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AngioGenex, Inc. - Quarter Report: 2008 June (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
x
Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2008

o
Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______.

000-50739
(Commission file number)
 
ANGIOGENEX INC.

(Exact name of small business issuer as specified in its charter)

Nevada
86-0945116
(State or other jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
 
425 Madison Ave. Suite 902, New York, New York 10017
(Address of principal executive offices)

(212) 874-6608
(Issuer’s telephone number)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer     o
Accelerated filer           o
Non-accelerated filer       o
Smaller reporting company     x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

On August 13, 2008, 21,222,906 shares of the registrant's common stock were outstanding.


TABLE OF CONTENTS

 
PART I - FINANCIAL INFORMATION
3
Item1.
Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
10
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
13
Item 4.
Controls and Procedures
13
Part II. - OTHER INFORMATION
13
Item 1.
Legal Proceedings
13
Item 1A.
Risk Factors
13
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
13
Item 3.
Defaults Upon Senior Securities
13
Item 4.
Submission of Matters to a Vote of Security Holders
13
Item 5.
Other Information
14
Item 6.
Exhibits
14
SIGNATURES
14
 
2
 
PART I - FINANCIAL INFORMATION

Item1.     Financial Statements
 
 
(A DEVELOPMENT STAGE COMPANY)
  
BALANCE SHEETS
  
 
            
             
             
   
 June 30,
       
   
 2008
  
 December 31,
 
ASSETS
  
 (unaudited)
  
 2007
  
CURRENT ASSETS
            
Cash
  
$
10,322
 
$
45,406
 
Prepaid expenses
    
15,633
   
6,122
 
Receivable
    
-
   
50,000
 
 TOTAL CURRENT ASSETS
    
25,955
   
101,528
 
               
PROPERTY AND EQUIPMENT
              
 Equipment, net of depreciation
    
880
   
1,190
 
 TOTAL PROPERTY AND EQUIPMENT
    
880
   
1,190
 
               
TOTAL ASSETS
  
$
26,835
 
$
102,718
 
               
               
LIABILITIES AND STOCKHOLDERS' DEFICIT
              
CURRENT LIABILITIES
              
Accrued expenses
  
$
329,415
 
$
273,442
 
Accrued expenses - related parties
    
164,144
   
148,793
 
Notes payable
    
11,000
   
11,000
 
Notes payable, related parties
    
35,000
   
35,000
 
Accrued interest
    
7,669
   
4,859
 
 TOTAL CURRENT LIABILITIES
    
547,228
   
473,094
 
               
LONG-TERM LIABILITIES
              
Settlement payable
    
30,000
   
35,000
 
     
30,000
   
35,000
 
COMMITMENTS AND CONTINGENCIES
              
               
STOCKHOLDERS' DEFICIT
              
Preferred stock, 5,000,000 shares authorized, $0.001 par value;
              
 no shares issued and outstanding
    
-
   
-
 
Common stock, 70,000,000 shares authorized, $0.001 par value;
              
 21,222,906 and 21,053,406 shares issued and outstanding, respectively
    
21,223
   
21,053
 
Additional paid-in capital
    
2,826,355
   
2,770,675
 
Stock options, warrants, and beneficial conversion rights
    
912,379
   
912,379
 
Accumulated deficit during development stage
    
(4,310,350
)
  
(4,109,483
)
 TOTAL STOCKHOLDERS' DEFICIT
    
(550,393
)
  
(405,376
)
               
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  
$
26,835
 
$
102,718
 

3

                     
(A DEVELOPMENT STAGE COMPANY)
                      
STATEMENTS OF OPERATIONS
  
 
  
 
  
 
  
 
  
 
  
 
  
                   
March , 1999
  
   
Three Months Ended
  
Six Months Ended
  
(Inception) to
  
   
June 30,
  
June 30,
  
June 30,
  
   
2008
  
2007
  
2008
  
2007
  
2008
  
   
(unaudited)
  
(unaudited)
  
(unaudited)
  
(unaudited)
  
(unaudited)
  
