UNITED STATES




SECURITIES AND EXCHANGE COMMISSION






Washington, D.C. 20549







FORM 10-K /A


(Mark One)






[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the fiscal year ended February 28, 2011




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




For the transition period from _____to _____




COMMISSION FILE NUMBER 000-53008




THERABIOGEN, INC.


(Exact name of registrant as specified in its charter)




NEVADA

98-0559606State or other jurisdiction of incorporation or organization

(I.R.S. Employer Identification No.)120 Wall Street, Suite 2401New York, NY

10005(Address of principal executive offices)

(Zip Code)




866-284-9561


Registrant's telephone number, including area code




Securities registered pursuant to Section 12(b) of the Act: NONE.




Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 Par Value Per Share.




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.


[ ] Yes [ x ]No





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.


[ ] Yes [ x ]No





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 [ ] 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 (s. 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


[ ] Yes  [ ] No





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.


[x]


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




Large accelerated filer [ ]
Accelerated filer [ ]Non-accelerated filer [ ]

(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 Act). [  ]Yes  [x ] No




On August 31, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Stock beneficially held by non-affiliates of the registrant was $14,949,326 based upon the average of the bid and asked prices of the stock on that date of $0.50.




Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.




As of May 19, 2011, we had 40,783,166 shares of common stock outstanding.








1






Explanatory Note
  This amended Form 10-K/A is being filed to correct clerical errors and make minor reclassifications in the financial statements included in the Company’s Form 10-K for the year ended February 28, 2011 which was originally filed on June 15, 2011. None of the corrections and minor reclassifications impacted net income (loss) or earnings (loss) per share as previously reported.





THERABIOGEN, INC.ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED FEBRUARY 28, 2011TABLE OF CONTENTS





PAGEPART IITEM 1.
BUSINESS
3ITEM 1A.
RISK FACTORS
7ITEM 1B
UNRESOLVED STAFF COMMENTS
10ITEM 2.
PROPERTIES
10ITEM 3.
LEGAL PROCEEDINGS
10ITEM 4.
REMOVEDAND RESERVED
10PART IIITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
11ITEM 6
SELECTED FINANCIAL DATA
11ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
11ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
12ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
12ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
13ITEM 9A.
CONTROLS AND PROCEDURES
13ITEM 9B.
OTHER INFORMATION.
15PART IIIITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
16ITEM 11.
EXECUTIVE COMPENSATION.
18ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
19ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
21ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
21ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
22SIGNATURES

23





2


PART I




FORWARD-LOOKING STATEMENTS




This Annual Report on Form 10-K contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” All statements other than statements of historical fact contained in this Annual Report on Form 10-K, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Annual Report on Form 10-K, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.





We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long term business operations, and financial needs.  These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed below and under the heading “Risk Factors” and those discussed in other documents we file with the United States Securities and Exchange Commission that are incorporated into this Annual Report on Form 10-K by reference.   We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.  In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement.




You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Annual Report on Form 10-K.  Before you invest in our common stock, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K could negatively affect our business, operating results, financial condition and stock price.  Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform our statements to actual results or changed expectations.




As used in this Annual Report, the terms “we,” “us,” “our,” “TheraBiogen,” and the “Company” mean TheraBiogen, Inc., formerly Kushi Resources Inc., unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated.




ITEM 1.
BUSINESS.




OVERVIEW




We were incorporated on October 3, 2005 under the laws of the State of Nevada as Kushi Resources, Inc. On January 5, 2010, we merged with TheraBiogen, Inc., also a Nevada corporation.  We were the surviving entity in the merger and changed our name to TheraBiogen, Inc.  All references in this Report to TheraBiogen mean TheraBiogen, Inc., formerly Kushi Resources Inc., unless otherwise indicated.




Until the merger with TheraBiogen, Inc. on January 5, 2010, we had been an exploration stage company engaged in the acquisition and exploration of mineral properties.  After the merger we began to pursue the activities of the former TheraBiogen, Inc, the development and marketing of homeopathic nasal spray products, as our primary business.  During the forth quarter of fiscal 2011 we determined that the value of our mineral rights was not sufficient to justify further pursuit of that business plan.  On April 20, 2011 the Board of Directors of the Company approved the write-off of the mining interests and assets.




On June 18, 2009, Kelly T. Hickel was appointed to our board of directors. During August, 2009, a controlling interest in the Company was acquired as reported on the Form 14F-1 filed with the SEC on August 31, 2009. As part of that change in control, our former Chairman and sole officer, Greg Corcoran, resigned as an officer and director, leaving Mr. Hickel as the sole remaining director.  Mr. Hickel also was appointed as our President, Secretary and Treasurer and sole officer.  On November 17, 2009, we appointed three new directors to the Board: Dwight Brunhoeler, Barry Saxe and Boris Rubizhevsky, to serve with Mr. Hickel.  Mr. Brunhoeler resigned in May 2010 for personal reasons.





On November 17, 2009, our Board of Directors approved the terms of an Agreement and Plan of Merger with TheraBiogen, Inc., which was approved unanimously by our shareholders, also on November 17, 2009.  Under the terms of the merger, Kushi Resources, Inc. would be the surviving entity but would change its corporate name to TheraBiogen, Inc., and would issue one share of its post-forward split common stock for each of the 19,091,000 shares of common stock of TheraBiogen, Inc. then outstanding.  Following approval by a majority of the shareholders of TheraBiogen, Inc. in December, 2009, the merger closed on January 5, 2010.





On January 4, 2010, we completed a 2.6 for 1 forward split of our common stock, as a result of which, our outstanding shares increased from 5,230,000 shares to 13,598,000 shares.  We issued an additional 19,091,000 shares of our common stock to the former shareholders of the old TheraBiogen, Inc. in the merger.  Following the merger, there were 32,689,000 common shares outstanding.  As a result of our corporate name change to TheraBiogen, Inc. in the merger, our trading symbol on the NASDAQ OTC Bulletin Board also changed from KUSI to TRAB.  For accounting purposes, the transaction has been accounted for as a reverse acquisition.








3







The financial statements contained in this Annual Report are the consolidated results of operations and financial position of the consolidated entities as a result of the merger for all periods reported, except that the historical financial statements of TheraBiogen, Inc. have been restated to a fiscal year ended February 28, 2010 to conform with the fiscal year of Kushi Resources, Inc., the surviving entity in the merger.  TheraBiogen, Inc. filed a Form 15 Notice of Termination of its former reporting status with the SEC on March 31, 2010, and we have assumed the former reporting obligations of the old TheraBiogen, Inc., as the survivor in the merger.




PLAN OF OPERATION




Nasal Products





During 2008, TheraBiogen, Inc. entered into an exclusive licensing agreement with a California company, Nasal Therapeutics, Inc., to develop, manufacture, market and sell four homeopathic nasal sprays, THERA MAXTM Cold Relief, THERA MAXTM Flu Relief, THERA MAXTM Allergy Relief and THERA MAXTM Migraine Relief, on an exclusive basis in North America and with a right of first refusal for all other product areas. The principal of Nasal Therapeutics, Inc., Dr. Charles Hensley had developed ZICAM Allergy and the nasal delivery systems used in the ZICAM product line extensions. Dr. Hensley founded Geltech, LLC. the company that launched ZICAM and made the product a household name. In 2001, Dr. Hensley and his partners sold their interest in Geltech to Matrixx Initiatives (MTXX).





ZICAM had been a leading cold remedy in the United States with sales exceeding $100,000,000 in 2006. However, in recent years, the use of zinc in the ZICAM product has come under fire. In 2003, reports began to surface that a small number of ZICAM users suffered a condition known as anosmia, or total loss of smell. These reports left questions in the minds of consumers, creating a significant market for a ZICAM-type product that does not contain zinc. In May, 2009, the Food & Drug Administration issued a nationwide recall of ZICAM nasal spray products containing zinc. No THERA MAXTM product contains zinc in any form.





Under the terms of the License Agreement, we issued 15,300,000 shares of its common stock to Nasal Therapeutics, Inc. on September 2, 2008 and paid Nasal Therapeutics, Inc. the sum of $150,000, as an initial license fee. There is also an annual license fee of $100, payable on September 1 of each subsequent year of the license, which has a 20 year term. The shares of common stock issued to Nasal Therapeutics, Inc. were valued at $0.144 per share, resulting in the cost of the license being $2,353,200, including the $150,000 cash payment and the value of the stock issued. This total license cost is being amortized over the twenty year life of the license. The issue of the shares to Nasal Therapeutics, Inc. resulted in a change of control of the Company.





In July, 2009, we entered into an Amended and Modified License Agreement with Nasal Therapeutics, Inc. to remove all territorial limits, to extend the terms to 25 years, and to obtain the transfer of the pending trademark application for the THERA MAXTM name. We paid a total of $75,000 for the extension and the trademark.  As a result of this modification, we calculated the amortization of the license cost over the new term, as follows:




Original license cost

$
2,353,200Less: Amortization to 7-31-2009


(107,855
)Remaining cost

$
2,245,345Add: Modification cost


75,000Total adjusted cost

$
2,320,345





The adjusted cost is being amortized over the 25 year term of the modified license commencing August 1, 2009, in equal monthly installments of $7,734.






4







Business model





In September 2010, we began shipping two homeopathic nasal sprays into the United States over-the-counter market, THERA MAXTM Cold and Flu Relief and THERA MAXTM Allergy Relief. We identified and contracted with manufacturers for the products, and designed packaging materials. On June 26, 2009, we entered into a marketing, sales and distribution agreement with Elias Shaker Company for distribution of THERA MAXTM products.  That agreement was terminated in November 2010. We received orders from and shipped product to Rite Aid Corporation in and since July 2010. Our two products have been sold in all Rite Aid locations since September 2010. We have an agreement in place with Rite Aid for their 2012 fiscal year for both products in amounts similar to their 2011 fiscal year volumes.





