NeuBase Therapeutics, Inc. - Quarter Report: 2009 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the quarterly period ended March 31, 2009
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from ________ to ________
Commission
File Number: 333-88480
BBM
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
|
Utah
|
13-3709558
|
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
1245
Brickyard Road, Suite 590
Salt
Lake City, Utah 84106
(Address
of principal executive offices)
(801)
433-2000
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant 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
|
Large
accelerated filer
|
¨
|
Accelerated filer ¨ |
|
Non-accelerated
filer
|
¨
(Do not check if smaller reporting company)
|
Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date. 25,247,006 shares of Common
Stock outstanding as of May 19, 2009.
BBM
HOLDINGS, INC.
TABLE OF
CONTENTS
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Page
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||
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PART
I FINANCIAL INFORMATION
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3
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|
|
Item
1.
|
Financial
Statements.
|
3
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
10
|
|
Item
3.
|
Quantitative
and Qualitative Risk
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13
|
|
Item
4.
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Controls
and Procedures
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13
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PART
II OTHER INFORMATION
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15
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|
|
Item
1.
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Legal
Proceedings
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15
|
|
Item
2.
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Sales
of Unregistered Securities and Use of Proceeds.
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15
|
|
Item
3.
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Defaults
Upon Senior Securities.
|
15
|
|
Item
4.
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Submission
of Matters to a Vote of Security Holders.
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15
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|
Item
5.
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Other
Information
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15
|
|
Item
6.
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Exhibits
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15
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2
PART
I FINANCIAL
INFORMATION
Item
1. Financial
Statements.
The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission ("SEC"), and should be
read in conjunction with the audited financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K filed with the SEC on
January 13, 2009. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the periods presented have been
reflected herein. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year.
|
TABLE
OF CONTENTS
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PAGE
|
|
Condensed
Balance Sheets as of March 31, 2009 (unaudited) and September 30,
2008
|
4
|
|
Condensed
Statements of Operations for the three month and six month periods
ended
|
|
|
March
31, 2009 and 2008 (unaudited)
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5
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Condensed
Statements of Cash Flows for the six month periods ended
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|
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March
31, 2009 and 2008 (unaudited)
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6
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|
Notes
to Unaudited Financial Statements
|
7
|
3
BBM
HOLDINGS, INC.
(a
Development Stage Company)
Condensed
Balance Sheets
(In
Thousands)
|
March
31,
|
September
30,
|
|||||||
|
2009
|
2008
|
|||||||
|
(unaudited)
|
||||||||
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ASSETS
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||||||||
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CURRENT
ASSETS
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||||||||
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Cash
and cash equivalents
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$ $ | 8 | $ $ | 96 | ||||
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Prepaid
expenses and deposits
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10 | - | ||||||
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Total
Current Assets
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18 | 96 | ||||||
|
|
||||||||
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OTHER
ASSETS
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||||||||
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Patent
costs
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608 | - | ||||||
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Security
deposits
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85 | 85 | ||||||
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Total
Other Assets
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693 | 85 | ||||||
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TOTAL
ASSETS
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$ $ | 711 | $ $ | 181 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
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CURRENT
LIABILITIES
|
||||||||
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Accounts
payable
|
$ $ | 53 | $ $ | 56 | ||||
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Convertible
Debenture-short term
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205 | - | ||||||
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Notes
payable
|
39 | - | ||||||
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Related
party advances
|
86 | - | ||||||
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Accrued
expenses
|
97 | 92 | ||||||
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Total
Current Liabilities
|
480 | 148 | ||||||
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LONG-TERM
LIABILITIES
|
||||||||
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Convertible
Debenture-long term
|
295 | - | ||||||
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TOTAL
LIABILITIES
|
$ | 775 | $ | 148 | ||||
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STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
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Preferred
stock, series A; 10,000,000 shares authorized,
|
||||||||
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at
no par value, no shares and 1,454,090
|
||||||||
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shares
issued and outstanding, respectively
|
- | - | ||||||
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Common
stock; 50,000,000 shares authorized,
|
||||||||
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at
no par value, 25,247,006
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||||||||
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shares
issued and outstanding, respectively
|
22,049 | 21,637 | ||||||
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Accumulated
deficit
|
(20,975 | ) | (20,975 | ) | ||||
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Deficit
accumulated during the development stage
|
(1,138 | ) | (629 | ) | ||||
|
|
||||||||
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Total
Stockholders' Equity (Deficit)
|
(64 | ) | 33 | |||||
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TOTAL
LIABILITIES AND
|
||||||||
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
$ $ | 711 | $ $ | 181 | ||||
|
The
accompanying notes are an integral part of these condensed financial
statements.
|
4
BBM
HOLDINGS, INC.
