UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2011
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 333-68008
NUVILEX, INC.
(Exact name of registrant as specified in its charter)
Nevada | 62-1772151 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
12510 Prosperity Drive, Suite #310, Silver Spring, MD 20904
(Address of principal executive offices)
(240) Own-NVLX
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company x |
(Do not check if a smaller reporting company)
1
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of December 12, 2011, the registrant had 378,162,581 outstanding shares of Common Stock.
2
Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the 1933 Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical fact are forward-looking statements for purposes of this Quarterly Report on Form 10-Q, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects, plans, anticipates, estimates, potential or continue, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct and actual results could differ materially from those projected or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents Nuvilex, Inc. files with the Securities and Exchange Commission. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in Part II, Item 1A Risk Factors below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements accept as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the Company, Nuvilex, we, us and our refer to Nuvilex, Inc., a Nevada corporation, and, where appropriate, its subsidiaries.
3
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared by Nuvilex, Inc. (the Company). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested these financial statements and notes to the financial statements be read in conjunction with financial statements included in the Companys Annual Form 10-K Report for the fiscal year ended April 30, 2011 and the Companys 2012 fiscal year 10-Q Quarterly Report for the six months ending October 31, 2011.
4
NUVILEX, INC.
C O N T E N T S
Consolidated Balance Sheets October 31, 2011 (Unaudited) and April 30, 2011
6
Consolidated Unaudited Statements of Operations for the Three and Six Months Ended
October 31, 2011 and 2010 (Unaudited)
7
Consolidated Unaudited Statement of Stockholders Equity (Deficit)
as of October 31, 2011 (Unaudited)
8
Consolidated Unaudited Statements of Cash Flows for the Six Months Ended
October 31, 2011 and 2010 (Unaudited)
9
Notes to Consolidated Unaudited Financial Statements (Unaudited)
10
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NUVILEX, INC. | |||||
CONSOLIDATED BALANCE SHEETS | |||||
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| October 31, 2011 |
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| April 30, 2011 |
ASSETS |
| (unaudited) |
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Cash | $ | 14,506 |
| $ | 57,201 |
Accounts receivable - net |
| 8,962 |
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| 2,316 |
Inventory |
| 4,518 |
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| 18,706 |
Prepaid on acquisition |
| 560,000 |
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| - |
Prepaid services |
| 18,505 |
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| 26,524 |
Total Current Assets |
| 606,491 |
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| 104,747 |
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Property, plant and equipment - net |
| 38,060 |
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| 54,440 |
Asset held and used |
| 1,081,000 |
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| 1,081,000 |
Total Assets | $ | 1,725,551 |
| $ | 1,240,187 |
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LIABILITIES AND STOCKHOLERS' EQUITY (DEFICIT) |
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Current Liabilities |
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Accounts payable | $ | 702,978 |
| $ | 705,763 |
Accrued interest |
| 346,384 |
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| 274,144 |
Due to shareholder |
| 82,229 |
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| 229 |
Due to an officer |
| 22,700 |
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| 37,200 |
Short term debt |
| 2,366,746 |
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| 2,372,144 |
Total Current Liabilities |
| 3,521,037 |
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| 3,389,480 |
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Total Liabilities |
| 3,521,037 |
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| 3,389,480 |
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Commitments and Contingencies |
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Preferred stock, authorized 10,000,000 shares, |
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$0.0001 par value, 8,500 and 8,500 shares issued |
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and outstanding, respectively |
| 580,000 |
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| 580,000 |
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Stockholders' Equity (Deficit) |
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Common Stock, authorized 1,490,000,000 shares, |
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$0.0001 par value, 374,337,581 and 357,137,581 |
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shares issued and outstanding, respectively |
| 37,434 |
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| 35,714 |
Common stock payable |
| 1,201,733 |
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| 768,031 |
Additional paid in capital |
| 35,457,210 |
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| 34,415,655 |
Accumulated deficit |
| (39,071,863) |
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| (37,948,693) |
Total Stockholders' Equity (Deficit) |
| (2,375,486) |
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| (2,729,293) |
Total Liabilities and Stockholders' Equity (Deficit) | $ | 1,725,551 |
| $ | 1,240,187 |
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The accompanying notes are an integral part of these consolidated financial statements. |
6
NUVILEX, INC. | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(UNAUDITED) | ||||||||||||
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| For the Six Months Ended October 31, |
| For the Three Months Ended October 31, | ||||||||
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| 2011 |
| 2010 |
| 2011 |
| 2010 | ||||
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Revenues |
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| Product sales | $ | 39,606 |
| $ | 42,829 |
| $ | 19,844 |
| $ | 15,869 |
Total revenue |
| 39,606 |
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| 42,829 |
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| 19,844 |
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| 15,869 | |
Cost of revenues |
| 21,711 |
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| 9,781 |
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| 6,036 |
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| 2,854 | |
Gross profit |
| 17,895 |
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| 33,048 |
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| 13,808 |
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| 13,015 | |
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Expenses |
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| Sales and marketing |
| 128,730 |
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| 7,000 |
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| 3,600 |
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| - |
| Compensation expense |
| 628,327 |
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| - |
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| 322,765 |
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| - |
| Legal & professional fees |
| 68,115 |
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| 25,151 |
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| 8,161 |
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| - |
| General and administrative |
| 249,052 |
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| 99,410 |
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| 83,013 |
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| 32,193 |
| Total operating expenses |
| 1,074,224 |
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| 131,561 |
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| 417,539 |
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| 32,193 |
Net loss from operations |
| (1,056,329) |
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| (98,513) |
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| (403,731) |
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| (19,178) | |
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Other income (expense) |
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| Interest expense |
| (66,841) |
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| (81,566) |
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| (33,421) |
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| (26,642) |
| Total other expense |
| (66,841) |
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| (81,566) |
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| (33,421) |
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| (26,642) |
Net loss | $ | (1,123,170) |
| $ | (180,079) |
| $ | (437,152) |
| $ | (45,820) | |
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Basic loss per share | $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) | |
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Weighted average shares outstanding |
| 370,932,961 |
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| 348,387,581 |
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| 374,087,581 |
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| 348,387,581 | |
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| The accompanying notes are an integral part of these consolidated financial statements. |
7
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NUVILEX, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||||
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| Common |
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| Additional |
| Stock Not |
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| Common Stock |
| Paid |
| Yet |
| Accumulated |
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| Shares |
| Amount |
| In Capital |
| Issued |
| Deficit |
| Total | ||
Balance April 30, 2010 | 348,387,581 | $ | 34,839 | $ | 34,064,993 |
| - | $ | (36,550,977) | $ | (2,451,145) | ||
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Forgiveness of related party debt | - |
| - |
| 42,897 |
| - |
| - |
| 42,897 | ||
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Shares issued for cash | 5,000,000 |
| 500 |
| 99,500 |
| - |
| - |
| 100,000 | ||
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Shares issued for compensation | 3,750,000 |
| 375 |
| 91,875 |
| - |
| - |
| 92,250 | ||
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Shares not yet issued for compensation | - |
| - |
| - |
| 37,750 |
| - |
| 37,750 | ||
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Shares issued for loan payable | - |
| - |
| 175,000 |
| - |
| - |
| 175,000 | ||
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Equity recognized on convertible preferred stock | - |
| - |
| (80,000) |
| - |
| - |
| (80,000) | ||
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Contributed capital | - |
| - |
| 21,390 |
| - |
| - |
| 21,390 | ||
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Shares pledged as collateral | - |
| - |
| - |
| 730,281 |
| - |
| 730,281 | ||
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Net loss for the year ended April 30, 2011 | - |
| - |
| - |
| - |
| (1,397,716) |
| (1,397,716) | ||
Balance April 30, 2011 | 357,137,581 | $ | 35,714 | $ | 34,415,655 | $ | 768,031 | $ | (37,948,693) | $ | (2,729,293) | ||
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Shares issued for cash (unaudited) | 9,750,000 |
| 975 |
| 620,025 |
| - |
| - |
| 621,000 | ||
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Shares issued for compensation (unaudited) | 3,500,000 |
| 350 |
| 191,275 |
| - |
| - |
| 191,625 | ||
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Shares issued for services (unaudited) | 3,950,000 |
| 395 |
| 230,255 |
| (7,500) |
| - |
| 223,150 | ||
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Stock not yet issued for compensation (unaudited) | - |
| - |
| - |
| 441,202 |
| - |
| 441,202 | ||
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Net Loss for the six months ended October 31, 2011 (unaudited) | - |
| - |
| - |
| - |
| (1,123,170) |
| (1,123,170) | ||
Balance, October 31, 2011 (unaudited) | 374,337,581 | $ | 37,434 | $ | 35,457,210 | $ | 1,201,733 | $ | (39,071,863) | $ | (2,375,486) | ||
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The accompanying notes are an integral part of these consolidated financial statements.
