Quarterly Report
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
For
the quarterly period ended December 31, 2006
[
]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For
the
transition period from ________________ to _______________
000-49620
(Commission
file number)
COBALIS
CORP.
(Exact
name of small business issuer as specified in its charter)
Nevada
(State
or other
jurisdiction
of
incorporation or organization)
|
91-1868007
(IRS
Employer
Identification
No.)
|
2445
McCabe Way, Suite 150, Irvine, California 92614
(Address
of principal executive offices)
(949)
757-0001
(Issuer's
telephone number)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter
period
that the registrant was required to file such reports), and (2) has been
subject
to such filing requirements for the past 90 days. Yes [ X ] No [
]
State
the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of February 16, 2007 - 35,824,672
shares of common stock Indicate by check mark whether the registrant is a
shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
Transitional
Small Business Disclosure Format (check one): Yes [ ] No
[X]
COBALIS
CORP.
Index
|
|
Page
|
|
|
|
PART
I.
|
FINANCIAL
INFORMATION
|
2
|
|
|
|
Item
1.
|
Financial
Statements
|
2
|
|
|
|
|
Consolidated
Balance Sheet as of December 31, 2006 (unaudited)
|
2
|
|
|
|
|
Consolidated
Statements of Operations for the three and nine months ended December
31, 2006 and 2005 (unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Stockholders’ Deficit for the nine
months ended December 31, 2006 (unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the nine
months ended December 31, 2006 and 2005 (unaudited)
|
8
|
|
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
10
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis or Plan of Operations
|
24
|
|
|
|
Item
3.
|
Controls
and Procedures
|
32
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
33
|
|
|
|
Item
1.
|
Legal
Proceedings
|
33
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
34
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
35
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
35
|
|
|
|
Item
5.
|
Other
Information
|
35
|
|
|
|
Item
6.
|
Exhibits
|
38
|
|
|
|
SIGNATURES
|
39
|
PART
I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
Cobalis
Corp. and Subsidiary
(A
Development Stage Company)
Consolidated
Balance Sheet
|
|
December
31,
|
|
|
|
2006
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,684,580
|
|
Prepaid
expenses and other current assets
|
|
|
21,801
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
1,706,381
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net of accumulated depreciation of $111,770
|
|
|
3,553
|
|
WEBSITE
DEVELOPMENT COSTS, net of accumulated amortization of
$33,545
|
|
|
1,062
|
|
PATENTS,
net of accumulated amortization of $321,177
|
|
|
632,262
|
|
DEBT
ISSUANCE COSTS
|
|
|
275,787
|
|
DEPOSIT
|
|
|
12,546
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
2,631,591
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Accounts
payable
|
|
$
|
545,629
|
|
Accrued
expenses
|
|
|
744,339
|
|
Accrued
clinical trial costs
|
|
|
2,611,356
|
|
Accrued
legal settlements
|
|
|
1,785,000
|
|
Accrued
salaries
|
|
|
376,125
|
|
Warrant
liability
|
|
|
7,186,980
|
|
Accrued
derivative liabililty
|
|
|
2,017,315
|
|
Promissory
notes
|
|
|
46,813
|
|
Notes
payable, net of discount of $54,508
|
|
|
300,000
|
|
Convertible
notes payable
|
|
|
850,000
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
16,463,557
|
|
|
|
|
|
|
SENIOR
DEBENTURE, net of discount of $53,806
|
|
|
196,194
|
|
CONVERTIBLE
DEBENTURE, net of discounts of $2,462,380
|
|
|
37,620
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
16,697,371
|
|
|
|
|
|
|
CONVERTIBLE
PREFERRED STOCK
|
|
|
442,500
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
-
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
Common
stock; $0.001 par value; 50,000,000 shares
|
|
|
|
|
authorized;
35,696,834 shares issued and outstanding
|
|
|
35,697
|
|
Additional
paid-in capital
|
|
|
23,679,456
|
|
Prepaid
expenses
|
|
|
(94,826
|
)
|
Deficit
accumulated during the development stage
|
|
|
(38,128,607
|
)
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' DEFICIT
|
|
|
(14,508,280
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
2,631,591
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements
Cobalis
Corp. and Subsidiary
(A
Development Stage Company)
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
Cumulative
from
|
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
November
21,
|
|
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
2000
(inception) to
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
December
31,2006
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
31,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT (LOSS)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(25,753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
|
656,601
|
|
|
1,003,441
|
|
|
2,224,275
|
|
|
1,961,801
|
|
|
11,399,802
|
|
Salary
and wages
|
|
|
651,607
|
|
|
317,025
|
|
|
1,755,239
|
|
|
495,245
|
|
|
4,792,537
|
|
Rent
expense
|
|
|
36,003
|
|
|
34,486
|
|
|
136,282
|
|
|
103,409
|
|
|
705,341
|
|
Marketing
and research
|
|
|
2,502,389
|
|
|
(406,315
|
)
|
|
3,801,753
|
|
|
(350,999
|
)
|
|
5,721,188
|
|
Depreciation
and amortization
|
|
|
16,580
|
|
|
23,262
|
|
|
47,857
|
|
|
69,545
|
|
|
575,121
|
|
Impairment
expense
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,331,522
|
|
Stock
option expense
|
|
|
469,296
|
|
|
-
|
|
|
1,059,888
|
|
|
-
|
|
|
1,059,888
|
|
Other
operating expenses
|
|
|
194,443
|
|
|
167,373
|
|
|
618,344
|
|
|
455,985
|
|
|
2,245,274
|
|
Legal
settlements
|
|
|
60,000
|
|
|
-
|
|
|
60,000
|
|
|
-
|
|
|
872,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
4,586,919
|
|
|
1,139,272
|
|
|
9,703,638
|
|
|
2,734,986
|
|
|
29,703,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(4,586,919
|
)
|
|
(1,139,272
|
)
|
|
(9,703,638
|
)
|
|
(2,734,986
|
)
|
|
(29,729,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense and financing costs
|
|
|
(225,639
|
)
|
|
(137,502
|
)
|
|
(457,774
|
)
|
|
(545,869
|
)
|
|
(4,659,748
|
)
|
Convertible
debenture financing cost
|
|
|
(3,065,293
|
)
|
|
-
|
|
|
(3,065,293
|
)
|
|
-
|
|
|
(3,065,293
|
)
|
Change
in fair value of warrant and accrued derivative
liabilities
|
|
|
(93,122
|
)
|
|
(51,270
|
)
|
|
(93,122
|
)
|
|
(24,928
|
)
|
|
210,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME (EXPENSE)
|
|
|
(3,384,054
|
)
|
|
(188,772
|
)
|
|
(3,616,189
|
)
|
|
(570,797
|
)
|
|
(7,514,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
|
|
(7,970,973
|
)
|
|
(1,328,044
|
)
|
|
(13,319,827
|
)
|
|
(3,305,783
|
)
|
|
(37,243,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(7,970,973
|
)
|
|
(1,328,044
|
)
|
|
(13,319,827
|
)
|
|
(3,305,783
|
)
|
|
(37,243,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
STOCK DIVIDENDS
|
|
|
9,375
|
|
|
18,750
|
|
|
37,500
|
|
|
56,250
|
|
|
1,110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
|
|
$
|
(7,980,348
|
)
|
$
|
(1,346,794
|
)
|
$
|
(13,357,327
|
)
|
$
|
(3,362,033
|
)
|
$
|
(38,353,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
$
|
(0.23
|
)
|
$
|
(0.05
|
)
|
$
|
(0.42
|
)
|
$
|
(0.13
|
)
|
$
|
(1.76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
|
34,945,875
|
|
|
26,154,906
|
|
|
31,430,962
|
|
|
25,410,249
|
|
|
21,754,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
Cobalis
Corp. and Subsidiary
(A
Development Stage Company)
Consolidated
Statements of Stockholders' Deficit
For
the Period From November 21, 2000 (inception) to September 30,
2006
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
Total
|
|
|
|
|
|
|
|
Additional
|
|
|
|
during
the
|
|
stockholders'
|
|
|
|
Common
stock
|
|
paid-in
|
|
Prepaid
|
|
development
|
|
equity
|
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
Expenses
|
|
stage
|
|
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at inception (November 21, 2000)
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Issuance
of founder’s shares in exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
property and equipment
|
|
|
16,300,000
|
|
|
16,300
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
16,300
|
|
Issuance
of common stock for cash - November 2000 @ $1.00
|
|
|
30,000
|
|
|
30
|
|
|
29,970
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
Issuance
of common stock for cash - December 2000 @ $1.00
|
|
|
15,000
|
|
|
15
|
|
|
14,985
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
Issuance
of common stock for cash - February 2001 @ $1.00
|
|
|
12,000
|
|
|
12
|
|
|
11,988
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
Issuance
of common stock for cash - March 2001 @ $1.00
|
|
|
125,000
|
|
|
125
|
|
|
124,875
|
|
|
-
|
|
|
-
|
|
|
125,000
|
|
Issuance
of common stock for services - March 2001 @ $1.00
|
|
|
10,000
|
|
|
10
|
|
|
9,990
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Contributed
capital
|
|
|
-
|
|
|
-
|
|
|
62,681
|
|
|
-
|
|
|
-
|
|
|
62,681
|
|
Net
loss for the period from inception
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
(November
21, 2000) to March 31, 2001
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(223,416
|
)
|
|
(223,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2001, as restated
|
|
|
16,492,000
|
|
|
16,492
|
|
|
254,489
|
|
|
-
|
|
|
(223,416
|
)
|
|
47,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash - April 2001 @ $1.00
|
|
|
10,000
|
|
|
10
|
|
|
9,990
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Issuance
of common stock for telephone equipment -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
2001 @ $1.00
|
|
|
6,750
|
|
|
7
|
|
|
6,743
|
|
|
-
|
|
|
-
|
|
|
6,750
|
|
Issuance
of common stock for cash - May 2001 @ $1.00
|
|
|
11,000
|
|
|
11
|
|
|
10,989
|
|
|
-
|
|
|
-
|
|
|
11,000
|
|
Issuance
of common stock for website development -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2001 @ $1.00
|
|
|
17,000
|
|
|
17
|
|
|
16,983
|
|
|
-
|
|
|
-
|
|
|
17,000
|
|
Issuance
of common stock for legal services -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2001 @ $1.00
|
|
|
1,000
|
|
|
1
|
|
|
999
|
|
|
-
|
|
|
-
|
|
|
1,000
|
|
Issuance
of common stock for cash - June 2001 @ $1.00
|
|
|
23,500
|
|
|
24
|
|
|
23,476
|
|
|
-
|
|
|
-
|
|
|
23,500
|
|
Issuance
of common stock for cash - July 2001 @ $1.00
|
|
|
20,000
|
|
|
20
|
|
|
19,980
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
Issuance
of common stock for cash - August 2001 @ $1.00
|
|
|
25,000
|
|
|
25
|
|
|
24,975
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Issuance
of common stock for services, related party -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
2001 @ $1.00
|
|
|
65,858
|
|
|
66
|
|
|
65,792
|
|
|
-
|
|
|
-
|
|
|
65,858
|
|
Issuance
of common stock for cash - September 2001 @ $1.00
|
|
|
15,000
|
|
|
15
|
|
|
14,985
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
Issuance
of common stock for services - September 2001 @ $1.00
|
|
|
11,000
|
|
|
11
|
|
|
10,989
|
|
|
-
|
|
|
-
|
|
|
11,000
|
|
Issuance
of stock options for services - September 2001
|
|
|
-
|
|
|
-
|
|
|
32,000
|
|
|
-
|
|
|
-
|
|
|
32,000
|
|
Issuance
of common stock for cash - October 2001 @ $1.00
|
|
|
5,000
|
|
|
5
|
|
|
4,995
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Issuance
of common stock for cash - December 2001 @ $1.00
|
|
|
30,000
|
|
|
30
|
|
|
29,970
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
Issuance
of common stock for services -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2001 @ $1.00
|
|
|
33,000
|
|
|
33
|
|
|
32,967
|
|
|
-
|
|
|
-
|
|
|
33,000
|
|
Issuance
of common stock for services, related party -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
2001 @ $1.00
|
|
|
117,500
|
|
|
118
|
|
|
117,382
|
|
|
-
|
|
|
-
|
|
|
117,500
|
|
Issuance
of common stock for prepaid advertising -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
2001 @ $1.00
|
|
|
15,600
|
|
|
15
|
|
|
15,585
|
|
|
-
|
|
|
-
|
|
|
15,600
|
|
Issuance
of common stock for property and equipment -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2002 @ $3.00
|
|
|
1,000
|
|
|
1
|
|
|
2,999
|
|
|
-
|
|
|
-
|
|
|
3,000
|
|
Issuance
of common stock for services, related party -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2002 @ $1.00
|
|
|
33,000
|
|
|
33
|
|
|
32,967
|
|
|
-
|
|
|
-
|
|
|
33,000
|
|
Issuance
of common stock for cash - February 2002 @ $2.00
|
|
|
20,000
|
|
|
20
|
|
|
39,980
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
Issuance
of common stock for cash - March 2002 @ $2.00
|
|
|
12,500
|
|
|
12
|
|
|
24,988
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Contributed
capital
|
|
|
-
|
|
|
-
|
|
|
211,269
|
|
|
-
|
|
|
-
|
|
|
211,269
|
|
Deferred
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(60,108
|
)
|
|
-
|
|
|
(60,108
|
)
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,144,249
|
)
|
|
(1,144,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2002, as restated
|
|
|
16,965,708
|
|
|
16,966
|
|
|
1,005,492
|
|
|
(60,108
|
)
|
|
(1,367,665
|
)
|
|
(405,315
|
)
|
Issuance
of common stock for services - April 2002 @ $2.00
|
|
|
3,000
|
|
|
3
|
|
|
5,997
|
|
|
-
|
|
|
-
|
|
|
6,000
|
|
Issuance
of common stock for cash - April 2002 @ $1.00
|
|
|
10,000
|
|
|
10
|
|
|
9,990
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Issuance
of common stock for cash - April 2002 @ $2.00
|
|
|
17,500
|
|
|
17
|
|
|
34,983
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
Issuance