We have received and shipped orders to, in addition to Rite Aid and Walgreens Miami District South, Hannaford Supermarkets, Discount Drug Mart, Big Y Supermarkets and Food Lion.We have also entered into a Sponsorship Agreement with the Miami Heat and Walgreens Miami South District and shipped product to approximately 300 Walgreens stores in that District. That product has been on sale in these locations since late February 2011.  THERA MAXTM has received visibility on both local and national television as a result of signage placement in the arena at the HEAT games. We are negotiating similar Sponsorship Agreements with additional sports teams and retailers in other regions of the country.





We are in the final stages of approval of THERA MAXTM Cold Relief by several additional major retailers for introduction into their retail stores for the 2012 season which begins in September 2011. We have received vendor approval for one of them and a vendor number which enables us to negotiate agreements in two others pending final approval





Homeopathic nasal sprays




THERA MAXTM Cold and Flu Relief





THERA MAXTM Cold Relief homeopathic nasal spray is, we believe, the next generation cold remedy product, without any actual or potential hazards from zinc ZICAM, which was developed by Dr. Hensley in the late 1990s and includes zinc in the formulation had been a highly successful product with sales exceeding US$100,000,000 in 2006. See above for a more complete explanation, but the ZICAM nasal cold remedy was ordered by the FDA to be removed from the shelves in July 2009.





Common colds are caused primarily by rhinoviruses and coronaviruses. Rhinoviruses infect nasal cells by attaching to ICAM (Inter-cellular Adhesion Molecule) receptor sites on the nasal membrane. The Company believes that THERA MAXTM Cold Relief is superior to other homeopathic cold remedies on a variety of levels. Similar to other remedies, the active ingredients of THERA MAXTM Cold Relief also binds to the rhinovirus attachment site inhibiting rhinovirus attachment to ICAM receptors. However, unlike other remedies, THERA MAXTM Cold Relief ingredients also inhibits the ability of rhinovirus to increase the amount of ICAM receptors on the nasal membrane. Furthermore, the active ingredients in THERA MAXTM Cold Relief also inhibits the entry of coronaviruses making it effective for coronavirus common colds as well. The fact that the actives in THERA MAXTM Cold Relief decreases ICAM levels and inhibits both rhinovirus and coronavirus should result in a more complete suppression of common cold infections than what is seen with other homeopathic products. Human studies on THERA MAXTM Cold Relief are still a few months from being initiated. However, we expect THERA MAXTM Cold Relief to be much more effective than other homeopathic products at reducing the duration of the common cold. Patents protecting the THERA MAXTM Cold Relief intellectual property have been filed with the United States Patent and Trademark Office.





THERA MAXTM Flu Relief





THERA MAXTM Flu Relief homeopathic nasal spray is the influenza equivalent to ZICAM cold remedy. The active  ingredient in THERA MAXTM Flu Relief inhibits influenza virus infections by blocking influenza virus entry into cells. Furthermore, the active ingredient of THERA MAXTM Flu Relief inhibits influenza viral uncoating and replication. Based on the in vitro data and preliminary clinical results, we expect the THERA MAXTM Flu Relief to be extremely effective at treating influenza in humans. Patent applications seeking to protect the THERA MAXTM Cold and Flu Relief intellectual property have been filed with the United States Patent and Trademark Office by the Licensor.





We are marketing the Cold and Flu Relief  in one formulation which distinguishes our product from any other product currently on the market.











5


THERA MAXTM Allergy Relief
  The nasal manifestation of allergies is mediated by receptors present on the surface of the nasal membrane. Antigens such as pollen, dust, animal proteins etc. increase the expression and subsequent presentation of receptors on the nasal membranes and provide the attachment site for inflammatory mediators of the allergic response. The intracellular mediator of the antigen induced increase in expression and the rhinovirus induced expression is the same. Therefore, active ingredients in THERA MAXTM cold that inhibit the expression form the core of the THERA MAXTM Allergy Relief formulation. By inhibiting the antigen induced expression on the nasal membrane, it is predicted that THERA MAXTM Allergy Relief will be extremely effective at treating and preventing nasal allergies.  We expect to launch the allergy relief during the second half of this year.





Additional formulations and delivery mechanisms are under development by the Company. For instance, in February 2011 the Company licensed an oral delivery mechanism which we intend to use to develop product line extensions for the current products. In addition, our scientific advisory board is reviewing additional possible formulations.




Manufacturing and Distribution





Our products are manufactured and packaged by a third-party manufacturer. The manufacturer is registered with the FDA, which requires it to adhere to current Good Manufacturing Practices in its production processes and procedures. The manufacturer is responsible for sourcing raw materials used in its production of our products from third-party suppliers. We rely on individual production orders to meet our needs from these suppliers.


Our manufacturer is subject to reporting, facility inspection, and governmental review. In general, subsequent discovery of previously unrecognized problems or failure to comply with applicable regulatory requirements could result in restrictions on manufacturing or marketing of the products, product recalls or withdrawal, fines, seizure of product, as well as withdrawal or suspension of regulatory approvals.


Our manufacturer is responsible for production processes, including compounding and producing product mixtures, filling bottles, assembling finished product and packing finished product in master cases. Finished products are shipped to an independent warehouse for storage prior to shipment to our customers.





RECENT DEVELOPMENTS





None.





COMPETITION




All of the THERA MAXTM products compete in the highly competitive over-the-counter cold, allergy/sinus, and symptom relief market groups of the overall cough and cold category. Our products compete against a vast number of well-established brands marketed by large pharmaceutical and consumer products companies as well as an increasing number of store brand products. Store brand products are generally sold at a substantial discount to branded products. Participants in the cough and cold category compete primarily on the basis of price, product benefit, quality of product, and brand recognition. Most of our competitors have substantially greater financial, marketing and other resources, longer operating histories, larger product portfolios and greater brand recognition than we do. With our limited resources, we aim to succeed in this category by emphasizing the unique claims regarding our products and providing consumers with innovative delivery systems.


REGULATORY MATTERS





We are subject to various federal, state and local laws and regulations that affect our business. All of our products are subject to regulation by the FDA, including regulations with respect to manufacturing processes and procedures, ingredients in the products, labeling and claims made. Our drug products are commercially distributed by following the Homeopathic Pharmacopeia or FDA’s OTC monographs. The OTC monographs classify certain drug ingredients as safe and effective for specified uses and establish categorical requirements for the marketing of drugs containing such ingredients without pre-approval. All of our THERA MAX Cold & Flu and THERA MAX Allergy Relief products are subject to the requirements of the Homeopathic Pharmacopeia of the United States.  All of our claims and advertising are subject to the rules of the Federal Trade Commission (FTC). Although we believe that our products and claims comply in all material respects with the regulatory requirements, if the FDA or FTC were to determine that we are in violation of any such requirement, either agency could restrict our ability to market the products, require us to change the claims that we make or cause us to remove the products from the market.








6





EMPLOYEES





As of February 28, 2011, we engaged five full or part time advisors under written or informal consulting agreements.








ITEM 1A.
RISK FACTORS.




The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.




IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS COULD FAIL.




Our current operating funds are not sufficient to meet the anticipated costs of our marketing and production programs,. Three of our exploration program or if we decide to begin mining efforts in the event that it is determined that our property contains mineral reserves, we will need to obtain additional financing in order to complete our business plan. Our plan of operation calls for significant expenses in connection with the marketing of our Thera MaxTM products. We currently do not have adequate arrangements for financing and we may not be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors outside of our control, including the results from our marketing programs including additional costs and expenses that may exceed our current estimates. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us in which case our business could fail.




WE HAVE YET TO EARN SIGNIFICANT REVENUE AND BECAUSE OUR ABILITY TO SUSTAIN OUR OPERATIONS IS DEPENDENT ON OUR ABILITY TO RAISE FINANCING, THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.




Because we have only recently commenced business operations, we expect to incur substantial losses for the foreseeable future. We have never earned significant revenues and we have never been profitable.. This could cause our business to fail.




Our future is dependent upon our ability to obtain additional customers and financing and upon future profitable operations from the development of retail distribution and sales. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditors, Moss, Krusick & Associates, LLC, have expressed substantial doubt about our ability to continue as a going concern given our accumulated losses. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital, we will not be able to complete our business plan.




BECAUSE OUR SOLE EXECUTIVE OFFICER DOES NOT HAVE FORMAL TRAINING SPECIFIC TO THE TECHNICALITIES OF THE PHARMACEUTICAL INDUSTRY, THERE IS A HIGHER RISK THAT OUR BUSINESS WILL FAIL.




Kelly Hickel, our sole executive officer and a director, does not have any formal training as a scientist or in the technical aspects of management of a pharmaceutical company. With no direct training or experience in these areas, our management may not be fully aware of the specific requirements related to working within this industry. Our management's decisions and choices may not take into account standard managerial approaches pharmaceutical companies commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.




WE FACE SIGNIFICANT COMPETITION IN THE PHARMACEUTICAL INDUSTRY.




We compete with other pharmaceutical companies possessing greater financial resources and technical facilities than us in connection with the development and marketing of pharmaceutical products and in connection with the recruitment and retention of qualified personnel.




7






THE COMPANY HAS LIMITED RESOURCES AND NO SIGNIFICANT REVENUES





The Company has limited resources and has had limited revenues to date. In addition, the Company will not achieve any significant revenues until, at the earliest, the expanded distribution of the THERA MAXTM Cold and Flu Relief. Moreover, there can be no assurance that the Company's additional distribution of any THERA MAXTM products will provide any material revenues or operate on a profitable basis.





