Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF MOLECULAR USA FOR THE SECOND QUARTER PERIOD ENDED DECEMBER 31, 2013 AND SHOULD BE READ IN CONJUNCTION WITH MOLECULAR USA’S INTERIM CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THE FORM 10-Q.

Our interim consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles ( " U.S. GAAP ").

Overview

We were incorporated in the state of Nevada on May 1, 2002. Up until the fall of 2005, Molecular USA was in the business of mineral exploration and development of a mineral property.

On October 13, 2005, Molecular USA entered into a distribution and supply agreement with Molecular Pharmacology Pty. Ltd. (formerly Molecular Pharmacology Limited) (" MPLA "). MPLA is incorporated under the laws of Australia and at the time was a wholly owned subsidiary company of PharmaNet Group Limited (" PharmaNet "), an Australian company listed on the Australian Stock Exchange. Under the terms of the distribution and supply agreement, Molecular USA received the exclusive distribution rights to distribute, market, promote, detail, advertise and sell certain " Licensed Products ", as defined in the agreement, with metallo-polypeptide analgesic as an active ingredient, in the United States (excluding its territories and possessions). 

On May 9, 2006, Molecular USA announced that it has acquired 100% of the issued and outstanding share capital of MPLA. The transaction was originally announced by Molecular USA in a press release dated November 29, 2005 and was subsequently approved by a majority of the stockholders of the Company at a stockholders meeting held on April 21, 2006. As a result of the transaction, PharmaNet, the former parent company of MPLA, now controls approximately 79% of Molecular USA's issued and outstanding share capital. The transaction between the parties closed in escrow with an effective closing date of May 8, 2006. The business of MPLA is now the business of Molecular USA.

On July 19, 2013, Molecular USA announced its wholly-owned subsidiary, MPLA, executed an agreement with a New York-based company, Dermatology Development Corporation (" DDC ") 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.

Under the terms of the agreement, DDC is contracted to drive business relationships with a number of third party entities to sell products predominantly in the dermatology and cosmetic fields in the United States in return for an establishment fee and royalties on the agreements executed as a result of DDC’s services, paid for a fixed period net of MPLA’s costs of sales. The engagement of DDC is limited to the provision of the services in the United States, and is for an initial one year period which may be extended by mutual agreement between MPLA and DDC.

Our Current Business

Molecular USA, through its wholly owned subsidiary MPLA, is in the business of developing and commercializing a new analgesic and anti-inflammatory molecule known as Tripeptofen. Tripeptofen is likely to appear in a new group of products suitable for the treatment of common every-day pain. As an analgesic and anti-inflammatory drug, Tripeptofen is unusual due to its rapid speed of action and its topical or rub-on application. 

The majority of over-the-counter anti-pain and anti-inflammatory products sold for the treatment of acute localized pain are based on non-steroidal anti-inflammatory drugs or NSAIDs. The majority of such products are slow acting and provide only mild pain relief.

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The NSAID group has come under additional pressure and increasing medical alarm, as many drugs in this class have been found to set-back the recovery of certain conditions and treatments for which they were marketed. Moreover, NSAIDs are associated with severe gastro-intestinal side-effects. This has left a niche in an industry under-served by new products and ingredients.

MPLA's business strategy is to exploit the fast and locally acting, low side effects, and recovery-enhancing properties of its new drug group and to market this as a new ingredient, enabling pharmaceutical companies to develop and market effective and safer products suited to a broad range of common everyday pain.

Licensed Products

Molecular USA has exclusive distribution rights to distribute, market, promote, advertise and sell certain Licensed Products, with metallo-polypeptide analgesic and anti-inflammatory activity as an active ingredient, in the United States (excluding its territories and possessions) from its wholly owned subsidiary company MPLA.

The Licensed Products include all products in all dosage forms, formulations, line extensions and package configurations using or otherwise incorporating any aspect or production method of metallo-polypeptide analgesic and anti-inflammatory activity as an active ingredient marketed by MPLA or its affiliates under the trade name Tripeptofen or any other trade names or trademarks used by MPLA relating to the product and any improvements to such formulations or dosages as may hereafter be distributed by MPLA or its affiliates in the territory during the term of the distribution and supply agreement between Molecular USA and MPLA for the topical application for human use only, and specifically excludes:

All Licensed Products must first obtain regulatory clearance in the United States before they may be marketed and sold by Molecular USA in that territory. Clinical programs are currently planned by MPLA for Europe, USA and Australia. The clinical trial program is expected to be expanded with follow-up trials. Regulatory approval, commencement of the Master Drug File (" MDF ") and market approval are the focus of an ongoing program expected to continue over the next 18 to 24 months.

