ITEM 1. BUSINESS
History and Organization
The Company was organized June 26, 2009 (Date of Inception) under the laws of the State of Nevada, as EnzymeBioSystems.
Our Business
EnzymeBioSystems researches specialty enzymes and enzyme related products.
We utilize enzyme technologies to develop commercial solutions for a broad range of applications within the specialty chemical industry. These markets are largely served by a small number of large, well-established businesses and research university centers. We plan to work collaboratively with those industrial companies to develop differentiated, high performance enzyme solutions for their target markets, and to leverage their well-developed distribution capabilities to better exploit commercial opportunities. Our enzyme technology will tie-in with development of new commercial biological active compounds. We hope we can develop specialty enzymes to eliminate the side effects and toxicity of the new commercially developed products.
Enzyme Industry
Enzymes can be categorized as "enzyme inhibitors" and "enzyme activators." Enzyme inhibitors are molecules that bind to enzymes and decrease their activity. Since blocking an enzyme's activity can kill a pathogen or correct a metabolic imbalance, many drugs are enzyme inhibitors. Enzyme activators are molecules that bind to enzymes and increase their activity. These molecules are often involved in the allosteric [defined as having to do with a protein with a structure that is altered reversibly by a small molecule so that its original function is modified] regulation of enzymes in the control of metabolism. Both enzyme inhibitors and enzyme activators are currently used by many pharmaceutical and biotechnology companies in research and development of new drug compounds.
Enzymes also can be used as pharmaceutical products. Enzymes as pharmaceuticals have two important features that distinguish them from all other types of pharmaceutical products. First, enzymes often bind and act on their targets with great affinity and specificity. Second, enzymes are catalytic and convert multiple target molecules to the desired products. These two features make for what are considered specialized enzymes that can accomplish therapeutic biochemistry in the body that small molecules cannot. These characteristics have resulted in the development of many enzyme drugs for a wide range of disorders, e.g. insulin and interferon.
Business Strategy
We foresee that our two areas of business opportunity, include: 1) buying raw materials to produce specialty enzymes in contract lab facilities; 2) contracting with CRO's with the goal to obtain FDA approval to further test the enzymes.
We plan to deploy our enzyme technologies across diverse markets that represent commercial opportunities in helping us build visibility for EnzymeBioSystems. This includes building our reputation in the scientific community through trade publications and protecting our intellectual property and technology through the patent process.
We plan to use enzyme technologies to develop commercial solutions for a broad range of applications within the specialty chemical industry. These markets are largely served by a small number of large, well-established businesses and research university centers.
Through contract laboratories we currently have only limited resources and capability to develop, manufacture, or distribute specialty enzyme products on a limited scale. We will determine which specialty enzyme products to pursue independently based on various criteria, including: investment required, estimated time to market, regulatory hurdles, infrastructure requirements, and industry-specific expertise necessary for successful commercialization. At any time, we may modify our strategy and pursue collaborations for the development and commercialization of some specialty enzyme products that we had intended to pursue independently. In order for us to commercialize more specialty enzyme products directly, we plan to establish or obtain through outsourcing arrangements additional capability to develop, manufacture, market, sell, and distribute such products.
Our Business Strategy
Management is evaluating an enzyme compound which it believes has a specific therapeutic value in fighting tumors, specifically breast tumors. Management has undertaken research to study its synthetic Amooranin compound, which the Company has developed in-house. Studies of Amooranin have already been completed in rats. Further, research is required to study Amooranin in a different animal species.
Amooranin is a triterpene acid with a novel structure isolated from the stem bark of Amoora rohituka, a tropical tree growing wild in India. Studies have demonstrated that multiple breast cancer cell lines respond to Amooranin in growth suppression assays. Mechanistic studies suggest that Amooranin suppresses growth factor signaling, induces cell cycle arrest, and promotes apoptosis. This is because the anti-neoplastic activity of the plant-derived compound of Amooranin is relatively weak.
Our founder developed a new synthetic analogue of this molecule by chemical transformations in an attempt to identify a more potent agent. One of these analogues, Amooranin-Me, was found to inhibit proliferation of several breast cancer cells with greater potency than the parent compound of Amooranin. Preliminary screening of Amooranin-Me in in-vitro experiments revealed some potenecy against breast cancer MCF-7 cells with concentrations down to the nanomolar range. All these studies indicate that Amooranin-Me is a promising drug with potential to be used for human breast cancer prevention.
The Company has moved further along with the process of evaluating an enzyme compound which they believe has specific therapeutic value in fighting tumors. In an effort to evaluate this compound, management has had a series of meetings with various contract research organizations to enlist their expertise in performing animal studies. The research will study the use of an antitumor natural product called amooranin. Specifically, the two areas of this study will include: 1) an exam of the in vitro cytotoxicity of amooranin against hepatocellular carcinoma cells, and 2) investigate the dose responsive antitumor actions of amooranin against chemically induced hepatic tumorgenesis in rats and dogs.
Management wants to continue its research with Amooranin that will lead to the filing of an Investigational New Drug Application (“IND”) with the U. S. Food and Drug Administration. It is still too early to determine if this project has any potential value for the Company, and there are no assurances that the Company will ever be able to obtain an IND for this compound.
As of the date of this report, management of the Company has identified an independent chemical laboratory that can produce sufficient quantities of amooranin to proceed with the required animal studies. A small preclinical batch of methyl amooranin has been manufactured by the independent chemical laboratory. This preclinical batch is not large enough to sufficiently test in several animal studies needed to obtain an IND.
Competition
Our competitors have substantially greater financial, technical, and marketing resources than we do and may succeed in developing products that would render our products obsolete or noncompetitive. In addition, many of these competitors have significantly greater experience than we do in their respective fields. Our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to, and/or are less expensive than, other products on the market. Current competitors or other companies may develop technologies and products that are more effective than ours. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors. The existing approaches of our competitors or new approaches or technology developed by our competitors may be more effective than those developed by us.
Any enzyme products that we develop will compete in multiple, highly competitive markets. For example, Codexis, Maxygen, Inc., Evotec, and Xencor have alternative evolution technologies. Integrated Genomics Inc., Myriad Genetics, Inc., and ArQule, Inc. perform screening, sequencing, and/or bioinformatics services. Novozymes A/S, Verenium Corporation, Genencor International Inc. and MPBiomedicals are involved in development, overexpression, fermentation, and purification of enzymes. Many of these competitors have significantly greater financial and human resources than we do. We believe that the principal competitive factors in our market are access to genetic material, technological experience and expertise, and proprietary position.
EnzymeBioSystems's Funding Requirements
Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive.
Patent, Trademark, License and Franchise Restrictions and Contractual Obligations and Concessions
We do not have any trademarks, patents, or other intellectual property. In 2012, the two founders of the Company, along with a third party, as inventors, filed Patent Application # 14/369339 entitled "Amooranin Compounds and Analogs Thereof and Related Methods of Use." The U.S. Patent Office informed us that they published the aforementioned pending Patent on December 4, 2014 (Publication No. 2014-0357711A1). The Company is currently working with its patent attorney to obtain a patent for this invention.
We plan to rely on trade secrets, technical know-how, and continuing invention to develop and maintain our competitive position. We will take security measures to protect our trade secrets, proprietary know-how and technologies, and confidential data and continue to explore further methods of protection. Our policy is to execute confidentiality agreements with our employees and consultants upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property.
