U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
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[ ] 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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Commission File No. 000-49655
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LIPIDVIRO TECH, INC.
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(Name of Small Business Issuer in its Charter)
NEVADA 87-0678927
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1338 S. Foothill Dr. #126
Salt Lake City, Utah 84108
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(Address of Principal Executive Offices)
Registrant's Telephone Number: (801) 583-9900
Not Applicable
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(Former name and former address, if changed since last report)
Securities Registered under Section 12(b) of the Exchange Act: None.
Name of Each Exchange on Which Registered: None.
Securities Registered under Section 12(g) of the Exchange Act: $0.001 par
value common stock.
Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Company was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Registrant's revenues for its most recent fiscal year: December 31,
2004 - $0.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days.
April 13, 2005 - $2,153.11. There are approximately 2,153,112 shares
of common voting stock of the Registrant held by non-affiliates. There is no
"established trading market" for our Company's securities, so these shares
have been arbitrarily valued at par value of $0.001 per share.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Not applicable.
Check whether the Registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Registrant's
classes of common equity, as of the latest practicable date:
April 13, 2005
Common Stock - 10,031,862
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in
Part III, Item 13.
Transitional Small Business Issuer Format Yes X No
--- ---
PART I
Item 1. Description of Business.
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Business Development.
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General.
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LipidViro Tech, Inc. ("our Company" and "we, "our," "us" and words of
similar import) was organized under the laws of the State of California on
October 19, 1954.
In October 2001, we change our domicile from the State of California to
Nevada by merging with and into a wholly-owned subsidiary with the same name,
with the Nevada entity being the surviving corporation.
We changed our name to "LipidViro Tech, Inc." on February 5, 2004.
Business Developments Prior to December 31, 2003.
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For information about our business development prior to December 31,
2003, see our 10-KSB Annual Report for the year ended December 31, 2003, that
was filed with the Securities and Exchange Commission on April 14, 2004, and
which is incorporated herein by reference. See Part III, Item 13.
Business Developments During the Year Ended December 31, 2004.
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On January 12, 2004,a Nevada state court conducted a Fairness Hearing
and found that the terms and provisions of our Reorganization Agreement and
the issuance and exchange of the securities of our Company with LipidViro
Tech, Inc., a Utah corporation ("LipidViro-Utah"), were fair to our
shareholders, based upon our acceptance of the terms of the Reorganization
Agreement and the information concerning our business and finances and
LipidViro-Utah's business and finances.
Copies of the Petition for Fairness Hearing and the court's Order
Granting Petition of Fairness were attached to our 8-KA-1 Current
Report dated August 19, 2003, filed with the Securities and Exchange
Commission on March 26, 2004, and are incorporated herein by reference. See
Part III, Item 13.
On May 10, 2004, we introduced our new GEN-3 technology and reported
enhanced viral inactivation utilizing the new GEN-3 technology.
Business Developments Subsequent to Year Ended December 31, 2004.
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On February 1, 2005, we offered a presentation of our Fluid Purification
and Cardiovascular platforms.
On March 3, 2005, we announced pre-clinical research results which
demonstrated the ability to substantially inactivate infectious prion proteins
in bovine serum utilizing our proprietary technology. Prion infectivity was
reduced in bovine serum below the limit of detection in both cell and Western
blot assays, two gold standard assays for prion detection. This research was
submitted for presentation at the Meeting of the International Union of
Microbiological Societies, San Francisco, July, 2005.
See Part II, Item 6, for additional information about these developments.
Business.
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Overview.
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We are a development-stage biotechnology company engaged in developing
drug products, fluid purification processes, and drug production and delivery
systems (DPD System). Utilizing our proprietary DPD System, we are currently
developing two products for commercialization; therapeutic treatments for
Cardiovascular diseases; and processes to inactivate virus, bacteria and
prions producing pathogen-free biological products.
Risk Factors.
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If we are unable to obtain adequate funds, we may not be able to develop
and market our potential products.
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For the twelve months ended December 31, 2004, we incurred a net loss of
approximately ($248,977), and from inception of exploration stage through
December 31, 2004, we have incurred an accumulated deficit of approximately
($394,692). We expect to continue to incur losses for the foreseeable future
as we continue funding for pre-clinical research and other activities related
to operations, research and development. Should we seek to develop products
that require regulatory approval to sell the products, the regulatory process
will take a number of years and will require significant amounts of capital.
As of December 31, 2004, we had no cash, cash equivalents and short-term
investments. We require immediate financing to provide sufficient working
capital for our research and development activities for the next year. For
these operational and research and development activities, we will require
additional capital in amounts that cannot be quantified, but are expected to
be significant. We intend to seek capital needed to fund our operations
through new collaborations, through pursuit of research and development grants
or through public or private equity or debt financings. Additional financing
may not be available on terms favorable to us, or at all. If we are unable to
obtain financing on acceptable terms, our ability to continue our business as
planned will be significantly harmed.
Our technology is only in the clinical development stage, may not prove
to be safe or effective and may never receive regulatory approval, which would
significantly harm our business prospects.
------------------------------------------
Before obtaining required regulatory approvals for the commercial sale of
any potential products, we must demonstrate, through pre-clinical studies and
clinical trials, that our technology is safe and effective for use in at least
one medical indication. These studies and clinical trials are expected to take
a number of years and may fail to show that our technology is sufficiently
safe and effective, in which case our technology will not receive regulatory
approval, and we will not be able to develop and commercialize our products.
Our technology, and hence, our business, at present is limited to
evaluating the capacity of LVT3 and our proprietary process to inactivate
pathogens including virus and prions, and treat different cardiovascular
diseases.
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Accordingly, if our technology does not prove to be safe or effective, or
if we otherwise fail to receive regulatory approval for our potential product
indications, our business prospects would be significantly harmed and possibly
it could cause us to cease operations.
Our pre-clinical studies may be delayed or unsuccessful.
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Our future success depends in large part upon the results of pre-clinical
studies designed to evaluate the capacity of LVT3 and our proprietary process
to inactivate pathogens including virus and prions, and treat different
cardiovascular diseases, so that we can select potential products for
commercial development. The ultimate results of pre-clinical studies cannot be
predicted with accuracy and may be impacted by many variables. We cannot be
sure whether planned pre-clinical research will begin on time or will be
completed on schedule or at all. Delay or failure to complete pre-clinical
studies may delay or prevent us from identifying potential products for
commercial development, which would materially harm our business. For
example, any of our future clinical studies might be delayed in their
initiation or performance, or even halted after initiation because we are
unable to secure financing of operations and research.
We intend to seek collaborations in order to further develop our
products.
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If we are unsuccessful in attaining these collaborations, the development
of our products could be adversely affected and we may incur significant
unexpected costs. We intend to seek collaborations with strategic partners,
licensors, licensees and others. We may be unable to attain collaborations or
licensing arrangements necessary to develop our technology or on favorable
terms. Any current or future collaborations or licensing arrangements may not
be successful. In addition, parties we collaborate with may develop products
that compete with ours, and we cannot be certain that they will perform their
contractual obligations or that any revenues will be derived from such
arrangements. If we were to enter into a collaboration, one or more of
parties in such may fails to achieve product development objectives, this
failure could harm our ability to fund related programs and develop or
commercialize products.
We may not be able to continue in our research facilities.
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We have outsourced our clinical research to independent laboratory
facilities where our primary research is conducted. We may encounter a time
when the lab is no longer available to our research, therefore limiting our
research until arrangements for other facilities can be negotiated.
Furthermore, we may encounter halts and delays related to our research as a
result of:
* Lengthy approvals required for government regulated materials
key to our research that may delays, or may make certain
materials unavailable to our outsourced research facilities;
* New regulatory requirements for laboratory facilities that
may delay our research efforts;
* Unforeseen cost overruns;
* Other unforeseeable factors that arise from not owning and
operating our laboratory facilities; and
* Failure to maintain financial obligations with our outsourced
laboratory facilities.
Our industry is intensely competitive.
--------------------------------------
The biotechnology industry is intensely competitive and we may not be
able to develop, perfect or acquire rights to new products with commercial
potential. We compete with biotechnology and pharmaceutical companies that
have been established longer than we have, have a greater number of products
on the market, have greater financial and other resources and have other
technological or competitive advantages. We also compete in the development of
technologies and processes and in acquiring personnel and technology from
academic institutions, governmental agencies, and other private and public
research organizations. We cannot be certain that one or more of our
competitors will not receive patent protection that dominates, blocks or
adversely affects our clinical studies, product development or business; will
benefit from significantly greater sales and marketing capabilities; or will
not develop products that are accepted more widely than ours.
If we fail to secure and then enforce patents and other intellectual
property rights underlying our technologies, we may be unable to compete
effectively.
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Our future success will depend in part on our ability to obtain patent
protection, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others, and if
needed, obtain appropriate licenses to patents or proprietary rights held by
third parties with respect to its technology, both in the United States and in
foreign countries. We currently have applied for patent protection covering
our technology. However, our patent applications may not be approved and,
even if approved, our patent rights may not be upheld in a court of law or may
be narrowed if challenged. The patent positions of pharmaceutical and
biotechnology companies can be highly uncertain and involve complex legal and
factual questions. Our patent rights may not provide competitive advantages
for our products and may be challenged, infringed upon or circumvented by our
competitors.
In addition to patents, we rely on trade secrets, know-how, continuing
technological innovations, and licensing opportunities to develop and maintain
our competitive position. It is our policy to require our employees, certain
contractors, consultants, members of our scientific and viral advisory boards
and parties to collaborative agreements to execute confidentiality agreements
upon the commencement of a business relationship with us. We cannot assure
you that these agreements will not be breached, that they will provide
meaningful protection of our trade secrets or know-how or adequate remedies if
there is unauthorized use or disclosure of this information or that our trade
secrets or know-how will not otherwise become known or be independently
discovered by our competitors.
If it were ultimately determined that our intellectual property rights
are unenforceable, or that our use of our technology infringes on the
intellectual property rights of others, we may be required or may desire to
obtain licenses to patents and other intellectual property held by third
parties to develop, manufacture and market products using our technology.
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We may not be able to obtain these licenses on commercially reasonable
terms, if at all, and any licensed patents or intellectual property that we
may obtain may not be valid or enforceable. In addition, the scope of
intellectual property protection is subject to scrutiny and challenge by
courts and other governmental bodies. Litigation and other proceedings
concerning patents and proprietary technologies can be protracted, expensive
and distracting to management and companies may sue competitors as a way of
delaying the introduction of competitors' products. Any litigation, including
any interference proceedings to determine priority of inventions, oppositions
to patents in foreign countries or litigation against our partners, may be
costly and time-consuming and could significantly harm our business.
Because of the large number of patent filings in the biopharmaceutical
field, our competitors may have filed applications or been issued patents and
may obtain additional patents and proprietary intellectual property rights
relating to products or processes competitive with or similar to ours. We
cannot be certain that U.S. or foreign patents do not exist or will be issued
that would harm our ability to commercialize our products and product
candidates.
If we use biological and hazardous materials in a manner that causes
injury, we may be liable for damages.
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Our research and development activities involve the controlled use of
potentially harmful biological materials, such as blood products, organic
solvents and other hazardous materials. We cannot completely eliminate the
risk of accidental contamination or injury from the use, storage, handling or
disposal of these materials. In the event of contamination or injury, we could
be held liable for damages that result, and any liability could be
significant. We are subject to federal, state and local laws and regulations
governing the use, storage, handling and disposal of these materials and
specified waste products. The cost of compliance with these laws and
regulations could be significant.
Our business exposes us to product liability claims.
----------------------------------------------------
Our design, testing, development, manufacture and marketing of products
involve an inherent risk of exposure to product liability claims and related
adverse publicity. Insurance coverage is expensive and difficult to obtain,
and we may be unable to obtain coverage in the future on acceptable terms, if
at all. If we seek insurance and are unable to obtain sufficient insurance at
an acceptable cost or if a successful product liability claim is made against
us, whether fully covered by insurance or not, our business could be harmed.
We depend on key personnel.
---------------------------
Our ability to operate successfully depends in significant part upon the
experience, abilities and continued service of certain key scientific,
technical and managerial personnel. If we lose the services of any of these
personnel and we are unable to hire qualified replacements, our business could
be harmed. Our future success also depends upon our ability to attract and
retain additional highly qualified personnel in these areas and our ability to
develop and maintain relationships with qualified clinical researchers.
