studies may be conducted concurrently with
Phase I clinical trials. In addition, Phase I/II clinical trials may
be conducted to evaluate not only the efficacy of the drug on the patient
population, but also its safety. During Phase III clinical trials, the drug
is studied in an expanded patient population and in multiple sites. Physicians
monitor the patients to determine efficacy and to observe and report any
reactions that may result from long-term or expanded use of the
drug.
The FDA publishes industry guidelines
specifically for the clinical evaluation of painkillers. We rely in
part on these guidelines to design a clinical strategy for the approval of each
of our product candidates. In particular, FDA guidelines recommend
that we demonstrate efficacy of our new pain drugs in more than one clinical
model of pain. Acceptable clinical models of pain include different
neuropathic pains, fibromyalgia, post-operative pain, and various types of
trauma and arthritis pain. Since models differ in their pain intensity and their
sensitivity to detect pain, we expect to complete several Phase II studies in
multiple clinical models of pain. Upon a clear demonstration of the safety and
efficacy of painkillers in multiple clinical models of pain, the FDA has
historically approved painkillers with broad indications. Such general purpose
labeling often takes the form of “for the management of moderate to severe
pain.”
We plan to formulate the drugs and
carry on the clinical development. We may not successfully complete
Phase I, Phase II or Phase III testing within any specified time
period, or at all, with respect to any of our product candidates. Furthermore,
we or the FDA may suspend clinical trials at any time in response to concerns
that participants are exposed to an unacceptable health risk.
After the completion of clinical
trials, if there is substantial evidence that the drug is safe and effective, an
NDA is filed with the FDA. The NDA must contain all of the information on the
drug gathered to that date, including data from the clinical trials. NDAs are
often over 100,000 pages in length.
The FDA reviews all NDAs submitted
before it accepts them for filing and may request additional information rather
than accepting a NDA for filing. In such an event, the NDA must be resubmitted
with the additional information and, again, is subject to review before filing.
Once the submission is accepted for filing, the FDA begins an in-depth review of
the NDA. Under the Federal Food, Drug and Cosmetic Act, the FDA has
365 days in which to review the NDA and respond to the applicant. The
review process is often significantly extended by FDA requests for additional
information or clarification regarding information already provided in the
submission. The FDA may refer the application to an appropriate advisory
committee, typically a panel of clinicians, for review, evaluation and a
recommendation as to whether the application should be approved.
The FDA is not bound by the
recommendation of an advisory committee. If FDA evaluations of the NDA and the
manufacturing facilities are favorable, the FDA may issue either an approval
letter, or an approvable letter which usually contains a number of conditions
that must be met in order to secure final approval of the NDA. When and if those
conditions have been met to the FDA’s satisfaction, the FDA will issue an
approval letter, authorizing commercial marketing of the drug for certain
indications. If the FDA’s evaluation of the NDA submission or manufacturing
facilities is not favorable, the FDA may refuse to approve the NDA or issue a
not approvable letter.
If the FDA approves the NDA, the
drug becomes available for physicians to prescribe. Periodic reports must be
submitted to the FDA, including descriptions of any adverse reactions reported.
The FDA may request additional post marketing studies, or Phase IV studies, to
evaluate long-term effects of the approved drug.
Other
Regulatory Requirements
The FDA mandates that drugs be
manufactured in conformity with current GMPs. If the FDA approves any of our
product candidates, we will be subject to requirements for labeling,
advertising, record keeping and adverse experience reporting. Failure to comply
with these requirements could result, among other things, in suspension of
regulatory approval, recalls, injunctions or civil or criminal sanctions. We may
also be subject to regulations under other federal, state, and local laws,
including the Occupational Safety and Health Act, the Environmental Protection
Act, the Clean Air Act, national restrictions on technology transfer, and
import, export, and customs regulations. In addition, any of our products that
contain narcotics will be subject to DEA regulations relating to manufacturing,
storage, distribution and physician prescribing procedures. It is possible that
any portion of the regulatory framework under which we operate may change and
that such change could have a negative impact on our current and anticipated
operations.
The Controlled Substances Act imposes
various registrations, record-keeping and reporting requirements, procurement
and manufacturing quotas, labeling and packaging requirements, security controls
and a restriction on prescription refills on certain pharmaceutical products. A
principal factor in determining the particular requirements, if any, applicable
to a product is, its actual or potential abuse profile. The DEA regulates
chemical compounds as Schedule I, II, III, IV or V substances, with
Schedule I substances considered to present the highest risk of substance
abuse and Schedule V substances the lowest risk. Any of our product
candidates that contain a scheduled substance will be subject to regulation by
the DEA.
Competition
Our future success will depend, in
part, upon our ability to develop products and achieve market share at the
expense of existing and established and future products in the relevant target
markets. Existing and future products, therapies, technological approaches or
delivery systems will compete directly with our products. Competing products may
provide greater therapeutic benefits for a specific indication, or may offer
comparable performance at a lower cost. Companies that currently sell generic or
proprietary pain drugs and novel formulations include, but are not limited to,
Pfizer, Depomed, Pain Therapeutics, Roxane Laboratories, Purdue Pharma,
Grunenthal, Janssen Pharmaceutica, Abbott Laboratories, Cephalon, Endo
Pharmaceuticals, Elkins-Sinn, Watson Laboratories, Ortho-McNeil Pharmaceutical
and Forest Pharmaceuticals. Alternative technologies are being developed to
increase opioid potency, as well as alternatives to GABA Analog therapy for pain
management, several of which are in clinical trials or are awaiting approval
from the FDA.
We compete with fully integrated
pharmaceutical companies, smaller companies that are collaborating with larger
pharmaceutical companies, academic institutions, government agencies and other
public and private research organizations. Many of these competitors have pain
products, such as opioids and GABA analogs and SNRIs already approved by the FDA
or in development and operate larger research and development programs in these
fields than we do. In addition, many of these competitors, either alone or
together with their collaborative partners, have substantially greater financial
resources than we do, as well as significantly greater experience
in:
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undertaking
preclinical testing and human clinical
trials;
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obtaining
FDA and other regulatory approvals of
drugs;
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formulating
and manufacturing drugs; and
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launching,
marketing, distributing and selling
drugs.
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Developments by competitors may render
our product candidates or technologies obsolete or non-competitive.
Alternatively, competitors may challenge our patents and prevail in a court of
law rendering our products, even if they are successfully developed, tested and
approved, unmarketable.
Facilities
Our principal offices are located at
759 Bloomfield Ave, Suite 411, West Caldwell, New Jersey
07006. Because all of our products will be developed by contract
manufacturers, we will not initially require production or research
space. Management believes that the current facilities are adequate
for the immediate future.
Industry
Segments
No information is presented regarding
industry segments. We are presently engaged in the development of
certain patents and technology related to drug delivery technologies and
drugs. We have no current plans to participate in another business or
industry. Reference is made to the statements of income included
herein in response to Item 13 of this Form 10 for a report of our operating
history for the past two fiscal years.
We are subject to certain substantial
risks inherent to our business and set forth or referred to
herein. Before considering an investment in our common stock,
prospective investors should carefully consider, among other potential risks,
the following risk factors as well as all other information set forth or
referred to herein. An investment in our shares involves a high
degree of risk. If any of the following events or outcomes actually occur,
business operating results and financial condition would likely
suffer. As a result, the trading price of our common stock could
decline and an investor may lose all or part of the money they invested in our
shares.
Risk
Factors Related to Our Business
Our auditors have expressed a going
concern opinion.
Our independent auditors
include a statement in their report to our financial statements that certain
matters regarding the company raise substantial doubt as to our ability to
continue as a going concern. Note 3 to the financial statements
states that we do not have significant cash or other material assets, nor do we
have an established source of revenues sufficient to cover operating costs and
allow us to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
We
have a limited operating history and have not recorded revenues or profits
since inception. Continuing losses may exhaust capital
resources and force us to discontinue operations.
Although the company was formed in
1983, we have had only limited operations and no significant revenues since
inception. We are considered a development stage company, which are
considered inherently more risky than established companies. Because
we have no earnings history and there is no assurance that we will realize
future revenues, there is doubt as whether we will ever achieve
profitability. If we are unsuccessful in the development and
commercialization of differentiated products based on our proprietary oral drug
delivery technologies, the substantial negative effect on our business would be
substantial and our future would be questionable.
The
success of future operations depends on our ability to develop our patent
applications and technology and generate revenues from the commercialization of
products developed therefrom, which may be subject to many
factors.
Our operations to date have been
limited to acquiring the patent applications and organizing and staffing our
company. We have not yet demonstrated the ability to formulate and
manufacture commercially viable products, obtain regulatory approval or organize
sales and marketing activities. There can be no assurance that we
will be able to develop commercially viable products from our patents and
technology, or that we will realize material revenues or achieve profitability
in the foreseeable future. The potential to generate revenues and
profits from our business depends on many factors, including, but not limited to
the following:
● our
ability to secure adequate funding to complete development of our patents and
technology into commercially viable products and to market those
products;
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our
ability to obtain regulatory approval of our
products;
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the
cost and expenses associated with developing products and gaining
regulatory approvals;
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size and timing of future customer orders, product delivery and customer
acceptance, if required;
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the costs of maintaining and expanding operations;
● our
ability to compete with existing and new entities that offer the same or similar
products and services; and
● our
ability to attract and retain a qualified work force as business
warrants.
There can be no assurance that we will
be able to achieve any of the foregoing factors or realize profitability in the
immediate future, or at any time.
If
outside collaborators fail to devote sufficient time and resources to our drug
development programs, or if their performance is substandard, our regulatory
submissions and product introductions will be materially and negatively
affected.
We depend on independent investigators
and collaborators, such as universities and medical institutions, to conduct our
clinical trials under agreements with us. Presently, we do not have any
definitive agreements for the performance of these duties. These
collaborators are not our employees and we cannot control the amount or timing
of resources that they devote to our programs. These investigators
may not assign as great a priority to our programs or pursue them as diligently
as we would if we were undertaking such programs ourselves. If
outside collaborators fail to devote sufficient time and resources to our drug
development programs, or if their performance is substandard, the approval of
our regulatory submissions and our introductions of new drugs will be
delayed.
