UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

OR

¨ 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:  333-88480
 
OHR PHARMACEUTICAL, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
  
90-0577933
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)

489 Fifth Avenue 28th Floor
New York, NY 10017
(Address of principal executive offices)

(212) 682-8452
(Registrant’s telephone number, including area code)

 (Former name, former address, and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) 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.     Yes þ        No   ¨  
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No þ  
 
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 o Accelerated filer o
Non-accelerated filer  o (Do not check if smaller reporting company) Smaller reporting company  þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 35,452,580 shares of Common Stock outstanding as of August 13, 2010.
 
 
 
 
 
OHR PHARMACEUTICAL, INC.
 
TABLE OF CONTENTS
 
      Page  
PART I    FINANCIAL INFORMATION     3   
           
Item 1. Financial Statements     3   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations        12   
Item 3. Quantitative and Qualitative Risk     17   
Item 4. Controls and Procedures     17   
           
PART I    OTHER INFORMATION     18   
           
Item 1. Legal Proceedings     18   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     18   
Item 3. Defaults Upon Senior Securities     18   
Item 4. Removed and Reserved     18   
Item 5. Other Information     18   
Item 6. Exhibits     18   
                                                                                                                                
 
2
 
 
PART I  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS.
 
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report on Form 10-K/A filed with the SEC on January 19, 2010. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
 
TABLE OF CONTENTS   PAGE  
         
Balance Sheets as of June 30, 2010 (unaudited) and September 30, 2009     4   
         
Statements of Operations for the three and nine month periods ended June 30, 2010 and 2009(unaudited)                                                     5   
         
Statement of Changes in Stockholders’ Equity (Deficit) through June 30, 2010 (unaudited)     6   
         
Statements of Cash Flows for the nine month periods ended June 30, 2010 and 2009 (unaudited)     7   
         
Notes to Unaudited Financial Statements     8   
 
 
3
 
  
OHR PHARMACEUTICAL, INC
( A Development Stage Company)
Balance Sheets
 
 
 ASSETS
  
June 30,
2010
    
September 30,
2009
  
CURRENT ASSETS  
(Unaudited)
        
             
Cash
   $ 599,801     $ 345,604  
Prepaid expenses
     27,211       -  
Security deposits
     85,025       85,025  
                 
Total Current Assets
     712,037       430,629  
                 
OTHER ASSETS
                
                 
Patent costs
     800,000       800,000  
                 
TOTAL ASSETS
   $ 1,512,037     $ 1,230,629  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                
                 
CURRENT LIABILITIES
                
                 
Accounts payable and accrued expenses
   $ 157,007     $ 157,956  
Short-term notes payable
     16,524       -  
Convertible debentures
     -       180,000  
                 
Total Current Liabilities
     173,531       337,956  
                 
LONG-TERM LIABILITIES
                
Convertible debenture-long term
     48,832       279,988  
Stock warrant derivative liability
     2,727,273       -  
                 
Total Long-term Liabilities
     2,776,105       279,988  
                 
TOTAL LIABILITIES
     2,949,636       617,944  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
                
                 
Preferred stock, Series B; 15,000,000 shares authorized,
                
  at $0.0001 par value, 5,583,336  and 5,583,336 shares
                
  issued and outstanding, respectively
     558       558  
Common stock; 180,000,000 shares authorized,
                
  at $0.0001 par value, 35,402,580 and 25,247,006
                
  shares issued and outstanding, respectively
     3,541       2,525  
Additional paid-in capital
     24,392,075       23,077,972  
Accumulated deficit
     (21,628,748 )     (21,628,748 )
Deficit accumulated during the development stage
     (4,205,025 )     (839,622 )
                 
Total Stockholders' Equity (Deficit)
     (1,437,599 )     612,685  
TOTAL LIABILITIES AND
                
  STOCKHOLDERS' EQUITY (DEFICIT)
   $ 1,512,037     $ 1,230,629  
 
The accompanying  notes are an integral part of these financial statements.
 