(a
Development Stage Company)
Condensed
Statements of Operations
(In
Thousands)
(unaudited)
|
From
Inception of
|
||||||||||||||||||||
|
the
Development
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||||||||||||||||||||
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Stage
on
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||||||||||||||||||||
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October
1,
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||||||||||||||||||||
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For
the Three Months Ended
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For
the Six Months Ended
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2007
Through
|
||||||||||||||||||
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March
31,
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March
31,
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March
31,
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||||||||||||||||||
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2009
|
2008
|
2009
|
2008
|
2009
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||||||||||||||||
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REVENUES
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$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
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GROSS
PROFIT
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- | - | - | - | - | |||||||||||||||
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OPERATING
EXPENSES
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||||||||||||||||||||
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General
and administrative
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442 | 96 | 507 | 339 | 1,147 | |||||||||||||||
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Total
Operating Expenses
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442 | 96 | 507 | 339 | 1,147 | |||||||||||||||
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OPERATING
LOSS
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(442 | ) | (96 | ) | (507 | ) | (339 | ) | (1,147 | ) | ||||||||||
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OTHER
INCOME AND EXPENSE
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||||||||||||||||||||
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Other
income and expense
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(2 | ) | 4 | (2 | ) | 5 | 9 | |||||||||||||
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LOSS
FROM CONTINUING OPERATIONS
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||||||||||||||||||||
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BEFORE
INCOME TAXES
|
(444 | ) | (92 | ) | (509 | ) | (334 | ) | (1,138 | ) | ||||||||||
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PROVISION
FOR INCOME TAXES
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- | - | - | - | - | |||||||||||||||
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LOSS
FROM CONTINUING OPERATIONS
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(444 | ) | (92 | ) | (509 | ) | (334 | ) | (1,138 | ) | ||||||||||
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DISCONTINUED
OPERATIONS
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||||||||||||||||||||
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Income
(loss) from discontinued
|
||||||||||||||||||||
|
operations
(including gain on
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||||||||||||||||||||
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disposal
of $606)
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- | - | - | 629 | 654 | |||||||||||||||
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Income
tax benefit
|
- | - | - | - | - | |||||||||||||||
|
GAIN
(LOSS) ON
|
||||||||||||||||||||
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DISCONTINUED
OPERATIONS
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- | - | - | 629 | 654 | |||||||||||||||
|
NET
INCOME (LOSS)
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$ | (444 | ) | $ | (92 | ) | $ | (509 | ) | $ | 295 | $ | (484 | ) | ||||||
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BASIC
INCOME (LOSS) PER SHARE
|
||||||||||||||||||||
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Continuing
operations
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$ | (0.02 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||||||
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Discontinued
operations
|
0.00 | 0.00 | 0.00 | 0.02 | ||||||||||||||||
| $ | (0.02 | ) | $ | (0.00 | ) | $ | 0.02 | $ | 0.01 | |||||||||||
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DILUTED
INCOME (LOSS) PER SHARE
|
||||||||||||||||||||
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Continuing
operations
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$ | (0.02 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||||||
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Discontinued
operations
|
0.00 | 0.00 | 0.00 | 0.02 | ||||||||||||||||
| $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | 0.01 | ||||||||||
|
WEIGHTED
AVERAGE NUMBER
|
||||||||||||||||||||
|
OF
SHARES OUTSTANDING:
|
||||||||||||||||||||
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BASIC
|
25,247 | 25,247 | 25,247 | 25,247 | ||||||||||||||||
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DILUTED
|
25,247 | 25,247 | 25,247 | 30,858 | ||||||||||||||||
|
The
accompanying notes are an integral part of these condensed financial
statements.
|
5
BBM
HOLDINGS, INC.