Our collaborators may also have
relationships with other commercial entities, some of which may compete with
us. If outside collaborators assist our competitors to our detriment,
the approval of our regulatory submissions will be delayed and future sales from
our products will be less than expected.
If
we are unable to design, conduct and complete clinical trials successfully, we
will not be able to submit a new drug application to the FDA.
In order to obtain FDA approval of any
of our product candidates, we must submit to the FDA a New Drug Application that
demonstrates the product candidate is safe for humans and effective for its
intended use. This demonstration requires significant research and animal tests,
which are referred to as preclinical studies, as well as human tests, which are
referred to as clinical trials.
We have acquired patent applications
that potentially enable several drug candidates. We are currently seeking
capital to complete technology optimization for clinical
development. We expect to complete technology development, production
of clinical supplies and patient enrollment for PRTT-100, PRTT-200 and PRTT-300
during the current fiscal year and early next year. If clinical data from the
studies does not support our hypothesis, we may also elect to discontinue
further development of drug candidates that use our technology.
Product development and clinical trials
are very expensive. They are difficult to design and implement, in
part because they are subject to rigorous requirements. The clinical
trial process is also time consuming. Furthermore, if we or the FDA
believe that production process may not be safe, or the participating patients
are being exposed to unacceptable health risks, we will have to suspend
development and or clinical trials. Failure can occur at any stage of
the development and clinical trials, and we could encounter problems that cause
us to abandon development and clinical trials or to repeat formulations and or
clinical studies.
Success
in early trials may not predict success of future trials.
Success in formulation, manufacturing
and pre-clinical testing and early clinical trials does not ensure that products
will be successful. Results of later clinical trials may not replicate the
results of prior clinical trials and pre-clinical testing.
Even if formulation, manufacturing and
clinical trials are completed as planned, their results may not support our
product claims. The clinical trial process may fail to demonstrate
that our product candidates are safe for humans and effective for indicated
uses. Such failure would cause us to abandon a product candidate and
could delay development of other product candidates.
Developments
by competitors may establish standards of care that affect our ability to
conduct our clinical trials as planned.
Changes in standards related to
clinical trial design could affect our ability to design and conduct clinical
trials as planned. For example, regulatory authorities may not allow
us to compare our drug to a placebo in a particular clinical indication where
approved products are available. In that case, both the cost and the
amount of time required to conduct a trial could increase and have a negative
affect on our financial condition
If
we fail to obtain necessary regulatory approvals, we will not be allowed to
commercialize our drugs and we will not generate revenues.
Satisfaction of all regulatory
requirements typically takes many years, is dependent upon the type, complexity
and novelty of the product candidate, and requires the expenditure of
substantial resources for research and development and testing. Our
research and clinical approaches may not lead to drugs that the FDA considers
safe for humans and effective for indicated uses. The FDA may require
us to conduct additional clinical testing, in which case we would have to expend
additional time and resources. The approval process may also be delayed by
changes in government regulation, future legislation or administrative action or
changes in FDA policy that occur prior to or during our regulatory review.
Delays in obtaining regulatory approvals may:
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delay
commercialization of, and product revenues from, our product
candidates;
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impose
costly procedures on us; and
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diminish
the competitive advantages that we would otherwise
enjoy.
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Even if we comply with all FDA
requests, the FDA may ultimately deny one or more of our NDAs, and we may never
obtain regulatory approval for any of our product candidates. If we
fail to achieve regulatory approval of any of our leading product candidates we
will have fewer saleable products and corresponding product
revenues. Even if we receive regulatory approval of our products,
such approval may involve limitations on the indicated uses or marketing claims
we may make for our products. Further, later discovery of previously unknown
problems could result in additional regulatory restrictions, including
withdrawal of products. The FDA may also require us to commit to
perform post-approval studies, for which we would have to expend additional
resources, which could have an adverse effect on our operating results and
financial condition.
In foreign jurisdictions, we must
receive marketing authorizations from the appropriate regulatory authorities
before we can commercialize our drugs. Foreign regulatory approval processes
generally include all of the aforementioned requirements and risks associated
with FDA approval.
Government
agencies may establish and promulgate guidelines that directly apply to us and
our products that may affect the use of our drugs.
Government agencies, professional
societies, and other groups may establish guidelines that apply to our drugs.
These guidelines could address such matters as usage and dose, among other
factors. Application of such guidelines could mitigate the use of our
drugs.
If
physicians and patients do not accept and use our drugs, we will not achieve
sufficient product revenues and our business will suffer.
Even if we are successful in
successfully formulating, manufacturing and testing our drugs and if FDA
approves the drugs, physicians and patients may not accept and use them.
Acceptance and use of our drugs will depend on a number of factors
including:
● perceptions
by members of the healthcare community, including physicians, about the safety
and effectiveness of our drugs;
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cost-effectiveness
of our drugs relative to competing
products;
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● availability
of reimbursement for our products from government or healthcare payers;
and
● effectiveness
of marketing and distribution efforts by us and our licensees and distributors,
if any.
We expect to rely on sales generated by
our current lead product candidates for substantially all of our product
revenues for the foreseeable future. However, we have not performed a
feasibility study related to the potential market of our proprietary oral drug
delivery technologies, nor have we commissioned anyone else to do so. Because
there has not been a market analysis made, we have no evidence to support the
potential demand for our future products. Failure of our products and
services to achieve and maintain meaningful levels of market acceptance would
materially and adversely affect our business, financial condition and results of
operations and market penetration.
We
plan to rely on third party commercial drug manufacturers that could fail to
devote sufficient time and resources to our concerns resulting in delayed
product introductions and higher costs than expected.
We have no manufacturing facilities and
limited experience in drug product development and commercial manufacturing. We
lack the resources and expertise to formulate, manufacture or test the technical
performance of our product candidates. We intend to rely on a very limited
number of company personnel and a small number of contract manufacturers and
other vendors to formulate, test, supply, store and distribute drug supplies for
our clinical trials. If these manufacturers fail to devote sufficient
time and resource to our product candidates, or if their performance is
substandard, our clinical trials and product introduction would be adversely
affected. Drug manufacturers are subject to ongoing periodic,
unannounced inspection by the FDA, the DEA and corresponding state and foreign
government agencies to ensure strict compliance with good manufacturing
practice, other government regulations and corresponding foreign
standards. We have no control over third-party manufacturers’
compliance with these regulations and standards.
The use of
alternate manufacturers may be difficult because of the limited number of
potential manufacturers that have the necessary governmental licenses to produce
narcotic products.
The FDA must approve any alternative
manufacturer of our product before we may use them to produce our supplies and
products. It may be difficult or impossible for us to find a replacement
manufacturer on acceptable terms quickly, or at all. Our contract manufacturers
and vendors may not perform as agreed or may not remain in the contract
manufacturing business for the time required to successfully produce, store and
distribute our products. If any third party manufacturer makes
improvements in the manufacturing process for our products, we may not own, or
may have to share, the intellectual property rights to such
innovation.
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Our
collaborative agreements may not succeed or may give rise to disputes over
intellectual property.
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Our strategy to focus on drug discovery
of novel drugs discovered by third parties requires us to enter into
collaborative agreements from time to time. Collaborative agreements are
generally complex and contain provisions that could give rise to legal disputes.
Such disputes can delay the development of potential new drug products, or can
lead to lengthy, expensive litigation or arbitration. Collaborative agreements
often take longer to conclude and may be more expensive than originally
expected. Other factors relating to collaborative agreements may adversely
affect the success of our potential products, including:
● the
development of parallel products by our collaborators or by a
competitor;
● arrangements
with collaborative partners that limit or preclude us from developing certain
products or technologies;
● premature
termination of a collaborative agreement; or
● failure
by a collaborative partner to devote sufficient resources to the development of
our potential products.
If
we are unable to develop our own sales, marketing and distribution capabilities,
or if we are not successful in contracting with third parties for these services
on favorable terms, our product revenues could be adversely
affected.
We currently have no sales, marketing
or distribution capabilities. In order to commercialize our products, if any are
approved by the FDA, we will either have to develop such capabilities internally
or collaborate with third parties who can perform these services for us. If we
decide to commercialize any of our drugs ourselves, we may not be able to hire
the necessary experienced personnel and build sales, marketing and distribution
operations which are capable of successfully launching new drugs and generating
sufficient product revenues. In addition, establishing such operations will take
time and involve significant expense.
If we decide to enter into co-promotion
or other licensing arrangements with third parties, we may be unable to locate
acceptable collaborators because the significant number of recent business
combinations among pharmaceutical companies has resulted in a reduced number of
potential future collaborators. Even if we are able to identify one or more
acceptable collaborators, we may not be able to enter into any collaborative
arrangements on favorable terms, or at all.
In addition, due to the nature of the
market for pain management products, it may be necessary for us to license all,
or substantially all of our product candidates to a single collaborator, thereby
eliminating our opportunity to commercialize other pain management products
independently. If we enter into any collaborative arrangements, our product
revenues are likely to be lower than if we marketed and sold our products
ourselves.
Any revenues we receive will depend
upon the collaborators’ efforts, which may not be adequate due to lack of
attention or resource commitments, management turnover, change of strategic
focus, further business combinations or other factors outside of our control.
Depending upon the terms of our collaboration, the remedies we have against an
under-performing collaborator may be limited. If we were to terminate the
relationship, it may be difficult or impossible to find a replacement
collaborator on acceptable terms, or at all.
If
we cannot compete successfully for market share against other drug companies, we
may not achieve sufficient product revenues and our business will
suffer.
The market for our product candidates
is characterized by intense competition and rapid technological advances. If our
products receive FDA approval, they will compete with a number of existing and
future drugs and therapies developed, manufactured and marketed by others.
Existing or future competing products may provide greater therapeutic
convenience or clinical or other benefits for a specific indication than our
products, or may offer comparable performance at a lower cost. If our products
are unable to capture and maintain market share, we may not achieve sufficient
product revenues and our business will suffer.
