BioCorRx Inc. - Quarter Report: 2011 September (Form 10-Q)

 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains statements that constitute forward-looking statements. The words “expect,” “estimate,” “anticipate,” “predict,” “believe,” and similar expressions and variations thereof are intended to identify forward-looking statements. Such forward-looking statements include statements regarding, among other things, (a) our estimates of raw material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital and (g) the benefits related to ownership of our common stock. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements for the reasons, among others, described within the various sections of this Form 10-Q.  

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Form 10-Q will in fact occur as projected. We undertake no obligation to release publicly any updated information about forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

ITEM 1.  FINANCIAL STATEMENTS

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS

The accompanying unaudited financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America. However, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These condensed financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and the notes thereto for the fiscal year ended December 31, 2010 included in its Annual Report on Form 10-K.

Nature of Business

Fresh Start Private Management, Inc. (“FSPM”) was originally incorporated as Cetrone Energy Company on January 28, 2008 in the State of Nevada.  The principal business of the Company originally was to develop “green” renewable fuel source for agricultural operations, specifically biodiesel.  On July 26, 2010, the Company filed an amendment to its Articles of Incorporation changing its name to Fresh Start Private Management Inc.  The Company signed a letter of intent with Fresh Start Private, Inc. (“FSP”) in anticipation of a merger.  FSP owns certain know how and intellectual property dealing with the treatment of alcoholism and operates a medical clinic in Orange County, California.  The Company’s year-end is December 31. The Company currently has no operations or realized revenues from its planned principle business purpose and, in accordance with FASB ASC 915 “Development Stage Entities,” is considered a Development Stage Enterprise.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Share Based Expenses

FASB ASC 718 "Compensation - Stock Compensation" prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.  The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 "Equity - Based Payments to Non-Employees."  Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

Recent Accounting Pronouncements

The Company has determined that the adoption of any proposed accounting pronouncements will not have an impact on the consolidated financial statements, as the Company does not currently have any such arrangements with its customers.

Going Concern

As shown in the accompanying financial statements, the Company had negative working capital and an accumulated deficit incurred through September 30, 2011.  The Company currently has minimal operations which raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the 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.

An estimated $120,000 is believed necessary to continue operations and increase development through the next fiscal year.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships.  Management intends to seek new capital from new equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.

NOTE 3– INTANGIBLE ASSETS

On October 28, 2010, the Company acquired an exclusive product license, which included the right to use the Naltrexone Implant and any procedures related to the licensed product. The Company paid a onetime license fee of 7.5% of the total common shares outstanding on the date of the agreement, or 5,672,250 common shares at the market value of $0.70 per share as of the date of the agreement.  Total value of the license is recorded as $3,970,575.  Additionally, the Company will pay $600 for each prescription request of the licensed product.  The agreement will remain in force for so long as the Company continues to use the Licensed Product.

For the purposes of the Asset Purchase Agreement, “Assets” shall mean those assets that are related to the Trademark and the Intellectual Property that are or were used or created by Licensor in its conduct of business, including all assets, rights, interests, and properties of Licensor of whatever nature, tangible or intangible, real or personal, fixed or contingent, except for the Trademark and the Intellectual Property.  For all assets received, the Company paid $10.00 in cash.  

NOTE 4– CAPITAL STOCK

Common Stock

The shares to be issued for the license agreements listed in Note 3 were not issued as of December 31, 2010 and considered subscribed.   On October 31, 2011, the Company issued these shares in conjunction with the completion of its merger with Fresh Start Private, Inc.

Net loss per common share

Net loss per share is calculated in accordance with FASB ASC 260, “Earnings Per Share.”  The weighted-average number of common shares outstanding during each period is used to compute basic loss per share.  Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding.  Dilutive potential common shares are additional common shares assumed to be exercised.

Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during 2011 or 2010 and since inception.  As of September 30, 2011 and December 31, 2010 and since inception, the Company had no dilutive potential common shares.

NOTE 5 – SUBSEQUENT EVENTS

On October 31, 2011 , the Company entered into a Share Exchange Agreement by and among (i) Fresh Start Private Management, Inc. (the “Company”), (ii) our former principal stockholder, (iii) Fresh Start Private, Inc. (“FSP”), and (iv) the former shareholders of FSP. Pursuant to the terms of the Exchange Agreement, each of the former shareholders of FSP transferred to us all of their shares of FSP in exchange for the issuance of 37,000,000 shares of our common stock, which represented approximately 33% of our total shares outstanding immediately following the closing of the transaction (such transaction, the “Share Exchange”).   As a result of the Share Exchange, FSP

became our wholly-owned subsidiary. We are now a holding company, which through FSP, engaging in alcohol and drug rehabilitation and treatment

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the financial statements of Fresh Start Private Management (“FSP”) and the notes which form an integral part of the financial statements which are attached hereto.

The financial statements mentioned above have been prepared in conformity with accounting principles generally accepted in the United States of America and are stated in United States dollars.