(a
Development Stage Company)
Condensed
Statements of Cash Flows
(In
Thousands)
(unaudited)
|
From
Inception
|
||||||||||||
|
of
the Development
|
||||||||||||
|
Stage
on October
|
||||||||||||
|
For
the Six Months Ended
|
1,
2007 Through
|
|||||||||||
|
March 31,
|
March 31,
|
|||||||||||
|
|
2009
|
2008
|
2009
|
|||||||||
|
OPERATING
ACTIVITIES
|
||||||||||||
|
Net
income (loss)
|
$ | (509 | ) | $ | 387 | $ | (484 | ) | ||||
|
Adjustments
to reconcile net loss to net cash
|
||||||||||||
|
used
by operating activities:
|
||||||||||||
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Discontinued
operations
|
- | (473 | ) | (684 | ) | |||||||
|
Fair
value of warrant issued for services
|
412 | - | 683 | |||||||||
|
Changes
in operating assets and liabilities
|
||||||||||||
|
Change
in prepaid expenses and deposits
|
(10 | ) | - | 8 | ||||||||
|
Change
in accounts payable
|
(3 | ) | (57 | ) | (95 | ) | ||||||
|
Change
in accrued expenses
|
5 | (41 | ) | (36 | ) | |||||||
|
|
||||||||||||
|
Net
Cash Used in Operating Activities
|
(105 | ) | (184 | ) | (624 | ) | ||||||
|
INVESTING
ACTIVITIES
|
||||||||||||
|
Payment
of patent costs
|
(108 | ) | - | (108 | ) | |||||||
|
Discontinued
operations
|
- | 460 | 418 | |||||||||
|
Net
Cash Provided by (used in) Investing Activities
|
(108 | ) | 460 | 310 | ||||||||
|
|
||||||||||||
|
FINANCING
ACTIVITIES
|
||||||||||||
|
Proceeds
from related party payables
|
125 | - | 125 | |||||||||
|
Net
Cash Provided by Financing Activities
|
125 | - | 125 | |||||||||
|
NET
DECREASE IN CASH
|
(88 | ) | 76 | (189 | ) | |||||||
|
CASH
AT BEGINNING OF PERIOD
|
96 | 197 | 197 | |||||||||
|
CASH
AT END OF PERIOD
|
$ | 8 | $ | 273 | $ | 8 | ||||||
|
SUPPLEMENTAL
DISCLOSURES OF
|
||||||||||||
|
CASH
FLOW INFORMATION
|
||||||||||||
|
CASH
PAID FOR:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Income
Taxes
|
$ | - | $ | - | $ | - | ||||||
|
NON-CASH
FINANCING ACTIVITIES:
|
||||||||||||
|
Transfer
of investment for dividends payable
|
$ | - | $ | - | $ | 186 | ||||||
|
Purchase
of patents for debenture
|
$ | 500 | $ | $ | 500 | |||||||
The
accompanying notes are an integral part of these condensed financial
statements.
6
BBM
Holdings, Inc.
(A
Development Stage Company)
NOTES TO
CONDENSED FINANCIAL STATEMENTS
Note
1. Purchase of Assets and Termination of Shell Company
Status
The
Company is a biotechnology development and rollup company.
On March
20, 2009, the Company acquired in a secured party sale all the patents, related
intellectual property, clinical data and other assets related to AVR 118 (soon
to be renamed OHR 118) and its topical counterpart AVR 123 (soon to be renamed
OHR 123). OHR 118 is in an ongoing Phase II trial for the treatment
of cachexia and OHR 123 is in an ongoing Phase I trial for wound healing. The
Company also exercised its option to acquire the new technology and early stage
pharmaceutical compounds from Dr. S. Z. Hirschman, who will join the Company as
a consultant and Chief Scientific Advisor.
The
Company acquired the assets in the secured party sale with $100,000 in cash and
by issuing a $500,000 principal amount of 11% convertible secured
non-recourse debenture due June 20, 2011, and convertible at $0.40 per share
(the “Convertible
Debenture”). The Convertible Debenture is secured by the acquired assets.
