UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549







FORM 10-Q







(Mark One)




xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934






For the quarterly period ended July 31, 2011




or




o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the transition period from _______________ to _______________




Commission File Number 000-52057




COMPASS BIOTECHNOLOGIES INC.


(Exact name of registrant as specified in its charter)




Nevada
47-0930829(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)9650 – 20 Avenue, Edmonton, Alberta, Canada
T6N 1G1(Address of principal executive offices)
(Zip Code)




780.990.4539


(Registrant’s telephone number, including area code)




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x YES  o NO




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  o YES   o NO




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer   o

Accelerated filer                   oNon-accelerated filer     o
(Do not check if a smaller reporting company)
Smaller reporting company x




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act o YES   x NO






APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY




PROCEEDINGS DURING THE PRECEDING FIVE YEARS






Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. o YES     o NO




APPLICABLE ONLY TO CORPORATE ISSUERS






Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
  21,655,629 common shares issued and outstanding as of September 19, 2011.


Table of Contents
  Table of Contents
 PART I - FINANCIAL INFORMATIONItem 1.
Financial Statements
3Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
16Item 3.
Quantitative Disclosures About Market Risks
27Item 4.
Controls and Procedures
27PART II - OTHER INFORMATIONItem 1.
Legal Proceedings
28Item 1A.
Risk Factors
28Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
34Item 3.
Defaults Upon Senior Securities
35Item 4.
[Removed and Reserved]
35Item 5.
Other Information
35Item 6.
Exhibits
36SIGNATURES
37
  Table of Contents
  PART I - FINANCIAL INFORMATION
   Item1.  Financial Statements
  Our unaudited consolidated interim financial statements for the three and six month periods ended July 31, 2011 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 July 31, 2011
 (Unaudited)
 
 
 Consolidated Balance Sheets
 
 Consolidated Statements of Operations
 
 Consolidated Statements of Cash Flows
 
 Notes to Consolidated Financial Statements
    3
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Consolidated Balance Sheets
 
 ASSETS

July 31,

2011


January 31,

2011$


$(Unaudited)


(Restated -Note 8)Current AssetsCash


58



34,753Receivables


49,101



45,071Prepaids


12,266



36,796Promissory note receivable (Note 3)


5,633



5,373Total Current Assets


67,058



121,993Equipment, net


447



730Licenses, net (Note 3)


656,436



695,050Total Assets


723,941



817,773LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)Current LiabilitiesAccounts payable and accrued liabilities (Notes 5 and 7)


861,529



935,682Promissory note (Note 3)


13,500



13,500Total Liabilities


875,029



949,182Contingency (Note 1)Commitments (Note 7)Subsequent Events (Note 9)Stockholders’ EquityCommon stock  (Note 4)

Authorized: 100,000,000 shares of common stock, par value $0.001

and 100,000,000 shares of preferred stock, par value $0.001

Issued and outstanding: 21,870,632 common shares (January 31, 2011 –  15,729,053)


21,871



15,729Additional paid-in capital


4,165,044



3,422,506Accumulated other comprehensive income


12,619



21,664Obligation to issue shares (Notes 2 and 7)


299,875



490,875Subscriptions receivable


(10,200
)


(10,200
)Subscriptions received (Note 4)


25,247



115,247Deferred compensation (Note 4)


-



(188,192
)Retained earnings (deficit)


(54,275
)


(54,275
)Deficit accumulated during the development stage


(4,611,269
)


(3,944,763
)Total Stockholders’ Equity (Deficit)


(151,088
)


(131,409
)Total Liabilities and Stockholders’ Equity (Deficit)


723,941



817,773
 
 The accompanying notes are an integral part of these consolidated financial statements.
  4
 Table of Contents
 
 Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Consolidated Statements of Operations
 (Unaudited)
 
 
 Accumulated From

February 15, 2007

(Date of reporting

as a development

stage company)to

July 31,

2011


Six

Months

Ended

July 31,

2011


Six

Months

Ended

July 31,

2010


Three

Months

Ended

July 31,

2011


Three

Months

Ended

July 31,

2010$


$


$


$


$Operating ExpensesAmortization


118,303



38,896



–



19,448



–General and administrative


3,070,280



571,893



408,395



384,763



328,241Management fees


406,202



40,491



32,643



20,307



16,222Research and development


1,035,926



40,491



32,643



20,307



16,222Loss Before Other Items


(4,630,711
)


(691,771
)


(473,681
)


(444,825
)


(360,685
)Other ItemsGain of sale of patent


70,025



–



–



–



–Loss on settlement of debt (note 4)


1,106



6,000



–



–



–Consulting  income


25,000



25,000



–



25,000



–Write-off of patent


(1
)


–



–



–



–Write-off of accounts receivable


(76,688
)


(5,735
)


(70,953
)


(3,507
)


(70,953
)Net Loss


(4,611,269
)


(666,506
)


(544,634
)


(423,332
)


(431,638
)Loss Per Share – Basic and Diluted






(0.03
)


(0.08
)


(0.02
)


(0.05
)Weighted Average Shares Outstanding – Basic and Diluted






19,697,784



7,341,471



21,089,119



9,617,683
  The accompanying notes are an integral part of these consolidated financial statements.
 
 5
 Table of Contents
 
 Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Consolidated Statements of Cash Flows
 (Unaudited)
 
 Accumulated From

February 15, 2007

(Date of reporting

as a development

stage company) to

July 31,

2011


Six

Months

Ended

July 31,

2011


Six

Months

Ended

July 31,

2010$


$


$Cash Flows From Operating ActivitiesNet loss


(4,665,544
)


(666,506
)


(544,634
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Amortization


118,304



38,897



423Gain on sale of patent


(70,025
)


–



–Deferred compensation


188,192



188,192Foreign exchange on gain on sale of patent


790



–



–Loss on settlement of debt


(1,106
)


(6,000
)


–Accrued interest on loan payable


3,429



1,107



962Shares for consulting services


1,324,183



186,000



347,500Prepaid consulting fees


23,945



23,945



–Stock-based compensation


435,910



58,815



–Write-off of patent


1



–



–Write-off of accounts receivable


75,070



5,735



69,335Changes in operating assets and liabilities:Receivables


(56,045
)


(10,974
)


(3,499
)Prepaids


(58,904
)


–



(5,056
)Accounts payable and accrued liabilities


911,169



108,605



(22,768
)Net Cash Used in Operating Activities


(1,770,631
)


(72,184
)


(157,737
)Cash Flows From Investing ActivitiesAcquisition of equipment


(2,909
)


–



–Acquisition of patent


(100
)


–



–Acquisition of license


(101,642
)


–



–Short-term loan


(5,373
)


–



–Net Cash Used in Investing Activities


(110,024
)


–



–Cash Flows From Financing ActivitiesProceeds from loan payable


13,500



–



10,000Issuance of common stock


1,550,547



45,000



42,947Subscriptions received


302,513



–



102,850Net Cash Provided By Financing Activities


1,866,560



45,000



155,797Effect of Exchange Rate Changes


14,153



(7,511
)


(1,604
)Change in Cash


58



(34,695
)


(3,544
)Cash– Beginning


–



34,753



4,918Cash– Ending


58



58



1,374
 
 The accompanying notes are an integral part of these consolidated financial statements.
  6
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notesto Consolidated Financial Statements
 July 31, 2011
  1. Nature of Operations and Going Concern
 
 Compass Biotechnologies Inc. (the “Company”) was incorporated in the state of Nevada on November 25, 2004 and is a development stage company in the business of developing its licenses for patents pertaining to the technology utilized in the prevention and treatment of hepatitis C.  Effective March 29, 2011, the Company entered into an agreement and plan of merger with its wholly-owned subsidiary whereby the subsidiary merged with and into the Company and effected a name change to Compass Biotechnologies Inc.  The Company’s shares are quoted on the OTC-BB.
 
 Unaudited Interim Financial Statements
 
 The accompanying unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the rules and regulations of the SEC.  They do not include all information and footnotes required by United States generally accepted accounting principles for for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended January 31, 2011 included in the Company’s Form 10-K filed with the SEC.  The unaudited interim financial statements should be read in conjunction
with those financial statements including in the Form 10-K.  In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made.  Operating results for the six months ended July 31, 2011 are not necessarily indicative of the results that may be expected for the year ending January 31, 2012.
 
 2. Licenses
 
 Effective December 29, 2009, the Company entered into an Asset Assignment Agreement with C-Virionics Corporation (“C-Virionics”) whereby the Company acquired certain licenses to patents used in the development of vaccination for prevention and treatment of hepatitis C.  In consideration, the Company paid $97,291 in royalty and other costs on behalf of C-Virionics and is obligated to issue 3,680,000 shares of common stock with a market value of $625,600 which had been recorded in obligation to issue shares at January 31, 2010.  During the year ended January 31, 2011, the Company issued 3,180,000 shares of common stock with market value of $540,600, 500,000 shares of common
stock at a market value of $85,000 remain in obligation to issue shares.
 