Competition for such personnel and relationships is intense. There can be no
assurance that we can retain such personnel or that we can attract or retain
other highly qualified scientific, technical and managerial personnel or
develop and maintain relationships with clinical researchers in the future.
Our stock price may be volatile and there may not be an active trading
market for our common stock.
----------------------------
There can be no assurance that there will be an active trading market for
our common stock or that the market price of the common stock will not decline
below its present market price. The market prices for securities of
biotechnology companies have been, and are likely to continue to be, highly
volatile. Factors that have had, and are expected to continue to have, a
significant impact on the market price of our common stock include:
* material public announcements;
* actual or potential clinical results with respect to our
products under development or those of our competitors;
* the announcement and timing of any new product introductions
by us or others;
* technical innovations or product development by us or our
competitors;
* regulatory approvals or regulatory issues;
* developments relating to patents and proprietary rights;
* political developments or proposed legislation in the medical
device or healthcare industry;
* economic and other external factors, disaster or crisis;
* changes to our management;
* period-to-period fluctuations in our financial results or
results which do not meet or exceed analyst expectations; and
* market trends relating to or affecting stock prices throughout our
industry, whether or not related to results or news regarding us or
our competitors.
In the past, securities class action litigation has often been brought against
a company following periods of volatility in the market price of its
securities. We may, in the future, be the target of similar litigation.
Regardless of its outcome, securities litigation may result in substantial
costs and divert management's attention and resources, which could harm our
business and results of operations.
Shares eligible for future sale.
--------------------------------
The future sale of substantial number of shares of our common stock, or
the perception that such sales could occur, would impact the market price of
our common stock.
The future sale of substantial number of the new shares issued to
LipidViro-Utah shareholders, or the exercise and sale of the common stock
underlying the A or B warrants or the perception that such sales could occur,
would also impact the market price of our common stock. If a substantial
number of these newly issued shares of common stock that have become available
for sale or will be available for sale in the future are sold, the market
price of our common stock may be negatively impacted. It is believed that all
of these securities are freely tradable without registration under the
Securities Act by reason of their issuance under Section 3(a)(10) thereof.
Existing stockholders may experience substantial dilution.
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In connection with the LipidViro-Utah Reorganization Agreement, we will
have to issue additional shares of common stock in the event 1,915,000
"A" warrants and 1,915,000 "B" like warrants are exercised, which will have
the effect of diluting the ownership of our stockholders. In addition, we
require immediate financing which if funded through equity financings, would
further dilute existing stockholders.
Principal Products or Services.
-------------------------------
We are currently conducting pre-clinical laboratory research focused on
the development of drug and biological products that utilize our proprietary
process and equipment that produces our lipid targeting, anti-pathogenic
investigational compound, LVT3. We currently have no approved, saleable
products or services, and accordingly, are considered to be a biotechnology
company in the development stage.
Distribution Methods.
---------------------
None; not applicable.
Competitive Business Conditions.
--------------------------------
The biotechnology industry is extremely competitive and we may not be
able to develop, perfect or acquire rights to new products with commercial
potential. We compete with biotechnology and pharmaceutical companies that
have been established longer than we have, have a greater number of products
on the market, have greater financial and other resources and have other
technological or competitive advantages. We also compete in the development
of technologies and processes and in acquiring personnel and technology from
academic institutions, governmental agencies, and other private and public
research organizations. We cannot be certain that one or more of our
competitors will not receive patent protection that dominates, blocks or
adversely affects our clinical studies, product development or business; will
benefit from significantly greater sales and marketing capabilities; or will
not develop products that are accepted more widely than ours.
Our future success will depend in part on our ability to obtain patent
protection, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others, and if
needed, obtain appropriate licenses to patents or proprietary rights held by
third parties with respect to its technology, both in the United States and in
foreign countries. Any future patent rights also may not provide competitive
advantages for our products and may be challenged, infringed upon or
circumvented by our competitors.
In addition to future patents, we rely on trade secrets, know-how,
continuing technological innovations, and licensing opportunities to develop
and maintain our competitive position. It is our policy to require our
employees, certain contractors, consultants, members of our general board and
scientific advisory boards and parties to collaborative agreements to execute
confidentiality agreements upon the commencement of a business relationship
with us. We cannot assure you that these agreements will not be breached,
that they will provide meaningful protection of our trade secrets or know-how
or adequate remedies if there is unauthorized use or disclosure of this
information or that our trade secrets or know-how will not otherwise become
known or be independently discovered by our competitors. We will pursue all
legal avenues to ensure however that any breach is held accountable by the
fullest extent of the law.
We can give no assurance that there will be an active trading market for
our common stock and warrants or that the market price of the common stock
will not decline below its present market price. The market prices for
securities of biotechnology companies have been, and are likely to continue to
be, highly volatile. Factors that have had, and are expected to continue to
have, significant impacts on the market price of our common stock include:
* intellectual property developments by us or our competitors;
* legislation in the field of biotechnology, medicine or healthcare;
* economic, environmental or disasters;
* management turnover;
* product development by us or our competitors;
* technical innovations by us or our competitors;
* regulatory issues or approvals;
* financial and analyst expectations;
* market trends relating to or affecting stock prices;
* press releases;
* clinical results under development or those of our competitors; and
* new products announced by us or our competitors.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
We have filed for patent protection in the U.S. and abroad seeking
protection of our lipid targeting, anti-pathogenic equipment, devices,
processes, potential products and compounds. To date we have not been issued
or denied patent protection on our patent applications. Where necessary, we
may attempt to obtain rights to various patents and patent applications under
licenses with third parties that provide for the payment of royalties by us.
The ultimate degree of patent protection that will be afforded to
biotechnology products and processes, including ours, in the U.S. and in other
important markets remains uncertain and is dependent upon the scope of
protection decided upon by the patent offices, courts and lawmakers in these
countries.
There is no certainty that our existing patent applications or others we
may apply for, if issued, will afford us substantial protection or commercial
benefit. Similarly, there is no assurance that our pending patent applications
or any potential patent applications licensed from third parties will
ultimately be granted as patents or that those patents that have been issued
or are issued in the future will prevail if they are challenged in court.
There has been, and we expect that there may continue to be, significant
litigation in the industry regarding patents and other intellectual property
rights. Intellectual property litigation could therefore create business
uncertainty and consume substantial financial and human resources.
In general, we might attempt to obtain licenses to third party patents
that we deem necessary or desirable for the manufacture, use and sale of any
products we may develop or attempt to develop. There is considerable
uncertainty within the biotechnology industry about the validity, scope and
enforceability of many issued patents in the U.S. and elsewhere in the world,
and, to date, there is no consistent policy regarding the breadth of claims
allowed in biotechnology patents.
Need for Governmental Approval of Principal Products or Services.
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The process of obtaining requisite United States Federal Drug
Administration ("FDA") approval has historically been costly and time
consuming. Current FDA requirements for a new human drug or biological product
to be marketed in the United States include: (1) the successful conclusion of
pre-clinical laboratory and animal tests, if appropriate, to gain preliminary
information on the product's safety; (2) filing with the FDA of an
Investigational New Drug Application, commonly known as an INDA, to conduct
human clinical trials for drugs or biologics; (3) the successful completion of
adequate and well-controlled human clinical investigations to establish the
safety and efficacy of the product for its recommended use; and (4) filing by
a company and acceptance and approval by the FDA of a New Drug Application
("NDA") for a drug product or a Biological License Application ("BLA") for a
biological product to allow commercial distribution of the drug or biologic.
Pre-clinical tests include the evaluation of the product in the
laboratory and in animal studies to assess the potential safety and efficacy
of the product and its formulation. The results of the pre-clinical tests are
submitted to the FDA as part of an INDA to support the evaluation of the
product in human subjects or patients.
Clinical trials involve administration of the product to patients under
supervision of a qualified principal investigator. Such trials are typically
conducted in four sequential Phases, although the Phases may overlap. In
Phase I, the initial introduction of the drug into human subjects, the product
is tested for safety, dosage tolerance, absorption, metabolism, distribution,
and excretion. Phase II involves studies in a limited patient population to:
(1) determine the biological or clinical activity of the product for specific,
targeted indications; (2) determine dosage tolerance and optimal dosage; and
(3) identify possible adverse effects and safety risks. If Phase II
evaluations indicate that a product is effective and has an acceptable
benefit-to-risk relationship, Phase III trials may be undertaken to further
evaluate clinical efficacy and to further test for safety within an expanded
patient population. Phase IV studies, or post-marketing studies, may also be
required to provide additional data on safety or efficacy.
The FDA reviews the results of the clinical trials and may order the
temporary or permanent discontinuation of clinical trials at any time if it
believes the product candidate exposes clinical subjects to an unacceptable
health risk. Investigational products used in clinical studies must be
produced in compliance with cGMP pursuant to FDA regulations.
On November 21, 1997, President Clinton signed into law the Food and Drug
Administration Modernization Act. That Act codified the FDA's policy of
granting "fast track" approval for cancer therapies and other therapies
intended to treat serious or life threatening diseases and that demonstrate
the potential to address unmet medical needs. The fast track program
emphasizes close, early communications between FDA and the sponsor to improve
the efficiency of pre-clinical and clinical development, and to reach
agreement on the design of the major clinical efficacy studies that will be
needed to support approval. Under the fast track program, a sponsor also has
the option to submit and receive review of parts of the NDA or BLA on a
rolling schedule approved by FDA, which expedites the review process.
The FDA's Guidelines for Industry Fast Track Development Programs require
that a clinical development program must continue to meet the criteria for
Fast Track designation for an application to be reviewed under the Fast Track
Program. Previously, the FDA approved cancer therapies primarily based on
patient survival rates or data on improved quality of life. While the FDA
could consider evidence of partial tumor shrinkage, which is often part of the
data relied on for approval, such information alone was usually insufficient
to warrant approval of a cancer therapy, except in limited situations. Under
the FDA's new policy, which became effective on February 19, 1998, fast track
designation ordinarily allows a product to be considered for accelerated
approval through the use of surrogate endpoints to demonstrate effectiveness.
As a result of these provisions, the FDA has broadened authority to consider
evidence of partial tumor shrinkage or other surrogate endpoints of clinical
benefit for approval. This new policy is intended to facilitate the study of
cancer therapies and shorten the total time for marketing approvals. Under
accelerated approval, the manufacturer must continue with the clinical testing
of the product after marketing approval to validate that the surrogate
endpoint did predict meaningful clinical benefit. We intend to take advantage
of the fast track programs; however, it is too early to tell what effect, if
any, these provisions may have on the approval of our product candidates.
The orphan drug provisions of the Federal Food, Drug, and Cosmetic Act
provide incentives to drug and biologics manufacturers to develop and
manufacture drugs for the treatment of rare diseases, currently defined as
diseases that exist in fewer than 200,000 individuals in the U.S. or, for a
disease that affects more than 200,000 individuals in the U.S., where the
sponsor does not realistically anticipate that its product will become
profitable. Under these provisions, a manufacturer of a designated orphan
product can seek tax benefits, and the holder of the first FDA approval of a
designated orphan product will be granted a seven-year period of marketing
exclusivity for that product for the orphan indication. While the marketing
exclusivity of an orphan drug would prevent other sponsors from obtaining
approval of the same compound for the same indication, it would not prevent
other types of drugs from being approved for the same indication.
We plan on performing pre-clinical research of a variety of viral and
bacterial and infectious protein (prion) pathogens that typically affect
humans and biological fluids. Should the compounds and substances targeted by
our Company show efficacy during initial in-vitro study, our Company may seek
"Fast Track" and Orphan Drug status designation to secure expedited review. It
is uncertain whether we will obtain fast track designation. We cannot predict
the ultimate effect, if any, of the new fast track process on the timing or
likelihood of FDA approval of any as yet unknown products.
Effect of Existing or Probable Governmental Regulations on the Business.
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General.