FSP is a start-up, development stage company, incorporated in the State of Nevada on January 28, 2008 and with a fiscal year end of December 31.

On October 31, 2011, we completed a reverse acquisition transaction through a share exchange with FSP whereby we acquired all of the issued and outstanding shares of FSP in exchange for 37,000,000 shares of our common stock, which represented approximately 31.3% of our total shares outstanding immediately following the closing of the Share Exchange.   As a result of the Share Exchange, FSP became our wholly-owned subsidiary.

Three months ended September 30, 2011

For the three months ended September 30, 2011 the Company had not generated any revenue and had interest income of $665 compared to $405 in 2010, a 64% increase.  Operating expenses of $2,600 in 2011 compared to $5,254 in 2010, a 51% decrease, primarily from lower professional fees.   The operating loss for the fiscal quarter of $1,935 compares to an operating loss for the three month period ending September 30, 2010 of $4,849, a decrease of 60% from the reduction of professional fees.

Nine months ended September 30, 2011

For the nine months ended September 30, 2011 the Company had not generated any revenue and had interest income of $1,975 compared to $405 in 2010, a 387% increase due to less than three months interest in 2010.  Operating expenses of $19,976 in 2011 compared to $18,193 in 2010, a 10% increase.  Year to date expenses for compliance with regulatory filings vary from quarter to quarter, but the year to date fees were comparable.   The operating loss for the nine months of $18,001 compares to an operating loss for the nine month period ending September 30, 2010 of $17,788, an increase of 1%.

Liquidity

The Company currently has approximately $1,116 of cash on hand and total assets of $4,062,736 with total liabilities of $38,294.

The Company intends to develop its business in alcohol abuse treatment and alcohol detox rehabilitation. On October 28, 2010, the Company acquired an exclusive product license, which included the right to use the Naltrexone Implant for alcohol Treatment and any procedures related to the licensed product.

On November 22, 2010, the Company entered into an intellectual property license and asset purchase agreement which included an exclusive right to use the Trademark “Fresh Start Private” and Intellectual Property, including written grogram regarding alcohol addiction, alcohol withdrawal, alcohol abuse treatment and alcohol detox rehabilitation. Finalization of the intellectual property license and asset purchase agreement is subject to due

diligence by FSPM board members along with audited financial statements from Fresh Start Private.  Fresh Start Private currently operates a clinic in Orange County California.

Principal Office

We operate from leased space. Our executive offices are located at 999 North Tustin Avenue, Suite 16, Santa Ana, California 92705, and our telephone number is (714) 541-6100. We lease this property. Our lease was entered into on May 1, 2010 and is for a term of one-year with an annual option to renew at a rate of $1,524.20 per month.

Other information

As of September 30, 2011 FSPM had 75,430,000 shares outstanding.

 FSPM is responsible for filing various forms with the United States Securities and Exchange Commission (the “SEC”) such as Form 10K and Form 10Qs.  The shareholders may read and copy any material filed by FSPM with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549.   The shareholders may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330.   The SEC maintains an Internet site that contains reports, proxy and information statements, and other information which FSPM has filed electronically with the SEC by assessing the website using the following address:  http://www.sec.gov. 

Description of the Property

We do not own any real estate or other physical properties material to our operations.  We operate from leased space. Our executive offices are located at 999 North Tustin Avenue, Suite 16, Santa Ana, California 92705, and our telephone number is (714) 541-6100. We lease this property. Our lease was entered into on May 1, 2010 and is for a term of one-year with an annual option to renew at a rate of $1,524.20 per month.

Plan of Operation

  We have accounts payable of $21,981.  Since incorporation, the Company has financed its operations through minimal initial capitalization and nominal business activity.  As of September 30, 2011 we had $1,116 of cash on hand.  We had total liabilities of $31,668.

The Company will finance its operations from the continuing business of  its subsidiary Fresh Start Private, Inc.  In addition, Fresh Start Private, Inc. has a relationship with a factoring company that enables it to access capital based on the value of its patient receivables.

Fresh Start has a new product using an FDA approved drug Naltrexone in the treatment of alcoholism. The Company's research has indicated that demand for its services are high, and that growth in highly marketed segments of the population may be achieved through additional clinic sites.

Fresh Start Private's goal is to meet its growth targets through opportunities of promoting its product and services to existing medical clinics and treatment centers that will be will be charged a fee and a percentage of sales.

The Company intends to also open corporately owned clinics in key markets where it has already established a foothold on the industry.

If FSPM does not produce sufficient cash flow to support its operations over the next 12 months, the Company will need to raise additional capital by issuing capital stock in exchange for cash in order to continue as a going concern.  

There are no formal or informal agreements to attain such financing.  FSPM cannot assure any investor that, if needed, sufficient financing can be obtained or, if obtained, that it will be on reasonable terms.  Without realization of additional capital, it would be unlikely for operations to continue and any investment made by an investor would be lost in its entirety.