of common stock for cash - May 2002 @ $1.00
|
|
|
10,000
|
|
|
10
|
|
|
9,990
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Issuance
of common stock for cash - May 2002 @ $2.00
|
|
|
16,000
|
|
|
16
|
|
|
31,984
|
|
|
-
|
|
|
-
|
|
|
32,000
|
|
Issuance
of stock options for services - May 2002
|
|
|
-
|
|
|
-
|
|
|
350,000
|
|
|
-
|
|
|
-
|
|
|
350,000
|
|
Contributed
capital - bonus expense
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Issuance
of common stock for cash - June 2002 @ $1.00
|
|
|
5,000
|
|
|
5
|
|
|
4,995
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Issuance
of common stock for cash - June 2002 @ $2.00
|
|
|
5,000
|
|
|
5
|
|
|
9,995
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Issuance
of common stock for cash - July 2002 @ $1.00
|
|
|
5,000
|
|
|
5
|
|
|
4,995
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Issuance
of common stock for cash - August 2002 @ $2.00
|
|
|
10,000
|
|
|
10
|
|
|
19,990
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
Issuance
of common stock for cash - September 2002 @ $2.00
|
|
|
10,000
|
|
|
10
|
|
|
19,990
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
Issuance
of stock options below fair market value - November 2002
|
|
|
-
|
|
|
-
|
|
|
250,000
|
|
|
(250,000
|
)
|
|
-
|
|
|
-
|
|
Issuance
of common stock for conversion of note - December 2002 @
2.00
|
|
|
50,000
|
|
|
50
|
|
|
99,950
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Issuance
of common stock for cash - December 2002 @ $2.00
|
|
|
20,000
|
|
|
20
|
|
|
39,980
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
Issuance
of common stock for services - December 2002 @ $2.00
|
|
|
15,000
|
|
|
15
|
|
|
29,985
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
Issuance
of common stock for patents - December 2002 @ $2.00
|
|
|
2,000,000
|
|
|
2,000
|
|
|
1,285,917
|
|
|
-
|
|
|
-
|
|
|
1,287,917
|
|
Contributed
capital
|
|
|
|
|
|
|
|
|
292,718
|
|
|
-
|
|
|
-
|
|
|
292,718
|
|
Issuance
of common stock for exercise of options - December 2002
|
|
|
574,000
|
|
|
574
|
|
|
574,028
|
|
|
-
|
|
|
-
|
|
|
574,602
|
|
Deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
60,108
|
|
|
|
|
|
60,108
|
|
Contributed
capital
|
|
|
|
|
|
|
|
|
5,000
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Issuance
of common stock for services - January 2003
|
|
|
|
|
|
|
|
|
25,000
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Issuance
of common stock for cash February 2003 @ $2.00
|
|
|
11,500
|
|
|
12
|
|
|
22,988
|
|
|
-
|
|
|
-
|
|
|
23,000
|
|
Issuance
of common stock for cash March 2003 @ $2.00
|
|
|
5,000
|
|
|
5
|
|
|
9,995
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
|
-
|
|
|
54,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(2,148,008
|
)
|
|
(2,148,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2003, as restated
|
|
|
19,732,708
|
|
|
19,733
|
|
|
4,193,962
|
|
|
(196,000
|
)
|
|
(3,515,673
|
)
|
|
502,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash April 2003 @ $2.00
|
|
|
70,000
|
|
|
70
|
|
|
139,930
|
|
|
-
|
|
|
-
|
|
|
140,000
|
|
Issuance
of common stock for cash May 2003 @ $2.00
|
|
|
30,000
|
|
|
30
|
|
|
59,970
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
Acquisition
by Biogentech Corp of ("Togs for Tykes")
|
|
|
1,032,000
|
|
|
1,032
|
|
|
(101,032
|
)
|
|
-
|
|
|
-
|
|
|
(100,000
|
)
|
Issuance
of common stock for penalties January 2004 @ $2.80
|
|
|
135,000
|
|
|
135
|
|
|
377,865
|
|
|
-
|
|
|
-
|
|
|
378,000
|
|
Issuance
of common stock for services February 2004 @ $2.20
|
|
|
100,000
|
|
|
100
|
|
|
219,900
|
|
|
-
|
|
|
-
|
|
|
220,000
|
|
Issuance
of common stock for services February 2004 @ $1.85
|
|
|
20,000
|
|
|
20
|
|
|
36,980
|
|
|
-
|
|
|
-
|
|
|
37,000
|
|
Value
of beneficial conversion feature of convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debenture
issued in September 2003
|
|
|
|
|
|
|
|
|
346,870
|
|
|
-
|
|
|
-
|
|
|
346,870
|
|
Fair
value allocated to warrant liability for detachable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants
issued with preferred stock
|
|
|
|
|
|
|
|
|
(181,849
|
)
|
|
-
|
|
|
-
|
|
|
(181,849
|
)
|
Dividend
on preferred stock
|
|
|
|
|
|
|
|
|
885,000
|
|
|
-
|
|
|
(885,000
|
)
|
|
-
|
|
Deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
196,000
|
|
|
-
|
|
|
196,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(5,703,639
|
)
|
|
(5,703,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2004
|
|
|
21,119,708
|
|
|
21,120
|
|
|
5,977,596
|
|
|
-
|
|
|
(10,104,312
|
)
|
|
(4,105,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for penalties May 2004 @ $1.85
|
|
|
170,000
|
|
|
170
|
|
|
314,330
|
|
|
-
|
|
|
-
|
|
|
314,500
|
|
Issuance
of common stock for services June 2004 @ $1.75
|
|
|
10,000
|
|
|
10
|
|
|
17,490
|
|
|
-
|
|
|
-
|
|
|
17,500
|
|
Issuance
of common stock for conversion of debt June 2004 @ $1.60
|
|
|
371,317
|
|
|
371
|
|
|
593,736
|
|
|
-
|
|
|
-
|
|
|
594,107
|
|
Issuance
of common stock for services July 2004 @ $1.35
|
|
|
7,489
|
|
|
8
|
|
|
10,101
|
|
|
|
|
|
|
|
|
10,109
|
|
Issuance
of common stock for services July 2004 @ $1.10
|
|
|
75,000
|
|
|
75
|
|
|
82,425
|
|
|
|
|
|
|
|
|
82,500
|
|
Issuance
of common stock for services August 2004 @ $0.75
|
|
|
100,000
|
|
|
100
|
|
|
74,900
|
|
|
|
|
|
|
|
|
75,000
|
|
Conversion
of debt to common stock September 2004 @ 2.22
|
|
|
857,143
|
|
|
857
|
|
|
1,902,000
|
|
|
|
|
|
|
|
|
1,902,857
|
|
Issuance
of common stock for services October 2004 @ $2.20
|
|
|
4,758
|
|
|
5
|
|
|
10,463
|
|
|
|
|
|
|
|
|
10,468
|
|
Issuance
of common stock for services October 2004 @ $2.55
|
|
|
375,000
|
|
|
375
|
|
|
955,875
|
|
|
|
|
|
|
|
|
956,250
|
|
Issuance
of common stock for services December 2004 @ $1.45
|
|
|
5,000
|
|
|
5
|
|
|
7,245
|
|
|
|
|
|
|
|
|
7,250
|
|
Issuance
of common stock for services December 2004 @ $1.30
|
|
|
63,676
|
|
|
63
|
|
|
82,715
|
|
|
|
|
|
|
|
|
82,778
|
|
Issuance
of common stock for services January 2005 @ $1.05
|
|
|
1,250
|
|
|
1
|
|
|
1,312
|
|
|
|
|
|
|
|
|
1,313
|
|
Issuance
of common stock for services January 2005 @ $1.18
|
|
|
75,000
|
|
|
75
|
|
|
88,425
|
|
|
|
|
|
|
|
|
88,500
|
|
Issuance
of common stock for services February 2005 @ $1.10
|
|
|
155,000
|
|
|
155
|
|
|
170,345
|
|
|
|
|
|
|
|
|
170,500
|
|
Issuance
of common stock for services February 2005 @ $1.06
|
|
|
100,000
|
|
|
100
|
|
|
105,900
|
|
|
|
|
|
|
|
|
106,000
|
|
Issuance
of common stock for services February 2005 @ $0.95
|
|
|
30,000
|
|
|
30
|
|
|
28,470
|
|
|
|
|
|
|
|
|
28,500
|
|
Issuance
of common stock for services February 2005 @ $1.05
|
|
|
80,628
|
|
|
81
|
|
|
84,578
|
|
|
|
|
|
|
|
|
84,659
|
|
Issuance
of common stock for services February 2005 @ $1.00
|
|
|
467,159
|
|
|
467
|
|
|
466,692
|
|
|
|
|
|
|
|
|
467,159
|
|
Issuance
of common stock for services February 2005 @ $0.96
|
|
|
350,000
|
|
|
350
|
|
|
335,650
|
|
|
|
|
|
|
|
|
336,000
|
|
Issuance
of common stock for financing costs March 2005 @ $0.81
|
|
|
50,000
|
|
|
50
|
|
|
40,450
|
|
|
|
|
|
|
|
|
40,500
|
|
Issuance
of common stock for services March 2005 @ $0.80
|
|
|
5,000
|
|
|
5
|
|
|
3,995
|
|
|
|
|
|
|
|
|
4,000
|
|
Issuance
of common stock for services March 2005 @ $0.75
|
|
|
120,000
|
|
|
120
|
|
|
89,880
|
|
|
|
|
|
|
|
|
90,000
|
|
Issuance
of common stock for services March 2005 @ $0.68
|
|
|
37,500
|
|
|
38
|
|
|
25,462
|
|
|
|
|
|
|
|
|
25,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued to consultants
|
|
|
|
|
|
|
|
|
553,715
|
|
|
|
|
|
|
|
|
553,715
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,101,014
|
)
|
|
(8,101,014
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2005
|
|
|
24,630,628
|
|
|
24,631
|
|
|
12,023,750
|
|
|
-
|
|
|
(18,205,326
|
)
|
|
(6,156,945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelation
of common stock previously issued
|
|
|
(105,000
|
)
|
|
(105
|
)
|
|
(113,895
|
)
|
|
|
|
|
|
|
|
(114,000
|
)
|
Issuance
of common stock for services April 2005 @ $0.59
|
|
|
100,000
|
|
|
100
|
|
|
58,900
|
|
|
|
|
|
|
|
|
59,000
|
|
Issuance
of common stock for services April 2005 @ $0.62
|
|
|
162,500
|
|
|
162
|
|
|
100,587
|
|
|
|
|
|
|
|
|
100,749
|
|
Issuance
of common stock for services May 2005 @ $0.60
|
|
|
39,836
|
|
|
40
|
|
|
23,862
|
|
|
|
|
|
|
|
|
23,902
|
|
Issuance
of common stock for services June 2005 @ $0.65
|
|
|
110,000
|
|
|
110
|
|
|
71,390
|
|
|
|
|
|
|
|
|
71,500
|
|
Issuance
of common stock for services June 2005 @ $0.45
|
|
|
200,000
|
|
|
200
|
|
|
89,800
|
|
|
|
|
|
|
|
|
90,000
|
|
Issuance
of common stock for services July 2005 @ $0.60
|
|
|
10,000
|
|
|
10
|
|
|
5,990
|
|
|
|
|
|
|
|
|
6,000
|
|
Issuance
of common stock for services July 2005 @ $0.61
|
|
|
125,000
|
|
|
125
|
|
|
76,125
|
|
|
|
|
|
|
|
|
76,250
|
|
Issuance
of common stock for interest July 2005 @ $0.61
|
|
|
50,000
|
|
|
50
|
|
|
30,450
|
|
|
|
|
|
|
|
|
30,500
|
|
Cancelation
of common stock previously issued
|
|
|
(150,000
|
)
|
|
(150
|
)
|
|
(143,850
|
)
|
|
|
|
|
|
|
|
(144,000
|
)
|
Issuance
of common stock for services August 2005 @ $0.48
|
|
|
100,000
|
|
|
100
|
|
|
47,900
|
|
|
|
|
|
|
|
|
48,000
|
|
Issuance
of common stock for services September 2005 @ $0.50
|
|
|
30,000
|
|
|
30
|
|
|
14,970
|
|
|
|
|
|
|
|
|
15,000
|
|
Issuance
of common stock for services September 2005 @ $0.42
|
|
|
50,000
|
|
|
50
|
|
|
20,950
|
|
|
|
|
|
|
|
|
21,000
|
|
Issuance
of common stock for services September 2005 @ $0.50
|
|
|
75,000
|
|
|
75
|
|
|
37,425
|
|
|
|
|
|
|
|
|
37,500
|
|
Issuance
of common stock for services October 2005 @ $0.53
|
|
|
220,000
|
|
|
220
|
|
|
115,280
|
|
|
(58,750
|
)
|
|
|
|
|
56,750
|
|
Issuance
of common stock for prepaid interest October 2005 @ $0.58
|
|
|
125,000
|
|
|
125
|
|
|
72,375
|
|
|
(72,500
|
)
|
|
|
|
|
-
|
|
Issuance
of common stock for conversion of debt October 2005 @
$1.75
|
|
|
150,000
|
|
|
150
|
|
|
262,350
|
|
|
|
|
|
|
|
|
262,500
|
|
Issuance
of common stock for services November 2005 @ $0.78
|
|
|
822,706
|
|
|
823
|
|
|
644,847
|
|
|
(26,700
|
)
|
|
|
|
|
618,970
|
|
Issuance
of common stock for services January 2006 @ $1.54
|
|
|
335,000
|
|
|
335
|
|
|
515,165
|
|
|
(119,500
|
)
|
|
|
|
|
396,000
|
|
Issuance
of common stock for services February 2006 @ $1.42
|
|
|
62,000
|
|
|
62
|
|
|
87,738
|
|
|
|
|
|
|
|
|
87,800
|
|
Issuance
of common stock for services March 2006 @ $1.58
|
|
|
121,467
|
|
|
121
|
|
|
192,237
|
|
|
|
|
|
|
|
|
192,358
|
|
Issuance
of common stock for conversion of notes payable and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued
interest March 2006
|
|
|
105,250
|
|
|
105
|
|
|
173,557
|
|
|
|
|
|
|
|
|
173,662
|
|
Cancelation
of common stock previously issued
|
|
|
(3,000
|
)
|
|
(3
|
)
|
|
(4,797
|
)
|
|
|
|
|
|
|
|
(4,800
|
)
|
Amortization
of prepaid expenses
|
|
|
|
|
|
|
|
|
|
|
|
112,025
|
|
|
|
|
|
112,025
|
|
Value
of warrants issued with debt
|
|
|
|
|
|
|
|
|
131,365
|
|
|
|
|
|
|
|
|
131,365
|
|
Repricing
of warrants
|
|
|
|
|
|
|
|
|
301,155
|
|
|
|
|
|
|
|
|
301,155
|
|
Amortization
of fair value of warrants issued to consultants
|
|
|
|
|
|
|
|
|
1,541,628
|
|
|
|
|
|
|
|
|
1,541,628
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,603,454
|
)
|
|
(6,603,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2006
|
|
|
27,366,387
|
|
|
27,366
|
|
|
16,377,254
|
|
|
(165,425
|
)
|
|
(24,808,780
|
)
|
|
(8,569,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for converstion of note payable and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued
interest April 2006
|
|
|
27,200
|
|
|
27
|
|
|
51,109
|
|
|
|
|
|
|
|
|
51,136
|
|
Issuance
of common stock for services April 2006 @ $1.46
|
|
|
115,000
|
|
|
115
|
|
|
167,835
|
|
|
|
|
|
|
|
|
167,950
|
|
Issuance
of common stock for cashless exercise of warrants
|
|
|
192,997
|
|
|
193
|
|
|
(193
|
)
|
|
|
|
|
|
|
|
-
|
|
Issuance
of common stock for services May 2006 @ $1.37
|
|
|
150,000
|
|
|
150
|
|
|
204,450
|
|
|
(165,600
|
)
|
|
|
|
|
39,000
|
|
Issuance
of common
stock for conversion of accounts payable May 2006 @ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.28
|
|
|
111,416
|
|
|
112
|
|
|
142,501
|
|
|
|
|
|
|
|
|
142,613
|
|
Issuance
of common stock for conversion of preferred stock July 2006 @
$2.12
|
|
|
208,333
|
|
|
208
|
|
|
442,292
|
|
|
|
|
|
|
|
|
442,500
|
|
Issuance
of common
stock for conversion of related party debt July 2006 @ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.30
|
|
|
3,995,806
|
|
|
3,996
|
|
|
5,190,558
|
|
|
|
|
|
|
|
|
5,194,554
|
|
Issuance
of common stock for services July 2006 @ $0.99
|
|
|
30,000
|
|
|
30
|
|
|
29,820
|
|
|
(14,850
|
)
|
|
|
|
|
15,000
|
|
Issuance
of common
stock for conversion of convertible note debt July 2006 @ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.01
|
|
|
200,000
|
|
|
200
|
|
|
201,800
|
|
|
|
|
|
|
|
|
202,000
|
|
Issuance
of common stock for services August 2006 @ $0.97
|
|
|
20,000
|
|
|
20
|
|
|
19,380
|
|
|
|
|
|
|
|
|
19,400
|
|
Issuance
of common stock for services September 2006 @ $0.92
|
|
|
156,000
|
|
|
156
|
|
|
143,684
|
|
|
(94,000
|
)
|
|
|
|
|
49,840
|
|
Issuance
of common stock for cash September 2006 @ $0.50
|
|
|
400,000
|
|
|
400
|
|
|
199,600
|
|
|
|
|
|
|
|
|
200,000
|
|
Issuance
of common stock for services October 2006 @ $0.99
|
|
|
360,000
|
|
|
360
|
|
|
356,440
|
|
|
|
|
|
|
|
|
356,800
|
|
Issuance
of common stock for cash October 2006 @ $0.50
|
|
|
1,150,000
|
|
|
1,150
|
|
|
573,850
|
|
|
|
|
|
|
|
|
575,000
|
|
Issuance
of common stock for services November 2006 @ $093