 The licenses to patents are licensed from the United Sates Public Health Service (“PHS”), to which the Company is obligated to make the following royalty payments:
 
 a)
$5,000 annually commencing January 1, 2010 (paid);
 b)
5% on net sales; and
 c)
Benchmark royalties of:
 ·
$25,000 upon initiation of phase I clinical trials;
 ·
$100,000 upon initiation of phase II clinical trials;
 ·
$250,000 upon initiation of phase III clinical trials;
 ·
$500,000 upon Biologics License Application (“BLA”) submission; and
 ·
$3,000,000 upon BLA approval.
  7
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  2.     Licenses (Continued)
 The Company is also obligated to pay PHS additional sublicensing royalties, of 12% - 25%, based on the market value of any consideration received for granting each sublicense or option to sublicense.
 
 The Company paid royalties of $Nil during the six month period ended July 31, 2011 ($Nil – July 31, 2010).  To July 31, 2011, the Company has recorded a royalty payable of $27,500 (January 31, 2011 - $27,500) in accounts payable and accrued liabilities.
 
 Management has determined that the Company’s license to patents to be used in the development of vaccination for the prevention and treatment of hepatitis C to have a useful life of 10 years.  For the six months ended July 31, 2011, the Company has recorded amortization of $38,614 (2010 - $Nil).
  3. Promissory Notes
 
 a) On January 1, 2011, the Company entered into an unsecured promissory note agreement with a related company that is controlled by a director.  The Company was loaned CAD $5,382 under the agreement.
 
 The note is interest bearing at 6% per annum commencing January 10, 2011, and repayable upon the related company completing a financing of at least $100,000.  If the related company controlled by a director of the Company fails to make payment, interest will accrue at a rate of 18% per annum on the outstanding balance plus accrued interest.  During the period ended July 31, 2011, the related company controlled by the director did not complete such financing.
 
 During the term that the note is outstanding the Company will have the right to convert the outstanding principal balance and accrued and unpaid interest into shares of preferred stock of the related company.  The number of preferred shares into which the note will be converted may be equal to the total borrowed plus accrued interest on the date of conversion divided by $0.20. The conversion feature had no intrinsic value and accordingly no beneficial conversion feature was recorded.
 
 b) On April 5, 2010, the Company entered into an unsecured promissory note agreement with a shareholder whereby the Company has borrowed $20,000.
 
 The note is interest bearing at 15% per annum commencing April 5, 2010, and repayable upon the Company completing a financing of at least $100,000.  The note is currently due and payable.  If the Company fails to make payment, interest accrues at a rate of 18% per annum on the outstanding balance plus accrued interest.  During the year ended January 31, 2011, the Company completed such financing and repaid $6,500, therefore the loan of $13,500 is interest bearing at 18% per annum.  Included in accounts payable and accrued liabilities at July 31, 2011 is $3,439 (January 31, 2011 - $2,332) in accrued interest, which has been recorded in general and administrative
expenses.
 
 During the term that the note is outstanding, the shareholder will have the right to convert the outstanding principal balance and accrued and unpaid interest into shares of preferred stock.  The number of preferred shares into which the note may be converted will be equal to the total outstanding amount plus accrued interest on the date of conversion divided by $0.80.  The conversion feature had no intrinsic value and accordingly no beneficial conversion feature was recorded.
  8
 Table of Contents
 Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
 4. Common Stock
 
 The Company is authorized to issue common stock of up to 100,000,000 shares, with a par value of $0.001 and up to 100,000,000 shares of preferred stock, with a par value of $0.001.  The preferred shares entitle the holder to payment as a preferred creditor in the case of corporate default.
 
 During the six month period ended July 31, 2011, the Company issued the following shares of common stock:
 
 a)
1,900,000 shares of common stock at a market value of $247,000 as a commencement bonus for consulting services from a third party and 1,000,000 shares of common stock at a market value of $130,000 as consulting fees, both of which had been recorded in obligation to issue shares at January 31, 2011.
 b)
900,000 shares of common stock for gross proceeds of $90,000, which was recorded in subscriptions received at January 31, 2011.
 c)
628,571 shares of common stock for gross proceeds of $45,000.
 d)
300,000 shares of common stock to settle debt of CAD $22,500 or USD $23,866 with the President of the Company.  The shares of common stock were issued at a market value of $23,866.
 e)
600,000 shares of common stock to settle debt of $60,000 to a third party consultant.  The shares were issued at a market value of $54,000.  The Company recorded a gain on settlement of debt of $6,000.
 f)
813,008 shares of common stock to settle accounts payable and accrued liabilities (Note 7). The shares were issued at a market value of $100,000.
 
 At July 31, 2011, the Company has $25,247 (January 30, 2011 - $115,247) in subscriptions received.  These subscriptions are comprised of advances towards a private placement of shares of common stock ranging from $0.10 to $0.17 per share.
 
 At January 31, 2011, the Company had recorded $188,192 in deferred compensation, which represents the issuance of shares of common stock for consulting services.  During the period ended July 31, 2011, the Company recorded $188,192 from deferred compensation to general and administrative expenses.
  Stock Options
 
 The following are the assumptions used for the Black-Scholes option pricing model to record the market value of the issued stock options:
 
 a)
The Company calculated volatility for stock options and awards using historical volatility.
 b)
The Company used a 0% forfeiture rate and the Company does not consider forfeitures to be material.
 c)
The Company has not, and does not intend to issue dividends, therefore, the dividend yield assumption is 0%.
 d)
The risk-free rate for the expected term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant.
  9
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  4. Common Stock (Continued)
 On January 31, 2010, the Company issued 500,000 stock options to the President of the Company, pursuant to the Company’s stock option plan.  These options are exercisable at a price of $0.18 for a period of five years.  The company recognizes stock-based compensation costs over the requisite service period of the award, which is the option vesting term.  The options vest at a rate of 20% per year, commencing January 31, 2010.  The market value of these options at the date of grant was estimated to the $68,006 using the Black-Scholes option pricing model with an expected life of 5 years, a risk-free interest rate of 2.34%, a dividend yield of 0%, and expected
volatility of 101%.  These stock options expire on January 31, 2014.  To July 31, 2011, 200,000 of these stock options are exercisable and the Company recognized $6,800 (January 31, 2011 - $13,600) in stock-based compensation expense in relation to these vested stock options, of which $3,400 was allocated to management fees and $3,400 was allocated to research and development costs.
 
 On April 18, 2011, the Company issued 1,000,000 stock options to a third party consultant.  These options are exercisable at a price of $0.07 for a period of 60 days.  The Company recognizes stock-based compensation costs over the requisite service period of the award, which is 60 days.  The market value of these options at the date of grant was estimated to be $52,015 using the Black-Scholes option pricing model with an expected life of 60 days, a risk-free interest rate of 1%, a dividend yield of 0%, and expected volatility of 105.59%. To July 31, 2011, 1,000,000 of these stock options are exercisable and the Company recognized $52,015 (January 31, 2011 - $Nil) in stock-based
compensation expense in relation to these stock options, of which $52,015 was allocated to consulting fees in general and administrative expenses. These stock options expired, unexercised, on June 20, 2011.
 
 Stock option transactions during the six months ended July 31, 2011 were as follows:
 
 Balance, January 31, 2010 and 2011


504,000Granted


1,000,000Expired


(1,004,000
)Balance, July 31, 2011 – Outstanding


500,000Balance, July 31, 2011 - Exercisable


500,000
  5.     Related Party Transactions
 
 During the six month period ended July 31, 2011:
  a)
the President of the Company received a management consulting fee of $74,182 (July  31, 2010 - $65,286), of which $37,091 has been recorded as management fees and $37,091 as a research and development;
 b)
a director of the Company received a consulting fee of $72,000 (July 31, 2010 - $Nil) which has been recorded as general and administrative expenses;
 c)
the Company settled debt with a director of the Company in the amount of $23,866 (July 31, 2010 - $Nil) through the issuance of shares of common stock (July 31, 2010 - $Nil).
  10
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  5.     Related Party Transactions (Continued)
 As at July 31, 2011, $351,512 (January 31, 2011 - $321, 913) was due to related parties and recorded in accounts payable and accrued liabilities and $5,633 (January 31, 2011 - $5,373) is due from a company controlled by a director of the Company (Note 3). As at July 31, 2011, $36,000 (January 31, 2011 - $Nil) was recorded in obligation to issue shares for shares of common stock issuable to a director of the Company for consulting fees (Note 7).
 