 
4
 
 
OHR PHARMACEUTICAL, INC
(A Development Stage Company)
Statements of Operations
(Unaudited)
 
    For the Three Months Ended
June 30,
    
For the Nine Months Ended
June 30,
    
From Inception of
the Development
Stage on
October 1,
2007 Through
June 30,
  
   
2010
     2009     2010     2009     2010  
REVENUES
   $ -     $ -     $ -     $ -     $ -  
COST OF SALES
     -       -       -       -       -  
GROSS PROFIT
     -       -       -       -       -  
                                         
OPERATING EXPENSES
                                        
                                         
Warrant expense
     -       -       2,868,242       -       3,667,217  
General and administrative
     354,593       216,583       686,943       724,117       1,487,492  
                                         
Total Operating Expenses
     354,593       216,583       3,555,185       724,117       5,154,709  
                                         
OPERATING LOSS
     (354,593 )     (216,583 )     (3,555,185       (724,117 )     (5,154,709 )
                                         
OTHER INCOME AND EXPENSE
                                        
                                         
Gain (loss) on foreign currency
     (312 )     1,312       (312       1,312       2,284  
Interest income
     98       -       259       438       259  
Interest expense
     (2,495 )     (13,712 )     (19,288       (15,520 )     (45,085 )
Gain on settlement of debt
     32,539       -       49,559       -       114,003  
Gain on derivative liability
     140,969       -       140,969       -       140,969  
Other income and expense
     7,189       -       18,595       -       58,841  
                                         
Total Other Income and Expense
     177,988       (12,400 )     189,782       (13,770 )     271,271  
                                         
LOSS FROM CONTINUING OPERATIONS
                                        
BEFORE INCOME TAXES
     (176,605 )     (228,983 )     (3,365,403       (737,887 )     (4,883,438 )
                                         
PROVISION FOR INCOME TAXES
     -       -       -       -       -  
                                         
LOSS FROM CONTINUING OPERATIONS
     (176,605 )     (228,983 )     (3,365,403       (737,887 )     (4,883,438 )
DISCONTINUED OPERATIONS
                                        
Income from discontinued operations (including gain on disposal of $606)
     -       -       -       -       678,413  
Income tax benefit
     -       -       -       -       -  
                                         
GAIN ON DISCONTINUED OPERATIONS
     -       -       -       -       678,413  
                                         
NET LOSS
   $ (176,605 )   $ (228,983 )   $ (3,365,403     $ (737,887 )   $ (4,205,025 )
                                         
BASIC LOSS PER SHARE
                                        
Continuing operations
   $ (0.00 )   $ (0.01 )   $ (0.11     $ (0.03 )        
Discontinued operations
     0.00       0.00       0.00       0.00          
    $ (0.00 )   $ (0.01 )   $ (0.11     $ (0.03 )        
WEIGHTED AVERAGE  NUMBER
                                        
  OF SHARES OUTSTANDING:
                                        
BASIC AND DILUTED
     35,379,778       25,247,006       31,742,119       25,247,006          
 
The accompanying notes are an integral part of these financial statements.
 
 
5
 
 
 
OHR PHARMACEUTICAL, INC
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
 (Unaudited)
 
   
Series B Preferred Stock
    
Common Stock
    
Additional
Paid-in
    
Accumulated
    
Deficit
Accumulated
During the
Development
    
Total
Stockholders'
Equity
  
   
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
    
Stage
    
(Deficit)
  
                                                 
Balance, September 30, 2008
     -     $ -       25,247,006     $ 2,525     $ 21,634,591     $ (21,628,748 )   $ 24,827     $ 33,195  
                                                                 
Fair value of warrants granted to employees
     -       -       -       -       411,860       -       -       411,860  
                                                                 
Preferred stock issued for cash
     5,583,336       558       -       -       348,442       -       -       349,000  
                                                                 
Warrants issued for in conjunction with preferred stock offering
     -       -       -       -       656,000       -       -       656,000  
                                                                 
Fair value of warrants granted
     -       -       -       -       27,079       -       -       27,079  
                                                                 
Net loss for the year ended September 30, 2009
     -       -       -       -       -       -       (864,449 )     (864,449 )
                                                                 
