Nutra Pharma Corp. Form 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
( ) TRANSITION REPORT PURSUANT OF SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period _________ to____________
Commission file number: 000-32141
NUTRA PHARMA CORP.
(Exact name of registrant as specified in its charter)
California 91-2021600
(State or other jurisdiction of (IRS Employer I.D. Number)
incorporation or organization)
1829 Corporate Drive, Boynton Beach, FL 33426
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (954) 509-0911
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
There were 64,567,182 shares of common stock outstanding as of May 24, 2005.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
NUTRA PHARMA CORP.
(A Development Stage Company)
Consolidated Balance Sheet - Unaudited
March 31, 2005
ASSETS
Current assets:
Cash $ 18,377
-------------
Property and equipment, net
60,486
-------------
Other assets
Investments at cost 185,000
Other 17,041
-------------
202,041
-------------
$ 280,904
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 72,940
Accrued expenses 259,435
Convertible loans 206,750
-------------
Total current liabilities 539,125
-------------
Stockholders' deficit:
Common stock, $0.001 par value,
2,000,000,000 shares authorized,
60,854,682 shares outstanding 60,855
Additional paid-in capital 12,715,149
Deficit accumulated during the
development stage (13,034,225)
-------------
(258,221)
-------------
$ 280,904
=============
----------------------------------------------------------------------
See the accompanying notes to the consolidated financial statements.
NUTRA PHARMA CORP.
(A Development Stage Company)
Consolidated Statements of Operations - Unaudited
For the
Period From
February 1,
2000
(Inception)
Through
Three Months Ended March 31, March 31,
---------------------------- ------------
2004 2005 2005
----------- ----------- ------------
Revenue $ - $ - $ -
----------- ----------- ------------
Costs and expenses:
General and administrative 140,288 381,907 3,804,467
Research and development 738,495 49,615 1,154,583
Stock based compensation 1,592,200 234,000 3,099,996
Write-off of advances to potential
acquiree - - 629,000
Finance costs - - 786,000
Interest expense - 7,902 12,608
Amortization of license agreement - - 155,210
Amortization of intangibles 177,775 - 656,732
Losses on settlements - - 1,261,284
Write-down of investment in
Infectech, Inc. - - 620,805
Equity in loss of unconsolidated
subsidiary - - 853,540
----------- ----------- ------------
Total costs and expenses 2,648,758 673,424 13,034,225
----------- ----------- ------------
Net loss before provision (benefit) for
income taxes (2,648,758) (673,424) (13,034,225)
Provision (benefit) for income taxes (71,110) - -
----------- ----------- ------------
Net loss $(2,577,648) $ (673,424) $(13,034,225)
=========== =========== ============
Per share information - basic and diluted
Loss per common share $ (0.05) $ (0.01)
=========== ===========
Weighted average common shares outstanding 49,369,910 58,724,862
=========== ===========
----------------------------------------------------------------------------------
See the accompanying notes to the consolidated financial statements.
NUTRA PHARMA CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows - Unaudited
For the
Period From
February 1,
2000
(Inception)
Through
Three Months Ended March 31, March 31,
2004 2005 2005
---------- ---------- -----------
Cash flows from operating activities:
Net cash (used in) operating activities $ (363,300) $ (442,127) $(2,058,314)
---------- ---------- -----------
Cash flows from investing activities:
Cash reduction due to deconsolidation
of Infectech, Inc. - - (2,997)
Cash acquired in acquisition of
Infectech, Inc. - - 3,004
Acquisition of property and equipment - (3,228) (60,319)
Investments carried at cost - (80,000) (185,000)
---------- ---------- -----------
Net cash (used in) provided by
investing activities - (83,228) (245,312)
---------- ---------- -----------
Cash flows from financing activities:
Common stock issued for cash - 134,300 1,082,000
Proceeds from convertible loans - - 304,750
Loans from stockholders 581,496 - 935,253
---------- ---------- -----------
Net cash provided by financing
activities 581,496 134,300 2,322,003
---------- ---------- -----------
Net increase (decrease) in cash 218,196 (391,055) 18,377
Cash - beginning of period 47,131 409,432 -
---------- ---------- -----------
Cash - end of period $ 265,327 18,377 18,377
========== ========== ===========
---------------------------------------------------------------------------------
See the accompanying notes to the consolidated financial statements.
NUTRA PHARMA CORP.
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
March 31, 2005
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) for interim financial
information and Item 310(b) of Regulation S-B. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of the Company as of December 31,
2004, and for the two years then ended, including notes thereto included in the
Company's Form 10-KSB.
The accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense. Actual results may differ from
these estimates.
Principles of Consolidation
The consolidated financial statements presented herein include the accounts of
Nutra Pharma and its subsidiary Receptopharm, Inc. (collectively, the
"Company"). In addition, the Company consolidated Nanologix, Inc. during the
period from January 1, 2004 through March 31, 2004 (see Note 2). All
intercompany transactions and balances have been eliminated in consolidation.
Loss per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods in which the Company incurs losses common stock
equivalents, if any, are not considered, as their effect would be anti dilutive.
2. BASIS OF REPORTING
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. For the period ended March 31, 2005, the Company
incurred a net loss of $673,424 and has working capital and accumulated deficits
of $520,748 and $13,034,225 at March 31, 2005.
The Company's ability to continue as a going concern is contingent upon its
ability to secure additional financing, increase ownership equity and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered in established markets and the competitive environment in
which the Company operates.
The Company is pursuing financing for its operations and seeking additional
investments. In addition, the Company is seeking to establish a revenue base.
Failure to secure such financing or to raise additional equity capital and to
establish a revenue base may result in the Company depleting its available funds
and not being able pay its obligations.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
3. NANOLOGIX, INC. (FORMERLY INFECTECH, INC.)
On September 19, 2003, the Company entered into an agreement ("Acquisition
Agreement") to acquire up to 100% of the issued and outstanding common stock of
Nanologix, Inc., a Delaware corporation ("Nanologix"). Nanologix is a
development stage company based in Sharon, Pennsylvania, which is engaged in the
development of diagnostic test kits used for the rapid identification of
infectious human and animal diseases. Nanologix owns patented technologies,
which allow for the rapid detection of disease causing pathogens. Nanologix also
owns a patented technology designed for use in the bioremediation of
contaminated soil and water.
The Acquisition Agreement provided for the acquisition by the Company of up to
100% of the issued and outstanding common stock of Nanologix, through an
exchange of one (1) share of the Company's common stock for every two (2) shares
of Nanologix common stock. The Company recorded the acquisition of Nanologix as
the purchase of assets, principally patents and other intangibles. The value of
the Company's common shares issued in connection with this transaction is $0.85,
which was the market value of the Company's common stock on September 22, 2003,
the date the terms of the acquisition were agreed to and announced.
Through December 31, 2003, the Company issued an aggregate of 4,502,549 shares
of its common stock in exchange for 9,005,098 shares of Nanologix. This initial
exchange resulted in the Company owning approximately 58% of the issued and
outstanding common stock of Nanologix. In January 2004, the Company issued an
additional 426,275 shares of its common stock, in exchange for 852,550 shares of
Nanologix. In September 2004, the Company issued an additional 293,288 shares of
its common stock in exchange for 586,576 shares of Nanologix. These exchanges
increased the Company's ownership interest in Nanologix from 58% to 67%.
On September 28, 2004, the Company transferred 6,000,000 shares of Nanologix,
Inc. common stock that it owned to a shareholder of Nutra Pharma, to discharge a
$1,384,931 demand loan to such shareholder. After giving effect to this
transfer, the Company owned a total of 4,444,224 shares or approximately 29% of
the issued and outstanding common stock of Nanologix which was 15,537,050.
Subsequent to September 28, 2004, the Company owned a minority interest in
Nanologix and accordingly, applied the equity method of accounting to its
investment in Nanologix. The Company's share of Nanologix's earnings or losses
is included in its statement of operations as a single amount. During the year
ended December 31, 2004, Nanologix incurred a loss of $6,658,838. The Company's
portion of the loss using the equity method of accounting of $1,664,710 exceeded
the carrying value of the Company's investment which was $853,540 at December
31, 2004, and as such, the $853,540 was charged to operations at December 31,
2004. This charge reduced the carrying value of the Company's investment in
Nanologix to $0.
At December 31, 2004, the Company owned a total of 4,556,174 shares or
approximately 25% of the issued and outstanding common stock of Nanologix.
During the first quarter of 2005 Nanologix issued additional shares of its
common stock reducing the Company's ownership to approximately 13% at March 31,
2005.
The aggregate market value of the Company's 4,556,174 shares of Nanologix common
stock based on the trading price of Nanologix common stock as quoted on the pink
sheets of $.80 and $.50 per share at March 31, 2005, and May 20, 2005, was
$3,644,939 and $2,278,087.
