10-K 1 dec0810k3-09.txt DEC 08 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2008 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-26947 WHISPERING OAKS INTERNATIONAL, INC. ----------------- ------------------------------------- (Name of Small Business Issuer in its charter) Texas 75-2742601 ------------------------ --------------------------------- (State of incorporation) (IRS Employer Identification No.) 7080 River Road, Suite 215 Richmond, British Columbia V6X 1X5 --------------------------------------- -------- (Address of Principal Executive Office) Zip Code Registrant's telephone number, including area code: (866) 884-8669 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Indicate by check mark whether the registrant (1) has filed all reports 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 [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): [ ] Yes [X] No The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the common stock on June 30, 2008, was approximately $18,220,000. As of March 25, 2009, the Registrant had 44,823,458 issued and outstanding shares of common stock. Documents Incorporated by Reference: None ITEM 1. DESCRIPTION OF BUSINESS Whispering Oaks International, Inc., d/b/a Biocurex, Inc. was incorporated in Texas in December 1997. In February 2001, Biocurex issued 1,950,000 shares of its common stock to acquire a U.S. patent, several foreign patents and other intellectual property which related to the early detection of cancer from Lagostar Trading S.A. In March 2001, Biocurex acquired the following assets from Pacific Biosciences (then named Curex Technologies Inc.) in consideration for the assumption by Biocurex of promissory notes in the amount of $2,326,869 which were payable by Pacific Biosciences to various third parties: o Canadian patent application related to the RECAF(TM) technology; o proprietary technology related to the RECAF(TM) technology; and o cash in the amount of $129,032. In May 2001, Biocurex issued 1,544,404 shares of its common stock in payment of the notes, plus accrued interest, which Biocurex assumed in connection with the acquisition of assets from Pacific Biosciences. Biocurex filed an Assumed Name Certificate with the Secretary of State of the State of Texas in March 2001 to enable Biocurex to conduct business under the name of "Biocurex, Inc." Biocurex intends to formally change its name from Whispering Oaks International Inc. to Biocurex, Inc., upon approval of the name change by the shareholders at its next shareholders' meeting. Cancer Detection Kits --------------------- A principal goal of cancer research and treatment is to accurately and timely diagnose cancer. One way to diagnose cancer is by differentiating cancer cells from healthy cells with the aid of certain molecules (markers) that are present on cancer cells but not on healthy cells. Biocurex owns patents and other intellectual property relating to technology that utilizes these markers to accurately and timely detect cancer. Biocurex's technology relates specifically to the RECAF(TM) marker, which is one of the markers that is only present on cancer cells. The RECAF(TM) marker and Biocurex's related technology can be used in blood and tissue tests to aid in determining if a patient has cancer. These tests can also be used on a regular basis for the early detection of recurring cancer, thereby allowing a more effective treatment of cancer patients. The RECAF(TM) marker has been found in all cancerous tissues studied, including breast, lung, stomach and prostate tissues. Biocurex has developed two cancer detection kits which use the RECAF(TM) marker to detect the presence or absence of cancer by staining cancer cells in tissues removed from a patient. 2 Each kit contains five chemicals which are mixed according to directions provided by Biocurex. Soft tissue removed from a patient is then stained with the chemicals in the kit and is examined by a physician under a microscope. When stained with the chemicals in the kit the cancer cells are clearly visible. In order to be seen under a microscope however, soft tissue must be cut into sections which are approximately five microns in thickness. To allow for this type of cutting the tissue must be turned into something more solid and for many years, paraffin (wax) has been used for that purpose. The tissue to be examined is fixed and embedded in a paraffin block, which is then cut precisely into 5 micron sections. The paraffin is then removed with solvents, the tissue is re-hydrated and stained. The process of embedding and re-hydrating takes 2-3 days. Another method used to harden tissue to allow it to be cut is to freeze the tissue and then slice the ice block. Biocurex's Histo-RECAF(TM) kit, which is designed for tissue hardened with paraffin, was sent to independent researchers for testing on a significant number of breast tissue samples selected at random. The samples included twenty malignant, twenty benign (fibro adenomas) and twenty dysplastic (benign diffuse growth) specimens. In June 2001, Biocurex received confirmation from the first of these researchers indicating that 100% of breast cancers tested positive with the kits. Only 