Balance, September 30, 2009
     5,583,336       558       25,247,006       2,525       23,077,972       (21,628,748 )     (839,622 )     612,685  
                                                                 
Fair value of warrants granted
     -       -       -       -       92,553       -       -       92,553  
                                                                 
Fair value of employee stock options                                     207,566        -        -       207,566   
                                                                 
Exercise of warrants for cash at $0.18 per share
     -       -       5,583,336       558       1,004,442       -       -       1,005,000  
                                                                 
Exercise of cashless warrants
     -       -       4,547,238       455       (455 )     -       -       -  
                                                                 
Conversion of convertible debenture at $0.40 per share
     -       -       25,000       3       9,997       -       -       10,000  
                                                                 
                                                                 
Net loss for the nine months ended June 30, 2010
     -       -       -       -       -       -       (3,365,403 )     (3,365,403 )
                                                                 
Balance, June 30, 2010
     5,583,336     $ 558       35,402,580     $ 3,541     $ 24,392,075     $ (21,628,748 )   $ (4,205,025 )   $ (1,437,599 )
                                                                 
 
The accompanying notes are an integral part of these financial statements.
 
 
6
 
 
OHR PHARMACEUTICAL, INC
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
 
   
For the Nine Months Months
June 30,
    
From Inception
of the
Development
 Stage on
October 1,
2007 Through
June 30,
  
    2010     2009     2010  
                   
OPERATING ACTIVITIES
                  
Net income (loss)
   $ (3,365,403 )   $ (737,887 )   $ (4,205,025 )
Adjustments to reconcile net income (loss) to net cash used by operating activities:
                        
Discontinued operations
     -       -       (678,413 )
Fair value of warrants issued for services
     3,164,370       438,939       3,874,793  
Gain on extinguishment of debt
     (49,559 )     -       (49,559 )
Gain on derivative liability
     (140,969 )     -       (140,969 )
Changes in operating assets and liabilities
                        
Change in prepaid expenses and deposits
     (27,211 )     -       (26,791 )
Change in accounts payable and accrued expenses
     52,601       (6,596 )     (74,866 )
                         
Net Cash (Used in) Operating Activities
     (366,171 )     (305,544 )     (1,300,830 )
                         
INVESTING ACTIVITIES
                        
                         
Purchase of patents and other intellectual property
     -       (107,953 )     (300,000 )
Discontinued operations
     -       -       418,000  
                         
Net Cash (Used In) Provided by Investing Activities
     -       (107,953 )     118,000  
                         
FINANCING ACTIVITIES
                        
                         
Sale of preferred stock and warrants
     -       1,005,000       1,005,000  
Proceeds of warrants exercised for cash
     1,005,000       -       1,005,000  
Proceeds from related party payables
     -       124,953       125,453  
Repayments of related party payables
     -       (119,953 )     (125,453 )
Proceeds from short-term notes payable
     24,500       -       24,500  
Repayments of short-term notes payable
     (7,976 )     -       (7,976 )
Repayment of convertible debentures
     (401,156 )     (37,538 )     (441,168 )
                         
Net Cash Provided by Financing Activities
     620,368       972,462       1,585,356  
                         
NET INCREASE IN CASH
     254,197       558,965       402,526  
CASH AT BEGINNING OF PERIOD
     345,604       95,782       197,275  
                         
CASH AT END OF PERIOD
   $ 599,801     $ 654,747     $ 599,801  
                         
SUPPLEMENTAL DISCLOSURES OF
                        
CASH FLOW INFORMATION
                        
                         
CASH PAID FOR:
                        
Interest
   $ 30,963     $ -     $ 44,963  
Income Taxes
     -       -       -  
                         
NON CASH FINANCING ACTIVITIES:
                        
Transfer of investment for dividends payable
   $ -     $ -     $ 186,000  
Purchase of patents for debenture
     -       500,000       500,000  
Conversion of debenture
     10,000       -       10,000  
 
The accompanying notes are an integral part of these financial statements.
 
 
7
 
 
OHR PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2010 and September 30, 2009
(Unaudited)
 
 
NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2010, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2009 audited financial statements.  The results of operations for the period ended June 30, 2010 is not necessarily indicative of the operating results for the full year.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
The preparation of 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that could change in the near term are impairment assessments, fair value of warrants and stock issued under cashless exercise of warrants.
 