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Drugs, devices and biologic products must satisfy rigorous standards of
safety and effectiveness before they can be approved or, in the case of some
medical devices, "cleared" for commercial marketing by the Food and Drug
Administration, or the FDA. The FDA has extensive power and discretion over
this approval process, subject to the provisions of its governing statutes,
which consist principally of the Federal Food, Drug, and Cosmetic Act with
respect to pharmaceuticals and medical devices, and the Public Health Service
Act in the case of drug or device products of a biological nature, such as
processed plasma.
The FDA also has promulgated detailed regulations to implement these
statutes and has issued various non-binding guidance documents to advise
industry on matters in more detail on statutory and regulatory requirements.
In evaluating the regulatory status of any proposed product, many different
factors are involved and, thus, there may be additional statutory/ regulatory
provisions or requirements that are unique to a particular product that are
not included in this general discussion.
In defining a product's regulatory status, several key factors must be
considered such as, but not limited to:
* the product's intended use as derived from proposed labeling;
* its primary mode of action;
* whether the active ingredient is derived from chemical synthesis, which
normally is regulated as a drug under the Federal Food, Drug, and Cosmetic
Act, or is a product derived from biotechnology, such as recombinant DNA, or
human, animal or plant sources, in which case it commonly, but not always, is
regulated as a biologic under the Public Health Service Act and a biological
drug under the Federal Food, Drug, and Cosmetic Act;
* whether it is a virus, therapeutic serum, antitoxin, vaccine, blood,
blood component, blood derivative, allergenic product, or analogous product or
other very specific products, in which case it is regulated under the Public
Health Service Act as a biologic and, if applicable, under the Federal Food,
Drug, and Cosmetic Act, as a biological drug; and
* the FDA's prior handling of similar products, which has, in a number of
cases, treated products differently than would appear to be required under a
reading of applicable statutes.
The extent and nature of the FDA regulatory requirements also will depend
on the labeled uses, or indications, for which approval is sought and the
type, complexity and novelty of the product. In the case of medical devices,
the Federal Food, Drug, and Cosmetic Act requires that the most risky
products, referred to as Class III devices, be the subject of a pre-market
approval application under Section 515 of the Federal Food, Drug, and Cosmetic
Act. A pre-market approval application usually requires that the applicant
conduct well-controlled clinical studies to demonstrate the safety and
effectiveness of its medical device. Other medical devices can be cleared for
marketing by the FDA pursuant to what is known as a pre-market notification.
Clearance of a pre-market notification filing relies on a finding by the FDA
that the applicant's device is substantially equivalent to a lawfully marketed
device that itself does not require a pre-market approval application. And,
in the case of other even less risky devices, the FDA has eliminated the need
to file a pre-market notification at all, although the product and its maker
generally are still subject to the other general controls contained in the
Federal Food, Drug, and Cosmetic Act and the device regulations. The part of
the FDA having primary jurisdiction over medical devices is the Center for
Devices and Radiological Health, or Devices Center.
Drug products and biological drug products whose active ingredients have
never been approved by the FDA or which, although having the same ingredient,
differ in a substantial way from an approved product usually will require the
applicant to file a full new drug application containing substantial evidence
in the form of well-controlled clinical investigations that the drug product
or biological drug product is safe and effective for its labeled
indication(s). In contrast, a generic version of a previously approved drug
product may be approved by the FDA under an "abbreviated" new drug application
in which the showing of safety and effectiveness is satisfied by the applicant
proving that its drug is bioequivalent to the drug product originally approved
under a full new drug application that forms the basis for the abbreviated new
drug application. To qualify for the abbreviated new drug application
process, a generic drug, with some limited exceptions, must be identical to
that of the drug covered under the full new drug application as to active
ingredient, labeling, dosage strength, dosage form, and route of
administration. The part of the FDA having primary jurisdiction over drugs is
the Center for Drug Evaluation and Research, or Drugs Center, and over
biological drugs is the Center for Biologics Evaluation and Research, or
Biologics Center.
Biologics are regulated under the Public Health Service Act, which
prohibits marketing them without an approved license from FDA known as a
Biologics License Application. Biologics regulation, under the Public Health
Service Act, also focuses on whether a biologic is pure, safe and potent.
Biologics License Applications for therapeutic biological drug products are
similar to new drug applications and well-controlled clinical investigations
to show safety and effectiveness are often required. The regulation of
biologics also is impacted by the fact that biologics may be used in
conjunction with a medical device such as a diagnostic kit. If used in
conjunction with a device, the biologic product must satisfy the Public Health
Service Act requirements and also may need to go through the pre-market
approval application procedure, which may require that the applicant conduct
clinical studies to secure approval. There is no mechanism existing today
that provides for a Biologics License Application for a "generic" biologic
drug. If the FDA grants marketing approval of a product, this approval will
be limited to those disease states and conditions for which the product has
been demonstrated to be safe and effective. Any product approval also could
include significant restrictions on the use or marketing of a firm's products
or include other conditions, such as the performance of post-approval studies
to monitor known or suspected adverse reactions. Product approvals, if
granted, are subject to potential withdrawal, either voluntarily or
involuntarily through legal process, for failure to comply with regulatory
requirements or upon the occurrence of adverse events following commercial
introduction of the products.
Regulatory Status of Our Products.
----------------------------------
Due to the early nature of our development efforts, we have not yet
confirmed with the FDA its view of the regulatory status of any of our
potential products or which center of the FDA might have primary
responsibility for review of our regulatory submissions. Depending on the
claims made and the FDA's ruling regarding the regulatory status of our
products, they may be designated as devices, biologics or as combination
products. However, we anticipate that regardless of regulatory designation,
we will need to conduct pre-clinical and clinical studies to prove the safety
and effectiveness of all potential products we may attempt to commercially
develop.
To support a regulatory submission, the FDA commonly requires clinical
studies to show safety and effectiveness. While we cannot currently state the
nature of any such studies that the FDA may require due to our early stage of
product research, it is likely any product we attempt to develop will require
extensive and time-consuming clinical studies in order to secure approval.
If we come to a point where we have selected specific products for
commercial development in the United States, once we have sufficient
information to design our pre-clinical and clinical development plans, we will
seek the FDA's input on those plans and, more specifically, the agency's
requirements for approval. However, the FDA may insist upon changes to a
development plan previously agreed to by the FDA if new information shows that
the plan may present safety or effectiveness concerns. The FDA also retains
considerable leverage to require changes in study protocols from the sponsors
of clinical investigations even after an FDA meeting and agreement has been
reached.
A meeting with the FDA to establish the pre-clinical and clinical
protocols to support a pre-market approval application will be a critical step
in the development of most products we anticipate developing. For medical
devices, such a meeting commonly is held at what is known as the pre-
investigational device exemption stage. For a drug or biologic product, such a
meeting commonly is held at what is known as the pre-investigational new drug
stage.
Outside the United States, the ability to market potential products is
contingent upon receiving market application authorizations from the
appropriate regulatory authorities. These foreign regulatory approval
processes may involve differing requirements than those of the FDA, but also
generally include many, if not all, of the risks associated with the FDA
approval process described above, depending on the country involved.
Clinical Studies - General.
---------------------------
Assuming we are able to select a product for commercial development,
depending on the regulatory status of a potential product, we will likely need
to conduct significant additional research before we can file applications for
product approval. Typically, in the drug, device, and biologics industries
there is a high rate of attrition for product candidates in pre-clinical
testing and clinical trials. Success in pre-clinical testing and early
clinical trials does not ensure that later clinical trials will be successful.
For example, a number of companies in the drug industry, including
biotechnology companies, have suffered significant setbacks in advanced
clinical trials, even after promising results in earlier trials and in interim
analyses. In addition, delays or rejections may be encountered based upon
additional government regulation, including any changes in the FDA policy
during the process of clinical trials. In order to conduct clinical
investigations on a new drug product, for example, whether of chemical or
biological origin, that have not been previously approved in the United States
or have not been approved for the labeled indication being sought by an
applicant, the applicant or sponsor must first file an investigational new
drug (IND) application with the FDA. Such application must contain, among
other things, detailed information on the proposed drug product, the
contemplated protocol for conducting the clinical investigation, and any
available safety and effectiveness information on the proposed drug product.
In addition, an Institutional Review Board must approve the protocol to ensure
that it provides adequate protection of the rights of the human subjects to be
included in the clinical study. If the FDA does not object to the IND
application, the study may begin after 30 days from the date the IND
application was filed. The FDA may affirmatively approve the IND application
prior to the expiration of the 30-day period, at which point the clinical
study may begin.
If human clinical trials of a device are required for a pre-market
approval application and if the device presents a significant risk as defined
in the FDA's regulations, the sponsor of the trial (usually the manufacturer
or the distributor of the device) must submit an investigational device
exemption (IDE) filing prior to commencing human clinical trials. The IDE
application must be supported by data, typically including the results of
animal and laboratory testing and include the proposed protocol governing the
clinical study. If the IDE application is approved by the FDA and an
appropriate Institutional Review Board, human clinical trials may begin at a
specific number of investigational sites with a specific number of patients,
as approved by the FDA.
Submission of an IDE application or IND application does not give
assurance that the FDA will not object to the IDE application or IND
application. Furthermore, even if the IDE application or IND application
becomes effective, there can be no assurance that the FDA will determine that
the data derived from the studies support the safety and efficacy of the drug
or device or warrant the continuation of clinical studies. In addition, the
regulations governing INDs and IDEs are extensive and involve numerous other
requirements including that, generally, an IDE application or IND application
supplement must be submitted to and approved by the FDA before a sponsor or
investigator may make a change to the investigational plan that may affect its
scientific soundness or the rights, safety or welfare of human subjects.
Deviation from these regulatory requirements can lead to the FDA refusing to
consider the study in support of a commercial marketing application.
In some circumstances, sponsors of clinical trials are permitted to sell
investigational drugs, biologics, or devices distributed in the course of the
study, provided such compensation does not exceed recovery of the costs of
manufacture, research, development and handling. If we elect to pursue this
option, we will need to seek the FDA's approval if the clinical investigation
is conducted under an investigational new drug or an investigational device
exemption. The FDA routinely does not grant such approvals. Typically, a
showing of special need is required.
Reporting Requirements.
-----------------------
As an issuer whose securities are registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act"), we are required to file
periodic reports with the Securities and Exchange Commission. In addition,
the National Association of Securities Dealers, Inc. (the "NASD"), requires
that all issuers maintaining quotations of their securities on the OTC
Bulletin Board file periodic reports under the Exchange Act, so if we apply
for a trading symbol on the OTC Bulletin Board, the NASD will also require
that we remain current in our reporting obligations.
The public may read and copy any materials that we file with the
Securities and Exchange Commission at the Securities and Exchange Commission's
Public Reference Room at 450 Fifth Street N.W., Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330 or 1-202-942-
8090. The securities and Exchange Commission maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Securities and Exchange
Commission. The address of that site is http://www.sec.gov.
Small Business Issuer.
----------------------
The Securities and Exchange Commission's integrated disclosure system for
small business issuers, which was adopted in Release No. 34-30968 and became
effective as of August 13, 1992, substantially modified the information and
financial requirements of a "Small Business Issuer," defined to be an issuer
that has revenues of less than $25,000,000; is a U.S. or Canadian issuer; is
not an investment company; and if a majority-owned subsidiary, the parent is
also a small business issuer; provided, however, an entity is not a small
business issuer if it has a public float (the aggregate market value of the
issuer's outstanding securities held by non-affiliates) of $25,000,000 or
more.
Sarbanes-Oxley Act.
-------------------
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002. The Sarbanes-Oxley Act imposes a wide variety of new regulatory
requirements on publicly-held companies and their insiders. Many of these
requirements will affect us. For example:
* Our chief executive officer and chief financial officer must
now certify the accuracy of all of our periodic reports that
contain financial statements;
* Our periodic reports must disclose our conclusions about the
effectiveness of our disclosure controls and procedures; and
* We may not make any loan to any director or executive officer and
we may not materially modify any existing loans.
The Sarbanes-Oxley Act has required us to review our current procedures
and policies to determine whether they comply with the Sarbanes-Oxley Act and
the new regulations promulgated thereunder. We will continue to monitor our
compliance with all future regulations that are adopted under the Sarbanes-
Oxley Act and will take whatever actions are necessary to ensure that we are
in compliance.
Estimate of Amount Spent on Research and Development Activities.
----------------------------------------------------------------
We spent $175,902 in research and development costs during the period
from January 1, 2004 through December 31, 2004, through LipidViro-Utah.