Research and Development Activities and Costs
Research and development expenses related to our specialty enzyme business include costs related to ongoing bioprocess development and manufacturing process yield improvements. For the fiscal year ending June 30, 2016, the Company spent $11,080 in product research and development.
Effect of Government Regulation on Business
We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees.
Non-drug biologically derived products, such as the specialty enzymes we plan to produce are regulated in the United States based on their application, by either the United States Food and Drug Administration, ("FDA"), the Environmental Protection Agency, ("EPA") in the case of plants and animals, or the United States Department of Agriculture ("USDA"). In addition to regulating drugs, the FDA also regulates food and food additives, feed and feed additives, and Generally Recognized As Safe substances used in the processing of food. The EPA regulates biologically derived chemicals not within the FDA's jurisdiction. Although the food and industrial regulatory process can vary significantly in time and expense from application to application, the timelines generally are shorter in duration than the drug regulatory process.
In the United States, transgenic agricultural products may be reviewed by the FDA, EPA, and USDA, depending on the plant and the trait engineered into it. The regulatory process for these agricultural products can take up to five years of field testing under USDA oversight, and up to another two years for applicable agencies to complete their reviews. At this time, we do not anticipate producing any enzymes that would require FDA approval. Our processes would include combining enzymes that have already been approved the FDA.
Even after investing significant time and expenditures, we may not obtain regulatory approval for our enzyme products that incorporate technologies that have not been approved for commercialization in the United States or elsewhere. For example, the EPA regulates biologically derived chemical substances not within the FDA’s jurisdiction. An unfavorable EPA ruling could delay commercialization or require modification of the production process resulting in higher manufacturing costs, thereby making the product uneconomical. In addition, the USDA may prohibit genetically engineered plants from being grown and transported except under an exemption, or under controls so burdensome that commercialization becomes impracticable. Our future products may not be exempted by the USDA. In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws, or other developments could require us to make additional significant expenditures.
We will be subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and health and safety issues.
Outside of the United States, scientifically-based standards, guidelines and recommendations pertinent to transgenic and other products intended for the international marketplace are being developed by, among others, the representatives of national governments within the jurisdiction of the standard-setting bodies, including Codex Alimentarius, the International Plant Protection Convention, and the Office des International Epizooties. The use of the existing standard-setting bodies to address concerns about products of biotechnology is intended to harmonize risk-assessment methodologies and evaluation of specific products or classes of products.
In the future we may be subject to additional laws, regulations, policies, approvals and the like of federal, state, local, municipal, foreign and other bodies.
Compliance With Environmental Laws
We seek to comply with all applicable statutory and administrative requirements concerning environmental quality. We have made, and will continue to make, expenditures for environmental compliance and protection. Expenditures for compliance with environmental laws have not had, and are not expected to have, a material effect on our capital expenditures, results of operation or competitive position.
Employees
The Company currently has: three officers and one director. These individuals perform all of the job functions for the Company. The Company has no intention at this time to add employees until it can become a profitable entity. The Company from time to time may retain independent consultants in connection with its operations.
(i)The Company's performance is dependent on the performance of its officers. In particular, the Company's success depends on their ability to develop a business strategy which will be successful for the Company.
(ii)The Company does not carry key person life insurance on any of its personnel. The loss of the services of any of its executive officers or other key employees could have a material adverse effect on the business, results of operations and financial condition of the Company. The Company's future success also depends on its ability to retain and attract highly qualified technical and managerial personnel.
(iii)There can be no assurance that the Company will be able to retain its key managerial and technical personnel or that it will be able to attract and retain additional highly qualified technical and managerial personnel in the future. The inability to attract and retain the technical and managerial personnel necessary to support the growth of the Company's business, due to, among other things, a large increase in the wages demanded by such personnel, could have a material adverse effect upon the Company's business, results of operations and financial condition.
Item 1A.
Item 1A. Risk Factors.
Risk Factors Relating to Our Company
RISK FACTORS RELATING TO OUR FINANCIAL CONDITION
1. We have a limited historical financial information upon which you may evaluate our performance.
We have a limited history and we are subject to all risks inherent in a developing business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with manufacturing specialty enzymes and the competitive and regulatory environment in which we operate. You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages of research. We may not successfully address these risks and uncertainties or successfully implement our operating and acquisition strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment. Even if we accomplish these objectives, we may not generate positive cash flows or profits we anticipate in the future.
2. As we have HAD minimal revenues since our inception, there is no assurance that we will be able to continue as a going concern.
Our financial statements included with this Annual Report for the year ended June 30, 2016, have been prepared assuming that we will continue as a going concern. Our auditors have made reference to the substantial doubt as to our ability to continue as a going concern in their audit report on our audited financial statements for the year ended June 30, 2016. Because the Company has been issued an opinion by its auditors that substantial doubt exists as to whether the Company can continue as a going concern, it may be more difficult for the Company to attract investors. Since our auditors have raised a substantial doubt about our ability to continue as a going concern, this typically results in greater difficulty to obtain loans than businesses that do not have a qualified auditors opinion. Additionally, any loans we might obtain may be on less advantageous terms. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the sale of our future enzyme products. We plan to seek additional funds through private placements of our common stock. You may be investing in a company that will not have the funds necessary to continue to deploy its business strategies. If we are not able to achieve revenues or find financing, then we likely will be forced to cease operations and investors will likely lose their entire investment.
3. WE MAY NOT BE ABLE TO ATTAIN PROFITABILITY WITHOUT ADDITIONAL FUNDING, WHICH MAY BE UNAVAILABLE.
We have prepared audited financial statements for the year end for June 30, 2016, which show we have cash and cash equivalents of $137,192. Our ability to continue to operate as a going concern is fully dependent upon the Company obtaining sufficient financing to continue its development and operational activities. The ability to achieve profitable operations is in direct correlation to our ability to generate revenues or raise sufficient financing. It is important to note that even if the appropriate financing is received, there is no guarantee that we will ever be able to operate profitably or derive any significant revenues from its operation. Management believes, for the next twelve months, it has sufficient funds available to implement its business, on a limited basis.
4. IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY AGAINST LARGER BIOMEDICAL MANUFACTURERS WITH GREATER RESOURCES, OUR PROSPECTS FOR FUTURE SUCCESS WILL BE JEOPARDIZED.
We will face intense competition from larger and better-established biomedical manufacturers that may prevent us from ever becoming a significant company. Management expects the competition to intensify in the future. Pressures created by our future competitors could negatively impact our business, results of operations and financial condition.
Many of our potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing, technical and other resources. In addition, our competitors may acquire or be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed competitors. Therefore, some of our competitors with other revenue sources may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to product development. There can be no assurance that we will be able to compete successfully against current and future competitors.
COMPANY RISK FACTORS
5. IF WE ARE UNABLE TO RESPOND EFFECTIVELY AS TECHNOLOGIES AND MARKET TRENDS EMERGE, OUR COMPETITIVE POSITION AND OUR ABILITY TO GENERATE REVENUES AND PROFITS MAY BE HARMED.