We will compete for market share
against fully integrated pharmaceutical companies or other companies that are
collaborating with larger pharmaceutical companies, academic institutions,
government agencies and other public and private research organizations. Many of
these competitors have opioid painkillers already approved or in development. In
addition, many of these competitors, either alone or together with their
collaborative partners, operate larger research and development programs and
have substantially greater financial resources than we do, as well as
significantly greater experience in:
● developing
drugs;
● undertaking
preclinical testing and human clinical trials;
● obtaining
FDA and other regulatory approvals of drugs;
● formulating
and manufacturing drugs; and
● launching,
marketing, distributing and selling drugs.
Developments
by competitors may render our products or technologies obsolete or
non-competitive.
Alternative technologies, drugs and
products are being developed by other companies to improve or replace the use of
opioids and calcium channel inhibitors and for pain management, several of which
are in clinical trials or are awaiting approval from the FDA. In addition,
companies that sell generic opioid and calcium channel inhibitors, such as
gabapentin, represent substantial competition. Most of these organizations
competing with us have substantially greater capital resources, larger research
and development staffs and facilities, greater experience in drug development
and in obtaining regulatory approvals and greater manufacturing and marketing
capabilities than we do. These organizations also compete with us to attract
qualified personnel and partners for acquisitions, joint ventures or other
collaborations.
If
we are unable to protect our intellectual property our competitors could develop
and market products with similar features that may reduce demand for our
products.
Our future success, competitive
position and potential revenues will depend in part on our ability to protect
our intellectual property. If either we, or our other collaborators fail to
file, prosecute or maintain certain patents, our competitors could market
products that contain features and clinical benefits similar to those of our
products, and demand for our products could decline as a
result. Also, it may be possible for unauthorized third parties to
copy or reverse engineer aspects of our products, develop similar products
independently or otherwise obtain and use information that we regard as
proprietary. Policing the unauthorized use of our technology and
products will be difficult. Litigation may be necessary in the future to enforce
our intellectual property rights, to protect our trade secrets or patents that
we may obtain, or to determine the validity and scope of the proprietary rights
of others.
We intend to file additional patent
applications relating to our technology, products and processes. We may direct
Nectid, Inc. or our collaborators to file additional patent applications
relating to the licensed technology or we may do so ourselves. However, our
competitors may challenge, invalidate or circumvent any of our current or future
patents. These patents may also fail to provide us with meaningful competitive
advantages.
We
may become involved in expensive litigation or other legal proceedings related
to our existing intellectual property rights, including patents.
We expect to rely upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain our competitive position. Others may
independently develop substantially equivalent proprietary information or be
issued patents that may prevent the sale of our products or know-how, or require
us to license such information and pay significant fees or royalties in order to
produce our products.
Our technology could infringe upon
claims of patents owned by others. If we were found to be infringing on a patent
held by another, we might have to seek a license to use the patented technology.
In that case, we might not be able to obtain such a license on terms acceptable
to us, or at all. If a legal action were to be brought against us or our
licensors, we could incur substantial defense costs and any such action might
not be resolved in our favor. If such a dispute were to be resolved against us,
we could have to pay the other party large sums of money and our use of our
technology and the testing, manufacture, marketing or sale of one or more of our
proposed products could be restricted or prohibited.
The
DEA limits the availability of the active ingredients in our current product
candidates and, as a result, our quota may not be sufficient to complete
clinical trials, meet commercial demand or may result in clinical
delays.
The DEA regulates chemical compounds as
Schedule I, II, III, IV or V substances, with Schedule I substances
considered to present the highest risk of substance abuse and Schedule V
substances the lowest risk. The active ingredients in some of our current
product candidates, including Tramadol, Tapentadol, or Morphine, Oxycodeine are
listed by the DEA as Schedule II or III substances under the Controlled
Substances Act of 1970. Consequently, their manufacture, shipment, storage, sale
and use are subject to a high degree of regulation. For example, all
Schedule II drug prescriptions must be signed by a physician, physically
presented to a pharmacist and may not be refilled without a new prescription.
Furthermore, the amount of Schedule II substances we can obtain for
clinical trials and commercial distribution is limited by the DEA and our quota
may not be sufficient to complete clinical trials or meet commercial demand.
There is a risk that DEA regulations may interfere with the supply of the drugs
used for our drug formulation and formulated drugs used in our clinical trials,
and in the future, our ability to produce and distribute our products in the
volume needed to meet commercial demand.
Conducting
clinical trials of our product candidates exposes us to expensive product
liability claims and we may not be able to obtain or maintain product liability
insurance on reasonable terms or at all.
The risk of product liability is
inherent in the testing of medical products. If we cannot successfully defend
ourselves against product liability claims, we may incur substantial liabilities
or be required to limit or terminate testing of one or more of our
products. Our inability to obtain sufficient product liability
insurance at an acceptable cost to protect against potential product liability
claims could prevent or inhibit the commercialization of our products. We
currently do not carry clinical trial insurance or product liability insurance.
We may not be able to obtain such insurance at a reasonable cost, if at all. If
our agreements with any future corporate collaborators entitle us to
indemnification against product liability losses, such indemnification may not
be available or adequate should any claim arise.
Our
ability to generate product revenues will be diminished if we fail to obtain
acceptable prices or an adequate level of reimbursement for our products from
healthcare payers.
Our ability to commercialize our drugs,
alone or with collaborators, will depend in part on the extent to which
reimbursement will be available from:
● government
and health administration authorities;
● private
health maintenance organizations and health insurers; and
● other
healthcare payers.
Significant uncertainty exists as to
the reimbursement status of newly approved healthcare products. Healthcare
payers, including Medicare, health maintenance organizations and managed care
organizations, are challenging prices charged for medical products and services
and/or are seeking pharmacoeconomic data to justify formulary acceptance and
reimbursement practices. Government and other healthcare payers increasingly are
attempting to contain healthcare costs by limiting both coverage and the level
of reimbursement for drugs and by refusing, in some cases, to provide coverage
for uses of approved products for disease indications for which the FDA has or
has not granted labeling approval. Third-party insurance coverage may not be
available to patients for any products we discover and develop, alone or with
collaborators. If government and other healthcare payers do not provide adequate
coverage and reimbursement levels for our products, market acceptance could be
limited.
Law
enforcement concerns over diversion of opioids and social issues around abuse of
opioids may make the regulatory approval process very difficult for our drug
candidates.
Media stories regarding the diversion
of opioids and other controlled substances are commonplace. Law enforcement
agencies or regulatory agencies may apply policies that seek to limit the
availability of opioids. Such efforts may adversely affect the regulatory
approval process for our drug candidates.
If
we cannot raise adequate capital on acceptable terms, we may be unable to
complete planned formulation, manufacturing and additional clinical trials of
any or some of our product candidates.
We plan to fund our near term
operations with proceeds from the sale of equity or debt securities, either
privately or publicly. No assurance can be made that such financing
will be available on acceptable terms, or at all. Debt
financing could be in the form of a loan from an individual or financial
institution. Such loans could put us at risk for amounts greater than
our assets and, if such loan is not promptly repaid, could result in
bankruptcy. In such case, our common stock would most likely become
worthless. Equity financing could take the form of either a private
placement or a secondary public offering. Even if we succeed in
selling additional equity or debt securities, existing stockholders’ ownership
percentage would be reduced and new investors may demand rights, preferences or
privileges senior to those of existing stockholders.
If we do not succeed in raising
additional funds, we may be unable to complete formulations, conduct the planned
clinical trials or obtain FDA approval of our product candidates. In
that event we could be forced to discontinue product development, reduce sales
and marketing efforts and forego attractive business opportunities.
Because we are preparing to develop
and market new products and we are significantly smaller than the majority of
our competitors, we may lack the financial resources required to capture a
significant market share
.
The future market for our drugs derived
from our technology will be highly competitive and rapidly changing. We are
significantly smaller than most of our competitors and face such competition on
a local, regional and international basis. If we compete for the same
geographical markets, our competitors’ financial strength could prevent us from
capturing those markets. Additional new competitors may enter the
market and competition may intensify. Our inability to successfully
compete with companies offering similar products will have a material, negative
impact on our results of operations.
Our
future success depends on retaining existing key employees and hiring and
assimilating new key employees.
In order to achieve success, we must
retain our current officers, particularly our Chief Executive Officer and Chief
Operating Officer, and also be able to attract new, qualified personnel as
needed. We anticipate securing key employees by using employment
contracts. Our ability to attract and retain key personnel is
influenced by a variety of factors, including compensation, which could be
adversely affected by our financial or market performance. It would
be difficult for us to replace key individuals. Additionally, as we grow we will
need to hire additional qualified key personnel. We may not be able
to identify and attract high quality employees or successfully assimilate new
employees into our existing management structure.
Competition for qualified personnel in
the pharmaceutical industry is intense. We will compete for qualified
individuals with numerous biopharmaceutical companies, universities and other
research institutions, however there is no assurance that our search will be
successful. Attracting and retaining qualified personnel will be
critical to our success.
As
a reporting company under the Securities Exchange Act of 1934, our cost of doing
business will increase significantly because of necessary expenses, including
compliance with SEC reporting requirements.
Pursuant to the regulations under the
Exchange Act, we will incur significant legal, accounting and other expenses to
comply with certain SEC requirements, in particular, the Sarbanes-Oxley Act of
2002. Sarbanes-Oxley and other rules implemented by the SEC, require
management to assess its internal controls over financial reporting and require
auditors to attest to that assessment. Current
regulations require us to include this assessment and attestation in
our annual report on Form 10-K.
Management will need to invest
significant time and energy to stay current with the requisite reporting
responsibilities of the Exchange Act, which will limit their time they can apply
to other tasks associated with operating company business. Management
estimates that compliance with the Exchange Act reporting requirements will cost
in excess of $35,000 annually. This is in addition to other costs of
doing business. It is important that we maintain adequate cash flow,
not only to operate our business, but also to pay the legal and accounting costs
associated with reporting requirements. If we fail to pay these costs
as such costs are incurred, we could become delinquent in our reporting
obligations and our shares may no longer remain qualified for quotation on a
public market, if one should develop. Further, investors may lose confidence in
the reliability of our financial statements causing our stock price to
decline.
