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Takung Art Co., Ltd - Quarter Report: 2014 June (Form 10-Q)

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UNITED STATES

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 June 30, 2014

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 333-176329

 

CARDIGANT MEDICAL, INC.

(Exact name of Registrant as Specified in Its Charter)

 

DELAWARE

 

26-4731758

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

1500 ROSECRANS AVENUE, ST 500, MANHATTAN BEACH, CALIFORNIA

 

90266

(Address of principal executive offices)

 

(Zip Code)

 

Registrants telephone number, including area code: (310) 421-8654

 

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  

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one).

 

Large Accelerated Filer   

Accelerated Filer

Non-Accelerated Filer 

Smaller reporting company X  

 

 

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   o    No  X

As of August 01, 2014, there were 23,330,662 shares of the registrants common stock outstanding.







1


CARDIGANT MEDICAL, INC.

INDEX

PART I

FINANCIAL INFORMATION

  Page

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Balance Sheets as of June 30, 2014 (unaudited)  and December 31, 2013

3

 

 

 

 

 

 

 

 

Unaudited Condensed Statements of Operations for the six months ended June 30, 2014  and 2013

4

 

 

 

 

 

 

 

 

Unaudited Condensed Statements of Cash Flows for the six months ended June 30, 2014 and  2013

5

 

 

 

 

 

 

 

 

Notes to Unaudited Condensed Financial Statements

7

 

 

 

 

 

 

 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

 10

 

 

 

 

 

 

 

Item 3.           

N/A

 

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

13

 

 

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

14

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

14

 

 

Item 3.

Defaults Upon Senior Securities

14

 

 

Item 4.

Reserved

14

 

 

Item 5.

Other Information

14

 

 

Item 6.

Exhibits

14

 















2


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

CARDIGANT MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS


 

 

June 30, 2014

 Unaudited

 


December 31, 2013


 

 

 

 

ASSETS

 

 

 

CURRENT ASSETS


 

 

Cash & equivalents

$        479 

 

$          3,124

Prepaid expenses

2,982

 

17,378

Deposits

1,195

 

1,195

Total current assets

4,656

 

21,697

 

 

 

 

 

PROPERTY AND EQUIPMENT, net

3,794

 

4,903

INTANGIBLES, net

5,980


2,363

 

TOTAL ASSETS

$          14,430

 

$        28,963

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

 

 

 

 

CURRENT LIABILITIES

 

 

 

Accounts payable

$           31,200

 

$        6,519

Accrued expenses

71,534

 

66,185

Accrued officer compensation

619,000

 

559,000

Due to stockholder

2,724

 

14,938

Total current liabilities

724,458

 

646,642

 

TOTAL LIABILITIES

724,458

 

646,642

 

STOCKHOLDERS'  (DEFICIT)

 

 

 

Common stock, 50,000,000 shares authorized; $0.001 par value; 23,330,662 shares issued and outstanding at June 30, 2014; 23,138,310 shares issued and outstanding at December 31, 2013

23,331

 

23,138

Additional paid-in capital

570,683

 

464,205

Deficit accumulated during the development stage

(1,304,042)

 

(1,105,022)

Total stockholders' (deficit)

(710,028)

 

(617,679)

 

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)

$          14,430

 

$        28,963





The accompanying notes are an integral part of these unaudited condensed financial statements.

     





3


                                                                        

CARDIGANT MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS Unaudited

 

 

For the Three Months Ended

June 30,


For the Six Months Ended

June 30, 


From Date of Inception  (April 17, 2009) to June 30, 2014

 

 

 2014

 

2013


 2014

 

2013



REVENUE

 

$             - 

 

$             - 


$             - 

 

$             - 


$             - 

 

OPERATING EXPENSES

 

 

 

 


 




 

Research and development

 

35,035

 

52,015


85,487 


103,288 


880,925

Selling, general, and administrative

 

55,944

 

31,767


112,261 


73,002 


561,318

Total operating expenses

 

90,979

 

83,782


197,748 


176,290 


1,442,243

 

LOSS FROM OPERATIONS

 

(90,979)

 

(83,782)


(197,748) 


(176,290) 


(1,442,243)

 

OTHER INCOME (EXPENSES)

 

 

 

 


 




 

Grant from National Institute of Health

 