Costs and Effects of Compliance with Environmental Laws.
--------------------------------------------------------
None, not applicable.
Total Number of Employees and Number of Full-Time Employees.
------------------------------------------------------------
As a development stage company, our business strategy for research,
product development and operational management relies on maintaining low
overhead by outsourced professional services for legal, accounting, laboratory
personnel including virology, cell biology, chemistry, laboratory equipment
and facilities, equipment manufacturing personnel and facilities, and,
business and scientific consulting.
We have outsourced our clinical research to independent laboratory
facilities in which our primary pre-clinical research is conducted. These
laboratory facilities have available, and include equipment and laboratory
personnel necessary to conduct our anticipated pre-clinical research during
the fiscal year 2005.
We have negotiated a one-year agreement for the use of these research
facilities, associated staff and a research coordinator to conduct these
activities. The new research agreement signed August 19, 2004, allows us to
pay up to $600,000 for supplies, facilities, a laboratory technician and
coordination efforts running through the end of fiscal year 2005; the overall
project design will be oriented toward investigations that may lead to a
potential in vitro, ex vivo or in vivo process, drug or other therapeutic
modality that resides within the proprietary scope of our patented technology.
Whenever possible, we have utilized unpaid consultants to
perform certain functions of our business, including (but not limited to):
business development, product development, strategic planning, corporate
structuring, patent and intellectual property strategies, research, drug
development and, equipment development. No cash, stock or compensation of any
kind has been paid or promised to any unpaid consultant. During the fiscal
year 2005, we expect to continue to utilize unpaid consultants whenever
possible to maintain low overhead expenses. In the event there are no unpaid
consultants available to assists us, we are able to manage all operational
aspects of the Company without the assistance of any such unpaid consultants.
As of December 31, 2004, no board member or officer has received any
cash compensation from us. Once we are better capitalized, we plan on
creating a compensation plan with benefits, intended to assist in attracting
and retaining qualified officers and personnel. We believe the success of our
business will depend, in significant part, on our ability to attract and
retain such personnel.
Offices, Research Facilities.
-----------------------------
We own no real estate and do not lease office space for management and
administrative functions. All administrative functions are conducted from
home-based offices located in the homes of the officers and employees of the
company. We have not had a need to rent office space, and we have no
anticipated need to lease office space for administrative and managerial
functions. We expect to continue the practice of conducting all
administrative and managerial functions from the home-based offices of
officers and employees of ours for fiscal year 2005. There is no expense to
us for these home based offices, other than incidental offices supplies. At
some point, we may require additional office space requiring rental expense,
but we do not anticipate any such need during fiscal year 2005.
We have outsourced our clinical research to independent laboratory
facilities in which our primary pre-clinical research is conducted. These
laboratory facilities have available, and include equipment and laboratory
personnel necessary to conduct our anticipated pre-clinical research during
the fiscal year 2005.
We have negotiated a one-year agreement for the use of these research
facilities, associated staff and a research coordinator to conduct these
activities. The new research agreement signed August 19, 2004 allows the
Company to pay up to $600,000 for supplies, facilities, a laboratory
technician and coordination efforts running through the end of fiscal year
2005; the overall project design will be oriented toward investigations that
may lead to a potential in vitro, ex vivo or in vivo process, drug or other
therapeutic modality that resides within the proprietary scope of our patented
technology.
Item 2. Description of Property.
------------------------
We own no office space, research facilities or real estate; we have no
need or anticipated need to lease office space or any real estate to conduct
our operations in the near future or during fiscal 2005. We have outsourced
our research by contracting independent research facilities to conduct our
research, negating the need to rent or lease research facilities and research
equipment. We conduct all administrative and managerial functions from the
home-based offices of officers and employees of ours. At some point in
the future, we may require additional office space and our own research
facilities that would necessitate rental or lease expenses. We do not
anticipate any such need for these offices or research facilities during
fiscal year 2005. (See the heading "Offices, Research Facilities," above)
Item 3. Legal Proceedings.
------------------
We are not the subject of any pending legal proceedings and, to the
knowledge of management, no proceedings are presently contemplated against us
by any federal, state or local governmental agency.
On December 1, 2004, the Third Judicial District Court of Salt Lake
County, State of Utah, Ordered, Adjudged and Decreed that our Motion for
Partial Summary Judgment be granted against Natt Bottomley, Ross Bottomley,
Jeff Pace, Advocates for Medizone and Does 1-20. Natt Bottomley, along with
other defendants named in this action, engaged in several unlawful activities
in an attempt to harm LipidViro-Utah by violating provisions of a
Non-Disclosure, Non-Compete Agreement, including: defaming LipidViro-Utah,
intentionally interfering with its present and prospective economic relations,
misappropriating trade secrets and engaging in conspiratorial activities to
irreparably harm LipidViro-Utah's business. We were originally granted a TRO
on August 20, 2003, and a Preliminary Injunction against the defendants on
December 9, 2003. Defendant Natt Bottomley was restrained and enjoined from
committing any further violations of the Confidentiality and Non-Compete
Agreement between Natt Bottomley and LipidViro-Utah; Defendants Advocates for
Medizone, Natt Bottomley, Ross Bottomley, Jeff Pace, were restrained and
enjoined from using and/or disclosing any of LipidViro-Utah's confidential or
proprietary information; Defendants were restrained and enjoined from making
any defamatory statements to any persons regarding LipidViro-Utah and/or
persons associated with LipidViro-Utah; Defendants were restrained and
enjoined from taking any actions to interfere with the economic relationships
of LipidViro-Utah; and Defendants were restrained and enjoined from contacting
any of LipidViro-Utah's business associates and/or vendors, including, but not
limited to the National Institute of Health.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of our security holders during the
calendar year covered by this Annual Report or during the two previous
calendar years, however, we did file an Information Statement that was mailed
to our shareholders on July 23, 2003, and filed with the Securities and
Exchange Commission on July 23, 2003, that notified our shareholders that
persons owning a majority of our outstanding voting securities had approved
amendments to our Articles of Incorporation to increase in our authorized
capital and provide that the Board of Directors can change the name of our
Company without stockholder approval. Our Definitive Information Statement is
incorporated herein by reference. See Part III, Item 13.
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Small
Business Purchases of Equity Securities.
----------------------------------------
Market Information.
-------------------
There is no "established trading market" for our shares of common stock.
We are listed on the OTC Bulletin Board of the National Association of
Securities Dealers, Inc. (the "NASD") under the symbol "LVRO"; however,
management does not expect any established trading market to develop unless
and until we have material operations. In any event, no assurance can be
given that any market for our common stock will develop or be maintained. If a
public market ever develops in the future, the sale of "unregistered" and
"restricted" shares of common stock pursuant to Rule 144 of the Securities and
Exchange Commission by members of management or others may have a substantial
adverse impact on any such market. All of these persons have satisfied the
one-year holding period requirement of Rule 144. See the heading "Sales of
Unregistered Securities During the Past Three Years," of this Annual Report.
Set forth below are the high and low closing bid prices for our common
stock for each quarter of 2004. These bid prices were obtained from Pink
Sheets, LLC, formerly known as the "National Quotation Bureau, LLC," All
prices listed herein reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions. Quotations
for our common stock only commenced at the end of the fourth quarter of 2002.
Quarter Ended High Bid Low Bid
------------- -------- -------
January 2, 2004 through
March 31, 2004 $0.30 $0.20
April 1, 2004 through
June 30, 2004 $8.00 $0.25
July 1, 2004 through
September 30, 2004 $7.50 $7.50
October 1, 2004 through
December 31, 2004 $7.50 $7.50
Holders.
--------
The number of record holders of our common stock as of the date of this
Annual Report is approximately 1632. This does not include an indeterminate
number of stockholders who may hold their shares in "street name."
Dividends.
----------
We have not declared any cash dividends with respect to our common
stock and do not intend to declare dividends in the foreseeable future.
There are no material restrictions limiting, or that are likely to limit, our
ability to pay dividends on our common stock.
Securities Authorized For Issuance under Equity Compensation Plans.
-------------------------------------------------------------------
In March 2003, our Board of Directors approved and adopted the "2003
Stock Option/Stock Issuance Plan" with a maximum of 1,500,000 shares of common
stock reserved for issuance under the plan. The Plan provides for both the
direct award of shares and for the grant of options to purchase shares. The
Board of Directors has authorized options to purchase 500,000 common shares to
be granted at a purchase price of $0.01 per share, but to date we have
not granted any options to our employees, officers or directors. Under the
Plan, the Board of Directors shall determine which eligible persons are to
receive Incentive Options, Non-Statutory grants or stock issuances. The Board
of Directors also sets the exercise price for options granted. The option
terms are not to exceed ten years from the option grant date. At December 31,
2004, total awards available to be granted from the Plan amounted to
1,500,000.
Recent Sales of Restricted Securities; Use of Proceeds of Registered
Securities.
-----------
Resales of Restricted Securities.
---------------------------------
For the three years ended December 31, 2004, the following are the only
"restricted securities" of our Company that were sold:
Name Date Number of shares Consideration
---- ---- ---------------- -------------
Jack R. Coombs 6/01 7,200 $0.25
North Beck 9/01 5,000,000 Mining Lease
Various 5/03 25,000 $0.03
Various 5/03 1,915,000 $0.05
Various 6/03 7,875,000 $0.03
Various 6/03 3,750 $0.03
LipidViro-Utah 1/04 213,112 Reorganization
We issued all of these securities to persons who were either
"accredited investors," or "sophisticated investors" who, by reason of
education, business acumen, experience or other factors, were fully capable of
evaluating the risks and merits of an investment in our company; and each had
prior access to all material information about us. We believe that the offer
and sale of these securities were exempt from the registration requirements of
the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506
of Regulation D of the Securities and Exchange Commission and from various
similar state exemptions.
Use of Proceeds of Registered Securities.
-----------------------------------------
There were no proceeds received during the calendar year ended December
31, 2004, from the sale of registered securities.
Purchases of Equity Securities by Us and Affiliated Purchasers.
---------------------------------------------------------------
There were no purchases of our equity securities by us or any affiliated
purchasers during the calendar year ended December 31, 2004.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Overview.
---------
We are a development-stage biotechnology company engaged in developing
drug products, fluid purification processes, and drug production and delivery
systems (DPD System). Utilizing our proprietary DPD System, we are currently
developing two products for commercialization; therapeutic treatments for
Cardiovascular diseases; and processes to inactivate virus, bacteria and
prions producing pathogen-free biological products.
Technology.
-----------
Our technology is based on three components:
* Our proprietary Drug Production and Delivery System (DPD System)
which produces and delivers a precise, measured dose of ozone
(LTV3);
* Our proprietary Gas-Fluid Exchange Device (GFE Device) which
efficiently mixes ozone with a fluid; and
* Our proprietary methods utilizing precise, measured dosages of
ozone in the treatment of disease and purification of bio-fluids.
We have applied for patent protection on all aspects of this technology.
While medicinal ozone therapies have been used for decades in European
countries, the FDA rejected applications to develop ozone as a drug in the
United States. The common reason underlying these repeated failures was poor
measuring and mixing techniques and the inability to produce and deliver ozone
in precise, measured dosages.
Our proprietary ozone Drug Production and Delivery System (DPD System)
solve both of these problems. The LipidViro DPD System produces a precise,
measured dose of ozone, accurate within 2% of the total dose. The technology
behind the DPD system allows for a precise, standardized treatment to be
delivered by any clinician throughout the world. Our GFE Device efficiently
mixes ozone with a fluid by achieving superior surface area contact between
the gas and the fluid; and it produces efficient, controlled, consistent, and
reproducible mixing, allowing for reliable, repeatable ozone delivery,
maximizing treatment results.
We believe our technology provides the first and only process able to deliver
precise, measured doses of ozone that are consistent and reproducible. We
believe this proprietary technology establishes LipidViro as the exclusive
market leader, with the only process capable of achieving regulatory approval
for use of ozone as a drug.
2004 Pre-Clinical Laboratory Research, Product Development.
-----------------------------------------------------------
Equipment Development and Pre-Clinical Research.