THE COMPANY MAY NEED ADDITIONAL FINANCING IN ORDER TO EXECUTE ITS BUSINESS


PLAN





The Company has had minimal revenues to date and will be dependent upon its limited available financial resources. The Company cannot ascertain with any degree of certainty the capital requirements for the execution of its business plan. In the event that the Company's limited financial resources prove to be insufficient to implement the Company's business plan, the Company may be required to seek additional financing.





ADDITIONAL FINANCING MAY NOT BE AVAILABLE TO THE COMPANY IF NEEDED





There can be no assurance that additional financing, if needed, will be available on acceptable terms, or at all. To the extent that additional financing proves to be unavailable when needed, the Company would, in all likelihood, be compelled to abandon plans to market the THERA MAXTM products. The failure by the Company to secure additional financing, if needed, could also have a material adverse effect on the continued development or growth of its business model. The Company is negotiating arrangements with bank or financial institution to secure additional financing and there can be no assurance that any such arrangement, will be available on terms deemed to be commercially acceptable and in the best interests of the Company.




THE COMPANY MAY NOT BE ABLE TO BORROW FUNDS IF NEEDED





There currently are no limitations on the Company's ability to borrow funds to increase the amount of capital available to the Company to undertake its business plan. Moreover, the limited resources of the Company and lack of operating history may make it difficult to borrow funds. The amount and nature of any borrowings by the Company will depend on numerous considerations, including the Company's capital requirements, the Company's perceived ability to meet debt service on any such borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. There can be no assurance that debt financing, if required or sought, would be available on terms deemed to be commercially acceptable by and in the best interests of the Company. The inability of the Company to borrow funds required to undertake its business model, may have a material adverse effect on the Company's financial condition and future prospects. Additionally, to the extent that debt financing ultimately proves to be available, any borrowings may subject the Company to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest.





SUCCESS OF THE COMPANY'S BUSINESS PLAN DEPENDS IN LARGE PART UPON THE SUCCESS OF ITS PRODUCTS, WHICH WERE ONLY RECENTLY INTRODUCED TO CONSUMERS





The success of the Company's proposed plan of operation will depend to a great extent on the acceptance of its homeopathic products by the public. To date, only limited market studies or projections of the acceptance of these products have been conducted.





General Risk Factors





THE COMPANY DEPENDS UPON ITS EXECUTIVE OFFICERS AND DIRECTORS





The ability of the Company to successfully carry out its business model will be dependent upon the efforts of its executive officers and directors, as well as its ability to attract additional directors and executive officers.  The Company has not entered into employment agreements with any officer or director concerning compensation.







8







THERE EXIST RISKS TO STOCKHOLDERS RELATING TO DILUTION:  AUTHORIZATION OF ADDITIONAL SECURITIES AND REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING THE ISSUE OF ADDITIONAL COMMON SHARES





To the extent that additional shares of common stock are issued, the Company's stockholders would experience dilution of their respective ownership interests in the Company. Furthermore, the issuance of a substantial number of shares of common stock may adversely affect prevailing market prices, if any, for the common stock and could impair the Company's ability to raise additional capital through the sale of its equity securities. The Company may use consultants and other third parties providing goods and services, including assistance in the manufacture, marketing, distribution and sale of products.  These consultants or third parties may be paid in cash, stock, options or other securities of the Company, and the consultants or third parties may be placement agents or their affiliates.





THE COMPANY EXPECTS TO PAY NO CASH DIVIDENDS





The Company does not expect to pay dividends in the foreseeable future, and the payment of dividends will be contingent upon the Company's revenues and earnings, if any, capital requirements, and general financial condition subsequent to the commencement of its business activities and the generation of profits from those activities. The payment of any dividends subsequent to an investment will be within the discretion of the Company's then Board of Directors. The Company presently intends to retain all earnings, if any, for use in the Company's business operations and accordingly, the Board does not anticipate declaring any dividends in the foreseeable future.





WE MAY NOT BE ABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL NECESSARY FOR THE IMPLEMENTATION OF OUR BUSINESS STRATEGY.




Our future success depends largely upon the continued service of our sole officer. Our future success also depends on our ability to attract, retain and motivate qualified personnel when needed. Key personnel represent a significant asset, and the competition for qualified personnel is intense in the mineral exploration industry.




WE MAY CONDUCT FURTHER OFFERINGS IN THE FUTURE IN WHICH CASE YOUR SHAREHOLDINGS WILL BE DILUTED.




Since our inception, we have relied on such equity sales of our common stock to fund our operations. We may conduct further equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, stockholders percentage interest in us will be diluted. The result of this could reduce the value of investors' stock.




BECAUSE OUR STOCK IS A PENNY STOCK, SHAREHOLDERS WILL BE MORE LIMITED IN THEIR ABILITY TO SELL THEIR STOCK.




The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.




Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, the common stock will be subject to rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:




1.
contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;2.
contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;   9
   3.
contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;4.
contains a toll-free telephone number for inquiries on disciplinary actions;5.
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and6.
contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.




The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.




ITEM 1B.  UNRESOLVED STAFF COMMENTS.




None




ITEM 2.  PROPERTIES.





We currently do not own any physical property or own any real property. Our principal office is located at 120 Wall Street, New York, NY 10005, a portion of which we sub-lease at the monthly rental of $2,000.




ITEM 3.  LEGAL PROCEEDINGS





There are no legal proceedings pending, or to the best knowledge of management threatened against the Company.  There were no legal proceedings previously pending which were resolved during the fiscal year ended February 28, 2011.




ITEM 4.  REMOVED AND RESERVED










10




PART II
 
 ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
 (a)  Market information.  During the fiscal year ended February 28, 2011, our common shares of stock were listed or admitted for trading on the NASD OTC Bulletin Board market under the symbol KUSI and then TRAB.  The trading activity in our stock during the fiscal year ended February 28, 2011 was minimal so the remaining information requested in Item 5(a) is omitted as not material.
 
 (b)  Holders.  As of May 19, 2011, there were approximately 170 holders of record of our common stock.
 
 (c)  Dividends. The Company has not paid any dividends to date, has not yet generated earnings sufficient to pay dividends, and currently does not intend to pay dividends in the foreseeable future.
 
 (d)  Securities authorized for issuance under equity compensation plans.


None.





ITEM 6.  SELECTED FINANCIAL DATA.





Not applicable.





ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





The financial summaries that follow present the consolidated results of operations of TheraBiogen, Inc. for the periods presented, as a result of the merger between the former TheraBiogen, Inc. and Kushi Resources, Inc. effective January 5, 2010. The consolidated results of operations for TheraBiogen, Inc. reflect the former Kushi Resources, Inc. fiscal year end of the last day of February, which differed from that of the former TheraBiogen, Inc. year end of December 31, 2009.  Accordingly, the amounts shown from the audited consolidated financials reflect the financial position and results of operations as of and for the years ended February 28, 2011 and 2010.




RESULTS OF OPERATIONS


Year Ended


Year EndedFebruary 28, 2011


February 28, 2010Revenue (sales and interest income)

$
468,158


$
411Expenses


(4,561,537
)


( 946,052
)Net income (loss)

$
(4,093,379
)

$
(945,641
)




Revenue




We began shipping products for revenue in September 2010.  From inception through August 2010 we generated no revenue.  Revenue comes from sales of our products to retailers.  We use sales agents to assist us in selling.  Our target customers are regional and national retail drug, grocery and general retail chains.




Operating Costs and Expenses




Our operating expenses for the years ended February 28, 2011 and 2010 consisted of the following:





Year ended


Year endedFebruary 28, 2011


February 28, 2010Cost of goods sold

$
488,619


$
--Advertising and marketing


93,118



77,508Amortization of license


92,808



103,166Bank charges


6,004



3,104Consulting expense


2,998,767



484,194Insurance


78,219



67,430Miscellaneous


5,484



17,607Office expense


119,860



25,403Payroll


25,528



31,146Professional fees


120,229



39,495Rent


29,850



17,150Testing


6,704



17,425Total operating expense

$
4,163,420


$
883,628




Our operating expenses increased by $3,279,792 or 371% from $883,628 for the year ended February 28, 2010 to $4,163,420 for the year ended February 28, 2011. $488,619 of this increase is cost of goods sold for initial product sales during the fiscal year.  An additional $2,227,323 of expenses in fiscal 2011 are non-cash grants of stock and  warrants to directors and consultants for services rendered and as incentive payments.  The remaining increase in operating expenses was primarily due to increases in our administrative and consulting fees as we begin shipping product to customers and increasing our sales and marketing activities.








11






Over the next twelve months, we anticipate generating significant revenue from the THERA MAXTM product line, but will require additional sources of capital to do so.




LIQUIDITY AND CAPITAL RESOURCES


Working CapitalPercentageAt


At


Increase /February 28, 2011


February 28, 2010


(Decrease)Current Assets

$
352,133


$
28,695



1127
%Current Liabilities


(1,472,024
)


(462,587
)


218
%Working Capital Surplus (Deficit)

$
(1,119,891
)

$
(433,892
)


158
%





Cash FlowsYear Ended February 28,2011


2010Cash Flows Used In Operating Activities

$
(1,331,402
)

$
(597,734
)Cash Flows Used In Investing Activities


(1,026
)


( 10,000
)Cash Flows From Financing Activities


1,328,291



611,000Net Increase (Decrease) In Cash During Period

$
(4,137
)

$
3,266





As at February 28, 2011, we had cash of $0 and negative cash flow from operations of $ (1,331,402). To date, we have funded our operations with cash that we received from the sale of our common stock, advances from related parties as loans, and advances against manufacturing costs from a financing company.





