SEAFARER EXPLORATION CORP - Quarter Report: 2008 March (Form 10-Q)
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2008
OR
o TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
FOR
THE TRANSITION FROM _______ TO ________.
COMMISSION
FILE NUMBER 000-29461
ORGANETIX,
INC.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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73-1556428
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|
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(State or other
jurisdiction of
incorporation or
organization)
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(I.R.S. Employer
Identification No.)
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|
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c/o Sichenzia
Ross Friedman Ference LLP
61
Broadway, Fl. 32
New
York, New York
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10006
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(Address of
principal executive offices)
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(Zip
code)
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Issuer's
telephone number: (917) 796-9926
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.
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Large
accelerated filer o
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Accelerated
filer o
|
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Non-accelerated
filer o
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Smaller
reporting company T
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x No o
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING
THE PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes o No o
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of May 15, 2008, there were
115,489,983 outstanding shares of the Registrant's Common Stock,
$.0001 par value.
ORGANETIX,
INC.
MARCH
31, 2008 QUARTERLY REPORT ON FORM 10-Q
TABLE
OF CONTENTS
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Page
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PART
I - FINANCIAL INFORMATION
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Item
1. Financial Statements
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3
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Item
2. Management’s Discussion and Analysis or Plan of
Operation
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8
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Item
3. Controls and Procedures
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9
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PART
II - OTHER INFORMATION
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Item
1. Legal Proceedings
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11
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Item
1A. Risk Factors
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11
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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11
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Item
3. Defaults Upon Senior Securities
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11
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Item
4. Submission of Matters to a Vote of Security Holders
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11
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Item
5. Other Information
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11
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Item
6. Exhibits
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11
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SIGNATURES
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12
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PART
I
FINANCIAL
INFORMATION
ITEM
1.
ORGANETIX,
INC.
(A
Development Stage Company)
BALANCE
SHEETS
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March
31,
2008
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December 31,
2007
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
| CURRENT ASSETS | ||||||||
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Prepaid
expenses
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$ | 493,989 | $ | 45,074 | ||||
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Total Current
Assets
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493,989 | 45,074 | ||||||
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Total
Assets
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$ | 493,989 | $ | 45,074 | ||||
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LIABILITIES AND
STOCKHOLDERS’ EQUITY
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||||||||
| CURRENT LIABILITIES | ||||||||
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Convertible notes
payable
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$ | 75,000 | ||||||
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Accounts
payable
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$ | 13,929 | 11,487 | |||||
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Accrued
expenses
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79,246 | 57,775 | ||||||
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Total Current
Liabilities
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93,175 | 144,262 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
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Common stock, par
value $0.0001, authorized 150,000,000 shares, issued and
outstanding
115,489,983 and 97,932,211 at March 31, 2008 and December 31, 2007,
respectively
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11,549 | 9,793 | ||||||
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Additional paid in
capital
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8,163,755 | 6,486,193 | ||||||
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Deficit accumulated
during the developmental stage
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(7,774,490 | ) | (6,595,174 | ) | ||||
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Total Stockholders’
Equity
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400,814 | (99,188 | ) | |||||
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Total Liabilities
and Stockholders’ Equity
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$ | 493,989 | $ | 45,074 | ||||
See
accompanying notes to financial statements.
3
ORGANETIX, INC.