 All related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.  Unless otherwise noted related party amounts are unsecured, bear no interest and have no fixed terms of repayment.
  6.     Supplemental Cash Flow Information
 
 Accumulated

From

February 15, 2007

(Date of reporting

as a development

stage company) to

July 31, 2011


Six Month

Period Ended

July 31, 2011


Six Month

Period Ended

July 31, 2010$


$


$Cash paid for Interest


–



–



–Cash paid for income taxes


–



–



–Obligation to issue shares of common stock for acquisition of licenses


85,000



–



–Issue shares of common stock for acquisition of licenses


540,600



–



–Obligation to issue shares of common stock for consulting services


405,875



377,000



–Royalties recorded in accounts payable and accrued liabilities


27,500



–



–Finder’s fee shares


82,000



–



–Finder’s fees recorded in accounts payable and accrued liabilities


114,346



–



–Reclassification of prepaids to common stock


–



–



22,108Reclassification of accounts payable and accrued liabilities to obligation to issue shares


36,000



36,000



–Issuance of shares of common stock for consulting services recorded in deferred compensation


80,826



–



–Subscriptions receivable for share issued


10,200



–



–Issue share for debt


177,865



177,865



–Reclassification of subscriptions received to common stock


90,000



90,000



153,480
  11
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  7.     Commitments
 
 a)
On July 14, 2009, the Company had entered into a service agreement with Moody Capital Solutions, Inc. (“Moody”) whereby Moody would serve as an investment banker and placement agency for the Company.  The term of the agreement was until November 10, 2009 and Moody was entitled to receive $8,000 ($4,000 paid, $4,000 accrued); and issued 210,000 restricted shares of common stock with a market value of $28,875 which have been recorded in obligation to issue shares.  To July 31, 2011 and 2010, Moody had not assisted with any private placement and, therefore, all fees have been allocated to consulting fees which are recorded in general and administrative expenses.
 
 Upon closing the placement of shares of common or preferred stock and any convertible or redeemable debt, Moody was entitled to receive 10% of the principal amount raised at each closing and 10% warrant coverage for any equity or sub-debt placed.  The warrants will be exercisable at 10% above the offering or conversion price, have piggyback registration rights and exercisable for a period of 5 years.  Should the Company be sold during the term of the agreement, Moody will receive a break-up fee of $100,000.  The Company also agrees that if Moody or any affiliate with over 50% control by Moody introduces the Company, during the term of the agreement or within three years from the termination date, to equity or debt financing, the Company will pay the fees as
stated above.
 
 b)
On February 28, 2010, the Company entered into a Letter of Agreement (the “letter of Agreement”) with Minapharm Pharmaceuticals SAE (“Minapharm”) a company incorporated in Egypt.  Minapharm is engaged in the development and commercialization of pharmaceutical products within Egypt.
 
 Pursuant to the Letter of Agreement, the Company will grant Minapharm an exclusive product distribution agreement and a royalty bearing sub-license which will give Minapharm the right to manufacture, market, sell or otherwise commercialize the Company’s ribavirin USP hepatitis C vaccine in either formula or other form.  In return, Minapharm will grant the Company the rights to exclusive product development, marketing and distribution rights and a royalty bearing license to rights to its pegylated interferon-alpha, in an active pharmaceutical ingredient or as finished final product.  The Letter of Agreement also stipulates that Minapharm will make a loan to the Company to assist in its
therapeutic development program.  To July 31, 2011, Minapharm has not made a loan to the Company.
 
 c)
On June 8, 2010, the Company entered into an Agreement with Investor Outreach Services LLC. (“IOS”) whereby IOS will introduce the Company to investors.  The Company will pay IOS a cash fee equal to 5% of the gross proceeds raised, in addition to 3% of any additional funds later brought forth from the investors.  Such provisions for compensation will last for a period of 3 years from the date any investor first invests in the Company.   To July 31, 2011 no funds have been raised by IOS and the Company has paid or accrued $Nil to IOS.
  d)
On June 1, 2010, the Company entered into a finder’s fee agreement with a third party consultant, whereby the consultant would assist with respect to a future financing.  The term of the agreement was for a period of 6 months and the consultant was entitled to receive a finder’s fee in cash or shares, based on the total amount of equity financing received.  To July 31, 2011, the consultant had not assisted with any private placement and, therefore, the Company has paid or accrued $Nil to the consultant.
 
 The Company also agreed that in the event that one or more parties introduced to the Company by the consultant during the term of the agreement completes an investment within 1 year after the termination of the agreement, then the Company agrees that the fee will continue to be due and payable.
  12
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  7.       Commitments (Continued)
 
 e)
On July 27, 2010, the Company had entered into a Securities Purchase Agreement (the “Securities Agreement”) with Tangiers Investors, LP (“Tangiers”).  Under the agreement, the Company agreed to issue and sell its common stock to Tangiers for an aggregate purchase price of up to $10,000,000.  The funding agreement specified that Tangiers would purchase the Company’s stock in amounts of up to $250,000 per draw down, at the Company’s discretion over a period of 2 years.
 
 The Company was required to issue Tangiers up to $300,000 worth of restricted shares of common stock as a commitment fee (the “commitment fee shares”).  In the event that Tangiers is unable to obtain at least $250,000 of value through the sale of the commitment fee shares, the Company will issue that number of shares to Tangiers that would allow Tangiers to obtain a minimum of $250,000 through the sale of the commitment fee shares.
 
 On March 1, 2011, the Company entered into a subscription agreement with Tangiers, which fully satisfied and extinguished the Securities Agreement.  Pursuant to the agreement, Tangiers subscribed for 813,008 shares of common stock at $0.123 per share and 1,250,000 shares of common stock at $0.12 per share for total proceeds of $250,000.  In lieu of receiving cash for issuance of shares of common stock, the Company has agreed to issue 2,063,008 shares of common stock to Tangiers in tranches at a market value of $250,000 to settle the commitment fee obligation. During the period ended July 31, 2011, the Company issued 813,008 shares of common stock at a market value of $100,000 which are subject
to certain escrow conditions. At July 31, 2011, the Company recorded in accounts payable and accrued liabilities $150,000 (January 31, 2011 - $250,000) which represents the Company’s obligation pursuant to the subscription agreement. Subsequent to July 31, 2011, the Company issued the additional 1,250,000 shares of common stock to Tangiers, which are also subject to certain escrow conditions.
 
 f)
On October 20, 2010, the Company entered into a one year consulting agreement with Rathbourne Mercantile Ltd. (“Rathbourne”), whereby the Company would pay Rathbourne an up-front non-refundable retainer of $50,000 (paid) and issue 1,000,000 shares of the Company for services completed to October 2010.  As at January 31, 2011 the Company had recorded an obligation to issue shares at a market value at $130,000. The payments to Rathbourne were recorded as consulting fees and are part of general and administrative expenses in the fiscal year ended January 31, 2011 (Note 8). During the period ended July 31, 2011, the Company issued 1,000,000 shares to Rathbourne.
 
 g)
On June 9, 2009, the Company entered into a consulting agreement with a third party whereby the consultant would provide research and development activities and consulting.  As consideration, the Company would pay a fee of US$12,000 per month.  Effective February 2, 2010, this third party became a director of the Company.  On April 14,, 2011, the Company entered into an agreement to issue restricted shares of common stock to settle debt of $268,500 with the director of the Company.  As at July 31, 2011, the shares of common stock have not been issued and, accordingly, the balance remains in accounts payable and accrued liabilities.  Commencing May 1, 2011, the Company will issue
the number of shares of common stock equal to $12,000 per month until the Company is able to pay in cash or the director becomes an employee of the Company. To July 31, 2011, the Company has recorded an obligation to issue shares at a market value of $36,000, which has been included in consulting fees and are part of general and administrative expenses.
 
 h)
On April 12, 2011, the Company entered into an agreement with a third party to issue 500,000 shares of common stock at a price of $0.20 per share pursuant to a Stock Purchase Agreement.  To July 31, 2011, the Stock Purchase Agreement has not been executed and the Company has not received any funds.
 
 i)
On July 1, 2011, the Company entered into a consulting agreement with a third party in consideration for the issuance of 500,000 shares of common stock. At July 31, 2011, the Company has recorded an obligation to issue shares at a market value of $45,000, which has been included as consulting fees and are part of general and administrative expenses. Subsequent to July 31, 2011, the Company issued the 500,000 shares of common stock.
 
 j)
On July 5, 2011, the Company entered into a consulting agreement with a third party in consideration for the issuance of 1,500,000 shares of common stock representing a commencement bonus. At July 31, 2011, the Company has recorded an obligation to issue shares at a market value of $105,000, which has been included as consulting fees and are part of general and administrative expenses. Subsequent to July 31, 2011, the Company issued the 1,500,000 shares of common stock.
  13
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
 
 8.     Restatement
 
 The Company has restated its financial statements for the year ended January 31, 2011, in order to record the following transactions in the correct fiscal period.
 
 a)  Promissory note of $5,373 (Note 3);
 b)  Commitment fee of $250,000 (Note 7);
 c)  Obligation to issue shares for services provided in the amount of $130,000 (Note 7); and
 d)  Obligation to issue shares for services provided in the amount of $247,000 (Note 6).
 