We had a working capital deficit of $1,119,891 as of February 28, 2011 compared to a working capital deficit of $(433,892) as of February 28, 2010. The increase in our working capital deficit is attributable to the completion of the merger and the resulting acquisition of operating assets and the increase in short term debt to finance operations.





Our current cash and operating cash flows are not sufficient to meet our working capital requirements for the next twelve months.  We currently need to raise additional funds through public or private financings or borrowings to fund our operations.  No assurance can be given that additional financing will be available or that, if available, such financings can be obtained on terms favorable to our stockholders or us.








ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





We are subject to financial market risks, including changes in interest rates, and equity price risk and the normal risks associated with a start-up business. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. During the twelve months ended February 28, 2011, we did not engage in any hedging activities.





Since the Company to date has had no significant operations, the information and disclosures required by Item 305 of Regulation S-K are omitted as not material.





ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





See the index to the financial statements of the Company on page 21.








12





ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





On June 30, 2010, our former audit firm, Berman Hopkins Wright & LaHam CPAs and Associates, LLP (“Berman Hopkins”)  notified us that the audit partners on our account were no longer affiliated with the firm and that, as a result, Berman Hopkins had decided to resign as the Company’s independent registered public accounting firm.





The reports of Berman Hopkins on the Company’s financial statements as of and for the year ended February 28, 2010 and 2009, contained no adverse opinion or disclaimer of opinion nor was it qualified or modified as to uncertainty, audit scope, or accounting principle, except that the reports for both years expressed a concern regarding the Company’s ability to continue as a going concern.





During the recent fiscal years ending February 28, 2010 and  2009 and the subsequent period through June 30, 2010, there have been no (i) disagreements with Berman Hopkins on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Berman’s satisfaction, would have caused Berman Hopkins to make reference to the subject matter of the disagreement(s) in connection with its reports; or (ii) “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.





The Company has provided Berman Hopkins with a copy of the above disclosures and requested that Berman Hopkins furnish the Company with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not it agrees with the above statement. A copy of Berman’s letter, dated October 4, 2010 was filed as Exhibit 16.1 to a Current Report on Form 8-K filed on October 6, 2010.





On October 6, 2010, effective July 1, 2010, the Board of Directors of the Company engaged Moss, Krusick & Associates, LLC of Winter Park (Orlando), Florida (“Moss, Krusick”) as the Company’s new independent public accounting firm.  Moss, Krusick was formed as a result of the split off of a substantial portion the securities practice of Berman Hopkins Wright & LaHam, CPAs and Associates, LLP (“Berman Hopkins”) into Moss, Krusick.  This was a result of the decision by Berman Hopkins, our former auditors to resign as our independent auditors to substantially reduce their securities audit practice.  The principals of Moss, Krusick are the same auditors who were engaged on the audit of the Company while at Berman Hopkins. Moss, Krusick has registered with the Public Company Accounting Oversight Board (”PCAOB”), and was advised of the acceptance of their application on August 12, 2010.





During the recent fiscal years ending February, 2010 and 2009, and the subsequent interim period prior to the engagement of Moss, Krusick, the Company had not either consulted Moss, Krusick regarding (i) the application of accounting principles to any specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company’s financial statements, or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(v)) or a reportable event (as defined in Item 304(a)(1)(v)).





During the fiscal year ending February 28, 2011 and the subsequent period through June 15, 2011, there have been no (i) disagreements with Moss, Krusick on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Moss, Krusick’s satisfaction, would have caused them to make reference to the subject matter of the disagreement(s) in connection with its reports; or (ii) “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.




ITEM 9A.  CONTROLS AND PROCEDURES.





Management’s Annual Report on Internal Control over Financial Reporting





Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management, including our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of February 28, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.








13





Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management’s review and evaluation of the company’s internal controls over financial reporting did not involve a recognized framework for financial controls and was limited to the identification of risks associated with the limited number of personnel employed by the company and the direct involvement of the CEO and CFO in most business functions. In its assessment of the effectiveness of internal control over financial reporting as of February 28, 2011, our management including our Chief Executive Officer and Chief Financial Officer determined that there were control deficiencies that constituted material weaknesses, as described below.





As of the end of the period covered by this report, our management including our Chief Executive Officer and Chief Financial Officer, also carried out an evaluation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based on that evaluation, management including our Chief Executive Officer and Chief Financial Officer determined that our disclosure controls and procedures are ineffective in enabling the Company to record, process, summarize and report, in a timely manner, the information that the Company is required to disclose in its Exchange Act reports. Control deficiencies that constituted material weaknesses, are described below.





Material Weaknesses





Lack of Effective Corporate Governance Policies and Procedures.We do not have effective policies regarding the independence of our directors and do not have independent directors. The lack of independent directors means that there is no effective review, authorization, or oversight of management or management’s actions by persons that were not involved in approving or executing those actions. This has resulted in inconsistent practices.  Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.





We have no conflicts of interest policies and there is no provision for the review and approval of transactions between the Company and interested members of management.





Lack of Effective Policies Regarding the General Accounting System.We do not have any documented processes for the input, accumulation, or testing of financial data that would provide assurance that all transactions are accurately and timely recorded or that the financial reports will be prepared on a periodic basis.





Lack of Effective Control over Financial Statement Disclosure.We do not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.   Accordingly, management has determined that this control deficiency constitutes a material weakness.





Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of February 28, 2011, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.





Management, including our Chief Executive Officer and Chief Financial Officer, has determined that the Company does not have the financial resources or personnel to address the material weaknesses identified or to conduct a more robust evaluation of its controls. As resources become available, management will develop and implement remedial actions to address the material weaknesses it has identified.





This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.





Changes in internal control over financial reporting





There were no changes in our internal control over financial reporting during the quarter ended February 28, 2011, that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.






14







Limitations on the Effectiveness of Controls





Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.





The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.





ITEM 9B.  OTHER INFORMATION.





None








15





PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





IDENTIFICATION OF DIRECTORS and EXECUTIVE OFFICERS





The persons who served as directors and executive officers of the Company as of May 19, 2011 their ages and positions held in the Company, are listed below.




Name

Age

PositionKelly T. Hickel

69

President, Chairman and CEOBoris Rubizhevsky

60

DirectorBarry Saxe

64

DirectorDr. Phillip Forman

52

DirectorRichard Rifenburgh

79

Director








In November, 2009, the Company entered into a Consulting Agreement with FSR, Inc. for management consulting services, under which Kelly T. Hickel became President and CEO of the Company. FSR, Inc. also had a similar consulting agreement with the former TheraBiogen, Inc. Under the terms of the Consulting Agreement, FSR, Inc. will receive a monthly consulting fee of $5,000, plus out-of-pocket expenses, and received 200,000 shares of common stock. The monthly compensation amount for FSR, Inc. was increased to $10,000 in December 2009.





KELLY T. HICKEL has been a director of the Company and Chief Executive Officer since August, 2009.  He was appointed as Chairman of Paradise Music & Entertainment, Inc. (PDSE.pk) in February 2001 until he resigned in June 2006. Previously, Mr. Hickel was the turn-around President of MiniScribe Corp., a troubled Fortune 500 disk drive manufacturer, from 1989 to 1990. Mr. Hickel helped conduct a sale to Maxtor from bankruptcy and supported the estate as it returned $900 million to its stakeholders including 41% of the value to the public shareholders. He was the President of the Maxwell Technology Information Systems Group from 1993 until 1997, during which, Maxwell was the 9th best performing stock on NASDAQ and the #1 performing stock in California in 1996. Mr. Hickel was, recently, Chairman and Chief Restructuring Officer of The Tyree Company in Farmingdale, New York. He is Managing Director of The Turnaround Group, LLC and Strategic Growth Associates, LLC, a Denver-based advisory firm, CEO of Environmental Testing Laboratories, Inc., CEO of Spring Creek Capital, Inc. (OTCBB: SCRK) and CEO of United EcoEnergy Corp. (OTCBB:UEEC). Mr. Hickel has arranged a number of private and public company financings and financial restructuring over the years. Mr. Hickel is a graduate of Indiana University, with a Bachelors of Science, and has attended coursework at Columbia University.





BARRY SAXE is a businessman with a 40 year career as an owner and operator of several companies in the electrical, environmental and constructions fields. Mr. Saxe worked as a biochemist in the 1960's on Interferon research at Becton Dickson and has been an investor and advisor to numerous biotechnology and healthcare companies, both public and private, since then. In the 1990's, he worked with Archibel of Brussels, Belgium on the development of homeopathic expert system software for diagnosis and treatment of diseases using homeopathic medicines. From 1969 to the present, he has been president of Cedar Electric, a design-build firm. From 2005 to the present, he has served as a member of the Board of Directors of International Ranger, a public exploration company. From 2006 till 2008 he was a cofounder and board member of Ringbolt Ventures, a fertilizer exploration company.  Mr. Saxe attended Brooklyn College of the University of New York City and University of California at Berkeley.








16





BORIS RUBISHEVSKY has served as a director of the Company since June, 2008.  He has over thirty years of business experience ranging from corporate management and mergers and acquisitions, to business development, sales and marketing. He has held several Board of Director positions. Most recently, Mr. Rubizhevsky founded NexGen Security Corporation, a consulting firm specializing in homeland security, biological and environmental products and technologies. He actively works with firms in Germany and the former Soviet Union on the development of new technologies for homeland security and life science applications. Prior to this, in 1992 Mr. Rubizhevsky co-founded Isonics Corporation (NASDAQ: ISON), a diversified international company with offices in the United States, Germany and Russia and businesses in life science, semi-conductor wafer services and homeland security products. Mr. Rubizhevsky was with Isonics for fifteen years, playing a key role in its growth and development. He originally started the company to pursue life science opportunities based on products developed by the Russian nuclear industry. He identified expansion opportunities, leveraging Isonics’ technology and expertise into homeland security and biotech applications as well as 22 identifying capital funding sources, including the company’s initial public offering and follow-on secondary equity and debt offerings. Before founding Isonics, Mr. Rubizhevsky spent more than ten years with General Electric Company in a number of international sales and marketing managerial positions. These positions were based both in the US and abroad. Mr. Rubizhevsky holds a B.S. degree in engineering from the Stevens Institute of Technology. He is fluent in the Russian language and culture.





