ZENOSENSE, INC. - Quarter Report: 2014 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
Or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
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000-54936
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Commission file number
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Zenosense, Inc.
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(Exact name of small business issuer as specified in its charter)
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Nevada
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26-3257291
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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Avda Cortes Valencianas 58, Planta 5, 46015 Valencia, Spain
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(Address of principal executive offices)
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34 960454202
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(Issuer’s telephone number)
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Not Applicable
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(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes [X]
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No [ ]
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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).
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Yes [X]
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No [ ]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small 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
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act
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Yes [ ]
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No [X]
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 48,939,797 common shares issued and outstanding as of August 15, 2014
2
ZENOSENSE, INC.
TABLE OF CONTENTS
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Page
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PART I – FINANCIAL INFORMATION
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Financial Statements
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4
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 |
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Quantitative and Qualitative Disclosures About Market Risk
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8
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Item 4.
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Controls and Procedures
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8
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PART II – OTHER INFORMATION
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Item 1.
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Legal Proceedings
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9
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Item 1A.
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Risk Factors
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9
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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9
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Item 3.
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Defaults Upon Senior Securities
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9
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Item 4.
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Mine Safety Disclosures
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9
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Item 5.
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Other Information
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9
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Item 6.
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Exhibits
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10
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SIGNATURES
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11
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3
PART I FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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PAGE
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F-1
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F-2
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F-3
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F-4 to F-8
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4
(Unaudited)
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June 30,
2014
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December 31,
2013
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Assets
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Current assets
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Cash and cash equivalent
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$
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2,359
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$
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26,778
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Prepaid expense
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-
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76,699
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Total current assets
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2,359
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103,477
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Total assets
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$
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2,359
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$
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103,477
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Liabilities and Stockholders’ Equity
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Current liabilities
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Accounts payable
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$
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11,444
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$
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19,074
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Accounts payable - related party
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6,161
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-
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Advances from third parties
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2,598
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2,598
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Notes payable
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14,675
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1,675
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Total current liabilities
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34,878
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23,347
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Commitments and contingencies
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Stockholders’ equity
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Common stock, $0.001 par value, 500,000,000 shares authorized, 48,517,297 and 48,038,212 shares issued and outstanding, respectively
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48,517
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48,038
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Additional paid-in capital
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786,768
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582,247
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Accumulated deficit
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(867,804)
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(550,155
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)
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Total stockholders’ equity
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(32,519)
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80,130
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Total liabilities and stockholders’ equity
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$
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2,359
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$
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103,477
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See accompanying notes to the unaudited financial statements.
F-1
ZENOSENSE, INC.
Statements of Operations
For the Three and Six Months Ended June 30, 2014 and 2013
(Unaudited)
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Three Months ended
June 30,
2014
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Three Months ended
June 30,
2013
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Six Months ended
June 30,
2014
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Six Months ended
June 30,
2013
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|||||||||||||
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Revenues
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$
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-
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$
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-
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$
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-
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$
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-
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Expense
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||||||||||||||||
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Exploration costs
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75,515
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-
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230,097
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-
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General and administrative expense
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36,543
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13,368
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87,462
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16,529
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Total expenses
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112,058
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13,368
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317,559
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16,529
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Loss from operations
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(112,058)
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(13,368
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)
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(317,559)
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(16,529)
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Other income/ (expense)
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Interest expense
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(69)
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(21)
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(90)
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(42)
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Total other expense
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(69)
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(21)
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(90)
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(42)
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Net loss
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$
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(112,127)
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$
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(13,389)
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$
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(317,649)
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$
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(16,571)
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Net loss per common share:
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Basic and diluted
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$
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(0.00)
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$
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(0.00
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)
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$
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(0.00)
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$
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(0.01
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)
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Weighted average common shares outstanding:
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Basic and diluted
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48,506,427
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30,000,000
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48,404,897
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30,000,000
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See accompanying notes to the unaudited financial statements
F-2
ZENOSENSE, INC.