 The effect of these restatements is as follows:
 
 As reported


Adjustment


As

restatedConsolidated balance sheet – As at January 31, 2011Cash

$
40,126


$
5,373


$
34,753Promissory note


–



5,373



5,373Accounts payable and accrued liabilities


685,682



250,000



935,682Obligation to issue shares


113,875



377,000



490,875Consolidated statements of operations – General and administrative expenses6 months ended July 31, 2010

$
408,395


$
250,000


$
658,3953 months ended July 31, 2010


328,241



250,000



578,241
 
 9.     Subsequent Events
 
 a)
On August 19, 2011, the Company entered into a $50,000 Convertible Promissory Note (the “Note”) with Asher Enterprises, Inc. (“Asher), an arms length Delaware corporation. The principal is interest bearing at a rate of 8% per annum. The Company is obligated to repay the principal with any interest by May 22, 2012 (the “maturity date”). Any principal or interest unpaid by the maturity date shall bear interest at a rate of 22% per annum. Asher has the option to convert the Note, commencing on February 15, 2012 and ending on the maturity date, in respect of the remaining outstanding principal amount in entirety or part, at a variable conversion price of 58% multiplied by the market price, being the
average of the lowest 3 trading prices for the Company’s shares of common stock during a 10 day trading period. If the trading price cannot be calculated, a trading price shall be the market value as mutually determined by the Company and Asher. In the event that the Company makes an announcement to consolidate or merge with any other corporation, sell or transfer substantially all of its assets or any person, group or entity announces a tender offer to purchase 50% or more of the Company’s common stock, the conversion price shall be adjusted on such announcement day to be equal to the lower of (a) the conversion price which would have been applicable before such announcement and (b) the conversion price that would otherwise be in effect. The Company may not prepay the Note in whole or part.
  14
 Table of Contents
  Compass Biotechnologies Inc. (formerly Cyplasin BioMedical, Ltd.)
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2011
  9.     Subsequent Events (Continued)
 
 b)
On August 19, 2011, the Company entered into a $2,500 Promissory Note (the “Note”) with an arms length individual. The Note bears interest at a rate of 13% per annum. The Company is obligated to repay the Principal with any interest upon demand. The Note is convertible at any time after February 15, 2012 into equity at a rate of 40% of the closing bid price of the previous 5 days of trading.
 
 c)
On August 24, 2011, the Company entered into a $2,500 Promissory Note (the “Note”) with an arms length individual. The Note bears interest at a rate of 13% per annum. The Company is obligated to repay the Principal with any interest upon demand. The Note is convertible at any time after February 20, 2012 into equity at a rate of 42% of the closing bid price of the previous 5 days of trading.
 
 d)
The Company issued 3,250,000 shares of common stock (Note 7) pursuant to obligation to issue shares. The Company issued a further 50,000 shares of common stock towards a private placement at $0.17 per share for proceeds of $8,500, which were recorded in subscriptions received at July 31, 2011.
  15
 Table of Contents
  Item2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
   FORWARD-LOOKING STATEMENTS
   This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
  Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
  In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common shares" refer to the common shares in our capital stock.
  As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Compass Biotechnologies Inc. and our wholly owned subsidiary, unless otherwise indicated.
  General Overview
  We were incorporated pursuant to the laws of the State of Nevada on May 12, 2004 under the name Glass Wave Enterprises, Inc. Effective February 16, 2007, we changed our name to Cyplasin Biomedical Ltd. and effected a six point two (6.2) for one (1) forward stock split of our authorized, issued and outstanding common stock. Following our incorporation, we commenced the business, through our wholly-owned subsidiary, Astro Nutrition Inc., as a reseller of health products and herbal remedies. We targeted the market of health food supplements and herbal remedies by catering mainly to the European and Asian markets. We disposed of our former wholly-owned subsidiary, Astro Nutrition Inc. during our quarter ended
July 31, 2007 and abandoned our business plan to focus on the identification of suitable businesses with which to enter into a business opportunity or business combination.
  On February 1, 2007, we entered into an asset purchase agreement dated February 1, 2007 with Christian Petzelt. The asset purchase agreement contemplated our company acquiring certain intellectual property pertaining to cancer treatments, specifically protein molecules, for potential applications in treating various cancers in exchange for the issuance by our company of 21,000,000 shares of our common stock on a post six point two (6.2) for one (1) forward basis. The closing of the transactions contemplated in the asset purchase agreement and the acquisition of such intellectual property occurred on February 15, 2007.
  16
 Table of Contents
  As of the closing date of the asset purchase agreement on February 15, 2007, our company commenced the business of developing a novel therapeutic, recombinant protein called “Cyplasin”. On April 10, 2007, we entered into an asset purchase agreement with Bioxen Ltd., whereby we acquired a second Cyplasin patent describing a protein having anti tumor effect. Research into the Cyplasin protein structure has allowed us to manufacture the protein in the laboratory and develop procedures for the scale up in large-scale manufacturing processes as the discovery was to be commercialized. Additional patents were filed for these various processes and some have been issued in various
jurisdictions.
  Prior to the Cyplasin asset being vended into our company an aggregate of approximately $1.8 million had been spent on research and development related activities. These previous expenditures allowed for our company to anticipate the further development of the protein molecule from discovery and proof of concept stage to a clinical development stage.
  On April 10, 2007, we entered into an asset purchase agreement with Bioxen Ltd. to acquire certain intellectual property. The closing of the transactions contemplated in the asset purchase agreement and the acquisition of the intellectual property occurred on April 10, 2007. In accordance with the closing of the asset purchase agreement, we paid $100 to Bioxen in exchange for the acquisition by our company of such intellectual property.
  During the last part of 2008 as we completed our preclinical testing and analysis of Cyplasin-SCTM, as a therapy for skin cancer and melanoma treatment it was determined the product would require additional product formulation work and additional funding would b e required in order to advance the potential product to human clinical studies. Due to the financial environment at the time and continuing forward we were not successful in being able to raise the required funds and subsequently we were unable to proceed with the Cyplasin product development on our own and started looking for strategic development partners or a sale of our company via a reverse takeover (RTO) event.
  In order to prepare for such events, on December 23, 2008, we effected a forty (40) old for one (1) new reverse stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital decreased from 465,000,000 shares of common stock with a par value of $0.001 to 11,625,000 shares of common stock with a par value of $0.001and our issued and outstanding shares decreased from 39,584,000 shares of common stock to 989,600 shares of common stock. The reverse stock split became effective with the Over-the-Counter Bulletin Board at the opening for trading on February 2, 2009 under the stock symbol “CPBM”.
  Effective November 25, 2009, the Nevada Secretary of State accepted for filing a Certificate of Amendment, wherein we effected an amendment to our Articles of Incorporation to increase the authorized number of shares of our common stock from 11,625,000 shares to 100,000,000 shares, par value of $0.001 per share; and an amendment to our Articles of Incorporation for the alteration of our authorized share capital to authorize the issuance of up to 100,000,000 shares of preferred stock, par value of $0.001 per share, for which our directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of the shares of preferred stock.
  On February 7, 2009, we entered into a licensing agreement with Bioxen for further development of the Cyplasin product. Under terms of the agreement, Bioxen received an exclusive license to further develop the Cyplasin product and commercialize the intellectual property and corresponding patents held by our company.
  In consideration of the license granted, Bioxen agreed to pay our company a 0.5% royalty, calculated on all gross revenue of licensed products sold by Bioxen. In addition, Bioxen agreed to pay a non-refundable license fee of 25,000 EUR. This fee to be due within 30 days of the completion of any corporate financing by Bioxen, in which Bioxen receives a minimum collective amount of 500,000 EUR. Bioxen also agreed to pay all current outstanding patent amounts owed by our company and all ongoing, continued, and related patent and maintenance fees owed.
  17
 Table of Contents
  On June 9, 2009, our company entered into a consulting agreement with a third party whereby the consultant would provide research and development activities and consulting. As consideration, our company would pay a fee of US$12,000 per month. Effective February 2, 2010, this third party became a director of our company. On April 14, 2011, our company entered into an agreement to issue restricted shares of common stock to settle debt of $268,500 with the director of our company. As at July 31, 2011, the shares of common stock have been issued and, accordingly, the balance remains in accounts payable and accrued liabilities. Commencing May 1, 2011, our company will issue the number shares of common stock equal
to $12,000 per month until our company is able to pay in cash or the director becomes an employee of our company. To July 31, 2011, our company has recorded an obligation to issue shares at a fair value of $36,000, which has been included in consulting fees and are part of general and administrative expenses.
  On February 28, 2010, we entered into a letter agreement with Minapharm Pharmaceuticals SAE, wherein Minapharm has agreed to provide our company with a loan. Pursuant to the terms of the letter agreement, the loan may be converted into common stock of our company provided that Minapharm enters into a promissory note, a debt conversion agreement and a subscription agreement. Minapharm shall grant to our company a distribution agreement to market and sell a version of its pegylated interferon-alpha (PEG-IFN) product in territories where it is legally able to do so. To July 31, 2011 Minapharm has not made a loan to our company. To July 32, 1011, Minapharm has not made a loan to our company.
  On July 1, 2010, we entered into an agreement with Virionics Corporation. Virionics holds an exclusive worldwide license to intellectual properties, data and knowhow pertaining to hepatitis C prevention and treatment technologies and product candidates licensed from the U.S. National Institutes of Health. Pursuant to the agreement, Virionics has agreed to provide our company with a sublicense for exclusive worldwide use to make, use and commercialize hepatitis prevention and therapy products according to the terms of the license agreed upon by Virionics and the U.S. National Institutes of Health.
  On July 27, 2010, we entered into a securities purchase agreement with Tangiers Investors, LP. Under the agreement, our company agreed to issue and sell our shares of common stock to Tangiers for an aggregate purchase price of up to $10,000,000. The funding agreement specifies that Tangiers would purchase our company’s stock in amounts of up to $250,000 per draw down, at our company’s discretion over a period of two (2) years.
  Our company was required to issue Tangiers up to $300,000 worth of restricted shares of common stock as a commitment fee (the “commitment fee shares”).  In the event that Tangiers is unable to obtain at least $250,000 of value through the sale of the commitment fee shares, our company will issue that number of shares to Tangiers that would allow Tangiers to obtain a minimum of $250,000 through the sale of the commitment fee shares.
 