8
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| NUVILEX, INC. | ||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(UNAUDITED) | |||||||||||||
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| For the Six Months Ended October 31, | ||||||||||
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| 2011 |
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Cash flows from operating activities: |
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Net loss |
| $ | (1,123,170) |
| $ | (180,079) | |||||||
| Adjustments to reconcile net loss to net cash |
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| used in operating activities: |
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| Stock issued for services |
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| 855,977 |
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| - | ||||||
| Depreciation and amortization |
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| 16,380 |
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| 22,988 | ||||||
| Net amortization of discount/premium |
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| (5,398) |
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| (5,398) | ||||||
| Change in assets and liabilities: |
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| (Increase) decrease in accounts receivable |
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| (6,646) |
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| (2,590) | ||||||
| Decrease in inventory |
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| 14,188 |
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| 2,528 | ||||||
| Decrease in prepaid expenses |
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| 8,019 |
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| - | ||||||
| Increase (decrease) in accounts payable |
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| (2,785) |
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| 65,064 | ||||||
| Increase in accrued expenses |
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| 72,240 |
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| 83,042 | ||||||
| Net cash used in operating activities |
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| (171,195) |
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| (14,445) | ||||||
Cash flows from investing activities: |
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| Payments towards acquisition |
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| (560,000) |
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| - | ||||||
| Net cash provided by investing activities |
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| (560,000) |
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| - | ||||||
Cash flows from financing activities: |
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| Increase in cash overdraft |
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| - |
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| 629 | ||||||
| Proceeds from the sale of common stock |
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| 621,000 |
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| - | ||||||
| Proceeds from borrowings, related party |
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| 83,500 |
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| 13,100 | ||||||
| Repayment of debt, related party |
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| (16,000) |
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| - | ||||||
| Net cash provided by financing activities |
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| 688,500 |
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| 13,729 | ||||||
| Net increase (decrease) in cash and cash equivalents |
| (42,695) |
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| (716) | |||||||
| Cash at beginning of period |
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| 57,201 |
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| 716 | ||||||
| Cash at end of period |
| $ | 14,506 |
| $ | - | ||||||
| Supplementary non-cash disclosures: |
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| Cash paid for interest |
| $ | - |
| $ | - | ||||||
| Franchise and income taxes |
| $ | - |
| $ | - |
The accompanying notes are an integral part of these consolidated financial statements.
9
NUVILEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2011
(UNAUDITED)
NOTE 1 BACKGROUND, ACQUISITION AND LIQUIDITY
Nuvilex, Inc. operates independently and through wholly-owned subsidiaries. We are dedicated to bringing to market scientifically derived products designed to improve the health and well-being of those who use them. The Companys current strategy is to focus on developing and marketing products in the biotechnology arena it believes have potential for long-term corporate growth.
This summary of accounting policies for Nuvilex, Inc. and its subsidiaries is presented to assist in understanding the Companys consolidated financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the consolidated financial statements.
Background
The Company was founded as DJH International, Inc., a Nevada corporation, on October 28, 1996, and changed its name to eFoodSafety.com, Inc. following the October 16, 2000 acquisition of Global Procurement Systems, Inc. The Company acquired Ozone Safe Food, Inc. for Common Stock on October 29, 2003. The Companys early mission was to provide methods and products to ensure the safety of marketed fruits and vegetables worldwide. On February 4, 2004, the Company registered shares with the Securities and Exchange Commission and its Common Stock began publicly trading on the OTC Bulletin Board under the trading symbol EFSF. The Company did not issue shares of Common Stock pursuant to an initial public offering. With less than projected demand for its produce sterilization methods and software tracking products, the Company changed its strategy and acquired Knock-Out Technologies, Ltd. and MedElite, Inc. in May 2004 and August 2005, respectively, of which Knock-Out Technologies, Ltd. was a developer of products using organic, non-toxic, food based substances and MedElite, Inc. was the exclusive U.S. distributor of TalsynTM-CI Scar Cream (Talsyn), a topical scar- reducing cream. The Companys new strategy was to bring to market scientifically derived products designed to improve the health and well-being of those who use them. The Company sold its Ozone Safe Food, Inc. operations in August 2005. In November 2006, the Company formed Cinnergen, Inc., a wholly-owned subsidiary, to manufacture and market a non-prescription liquid nutritional supplement designed to promote healthy glucose metabolism, and purEffect, Inc., another wholly-owned subsidiary, to manufacture and market purEffectTM, a four-step non-prescription acne treatment. On March 10, 2006, the Company licensed the marketing rights for purEffectTM to Charlston Kentrist 41 Direct, Inc. (CK41). In July 2007, the Company formed I-Boost, Inc., a wholly-owned subsidiary, to manufacture and market a food bar designed to improve the effectiveness of the human immune system. In March 2008, the Company formed Cinnechol, Inc., a wholly-owned subsidiary, to manufacture and market a non-prescription nutritional supplement designed to promote cardiovascular health. In February 2009, the Company sold the rights to the purEffectTM product to CK41 for an equity position in CK41 and future royalty compensation. In March 2009, the Company acquired Freedom2 Holdings, Inc., the manufacturer and marketer of Infinitink®, a permanent tattoo ink designed to be removed more easily using conventional laser removal methods. On March 18, 2009, the Company changed its name to Nuvilex, Inc.
Acquisition Purchase Price
On May 26, 2011, The Company entered into a purchase agreement with SG Austria Private Limited (SG Austria), whereby the Company is to pay $200,000 to acquire the pancreatic cancer treatment owned by the principals of SG Austria. This purchase has been completed from Company funds provided by interested shareholders and are classified as assets since this acquisition will provide a substantial positive growth value for Nuvilex.