To be successful, we must keep pace with rapid changes in enzyme research and technology, changing customer requirements, new innovations by competitors and evolving industry standards, any of which could render our existing products obsolete if we fail to respond in a timely manner. For example, if new enzyme applications are introduced by our competitors not part of our technology, or if effective new sources of enzymes are discovered, our future products and technology could become less competitive or obsolete. If competitors develop innovative applications and technology that is superior to ours or if we fail to accurately anticipate market trends and respond on a timely basis with our own innovations, our potential competitive position may be harmed and we may not achieve sufficient growth in our revenues to attain, or sustain, profitability.
6. THERE MAY BE A POSSIBLE INABILITY TO FIND SUITABLE EMPLOYEES.
In order to implement our business plan, management recognizes that additional staff will be required. No assurances can be given that we will be able to find suitable employees that can support our needs or that these employees can be hired on favorable terms. We do not plan to hire any additional employees until our cash flows can justify the expense. When we are ready to hire new employees, we will most likely look for people who have some type of chemistry experience or a working knowledge of chemical engineering, which may be difficult to find.
7. WE MAY BE LIABLE FOR THE PRODUCTS WE PLAN TO PRODUCE.
There is no guarantee that the level of insurance coverage we secure will be adequate to protect us from risks associated with claims that exceed the level of coverage maintained. As a result of our limited operations to date, no threatened or actual claims have been made upon us for product liability.
8. THE ENZYME COMPOUND INDUSTRY IS SUBJECT TO PRICING PRESSURES THAT MAY CAUSE US TO REDUCE THE FUTURE GROSS MARGINS FOR OUR PRODUCTS.
If we are able to become operational, management believes to be competitive, we might be required to adjust our prices in response to industry-wide pricing pressures. Our competitors may possibly source from regions with lower costs than those of our sourcing partners and those competitors may apply such additional cost savings to further reduce prices.
We are not currently operational. If we are able to become operational, management believes increased customer demands for markdown allowances, incentives and other forms of economic support might reduce our gross margins and affect our profitability. Our financial performance may be negatively affected by these pricing pressures if we are forced to reduce our prices without being able to correspondingly reduce our costs for finished goods or if our costs for finished goods increase and we cannot increase our prices. Management wants investors to know that there are no assurances that we may ever achieve acceptable operating margins, we may never obtain any share of the market, or be able to establish any value for our enzyme products.
9. THE LOSS OF ONE OR MORE OF OUR FUTURE SUPPLIERS OF RAW MATERIALS MAY INTERRUPT OUR SUPPLIES.
We plan to purchase our raw materials from a limited number of third-party suppliers. We do not have any material or long-term contracts in place with any suppliers at this time. Furthermore, our future suppliers also purchase the components of our products from a limited number of suppliers. The loss of one or more of these vendors could interrupt our supply chain and impact our ability to deliver products to our customers, which would have a material
adverse effect on our future net sales and profitability.
10. INCREASES IN THE PRICE OF RAW MATERIALS USED TO MANUFACTURE OUR ENZYME PRODUCTS COULD MATERIALLY INCREASE OUR COSTS AND DECREASE OUR PROFITABILITY.
The prices for enzyme components are dependent on the market price for the raw materials used to produce them. There can be no assurance that prices for these and other raw materials will not increase in the near future.
These raw materials are subject to price volatility caused by supply conditions, power outages, government regulations, economic climate and other unpredictable factors. Any raw material price increase would increase our cost of sales and decrease our future profitability unless we are able to pass higher prices on to our customers. In addition, if one or more of our competitors is able to reduce its production costs by taking advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures from those competitors and may be forced to reduce our prices or face a decline in net sales, either of which could have a material and adverse effect on our business, results of operations and financial condition.
11. We do not own equipment with the capacity to manufacture products on a commercial scale. If we are unable to access the capacity to manufacture products in sufficient quantity, we may not be able to commercialize our products or generate significant sales.
We have only limited experience in enzyme manufacturing, and we do not have our own internal capacity to manufacture specialty enzyme products on a commercial scale. We expect to be dependent to a significant extent on third parties for commercial scale manufacturing of our specialty enzyme products. We do not have any arrangements with third parties that have the required manufacturing equipment and available capacity to manufacture our commercial enzymes. While we plan to build our own pilot development facility, we will continue to depend on third parties for large-scale commercial manufacturing. Any difficulties or interruptions of service with our third party manufacturers or our own pilot manufacturing facility could disrupt our research and development efforts, delay our commercialization of specialty enzyme products, and harm our relationships with our specialty enzyme strategic partners, collaborators, or customers.
12. We may pursue specialty enzyme products that ultimately require more resources than we anticipate or which may be technically unsuccessful.
We currently have only limited resources and capability to develop, manufacture, market, sell, or distribute specialty enzyme products on a commercial scale. We will determine which specialty enzyme products to pursue independently based on various criteria, including: investment required, estimated time to market, regulatory hurdles, infrastructure requirements, and industry-specific expertise necessary for successful commercialization. At any time, we may modify our strategy and pursue collaborations for the development and commercialization of some specialty enzyme products that we had intended to pursue independently. We may pursue specialty enzyme products that ultimately require more resources than we anticipate or which may be technically unsuccessful. In order for us to commercialize more specialty enzyme products
directly, we would need to establish or obtain through outsourcing arrangements additional capability to develop, manufacture, market, sell, and distribute such products. If we are unable to successfully commercialize specialty enzyme products resulting from our internal product development efforts, we will continue to incur losses in our specialty enzymes business, as well as in our business as a whole. Even if we successfully develop a commercial specialty enzyme product, we may not generate significant sales and achieve profitability in our specialty enzymes business, or in our business as a whole.
13. We may not be able to develop manufacturing capacity sufficient to meet demand in an economical manner or at all.
If demand for enzyme products increases beyond the scope of our future production facilities, we may incur significant expenses in the expansion and/or construction of production facilities and increases in personnel in order to increase production capacity. Any unanticipated expansion requirements may cause complications for delays in production, which could result in a loss of business and customers. To finance the expansion of a commercial-scale production facility is complex and expensive. We cannot assure you that we will have the necessary funds to finance the development of production facilities, or that we will be able to develop this infrastructure in a timely or economical manner, or at all.
14. Our officers have no experience in operating an operational specialty enzyme company, and have no experience in evaluating the success of future products.
Our executive officers, who have chemical engineering education and a pharmaceutical background, have no experience in operating a specialty enzyme Company. Their work history includes working for an antibiotic laboratory and working as a production engineer. They have no experience in independently developing, manufacturing, marketing, selling, and distributing commercial specialty enzyme products. Due to their lack of experience, our executive officers may make wrong decisions and choices regarding selection of products to pursue on behalf of the Company. Consequently, our Company may suffer irreparable harm due to management's lack of experience in this industry. As a result we may have to suspend or cease operations, which will result in the loss of your investment.
15. We expect that certain enzyme development will require us to use hazardous materials in our business. Any claims relating to improper handling, storage, or disposal of these materials could be time consuming and costly and could adversely affect our business and results of operations.
Our research and development processes may involve the controlled use of hazardous materials, including chemical, and biological materials. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state, and local laws and regulations govern the use, manufacture, storage, handling, and disposal of these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. In addition, compliance with applicable environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development, or production efforts. We plan to purchase insurance to protect us from potential losses; however, at this time, we do not have any insurance coverage for accidental contamination, discharge or any resultant injury from these hazardous materials.