 On March 1, 2011, our company entered into a subscription agreement with Tangiers, which fully satisfied and extinguished the Securities Agreement.  Pursuant to the agreement, Tangiers subscribed for 813,008 shares of common stock at $0.123 per share and 1,250,000 shares of common stock at $0.12 per share for total proceeds of $250,000.  In lieu of receiving cash for issuance of shares of common stock, our company has agreed to issue 2,063,008 shares of common stock to Tangiers in tranches at a market value of $250,000 to settle the commitment fee obligation. During the period ended July 31, 2011, our company issued 813,008 shares of common stock at a market value of $100,000 which are
subject to certain escrow conditions. At July 31, 2011, our company recorded in accounts payable and accrued liabilities $150,000 (January 31, 2011 - $250,000) which represents our company’s obligation pursuant to the subscription agreement, Subsequent to July 31, 2011, our company issued the additional 1,250,000 shares of common stock to Tangiers, which are also subject to certain escrow conditions.
  18
 Table of Contents
  On October 20, 2010, we entered into a one year consulting agreement with Rathbourne Mercantile Ltd., which was subsequently amended on October 26, 2010, whereby our company would pay Rathbourne an up-front non-refundable retainer of $50,000 and issue 1,000,000 shares of our company for services completed to October 2010. As at July 31, 2011 our company has recorded an obligation to issue shares at a fair value at $130,000 (January 31, 2011 - $130,000) and has paid the non-refundable retainer. The payments to Rathbourne were recorded as consulting fees and are part of general and administrative expenses. During eh period ended July 31, 2011, our company issued 1,000,000 shares to Rathbourne.
  On December 27, 2010, we entered into an asset assignment agreement with Dr. Joseph Sinkule, wherein Dr. Sinkule agreed to assign to our company certain therapeutic products licensed from the Public Health Services of the National Institute of Health in Bethesda, Maryland. We issued 3,680,000 shares of our common stock with a fair value of $0.17 per share as consideration for the license assignment.
  In February 2011 we changed the name of our wholly owned private Canadian subsidiary from Cyplasin Oncoscience Inc., to C-Pharma Inc.
  On March 29, 2011, we changed our name from Cyplasin Biomedical Ltd. to Compass Biotechnologies Inc., by way of a merger with our wholly-owned subsidiary Compass Biotechnologies Inc. which was formed solely for the purpose of the change of name. We changed our name to better reflect a new business direction for our company.
  On July 1, 2011, we entered into a consulting agreement with Mr. Rick Shykora in consideration for the issuance of 500,000 shares of common stock. At July 31, 2011, the Company has recorded an obligation to issue shares at a market value of $45,000, which has been included as consulting fees and are part of general and administrative expenses. Subsequent to July 31, 2011, we issued the 500,000 shares of common stock.
 
 On July 5, 2011, we entered into a consulting agreement with Paradigmin consideration for the issuance of 1,500,000 shares of common stock representing a commencement bonus. At July 31, 2011, our company has recorded an obligation to issue shares at a market value of $105,000, which has been included as consulting fees and are part of general and administrative expenses. Subsequent to July 31, 2011, we issued the 1,500,000 shares of common stock.
 
 On August 19, 2011, we entered into a $50,000 convertible promissory note with Asher Enterprises, Inc., an arms-length Delaware corporation. The principal is interest bearing at a rate of 8% per annum. Our company is obligated to repay the principal with any interest by May 22, 2012 (the “maturity date”). Any principal or interest unpaid by the maturity date shall bear interest at a rate of 22% per annum. Asher has the option to convert the note, commencing on February 15, 2012 and ending on the maturity date, in respect of the remaining outstanding principal amount in entirety or part, at a variable conversion price of 58% multiplied by the market price, being the average of the lowest 3 trading
prices for our company’s shares of common stock during a 10 day trading period. If the trading price cannot be calculated, a trading price shall be the market value as mutually determined by our company and Asher. In the event that our company makes an announcement to consolidate or merge with any other corporation, sell or transfer substantially all of its assets or any person, group or entity announces a tender offer to purchase 50% or more of our company’s common stock, the conversion price shall be adjusted on such announcement day to be equal to the lower of (a) the conversion price which would have been applicable before such announcement and (b) the conversion price that would otherwise be in effect. Our company may not prepay the note in whole or part.
  19
 Table of Contents
  On August 19, 2011, we entered into a $2,500 promissory note with an arms-length individual. The note bears interest at a rate of 13% per annum. Our company is obligated to repay the principal with any interest upon demand. The note is convertible at any time after February 15, 2012 into equity at a rate of 40% of the closing bid price of the previous 5 days of trading.
 