Subsequently, it was decided to acquire all of the assets of SG Austria through an asset acquisition and share exchange agreement consisting of all of the assets of the parent company SG Austria, which is comprised of Austrianova Singapore Private Limited (ASPL) and BioBlueBird AG (BBB). The parent company, SG Austria, will revert to its owners and shareholders. To complete the entire acquisition, items must be provided by Nuvilex to SG Austria. In addition to Nuvilex remaining a publicly traded company, we must provide several items including, but not limited to: 1) funding for outstanding loans for BBB of $500,000 or Nuvilex shares or a combination of the two; 2) a share exchange to be determined based on Nuvilex share price and reaching milestones; and 3) temporary monthly funding during the transition of which $560,000 has been completed from Company funds provided by interested shareholders. These requirements were agreed to in order to provide initial funding for purchasing all of the assets of SG Austria. In addition, providing funding during the interim will enable SG Austria to: 1) carry out company activities including present agreements, initiation, maintenance, and completion of ongoing work; and 2) initiate and advance the pancreatic cancer treatment IND preparation, regulatory and GMP activities in anticipation of and preparation for pancreatic cancer clinical trials. In a combined effort to make certain the acquisition occur, management from Nuvilex and SG Austria have worked in concert and renegotiated in order to allocate initial funds received for the acquisition to cover ASPL, the pancreatic cancer funding needs, BBB loans, and advance Nuvilex operations.
10
In the unlikely event of Cancellation or Termination of this Agreement without consummation, Nuvilex shall receive a pro-rata ownership percentage in SG Austria based on 0.8496% of SG Austrias shares for every $60,000 USD payment and 2.83% of SG Austria for the payment of the $200,000. As of December 12, 2011 the Company has paid $780,000 toward monthly maintenance and the pancreatic cancer treatment acquisition. The purchase still requires additional funding and a stock exchange for completion of the acquisition. Closing will occur when all of the issues regarding the agreement are fulfilled.
According to the original agreement, in order to close this acquisition, Nuvilex must raise approximately $3 Million USD and as indicated above, management from Nuvilex and SG Austria have worked in concert and renegotiated the terms such that initial funds received for the acquisition will now cover the acquisition of the SG Austria assets (ASPL and BBB), the pancreatic cancer funding needs, BBB loans, and advance Nuvilex operations. The funding provided for maintaining operations during the present period prior to and including November 30, 2011, has been and can continue to be extended through the agreement of both parties as we work toward completion of funding for Nuvilex and completion of the acquisition.
NOTE 2 - Going Concern and Managements Plans
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America (GAAP) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to no longer be a going concern.
In addition, as of October 31, 2011, the Company had an accumulated deficit of $39,071,863 since inception in 2001, had incurred a net loss for the six months ended October 31, 2011 of $1,123,170, and had negative working capital of $2,914,546. Funding for continued operation has been provided by various generous investors which have primarily enabled continuance of Nuvilex to date. The Companys current business plan requires additional funding beyond its anticipated cash flows from present operations, some of which may have to cease if sufficient funding is not acquired shortly. Nonetheless, these and other factors raise substantial doubt about the Company's ability to continue as a going concern.
Strategy
As mentioned in the 2011 10-K, the Companys overall goal of long-term growth in 2012 and beyond has been and continues to be working to stabilize its financial condition with the implementation, in agreement with SG Austria, of a long-term plan of revenue generation and monetization of technology already in-house as well as that being acquired through the acquisition of SG Austria.
As a result, the Companys financial stability and expansion efforts include four primary components:
1.
Maintenance of the Companys cash burn rate through monetary restraint and thoughtful and careful planning;
2.
Sale or lease of the Freedom-2 Holdings, Inc. property and completion of the Companys plan to resolve all debts, It is worth mentioning that much of the current financial situation of the company is due to 3 primary sources:
a.
funding expenditures for the acquisition,
b.
officers salaries in stock, and
c.
accounts payable remaining from prior company operations.
3.
Ongoing execution of the Companys revenue growth strategy, and
4.
Expansion of the Companys effort on biotechnology to the overall goals and mission of Nuvilex. Most important to pass on to Nuvilex investors and shareholders is that substantial effort has been expended on financial plans created by Nuvilex and SG Austria/ASPL. Our plans will enable the complete operation of the new enlarged Nuvilex and initiate cash flow as rapidly as possible from operations and quickly move the pancreatic cancer treatment and other efforts forward, as is already being done.
NOTE 3 Significant Accounting Policies
Unaudited Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended October 31, 2011 are not necessarily indicative of the results that may be expected for the year ending April 30, 2012. The balance sheet at October 31, 2011, has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended April 30, 2011.
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Principles of Consolidation
The consolidated financial statements include the accounts of Nuvilex, Inc. and its subsidiaries, Knock-Out Technologies, Ltd., MedElite, Inc., Cinnergen, Inc., I-Boost, Inc., Cinnechol Inc., Freedom-2 Holdings, Inc, Freedom-2, Inc. and Exceptional Equipment and Ink Supply Company, Inc. With respect to the latter three subsidiaries the financials include the profit and loss activity from the date of purchase March 2, 2009 to January 31, 2011 as the acquisition was accounted for under the purchase method of accounting.
All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. There were no cash equivalents as of October 31, 2011 or April 30, 2011.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.
Use of Estimates
The preparation of financial statements in conformity with GAAP required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost. Expenditures that increase the useful lives or capacities of the plant and equipment are capitalized. Expenditures for repairs and maintenance are charged to income as incurred. Depreciation is provided using the straight-line method over the estimated useful lives as follows:
Computer equipment/software
3 years
Furniture and fixtures
7 years
Machinery and equipment
7 years
Building improvements
15 years
Building
40 years
Goodwill and other indefinite-lived intangibles
The Company records the excess of purchase price over the fair value of the identifiable net assets acquired as goodwill and other indefinite-lived intangibles. The FASB standard on goodwill and other intangible assets, prescribes a two-step process for impairment testing of goodwill and indefinite-lived intangibles, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment, while the second step, if necessary, measures the impairment. The Company has elected to perform its annual analysis at the end of its reporting year.
Valuation of long-lived assets
The Company accounts for the valuation of long-lived assets under the FASB standard for accounting for the impairment or disposal of Long-Lived Assets. The FASB standard requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell.
Basic and Diluted Earnings (Loss) per Share
Basic and diluted earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock warrants, convertible notes and convertible preferred shares.
Fair value of financial instruments
For certain of the Companys non-derivative financial instruments, including cash and cash equivalents, receivables, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The estimated fair value of long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt.
12
ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| · | Level 1. Observable inputs such as quoted prices in active markets; |
| · | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| · | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The following presents the gross value of assets and liabilities that were measured and recognized at fair value.
| · | Level 1: none |
| · | Level 2: none |
| · | Level 3: none |
Recent accounting pronouncements
As of October 31, 2011 and April 30, 2011 the Company has recorded several of its assets and liabilities at fair value. The building held for sale was written down in the last quarter of fiscal 2010 to its fair value based upon a pending sale agreement. Although the agreement was not finalized it established the current market value for the property (refer to Note 7). In March of 2009 through the acquisition of another company the Company acquired certain debt. As part of the acquisition these liabilities were evaluated by a third party and valued at fair value at which they were recorded. As a result of this the Company is amortizing the associated discount and premium for two of the liabilities (refer to Note 8).