Risks
Relating to Ownership of Our Common Stock
There
is a limited public trading market for our common stock.
Our common stock is currently traded in
the over-the-counter market and included on the Pink Sheets under the trading
symbol “PRTT”. Following the filing of this registration statement
with the SEC, we intend to request a broker/dealer to make an initial
application to the Financial Industry Regulatory Authority to have our shares
quoted on the OTC Bulletin Board (“
OTCBB
”). Inclusion
on the OTCBB would permit price quotations for our shares to be published by
that service. However, we do not anticipate a substantial public trading market
in our shares in the immediate future.
Except for the application to the
OTCBB, there are no plans, proposals, arrangements or understandings with any
person concerning the development of a trading market in any of our securities.
There can be no assurance that our shares will be accepted for trading on the
OTCBB or any other recognized trading market. Also, there can be no
assurance that an active public trading market will develop following acceptance
by the OTCBB or at any other time in the future or, that if such a market does
develop, that it can be sustained.
Only companies that report their
current financial information to the SEC may have their securities included on
the OTCBB. Therefore, we must keep current in our filing obligations with the
SEC, including periodic and annual reports and the financial statements required
thereby. In the event that we become delinquent in our filings or
otherwise lose our status as a "reporting issuer," any future quotation of our
shares on the OTC Bulletin Board would be jeopardized.
A number of states require that an
issuer's securities be registered in their state or appropriately exempted from
registration before the securities are permitted to trade in that state.
Presently, we have no plans to register our securities in any particular
state. Whether stockholders may trade their shares in a particular
state is subject to various rules and regulations of that state.
The
stock price of our common stock in the public market may be volatile and subject
to numerous factors.
There can be no assurance that our
shares will be accepted for trading on the OTC Bulletin Board or other
recognized trading market, or that if they are, there will be an active trading
market for the shares. Accordingly, it could be difficult for holders
of our common stock to liquidate their shares. Any trading market for
our shares will most likely be very volatile and subject to numerous factors,
many beyond our control. Some of the factors that may influence the
price of our shares are:
|
|
●
|
our
ability to develop our patents and technology into commercially viable
products;
|
● our
ability to achieve and maintain profitability;
● changes in
earnings estimates and recommendations by financial analysts;
● actual or
anticipated variations in our quarterly and annual results of
operations;
● changes in
market valuations of similar companies;
● announcements
by us or our competitors of significant contracts, new products or drugs,
acquisitions, commercial relationships, joint ventures or capital commitments;
and
● general
market, political and economic conditions.
In the past, following periods of
extreme volatility in the market price of a company's securities, securities
class action litigation has often been instituted. A securities class action
suit against us could result in substantial costs and divert our management's
time and attention, which would otherwise be used to benefit our
business.
Future
operating results are difficult to predict.
We may experience significant
quarter-to-quarter fluctuations in revenues and net income
(loss). Initially, we will be dependent on securing funding to
complete development of our proprietary oral drug delivery
technologies. Thus, we believe that quarter-to-quarter comparisons of
our historical operating results will not be a good indication of future
performance. It is likely that in some future quarter, operating
results may fall below expectations of securities analysts and investors, which
would have negative impact on the price of our common stock.
Effective
voting control of our company is held by directors and certain principal
stockholders.
Approximately 98% of our outstanding
shares of common stock are held by our directors and a small number of principal
stockholders. These persons have the ability to exert significant
control in matters requiring a stockholder vote and may have interests that
conflict with other stockholders. As a result, a relatively small
number of stockholders acting together, have the ability to control all matters
requiring stockholder approval, including the election of directors and approval
of acquisitions, mergers and other significant corporate
transactions. This concentration of ownership may have the effect of
delaying, preventing or deterring a change in control of our company. It could
also deprive stockholders of an opportunity to receive a premium for their
shares as part of a sale of our company and it may affect the market price of
our common stock.
We
do not expect to pay dividends in the foreseeable future, which could make our
stock less attractive to potential investors.
We anticipate that we will retain any
future earnings and other cash resources for operation and business development
and do not intend to declare or pay any cash dividends in the foreseeable
future. Any future payment of cash dividends will be at the
discretion of our board of directors after taking into account many factors,
including operating results, financial condition and capital
requirements. Corporations that pay dividends may be viewed as a
better investment than corporations that do not.
Trading
of our shares in the public market may be subject to certain "penny stock”
regulation which could have a negative effect on the price of our shares in the
public market.
Public trading of our common stock,
whether on the Pink Sheets or the OTCBB, if accepted, may be subject to certain
regulations commonly referred to as penny stock rules. A penny stock
is generally defined to be any equity security that has a market price less than
$5.00 per share, subject to certain exceptions. If our stock is
deemed to be a penny stock, trading in the shares will be subject to additional
sales practice requirements on broker-dealers. These may require a
broker-dealer to make a special suitability determination for purchasers of
penny stocks and to receive the purchaser's prior written consent to the
transaction. A broker-dealer may also be required to deliver to a
prospective purchaser of a penny stock, prior to the first transaction, a risk
disclosure document relating to the penny stock market.
Consequently, penny stock rules may
restrict the ability of broker-dealers to trade and/or maintain a market in our
common stock and may affect the ability of stockholders to sell their
shares. These requirements may be considered cumbersome by
broker-dealers and could impact the willingness of a particular broker-dealer to
make a market in our shares, or they could affect the price at which our shares
trade. Also, many prospective investors may not want to get involved
with the additional administrative requirements, which may have a material
adverse effect on the trading of our shares.
Future
sales or the potential for sale of a substantial number of shares of our common
stock, could cause our market value to decline.
We currently have outstanding
43,368,012 shares of common stock, of which 42,803,112 shares are considered
restricted securities and may be sold only pursuant to a registration statement
or the availability of an appropriate exemption from
registration. Sales of a substantial number of these shares in the
public markets, or the perception that these sales may occur, could cause the
market price of our common stock to decline and materially impair our ability to
raise capital through the sale of additional equity securities.
|
Item
2.
|
Financial
Information
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The following information should be
read in conjunction with the financial statements and related notes thereto
included elsewhere in this Form 10.
We are considered a development stage
company with limited capital and no current revenues. We do not
expect to realize any revenues until we are successful in developing, achieving
approval and marketing one or more of our drug delivery technologies or
solutions. We anticipate that in the near term, ongoing expenses,
including the costs associated with the preparation and filing of this
registration statement, will be paid for by advances from stockholders or from
the private sale of securities, either debt or equity. However, there
is no assurance that we will be able to realize such funds on terms favorable to
us, or at all.
Results
of Operations
We did not realized any revenues for
the years ended December 31, 2009 and 2008, nor did we realize any revenues
during the three month periods ended March 31, 2010 and 2009. General
and administrative expenses for 2009 were $2,150 compared to $1,605 for 2008,
resulting in a net loss of $2,150 for 2009 and $1,605 compared for
2008. General and administrative expenses for the three months ended
March 31, 2010 were $1,665 compared to $0 for the 2009 period, resulting in a
net loss of $1,665 for the 2010 period and $0 for the 2009
period.
Liquidity
and Capital Resources
Total assets at March 31, 2010 were
$1,250,000, representing the acquired patent applications, compared to $0 assets
at fiscal year end December 31, 2009. Total liabilities at March 31,
2010 were $6,896, consisting of $5,165 in accounts payable and $1,731 in payable
related party. At December 31, 2009, total liabilities were $5,231
consisting of $3,500 in accounts payable and $1,731 in payable related
party.
Because currently we have no revenues
and only limited cash reserves, for the immediate future we will have to rely on
our directors and/or stockholders to pay expenses or raise funds through the
private placement of securities. There is no assurance that we will
be able to raise adequate capital in the immediate future to satisfy cash
needs. At March 31, 2010, we had stockholders’ equity of $1,245,194
compared to a stockholders’ deficit of $5,231 at December 31,
2009. The increase in equity is directly related to the acquisition
of patents.
In the opinion of management, inflation
has not and will not have a material effect on the ongoing operations of our
company.
Plan
of Operation
Protect Pharmaceutical is developing
new generation drug delivery technologies that enable products with improved
clinical benefits. We believe our drugs will offer enhanced pain
relief and reduced tolerance/physical dependence, reduced addiction potential
and side effects compared to existing neuropathic and fibromyalgia drugs and
opioid painkillers. We will conduct our research and development
through collaborative programs. We anticipate relying on arrangements with third
party drug developers such as contract research organizations and clinical
research sites for a significant portion of our product development
efforts.
We acquired a portfolio of patent
applications in March 2010, although we are yet to formulate products or receive
approvals from regulatory agencies or generate any revenues from product sales.
We have not been profitable since our inception through March 31,
2010.
We expect to incur significant
operating losses for the next several years and until we are able to formulate a
commercially viable product. We also expect to continue to incur
significant operating and capital expenditures and anticipate that our expenses
will increase substantially in the foreseeable future as we:
● continue
to undertake formulation of novel products and subsequent preclinical
and clinical trials for our product candidates;
● seek
regulatory approvals for our product candidates;
● develop,
formulate, manufacture and commercialize our drugs;
● implement
additional internal systems and develop new infrastructure;
● acquire
or in-license additional products or technologies, or expand the use of our
technology;
● maintain,
defend and expand the scope of our intellectual property; and
● hire
additional personnel.
Product revenue will depend on our
ability to receive regulatory approvals for, and successfully market, our
product candidates. In the event that our development efforts result in
regulatory approval and successful commercialization of our product candidates,
we will generate revenue from direct sales of our products and/or, if we license
our products to future collaborators, from the receipt of license fees and
royalties from licensed products.
Management estimates that our research
and development expenses for the next 12 months will be approximately $2.5
million, primarily for research and pilot studies. We also estimate
that other expenses, including personnel, general and administrative and
miscellaneous expenses could be as much as $1.5 million during the same time
period. Because we currently have no revenues, most likely the only
source of funding these expenses will be through he private sale of our
securities, either equity or debt. We are currently exploring
possible funding sources, but we have not entered into any arrangements or
agreements for funding as of this time. If we are unable to raise the
necessary funding, our research and development plans will be delayed
indefinitely. There can be no assurance that we will be able to raise
the funds necessary to carry out our business plan on terms favorable to the
company, or at all.