4. ACQUISITION OF RECEPTOPHARM, INC.
On December 12, 2003, the Company entered into an acquisition agreement (the
"Agreement"), whereby it agreed to acquire a 49.5% interest in Receptopharm,
Inc. ("Receptopharm"), a privately held biopharmaceutical company based in Ft.
Lauderdale, Florida. Receptopharm is a development stage company engaged in the
research and development of proprietary therapeutic proteins for the treatment
of several chronic viral, autoimmune and neuro-degenerative diseases.
The closing of this transaction was subject to the approval of Receptopharm's
board of directors, which was obtained on February 20, 2004. Pursuant to the
Agreement, the Company is acquiring 49.5% of Receptopharm's common equity for
$2,000,000 in cash. Receptopharm intends to use such funds to further research
and development, which could significantly impact future results of operations.
The Company is purchasing its 49.5% ownership interest in a series of
installments. At March 31, 2005, the Company had funded an aggregate of
$1,450,000 to Receptopharm under the Agreement, which represented a 37 %
interest in Receptopharm. From April 1, 2005 through May 20, 2005, the Company
funded an additional $235,000 to Receptopharm, which increased the Company's
ownership of Receptopharm to approximately 39%.
For accounting purposes, the Company is treating its capital investment in
Receptopharm as a vehicle for research and development. Because the Company is
solely providing financial support to further the research and development of
Receptopharm, such amounts are being charged to expense as incurred by
Receptopharm. Receptopharm presently has no ability to fund these activities and
is dependent on the Company to fund its operations. In these circumstances,
Receptopharm is considered a variable interest entity and has been consolidated.
The creditors of Receptopharm do not have recourse to the general credit of the
Company.
5. CONVERTIBLE LOANS
In November 2004, in accordance with the terms of completed Subscription
Agreements, the Company received total proceeds of $206,750 from four (4)
investors. These agreements provide that upon the expiration of a 6 month term
from the date of execution, each of the four investors has the option of: (a)
being repaid the amount of their investment together with 15% interest per
annum; (b) converting their investment into shares of the Company's common stock
at a conversion price of $0.17 per share up to an aggregate of 1,216,176 shares,
if all four investors convert; or (c) converting their investment into a number
of shares of common stock of the Company equal to the sum of the principal and
accrued interest on the note, divided by the conversion price equal to a price
which is 35% below (i) the average of the last reported sales prices for the
shares of Common Stock on the NASDAQ National Market, the American Stock
Exchange, the NASDAQ Small Cap Market or the Over-the-Counter Bulletin Board for
the 5 trading days immediately prior to such date or (ii) if there has been no
sales on any such market on any applicable day, the average of the highest bid
and lowest ask prices on such market at the end of any applicable day, or (iii)
if the market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price will be at the fair market value as reasonably
determined in good faith by our Board of Directors.
Each investor has piggyback registration rights that require the Company to
register any shares held by them if the Company voluntarily files a registration
statement. Additionally, should an investor decide to convert their investment
into shares of common stock, the Company is required to file a registration
statement with the Securities and Exchange Commission to register the investor's
common stock. Should the Company fail to file the registration statement
immediately upon the investor's conversion, the Company is required to issue to
each investor, penalty shares of 5,000 shares of common stock per week for every
week the registration statement is not filed.
The 6 month term provided for in the agreements expired in May 2005; therefore,
the four (4) investors have the option to exercise their rights described in (a)
- (c) above. The Company is currently renegotiating these agreements; however,
there is no assurance that such negotiations will be successful or that they
will be completed on favorable terms to the Company or that the investors will
not exercise their rights under the agreements.
6. STOCKHOLDERS' DEFICIT
During the quarter ended March 31, 2005, the Company issued 6,105,000 shares
which were subscribed for at December 31, 2004.
During the quarter ended March 31, 2005, the Company sold 790,000 shares of
restricted common stock at $0.17 per share and received proceeds of $134,300. Of
the shares sold, 90,000 were issued at March 31, 2005 and the remaining 700,000
were recorded as a subscription and the amount received is included in
additional paid in capital.
During the quarter ended March 31, 2005, the Company issued 100,000 shares of
restricted common stock to a consultant for services rendered. The Company
recorded stock based compensation expense of $34,000 based on the market value
of the Company's common stock on the date of the grant.
During the quarter ended March 31, 2005, the Company issued 500,000 shares of
restricted common stock to a Director for services rendered. The Company
recorded stock based compensation expense of $200,000 based on the market value
of the Company's common stock on the date of the grant.