 On August 24, 2011, we entered into a $2,500 promissory note with an arms-length individual. The note bears interest at a rate of 13% per annum. Our company is obligated to repay the principal with any interest upon demand. The note is convertible at any time after February 20, 2012 into equity at a rate of 42% of the closing bid price of the previous 5 days of trading.
  Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.
  Our Current Business
  Until our year ended January 31, 2009, we were a company focused on developing a novel therapeutic, recombinant protein called “Cyplasin”. During the last part of 2008 and early 2009 as we completed our preclinical testing and analysis of Cyplasin-SCTM, as a therapy for skin cancer and melanoma treatment it was determined the product would require additional product formulation work and additional funding would be required in order to advance the potential product to human clinical studies. Subsequently it was determined that the project should not continue and in early 2010 we completed the transfer of the project back to Bioxen, the original owners of the IP.
  In January 2010 we were assigned an exclusive worldwide license from the National Institutes of Health (NIH) for a technology based on using virus like particles (VLPs) to produce vaccines. The first license we decided to develop was to use the VLP technology to develop a vaccine for Hepatitis C. We also decided to develop generic products using different formulations off the off patent drugs Ribavirin and alpha interferon. These two drugs are the current standard of care for Hepatitis C and represent a global US$2 billion a year market.
  In addition to these two generic drugs we became aware of other similar projects for drug development not related to Hepatitis C. Thus in February of 2011 we out-licensed the VLP vaccine project and the two Hepatitis C generic drugs to our wholly owned private Canadian subsidiary Cyplasin Oncoscience Inc and then renamed the Canadian subsidiary to C-Pharma Inc. to better reflect the subsidiary’s corporate mission. C-Pharma is now charged with the development of the Hepatitis C products and also to expand the pipeline of products to develop a Hepatitis franchise.
  This left our company to pursue the development of generic, biosimiliar and biobetter drug products. Generic drugs are duplicates of small molecule or chemical compounds and are well established in the pharmaceutical industry. Biosimiliars are protein drugs which are close duplicates of the originally marketed protein drug but are not exact replicas. The European Union and other countries have a regulatory approval process in place to allow these biosimiliar drugs to be marketed. The USA and Canada are expected to have a similar approval process in place shortly. Biobetter drugs use existing protein drugs and through modifications to these protein drugs add value and new intellectual properties. A "biobetter"
is a biopharmaceutical product that is a copy of an existing product but is designed to have superior efficacy, safety, or improved drug delivery characteristics compared to the original product. Biobetter drugs are subject to full clinical trials but the cost, time and risk in getting them to market are lower; as the base component of the drug (the protein component) is already well known, characterized and accepted by regulatory agencies like the US Food and Drug Administration (FDA). Markets and their sizes are already established.
  20
 Table of Contents
  We are now focused on the development and commercialization of generic, biosimiliar and biobetter products. Our subsidiary, C-Pharma Inc., will continue to develop the Hepatitis C project our company was previously focused on.
  Research and Development
  We are a biotechnology development stage company and have not generated any revenues from our technologies. We believe, however, that there are opportunities to discover and develop effective and cost-effective treatments for the VLP technology licensed via the NIH for Hepatitis C. In addition to developing a vaccine for Hepatitis C, we anticipate to be able to develop generic Hepatitis C therapeutic drugs which we can market and generate revenue from. The focus of our company will be to develop protein based biosimiliar and biobetter drugs.
  During our quarter ended July 31, 2011 we expended $40,491 on research and development costs, compared to $32,643 during the quarter ended July 31, 2010.
  Intellectual property
  We currently own and operate the registered internet domain http://www.c-pharma.net/. We rely on a combination of patents and licenses to establish and protect our proprietary rights. We intend to require our customers to enter into confidentiality and nondisclosure agreements before we disclose any sensitive aspects of our technologies or strategic plans, and it is our policy to enter into proprietary information agreements with employees and consultants. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. It is difficult to monitor unauthorized use of
technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as laws in the United States, Canada and Europe. In addition, our competitors may independently develop technologies similar to ours. Our precautions may not prevent misappropriation or infringement of our intellectual property.
  We currently have the rights to the following patents in the US and in Europe with other territories:
  Patent(s) or Patent Application(s):
  entitled "Synthesis and Purification of Hepatitis C Virus-Like particles" (PHS Ref. E-009-1997/0).
  Serial Number
Country
Filing Date
Issue Date
Status
Patent Number09/296,441
U.S.A.
04/21/1999
05/14/2002
Issued
6,387,66223479/97
Australia
03/25/1997
01/03/2002
Issued
7385859791652.6
EPO
03/25/1997
--
Pending
--10-522521
Japan
03/25/1997
--
Pending
--2269097
Canada
03/25/1997
--
Pending
--
  No assurance can be given that any patents based on pending patent applications or any future patent applications by us, or any future licensors, will be issued, that the scope of any patent protection will exclude competitors or provide competitive advantages to us, that any of the provisional patent applications that have been or may be issued to us will be held valid if subsequently challenged or that others will not claim rights in or ownership of the provisional patent applications and other proprietary rights held or licensed by us. Furthermore, there can be no assurance that others have not developed or will not develop similar products, duplicate any of our technology or design around any patents that
may be issued to us.
  21
 Table of Contents
  Our success will also depend in part on our ability to commercialize our technology without infringing the proprietary rights of others. While we have conducted freedom of use patent searches no assurance can be given that patents do not exist or could not be filed which would have an adverse affect on our ability to market our technology or maintain our competitive position with respect to our technology. If our technologies or subject matter are claimed under other existing United States or foreign patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may
be required to obtain licenses from such companies in order to develop, manufacture or market our technology.
  There can be no assurances that we will be able to obtain such licenses or that such licenses, if available, may be obtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses may result in delays in marketing our proposed technology or the inability to proceed with the development, manufacture or sale of products requiring such licenses, which may have a material adverse affect on our business, financial condition and results of operations. If we are required to defend ourselves against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of
whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease our development and commercialization of our technology.
  Results of Operations
  As a result of a review of our company’s significant transactions, in preparing for our three and six month period ended July 31, 2011, we identified certain errors that have a significant impact on our previously issued financial information contained in our Forms 10-K for the year ended January 31, 2011.
  In performing these reviews our company discovered that certain transactions were not properly accounted for. We have restated our financial statements for the year ended January 31, 2011, in order to record the following transactions in the correct fiscal period, with the result being a corresponding increase in our loss for the year.
  ·
Promissory note of $5,373;
  ·
Commitment fee of $250,000;
  ·
Obligation to issue shares for services provided in the amount of $130,000; and
  ·
Obligation to issue shares for services provided in the amount of $247,000.
  Three month Summary ending July 31, 2011 and 2010
  Three Months EndedJuly 31,2011


2010Revenue

$
Nil


$
NilOperating Expenses

$
(444,825
)

$
(360,685
)Gain (loss) on settlement of debt

$
Nil


$
NilConsulting income

$
25,000


$
NilWrite-off of accounts receivable

$
(3,507
)

$
(70,953
)Net Loss

$
(423,332
)

$
(431,638
)
  22
 Table of Contents
  Expenses
  Our operating expenses for the three month periods ended July 31, 2011 and 2010 are outlined in the table below:
  Three Months EndedJuly 31,2011


2010Amortization

$
19,448


$
NilGeneral and administrative

$
384,763


$
328,241Management fees

$
20,307


$
16,222Research and development

$
20,307


$
16,222
  Operating expenses for the three months ended July 31, 2011, increased by 18.91% as compared to the comparative period in 2010 primarily as a result of increased amortization, general and administrative expenses, management fees and research and development expenses.
  Six month Summary ending July 31, 2011 and 2010
  Six Months EndedJuly 31,2011


2010Revenue

$
Nil


$
NilOperating Expenses

$
691,771


$
(473,681
)(Gain) loss on settlement of debt

$
(6,000
)

$
NilConsulting income

$
25,000


$
NilWrite-off of accounts receivable

$
5,735


$
70,953Net Loss

$
(666,506
)

$
(544,634
)
  Expenses
  Our operating expenses for the six month periods ended July 31, 2011 and 2010 are outlined in the table below:
  Six Months EndedJuly 31,2011


2010Amortization

$
38,896


$
NilGeneral and administrative

$
571,893


$
408,395Management fees

$
40,491


$
32,643Research and development

$
40,491


$
32,643
  Operating expenses for the six months ended July 31, 2011, increased by 31.53% as compared to the comparative period in 2010 primarily as a result of increased amortization, general and administrative expenses, management fees and research and development expenses.
  Revenue
  We have not earned any revenues since our inception and we do not anticipate earning revenues in the upcoming quarter.
  23
 Table of Contents
  Equity Compensation
  On March 31, 2007 our board of directors approved our 2007 stock option plan. Under the 2007 stock option plan, options may be granted only to our directors, officers, employees and consultants as determined by our board of directors. Pursuant to the stock option plan, we reserved for issuance 75,000 post split shares of our common stock.
  Liquidity and Financial Condition
  Working CapitalAt July 31,


At January 31,


Percentage2011


2011


Increase/DecreaseCurrent Assets

$
67,058


$
121,993



(45.03
) %Current Liabilities

$
875,029


$
949,182



(7.81
) %Working Capital

$
(807,971
)

$
(827,189
)


(2.32
) %
 
 Cash FlowsAs at


As atJuly 31,


July 31,2011


2010Net Cash Provided by (Used in) Operating Activities

$
(72,184
)

$
(157,737
)Net Cash Provided by (Used In) Investing Activities

$
Nil


$
NilNet Cash Provided by Financing Activities

$
45,000


$
155,797Effect of Exchange Rate Changes

$
(7,511
)

$
(1,604
)Increase (Decrease) In Cash During The Period

$
(34,695
)

$
(3,544
)
  As of July 31, 2011, our company had working capital deficit of $807,971. In the next twelve months we anticipate spending $360,000 on management fees, $250,000 on general and administrative expenses and $1,180,000 on research and development. Our cash on hand at July 31, 2011 was $58. We plan to raise additional capital required to meet immediate short-term needs and to meet the balance of our estimated funding requirements for the twelve months, primarily through the private placement of our securities.
  We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.
  Future Financings
 