Net
Operating Loss
We have accumulated approximately
$21,150 of net operating loss carryforwards as of December 31,
2009. This loss carry forward may be offset against taxable income
and income taxes in future years and expires starting in the year 2010 through
2030. The use of these losses to reduce future income taxes will
depend on the generation of sufficient taxable income prior to the expiration of
the net operating loss carryforwards. In the event of certain changes
in control, there will be an annual limitation on the amount of net operating
loss carryforwards which can be used. No tax benefit has been
reported in the financial statements for fiscal years ended December 31, 2009
and 2008 or the three months ended March 31, 2010 because it has been fully
offset by a valuation reserve. The use of future tax benefit is
undeterminable because presently we have not started full
operations.
Recent
Accounting Pronouncements
In October 2009, the Financial
Accounting Standards Board (“
FASB
”)
issued
Accounting Standards
Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation
of Convertible Debt Issuance or Other Financing
. This Accounting
Standards Update amends FASB Accounting Standard Codification for EITF
09-1.
In October 2009, the FASB issued
Accounting Standards Update 2009-14,
Software (Topic 985): Certain Revenue Arrangements That Include Software
Elements
. This update changed the accounting model for revenue
arrangements that include both tangible products and software elements.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. We do not expect the provisions of ASU 2009-14 to have a material
effect on our financial position, results of operations or cash
flows.
In October 2009, the FASB issued
Accounting Standards Update 2009-13,
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements
. This update addressed the accounting for
multiple-deliverable arrangements to enable vendors to account for products or
services (deliverables) separately rather than a combined unit and will be
separated in more circumstances that under existing US GAAP. This amendment has
eliminated that residual method of allocation. Effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. We do not
expect the provisions of ASU 2009-13 to have a material effect on our financial
position, results of operations or cash flows.
In September 2009, the FASB issued
Accounting Standards Update
2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in
Certain Entities That Calculate Net Asset Value per Share (or its
equivalent)
. This update provides amendments to Topic 820 for the fair
value measurement of investments in certain entities that calculate net asset
value per share (or its equivalent). It is effective for interim and annual
periods ending after December 15, 2009. Early application is permitted in
financial statements for earlier interim and annual periods that have not been
issued. We do not expect the provisions of ASU 2009-12 to have a material effect
on our financial position, results of operations or cash flows.
In July 2009, the FASB ratified the
consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1,
(ASC Topic 470)
Accounting for
Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance
("EITF 09-1"). The provisions of EITF 09-1, clarifies the
accounting treatment and disclosure of share-lending arrangements that are
classified as equity in the financial statements of the share lender. EITF 09-1
is effective for fiscal years that beginning on or after December 15, 2009 and
requires retrospective application for all arrangements outstanding as of the
beginning of fiscal years beginning on or after December 15, 2009.
We do not presently own any property,
but instead we lease a small office in West Caldwell, New Jersey, which is used
as general office space. We believe that this facility will be adequate and
suitable for our immediate current needs.
|
Item
4.
|
Security
Ownership of Certain Beneficial Owners and
Management
|
The following table sets forth
information, based upon stockholder records and the representations of our
officers and directors, as of June 8, 2010, with respect to each person known to
own beneficially more than 5% of the outstanding common stock, each director and
all directors and officers as a group. The address of each person
listed below, unless otherwise indicated, is c/o Protect Pharmaceutical
Corporation, 759 Bloomfield Ave, Suite 411, West Caldwell, New Jersey
07006.
|
Name and Address
|
|
Amount and Nature of
|
|
|
Percent
|
|
|
of Beneficial Owner
|
|
Beneficial Ownership
|
|
|
of Class
(1)
|
|
|
Directors and Executive
Officers
|
|
|
|
|
|
|
|
William
D. Abajian
|
|
|
5,000,000
|
|
|
|
11.5%
|
|
|
Anna
E. Gluskin
|
|
|
20,000
|
|
|
|
.05%
|
|
|
Gerald
Bernstein, MD
|
|
|
20,000
|
|
|
|
.05%
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
Nectid
Inc.
(2)
|
|
|
5,000,000
|
|
|
|
11.5%
|
|
|
116,
Village Boulevard
|
|
|
|
|
|
|
|
|
|
Princeton,
NJ 0854
|
|
|
|
|
|
|
|
|
|
Edward
F. Cowle
|
|
|
8,250,000
|
|
|
|
19.0%
|
|
|
20
West 64
th
Street
|
|
|
|
|
|
|
|
|
|
New
York, NY 10023
|
|
|
|
|
|
|
|
|
|
GBB
Limited
(3)
|
|
|
|
|
|
|
|
|
|
c/o
Lion Corporate Services
|
|
|
15,000,000
|
|
|
|
34.6%
|
|
|
Cumberland
House
|
|
|
|
|
|
|
|
|
|
#27
Cumberland Street / Box N-10818
|
|
|
|
|
|
|
|
|
|
Nassau,
New Providence
|
|
|
|
|
|
|
|
|
|
Geoff
Williams
|
|
|
2,785,556
|
|
|
|
6.4%
|
|
|
175
South Main Street, Suite 740
|
|
|
|
|
|
|
|
|
|
Salt
Lake City, UT 84111
|
|
|
|
|
|
|
|
|
|
H.
Deworth Williams
|
|
|
6,562,556
|
|
|
|
15.1%
|
|
|
175
South Main Street, Suite 740
|
|
|
|
|
|
|
|
|
|
Salt
Lake City, UT 84111
|
|
|
|
|
|
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|
|
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All
directors and officers a group (4 persons)
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10,040,000
(4)
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23.2%
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|
Note:
|
Unless
otherwise indicated, we have been advised that each person above has sole
voting power over the shares indicated
above.
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(1)
|
Based
upon 43,368,012 shares of common stock outstanding on June 8,
2010.
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|
(2)
|
Nectid
Inc. is a Delaware corporation with offices in Princeton, New Jersey and
principally owed by Ramesha Sesha, our director and Chief Operating
Officer who has voting control and investment power over the
shares.
|
|
|
(3)
|
GBB
Limited is a Bahamian corporation entity principally controlled by Barry
Herman, who has voting control and investment power over the
shares.
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(4)
|
Includes
5,000,000 shares held in the name of Nectid Inc., that is controlled by
Ramesha Sesha, our director and Chief Operation
Officer.
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|
Item
5.
|
Directors
and Executive Officers
|
The executive officers and directors of
the company are as follows:
|
Name
|
|
Age
|
|
Position
|
|
William
D. Abajian
|
|
52
|
|
President,
CEO, Treasurer and Director
|
|
Ramesha
Sesha
|
|
45
|
|
COO,
Secretary and Director
|
|
Anna
E. Gluskin
|
|
58
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|
Director
|
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Gerald
Bernstein, MD
|
|
77
|
|
Director
|
All directors hold office until the
next annual meeting of stockholders and until their successors have been duly
elected and qualified. There are no agreements with respect to the
election of directors. We have not compensated directors for service
on the board of directors or any committee thereof, although two outside
director have each received 20,000 shares of our common stock upon becoming a
director. Directors are entitled to be reimbursed for expenses
incurred for attendance at meetings of the board and any committee of the
board. However, directors may defer expenses and/or take payment in
shares of Protect common stock. As of the date hereof, no director
has accrued any expenses or compensation. Officers are appointed
annually by the board and each executive officer serves at the discretion of the
board. Presently we do not have any standing committees.
No director, officer or affiliate has,
within the past five years, filed any bankruptcy petition, been convicted in or
been the subject of any pending criminal proceedings, or is any such person the
subject or any order, judgment, or decree involving the violation of any state
or federal securities laws.
Two of our directors are employed by
the company. Our two outside directors currently devote only such
time to company affairs as needed. The time devoted could amount to
as little as 1% of the time they devote to their own business affairs, or if
business conditions ultimately warrant, they could possibly elect to devote
their full time to our business. Presently, there are no other
persons whose activities are material to our operations.
Currently, there is no arrangement,
agreement or understanding between management and non-management stockholders
under which non-management stockholders may directly or indirectly participate
in or influence the management of our affairs. Present management
openly accepts and appreciates any input or suggestions from
stockholders. However, the board of directors is elected by
stockholders and the stockholders have the ultimate say in who represents them
on the board. There are no agreements or understandings for any
officer or director to resign at the request of another person and none of the
current offers or directors are acting on behalf of, or will act at the
direction of any other person.
The business experience of each of the
persons listed above during the past five years is as
follows:
William D.
Abajian
became a director in February 2010 and serves as our President,
Chief Executive Officer and Treasurer. Mr. Abajian is a Business
Development Consultant and has served in senior management and executive
positions with various businesses for the past 25 years. He has been
involved in the development and launches of a number of pharmaceutical and
device products. In 1988, he founded CPG Inc. in Lincoln Park, New
Jersey, where he served as Chief Executive Officer until 2002. CPG Inc.
invented, manufactured and sold DNA Synthesis products, chromatography media’s
and molecular biology kits to researchers. This privately-held
company was sold to Millipore Corporation in 2002. Prior to running
his own company, Mr. Abajian served as the Vice President of Sales and Marketing
at Electro Nucleonics Inc. in Fairfield, New Jersey between 1981 and 1988.
Electro Nucleonics Inc. invented, manufactured and sold blood chemistry systems
and diagnostic kits worldwide. In 2004, he founded The Abajian Group
LLC, a company that advises CEOs on strategic planning and assists in the
commercialization of technologies and sales and marketing. He
continues to serve as a trustee of Eva’s Village, a non-for-profit organization
in Paterson, New Jersey and of St. Joseph’s Hospital in Paterson, New Jersey,
where he previously held the positions of Chairman of the OPEC Committee and a
member of the hospital’s Finance and Pension Committee and the Executive
Committee. Mr. Abajian also serves as a Business Development Consultant to
Generex Biotechnology Corporation.