Statements of Cash Flows
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
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Six Months
ended
June 30, 2014
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Six months ended
June 30, 2013
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Operating Activities
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Net loss
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$
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(317,649
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)
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$
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(16,571
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Changes in operating assets and liabilities:
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Accounts payable
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(7,630)
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(1,454
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)
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Accounts payable - related party
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6,161
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-
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Prepaid expenses
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76,699
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-
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Net Cash used in operating activities
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(242,419)
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(18,025
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)
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Financing activities
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Proceeds from sale of common stock
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205,000
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-
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Proceeds from note payable
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13,000
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-
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Proceeds from advances from third parties
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-
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18,025
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Net Cash provided by financing activities
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218,000
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18,025
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Net increase (decrease) in cash
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(24,419)
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-
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Cash, beginning of period
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26,778
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-
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Cash, end of period
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$
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2,359
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$
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-
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Supplemental disclosure of cash flows information
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Cash paid for income taxes
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$
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-
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$
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-
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Cash paid for interest
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$
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$
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-
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|||||
See accompanying notes to the unaudited financial statements
F-3
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
1. Nature of operations
Zenosense, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on August 11, 2008, for the purpose of acquiring and developing mineral properties. The Company's mineral rights agreement was terminated on May 15, 2013, and as a result, the Company was no longer a pre-exploration stage company.
On October 1, 2013, because the Company had abandoned its mineral properties development business plan, it accordingly reclassified the mineral development component of operations as discontinued operations.
On November 22, 2013, the Company filed a certificate of amendment to with the State of Nevada and (1) changed its name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and (2) effected an increase in the Company’s authorized shares from 50,000,000 to 500,000,000, with par value of $0.001 per share.
Effective December 4, 2013, the Company entered into a development and exclusive license agreement, as amended (“License Agreement”) whereby the Company will provide a third party with capital for the development of the sensory technology for a methicillin resistant Staphylococcus aureus / Staphylococcus aureus (“MRSA/SA”) detection device and a cancer detective device and other improvements and variations to the products (the “Sgenia Products”) to be used in the hospital and health care environments, in exchange for a worldwide, exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. This agreement was modified in April 2014 to extend to additional cancer sensory products.
2. Basis of presentation
The accompanying unaudited interim consolidated financial statements of Zenosense, Inc. 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 latest Annual Report on Form 10-K filed with the SEC. 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 interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2013, as reported in Form 10-K, have been omitted.
3. Going Concern
The financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for 12 months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At June 30, 2014, the Company had not yet achieved profitable operations, had accumulated losses of $867,804 since its inception and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
F-4
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
3. Going Concern (cont')
The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings, advances and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives including anticipated cash needs for working capital, for the next fiscal year. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operations, or if obtained, upon terms favorable to the Company.
4. Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments with an original maturity of ninety days or less. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Research and development
Research and development costs are expensed as incurred.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Loss per common share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
F-5
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
4. Summary of Significant Accounting Policies (cont'd)
Recently Adopted Accounting Standards
In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the reporting period ended June 30, 2014.
5. Notes Payable
On September 30, 2008, Zenosense received $1,675 pursuant to a promissory note with the former President of the Company. The note is unsecured, bears interest at 5% per annum and is due on demand. At June 30, 2014 and December 31, 2013, the Company owed $1,675 to the former President of the Company for this promissory note. At June 30, 2014 and December 31, 2013, the Company owed interest of $482 and $440, respectively, in connection with this promissory note.
The Company also entered into a Demand Promissory Note with a principal amount of $13,000 on June 3, 2014. The note is unsecured and bears interest at 5% per annum and is due on demand. At June 30, 2014, the Company owed and accrued interest of $48 in connection with this promissory note.
6. Common Stock
In February 2014, the Company issued 423,529 shares of common stock to an investor for cash proceeds of $180,000.