16. We are subject to all governmental rules, laws and regulations relating to the biomedicals industry in the U.S.
We are subject to all governmental rules, laws and regulations relating to the biomedical industry in the U.S., and we fully intend to comply therewith.
Biologically derived enzyme products are regulated in the United States based on their application, by either the United States Food and Drug Administration ("FDA"), or the Environmental Protection Agency ("EPA"), or, in the case of plants and animals, the United States Department of Agriculture ("USDA"). In addition to regulating drugs, the FDA also regulates food and food additives, feed and feed additives, and GRAS (Generally Recognized As Safe) substances used in the processing of food. The EPA regulates biologically derived chemicals not within the FDA's jurisdiction.
Under current FDA policy, our future products will most likely come within the FDA's jurisdiction, may be subject to lengthy FDA reviews and unfavorable FDA determinations if they raise safety questions which cannot be satisfactorily answered, if results do not meet regulatory requirements or if they are deemed to be food additives whose safety cannot be demonstrated. An unfavorable FDA ruling could be difficult to resolve and could prevent a product from being commercialized. Even after investing significant time and expenditures, we may not obtain regulatory approval for any drug products that incorporate our technologies or inventions.
The EPA regulates biologically derived chemical substances not within the FDA's jurisdiction. An unfavorable EPA ruling could delay commercialization or require modification of the production process resulting in higher manufacturing costs, thereby making the product uneconomical. In addition, the USDA may prohibit genetically engineered plants from being grown and transported except under an exemption, or under controls so burdensome that commercialization becomes impracticable. Our future products may not be exempted by the USDA.
Further, there is no assurance the governmental agencies having jurisdiction over us, our operations and properties, will not enact laws, rules and/or regulations in the future which may have an adverse impact on us and our operations.
17. Our results of operations may be adversely affected by environmental, health and safety laws, regulations and liabilities.
We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. We will need to meet a significant number of environmental and other regulations and standards established by various federal, state and local regulatory agencies.
In addition, some of these laws and regulations require our contemplated facilities to operate under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. As these regulations and standards evolve, and if new regulations or standards are implemented, we may be required to modify our proposed facilities and processes or develop and support new facilities or processes and this will increase our costs. Any failure to comply, or delays in compliance, with the various existing and evolving industry regulations and standards could prevent or delay our production of specialty enzyme products. Any inability to address these requirements and any regulatory changes could have a material adverse effect on our specialty enzyme business, financial condition and operating results.
A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns.
18. BERKELEY CLINIC, LC controls 63.6% OF THE TOTAL VOTING POWER OF OUR CAPITAL that will allow them to control the Company.
As of September 20, 2016, Berkeley Clinic, LC ("Berkeley") controls approximately 63.6% of the total voting power of our outstanding capital stock. As a result, Berkeley will have the ability to control substantially all matters submitted to our stockholders for approval including:
a) election of our board of directors;
b) removal of any of our directors;
c) amendment of our Articles of Incorporation or bylaws; and
d) adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.
As a result of its ownership of all of the 2,500,000 outstanding shares of Series A Preferrd Stock, Berkeley has the ability to influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by our officers, directors and 5% stockholders could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in the Company may decrease. Berkeley's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
19. Some of our officers and directors have other business ventures.
As disclosed in their biographies contained herein, some of our officers and directors work with other companies in addition to their work for us. John Dean Harper, Esq., our Corporate Secretary and Interim Accounting Officer, has his own law practice. Therefore, it is possible that a conflict of interest with regard to his time may arise based on his involvement in other activities. Although none of our officers and directors are currently working for any other companies in the biomedical industry, they are not prohibited from doing so.
If one or more of our officers or directors began working for another biomedical company it could take away from the time they currently spend working on our business affairs and could create a potential conflict of interest. We do not have any employment agreements with any of our officers, which means they are not obligated to continue to work for the Company and can resign their positions whenever they are inclined to do so.
RISK FACTORS RELATING TO OUR COMMON STOCK AND THIS OFFERING
20. We have never declared dividends on our common stock and do not plan to do so in the foreseeable future.
We intend to retain any future earnings to finance the operation and expansion of its business and do not anticipate paying any cash dividends in the foreseeable future. As a result, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any. You should not rely on an investment in our company if you require dividend income. The only possibility of any income to investors would come from any rise in the market price of your stock, which is uncertain and unpredictable.
A holder of common stock will be entitled to receive dividends only when, as, and if declared by the Board of Directors out of funds legally available therefore. We have never issued dividends on our common stock. Our Board of Directors will determine future dividend policy based upon our results of operations, financial condition, capital requirements, and other circumstances.
21. Holders of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.
Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our existing stockholders in connection with any future issuance of our common stock, the future issuance of additional shares of our common stock would cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of common stock that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value of our issued and outstanding shares could have a material effect on the market value of the shares.
22. We do not have insurance and, therefore, liability we incur could have substantial impact on our ability to continue as a going concern.
We have limited capital and, therefore, we do not currently have a policy of insurance against liabilities arising out of the negligence of our officers and directors and/or arising from deficiencies in any of our business operations. Even assuming we obtained insurance, there is no assurance that such insurance coverage would be adequate to satisfy any potential claims made against us, our officers and directors, or our business operations or assets. Any such liability which might arise could be substantial and would likely exceed our total assets. However, our Articles of Incorporation and Bylaws provide for indemnification of officers and directors to the fullest extent permitted under Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officer and controlling persons, it is the opinion of the U. S. Securities and Exchange Commission that such indemnification is against public policy, as expressed in the Act, and is therefore, unenforceable.
23. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud and as a result, investors may be misled and lose confidence in our financial reporting and disclosures, and the price of our common stock may be negatively affected.
The Sarbanes-Oxley Act of 2002 requires that we report annually on the effectiveness of our internal control over financial reporting. A "significant deficiency" means a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting. A "material weakness" is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
As of June 30, 2016 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties consistent with control objectives.
In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Failure to provide effective internal controls may cause investors to lose confidence in our financial reporting and may negatively affect the price of our common stock. Moreover, effective internal controls are necessary to produce accurate, reliable financial reports and to prevent fraud. If we have deficiencies in our internal controls over financial reporting, these deficiencies may negatively impact our business and operations.
24. LOW-PRICED STOCKS MAY AFFECT THE RESELL OF OUR SHARES.
Penny Stock Regulation Broker-dealer practices in connection with transactions in "Penny Stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock; the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Since the Company's common stock has a trading price of less than $5.00 per share and is not traded on any exchange,it is subject to the penny stock rules and investors may find it more difficult to sell their securities, should they desire to do so.
25. IN THE FUTURE, WE WILL INCUR INCREMENTAL COSTS AS A RESULT OF OPERATING AS A PUBLIC COMPANY, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO COMPLIANCE INITIATIVES.
Because we are a fully reporting company with the SEC, we will incur additional legal, accounting and other expenses. Moreover, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well as new rules subsequently implemented by the SEC, have imposed various new requirements on public companies, including requiring changes in corporate governance practices. Our management will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2.
Item 2. Properties.
Our offices are currently located at 8440 W. Lake Mead, Suite 214, Las Vegas, NV 89128. Management believes that its current facilities are adequate for its needs, and that, should it be needed, suitable additional space will be available to accommodate expansion of the Company's operations on commercially reasonable terms, although there can be no assurance in this regard.