The cash portion of the purchase price was financed by short term loans from an
affiliate of Orin Hirschman, a director of the Company, and another current
shareholder.
At
present, the Company is a biotechnology rollup company. The assets acquired in
the secured party sale are part of the Company’s previously announced strategy
to create a rollup of undervalued biotechnology companies and assets. Small
biotechnology companies can benefit significantly from being part of a large
diversified biotech company with many promising drugs in various stages of
clinical development. Additionally, Dr. Hirschman and his extensive network of
scientific and industry contacts bring the benefit of expertise of both clinical
medicine and molecular biology, trial design and obtaining FDA approval. There
can be no assurances of any future acquisitions.
The
Company also continues to seek to acquire YM Biosciences Inc. (“YMI”) (see “Material
Subsequent Events” in the Registrant’s Annual Report on Form 10-K for the fiscal
year ended September 30, 2008 filed January 13, 2009).
Note
2. Going Concern Uncertainty
Going
Concern Uncertainty – The accompanying unaudited condensed financial statements
have been prepared assuming the Company will continue as a going
concern. At March 31, 2009, the Company had cash and cash equivalents
of $8,000, an accumulated deficit of approximately $22,113,000 and negative
working capital of approximately $462,000. For the three months
ended March 31, 2009, the Company had no revenues and utilized cash in operating
activities of approximately $105,000. The Company’s plan includes
settling its remaining outstanding liabilities. Thereafter, the
Company will have limited capital to pay for ongoing public reporting and
minimal operating expense. In addition, not all obligations of the
Company have been settled and it is possible that the Company may incur other
financial obligations.
The
Company has no present avenues of financing and no present plans to obtain
interim financing while continuing its search for a suitable merger or
acquisition candidate. Should there come a point in time when the
Company has exhausted its reserve funds and must seek additional funding to
maintain itself as a public reporting company engaged in searching for merger
and acquisition opportunities, it may be necessary to seek private capital
either from principal shareholders or private parties. It is highly
unlikely that the Company would be able to obtain financing from any commercial
lending source, as it is presently constituted. As a result of the
foregoing, the future liquidity of the Company and funding sources must be
considered as tentative and very limited and pose a substantial risk factor to
the ongoing viability of the Company. These conditions raise
substantial doubt about the Company’s ability to continue as a going
concern. These unaudited condensed financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
7
Note
3. Basis of Presentation
The
accompanying interim condensed financial statements and notes have been
prepared, in accordance with the instructions for Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”), but
have not been audited. Therefore such financial statements and notes
do not include all information and notes normally provided in the annual
financial statements. These interim condensed financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for the fiscal year ended September 30, 2008, which are presented
in the Registrant’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2008 filed January 13, 2009. These statements reflect
all adjustments which are of a normal recurring nature and which, in the opinion
of management, are necessary for a fair presentation of the results for the six
months ended March 31, 2009 and 2008. The results of operations for
the six months ended March 31, 2009 and 2008 are not necessarily indicative of
the results for the full year.
Certain
amounts in the prior year financial statements have been reclassified to conform
to the presentation in the current financial statements. The Company has been
reclassified as a development stage enterprise as of October 1,
2007.
Note
4. Net Income (Loss) Per Common Share
The
Company complies with Statement of Financial Accounting Standards (“SFAS”) No.
128 “Earnings per
Share.” Under SFAS No. 128, basic income (loss) per common share is
computed by dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted income per common share
incorporates the dilutive effect of common stock equivalents during the period
using the treasury stock method. The calculation of diluted loss per common
share excludes potential common stock equivalents since the effect is
anti-dilutive. As of March 31,
2009, the Company had the following common stock equivalents
outstanding:
|
Warrants
|
21,679,566 | |||
|
Total
|
21,679,566 |
Note
5. Recently Issued Accounting Pronouncements
In
June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in FASB Statement of Financial Accounting
Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 and earlier adoption is prohibited. We are not required
to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have
material effect on our financial position and results of
operations if adopted.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies
how Statement 60 applies to financial guarantee insurance contracts, including
the recognition and measurement of premium revenue and claims liabilities.