On April 8, 2014, a third party purchased 55,556 shares of the Company’s common stock for cash proceeds of $25,000. The third party has also committed to purchase an additional 900,000 shares of Company’s common stock in four tranches for an aggregate purchase price of $450,000, subject to certain conditions..
7. Commitments
On December 4, 2013, the Company entered into the License Agreement with Sgenia Industrial S.L. and its subsidiaries, Sgenia Soluciones S.L and ZENON Biosystem S.L (collectively, “Sgenia”) for the development of an MRSA/SA detection device and cancer detective device and other improvements and variations to the devices (the “Sgenia Products”), to be based on the Sgenia sensory technology. Pursuant to the License Agreement, the Company will have a worldwide exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. On July 21, 2014, the Company entered into an amendment (the “Amendment”) to the License Agreement to modify and extend the Sgenia Products to include a lung cancer product. The Amendment also changed the product development schedule and the research funding budget to accommodate the additional lung cancer product as well as the continuation of the development of the MRSA product. Additionally, the development stage objectives and milestones were modified to reflect the current state of development of each of the Sgenia Products.
F-6
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
7. Commitments (cont'd)
Under the License Agreement, the Company will fund the development of the Sgenia Products pursuant to a research and development plan proposed by Sgenia and accepted by the Company. The funding will be provided on an advance basis, per month, based on agreed upon development stages. In return, the Company will have the exclusive right to manufacture, formulate, package, market and sell the Sgenia Products world-wide, for 40 years, subject to a limitation on the inclusion of Spain in the territory. All intellectual property developed by Sgenia at any time during the term related to manufacturing, formulating and/or packaging process shall be shared ownership and licensed to the Company on a royalty-free basis. Sgenia will also supply to the Company, at a negotiated price based on quantity, all of the requirements for the integrated circuits on microchips that are necessary for the operation of the Sgenia Products. Sgenia and the Company will also work together to research and develop the Sgenia Products and establish written plans and reviewing committees for the management of the overall development project and commercialization of the Sgenia Products.
The Company’s funding of the MRSA product development was limited to an initial approved budget of $1,256,438, of which $526,846 was advanced by the Company. As a result of the Amendment of July 2014, the current revised and approved aggregate budget for research and development of the Sgenia Products is approximately $1,411,000, of which $579,527 has been advanced (including the amounts advanced under the prior budget). For the remainder of 2014 and 2015, the Company is committed to advancing $1,358,319 in research and development funds under the revised and approved budget subject to Sgenia meeting certain milestones. The aggregate of the advances paid by the Company are recorded as research and development expenses. During the three month period ended June 30, 2014, no amounts were advanced under the terms of the License Agreement and the budget. The budget may be changed by mutual agreement from time to time.
In addition to providing the development funding, the Company will also pay royalties for completed sales of the Sgenia Products, payable 60 days after each fiscal quarter of the Company (the “Royalties”). The Royalties will be 20% of net sales, which is calculated based on gross sales of the device and the installation and training for the Sgenia Products, less various expenses, including manufacturing, components acquired from Sgenia, commissions, refunds and discounts and sales taxes. If the Sgenia Products are sold by Sgenia in Spain for original use in Spain, then the Royalties will be reduced. The Company also has the right to sublicense to other parties throughout the world, except in Spain if and when, if at all, Sgenia seeks to act as the distributor in that territory.
The Company has the option to fund the development of the Sgenia Products, and if funded the Company will obtain the right to manufacture, market and sell the resulting devices.
8. Related Party
On December 5, 2013, the Company entered into a one-year service agreement with Mr. Carlos Jose Gil, through his consulting firm, Ksego Engineering S.L., under which the Company will obtain the services of him as the Chief Executive Officer of the Company. Mr. Gil will receive a base salary and additional compensation equal to 10% of the net sales generated from the License Agreement. During the three and six months ended June 30, 2014, the Company recorded $18,470 and $40,152, respectively, of general and administrative expenses related to amounts paid/owed to Ksego Engineering S.L. for services rendered by Mr. Gil. As of June 30, 2014, the Company owes Mr. Gil $6,161.