DR. PHILLIP FORMAN, DPM, has been a member of the Board of Directors since March 2011.   He served as the Co-Chief Compliance Officer of The Center for Wound Healing, Inc. (“CFWH”), a leading manager of comprehensive wound care treatment centers that offer hyperbaric oxygen therapy as well as traditional wound care treatment modalities.  Prior to Dr. Forman’s service with CFWH, he was the Medical Director of the New York Hyperbaric, the predecessor to American Hyperbaric, Inc., since 2001 and, from July, 2005 through January 18, 2007, served as the chief executive officer of American Hyperbaric, Inc.  Prior to joining New York Hyperbaric, Dr. Forman served as the co-medical director of the Staten Island University Hospital diabetic Treatment Center.





Dr. Forman received his doctor degree of Podiatric Medicine from the Pennsylvania College of Podiatric Medicine. His degree is a Diplomat, American Board of Podiatric Surgery. His academic appointments include Podiatric Attending and he has lectured both nationally and internationally on advanced wound care and hyperbaric medicine.  In addition, Dr. Forman has extensively participated in numerous wound care clinical trials involving diabetic foot infections, novel antibiotics, and new biopharmaceuticals for problem and non-healing wounds of the lower extremities.





RICHARD RIFENBURGH has been a member of the Board of Directors since March 11 He has also been a member of the Board of Directors of United EcoEnergy Corp. since June 2008. Since June 2008 he has served as the Chairman of Board of Directors of Paradise Music and Entertainment, Inc. and previously was its Vice Chairman. Mr. Rifenburgh has been an officer and director of many public companies since 1969. Mr. Rifenburgh attended Wayne University, majoring in Electrical Engineering.





SIGNIFICANT EMPLOYEES





We have no direct employees.  Kelly T. Hickel, the sole officer of the Company listed above, acted as an officer pursuant to a consulting agreement with FSR, Inc.  Ron Gustilo, serves as product manager for the THERA MAX® line of products under a consulting agreement beginning in January 2010, and William Warchus serves as Chief Accounting Officer also under a consulting agreement. Our Chief Medical Officer serves part time on an informal consulting basis.





COMMITTEES AND BOARD MEETINGS





The Company has currently not adopted charters for an Audit Committee, Compensation Committee or Governance and Nominating Committee, and has no Board committees.





CODE OF ETHICS





The Company has not yet adopted a Code of Ethics that applies to its directors, officers and employees performing financial functions for the Company, including its chief executive officer, chief financial officer, controller and any person performing similar functions.








17





EXCLUSION OF DIRECTOR LIABILITY





Pursuant to the General Corporation Law of Nevada, the Company Certificate of Incorporation excludes personal liability on the part of its directors to the Company for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or for improper payment of dividends. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director's liability under federal or applicable state securities laws.





ITEM 11.  EXECUTIVE COMPENSATION.





CASH AND OTHER COMPENSATION




For the year ended February 28, 2011,  the Company incurred consulting fees of $60,000 for the services of Mr. Hickel as CEO. These amounts were paid to FSR, Inc. under the Consulting Agreement. The Company had no other agreement or understanding, express or implied, with any other executive officer concerning employment or cash or other compensation for services.





COMPENSATION PURSUANT TO PLANS





For the years ended February 28, 2011 and through the date of this report, no executive officer has received compensation from the Company pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any executive officer pursuant to any compensatory or benefit plan of the Company.





OPTION/SAR GRANTS





No individual grants of stock options, whether or not in tandem with stock appreciation rights ("SARs") and freestanding SARs, have been made to any executive officer or any director during the year ended February 28, 2010,


Accordingly, no stock options were exercised by any of the officers or directors in fiscal 2010.





In December, 2009, the Board of Directors of Kushi Resources, Inc. approved grants of stock to certain officers or consultants, as follows, effective April 1, 2010:





Recipient

Shares


ValueFSR, Inc.


500,000


$
100,000CF Consulting


300,000



60,000Jan Chason


150,000



30,000Philip Forman


100,000



20,000Marc Harwood


25,000



5,000Ron Gustilo


100,000



20,000Jerry Wolff (CMO)


100,000



20,000William F. Warchus


50,000



10,0001,325,000


$
265,000





In addition, the Board granted options to acquire additional shares effective on closing of the merger, January 5, 2010, for a three year period at the closing market price on the date the merger closed, as follows:





Recipient

SharesFSR, Inc.


300,000CF Consulting


150,000Jan Chason


150,000Philip Forman


100,000Marc Harwood


25,000Ron Gustilo


100,000825,000








18





EMPLOYEE STOCK COMPENSATION PLAN





None





COMPENSATION OF DIRECTORS





On December 8, 2009, our Board of Directors adopted a Board of Directors Compensation Plan.  This Plan provides for the following compensation to each member of the Board of Directors:





(i)            A grant of 250,000 shares of common stock;





(ii)           A grant of a warrant to purchase 125,000 shares of common stock;





(iii)           $1,000 for each meeting attended in person plus out-of-pocket expenses; and





(iv)           $500 for each telephonic meeting.





The stock and warrant grants will be made on the last business day of January and pro rated grants will be made to directors appointed or elected during the calendar year.




EMPLOYMENT CONTRACTS





No person entered into any employment or similar contract with the Company, during the year ended February 28, 2011, other than the consulting agreement with FSR, Inc. discussed above.





ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





BENEFICIAL OWNERSHIP





The following table sets forth, as of May 19, 2011, the stock ownership of each executive officer and director of the Company, of all executive officers and directors of the Company as a group, and of each person known by the Company to be a beneficial owner of 5% or more of its common stock. Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power as to such shares. No person listed below has any option, warrant or other right to acquire additional securities of the Company, except as may be otherwise noted.




Name and Address of Beneficial Owner

Position

Amount and Nature

of Beneficial Ownership

Percentage of Shares1Kelly T. Hickel2

120 Wall Street, Suite 2401

New York, New York 10005

Chairman, Director, CEO, and Treasurer

926,666

2.3%Barry Saxe

120 Wall Street, Suite 2401

New York, New York 10005

Director

1,250,000(3)

3.1%Boris Rubizhefsky

120 Wall Street, Suite 2401

New York, New York 10005

Director

750,000(4)

1.8%
   19
   Dr .Phillip Forman

120 Wall Street, Suite 2401

New York, New York 10005

Secretary, Director

1,850,000(5)

4.5%Richard P. Rifenburgh

120 Wall Street, Suite 2401

New York, New York 10005

Director

5,000-

*All officers and directors as a group ( 5 persons)



4,781,666

11.7%Charles Hensley6

116 S. Catalina Ave., Suite 102

Redondo Beach, CA 90277

--

7,469,000

18.3%Sung Pyo7

162 Cherrybrook Lane

Irvine, CA 92618

--

1,913,750

4.7%Jonathan Pyo7

2559 16th Avenue

San Francisco, CA 94116

--

1,913,750

4.7%CF Consulting, LLC8

1365 N. Courtney Parkway, Suite A

Merritt Island, FL  32953



2,050,000

5.0%Lawler & Associates, LP9

San Diego, CA

--

3,771,282

9.2%





*Less than 1%


(1)
Based on 40,783,166shares outstanding at May 19, 2011.


(2)
Kelly T. Hickel is engaged by FSR, Inc. which holds 2,213,000 shares of common stock.  Mr. Hickel is not an officer or owner of FSR, Inc. and disclaims any beneficial interest in the shares held by FSR, Inc.


(3)
Represents shares of Common Stock underlying stock options that are exercisable within 60 days of May 19, 2011.


(4)
Includes 500,000 shares of Common Stock underlying stock options that are exercisable within 60 days of May 19, 2011.


(5)
Includes 1,750,000 shares of Common Stock underlying stock options that are exercisable within 60 days of May 19, 2011.


(6)
In August, 2008, 15,300,000 shares of Common Stock were issued to Nasal Therapeutics, Inc. as the license fee payment for the acquisition of all rights to the THERA MAXTM products.


(7)
Sung Pyo is an officer of Nasal Therapeutics, Inc., and the brother of Jonathon Pyo.


(8)
CF Consulting, LLC holds 2,050,000 common shares, representing 5.0 percent of the outstanding shares.  Since these shares are subject to an option granted to LeadDog Capital, LP to acquire the shares, any beneficial ownership interest in these shares is disclaimed.


(9)
Lawler & Associates holds 3,771,282 shares as escrow agent for other parties and disclaims all beneficial interest in the shares held.








20





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.





There were no transactions, or series of transactions, for the years ended February 28, 2011 or 2010, nor are there any currently proposed transactions, or series of transactions, to which the Company is a party, in which the amount exceeds $60,000, and in which to the knowledge of the Company any director, executive officer, nominee, five percent or greater shareholder, or any member of the immediate family of any of the foregoing persons, have or will have any direct or indirect material interest, except as noted above.





ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.





AUDIT FEES





The aggregate fees billed in each of the fiscal years ended February 28, 2011 and 2010 for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's previously filed Forms 10-Q for services that are normally provided by the accountant in connection with  statutory and regulatory filings or engagements for those fiscal years, were $50,665 and $21,763, respectively, and were approved by the Board of Directors.