MPLA has an exclusive license from Cambridge Scientific Pty Ltd. (" Cambridge Scientific ") of Australia. This license is restricted to a "field of use" defined in the license documentation. Cambridge Scientific may grant other licenses to third parties outside the "field of use" the subject of the licenses granted to MPLA. 

Patents & Trademarks

Molecular USA and its subsidiary MPLA, regard their intellectual property rights, such as copyrights, trademarks, trade secrets, practices and tools, as important to the success of their company. To protect their intellectual property rights, Molecular USA relies on a combination of patent, trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with their employees, affiliates, clients, strategic partners, acquisition targets and others. Effective patent, trademark, copyright and trade secret protection may not be available in every country in which the combined company intends to offer its products. The steps taken by Molecular USA and MPLA to protect their intellectual property rights may not be adequate. Third parties may infringe or misappropriate the combined company's intellectual property rights or the combined company may not be able to detect unauthorized use and take appropriate steps to enforce its rights. In addition, other parties may assert infringement claims against the combined company. Such claims, regardless of merit, could result in the expenditure of significant financial and managerial resources. Further, an increasing number of patents are being issued to third parties regarding these processes. Future patents may limit the combined company's ability to use processes covered by such patents or expose the combined company to claims of patent infringement or otherwise require the combined company to seek to obtain related licenses. Such licenses may not be available on acceptable terms. The failure to obtain such licenses on acceptable terms could have a negative effect on the combined company's business.

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To protect their intellectual property rights, MPLA relies on a combination of license and patent applications held by Cambridge Scientific which includes "Analgesic and Anti-Inflammatory Composition" comprising USA patent application in completion plus PCT Provisional Specification having the same name designated as Serial No. 11/059580. These patent applications embody all the current Analgesic and Anti-inflammatory assets. MPLA will also rely on the exclusive nature of its license, trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements as it may execute from time to time.

Management of Molecular USA and MPLA believes that MPLA's products, trademarks, and other proprietary rights do not infringe on the proprietary rights of third parties.

Marketing

Molecular USA plans to market its Licensed Products, when approved, through existing pharmaceutical distributors and by collaborative dealings with major companies active in the United States and Europe.

In addition, Molecular USA plans to explore opportunities for direct sales, out-licensing and the integration of the company’s proprietary anti-inflammatory and analgesic components in products already distributed through various international markets. 

Molecular USA expects that these activities may even help fund the development costs of the Licensed Products in the United States.

Manufacturing & Supply

Molecular USA and MPLA have no manufacturing facilities. MPLA is required to supply Molecular USA with all Licensed Products under the distribution and supply agreement entered into by the parties in October 2005. It is likely MPLA will enter into arrangements with various Good Manufacturing Practice (" GMP ") certified formulation and manufacturers of the Licensed Products for clinical trial and sales purposes. These formulations and the manufacturing facilities must comply with regulations and Current Good Laboratory Practices ( " CGLP "), and current GMPs, enforced by the Food and Drug Administration (" FDA "). Molecular USA plans to continue MPLA's practice to outsource formulation and manufacturing for its clinical trials and potential commercialization after the acquisition of MPLA by Molecular USA.

Molecular USA has not entered into any supply agreements.

Competition

Molecular USA and MPLA compete in the segment of the pharmaceutical market that treats pain and inflammation, which is highly competitive. We face significant competition from most pharmaceutical companies as well as biotechnology companies that are also researching and selling products designed to treat pain and inflammation. Many of our competitors have significantly greater financial, manufacturing, marketing and product development resources than we do. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and public research institutes are active in neurological research, some in direct competition with us. These companies, as well as academic institutions, governmental agencies and other public and private organizations conducting research, also compete with Molecular USA and MPLA in recruiting and retaining highly qualified scientific personnel and consultants and may establish collaborative arrangements with competitors of Molecular USA.

Molecular USA's competition will be determined in part by the potential indications for which the MPLA's products are developed and ultimately approved by regulatory authorities.