F-7
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
9. Subsequent Events
On July 21, 2014, the Company entered into an amendment (the “Amendment”) to its License Agreement. The Amendment modifies and extends the development schedule and changes the research funding budget to accommodate the development of a lung cancer product as well as the continuation of the development of the MRSA product.
On July 28, 2014, the loan from a third party investor, in the principal amount of $13,000, and the accrued interest of $100 was converted into 67,500 shares of our common stock. The shares were issued as restricted stock, pursuant to an exemption from registration under the federal securities laws.
On July 28, 2014, the Company entered into a Securities Purchase Agreement (the “Agreement”) under which the investor (the “Investor”) will purchase an aggregate of 1,370,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $274,000. The initial purchase of shares was made on July 28, 2014 for 357,000 shares for a purchase price of $71,500. Additional purchases will be made in three installments, in August, September and October, each installment to be in the amount of 337,500 shares for a purchase price of $67,500 per installment. The shares were issued and future installment purchases of shares will be issued, pursuant to an exemption from registration under the federal securities laws.
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This section of this quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
As used in this quarterly report, the terms “we”, “us”, “our”, “our company” and “Zenosense” mean Zenosense, Inc., unless otherwise indicated. We have no subsidiaries.
General Overview
Zenosense, Inc. was incorporated on August 11, 2008 in the State of Nevada. Our authorized common stock currently consists of 500,000,000 authorized shares of common stock, with par value of $0.001.
The original purpose of the company was to acquire and to develop mineral properties and to engage in the exploration for gold and other mineral properties. On May 15, 2013, our mining lease expired and we lost our right to explore the mining property. We then became a shell company, as defined under the Securities and Exchange Act of 1934, as amended, until December 4, 2013, when we entered into the transaction with Sgenia described below.
In the summer of 2013, we started to look for other business opportunities. We became interested in a sensory technology for a methicillin resistant Staphylococcus aureus/Staphylococcus aureus (“MRSA/SA”) detection device to be used in the hospital and health care environments and began to negotiate a license agreement with the developers of such technology (the “Sgenia Technology”). In late 2013, we entered into a Development and Exclusive License Agreement (the “License Agreement”) with Sgenia Industrial, S.L. and its subsidiaries Sgenia Soluciones, S.L. and ZENON Biosystem, S.L. (“Zenon”) (collectively “Sgenia”), all of which are formed under the laws of Spain. Under the terms of the License Agreement, we will provide Zenon with capital for the research and development of devices that utilizes the Sgenia technology (the “Sgenia Products”), in exchange for a worldwide, exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement gives us additional rights to improvements and developments and future products.
Sgenia and the company entered into amendments in April 2014 and July 2014 to extend the License Agreement to cancer sensory devices based on the intellectual property of Sgenia and to amend the budget and development objectives and stages due to the expansion of development work.
In December 2013, we filed an amendment to our charter to change our name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and to increase the number of our authorized shares of Common Stock from 50,000,000 shares to 500,000,000 shares. The amendments were approved by our stockholders on November 23, 2013 at the annual meeting of the stockholders. We also entered into capital contribution agreements to reduce the number of outstanding shares held by our prior management, converted some outstanding debt and raised initial working capital, in part to be able to finalize the License Agreement and make the initial development payment.
To fund our obligations under the License Agreement, we have sold shares of common stock from time to time on a private placement basis and converted funds advanced to the company into common shares of the company. Since the end of the previous fiscal year, we have received an aggregate of $218,000 from the sale of common stock and debt securities, which has been used to pay our financial obligations and for working capital.