AUDIT RELATED FEES





None





TAX FEES




None




ALL OTHER FEES





None





PRE-APPROVAL POLICIES AND PROCEDURES





The Company Board of Director policy is to pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm.  These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.  The independent registered public accounting firm and management are required to report periodically to the Board of Directors regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.  The Board of Directors may also pre-approve particular services in a case-by-case basis.








21





PART IV





ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





The following exhibits are filed with this report, except those indicated as having previously been filed with the Securities and Exchange Commission and are incorporated by reference to another report, registration statement or form. As to any shareholder of record requesting a copy of this report, the Company will furnish any exhibit indicated in the list below as filed with this report upon payment to the Company of its expenses in furnishing the information. Any references to the "the Company" means TheraBiogen, Inc. and its predecessor by name change, Kushi Resources, Inc.






*3.1
Articles of Incorporation*3.1.1
Amendment of the Articles of Incorporation to change the corporate name to TheraBiogen, Inc.*3.1.2
Article of Merger.*3.2
By-laws*10.1
License Agreement dated July 22, 2008 between the Company and Nasal  Therapeutics, Inc.*10.3
Amendment to License Agreement with Nasal Therapeutics, Inc.*10.2
Consulting Agreement dated November 2009 between the Company and FSR, Inc.31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





*      Previously filed.








INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Registered Certified Public Accounting Firm



F-1Balance Sheets as of February 28, 2011 and 2010



F-2Statements of Operations for the years ended February 28, 2011 and 2010.



F-3Statements of Changes in Stockholders' Equity (Deficit) for the years endedFebruary 28, 2011 and 2010



F-4Statements of Cash Flows for the years ended February 28, 2011 and 2010



F-5Notes to Financial Statements



F-6





Item 8.  FINANCIAL INFORMATION




Item 1.  Financial Statements.








22



















REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM




To the Board of Directors and




Stockholders of TheraBiogen, Inc.




We have audited the accompanying balance sheets of TheraBiogen, Inc., as of February 28, 2011 and 2010, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended.  The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.




In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TheraBiogen, Inc. as of February 28, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.




The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has had minimal operations to date, has an accumulated deficit, and has negative working capital. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.






/s/ Moss, Krusick and Associates, LLC











Winter Park, Florida


July 1, 2011






F-1











THERABIOGEN, INC.


BALANCE SHEETS





February 28,


February 28,2011


2010ASSETSCurrent assets:Cash and cash equivalents

$
-


$
4,137Deposits


35,231



-Accounts receivable


154,230



-Due from affiliate


1,026



-Note and interest receivable – related party


12,252



10,411Inventory


149,394



14,147Total current assets


352,133



28,695Other assets:License, net of amortization of  $254,801 and $161,993


2,173,399



2,266,207Mineral rights


-



7,349Goodwill


101,183



101,183Total other assets


2,274,582



2,374,739Total assets

$
2,626,715


$
2,403,434LIABILITIES AND STOCKHOLDERS’ EQUITYLiabilitiesCurrent liabilities:Accounts payable (including $2,500 and $ 5,000 payable to related party)

$
208,585


$
89,623Accrued interest


152,904



70,559Payroll taxes payable


2,888



9,905Notes payable-related parties-current portion


705,607



272,500Notes payable - net of discount of $47,469 and $0


402,040



20,000Total current liabilities


1,472,024



462,587Long term liabilities:Notes payable-related parties


-



374,000Liability for unissued common stock


136,000



-Total long-term liabilities


136,000



374,000Total Liabilities


1,608,024



836,587STOCKHOLDERS’ EQUITYCommon stock, $0.001 par value, 150,000,000 shares authorized, 38,784,500and 32,927,000 shares issued at February 28, 2011 and 2010


38,785



32,927Additional paid-in capital


6,228,787



2,689,422Accumulated deficit


(5,248,881
)


(1,155,502
)Total stockholders’ equity


1,018,691



1,566,847Total liabilities and stockholders’ equity

$
2,626,715


$
2,403,434







The accompanying notes are an integral part of these financial statements








F-2






THERABIOGEN, INC.


STATEMENTS OF OPERATIONS

















For the years endedFebruary 28,2011



2010SALES

$
466,317


$
-EXPENSESCost of goods sold


488,619



--Marketing and sales expense


93,116



77,508General and administrative:


3,581,685



806,120Total expenses


4,163,420



883,628(LOSS) FROM OPERATIONS


(3,697,103
)


(883,628
)Other income (expense):Other income


1,841



411Interest expense


(398,117
)


(62,424
)Total other income (expense)


(396,276
)


(62,013
)NET (LOSS) BEFORE INCOME TAX


(4,093,379
)


(945,641
)Provision for income tax


--



--NET (LOSS)

$
(4,093,379
)

$
(945,641
)Net loss per share- basic and diluted

$
(0.11
)

$
(0.05
)Weighted average common shares outstandingBasic and diluted


35,974,520



20,907,586
















The accompanying notes are an integral part of these financial statements










F-3





THERABIOGEN, INC.STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY (DEFICIT)








For the years endedFebruary 28, 2011 and 2010Common

Shares

#



Stock

Amount

$



Capital

Paid-in

$



Accumulated

Deficit

$



Total Stockholder

Equity

$Balance at February 28, 2009

18,791,000



1,880



2,225,315



(209,861
)


2,017,334Effect of recapitalization – reverse merger

13,598,000



30,509



195,645



--



226,154Issuance of units of two shares of common stock and one warrant

538,000



538



268,462



--



269,000Net loss

--



--



--



(945,641
)


(945,641
)Balance at February 28, 2010

32,927,000



32,927



2,689,422



(1,155,502
)


1,566,847Issuance of units of two shares of common stock and one warrant

1,450,000



1,450



711,550



--



713,000Warrant exercise

400,000



400



--



--



400Conversion of debt

485,000



485



242,015



--



242,500Stock issued for services

3,522,500



3,523



1,530,800



--



1,534,323Warrants issued for services

--



--



693,000



--



693,000Beneficial conversion feature – notes payable

--



--



362,000



--



362,000Net loss for period

--



--



--



(4,093,379
)


(4,093,379
)Balance at February 28, 2011

38,784,500



38,785



6,228,787



(5,248,881
)


1,018,691













The accompanying notes are an integral part of these financial statements










F-4





THERABIOGEN, INC.


STATEMENTS OF CASH FLOWS





For the year ended February 28,2011


2010CASH FLOWS FROM OPERATING ACTIVITIESNet Loss

$
(4,093,379
)

$
(945,641
)Amortization expense


414,688



103,166Stock issued for services


1,534,323



165,000Warrants issued for services


693,000



--Notes payable issued for services


117,500



--Notes payable -related party issued for services


30,000Accounts receivable


(154,230
)


--Interest receivable


(1,841
)


(411
)Inventory


(30,522
)


(14,147
)Deposits


(35,231
)


(13,270
)Accounts payable and accrued expenses


118,962



21,970Accrued interest payable


82,345



62,424Payroll liabilities


(7,017
)


9,905NET CASH USED BY OPERATING ACTIVITIES


(1,331,402
)


(597,734
)CASH FLOWS FROM INVESTING ACTIVITIESAdvance to affiliate


(1,026
)


--Loan to related party


--



(10,000
)NET CASH USED BY INVESTING ACTIVITIES


(1,026
)


(10,000
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock


713,000



269,000Proceeds from exercise of stock warrants


400



--Proceeds from notes payable


449,784



20,000Proceeds from notes payable-related parties


57,107



322,000Payments on notes payable – related parties


(28,000
)


--Proceeds received for unissued shares


136,000



--NET CASH PROVIDED BY FINANCING ACTIVITIES


1,328,291



611,000NET CASH INCREASE (DECREASE) FOR PERIOD


(4,137
)


3,266CASH AT BEGINNING OF PERIOD


4,137



871CASH AT END OF PERIOD

$
--


$
4,137SUPPLEMENTAL CASH FLOW INFORMATIONNoncash transaction –issuance of common stock for debt

$
242,500


$
--Noncash transaction –issuance of  debt in exchange for inventory

$
104,725


$
--Noncash transaction –issuance of common stock in exchange

for Kushi Resources, Inc.

$
--


$
61,154Noncash transaction –issuance of debt in exchange

for intangible asset

$
--


$
75,000Income taxes paid

$
--


$
--Interest paid

$
--


$
--




The accompanying notes are an integral part of these financial statements








F-5






THERABIOGEN INC.NOTES TO THE  FINANCIAL STATEMENTSFEBRUARY 28, 2011 and 2010




NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION




Nature of Operations




TheraBiogen, Inc. (formerly Kushi Resources, Inc. (“Kushi”)) (the “Company”) was incorporated on October 3, 2005, under the laws of the State of Nevada.





In November, 2009, the Company entered into an Agreement and Plan of Merger with TheraBiogen, Inc. (“Former TheraBiogen”), a Nevada corporation, which was incorporated in April 2000.  The merger closed on January 5, 2010, and, as a result of, the transaction the Company changed its name to TheraBiogen, Inc.





In July 2008, Former TheraBiogen entered into an exclusive licensing agreement with Therapeutics, Inc., to develop, manufacture, market and sell four homeopathic nasal sprays, THERA MAX® Cold Relief, THERA MAX®  Flu Relief, THERA MAX®  Allergy Relief and THERA MAX®  Migraine Relief, on an exclusive basis in North America and, and as a result of a subsequent transaction, in July 2009, the Company has the rights for all other areas of the world. The principal of Nasal Therapeutics, Inc., Dr. Charles Hensley had also developed the ZICAM homeopathic nasal product.