 We will require additional financing in order to enable us to proceed with our plan of operations, as discussed above, including approximately $1,790,000 over the next 12 months to pay for our ongoing operating expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.
  We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
  24
 Table of Contents
  Other than as described below, we presently do not have any arrangements for additional financing and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.
  Estimated Expenses for the Next Twelve Month PeriodOperating ExpensesManagement and Consulting

$
360,000Research and Development


1,180,000General and Administrative


250,000Total

$
1,790,000
  Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended January 31, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
  As a result, there will also be substantial doubt about our ability to continue as a going concern as the continuation of our business will be dependent upon obtaining further financing and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of the stockholders who will be receiving our shares in the spin off. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
  There are no assurances that we will be able to obtain further funds required for our continued operations. We intend to pursue various financing alternatives to meet our immediate and long-term financial requirements, which we anticipate will consist of further private placements of our equity securities or shareholder loans. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to further scale down or perhaps even cease operations.
  As noted, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements, which we anticipate will consist of further private placements of equity securities, advances from related parties or shareholder loans. We plan to rely on shareholder loans and private placements to meet our short term cash requirements. We have not entered into any definitive agreements with any shareholders or related parties for the provision of loans or advances. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely
basis, or generate significant material revenues from operations, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.
  Contractual Obligations
  As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
  Going Concern
  We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.
  25
 Table of Contents
  Off-Balance Sheet Arrangements
  We have 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 is material to stockholders.
  Critical Accounting PoliciesThe discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. 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 financial statements is critical to an understanding of our financial statements.
  Basis of Presentation
  The consolidated unaudited financial statements and notes are presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in US dollars. Our company’s fiscal year end is January 31.
  Use of Estimates
  The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Our company’s actual results could differ from management’s estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination of impairment of intangibles and long lived assets, expected tax rates for future income tax recoveries and determining the fair values of financial instruments.
  Recent Accounting Pronouncements
  In January 2010, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU“) 2010-06, Improving Disclosures about Fair Value Measurements, which is included in the ASC Topic 820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. ASU 2010-06 also requires disclosures of activities, including purchases, sales, issuances, and a settlement within Level 3 fair value measurements and clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. ASU 2010-06 is effective for
interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The implementation of the adoption of ASU 2010-06 did not have a material impact on our company’s consolidated financial statements.
  In February 2010, the FASB issued ASU 2010-09, "Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements". The amendment eliminates the requirement for SEC filers to disclose the date through which subsequent events have been evaluated. This standard had no impact on our company's consolidated financial statements. Certain other recent accounting pronouncements have not been disclosed as they are not applicable to our company.
  There are several new accounting pronouncements issued by FASB which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by our company. Management does not believe any of these accounting pronouncements has had or will have a material impact on our company's financial position or operating results.
  26
 Table of Contents
  Item3.  Quantitative Disclosures About Market Risks
  As a “smaller reporting company”, we are not required to provide the information required by this Item.
  Item4.  Controls and Procedures
  Management’s Report on Disclosure Controls and Procedures
  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
  As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer, principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer, principal financial and accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.
  Changes in Internal Control over Financial Reporting
  There have been no changes in our internal controls over financial reporting that occurred during the quarter ended July 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
  27
 Table of Contents
  PART II - OTHER INFORMATION
   Item1.  Legal Proceedings
  We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
  Item1A.  Risk Factors
  Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
  Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".
  Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.
  Risks Related to our Business
  We have had negative cash flows from operations since inception. We will require significant additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail.
  To date, we have had negative cash flows from operations and have depended on sales of our equity securities and debt financing to meet our cash requirements. Our ability to develop and, if warranted, commercialize our technologies, will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, we will not be able to fully develop our business. Specifically, we will need to raise additional funds to:
  ·
support our planned growth and carry out our business plan;
  ·
continue scientific progress in our research and development programs;
  ·
address costs and timing of conducting clinical trials and seek regulatory approvals and patent prosecutions;
  ·
address competing technological and market developments; and
  ·
establish additional collaborative relationships.
  28
 Table of Contents
  We may not be able to obtain additional equity or debt financing on acceptable terms as required. Even if financing is available, it may not be available on terms that are favourable to us or in sufficient amounts to satisfy our requirements. If we require, but are unable to obtain, additional financing in the future, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions, withstand adverse operating results and compete effectively. More importantly, if we are unable to raise further financing when required, we may be forced to scale down our operations and our ability to generate revenues may be negatively affected.
  We have a history of losses and nominal operating results, which raise substantial doubt about our ability to continue as a going concern.
  Since February 15, 2007 (date of reporting as a development stage company), we have a net loss of $4,611,269. We can offer no assurance that we will operate profitably or that we will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the level of competition and general economic conditions.
  Our company's operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis.
  Due to the nature of our business and the early stage of our development, our securities must be considered highly speculative. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term. Any profitability in the future from our business will be dependent upon the successful commercialization or licensing of our core technology, which itself is subject to numerous risks.
  We expect to continue to incur development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flows until our technology gains market acceptance sufficient to generate a sustainable level of income from the commercialization or licensing of our technology.
  Our inability to complete our product development activities successfully may severely limit our ability to operate and finance operations.
  Commercialization of our core technology will require significant additional research and development as well as substantial clinical trials. We believe that the United States will be the principal market for our technology, as will any country in the world where the need for anti cancer therapeutics, initially for skin cancer and melanomas, exists. We may not be able to successfully complete development of our core technology, or successfully market our technology. We, and any of our potential collaborators, may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technology. Our research and development programs may not be
successful. Our core technology may not prove to be safe and efficacious in clinical trials, and we may not obtain the intended regulatory approvals for our core technology. Whether or not any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issue delaying commercialization and we may not be able to raise capital to finance our continued operation during the period required for resolution of that issue.
  29
 Table of Contents
  We may lose our competitiveness if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation may be time-consuming and costly.
  Our success and ability to compete depends to a significant degree on our proprietary technology. If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar technologies independently, we may not be able to compete as effectively. The measures we have implemented to protect our proprietary technology and other intellectual property rights are currently based upon a combination of patents and trade secrets. This, however, may not be adequate to prevent the unauthorized use of our proprietary technology and our other intellectual property rights. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights. We may
need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, may result in substantial costs and a diversion of our company's resources. In addition, notwithstanding our rights to our intellectual property, other persons may bring claims against us alleging that we have infringed on their intellectual property rights or claims that our intellectual property rights are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our business or require us to make changes to our technology.
  Our company may become subject to intellectual property litigation which may harm our business.
  Our success depends in part on our ability to develop commercially viable products without infringing the proprietary rights of others. Although we have not been subject to any filed infringement claims, other patents could exist or could be filed which may prohibit or limit our ability to market our products or maintain a competitive position. In the event of an intellectual property dispute, we may be forced to litigate. Intellectual property litigation may divert management's attention from developing our technology and may force us to incur substantial costs regardless of whether we are successful. An adverse outcome could subject us to significant liabilities to third parties, and force us to curtail or
cease the development and commercialization of our technology.
  If our company commercializes or tests our technology, our company will be subject to potential product liability claims which may affect our earnings and financial condition.
  We face an inherent business risk of exposure to product liability claims in the event that the use of our core technology during research and development efforts, including clinical trials, or after commercialization, results in adverse affects. As a result, we may incur significant product liability exposure, which may exceed any insurance coverage that we obtain in the future. Even if we elect to purchase such issuance in the future, we may not be able to maintain adequate levels of insurance at reasonable cost and/or reasonable terms. Excessive insurance costs or uninsured claims may increase our operating loss and affect our financial condition.
  If we fail to effectively manage the growth of our company and the commercialization or licensing of our technology, our future business results could be harmed and our managerial and operational resources may be strained.
  As we proceed with the development of our technology and the expansion of our marketing and commercialization efforts, we expect to experience significant growth in the scope and complexity of our business. We will need to add staff to manage operations, handle business development efforts and perform finance and accounting functions. We anticipate that we will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to
effectively service and manage our potential business, or the failure to manage growth effectively, could have a material adverse effect on our business and financial condition.
  30
 Table of Contents
  Failure to obtain and maintain required regulatory approvals will severely limit our ability to commercialize our technology.
  We believe that it is important for the success of our business to obtain the approval of the Food and Drug Administration in the United States (FDA) before we commence commercialization of our technology in the United States, the principal market for our technology. We may also be required to obtain additional approvals from foreign regulatory authorities to apply for any sales activities we may carry out in those jurisdictions. If we cannot demonstrate the safety, reliability and efficacy of our technology, the FDA or other regulatory authorities could delay or withhold regulatory approval of our technology.
  Even if we obtain regulatory approval of our technology, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA and other regulatory agencies and governments in other countries will continue to review and inspect any future marketed products as well as any manufacturing facilities that we may establish in the future. Later discovery of previously unknown problems with a product or facility may result in restrictions on the product, including a withdrawal of the product from the market. Further, governmental regulatory agencies may establish additional regulations which could prevent or delay regulatory approval of our
technology.
  Even if we obtain regulatory approval to commercialize our products, lack of commercial acceptance may impair our business.
  Our product development efforts are primarily directed toward obtaining regulatory approval for our Hepatitis C product treatments. Our products may not be employed in all potential applications being investigated, and any reduction in applications may limit the market acceptance of our products and our potential revenues. As a result, even if our products are developed into marketable products and we obtain all required regulatory approvals, we cannot be certain that our products will be adopted at a level that would allow us to operate profitably.
  If we do not keep pace with our competitors, technological advancements and market changes, our technology may become obsolete and our business may suffer.
  The market for our technology is very competitive, is subject to rapid technological changes and varies for different individual products. We believe that there are potentially many competitive approaches being pursued that compete with our technology, including some by private companies for which information is difficult to obtain.
 