4% of the benign tumors and other non-malignant breast tissues studied were positive. Furthermore, several in-situ carcinomas (the earliest stage of cancer) tested positive. The test results are not only important in reference to the product itself, but also validate the RECAF(TM) system and its potential for other uses, such as serum testing, and cancer cell targeting in general. The FDA lists the Histo-RECAF(TM) kit as a Class I medical device in its listing database. As a Class I medical device the Histo-RECAF(TM) kits may be sold in the United States as a staining test for AFP receptors (a.k.a. RECAF(TM)) in tissues. However, until the Histo-RECAF(TM) kit is approved by the FDA as a 510K diagnostic device, the Histo-RECAF(TM) kit may only be marketed in the United States as a device which can be used as an adjunct to standard light microscopy staining methods to aid in the identification of cancer in breast and axillary node tissues. 3 Due to the costs involved in manufacturing and marketing, Biocurex plans to license the Histo-RECAF(TM) technology to third parties or bring the Histo-RECAF(TM) technology to market through a joint venture with a third party. As of September 30, 2008, Biocurex had not sold any Histo-RECAF(TM) test kits and did not have any licensing or joint venture agreements with respect to its Histo- RECAF(TM) technology. Biocurex's Cryo-RECAF(TM) kit was designed for use by pathologists during surgery since, in many cases, the determination as to whether cancer cells are benign or malignant is still not clear at the time of surgery. With the Cryo-RECAF(TM) kit the surgeon removes a portion of the tumor and, while the patient is still under anesthesia, the material is frozen, sliced, stained with the chemicals in the kit and examined by the pathologist to determine if the cancer cells are benign or malignant. Using this information, the surgeon is then able to determine the proper procedures to be used while the patient is still in the operating room. Although the quality of frozen tissue is not as good as tissue examined with the use of the Histo-RECAF(TM) kit, the advantage of the Cryo-RECAF(TM) test is that the results are available within 15 minutes. Biocurex has not sold any Cryo-RECAF(TM) kits. Although the Cryo-RECAF(TM) kit is fully developed, Biocurex has not applied to the FDA, Canada's Health Products and Food Branch, or any other regulatory authority for permission to sell the Cryo-RECAF(TM) kit on a commercial basis due to the costs involved with regulatory approvals, Biocurex plans to license the Cryo-RECAF(TM) technology to third parties for completion of the research and clinical studies necessary to obtain clearance from the FDA and other regulatory authorities for the commercial sale of this product. Biocurex believes that a significant market exists for a screening assay which can detect multiple cancers from a blood (serum) sample. As a result, since March 2002 Biocurex's research and development efforts have been focused on the development of a serum-based screening assay based upon Biocurex's RECAF(TM) technology. The potential market for a serum assay is hard to define, but market statistics confirm that there are over 100 million serum tumor marker (screening) tests performed every year. However, most of the assays are specific to a particular cancer and suffer from poor sensitivity and specificity. As an example, assay sales for CEA - Carcino Embryonic Antigen, a relatively insensitive assay for colorectal cancer are estimated to be over $300 million US dollars annually. Since 2004 Biocurex performed over 120,000 tests on over 4,000 serum samples. Results of these clinical studies have shown the serum RECAF test to have an 80-90% sensitivity for a variety of cancers, with a 95% specificity for lung, breast, stomach and ovary cancers. These tests have shown that Biocurex's serum-RECAF assay performs much better than competing technologies in detecting prostate cancers and discriminating between malignant and benign lesions. In March 2005, Biocurex signed a license agreement with Abbott Laboratories. Under terms of the licensing agreement, Abbott obtained worldwide, semi-exclusive rights to market and sell products using Biocurex's RECAF(TM) technology. The license agreement requires Abbott to pay Biocurex royalties based on the net sales price of any product incorporating the RECAF(TM) technology. 4 The license agreement will end on the last to occur of either the expiration of the last patent pertaining to the RECAF(TM) technology or the date on which Abbott no longer uses the RECAF(TM) technology in any of its products. However, Abbott may terminate the license agreement earlier on 90 days notice to Biocurex. Biocurex may terminate the license agreement earlier only if, following 60 days notice, Abbott fails to pay any royalties which are not in dispute. In April 2008 Biocurex and Abbott amended the license agreement. The amendment relieves Abbott of future obligations to perform further research and development with respect to the RECAF technology as well as the obligation to pay annual minimum royalties. Biocurex will continue the development of a chemoluminescence