This statement also requires expanded disclosures about financial guarantee
insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or
after December 15, 2008, and interim periods within those years. SFAS No. 163
has no effect on the Company’s financial position, statements of operations, or
cash flows at this time.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB’s amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time
8
Note
6. Related Party Transactions
On March
16, 2009, AIGH Investment Partners LLC, a major stockholder of the Company and
an affiliate of Orin Hirschman, a director of the Company, provided an aggregate
of $86,355 to the Company in the form of a demand loan.
As of
March 2, 2008 the Company declared a dividend of the Lightspace Units equal to
0.03997 Units per share on its outstanding shares of Series A Preferred Stock
payable on the close of business on March 27, 2008 pending certificate printing
and any other regulatory approvals. The dividend was distributed to
all Series A Preferred Stockholders on June 23, 2008 and the under the terms of
the Series A Preferred Stock the shares were simultaneously
cancelled.
Note
7. Accrued Expenses
Accrued
expenses consist of the following at March 31, 2009:
|
Rent
|
$ | 67,826 | ||
|
Other
|
29,416 | |||
| $ | 97,242 |
Note
8. Commitments and Contingencies
BBM
received notice of a possible claim concerning an outstanding liability in
connection with a software lease entered into as the Company was ceasing
operations. Management has been trying to settle this
lease. The Company has accrued for the full outstanding amount under
the lease during the last fiscal year and is carrying the full costs as an
outstanding payable for $67,826 (see note 7).
Note
9. Convertible Debt
During
the six months ended March 31, 2009, the Company issued an 11% convertible note
in the amount of $500,000, due June 20, 2011. Under the note, the Company must
prepay $180,000 on December 15, 2009, and must make quarterly payments of
$25,000 commencing on March 30, 2010, each of which shall be applied first
towards the satisfaction of accrued interest and then towards the satisfaction
of principal.
All
principal and accrued interest on the notes is convertible into shares of the
Company’s common stock at the election of the purchasers at any time at the
conversion price of $0.40 per share. Using the intrinsic value
method, the Company determined a $500,000 beneficial conversion feature existed
at the issuance of the note. The Company recorded the $500,000 beneficial
conversion feature as contributed capital and as a discount on the convertible
debt. The Company is amortizing the discount over the 27 month term of the
debenture. The Company recorded $7,212 in amortization expense during the period
ended March 31, 2009.
Note
10. Warrants
The
Company has determined the estimated value of the compensatory warrants granted
to non-employees in exchange for services and financing expenses using the
Black-Scholes pricing model and the following assumptions: expected term of 5
years, a risk free interest rate of 1.66% in 2009, a dividend yield of 0% in
both years and volatility of 58.15% in 2009. The amount of the expense charged
to operations for compensatory warrants granted in exchange for services was
$412,142 during the six months ended March 31, 2009.
9
Item
2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
Certain
statements contained in this report, including, without limitation, statements
containing the words “believes,” “anticipates,” “expects,” “intends,” and words
of similar import, constitute “forward-looking statements” as defined in the
Private Securities Litigation Reform Act of 1995 or by the Securities and
Exchange Commission in its rules, regulations and releases, regarding the
Company’s financial and business prospects. These forward-looking statements are
qualified in their entirety by these cautionary statements, which are being made
pursuant to the provisions of such Act and with the intention of obtaining the
benefits of the “safe harbor” provisions of such Act. The Company cautions
investors that any forward-looking statements it makes are not guarantees of
future performance and that actual results may differ materially from those in
the forward-looking statements. We assume no obligation to update any
forward-looking statements contained in this report, whether as a result of new
information, future events or otherwise. Any investment in our common stock
involves a high degree of risk. For a general discussion of some of
these risks in greater detail, see our “Risk Factors” in the Amendment
No. 1 on Form 10-K/A filed on March 30, 2009 (the “Form
10-K/A”) to the annual report of BBM Holdings, Inc. (the “Company”)
for the fiscal year ended September 30, 2008 as filed with the Securities and
Exchange Commission.
