Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
1.
Nature and Continuance of Operations
Molecular Pharmacology (USA) Limited (the
"Company") was incorporated in the state of Nevada on 1 May 2002
under the name Blue Hawk Ventures, Inc.
The Company changed its name to Molecular Pharmacology (USA) Limited on
29 August 2005. At the same time, the
Company completed a four for one forward split of its issued and outstanding
share capital and altered its authorized share capital to 300,000,000 shares of
common stock with a par value of $0.001 per share.
The Company is a development stage enterprise, as
defined in
Accounting Standards Codification
(the "Codification" or "ASC") 915-10,
"
Development Stage Entities
". The
Company is devoting all of its present efforts to securing and establishing a
new business and its current planned principle operations have not
commenced. Accordingly, no revenue
has been derived during the organization period.
Up until the fall of 2005, the Company was in the
business of mineral exploration and development of a mineral property. The Company allowed the option on its
mineral claim to lapse in the fall of 2005.
On 13 October 2005, the Company acquired the exclusive
distribution rights to distribute, market, promote, detail, advertise and sell
certain "Licensed Products" through Molecular Pharmacology Pty.
Ltd. (formerly Molecular Pharmacology Limited) ("MPLA") (Note
10). MPLA was incorporated under
the laws of Australia and converted to a proprietary company on 29 October
2009. MPLA is a wholly owned
subsidiary company of PharmaNet Group Limited ("PharmaNet"), an Australian company listed on the Australian
Stock Exchange.
Since then, the Company has engaged in organizational
and start up activities, including developing a new business plan, recruiting
new directors, scientific advisors and key scientists, making arrangements for
laboratory facilities and office space and raising additional capital. The Company has generated no revenue
from product sales. The Company
does not have any pharmaceutical products currently available for sale, and
none are expected to be commercially available for some time, if at all. The Licensed Products must first undergo
pre-clinical and human clinical testing in the United States before they may be
sold commercially.
The Company completed a share purchase agreement on 8
May 2006 with PharmaNet (the "Purchase Agreement"). Under the terms of the Purchase
Agreement the Company acquired 100% of the issued and outstanding shares of
MPLA. The Company, in exchange for
100% of the issued and outstanding shares of MPLA, issued PharmaNet an
aggregate total of 88,000,000 common shares of the Company on the closing of
the transaction. The issuance of
88,000,000 common shares of the Company constituted an acquisition of control
of the Company by PharmaNet. The
transaction has been accounted for as a recapitalization of the Company (Note
2).
MPLA was incorporated on 14 July 2004 under the laws
of Australia. The accompanying
consolidated financial statements are the historical financial statements of
MPLA.
On 15 March 2007, the Board of Directors approved a
change in the Company’s financial year end from 31 October to 30 June.
The decision to change the fiscal year end was intended to assist the financial
community in its analysis of the business and in comparing the Company’s
financial results to others in the industry, and to synchronize the
Company’s fiscal reporting with MPLA.
19
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
The Company’s consolidated financial statements as at 30 June
2013 and for the year then ended have been prepared on a going concern basis,
which contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. The Company has a net loss of $209,900
for the year ended 30 June 2013 (30 June 2012 – $179,382; 30 June 2011 -
$121,860; cumulative - $2,061,948) and has working capital deficit of $9,512 at
30 June 2013 (30 June 2012 – $11,570).
Management cannot provide
assurance that the Company will ultimately achieve profitable operations or
become cash flow positive, or raise additional debt and/or equity capital. Management believes that the
Company’s capital resources should be adequate to continue operating and
maintaining its business strategy during the fiscal year ended 30 June
2014. However, if the Company is
unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will
need to curtail operations, liquidate assets, seek additional capital on less
favorable terms and/or pursue other remedial measures. These consolidated financial statements
do not include any adjustments related to the recoverability and classification
of assets or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
At 30 June 2013, the Company
has suffered losses from development stage activities to date. Although management is currently
attempting to implement its business plan, and is seeking additional sources of
equity or debt financing, there is no assurance these activities will be
successful. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
2.
Significant Accounting Policies
The following is a summary
of significant accounting policies used in the preparation of these
consolidated financial statements.
Basis of
presentation
These consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP")
applicable for a development stage company for financial information and are
expressed in U.S. dollars.
Principles of
consolidation
These consolidated financial
statements include the accounts of MPLA since its incorporation on 14 July 2004
and the Company since the reverse acquisition on 8 May 2006 (Note 1). All intercompany balances and
transactions have been eliminated.