In September 2011 the Accounting Standards Update No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for impairment. This ASU's objective is to simplify the process of performing impairment testing for Goodwill. With this update a company is allowed to asses qualitative factors, first, to determine if it is more likely than not (greater than 50%) that the FV is less than the carrying amount. This would be done, prior to performing the two-step goodwill impairment testing, as prescribed by Topic 350. Prior to this ASU, all entities were required to test, annually, their good will for impairment by Step 1 - comparing the FV to the carrying amount, and if impaired, then step 2 - calculate and recognize the impairment. Therefore, the fair value measurement is not required, until the "more likely than not" reasonableness test is concluded. Effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.
In May 2011, FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU clarifies the board's intent of current guidance, modifies and changes certain guidance and principles, and adds additional disclosure requirements concerning the 3 levels of fair value measurements. Specific amendments are applied to FASB ASC 820-10-35, Subsequent Measurement and FASB ASC 820-10-50, Disclosures. This ASU is effective for interim and annual periods beginning after December 15, 2011.
In June 2011, FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. - ASU 2011-05. Current US GAAP allows companies to present the components of comprehensive income as a part of the statement of changes in stockholders' equity. This ASU eliminates that option. in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income This ASU is effective interim and annual periods beginning after December 15, 2011. This ASU should be applied retrospectively. There are no specific transition disclosures.
13
In December 2010, the FASB Accounting Standards Update 2010-29 Business Combinations Topic 805, which requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. Effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Revenue Recognition
Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. These terms are typically met upon the prepayment or invoicing and shipment of products.
Allowance for Doubtful Accounts
The Company provides an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.
Income Taxes
Deferred taxes are calculated using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
In June 2006, the FASB interpreted its standard for accounting for uncertainty in income taxes, an interpretation of accounting for income taxes. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance the minimum recognition threshold and measurement attributable to a tax position taken on a tax return is required to be met before being recognized in the financial statements.
The FASBs interpretation had no material impact on the Companys financial statements for the quarter ended October 31, 2011 or the year ended April 30, 2011. As of October 31, 2011, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $35,619,000 that may be offset against future taxable income through 2027. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes the carry forwards may expire unused, although acquisition of sufficient operating capital to complete the acquisition of all of the assets of SG Austria may change this. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.
Research and Development Costs
Expenditures for research and development are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution in the form of demand deposits.
14
Reclassifications
Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current periods presentation. These reclassifications have no effect on the previously reported income (loss).
NOTE 4 ACCOUNTS RECEIVABLE
The Company recognizes receivables predominately on sales of its Cinnergen product. At October 31, 2011 and April 30, 2011 the company recorded an allowance for doubtful accounts of $3,906.
NOTE 5 - INVENTORY
On October 31, 2011 and April 30, 2011, inventory consisted of $4,518 and $18,706, respectively of finished goods inventory for Cinnergen products. Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.
NOTE 6 - FIXED ASSETS
Fixed assets consisted of the following:
| October 31, 2011 |
| April 30,2011 |
Building | $ - |
| $ - |
Computers | 59,838 |
| 59,838 |
Furniture and fixtures | 13,335 |
| 13,335 |
Lab equipment | 147,202 |
| 147,202 |
| 220,375 |
| 220,375 |
Less: accumulated depreciation | (182,315) |
| (165,935) |
| $ 38,060 |
| $ 54,440 |
Depreciation expense for the six months ended October 31, 2011 and April 30, 2011 was $16,380 and $88,800, respectively.
NOTE 7 - ASSETS HELD FOR SALE
In accordance with the authoritative guidance of the Financial Accounting Standards Board, assets held for sale are reported at the lower of the carrying amount or fair value less cost to sell and the recognition of depreciation expense is discontinued. On June 23, 2008, Freedom-2 Holdings, Inc., entered into a Sale Agreement for its Cherry Hill facility, which was agreed to and then was rescinded by the purchaser. In 2009 with one potential buyer and then again another on February 16, 2010, Freedom-2 Holdings, Inc., entered into a $1,150,000 Sale Agreement for its Cherry Hill facility which, from information stated to management, was not agreed to by the mortgage holder. Although neither of the latter Sale Agreements was ever finalized, they established a fair market value less than the book value for Freedom-2 Holdings, Inc.s building and building improvements. Generally accepted accounting procedures require Freedom-2 Holdings, Inc. to adjust the value of its fixed asset to fair market value. Therefore, Freedom-2 Holdings, Inc., and as a result, Nuvilex, has adjusted and reclassified the value of Freedom-2 Holdings, Inc.s building and building improvements to fixed assets held for sale in the amount of $1,081,000 ($1,150,000 less $69,000 in estimated real estate commission) as of April 30, 2010 and has recorded a loss for impairment of $1,197,779 for the year ending April 30, 2010. For the year ended April 30, 2011 the Company obtained a third party fair market valuation of the building for Freedom-2 Holdings, Inc., which resulted in no further impairment. As of October 31, 2011, in accordance with ASC Topic 360-10-45-9, because the asset has not been sold within one year it has been reclassified as held and used. As the property is held for sale the Company is not depreciating the asset, in accordance with ASC Topic 360-10.
15
NOTE 8 DEBT
As of October 31, 2011 and April 30, 2011, respectively, the following debts associated with the Freedom-2 Holdings, Inc. subsidiary are as follows:
|
|
|
|
|
|
|
| October 31, 2011 | April 30, 2011 | ||||
| Principal | Accrued interest & penalty | Total | Principal | Accrued interest & penalty | Total |
Note payable to a Bank for a mortgage secured by the building, interest at 7.75 % payable in monthly installments of $19,202, with a balloon payment due 2/1/2013. | $ 1,592,315 | $ 295,465 | $ 1,887,780 | $ 1,592,315 | $ 233,762 | $ 1,826,077 |
Increase for fair value at acquisition | 112,681 | - | 112,681 | 112,681 | - | 112,681 |
Amortization of premium | (76,718) | - | (76,718) | (62,334) | - | (62,334) |
Note payable for a mortgage | 1,628,278 | 295,465 | 1,923,743 | 1,642,662 | 233,732 | 1,.876,424 |
Note Payable to Fish & Richardson, secured by a second mortgage on the building with interest at 2.5% payable in monthly installments of $5,787. | 178,951 | 26,019 | 204,019 | 178,951 | 23,782 | 202,733 |
Note Payable to MFE, LLC secured by a third mortgage on the property due 12/31/2009 with interest at 10% payable on the first day of April, July and October until the maturity date with the balance payable on the maturity date. | 150,000 | 22,500 | 172,500 | 150,000 | 15,000 | 165,000 |
License fee agreement with Brown University, amended February 12, 2009, for intellectual property rights. Equal payments of $100,000 are due on June 1, 2009, 2010, 2011 and 2012. The license fee payments do not include interest. | 400,000 | - | 400,000 | 400,000 | - | 400,000 |
Decrease for fair value at acquisition | (58,408) | - | (58,408) | (58,408) | - | (58,408) |
Amortization of premium | 47,925 | - | 47,925 | 38,939 | - | 38,939 |
Note fee payable | 389,517 | - | 389,517 | 380,531 | - | 380,531 |
Bridge loan payable initiated 12/01/2008 accruing interest at 8% and payable upon maturity on 6/30/2010. | 20,000 | 2,400 | 22,400 | 20,000 | 1,600 | 21,600 |
Total | 2,366,746 | 346,384 | 2,713,130 | 2,372,144 | 274,144 | 2,646,288 |
Less: current portion | 2,366,746 | 346,384 | 2,713,130 | 2,372,144 | 274,144 | 2,646,288 |
Long-term portion | $ - | $ - | $ - | $ - | $ - | $ - |
On July 30, 2009, the mortgage agreement with Cornerstone Bank was modified whereby the principle of $43,572 paid to date on the note was re-advanced to the borrower returning the principle balance to $1,600,000. Payments under the modified agreement commenced on September 1, 2009.