Item 3.
Item 3. Legal Proceedings.
From time-to-time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
In November 2015, the Company filed a complaint titled EnzymeBioSystems v. Edward C. Zimmerman, III, Case No. A-15-727138-CV, Department, filed in the District Court of the State of Nevada for Clark County. EnzymeBioSystems, the plaintiff in this matter, brings an action against Edward C. Zimmerman III, the defendant, for reimbursement of $38,567.95 in unauthorized expenditures. While considerable uncertainty exists, it is difficult to ascertain the outcome of any litigation.
Item 4.
Item 4. Mine Safety Disclosure.
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
EnzymeBioSystems Common Stock, $0.001 par value, was cleared for quotation on the OTC-Bulletin Board on November 4, 2010, under the symbol: ENZB. The range of high and low closing trading price information for each quarter in the past two years is set forth below. These quotations reflect inter-dealer prices without retail mark-up, mark-down or commission.
*All numbers have been adjusted for a 1-for-2 reverse split that took place on June 18, 2015.
(b) Holders of Common Stock
As of September 20, 2016, the Company has a total of 16,641,822 common shares issued and outstanding held by approximately one hundred (100) shareholders.
(c) Dividends
In the future we intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Common Stock will be at the sole discretion of board of directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant.
(d) Securities Authorized for Issuance under Equity Compensation Plans
There are no outstanding grants or rights or any equity compensation plan in place.
(e) Recent Sales of Unregistered Securities
The Company did not sell any stock during the fiscal year ended June 30, 2016.
(f) Preferred Stock
On January 28, 2011, EnzymeBioSystems entered into an Exclusive Technology License and Patents Agreement with Berkeley Clinic LC, an Arizona Limited Liability Company, whereby Berkeley Clinic LC was granted:
1)an exclusive fifty (50) percent ownership in all EnymeBioSystems proprietary enzyme products;
2)the assignment of all rights, title and interest in all future patents (domestic and foreign) granted in all enzyme products developed by EnzymeBioSystems; and,
3)and one million (1,000,000) unregistered restricted Series A Preferred shares of EnzymeBioSystems,
in exchange for One Hundred Fifty Thousand ($150,000) Dollars. The Series A Preferred Shares carry a voting weight equal to ten (10) Common Shares. The shares of Series A Preferred Stock are not redeemable and cannot be converted into Common Shares, unless it is approved by the Board of Directors and agreed upon by the Series A Preferred Shareholders. The Company used these funds to further capitalize the Company, and work towards the development of proprietary enzyme products.
On May 2, 2014, EnzymeBioSystems issued 4,000,000 unregistered restricted shares of Series A Preferred Stock to Berkeley Clinic, LC in order to satisfy the terms of a Purchase Agreement with Berkeley. The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale.
The 2,500,000 (reverse split adjusted) shares of Series A Preferred Stock issued and outstanding are not redeemable and cannot be converted into Common Shares, unless it is approved by the Board of Directors and agreed upon by the Series A Preferred Shareholders.
(g) Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended June 30, 2016 or June 30, 2015.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview of Current Operations
EnzymeBioSystems plans to contract manufacturer and market specialty enzymes and enzyme related products.
Results of Operations for the year ended June 30, 2016
We generated no revenues since our inception on June 26, 2009 through June 30, 2016. We do not anticipate earning any significant revenues until such time as we can produce and market specialty enzyme products. We are presently in the development stage of our business and we can provide no assurance that we will be successful in finding a market for our specialty enzyme products.
Since our inception on June 26, 2009 through June 30, 2016, we experienced a net loss of $(1,126,558). For the year ended June 30, 2016, we had an operating loss of $(125,359) as compared to a loss of $(178,304) for the same period last year. Our loss for the year ended June 30, 2016 was primarily attributable to officer compensation of $71,000, legal fees of $6,300, research and development of $11,080, and auditing and review fees of $22,500.
Revenues
We generated no revenues for the period from June 26, 2009 (inception) through June 30, 2016. We do not anticipate generating any significant revenues until we can develop a market for our specialty enzymes.
Liquidity and Capital Resources
Our balance sheet as of June 30, 2016 reflects current assets of $140,042 and current liabilities of $4,100.
Notwithstanding, we anticipate generating losses and therefore we may be unable to continue operations in the future. We anticipate we will require additional capital where we would have to issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
We believe we have sufficient cash on hand to keep our Company fully reporting for the next twelve (12) months. If we do not have sufficient cash, our directors are committed to contribute sufficient cash to keep the business operational for the next twelve months.
Future Financings
We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing to fund our research and development activities.
Going Concern
The financial conditions evidenced by the accompanying financial statements raise substantial doubt as to our ability to continue as a going concern. Our plans include obtaining additional capital through debt or equity financing. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Summary of any product research and development that we will perform for the term of our plan of operation.
For the fiscal year ending June 30, 2016, the Company spent $11,080 in product research and development. As the Company moves forward, management expects to spend a significant amount of monies on animal studies and the research required to obtain an IND from the Food and Drug Administration.
Expected purchase or sale of property and significant equipment
We do not anticipate the purchase or sale of any property or significant equipment; as such items are not required by us at this time.
Significant changes in the number of employees
As of June 30, 2016, we did not have any employees. We are dependent upon our officers and director for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material
to investors.
Critical Accounting Policies and Estimates
Revenue Recognition: The Company recognizes revenue on an accrual basis as it invoices for services. Revenue is generally realized or realizable and earned when all of the following criteria are met: 1) persuasive evidence of an arrangement exists between the Company and our customer(s); 2) services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.
Recent Pronouncements
The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
EnzymeBioSystems Financial Statements
June 30, 2016
Financial Statements of EnzymeBioSystems:
Page
Report of Independent Registered Public Accounting Firm
Balance Sheets as of June 30, 2016 and June 30, 2015
Statements of Operations for the years ended June 30, 2016 and June 30, 2015
Statements of Stockholders' Equity for the years ended June 30, 2016 and June 30, 2015
Statements of Cash Flows for the years ended June 30, 2016 and June 30, 2015
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of EnzymeBioSystems
I have audited the accompanying balance sheets of EnzymeBioSystems (the “Company”) as of June 30, 2016 and 2015 and the related statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EnzymeBioSystems as of June 30, 2016 and 2015 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s present financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Michael T. Studer CPA P.C.
	Michael T. Studer CPA P.C.
Freeport, New York
September 20, 2016
EnzymeBioSystems
Balance Sheets
The accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Statements of Operations
The accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Statements of Stockholders’ Equity (A)
(A) As retroactively adjusted to reflect the June 18, 2015 reverse stock split (see Note 1).
The accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
NOTE 1 - GENERAL ORGANIZATION AND BUSINESS
EnzymeBioSystems (the "Company") was incorporated under the laws of the state of Nevada on June 26, 2009. The Company was organized to conduct any lawful business. The Company contract manufactures specialty enzymes and enzyme related products. To date, the Company has had no revenues.
Effective June 18, 2015, the Company effected a 1-for-2 reverse stock split of its common stock (which reduced the issued and outstanding shares of common stock from 33,283,587 shares to 16,641,822 shares) and its Series A Preferred Stock (which reduced the issued and outstanding shares of Series A Preferred Stock from 5,000,000 shares to 2,500,000 shares.)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The basis is United States generally accepted accounting principles.