Ramesha
Sesha
has been a director and Chief Operating Officer and Secretary since
March 2010. Mr. Sesha has over 15 years experience in both the brand
and generic pharmaceutical industry. In November 2007, he founded
Nectid Inc, a privately held, Princeton based pharmaceutical research and
development firm. Nectid successfully outsourced the development of
three platform technologies and a portfolio of combination and slow release
drugs in diabetes and pain therapeutic area. Mr. Sesha continues to
be the honorary President of Nectid. From 2001 to October 2007, Mr.
Sesha was the Senior Vice President of Intellectual Property and Corporate3
Development at Wockhardt Limited in Bedminster, New Jersey, a generic
pharmaceutical company. Mr. Sesha holds a Ph. D, Degree to be
conferred (1984 – 1987), Raman Research Institute, Bangalore, India, and a
Masters of Science in 1984 from the University of Mysore, Mysore, India, with a
focus on organic chemistry.
Anna E.
Gluskin
became a director in March 2010. Ms. Gluskin has been
a director of Generex Biotechnology Corporation since September 1997 and served
its President and Chief Executive Officer since October 1997 and Chairperson of
the Generex Board of Directors since November 2002. She held comparable
positions with Generex Pharmaceuticals Inc. from its formation in 1995 until its
acquisition by Generex in October 1997. Ms. Gluskin holds a Masters
degree in Microbiology and Genetics from Moscow State University.
Gerald Bernstein,
MD
became a director in May 2010. Dr. Bernstein, M.D.,
F.A.C.P. graduated from Dartmouth College and Tufts University School of
Medicine. He is board certified in internal medicine (1966) and endocrinology
and metabolism (1973). Dr. Bernstein is an associate clinical
professor at the Albert Einstein College of Medicine in New York. He
is an attending physician at Beth Israel Medical Center, and physician emeritus
at Lenox Hill Hospital and Montefiore Medical Center, all in New
York. He was formerly Director of the Beth Israel Health Care Systems
Diabetes Management Program. Dr. Bernstein was president of the American
Diabetes Association in 1998-99 and was for many years a member of the ADA's
Board of Directors and its Executive Committee. Dr. Bernstein
presently serves on several ADA committees and on the Board of Directors of the
American Diabetes Association Research Foundation. He also serves as
Vice President Medical Affairs for Generex Biotechnology
Corporation.
|
Item
6.
|
Executive
Compensation
|
We have not had a bonus, profit
sharing, or deferred compensation plan for the benefit of employees, officers or
directors. We have not paid any salaries or other compensation to our
officers, directors or employees for the three-month period ended March 31, 2010
and fiscal year ended December 31, 2009 and 2008. We have entered
into employment agreements with our Chief Executive Officer and Chief Operating
Officer. We believe that it will be necessary for these persons to
defer any compensation until such time as operations provide sufficient cash
flow to provide for salaries. As of the date hereof, no person has
accrued any compensation.
|
Item
7.
|
Certain
Relationships and Related Transactions and Director
Independence
|
During the last three years, to the
best knowledge of the company, there was no person who had or has a direct or
indirect material interest in any transaction or proposed transaction to which
the company was or is a party.
Currently we have four directors
serving on our board of directors. Two directors, Anne E. Gluskin and
Dr. Gerald Bernstein are outside directors and considered
independent. We do not presently have any standing committees,
although our Bylaws empower the board to establish one or more committees,
including an audit and compensation committee.
|
Item
8.
|
Legal
Proceedings
|
There are presently no material pending
legal proceedings to which the company is a party or to which any of our
property is subject and, to the best of our knowledge, no such actions against
the company are contemplated or threatened.
|
Item
9.
|
Market
Price of and Dividends on the Registrant’s Common Equity and Related
Stockholder Matters
|
Our common stock currently trades in
the over-the-counter market and is included on the Pink Sheets under the trading
symbol of “PRTT.” There is currently a limited public trading market
for our shares and there has only been sporadic trades. Accordingly,
no trading history is being presented. The last reported trade by the
Pink Sheets was at $1.02 per share on May 18, 2010.
Following the effectiveness of this
registration statement, we intend to request a broker/dealer to make an initial
application to the Financial Industry Regulatory Authority to have our shares
quoted on the OTCBB. Inclusion on the OTCBB would permit price
quotations for our shares to be published by that service. Except for
our application to the OTCBB, there are no other plans, proposals, arrangements
or understandings with any person concerning the development of a trading market
in any of our securities. Also, there can be no assurance that an active public
trading market in our shares will develop or, that if such a market does
develop, that it can be sustained.
The ability of individual stockholders
to trade their shares in a particular state may be subject to various rules and
regulations of that state. A number of states require that an issuer's
securities be registered in their state or appropriately exempted from
registration before the securities are permitted to trade in that state.
Presently, we have no plans to register our securities in any particular
state.
It is most unlikely that our securities
will be listed on any national or regional exchange or on The Nasdaq Stock
Market in the near future. Therefore our shares most likely will be
subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act,
commonly referred to as the "penny stock" rule. Section
15(g) sets forth certain requirements for broker-dealer transactions in penny
stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as
that used in Rule 3a51-1 of the Exchange Act.
The SEC generally defines penny stock
to be any equity security that has a market price less than $5.00 per share,
subject to certain exceptions. Rule 3a51-1 provides that any equity
security is considered to be a penny stock unless that security is:
|
|
●
|
registered
and traded on a national securities exchange meeting specified criteria
set by the SEC;
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|
|
●
|
authorized
for quotation on The Nasdaq Stock
Market;
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|
|
●
|
issued
by a registered investment company;
|
|
|
●
|
excluded
from the definition on the basis of price (at least $5.00 per share) or
the issuer's net tangible assets;
or
|
|
|
●
|
exempted
from the definition by the SEC.
|
Broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse), are subject to additional sales
practice requirements. Broker-dealers must also make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the first transaction,
of a risk disclosure document relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for
the securities. Finally, monthly statements must be sent to
clients disclosing recent price information for the penny stocks held in the
account and information on the limited market in penny stocks.
Consequently, these rules may restrict
the ability of broker-dealers to trade and/or maintain a market in Protect
common stock and may affect the ability of stockholders to sell their
shares. These requirements may be considered cumbersome by
broker-dealers and could impact the willingness of a particular broker-dealer to
make a market in our shares, or they could affect the value at which the shares
trade. Classification of Protect shares as penny stocks increases the risk of an
investment in the shares.
As of June 8, 2010, there were
approximately 55 holders of record of our common stock. All of the
outstanding shares of common stock were issued pursuant to exemptions under the
1933 Act.
Rule
144
Rule 144 is the common means for a
stockholder to resell restricted securities and for an affiliate to sell
securities, either restricted or non restricted (control)
shares. Rule 144 was amended by the SEC, effective February 15,
2008.
Under the amended Rule 144, an
affiliate of a company filing reports under the Exchange Act who has held their
shares for more than six months, may sell in any three-month period an amount of
shares that does not exceed the greater of:
●
the average weekly trading volume in the common stock, as reported through the
automated quotation system of a registered securities association, during the
four calendar weeks preceding such sale, or
● 1%
of the shares then outstanding.
Sales by
affiliates under Rule 144 are also subject to certain requirements as to the
manner of sale, filing appropriate notice and the availability of current public
information about the issuer.
A non affiliate stockholder of a
reporting company, who has held restricted shares for more than six months, may
make unlimited resales under Rule 144,
provided
only that the issuer
has available current public information about itself. After a
one-year holding period, a non affiliate may make unlimited sales with no other
requirements or limitations.
If a company is not a reporting company
under the Exchange Act, restricted shares cannot be sold in reliance on Rule
144, by either an affiliate or a non affiliate, until the stockholder has
satisfied a one year holding period. After the one year holding
period, an affiliate may sell restricted shares pursuant to the same Rule 144
provisions as an affiliate of a reporting company having satisfied a six month
holding period. A non affiliate of a non reporting company, who has
held their restricted shares for more than one year, may make unlimited resales
under Rule 144 with no other requirements or limitations.
Current holders of restricted shares
may in the future elect to sell shares of our common stock pursuant to Rule 144,
provided
they comply
with the appropriate holding periods and volume limitations. We
cannot predict the effect any future sales under Rule 144 may have on the market
price of our common stock, but such sales could have a substantial depressing
effect on the market price.
Dividend
Policy
We have not declared or paid cash
dividends or made distributions in the past on our common stock, and we do not
anticipate paying cash dividends or making distributions in the foreseeable
future. It is our present intention to retain and invest any future
earnings to finance operations.
Item
10. Recent Sales of Unregistered
Securities
Upon the acquisition of patent
applications from Nectid in February 2010 we issued 5 million shares of our
authorized, but previously unissued common stock to Ramesha Sesha pursuant to
the terms of the acquisition agreement. In May 2010, we issued 5
million shares of our common stock to William D. Abajian pursuant tot he terms
of his employment agreement. Also in May 2010, we issued 40,000
shares to two new directors (20,000 shares each), and an aggregate of 165,000
shares to two persons for services. These shares were all issued
pursuant to an exemption from registration under the Securities Act of 1933
provided by Section 4(2) of that Act.
Item
11. Description of Registrant’s
Securities to be Registered
Common
Stock
We are authorized to issue 50 million
shares of common stock, par value $0.005 per share, of which 43,368,012 shares
are issued and outstanding as of the date hereof. All shares of
common stock have equal rights and privileges with respect to voting,
liquidation and dividend rights. Each share of common stock entitles
the holder thereof to:
|
|
(i)
|
One
non-cumulative vote for each share held of record on all matters submitted
to a vote of the stockholders;
|
|
|
(ii)
|
to
participate equally and to receive any and all such dividends as may be
declared by the board of directors out of funds legally available
therefor; and
|
|
|
(iii)
|
to
participate pro rata in any distribution of assets available for
distribution upon liquidation of the
company.
|
Stockholders have no preemptive rights
to acquire additional shares of common stock or any other
securities. The common stock is not subject to redemption and carries
no subscription or conversion rights. All outstanding shares of
common stock are fully paid and non-assessable.