There have been pending sales of the Companys building in 2008 and again in 2009 and 2010, which would have accelerated the payment of the Cornerstone Bank mortgage. In addition, there was a temporary leasing of a small separated portion of the building in 2009, which unfortunately ended due to bankruptcy of the lessee, Eldon of NJ. Although the Companys efforts continue in this area to sell or lease part or all of the building, to date, the large number of vacant properties in the Cherry Hill, NJ region have made it difficult to accomplish either, through and including the current year. Accordingly, although the maturity date of the mortgage extends to February 1, 2013, the Company recognizes the entire outstanding mortgage value as a current liability. At the date of acquisition the mortgage and license fee payable were recorded at fair value on the Companys balance sheet. The above schedule adjusts the book value of those liabilities to their fair value, net of applicable amortization of the discount and premium as of October 31, 2011 and April 30, 2011.
16
NOTE 9 - COMMON STOCK TRANSACTIONS
During the six months ended October 31, 2011, the company authorized the issuance of 8,125,000 shares of common stock for compensation to its officers for total expense of $441,202. As of October 31, 2011 these shares had not yet been issued by the transfer agent and were recorded as stock payable. Shares were valued using the closing stock price on the date of grant.
In August 2011, 1,000,000 shares of common stock were issued for compensation to Robert Bowker. Shares were valued using the closing stock price on the day of granting for a total expense of $54,500.
During the three months ended July 31, 2011, 9,750,000 shares of common stock were issued to various investors for $621,000 cash received. $148,000 of this amount was recorded as a stock receivable in the first quarter and was subsequently received in full as of October 31, 2011.
During the year ended April 30, 2011, the company authorized the issuance of 1,375,000 shares of common stock for compensation to its officers for total expense of $37,750. As of October 31, 2011 1,125,000 of these shares had not yet been issued by the transfer agent.
All shares were issued without registration under the Securities Act of 1933, as amended, in reliance upon the exemption afforded by Section 4(2) of that Act. No underwriters were involved.
NOTE 10 - PREFERRED STOCK
The Series E Preferred Stock has not been changed in any material or other fashion since the last quarter. No additional shares were dispersed during the present quarter. Therefore, please refer to the information provided therein for particulars.
NOTE 11 LEGAL PROCEEDINGS
In July 2011, a claim was filed by Cornerstone Bank against Freedom-2, Inc., a wholly owned subsidiary of the Company, for amounts due under a promissory note. The bank is also seeking to foreclose its mortgage on the property located in Cherry Hill, New Jersey for which the promissory note is held. Although at this time it is unknown what any estimated loss may be, it is reasonable to assume at least a loss between $750,000 and $1,000,000 is possible, with a worst case scenario of a 100% liability plus any applicable fees. In addition, there is a claim to enforce a purported pledge of additional collateral of 14,605,614 shares of common stock as security for the Note. It should be noted that the shares pledged by Freedom-2 and purportedly owed by the Company to Cornerstone Bank were not part of the mortgage note, but the shares in question were above, beyond, and thus in addition to the note as collateral for obtaining the second mortgage modification, they have been indicated as additional collateral, since they were not part nor parcel of the original note nor its modification itself except as collateral. The Company has recorded a stock payable and expense in the amount of $730,281 to account for the shares at April 30, 2011. To date, the Company continues to aim to work with Cornerstone Bank with multiple means for addressing this issue.
NOTE 12 - RELATED PARTY TRANSACTIONS
On February 11, 2009, the Company and Charlston Kentrist 41 Direct, Inc. (CK-41) restructured its Marketing Agreement (the restructured agreement) surrounding purEffect, an acne treatment system. Under the terms of the restructured agreement, the Company will transfer all of its rights to purEffect to CK-41 for four million two hundred-fifty thousand (4,250,000) shares of CK-41 common stock at the price of $0.01 per share. CK-41 will also grant the Company a three-year warrant to purchase an additional four million two hundred-fifty thousand (4,250,000) shares of common stock at $6.00 per share. Additionally, the Company will receive a two percent (2%) royalty on worldwide purEffect adjusted net sales. The restructured agreement set minimum royalty payments of one hundred-fifty thousand ($150,000) dollars payable March 1, 2010 and two hundred-fifty thousand ($250,000) dollars payable on March 1, 2011. In addition to these royalty payments, a one hundred thousand ($100,000) dollar late penalty is due if not paid by the appropriate due date. The Company was also guaranteed to hold one seat on the Board of Directors of CK-41. In the event royalty payments were not paid in full, the agreement included a full product recall right, that Nuvilex can, at its option, recall the product, advertising, and all other aspects of purEffect treatment spent or accumulated to date, back to Nuvilex. This would then allow Nuvilex the opportunity to develop purEffect from that point forward. As of October 31, 2011, CK-41 remains delinquent in its payments and the associated penalties. Accordingly, the Company has no assurance this royalty payment will be made for the purEffect product and is considering appropriate activities as a result.
As of October 31, 2011 the balance due to an officer for loan advances was $22,700 and to a related party was $82,000.
NOTE 13 - SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855. Other than the events noted below, the Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.
17
Subsequent to October 31, 2011 and prior to November 30, 2011, the Company authorized the issuance of 2,325,000 shares of common stock to its various officers for compensation.
Subsequent to October 31, 2011 and prior to December 12, 2011, the Company was able to substantially decrease some of the accounts payable due to payment of a loan and payments associated with lawyers and other bills totaling ~$160,000.
No material changes to the original agreement with SG Austria have occurred prior to December 12, 2011 and written extensions have been received from SG Austria for October, November and December 2011.
Subsequent to October 31, 2011 the company issued 1,500,000 shares of common stock to three of its officers as reward shares for the development of new products.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2011 AND 2010
The following discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, any factors discussed in this section as well as factors described in Part II, Item 1A Risk Factors.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2011 AND 2010
SALES
Revenues from operations for the three months ending October 31, 2011 compared to 2010 rose slightly from $13,015 to $13,808, presumably from ending sales in the prior year. On the other hand, revenue from operations dropped for the six months ending October 31, 2011 compared to a year earlier, from $33,048 to $17,895, respectively, potentially associated with the overall slow-down observed in the economy, the inherent challenges in restarting a product, initializing pricing increases for the first time in 6 years according to actual costs for the products, and greater operations in the spring of 2010 (prior to ending sales in 2010). There was a decrease in quarterly revenue on a yearly basis (October 31, 2011 and 2010) of $39,606 and $42,814, respectively, primarily attributable to costs and efforts of reinitiating sales of Cinnergen.