|
|
|
1,113,695
|
|
|
1,114
|
|
|
1,056,896
|
|
|
|
|
|
|
|
|
1,058,010
|
|
Issuance
of common stock for cash December 2006 @ $0.50
|
|
|
100,000
|
|
|
100
|
|
|
49,900
|
|
|
|
|
|
|
|
|
50,000
|
|
Payment
of equity offering costs
|
|
|
|
|
|
|
|
|
(57,500
|
)
|
|
|
|
|
|
|
|
(57,500
|
)
|
Amortization
of prepaid expenses
|
|
|
|
|
|
|
|
|
|
|
|
345,049
|
|
|
|
|
|
345,049
|
|
Value
of warrants issued with debt
|
|
|
|
|
|
|
|
|
112,533
|
|
|
|
|
|
|
|
|
112,533
|
|
Fair
value of vested stock options issued to employees
|
|
|
|
|
|
|
|
|
1,059,888
|
|
|
|
|
|
|
|
|
1,059,888
|
|
Fair
value of warrants issued for extension of debt
|
|
|
|
|
|
|
|
|
15,307
|
|
|
|
|
|
|
|
|
15,307
|
|
Amortization
of fair value of warrants issued to consultants
|
|
|
|
|
|
|
|
|
887,932
|
|
|
|
|
|
|
|
|
887,932
|
|
Value
of warrants transferred to liability
|
|
|
|
|
|
|
|
|
(3,545,880
|
)
|
|
|
|
|
|
|
|
(3,545,880
|
)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,319,827
|
)
|
|
(13,319,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31,2006 (unaudited)
|
|
|
35,696,834
|
|
$
|
35,697
|
|
$
|
23,679,456
|
|
$
|
(94,826
|
)
|
$
|
(38,128,607
|
)
|
$
|
(14,508,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
Cobalis
Corp. and Subsidiary
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
Cumulative
from
|
|
|
|
Nine
Months Ended
|
|
|
|
November
21,
|
|
|
|
December
31,
|
|
December
31,
|
|
2000
(inception) to
|
|
|
|
2006
|
|
2005
|
|
December
31, 2006
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(13,319,827
|
)
|
$
|
(3,305,783
|
)
|
$
|
(37,243,607
|
)
|
Adjustment
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
47,857
|
|
|
69,545
|
|
|
575,121
|
|
Common
stock issued for services
|
|
|
1,706,000
|
|
|
1,025,371
|
|
|
6,552,323
|
|
Common
stock issued for penalty
|
|
|
-
|
|
|
-
|
|
|
692,500
|
|
Common
stock issued for financing costs
|
|
|
-
|
|
|
30,500
|
|
|
71,000
|
|
Change
in value of warrant liability
|
|
|
93,122
|
|
|
24,928
|
|
|
(210,578
|
)
|
Amortization
of debt issue costs
|
|
|
203,853
|
|
|
11,877
|
|
|
315,425
|
|
Exercise
of stock options for services
|
|
|
-
|
|
|
-
|
|
|
26,960
|
|
Amortization
of discounts on notes
|
|
|
-
|
|
|
-
|
|
|
790,128
|
|
Issuance
of stock options/warrants for services/debt
extension
|
|
|
903,239
|
|
|
913,199
|
|
|
3,405,582
|
|
Capital
contribution - bonus (related party)
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Amortization
of prepaid expenses
|
|
|
345,049
|
|
|
11,005
|
|
|
472,674
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
250,000
|
|
Discount
on common stock issued for settlement of debt
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Impairment
expense
|
|
|
-
|
|
|
-
|
|
|
2,331,522
|
|
Re-pricing
of warrants
|
|
|
-
|
|
|
-
|
|
|
301,155
|
|
Value
of vested stock options issued to employees
|
|
|
1,059,888
|
|
|
-
|
|
|
1,059,888
|
|
Non-cash
financing costs
|
|
|
3,065,293
|
|
|
-
|
|
|
3,065,293
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
-
|
|
Prepaid
expenses and other assets
|
|
|
(17,121
|
)
|
|
-
|
|
|
(21,801
|
)
|
Inventory
|
|
|
-
|
|
|
-
|
|
|
6,250
|
|
Deposits
|
|
|
-
|
|
|
-
|
|
|
27,454
|
|
Accounts
payable
|
|
|
248,493
|
|
|
(171,734
|
)
|
|
1,096,632
|
|
Accrued
expenses
|
|
|
345,727
|
|
|
(506,943
|
)
|
|
1,760,528
|
|
Accrued
clinical trial costs
|
|
|
2,611,356
|
|
|
|
|
|
2,611,356
|
|
Accrued
legal settlement
|
|
|
60,000
|
|
|
-
|
|
|
1,785,000
|
|
Accrued
salaries
|
|
|
110,010
|
|
|
|
|
|
110,010
|
|
Amounts
due to related parties
|
|
|
215,574
|
|
|
228,561
|
|
|
2,043,481
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(2,321,487
|
)
|
|
(1,669,474
|
)
|
|
(8,025,704
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
-
|
|
|
(1,542
|
)
|
|
(89,272
|
)
|
Increase
in patent costs
|
|
|
(48,124
|
)
|
|
-
|
|
|
(72,835
|
)
|
Change
in restricted cash
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Merger
fees and costs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Increase
in acquisition deposits
|
|
|
-
|
|
|
-
|
|
|
(2,220,000
|
)
|
Increase
in other deposits
|
|
|
-
|
|
|
-
|
|
|
(40,000
|
)
|
Increase
in capitalized website
|
|
|
-
|
|
|
-
|
|
|
(18,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(48,124
|
)
|
|
(1,542
|
)
|
|
(2,440,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Change
in cash overdraft
|
|
|
-
|
|
|
(11,941
|
)
|
|
-
|
|
Payment
on contract
|
|
|
-
|
|
|
-
|
|
|
(161,000
|
)
|
Proceeds
from advances - related party
|
|
|
-
|
|
|
1,217,500
|
|
|
4,581,449
|
|
Proceeds
from advances from stockholders
|
|
|
-
|
|
|
310,000
|
|
|
310,000
|
|
Proceeds
from issuance of notes payable
|
|
|
550,000
|
|
|
250,000
|
|
|
2,015,000
|
|
Proceeds
from sale of common stock
|
|
|
825,000
|
|
|
-
|
|
|
1,631,500
|
|
Payment
of equity offering costs
|
|
|
(57,500
|
)
|
|
|
|
|
(57,500
|
)
|
Proceeds
from sale of preferred stock
|
|
|
-
|
|
|
-
|
|
|
885,000
|
|
Proceeds
from convertible debenture
|
|
|
-
|
|
|
100,000
|
|
|
700,000
|
|
Capital
contribution
|
|
|
2,500,000
|
|
|
-
|
|
|
3,071,668
|
|
Payment
of debt issue costs
|
|
|
(280,000
|
)
|
|
-
|
|
|
(363,500
|
)
|
Payments
on advances from stockholders
|
|
|
(10,000
|
)
|
|
(50,000
|
)
|
|
(60,000
|
)
|
Payments
on advances - related party
|
|
|
-
|
|
|
(131,329
|
)
|
|
(402,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
3,527,500
|
|
|
1,684,230
|
|
|
12,150,488
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND
|
|
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
1,157,889
|
|
|
13,214
|
|
|
1,684,580
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, Beginning of period
|
|
|
526,691
|
|
|
1,169
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, End of period
|
|
$
|
1,684,580
|
|
$
|
14,383
|
|
$
|
1,684,580
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Income
taxes paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued for conversion of debt
|
|
$
|
5,396,554
|
|
$
|
-
|
|
$
|
5,396,554
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
NOTE
1 - BASIS OF PRESENTATION
The
unaudited consolidated financial statements have been prepared by Cobalis Corp.
(the “Company”), pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which are, in the
opinion of management, necessary to fairly present the operating results for
the
respective periods. Certain information and footnote disclosures normally
present in annual consolidated financial statements prepared in accordance
with
accounting principles generally accepted in the United States of America have
been omitted pursuant to such rules and regulations. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes for the year ended March 31, 2006 included
in
the Company’s Annual Report on Form 10-KSB. The results of the nine months ended
December 31, 2006 are not necessarily indicative of the results to be expected
for the full year ending March 31, 2007.
Going
Concern
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The Company
has incurred a net loss of $13,319,827 for the nine months ended December 31,
2006 and as of December 31, 2006, the Company had a working capital deficit
of
$14,757,176 and a stockholder deficit of $14,508,280. In addition, as of
December 31, 2006, the Company has not developed a substantial source of
revenue.
These
conditions raise substantial doubt as to the Company's ability to continue
as a
going concern. These consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty. These
consolidated financial statements do not include any adjustments relating to
the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The
Company has recently raised $2,500,000 by issuing a convertible debenture and
has sold shares of its common stock for gross proceeds of $800,000 and is
currently attempting to raise additional financing for operating purposes.
The
Company is also attempting to partner with a large pharmaceutical company for
research and development, marketing and distribution of its
product.
The
Company requires substantial capital to pursue its operating strategy, including
paying for its phase III clinical trials and currently has limited cash for
operations. Until the Company can obtain revenues or obtain funding through
debt
and equity financing sufficient to fund working capital needs and additional
research and development costs necessary to obtain the regulatory approvals
for
commercialization, the Company will be dependent upon external sources of
financing.
There
can
be no assurances that sufficient financing will be available on terms acceptable
to the Company, or at all. If the Company is unable to obtain such financing,
the Company will be forced to scale back operations, which could have an adverse
effect on the Company's financial condition and results of operations. These
factors raise substantial doubt about the Company's ability to continue as
a
going concern.
Management
believes that actions presently being taken to revise the Company's operating
and financial requirements provide the opportunity for the Company to continue
as a going concern.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
Stock
Options
The
Company adopted SFAS No. 123 (Revised 2004), Share
Based Payment (“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value. Share-based compensation
recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting
for Stock-Based Compensation, for
all
share-based payments granted prior to and not yet vested as of January 1,
2006 and share-based compensation based on the grant-date fair-value determined
in accordance with SFAS No. 123R for all share-based payments granted after
January 1, 2006. SFAS No. 123R eliminates the ability to account for
the award of these instruments under the intrinsic value method prescribed
by
Accounting Principles Board (“APB”) Opinion No. 25, Accounting
for Stock Issued to Employees,
and
allowed under the original provisions of SFAS No. 123. Prior to the
adoption of SFAS No. 123R, the Company accounted for our stock option plans
using the intrinsic value method in accordance with the provisions of APB
Opinion No. 25 and related interpretations.
As
a
result of adopting SFAS No. 123R, the Company recognized $1,059,888 in
share-based compensation expense for the nine months ended December 31, 2006
related to options granted to employees in May 2006. The impact of this
share-based compensation expense on the Company’s basic and diluted earnings per
share was $0.03 per share for the nine months ended December 31, 2006. The
fair
value of our stock options was estimated using the Black-Scholes option pricing
model.
For
periods presented prior to the adoption of SFAS No. 123R, pro forma
information regarding net income and earnings per share as required by SFAS
No. 123R has been determined as if the Company had accounted for its
employee stock options under the original provisions of SFAS No. 123. The
fair value of these options was estimated using the Black-Scholes option pricing
model.
If
the
Company had elected to recognize compensation expense based upon the fair value
at the grant date for awards under the Stock Option Plan consistent with the
methodology prescribed by SFAS No. 123, the Company’s net loss and loss per
share would be increased to the pro forma amounts indicated below for the nine
months ended December 31, 2005:
|
|
2005
|
|
Net
loss attributed to common stockholders:
|
|
|
|
As
reported
|
|
$
|
(3,362,033
|
)
|
Compensation
recognized under APB 25
|
|
|
—
|
|
Compensation
recognized under SFAS 123
|
|
|
(579,035
|
)
|
Pro
forma
|
|
$
|
(3,941,068
|
)
|
Basic
and diluted loss per common share:
|
|
|
|
|
As
reported
|
|
$
|
(0.13
|
)
|
Pro
forma
|
|
$
|
(0.16
|
)
|
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
The
fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions
for 2005: risk-free interest rate of 4.25%; dividend yields of 0%;
volatility factors of the expected market price of the Company’s common shares
of 202%; and a weighted average expected life of the option of 5 years.
Patent
Costs
Patent
costs are carried at cost less accumulated amortization, which is calculated
on
a straight-line basis, over the estimated economic life of the patent. In
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," the
Company evaluates intangible assets and other long-lived assets (including
patent costs) for impairment, at least on an annual basis and whenever events
or
changes in circumstances indicate that the carrying value may not be recoverable
from its estimated future cash flows. Recoverability of intangible assets and
other long-lived assets is measured by comparing their net book value to the
related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book
value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. During the year ended March 31, 2004, the Company recognized
an
impairment expense of $111,522 related to one of its patents as it determined
that this patent had no future value based on its assessment of expected future
cash flows to be generated by this patent and the results of an independent
appraisal done in April 2004. Amortization expense related to these patents
for
the nine months ended December 31, 2006 and 2005 was $42,461 and $40,399,
respectively. Projected amortization expense approximates $54,000, $53,000,
$53,000, $53,000 and $53,000, respectively, for each of the five years ended
March 31, 2011. The weighted-average life of the remaining patents is
approximately 14.9 years.
Recently
Issued Accounting Pronouncements
In
February 2006, FASB issued SFAS No. 155, “Accounting
for Certain Hybrid Financial Instruments”.