based serum RECAF test in its own facilities. At any time, and at its option, Abbott may resume research and development work and commercialize products incorporating the RECAF technology in accordance with the license agreement. In consideration for this modification, Biocurex will receive a higher royalty on any RECAF products that may be sold by Abbott. Biocurex also obtained the right to terminate the license at any time if Abbott, following 90-days notice from Biocurex, does not agree to resume research and development efforts with respect to the licensed technology. In January 2008 Biocurex entered into a licensing agreement with Inverness Medical Innovations, Inc. Under terms of the agreement, Inverness obtained the worldwide, semi-exclusive rights to commercialize products using Biocurex's RECAF technology. The agreement includes payment to Biocurex of up-front fees, annual minimum royalties and royalties on any product sales. Inverness may terminate the License Agreement on 30 days notice written notice to Biocurex, provided that: o All initial licensing fees must nevertheless be paid; and o If the License Agreement is terminated by Inverness without cause after the first commercial sale of a product subject to the License Agreement, an amount equal to the greater of $300,000 or the royalties payable to Biocurex during the twelve month period prior to the date of termination. In March 2006 Biocurex began modifying its serum RECAF test so that the test would be a "colorimetric" or chemoluminescent test that does not require the use of radioactivity. The chemoluminescent test is the format used by many automated high throughput instruments such as the Architect(TM) system from Abbott. In a study on 68 early stage (I & II) prostate cancer serum samples, presented at an international cancer conference in late 2006, Biocurex's RECAF chemoluminescent blood test detected 71% of cancers, while commercial PSA tests detected less than 30% of cancers using the same samples. As of September 30, 2008 Biocurex: o had prepared all documents describing the protocols required to produce the required reagents and assays by clinical laboratories or licenses, and 5 o was working on improvements to the test to reduce its cost and improve its shelf life. Since February 2007 Biocurex has been working on the development of a point-of-care or rapid test for cancer. The test, which is similar in appearance to a dip-stick pregnancy test, is intended to be used by physicians in their office as a first step in detecting cancer. As of September 30, 2008 Biocurex had further advanced the development of the dip stick and had tested approximately 400 serum samples. As of March 25, 2009 Biocurex was: o Continuing with the development of its colorimetric test; o Continuing with the development of its point-of-care test; and o Investigating the feasibility of using its RECAF(TM) marker as a target for drugs or therapies which destroy cancer cells. The license agreements with Abbott and Inverness are semi-exclusive. Biocurex is currently attempting to license serum RECAF(TM) technology to another diagnostic firm that has the financial capability to complete the research and clinical studies necessary to obtain clearance from the FDA and other regulatory authorities as well as to manufacture and commercialize the technology. In October 2008 Biocurex formed a wholly-owned subsidiary in China. The subsidiary, named "Biocurex Inc. China" will be used to manufacture, market and distribute Biocurex's RECAF tests in China. Research and Development ------------------------ Pacific BioSciences conducts all research relating to the technology under development by Biocurex. Pacific BioSciences is owned 100% by Dr. Ricardo Moro. Pacific BioSciences billed the following amounts to Biocurex for research and development; year ended December 31, 2006 - $544,460; year ended December 31, 2007 - $651,009; and year ended December 31, 2008 - $674,326. The amounts billed to Biocurex represent the costs incurred by Pacific BioSciences plus 15%. As of December 31, 2008, Biocurex owed Pacific Biosciences $328,269 for research and for general and administrative expenses paid by Pacific Biosciences on behalf of Biocurex. Pacific Biosciences conducts research for Biocurex in accordance with research protocols and expenditures approved on a monthly basis by Dr. Moro and Dr. Wittenberg both of whom are executive officers of Biocurex. As of March 25, 2009, Biocurex did not have any written agreement with Pacific BioSciences concerning research performed on behalf of Biocurex. In May 2003, a group of Japanese physicians/scientists agreed to test an improved Histo-RECAF(TM) kit on stomach cancer tissues to determine the kit's ability to accurately detect cancer cells. The Japanese research teams conducted the tests on a voluntary basis and without charge to Biocurex. Biocurex supplied the research teams, free of charge, with the chemicals required for the tests. 