 
8
 
 
OHR PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2010 and September 30, 2009
(Unaudited)
 
 
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

NOTE 4 – PATENT COSTS

Patent costs represent the capitalized purchase price of assets acquired in the secured party sale as part of the Company’s previously announced strategy to create a rollup of undervalued biotechnology companies and assets.  As of June 30, 2010, the Company had purchased $800,000 worth of biotechnology patents and other intellectual property.  In these acquisitions, the Company used approximately $300,000 in cash and issued a $500,000 convertible debenture for the remainder of the cost which is secured by the acquired assets.

NOTE 5 – CONVERTIBLE DEBT

During the year ended September 30, 2009, the Company issued an 11% convertible note in the amount of $500,000, due June 20, 2011. Under the note, the Company was to pay $180,000 on December 15, 2009, and quarterly payments of $25,000 commencing on March 30, 2010, each of which shall be applied first towards the satisfaction of accrued interest and then towards the satisfaction of principal. All principal and accrued interest on the notes is convertible into shares of the Company’s common stock at the election of the purchasers at any time at the conversion price of $0.40 per share.

During the nine months ended June 30, 2010, the Company paid $30,181 in interest and $401,156 in principal on the convertible debt, respectively.   On June 23, 2010 the holder of the note converted $10,000 of principal into 25,000 shares of the Company’s common stock at $0.40 per share.  The balance of the convertible note as of June 30, 2010 was $48,832.  Accrued interest as of June 30, 2010 totaled $2,851.

NOTE 6 – CAPITAL STOCK

On June 3, 2009, the Company sold $1,005,000 in securities in a private placement, comprised of 5,583,336 shares of Series B Convertible Preferred Stock and 11, 116,672 Common Stock purchase warrants exercisable at a price of $0.18 per share.  

Between October 29, 2009 and December 4, 2009, the Company issued a total of 236,000 warrants for services rendered to the Company.  In conjunction with this issuance, the Company recognized $88,562 in consulting expense.

On December 15, 2009, investors exercised 5,583,336 warrants via a cashless exchange for 4,547,238 shares of the Company’s common stock.

Between December 24, 2009 and March 31, 2010, the Company received $1,005,000 in cash upon the exercise of warrants for cash.  The exercise price of these warrants was $0.18 per share resulting in the Company issuing 5,583,336 shares of common stock.
 
 
9
 
 
OHR PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2010 and September 30, 2009
(Unaudited)
 
NOTE 6 – CAPITAL STOCK (CONTINUED)

On January 15, 2010 the Company issued 5,583,336 warrants in accordance with the warrant agreements to those holders of warrants that were exercised during the period at $0.18.  The Company used the Black-Scholes option pricing model to calculate the fair market value of these warrants.  Using the assumptions in the table below, the Company calculated a fair value of $0.51 per warrant and recognized $2,868,242 in warrant expense associated with this issuance.

Stock Price at Valuation Date
   $ 0.52  
Exercise (Strike) Price
   $ 0.55  
Dividend Yield
     0.00 %
Years to Maturity
     5.00  
Risk-free Rate
     1.35 %
Volatility
     270 %

In accordance with ASC 815, the Company has classified these warrants as a derivative liability on the Company’s financial statements.  ASC 815 requires Company management to assess the fair market value of the warrants at each reporting period and recognize any change in the fair market value of the warrants as another income or expense item.  At June 30, 2010, the Company revalued the warrants using the Black-Scholes option pricing model and determined that the Company’s liability associated with this derivative liability decreased by $140,969 to $2,727,273.  The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation.

On April 9, 2010 the Company granted 10,000 warrants as payment for an outstanding accounts payable balance.  The Company used the Black-Scholes option pricing model to calculate the fair market value of these warrants.  Using the assumptions in the table below, the Company calculated a fair value of $0.40 per warrant.
 