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Molecular USA knows of other companies and institutions dedicated to the development of anti-pain and anti-inflammatory pharmaceuticals similar to those being developed by MPLA and licensed to Molecular USA. Many of Molecular USA's competitors, existing or potential, have substantially greater financial and technical resources and therefore may be in a better position to develop, manufacture and market pharmaceutical products. Many of these competitors are also more experienced with regard to preclinical testing, human clinical trials and obtaining regulatory approvals. The current or future existence of competitive products may also adversely affect the marketability of Molecular USA's products.

Governmental Regulation

FDA Regulation .  Pharmaceutical products are subject to extensive pre- and post-marketing regulation by the FDA, including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record-keeping, advertising and promotion of the products under the Federal Food, Drug and Cosmetic Act and the Public Health Services Act, and by comparable agencies in most foreign countries. The process required by the FDA before a new drug may be marketed in the United States generally involves the following: completion of pre-clinical laboratory and animal testing; submission of an investigational new drug application (" IND "), which must become effective before clinical trials may begin; performance of adequate and well controlled human clinical trials to establish the safety and efficacy of the proposed drug’s intended use; and approval by the FDA of a New Drug Application (" NDA ").

The activities required before a pharmaceutical agent may be marketed in the United States begin with pre-clinical testing. Pre-clinical tests include laboratory evaluation of potential products and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies and other information must be submitted to the FDA as part of an IND application, which must be reviewed and approved by the FDA before proposed clinical testing can begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. Clinical trials are conducted in accordance with Good Clinical Practices under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND application. Further, each clinical study must be conducted under the auspices of an independent institutional review board. The institutional review board will consider, among other things, ethical factors and the safety of human subjects.

Typically, human clinical trials are conducted in three phases that may overlap. In Phase 1, clinical trials are conducted with a small number of subjects to determine the early safety profile and pharmacology of the new therapy. In Phase 2, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase 3, large scale, multicenter, comparative clinical trials are conducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of efficacy and safety required by the FDA and others.

The results of the pre-clinical and clinical testing, together with chemistry and manufacturing information, are submitted to the FDA in the form of an NDA for a pharmaceutical product in order to obtain approval to commence commercial sales. In responding to an NDA, the FDA may grant marketing approvals, request additional information or further research, or deny the application if it determines that the application does not satisfy its regulatory approval criteria. Patient-specific therapies may be subject to additional risk with respect to the regulatory review process. FDA approval for a pharmaceutical product may not be granted on a timely basis, if at all, or if granted may not cover all the clinical indications for which approval is sought or may contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use.

Satisfaction of FDA premarket approval requirements for new drugs typically takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the product or targeted disease. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities. Success in early stage clinical trials or with prior versions of products does not assure success in later stage clinical trials. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval.

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Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require post-marketing studies, referred to as Phase 4 studies, to monitor the effect of an approved product, and may limit further marketing of the product based on the results of these post-market studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, or withdraw approvals.

Facilities used to manufacture drugs are subject to periodic inspection by the FDA, Drug Enforcement Agency and other authorities where applicable, and must comply with the FDA’s Current Good Manufacturing regulations. Failure to comply with the statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing, seizure of product or voluntary recall of a product. Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restriction through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

With respect to post-market product advertising and promotion, the FDA imposes a number of complex regulations on entities that advertise and promote pharmaceuticals, which include, among other things, standards and regulations relating to direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The FDA has very broad enforcement authority under the Federal Food, Drug and Cosmetic Act, and failure to abide by these regulations can result in penalties including the issuance of a warning letter directing the entity to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.

Research facilities are subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with the research in question.  In each of these areas, as above, the government has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect upon us.

Other Government Regulations .  In addition to laws and regulations enforced by the FDA, research of Molecular USA’s products in the United States are subject to regulation under National Institutes of Health guidelines, as well as under the Controlled Substances Act, the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local laws and regulations, as research and development of its products involves the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds.

In addition to regulations in the United States, Molecular USA’s products are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of its Licensed Products. Whether or not Molecular USA obtains FDA approval for a product, Molecular USA or its subsidiaries must obtain approval of a product by the comparable regulatory authorities of foreign countries before it can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Sarbanes-Oxley Act of 2002 .  On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (" SOA "). The SOA imposes a wide variety of new requirements on both United States and non-United States companies, that file or are required to file periodic reports with the SEC under the Securities Exchange Act of 1934. Many of these new requirements will affect Molecular USA and its board of directors. For instance, under the SOA Molecular USA is required to:  

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The SOA has required us to review our current procedures and policies to determine whether they comply with the SOA and the new regulations promulgated thereunder. We will continue to monitor our compliance with all future regulations that are adopted under the SOA and will take whatever actions are necessary to ensure that we are in compliance.