                       
REVENUES
  
$
-
  
$
-
  
$
-
  
$
-
  
$
50,000
  
                                 
EXPENSES
                                
Research and development
    
16,050
   
7,542
   
21,919
   
8,973
   
1,689,734
 
Consulting
    
-
   
-
   
-
   
-
   
109,666
 
Licenses and fees
    
-
   
-
   
-
   
-
   
155,000
 
Professional fees
    
42,207
   
139,402
   
88,891
   
151,786
   
1,465,763
 
General and administrative
    
59,350
   
12,894
   
84,892
   
18,235
   
357,763
 
 TOTAL OPERATING EXPENSES
    
117,607
   
159,838
   
195,702
   
178,994
   
3,777,926
 
                                 
LOSS FROM OPERATIONS
    
(117,607
)
  
(159,838
)
  
(195,702
)
  
(178,994
)
  
(3,727,926
)
                                 
OTHER INCOME (EXPENSES)
                                
Other income
    
-
   
-
   
-
   
-
   
464,688
 
Interest income
    
21
   
-
   
21
   
-
   
7,257
 
Finance costs
    
(2,310
)
  
(4,045
)
  
(5,186
)
  
(58,387
)
  
(1,054,369
)
 TOTAL OTHER INCOME (EXPENSES)
    
(2,289
)
  
(4,045
)
  
(5,165
)
  
(58,387
)
  
(582,424
)
                                 
LOSS BEFORE INCOME TAXES
    
(119,896
)
  
(163,883
)
  
(200,867
)
  
(237,381
)
  
(4,310,350
)
                                 
INCOME TAXES
    
-
   
-
   
-
   
-
   
-
 
                                 
NET LOSS
  
$
(119,896
)
$
(163,883
)
$
(200,867
)
$
(237,381
)
$
(4,310,350
)
                                 
                                 
NET LOSS PER COMMON SHARE,
                                
 BASIC AND DILUTED
 
$
(0.01
)
$
(0.01
)
$
(0.01
)
$
(0.01
)
      
                                 
WEIGHTED AVERAGE NUMBER OF
                                
 COMMON STOCK SHARES OUTSTANDING,
                                
 BASIC AND DILUTED
    
21,119,060
   
20,493,417
   
21,089,876
   
20,431,252
       

4

 
(A DEVELOPMENT STAGE COMPANY)
  
STATEMENTS OF CASH FLOWS
  
                  
             
Period from
  
             
March, 1999
  
   
Six Months Ended
 
(Inception) to
  
   
June 30,
  
June 30,
  
   
2008
  
2007
  
 2008
  
   
(unaudited)
  
(unaudited)
  
(unaudited)
  
                  
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net loss
  
$
(200,867
)
$
(237,381
)
$
(4,310,350
)
Adjustments to reconcile net loss
                    
to net cash used by operating activities:
                    
Depreciation
    
310
   
310
   
6,969
 
Services paid by issuance of common stock
    
-
   
90,000
   
526,450
 
Services paid by issuance of common stock options
    
-
   
-
   
289,557
 
Amortization of warrants and beneficial conversion
    
-
   
54,429
   
948,929
 
Non cash financing & other charges
    
-
   
-
   
6,285
 
(Increase) decrease in prepaid expenses
    
(9,511
)
  
(21,533
)
  
(15,633
)
(Increase) decrease in receivables
    
50,000
   
-
   
-
 
(Increase) decrease in prepaid offering costs
    
-
   
12,000
   
-
 
Increase (decrease) in accrued expenses
    
55,973
   
9,075
   
327,993
 
Increase (decrease) in accrued expenses, related party
    
15,351
   
3,770
   
165,566
 
Increase (decrease) in accrued interest
    
2,810
   
1,072
   
97,783
 
Increase (decrease) in settlement payable
    
(5,000
)
  
-
   
30,000
 
Net cash used in operating activities
    
(90,934
)
  
(88,258
)
  
(1,926,451
)
                     
CASH FLOWS FROM INVESTING ACTIVITIES:
                    
Purchase of equipment
    
-
   
-
   
(7,849
)
Net cash used in investing activities
    
-
   
-
   
(7,849
)
                     
CASH FLOWS FROM FINANCING ACTIVITIES:
                    