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS (Unaudited)
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For the
Period
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||||||||||||
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Three Months
Ended
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From
Inception
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|||||||||||
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March
31,
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(May 28, 2003)
to
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|||||||||||
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2008
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2007
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March 31,
2008
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||||||||||
| COSTS AND EXPENSES | ||||||||||||
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Officers’
compensation
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$ | 22,500 | $ | 387,250 | ||||||||
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Operating
expenses-research facility
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247,659 | |||||||||||
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Research and
development expenses
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$ | 204,000 | 1,563,154 | |||||||||
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Consulting
fees
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834,710 | 12,315 | 2,636,164 | |||||||||
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Professional
fees
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213,460 | 48,058 | 832,277 | |||||||||
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Commissions
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26,000 | |||||||||||
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Filing
fees
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2,000 | |||||||||||
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Investor
relations
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30,000 | |||||||||||
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Lock-up
fees
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91,500 | 116,500 | ||||||||||
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Website
expense
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14,200 | |||||||||||
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State political
contributions
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10,000 | |||||||||||
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Travel and
accommodations
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3,871 | 176,503 | ||||||||||
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Telephone
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38,248 | |||||||||||
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Interest
expense
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54,045 | |||||||||||
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Insurance
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104,188 | |||||||||||
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Rent
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42,410 | |||||||||||
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Shipping
expense
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6,184 | |||||||||||
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Office and other
expense
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3,492 | 245,155 | ||||||||||
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Marketing and public
relations
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9,783 | 441,531 | ||||||||||
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Depreciation and
amortization expense
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208,719 | |||||||||||
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Loss on disposition
of assets
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592,861 | |||||||||||
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Total Cost and
Expenses
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1,179,316 | 264,373 | 7,775,048 | |||||||||
| OTHER INCOME | ||||||||||||
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Interest
income
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558 | 558 | ||||||||||
| NET LOSS | $ | (1,179,316 | ) | $ | (263,815 | ) | $ | (7,774,490 | ) | |||
| NET LOSS PER COMMON SHARE | ||||||||||||
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(Basic and
Diluted)
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$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.09 | ) | |||
| WEIGHTED AVERAGE SHARES OUTSTANDING | 113,225,962 | 58,079,271 | 82,369,071 | |||||||||
See
accompanying notes to financial statements.
4
ORGANETIX, INC.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS (Unaudited)
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For the
Period
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||||||||||||
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Three Months
Ended
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From
Inception
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|||||||||||
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March
31,
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(May 28, 2003)
to
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|||||||||||
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2008
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2007
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March 31,
2008
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||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
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Net
loss
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$ | (1,179,316 | ) | $ | (263,815 | ) | $ | (7,774,490 | ) | |||
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Adjustments to
reconcile net loss to net cash provided by operating
activities:
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||||||||||||
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Depreciation and
amortization
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208,719 | |||||||||||
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Loss on disposition
of assets
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592,861 | |||||||||||
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Compensatory
shares
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324,111 | |||||||||||
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Stock based
compensation
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1,375,000 | 2,868,250 | ||||||||||
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Amortization of
prepaid consulting
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9,835 | 4,815 | 44,761 | |||||||||
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Changes in assets
and liabilities:
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||||||||||||
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(Increase) decrease
in prepaid expenses
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(458,750 | ) | (502,164 | ) | ||||||||
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Increase in accounts
payable
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2,442 | 368,085 | ||||||||||
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Increase in accrued
salaries to officers
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708,966 | |||||||||||
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Increase in accrued
expenses
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21,471 | 79,246 | ||||||||||
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Increase in due to
shareholders
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||||||||||||
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Increase in accrued
interest
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28,239 | |||||||||||
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Due to related
parties
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204,273 | |||||||||||
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Net cash used in
operating activities
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(229,318 | ) | (259,000 | ) | (2,849,143 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
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Payment regarding
license
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(150,000 | ) | ||||||||||
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Capital
expenditures
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(30,000 | ) | ||||||||||
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Net cash used in
investing activities
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(180,000 | ) | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
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Issuance of common
stock to founders
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65,760 | |||||||||||
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Issuance of common
stock in private placement
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304,318 | 259,000 | 1,208,317 | |||||||||
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Additional
contribution of capital
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1,288,866 | |||||||||||
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Issuance of note
receivable
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(100,000 | ) | (100,000 | ) | ||||||||
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Repayment of note
receivable
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100,000 | 100,000 | ||||||||||
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Cash received in
merger
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300,000 | |||||||||||
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Convertible note
payable
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150,000 | |||||||||||
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Note payable to
individual
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(75,000 | ) | 16,200 | |||||||||
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Net cash provided by
financing activities
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229,318 | 259,000 | 3,029,143 | |||||||||
| DECREASE IN CASH | ||||||||||||
| CASH AT BEGINNING OF PERIOD | ||||||||||||
| CASH AT END OF PERIOD | $ | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||
| NON-CASH FINANCING ACTIVITIES | ||||||||||||
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Cancellation of
common stock
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2,350 | |||||||||||
See
accompanying notes to financial statements.