7. INVESTMENTS
Letter of Intent to Acquire Portage BioMed LLC
On October 28, 2004, the Company entered into a non-binding letter of intent to
acquire 100% of the issued and outstanding common stock of Portage BioMed LLC, a
biotechnology research company. The proposed terms reflected in the non-binding
letter of intent are: (i) beginning on November 1, 2004, the Company will pay
$40,000 per month to Portage BioMed for working capital, until such time that
Portage BioMed generates sufficient cash flow to sustain its operations; (ii)
the Company will issue an aggregate of 1,000,000 shares of its restricted common
stock to Portage BioMed's four members in exchange for their interest in Portage
BioMed; (iii) the Company will also issue an aggregate of 550,000 shares of its
restricted common stock to Portage BioMed's four members for four consecutive
quarters commencing six months from the closing date of the transaction and upon
the completion of certain agreed upon quarterly milestones; and (iv) Rik J.
Deitsch, the Company's Chief Executive Officer, will be appointed to Portage
BioMed's Board of Directors and one current Portage BioMed Director will be
appointed as a Director of the Company.
As of March 31, 2005 the Company has made payments totaling $60,000 to Portage
BioMed in connection with the letter of intent. As of March 31, 2005, the
Company has not entered into a definitive agreement with Portage BioMed. This
investment is included in other assets in the accompanying financial statements.
Investment in XenaCare LLC
On November 1, 2004, the Company completed an agreement with XenaCare LLC, a
healthcare management company engaged in the business of manufacturing and
distributing non-prescription pharmaceuticals to physician's offices. This
agreement provides that the Company make an investment of up to $250,000 in 15
Site of Cares physician locations to be managed by XenaCare.
As of March 31, 2005, the Company has made payments totaling $125,000 to
XenaCare in connection with this agreement. This investment is included in other
assets in the accompanying financial statements.
8. SUBSEQUENT EVENTS
>From April 1, 2005 through May 20, 2005, the Company sold 3,012,500 shares of
restricted common stock at $0.20 per share and received proceeds of $602,500.
On April 4, 2005, a Motion to Enforce Settlement Agreement was filed against the
Company in the Circuit Court of Broward County Florida by Bio Therapeutics, Inc.
f/k/a Phylomed Corp. in Nutra Pharma Corp. v. Bio Therapeutics, Inc. (17th
Judicial Circuit, Case No. 03-008928 (03). This proceeding results from the
Company's alleged breach of a settlement agreement that was entered into between
Bio Therapeutics and the Company in resolution of a previous lawsuit between the
Company and Bio Therapeutics that was resolved by entering into a Settlement
Agreement. The Company also entered into a related License Agreement and
Amendment to the License Agreement ("License Agreement") with Bio Therapeutics.
In the April 4, 2005 motion, Bio Therapeutics alleges that the Company breached
certain provisions of the License Agreement and requests that the Court grant
its motion to enforce the Settlement Agreement by declaring the License
Agreement terminated, enjoining the Company from further use of license products
that was granted to the Company by the License Agreement, and awarding attorneys
fees and costs to Bio Therapeutics.
The Company intends to defend against this action. The Company does not believe
that this action will have a material effect upon its operations; and if the
license agreement is terminated the Company does not believe there will be a
material negative impact on the Company.
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operations
Forward-Looking Statements
The following discussion and analysis contains forward-looking statements and
should be read in conjunction with our financial statements and related notes.
For purposes of this Plan of Operations, Nutra Pharma Corp. is referred to
herein as "we," "us," or "our." This discussion and analysis contains
forward-looking statements based on our current expectations, assumptions,
estimates and projections overview. The words or phrases "believe," "expect,"
"may," "should," "anticipates" or similar expressions are intended to identify
"forward-looking statements". Actual results could differ materially from those
projected in the forward-looking statements as a result of the following risks
and uncertainties, including: (a) we have experienced recurring net losses and a
working capital deficiency which raises substantial doubt about our ability to
continue as a going concern; (b) our history of losses makes it difficult to
evaluate our current and future business and our future financial results; (c)
our continued operations are dependent upon obtaining equity or other financing
and should we be unable to obtain such financing, we will be unable to continue
our operations; (d) our inability to retain and attract key personnel could
adversely affect our business; (e) we are subject to substantial Federal Drug
Administration and other regulations and related costs which may adversely
affect our operations; (f) a market for our potential products may never
develop; (g) if we fail to adequately protect our patents, we may be unable to
proceed with development of potential drug products; (h) we are dependent upon
patents, licenses and other proprietary rights from third parties; should we
lose such rights our operations will be negatively affected; (h) we may be
unable to compete against our competitors in the medical device and
biopharmaceutical markets since our competitors have superior financial and
technical resources than we do; (i) issuance of shares of our common stock to
consultants has and may in the future have a dilutive effect on the value of our
common stock and may negatively effect the trading price of our common stock;
(j) our Plan of Operations has been substantially delayed due to lack of
financing; (k) our management decisions are made by our Chief Executive Officer,
Rik Deitsch; if we lose his services, our operations will be negatively
impacted; (l) we have entered into acquisition agreements which were later
rescinded, which has delayed and otherwise negatively affected our operations;
(m) we are subject to a substantial funding commitment of $315,000 due to
Receptopharm in connection with the Receptopharm acquisition agreement and
should we fail to meet this commitment, we may lose our ownership interest in
Receptopharm and a substantial part of our Plan of Operations; and (n) we no
longer have a controlling ownership or management interest in Infectech, Inc.,
which previously constituted a substantial part of our Plan of Operations and a
possible revenue source.