Proceeds from bridge loan
   
-
   
-
   
875,000
 
Payment of notes payable - related party
    
-
   
-
   
(25,000
)
Payment of notes payable
    
-
   
-
   
(35,000
)
Proceeds from notes payable
    
-
   
85,000
   
191,000
 
Issuance of stock for cash - net
    
55,850
   
12,930
   
938,622
 
Net cash provided by financing activities
    
55,850
   
97,930
   
1,944,622
 
                     
Net increase (decrease) in cash
    
(35,084
)
  
9,672
   
10,322
 
                     
Cash, beginning of period
    
45,406
   
4,386
   
-
 
                     
Cash, end of period
  
$
10,322
 
$
14,058
 
$
10,322
 
                     
SUPPLEMENTAL CASH FLOW DISCLOSURES:
                    
Cash paid for interest and income taxes:
                    
Interest expense
        
$
$-
 
$
-
 
Income taxes
  
$
-
 
$
-
 
$
-
 
                     
NON-CASH INVESTING AND FINANCING ACTIVITIES:
                    
Services paid by issuance of stock
  
$
-
 
$
-
 
$
526,450
 
Services paid by issuance of stock options
  
$
-
 
$
-
 
$
274,735
 
Offering costs paid by issuance of stock options
  
$
-
 
$
-
 
$
14,822
 
Conversion of debt to equity
  
$
-
 
$
-
 
$
960,000
 

5
 
ANGIOGENEX, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTED TO FINANCIAL STATEMENTS JUNE 30,2008
(UNAUDITED)
 
NOTE 1 - BASIS OF PRESENTATION

AngioGenex, Inc. (“AngioGenex” or the “Company”) incorporated in the State of Nevada on March 1, 1999. The Company is a biopharmaceutical company founded to create products that are uniquely useful for the treatment, diagnosis and prognosis of cancer. Company programs focus on (1) the discovery and development of orally active anti-cancer drugs that act by modulating the action of the Id proteins, (2) the measurement of Id proteins in tumors and blood to create products for the diagnosis and prognosis of cancer, (3) generating proof-of-concept data in relevant preclinical models to establish that modulation of Id proteins is useful to treat non-oncologic diseases in which an overgrowth of blood vessels is an important part of the underling pathology and (4) collaborating in respect to treatments of diseases in which blood vessel proliferation is desirable.

The Company has been in the development stage since inception and as of June 30, 2008 has had minimal revenues from its planned operations.

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-B as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2007, included in the Company’s Form 10 KSB filing. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. Operating results for the six month period ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying financial statements, the Company has incurred substantial net losses since inception. The future of the Company is dependent upon additional financing and revenue to fund its research and development activities and to support operations. However, there is no assurance that the Company will be able to obtain additional financing. Furthermore, there is no assurance that the Food and Drug Administration will grant future approval of the Company’s prospective products or that profitable operations can be attained as a result thereof.

6
 
ANGIOGENEX, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTED TO FINANCIAL STATEMENTS JUNE 30,2008
(UNAUDITED)
 
The Company anticipates that its principal source of funds for the next year will be the issuance for cash of additional equity instruments. The financial statements do not include any recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management plans to seek additional capital from new equity securities issuances that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan. The Company anticipates that its minimum cash requirements to continue as a going concern for the next twelve months will be at least $70,000.

Development Stage Activities

The Company is currently and has been a development stage company since its formation on March 31, 1999. It is primarily engaged in the research to develop anti-cancer strategies using the field of antiangiogenesis. In 2003, the Company entered into an agreement to provide certain properties to an unrelated outside company. The Company recognized $50,000 of royalty revenue under this agreement for the year ended December 31, 2007, however the Company does not deem this revenue sufficient to move the Company from development stage to a fully reporting company. See Note 3.

Recent Accounting Pronouncements

FAS 163 is effective January 1, 2009 except for disclosures about the risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuance of this Statement. Except for those disclosures, earlier application is not permitted. FAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. FAS 163 also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. The effect of adoption of FAS 163 on the Company’s financial position and results of operations is not expected to be material.
 
FAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. FAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The effect of adoption of FAS 162 on the Company’s financial position and results of operations is not expected to be material.

FAS 161, which is effective January 1, 2009 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance, and cash flows. Among other things, FAS 161 requires disclosure of the fair values of derivative instruments and associated gains and losses in a tabular format. The adoption of FAS 161 will not affect the Company’s financial position or results of operations.

FAS 159, which is effective January 1, 2008, permits companies to choose to measure certain financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The effect of adoption of FAS 159 on the Company’s financial position and results of operations is not expected to be material.

EITF Issue 07-03, which is effective January 1, 2008 and is applied prospectively for new contracts entered into on or after the effective date, addresses nonrefundable advance payments for goods and services that will be used or rendered for future research and development activities. Issue 07-3 will require these payments to be deferred and capitalized and recognized as an expense as the related goods are delivered or the related services are preformed. The effect of adoption of Issue 07-3 on the Company’s financial position and results of operations is not expected to be material.

7
 
ANGIOGENEX, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTED TO FINANCIAL STATEMENTS JUNE 30,2008
(UNAUDITED)
 
FAS 141R expends the scope of acquisition accounting to all transactions under which control of a business is obtained. Among other things, FAS 141R requires that contingent consideration as well as contingent assets and liabilities be recorded at fair value at the acquisition date, that acquired in-process research and development be capitalized and recorded as intangible assets at the acquisition date, and also requires transaction costs and costs to restructure the acquired company be expensed. FAS 160 requires, among other things, that noncontrolling interests be recorded as equity in the consolidated financial statements. FAS 141R and FAS 160 are both effective January 1, 2009. The effect of adoption of FAS 141R and FAS 160 on the Company’s financial position and results of operations is not expected to be material.

Revenue recognition

Royalties will be recognized as revenue when the amounts are contractually earned, fixed and determinable, and there is substantial probability of collection.

NOTE 3 - AGREEMENT WITH BIOCHECK, INC.

On December 15, 2003 the Company entered into a development and marketing agreement with BioCheck Inc. for the development and marketing of diagnostic, prognostic, or bio-analytical products. The agreement was modified as of July 21, 2008. Under the agreement, the Company will receive license fees equal to 9% of the gross revenue of the direct sale by BioCheck, Inc. of any products and 25% of any sublicensing revenue received from BioCheck, Inc. As of June 30, 2008 no revenues were generated. Prior to its modification the agreement provided for certain minimum royalty to be paid to the Company. The provision for minimum royalty payments has been eliminated. Therefore the receivable of $50,000 that was recognized has been charged to bad debt as of June 30, 2008.

NOTE 4 - RELATED PARTY TRANSACTIONS

An officer of the Company allows the Company to use space in his offices for file keeping and other business purposes. The Company pays no rent for this space. This same officer also provides services to the Company in the form of bookkeeping and tax preparation, for which the Company is billed. At June 30, 2008 and December 31, 2007 the Company owed the officer’s business $67,568 and $53,793, respectively, which is included in accrued expenses - related parties in the financial statements.

At June 30, 2008 the Company owed an officer $95,000 for unpaid salary pursuant to an agreement to pay $5,000 per month through September 30, 2006.

For additional related party transactions, see Note 5.

NOTE 5 - NOTES PAYABLE

On September 1, 2005, the Company obtained an unsecured loan in the amount of $25,000 from a corporate officer. The agreement provides for repayment of principal and interest accrued at 6% per annum at September 1, 2008. At June 30, 2008 the Company had accrued interest of $4,159.

On November 25, 2005, the Company obtained an unsecured loan in the amount of $1,000 from an unrelated third party. The agreement provides for repayment of principal and interest accrued at 6% per annum at December 1, 2008. At June 30, 2008 the Company had accrued interest of $156.

On November 29, 2005, the Company obtained an unsecured loan in the amount of $10,000 from a corporate officer. The agreement provides for repayment of principal and interest accrued at 6% per annum at December 1, 2008. At June 30, 2008, the Company had accrued interest of $1,552.

On November 19, 2007, the Company obtained an unsecured loan in the amount of $10,000 from an unrelated third party. The agreement provides for repayment of principal and interest accrued at 6% per annum at November 19, 2009. At June 30, 2008 the Company had accrued interest of $368.