Cash and cash equivalents
Cash and cash equivalents
include highly liquid investments with original maturities of three months or
less.
Equipment
Equipment is recorded at
cost and amortization is provided over its estimated economic life at the rate
of 15% declining balance.
20
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
Segments of an enterprise and
related information
ASC
280, "
Segment Reporting
" establishes
guidance for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes
standards for disclosures regarding products and services, geographic areas and
major customers. ASC 280 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
Foreign
currency translation
The Company’s functional and reporting
currency is U.S. dollars.
The consolidated financial
statements of the Company are translated to U.S. dollars
in accordance with ASC 830, "
Foreign
Currency Matters
".
Assets
and liabilities denominated in foreign currencies are translated using
the exchange rate prevailing at the balance sheet date. Revenue and expenses are translated at
average rates of exchange prevailing during the period. Translation adjustments
resulting from this process are charged or credited to other comprehensive
income
.
The Company has not, to the
date of these consolidated financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
Income
taxes
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the consolidated financial statements and those reported
for income tax purposes in accordance with ASC 740,
"Income
Taxes"
, which requires the use of the asset/liability method
of accounting for income taxes.
Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The Company provides for
deferred taxes for the estimated future tax effects attributable to temporary
differences and carry-forwards when realization is more likely than not.
Basic
and diluted net income (loss) per share
The
Company computes net income (loss) per share in accordance with ASC 260, "
Earnings per Share
". ASC 260 requires presentation of both
basic and diluted earnings per share ("EPS") on the face of the
income statement. Basic EPS is
computed by dividing net income (loss) available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to
all potentially dilutive common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS,
the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all
potentially dilutive shares if their effect is anti-dilutive. As at 30 June 2013, the Company had no
outstanding stock options or warrants.
21
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
Comprehensive income (loss)
ASC
220, "
Comprehensive Income
",
establishes standards for the reporting and disclosure of comprehensive income
(loss) and its components in the financial statements. As at 30 June 2013, the Company has
items that represent a comprehensive loss and, therefore, has included a
schedule of comprehensive loss in the consolidated financial statements.
Stock-based compensation
Effective
1 January 2006, the Company adopted the provisions of ASC 718, "
Compensation – Stock Compensation
", which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of ASC 718, stock-based compensation cost is measured at
the grant date, based on the calculated fair value of the award, and is
recognized as an expense over the employees’ requisite service period
(generally the vesting period of the equity grant). The Company adopted ASC 718
using the modified prospective method, which requires the Company to record
compensation expense over the vesting period for all awards granted after the
date of adoption, and for the unvested portion of previously granted awards
that remain outstanding at the date of adoption. Accordingly, the
financial statements for the periods prior to 1 January 2006 have not been
restated to reflect the fair value method of expensing share-based
compensation. The adoption of ASC 718 does not change the way the Company
accounts for share-based payments to non-employees, with guidance provided by
ASC 505-50, "
Equity-Based Payments to
Non-Employees
".
Comparative figures
Certain
comparative figures have been adjusted to conform to the current year’s
presentation.
3.
Changes in Accounting Policies
Effective 1 July 2012, the
Company retroactively adopted the Financial Accounting Standards Board
("FASB") Accounting Standards Update ("ASU") No.
2011-12,
"Comprehensive Income"
. This ASU effectively defers the changes
in ASU No. 2011-05,
"Presentation of
Comprehensive Income"
, issued in June 2011, that relates to
the presentation of reclassification adjustments out of accumulated other
comprehensive income. As ASU No. 2011-12 relates only to the presentation of
comprehensive income, the adoption of this update did not have a material
effect on the Company’s consolidated financial statements.
Effective 1 July 2012, the
Company retroactively adopted ASU No. 2011-05,
"Presentation
of Comprehensive Income"
.
This ASU presents an entity with the option to present the total of
comprehensive income, the components of net income, and the component of other
comprehensive income either in a single continuous statement of comprehensive
income or in two separate but consecutive statements. In both choices, an entity is required
to present each component of other comprehensive income along with a total for
other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to
present the components of other comprehensive income as part of the statement
of changes in stockholders’ deficiency. The amendments in this update do not
change the items that must be reported in other comprehensive income or when an
item of other comprehensive income must be reclassified to net income. As ASU
No. 2011-05 relates only to the presentation of comprehensive income, the
adoption of this update did not have a material effect on the Company’s
consolidated financial statements.