Environmental Compliance

The nature of Molecular USA's and MPLA's business does not require special environmental or local government approval. Molecular USA and MPLA are compliant with all environmental laws. The cost of such compliance is minimal for the company.

Employees

In the period ended December 31, 2013, Molecular USA did not have any employees and does not intend to hire any employees in the upcoming year. We rely heavily on outside contractors to conduct our business.

Immediate Business Plans

The Company, through its subsidiary MPLA, plans to continue to pursue the various levels of the international regulatory approval processes. Applications and product opportunities for Tripeptofen are believed to be broad and cover a range of commercial fields, each with distinct pre-market requirements. The international drug development team, global resources and local know-how will allow MPLA to seek the most time and cost effective regulatory pathways for each product and market sector.

On commercial development, MPLA will focus on consolidating the regulatory pathway work in order to prioritize the path to market. Jeffrey Edwards will work to set-out the strategies designed to maximize the multi-jurisdictional capabilities of MPLA's development teams.

Reports to Security Holders

We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a current report on Form 8-K.

Although our Internet site www.mpl-usa.com does not contain our reports, you may read and copy any materials we file with the SEC at their Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Results of Operation

For the quarter ended December 31, 2013.

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Rev enues

REVENUE – Molecular USA has not generated any revenues for the quarter ended December 31, 2013, or since inception.

COMMON STOCK – Molecular USA has not issued any shares during the most recent quarter. As of the date of February 11, 2014, Molecular USA has 111,553,740 common shares issued and outstanding.

Expenses

SUMMARY – Total expenses were $63,327 for the six month period ended December 31, 2013. Expenses had decreased during this past six month period as compared to the six month period ended December 31, 2012 – $100,170. A total of $2,409,423 in expenses has been incurred by Molecular USA since inception on July 14, 2004 through to December 31, 2013. The decrease in costs over this six month period has occurred as the result of Molecular USA’s wholly owned subsidiary decreasing in its consulting fees. The costs can be subdivided into the following categories:

1. Office Expenses and Rent : $15,170 in office expenses (for administrative costs) were incurred for the six month period ended December 31, 2013, as compared to $15,780 for the six month period ended December 31, 2012, while a total of $262,031 was incurred in the period from inception on July 14, 2004 to December 31, 2013. All contributed expenses are reported as contributed costs with a corresponding credit to additional paid-in capital.
2. Consulting and Analysis Costs : Molecular USA relies on consultants and other third parties to conduct the majority of its research. For the six month period ended December 31, 2013, $23,467 in consulting and analysis expenses were incurred as compared to $64,118 during the six month period ended December 31, 2012. We have incurred a total of $1,447,831 in consulting and analyst fees since our inception on July 14, 2004 to December 31, 2013 .
3. Advertising and Promotion Fees : Molecular USA has spent no money in this area this year. During the six month period ended December 31, 2013, we spent $Nil on advertising and public relations and $Nil for six month period ended December 31, 2012. A total of $23,739 has been incurred in this area during the period from inception on July 14, 2004 to December 31, 2013 .
4. Professional Fees : Molecular USA incurred $21,044 in professional fees for the six month period ended on December 31, 2013, as compared to $19,743 for the six month period ended December 31, 2012. From inception to December 31, 2013, we have incurred a total of $426,581 professional fees mainly spent on legal and accounting matters.
5. Travel Costs : Molecular USA incurred $Nil in travel costs for the six month period ended December 31, 2013, as compared to $359 for the six month period ended December 31, 2012 and $111,710 has been incurred in the period from inception on July 14, 2004 to December 31, 2013 . 
6. Salaries and Benefit Costs : Molecular USA and its subsidiary rely primarily on outside consultants and not salaried employees. As a result, Molecular USA incurred $Nil in salaries and benefits for the six month period ended December 31, 2013 and $Nil in salaries and benefits during the six month period ended December 31, 2012. For the period July 14, 2004 (inception) through December 31, 2013 , Molecular USA has spent a total of $44,464 on salaries and benefits.

Molecular USA continues to carefully control its expenses and overall costs as it moves forward with the development of its new business plan. Molecular USA does not have any employees and engages personnel through outside consulting contracts or agreements or other such arrangements.

Income Tax Provision : We have losses carried-forward for income tax purpose to December 31, 2013. There are no current or deferred tax expenses for the six month period ended December 31, 2013, due to our loss position. We have fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized as appropriate.