Stock Price at Valuation Date
   $ 0.40  
Exercise (Strike) Price
   $ 0.55  
Dividend Yield
     0.00 %
Years to Maturity
     5.00  
Risk-free Rate
     1.35 %
Volatility
     277 %

On April 12, 2010 the Company granted 1,000,000 warrants to employees as part of its 2009 stock option plan.  The Company used the Black-Scholes option pricing model to calculate the fair market value of these warrants.  Using the assumptions in the table below, the Company calculated a fair value of $0.40 per warrant. Of the 1,000,000 options issued, 520,000 vested upon issuance and the remaining 480,000 will vest over the 5 year life of the options.  Accordingly, the Company recognized compensation expense of $207,566 for the vested options.
 
Stock Price at Valuation Date
   $ 0.40  
Exercise (Strike) Price
   $ 0.50  
Dividend Yield
     0.00 %
Years to Maturity
     5.00  
Risk-free Rate
     2.60 %
Volatility
     277 %
 
 
10
 
 
 OHR PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2010 and September 30, 2009
(Unaudited)
 
NOTE 6 – CAPITAL STOCK (CONTINUED)

On June 23, 2010 the holder of the convertible debenture elected to convert $10,000 of the remaining principal balance into 25,000 shares of Common Stock at $0.40 per share pursuant to the conversion rights of the note.

NOTE 7 – SUBSEQUENT EVENTS

On August 5, 2010 the Company issued 50,000 shares of its common stock to a consultant for services to be provided to the Company.

On June 22, 2010 the Company authorized the issuance of 93,000 warrants to be issued for services to be provided to the Company.  Of these authorized warrants, 90,000 were issued on June 23, 2010 once the contract for services was finalized.  As of August 13, 2010, the remaining 3,000 warrants had yet to be issued as the services have not yet been completed.

In accordance with ASC 855, management evaluated subsequent events through the date these financial statements were issued and determined that the Company had no additional material subsequent events to report.
 
 
11
 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “intends,” and words of similar import, constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases, regarding the Company’s financial and business prospects. These forward-looking statements are qualified in their entirety by these cautionary statements, which are being made pursuant to the provisions of such Act and with the intention of obtaining the benefits of the “safe harbor” provisions of such Act. The Company cautions investors that any forward-looking statements it makes are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements. We assume no obligation to update any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. Any investment in our common stock involves a high degree of risk.  For a general discussion of some of these risks in greater detail, see our “Risk Factors” in the Amendment No. 2 on Form 10-K/A (the “Form 10-K/A”) to the annual report of Ohr Pharmaceutical, Inc. (the “Company”) for the fiscal year ended September 30, 2009 filed on January 19, 2010 with the Securities and Exchange Commission.
 
History and Recent Events
 
Ohr Pharmaceutical, Inc. (“we”, “Ohr”, the “Company” or the “Registrant”) is a Delaware corporation that was organized on August 4, 2009, as successor to, BBM Holdings, Inc., (formerly Prime Resource, Inc., which was organized March 29, 2002) pursuant to a reincorporation merger. The reincorporation merger did not result in any material change in our business, offices, facilities, assets, liabilities, obligations or net worth, or our directors, officers or employees.
 
On March 19, 2009, the Company acquired in a secured party sale all the patents, related intellectual property, clinical data and other assets related to AVR118 (also known now as OHR/AVR118). OHR/AVR118 is in an ongoing Phase II trial for the treatment of cachexia. The Company also exercised its option to acquire the new technology and early stage pharmaceutical compounds from Dr. S. Z. Hirschman, who joined the Company as a consultant and Chief Scientific Advisor.

The Company acquired OHR/AVR118 and related assets in a secured party sale with $100,000 in cash and $500,000 principal amount of 11% convertible secured non-recourse debenture due June 20, 2011  convertible into common stock at $0.40 per share (the “Convertible Debenture”). The Convertible Debenture is secured by the acquired assets. The cash portion of the purchase price was financed by short-term loans from an affiliate of Orin Hirschman and another current shareholder.

On August 19, 2009, the Company completed the acquisition of Squalamine, Trodusquemine and related compounds from Genaera Liquidating Trust. The Company paid $200,000 in cash for the compounds.