SFAS
No. 155 amends SFAS No 133, “Accounting for Derivative Instruments and Hedging
Activities”, and SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”. SFAS No. 155, permits fair
value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation, clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of SFAS No. 133, establishes a requirement to evaluate interest
in
securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded
derivative requiring bifurcation, clarifies that concentrations of credit risk
in the form of subordination are not embedded derivatives, and amends SFAS
No.
140 to eliminate the prohibition on the qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument. SFAS 155 is effective for
all financial instruments acquired or issued after the beginning of the
Company’s first fiscal year that begins after September 15, 2006. Management
believes that this statement will not have a significant impact on the
consolidated financial statements.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
In
March
2006 FASB issued SFAS 156 “Accounting
for Servicing of Financial Assets”. SFAS
No.
156 amends FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,
with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement: (1) requires an entity to recognize
a
servicing asset or servicing liability each time it undertakes an obligation
to
service a financial asset by entering into a servicing contract, (2) requires
all separately recognized servicing assets and servicing liabilities to be
initially measured at fair value, if practicable; (3) permits an entity to
choose the ‘amortization method’ or ‘fair value measurement method’ for each
class of separately recognized servicing assets and servicing liabilities;
(4)
at its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights, without calling into question the treatment of other
available-for-sale securities under Statement 115, provided that the
available-for-sale securities are identified in some manner as offsetting the
entity’s exposure to changes in fair value of servicing assets or servicing
liabilities that a servicer elects to subsequently measure at fair value; and
(5) requires separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial position
and
additional disclosures for all separately recognized servicing assets and
servicing liabilities. SFAS 156 is effective as of the beginning of the
Company’s first fiscal year that begins after September 15, 2006. Management
believes that this statement will not have a significant impact on the
consolidated financial statements.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” This statement clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures
on
fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. Management has not determined the
effect, if any, the adoption of this statement will have on the financial
statements.
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans−−an amendment of FASB Statements
No. 87, 88, 106, and 132(R)". One objective of this standard is to make it
easier for investors, employees, retirees and other parties to understand and
assess an employer's financial position and its ability to fulfill the
obligations under its benefit plans. SFAS No. 158 requires employers to fully
recognize in their financial statements the obligations associated with
single−employer defined benefit pension plans, retiree healthcare plans, and
other postretirement plans. SFAS No. 158 requires an employer to fully recognize
in its statement of financial position the overfunded or underfunded status
of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability and to recognize changes in that funded status in the year
in
which the changes occur through comprehensive income. This Statement also
requires an employer to measure the funded status of a plan as of the date
of
its year−end statement of financial position, with limited exceptions. SFAS No.
158 requires an entity to recognize as a component of other comprehensive
income, net of tax, the gains or losses and prior service costs or credits
that
arise during the period but are not recognized as components of net periodic
benefit cost pursuant to SFAS No. 87. This Statement requires an entity to
disclose in the notes to financial statements additional information about
certain effects on net periodic benefit cost for the next fiscal year that
arise
from delayed recognition of the gains or losses, prior service costs or credits,
and transition asset or obligation. The Company is required to initially
recognize the funded status of a defined benefit postretirement plan and to
provide the required disclosures for fiscal years ending after December 15,
2006. Management believes that this statement will not have a significant impact
on the financial statements.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
NOTE
2 - LOSS PER SHARE
The
Company reports loss per share in accordance with SFAS No. 128, "Earnings per
Share." Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares available. Diluted
loss per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares
that
would have been outstanding if the potential common shares had been issued
and
if the additional common shares were dilutive. Diluted loss per share has not
been presented since the effect of the assumed exercise of options and warrants
to purchase common shares would have an anti-dilutive effect. There
were 19,132,369 and 8,194,167 common
equivalent shares outstanding related to the options and warrants at December
31, 2006 and 2005, respectively. In addition, as of December 31, 2006, 508,333
shares of common stock are issuable upon the conversion of the convertible
note
payable and convertible preferred stock.
NOTE
3 - PROPERTY AND EQUIPMENT
The
cost
of property and equipment at December 31, 2006 consisted of the
following:
Furniture
and fixtures
|
|
$
|
73,203
|
|
Office
equipment
|
|
|
42,120
|
|
|
|
|
115,323
|
|
Less
accumulated depreciation and amortization
|
|
|
(111,770
|
)
|
|
|
|
|
|
|
|
$
|
3,553
|
|
Depreciation
expense for the nine months ended December 31, 2006 and 2005 was $4,866 and
$29,146, respectively.
NOTE
4 - ACCRUED LEGAL SETTLEMENTS
Former
Landlord
In
March
2003, the Company vacated its office space. The landlord then filed suit against
the Company in the County of Orange, Superior Court of California, for unpaid
rent. In January 2006, this matter was settled and the Company agreed to pay
a
total of $200,000 over the next year. The Company paid $75,000 in January 2006,
leaving $125,000 owing. During the quarter ended December 31, 2006, the Company
increased the settlement amount by $60,000 bring the balance due at December
31,
2006 to $185,000. The entire amount was paid in January 2007.
Gryphon
Master Fund LP
On
March
31, 2006, the Company reached a settlement with Gryphon Master Lund LP related
to two investments (See Notes 8 and 10) in the Company by Gryphon in September
2003 totaling $1,600,000. The settlement agreement requires the Company to
pay a
maximum of $1,600,000 which will be reduced to $1,400,000 if the Company is
able
to pay the judgment on or before October 1, 2006. Full repayment is due under
the settlement agreement on or before April 1, 2007. The settlement agreement
also provides for Gryphon to convert its two investments (convertible debenture
and convertible preferred stock) in the Company totaling $1,600,000 into 716,667
shares of the Company common stock as per the terms of the original investment
agreements. In addition the settlement agreement provides for a reduction of
the
exercise price to $0.01 for the 194,167 warrants currently held by Gryphon.
In
the event that the Company does not make the payment by April 1, 2007, then
the
stipulated judgment into which the Company entered with Gryphon provides that
Gryphon has the right to enter a judgment of $1,600,000 against the Company
with
the court upon the Company’s default.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
During
the nine months ended December 31, 2006, Gryphon did a cashless exercise of
these warrants and received a total of 192,997 shares of the Company’s common
stock and converted a total of $442,500 worth of preferred stock into 208,333
shares of the Company’s common stock.
As
of
December 31, 2006, the full $1,600,000 was still due under the settlement
agreement.
NOTE
5 - RELATED PARTY TRANSACTIONS
On
July
18, 2006, the Company entered into an Accord and Satisfaction Agreement
(“Agreement”) with several related party creditors, arranging to settle debt of
$5,194,553 including interest accrued through June 30, 2006, in exchange for
the
issuance of 3,995,809 shares of the Company’s $.001 par value common stock. This
debt was incurred in the form of related party advances and services rendered
to
the Company over recent months. The conversion rate was $1.30 per share,
representing a premium on the market price of the Company’s closing share price
on Monday, July 17, 2006 of $1.00 per share.
The
related parties that were owed funds included Radul Radovich, the Company’s
Chairman of the Board of Directors, and several entities owned and controlled
by
Mr. Radovich. The amounts owed were as follows: Mr. Radovich was owed $952,611
principal along with interest of $127,509, for a total of $1,084,120, which
was
to be converted to 833,938 restricted shares of the Company’s common stock; St.
Petka Trust, a majority shareholder of the Company, and of which Mr. Radovich
is
the beneficiary and trustor, was owed $1,585,500 principal, along with interest
of $211,335, for a total of $1,796,835, which was to be converted to 1,382,180
restricted shares of the Company’s common stock; R and R Holdings, Inc. a Nevada
corporation owned by Mr. Radovich, was owed $471,507 principal, along with
interest of $62,848, for a total of $534,355, which was converted to 411,042
restricted shares of the Company’s common stock; Silver Mountain Promotions,
Inc., a Nevada corporation, owned by Mr. Radovich, was owed $922,103 principal,
along with interest of $122,909, for a total of $1,045,012, which was converted
to 803,855 restricted shares of the Company’s common stock; R R Development,
Inc., a California corporation, owned by Mr. Radovich, was owed $170,000
principal, along with interest of $51,838, for a total of $221,838, which was
converted to restricted 170,644 shares of the Company’s common stock. In
addition, Mr. Radovich was owed $512,392 for consulting fees, pursuant to a
consulting contract with the Company. This amount was converted to 394,147
restricted shares of the Company’s common stock.
NOTE
6 - PROMISSORY NOTES
In
June
2005, the Company converted a total of $205,174 of amounts due for clinical
trials into nine promissory notes that accrued interest at a rate of 10% per
annum and were due on December 27, 2005. During the three months ended March
31,
2006 and June 30, 2006, respectively, the Company converted $131,042 and $27,319
of these promissory notes plus accrued interest into 105,250 and 27,200 shares
of the Company’s common stock. At December 31, 2006, $46,813 of these notes was
still outstanding.
NOTE
7 - NOTES PAYABLE
In
August
2006, the Company issued a note payable to MDC Enterprises Ltd. in the amount
of
$250,000 that accrues interest at 40% per annum and is due on December 29,
2006.
In addition, the Company also issued to MDC Enterprises Ltd. a warrant to
purchase 150,000 shares of the Company’s common stock for $0.75 per shares.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
The
fair
value of these warrants totaling $102,464 was computed using the Black-Scholes
model under the following assumptions: (1) expected life of 5 years; (2)
volatility of 199%, (3) risk free interest of 4.50% and (4) dividend rate of
$0%. The face amount of the note payable of $250,000 was proportionately
allocated to the note payable and the warrants in the amount of $177,323 and
$72,677, respectively. The amount allocated to the warrants of $72,677 was
recorded as a discount on the note payable and is being amortized over the
term
of the debenture. During the nine months ended December 31, 2006, the Company
fully amortized the $72,677 of the discount to interest expense.
In
September 2006, the Company issued a note payable in the amount of $50,000
to an
investor. The note bears interest at 10% per annum and is payable upon
demand.
NOTE
8 - CONVERTIBLE NOTES PAYABLE
Gryphon
Master Fund, LP (See Note 4)
In
September 2003, the Company sold a $600,000, six-year, 8% convertible note
payable to Gryphon Master Fund, LP, which is convertible into shares of the
Company's common stock at the initial conversion price of $2.00 per share.
This
price is subject to adjustment should the Company issue shares of its common
stock at a price less than $1.75 per share. The convertible note payable was
sold with detachable six-year warrants to purchase 90,000 shares of the
Company's common stock at $2.88 per share. The warrant exercise price is also
subject to adjustment based on sales of the Company's common stock below the
current fair market value on the contract date.
The
fair
value of these warrants totaling $169,630 was computed using the Black-Scholes
model under the following assumptions: (1) expected life of 3 years; (2)
volatility of 104%, (3) risk free interest of 4.39% and (4) dividend rate of
$0%. In addition, since this debt is convertible into equity at the option
of
the note holder at beneficial conversion rates, an embedded beneficial
conversion feature was recorded as a debt discount and amortized using the
effective interest method over the life of the debt in accordance with Emerging
Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain
Convertible Instruments." Since the intrinsic value of the beneficial conversion
feature and relative fair value of the warrants exceeds the proceeds of the
convertible debt, the amount of the discount assigned to the beneficial
conversion feature and warrants is limited to the amount of the net proceeds
of
the convertible debt. Therefore, the Company recorded a discount of $516,500
(consisting of relative fair value of the warrants of $169,630 and beneficial
conversion features of $346,870), the net proceeds received by the Company
after
the debt discount of $83,500. During the year ended March 31, 2005, the Company
fully amortized the debt discount associated with the $600,000 convertible
note
payable due to the lawsuit filed by the holder of the convertible note
payable.
On
March
31, 2006, the Company reached a settlement with Gryphon Master Lund LP related
to two investments in the Company by Gryphon in September 2003 totaling
$1,600,000 (See Notes 4 and 9). The settlement agreement requires the Company
to
pay a maximum of $1,600,000 which will be reduced to $1,400,000 if the Company
is able to pay the judgment on or before October 1, 2006. Full repayment is
due
under the settlement agreement on or before April 1, 2007. The settlement
agreement also provides for Gryphon to convert its two investments (convertible
debenture and convertible preferred stock) in the Company totaling $1,600,000
into 716,667 shares of the Company common stock as per the terms of the original
investment agreements. In addition the settlement agreement provides for a
reduction of the exercise price to $0.01 for the 194,167 warrants currently
held
by Gryphon. In the event that the Company does not make the payment by April
1,
2007, then the stipulated judgment into which the Company entered with Gryphon
provides that Gryphon has the right to enter a judgment of $1,600,000 against
the Company with the court upon the Company’s default.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
During
the nine months ended December 31, 2006, Gryphon did a cashless exercise of
these warrants and received a total of 192,997 shares of the Company’s common
stock and converted a total of $442,500 worth of preferred stock into 208,333
shares of the Company’s common stock.
Tejeda
and Tejeda, Inc.
On
June
13, 2005, the Company entered into a loan agreement with Tejeda and Tejeda,
Inc.
in the amount of $100,000. The loan was due on or before the 12-month
anniversary and accrued interest at the rate of 10% per annum. The note is
personally guaranteed by Mr. Radul Radovich, the Company’s Chairman, and Mr.
Chaslav Radovich the Company’s CEO at the time. On the 12-month anniversary, the
holder of the note was permitted to convert the loan into shares of the
Company’s common stock at $1.75 per shares or at a price equal to a 25% discount
to the closing bid price on the day of conversion at maturity. Upon conversion,
the loan would be considered paid in full. In July 2006, Tejeda and Tejeda,
Inc.
elected to convert the note plus accrued interest into 200,000 shares of the
Company’s common stock. The Company recognized an additional expense of $91,583
related to the conversion of this note and accrued interest into shares of
common stock.
Convertible
Bridge Notes.
In
July
2006, the Company issued notes payable in the aggregate amount of $250,000
to
three investors. The notes bear interest at 5% per month, were due on September
14, 2006, and carried a conversion feature provided the Company completed a
larger financing by no later than October 14, 2006. The Company exercised its
option to extend the due date to October 14, 2006 and issued to the investors
a
total of 25,000 warrants The warrants have an exercise price of $1.50 per shares
and expire in September 2011. The value of these warrants of $15,307 has been
expensed as financing costs. The fair value of these warrants of $15,307 was
computed using the Black-Scholes model under the following assumptions: (1)
expected life of 5 years; (2) volatility of 199%, (3) risk free interest of
4.50% and (4) dividend rate of $0%. These notes were either converted to equity
or repaid as follows: In
January 2007, the Company paid $200,000 of the amount owed, plus the interest
that had accrued on that portion of the principal. In
February 2007, the Company repaid the remaining principal of $50,000 and
interest owing at the time of conversion of $13,918.62 with the issuance of
127,838 shares of the Company’s common stock and the grant of 44,744 warrants to
purchase shares of the Company’s common stock at $1.00 per share. These warrants
expire five years from the date of grant.
Cornell
Capital Partners, L.P.