5
Plan of Operation
Our business plan is to develop devices that can detect MRSA/SA and cancer to be used in hospitals and other medical care centers. Our principal activity since December 2013 and for the next 18 months and thereafter will be funding the research and development of the Sgenia Products. At June 30, 2014, we had working capital deficit of $32,519. Our current cash assets are not sufficient to cover our current and expected expenses, including the funding obligation under the License Agreement, and therefore, we will need to obtain further financing, without which we will not be able to execute our business plan.
We reviewed with Sgenia the development schedule and funding requirements for the initial products and requirements to develop the cancer sensory devices, and in July we agreed upon a new budget and developmental schedule for these products. Currently, the budget and development schedule extends to July 2015. The company agreed to the changes based on the generally positive results of Sgenia in its work to date.
We anticipate that we will incur the following expenses over the next 12 month period in connection with the development of the Sgenia Products: (1) we will have to fund the future development expenses of Sgenia up to an amount of $1,358,319, (2) payment of compensation to our officers, employees, and consultants of approximately $130,000, (3) legal, audit and reporting expenses of approximately $70,000, and (4) general working capital. Additional expenses may arise from time to time, which we cannot currently identify or determine a possible expense. We will need additional funding to cover our anticipated expenses mentioned above, and for future development.
Liquidity and Capital Resources
As of June 30, 2014 and December 31, 2013, our total assets were $2,359 and $103,477, respectively, and our total current liabilities were $34,878 and $23,347, respectively. As of June 30, 2014, we had a working capital deficit of $32,519 .Our financial statements report a net loss of $317,649 for the six months ended June 30, 2014.
We have had recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. Our financial statements reflect that there is a going concern qualification.
Results of Operations
Overview
The following discussion of the results of operations, cash flows and changes in our financial position should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2013, which are included in our Form 10-K, filed on March 26, 2014.
Three Months Ended June 30, 2014 and 2013
Operating Expenses
Our operating expenses for the three months ended June 30, 2014 and 2013 are outlined in the table below:
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Three Months Ended
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||||||||
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June 30,
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||||||||
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2014
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2013
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|||||||
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Research and development expenses
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$
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75,515
|
$
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|||||
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General and administrative expenses
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$
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36,543
|
$
|
13,368
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||||
6
The increase in research and development expenses is due to the company’s License Agreement with Sgenia signed in December 2013, which requires the company to make monthly payments to Sgenia in return for research and development services.
General and administrative expenses have increased as a result of the company hiring a Chief Executive Officer and incurring additional legal and accounting fees in connection with the new operations of the company.
The Company has suffered recurring losses from operations. The continuation of our Company is dependent upon our Company attaining and maintaining profitable operations and raising additional capital as needed.
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Three Months Ended
June 30,
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||||||||
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Cash Flows
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2014
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2013
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||||||
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Net Cash Used in Operating Activities
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$
|
(41,685)
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$
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(13,863
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)
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|||
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Net Cash Provided by Financing Activities
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$
|
38,000
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$
|
13,863
|
||||
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Cash increase (decrease) during the period
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$
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(3,685)
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$
|
-
|
||||
We had cash of $2,359 and $26,778 as of June 30, 2014 and December 31, 2013, respectively. We had a working capital deficit of $32,519 as of June 30, 2014 compared to working capital of $80,130 as of December 31, 2013.
We used cash in operations of $41,685 during the three months ended June 30, 2014, principally due to payments to Sgenia to conduct research and development activities on behalf of the Company.
We received $25,000 of cash proceeds from the sale of the Company’s common stock during the three months ended June 30, 2014. During the three months ended June 30, 2014, we received cash advances of $13,000 from a third party.