------------------------------------------------
During the first fiscal quarter of 2004, we designed, engineered and
constructed the first generation of our proprietary drug manufacturing
equipment utilized in producing our investigational compound, LVT3. We also
engineered and constructed the first ("GEN-1") and second generation ("GEN-2")
of our proprietary LVT3 drug delivery systems utilized in our Viral
Inactivation Platform. After constructing and testing the equipment, we
commenced pre-clinical research of LVT3 with out GEN-2 technology.
On March 29, 2004, we released pre-clinical research results of studies
that utilized LVT3 and our GEN-2 technology. The results demonstrated
substantial inactivation of four different infectious viruses, including: a
DNA and a RNA virus, both with simple lipid envelopes; a DNA virus with a
complex lipid envelope; and, a small, non-enveloped virus. The research was
sponsored by us and conducted by an independent laboratory. The studies were
performed in a variety of biological media chosen to represent potential
candidates for commercial products. We are encouraged by these results, as a
demonstration of antiviral efficacy in four differently structured viruses
suggests a broad spectrum antiviral capacity, with the ability to inactivate
multiple families of viruses structured similarly to those studied. See our
8-K Current Report dated and filed May 10, 2004, with the Securities and
Exchange Commission and which is incorporated herein by reference. See Part
III, Item 13.
Also during the first quarter, we utilized results from hundreds of
studies performed with the GEN-1 and GEN-2 systems to further refine our drug
delivery technology and maximize the efficacy of LVT3. As a result of these
efforts, late in the first quarter, we completed engineering and construction
of our third generation ("GEN-3") drug delivery system.
During the second fiscal quarter of 2004, we initiated performance
assessment of the newly constructed GEN-3 system, performed studies to further
evaluate our Viral Inactivation Platform, initiated a series of toxicity
studies and expanded the scope of our research by initiating prion research
and developing our Cardiovascular Platform.
The viral inactivation studies were designed using infectious virus
prepared in artificially contaminated commercial bovine growth serum
preparations. The studies compared efficiency and performance to our earlier
GEN-2 technology. On May 10, 2004, we announced preliminary results of this
research. The studies were conducted on an RNA-based, nucleo-enveloped
rhabdovirus, and demonstrated substantial inactivation of the measurable virus
in less than half the time required by the older GEN-2 technology. In
addition, the studies demonstrated the new GEN-3 system required less than
half the dosage of LVT3 required by the earlier GEN-2 system to achieve
similar viral inactivation. These improvements in the efficacy of delivering
LVT3 are very encouraging for our Viral Inactivation Platform, but also
translate directly to all of our disease Platforms, which will also utilize
the GEN-3 drug delivery technology.
Biological Fluid Purification.
------------------------------
During the third fiscal quarter 2004, we designed studies to examine the
effect of LVT3 delivered through our GEN-3 technology on a variety of
biological fluids that we are considering for potential commercial
development. These studies include the evaluation of protein structure and
cellular growth potential, both essential parameters in the maintenance of the
integrity of specific commercial products. These studies are ongoing.
Prion Research.
---------------
During the second fiscal quarter of 2004, our contracted
laboratory facilities took part in and passed USDA and state health
inspections and applied for and received USDA licensing to purchase and
transport infectious prion material. This allowed us to initiate the
laboratory research required to investigate the ability of LVT3 to inactivate
prions.
During the third fiscal quarter of 2004, we designed and performed
complex studies which allowed us to identify the presence and quantify amounts
of infectious prion proteins in biological media. The results of these
studies have allowed us to treat infectious prion proteins in artificially
contaminated biological media and determine if we could render it non-
infectious. During the fourth fiscal quarter, we treated bovine serum
preparations spiked with infectious prion in studies designed to evaluate the
ability of our technology to inactivate prions in bovine serum.
On March 3, 2005, we announced pre-clinical research results which
demonstrated the ability to substantially inactivate infectious prion
proteins in bovine serum. Our proprietary technology reduced prion
infectivity in bovine serum below the limits of detection in both cell and
Western blot assays; two gold standards for prion detection. These data were
submitted for presentation at the Meeting of the International Union of
Microbiological Societies, San Francisco, July 2005.
Cardiovascular Platform.
------------------------
During the second fiscal quarter of 2004, we began development and design
of pre-clinical studies associated with our Cardiovascular Platform. During
the third fiscal quarter 2004, we engineered and constructed the fourth
generation of our proprietary drug delivery technology, the "GEN-4H", designed
specifically for use in human trials. The GEN-4H was designed specifically to
develop pilot data from human studies using our proprietary technology and our
investigational compound LVT3. These data will allow us to evaluate LVT3 and
our proprietary drug delivery technology as a commercial therapeutic for the
treatment of cardiovascular diseases.
During the third and fourth fiscal quarters of 2004, we initiated
preliminary in-vitro studies utilizing the new GEN-4H drug delivery system.
Theses early studies are designed to evaluate biocompatibility, toxicity and
performance for human use. These studies are ongoing.
During the fourth fiscal quarter of 2004, we initiated discussions with
foreign clinical investigators in an attempt to initiate human trials to treat
cardiovascular disease using our proprietary technology. These discussions
are ongoing.
Intellectual Property.
----------------------
During fiscal year 2003-2004, we filed for patent protection covering our
LVT3 drug production and delivery technology and, and our GEN-1, GEN-2 GEN-3
and GEN-4H drug delivery devices, and for proprietary applications utilized by
our process.
Viral Purification of Biologicals - Background.
-----------------------------------------------
The risk of viral and prion contamination is a feature common to all
biologicals whose production involves the use of material of animal or human
origin. Contamination of a biological may arise from the source material,
e.g. cell banks of animal origin, human blood, human or animal tissues, or as
adventitious agents introduced by the production process, e.g. the use of
animal sera in cell culture. Other examples of products at risk for viral
contamination include:
* Products derived from in-vitro culture of cell lines of human or
animal origin;
* Products derived from in-vivo culture of cells or from organs or
tissues of human or animal origin; and
* Products derived from blood and fractionates thereof, urine or other
biological fluids of human or animal origin.
Research reports a number of biologicals administered to humans have been
contaminated with viruses and prion. In several instances, the transmission
of disease due to contamination was only identified many years after the
product had been introduced into the market because contamination occurred
prior to recognition and understanding of the infectious agent. The primary
cause of biological derived disease transmissions has been contamination of
the starting or source materials. Viral contamination examples include Yellow
Fever vaccine, which was contaminated by avian leucosis virus by virtue of its
production in naturally infected hen eggs. SV40 was a contaminant of
poliovirus and adenovirus vaccines prepared in the 1950's. These vaccines
were developed on primary cultures of kidney cells obtained from Rhesus
monkeys which naturally harbored a clinically undetectable infection of SV40.
In addition, viruses present in human plasma, e.g., HIV and HCV, have
contaminated blood products while human growth hormone extracted from the
pituitaries of cadavers and transfusion of blood products have been implicated
in the Transmission of the infectious prion protein believed to be responsible
for Creutzfeldt-Jacob disease.
Validation of Viral Inactivation.
---------------------------------
Our pre-clinical research program is designed to investigate the ability
of our technology to inactive different viruses, while also considering
safety, toxicity and the ability to maintain the integrity of the biological
media being studied. Our viral inactivation validation research is designed
to: (i) provide evidence that our process will effectively inactivate viruses
which are either known to contaminate the starting materials, or which could
conceivably do so; and, (ii) provide indirect evidence that our process might
inactivate viruses that are presently unknown or undetectable, or for which
testing is generally not conducted or is unavailable.
Evidence of inactivation is achieved by deliberately adding (spiking) a
virus to a biological similar or identical in composition to a biological
being considered for development as a commercial product, then measuring for
the presence of infectious virus after treatment with our technology. Viral
inactivation validation research will assist in demonstrating the capacity and
efficacy of our proprietary process to inactivate different viruses. It will
also provide an evaluation of the efficacy of our technology to purify certain
biological media from infectious viruses which is a product category we are
evaluating for commercial development.
Virus Research Choices.
-----------------------
The viruses selected for study are chosen first to resemble, as closely
as possible, viruses which would typically contaminate the biological media
being considered, and secondly to represent as wide a range of physico-
chemical properties as possible in order to test the ability of the system to
eliminate viruses in general. Generally, a process used for purifying
biologics of viruses must demonstrate an ability to inactivate a full spectrum
of different viruses, including: retroviruses, small and large, lipid
enveloped DNA and RNA viruses, and small and large DNA and RNA non-enveloped
viruses. Where two similar viruses are available for our viral inactivation
studies, either because of their equal resemblance to possible contaminates,
or similarities in their properties, it is preferred to study the virus
considered to be more resistant. Where available, viruses which can be grown
to a high titer (concentration) will be selected, although this may not always
be possible.
The different viruses chosen to represent the range of viruses we study,
require different assay methodologies to demonstrate viral inactivation. These
infectivity assays may involve plaque formation, detection of other cytopathic
effects such as syncytia or foci formation, end point titrations (e.g. TCID50
assays), detection of virus antigen synthesis or other methods. Generally, the
assay method chosen for different viruses will be selected based on a high
level of relative sensitivity and reproducibility and will be performed in
sufficient replicates and controls to ensure adequate statistical
accuracy of the results.
2004 Twelve Month Operational Plan and 2005 Milestones.
-------------------------------------------------------
During 2004, we accomplished the following milestones set out one year
ago in our operational plan for 2004. Our Operational plan called for further
development of our Drug Production and Delivery System; further development of
our Gas-Fluid Exchange Devices; testing of the combined system, developing
intellectual property covering our technology then identification and
selection of products for commercial development.
We accomplished these objectives by developing the LipidViro DPD System
and four generations of our proprietary Gas-Fluid Exchange Devices. Combined
our proprietary technologies produce and deliver a precise, measured dose of
ozone, suitable for standardized dosing. Testing on multiple, differently
structured viruses demonstrated wide antiviral capacity; studies of infectious
prions proteins demonstrate breakthrough inactivation of prions in sera
products. Our research identified two products suitable for commercial
development, purification of bio-fluids and therapeutic treatments for several
cardiovascular diseases.
2005 Milestones and Operational Plan.
-------------------------------------
Corporate Development: Our corporate operations objectives for 2005
include financing operations, establishing corporate governance sufficient to
apply for NASDAQ SM cap listing, developing and implementing a public
relations strategy to enhance shareholder liquidity and value.
Scientific Agenda: Our scientific agenda for 2005 includes, site
selection and contracting for initial cardiovascular clinical trials; design
and initiate cardiovascular clinical trials to produce pilot data; design and
initiate Phase I cardiovascular clinical trials; and selection of a strategic
partner for sera purification.
Technology Development: Our technology agenda for 2005 includes:
selecting a strategic partner to produce the LipdiViro Drug Production and
Delivery System; and, selecting a strategic partner to manufacture the
LipidViro Gas-Fluid Exchange Device.
Financing: We require immediate financing to fund operations for the
next 12 months, including our described technology and corporate development
and our scientific agenda. During fiscal year 2005 we will attempt to raise
$3-7 million dollars from equity, debt and grants, which we believe will
sufficiently sustain our projected operations through the end of fiscal '06.
We will attempt to raise additional money from the exercise of the Company's
Class A and B warrants during June of 2006. If fully exercised, these
warrants could raise an additional $28 million. We do not have sufficient cash
on hand to finance our current plan of operation. Since inception, debt and
equity financing have funded all operations including research expenses. We
expend and will likely continue to expend substantial funds to complete our
research, development and operational objectives. To fund these operations we
will consider all options available. Consequently, now and on an ongoing
basis we will consider raising capital through collaborative arrangements,
strategic alliances, research grants or equity and debt financings or from
other sources.
Safe Harbor Statement.
----------------------
Statements made in this Form 10-KSB which are not purely historical are
forward-looking statements with respect to the goals, plan objectives,
intentions, expectations, financial condition, results of operations, future
performance and business of our Company, including, without limitation: (i)our
ability to develop products and technologies acceptable to industry; establish
and maintain relationships with licensees and other users of our technology
and products; and raise capital; (ii) statements preceded by, followed by or
that include the words "may", "would", "could", "should", "expects",
"projects", "anticipates", "believes", "estimates", "plans", "intends",
"targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our Company's control) that could
cause actual results to differ materially from those set forth in the forward-
looking statements, including the following, in addition to those contained in
our Company's reports on file with the SEC: general economic or industry
conditions, nationally and/or in the communities in which our Company conducts
business; legislation or regulatory requirements; conditions of the securities
markets; the development of products that may be superior to the products
developed by our Company; competition; changes in the quality or composition
of our Company's products; our ability to develop new products; our ability to
raise capital; changes in accounting principals, policies or guidelines;
financial or political instability; acts of war or terrorism; and other
economic, competitive, governmental, regulatory and technical factors
affecting our Company's operations, products, services and prices.