PLAN OF OPERATIONS
We anticipate that our total estimated cash requirements of $880,000 for the
next 12 months, pending adequate financing, will include: (a) $490,000
pertaining directly to our own operations; (b) funding of $315,000 for
ReceptoPharm; and (c) $75,000 pertaining to our investment in Xenacare.
Specifically, our planned expenditures pertaining to (a) and (b) are:
OUR DIRECT EXPENDITURES
Type Expenditure Total Expenditure Monthly Expenditure
--------------------- ----------------- -------------------
Salaries* $ 165,000 $ 13,750
--------------------- ----------------- -------------------
Travel related
expenses for our
Chief Executive
Officer pertaining
to research and due
diligence $ 40,000 $ 3,333
--------------------- ----------------- -------------------
Consulting Fees for $ 120,000 $ 10,000
Director Tanvir
Khandaker Pertaining
to acquisition of
licenses
Professional
Fees -Legal
and Accounting $ 165,000 $ 13,750
--------------------- ----------------- -------------------
Total $ 490,000 $ 40,833
* Salaries include the following: (a) Chief Executive Officer - $130,000;
and (b) Administrative Assistant - $35,000
FUNDING OF RECEPTOPHARM, INC.
Type Expenditure Total Expenditure Monthly Expenditure
--------------------- ----------------- -------------------
Operating Expenses
(Rent, supplies,
utilities) $ 50,000 $ 4,166
--------------------- ----------------- -------------------
Salaries
(CEO, President,
Chief Science
Officer, and
Administrative
Assistant) $ 80,000 $ 6,667
--------------------- ----------------- -------------------
Pre-Clinical
Related Consulting $ 15,000 $ 1,250
--------------------- ----------------- -------------------
Clinical Studies
(HIV, MS, AMN) $ 170,000 $ 14,167
--------------------- ----------------- -------------------
Total: $ 315,000 $ 26,250
FUNDING OF XENACARE
Type Expenditure Total Expenditure Monthly Expenditure
--------------------- ----------------- -------------------
Funding of Site of
Cares $ 75,000 $ 6,250
OUR TWELVE-MONTH PLAN OF OPERATIONS PENDING ADEQUATE FINANCING
We intend to accomplish the following regarding our Plan of Operations over the
next twelve months.
ReceptoPharm
Pre-Clinical Related Consulting
Throughout our Plan of Operations, we plan to conduct pre-clinical consulting
with various companies that we have agreements with pertaining to ReceptoPharm's
Multiple Sclerosis (MS) and HIV drugs, which will consist of the following:
o MS Drug under Development - Microarray analysis is the study of the
gene expression of cells. Histoculture is the study of the entire
cellular environment. We plan to conduct microarray and histoculture
studies and related analysis of the cells of Multiple Sclerosis
patients' to ascertain how certain drugs affect the cells of these
patients. We plan to conduct these studies through our agreement with
Eno Research and Development, a clinical research organization; and
o HIV Drug under Development - Viral isolates are common mutations of
HIV. We plan to conduct these studies through our agreement with
ReceptoPharm. ReceptoPharm has an agreement with the University of
California, San Diego, to study the effect of ReceptoPharm's drug
under development on different viral isolates to determine the drug's
efficacy in mutated forms of the HIV virus.