Recent
Events
On March
19, 2009, the Company acquired in a secured party sale all the patents, related
intellectual property, clinical data and other assets related to AVR 118 (soon
to be renamed OHR 118) and its topical counterpart AVR 123 (soon to be renamed
OHR 123). OHR 118 is in an ongoing Phase II trial for the treatment
of cachexia and OHR 123 is in an ongoing Phase I trial for wound healing. The
Company also exercised its option to acquire the new technology and early stage
pharmaceutical compounds from Dr. S. Z. Hirschman, who will join the Company as
a consultant and Chief Scientific Advisor.
The
Company acquired the assets in the secured party sale with $100,000 in cash and
by issuing a $500,000 principal amount 11% convertible secured non-recourse
debenture due June 20, 2011, and convertible at $0.40 per share (the “Convertible
Debenture”). The Convertible Debenture is secured by the acquired assets.
The cash portion of the purchase price was financed by short-term loans from an
affiliate of Orin Hirschman, a director of the Company, and another current
shareholder.
History
On March
30, 2007 (the "Effective
Date"), Prime Acquisition, Inc., a wholly-owned subsidiary of the
Registrant, merged with and into Broadband Maritime Inc., (“Broadband”)
and the stockholders of Broadband received Common Stock of the Registrant (the
“Merger”).
As a result of the Merger, the Company acquired a telecommunications engineering
and service company offering turn key, always-on Internet access to commercial
shipping fleets. For purposes of accounting, Broadband is treated as the
accounting acquirer and as such these financial statements contain present the
operations of Broadband for all periods presented.
In
connection with the Merger, the Articles of Incorporation of the Registrant were
amended on March 22, 2007, to (1) change its name to "BBM Holdings, Inc." and
(2) increase the total authorized capital stock of the Registrant to 60,000,000
shares, of which 50,000,000 shares were designated common stock, no par value,
and 10,000,000 shares were designated preferred stock, no par value, of which
1,454,090 shares of the Preferred Stock were designated Series A Preferred Stock
(the "Series A
Stock"). Prior to the Merger, the Registrant paid a dividend of one share
of Series A Stock per share of Common Stock outstanding. Each share of Series A
Stock represents the right to exchange such share for a pro rata share (among
the issued and outstanding Series A Stock) of whatever right, title and interest
is held by the Registrant in the Units consisting of 465,000 shares of common
stock of Lightspace, and warrants to purchase common stock of Lightspace (the
"Lightspace
Securities"), described in the Company’s Quarterly Report on Form 10-QSB
filed by the Registrant on November 16, 2006. As discussed above, this
distribution occurred on June 30, 2008 and, the shares of Series A Stock were
deemed canceled.
10
The
Merger (reverse acquisition) described above has been accounted for as a
purchase business combination in which Broadband was the acquirer for accounting
purposes and BBM was the legal acquirer. No goodwill has been recognized since
BBM was then a “shell company.” Accordingly, the accompanying
statements of operations include the results of operations and cash flows of
Broadband from October 1, 2006 through September 30, 2007 and the results of
operations and cash flows of the Registrant from March 30, 2007, the effective
date of the Merger, through September 30, 2008.
Discontinued
Operations and Divestment of Assets
On June
5, 2007, BBM Holdings announced that it ceased operations and reduced employment
to a small residual force. The Company received notification of the
cancellation of two customer contracts on May 22, 2007 and May 28, 2007,
respectively. In addition, the Company’s largest customer announced
that it would suspend further installations of systems on its vessels for a
four-month period. The Company also received notification of
the cancellation of a third customer contract on June 1, 2007.
The
Company has negotiated with substantially all of its current vendors to obtain a
release of long-term obligations.
On
October 16, 2007, BBM agreed to sell substantially all of its assets (primarily
intellectual property and technology) relating to broadband services to ships to
private investors for $460,000 pursuant to an asset purchase agreement (the
“Asset
Purchase Agreement”). The Company completed the transaction on November
1, 2007, after required stockholder approval under Utah corporate
law. In conjunction with the completion of the asset sale, BBM’s
major customer has agreed to release the Company of its obligation to pay
accrued commissions of $45,000 as well as agreeing to withdraw its claim of
$420,000.