22
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
Effective
1 July 2012, the Company retroactively adopted ASU No. 2011-04,
"Fair Value Measurement"
to amend the accounting
and disclosure requirements on fair value measurements. This ASU limits the highest-and-best-use
measure to nonfinancial assets, permits certain financial assets and
liabilities with offsetting positions in market or counterparty credit risks to
be measured at a net basis, and provides guidance on the applicability of
premiums and discounts.
Additionally, this update expands the disclosure on Level 3 inputs by
requiring quantitative disclosure of the unobservable inputs and assumptions,
as well as description of the valuation processes and the sensitivity of the
fair value to changes in unobservable inputs. The adoption of this update did
not have a material effect on the Company’s consolidated financial
statements.
4.
Recent Accounting Pronouncements
Certain new standards, interpretations,
amendments and improvements to existing standards were issued by FASB. The new
standards, amendments to standards and interpretations that have been issued
and that are applicable to the Company but not effective during the year ended
30 June 2013 are as follows:
In April 2013, the FASB issued ASU 2013-07,
"
Presentation of Financial Statements (Topic 205)
– Liquidation Basis of Accounting"
. These amendments
require an entity to prepare its financial statements using the liquidity basis
of accounting ("LBA") when liquidation is imminent. Among the
requirements of LBA financial statements is that they (a) present relevant
information about an entity’s expected resources in liquidation by
measuring and presenting assets at the amount of the expected cash proceeds
from liquidation; (b) include in its presentation of assets any items not
previously recognized under U.S. GAAP but that is expected to sell in
liquidation or use in settling liabilities; (c) recognize and measure an
entity’s liabilities in accordance with U.S. GAAP that otherwise applies
to those liabilities; and (d) disclose and entity’s plan for liquidation,
the methods and significant assumptions used to measure assets and liabilities,
the type and amount of costs and income accrued, and the expected duration of
the liquidation process. These amendments are effective for entities that
determine liquidation is imminent during annual reporting periods beginning
after 15 December 2013, and interim reporting periods therein. Entities should
apply the requirements prospectively from the day that liquidation becomes
imminent. Early adoption is permitted. The adoption is not expected to have an
impact on the Company’s consolidated financial statements in its present
condition.
In March 2013, the FASB issued ASU 2013-05,
"Foreign Currency Matters (Topic 830) – Parent’s
Accounting for the Cumulative Translation Adjustment upon Derecognition of
Certain Subsidiaries or Group of Assets within a Foreign Entity or of an
Investment in a Foreign Entity".
These amendments provide
guidance on releasing cumulative translation adjustments when a reporting
entity (parent) ceases to have a controlling financial interest in a subsidiary
or a group of assets that is a non-profit activity or a business within a
foreign entity. In addition, these amendments provide guidance on the release
of cumulative translation adjustments in partial sales of equity method
investments and in step acquisitions. The amendments are effective for fiscal
years and interim reporting periods within those years, beginning after 15
December 2013. The amendments should be applied prospectively to derecognition
events occurring after the effective date. Prior periods should not be
adjusted. Early adoption is permitted. If an entity elects to early adopt the
amendments, it should apply them as of the beginning of the entity’s
fiscal year of adoption. The adoption of these amendments is not expected to
have a material effect on the Company’s consolidated financial
statements.
23
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
In February 2013, the FASB issued ASU 2013-04,
"Liabilities (Topic 405) – Obligations Resulting from Joint
and Several Liability Arrangements for Which the Total Amount of the Obligation
is Fixed at the Reporting Date".
These amendments provide
guidance for the recognition, measurement, and disclosure of obligations resulting
from joint and several liability arrangements for which the total amount of the
obligation within the scope of this guidance is fixed at the reporting date,
except for obligations addressed within existing guidance in U.S. GAAP.
Examples of obligations within this guidance are debt arrangements, other
contractual obligations, and settled litigation and judicial rulings. The
amendments are effective for fiscal years, and interim periods within those
years, beginning after 15 December 2013. These amendments shall be applied
retrospectively to all prior periods presented for those obligations within the
scope of this Subtopic that exist at the beginning of an entity’s fiscal
year of adoption. Early adoption is permitted. The adoption of these amendments
is not expected to have a material effect on the Company’s consolidated
financial statements.