Compared to July 2011, the revenue from sales has increased more than 3 fold from $4,087 for the three months ending on July 31, 2011 to $13,808 for the three months ending on October 31, 2011. In addition, the total operating expenses for the company have decreased by more than 30% from $656,687 to $417,539 for the three months ending on July 31, 2011 compared to October 31, 2011, respectively, most likely from careful planning and operating of the company by its principals and critical aid by related parties.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
A summary of the Companys selling, general and administrative costs are as follows:
During the six months ended October 31, 2011 and October 31, 2010, the Company incurred increased sales and marketing expenses from $128,730 to $7,000 primarily associated with the restarting of the Cinnergen and Cinnechol products, creation of a secure internet sales web marketing website, and payment of prior year debts. The overall general and administrative expenses all increased during the six months ended October 31, 2011 and October 31, 2010, respectively, from $131,561 to $1,074,224 primarily as a result of the payment of officers with Nuvilex stock, restart of the company, and legal and professional fees associated with ongoing operations and prior year debt.
During the three months ended October 31, 2011 and October 31, 2010, the scenario is similar, with an increase in the overall net operating loss from operations to $403,731 from $19,178, primarily due to the same reasons: payments to officers in stock, company restart, and legal and professional fees. Nonetheless, it is important to note that the overall net operating loss from operations decreased to ~60% of its former value from $652,600 to $403,731 in the three month periods ending July 31, 2011 compared to October 31, 2011 due to a decrease in general and administrative expenses as well as legal and professional fees.
However, the Company only paid $3,000 in sales and marketing expenses in the three months from July 31, 2011 to October 31, 2011, dropping from $125,130 in the first three months ending July 31, 2011 which were due to costs of increasing investor exposure and awareness including stock costs.
Legal and professional fee expenses decreased dramatically to only $8,161 in the 3 months ending October 31, 2011 from the high of $59,954 ending July 31, 2011, as a result of addressing prior issues, and efficient use of funds, prepaid expenses and continued support from numerous individuals and companies. This is an increase from $0 to the $8,161 for the three months ending October 31, 2010 compared to 2011. The costs increased to $68,115 during the six months ended October 31, 2011 from $25,151 during the six months ended October 31, 2010 primarily due to expanding versus ending operations of the Company during those periods.
It is important to note there has also been a dramatic decrease by ~50% in general and administrative expenses for the three months ended October 31, 2011 of $83,013 as compared to the prior three months ended July 31, 2011 of $166,039. The decrease is primarily attributable to a decrease in unnecessary operating expenses, consolidation, as well as the efforts provided by the Consumer Healthcare Distribution Center in Mesa, AZ and the Sales and Marketing Division in Payson, AZ. Nonetheless, this is an increase when compared to the prior 3 or 6 month period of 2010 as a result of the operational needs of the Company.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2011, the Company had a working capital deficit of $2,914,546, which is lower than the prior 3 months ending July 31, 2011 of $2,953,016. This is primarily through decreased spending, careful planning and the generous support of interested investors, for which the Company is extremely grateful.
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By adjusting the Companys operations and through bridge financing being provided by existing interested investors and shareholders, management believes it has sufficient capital resources to meet projected cash flow needs. Failure by the Company to generate sufficient liquidity from operations or in raising sufficient capital resources on acceptable terms would have a materially adverse effect on the Companys business, results of operations, liquidity and financial condition.
The Companys independent certified public accountants have stated in their reports, included as part of the Companys audited financial statements for the fiscal years ended April 30, 2011 and 2010, respectively, that the Company has recurring losses from operations which raise doubt about the Companys ability to continue as a going concern. It is the aim and effort of the managements of Nuvilex and ASPL to prevent this.
We have no off-balance sheet arrangements, special purpose entities, financing partnerships or guarantees.
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of and Report on Internal Control over Financial Reporting
The management of Nuvilex, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the companys principal executive and principal financial officers and effected by the companys 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 accounting principles generally accepted in the United States of America and 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 the assets of the company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, 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. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management assessed the effectiveness of the Companys internal control over financial reporting as of July 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Based on its assessment, management concluded that, as of October 31, 2011, the Companys internal control over financial reporting is ineffective based on those criteria as they relate to timely and accurate filing. Nonetheless, effort has been made to change this.
Changes in Internal Control
During the three months ended October 31, 2011 there were no substantial changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, even though effort has been made to advance this area.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In July 2011 a claim was filed by Cornerstone Bank against Freedom-2, Inc., a wholly owned subsidiary of the Company, for amounts due under a promissory note. The bank is also seeking to foreclose its mortgage on the property located in Cherry Hill, New Jersey for which the promissory note is held. Although at this time it is unknown what any estimated loss may be, it is reasonable to assume at least an accrued loss between $750,000 - $1,000,000 is possible, with a worst case scenario of a 100% liability plus any applicable fees. In addition, there is a claim to enforce a purported pledge of additional collateral of 14,605,614 shares of Nuvilex common stock as security for the Note. It should be noted that the shares pledged by Freedom-2 and purportedly owed by the Company to Cornerstone Bank were not part of the mortgage note, but the shares in question were above, beyond, and thus in addition to the note as collateral for obtaining the second mortgage modification so they have been indicated as additional collateral, since they were not part nor parcel of the original note nor its modification itself except as collateral. The Company has recorded a stock payable and expense in the amount of $730,281 to account for the shares. Communication has been ongoing with Cornerstone Bank through legal means and there has been no material change to date since last reported in the April 30, 2011 10-K report. To date, the Company continues to aim to work to solve this with Cornerstone Bank with multiple means for addressing this issue.
ITEM 1A. RISK FACTORS
You should carefully consider these factors that may affect future results, together with all of the other information included in this Form 10-K, in evaluating the business and the Company. The risks and uncertainties described below are those that the Company currently believes may materially affect its business and results of operations. Additional risks and uncertainties that Nuvilex is unaware of or that it currently deems immaterial also may become important factors that affect its business and result of operations. Nuvilex common shares involve a high degree of risk and should be purchased only by investors who can afford a loss of their entire investment. Prospective investors should carefully consider the following risk factors concerning the Companys business before making an investment.
In addition, you should carefully consider these risks when you read forward-looking statements elsewhere in this Form 10-K. These are statements that relate to the Companys expectations for future events and time periods. Generally, the words anticipate, expect, intend, and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements.
Doubt Regarding Ability to Continue as a Going Concern
Nuvilexs financial statements have been presented on the basis that it is and will remain a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had minimal revenues and incurred net operating losses for the period October 1999 (inception) to October 31, 2011. As the Companys independent auditors have concluded, these factors create an uncertainty about Nuvilexs ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent, among other factors, on its success in marketing its products, containing costs, establishing a credit facility, and/or raising additional equity capital. The financial statements of Nuvilex do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Early Revenue Stage Company: Generation of Revenues
Nuvilex is an early revenue stage company and an investor cannot reasonably determine if the Company will ever be profitable. Nuvilex is likely to continue to experience financial difficulties during its early revenue stage and beyond. The Company may be unable to operate profitably, even if it generates additional revenues. Nuvilex may not obtain the necessary working capital to continue developing and marketing its products. Furthermore, Nuvilexs products may not receive sufficient interest to generate revenues or achieve profitability.
Need for Future Capital: Long-Term Viability of Company
Nuvilex will need additional capital to continue its operations.