-

 

-



-


151,247

Interest income

 

-

 

-



-


381

Interest (expense)

 

(226)

 

(2,932)


(472) 


(3,299) 


(9,427)

Total other income (expenses)

 

(226)

 

(2,932)


(472)  


(3,299)  


142,201

 

NET LOSS BEFORE INCOME TAXES

 

(91,205)

 

(86,714)


(198,220) 


(179,589) 


(1,300,042)

 

PROVISION FOR INCOME TAXES

 

(800)

 

-


(800)


(800)


(4,000)

 

NET LOSS

 

$ (92,005)  

 

$  (86,714)


$  (199,020) 


  $(180,389) 


$ (1,304,042)

 

LOSS PER COMMON SHARE -   BASIC AND DILUTED

 

(0.00)

 

(0.00)


(0.01) 


(0.01) 


 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

23,299,233

 

23,070,905


23,219,216 


23,055,920 


 












The accompanying notes are an integral part of these unaudited condensed financial statements.

4


CARDIGANT MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

 CONDENSED STATEMENTS OF CASH FLOWS Unaudited

 

For the Six Months Ended

June  30,

 

From Date of  Inception (April 17, 2009) to

 

June 30,

 CASH FLOWS FROM OPERATING ACTIVITIES

2014

 

 

2013


 

2014

 

Net loss

$ (199,020)

 

$ (180,389)

 

$    (1,304,042)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

 

 

 

 

 

Stock-based compensation

55,155

 

28,505

 

177,257

Depreciation expense

1,109

 

959

 

4,301

Net changes in operating assets and liabilities:

 

 

 

 

 

 (Increase) in prepaid expenses

14,396

 

16

 

(3,732)

(Increase) in deposits

-

 

-

 

(1,195)

Increase (decrease) in accounts payable

24,681

 

203

 

40,097

Increase (Decrease) in accrued expenses

5,435

 

6,898

 

71,621

Increase in accrued officer compensation

60,000

 

54,000

 

619,000

Net cash used in operating activities

(38,244)

 

(89,808)

 

(396,693)

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchase and reinvestments in certificate of deposit

-

 

-

 

(100,381)

Redemption of certificate of deposit

-

 

-

 

100,381

Investment in intellectual property

(3,617)


-


(5,980)

Purchase of equipment and computer software

-

 

(3,600

 

(8,095)

Net cash used in investing  activities

(3,617)

 

(3,600)

 

(14,075)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Proceeds from issuance of common stock            

51,516

 

85,700

 

367,508

Advances from related party

18,400

 

23,848

 

227,883

Repayments on related-party advances

(30,700)

 

(32,200)

 

(184,144)

Net cash provided by financing activities  

39,216

 

77,348

 

411,247


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(2,645)

 

(16,060)

 

479

 

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

3,124

 

54,194

 

-

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

$   479

 

$    38,134

 

$    479

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITY

 

 

 

 

 

Cash paid during the year for income taxes

$        -

 

               $  800

 

$     2,410

Cash paid during the year for interest expense

$        -

 

$         -

 

$     4,985







The accompanying notes are an integral part of these unaudited condensed financial statements.













5


CARDIGANT MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS - Unaudited (Continued)


Non-cash investing and financing activities:


During the three months ended March 31, 2014, the Company issued 25,152 shares of common stock for services rendered in connection with the preparation of our annual report.  The services were valued at $0.53 per share.


During the three months ended June 30, 2014, the Company issued 70,000 shares for legal services. The services were valued at $0.53 per share and charged to selling, general and administrative expenses.


During the six months ended June 30, 2013, the Company issued 5,712 shares of its common stock for services provided by its Chief Scientific Officer valued at $3,000 and charged to expense.  The Company also issued 4,500 shares of its common stock for services provided by its Chief Financial Officer valued at $2,363 and charged to expense.  During the three months ended June 30, 2013, the Company issued a technical consultant options to purchase 5,000 shares of the Companys common stock at $0.53 per share.  The options were valued at $932 using the Black-Scholes Option Model, of which all were immediately vested.



The accompanying notes are an integral part of these unaudited condensed financial statements.