FSPM management does not expect to incur research and development costs within the next twelve months.

FSPM currently does not own any significant plant or equipment that it would seek to sell in the near future

The Company has not paid for expenses on behalf of any director.  Additionally, FSPM believes that this policy shall not materially change within the next twelve months.

Competitive Factors

There are many benefits of the Fresh Start Program compared to other traditional alcohol treatments. As the Fresh Start treatment is administered on an out patient basis there is no need for patients to leave their work and family for any extended period of time. With over 5,000 patients successfully treated the Fresh Start team has the experience to handle all alcohol addiction scenarios. The Fresh Start Private program is also less expensive that many traditional treatment centers. 

Regulations

We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the treatment of alcoholism and use of pharmaceuticals. Moreover, if we begin treatment, we may have expenses to comply with permit and regulatory environment laws both locally and federally.

Employees

As of the date hereof, we have approximately 5 employees who work full-time. All employees assist with scheduling patients and other administrative tasks. We also contract with 2 doctors who are independent contractors. It is their responsibility to perform the surgeries 

Investment Policies

FSPM does not have an investment policy at this time.  On August 5, 2010 the Company invested $88,000 in Fresh Start Private, Inc. a private Nevada Corporation at an interest rate of 3% simple fee with a 2-year term, payable at the end of the term.

Since we have had very minimal business activity, it is the opinion of management that the most meaningful financial information relates primarily to current liquidity and solvency.  As at September 30, 2011 we had $1,116 cash on hand and liabilities of $38,294. The Company anticipates that it will generate sufficient capital to continue its opereations and execute its business objectives through the results of operations of its subsidiary Fresh Start Private, Inc.

Our financial statements contained herein have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business. We incurred a net loss for the period from the inception of our business on January 28, 2008 to September 30, 2011 of $59,305. We did not earn any revenues from operations during the aforementioned period.

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”).  GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.  These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition.  We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our financial statements.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.  Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that

applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Limited Operating History; Need for Additional Capital.  

The Company’s operating history is limited to the results of operations of its operating subsidiary Fresh Start Private, Inc.  It is anticipated that the results of operations of Fresh Start Private, Inc. will be sufficient to meet the needs of the Company on a go forward basis.  No additional capital is projected to be required at this time.

We cannot guarantee we will be successful in our business activities or in any activity that management directs the business.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, and possible cost overruns due to price and cost increases in services.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MAKET RISK

Not required for smaller reporting companies.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Dr. Jorge Andrade, Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer/Chief Financial Officer concluded that these disclosure controls and procedures are not effective.  See below within this section “CONCLUSION” for specifics of why the controls and procedures were determined to be not effective.

As of the quarter ended September 30, 2011, we have determined that our controls and procedures were not effective for the following reasons:

• Policies and Procedures for the Financial Close and Reporting Process — Currently there are no policies or procedures that clearly define the roles in the financial close and reporting process. The various roles and responsibilities related to this process should be defined, documented, updated and communicated. Failure to have such policies and procedures in place amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

• Representative with Financial Expertise — For the period ending September 30, 2011, the Company did not have a representative with the requisite knowledge and expertise to review the financial statements and disclosures at a sufficient level to monitor the financial statements and disclosures of the Company. Failure to have a representative with such knowledge and expertise amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

• Adequacy of Accounting Systems at Meeting Company Needs — The accounting system in place at the time of the assessment lacks the ability to provide high quality financial statements from within the system, and there were no procedures in place or built into the system to ensure that all relevant information is secure, identified, captured, processed, and reported within the accounting system. Failure to have an adequate accounting system with procedures to ensure the information is secure and accurately recorded and reported amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

• Segregation of Duties — Management has identified a significant general lack of definition and segregation of duties throughout the financial reporting processes. Due to the pervasive nature of this issue, the lack of adequate definition and segregation of duties amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

• Lack of Audit Committee and Outside Directors in the Company’s Board of Directors - We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

In light of the foregoing, once we have the adequate funds, management plans to develop the following additional procedures to help address these material weaknesses:

• Fresh Start Private Management, Inc. will create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, we plan to enhance and test our month-end and year-end financial close process. Additionally, our audit committee will increase its review of our disclosure controls and procedures. We also intend to develop and implement policies and procedures for the financial close and reporting process, such as identifying the roles, responsibilities, methodologies, and review/approval process. We believe these actions will remediate the material weaknesses by focusing additional attention and resources in our internal accounting functions. However, the material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (Exchange Act), such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (SEC) rules and forms.  Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.  Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART 11 – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 1A.   RISK FACTORS

Not required for smaller reporting companies.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No equity securities of the registrant were sold by the registrant during the period covered by the report.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  [REMOVED AND RESERVED]

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

The following exhibits are included as part of this report:

*     Includes the following materials contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Changes in Equity, (iv) the Statements of Cash Flows, and (v) Notes.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.