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Liquidity and Capital Resources

During the six month period ended December 31, 2013, Molecular USA satisfied its working capital needs by borrowing cash from its parent company PharmaNet. As December 31, 2013, the Company had cash and cash equivalents on hand in the amount of $4,997 ( June 30, 2013 - $7,046) and current payable and accrued liabilities of $20,482 ( June 30, 2013 - $21,628 ). As December 31, 2013, Molecular USA currently owes its parent company PharmaNet, $2,004,134 , an additional $47,845 to other related parties, and $20,482 to non-related parties. Given the proposed business activities of Molecular USA and its subsidiary, Management does not expect that the current level of cash on hand will be sufficient to fund its operation for the next twelve month period.  

To achieve our goals and objectives for the next 12 months, we plan to raise additional capital through private placements of our equity securities and future financing from our majority shareholder PharmaNet.

We plan to use any additional funds that we might be successful in raising for development, as well as for strategic acquisition of existing businesses that complement our market niche, and general working capital purposes.

If we are unsuccessful in obtaining new capital, our ability to seek and consummate strategic acquisitions to build our company internationally and to expand of our business development and marketing programs could be adversely affected.

Off-Balance Sheet Arrangement

As of December 31, 2013, Molecular USA did not have any off-balance sheet arrangements.

Research and Development

Since the acquisition of MPLA, Molecular USA has maintained MPLA’s research and development program to:

MPLA is in the business of developing and commercializing a new analgesic and anti-inflammatory molecule known as Tripeptofen. Tripeptofen is likely to appear in a new group of products suitable for the treatment of common every-day pain. As an analgesic and anti-inflammatory drug, Tripeptofen is unusual due to its rapid speed of action and its topical or rub-on application. 

On April 19, 2006, Molecular USA announced the filing of a new patent, Tissue Disruption Treatment and Composition for Use (US Patent number 11218382). The patent describes a proprietary process for the manufacture of topical biological secondary injury mediators (" B-SIMs ") that should have local, rather than systemic, effects and may be significantly less expensive to manufacture than conventional B-SIMs. MPLA is developing its B-SIMs to stop the tissue disruption that occurs after injury by suppressing the body's reactions, such as inflammation and damage/death of otherwise uninjured cells that are triggered in response to primary injury.

The first conditions targeted by MPLA will be the musculoskeletal injuries. The use of a B-SIM in these markets represents a new approach to one of the world’s largest over the counter drug markets and includes indications such as joint inflammation, musculoskeletal pain, overuse and strain injuries, burns and even surgical and cosmetic procedures. MPLA’s proprietary, industrially scalable peptide-ligand bond exchange (" PLBE ") B-SIM manufacturing process involves the disassociation of proteins, rather than the far more costly process of assembling B-SIMs one sequence at a time. The patent was lodged in the name of Cambridge Scientific; however, Molecular USA holds the worldwide exclusive license to manufacture, commercialize, market and distribute topical anti-inflammatory and analgesic products based on the proprietary MPL-TL compound.

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Molecular USA is still working on the projections regarding the necessary expenditure and time frame involved in pursuing this research and development program. Any such program will also be subject to Molecular USA raising the necessary funds to advance such a program.

Capital Expenditure Commitments

Capital expenditures for the six month period ended December 31, 2013, amounted to $Nil. Molecular USA does not anticipate any significant purchase or sale of equipment over the next 12 months.

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 six month period ended December 31, 2013 are as follows:

In July 2013, the FASB issued ASU 2013-11, " Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exist ". These amendments require that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from a disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. These amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application and early adoption is permitted. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.

Changes in Accounting Policies

Effective July 1, 2013, the Company adopted 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 adoption of these amendments did not have an impact on the Company’s interim consolidated financial statements.

Effective July 1, 2013, the Company adopted 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. The adoption of these amendments did not have an impact on the Company’s interim consolidated financial statements.

Effective July 1, 2013, the Company adopted ASU 2013-02, " Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income ". The amendments 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 adoption of these amendments did not have an impact on the Company’s interim consolidated financial statements.

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Critical Accounting Policies and Estimates

Our quarterly interim consolidated financial statements and accompanying notes are prepared in accordance with U.S. GAAP used in the United States. Preparing financial statements requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by Management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our interim consolidated financial statements is critical to an understanding of our financials.

Stock-Based Compensation

Effective January 1, 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 January 1, 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".