6


CARDIGANT MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

(UNAUDITED)

 

(1) Nature and Continuance of Operations

Description of the Business

Cardigant Medical Inc. ("Cardigant" or "Company") is a development stage biotechnology company focused on the development of novel biologic and peptide based compounds and enhanced methods for local delivery for the treatment of vascular disease including peripheral artery disease and ischemic stroke. Cardigant was founded on April 17, 2009 and is incorporated within the state of Delaware.  The Company is engaged in research and development in multiple locations but maintains its corporate office in greater Los Angeles.

The Company is in the development stage, as defined in Accounting Standards Codification ("ASC") Topic 915-10. From its inception (April 17, 2009) through June 30, 2014, the Company has not had any revenue from its principal planned operations. The Company will continue to report as a development stage company until significant revenues are produced.

On March 4, 2013, the Company filed an amendment to its articles of incorporation changing its authorized common stock to 50,000,000.  Also on March 4, 2013, the Company authorized a 2:1 forward stock split.  The accompanying unaudited condensed financial statements reflect the change in capital and stock split as if they occurred at the Companys inception.

Going Concern

The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business.  

The Company has generated losses from operations to date, does not expect to generate operating revenue for several years, and its viability is dependent upon its ability to obtain financing and the success of its future operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern.

Basis of Presentation

The accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of June 30, 2014, and the results of its operations for the three and six months ended June 30, 2014 and 2013, and cash flows for the six months ended June 30, 2014 and 2013. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission (the Commission). The Company believes that the disclosures in the unaudited financial statements are adequate to ensure the information presented is not misleading. However, the unaudited financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Companys Amended Annual Report on Form 10-K/A for the year ended December 31, 2013, filed with the Commission on April 8, 2014.

The accompanying financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.


(2) Summary of Significant Accounting Policies




7


Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash balances at one financial institution that is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. As of June 30, 2014, the Company's cash balances did not exceed the FDIC limits.

Research and Development

The Company accounts for research and development costs in accordance with ASC Topic 730-10 "Research and Development." Under ASC Topic 730-10, all research and development costs must be charged to expenses as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company sponsored research and development costs related to both present and future products are expensed in the period incurred. For the three months ended June 30, 2014 and 2013, the Company incurred research and development expenses of $35,035 and $52,015, respectively. For the six months ended June 30, 2014 and 2013, the Company incurred research and development expenses of $85,487 and $103,288, respectively.

Stock-Based Compensation

The Company accounts for its stock-based compensation under ASC Topic 505-50. This standard defines a fair value-based method of accounting for stock-based compensation. In accordance with ASC Topic 505-50, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the period in which the Company expects to receive the benefit, which is generally the vesting period.

See Note (6) Stockholders Equity (Deficit) for detail stock-based compensation activity.

Per Share Amounts

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10 "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Companys financials properly reflect the change.

(3) Fair Value Measurements

The Companys financial instruments for 2014 and 2013 consist of account payables, accrued expenses and a short term loan payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to their respective short maturity dates.

(4) Related Party Transactions




8


The Company has received some of its working capital from its founder, Jerett A. Creed. Mr. Creed has also paid Company expenses with personal funds.  These costs have been carried as a shareholder loan accruing interest at the rate of 5% per annum.  The total outstanding balance as of June 30, 2014 and December 31, 2013 was $2,724, and $14,938, respectively. Accrued interest on the outstanding balance charged to operations for the quarter ended June 30, 2014 and 2013 was $33 and $279, respectively.  Accrued interest on the outstanding balance charged to operations for the six months ended June 30, 2014 and 2013 was $86 and $646, respectively.    

(5) Accrued Officer's Compensation

The accrued officers compensation balances, net of any salary payments, at June 30, 2014 and December 31, 2013 were $619,000 and $559,000, respectively. Salary is allocated between research and development and general and administrative based upon time spent.

(6) Stockholders Equity (Deficit)

There is no public market for the Company's common shares. Since its inception, the Company has negotiated the value of its common stock in arm's length transactions with unrelated parties. 

During the three months ended June 30, 2014, the Company issued 70,000 unregistered shares of its common stock for services valued at $0.53 per share.


During the three months ended March 31, 2014, the Company issued 122,352 unregistered shares of its common stock.  The issuance included 97,200 units issued for cash proceeds of $51,516 and 25,152 shares issued for services valued at $0.53 per share.  The 97,200 units issued consisted of one common share and one common stock warrant.  The warrants have an exercise price of $0.65 per share and expire in January 2018.     