Products
and Markets
After
giving effect to the purchase of pharmaceutical compounds described in “Recent
Events” above, BBM currently has become a biotech development and roll-up
company. In addition to developing the pharmaceutical compounds
acquired to a point where they can be marketed, management is also engaged, on a
best-effort, time available basis, in searching out a potential merger and
acquisition candidate that would yield additional value to public shareholders
in the entity. No warranty or assurance, however, of future results can be made
or is implied by these efforts.
The
Company will continue to incur ongoing operating losses, which are expected to
increase substantially after it funds development of the new pharmaceutical
compounds. In addition, losses will be incurred in paying ongoing reporting
expenses, including legal and accounting expenses, as necessary to maintain the
Company as a public entity, as well as costs while searching for additional
merger and acquisition candidates.
Liquidity
and Sources of Capital
The
liquidity of the Company is extremely limited at the present time in terms of
its ability to pay for development of the new pharmaceutical compounds and
ongoing reporting and minimal operating expenses as previously described. In
addition, not all obligations of the Company have been settled and it is
possible other financial obligations of the Company may occur.
As
of March 31, 2009, BBM had cash of approximately $8,000, prepaid expenses and
deposits of $10,000 and security deposits of $85,000. We had current liabilities
of approximately $283,000. This translates to a working capital
deficit of about $265,000, which means that our cash reserves are not adequate
for the next 12 months. We do not have any source of revenues as of
September 30, 2008 or March 31, 2009 and expect to rely on additional
financing.
BBM has
no present avenues of financing and no present agreements to obtain interim
financing while continuing its search for a suitable merger or acquisition
candidate and arrangements. It will be necessary for BBM to seek private capital
through the sale of additional restricted stock or borrowing either from
principal shareholders or private parties. It does not appear probable that BBM
would be able to obtain financing from any commercial lending source, as it is
presently constituted.
11
As a
result of the foregoing, the future liquidity of the Company and funding sources
must be considered as tentative and very limited and pose a substantial risk
factor to the ongoing viability of BBM. At present, the Company has no known or
fixed means of alternative or subsequent financing. Our independent
accountants have qualified their audit report by expressing doubt about the
Company’s ability to continue as a “going concern.” See “Risk
Factors” in the Form 10-K/A.
Results
of Operations
Three
months ended March 31, 2009 (“2009”) compared to the three months ended March
31, 2008 (“2008”).
Results
of operations for the three months ended March 31, 2009 reflect the following
changes from the prior period.
|
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
|
Net
Revenues
|
- | - | - | |||||||||
|
Cost
of Revenues
|
- | - | - | |||||||||
|
Selling,
General & Administrative Expense
|
442,000 | 96,000 | 346,000 | |||||||||
|
Other
Income (Expense)
|
(2,000 | ) | 4,000 | (6,000 | ) | |||||||
|
Income
(Loss) from Operations
|
(444,000 | ) | (92,000 | ) | 352,000 | |||||||
|
Discontinued
Operations
|
- | - | - | |||||||||
|
Net
Income (Loss)
|
(444,000 | ) | (92,000 | ) | 352,000 | |||||||
The
Company had no net revenues from continuing operations in the three months ended
March 31, 2009. The Company’s products acquired in March 2009 are in the
development stage.
The
Company also had no cost of revenue from continuing operations in the three
months ended March 31, 2009.
Selling,
general and administrative expenses from continuing operations increased from
$96,000 in 2008 to $442,000 in 2009 as the Company had re-entered the
development stage effective October 1, 2007. Included in expenses from
continuing operations during the three months ended March 31, 2009 were
professional fees of almost $12,000, the value of warrants granted for services
of $412,000 and insurance expenses of approximately $13,000.
For the
three months ended March 31, 2009, BBM recognized net loss of $442,000 from
continuing operations compared to a loss of $92,000 for the same period in
2008.
Six
months ended March 31, 2009 (“2009”) compared to the six months ended March 31,
2008 (“2008”).
Results
of operations for the six months ended March 31, 2009 reflect the following
changes from the prior period.