On April 12, 2010, Dr. Irach Taraporewala was hired as the Company’s full-time CEO and Sam Backenroth was hired as the Company’s VP of Business Development and Interim CFO. In connection with their employment, Mr. Limpert resigned as an officer of the Company.
 
 
 
 
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Product Pipeline
 
OHR/AVR118
 
OHR/AVR118 is a novel immunomodulator with a singular chemical structure that is terminally sterilized and endotoxin-free.  The compound is composed of two small peptides, Peptide A, that is 31 amino acids long, and Peptide B, that is 21 amino acids long. Peptide B is unique in that the dinucleotide, diadenosine, is covalently attached to serine at position 18 through a phosphodiester bond. OHR/AVR118 is quite stable and has a very favorable safety profile both in animal toxicity studies and in human clinical trials.
 
Ohr is currently conducting a Phase II clinical trial of OHR/AVR 118 for the treatment of cancer cachexia at a leading cancer center in Canada. Cancer cachexia is a severe wasting disorder characterized by weight loss, muscle atrophy, fatigue, weakness, and significant loss of appetite. This disorder is often seen in late stage Cancer patients. OHR/AVR118 has shown to have chemoprotective effects, thus potentially allowing patients to better tolerate chemotherapy and radiation as well as more intensive treatment regimens with ordinary toxic chemotherapeutic agents, while maintaining body weight and avoiding other side effects. There is currently no widely accepted long-term effective drug for the treatment of cancer cachexia. The company presented interim data on this current trial at the annual conference of the Society of Cachexia and Wasting Disorders in Barcelona, Spain in December 2009.  
 
Squalamine
 
Squalamine is a first-in-class systemic intracellular, anti-angiogenic drug with a novel mechanism of action. Its ophthalmic formulation, Evizon®, has been evaluated against the wet form of age-related macular degeneration (AMD), a leading cause of blindness in the elderly, which affects over 200,000 new patients a year in the US alone.  
 
In Phase II trials, in which no drug-related ocular or systemic effects were observed, stabilization or improvement in visual activity was observed in the vast majority of patients, with both early and advanced lesions responding. In a significant number of patients in whom the more foregone AMD-affected eye was not a candidate for therapy with the currently approved wet-AMD drug therapy, the administration of Squalamine produced beneficial effects in the more foregone otherwise non-treatable AMD-affected “fellow” eye as well.  As opposed to the current approved standard of therapy, Evizon® does not require direct injection into the eye.  In addition, Evizon®’s novel mechanism of action avoids the systemic and ophthalmic side effects associated with intraocular injections of anti-vascular endothelial growth factor (VEGF) antibodies.
 
Additionally, because of its potent anti-angiogenic effects, Squalamine also shows promise in the treatment of solid tumors such as ovarian cancer. In a concluded Phase IIa study, patients with stage III and IV Refractory and Resistant Ovarian Cancer received Squalamine in conjunction with another chemotherapeutic agent with approximately two thirds of the patients achieving a complete response, partial response or stable disease. In 2001, Squalamine was awarded Orphan Drug Status by the Food and Drug Administration (“FDA”) for the treatment of late stage resistant ovarian cancer. Because of funding constraints, Ohr is seeking a development partner to further advance development of this indication.
 
General
 
The Company is a biotechnology rollup company currently focused on development of the Company’s previously acquired compounds. With the addition of our executive management team in April 2010, we have shifted our strategy accordingly to focus on the development of our two later stage lead products, OHR/AVR 118 for the treatment of Cancer Cachexia, and Evizon® (Squalamine) for the treatment of Wet-AMD. We acquired OHR/AVR118 in a secured party sale and Evizon®(Squalamine) from the Genaera Liquidating Trust as part of the Company’s previous strategy to create a rollup of undervalued biotechnology companies and assets.
 
 
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We seek to advance our two lead products through later stage clinical trials as well as developing some of our earlier stage products and indications that we are moving forward with minimal capital outlay. We have also started a new initiative to seek and implement strategic alternatives with respect to our products, including licenses, business collaborations and other business combinations or transactions with other pharmaceutical and biotechnology companies.  From time to time, we may engage in discussions with third parties regarding the licensure, sale or acquisition of our products and technologies or a merger or sale of the Company; however we currently do not have plans to enter into such a transaction and there is no assurance that the Company will complete such a transaction.
 