During the three months ended March 31, 2013, the Company issued 163,238 shares of its common stock and received $85,700 through the January 19, 2012 S-1 offering.


During the six months ended June 30, 2013, the Company issued 5,712 shares of its common stock for services provided by its Chief Scientific Officer valued at $3,000 and charged to expense. The Company also issued 4,500 shares of its common stock for services provided by its Chief Financial Officer valued at $2,363 and charged to expense.  During the three months ended June 30, 2013, the Company issued options to a laboratory consultant to purchase 5,000 shares of the Company common stock at $0.53 per share. The options were valued at $932 using the Black-Sholes Option Model, of which all were immediately vested.  Their fair value of $932 was charged to operations.  The option valuation factors included a term of 10 years, volatility of approximately 23%, a U.S Treasury interest rate of 2.13%, a dividend rate of 0.0% with an exercise price of $0.53, and a stock price of $0.525.


(7) Income Taxes

The Company's policy regarding income tax interest and penalties is to expense those items as general and administrative expense and to identify them for tax purposes.  The Company files income tax returns in the U.S. federal jurisdiction and the state of California. The Company is subject to income tax examination by tax authorities for 2011, 2012 and 2013 for its Federal tax returns and 2010, 2011, 2012, and 2013 for its state tax returns.

(8) Commitments and Contingencies

Rental Agreement

On May 3, 2011 the Company entered into a rental agreement for laboratory space at a bioscience collective in Pasadena, California. The rental agreement calls for a security deposit of $1,100 and monthly rent payments of $1,200. The lease is month-to-month and can be terminated by either party with thirty days' notice. 

Rent expense for the three months ended June 30, 2014 and 2013 totaled $3,885 and $3,885, respectively.  Rent expense for the six months ended June 30, 2014 and 2013 was $7,770 and $7,770 respectively.




9


Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains certain statements that may be deemed forward-looking statements within the meaning of United States of America securities laws.  All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

 

These statements include, without limitation, statements about our anticipated expenditures, including those related to clinical research studies and general and administrative expenses; the potential size of the market for our potential products, future development and/or expansion of our potential products and therapies in our markets, our ability to generate product revenues, our ability to obtain regulatory clearance and expectations as to our future financial performance. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and ability to raise additional cash, the costs of conducting research in the life sciences field and risks associated with the regulatory requirements applicable to us. The forward-looking statements included in this report are subject to a number of additional material risks and uncertainties, including but not limited to the risks described in our filings with the Securities and Exchange Commission.


The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes to those statements included in this filing. In addition to historical financial information, this discussion may contain forward-looking statements reflecting our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, particularly those set forth under "Special Note Regarding Forward-Looking Statements", our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements.  

Overview

We are a development stage biotechnology company focused on systemic and local drug delivery for the treatment of vascular disease. Cardigant was founded to capitalize on the belief that local drug delivery to the vasculature holds the potential to improve outcomes and treat previously untreated disease segments most notably vulnerable atherosclerotic plaque lesions of the coronary, peripheral, and neuro vasculatures. Our primary focus is on treating atherosclerosis and acute plaque stabilization using systemic and targeted delivery of large molecule and peptide based therapeutics based on the structure and function of high density lipoprotein (HDL) targets. Circulating plasma levels of HDL have been shown to be inversely correlated with coronary artery disease.  Towards this goal, we are evaluating drug formulations based on the Apolipoprotein A-I  (ApoA-1)  protein and peptide mimetics  that are delivered both systemically via intravenous infusion and  locally  to one or more lesions. The ApoA-1 protein's primary function is the promotion of reverse cholesterol transport (RCT) from the arterial wall to the liver for catabolism and excretion. ApoA-1 is a protein that in humans is encoded by the ApoA-1 gene. It has a specific role in the metabolism of lipids. Naturally occurring ApoA-1 is the major protein component of HDL also known as the good cholesterol. ApoA-1 protein constitutes roughly 70% of the HDL composition. There are both naturally occurring and synthetically modified mutations of the AApoA-1 protein.  Some of these mutations can have positive effects on cholesterol mobilization. We are currently evaluating various ApoA-1 based protein sequences and mimetic peptides to determine the optimal drug candidate based on efficacy, minimum royalty costs and available production methods among other factors. We have also been evaluating the local delivery of our product for specifically reducing the plaque content and burden within one or more adjacent sites.