The Company’s principal business activity prior to the merger was the acquisition and exploration of mineral resources in northern British Columbia, Canada.  The Company has not determined whether its properties contain mineral reserves that are economically recoverable.




Basis of Presentation and Going Concern




The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate the continuation of the Company as a going concern.  This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.  The Company has not as yet attained a level of operations which allows it to meet its current overhead and may not attain profitable operations within its first few business operating cycles, nor is there any assurance that such an operating level can ever be achieved. The Company is dependent upon obtaining additional financing adequate to fund its operations. While the Company has funded its initial operations with private placements and secured loans principally from related parties, there can be no assurance that adequate financing will continue to be available to the Company and, if available, on terms that are favorable to the Company.   The Company’s ability to continue as a going concern is also dependent on many events outside of its direct control, including, among other things improvement in the economic climate.  The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.





As described in Notes 1 and 3, effective January 5, 2010, Former TheraBiogen merged into Kushi and Kushi changed its corporate name to TheraBiogen, Inc.  For accounting purposes, this transaction was treated as an acquisition of Kushi and a recapitalization of Former TheraBiogen.  The Former TheraBiogen is the accounting acquirer and the results of its operations carryover.








F-6








For the periods from the Company’s inception (April 26, 2000) through August 31, 2010, the Company accounted for its operations as a development stage company in accordance with FASB Codification 915-205-20. During the quarter ended November 30, 2010, the Company initiated significant revenue producing activities and, as a result, determined that it was no longer a development stage company.




NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Revenue Recognition





The Company recognizes revenue from product sales when the risks and rewards of ownership have transferred to the customer. Transfer of risks and rewards is considered to have occurred upon shipment of the finished product to retailers. Sales incentives, promotional allowances and returns are estimated and recognized as a reduction from revenue at the date of shipment based upon current agreements with customers and as the Company develops more revenues historical activity will also be utilized. The Company evaluates these estimates on a quarterly basis and revises them as necessary.





The allowance for sales incentives, promotional allowances and returns will reflect our historical experience and will be reviewed regularly to ensure that it reflects potential chargebacks from customers. The allowance as of February 28, 2011 is based upon our experience through April 30, 2011 since we have recently begun our initial placements at retailers.  We review the need for a return provision at least quarterly and adjust the reserve amounts if actual chargebacks differ materially from our reserve percentage once established.





Inventory





Inventory consists principally of deposits to the contract manufacturer of the THERA MAX®  products and bottles and spray tops purchased from a third party supplier and delivered to the Company’s contract manufacturer to be used in the final packaging of the products for distribution.  Inventory is carried at the lower of cost or market on a first in, first out basis.





License Agreement





The Company recorded as an intangible asset the cost of the license agreement entered into with Nasal Therapeutics, Inc. based on the consideration paid.  The intangible asset is amortized on a straight-line basis over the 25 year life of the agreement.  The amortization charge is included in cost of sales, and, as a result of the initiation of sales during the third quarter of 2010 prior period amortization expense has been reclassified to cost of sales for the applicable periods.  The Company evaluates for impairment when events and circumstances warrant in accordance with FASB ASC Topic 350-30, and an impairment loss will be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset will be its new accounting basis.





Goodwill





The Company recorded goodwill as the excess of the consideration paid over the estimated fair values of the assets acquired and liabilities assumed in a business combination.  The goodwill is not amortized, but is subject to an annual impairment test in accordance with FASB ASC Topic 350-20.  The two step test first determines whether the carrying amount of the reporting unit exceeds the fair value of the reporting unit.  If so, the next step is to measure the impairment loss as the difference between the implied fair value of the good will and the carrying amount of the reporting unit.







F-7




Mineral Property Costs





Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under ASC Topic 350-30 Accounting for Impairment or Disposal of Long Lived Assets at each fiscal quarter end.  Impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value.





When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, will be capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.





Fair Value of Financial Instruments





The carrying amounts reported in the accompanying balance sheets of all financial instruments approximates their fair values because of the immediate or short-term maturity of these financial instruments or comparable interest rates of similar instruments. The Company follows newly issued accounting guidance relating to fair value measurements. This guidance establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:





Level 1 -- quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.





Level 2 -- inputs  other than quoted  prices included  within Level  1 that are  directly  observable  for the asset or liability or  indirectly observable through corroboration  with observable  market data.





Level 3 -- unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.





The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the unobservable inputs.





Basic and Diluted Net Loss Per Common Share (“EPS”)





Basic net (loss) per share is computed by dividing the net (loss) attributable to the common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted net income per common share includes the potential dilution that could occur upon exercise of the options and warrants to acquire common stock computed using the treasury stock method which assumes that the increase in the number of shares is reduced by the number of shares which could have been repurchased by the Company with the proceeds from the exercise of the options and warrants (which were assumed to have been made at the average market price of the common shares during the reporting period).








F-8





Income Taxes





The Company accounts for income taxes in accordance with ASC 740, Income Taxes.  Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  A valuation allowance is recorded and deducted from deferred tax assets when the deferred tax assets are not expected to be realized based on currently available evidence.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.




The Company adopted section 740-10-25 of the Codification (“Section 740-10-25”) which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.





Stock-Based Compensation





Compensation costs attributable to stock options, restricted stock or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period.




Cash and Cash Equivalents




For purposes of the balance sheet and statement of cash flows, the Company considers all amounts on deposit with financial institutions and highly liquid investments with maturities of 90 days or less to be cash equivalents.




Foreign Currency Translation




The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830 Foreign Currency Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. During the year ended February 28, 2011 and 2010 , the Company incurred no foreign currency losses. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.




Comprehensive Income (Loss)




Comprehensive Income (loss) reflects changes in equity that results from transactions and economic events from non-owner sources. At February 28, 2011 and February 28, 2010, the Company has no items that represent a comprehensive income (loss) and, therefore, has not included a schedule of comprehensive income (loss) in these financial statements.




Asset Retirement Obligations




Topic ASC 410 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, ASC 410 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. In addition, the asset retirement cost is capitalized as part of the asset’s carrying value and subsequently allocated to expense over the asset’s useful life. At February 28, 2011 and 2010, the Company did not have any asset retirement obligations.




Financial Instruments





Foreign Exchange Risk






F-9







The Company may be subject to foreign exchange risk for transactions denominated in foreign currencies. Foreign currency risk arises from the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to the United States dollar. The Company does not believe that it has any material risk due to foreign currency exchange.





Fair Value of Financial Instruments





The Company’s financial instruments include cash, accounts payable, accrued administrative fees and accrued professional fees. The fair value of these financial instruments approximate their carrying values due to their short maturities.





Concentration of Credit Risk





Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits. At February 28, 2011 and February 28, 2010, any cash held by the Company was held in fully insured accounts in institutions insured by the Federal Deposit Insurance Corporation. As part of its cash management process, the Company performs periodic evaluations of the relative credit standing of its financial institution. The Company has not experienced any losses in cash balances and does not believe it is exposed to any significant credit risk on its cash.





Accounting Estimates





The preparation of these unaudited financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.





The Company’s financial statements are based on a number of estimates, including an accrual for estimated administrative fees.





Recent Accounting Pronouncements:




In October 2009, the FASB issued guidance on multiple-deliverable revenue arrangements which requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. This guidance eliminates the use of the residual method of allocation and requires allocation using the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. The guidance is effective for fiscal years beginning on or after June 15, 2010. We will adopt the guidance on March 1, 2011 and apply it prospectively. The adoption of this guidance is not expected to have a material effect on our financial position or results of operations.




In December 2010, the FASB issued guidance on disclosure of supplementary pro forma information for business combinations which amends and requires additional pro forma disclosure requirements for material business combinations on an individual or aggregate basis including pro forma revenue and earnings of the combined entity as if the acquisition date(s) had occurred as of the beginning of the comparable prior annual reporting period. This guidance also expands the supplemental pro forma disclosure requirements to include a description of the nature and amount of any material non-recurring adjustments that are directly attributable to the business combination. The guidance is effective for fiscal years beginning on or after December 15, 2010. The Company will adopt this guidance on March 1, 2011 and will apply it prospectively.




NOTE 3 – LICENSE AGREEMENT





In September 2008, the Company acquired licensing rights to the THERA MAX® products for a cash payment of $150,000 and the issuance of 15,300,000 shares of common stock.  In July 31, 2009, the Company renegotiated the terms of the license agreement, extending the territory to the entire world and the term to 25 years from July 31, 2009, and also received a transfer of all trademark rights to the THERA MAX® name in exchange for $75,000. Amortization expense related to the license was charged to general and administrative expense prior to the first sales of the product in September 2010 resulting in charges of   $38,670 for the year ended February 2011 and $103,166 for the year ended February 2010.  Since September 2010 license amortization is charged to cost of sales and amounted to $54,138 for the year ended February 2011.






F-10






NOTE 4 – RELATED PARTY TRANSACTIONS




As described in Note 5, the Company’s indebtedness to related parties aggregates $834,000, including interest as of February 28, 2011. While $612,000 of that debt and the associated accrued interest is convertible into shares of the Company’s common stock, the holder is restricted from owning greater than 9.5% of the Company’s common stock outstanding.





Pursuant to a consulting agreement with a shareholder, the Company was obligated to pay for financial and legal consulting services in the amount of $15,000 monthly effective January 1, 2010.  In addition, the Company rented office space at $550 per month from the shareholder.   For the year ended February 28, 2011 and 2010 , the Company incurred consulting and rent expenses related to these agreements of $116,000 and $68,000, respectively.  In December 2010, the Company and the shareholder entered into a note agreement in which the Company agreed to pay the balance due of $30,000 in 5 monthly installments starting January 1, 2011 with interest on the unpaid balance of 6%.