Item
12. Indemnification of Directors
and Officers
As permitted by the provisions of the
Nevada Revised Statutes (the “
NRS
”), we
have the power to indemnify any person made a party to an action, suit or
proceeding because the person was a director, officer, employee or agent of the
company. Under the NRS, director immunity from liability to a company
or its stockholders for monetary liabilities applies automatically unless it is
specifically limited by a company's articles of incorporation, which is not the
case with our articles of incorporation.
Excepted from that immunity
are:
(1) a
willful failure to deal fairly with the company or our stockholders in
connection with a matter in which the director has a material conflict of
interest;
(2) a
violation of criminal law, unless the director had reasonable cause to believe
that his or her conduct was lawful or no reasonable cause to believe that his or
her conduct was unlawful;
(3) a
transaction from which the director derived an improper personal profit;
and
(4) willful
misconduct.
Our by-laws provide that we will
indemnify all officers and directors, past, present and future, against any and
all expenses incurred, including, but not limited to, legal fees, judgments and
penalties that may be incurred in any legal action brought against them for any
act or omission alleged to have been committed while acting within the scope of
their duties as officers or directors.
We may pay the expenses of an officer
or director incurred in defending a civil or criminal action, suit or
proceeding, as the expenses are incurred and in advance of the final disposition
of the action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that they are not entitled to be
indemnified by the company.
The NRS also permits a corporation to
purchase and maintain liability insurance or make other financial arrangements
on behalf of any person who is or was a director, officer, employee or agent, or
is or was serving at the request of the corporation as a director, officer,
employee or agent, of another entity. Coverage may include any
liability asserted against them and liability and expenses incurred by them in
their capacity as a director, officer, employee or agent, or arising out of
their status as such, whether or not the Company has the authority to indemnify
them against such liability and expenses. Presently, the Company does
not carry such insurance.
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and control persons pursuant to the foregoing provisions, or
otherwise, we have been advised that, in the opinion of the SEC, such
indemnification is against public policy and is, therefore,
unenforceable.
Transfer
Agent
We have designated as our transfer
agent Interstate Transfer Company, 6084 South 900 East, Suite 101, Salt Lake
City, Utah 84121.
|
Item
13.
|
Financial
Statements and Supplementary Data
|
Our financial statements for the fiscal
years ended December 31, 2009 and 2008 have been examined to the extent
indicated in their reports by Sadler, Gibb & Associates, L.L.C., independent
certified public accountants. The financial statements have been
prepared in accordance with generally accepted accounting principles, pursuant
to Regulation S-X as promulgated by the SEC, and are included herein in response
to Item 13 of this Form 10. The unaudited financial statements for
the three-month period ended March 31, 2010 have been prepared by the
company.
|
Item
14.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
On April 19, 2010, we engaged Sadler,
Gibb and Associates as our independent certifying accountants. For
the three years prior to the engagement of Sadler, Gibb and Associates, we did
not have audited financial statements prepared for the
company. During the two most recent fiscal years and the
interim periods preceding the engagement, we have not consulted Sadler, Gibb and
Associates regarding any of the matters set forth in Item 304(a)(2)(i) or (ii)
of Regulation S-B.
Item
15. Financial Statements and Exhibits
|
|
(a)
|
Index to Financial
Statements
|
Annual
Financial Statements for the Fiscal Years Ended June 30, 2009 and
2008
|
Cover
Page
|
F-1
|
|
Table
of Contents
|
F-2
|
|
Report
of Independent Registered Public Accounting Firm
|
F-3
|
|
Balance
Sheets
|
F-4
|
|
Statements
of Operations
|
F-5
|
|
Statements
of Stockholders’ Equity
|
F-6
|
|
Statements
of Cash Flows
|
F-10
|
|
Notes
to Financial Statements
|
F-11
to F-16
|
Financial Statements for the Three
Months Ended March 31, 2010
|
Balance
Sheets
|
F-17
|
|
Statements
of Operations
|
F-18
|
|
Statements
of Stockholders’ Equity
|
F-19
|
|
Statements
of Cash Flows
|
F-23
|
|
Notes
to Financial Statements
|
F-24 to
F-25
|
|
|
(b)
|
The following exhibits are
filed with this registration
statement:
|
|
Exhibit No.
|
|
Exhibit Name
|
|
2.1
|
|
Patent
Acquisition Agreement
|
|
2.2
|
|
Patent
Portfolio
|
|
3.1
|
|
Articles
of Incorporation
|
|
3.2
|
|
Certificate
of Amendment - Capitalization Change
|
|
3.3
|
|
Certificate
of Amendment - Name Change 2006
|
|
3.4
|
|
Certificate
of Amendment - Name Change 2010
|
|
3.5
|
|
By-Laws
|
|
4.1
|
|
Instrument
defining rights of holders - Specimen Stock Certificate
|
|
10.1
|
|
Employment
Agreement – Ramesha Sesha
|
|
10.2
|
|
Form
of Employment Agreement – William D.
Abajian
|
PROTECT
PHARMACEUTICAL CORPORATION
AUDIT
REPORT OF INDEPENDENT ACCOUNTANTS
AND
FINANCIAL
STATEMENTS
December
31, 2009 and 2008
PROTECT
PHARMACEUTICAL CORPORATION
TABLE
OF CONTENTS
|
|
|
Page
|
|
|
|
|
|
Audit
Report of Independent Accountants
|
|
F-3
|
|
|
|
|
|
Balance
Sheets – December 31, 2009 and 2008
|
|
F-4
|
|
|
|
|
|
Statements
of Operations for the years ended December 31, 2009 and 2008 and from
inception through December 31, 2009
|
|
F-5
|
|
|
|
|
|
Statements
of Stockholder’s Equity for the years ended December 31, 2009 and 2008 and
from inception through December 31, 2009
|
|
F-6
|
|
|
|
|
|
Statements
of Cash Flows for the years ended December 31, 2009 and 2008 and from
inception through December 31, 2009
|
|
F-10
|
|
|
|
|
|
Notes
to Financial Statements
|
|
F-11
|
S
ADLER
, G
IBB
& A
SSOCIATES,
L.L.C.
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Protect
Pharmaceutical Corporation
(A
development stage company)
We have
audited the accompanying balance sheet of Protect Pharmaceutical Corporation as
of December 31, 2009 and 2008, and the related statements of income,
stockholders’ equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Protect Pharmaceutical Corporation
as of December 31, 2009 and 2008, and the results of their operations and their
cash flows for the years then ended, in conformity with U.S. generally accepted
accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has had a loss from operations since inception of
$153,755, an accumulated deficit of $772,596, and working capital deficit of
$5,231, which raises substantial doubt about its ability to continue as a going
concern. Management’s plans concerning these matters are also described in Note
3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
|
|
SADLER,
GIBB AND ASSOCIATES, LLC
|
|
|
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|
Salt
Lake City, UT
|
|
|
May
17, 2010
|
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
BALANCE
SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,500
|
|
|
$
|
1,500
|
|
|
Payable
related party
|
|
|
1,731
|
|
|
|
1,581
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
5,231
|
|
|
|
3,081
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
5,231
|
|
|
|
3,081
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock; 50,000,000 shares authorized, at $0.005 par value, 33,163,012 and
33,163,012 shares issued and outstanding, respectively
|
|
|
33,163
|
|
|
|
33,163
|
|
|
Additional
paid-in capital
|
|
|
734,202
|
|
|
|
734,202
|
|
|
Deficit
accumulated during the development stage
|
|
|
(772,596
|
)
|
|
|
(770,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(5,231
|
)
|
|
|
(3,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
|
|
|
|
|
|
|
|
on August 5,
|
|
|
|
|
For the Year Ended
|
|
|
1987 Through
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
2,150
|
|
|
|
1,605
|
|
|
|
153,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(2,150
|
)
|
|
|
(1,605
|
)
|
|
|
(153,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,340,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(2,150
|
)
|
|
$
|
(1,605
|
)
|
|
$
|
(4,494,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER SHARE OF COMMON STOCK
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
33,163,012
|
|
|
|
33,163,012
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During the
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
August 5, 1987
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period ended December 31, 1987
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1987
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $15.00 per share on January 27,
1988
|
|
|
624,000
|
|
|
|
624
|
|
|
|
2,339,376
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for Midway Mining Development Corp. at $15.00 per share on
January 27, 1988
|
|
|
359,592
|
|
|
|
360
|
|
|
|
1,348,110
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for mining claims at predecessor cost on May 24,
1988
|
|
|
19,420
|
|
|
|
19
|
|
|
|
(19
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock cancelled due to the acquisition agreement on Midway Mining and
Development Corp. being rescinded on July 6, 1988
|
|
|
(209,112
|
)
|
|
|
(1,046
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $0.00 per share on July 6,
1988
|
|
|
209,112
|
|
|
|
1,046
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
capital contributed
|
|
|
-
|
|
|
|
-
|
|
|
|
33,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1988
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,721,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1988
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
3,720,467
|
|
|
|
(3,721,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1989
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1989
|
|
|
1,003,012
|
|
|
$
|
1,003
|
|
|
$
|
3,720,467
|
|
|
$
|
(3,721,560
|
)
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During the
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1989
|
|
|
1,003,012
|
|
|
$
|
1,003
|
|
|
$
|
3,720,467
|
|
|
$
|
(3,721,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1990
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1990
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
3,720,467
|
|
|
|
(3,721,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1991
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1991
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
3,720,467
|
|
|
|
(3,721,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1992
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1992
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
3,720,467
|
|
|
|
(3,721,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1993
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1993
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
3,720,467
|
|
|
|
(3,721,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quasi
- reorganization (Note 2)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,721,710
|
)
|
|
|
3,721,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1994
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1994
|
|
|
1,003,012
|
|
|
|
1,003
|
|
|
|
(1,243
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $15.00 per share on June 12,
1995
|
|
|
160,000
|
|
|
|
160
|
|
|
|
599,840
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
capital contributed
|
|
|
-
|
|
|
|
-
|
|
|
|
2,605
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1995
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(605,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1995
|
|
|
1,163,012
|
|
|
$
|
1,163
|
|
|
$
|
601,202
|
|
|
$
|
(605,105
|
)
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During the
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1995
|
|
|
1,163,012
|
|
|
$
|
1,163
|
|
|
$
|
601,202
|
|
|
$
|
(605,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for expenses paid at $0.01 per share
|
|
|
2,000,000
|
|
|
|
2,000
|
|
|
|
13,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1996
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1996
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1997
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1997
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1998
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1998
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 1999
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 1999
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2000
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2000
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2001
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2001
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2002
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002
|
|
|
3,163,012
|
|
|
$
|
3,163
|
|
|
$
|
614,202
|
|
|
$
|
(617,365
|
)
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During the
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002
|
|
|
3,163,012
|
|
|
$
|
3,163
|
|
|
$
|
614,202
|
|
|
$
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2003
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2004
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(617,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2005
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(618,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
3,163,012
|
|
|
|
3,163
|
|
|
|
614,202
|
|
|
|
(618,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services at $0.005 per share on May 9,
2007
|
|
|
30,000,000
|
|
|
|
30,000
|
|
|
|
120,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
33,163,012
|
|
|
|
33,163
|
|
|
|
734,202
|
|
|
|
(768,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
33,163,012
|
|
|
|
33,163
|
|
|
|
734,202
|
|
|
|
(770,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2009
|
|
|
33,163,012
|
|
|
$
|
33,163
|
|
|
$
|
734,202
|
|
|
$
|
(772,596
|
)
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
|
|
|
|
|
|
|
|
on August 5,
|
|
|
|
|
For the Year Ended
|
|
|
1987 Through
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,150
|
)
|
|
$
|
(1,605
|
)
|
|
$
|
(4,494,306
|
)
|
|
Adjustments
to reconcile loss to cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
3,874,170
|
|
|
Loss
from disposition of subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
564,300
|
|
|
Expenses
paid on behalf of the Company
|
|
|
150
|
|
|
|
105
|
|
|
|
52,336
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in accounts payable
|
|
|
2,000
|
|
|
|
1,500
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:CASH PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
1 - ORGANIZATION AND HISTORY
Business
and Organization
The
financial statements presented are those of Protect Pharmaceutical, Corp. (a
development stage company) (“the Company”). The Company was
originally incorporated under the laws of the state of Idaho on August 5,
1987. The Company was incorporated for the purpose of purchasing,
leasing or otherwise acquiring mining claims and rights and also to develop
mines. The Company was unable to raise development money and the
Company’s operations ceased. The Company has been seeking new
business opportunities believed to hold a potential profit or to merge with an
existing, operating company. On July 15, 1996 the Company changed its
name from Interstate Mining and Development Properties, Inc. to Interstate
Development, Inc.