In February 2013, the FASB issued ASU 2013-02,
"Comprehensive Income (Topic 220) – Reporting of Amounts
Reclassified out of Accumulated Other Comprehensive Income"
. The amendments do not change the current
requirements for reporting net income or other comprehensive income in
financial statements but require an entity to provide information about the
amounts reclassified out of accumulated other comprehensive income by
component. In addition, an entity is required to present, either on the face of
the statement where net income is presented or in the notes, significant
amounts reclassified out of accumulated other comprehensive income by the
respective line items of net income but only if the amount reclassified is
required under U.S. GAAP to be reclassified to net income in its entirety in
the same reporting period. For other amounts that are not required under U.S.
GAAP to be reclassified in their entirety to net income, an entity is required
to cross reference to other disclosures required under U.S. GAAP that provide
additional details about those amounts. The amendments are effective
prospectively for fiscal years, and interim periods within those years, beginning
after 15 December 2013. Early adoption is permitted. The adoption of these
amendments is not expected to have a material effect on the Company’s
consolidated financial statements.
5.
Equipment
|
|
|
|
|
|
Net
Book Value
|
|
|
Cost
|
|
Accumulated
amortization
|
|
As
at
30
June
2013
|
|
As
at
30
June
2012
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Office
equipment
|
|
864
|
|
724
|
|
140
|
|
1,159
|
During
the year ended 30 June 2013, the total additions to equipment were $Nil (30
June 2012 – $Nil) and equipment with a carrying value of $823 was written
off (30 June 2012 - $Nil).
6.
Accounts Payable and Accrued
Liabilities
Accounts payable and accrued liabilities are non-interest bearing,
unsecured and have settlement dates within one year.
24
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
7.
Due to Related Parties and
Related Party Transactions
As at 30 June 2013, the amount due to
related parties includes $1,000 payable to a director of the Company (30 June
2012
–
$1,000). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 30 June 2013, the amount due to
related parties includes $18,009 payable to a company owned by a director of
the Company or an officer of PharmaNet (30 June 2012
–
$22,846). This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at 30 June 2013, the amount due to
related parties includes $2,772 payable to a company owned by a director of the
Company or an officer of PharmaNet (30 June 2012
–
$1,101). This
balance is non-interest bearing, unsecured and has no fixed terms of repayment.
As at 30 June 2013, the amount due to
related parties includes $15,252 payable to a company owned by a director of
the Company or an officer of PharmaNet (30 June 2012 - $7,741). This balance is non-interest bearing,
unsecured and has no fixed terms of repayment.
As at 30 June 2013, the amount due to
related parties includes $2,007,468 payable to PharmaNet (30 June 2012
–
$2,036,760).
This balance is non-interest bearing, unsecured and has no fixed terms
of repayment.
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued consulting fees of $33,582 (
30 June 2012
– $46,316, 30 June 2011 - $43,786, cumulative -
$896,178).
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued administrative fees of $24,948 (
30 June 2012
–
$20,449, 30 June 2011 - $22,897, cumulative - $68,294) by
the Company, which have been recorded in office and miscellaneous expense.
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued consulting fees of $90,376 (30 June 2012 -
$21,285, 30 June 2011 - $Nil, cumulative - $111,661) by the Company.
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued consulting fees of $Nil (30 June 2012 –
$33,024, 30 June 2011 - $8,904, cumulative – $41,928) by the Company.
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued office and miscellaneous expenses of $Nil (
30 June 2012
–
$Nil, 30 June 2011 - $Nil, cumulative
–
$80,468) by the Company.
During the year ended 30 June 2013, a
director of the Company or an officer of PharmaNet, and their controlled
entities were paid or accrued rental fees of $Nil (
30 June 2012
– $Nil, 30 June 2011 - $Nil, cumulative –
$12,987) by the Company.
25
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
During the year ended 30 June 2013, a director of the Company or
an officer of PharmaNet, and their controlled entities were paid or accrued
office and miscellaneous expenses of $Nil (30 June 2012 - $Nil, 30 June 2011
– $Nil, cumulative – $4,481) by the Company.
During the year ended 30 June 2013, a director of the Company or
an officer of PharmaNet, and their controlled entities were paid or accrued
consulting fees of $8,473 (30 June 2012 - $Nil, 30 June 2011 - $Nil, Cumulative
- $8,473) by the Company.