Earnings per Share
The basic earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since inception.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.
Research and development costs
Research and development costs are expensed as incurred. The amounts of costs expensed for the years ended June 30, 2016 and 2015 were $11,080 and $17,698, respectively.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
Year-end
The Company has selected June 30 as its year-end.
Advertising
Advertising is expensed when incurred. There has been no advertising during the periods presented herein.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company applies the provisions of ASC 605, Revenue Recognition ("ASC 605"). ASC 605 provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for the disclosure of revenue recognition policies. The Company will recognize revenue related to product sales when (i) persuasive evidence of the arrangement exists, (ii) shipment has occurred, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. For the period from June 26, 2009 (inception) to June 30, 2016, the Company has not recognized any revenues.
Recent accounting pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company's financial position and results of operations from adoption of these standards is not expected to be material.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred net losses of $(1,126,558) for the period from June 26, 2009 (inception) to June 30, 2016. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.
Management has plans to seek additional capital through private placements and public offerings of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.
NOTE 4. STOCKHOLDERS' EQUITY
The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 195,000,000 shares of its $0.001 par value common stock.
Effective June 18, 2015, the Company effected a 1-for-2 reverse stock split of its common stock (which reduced the issued and outstanding shares of common stock from 33,283,587 shares to 16,641,822 shares) and its Series A Preferred Stock (which reduced the issued and outstanding shares of Series A Preferred Stock from 5,000,000 shares to 2,500,000 shares).
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
NOTE 4. STOCKHOLDERS' EQUITY (Continued)
Preferred Stock
On January 28, 2011, EnzymeBioSystems entered into an Exclusive Technology License and Patents Agreement with Berkeley Clinic, LC, an Arizona Limited Liability Company, whereby Berkeley Clinic LC was granted:
1) an exclusive fifty (50) percent ownership in all EnymeBioSystems proprietary enzyme products; 2) the assignment of all rights, title and interest in all future patents (domestic and foreign) granted in all enzyme products developed by EnzymeBioSystems; and, 3) 500,000 unregistered restricted Series A Preferred shares of EnzymeBioSystems, in exchange for One Hundred Fifty Thousand ($150,000) Dollars. The Series A Preferred Shares carry a voting weight equal to ten (10) Common Shares per share of preferred stock.
On May 2, 2014, EnzymeBioSystems issued 2,000,000 unregistered restricted shares of Series A Preferred Stock to Berkeley Clinic, LC in order to satisfy the terms of a Purchase Agreement with Berkeley. The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale.
The shares of Series A Preferred Stock are not redeemable and cannot be converted into Common Shares, unless it is approved by the Board of Directors and agreed upon by the Series A Preferred Shareholders. The shares of Series A Preferred Stock have no dividend rights but have a liquidation preference for funds paid for the Series A Preferred Stock shares.
Common Stock
On June 29, 2009, the Company issued 15,250,000 shares of its $0.001 par value common stock to its nine founders for $30,500 in cash.
On March 26, 2010, the Company issued 500,000 shares of its $0.001 par value common stock to approximately 28 qualified investors for $10,000 in cash.
On May 2, 2014, the Company entered into a Purchase Agreement with Berkeley Clinic, LC ("Berkeley") whereby it purchased Berkeley's ownership rights, title and interest in all patents and technology developed by EnzymeBioSystems (which rights were acquired by Berkeley on January 28, 2011) and whereby it purchased 5,500,000 unregistered restricted shares of common stock owned by Berkeley in exchange for issuing 2,000,000 Series A Preferred shares and cash of $438,000 to Berkeley. The $438,000 cash paid to Berkeley has been included in operating expenses in the Statement of Operations for the year ended June 30, 2014. The 5,500,000 shares were returned to the Company and cancelled in the year ended June 30, 2015.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
From March 2014 to June 2014, the Company conducted a Regulation S offering in which it sold 6,391,796 shares of the Company's $0.001 par value common stock in exchange for cash of $980,000. These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and were issued under Regulation S to six (6) foreign entities who attested they are accredited investors who are not citizens nor residents of the USA. The issuance of these shares by us did not involve a public offering. The offering was not a "public offering" as defined in Section 4(2) due to the fact that only six (6) foreign entities were involved in the offering, the size of the offering, the manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. The management of the foreign entities were known to us and our management, through pre-existing business relationships, as a long standing business associate. We did not engage in any form of general solicitation or general advertising in connection with these transactions. The investors were provided access to all material information, which they requested and all information necessary to verify such information and was afforded access to our management in connection with this transaction. These foreign entities acquired these securities for investment and not with a view toward distribution, acknowledging such intent to us. They understood the ramifications of their actions. The sale of these shares were to the following six foreign entities: Fleetwood Investments, Inc. (who paid $105,000 cash for 684,932 shares), Pigeon Rock Group (who paid $25,000 cash for 163,079 shares), Quattro Associates (who paid $580,000 cash for 3,782,616 shares), Rycon Corporation (who paid $60,000 cash for 391,305 shares), STSV Investments (who paid $105,000 cash for 684,932 shares) and Oceanside Strategies, Inc. (who paid $105,000 cash for 684,932 shares). In addition, these investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
NOTE 5 - RELATED PARTY TRANSACTIONS
On September 21, 2015, the Company's then chief financial officer (appointed October 20, 2014) was dismissed for his alleged payment of unauthorized expenses totaling approximately $36,018 ($25,698 in the year ended June 30, 2015 and $10,320 in the three months ended September 30, 2015). To date, efforts to recover any of the $36,018 from the Company's former chief financial officer have not been successful.
The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 6 - PROVISION FOR INCOME TAXES
The Company accounts for income taxes under ASC 740, "Accounting for Income Taxes", which requires use of the liability method. ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
EnzymeBioSystems
Notes to Financial Statements
June 30, 2016 and 2015
NOTE 6 - PROVISION FOR INCOME TAXES - Continued)
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income (loss) before provision for income taxes. The sources and tax effects of the differences are as follows:
U.S federal statutory rate (35.0%)
Increase in valuation allowance 35.0%
Provision for income taxes - %
Deferred tax assets as of June 30, 2016 and June 30, 2015, are calculated as follows:
Deferred tax assets:
Net operating loss carry forward $394,295 $350,420
Less: valuation allowance (394,295) (350,420)
Net deferred tax assets $ - $ -
During the year ended June 30, 2016, the Company recorded an increase in the valuation allowance of $43,875, as compared to $62,438 for the previous year, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. There was no other activity in the valuation allowance account during the year ended June 30, 2016.
The net operating loss carryforward of approximately $1,126,558 at June 30, 2016 expires commencing in year 2029.
Item 9.
Item 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure.
(a) Resignation of Seale & Beers, CPAs
On October 9, 2015, EnzymeBioSystems (the “Company”) was notified by its independent registered public accounting firm, Seale & Beers, CPAs (“Seale & Beers”), that it was resigning its engagement as the Company’s independent registered public accounting firm.