On
January 27, 1988, the Company acquired Midway Mining and Development
Corp. in a stock-for-stock reorganization pursuant to Section 36B (a)
(1) (B) of the Internal Revenue Code. In the reorganization,
shareholders of Midway Mining and Development Corp. transferred all of their
shares of common stock to the Company in exchange for 89,898 shares of common
stock of the Company. However, since the Company was unable to begin
operations and had no operating assets, 52,278 of the original shares issued for
Midway Mining and Development Corp. were later cancelled on July 6, 1988 and the
subsidiary was transferred back to its original owners.
As of
June 15, 2006, the name of the Company changed to Pro-Tect, Inc. and its
domicile was moved to the state of Nevada. Subsequently, the Company
changed its name on March 25, 2010 to Protect Pharmaceutical, Corp.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company’s fiscal year-end is December 31. The Company has not
realized revenues as of December 31, 2009 and is classified as a development
stage enterprise.
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 reporting period. Actual results could differ from those
estimates
Cash and
Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents. As of December 31, 2009 and
2008 the Company had $-0- and $-0- of cash and cash
equivalents, respectively.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
The
Company currently has no source of revenues. The Company will
recognize revenue from the performance of its services and/or sale of its
products in accordance with Securities and Exchange Commission Staff Bulletin
No. 104 (“SAB 104”), “Revenue Recognition in Financial Statements”. Revenue will
be recognized only when the price is fixed or determinable, persuasive evidence
of an arrangement exists, the service is provided, and collectability is
assured.
Advertising
Costs
The
Company follows the policy of expensing advertising costs during the period in
which they are incurred. The Company incurred no advertising costs during the
years ended December 31, 2009 and 2008, respectively.
Stock-based
Compensation
The
Company adopted SFAS No. 123-R (ASC 718) effective January 1, 2006
using the modified prospective method. Under this transition method, stock
compensation expense includes compensation expense for all stock-based
compensation awards granted on or after January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of ASC 718. As
of December 31, 2009, the Company has not issued any share-based payments to its
employees.
Provision
for Taxes
The
Company applies SFAS No. 109 (ASC 740), which requires the asset and liability
method of accounting for income taxes. The asset and liability method
requires that the current or deferred tax consequences of all events recognized
in the financial statements are measured by applying the provisions of enacted
tax laws to determine the amount of taxes payable or refundable currently or in
future years. Deferred tax assets are reviewed for recoverability and the
Company records a valuation allowance to reduce its deferred tax assets when it
is more likely than not that all or some portion of the deferred tax assets will
not be recovered.
The
Company adopted FIN 48(ASC 740), at the beginning of fiscal year 2009. This
interpretation requires recognition and measurement of uncertain tax positions
using a “more-likely-than-not” approach, requiring the recognition and
measurement of uncertain tax positions. The adoption of FIN 48 (ASC 740) had no
material impact on the Company’s financial statements.
Basic
(Loss) per Common Share
Basic
(loss) per share is calculated by dividing the Company’s net loss applicable to
common shareholders by the weighted average number of common shares during the
period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number
of shares outstanding during the year. The diluted weighted average number of
shares outstanding is the basic weighted number of shares
adjusted
for any potentially dilutive debt or equity. There are no such common stock
equivalents outstanding as of December 31, 2009 and 2008.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic
(Loss) per Common Share (continued)
|
|
|
For the
Year Ended
December 31,
2009
|
|
|
For the
Year Ended
December 31,
2008
|
|
|
Loss
(numerator)
|
|
$
|
(2,150
|
)
|
|
$
|
(1,605
|
)
|
|
Shares
(denominator)
|
|
|
33,163,012
|
|
|
|
33,163,012
|
|
|
Per
share amount
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Recent
Accounting Pronouncements
In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset de-recognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts FAS 160 (now included in
Subtopic 810-10). For those entities that have already adopted FAS 160, the
amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted FAS 160. The
Company does not expect the provisions of ASU 2010-02 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis. The Company
does not expect the provisions of ASU 2010-01 to have a material effect on the
financial position, results of operations or cash flows of the
Company.
In
December 2009, the FASB issued Accounting Standards Update 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities. This Accounting Standards Update
amends the FASB Accounting Standards Codification for Statement
167.
In
December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This
Accounting Standards Update amends the FASB Accounting Standards Codification
for Statement 166.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements (continued)
In
October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing. This Accounting Standards Update amends the FASB Accounting
Standard Codification for EITF 09-1.
In
October 2009, the FASB issued Accounting Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements. This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The Company does not expect
the provisions of ASU 2009-14 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In
October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company does not expect the provisions of ASU 2009-13 to have a
material effect on the financial position, results of operations or cash flows
of the Company.
In
September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). This update provides
amendments to Topic 820 for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its equivalent). It is
effective for interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Company does not expect the provisions of
ASU 2009-12 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In July
2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task
Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The
provisions of EITF 09-1, clarifies the accounting treatment and disclosure of
share-lending arrangements that are classified as equity in the financial
statements of the share lender. An example of a share-lending arrangement is an
agreement between the Company (share lender) and an investment bank (share
borrower) which allows the investment bank to use the loaned shares to enter
into equity derivative contracts with investors. EITF 09-1 is effective for
fiscal years that beginning on or after December 15, 2009 and requires
retrospective application for all arrangements outstanding as of the beginning
of fiscal years beginning on or after December 15, 2009.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements (continued)
Share-lending
arrangements that have been terminated as a result of counterparty default prior
to December 15, 2009, but for which the entity has not reached a final
settlement as of December 15, 2009 are within the scope. Effective for
share-lending arrangements entered into on or after the beginning of the first
reporting period that begins on or after June 15, 2009. The Company does not
expect the provisions of EITF 09-1 to have a material effect on the financial
position, results of operations or cash flows of the Company.
NOTE
3 – GOING CONCERN
The
Company’s financial statements are prepared using generally accepted accounting
principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs which raises substantial
doubt regarding its ability to continue as a going concern.
The
ability of the Company to continue as a going concern is dependent on the
Company obtaining adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it could be
forced to cease operations. Management’s plan is to obtain such resources for
the Company by obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses and seeking equity and/or debt
financing. However management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
NOTE
4 – RELATED PARTY PAYABLE
Various
startup expenses of the Company including purchase of property and equipment,
officer’s compensation and general and administrative expenses have been paid
for using funds provided by the shareholders of the Company. The loans are non
interest bearing, unsecured and due upon demand. The Company owes $1,731 and
$1,581 for such loans as of December 31, 2009 and 2008,
respectively.
NOTE
5 – INCOME TAXES
The
Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (ASC 740). ASC 740 requires the
use of an asset and liability approach in accounting for income taxes. Deferred
tax assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
PROTECT
PHARMACEUTICAL CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
NOTE
5 – INCOME TAXES (CONTINUED)
ASC 740
requires the reduction of deferred tax assets by a valuation allowance if, based
on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized.
The
provision for income taxes differs from the amounts which would be provided by
applying the statutory federal income tax rate of 39% to net loss before
provision for income taxes for the following reasons:
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
Income
tax expense at statutory rate
|
|
$
|
(839
|
)
|
|
$
|
(626
|
)
|
|
Valuation
allowance
|
|
|
839
|
|
|
|
626
|
|
|
Income
tax expense per books
|
|
$
|
-
|
|
|
$
|
-
|
|
Net
deferred tax assets consist of the following components as of:
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
NOL
carryover
|
|
$
|
8,249
|
|
|
$
|
7,410
|
|
|
Valuation
allowance
|
|
|
(8,249
|
)
|
|
|
(7,410
|
)
|
|
Net
deferred tax asset
|
|
$
|
-
|
|