6 In April 2004, Biocurex received notice that approximately 83% of the cancer tissues stained with the Histo-RECAF(TM) kit were clearly positive and distinguishable from normal specimens with a microscope. To the knowledge of Biocurex, no other stomach cancer marker matches these results. These results were published in a peer-reviewed scientific journal (In Vitro Diagnostic Technology) in December 2005. Patents ------- Biocurex's technology is protected by a United States patent which expires in 2014 and by patents in Australia, Russia, and China which expire in 2015. Biocurex has also filed patent applications in Canada and 22 other foreign countries. Competition ----------- A number of companies, such as Dako Inc., have developed cancer detection products which stain cells to detect cancer. However the cancer detection kits presently on the market can only detect one form of cancer. In contrast, Biocurex's cancer detection kits can detect the RECAF(TM) marker in all the types of cancer studied so far, including breast, stomach, lung and colon cancers. A number of companies, including Abbott, Roche and Ortho Diagnostics, have developed serum based screening assays to detect cancer. However, the serum based screening assays kits presently on the market can only detect one form of cancer. In contrast, Biocurex's serum based screening assays have detected, in internal preliminary studies, ovary, lung, breast and stomach cancers with high sensitivity and specificity. In addition, and based upon studies conducted by Biocurex, Biocurex believes that for certain types of cancer, its serum based screening assays is more accurate than the screening assays of its competitors. Government Regulation --------------------- Drugs, pharmaceutical products, medical devices and other related products are regulated in the United States under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and the laws of certain states. The FDA exercises significant regulatory control over the clinical investigation, manufacture and marketing of pharmaceutical and biological products. Prior to the time a pharmaceutical product can be marketed in the United States for therapeutic use, approval of the FDA must normally be obtained. Preclinical testing programs on animals, followed by three phases of clinical testing on humans, are typically required in order to establish product safety and efficacy. The first stage of evaluation, preclinical testing, must be conducted on animals. After lack of toxicity has been demonstrated, the test results are submitted to the FDA along with a request for clearance to conduct clinical testing, which includes the protocol that will be followed in the initial human clinical evaluation. If the applicable regulatory authority does not object to the proposed study, the investigator can proceed with Phase I trials. Phase I trials consist of pharmacological studies on a relatively few number of humans 7 under rigidly controlled conditions in order to establish lack of toxicity and a safe dosage range. After Phase I testing is completed, one or more Phase II trials are conducted in a larger number of patients to test the product's ability to treat or prevent a specific disease, and the results are analyzed for clinical efficacy and safety. If the results appear to warrant confirmatory studies, the data is submitted to the applicable regulatory authority along with the protocol for a Phase III trial. Phase III trials consist of extensive studies in large populations designed to assess the safety of the product and the most desirable dosage for the treatment or prevention of a specific disease. The results of the clinical trials for a new biological drug are submitted to the FDA as part of a product license application ("PLA"), a New Drug Application ("NDA") or Biologics License Application ("BLA"), depending on the type or derivation of the product being studied. In addition to obtaining FDA approval for a product, a biologics establishment license application ("ELA") may need to be obtained for biological products derived from blood, or not considered to be sufficiently well characterized, in order to obtain FDA approval of the testing and manufacturing facilities in which the product is produced. Domestic manufacturing establishments are subject to inspections by the FDA and by other Federal, state and local agencies and must comply with Good Manufacturing Practices ("GMP") as appropriate for production. In complying with GMP regulations, manufacturers must continue to expend time, money and effort in the area of production, quality control and quality assurance to ensure full technical compliance. The process of drug development and regulatory approval requires substantial resources and many years. Approval of drugs and biological products by regulatory authorities of most foreign countries must also be obtained prior to initiation of clinical studies and marketing in those countries. The approval process varies from country to country and the time period required in each foreign country to obtain approval may be longer or shorter than that required for regulatory approval in the United States. Clinical trials conducted under approvals from foreign countries may not be accepted by the FDA and product licensure in a foreign country does not mean that a product will be licensed by the FDA or any other government entity for manufacturing