10


As we are a development stage company, we have incurred losses since our inception in April of 2009. As we continue to raise funds and further our development program, we expect to incur even greater expenses and losses.  We have no revenues and do not expect to incur any revenue for several years until such time as one of our therapeutic compounds may, if at all, be approved by a regulatory body for sale in a region of the world covered by that  regulatory body.

Research and Development Expenses ("R&D")

Our research and development expenses primarily consist of personnel-related costs, technical consulting fees, and contract research fees. As our senior management are largely involved with overseeing our current development programs, we currently allocate 80% of Mr. Creed's salary (accrued or otherwise) and 100% of Dr. Sinibaldi, Dr. Perin, Dr. Rodriguez, and Dr. Merz to R&D expense. We expect to hire additional technical personnel, engage in additional pre-clinical studies and incur additional patent fees. As such we expect our R&D spending to increase in the coming periods.

Our lead program is focused on optimizing our ApoA-1 peptide compound for delivery in the treatment of symptomatic carotid plaque lesions for the treatment of ischemic stroke.  Assuming we are able to raise sufficient funds, we expect to incur an additional $1.3 million over the next 12 months in execution of our pre-clinical and clinical development programs. We believe this will take us through the required approval to begin a Phase I trial.  

Selling, General and Administrative Expenses ("SG&A")

Our selling, general and administrative expenses consist primarily of non allocated salaries including benefits. As we expect to hire additional personnel, we expect this amount to increase to approximately $500,000 over the next 12-18 months. Additionally we expect to move into a new office space which will add an additional $23,000 annual expense. In addition to hiring accounting personnel for public company reporting requirements, we also expect to incur an additional $80,000 per year of investor relations expenses for disseminating company information, news releases and public filings.

Results of Operations for the three and six months ended June 30, 2014 as compared to the three and six months ended June 30, 2013

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2014 were $35,035 versus $52,015 for the three months ended June 30, 2013. This represents a 32.6% decrease from the prior year period.  

Research and development expenses for the six months ended June 30, 2014 were $85,487 versus $103,288 for the six months ended June 30, 2013.  This represents a 17% decrease from the prior year period.  

The decrease noted in both periods is due primarily to reduced use of outside research facilities.  These expenses consisted mainly of allocated salary for our CEO, expense for our CSO and other consultants and laboratory supplies. We expect our R&D expenses to ramp up to approximately $1,000,000 over the next 18 months with most of the expenses back ended.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2014 were $55,944 versus $31,767 for the three months ended June 30, 2013. This represents a 76.1% increase from the prior period.

Selling, general and administrative expenses for the six months ended June 30, 2014 were $112,261 versus $73,002 for the six months ended June 30, 2013.  This represents a 53.8% increase from the prior period.

The increased amounts in both periods are due primarily to the increased cost associated with SEC compliance related costs.   




11


Net Income (Loss)

We had a net loss for the three months ended June 30, 2014 of $92,005 versus a net loss of $86,714 for the three months ended June 30, 2013.

We had a net loss for the six months ended June 30, 2014 of $199,020 versus a net loss of $180,389 for the six months ended June 30, 2013.

This change in both periods is due to primarily to the increased cost of our SEC compliance activities.

Liquidity and Capital Resources

Sources of Liquidity

During the six months ended June 30, 2014, net cash used by operating activities totaled $38,244. Net cash used by investing activities totaled $3,617. Net cash provided by financing activities during the period was $39,216 of which included proceeds of $51,516 received from the sale of 97,200 shares of our common stock through a Reg D offering plus net repayments of $12,300 we paid to our Chief Executive Officer. The resulting change in cash for the period was a decrease of $2,645. The cash balance at the beginning of the period was $3,124. The cash balance at June 30, 2014 was $479.


During the six months ended June 30, 2013, net cash used by operating activities totaled $89,808.  Net cash used by investing activities totaled $3,600.  Net cash provided by financing activities during the period was $77,348 of which included proceeds of $85,700 received from the sale of 163,238 shares of our common stock through our public offering plus net repayments of $8,352 to our Chief Executive Officer.  The resulting change in cash for the period was a decrease of $16,060.  The cash balance at the beginning of the period was $54,194.  The cash balance at June 30, 2013 was $38,134.