5
ORGANETIX,
INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS (Unaudited)
MARCH 31,
2008
NOTE 1 -
DESCRIPTION OF COMPANY/OPERATIONS, GOING CONCERN AND BASIS OF
PRESENTATION
Organetix,
Inc. ("the Company" or "Organetix"), a Delaware Corporation, was incorporated on
May 28, 2003.
Organetix
was a biotechnology company with an exclusive worldwide license for the formula
of a proprietary medical discovery relating to the liver referred to as
A4+L.
On
November 7, 2003 (the "Effective Date"), pursuant to a Share Exchange Agreement
("Agreement") between Diamond International Group, Inc. ("Diamond"), a Delaware
corporation and Organetix, Inc. ("Organetix"), a Delaware corporation and all of
the shareholders of Organetix, Diamond acquired all of the shares of Organetix
as consideration for the issuance of 64,000,000 restricted shares of Diamond to
the Organetix shareholders. As a result of this Agreement, Diamond
International Group, Inc. (the legal acquirer) received 100% of the issued and
outstanding common stock of Organetix, Inc. in exchange for 64,000,000 shares of
common stock of Diamond. Pursuant to the Agreement, Organetix became a wholly
owned subsidiary of Diamond which entity filed a Certificate of Amendment with
the State of Delaware changing its name to Organetix, Inc. This reverse merger
transaction was treated retroactively as a recapitalization with Organetix, Inc.
being treated as the acquirer for accounting purposes.
Previously,
the Company devoted its time towards establishing its business and no revenues
have been generated to date. As such, the Company is considered as being in the
development stage, since its inception, in accordance with Statement of
Financial Accounting Standards No. 7, and its year-end is December
31.
Going
Concern:
As shown
in the accompanying financial statements, the Company has incurred net losses of
$7,774,490 since inception. Management's plans include raising of capital
through the equity markets to fund operations, and the generating of revenue
through its business. Failure to raise adequate capital and generate adequate
sales revenues could result in the Company having to curtail or cease
operations. Additionally, even if the Company does raise sufficient capital to
support its operating expenses and generate adequate revenues, there can be no
assurances that the revenue will be sufficient to enable it to develop to a
level where it will generate profits and cash flows from operations. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. However, the accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classifications of the liabilities that might be
necessary should the Company be unable to continue as a going
concern.
Basis of
Presentation:
The
accompanying condensed financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary in order to make
the financial statements not misleading have been included. Results
for the three month period ended March 31, 2008 are not necessarily indicative
of the results that may be expected for the year ending December 31,
2008. For further information, refer to the financial statements and
footnotes thereto included in the Organetix, Inc. annual report on Form 10-KSB
for the year ended December 31, 2007.
6
ORGANETIX, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS (Unaudited)
MARCH 31,
2008
NOTE 2 -
SHAREHOLDERS' EQUITY:
During
the three months ended March 31, 2008, the Company sold 2,030,000 shares of its
common stock at $0.75 in a private placement and received proceeds of
$152,250.
On
February 15, 2007, the Company entered into non-exclusive agreements with Mr.
David Lewis and Mr. Aaron Foley to serve on the Corporation’s Board of
Advisors. Messrs. Lewis and Foley shall serve as Advisors until the
earlier of February 15, 2009 or the date that any Advisor is removed from the
Board. As compensation for participation on the Board of Advisors,
Messrs. Lewis and Foley each received 500,000 shares of the Corporation’s common
stock. Such shares were recorded at their fair value of $0.08 per
share and are being amortized over the life of the agreements.