The audit reports of Seale & Beers on the financial statements for the fiscal years ended June 30, 2014 and 2013 did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of Seale & Beers, dated October 9, 2014 on the consolidated financial statements of the Company as of and for the fiscal years ended June 30, 2014 and 2013 noted that the Company’s history of no revenues, recurring losses and recurring negative cash flow from operating activities and an accumulated deficit, raise substantial doubt about the Company’s ability to continue as a going concern.
During the fiscal years ended June 30, 2014 and June 30, 2013, and the subsequent period through March 31, 2015, there were no disagreements (as defined in Item 304(a)(1)(iv) of regulation S-K and the related instructions to Item 304 of Regulation S-K) with Seale & Beers, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Seale & Beers’ satisfaction, would have caused Seale & Beers to make reference to the subject matter of the disagreement in its reports on the consolidated financial statements for such years.
During the fiscal years ended June 30, 2014 and June 30, 2013, and the subsequent period through March 31, 2015, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K), other than the material weaknesses reported in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with respect to such periods.
(b) Engagement of Michael T. Studer CPA P.C.
On October 9, 2015 (the "Engagement Date"), the Registrant's Board of Directors approved the appointment of and engaged Michael T. Studer CPA P.C., 111 West Sunrise Highway, 2nd Floor East, Freeport, NY 11520, as the Registrant's independent registered public accounting firm. During the Registrant's fiscal years ended June 30, 2014 and 2013, the subsequent interim periods thereto, and through the Engagement Date, neither the Registrant nor anyone on its behalf consulted the Current Accountants regarding either (1) the application of accounting principles to a specified transaction regarding the Company, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements; or (2) any matter regarding the Company that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
Management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, management concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses."
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
·pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met
and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2016. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of June 30, 2016.
A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of the year related to the preparation of management's report on internal controls over financial reporting required for this annual report on Form 10-K, management concluded that we had material weaknesses in our control environment and financial reporting process which consisted of the following:
Deficiencies Related to the Design and Operation of Certain Company-Level Controls
•
Non-compliance by the former chief financial officer with regards to unauthorized travel and entertainment expenses;
•
Unauthorized personal charges by the former chief financial officer.
Deficiencies Related to the Design and Operation of Certain Accounting Procedures
· Inadequate accounting procedures responsible for processing payment requests by our former chief financial officer related to travel and entertainment expenditures;
· Lack of clear procedures for ensuring appropriate expense controls.
In consultation with our board of directors and new interim accounting officer, we are implementing certain remediation measures, and we are in the process of creating and implementing additional remediation plans for the internal control deficiencies noted above. The remediation activities include:
Design and Operation of Certain Company-Level Controls
Management has conducted an internal investigation relating to the unauthorized travel and entertainment expenses, incurred by the former chief financial officer. We have identified various expenses by the Company’s former chief financial officer since February, 2015 that were inconsistent with Company policies or that lacked sufficient documentation. On September 21, 2015, the former chief financial officer was dismissed for cause, based on a breach of his fiduciary duties. The Board has subsequently appointed a new interim accounting officer and corporate secretary
We will implement a check-and-balance system to monitor all expenses.
Design and Operation of Certain Accounting Procedures
We expect to complete the following remediation during the remainder of 2016.
We will adopt a new policy and procedure that authorizes and reviews the accounting oversight by persons at the appropriate levels within the Company.
Changes in Internal Controls over Financial Reporting
On September 21, 2015, we replaced our former chief financial officer. We added a new interim accounting officer who has experience related to the application of generally accepted accounting principles and U. S. Securities and Exchange Commission rules and regulations as they pertain to financial reporting. We believe these personnel changes will strengthen our controls related to financial reporting. Other than these changes, there have been no other changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Director, Executive Officers and Corporate Governance.
The following table sets forth certain information regarding our current director and executive officers. Our executive officers serve one-year terms. Set forth below are the names, ages and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years of our current director and executive officers.
All directors hold office until the next annual meeting of stockholders of the Company and until their successors have been elected and qualified. Directors currently receive no fees for services provided in that capacity.
Set forth below is a brief description of the background and business experience of our officers and directors.
Gary Rojewski, Chief Executive Officer and Director
2014 - Present Chief Executive Officer of EnzymeBioSystems
2013 - 2014 Account Executive Managed Markets Actavis, Inc., Parsippany, NJ
2009 - 2013 Account Executive Managed Markets Warner Chilcott Pharmaceuticals, Rockaway, NJ
1984 - 2009 Sales Representative, District Manager, Account Executive Procter & Gamble Pharmaceuticals, Cincinnati, OH
1976 - 1984 Sales Representative at W. Berman Company, Ohio
1975 - 1976 Admissions Recruiter at Davis Junior College/I.T.T. Technical College.
Education
1971 - 1975
University of Findlay
Findlay, OH
B.A. Communications
John Dean Harper, Esq., Corporate Secretary and Interim Accounting Officer
Mr. John Dean Harper, Esq., is a practicing attorney in Las Vegas, NV. He was appointed as Corporate Secretary and Interim Accounting Officer because of his years of experience as general counsel for the Las Vegas Police Protective Association. Management believes he can bring stability to the finances of the Company and he can conduct a forensic investigation to determine any wrongdoing.
Mr. Harper currently has a private law practice focusing primarily on corporate law, labor/employment and litigation.
Work Experience:
Dates Name of Organization Job Title
2015-Present Sitescapes LLC, President
2015-Present Thunderhill Consulting Limited, Owner
2014-Present RD Heritage Group, LLC, Manager
1996-Present John Dean Harper, Harper Law Office
1996-2013 Nevada Conf. of Police and Sheriffs, General Counsel
1999-2013 Las Vegas Police Protective Assoc., Chief General Counsel
2007-2010 Tone in Twenty, President, Treasurer, Director
2001-2005 Absolute Glass Protection, Inc., Pres., Treasurer, Director
1999-Present Injured Police Officers Fund, General Counsel
2000-2002 Lock-Gun.com, President
1999-2002 Starbase-1 Coffee Co. Ltd., President
1996-1998 Gugino & Schwartz, Assoc. Attorney
1991-1995 Redmon & Harper, Partner
1989-1991 Schottenstein, Zox and Dunn, Assoc. Attorney
1986-1989 Univ. of Cincinnati, College of Law, Law Student
Education: Mr. Harper is a graduate of Ohio University in Athens, Ohio with a Bachelors of Business Administration Degree, and a double major in Business Pre-Law and General Business. He is also a graduate of the University of Cincinnati, College of Law with a Juris Doctor.
Ashot Martirosyan, Chief Scientific Officer
Mr. Martirosyan was the head of the "Anti-Biotics and Enzyme Inhibitors Laboratory" of "Institute of Organic Chemistry" in Yerevan, Armenia until November 2008. He moved to USA November 2008 and started preparing his research results and scientific materials for publications.
Mar. 2009 -Present
Officer of EnzymeBioSystems.
1992 - 2008
Institute of Fine Organic Chemistry,
National Academy of Sciences, Republic of Armenia
Head of Antibiotics Laboratory
1984 - 1992
Institute of Fine Organic Chemistry,
National Academy of Sciences, Republic of Armenia
Senior Researcher
1976 - 1984
Institute of Fine Organic Chemistry,
National Academy of Sciences, Republic of Armenia
Antibiotics Laboratory Researcher
1974 - 1976
Optical-Mechanical Corporation - "Astro"
Head of Chemical Laboratory
Republic of Armenia
Education:
1980 - 1984
Yerevan State University
Ph.D. degree, Candidate of Chemical Sciences: Organic Chemistry
1969 - 1974
Moscow Chemical and Technological Institute of D.I. Mendeleev
Department of Organic Chemistry, Chemical Technology
Code of Ethics
We have not adopted a Code of Ethics for the Board and any salaried employees.