As of June 30, 2014, the Company had $724,458 in total current liabilities, which was represented by $31,200 in accounts payable, $71,534 in accrued expenses, $619,000 in accrued officers compensation and $2,724 due to the Companys CEO, a stockholder.  As of June 30, 2013, the Company had $597,058 in total current liabilities, which was represented by $9,038 in accounts payable, $64,520 in accrued expenses, $502,000 in accrued officers compensation and $21,500 due to the Companys CEO, a stockholder.  

The Company had no long-term liabilities at both June 30, 2014 and 2013; therefore the Companys total liabilities at June 30, 2014 and 2013 amounted to $724,458 and $597,058, respectively.  


The Company is not aware of any known trends, events or uncertainties which may affect its future liquidity. We are development stage and do not have a product commercially available for sale. We do not expect to realize any revenue for several years. As such it is imperative that the reader recognize that our primary source of working capital will generally come from equity sales, or the issuance of debt. We do, however, occasionally apply for non-taxable grant funding to support our research and development efforts. We currently do not have grant applications outstanding, and we can make no guarantees that any grant money will be awarded from any future applications. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.


Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will




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achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities or if we are able, there is no guarantee that existing shareholders will not be substantially diluted.


Critical Accounting Policies

We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.


Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Research and development

The Company accounts for research and development costs in accordance with the ASC 730-10, Research and Development. Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.


Fair Value of Financial Instruments

The Companys financial instruments for 2014 and 2013 consist of accounts payables, accrued expenses and a short term loan payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due their respective short maturity dates.

 

Loss Per Share of Common Stock

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10 "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.  

 

Stock-Based Compensation

The Company accounts for stock-based compensation under ASC Topic 505-50. This standard defines a fair value-based method of accounting for stock-based compensation. The cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the period in which the Company expects to receive the benefit, which is generally the vesting period.  


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

N/A

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with our compliance with securities laws and rules, our Chief Financial Officer has evaluated our disclosure controls and procedures on June 30, 2014. As of October 2013, our Chief Executive Officer is also serving in the capacity of Chief Financial Officer, Chief Accounting Officer and company director. Because of these multiple roles, it is impossible to fully segregate duties. As such in his capacity, he has concluded that our disclosure




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controls and procedures are ineffective. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation including any corrective actions with regard to significant deficiencies and material weaknesses. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control-Integrated Framework. Inherent in a development stage entity is the problem of segregation of duties. Given that the Company has a limited accounting department, segregation of duties cannot be completely accomplished at this stage in the business lifecycle.

Based on its assessment, management has concluded that the Company's disclosure controls and procedures and internal control over financial reporting are not effective based on those criteria.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to or engaged in any material legal proceedings. However, we may be subject to various claims and legal actions arising in the ordinary course of business from time to time.

Item 1A. Risk Factors

N/A

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2014, the Company issued 122,352 shares of its common stock.  The issuance included 97,200 shares issued for cash proceeds of $51,516 and 25,152 shares issued for services valued at $0.53 per share.


During the three months ended June 30, 2014, the Company issued 70,000 shares of its common stock for services valued at $0.53 per share.    


Item 3. Defaults Upon Senior Securities

None

Item 4. (Reserved)

Item 5.  Other Information

Current report form 8-K filed on May 01, 2014 is incorporated by reference.

Item 6.  Exhibits

Exhibit No.

 

Description

31.1

 

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

 

 

 

31.2

 

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Schema Document

 

 

 

101.CAL

 

XBRL Calculation Linkbase Document

 

 

 

101.LAB

 

XBRL Label Linkbase Document

 

 

 

101.PRE

 

XBRL Presentation Linkbase Document

 

    

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.

 

CARDIGANT MEDICAL, INC.

 

 


 

 

By: /s/ Jerett A Creed

Dated: August 14, 2014

 

Jerett A. Creed

 

 

Chief Executive Officer






By: /s/ Jerett A. Creed

Dated: August 14, 2014


Jerett A. Creed



Chief Financial Officer (Principal Financial Officer and  Principal Accounting Officer)





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