12
|
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
|
Net
Revenues
|
- | - | - | |||||||||
|
Cost
of Revenues
|
- | - | - | |||||||||
|
Selling,
General & Administrative Expense
|
507,000 | 339,000 | 168,000 | |||||||||
|
Other
Income (Expense)
|
(2,000 | ) | 5,000 | (7,000 | ) | |||||||
|
Income
(Loss) from Operations
|
(509,000 | ) | (334,000 | ) | 175,000 | |||||||
|
Discontinued
Operations
|
- | - | - | |||||||||
|
Net
Income (Loss)
|
(509,000 | ) | (334,000 | ) | 175,000 | |||||||
The
Company had no net revenues from continuing operations in the six months ended
March 31, 2009. The Company’s products acquired in March 2009 are in
the development stage.
The
Company also had no cost of revenue from continuing operations in the six months
ended March 31, 2009.
Selling,
general and administrative expenses from continuing operations increased from
$339,000 in the six months ended March 31, 2008 to $507,000 in the six months
ended March 31, 2009 as the Company had re-entered the development stage
effective October 1, 2007. Included in expenses from continuing operations
during the six months ended March 31, 2009 were professional fees of almost
$68,000, the value of warrants granted for services of $412,000 and insurance
expense of approximately $20,000.
For the
six months ended March 31, 2009, BBM recognized net loss of $509,000 from
continuing operations compared to a loss of $334,000 for the same period in
2008. Excluding the non cash expense for the value of warrants granted for
services the net loss would have been $105,000 for 2009.
Item
3. Quantitative and Qualitative
Risk
Market
risk represents the risk of loss arising from adverse changes in interest rates
and foreign exchange rates. The Company does not have any material
exposure to interest rate or exchange rate risk.
Item
4. Controls and
Procedures
The
Company’s management, including the chief executive officer and chief financial
officer (who are the same person), do not expect that our disclosure controls
and procedures or our internal control over financial reporting will prevent or
detect all errors and all fraud that could occur. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met. 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.
Further, because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to
error or fraud will not occur or 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. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in part
on certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.
Disclosure
Controls and Procedures
The
Company’s management, including the chief executive officer and chief financial
officer (who are the same person), is responsible for establishing and
maintaining adequate disclosure controls and procedures, as defined in Exchange
Act Rule 13a-15(e). The Company recognizes the need to segregate the functions
of the chief executive officer and chief financial officer. The Company’s
management, including the chief executive officer and chief financial officer
(who are the same person), has evaluated our disclosure controls and procedures
and despite the unsegregated functions of the chief executive officer and chief
financial officer, in view of the limited amount of transactions, has concluded
that they are currently effective. The Company plans to install segregated
controls if it is able to obtain additional financing needed to sustain its
business plan. See “Risk Factors” in the Form 10-K/A.
13
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal control over financial reporting in
connection with the evaluation required under paragraph (d) of Rule 13a-15 of
the Exchange Act that occurred during the fiscal quarter ended March 31, 2009
that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
14
PART
II OTHER
INFORMATION
Item
1. Legal
Proceedings
Our
management is not aware of any significant litigation, pending or threatened,
that would have a significant adverse effect on our financial position or
results of operations.
Item
2. Sales of Unregistered Securities and
Use of Proceeds.
On March
19, 2009, the Company sold an 11% convertible senior secured non-recourse
debenture, due June 20, 2011, of the Company with a face value of $500,000 in
reliance on the exemption from registration in Section 4(2) and/or Rule 506
of Regulation D of the Securities Act of 1933.
Item
3. Defaults Upon Senior
Securities.
None.
Item
4. Submission of Matters to a Vote of
Security Holders.
None.
Item
5. Other
Information
None.
Item
6. Exhibits
Exhibit
Number
|
|
1.
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a–14 of the Securities Exchange
Act.
|
|
|
2.
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
15
Signatures
In
accordance with 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 there unto duly authorized.
|
BBM
HOLDINGS, INC.
|
|
|
By:
|
/s/ Andrew Limpert
|
|
Andrew
Limpert
|
|
|
President
and Chief Executive Officer
|
|
Dated: May
20, 2009
16