On
December 20, 2006, the Company entered into a Securities Purchase Agreement
with
Cornell Capital Partners, L.P. ("Cornell Capital") pursuant to which the Company
agreed to issue up to an aggregate principal amount of $3,850,000 of convertible
debentures. Of that amount, $2,500,000 was funded on December 20, 2006. Two
additional closings of $675,000 each are scheduled to occur as follows: the
first upon the Company’s filing of a registration statement with the Securities
and Exchange Commission (“SEC”), and the second upon that registration statement
being declared effective by the SEC and Shareholder approval to increase the
Company’s authorized shares from the current limit of 50,000,000. There is
no guarantee that the Company will complete and file a registration statement,
or that if filed, there is no guarantee that the SEC will declare the
registration statement effective. Further, there is no guarantee that
Shareholders will approve the increase in authorized shares.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
The
convertible debenture is convertible into shares of the Company common stock
determined by dividing the dollar amount being converted by the lower of
the
fixed conversion price of $0.99 or the market conversion price, defined as
90%
of the average of the lowest three daily volume weighted average trading
prices
per share of the Company’s common stock for the fifteen trading days immediately
preceding the conversion date. However, the maximum number of shares that
will
be issued upon conversion is 77,000,000. The convertible debenture is secured
by
the assets of the Company and shares of common stock pledged by certain founding
shareholders of the Company. The Company, at its option, may redeem the
convertible debenture beginning four months after the registration statement
has
been declared effective by the SEC.
As
part
of the funding commitment, the Company issued four classes of warrants
exercisable on a cash basis that enable Cornell Capital to purchase up to
6,640,602 shares of common stock for an additional $5,500,000: an A Warrant
to
purchase 1,333,333 shares at $0.75 per share; B Warrant to purchase 1,205,400
shares at $0.8296 per share; C Warrant to purchase 2,343,959 shares at $0.7466
per share; and D Warrant to purchase 1,757,910 shares at $0.9955 per share.
The
A and B Warrants expire six months following the effective date of the
registration and carry forced exercise provisions. The C & D Warrants are
non-callable and have a five-year term. The warrants and convertible debenture
are subject to certain anti-dilution rights.
These
convertible debentures do not meet the definition of a “conventional convertible
debt instrument” since the Company does not have enough authorized shares to
satisfy the conversion requests if the Company stock were to significantly
decrease. The debt can be converted into common stock at a conversions
price that is a percentage of the market price (limited to 77,000,000 shares);
therefore the number of shares that could be required to be delivered upon
“net-share settlement” is in excess of the Company’s authorized and unissued
shares. As a result, the convertible debenture is considered
“non-conventional,” which means that the conversion feature must be bifurcated
from the debt and shown as a separate derivative liability. This
beneficial conversion liability has been calculated to be $1,897,735 on December
20, 2006. In addition, since the convertible debenture is convertible into
shares of common stock in excess of their authorized capital, the Company
does
not have enough authorized and unissued shares to settle the conversion of
the
warrants into common stock. Therefore, the warrants issued in connection
with this transaction are shown as a liability and have a fair value of
$3,667,558 at December 20, 2006. The value of the warrant was calculated
using the Black-Scholes model using the following assumptions: Discount rate
of
4.5%, volatility of 137% and expected term of 1 to 5 years. The fair value
of the beneficial conversion feature and the warrant liability will be adjusted
to fair value each balance sheet date with the change being shown as a component
of net loss.
The
fair
value of the beneficial conversion feature and the warrants at the inception
of
these convertible debentures were $1897,735 and $3,667,558, respectively.
The first $2,500,000 of these discounts has been shown as a discount to
the convertible debentures which will be amortized over the term of the
convertible debenture and the excess of $3,065,293 has been shown as financing
costs in the accompanying statement of operations.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
NOTE
9 - SENIOR DEBENTURE
On
October 26, 2005, the Company issued a senior debenture to the Brad Chisick
Trust in the amount of $250,000 that accrues interest at 10% per annum and
is
due on October 26, 2007. In addition, the Company also issued to the Brad
Chisick Trust a warrant to purchase 500,000 shares of the Company’s common stock
for $1.75 per shares.
The
fair
value of these warrants totaling $276,827 was computed using the Black-Scholes
model under the following assumptions: (1) expected life of 5 years; (2)
volatility of 194%, (3) risk free interest of 4.50% and (4) dividend rate of
$0%. The face amount of the senior debenture of $250,000 was proportionately
allocated to the senior debenture and the warrants in the amount of $118,635
and
$131,365, respectively. The amount allocated to the warrants of $131,365 was
recorded as a discount on the senior debenture and is being amortized over
the
term of the debenture. During the nine months ended December 31, 2006, the
Company amortized $49,487 of the discount to interest expense. At December
31,
2006, the balance of the debenture is shown net of unamortized discount of
$53,806 in the consolidated balance sheet. In addition, on October 26, 2005,
the
Company issued to the Brad Chisick Trust 125,000 shares of its common stock
valued at $72,500 as pre-payment of the accrued interest on this senior
debenture. The prepaid interest will be amortized to interest expense over
the
two year term of the senior debenture.
NOTE
10 - CONVERTIBLE PREFERRED STOCK
In
September 2003, the Company sold 1,000 shares of its 7.5% convertible preferred
stock (the "Convertible Preferred Stock") to Gryphon Master Fund, LP, for
$1,000,000, less direct issuance costs of $115,000, which were netted against
the proceeds of the offering. The Convertible Preferred Stock carries voting
rights equivalent to the number of shares of common stock into which it can
be
converted, and has liquidation preference of $1,000 per share. The Convertible
Preferred Stock is convertible into shares of the Company's common stock at
the
initial conversion price of $2.40 per share. This price is subject to change
should the Company issue shares of its common stock at a price less than $1.75
per share. Included with the Convertible Preferred Stock were detachable
three-year warrants to purchase 104,167 shares of the Company's common stock
at
the price of $2.88 per share (the "Preferred Warrants"). The warrant exercise
price is also subject to adjustment based on sales of the Company's common
stock
below the current fair market value on the contract date.
The
fair
value of these warrants totaling $181,849 was computed using the Black-Scholes
model under the following assumptions: (1) expected life of 3 years; (2)
volatility of 112%, (3) risk free interest of 4.1% and (4) dividend rate of
$0%.
In addition, since this convertible preferred stock is convertible into equity
at the option of the stockholder at beneficial conversion rates, an embedded
beneficial conversion feature was recorded as a discount to additional paid
in
capital in accordance with Emerging Issues Task Force No. 00-27, "Application
of
Issue No. 98-5 to Certain Convertible Instruments." Since the intrinsic value
of
the beneficial conversion feature and relative fair value of the warrants
exceeds the proceeds of the convertible debt, the amount of the discount
assigned to the beneficial conversion feature and warrants is limited to the
amount of the proceeds of the convertible preferred stock. The discount was
recorded as a preferred stock dividend at the date of issuance. The Company
recognized $885,000 of preferred dividends related to the discount.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
On
March
31, 2006, the Company reached a settlement with Gryphon Master Lund LP related
to two investments in the Company by Gryphon in September 2003 totaling
$1,600,000 (See Notes 4 and 8). The settlement agreement requires the Company
to
pay a maximum of $1,600,000 which will be reduced to $1,400,000 if the Company
is able to pay the judgment on or before October 1, 2006. Full repayment is
due
under the settlement agreement on or before April 1, 2007. The settlement
agreement also provides for Gryphon to convert its two investments (convertible
debenture and convertible preferred stock) in the Company totaling $1,600,000
into 716,667 shares of the Company common stock as per the terms of the original
investment agreements. In addition the settlement agreement provides for a
reduction of the exercise price to $0.01 for the 194,167 warrants currently
held
by Gryphon. In the event that the Company does not make the payment by April
1,
2007, then the stipulated judgment into which the Company entered with Gryphon
provides that Gryphon has the right to enter a judgment of $1,600,000 against
the Company with the court upon the Company’s default.
During
the nine months ended December 31, 2006, Gryphon did a cashless exercise of
these warrants and received a total of 192,997 shares of the Company’s common
stock and converted a total of $500,000 worth of preferred stock into 208,333
shares of the Company’s common stock.
.
NOTE
11 - STOCKHOLDERS’ DEFICIT
Preferred
Stock
The
Company has authorized 5,000,000 shares of $0.001 par value preferred stock
of
which 1,000 have been designated at Convertible Preferred Stock (see Note
10).
Common
Stock
The
Company has authorized 50,000,000 shares of $0.001 par value common
stock.
Stock
Options
The
following table summarizes the options outstanding:
|
|
Options
outstanding
|
|
Weighted
Average Exercise Price
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding,
March 31, 2006
|
|
|
1,625,000
|
|
$
|
1.74
|
|
$
|
374,000
|
|
Reclassified
from warrants
|
|
|
2,000,000
|
|
$
|
1.75
|
|
|
|
|
Granted
|
|
|
2,800,000
|
|
$
|
1.40
|
|
|
|
|
Forfeited/Canceled
|
|
|
(433,333
|
)
|
$
|
1.58
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
|
Outstanding,
December 31, 2006
|
|
|
5,991,667
|
|
$
|
1.60
|
|
$
|
0
|
|
The
weighted average remaining contractual life of options outstanding is 7.49
years
at December 31, 2006. The exercise prices for the options outstanding at
December 31, 2006 are as follows:
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
Number
of
Options
|
|
Exercise
Price
|
325,000
|
|
$1.00
|
2,800,000
|
|
$1.40
|
1,666,667
|
|
$1.75
|
1,200,000
|
|
$2.00
|
5,991,667
|
|
|
The
fair
value for the options issued during the three months ended June 30, 2006 was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions: risk-free interest rate of 4.50%;
dividend yields of 0%; volatility factors of the expected market price of the
Company’s common shares of 188%; and a weighted average expected life of the
option of 5 years.
The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.
Warrants
As
a
result of the issuance of the convertible debenture to Cornell Capital (See
Note
8) the fair value of all warrant issued to non-employees have been removed
from
stockholders’ equity and shown as a liability. On December 20, 2006, the fair
value of such warrants was $3,545,880. The fair value of these warrants and
those issued to Cornell Capital will be adjusted to fair value at each balance
sheet date.
The
following table summarizes the warrants outstanding:
|
|
Warrants
outstanding
|
|
Weighted
Average Exercise Price
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding,
March 31, 2006
|
|
|
6,636,767
|
|
$
|
1.67
|
|
$
|
1,435,630
|
|
Transferred
to options
|
|
|
(2,000,000
|
)
|
$
|
1.75
|
|
|
|
|
Granted
|
|
|
8,698,102
|
|
$
|
0.86
|
|
|
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
-
|
|
|
|
|
Exercised
|
|
|
(194,167
|
)
|
$
|
0.01
|
|
|
|
|
Outstanding,
December 31, 2006
|
|
|
13,140,702
|
|
$
|
1.14
|
|
$
|
105,000
|
|
The
weighted average remaining contractual life of warrants outstanding is 3.56
years at December 31, 2006. The exercise prices for the warrants outstanding
at
December 31, 2006 are as follows:
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
Number
of
Warrants
|
|
Exercise
Price
|
150,000
|
|
$0.01
|
4,597,292
|
|
$0.75
|
1,205,400
|
|
$0.83
|
2,707,910
|
|
$1.00
|
87,500
|
|
$1.50
|
4,192,600
|
|
$1.75
|
200,000
|
|
$2.00
|
13,140,702
|
|
|
NOTE
12
- LITIGATION
Former
Leased Office Space:
The
Company was a defendant in a suit brought by its former landlord for breach
of
lease agreement and alleged unpaid rent in the County of Orange, Superior Court
of California, Case #03CC02904. In January 2006, this matter was settled and
the
Company is to pay a total of $200,000 over the next year, of which the Company
paid the first $75,000 on January 31, 2006, leaving $125,000 as of that time.
The Company has accrued an additional $60,000 related to this matter during
the
quarter ended December 31, 2006 being the total accrual on that date to
$185,000. This amount was paid in full in January 2007.
Marinko
Vekovic: On
March
9, 2006, Marinko Vekovic, a former consultant, filed a Complaint against the
Company alleging a breach of a written consulting agreement, specific
performance of common stock warrants and the “reasonable value of work and labor
performed,” seeking damages in excess of $700,000, and specific performance of
an alleged obligation to issue 600,000 free trading warrants at a $1.75 share
price. The lawsuit, entitled Vekovic vs. Cobalis, is pending in Orange County
Superior Court, Central Justice Center, Case No. 06CC03923.
On
April
18, 2006, the Company filed an Answer to the Complaint, denying the allegations
by Mr. Vekovic. On the same date, the Company also filed a Cross-Complaint
for
rescission of the consulting agreement, on grounds that Mr. Vekovic made
numerous material misrepresentations intended to fraudulently induce the Company
to enter the consulting agreement and to issue to Vekovic 112,500 shares of
the
Company’s common stock registered in a registration statement on Form S-8.
Through the Company’s Cross-Complaint, the Company seeks to rescind the
consulting agreement and seeks restitution from Mr. Vekovic in an amount no
less
than the price for which Mr. Vekovic sold the 112,500 shares of the S-8 stock,
plus all or some portion of the compensation paid to Mr. Vekovic, given that
Mr.
Vekovic substantially failed to perform the consulting services which were
the
subject of the consulting agreement. The Company also seeks to recover
attorneys’ fees incurred in the defense of the Complaint and the prosecution of
the Company’s Cross-Complaint, pursuant to the attorneys’ fee provision in the
consulting agreement.
COBALIS
CORP. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(UNAUDITED)
The
Company believes that it will prevail in defending Mr. Vekovic’s Complaint and
that its liability to Mr. Vekovic, if any, would not be material. Furthermore,
the Company believes that it has a good chance of prevailing on its
Cross-Complaint, such that the Company would recover a monetary award from
Mr.
Vekovic. However, as is the case with any litigation, the Company cannot
guarantee the outcome of the case.
Europacific
Consulting, Inc.
This
action was filed on May 23, 2006 in the Supreme Court of New York, County of
New
York, Case No. 601830/06. Europacific Consulting, Inc. (“Europacific”) is a New
York corporation whose sole shareholder and director is Antonio Treminio.
Europacific is suing for alleged breach of oral contract and damages of
$250,000. Europacific alleges that Cobalis orally engaged Europacific to perform
certain services for us, including introductions to potential board members,
qualified investors and strategic alliances for our product line. We issued
20,000 shares to Europacific in January 2005, and canceled those shares in
May
2005. In October 2006, we settled this case by rescinding our stop order on
those 20,000 shares.
Cappello
Capital Corp. In
March
2005, we entered into an agreement with Cappello Capital Corp. (“Cappello”) for
investment banking and related financial services. Pursuant to a financing
agreement, we issued 100,000 shares as an initial retainer. We believe that
Cappello did not perform per the agreement, but we are currently in discussions
with Cappello to attempt to arrive at a settlement, but no settlement can be
guaranteed.
In
the
ordinary course of business, the Company is generally subject to claims,
complaints, and legal actions. At December 31, 2006, management believes that
the Company is not a party to any action which would have a material impact
on
its financial condition, operations, or cash flows.
NOTE
13
- SUBSEQUENT EVENTS
The
following events occurred subsequent to December 31, 2006:
· |
On
January 11, 2007 the Company paid $169,950 to Advance Botanicals/MDC.