and/or marketing. Medical device regulation is based on classification of the device into three classes, I, II, or III. Class III medical devices are regulated much like drugs, whereas Class I and II devices have less stringent data requirements than drugs and do not require clinical trials for FDA clearance. Products submitted to the FDA for clearance as medical devices can refer to the safety and effectiveness of medical devices which perform similar functions to products which the FDA has already cleared. As long as a medical device submitted to the FDA has the same clinical use as a medical device previously cleared by the FDA, such medical device will normally receive FDA clearance upon a showing that the device is substantially equivalent to the other approved medical devices. In the case of the Histo-RECAF(TM) kit, Biocurex provided the FDA with reports from pathologists who have used the kit and also provided the FDA with a collection of tissues stained with the kit. The FDA lists the Histo-RECAF(TM) kit as a Class I medical device in its device listing database. Biocurex expects that its 8 Cryo-RECAF(TM) kit will also be classified as a Class I medical device. Biocurex anticipates that its serum assay, if successfully developed, will be classified as a Class II medical device. Biocurex's strategy is to license its cancer detection kits and its serum assay to third parties which will be responsible for any further regulatory approvals. However, any licensee of Biocurex may not be successful in obtaining additional clearances or approvals from any regulatory authority with respect to Biocurex's cancer detection kits or its serum screening assay. The lack of regulatory approval for Biocurex's products will prevent the sale of these products. Delays in obtaining regulatory approval or the failure to obtain regulatory approval in one or more countries may have a material adverse impact upon Biocurex's operations. Employees --------- As of March 25, 2009 Biocurex's only employee was Dr. Ricardo Moro. Dr. Moro is an officer and director of Biocurex. As mentioned elsewhere in this report, Pacific BioSciences conducts all research relating to the technology under development by Biocurex. Employees of Pacific BioSciences also provide most of the administrative and accounting services required by Biocurex. As of December 31, 2008 Pacific BioSciences had ten full time employees. These employees devote substantially all of their time to research conducted on behalf of Biocurex as well as administrative matters relating to both Biocurex and Pacific BioSciences. Dr. Moro considers himself to be a full time employee of Pacific BioSciences, despite the time he devotes to Biocurex. ITEM 2. PROPERTIES Biocurex's offices are located at 7080 River Road, Suite 215 Richmond, British Columbia, and consist of 5,000 square feet of space. Biocurex's offices are rented on a month-to-month basis for $4,895 per month. Biocurex rents its office space from Pacific Bioscience, a company owned by Dr. Ricardo Moro. ITEM 3. LEGAL PROCEEDINGS Biocurex is not involved in any legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES. Between April 2004 and August 21, 2006 Biocurex's common stock traded in the over-the-counter market, which is sometimes referred to as the "pink sheets". On August 22, 2006, Biocurex re-listed its common stock on the OTC Bulletin Board under the symbol "BOCX." 9 Shown below is the range of high and low quotations for Biocurex's common stock for the periods indicated as reported by the National Association of Securities Dealers, Inc. The market quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not necessarily represent actual transactions. Quarter Ending High Low -------------- ---- --- 3/31/07 $0.71 $0.57 6/30/07 $0.67 $0.56 9/30/07 $0.82 $0.46 12/31/07 $0.70 $0.55 3/31/08 $0.75 $0.53 6/30/08 $0.65 $0.44 9/30/08 $0.43 $0.17 12/31/08 $0.25 $0.14 As of March 25, 2009, there were approximately 120 record holders of Biocurex's common stock and over 2,000 shareholders who owned shares through brokerage houses, banks and similar financial institutions. Holders of common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available and, in the event of liquidation, to share pro rata in any distribution of Biocurex's assets after payment of liabilities. The Board of Directors is not obligated to declare a dividend. Biocurex has not paid any dividends on its common stock and Biocurex does not have any current plans to pay any common stock dividends. Note 8 to the financial statements included as part of this report lists the shares of Biocurex's common stock which were issued during the year ended December 31, 2008. With the exception of the shares described in subparagraphs a, g and j, Biocurex relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 in connection with the issuance of the shares described in Note 8 during the year ended December 31, 2008. The shares described in subparagraphs a, g and j of Note 8 were registered by means of a registration statement on Form S-8. During the year ended December 31, 2008 Biocurex did not purchase any shares of its common stock from third parties in a private transaction or as