Accordingly, results actually achieved may differ materially from
expected results in these statements. Forward-looking statements speak only
as of the date they are made. Our Company does not undertake, and
specifically disclaims, any obligation to update any forward-looking
statements to reflect events or circumstances occurring after the date of such
statements.
Item 7. Consolidated Financial Statements.
----------------------------------
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONTENTS
PAGE
Report of registered independent public accounting firm 1
Consolidated Balance Sheet, December 31, 2004 2
Consolidated Statements of Operations, for the
Year ended December 31, 2004 and for the
period from inception on May 6, 2003 through
December 31, 2003 and 2004 3
Consolidated Statement of Stockholders' Equity,
from inception on May 6, 2003 through
December 31, 2004 4
Consolidated Statements of Cash Flows, for the
Year ended December 31, 2004 and for the
period from inception on May 6, 2003 through
December 31, 2003 and 2004 5
Notes to Consolidated Financial Statements 6 - 15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
LIPIDVIRO TECH, INC. AND SUBSIDIARY
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of LipidViro Tech,
Inc. and Subsidiary [a development stage company] at December 31, 2004 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 2004 and for the periods from inception
on May 6, 2003 through December 31, 2003 and 2004. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LipidViro Tech,
Inc. and Subsidiary [a development stage company] as of December 31, 2004 and
the consolidated results of their operations and their cash flows for the year
ended December 31, 2004 and for the periods from inception on May 6, 2003
through December 31, 2003 and 2004, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 10 to the financial
statements, the Company was only recently formed and has not yet been
successful in establishing profitable operations. Further, the Company has
current liabilities in excess of current assets. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 10. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/Pritchett, Siler & Hardy
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
February 14, 2005
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED BALANCE SHEET
ASSETS
December 31,
2004
___________
CURRENT ASSETS:
Cash $ -
___________
Total Current Assets -
PROPERTY AND EQUIPMENT, net 2,471
OTHER ASSETS:
Goodwill 290,318
Other Intangible Assets 29,489
___________
Total Other Assets 319,807
-----------
Total Assets $ 322,278
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank Overdraft $ 1,023
Accounts payable 159,063
Shareholder advances 202,500
-----------
Total Current Liabilities 362,586
-----------
MINORITY INTEREST IN SUBSIDIARY -
COMMITMENTS -
STOCKHOLDERS' EQUITY:
Common stock, no par value,
150,000,000 shares authorized,
10,031,862 shares issued and
outstanding 10,032
Additional paid-in capital 344,352
Deficit accumulated during the
development stage (394,692)
-----------
Total Stockholders' Equity (40,308)
-----------
Total Liabilities and Stockholders' Equity $ 322,278
===========
F-3
The accompanying notes are an integral part of these financial statements.
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENTS OF OPERATIONS
From Inception
For the on May 6,
Year ended 2003 Through
December 31, December 31,
_________________________________
2004 2003 2004
_________________________________
REVENUE $ $ $ -
EXPENSES:
General and administrative 73,098 80,157 153,255
Research and development 175,902 65,558 241,460
---------- ---------- ---------
Total Expenses 249,000 145,715 394,715
---------- ---------- ---------
LOSS FROM OPERATIONS (249,000) (145,715) (394,715)
OTHER INCOME (EXPENSES):
Other Income 23 - 23
---------- ---------- ---------
Total Other Income (Expenses) 23 - 23
---------- ---------- ---------
LOSS BEFORE INCOME TAXES (248,977) (145,715) (394,692)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
---------- ---------- ---------
LOSS BEFORE MINORITY INTEREST
MINORITY INTEREST IN
SUBSIDIARY'S OPERATIONS (248,977) (145,715) (394,692)
MINORITY INTEREST IN
SUBSIDIARY'S OPERATIONS - - -
---------- ---------- ---------
NET LOSS $ (248,977)$ (145,715) $(394,692)
========== ========== =========
LOSS PER COMMON SHARE $ (.02)$ (.02) $ (.04)
========== ========== =========
F-4
The accompanying notes are an integral part of these financial statements.
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON MAY 6, 2003
THROUGH DECEMBER 31, 2004
Deficit
Accumulated
Common Stock Additional During the
_______________________ Paid-in Development
Shares Amount Capital Stage
BALANCE, May 6, 2003 - $ - $ - $ -
Issuance of 25,000 shares of
common stock for payment of
organization costs of $750, or
$.03 per share, May 2003 25,000 25 725 -
Issuance of 1,915,000 units, each
consisting of one share of
common stock, one class A
warrant and one class B warrant,
for cash of $95,960, or
approximately $.05 per unit,
May 2003 1,915,000 1,915 94,045 -
Issuance of 7,875,000 shares of
Common stock for cash of
$236,250, or $.03 per share,
June 2003 7,875,000 7,875 228,375 -
Issuance of 3,750 shares of
common stock for services
rendered valued at $113, or
$.03 per share, June 2003 3,750 4 109 -
Net loss for the period ended
December 31, 2003 - - - (145,715)
----------- ----------- -------- -----------
BALANCE, December 31, 2003 9,818,750 $ 9,819 $323,254 $ (145,715)
Issuance of 213,112 shares of
common stock for the purchase
minority interest at $21,311,
or $.10 per share, January
2004 213,112 213 21,098 -
Net loss for the period ended
December 31, 2004 - - - (248,977)
----------- ----------- -------- -----------
BALANCE, December 31, 2004 10,031,862 $ 10,032 $344,352 $ (394,692)
=========== =========== ======== ===========
F-5
The accompanying notes are an integral part of these financial statements.
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENTS OF CASH FLOWS
From Inception
For the on May 6,
Year ended 2003 Through
December 31, December 31,
___________________________
2004 2003 2004
__________________________________________
Cash Flows from Operating Activities:
Net loss $ (248,977) $ (145,715) $ (394,692)
Adjustments to reconcile net
loss to net cash used
by operating activities:
Depreciation and amortization
expense 1,119 185 1,304
Non-cash expenses paid by
issuance of common stock 750 750
Non-cash services paid by
issuance of common stock 113 113
Changes in assets and liabilities:
(Increase) in prepaid expense 3,919 (3,919)
Increase in bank overdraft 1,023 1,023
Increase in accounts payable 132,677 26,287 159,064
---------- ---------- ----------
Net Cash (Used) by
Operating Activities (110,239) (122,199) (232,438)
---------- ---------- ----------
Cash Flows from Investing Activities:
Payments for property and equipment (960) (2,303) (3,263)
Payments for intangible assets (30,003) (30,003)
Payments for goodwill (269,006) (269,006)
---------- ---------- ----------
Net Cash (Used) by
Investing Activities (30,963) (271,309) (302,272)
---------- ---------- ----------
Cash Flows from Financing Activities:
Proceeds from shareholder advances 137,500 65,000 202,500
Proceeds from issuance of common
stock 293,700 293,700
Proceeds from sale of warrants 38,510 38,510
---------- ----------- -----------
Net Cash Provided by
Financing Activities 137,500 397,210 534,710
Net Increase (Decrease) in Cash (3,702) 3,702 -
Cash at Beginning of Period 3,702 - -
---------- ----------- -----------
Cash at End of Period $ - $ 3,702 $ -
========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes - - $ -
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the period from inception on May 6, 2003 through December 31, 2004:
In January 2004, the Company issued 213,112 shares of common stock as
part of a downstream merger [See Note 2].
In June 2003, the Company issued 3,750 shares of common stock for
services rendered valued at $113.
In May 2003, the Company issued 25,000 shares of common stock as
repayment of organization costs of $750.
F-6
The accompanying notes are an integral part of these financial statements.
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - LipidViro Tech, Inc. ("Parent") was organized under the laws
of the State of California on October 19, 1954 as Anticline Uranium, Inc.
In October 2001, Parent changed its domicile from California to Nevada by
merging with and into a wholly owned subsidiary with the same name and the
Nevada entity being the surviving entity. In January 2004, Parent changed
its name to LipidViro Tech, Inc. On June 24, 2003, Subsidiary acquired
95.9% of the outstanding stock of Parent pursuant to a Share Purchase
Agreement. The agreement called for Subsidiary to pay $65,718 to the
former shareholders of Parent for 5,000,000 shares of Parent's common stock
wherein Parent became a 95.9% owned subsidiary of Subsidiary [See Note 3].
On January 14, 2004, Parent issued 9,818,750 shares of its common stock for
all 9,818,750 outstanding shares of Subsidiary's common stock wherein
Subsidiary became a wholly owned subsidiary of Parent in a transaction
which has been accounted for as a downstream merger [See Note 2].
Accordingly, the equity transactions have been restated to reflect the
recapitalization of Subsidiary and the operations of Parent prior to June
24, 2003 have been eliminated. The financial statements reflect the
operations of Subsidiary from its inception.
Lipidviro Tech Inc. ("Subsidiary") was organized under the laws of the
State of Utah on May 6, 2003.
LipidViro Tech, Inc. and Subsidiary ("the Company") plans to research and
market substances and compounds for antiviral and antibacterial purposes.
The Company has not generated any revenues from their planned principal
operations and is considered a development stage company as defined in
Statement of Financial Accounting Standards No. 7. The Company has, at the
present time, not paid any dividends and any dividends that may be paid in
the future will depend upon the financial requirements of the Company and
other relevant factors.
Consolidation - The consolidated financial statements include the accounts
of Parent and Parent's 95.9% owned Subsidiary. All significant
intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents - The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
Property and Equipment - Property and equipment are stated at cost.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized upon being placed in
service. Expenditures for maintenance and repairs are charged to expense
as incurred. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets of five years. In accordance with
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", the Company periodically
reviews their property and equipment for impairment.
Website Costs - The Company has adopted the provisions of Emerging Issues
Task Force 00-2, "Accounting for Web Site Development Costs." Costs
incurred in the planning stage of a website are expensed as research and
development while costs incurred in the development stage are capitalized
and amortized over the life of the asset, estimated to be five years. As
of December 31, 2004 and 2003, the Company had capitalized a total of
$2,830 and $1,870 of website costs which are included in property and
equipment. The Company did not incur any planning costs and did not record
any research and development costs for the period from inception on May 6,
2003 through December 31, 2004.
F-7
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Intangible Assets - The Company accounts for their intangible assets in
accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 establishes three
classifications for intangible assets including definite-life intangible
assets, indefinite-life intangible assets and goodwill and requires
different accounting treatment and disclosures for each classification. In
accordance with SFAS No. 142, the Company periodically reviews their
intangible assets for impairment. No impairment was recorded during the
period from inception on May 6, 2003 through December 31, 2004.
Research and Development - Research and development costs are expensed as
incurred. The Company expensed $175,902 and $65,558 in research and
development costs during the year ended December 31, 2004 and the period
from inception on May 6, 2003 through December 31, 2003, respectively.
Minority Interest - From June 24, 2003 through January 14, 2004, Subsidiary
owned 95.9% of Parent. The net loss of Parent applicable to the non-
controlling minority interest was not allocated to the minority interests
as there was no obligation of the non-controlling minority interests to
share in such losses. On January 14, 2004, Subsidiary acquired the
minority interest in a downstream merger [See Note 2].
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" [See Note 11].
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reported period. Actual results could differ from those estimated.
Recently Enacted Accounting Standards - In January 2003, the Emerging
Issues Task Force ("EITF") issued EITF Issue No. 00-21, Accounting for
Revenue Arrangements with Multiple Deliverables. This consensus addresses
certain aspects of accounting by a vendor for arrangements under which it
will perform multiple revenue-generating activities, specifically, how to
determine whether an arrangement involving multiple deliverables contains
more than one unit of accounting. EITF Issue No. 00-21 is effective for
revenue arrangements entered into in fiscal periods beginning after June
15, 2003, or entities may elect to report the change in accounting as a
cumulative-effect adjustment. The adoption of EITF Issue No. 00-21 did not
have a material impact on the Company's financial statements.