8

ANGIOGENEX, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTED TO FINANCIAL STATEMENTS JUNE 30,2008
(UNAUDITED)

NOTE 6 - FAIR VALUE

In September 2006, the FASB issued FASB Statement No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS 157 were adopted January 1, 2008.
 
SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under SFAS 157 are described below:
 
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities.
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Prices or valuation techniques that require inputs that are both significant to fair value measurement and unobservable (supported by little or no market activity).

The Company's cash instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash instruments that are valued based on quoted market prices in active markets are primarily money market securities.

NOTE 7 - CAPITAL STOCK

Common Stock

During the six months ended June 30, 2008 the Company sold 169,500 shares of common stock for $55,850, net of expenses of $650.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

In July 2006, Comparative Biosciences Inc. (“CompBio”) , a company that AngioGenex hired to breed and house a colony of its proprietary “ID-Knockout” mice, sued the Company in state of court in California claiming approximately $200,000 in unpaid invoices. AngioGenex removed the case to federal court. AngioGenex’s response included counter-claims for CompBio’s breaches of contract, as well as a number of business torts. On November 6, 2007 the parties agreed to a disposition of the suit under a stipulated judgment and settlement agreement pursuant to which: CompBio must return the laboratory mice and all scientific data from the research, CompBio agrees to forego all intellectual property rights in the mice and in the research, that it acknowledges belong to AngioGenex, and AngioGenex agreed to pay the CompBio $55,000 in installments over a 5-year period, plus accumulated interest at 5% per annum. The stipulated judgment and settlement agreement was filed with the court by November 15. At June 30, 2008 the Company has made $15,000 payments to CompBio pursuant to the settlement agreement, and had accrued interest of $1434.

9
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND INVOLVE A HIGH DEGREE OF RISK AND UNCERTAINTY. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-QSB ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT, THE WORDS “ANTICIPATE,” “ESTIMATE,” “PROJECT,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS DUE TO RISKS AND UNCERTAINTIES THAT EXIST IN OUR OPERATIONS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDING AMONG OTHERS, THE RISK THAT OUR PRODUCT DEVELOPMENT PROGRAMS WILL NOT PROVE SUCCESSFUL, THAT WE WILL NOT BE ABLE TO OBTAIN FINANCING TO COMPLETE ANY FUTURE PRODUCT DEVELOPMENT, THAT OUR PRODUCTS WILL NOT PROVE COMPETITVE IN THEIR MARKETS. THESE RISKS AND OTHERS ARE MORE FULLY DESCRIBED IN OUR ANNUAL REPORT ON FORM 10-KSB. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR PROJECTED.

ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS INCLUDED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GIVE ANY ASSURANCES THAT THESE EXPECTATIONS WILL PROVE TO BE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto appearing in Part I, Item 1.

Company Overview

AngioGenex is an early stage biotechnology company focused on the discovery and development of compounds useful for the diagnosis and treatment of cancer. Our proprietary technology is based on the research work of Dr. Robert Benezra and his collegues at Memorial Sloan Kettering Cancer Center, who established the role of the Id (inhibition of differentiation) genes and corresponding Id proteins in the formation of new blood vessels (angiogenesis) required for tumor growth and metastasis. This intellectual property includes the exclusive worldwide rights to certain patent pending Id based anti-angiogenesis anti-cancer biotechnology that we acquired in 2000 from the Sloan Kettering Institute for Cancer Research and subsequently from sponsored research. In addition, our intellectual property includes molecules that were generated as a result of in-house screening and out-sourced contract research concerning organic molecules that appear to inhibit the Id related process responsible for the formation of new blood vessels and consequent tumor growth, as well as other “know-how” and trade secrets which resulted from other out-sourced research.

Our therapeutic focus is on the identification and development of orally active molecules capable of inhibiting Id activity and preventing the formation of blood vessels that support the growth of cancerous tumors. In addition, we have sponsored other research on the modulation of Id genes and proteins that may be useful in the treatment of non-oncological diseases, such as age related macular degeneration and diabetic retinopathy, in which a surplus in the growth of blood vessels is an important part of the underlying pathology of such diseases.