Clinical Studies
Adrenomyeloneuropathy (AMN)
Adrenomyeloneuropathy (AMN) is a genetic disorder that affects the central
nervous system. The disease causes neurological disability that is slowly
progressive over several decades. Throughout our twelve month Plan of Operations
and for 3 months thereafter, ReceptoPharm plans to conduct clinical studies of
its Adrenomyeloneuropathy (AMN) drug, which is currently under development. We
have an agreement with the Charles Dent Metabolic Unit located in London,
England to conduct a clinical study that consists of:
o Recruitment of 20 patients with AMN;
o Administering the ReceptoPharm's AMN drug under development; and
o Monitoring patients throughout a 15-month protocol.
The clinical study is classified as a Phase III study and is the final step
required for regulatory approval of the drug.
HIV and MS
ReceptoPharm also plans to conduct clinical studies of its HIV and MS drugs
under development. These "Phase II" studies will either prove or disprove the
preliminary efficacy of ReceptoPharms's HIV/MS drugs under development.
ReceptoPharm will seek to secure agreements with third parties to conduct such
clinical studies.
Liquidity and Capital Resources
We have experienced a significant loss from operations. Our ability to continue
as a going concern is dependent on our ability to secure additional financing,
increase ownership equity, and attain profitable operations. Additionally, our
independent registered public accounting firm has issued a going concern opinion
on our audited financial statements for the fiscal year ended December 31, 2004
since we have experienced recurring net losses and at December 31, 2004, a
working capital deficiency. We have estimated expenses of $880,000 pertaining to
our twelve month Plan of Operations or $73,333 of monthly expenditures. Based
upon our current cash position of approximately $104,000, we have sufficient
funds to conduct our operations for only approximately 5 weeks. We intend to
satisfy our estimated cash requirements of $880,000 for our twelve month Plan of
Operations pending adequate financing through divestiture of assets, a private
placement of our equity securities or, if necessary, possibly through
shareholder loans or traditional bank financing or a debt offering; however,
because we are a development stage company with a limited operating history and
a poor financial condition, we may be unsuccessful in obtaining shareholder
loans, conducting a private placement of equity or debt securities, or in
obtaining bank financing. In addition, if we only have nominal funds by which to
conduct our operations, we may have to curtail our research and development
activities, which will negatively impact development of our possible products.
We have no alternative Plan of Operations. In the event that we do not obtain
adequate financing to complete our Plan of Operations or if we do not adequately
implement an alternative plan of operations that enables us to conduct
operations without having received adequate financing, we may have to liquidate
our business and undertake any or all of the following actions:
o Sell or dispose of our assets, if any;
o Pay our liabilities in order of priority, if we have available cash to
pay such liabilities;
o If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal
to the net market value of our net assets;
o File a Certificate of Dissolution with the State of California to
dissolve our corporation and close our business;
o Make the appropriate filings with the Securities and Exchange
Commission so that we will no longer be required to file periodic and
other required reports with the Securities and Exchange Commission,
if, in fact, we are a reporting company at that time; and
o Make the appropriate filings with the National Association of Security
Dealers to effect a delisting of our common stock, if, in fact, our
common stock is trading on the Over-the-Counter Bulletin Board at that
time.
Based upon our current assets, however, we will not have the ability to
distribute any cash to our shareholders. If we have any liabilities that we are
unable to satisfy and we qualify for protection under the U.S. Bankruptcy Code,
we may voluntarily file for reorganization under Chapter 11 or liquidation under
Chapter 7. Our creditors may also file a Chapter 7 or Chapter 11 bankruptcy
action against us. If our creditors or we file for Chapter 7 or Chapter 11
bankruptcy, our creditors will take priority over our shareholders. If we fail
to file for bankruptcy under Chapter 7 or Chapter 11 and we have creditors, such
creditors may institute proceedings against us seeking forfeiture of our assets,
if any.
We do not know and cannot determine which, if any, of these actions we will be
forced to take. If any of these foregoing events occur, you could lose your
entire investment in our shares.
If any of these foregoing events occur, you could lose your entire investment in
our shares.
Item 3. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this Quarterly Report on Form 10-QSB, we carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was carried out by our sole executive officer Rik
Deitsch, who is our chief executive officer and chief financial officer, and a
member of our board of directors. Based upon his evaluation, Mr. Deitsch
concluded that our disclosure controls and procedures are effective. However,
Mr. Deitsch did recommend to the board of directors that the Company should seek
to hire an experienced chief financial officer, which would improve the review
process of our controls and procedures.