This
was a re-payment of $150,000 on their $250,000 bridge note plus accrued
interest. MDC also agreed to extend the payment for the remaining
$100,000
owed to MDC for an additional 60 days in return for an additional
25,000
warrants to purchase the Company’s common stock at $1.00.
|
· |
On
January 11, 2007 the Company paid $125,000 to Irwin Geduld. This
was a
repayment of a $100,000 bridge loan plus accrued interest of $25,000
and
represents a full payment of this obligation.
|
· |
On
January 11, 2007 the Company paid $75,000 to Steve Geduld. This was
a
repayment of $50,000 on his $100,000 bridge note plus accrued interest,
which represents full payment of this obligation. Also on January
29, 2007
the Company repaid the remaining $50,000 principal plus $1,666.66
in
accrued interest.
|
· |
On
January 10, 2007 the Company paid $185,000 as final settlement with
its
former landlord.
|
· |
On
February 6, 2007 the Company converted a $50,000 bridge note from
Anthony
Brent into shares of common stock plus $13,918.62 accrued interest.
In
satisfaction of that note, the Company issued 127,838 Shares at $0.50
per
share, and 44,744 warrants to purchase shares of the Company’s common
stock at $1.00 per share. Those warrants expire five years from the
date
of grant.
|
Item
2. Management's
Discussion and Analysis or Plan of Operations
This
following information specifies certain forward-looking statements of management
of the company. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology, such
as
“may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”,
“probable”, “possible”, “should”, “continue”, or similar terms, variations of
those terms or the negative of those terms. The forward-looking statements
specified in the following information have been compiled by our management
on
the basis of assumptions made by management and considered by management to
be
reasonable. Our future operating results, however, are impossible to predict
and
no representation, guaranty, or warranty is to be inferred from those
forward-looking statements.
The
assumptions used for purposes of the forward-looking statements specified in
the
following information represent estimates of future events and are subject
to
uncertainty as to possible changes in economic, legislative, industry, and
other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from
and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed
on
the achievability of those forward-looking statements. No assurance can be
given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
revenues and expenses during the reporting period. On an on-going basis, we
evaluate our estimates and judgments, including those related to revenue
recognition, accrued expenses, financing operations, and contingencies and
litigation. We base our estimates and judgments on historical experience and
on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent
from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent
in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources, primarily valuation of patent costs and
stock-based compensation. The methods, estimates and judgments we use in
applying these most critical accounting policies have a significant impact
on
the results we report in our consolidated financial statements.
OVERVIEW
As
discussed above, we were incorporated in 1997 and on July 6, 2004 changed our
name to Cobalis Corp., having previously used the BioGentech Corp. In 2003,
we
acquired our operational subsidiary, BioGentech Incorporated,(BioGentec). To
distinguish between parent and subsidiary, a slight spelling difference was
utilized. BioGentec, a private Nevada corporation, was incorporated on November
21, 2000 according to the laws of Nevada, under the name St Petka, Inc. On
May
4, 2001, St. Petka, Inc. changed its name to BioGentec Incorporated. On July
2,
2003, BioGentec was merged into Togs for Tykes Acquisition Corp., a wholly
owned
subsidiary formed for the purpose of acquiring BioGentec. As allowed under
SFAS
141, “Business Combinations” (“SFAS 141”), we designated a date of convenience
of the closing for accounting purposes as June 30, 2003. Under the terms of
the
merger
agreement,
all of BioGentec's outstanding common stock (19,732,705 shares of $0.001 par
value stock) was exchanged for 19,732,705 shares newly issued shares of $0.001
par value stock of Cobalis Corp. common stock. This transaction was consummated
with the filing of the Articles of Merger with the State of Nevada on July
2,
2003. BioGentec shareholders then effectively controlled approximately 95%
of
the issued and outstanding common stock of Cobalis. Since the shareholders
of
BioGentec obtained control of Cobalis, according to SFAS 141, this acquisition
was treated as a recapitalization for accounting purposes, in a manner similar
to reverse acquisition accounting.
GOING
CONCERN
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation as a going concern. We incurred a net loss of
$13,319,827 for the nine months ended December 31, 2006 and as of December
31,
2006; we had a working capital deficit of $14,757,176 and a stockholder deficit
of $14,508,280. In addition, as of December 31, 2006, we have not developed
a
substantial source of revenue. These conditions raise substantial doubt as
to
our ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern.
We
have
recently raised $2,500,000 by issuing a convertible debenture and has sold
shares of our common stock for gross proceeds of $800,000 and are currently
attempting to raise additional debt and equity financing for operating purposes.
We are also attempting to partner with a large pharmaceutical company for
research and development, marketing and distribution of its product. We require
substantial capital to pursue our operating strategy, which includes
commercialization of our product and paying for our phase III clinical trials,
and we currently have limited cash for operations. Until we can obtain revenues
sufficient to fund working capital needs and additional research and development
costs necessary to obtain the regulatory approvals for commercialization, we
will be dependent upon external sources of financing.
We
believe that actions presently being taken to revise our operating and financial
requirements provide the opportunity for us to continue as a going concern.
There can be no assurances that sufficient financing will be available on terms
acceptable to us, or at all. If we are unable to obtain such financing, we
will
be forced to scale back operations, which could have an adverse effect on our
financial condition and results of operations.
CRITICAL
ACCOUNTING POLICY AND ESTIMATES
Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the
United States of America. The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect
the
reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, management evaluates its estimates
and judgments, including those related to revenue recognition, accrued expenses,
financing operations, and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of
which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or conditions. The
most
significant accounting estimates inherent in the preparation of our consolidated
financial statements include estimates as to the appropriate carrying value
of
certain assets and liabilities which are not readily apparent from other
sources, primarily valuation of patent costs and stock-based compensation.
The
methods, estimates and judgments we use in applying these most critical
accounting policies have a significant impact on the results we report in our
consolidated financial statements.
Patent
Cost Valuation. The
determination of the fair value of certain acquired assets and liabilities
is
subjective in nature and often involves the use of significant estimates and
assumptions. Determining the fair values and useful lives of intangible assets
requires the exercise of judgment. While there are a number of different
generally accepted valuation methods to estimate the value of intangible assets
acquired, we primarily use the weighted-average probability method outlined
in
SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This
method requires significant management judgment to forecast the future operating
results used in the analysis. In addition, other significant estimates are
required such as residual growth rates and discount factors. The estimates
we
have used are consistent with the plans and estimates that we use to manage
our
business, based on available historical information and industry averages.
The
judgments made in determining the estimated useful lives assigned to each class
of assets acquired can also significantly affect our net operating results.
Stock-based
Compensation. We
adopted SFAS No. 123 (Revised 2004), Share
Based Payment (“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value. Share-based compensation
recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting
for Stock-Based Compensation, for
all
share-based payments granted prior to and not yet vested as of January 1,
2006 and share-based compensation based on the grant-date fair-value determined
in accordance with SFAS No. 123R for all share-based payments granted after
January 1, 2006. SFAS No. 123R eliminates the ability to account for
the award of these instruments under the intrinsic value method prescribed
by
Accounting Principles Board (“APB”) Opinion No. 25, Accounting
for Stock Issued to Employees,
and
allowed under the original provisions of SFAS No. 123. Prior to the
adoption of SFAS No. 123R, we accounted for our stock option plans using
the intrinsic value method in accordance with the provisions of APB Opinion
No. 25 and related interpretations.
Estimate
of Litigation-based Liability. We
are a
defendant in certain claims and litigation in the ordinary course of business.
We accrue liabilities relating to these lawsuits on a case-by-case basis. We
generally accrue attorney fees and interest in addition to the liability being
sought. Liabilities are adjusted on a regular basis as new information becomes
available. We consult with our attorneys to determine the viability of an
expected outcome. The actual amount paid to settle a case could differ
materially from the amount accrued.
LIQUIDITY
AND CAPITAL RESOURCES
We
had
cash and cash equivalents of $1,684,580 and prepaid expenses and other current
assets of $21,801 December 31, 2006. Our total current assets at December 31,
2006 were $1,706,381. We also had the following long term assets: $3,553 in
property and equipment, net; $1,062 in net website development costs; $632,262
represented by net value of our patents; debt issue cost of $275,787 and $12,546
in deposits. Our total assets as of December 31, 2006 were $2,631,591.
Our
total
current liabilities were $16,463,557 at December 31, 2006, which was represented
by accounts payable of $545,629; accrued expenses of $744,339; accrued clinical
trials costs of $2,611,356; accrued legal settlements of $1,785,000; accrued
salaries of $376,125; warrant liability of $7,186,980; accrued derivative
liability of $2,017,315; promissory notes of $46,813; notes payable of $300,000
and convertible notes payable of $850,000.
In
June
2005, we converted a total of $205,174 of amounts due for clinical trials into
nine promissory notes that accrued interest at a rate of 10% per annum and
were
due on December 27, 2005. During the three months ended March 31, 2006 and
June
30, 2006, respectively, we converted $131,042 and $27,319 of these promissory
notes plus accrued interest into 105,250 and 27,200 shares of our common stock.
At December 31, 2006, $46,813 of these notes was still outstanding.
We
also
had $196,194 represented by a senior debenture and $37,620 represented by a
convertible debenture, making our total liabilities $16,485,371, and a
convertible preferred stock liability of $442,500. Our liabilities exceeded
our
assets by $14,508,280.
On
July
18, 2006, we entered into an Accord and Satisfaction Agreement (“Agreement”)
with several related party creditors, arranging to settle debt of $5,194,553
including interest accrued through June 30, 2006, in exchange for the issuance
of 3,995,809 shares of our $.001 par value common stock. This debt was incurred
in the form of related party advances and services rendered to the company
over
recent months. The conversion rate was $1.30 per share, representing a premium
on the market price of our closing share price on Monday, July 17, 2006 of
$1.00
per share.
The
related parties that were owed funds include Radul Radovich, our Chairman of
the
Board of Directors, and several entities owned and controlled by Mr. Radovich.
The amounts owed were as follows: Mr. Radovich was owed $952,611 principal
along
with interest of $127,509, for a total of $1,084,120, which was converted to
833,938 restricted shares of our common stock; St. Petka Trust, a majority
shareholder of the company, and of which Mr. Radovich is the beneficiary and
trustor, was owed $1,585,500 principal, along with interest of $211,335, for
a
total of $1,796,835, which was converted to 1,382,180 restricted shares of
our
common stock; R and R Holdings, Inc. a Nevada corporation owned by Mr. Radovich,
was owed $471,507 principal, along with interest of $62,848, for a total of
$534,355, which was converted to 411,042 restricted shares of our common stock;
Silver Mountain Promotions, Inc., a Nevada corporation, owned by Mr. Radovich,
was owed $922,103 principal, along with interest of $122,909, for a total of
$1,045,012, which was converted to 803,855 restricted shares of our common
stock; R R Development, Inc., a California corporation, owned by Mr. Radovich,
was owed $170,000 principal, along with interest of $51,838, for a total of
$221,838, which was converted to restricted 170,644 shares of our common stock.
In addition, Mr. Radovich was owed $512,392 for consulting fees, pursuant to
a
consulting contract with the company. This amount was converted to 394,147
restricted shares of our common stock.
We
have
financed our operations primarily through cash generated from related party
debt
financing as well as issuing a convertible debenture.
Our
net
cash used by investing activities was $48,124 for the nine months ended December
31, 2006 compared to $1,542 for the nine months ended December 31, 2005. The
increase of $46,582 is primarily due to a payment for our patent.
Our
net
cash provided by financing activities was $3,527,500 for the nine months ended
December 31, 2006 compared to net cash provided by financing activities of
$1,684,230 for the nine months ended December 31, 2005. The increase of
$1,818,270 is primarily due to the issuance of the convertible debenture and
the
sale of our common stock offset by a reduction in related party
advances.
In
June
2005, we entered into a loan agreement with Tejeda and Tejeda, Inc. in the
amount of $100,000. The loan is due in one year. The note is personally
guaranteed by Mr. Radul Radovich, the chairman of our board of directors, and
Mr. Chas Radovich, our President, Secretary and one of our directors. When
the
loan is due, the holder of the note has the option to convert the loan into
shares of our common stock at $0.50 per share or at a price equal to a 25%
discount to the closing bid price on the day of conversion at maturity. In
July
2006, the holder of the note elected to convert the note to 200,000 shares
of
our common stock. We recognized an additional expense of $91,583 related to
the
conversion of this note and accrued interest into shares of common stock.
In
October 2005, we issued a senior debenture to the Brad Chisick Trust for
$250,000 that accrues interest at 10% per annum, and is due in two years.
We
also issued the holder of this debenture a warrant to purchase 500,000 shares
of
our common stock at $1.75 per share.
During
the three months ended June 30, 2006, we issued 111,416 shares of our common
stock that were registered on or about May 11, 2006 on Form S-8 as payment
for
certain accounts payable, past due salaries to certain related parties and
amounts due to consultants.
In
July
2006, we issued notes payable in the aggregate amount of $250,000 to three
investors. The notes bear interest at 5% per month and were due on September
14,
2006. We exercised our option to extend the due date to October 14, 2006 and
issued to the investors a total of 25,000 warrants. These notes were repaid
subsequent to the quarter ended December 31, 2006.
In
August
2006, we issued a note payable to MDC Enterprises Ltd. in the amount of $250,000
that accrues interest at 40% per annum and is due on December 29, 2006. In
addition, we also issued to MDC Enterprises Ltd. a warrant to purchase 150,000
shares of our common stock for $0.75 per shares.
In
September 2006, we issued a note payable in the amount of $50,000 to an
investor. The note bears interest at 10% per annum and is payable upon
demand.
On
December 20, 2006, the we entered into a Securities Purchase Agreement with
Cornell Capital Partners, L.P. ("Cornell Capital") pursuant to which we agreed
to issue up to an aggregate principal amount of $3,850,000 of convertible
debentures. Of that amount, $2,500,000 was funded on December 20, 2006. Two
additional closings of $675,000 each are scheduled to occur as follows: the
first upon the Company’s filing of a registration statement with the Securities
and Exchange Commission (“SEC”), and the second upon that registration statement
being declared effective by the SEC and Shareholder approval of additional
authorized shares. There is no guarantee that we will complete and file a
registration statement, or that if filed, there is no guarantee that the SEC
will declare the registration statement effective. Further, there is no
guarantee that Shareholders will approve the increase in authorized
shares.
The
convertible debenture is convertible into shares of our common stock determined
by dividing the dollar amount being converted by the lower of the fixed
conversion price of $0.99 or the market conversion price, defined as 90% of
the
average of the lowest three daily volume weighted average trading prices per
share of our common stock for the fifteen trading days immediately preceding
the
conversion date. The convertible debenture is secured by our assets and shares
of common stock pledged by certain founding shareholders. At our option, we
may
redeem the convertible debenture beginning four months after the registration
statement has been declared effective by the SEC.