We have out-licensed our rights to develop Id-based prognostics and diagnostics to BioCheck, Inc., a leading producer of clinical diagnostic assays. In June 2004 we signed a Development and Marketing Agreement with BioCheck under which we assigned BioCheck the exclusive rights to develop and market cancer prognostic and diagnostics in return for royalties and milestone payments. Pursuant to this sub-license BioCheck has been developing monoclonal antibodies for all four Id proteins (Id1, Id2, Id3, and Id4) for use in standard enzyme linked immunoassay or ELISA type assay tests and for kits for the detection of the proteins in tumors and other tissues. The sale of monoclonal antibodies to the Id proteins by BioCheck has begun to generate revenue for BioCheck.

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Since commencement of operations in 1999, our efforts have been principally devoted to in-licensing our intellectual property, research and development activities, entering into collaborative agreements, recruiting management personnel and advisors, and raising capital. Our current business strategy is to concentrate our financial resources primarily on the further development of our proprietary potential anti-cancer lead drug compounds.

Product Research and Development Plans

Our current plan of operation for the next 12 months primarily involves out-sourced contract research and development activities on the design of more potent and efficient Id protein inhibitors based on two organic molecules which have exhibited anti-Id protein properties. Given sufficient capital resources, we plan to continue to test these organic molecules in established animal tumor models for their ability to block blood vessel formation and inhibit tumor growth. This testing as well as further refinement of the structure of active molecules is expected to result in the identification of a lead therapeutic drug compound. The lead compound would then be subjected to further testing in animals to obtain preliminary knowledge of its properties including safety. After the receiving promising preliminary data on the lead compound, it would be subjected to the more stringent tests required to complete the FDA requirements for an IND (Investigational New Drug Application). Such additional research and testing necessary for an IND application will require significant capital expenditures of approximately $1.5 million and will only be possible if we raise additional capital through equity financings.

We intend to contract out substantially all of the research and development work on our potential anti-cancer lead drug compounds. No employees were hired in the second quarter of 2008. We do not expect to hire employees during the next twelve months unless we raise substantial additional capital in the range of $5 million.

Our actual research and development and related activities may vary significantly from current plans depending on numerous factors, including changes in the costs of such activities from current estimates, the results of our research and development programs, technological advances, determinations as to commercial viability and the status of competitive products. The focus and direction of our operations will also be dependent on the establishment of our collaborative arrangements with other companies, the availability of financing and other factors. We expect our development costs to increase as any future lead anti-cancer drug compound or compounds enter the later stages of development.

Liquidity and Capital Resources

    Since inception, we have financed our operations through the private placement of equity and debt securities, as well as loans from certain of our officers and directors. In February 2008 we sold 19,500 shares in a private placement for net proceeds of $5,850. As of June 30, 2008, we had $10,322 in cash as compared to $45,406 in cash at December 31, 2007. In June 2008 we sold 150,000 shares of common stock at $0.333 per share with net proceeds of $50,000. We do not have any available lines of credit.

    Net cash used in operating activities during the six months ended June 30, 2008 was $90,934 resulting in a net loss of $200,867, after taking into account significant non-cash charges for operating expenses during the six month period and other adjustments. We pay no rent to Martin Murray, a director and our Chief Financial Officer, Secretary and Treasurer, for the use of office space for file keeping and other business purposes.

As of June 30, 2008, our current liabilities exceeded our current assets by $521,273. We anticipate that our minimum cash requirements to continue as a going concern for the next twelve months will be at least $70,000.

We plan to finance our needs principally from the following:

·
our existing capital resources and interest earned on that capital;

·
royalty income, if any, from licensed product sales by BioCheck, Inc.;

·
through future private placement financing.