There have been no changes in our system of internal control over financial
reporting in connection with the evaluation by our principal executive officer
and principal financial officer during our fiscal quarter ended March 31,
2005 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On April 4, 2005, a Motion to Enforce Settlement Agreement was filed against us
in the Circuit Court of Broward County Florida by Bio Therapeutics, Inc. f/k/a
Phylomed Corp. in Nutra Pharma Corp. v. Bio Therapeutics, Inc. (17th Judicial
Circuit, Case No. 03-008928 (03)). This proceeding results from our alleged
breach of a settlement agreement that was entered into between Bio Therapeutics
and us in resolution of a previous lawsuit between us and Bio Therapeutics that
was resolved by entering into a Settlement Agreement. We also entered into a
related License Agreement and Amendment to the License Agreement ("License
Agreement") with Bio Therapeutics.
In the April 4, 2005 motion, Bio Therapeutics alleges that we breached certain
provisions of the License Agreement and requests that the Court grant its motion
to enforce the Settlement Agreement by declaring the License Agreement
terminated, enjoining us from further use of license products that were granted
to us by the License Agreement, and awarding attorneys fees and costs to Bio
Therapeutics. This matter was set for a hearing on April 28, 2005 to hear a
motion to set a motion for an evidential hearing. However, such hearing was
cancelled and a new hearing date has not been set.
We intend to defend against this action. We do not believe that this action will
have a material effect upon our operations; however, a negative judgment against
us could have a materially adverse effect on our operations and financial
condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 26, 2005, we sold 60,000 shares of our restricted common stock at
$0.17 per share or an aggregate of $10,200 to Richard Schimmoeller. We relied
upon Section 4(2) of the Securities Act of 1933, as amended ("the Act") for the
issuances of these shares. We believed Section 4(2) was available because:
o We are not and were not a blank check company at the time of the offer
or sale;
o The investor had business experience and was an Accredited Investor
as defined by Rule 501 of Regulation D of the Act;
o All offers and sales of the investment were made privately and no
party engaged in any general solicitation or advertising of the
proposed investment;
o The investor had a preexisting social, personal or business
relationship with us and members of our management;
o The investor was provided with all information sufficient to allow him
to make an informed investment decision;
o The investor had the opportunity to inspect our books and records and
to verify statements made to induce them to invest;
o The Certificate representing the investment was issued with a
restrictive legend indicating the securities represented by the
certificate have not been registered; and
o No party received any transaction based compensation such as
commissions in regard to locating any investor.
On January 26, 2005, we sold 30,000 shares of our restricted common stock at
$0.17 per share or an aggregate of $5,100 to Dennis McDonald. We relied upon
Section 4(2) of the Securities Act of 1933, as amended ("the Act") for the
issuances of these shares. We believed Section 4(2) was available because:
o We are not and were not a blank check company at the time of the offer
or sale;
o The investor had business experience and was an Accredited Investor
as defined by Rule 501 of Regulation D of the Act;
o All offers and sales of the investment were made privately and no
party engaged in any general solicitation or advertising of the
proposed investment;
o The investor had a preexisting social, personal or business
relationship with us and members of our management;
o The investor was provided with all information sufficient to allow him
to make an informed investment decision;
o The investor had the opportunity to inspect our books and records and
to verify statements made to induce her to invest;
o The Certificate representing the investment was issued with a
restrictive legend indicating the securities represented by the
certificate have not been registered; and
o No party received any transaction based compensation such as
commissions in regard to locating any investor.
We sold a total of 700,000 shares of our restricted common stock at $0.17 per
share or an aggregate of $119,000 to Rajni Kassett on the following dates and in
the following shares denominations: (a) February 1, 2005 - 411,765 shares; (b)
March 4, 2005 - 147,059 shares; (c) March 17, 2005 - 58,823 shares; and (d)
March 24, 2005 - 82,353 shares. We relied upon Section 4(2) of the Securities
Act of 1933, as amended ("the Act") for the issuances of these shares. We
believed Section 4(2) was available because:
o We are not and were not a blank check company at the time of the offer
or sale;
o The investor had business experience and was an Accredited Investor
as defined by Rule 501 of Regulation D of the Act;
o All offers and sales of the investment were made privately and no
party engaged in any general solicitation or advertising of the
proposed investment;
o The investor had a preexisting social, personal or business
relationship with us and members of our management;
o The investor was provided with all information sufficient to allow her
to make an informed investment decision;
o The investor had the opportunity to inspect our books and records and
to verify statements made to induce her to invest;
o The Certificate representing the investment was issued with a
restrictive legend indicating the securities represented by the
certificate have not been registered; and
o No party received any transaction based compensation such as
commissions in regard to locating any investor.