 The Company has limited core operating expenses as we have only two full-time employees.  In connection with the hiring of our executive management team, we have established an office in New York City. The office is being provided by an affiliate of Mr. Backenroth free of charge with the exception of minimal office related expenses. 
 
The Company will continue to incur ongoing operating losses, which are expected to increase substantially as it funds development of the new pharmaceutical compounds. In addition, losses will be incurred in paying ongoing reporting expenses, including legal and accounting expenses, as necessary to maintain the Company as a public entity.  No projected date for potential revenues can be made, and the Company is undercapitalized at present to completely develop, test and market any pharmaceutical product.
 
Until the Company is able to generate significant revenue from its principal operations, it will remain classified as a development stage company. The Company can give no assurance that it will be successful in such efforts or that its limited operating funds will be adequate to support the Company’s operations, nor can there be any assurance of any additional funding being available to the Company. Our independent accountants have qualified their audit report by expressing doubt about the Company’s ability to continue as a “going concern.”
 
Liquidity and Sources of Capital
 
The Company has insufficient capital to pay for development of its pharmaceutical compounds and ongoing reporting and minimal operating expenses as previously described.
 
As of June 30, 2010, the Company had cash of $599,801, prepaid expenses of $27,211 and security deposits of $85,025. The Company had current liabilities of $173,531.  This translates to total working capital of $538,506, which means that our cash reserves are not adequate to fund operations after January 2011.  We do not have any source of revenues as of June 30, 2010 and expect to rely on additional financing.  The Company plans to seek private capital through the sale of additional restricted stock or borrowing either from principal shareholders or private parties; however we currently do not have plans to enter into such a transaction and there is no assurance that the Company will complete such a transaction.
 
In view of the lack of financing plans, the Company may be obliged to discontinue operations, which will adversely affect the value of its common stock. See “Risk Factors” in the Form 10-K/A.
 
 
14
 
 
Significant Subsequent Events
 
On August 5, 2010 the Company issued 50,000 shares of its common stock to a consultant for services to be provided to the Company.

On June 22, 2010 the Company authorized the issuance of 93,000 warrants to be issued for services to be provided to the Company.  Of these authorized warrants, 90,000 were issued on June 23, 2010 once the contract for services was finalized.  As of August 13, 2010 the remaining 3,000 warrants had yet to be issued as the services have not yet been completed.

  Results of Operations
 
  Three Months Ended June 30, 2010
 
Three months ended June 30, 2010 compared to the three months ended June 30, 2009.Results of operations for the three months ended June 30, 2010 reflect the following changes from the prior period.
 
 
Three Month Period Ended June 30
  
 
2010
2009
Increase (Decrease)
Net Revenues
-
-
-
Cost of Revenues
-
-
-
General & Administrative Expense
$354,593
$216,583
$138,010
Other Income (Expense)
$177,988
($12,400)
$190,388
Income (Loss) from Operations
($176,605)
($228,983)
$52,378
 
       
Net Income (Loss)
($176,605)
($228,983)
$52,378
 
The Company had no net revenues from continuing operations in the three months ended June 30, 2010. The Company’s products are in the development stage.
 
The Company also had no cost of revenue from continuing operations in the three months ended June 30, 2010.
 
General and administrative expenses from continuing operations increased as noted above due to the fact that the Company has started development of the products that it has acquired over the prior twelve months. Included in expenses from continuing operations during the three months ended June 30, 2010 were professional fees and patent fees of $89,032 and expense related to the issuance of stock options of $207,566.
 
For the three months ended June 30, 2010, the Company recognized net loss of $176,605 from continuing operations compared to a loss of $228,983 for the same period in 2009. Included in this loss is a non-cash gain from the decrease in fair value of the Company’s derivative liabilities.
 
The Company issued 1,000,000 options pursuant to the Company’s employee stock option plan.  As of June 30, 2010 520,000 options had vested. In conjunction with this issuance, the Company recognized $207,566 in stock option expense for vested options.
 