In January 2003, the FASB issued Interpretation ("FIN") No. 46,
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN
No. 46 requires a variable interest entity, as defined, to be consolidated
by a company if that company is subject to a majority of the risk of loss
from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns. FIN No. 46 is effective for
reporting periods ending after
F-11
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Recently Enacted Accounting Standards (continued)
December 15, 2003. The adoption of FIN No. 46 did not have an impact on
the Company's financial statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of SFAS No. 149 will not have an impact on the
Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 changes the accounting guidance for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine"
equity by now requiring those instruments to be reported as liabilities.
SFAS No. 150 also requires disclosure relating to the terms of those
instruments and settlement alternatives. SFAS No. 150 is generally
effective for all financial instruments entered into or modified after May
31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No. 150 did not
have an impact on the Company's financial statements.
In December 2003, the SEC issued SAB No. 104. SAB No. 104 revises or
rescinds portions of the interpretative guidance included in Topic 13 of
the codification of staff accounting bulletins in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. It also rescinds the
Revenue Recognition in Financial Statements Frequently Asked Questions and
Answers document issued in conjunction with Topic 13. Selected portions of
that document have been incorporated into Topic 13. The adoption of SAB
No. 104 in December 2003 did not have an impact on the Company's financial
position, results of operations or cash flows.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs. This
statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing,
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). In addition, this
Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. The adoption of SFAS No. 151 did not have an impact on the
Company's consolidated financial statements.
In December 2004, the FASB issues SFAS No. 152, Accounting for Real Estate
Time-Sharing Transactions. This Statement amends FASB Statement No. 66,
Accounting for Sales of Real Estate, to reference the financial accounting
and reporting guidance for real estate time-sharing transactions that is
provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
Estate Time-Sharing Transactions. This Statement also amends FASB
Statement No. 67, Accounting for Costs and Initial Rental Operations of
Real Estate Projects, to state that the
F-12
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Recently Enacted Accounting Standards (continued)
guidance for (a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing transactions.
The accounting for those operations and costs is subject to the guidance in
SOP 04-2. This Statement is effective for financial statements for fiscal
years beginning after June 15, 2005. The adoption of SFAS No. 152 did not
have an impact on the Company's consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets. The guidance in APB Opinion No. 29, Accounting for Nonmonetary
Transactions, is based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged.
This Statement amends Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly as a result
of the exchange. The adoption of SFAS No. 153 did not have an impact on the
Company's consolidated financial statements.
In December 2004, the FASB issued SFAS No. 123, Summary of Statement No.
123 (revised 2004). This Statement is a revision of FASB Statement No.
123, Accounting for Stock-Based Compensation. This Statement supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and its
related implementation guidance. This Statement establishes standards for
the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This Statement
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. This Statement does
not change the accounting guidance for share-based payment transactions
with parties other than employees provided in Statement 123 as originally
issued and EITF Issue No. 96-18, Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services. The Company is currently evaluating the
provisions of SFAS 123 and the impact that it will have on its share
based employee compensation programs.
Restatement - The financial statements have been restated for all periods
presented to reflect the recapitalization of Subsidiary [See Note 2] and to
reflect a 1-for-100 reverse stock split that Parent effected on October 4,
2001 and a 4-for-1 forward stock split that Parent effected on December 31,
2001 [See Note 7].
F-12
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - DOWNSTREAM MERGER
On January 14, 2004, Subsidiary acquired the minority interests in Parent and
Subsidiary was reorganized as a subsidiary of Parent in a transaction in which
Parent issued 9,818,750 shares of its common stock in exchange for all
9,818,750 outstanding shares of Subsidiary's common stock. Accordingly, the
equity transactions have been restated to reflect the recapitalization of
Subsidiary. The Company recorded goodwill of $21,311 as a result of the
downstream merger. The financial statements reflect the operations of
Subsidiary from its inception. As part of the downstream merger, Parent
issued 1,915,000 Class A warrants and 1,915,000 Class B warrants to replace
similar warrants of Subsidiary. Parent also cancelled 5,000,000 shares of its
common stock which had previously been owned by Subsidiary.
NOTE 3 - ACQUISITION OF 95.9% OF LIPIDVIRO TECH, INC.
On June 24, 2003, Subsidiary acquired 95.9% of the outstanding stock of Parent
pursuant to a Share Purchase Agreement. The agreement called for Subsidiary
to pay $65,718 to the former shareholders of Parent for 5,000,000 shares of
Parent's common stock wherein Parent became a 95.9% owned subsidiary of
Subsidiary. The agreement also called for Subsidiary to advance an additional
$203,282 to pay costs associated with the acquisition and to reduce the
liabilities of Parent. The acquisition closed June 24, 2003 and has been
accounted for as a purchase of Parent. The Company recorded goodwill of
$290,317 as a result of the acquisition. The financial statements reflect the
operations of Parent from June 24, 2003.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
December 31, December 31,
2004 2003
___________ ___________
Office equipment $ 433 $ 433
Website 2,828 1,870
___________ ___________
3,261 2,303
Less: accumulated depreciation (790) (185)
___________ ___________
Net property and equipment $ 2,471 $ 2,118
___________ ___________
Depreciation expense for the years ended December 31, 2004 and 2003 was $605
and $185, respectively.
F-13
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - DEFINITE-LIFE INTANGIBLE ASSETS
Definite-life intangible assets consist of the following at:
December 31, December 31,
2004 2003
___________ ___________
Pending Patents $ 29,233 $ -
Patent applications in process 770 -
----------- -----------
30,003 -
Less: Accumulated amortization (514) -
___________ ___________
Net Definite-life Intangible Assets $ 29,489 $ -
___________ ___________
The Company's definite-life intangible assets are amortized, upon being placed
in service, over the estimated useful lives of the assets of 20 years with no
residual value. Amortization expense for the year ended December 31, 2004 and
for the period from inception on May 6, 2003 through December 31, 2003 was
$514 and $0, respectively. The Company estimates that their amortization
expense for each of the next five years will be approximately $1,000 per year.
NOTE 6 - GOODWILL
The Company has no indefinite-life intangible assets. The following is a
summary of the transactions affecting the Company's goodwill.
December 31,
________________________
2004 2003
___________ ___________
Goodwill at beginning of period $ 269,006 $ -
Goodwill from the acquisition of 95.9% of Parent - 269,006
Goodwill from the acquisition of the minority
interests in Parent 21,311 -
___________ ___________
Goodwill at end of period $ 290,317 $ 269,006
___________ ___________
F-14
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - CAPITAL STOCK
Common Stock - The Company has authorized 150,000,000 shares of common stock
with a par value of $.001.
In January 2004, the Company issued 213,112 shares of their previously
authorized but unissued common stock to the former shareholders of Subsidiary
as part of a downstream merger [See Note 2].
In June 2003, the Company issued 3,750 shares of their previously authorized
but unissued common stock to an officer of the Company for services rendered
valued at $113, or $.03 per share.
In June 2003, the Company issued 7,875,000 shares of their previously
authorized but unissued common stock for cash of $236,250, or .03 per share.
In May 2003, the Company issued 1,915,000 units. Each unit consisted of one
share of the Company's previously authorized but unissued common stock, one
Class A warrant and one Class B warrant. The units were issued for cash of
$95,960, or approximately $.05 per unit.
In May 2003, in connection with their organization, the Company issued 25,000
shares of their previously authorized but unissued common stock to an officer
of the Company as repayment of organization costs of $750, or $.03 per share.
Stock Splits - On December 31, 2001, Parent effected a 4-for-1 forward stock
split. On October 4, 2001, Parent effected a 1-for-100 reverse stock split.
The financial statements for all periods presented have been restated to
reflect these stock splits.
Class A Warrants - In May 2003, the Company issued 1,915,000 Class A Warrants
for cash of $19,255, or approximately $.01 per warrant, as part of a private
placement offering. The warrants vested immediately and are exercisable at
$5.00 per share. The warrants were originally exercisable for two years. In
August 2003, the Company changed the exercise period so the warrants are only
exercisable during June 2006. At December 31, 2004, none of these warrants
had been exercised, forfeited or cancelled.
Class B Warrants - In May 2003, the Company issued 1,915,000 Class B Warrants
for cash of $19,255, or approximately $.01 per warrant, as part of a private
placement offering. The warrants vested immediately and are exercisable at
$10.00 per share. The warrants were originally exercisable for two years. In
August 2003, the Company changed the exercise period so the warrants are only
exercisable during June 2006. At December 31, 2004, none of these warrants
had been exercised, forfeited or cancelled.
Stock Option Plan - In March 2003, the Board of Directors of Parent approved
and adopted the "2003 Stock Option/Stock Issuance Plan" ("the Plan") with a
maximum of 1,500,000 shares of common stock reserved for issuance under the
Plan. The Plan provides for both the direct award of shares and for the grant
of options to purchase shares. The Board of Directors has authorized options
to purchase 500,000 common shares to be granted at a purchase price of $0.01
per share, but to date the Company has not granted any options to their
employees, officers or directors. Under the Plan, the Board of Directors
shall determine which eligible persons are to receive Incentive Options,
Non-Statutory grants or stock issuances. The Board of Directors also sets the
exercise price for options granted. The option terms are not to exceed ten
years from the
F-15
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Option Plan (continued)
option grant date. At December 31, 2004, total awards available to be granted
from the Plan amounted to 1,500,000.
NOTE 8 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
No. 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards.
The Company has available at December 31, 2004 unused operating loss
carryforwards of approximately $480,000 which may be applied against future
taxable income and which expire in various years through 2024. Due to
substantial changes in the Company's ownership, there will be an annual
limitation on the amount of net operating loss carryforwards which can be
utilized.
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the deferred tax assets, the Company has established a
valuation allowance equal to the tax effect of the loss carryforwards,
therefore, no deferred tax asset has been recognized. The net deferred tax
assets, which consist of difference in book and tax basis of fixed assets and
net operating losses, are approximately $88,350 and $38,400 as of December 31,
2004 and December 31, 2003, respectively, with an offsetting valuation
allowance of the same amount, resulting in a change in the valuation allowance
of approximately $49,950 during the year ended December 31, 2004.
NOTE 9 - RELATED PARTY TRANSACTIONS
Management Compensation - The Company has not paid any cash compensation to
any officer or director of the Company. However, in June 2003, the Company
issued 3,750 shares of common stock to an officer of the Company for services
rendered valued at $113 [See Note 7].
Office Space - The Company has not had a need to rent office space. A
shareholder (former officer) of the Company is allowing the Company to use her
mailing address, as needed, at no expense to the Company.
Stock Issuance - In May 2003, in connection with their organization, the
Company issued 25,000 shares of their previously authorized but unissued
common stock to an officer of the Company as repayment of organization costs
of $750, or $.03 per share.
Shareholder Advances - During the year ended December 31, 2004, a shareholder
of the Company advanced $137,500 to the Company. At December 31, 2004, the
Company owes a total of $202,500 to the shareholder. The advances bear no
interest and are due December 31, 2005.
F-15
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America,
which contemplate continuation of the Company as a going concern. However,
the Company was only recently formed and has not yet been successful in
establishing profitable operations. Further, the Company has current
liabilities in excess of current assets. These factors raise substantial
doubt about the ability of the Company to continue as a going concern. In
this regard, management is proposing to raise any necessary additional funds
not provided by operations through loans or through additional sales of their
common stock. There is no assurance that the Company will be successful in
raising this additional capital or in achieving profitable operations. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
NOTE 11 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share:
From Inception
For the on May 6,
Year ended 2003 Through
December 31, December 31,
_________________________________
2004 2003 2004
_________ _________ _________
Loss from continuing operations
available to common
shareholders (numerator) $(248,977) $(394,692) $(145,715)
Weighted average number of
common shares outstanding
used in loss per share for the
period (denominator) 10,023,710 9,435,941 8,535,842
At December 31, 2004, the Company had 1,915,000 Class A warrants and 1,915,000
Class B warrants outstanding which were not used in the computation of
dilutive loss per share because their effect would be anti-dilutive. Dilutive
loss per share was not presented, as the Company had no common stock
equivalent shares for all periods presented that would effect the computation
of diluted loss per share.