As
part
of the funding commitment, we issued four classes of warrants exercisable on
a
cash basis that enable Cornell Capital to purchase up to 6,640,602 shares of
common stock for an additional $5,500,000: an A Warrant to purchase 1,333,333
shares at $0.75 per share; B Warrant to purchase 1,205,400 shares at $0.8296
per
share; C Warrant to purchase 2,343,959 shares at $0.7466 per share; and D
Warrant to purchase 1,757,910 shares at $0.9955 per share. The A and B Warrants
expire six months following the effective date of the registration and carry
forced exercise provisions. The C and D Warrants are non-callable and have
a
five-year term. The warrants and convertible debenture are subject to certain
anti-dilution rights.
Per
EITF
00-19, paragraph 4, these convertible debentures do not meet the definition
of a
“conventional convertible debt instrument” since the debt is not convertible
into a fixed number of shares. The debt can be converted into common stock
at a conversions price that is a percentage of the market price; therefore
the
number of shares that could be required to be delivered upon “net-share
settlement” is essentially indeterminate. Therefore, the convertible
debenture is considered “non-conventional,” which means that the conversion
feature must be bifurcated from the debt and shown as a separate derivative
liability. This beneficial conversion liability has been calculated to be
$1,897,735 on December 20, 2006. In addition, since the convertible
debenture is convertible into an indeterminate number of shares of common stock,
it is assumed that the Company could never have enough authorized and unissued
shares to settle the conversion of the warrants into common stock.
Therefore, the warrants issued in connection with this transaction have a
fair value of $3,667,558 at December 20, 2006. The value of the warrant
was calculated using the Black-Scholes model using the following assumptions:
Discount rate of 4.5%, volatility of 137% and expected term of 1 to 5 years.
The fair value of the beneficial conversion feature and the warrant
liability will be adjusted to fair value each balance sheet date with the change
being shown as a component of net loss.
The
fair
value of the beneficial conversion feature and the warrants at the inception
of
these convertible debentures were $1897,735 and $3,667,558, respectively.
The first $2,500,000 of these discounts has been shown as a discount to
the convertible debentures which will be amortized over the term of the
convertible debenture and the excess of $3,065,293 has been shown as financing
costs in the accompanying statement of operations.
As
a
result of the issuance of the convertible debenture to Cornell Capital the
fair
value of all warrant issued to non-employees have been removed from
stockholders’ equity and shown as a liability. On December 20, 2006, the fair
value of such warrants was $3,545,880. The fair value of these warrants and
those issued to Cornell Capital will be adjusted to fair value at each balance
sheet date.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AS COMPARED TO THE
THREE MONTHS ENDED DECEMBER 31, 2005
Revenues
and Cost of Sales. We
had no
significant revenues for the three months ended December 31, 2006 and December
31, 2005 as we are undertaking twin Phase III clinical trials in order to obtain
FDA approval of PreHistinTM
as an
over the counter drug. Our net sales were $0, as were our cost of sales and
gross loss for the three months ended December 31, 2006, as compared net sales
of $0 as were our cost of sales and gross loss for the three months ended
December 31, 2005.
Operating
Expenses. Our
operating expenses for the three months ended December 31, 2006 were $4,586,919
compared to $1,139,272 for the three months ended December 31, 2005. For both
periods, we incurred expenses for two major purposes: i) ongoing development
of
our PreHistinTM
product
and related product management and ii) general management and fund raising
efforts. For the three months ended December 31, 2006, this amount was
represented by $16,580 in depreciation and amortization; $656,601 in
professional fees; $651,607 in salary and wages; $36,003 in rent expense;
$2,502,389 in marketing and research; $469,296 in stock option expense; $194,443
in other operating expenses and $60,000 in a legal settlement. This is compared
to the three months ended December 31, 2005, where we had $23,262 in
depreciation and amortization; $1,003,441 in professional fees; $317,025 in
salary and wages; $34,486 in rent expense; $(406,315) in marketing and research;
and $167,373 in other operating expenses. Our operating expenses increased
during the three months ended December 31, 2006 as compared to the three months
ended December 31, 2005 principally as a result of an increase in salaries
and
wages due to the addition of two executives, an increase in marketing and
research due to our Phase III clinical trials and an increase in stock
option
expense
related
to the adoption of SFAS No. 123R.
Interest
expense and financing costs for the three months ended December 31, 2006 were
$225,639 compared to $137,502 for the three months ended December 31, 2005.
The
increase is due the increase in debt in 2006 and the amortization of debt
discounts in 2006 offset by no non-registration penalties being accrued during
the three months ended December 31, 2006 as compared to penalties of $96,000
during the three months ended December 31, 2005.
The
convertible debenture financing costs relate to the excess of the fair value
of
the beneficial conversion feature and the warrants over the face amount of
the
convertible debt.
The
change in the fair value in the warrant and accrued derivative liabilities
relates to the change in the value of the detachable warrants and beneficial
conversion feature issued in connection with the convertible debentures and
convertible preferred stock.
RESULTS
OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2006 AS COMPARED TO THE
NINE MONTHS ENDED DECEMBER 31, 2005
Revenues
and Cost of Sales. We
had no
significant revenues for the nine months ended December 31, 2006 and December
31, 2005 as we are undertaking clinical development in order to obtain FDA
approval of PreHistinTM
as an
over the counter drug. Our net sales were $0, as were our cost of sales and
gross loss for the nine months ended December 31, 2006, as compared net sales
of
$0 as were our cost of sales and gross loss for the nine months ended December
31, 2005.
Operating
Expenses. Our
operating expenses for the nine months ended December 31, 2006 were $9,703,638
compared to $2,734,986 for the nine months ended December 31, 2005. For both
periods, we incurred expenses for two major purposes: i) ongoing development
of
our PreHistinTM
product
and related product management and ii) general management and fund raising
efforts. For the nine months ended December 31, 2006, this amount was
represented by $47,857 in depreciation and amortization; $2,224,275 in
professional fees; $1,755,239 in salary and wages; $136,282 in rent expense;
$3,801,753 in marketing and research; $1,059,888 in stock option expense;
$618,344 in other operating expenses and $60,000 in a legal settlement. This
is
compared to the nine months ended December 31, 2005, where we had $69,545 in
depreciation and amortization; $1,961,801 in professional fees; $495,245 in
salary and wages; $103,409 in rent expense; $(350,999) in marketing and
research; and $455,985 in other operating expenses. Our operating expenses
increased during the nine months ended December 31, 2006 as compared to the
nine
months ended December 31, 2005 principally as a result of an increase in
salaries and wages due to the addition of two executives, an increase in
marketing and research due to our Phase III clinical trials and an increase
in
stock option expense related to the adoption of SFAS No. 123R. A significant
portion of the professional fees were paid by issuing shares of our stock.
The
value of these services was based on the market value of our stock at the
measurement date.
Interest
expense and financing costs for the nine months ended December 31, 2006 were
$457,774 compared to $545,869 for the nine months ended December 31, 2005.
The
decrease is due to no non-registration penalties being accrued during the nine
months ended December 31, 2006 as compared to penalties of $192,000 during
the
nine months ended December 31, 2005 offset by the increase in debt in 2006
and
the amortization of debt discounts in 2006.
The
convertible debenture financing costs relate to the excess of the fair value
of
the beneficial conversion feature and the warrants over the face amount of
the
convertible debt.
The
change in the fair value in the warrant and accrued derivative liabilities
relates to the change in the value of the detachable warrants and beneficial
conversion feature issued in connection with the convertible debentures and
convertible preferred stock.
OUR
PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
Over
the
next twelve months, we plan to continue moving forward with the completion
of
the Phase III clinical trials of our planned allergy prevention product,
PreHistinTM,
followed by submission by the end of the third quarter of 2007 of a new drug
application (“NDA”) to the FDA for marketing approval of PreHistinTM
as an
over-the-counter allergy medication. Once the NDA is filed, we hope to receive
approval from the FDA within twelve months enabling market launch in the
United
States of the product. We do not anticipate generating product sales within
the
next twelve months. However, if results from our twin Phase III trials are
compelling, we may be successful in generating licensing revenue from a
potential pharmaceutical partner.
In
addition to seeking approval from the FDA for the primary indication of seasonal
allergic rhinitis (hay fever) for PreHistinTM,
we may
conduct additional studies to validate the viability of approval for
supplemental indications and alternative delivery mechanisms. The tests will
be
a combination of clinical trials and laboratory analyses.
As
of
December 31, 2006, we had cash and equivalents of $1,684,580. To fully execute
our business plan for the next 12 months, we will need to raise additional
funds
in order to complete the Phase III clinical trials, submit the
PreHistinTM
application to the United States FDA, and execute a licensing agreement or
otherwise launch the PreHistinTM
product.
There is no assurance that these funds will be raised. Other than the funds
already received from Cornell Capital, we have no ongoing source of working
capital.
In
October 2005, we reported results of an initial six-week 714 patient Phase
III
trial designed to study various PreHistinTM
dose
regimens for reducing seasonal allergy symptoms when compared to placebo. As
reported, the statistical analysis utilized a modified intent to treat and
an
ANOVA (ANalysis Of VAriation) model to determine the treatment effects for
the
four arm study and certain assumptions used were not specified in the
statistical analysis plan (SAP). Although the data resulting from the prior
Phase III clinical trial demonstrated that patients who were administered
PreHistinTM
showed a
statistically significant reduction of allergy symptoms when the modified
analysis was applied, the data most likely will be viewed by the FDA as
supportive data and not as pivotal Phase III results required to secure
approval.
In
January 2006, we were notified by the FDA that the marketing approval process
for PreHistinTM
would be
conducted within the FDA by the Office of Nonprescription Products, the branch
of the FDA which handles over-the-counter drug products. Previously the Division
of Pulmonary and Allergy Drug Products had handled our approval process (IND
number 68,994). We believe this is a positive development since, as an
FDA-approved over-the-counter drug, PreHistinTM
would
not require a doctor's prescription, thus making consumer purchases easier,
faster and more convenient.
In
April
2006, we submitted a protocol to the FDA (Protocol DF0107) for a Phase III
study
on ragweed sensitive seasonal allergy patients in the central and eastern United
States. In June 2006 the FDA notified us by letter regarding that protocol
stating that our two proposed study designs were “acceptable”. From the time we
had submitted Protocol DF0107 for review by the FDA in early April 2006, until
June 2006, the protocol had changed with the following notable exceptions:
· |
There
are two study arms in two studies (Protocol RA3333 and Protocol RA55555),
one with a placebo lozenge BID and one with a 3.3mg cyanocobalamin
lozenge
BID. Each arm in each study is between 312 and 500 patient-volunteers.
|
· |
Patients
are to keep symptom diaries for 10 consecutive weeks. Patients are
to
receive a bottle of nasal saline, ocular saline and a supply of loratadine
10 mg sufficient for them to take, if required, from Week 7 to Week
10.
(As with the prior protocol, the patients are to use the study medication
from Week 1 to Week 6, with Weeks 4, 5 and 6 being the primary endpoint.)
|
In
June
2006, we announced that we intend to initiate two identical, Phase III clinical
trials of our anti-allergy medication PreHistinTM
in
patients with seasonal allergic rhinitis. The randomized, double blind,
placebo-controlled studies are intended to assess the efficacy, overall safety
and tolerability of our flagship drug PreHistinTM
to
prevent the onset and reduce the severity of allergy symptoms.
We
commenced these studies in July 2006 and, if they are successful, we anticipate
using them in conjunction with our Mt. Cedar study as the primary basis for
submitting an application to FDA for marketing approval.
The
new
study design calls for two simultaneously conducted Phase III clinical trials,
each comprised of one placebo arm and one active arm receiving 3.3 mg of
sublingual PreHistinTM
administered twice daily for the six weeks of the study. In July 2006, we
conducted the double-blind, placebo-controlled trials will be conducted at
23
sites throughout the United States during the Ragweed allergy season. The
trials
utilized electronic diary records to assess improvement in the severity of
nasal
allergy symptoms. A total of 1,551 patients were randomized into the twin
studies to receive either placebo or PreHistinTM
for
three weeks prior to the onset of the allergy season, and for an additional
three weeks into the season. The patients’ dosing regimens were completed in
October 2006.
Other
than the research and development related to our PreHistinTM
product,
we do not plan to engage in any other research and development unless we
are
able to raise additional funds. We do not anticipate any significant hiring
over
the next 12 months.
Off-balance
sheet arrangements. There
are
no off balance sheet arrangements that have or are reasonably likely to have
a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
Item
3. Controls
and Procedures
As
required by SEC rules, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures at the end of the period
covered by this report. This evaluation was carried out under the supervision
and with the participation of our management, including our principal executive
officer and principal financial officer. Based on this evaluation, these
officers have concluded that the design and operation of our disclosure controls
and procedures are effective. There were no changes in our internal control
over
financial reporting or in other factors that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that
we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by
us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.
Part
II. OTHER
INFORMATION
Item
1. Legal
Proceedings
Former
Leased Office Space:
The
Company was a defendant in a suit brought by its former landlord for breach
of
lease agreement and alleged unpaid rent in the County of Orange, Superior Court
of California, Case #03CC02904. In January 2006, this matter was settled and
the
Company is to pay a total of $200,000 over the next year, of which the Company
paid the first $75,000 on January 31, 2006. The Company has accrued an
additional $60,000 related to this matter during the quarter ended December
31,
2006 being the total accrual on that date to $185,000. This amount was paid
in
full in January 2007.
Marinko
Vekovic: On
March
9, 2006, Marinko Vekovic, a former consultant, filed a Complaint against the
Company alleging a breach of a written consulting agreement, specific
performance of common stock warrants and the “reasonable value of work and labor
performed,” seeking damages in excess of $700,000, and specific performance of
an alleged obligation to issue 600,000 free trading warrants at a $1.75 share
price. The lawsuit, entitled Vekovic vs. Cobalis, is pending in Orange County
Superior Court, Central Justice Center, Case No. 06CC03923.
On
April
18, 2006, the Company filed an Answer to the Complaint, denying the allegations
by Mr. Vekovic. On the same date, the Company also filed a Cross-Complaint
for
rescission of the consulting agreement, on grounds that Mr. Vekovic made
numerous material misrepresentations intended to fraudulently induce the Company
to enter the consulting agreement and to issue to Vekovic 112,500 shares of
the
Company’s common stock registered in a registration statement on Form S-8.
Through the Company’s Cross-Complaint, the Company seeks to rescind the
consulting agreement and seeks restitution from Mr. Vekovic in an amount no
less
than the price for which Mr. Vekovic sold the 112,500 shares of the S-8 stock,
plus all or some portion of the compensation paid to Mr. Vekovic, given that
Mr.
Vekovic substantially failed to perform the consulting services which were
the
subject of the consulting agreement. The Company also seeks to recover
attorneys’ fees incurred in the defense of the Complaint and the prosecution of
the Company’s Cross-Complaint, pursuant to the attorneys’ fee provision in the
consulting agreement.
The
Company believes that it will prevail in defending Mr. Vekovic’s Complaint and
that its liability to Mr. Vekovic, if any, would not be material. Furthermore,
the Company believes that it has a good chance of prevailing on its
Cross-Complaint, such that the Company would recover a monetary award from
Mr.
Vekovic. However, as is the case with any litigation, the Company cannot
guarantee the outcome of the case.
Europacific
Consulting, Inc.
This
action was filed on May 23, 2006 in the Supreme Court of New York, County of
New
York, Case No. 601830/06. Europacific Consulting, Inc. (“Europacific”) is a New
York corporation whose sole shareholder and director is Antonio Treminio.