a result of any purchases in the open market. During the year ended December 31, 2008 none of the officers or directors of Biocurex, nor any of its principal shareholders, purchased, on behalf of Biocurex, any shares of its common stock from third parties in a private transaction or as a result of purchases in the open market. As of March 25, 2009 Biocurex had 44,823,458 outstanding shares of common stock. The following table lists additional shares of Biocurex's common stock which may be issued as the result of payment of note principal or interest with shares of Biocurex's common stock or as the result of the exercise of outstanding options or warrants or the conversion of notes: 10 Number of Note Shares Reference --------- --------- Shares issuable upon conversion of notes or as payment of principal on the notes 2,833,333 A Shares issuable upon exercise of warrants 3,500,000 A Shares issuable as payment of interest on the notes 1,000,000 A Shares issuable upon exercise of warrants issued to consultants 937,500 B Shares issuable upon exercise of Non-Qualified Stock options granted to officers, directors, employees and consultants. 6,153,157 C Shares issuable upon exercise of warrants granted to Biocurex's officers, directors, employees, financial consultants and private investors 5,291,851 D Shares issuable upon conversion of notes 1,075,715 D Shares issuable upon exercise of warrants issued to note holders 3,940,326 E A. On June 29, 2007, Biocurex sold convertible notes, plus warrants, to private investors for $3,000,000. The notes are due and payable on June 29, 2010 and are secured by substantially all of Biocurex's assets. At the holder's option the notes are convertible into shares of Biocurex's common stock at a conversion price of $0.60. As of March 25, 2009 the outstanding principal balance of the notes was $1,955,000. The warrants allow the holders to purchase up to 3,500,000 shares of Biocurex's common stock at a price of $0.25 per share at any time prior to June 29, 2012. In the event the closing price of Biocurex's common stock is $1.20 or greater for ten consecutive trading days, the holders will be required to exercise the warrants relating to the 3,500,000 shares of Biocurex's common stock. Following the exercise of the warrants, Biocurex will issue to the holders new warrants, which will entitle the holders to purchase 1,750,000 shares of Biocurex's common stock. The new warrants will be exercisable at a price of $1.20 per share at any time prior to the later of June 25, 2012 or three years from the date the new warrants are issued. 11 The actual number of shares issuable upon the conversion of the notes or upon the exercise of the warrants may increase as the result of future sales of Biocurex's common stock at prices below either the note conversion price or warrant exercise price, as the case may be. At Biocurex's election and under certain conditions, Biocurex may use shares of its common stock to make interest or principal payments on the notes. The actual number of shares which may be issued as payment of interest or principal may increase if the price of Biocurex's common stock is below the then applicable conversion price of the notes. To the extent Biocurex uses its shares to make principal payments on the notes, the number of shares which may be issued upon the conversion of the notes may be less due to the reduction in the outstanding principal balance of the notes. The actual number of shares which will ultimately be issued upon the payment or conversion of the notes and the exercise of the warrants (if any) will vary depending upon a number of factors, including the price at which Biocurex sells any additional shares of its common stock prior to the date the notes are paid or converted or the date the warrants are exercised or expire. See Biocurex's 8-K reports filed on June 29, 2007 and February 6, 2009 for more detailed information concerning the notes and warrants. B. Pursuant to the terms of a consulting agreement with the Sales Agent, Biocurex issued the Sales Agent warrants to purchase 937,500 shares of Biocurex's common stock as consideration for services the Sales Agent provided in connection with the sale of Biocurex's notes and warrants. Warrants to purchase 187,500 of the 937,500 shares are exercisable at a price of $0.01 per share and warrants to purchase the remaining 750,000 shares are exercisable at a price of $0.60 per share. These warrants expire on June 30, 2012. The Sales Agent subsequently assigned to two of its employees 234,375 warrants each. C. Options are exercisable at prices between $0.001 and $0.75 per share and expire at various dates between January 2010 and March 2014. D. Warrants in this category were not granted pursuant to Biocurex's Non-Qualified Stock Option Plan. The warrants are exercisable at prices between $0.12 and $0.90 per share and expire between October 2008 and July 2012. E. During 2003 Biocurex sold convertible notes in the principal amount of $529,813 to six private investors. The notes bear interest at 5% per year and are due and payable five years from the respective dates of the notes. Each note may, at the option of the holder, be converted