In July,
2007 and January 2008, the Company authorized and issued 500,000 and 15,527,572
shares of common stock at $.11, $0.08 and $0.11 per share, respectively for
payment of professional fees.
NOTE 3 –
AGREEMENT WITH SEAFARER EXPLORATION, INC.
On
January 23, 2008, the Company announced that it completed a $310,000 equity
private placement financing. Proceeds from this private placement
will be used to complete the pending transaction with Florida based Seafarer
Exploration, Inc. ("Seafarer"). Under terms of the previously executed
Memorandum of Understanding ("MOU") with Seafarer, Organetix is required to
contribute a minimum of $150,000 and a maximum of $600,000 to the Combined
Company. The final percentage ownerships of the Combined Company,
will vary based upon the amount of cash contributed by Organetix
shareholders. The terms of this private placement were as follows:
Restricted shares were purchased from the Company at a price of 0.075 cents per
share, with 1/2 warrant (50% coverage) at a strike price of 15 cents per share.
The warrants expire after 12 months, at close of business on January 31, 2009.
There have been no registration rights offered in conjunction with this private
placement.
NOTE 4 –
SUBSEQUENT EVENTS.
On May
12, 2008, the Company filed with the Securities and Exchange Commission a
definitive Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (the “Information Statement”). The Information Statement
was mailed out to the Company’s shareholders of record as of May 6, 2008. The
purpose of the Information Statement was to alert the Company’s shareholders
that, pursuant to written action by a majority of the Company’s shareholders,
the Company had (i) amended the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock, par value $0.0001 per
share of the Company from 150,000,000 shares to 500,000,000 shares, and (ii)
amended the Company’s Certificate of Incorporation to create 50,000,000 shares
of blank check preferred stock, $0.0001 par value.
Additionally,
from May 1, 2008 through May 12, 2008, the Company engaged in a private
placement of its common stock in the amount of $37,500 at $0.075 per share with
50% warrant coverage at $0.15 per share (the “Warrans”). The Warrants expire on
May 15, 2009. In conjunction with this additional financing, the Company
issued 500,000 shares of restricted common stock and 250,000
warrants.
7
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report. References in
this section to "Organetix, Inc.," “Organetix,” the "Company," "we," "us," and
"our" refer to Organetix, Inc. and our direct and indirect subsidiaries on a
consolidated basis unless the context indicates otherwise.
This
quarterly report contains forward looking statements relating to our Company's
future economic performance, plans and objectives of management for future
operations, projections of revenue mix and other financial items that are based
on the beliefs of, as well as assumptions made by and information currently
known to, our management. The words "expects, intends, believes, anticipates,
may, could, should" and similar expressions and variations thereof are intended
to identify forward-looking statements. The cautionary statements set forth in
this section are intended to emphasize that actual results may differ materially
from those contained in any forward looking statement.
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements, included herewith. This discussion should not
be construed to imply that the results discussed herein will necessarily
continue into the future, or that any conclusion reached herein will necessarily
be indicative of actual operating results in the future. Such discussion
represents only the best present assessment of our management.
You
should read the following discussion and analysis of our financial condition and
results of operations together with our financial statements and the related
notes appearing in this Report. Some of the information contained in
this discussion and analysis or set forth elsewhere in this Report, including
information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and
uncertainties. You should review the “Risk Factors” section of this
Report for a discussion of important factors that could cause actual results to
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and
analysis.
As a
result of the reverse merger described in our current report on Form 8-K (“Form
8-K) filed with the SEC on April 7, 2008, the Company ceased to be a shell
company and became involved in the business of licensing and promotions though
its group of touring swimsuit models. Currently we are more specifically
committed to marketing and licensing such products as described in our Form 8-K,
but will seek to promote, develop and sell other related products.
Significant Accounting
Policies
RESULTS
OF OPERATIONS
THREE
MONTHS ENDED MARCH 31, 2008 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2007
Revenues.