Transactions comprising the amount due to PharmaNet for the years
ended 30 June 2013 and 2012 are as follows:
|
|
2013
|
|
2012
|
|
|
$
|
|
$
|
|
|
|
|
|
Opening balance, beginning of year
|
|
2,036,760
|
|
1,896,625
|
Funds
transferred to the Company by PharmaNet
|
|
204,583
|
|
170,790
|
Expenses paid by PharmaNet on behalf of the
Company
|
|
1,004
|
|
33,852
|
Foreign
currency translation adjustment
|
|
(234,879)
|
|
(64,507)
|
|
|
|
|
|
Balances, end of year
|
|
2,007,468
|
|
2,036,760
|
The weighted average amount due to PharmaNet for the year ended 30
June 2013 was $2,160,632 (30 June 2012 - $1,816,134, 30 June 2011 - $1,660,885).
8.
Capital Stock
Authorized
The total authorized capital is 300,000,000 common shares with a par
value of $0.001 per common share.
Issued and outstanding
The total issued and outstanding capital stock is 111,553,740 common
shares with a par value of $0.001 per common share.
26
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
9.
Segmented Information
Details on a geographic basis as at and for the years ended 30 June
2013, 2012 and 2011 are as follows:
|
|
Australia
|
|
U.S.A.
|
|
Total
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
2013
|
Current assets
|
12,116
|
|
-
|
|
12,116
|
|
Long-term assets
|
140
|
|
-
|
|
140
|
|
Loss for the year
|
(162,485)
|
|
(47,415)
|
|
(209,900)
|
|
|
|
|
|
|
|
2012
|
Current assets
|
7,682
|
|
-
|
|
7,682
|
|
Long-term assets
|
1,159
|
|
-
|
|
1,159
|
|
Loss for the year
|
(130,377)
|
|
(49,005)
|
|
(179,382)
|
|
|
|
|
|
|
|
2011
|
Current assets
|
15,281
|
|
-
|
|
15,281
|
|
Long-term assets
|
1,608
|
|
-
|
|
1,608
|
|
Loss for the year
|
(78,024)
|
|
(43,836)
|
|
(121,860)
|
10.
Distribution Agreement
The Company has the exclusive
distribution rights, through MPLA, to distribute, market, promote, detail,
advertise and sell certain Licensed Products, with metallo-polypeptide analgesic
as an active ingredient, in the United States (excluding its territories and
possessions) (Note 1). If, and when necessary, the Company will
obtain all necessary regulatory approvals for the Licensed Products and
incorporate the Licensed Products in the United States.
27
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
11.
Income Taxes
Income tax expense differs
from the amount that would result from applying the federal income tax rate to
earnings before income taxes.
During the years ended 30 June 2013, 2012 and 2011, these differences
result from the following items:
|
|
2013
|
|
2012
|
|
2011
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(209,900)
|
|
(179,382)
|
|
(121,860)
|
|
|
|
|
|
|
|
Federal income tax rates
|
|
35.0%
|
|
34.0%
|
|
34.0%
|
|
|
|
|
|
|
|
Income
tax recovery based on the above rates
|
|
(73,465)
|
|
(60,990)
|
|
(41,432)
|
|
|
|
|
|
|
|
Increase
(decrease) due to:
|
|
|
|
|
|
|
Difference
between U.S. and foreign tax rates
|
|
8,124
|
|
5,215
|
|
3,121
|
Change in tax
rates
|
|
(7,567)
|
|
-
|
|
-
|
Change in
valuation allowance
|
|
17,041
|
|
39,496
|
|
99,383
|
Foreign
exchange and other
|
|
55,867
|
|
16,279
|
|
(61,072)
|
|
|
|
|
|
|
|
Income tax expense
|
|
-
|
|
-
|
|
-
|
The composition of the Company’s deferred tax assets as at 30 June 2013
and 2012 are as follows:
|
|
2013
|
|
2012
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax operating loss
carry-forward
|
|
2,125,274
|
|
2,101,601
|
|
|
|
|
|
Deferred
tax assets
|
|
677,789
|
|
660,748
|
Less:
Valuation allowance
|
|
(677,789)
|
|
(660,748)
|
|
|
|
|
|
Net
deferred tax asset
|
|
-
|
|
-
|
28
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to Consolidated
Financial Statements
(Expressed in U.S.