 Many of our competitors have significantly greater resources and have developed products and processes that directly compete with our technology. Our competitors may develop, or may in the future develop, new technologies that directly compete with our technology or even render our technology obsolete. Our technology is designed to develop a topical treatment for skin cancer and melanoma. Even if we are able to demonstrate improved or equivalent results from our technology, researchers and practitioners may not use our technology and we may suffer a competitive disadvantage. Finally, to the extent that others develop new technologies that address the targeted application for our current technology, our
business will suffer.
  31
 Table of Contents
  Our ability to hire and retain key personnel will be an important factor in the success of our business and a failure to hire and retain key personnel may result in our inability to manage and implement our business plan.
  We are highly dependent upon our management personnel such as the loss of the services of one or more of our management may impair management's ability to operate our company. We have not purchased key man insurance on any of these individuals, which insurance would provide us with insurance proceeds in the event of their death. Without key man insurance, we may not have the financial resources to develop or maintain our business until we could replace the individual or to replace any business lost by the death of that person. The competition for qualified personnel in the markets in which we operate is intense. In addition, in order to manage growth effectively, we must implement management systems and
recruit and train new employees. We may not be able to attract and retain the necessary qualified personnel. If we are unable to retain or to hire qualified personnel as required, we may not be able to adequately manage and implement our business.
  Most of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.
  Although we are organized under the laws of the State of Nevada, United States, our principal business office is located in Edmonton, Alberta, Canada. Outside the United States, it may be difficult for investors to enforce judgments against us that are obtained in the United States in any action, including actions predicated upon civil liability provisions of federal securities laws. In addition, a majority of our directors and officers reside outside the United States, and nearly all of the assets of these persons and our assets are located outside of the United States. As a result, it may not be possible for investors to affect service of process within the United States upon such persons or to enforce
against us or such persons judgments predicated upon the liability provisions of United States securities laws. There is substantial doubt as to the enforceability against us or any of our directors and officers located outside the United States in original actions or in actions of enforcement of judgments of United States courts or liabilities predicated on the civil liability provisions of United States federal securities laws. In addition, as the majority of our assets are located outside of the United States, it may be difficult to enforce United States bankruptcy proceedings against us. Under bankruptcy laws in the United States, courts typically have jurisdiction over a debtor's property, wherever it is located, including property situated in other countries. Courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction. Accordingly, you
may have trouble administering a United States bankruptcy case involving a Nevada company as debtor with most of its property located outside the United States. Any orders or judgments of a bankruptcy court obtained by you in the United States may not be enforceable.
  Our business is subject to comprehensive government regulation and any change in such regulation may have a material adverse effect on our company.
  There is no assurance that the laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, will not be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on our company. Any or all of these situations may have a negative impact on our operations.
  32
 Table of Contents
  Risks Related to our Common Stock
  A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.
  A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because a significant portion of our operations has been and will be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we can offer no assurance that we will be able to raise
additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
  The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock.
  If we issue additional shares in the future, it will result in the dilution of our existing shareholders.
  Our certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
  Trading of our stock may be restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our stock.
  The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In
addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
  33
 Table of Contents
  The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock.
  In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
  Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.
  Our common stock currently trades on a limited basis on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the
stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
  Other Risks
  Trends, Risks and Uncertainties
  We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.
  Item2.  Unregistered Sales of Equity Securities and Use of Proceeds
  On August 24,
2011we issued 1,250,000 shares of common stock pursuant to obligation to issue shares at a value of $150,000. These shares were issued pursuant to Rule 144 of the Securities and Exchange Commission under the Securities Act of 1933, as amended.
 
 On August 26, 2011 we issued a further 50,000 shares of common stock towards a private placement at $0.17 per share for proceeds of $8,500, which were recorded in subscriptions received at July 31, 2011. These shares were issued pursuant to Rule 144 of the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
 34
 Table of Contents
 On  August 26, 2011, we issued 500,000 shares of common stock as consideration paid under a consulting agreement with a recorded market value of $45,000. These shares were issued pursuant to a previous S8 registration Filed July 20, 2010.
 
 On August 26, 2011, we issued 1,500,000 shares of common stock as consideration paid under a consulting agreement with a recorded market value of $105,000. These shares were issued pursuant to an exemption from registration under Rule 144 of the Securities and Exchange Commission under the Securities Act of 1933, as amended.
 Item3.  Defaults Upon Senior Securities
  None.
  Item4.  [Removed and Reserved]
   Item5.  Other Information
  None.
  35
 Table of Contents
  Item 6. Exhibits
  Exhibit Number
Description(3)
Articles of Incorporation and Bylaws3.1
Articles of Incorporation (Incorporated by reference from our Registration Statement on Form SB-2/a filed on July 29, 2005)3.2
Bylaws (Incorporated by reference from our Registration Statement on Form SB-2 filed on May 5, 2005)3.3
Articles of Merger (Incorporated by reference from our Current Report on Form 8-K filed on April 4, 2011)(10)
Material Contracts10.1
Asset Purchase Agreement dated April 10, 2007 with Bioxen Ltd. (Incorporated by reference from our Form 8-K Current Report filed on April 13, 2007).10.2
Consulting Agreement dated February 15, 2007 with Garth Likes (Incorporated by reference from our Form 10-KSB filed on May 1, 2007).10.3
Exclusive License and Option Agreement between our company and Bioxen Ltd. dated February 7, 2009. (Incorporated by reference to our Current Report on Form 8-K filed on February 8, 2011).10.4
Asset Assignment Agreement between our company and Dr. Joseph Sinkule and C-Virionics Corporation, dated December 27, 2009. (Incorporated by reference to our Current Report on Form 8- K/A filed on April 12, 2011).10.5
Letter of Agreement between our company and Minapharm Pharmaceuticals SAE, dated February 28, 2010. (Incorporated by reference to our Current Report on Form 8-K filed on February 8, 2011).10.6
Exclusive License Agreement between our company and Virionics Corporation, dated July 1, 2010. (Incorporated by reference to our Current Report on Form 8-K filed on February 8, 2011).10.7
Securities Purchase Agreement between our company and Tangiers Investors, LP, dated July 19, 2010. (Incorporated by reference to our Current Report on Form 8-K filed on February 8, 2011).10.8
Consulting Agreement between our company and Rathbourne Mercantile Ltd. dated October 20, 2010 (Incorporated by reference to our Quarterly Report on Form 10-Q filed on June 27, 2011).10.9
Amendment to Consulting Agreement between our company and Rathbourne Mercantile Ltd. dated October 26, 2010 (Incorporated by reference to our Quarterly Report on Form 10-Q filed on June 27, 2011).10.10
Debt Settlement Subscription Agreement between our company and Tangiers Investors, LP dated   March 1, 2011 (Incorporated by reference to our Quarterly Report on Form 10-Q filed on June 27, 2011).10.11*
Consulting Agreement between our company and Mr Richard Shykoradated July 1, 201110.12*
Consulting Agreement between our company and Paradigm Consulting dated July 5, 2011(21)
Subsidiaries of the Registrant21.1
C-Pharma Inc. (a Canada corporation).(31)
Section 302 Certifications31.1*
Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(32)
Section 906 Certification32.1*
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  * Filed herewith.
 36
 Table of Contents




SIGNATURES
   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  COMPASS BIOTECHNOLOGIES INC.(Registrant)Dated: September 19, 2011
/s/ Garth LikesGarth LikesPresident, Chief Executive Officer and Director(Principal Executive Officer, Principal FinancialOfficer and Principal Accounting Officer)






37
 Table of Contents