F-16
LIPIDVIRO TECH, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Agreements - In August 2004, the Company signed a one-year agreement for the
use of a research facility and staff to conduct research on behalf of the
Company and to have a researcher coordinate the activities. The Company
agreed to pay up to $600,000 for supplies, facilities, a laboratory technician
and coordination efforts. During the year ended December 31, 2004, the
Company paid $5,000 under this agreement.
In July 2004, the Company signed a six-month agreement for a researcher to
conduct research on behalf of the Company. The Company agreed to pay $15,000
for the services of the researcher. During the year ended December 31, 2004
the Company paid $10,000 under this agreement.
In October 2003, the Company signed one-year agreements for the use of a
research facility and staff to conduct research on behalf of the Company and
to have a researcher coordinate the activities. The Company agreed to pay up
to $76,325 for supplies, facilities, a laboratory technician and coordination
efforts. The costs incurred under this agreement totaled $75,000. During the
year ended December 31, 2004 and the period from inception on May 6, 2003
through December 31, 2003, respectively, the Company paid $52,000 and $23,000
under these agreements.
Possible Claims Related to Previously Leased Mining Property - In August 2001,
Parent obtained 96.5% of the rights to certain mining claims in the Tintic
Mining District of Juab County, Utah under the terms of a 5-year Mining Lease.
Under the terms of the lease, Parent was obligated to spend $15,000 over the
term of the lease for exploration, mining, development or similar costs for
the benefit of the property subject to the lease. Parent was also obligated
to pay a 3.5% net smelter royalty on all mineral-bearing ores sold. The lease
also gave a credit to Parent for the first $30,000 of net smelter royalties.
The lessor also agreed to indemnify and hold Parent harmless from any
Environmental Protection Agency claim or claims by a similar state agency
based solely on past mining contaminations or other environmental violations
or damage. In June 2003, Parent paid $3,459 to cancel the Mining Lease. The
Company's management believes that the Company would not be responsible for
any future claims against the property which Parent previously leased, but the
possibility exists that claims may arise against the property and the Company
may be named in such claims based on the previous leasing arrangements. The
Company's management believes that the Company would be successful in
defending against any such claims that may arise. No accrual for possible
losses or settlements has been recorded in the accompanying financial
statements.
F-17
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------
None; not applicable.
Item 8(a). Controls and Procedures.
------------------------
As of the end of the period covered by this Annual Report, we carried out
an evaluation, under the supervision and with the participation of our
President and Chief Operating Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this
evaluation, our President and Chief Operating Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic Securities and
Exchange Commission reports. It should be noted that the design of any system
of controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless
of how remote. In addition, we reviewed our internal controls, and there have
been no significant changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.
Item 8(b) Other Information.
----------------------------
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Identification of Directors and Executive Officers.
---------------------------------------------------
The following table sets forth the names of all of our current directors
and executive officers for the calendar year ended December 31, 2004, and to
the date hereof. These persons will serve until the next annual meeting of
the stockholders or until their successors are elected or appointed and
qualified, or their prior resignation or termination.
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ---- ----------- ---------------
Kenneth P. Hamik President and 6/24/2003 *
Director 6/24/2003 *
Kristy Hamik COO and 6/24/2003 1/19/2004
Director 6/24/2003 1/19/2004
Patrick A. Seymour COO and 1/19/2004 4/5/2004
Director 1/19/2004 4/5/2004
* Still are serving in these positions.
Directors are elected by our stockholders to serve until the next
annual meeting of our stockholders or until their successors have been elected
and have been duly qualified. Officers are appointed to serve until the
annual meeting of our Board of Directors following the next annual meeting of
our stockholders and until their successors have been elected and have
qualified.
Business Experience.
--------------------
Kenneth P. Hamik, President, CEO and a director. Mr. Hamik is 46 years
of age. Kenneth P. Hamik has over 20 years of management and consulting
experience across a wide range of markets: healthcare, media/entertainment,
consumer products, Internet, education, financial services,
telecommunications, energy, electronics/computers, air travel and auto
manufacturing. He was featured in the January 2000 cover article of Consumer
Reports on future product trends, in an MSN article on future career paths,
and recently headed a team to manage Charles Schwab electronic relationship
management strategies. Before joining LipidViro, he served as Vice President
of Marketing & Strategy at Triple Aught, Inc., a Berkeley, California based
energy technology & engineering start-up company. Ken completed his Masters
of Science work at the University of Houston's Studies of the Future program.
He also has a B.S. Degree from the University of Nebraska.
Significant Employees.
----------------------
We have no employees who are not executive officers, but who are expected
to make a significant contribution to its business.
Family Relationships.
---------------------
None; not applicable.
Involvement in Certain Legal Proceedings.
-----------------------------------------
During the past five years, no director, person nominated to become a
director, executive officer, promoter or control person of our Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
On June 26, 2003, LipidViro-Utah filed a Form 3, Initial Statement of
Beneficial Ownership of Securities with the Securities and Exchange Commission
regarding their acquisition of 5,000,000 of our shares.
On April 20, 2004, LipidViro filed a Form 4, Statement of Changes in
Beneficial Ownership of Securities with the Securities and Exchange Commission
regarding the return to treasury of 5,000,000 shares after approval at a
Fairness Hearing January 12, 2004.
Audit Committee.
----------------
We have do not have an Audit Committee due to the fact that we are a
development stage company with limited operations that has generated no
revenues from operations; however, when operations require, we will designate
an Audit Committee.
Code of Ethics.
---------------
We have adopted a Code of Ethics for our President and Chief Executive
Officer that was attached to our 2003 Annual Report on Form 10-KSB as exhibit
14. See Part III Item 13.
Item 10. Executive Compensation.
-----------------------
In March, 2003, the Board of Directors approved and adopted the "2003
Stock Option/Stock Issuance Plan" ("the Plan") with a maximum of 1,500,000
shares of common stock reserved for issuance under the Plan. The Plan
provides for both the direct award of shares and for the grant of options to
purchase shares. The Board of Directors has authorized options to purchase
500,000 common shares to be granted at a purchase price of $0.01 per share,
but to date our Company has not granted any options to its employees, officers
or directors. Under the Plan, the Board of Directors shall determine which
eligible persons are to receive Incentive Options, Non-Statutory grants or
stock issuances. The Board of Directors also sets the exercise price for
options granted. The option terms are not to exceed ten years from the option
grant date. At December 31, 2004, total awards available to be granted from
the Plan amounted to 1,500,000.
Options/SAR Grants in Last Fiscal Year
--------------------------------------
Individual Grants
-----------------
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
---- ----------- ----------- ------------ ----
None -0- -0- -0- -0-
Compensation of Directors.
--------------------------
There are no standard arrangements pursuant to which our directors are
compensated for any services provided as a director. No additional amounts
are payable to our directors for committee participation or special
assignments.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
-------------
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from us, with respect to any director or
executive officer of ours that would in any way result in payments to any such
person because of his or her resignation, retirement or other termination of
employment with us or any subsidiary or any change in control of our Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
----------------------------
Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth the share holdings of those persons who
beneficially own more than five percent of our common stock as of the date of
December 31, 2004:
Number of Shares Percentage
Name and Address Beneficially Owned of Class
---------------- ------------------ --------
Lombard, Inc. 7,875,000 78.5%
Blackfriars Limited 568,000 5.7%
Security Ownership of Management.
---------------------------------
The following table sets forth the shareholdings of our directors and
executive officers as of the date of this Report:
Number of Percentage of
Name and Address Shares Beneficially Owned of Class
---------------- ------------------------- --------
Kenneth P. Hamik 3,750 *
All Directors and Executive
Officers as a group 3,750 *
* Represents less than one percent.
Changes in Control.
-------------------
To the knowledge of our management, there are no present arrangements or
pledges of our securities which may result in a change in control of our
Company.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
Transactions with Management and Others.
----------------------------------------
Except as indicated below, during the calendar years ended December 31,
2004 and 2003, and since then, there were no material transactions, series of
similar transactions, currently proposed transactions, or series of similar
transactions, to which we or any of our subsidiaries was or is to be a party,
in which the amount involved exceeded $60,000 and in which any director or
executive officer, or any security holder who is known to us to own of record
or beneficially more than five percent of our common stock, or any member of
the immediate family of any of the foregoing persons, had a material interest.
During the year ended December 31, 2004, a shareholder of our Company
advanced $137,500 to us. At December 31, 2004, we owed a total of $202,500 to
that shareholder. The advances bear no interest and are due December 31,
2005.
Certain Business Relationships.
-------------------------------
Except as indicated under the heading "Transactions with Management and
Others," during the calendar years ended December 31, 2004 and 2003, and since
then, there were no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
we or any of our subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any director or executive officer, or
any security holder who is known to us to own of record or beneficially more
than five percent of our common stock, or any member of the immediate family
of any of the foregoing persons, had a material interest.
Indebtedness of Management.
---------------------------
Except as indicated under the heading "Transactions with Management and
Others," during the calendar years ended December 31, 2004 and 2003, there
were no material transactions, series of similar transactions, currently
proposed transactions, or series of similar transactions, to which we or any
of our subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any director or executive officer, or any
security holder who is known to us to own of record or beneficially more than
five percent of our common stock, or any member of the immediate family of any
of the foregoing persons, had a material interest.
Parents of the Issuer.
----------------------
None; not applicable.
Transactions with Promoters.
----------------------------
Except as indicated under the heading "Transactions with Management and
Others," during the calendar years ended December 31, 2004 and 2003, there
were no material transactions, series of similar transactions, currently
proposed transactions, or series of similar transactions, to which we or any
of our subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any promoter or founder of us, or any member of
the immediate family of any of the foregoing persons, had a material interest.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
Reports on Form 8-K.*
---------------------
8-KA-1 Current Report dated August 19, 2003, regarding the Fairness Hearing on
the Reorganization Agreement with LipidViro-Utah, filed with the Securities
and Exchange Commission on March 26, 2004.*
8-K Current Report dated March 30, 2004, regarding a press release on results
of pre-clinical research.*
8-K Current Report dated May 10, 2004, Introducing the Company's new GEN-3
technology, and reports enhanced viral inactivation utilizing the new GEN-3
technology.*
8-K Current Report dated February 1, 2005, regarding a Press Release and
Investor Presentation.*
8-K Current Report dated March 3, 2005, regarding a Press Release.*
Exhibits.*
----------
Exhibit
Number Description
------ -----------
31.1 302 Certification of Kenneth P. Hamik
32 906 Certification
10-KSB Annual Report for the year ended December 31, 2004.*
Definitive Information Statement filed July 23, 2003.*
* The 8-K Current Reports referenced above under this Item, the
10-KSB Annual Report for the year ended December 31, 2004, are
incorporated herein by reference in Part I, Item 1, and the
Definitive Information Statement is incorporated herein by
reference in Part I, Item 4.
Item 14. Principal Accountant Fees and Services.
---------------------------------------
The following is a summary of the fees billed to LipidViro by its
principal accountants during the calendar years ended December 31, 2004, and
December 31, 2003:
Fee category 2004 2003
------------ ---- ----
Audit fees $11,629 $6,486
Audit-related fees $ 0 $ 0
Tax fees $ 1,562 $ 110
All other fees $ 0 $ 0
Total fees $13,191 $6,596
Audit fees. Consists of fees for professional services rendered by our
principal accountants for the audit of our annual financial statements and the
review of financial statements included in our Forms 10-QSB or services that
are normally provided by our principal accountants in connection with
statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees for assurance and related services
by our principal accountants that are reasonably related to the performance of
the audit or review of our financial statements and are not reported under
"Audit fees."
Tax fees. Consists of fees for professional services rendered by our
principal accountants for tax compliance, tax advice and tax planning.
All other fees. Consists of fees for products and services provided by
our principal accountants, other than the services reported under "Audit
fees," "Audit-related fees" and "Tax fees" above.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIPIDVIRO TECH, INC.
Date: 4/14/05 By/s/Kenneth P. Hamik
------------- -------------------
Kenneth P. Hamik
President, Chief Executive Office and
Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:
Date: 4/14/05 By/s/Kenneth P. Hamik
------------- ----------------------
Kenneth P. Hamik
President, Chief Executive
Officer and Director