For the quarter ending March 31, 2008, the Company reported no revenues.
For the comparable year ago period, ending March 31, 2007, the Company reported
no revenues as well. During both periods the Company has existed as a
shell Company, with no significant operations.
Research &
Development. For the quarter ending March 31, 2008, the
Company reported no expenditures of Research & Development ("R &
D"). For the comparable year ago period, ending March 31, 2007, the
Company spent $204,000 on R & D activities. The reason for the
decrease is that the Company invested $204,000 into ADAO Telecom, Inc. ("ADAO"),
during the first quarter of 2007. In January of 2007, Organetix, Inc.
entered into a definitive agreement to acquire Florida based privately held
ADAO. This definitive agreement was amicably terminated in early July
2007. In total the Company invested $279,000 into ADAO, for which it
received consideration in terms of a 7.5% convertible
promissory note for $279,000 with interest accruing beginning on
August 01, 2007. In the event ADAO is unable to repay the note
within 12 months, the note will convert on July 31, 2008 into 12.5% of the
outstanding common shares of ADAO.
Selling, General,
and Administrative Costs. Selling, General, and Administrative
Costs ("SG&A") consist of expenses for management, consultants,
administrative personnel, legal, accounting, marketing, and depreciation &
amortization of intangible assets. For the quarter ending March 31, 2008, the
SG&A expense was $1,087,816 compared with $264,373 the quarter ending March
31, 2007. This represents an increase of 411% from the prior compared
period. The main expenses were consulting fees of $834,710 and
professional fees (legal & accounting) of $213,460. The vast majority
of those expenses were paid in the form of restricted common stock. The
primary reasons for these increases in SG&A were the necessities of legal,
accounting, and consulting services to help the Company survive as a going
concern.
Lock Up
Fee. During the quarter ending March 31, 2008, the Company
invested $91,500 into Seafarer Exploration, Inc. ("Seafarer") as a lock up
fee. On December 17, 2007, Organetix, Inc. signed a Letter of Intent
("LOI") to acquire St. Petersburg, Florida based Seafarer, which is engaged in
the exploration and salvaging of shipwrecks off the Floridian
coast.
8
Net Loss. The net loss was $1,179,316 for the period ending March 31, 2008, compared to $264,373 for period ended March 31, 2007. The Company still has not achieved sufficient operations or cashflows to offset its operating costs.
Financing
Activities. During the quarter ending March 31, 2008, the
Company completed a $310,000 private placement with 6 different investors,
including its Chief Executive Officer ("CEO"), Seth M. Shaw. The terms of
the financing were as follows: 7.5 cents per share restricted with 50%
warrant coverage at 15 cents per share (these warrants expire at 5 pm EST
on January 31, 2009). No registration rights were offered in
conjunction with this financing. The private placement included the
conversion of the outstanding $75,000 bridge loan (completed during Q3
2007) into equity. To compensate bridge loan investor for interest
and conversion premium, investor received $90,000 of private placement
units. In total, $304,318 was received by the Company and 4,057,573 shares
& 2,028,787 warrants were issued in conjunction with the
financing.
Liquidity and Capital
Resources
Other
components of the Company’s working capital and changes therein are discussed as
follows:
Cash & Cash
Equivalents. As of March 31, 2008, the Company reported no
cash on its balance sheet. In order to continue as a going concern, the
Company will be required to secure additional funding moving forward.
There are no guarantees that the Company will be able to secure any new funding
and the terms of any future financing may be burdensome to
shareholders.
Current Assets
& Liabilities. For the quarter ending March 31, 2008, the
Company reported total current assets of $493,989 and total current liabilities
of $93,175. Since inception (through the period ending March 31, 2008),
the Company has accumulated a paid in capital deficit of
$7,774,490.
OFF
BALANCE SHEET ARRANGEMENTS
We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A.