Six Months Ended June 30, 2014 and 2013
Operating Expenses
Our operating expenses for the six months ended June 30, 2014 and 2013 are outlined in the table below:
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Six Months Ended
|
||||||||
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June 30
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||||||||
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2014
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2013
|
|||||||
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Research and development expenses
|
$
|
230,097
|
$
|
-
|
||||
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General and administrative expenses
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$
|
87,462
|
$
|
16,529
|
||||
The increase in research and development expenses is due to the Company’s License Agreement with Sgenia signed in December 2013, which requires the Company to make monthly payments to Sgenia in return for research and development services.
General and administrative expenses have increased as a result of the company hiring a Chief Executive Officer and incurring additional legal and accounting fees in connection with the new operations of the Company.
The Company has suffered recurring losses from operations. The continuation of our Company is dependent upon our Company attaining and maintaining profitable operations and raising additional capital as needed.
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Six Months Ended
June 30,
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||||||||
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Cash Flows
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2014
|
2013
|
||||||
|
Net Cash Used in Operating Activities
|
$
|
(242,419)
|
$
|
(18,025
|
)
|
|||
|
Net Cash Provided by Financing Activities
|
$
|
(218,000)
|
$
|
18,025
|
||||
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Cash increase (decrease) during the period
|
$
|
(24,419)
|
$
|
-
|
||||
7
We used cash in operations of $242,419 during the six months ended June 30, 2014, principally due to payments to Sgenia to conduct research and development activities on behalf of the Company.
We received $205,000 of cash proceeds from the sale of the Company’s common stock during the six months ended June 30, 2014. During the six months ended June 30, 2014, we received cash advances from a third party of $13,000, which had an interest rate of 5% per annum. The advance and the accrued interest were converted into 67,500 shares of common stock subsequent to the end of the six month period reported upon.
Based on our current operating plan, we will not generate revenue that is sufficient to cover our expenses for at least the next twelve (12) months. In addition, we do not have sufficient cash and cash equivalents to execute our operations for at least the next twelve (12) months. We will need to obtain additional financing to operate our business for the next twelve (12) months. We expect to raise the capital necessary to fund our company through advances or a private placement and public offering of our common stock. Additional financing, whether through public or private equity or debt financing, arrangements with stockholders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us. Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Limited Operating History: Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We have no assets, operating plan or business plan and have not generated any revenues from operations. We are seeking new business opportunities and there is no assurance we will be able to locate or acquire any such opportunities.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Not Applicable.
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ITEM 4.
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CONTROLS AND PROCEDURES.
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Disclosure Controls and Procedures
Under the supervision and the participation of our management, including our principal executive officer (who is also our principal financial officer), we conducted an evaluation as of June 30, 2014 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2014, and was not effective during the entire quarter ended June 30, 2014 because (1) the Company lacks a functioning audit committee and there is a lack of independent directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) the Company has inadequate segregation of duties consistent with control objectives; and (3) the Company has ineffective controls over its period end financial disclosure and reporting processes.
Changes in internal controls over financial reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1 LEGAL PROCEEDINGS
As of August 19, 2014, there are no material pending legal proceedings, to which we are a party or of which any of our properties is the subject. Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.
There have been no material changes to the risk factors previously disclosed in the company’s annual report on Form 10-K, which was filed with the Securities and Exchange Commission on March 26, 2014. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
None.
Not applicable.
ITEM 5 OTHER INFORMATION
None.
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ITEM 6 EXHIBITS.
The following documents are included herein:
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Exhibit No.
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Document Description
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|
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31.1
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Certification of Principal Executive Officer and Principal Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith
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32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
|
Filed herewith
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101.INS*
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XBRL Instance Document
|
Filed herewith.
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101.SCH*
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XBRL Taxonomy Extension Schema Document
|
Filed herewith.
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith.
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101.LAB*
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XBRL Taxonomy Extension Labels Linkbase Document
|
Filed herewith.
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith.
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith.
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* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
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ZENOSENSE, INC.
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||
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Date: August 19, 2014
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By:
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/s/Carlos Jose Gil
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Name:
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Carlos Jose Gil
|
|
|
Title:
|
Chief Executive Officer
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11