Dollars)
30 June 2013
The Company has non-capital loss carry-forwards of
approximately $2,125,274 that may be available for tax purposes. The loss carry-forwards are all in
respect to U.S. and Australian operations and expire as follows:
|
$
|
|
|
2022
|
20,402
|
2023
|
46,992
|
2024
|
27,717
|
2025
|
14,187
|
2026
|
261,311
|
2027
|
111,155
|
2028
|
75,463
|
2029
|
57,882
|
2030
|
48,765
|
2031
|
43,836
|
2032
|
49,005
|
2033
|
47,415
|
No expiry
|
1,321,144
|
|
|
|
2,125,274
|
A full valuation allowance has been recorded
against the potential deferred tax assets associated with all the loss
carry-forwards as their utilization is not considered more likely than not at
this time.
12.
Supplemental Disclosures with
Respect to Cash Flows
|
For
the
period
from
the
date of inception on
14
July 2004
to
30 June
2013
(Unaudited)
|
For
the
year
ended
30
June
2013
|
For
the
year
ended
30
June
2012
|
For
the
year
ended
30
June
2011
|
|
$
|
$
|
$
|
$
|
|
|
|
|
|
Cash paid during
the period for interest
|
-
|
-
|
-
|
-
|
Cash paid during
the period for income taxes
|
-
|
-
|
-
|
-
|
Common shares
issued on acquisition of MPLA
|
16,236
|
-
|
-
|
-
|
Amounts receivable
acquired on recapitalization of the Company
|
2,226
|
-
|
-
|
-
|
Accounts payable
assumed on recapitalization of the Company
|
54,624
|
-
|
-
|
-
|
Due to related
party assumed on recapitalization of the Company
|
1,000
|
-
|
-
|
-
|
29
Molecular Pharmacology (USA) Limited
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
30 June 2013
13.
Financial Instruments
A fair value hierarchy was established that
prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurements).
The fair values of the financial instruments were
determined using the following input levels and valuation techniques:
Level 1:
classification is applied to any asset or liability that has a readily
available quoted market price from an active market where there is significant
transparency in the executed/quoted price.
Level 2:
classification is applied to assets and liabilities that have evaluated
prices where the data inputs to these valuations are observable either directly
or indirectly, but do not represent quoted market prices from an active market.
Level 3:
classification is applied to assets and liabilities when prices are not
derived from existing market data and requires us to develop our own
assumptions about how market participants would price the asset or liability.
The carrying values of cash and cash equivalents,
amounts receivable and accounts payable approximate fair value due to the short
term maturity of these financial instruments.
Credit
Risk
Financial
instruments that potentially subject the Company to credit risk consists of
cash and cash equivalents. The Company deposits cash and cash equivalents with
high credit quality financial institutions as determined by rating
agencies. As a result, credit risk
is considered insignificant.
Currency Risk
The
Company’s subsidiary is located in Australia. As a result, a significant
portion of the Company’s assets, liabilities and expenses were
denominated in the Australian dollar and were therefore subject to fluctuation
in exchange rates.
The
Company’s objective in managing its foreign currency risk is to minimize
its net exposures to foreign currency cash flows by holding most of its cash
and cash equivalents in Australian dollars. The Company monitors and forecasts the
values of net foreign currency cash flow and balance sheet exposures and from
time to time could authorize the use of derivative financial instruments such
as forward foreign exchange contracts to economically hedge a portion of
foreign currency fluctuations.
If the
Australian dollar had weakened (strengthened) against the U.S. dollar, with all
other variables held constant, by 100 basis points (1%) at period end, the
impact on net loss and other comprehensive loss would have been $20,314 lower
($20,314 higher).
The
Company has not, to the date of these consolidated financial statements,
entered into derivative instruments to offset the impact of foreign currency
fluctuations
.
30
Molecular Pharmacology
(USA) Limited
(A Development Stage
Company)
Notes to
Consolidated Financial Statements
(Expressed in U.S.
Dollars)
30
June 2013
Interest
Rate Risk
The
Company has non-interest paying cash balances and no interest-bearing
debt. It is management’s opinion that the Company is not exposed to
significant interest risk arising from these financial instruments.
Liquidity
Risk
Liquidity
risk is the risk that an entity will encounter difficulty in meeting
obligations associated with its financial liabilities. The Company is reliant upon PharmaNet as
its sole source of cash. The
Company has received financing from PharmaNet in the past; however, there is no
assurance that it will be able to do so in the future.
14.
Subsequent Event
On 19
July 2013, the Company executed an agreement with a New York-based company,
Dermatology Development Corporation to develop and market a range of
therapeutic, cosmetic and cosmecutical products based on the ThermaLIFE®
product range and its active ingredient in the United States.
31