Excluding the non cash gain and the non cash expenses resulting from options issued during the period, the net loss would have been $119,008 for the three month period ended June 30, 2010.
 
 
15
 
 
 
NineMonths Ended June 30, 2010
 
Nine months ended June 30, 2010 compared to the nine months ended June 30, 2009.  Results of operations for the nine months ended June 30, 2009 reflect the following changes from the prior period.
 
 
Nine Months Period Ended June 30
  
 
2010
2009
Increase (Decrease)
Net Revenues
-
-
-
Cost of Revenues
-
-
-
Warrant Expense
$2,868,242
-
$2,868,242
General & Administrative Expense
$686,943
$724,117
($37,174)
Other Income (Expense)
$189,782
($13,770)
$203,552
Income (Loss) from Operations
($3,365,403)
($737,887)
($2,627,516)
       
Net Income (Loss)
($3,365,403)
($737,887)
($2,627,516)
 
The Company had no net revenues from continuing operations in the nine months ended June 30, 2010. The Company’s products are in the development stage.
 
The Company also had no cost of revenue from continuing operations in the nine months ended June 30, 2010.
 
General and administrative expenses from continuing operations increased as noted above due to the fact that the Company has started development of the products that it has acquired over the prior twelve months. Included in expenses from continuing operations during the nine months ended June 30, 2010 were professional and patent fees of $251,985.
 
During the nine months ended June 30, 2010, the Company issued 5,583,336 warrants in accordance with the warrant agreements to those holders of warrants that were exercised during the period at $0.18.  The Company used the Black Scholes option pricing model to calculate the fair market value of these warrants resulting in a calculated fair value of $2,868,242 in warrant expense associated with this issuance.  Additionally, the Company issued 236,000 warrants for services rendered to the Company.  In conjunction with this issuance, the Company recognized $88,562 in consulting expense.

The Company issued 1,000,000 options pursuant to the Company’s employee stock option plan.  As of June 30, 2010 520,000 options had vested. In conjunction with this issuance, the Company recognized $207,566 in stock option expense for vested options.
 
For the nine months ended June 30, 2010, the Company recognized net loss of $3,365,403 from continuing operations compared to a loss of $737,887 for the same period in 2009. Excluding the non cash gain and the non cash expenses resulting from options issued during the period, the net loss would have been $342,002 for the nine month period ended June 30, 2010.
 
 
16
 
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE RISK
 
Market risk represents the risk of loss arising from adverse changes in interest rates and foreign exchange rates.  The Company does not have any material exposure to interest rate or exchange rate risk.
 
ITEM 4.  CONTROLS AND PROCEDURES
 
The Company’s management, including the chief executive officer and chief financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud that could occur. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. 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.  Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or 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 simple error or mistake.  Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.  The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
 
Disclosure Controls and Procedures
 
The Company’s management, including the chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). The Company’s management, including the chief executive officer and chief financial officer, has evaluated our disclosure controls and procedures as of the period ended June 30 2010 and, since the Company has no audit committee, has concluded that they are currently ineffective. The Company plans to establish an audit committee if it is able to obtain additional financing needed to sustain its business plan.  See “Risk Factors” in the Form 10-K/A.
 
Changes in Internal Control over Financial Reporting
 
There have been no changes in our internal control over financial reporting in connection with the evaluation required under paragraph (d) of Rule 13a-15 of the Exchange Act that occurred during the fiscal quarter ended  June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
The Company is aware that under the rules of the SEC, it will be required to establish a Sarbanes-Oxleycompliant independent audit committee, develop internal financial review, and include an auditor attestation report on internal control over financial reporting when it files its annual report for fiscal year ending September 30, 2010.
 
 
17
 
 
PART II  OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
Our management is not aware of any significant litigation, pending or threatened, that would have a significant adverse effect on our financial position or results of operations.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.
 
None.
 
ITEM 4.  REMOVED AND RESERVED.
 
None.
 
ITEM 5.  OTHER INFORMATION
 
None.
 
ITEM 6.  EXHIBITS
 
Exhibit Number
 
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial 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

32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
18