There can be no assurance that the Company will generate revenues from present operations or obtain sufficient capital on acceptable terms, if at all. Failure to obtain such capital or generate such operating revenues would have an adverse impact on the Companys financial position, operations and ability to continue as a going concern. Nuvilex operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for its services and products. There can be no assurance that additional private or public financing, including debt or equity financing, will be available as needed or if available, on terms favorable to the Company. Additionally, any future equity financing may be dilutive to stockholders present ownership levels and such additional equity securities may have rights, preferences, or privileges that are senior to those of Nuvilex existing common stock.
21
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on the flexibility of the Company to operate. Nuvilexs failure to successfully obtain additional funding may jeopardize its ability to continue the business and its operations.
Unpredictability of Future Revenues: Potential Fluctuations in Operating Results
The Company is currently unable to accurately forecast its revenues. Typically, current and future expense levels are based largely on marketing and development plans and estimates of future revenues. Sales and operating results will generally depend on the volume and timing of orders and on the Companys ability to fulfill such orders, both of which are difficult to forecast at this stage. Nuvilex may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to planned expenditures could have an immediate adverse effect on the Companys business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, Nuvilex may from time to time make certain pricing, service or marketing decisions that could have a materially adverse effect on its business, prospects, financial condition and results of operations.
Nuvilex may experience significant fluctuations in future operating results due to a variety of factors, many of which are outside the Companys control. Factors that may affect operating results include: (i) the ability to obtain and retain customers, attract new customers at a steady rate and maintain customer satisfaction with products, (ii) the announcement or introduction of new services by Nuvilex or its competitors, (iii) price competition, (iv) the level of use and consumer acceptance of its products, (v) the amount and timing of operating costs and capital expenditures relating to expansion of the business, operations and infrastructure, (vi) governmental regulations, and (vii) general economic conditions.
Flaws and Defects in Products
Products offered by Nuvilex may contain undetected flaws or defects when first introduced or as new versions are released. Any inaccuracy or defects may result in adverse product reviews and a loss or delay in market acceptance. There can be no assurance that flaws or defects will not be found in Nuvilex products. Flaws and defects, if found, could have a materially adverse effect upon the business operations and financial condition of the Company. Marketing of any of the Companys potential products may expose the Company to liability claims resulting from the use of the Companys products. These claims might be made by consumers, health care providers, sellers of the Companys products or others. A claim, particularly resulting from a clinical trial, or a product recall could harm the Companys business, results of operations, financial condition, cash flow and future prospects.
Stock Price Volatility
The market price of the Companys stock has fluctuated significantly in the past and may continue to fluctuate in the future. The Company believes that such fluctuations will continue as a result of many factors, including financing plans, future announcements concerning the Company, the Companys competitors or principal customers regarding financial results or expectations, industry supply or demand dynamics, new product introductions, governmental regulations, the commencement or results of litigation or changes in earnings estimates by analysts. In addition, in recent years the stock market has experienced significant price and volume fluctuations often for reasons outside the control of the particular companies. These fluctuations as well as general economic, political and market conditions may have an adverse affect on the market price of the Companys common stock.
Worldwide Economic Conditions
The Companys financial performance is significantly affected by worldwide economic conditions and the related impact on levels of consumer spending, which has recently deteriorated significantly in many countries and regions, including the U.S., and may remain depressed for the foreseeable future. Demand for the Companys products is adversely affected by negative macroeconomic factors affecting consumer spending. The severe tightening of consumer credit, low level of consumer liquidity, and extreme volatility in credit and equity markets have weakened consumer confidence and decreased consumer spending. These and other economic factors have reduced demand for the Companys products and harmed the Companys business, financial condition and results of operations, and to the extent such economic conditions continue, they could cause further harm to the Companys business, financial condition and results of operations.
Dependence on Sales through Retailers and Distributors
The Companys business depends significantly upon sales through retailers and distributors, and if the Companys retailers and distributors are not successful, the Company could experience reduced sales, substantial product returns or increased price protection, any of which would negatively impact the Companys business, financial condition and results of operations. A significant portion of the Companys sales are made through retailers, either directly or through distributors. If the Companys retailers and distributors are not successful due to weak consumer retail demand caused by the current worldwide economic downturn, decline in consumer confidence, or other factors, the Company could continue to experience reduced sales as well as substantial product returns or price protection claims, which would harm the Companys business, financial condition and results of operations.
22
Limited Senior Management Personnel: Management of Potential Growth; New Management Team
Under Nuvilexs business plan, significant and material matters of business must be conducted and concluded in a timely fashion. The execution of the Companys business plan is expected to place a significant strain on the Companys management while providing little or no immediate compensation.
There can be no assurance that Nuvilexs planned personnel, systems, procedures and controls will be adequate to support its future operations, that management will be able to hire, train, retain, motivate and manage personnel or that its management will be able to successfully identify, manage and exploit existing and potential market opportunities. If Nuvilex is unable to manage growth effectively, the Companys business, prospects, financial condition, results and operations could be adversely affected.
Competition
The market in which Nuvilex competes is highly competitive, and the Company has no assurance that it will be able to compete effectively, especially against established industry competitors with significantly greater financial resources. The Company expects to face competition from a few competitors with significantly greater financial resources, well-established brand names and large, existing customer bases. Nuvilex expects the level of competition to intensify in the future.
Dependence on Management
Nuvilexs performance will be substantially dependent on the continued services and on the performance of the current senior management and other key personnel of the Company. Nuvilexs performance will also depend on the Companys ability to retain and motivate its other officers and key employees. The loss of Nuvilexs chief executive officer or other key employees could have a materially adverse effect on the Companys business, prospects, financial condition and results of operations. Nuvilexs future success will depend on its ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, merchandising, and marketing and customer service personnel. Competition for such personnel is intense and there can be no assurance that Nuvilex will be able to successfully attract, assimilate and retain sufficiently qualified personnel. The failure to retain and attract the necessary technical and managerial personnel could have a materially adverse effect on the Companys business, prospects, financial condition and results of operations.
Development of Brand Awareness
For certain market segments that Nuvilex plans to pursue, the development of its brand awareness is essential for it to reduce its marketing expenditures over time and realize greater benefits from marketing expenditures. If the Companys brand-marketing efforts are unsuccessful, growth prospects, financial condition and results of operations would be materially adversely affected. Nuvilexs brand awareness efforts have required, and will continue to require, incurrence of significant expenses.
Intellectual Property Protection: Uncertainty of Protection of Proprietary Rights
Nuvilex currently relies on a combination of patents, trademarks, trade secret protection, non-disclosure agreements and licensing arrangements to establish and protect its proprietary rights. Despite efforts to safeguard and maintain Nuvilexs proprietary rights, there can be no assurance that the Company will be successful in doing so or that its competitors will not independently develop products that are substantially equivalent or superior to Nuvilexs products.
Nuvilex also relies on trade secrets and proprietary know-how, which the Company seeks to protect by confidentiality and non-disclosure agreements with its employees, consultants, and third parties. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach, or that certain of Nuvilexs trade secrets and proprietary know-how will not otherwise become known or be discovered by competitors.
Litigation may become necessary to enforce Nuvilexs intellectual property rights, to protect trade secrets, to determine the validity or scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Such litigation, whether successful or unsuccessful, could result in substantial costs and diversions of management resources, either of which could have a materially adverse effect on Nuvilexs business, prospects, financial condition, or operating results.