Limitation of Liability of Directors
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.
Nevada Anti-Takeover Law and Charter and By-law Provisions
The anti-takeover provisions of Sections 78.411 through 78.445 of the Nevada Corporation Law apply to EnzymeBioSystems Section 78.438 of the Nevada law prohibits the Company from merging with or selling more than 5% of our assets or stock to any shareholder who owns or owned more than 10% of any stock or any entity related to a 10% shareholder for three years after the date on which the shareholder acquired the EnzymeBioSystems shares, unless the transaction is approved by EnzymeBioSystems's Board of Directors. The provisions also prohibit the Company from completing any of the transactions described in the preceding sentence with a 10% shareholder who has held the shares more than three years and its related entities unless the transaction is approved by our Board of Directors or a majority of our shares, other than shares owned by that 10% shareholder or any related entity. These provisions could delay, defer or prevent a change in control of EnzymeBioSystems
Item 11.
Item 11. Executive Compensation
The following table sets forth certain compensation information for: (i) each person who served as the chief executive officer of our company at any time during the years ended June 30, 2016, 2015, and 2014 regardless of compensation level, and (ii) each of our other executive officers, other than the chief executive officer, serving as an executive officer at any time during the fiscal years ended June 30, 2016, 2015 and 2014. The foregoing persons are collectively referred to herein as the "Named Executive Officers."
EnzymeBioSystems Summary Compensation Table
* Mr. Rojewski is entitled to receive 2,000,000 common shares as part of his compensation package. The shares have vested and are expected to be issued in the future.
** Authorized Officer Expenses
*** Unauthorized expenses.
We do not maintain key-man life insurance for our executive officers/directors. We do not have any long-term compensation plans, stock option plans or employment agreements with our executive officers/directors.
Stock Option Grants
We did not grant any stock options to executive officers or directors from inception through fiscal year ended June 30, 2016.
Outstanding Equity Awards at 2016 Fiscal Year-End
We did not issue any outstanding equity awards in the fiscal year ended June 30, 2016 or June 30, 2015. However, Mr. Rojewski, our Chief Executive Officer is entitled to receive 2,000,000 common shares as part of his compensation package. The shares have vested and are expected to be issued in the near future.
Option Exercises for Fiscal 2015
There were no options exercised by our named executive officers in fiscal 2016 or 2015.
Potential Payments Upon Termination or Change in Control
We have not entered into any compensatory plans or arrangements with respect to our named executive officers, which would in any way result in payments to such officer(s) because of their resignation, retirement, or other termination of employment with us or our subsidiaries, or any change in control of, or a change in their responsibilities following a change in control.
Director Compensation
Our directors were not paid any director fees during the fiscal year ended June 30, 2016 or June 30, 2015.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table presents information, to the best of our knowledge, about the ownership of our common stock on September 20, 2016 relating to those persons known to beneficially own more than 5% of our capital stock and by our named executive officers and directors.
Beneficial ownership is determined in accordance with the rules of the U. S. Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60-days after September 20, 2016 pursuant to options, warrants, conversion privileges or other right.
The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the U. S. Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of EnzymeBioSystems' common stock.
We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock.
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(1) Percentage of total voting power represents voting power with respect to all shares of our common stock (16,641,822 issued and outstanding) and Preferred Voting stock (2,500,000 shares issued and outstanding), as a single class. The holders of our Preferred Voting Stock are entitled to ten votes per share, and holders of our common stock are entitled to one vote per share. The 2,500,000 preferred shares have voting rights equal to 25,000,000 common shares. Percentage of Total Voting Power is calculated based on an aggregate of 41,641,822 (16,641,822 common + 25,000,000 Preferred Voting Rights) shares issued and outstanding.
2) Gary Rojewski is entitled to receive 2,000,000 common shares as part of his compensation package; however, the shares have yet to be issued at this time. Once issued, there will be 18,641,822 shares issued and outstanding.
3) Ashot Martirosyan, 16773 W Park Drive, Chagrin Falls, Ohio, 44023.
4) Quattro Associates, Inc., Hunkins Waterfront Plaza, Suite 556, Main Street, Charlestown, Nevis. Lindsay Oliver is the beneficial owner who has the ultimate voting control over the shares held by this entity.
5) Berkeley Clinic, LC, an Arizona Limited Liability Company, POB 2742, Scottsdale, AZ 85252. T. J. Jesky is the managing member and beneficial owner who has the ultimate voting control over the shares held by this entity.
We are not aware of any arrangements that may result in "changes in control" as that term is defined by the provisions of Item 403(c) of Regulation S-B.
We believe that all persons named have full voting and investment power with respect to the shares indicated, unless otherwise noted in the table. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
Item 14.
Item 14. Principal Accountant Fees and Services.
Seale and Beers, CPAs served as our principal independent public accountant for the reviews of our financial statements contained in our Forms 10-Q for the quarterly periods ended September 30, 2014, December 31,2014 and March 31, 2015. Michael T. Studer CPA P.C. served as our independent public accountant for the audits of our financial statements contained in our Forms 10-K for the annual periods ended June 30, 2015 and 2016 and the reviews of our financial statements contained in our Forms 10-Q for the quarterly periods ended September 30, 2015, December 31, 2015 and March 31, 2016. Aggregate fees billed to us for the years ended June 30, 2016 and 2015 for audit fees were as follows:
For Year Ended June 30,
For the Year Ended June 30,
1) Audit Fees (1) $22,500
$15,000
2) Audit-Related Fees
3) Tax Fees
4) All Other Fees
(1) Audit Fees include fees billed and expected to be billed for services performed in connection with the recurring audit of the Company's financial statements for such period included in this Annual Report on Form 10-K and for the reviews of the quarterly financial statements included in the Quarterly Reports on Forms 10-Q filed with the Securities and Exchange Commission.
Audit Committee Policies and Procedures
We do not have an audit committee; therefore our sole director pre-approves all services to be provided to us by our independent auditor. This process involves obtaining (i) a written description of the proposed services, (ii) the confirmation of our Principal Accounting Officer that the services are compatible with maintaining specific principles relating to independence, and (iii) confirmation from our securities counsel that the services are not among those that our independent auditors have been prohibited from performing under SEC rules. Our director then makes a determination to approve or disapprove the engagement of the auditor for the proposed services. In the fiscal year ended June 30, 2016, all fees paid to our auditor were unanimously pre-approved in accordance with this policy.
Less than 50 percent of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
The following information required under this item is filed as part of this report:
(a) 1. Financial Statements
Page
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
(b) Financial Statement Schedules
None.
(c) Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant and in the capacities and on the dates indicated have signed this report below.
Signature
Title
Date
/s/ Gary Rojewski
(Gary Rojewski)
Chief Executive Officer
Principal Executive Officer
September 20, 2016
/s/ John Dean Harper
(John Dean Harper)
Corporate Secretary and
Interim Chief Accounting Officer
September 20, 2016