During the quarter ended February 28, 2010, the former officers and directors, as well as certain shareholders, agreed, as part of the transfer of control of the Company reported on Form 14f filed with the SEC on February 28, 2010, to forgive certain indebtedness owed to them by the Company, and also agreed to pay certain outstanding payables due as of February 28, 2010.  The payment of the accounts payable was treated as a contribution to capital when completed during the year ended February 28, 2010, and the forgiveness of debt in the total amount of $45,320 has been treated as debt forgiveness income in the accompanying financial statements.




NOTE 5 – NOTES PAYABLE





The Company has entered into notes payable agreements with a related party totaling $686,000 and $646,500  as of February 28, 2011 and 2010 respectively , with interest due under the notes aggregating $148,000 and $79,000, respectively .  Approximately $605,000 of the related notes payable are convertible into common shares at 75% of market price per share with a minimum of $.01 to a maximum of $.10 per share and if not paid by the due date, July 1, 2011, convert automatically. The notes and accrued interest are payable at maturity and the notes  bear interest rates of 12 or 16%.




As of February 28, 2011, the Company is obligated under outstanding promissory notes totaling $250,000 to unrelated parties.  The notes bear interest at 10 or 12 percent per annum, with interest payable monthly and principal payable at maturity.  In connection with the note issuances, the Company also agreed to issue the note holders a total of 500,000 shares of common stock and 200,000 warrants to purchase common stock at $1.25 per share for five years from date of grant. A discount of $63,000 based upon the estimated relative fair values of the warrants was recorded as reduction of the debt and  was amortized over the life of the loans using the straight line method which approximates the effective interest method. Notes payable of $100,000 matured during the year ended February 28, 2011 and new notes with the same terms were issued. Upon issuance of the new notes, a discount of $75,000 based on estimated relative fair value of the warrants was recorded and is being amortized over the life of the new loans using the straight line method which approximates the effective interest method . During the year ended February 28, 2011 the Company amortized $59,000 of the discount to interest expense.  One note for $80,000 is collateralized by receivables to be generated from one customer and one note for $50,000 is secured by an obligation to issue 1 million shares of the Company’s common stock if payment is not made by the due date.





During the year ended February 28, 2011, the Company also issued promissory notes totaling $365,000 to unrelated parties.  All of the notes were payable six months from issuance with interest at 16 percent per annum.  In connection with the note issuances, the Company issued the note holders a total of 297,500 shares of common stock. The notes also had a conversion rights and holders of indebtedness aggregating $125,000 converted debt for 250,000 shares.  Holders of notes totaling $215,000 had the right to convert their notes at $.30 per share. The conversion rate was favorable to market and the Company credited paid in capital $224,000 for the beneficial conversion feature.  A discount of $224,000 based on the estimated relative fair value of the debt and the shares and the beneficial conversion feature was recorded as a reduction of debt for the shares issued.  This discount was amortized over the life of the loans using the straight line method which approximates the effective interest method. The Company redeemed the $215,000 of notes not converted in November 2010. Also during the year ended February 28, 2011, the holders of debt totaling $242,500 converted this debt into 485,000 shares of the Company’s common stock.






F-11







NOTE 6 - OTHER FINANCING ARRANGEMENTS





In December 2010, the Company also entered into a master materials acquisition and purchase order assignment agreement with a finance company under which the Company can request the finance company to acquire materials necessary to manufacture inventory in order to fulfill the Company’s orders from customers.  The finance company charges 5% of the material purchase order amount for each transaction for 30 days, plus its expenses related to the transaction.  The initial funding limit and term of the agreement is $225,000 and 90 days, each of these terms increase upon satisfactory repayment of advances.  The maximum advances permitted will be $1 million and the term can be extended for up to 2 years from the date of the agreement. In connection with the agreement, the Company is required to issue 250,000 shares of the Company’s common stock and 200,000 warrants to purchase additional shares of the Company’s common stock for $0.50 per share.  Additionally, as additional consideration for funding limit increases, the Company may issue up to an additional 500,000 shares of common stock and up to 600,000 warrants to purchase additional shares of common stock.   On February 28, 2011 the Company had an outstanding balance of $241,000 under this agreement.




NOTE 7 - MINERAL RIGHTS





On January 30, 2006, the Company staked a mineral claim near Atlin, British Columbia, Canada, comprising an area of 410.65 hectares. The Company is required to incur approximately $2,600 (CDN$2,997) on or before January 30, 2010 and each year thereafter in exploration expenditures or pay the equivalent sum in cash in lieu of work, in order to retain title to the claims. In January 2008, the Company paid $1,635 (CDN$1,643) in cash to the Province of British Columbia, in lieu of work, to retain title to the claims until January 30, 2009 and on January 5, 2009, the Company registered $12,000 CDN in exploration work performed on its unproved mineral properties with the Government of British Columbia, which extend the Company’s title to the claims until January 30, 2012.  In February 2011 the Company determined that the cost of maintaining the claim was not justified given the potential value of the claim and the change in the primary business of the Company.  Consequently the Company charged the $7,349 of mineral rights to general and administrative expense and no longer maintains any claim to the mineral rights.





NOTE 8 – DEFERRED TAX ASSETS





At February 28, 2011, the Company had net operating loss (NOL) carry-forwards available to offset future taxable income of approximately $4,391,000 (2010- $991,000)  including approximately $104,000 from Kushi Resources, Inc. at date of the merger. The utilization of the NOL carry-forwards is dependent upon the tax laws in effect at the time the NOL carry-forwards can be utilized. It is also likely that utilization of the NOL carry-forwards are limited based on changes in control from the merger. As of February 28, 2011 and 2010 valuation allowances of $1,691,000 and $412,000, respectively, (a change of $1,279,000) havebeen recorded against the deferred tax asset due to the uncertainty surrounding its realization caused by the Company’s recurring losses. The NOL carry-forwards will expire from 2020 through 2030.




NOTE 9 – WARRANTS AND OPTIONS





On September 1, 2008, the Company issued 400,000 warrants expiring on September 1, 2011, exercisable at $0.01.  On October 29, 2009, the Company issued 150,000 warrants expiring on October 29, 2012, 2011, exercisable at $0.01.  From October 2009 through February 2010, the Company issued warrants in connection with subscriptions of its common stock – 1 warrant to buy 1 share for each two shares subscribed.  Under these arrangements, 269,000 warrants expiring three years from issuance were issued and were exercisable at $1.25.  From March 2010 through February 2011, the Company issued warrants in connection with subscriptions of its common stock – 1 warrant to buy 1 share for each two shares subscribed.  Under these arrangements, 999,000 warrants expiring three years from issuance were issued and were exercisable at $1.25.








F-12









Information regarding warrants and options to purchase common shares is summarized below:


Number of Options and Warrants


Weighted Average Exercise Price Per ShareOutstanding at February 28, 2009


400,000


$
0.01Granted


1,244,000



0.40Cancelled/forfeited


-



-Expired


-



-Exercised


-



-Outstanding at February 28, 2010


1,644,000



0.31Granted


2,849,000



0.81Cancelled/forfeited


-



-Expired


-



-Exercised


-



-Outstanding at February 28, 2011


4,493,000


$
0.62





The following table summarizes information about outstanding warrants and options for common stock at February 28, 2011:


Range of Exercise


Number Outstanding


Weighted Average Remaining Contractual Life (years)


Weighted Average Exercise Price

Number Exercised

Average Exercise Price$
0.01



550,000



1.28



n/a

0


n/a$
0.20



825,000



3.78



n/a

0


n/a$
0.35



150,000



2.70



n/a

0


n/a$
0.50



1,500,000



4.39



n/a

0


n/a$
1.25



1,468,000



2.44



n/a

0


n/a




NOTE 10 - COMMON STOCK




During the fiscal year ended February 28, 2010, the Company issued 8,368,000 shares of common stock to effect the 2.6 for 1 forward split of the 5,230,000 shares of common stock of Kushi Resources, Inc. then outstanding.  The Company also issued a total of 538,000 shares of common stock and 269,000 two-year warrants to acquire common shares at $1.00 per share, for a total of $269,000 in cash.  As a result, there were 32,927,000 common shares outstanding at February 28, 2010.





During the fiscal year ended February 28, 2011 the Company issued 1,450,000 shares and is obligated to issue 302,000shares of common stock as a result of a private placement of units consisting of two shares of common stock and a warrant to purchase a share of common stock at $1.25.   Additionally the Company issued  485,000 shares of common stock in conjunction with various debt conversions.   The Company also awarded  3,522,500 shares of common stock to directors,consultants and other service providers . As a result, there were 38,784,500 common shares outstanding at February 28, 2011.




NOTE 11 - SUBSEQUENT EVENTS




On March 10, 2011, the Board of Directors appointed Dr. Phillip Forman as the Secretary, Chief Compliance Officer and member of the Board of Directors of the Company.  On that same date, the Board of Directors also appointed Mr. Richard Rifenburgh as a member of the Board of Directors of the Company and Chairman of the Compensation Committee.













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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.




THERABIOGEN INC.Date:
July 1, 2011
By:
/s/ Kelly T. HickelKELLY T. HICKELPresident, Secretary, Treasurer, Chief Executive Officer,  Chief Financial Officer and Director(Principal Executive Officer and Principal AccountingOfficer)




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




Date:
July 1, 2011
By:
/s/ Kelly T. HickelKELLY T. HICKELPresident, Treasurer, Chief Executive Officer,  Chief Financial Officer and Director/s/ Phillip FormanPHILLIP FORMANSecretary and Director/s/ Boris RubizhevskyBORIS RUBIZHEVSKYDirector/s/ Barry SaxeBARRY SAXEDirector/s/ Richard RifenburghRichard RifenburghDirector








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