ITEM
4. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
9
Management’s Evaluation on Internal Control over Financial Reporting.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is under the
supervision of the Company’s principal executive and principal financial officer
and attempts to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP to provide reasonable assurances
that:
|
l
|
Maintenance
of records is in reasonable detail and accurately and fairly reflect our
transactions and dispositions of our
assets;
|
|
l
|
Transactions
are recorded as necessary to permit preparation of our financial
statements in accordance with GAAP, and that receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and
|
|
l
|
The
Company can detect on a timely basis any unauthorized acquisition, use or
disposition of our assets that could have a material effect on the
financial statement.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. It should be noted that any system of internal
control, however well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system will be met. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Under the
supervision and with the participation of our management, including our
President, Chief Executive Officer, Chief Financial Officer and financial
consultant, we conducted an assessment of the effectiveness of our internal
control over financial reporting based on criteria publicly available in
“Internal Control-Integrated Framework Executive Summary” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of
December 31, 2007.
A
material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of annual or interim financial statements will not be prevented or
detected. In connection with the assessment described above, management
identified the following control deficiencies that represent material weaknesses
at December 31, 2007:
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Due
to the Company’s limited resources, the Company has insufficient personnel
resources and technical accounting and reporting expertise to properly
address all of the accounting matters inherent in the Company’s financial
transactions. The Company relies on an outside consultant to enter all of
the Company’s financial transactions in the Company’s books and accounts,
and a separate outside accountant to prepare its quarterly financial
statements. Additionally, the Company does not have a formal audit
committee, and the Board does not have a financial expert, thus the
Company lacks the board oversight role within the financial reporting
process.
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The
Company’s small size and “one-person” office prohibits the segregation of
duties and the timely review of accounts payable, expense reporting and
inventory management and banking
information.
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As a
result of these material weaknesses described above, management has concluded
that, as of December 31, 2007, our internal control over financial reporting was
not effective based on the publicly available criteria in “Internal
Control-Integrated Framework” issued by COSO.
Our
President, Chief Executive Officer, Chief Financial Officer and financial
consultant are in the process of determining how best to change our current
system and implement a more effective system of controls, procedures to insure
that information required to be disclosed in this annual report on Form 10-KSB
has been recorded, processed, summarized and reported accurately. Our management
acknowledges the existence of this problem, and intends to developed procedures
to address them to the extent possible given limitations in financial and
manpower resources. However, since inception, the Company has experienced cash
flow problems and as a result has not had the resources to address fully the
certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
While management is working on a plan, no assurance can be made at this point
that the implementation of such controls and procedures will be completed in a
timely manner or that they will be adequate once implemented. Failure to develop
adequate internal control and hiring of qualified accounting personnel may
result in a “material weakness” in the Company’s internal control relating to
the above activities.
This
evaluation does not include an attestation report of our independent registered
public accounting firm regarding internal control over financial reporting.
Management’s evaluation was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management’s report in this annual
report.
Changes in Internal
Controls.
During
the three months ended March 31, 2008, there were no changes in our internal
control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
10
PART
II
OTHER
INFORMATION
ITEM
1 - LEGAL PROCEEDINGS
We are
not a party to any pending legal proceeding, nor is our property the subject of
a pending legal proceeding, that is not in the ordinary course of business or
otherwise material to the financial condition of our business. None of our
directors, officers or affiliates is involved in a proceeding adverse to our
business or has a material interest adverse to our business.
ITEM
1A. RISK FACTORS
There
have been no material changes from the Risk Factors described in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2007.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM
5 - OTHER INFORMATION
None.
There
were no material changes to the procedures by which security holders may
recommend nominees to the registrant’s board of directors.
ITEM
6 - EXHIBITS
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Description
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31.1
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Certification
by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act.
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31.2
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Certification
by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act.
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32.1
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Certification
by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code.
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32.2
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Certification
by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code.
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11
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.
| ORGANETIX, INC. | |
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By: /s/ Seth Shaw
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Seth
Shaw
President
and Chief Executive Officer (principal executive
officer)
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By: /s/ Seth Shaw
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Seth Shaw
Principal financial and accounting
officer
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12