23
Availability and Coverage of Insurance
For certain risks, the Company does not maintain insurance coverage because of cost and/or availability. Because the Company retains some portion of its insurable risks, and in some cases self-insures completely, unforeseen or catastrophic losses in excess of insured limits could have a materially adverse effect on the Companys financial condition and operating results.
Federal, State, Local and Foreign Laws and Regulations
The Companys past research, product development and manufacturing activities have involved the controlled use of hazardous materials, and the Company may incur significant costs as a result of the need to comply with numerous laws and regulations. The Company is subject to laws and regulations enforced by the FDA, the DEA, the CDHS, foreign health authorities and other regulatory statutes including the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Food, Drug and Cosmetic Act, the Resource Conservation and Recovery Act, and other current and potential federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal of the Companys products, materials used to develop the Companys products, and resulting waste products.
Penny Stock Regulation
The Companys securities may be subject to penny stock rules that impose additional sales requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchasers written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the penny stock rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the penny stock rules may restrict the ability of broker-dealers to sell the Companys securities. The foregoing required penny stock restrictions will not apply to the Companys common stock if such securities maintain a market price of $5.00 or greater. The market price of the Companys common stock may not reach or remain at such a level.
Nuvilex anticipates it will expend significant financial and management resources in its efforts to comply with the internal control attestation provisions of Section 404 of the Sarbanes-Oxley Act of 2002 for the first quarter ending October 31, 2011.
Section 404 of the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated there under, require Nuvilex to have management attest to the adequacy of its internal controls in the Companys annual report on Form 10-K for the year ending April 30, 2011. The Companys internal controls did not meet such requirements on April 30, 2011 or October 31, 2011 and the Company is working to make changes to its internal controls in order for management to be able to make the required attestations by the end of the fiscal year ending April 30, 2012. Larger public companies currently required to comply with Section 404 have incurred significant monetary and other expenses from diversion of management time and attention, the acquisition of new computer software, the employment of additional personnel and training and third party internal controls consultants. In light of Nuvilexs current capital position, the Company anticipates that it will be time-consuming, costly and difficult for it to develop and implement the internal controls necessary for management to make the required attestations. It is Nuvilex intention in any case, to do what is necessary regarding financial reporting and internal controls, through software, personnel, and third party consultants to succeed in implementing the necessary financial reporting and internal controls during year ended 2012.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three months ended July 31, 2011, 9,750,000 shares of common stock were issued to various investors for $621,000 cash received. $148,000 of this amount has been recorded as a stock receivable and was received in the second quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION.
None.
24
ITEM 6. EXHIBITS.
Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as part of, or incorporated by reference, this Quarterly Report on Form 10-Q/A.
Exhibit No. |
| Description |
| Location |
2.1 |
| Asset Purchase Agreement, dated August 24, 2005, between the Company and Mark Taggatz. |
| Incorporated by reference from the Companys Current Report on Form 8-K filed with the SEC on August 30, 2005. |
2.2 |
| Share Purchase Agreement, dated August 31, 2005, between the Company and Dr. Richard Goldfarb. |
| Incorporated by reference from the Companys Current Report on Form 8-K filed with the SEC on September 7, 2005. |
2.3 |
| Addendum to Share Purchase Agreement, dated August 31, 2005, between the Company and Dr. Richard Goldfarb. |
| Incorporated by reference from the Companys Current Report on Form 8-K filed with the SEC on September 7, 2005. |
2.4 |
| Share Exchange Agreement, dated January 12, 2009, between the Company and Freedom2 Holdings, Inc. |
| Incorporated by reference from the Companys Current Report on Form 10-K filed with the SEC on August 13, 2009. |
2.5 |
| Share Exchange Agreement, dated May 26, 2011 between the Company and SG Austria Private Limited. |
| Incorporated by reference from the Companys Current Report on Form 10-Q filed with the SEC on September 14, 2011. |
3.1 |
| Articles of Incorporation of DJH International, Inc. dated October 25, 1996. |
| Incorporated by reference from the Companys Registration Statement on Form SB-2 (File No. 333-68008) filed with the SEC on August 20, 2001. |
3.2 |
| Certificate of Amendment of Articles of Incorporation of DJH International, Inc. dated October 20, 2000. |
| Incorporated by reference from the Companys Registration Statement on Form SB-2 (File No. 333-68008) filed with the SEC on August 20, 2001. |
3.3 |
| Certificate of Amendment of Articles of Incorporation dated November 14, 2003. |
| Incorporated by reference from the Companys Registration Statement on Form. |
3.4 |
| Certificate of Amendment of Articles of Incorporation dated June 30, 2008. |
| Incorporated by reference from the Companys Registration Statement on Form. |
3.5 |
| Certificate of Amendment of Articles of Incorporation dated January 22, 2009. |
| Incorporated by reference from the Companys Current Report on Form 8-K filed with the SEC on March 26, 2009. |
3.6 |
| Corporate Bylaws. |
| Incorporated by reference from the Companys Registration Statement on Form SB-2 (File No. 333-68008) filed with the SEC on August 20, 2001. |
3.7 |
| Certificate of Designations, Preferences and Rights of Series E Convertible Preferred Stock dated December 20, 2007. |
| Incorporated by reference from the Companys Current Report on Form 10-K filed with the SEC on August 13, 2009. |
3.8 |
| Certificate of Designations, Preferences and Rights of Series E Convertible Preferred Stock, dated April 29, 2008. |
| Incorporated by reference from the Companys Current Report on Form 10-K filed with the SEC on August 13, 2009. |
4.1 |
| Reference is made to Exhibits 3.1, 3.2 and 3.3. |
|
|
4.2 |
| Form of Common Stock Certificate. |
| Incorporated by reference from the Companys Registration Statement on Form SB-2 (File No. 333-68008) filed with the SEC on August 20, 2001. |
31.1 |
| Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under Sarbanes-Oxley Act of 1934, as amended. |
| Filed herewith. |
32.1 |
| Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*. |
| Filed herewith. |
|
|
|
|
|
101 |
| Interactive Data Files for Nuvilex, Inc. Form 10-Q for the period ended October 31, 2011 |
| Filed herewith. |
*Exhibits 32.1 are being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing.
25
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.
NUVILEX, INC.
|
By: /s/ Robert F. Ryan President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
26
SECTION 302 CERTIFICATION
I, Robert F. Ryan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Nuvilex, Inc.:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuers other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business owners other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small issuer's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: December 14, 2011
By: /s/ Robert F. Ryan
Robert F. Ryan, M.S., Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Patricia Gruden, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Nuvilex, Inc.:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business owners other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business owners other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small issuer's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: December 14, 2011
By: /s/ Patricia Gruden
Patricia Gruden
Interim Chief Financial Officer
(Interim Principal Financial Officer)
SECTION 906 CERTIFICATION
In connection with the Quarterly Report of Nuvilex, Inc. on Form 10-Q/A for the period ending October 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Ryan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
By: /s/ Robert F. Ryan President and Chief Executive Officer (Principal Executive Officer)
Date: December 14, 2011 |
EXHIBIT 32.2
SECTION 906 CERTIFICATION
In connection with the Quarterly Report of Nuvilex, Inc. on Form 10-Q/A for the period ending October 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patricia Gruden, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
By: /s/ Patricia Gruden Interim Chief Financial Officer (Interim Principal Executive Officer)
|
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6 Months Ended
Inventory Disclosure [Abstract]
Inventory Disclosure [Text Block]