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As mentioned above, we may generate revenue from BioCheck from royalties on sales of licensed products or from minimum annual royalty payments under our license agreement. The sale of monoclonal antibodies to the Id proteins by BioCheck has begun to generate revenue, upon which we will receive royalty payments. As of December 31, 2007 we recognized royalty revenue and recorded a receivable of $50,000 based on the minimum annual royalty that BioCheck was obligated to pay us during the twelve months ending in the second quarter of 2008. We had agreed to an alternative arrangement with BioCheck by which it has met its minimum annual royalty payment obligation for the twelve months ending in the second quarter of 2008 by providing proprietary antibodies to contract research organizations at which we are undertaking ongoing research as well as to Dr. Robert Benezra’s lab at Memorial Sloan Kettering Cancer Center for research related to our intellectual property. Pursuant to an amendment to the Development and Marketing Agreement with BioCheck, BioCheck is no longer required to make annual minimum royalty payments in the amount of $50,000. This amendment also applies retroactively to the 2007 and 2008 annual minimum royalty payments as well. Therefore the Company charged $50,000 t bad debt expenses for revenue recognized previously under this agreement, We cannot at this time assure you that additional revenues will be generated in fiscal year 2008, if at all.

The current rate of our cash usage raises substantial doubt about our ability to continue as a going concern, absent any new sources of significant cash flows. We believe that we have sufficient capital resources to finance our plan of operation into the fourth quarter of 2008. However, this is a forward-looking statement, and there may be changes that could consume available resources before such time. Our long term capital requirements and the adequacy of our available funds will depend on many factors, including the eventual reporting company costs, public relations fees, patent costs for filing, prosecuting, maintaining and defending our patent rights, among others.

We do not currently have sufficient capital resources to finance our plan of operation through the fourth quarter of 2008. We will need to raise additional capital during the third quarter of 2008 in order to fund our plan of operation through 2008. Our long term capital requirements and the adequacy of our available funds will depend on many factors, including our reporting company costs, patent costs for filing, prosecuting, maintaining and defending our patent rights, among others.

We will need to raise substantial additional capital through equity or debt financings or generate additional revenue to complete our development of lead anti-cancer drug compounds. We cannot assure you that we will generate sufficient additional capital or revenues, if any, to fund our operations through the fourth quarter of 2008, that any future equity financings will be successful, or that other potential financings through equity offerings, or otherwise, will be available on acceptable terms or at all. Having insufficient funds may require us to delay, scale back, or eliminate some or all of our development programs, relinquish some or even all rights to product candidates at an earlier stage of development, or renegotiate less favorable terms that we would otherwise. If we are unable to raise additional capital through the fourth quarter of 2008 we may have to further curtail or cease operations.

Critical Accounting Policies and Estimates.

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. We have disclosed all significant accounting policies in note 2 to the financial statements included in our Form 10-KSB. Our critical accounting policies are:

Revenue recognition: Royalties will be recognized as revenue when the amounts are contractually earned, fixed and determinable, and there is substantial probability of collection.

Research, development costs: Research and development costs are expensed as incurred.

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    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.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Not required
Item 4T.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-QSB, an evaluation was carried out by our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2008. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, and in light of the previously identified material weakness in internal control over financial reporting, as of December 31, 2007, relating to fundamental elements of an effective control environment described in the 2007 Annual Report on Form 10-KSB, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2008. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II.    OTHER INFORMATION

Item 1.    Legal Proceedings

    There have been no material changes from the disclosure provided in Part 1, Item 3 of our Annual Report on Form 10-KSB for the year ended December 31, 2007.

Item 1A.     Risk Factors

    There have been no material changes from the disclosure provided in Part 1, Item 1 of our Annual Report on Form 10-KSB for the year ended December 31, 2007.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds 
 
In June 2008 we sold 150,000 shares of common stock at $0.333 per share with net proceeds of $50,000.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders
 
None.

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Item 5.    Other Information

None.

Item 6.    Exhibits 

(a)
Exhibits

Exhibit Number
Description of Exhibit
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
 
Angiogenex, Inc.
 
 		  
 		  
 
August 14, 2008
 By:   /s/ William Garland
 
William Garland
 
Chief Executive Officer & COO
(Principal Executive Officer)

     
   
 
 		  
 		  
 
August 14, 2008
 By:   /s/ Martin Murray
 
Martin Murray
 
Chief Financial Officer
(Principal Financial and Accounting Officer)

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