Europacific is suing for alleged breach of oral contract and damages of
$250,000. Europacific alleges that Cobalis orally engaged Europacific to perform
certain services for us, including introductions to potential board members,
qualified investors and strategic alliances for our product line. We issued
20,000 shares to Europacific in January 2005, and canceled those shares in
May
2005. In October 2006, we settled this case by rescinding our stop order on
those 20,000 shares.
Cappello
Capital Corp. In
March
2005, we entered into an agreement with Cappello Capital Corp. (“Cappello”) for
investment banking and related financial services. Pursuant to a financing
agreement, we issued 100,000 shares as an initial retainer. We believe that
Cappello did not perform per the agreement, but we are currently in discussions
with Cappello to attempt to arrive at a settlement, but no settlement can be
guaranteed.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
During
the three months ended December 31, 2006, we issued the following shares of
our
unregistered common stock:
·
|
1,000,000
shares with registration rights issued to Chaim Stern for cash of
$500,000;
|
·
|
150,000
shares with registration rights issued to Irina Aronson and Yuly
Aronson
Irrevocable Trust for cash of
$75,000;
|
·
|
50,000
shares issued to John Bridle for cash of $25,000; and
|
·
|
50,000
shares issued to Robert Stillwagon for cash of $25,000.
|
The
proceeds were used for working capital and for funding our clinical
trials.
We
also
issued these shares:
·
|
20,000
shares issued to Norman Rest for rent value at $19,600;
|
·
|
100,000
shares issued to Chaslav Radovich for compensation valued at $99,000;
|
·
|
200,000
shares issued to Gerald Yakatan for compensation value at $198,000;
|
·
|
20,000
shares issued to Jaffoni & Collins for services valued at $20,200;
|
We
did
not receive any proceeds from the issuance of these shares; these shares were
all issued in lieu of repaying our employees, consultants, advisors, and as
the
case may be, creditors, in cash
These
transactions were not registered under the Act in reliance on the exemption
from
registration in Section 4(2) of the Act, as transactions not involving any
public offering. The securities were issued to our employees, officers,
directors, creditors, consultants, advisors, and existing shareholders, who
by
virtue of those relationships, we believe were familiar with our business,
and
were able to assess the risks and merits of the investment.
Item
3. Defaults
Upon Senior Securities
Not
applicable
Item
4. Submission
of Matters to a Vote of Security Holders
Not
applicable
Item
5. Other
Information
APPOINTMENT
AND RESIGNATION OF PRINCIPAL OFFICERS AND DIRECTORS.
On
February 14, 2007, Dr. Lawrence May and Messrs. Chaslav Radovich and Ernest
Armstrong resigned as members of the board of directors of Cobalis Corp., a
Nevada corporation ("Registrant"). Mr. Radovich will continue to serve as the
Registrant’s President and Secretary, and Mr. Armstrong will continue to serve
as the Registrant’s Chief Scientific Officer. Dr. May and Mr. Armstrong have
served as members of the Registrant’s board of directors since December 2004,
and Mr. Radovich has served as a director since 2003. Chaslav Radovich resigned
his position as a director under the condition that in the event that Chaslav
Radovich’s father, Mr. Radul Radovich, currently the chairman of the
Registrant’s board of directors, leaves or is removed from office for any
reason, Mr. Chaslav Radovich will be appointed as director and as chairman
of
the board. The resignations were not the result of any disagreement with the
policies or practices of the Registrant.
On
the
same date, the Registrant appointed Mr. Thomas H. Silberg, Ms. Ellen McDonald
and Mr. S. Wayne Kay as members of its board of directors. The Registrant has
agreed to issue each newly appointed director 50,000 options to purchase shares
of the Registrant’s common stock at $1.00 per share. These options will vest
over three years and expire after five years.
The
following are the biographies of the new directors:
S.
Wayne Kay, 56. From
2005
to the present, Mr. Kay has served as an executive advisor to the management
and
boards of several early-stage companies as a self employed consultant, including
a life sciences tool company, a company developing a non-invasive cardiac output
measurement device, a clinical chemistry reagent medical device company and
similar enterprises. From 2001 to 2004, Mr. Kay was the president, chief
executive officer and director of Quidel Corporation in San Diego, California,
initially serving as chief operating officer in 2001. Prior to that, from 1999
through 2000, Mr. Kay was the senior vice president and officer of Neoforma.com,
with offices in Santa Clara, California and Washington D.C. From 1994 to
1999, he was the president, chief executive officer and director of Health
Industry Distributors Association, (HIDA) in Alexandria, Virginia. Prior
to that, he was president, chief executive officer and director of Enzymatics,
Inc. from 1989 to 1994, and president of SmithKline Diagnostics, Inc. in San
Jose, California, a division of SmithKline Beecham Corporation, from 1982 to
1989. Mr. Kay earned his bachelor of science in business administration in
1978 from the University of San Francisco, and his masters of business
administration from Pepperdine University in 1982. Mr. Kay also
serves on the board of directors of HIDA, in Alexandria, Virginia, and of
iMedical Devices, Inc., in Los Altos, California and Cyntellect, Inc., in San
Diego, California. Mr. Kay is not an officer or director of any other reporting
company.
Ellen
McDonald, 45.
From
2005 to the present, Ms. McDonald has served as the senior vice president
business operations for Chugai Pharma USA, LLC, which is a foreign issuer listed
on the Over-the-Counter Pink Sheets as CHGCF.PK. From 2004 to 2005, she was
self-employed as a strategic commercialization consultant for small to mid-sized
biotechnology, pharmaceutical and medical device companies. From 2001 to 2004,
Ms. McDonald was the senior vice president for cardiovascular marketing and
medical with Bristol-Myers Squibb. From 1989 to 2001, she held positions of
increasing responsibility with Johnson & Johnson, Inc. In 1999, she assumed
the role of vice president, oncology franchise for Ortho Biotech Inc., which
at
the time was Johnson & Johnson’s largest pharmaceutical franchise. Ms.
McDonald served on active duty with the U.S. Army Military Police Corps from
1984 to 1989, achieving the rank of captain. Ms. McDonald earned her bachelor’s
of science degree in general engineering from the U.S. Military Academy at
West
Point in 1984, and her masters of business administration from Columbia
University in 1996. Ms. McDonald is not an officer or director of any other
reporting company.
Thomas
H. Silberg, 60.
In May
2006, Mr. Silberg became the executive vice president for operations for Abraxis
Bioscience, Inc. a company listed on NASDAQ under the symbol ABBI, and in
September 2006, was appointed as the president of Abraxis Pharmaceutical
Products, with offices in Chicago and Los Angeles. From 2004 to 2005, Mr.
Silberg has served as the chief operating officer of Tercica Inc., located
in
South San Francisco, which is a biopharmaceutical company listed on NASDAQ
under
the symbol TRCA. From 2001 to 2003, Mr. Silberg was the executive vice president
and chief operating officer for Ligand Pharmaceuticals, Inc., and from 2000
to
2001, its senior vice president for commercial operations. From 1972 to 2000,
he
was with Hoffmann La-Roche Inc. in increasingly responsible positions, finally
serving as its vice president for business operations from 1994 to 1999. Mr.
Silberg earned his bachelor’s degree in marketing and advertising from the
University of Minnesota in 1972. He also attended programs in Management at
Harvard in 1992 and in Finance at Wharton in 1986. In the past, he also served
as a member of the Licensing Executive Society, the Biotechnology Industry
Organization, a member of the Medi-Promotions Board of directors, the American
Society of Health-Systems Pharmacists Commission on Goals, the University of
Southern California, Center of Excellence in Health Management Executive Board
and several Hoffman-LaRoche organizations. Mr. Silberg is not an officer or
director of any other reporting company.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of February 16, 2007 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all
of
our directors and executive officers as a group.
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Owner
|
Percent
of Class
|
Common
Stock
|
Gerald
Yakatan
2445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
612,500
shares (1)
Chief
Executive Officer
and
Director
|
1.7%
|
Common
Stock
|
Thomas
Stankovich
2445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
428,070
shares (2)
Director
|
1.2%
|
Common
Stock
|
Chaslav
Radovich
2445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
1,184,934
shares (3)
President,
Secretary
|
3.3%
|
Common
Stock
|
Radul
Radovich
46
Calle Fresno
San
Clemente, CA, 92672
|
10,076,528
shares (4)
Chairman
of the
Board
of Directors
|
28.1%
|
Common
Stock
|
Ernest
Armstrong
2445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
251,967
shares (5)
Chief
Scientific Officer
|
0.7%
|
Common
Stock
|
Kevin
Prendiville
2445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
506,480
shares (6)
Director
|
1.4%
|
Common
Stock
|
Kevin
Pickard
445
McCabe Way, Suite 150
Irvine,
CA, 92614
|
30,000
shares (7)
Interim
Chief
Financial Officer
and
Treasurer
|
0.1%
|
Common
Stock
|
St.
Petka Trust
46
Calle Fresno
San
Clemente, CA 92672
|
7,417,736
shares (4)
|
20.7%
|
Common
Stock
|
Silver
Mountain Promotions
6446
Silver Dawn Lane
Las
Vegas, NV, 89118
|
848,688
shares (4)
|
2.4%
|
Common
Stock
|
R
and R Holdings
46
Calle Fresno
San
Clemente, CA, 92672
|
411,375
shares (4)
|
1.2%
|
Common
Stock
|
R
& R Development
46
Calle Fresno
San
Clemente, CA, 92672
|
170,644
shares (4)
|
0.5%
|
Common
Stock
|
Gene
Pharmaceuticals
2445
McCabe Way, Suite 150
Irvine,
CA, 2614
|
1,449,087
shares (8)
|
4.0%
|
Common
Stock
|
James
Hammer
2537
Red Arrow Drive
Las
Vegas, NV 8913
|
3,294,643
shares (9)
|
9.2%
|
Common
Stock
|
Thomas
H. Silberg
2445
McCabe Way, Suite 150
Irvine,
CA, 2614
|
No
shares (10)
|
0%
|
Common
Stock
|
Ellen
McDonald
2445
McCabe Way, Suite 150
Irvine,
CA, 2614
|
No
shares (10)
|
0%
|
Common
Stock
|
S.
Wayne Kay
2445
McCabe Way, Suite 150
Irvine,
CA, 2614
|
No
shares (10)
|
0%
|
Common
Stock
|
Officers
and directors as a group
|
14,539,566
shares
|
40.6%
|
______________________________
(1) |
Dr.
Yakatan also owns 1,000,000 options to purchase shares of our common
stock
at $1.40 per share which were granted on May 15, 2006, vest over
three
years, and expire on May 15, 2016.
|
(2) |
Thomas
Stankovich was granted 1,000,000 options to purchase shares of our
common
stock at $1.75 per share, which were granted in November 2006 to
replace
warrants he was granted while serving as one of our officers. Of
those
options, 666,667 vested by the date of his resignation in December
2006.
He was to receive a total of 1,000,000 options pursuant to his employment
agreement, though he is no not entitled to the unvested options after
he
left his employment with us. These options expire in November 2016.
|
(3) |
Chaslav
Radovich owns 1,140,934 shares individually and is the custodian
of the
44,000 shares owned by Milena Radovich, his minor child. Mr. Radovich
also
owns 1,500,000 options to purchase shares of our common stock at
$1.40 per
share, which were granted on May 15, 2006 and vest over three years.
These
options expire on May 15, 2016.
|
(4) |
Radul
Radovich and his spouse are the beneficiaries of the St. Petka Trust,
which owns 7,417,736 shares. Radul Radovich is also the Trustor of
St.
Petka Trust. Radul Radovich also owns R and R Holdings, which holds
411,375 shares of our common stock. Radul Radovich also owns R&R
Development, which holds 170,644 shares. Radul Radovich also owns
Silver
Mountain Promotions, which holds 848,688 shares of our common
stock.
|
(5) |
Ernest
Armstrong owns 245,063 shares individually, 550 shares owned jointly
with
his parent, has beneficial ownership of 3,000 shares owned jointly
by Mr.
Armstrong’s spouse and Mr. Armstrong’s parent, and 3,354 shares owned
jointly with his spouse. Mr. Armstrong is also anticipated to receive
2,200,000 options to purchase shares of our common stock at $2.00
per
share expiring seven years from the dates of grants, including 1,200,000
options from us and 1,000,000 options to purchase shares owned by
St.
Petka Trust.
|
(6) |
Kevin
Prendiville owns 100,000 shares directly and is one of the trustees
of the
Prendiville Revocable Trust which owns 402,840 shares; he also owns
3,640
shares as custodian for his minor child. Dr. Prendiville also owns
333,000
warrants to purchase shares of our common stock at $1.75 per share,
which
were granted and vested on October 24, 2005 and expire on October
24,
2010.
|
(7) |
Kevin
Pickard was appointed as our interim CFO and treasurer in December
2006.
He holds 100,000 warrants to purchase shares of our common stock
for $1.75
per share; of those, 50,000 warrants expire on September 7, 2009
and
50,000 warrants expire on July 29, 2010. Those warrants were issued
while
Mr. Pickard served as our consultant.
|
(8) |
Mr.
Armstrong is a majority owner and managing member of Gene Pharmaceuticals,
LLC, which owns 1,449,087 shares.
|
(9) |
James
Hammer owns 1,177,143 shares individually, 360,000 owned by immediate
family members who share his household, 107,500 shares owned jointly
with
his spouse and 1,650,000 shares owned by the Hammer Family Trust.
|
(10) |
Thomas
H. Silberg, Ellen McDonald and S. Wayne Kay were appointed as directors
in
February 2007. Each is anticipated to receive 50,000 options to purchase
shares of our common stock with an exercise price of $1.00 per share.
Those options will vest over three years and expire after five
years.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. In accordance with Securities and Exchange Commission
rules, shares of our common stock which may be acquired upon exercise of stock
options or warrants which are currently exercisable or which become exercisable
within 60 days of the date of the table are deemed beneficially owned by the
optionees. Subject to community property laws, where applicable, the persons
or
entities named in the table above have sole voting and investment power with
respect to all shares of our common stock indicated as beneficially owned by
them.
Item
6. Exhibits
Regulation
S-B
Number
|
|
Exhibit
|
17.1
|
|
Letter
of Resignation for Dr. May
|
17.2
|
|
Letter
of Resignation for Mr. Radovich
|
17.3
|
|
Letter
of Resignation for Mr. Armstrong
|
31.1
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer of
the
Company (5)
|
31.2
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial Officer of
the
Company (5)
|
32.1
|
|
Section
906 Certification by Chief Executive Officer (5)
|
32.2
|
|
Section
906 Certification by Chief Financial Officer
(5)
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
COBALIS
CORP.
|
|
|
|
Date: February
16, 2007 |
By: |
/s/ Gerald
Yakatan |
|
Gerald
Yakatan |
|
Principal
Executive Officer, Director |
|
|
|
Date: February
16, 2007 |
By: |
/s/ Chaslav
Radovich |
|
Chaslav
Radovich |
|
President,
Secretary |
|
|
|
Date: February
16, 2007 |
By: |
/s/ Kevin
Pickard |
|
Kevin
Pickard |
|
Chief
Financial Officer, Treasurer |
39