On February 28, 2005, we issued 100,000 shares of our restricted common stock to
Jason Unverferth in return for consulting services, specifically due diligence
relating to potential acquisitions, that Mr. Unverferth rendered to us. The
restricted shares were valued at $0.34 per share or an aggregate of $34,000. We
believed Section 4(2) was available because the offer and sale did not involve a
public offering. We had a pre-existing relationship with Mr. Unverferth as our
consultant.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the SEC:
3.1 Certificate of Incorporation dated February 1, 2000. (i)
3.2 Certificate of Amendment to Articles of Incorporation dated July 5,
2000. (i)
3.3 Certificate of Amendment to Articles of Incorporation dated October 31,
2001.
3.4 Bylaws of the Company. (i)
4.1 Form of Stock Certificate (i)
5.1 Opinion of Kenneth Eade, Attorney at Law on SB-2 Registration (i)
5.2 Opinion of Kenneth Eade, Attorney at Law on issuance of stock under plan
and consent dated December 4, 2003 (vi)
6 Specimen of Stock Certificate (i)
10.1 Acquisition Agreement between Cyber Vitamin.com and Desert Corporate
Services dated November 26, 2001 (ii)
10.2 Share Exchange Agreement between Nutra Pharma Corp. and Nutra Pharma,
Inc. dated November 26, 2001 (ii)
10.3 Joint Venture Agreement between Nutra Pharma Corp. and Terra Bio Pharma
dated January 29, 2002 (iii)
10.4 Definitive Agreement for Exchange of Common Stock dated August 20, 2002
by and among Nutra Pharma Corp. and Bio Therapeutics, Inc. (iii)
10.5 Closing Agreement for the Exchange of Common Stock dated August 20, 2002
by and between Nutra Pharma Corp. and Bio Therapeutics, Inc. (iv)
10.6 Amendment to Closing Agreement for the Exchange of Common Stock dated
September 27, 2002 (v)
10.7 Acquisition Agreement dated September 19, 2003 between Nutra Pharma Corp.
and Infectech, Inc. (vi)
10.8 Acquisition Agreement between Nutra Pharma Corp. and ReceptoPharm, Inc.
dated February 20, 2004 (vii)
10.9 Settlement Agreement dated September 28, 2004 between Opus International,
LLC (xi)
10.10 Agreement with XenaCare (xi)
10.11 Agreement with Eno Research and Development, Inc. (xi)
10.12 Agreement with Investor-Gate.com (xi)
10.13 Agreement with Tanvir Khandaker (xii)
14.1 Code of Ethics of the Company (x)
20.1 Rescission, Settlement and Release Agreement between George Minto and
Zirk Engelbrecht (viii)
20.2 Offer to Purchase for Cash up to 2,000,000 shares of Nutra Pharma Corp.
for $.80 cash per share (viii)
20.3 License Agreement dated October 3, 2003 between Biotherapeutics, Inc.
and Nutra Pharma Corp. (ix)
20.4 Addendum to license Agreement dated October 3, 2003 between
Biotherapeutics, Inc. and Nutra Pharma Corp. (ix)
31.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
-------------------
(i) Incorporated by reference to the Company's Registration Statement on Form
SB-2/A (Registration No. 33-44398) filed on April 6, 2001 (the
"Registration Statement").
(ii) Incorporated by reference to the Company's Current Report on Form 8K, filed
December 26, 2001
(iii)Incorporated by reference to the Company's Current Report on Form 8K,
filed February 28, 2002
(iv) Incorporated by reference to the Company's Current Report on Form 8K, filed
September 9, 2002
(v) Incorporated by reference to the Company's Current Report on Form 8K, filed
October 31, 2002
(vi) Incorporated by reference to the Company's Current Report on Form 8K, filed
October 20, 2003
(vii)Incorporated by reference to the Company's Current Report on Form 8K,
filed March 8, 2004
(viii)Incorporated by reference to the Company's Current Report on Form 8K,
filed November 5, 2002
(ix) Incorporated by reference to the Company's Report on Form 10-KSB, filed
April 20, 2004
(x) Incorporated by reference to the Company's Report on Form 10-KSB/A, filed
May 7, 2004
(xi) Incorporated by reference to the Company's Report on Form 10-QSB, filed
December 21, 2004
(xii)Incorporated by reference to the Company's Report on Form 10-KSB, filed
May 2, 2005
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NUTRA PHARMA CORP.
/s/ Rik J. Deitsch
Rik J. Deitsch, Chairman, President
Chief Executive Officer and Chief Financial Officer
Dated: May 26, 2005