at any time into shares of Biocurex's common stock. The number of shares to be issued upon the conversion of any note is equal to the amount determined by dividing (i) the principal amount to be converted by (ii) the conversion price. The conversion price was separately negotiated for each note and ranges between $0.05 and $0.23 and was based upon the market price of Biocurex's common stock on the date the notes were sold. As of March 25, 2009, one note in the principal amount of $53,000 had been repaid and four notes in the aggregate principal amount of $281,915 had been converted into 2,123,634 shares of Biocurex's common stock. If all 12 remaining notes were converted Biocurex would be obligated to issue an additional 1,075,715 shares of common stock. The note holders also received warrants to purchase an aggregate of 2,434,088 shares of Biocurex's common stock at prices between $0.08 and $0.38 per share. The warrants expire at various dates prior to November 11, 2008. As of March 25, 2009, warrants to purchase 1,693,111 shares had been exercised. For every share issued upon conversion, the note holders are entitled to receive new warrants to purchase one additional share of common stock at prices between $0.055 and $0.176 per share. These new warrants expire at various dates in 2011. Warrants for 2,123,634 shares were issued when notes in the principal amount of $281,915 were converted. If all remaining notes were converted, Biocurex would be obligated to issue the holders of the notes warrants to purchase 1,075,715 additional shares of Biocurex's common stock. ITEM 6. SELECTED FINANCIAL DATA Not applicable. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Plan of Operation ----------------- Biocurex is involved in developing cancer detection technology and: o has developed a cancer detection kit which stains cancer cells, thereby allowing a pathologist to easily view the cancer cells with the use of a microscope, o has developed the Cryo-RECAF(TM) diagnostic kit which can be used by pathologists during surgery to determine whether cancer cells are benign or malignant, and o is working on the development of a screening assay which can detect multiple cancers from a blood (serum) sample. The FDA lists the Histo-RECAF(TM) kit as a Class I medical device in its device listing database. As a Class I medical device the Histo-RECAF(TM) kits may be sold in the United States as a staining test for AFP receptors (a.k.a. RECAF(TM)) in tissues. Biocurex has not applied to the FDA, Canada's Health Products and Food Branch, or any other regulatory authority for permission to sell the Cryo-RECAF(TM) kit on a commercial basis. Due to the costs involved in manufacturing and marketing, Biocurex plans to license its Histo-RECAF(TM) and Cryo-RECAF(TM) technology to third parties. As of March 31, 2008, Biocurex had not sold any Histo-RECAF(TM) or Cryo-RECAF(TM) test kits and had not licensed the technology pertaining to these kits to any third parties. As explained in Item 1 of this report, Biocurex has developed a serum based cancer screening assay and has licensed certain aspects of the serum assay technology to third parties. The licensing agreements are semi-exclusive thus allowing for more than one licensee. Biocurex expects to enter into other licensing agreements in 2008. Biocurex retained all rights to its prototype format, a radio-immunoassay ("RIA"), which it plans to commercialize directly to 13 clinical laboratories as Analyte Specific Reagents ("ASRs") for production of "home-brew" tests. A home-brew test is a test developed by a clinical laboratory using one or more ASRs, general laboratory reagents and/or general laboratory instruments for diagnostic purposes. The FDA issued a new regulation in November of 1997 classifying ASRs based on risk to public health. The regulation allows certain individual reagents to be available for clinical laboratories to use in their own in-house developed (home-brew) tests, without requiring manufacturers to obtain approval from the FDA for the majority of individual reagents. This regulation could allow clinical laboratories to produce RECAF(TM) tests based on Biocurex's RIA without the need for a lengthy FDA approval process. For more information visit http:// www.aacc.org/govt/asr.htm. During the twelve months ending December 31, 2009, Biocurex: o plans to continue its efforts to license the Histo-RECAF(TM) technology to third parties. o plans to enter into agreements relating to its RIA chemiLuminescence and ELISA blood tests with clinical laboratories using ASRs. o intends to license its Serum-RECAF(TM) to other major bio-pharma companies. o plans to, if necessary, continue to raise capital in order to fund Biocurex's operations and research and development. o plans to sell serum RECAF tests directly in China and through other clinical laboratories in countries. o plans to continue research in the areas of therapeutics and imagery. During the twelve months ending December 31, 2009 it is expected that all research and development work, as well as production of ASR's for blood test sales, will be performed by Pacific Biosciences on behalf of Biocurex. Liquidity and Capital Resources ------------------------------- Biocurex's sources and (uses) of cash during the year ended December 31, 2008 were: Cash used in operations $(629,979) Patent costs (191,512) Sale of investment securities 53,621 Repayment of loans from related parties (9,086) Repayment of convertible debt (825,000) Sale of common stock in private placements and exercise of options and warrants, net of issuance costs 274,983 Cash on hand at January 1, 2008 1,372,598 14 Biocurex's sources and (uses) of cash during the year ended December 31, 2007 were: Cash used in operations $(1,509,939) Patent costs (59,704) Repayment of loans from related parties (14,408) Sale of convertible notes, net of issuance costs 2,467,500 Repayment of convertible notes (300,000) Sale of common stock, net of offering costs 198,895 Convertible Notes and Warrants ------------------------------ On June 29, 2007, Biocurex sold convertible notes, plus warrants, to two private investors for $3,000,000. These notes bear interest annually at a rate of prime (as adjusted monthly on the first business day of each month) plus 2.75% per year. These notes are due and payable on June 29, 2010 and are secured by substantially all of Biocurex's assets. Interest on these notes is payable monthly and is due the first of every month. Biocurex is also required to make monthly payments of $100,000 towards the principal amount of the notes. If Biocurex fails to make any interest or principal payment when due, the notes will become immediately due and payable. At the holder's option the notes are convertible into shares of Biocurex's common stock at a conversion price of $0.60. Biocurex intends to repay the notes, plus accrued interest, with cash on hand, proceeds from the sale of Biocurex's securities and shares of its common stock. For more detailed information concerning the notes and warrants see Biocurex's 8-K reports filed on June 29, 2007 and February 6, 2009. Capital Requirements Biocurex anticipates that its capital requirements for the twelve months ending December 31, 2009 will be as follows: Research and Development - Therapeutics $ 150,000 Research and Development - Invitro diagnostics (rapid tests, blood tests, histology tests, production of ASR's) 700,000 Research and Development - Imagery 50,000 Payment of Outstanding Liabilities 80,000 General and Administrative Expenses 450,000 Marketing and Investor Communications 600,000 Payment of Principal on Convertible Notes 1,200,000 Payment of Interest on Convertible Notes 198,660 ------------ $3,428,660 ============ 15 To maintain its present level of operations, including research and development, and to avoid defaulting on payments to the convertible note holders, Biocurex will need to raise approximately $4,000,000 to satisfy its monthly cash requirements until the notes are fully paid. Biocurex does not have any lines of credit with banks or other financial institutions or any other traditional financing arrangements. Biocurex will need additional capital until it is able to generate significant revenues to cover its expenditures. Since January 2003, Biocurex has been able to finance its operations through the private sale of its securities and from borrowings from private lenders and intends to obtain the capital needed for its operations through these financial arrangements in the future. Biocurex's most significant capital requirements are general and administrative expenses and research and development expenses. General and administrative expenses, exclusive of depreciation, amortization and other expenses not requiring the use of cash (such as the costs associated with issuing stock and options for services) average approximately $60,500 per month. Biocurex's research and development expenses vary, depending upon available capital. When more capital is available to Biocurex, research and development expenses increase. Conversely, research and development expenses decline when less capital is available. Pacific Biosciences, which is owned by Dr. Ricardo Moro, an officer and director of Biocurex, performs all of Biocurex's research and development work. Biocurex may not be successful in obtaining additional capital in the future. If Biocurex is unable to raise the capital it needs, its research and development activities will be curtailed or delayed and its operations will be reduced to a level which can be funded with the capital available to Biocurex. Results of Operations Material changes of items in Biocurex's Statement of Operations for the year ended December 31, 2008, as compared to the same period in the prior year, are discussed below: Increase (I) Item or Decrease (D) Reason ---- --------------- ------ Revenue I Licensing fee from Inverness Medical Switzerland Gmbh General and administrative D Decrease in stock based compensation and public relations expenses. Professional and Consulting Fees I Biocurex made greater use of consultants for marketing its products during 2008. Accretion of discount I Sale of convertible notes in the on convertible debt principal amount of $3,000,000 in June 2007. The notes bear interest 16 annually at a rate of prime (adjusted monthly on the first business day of each month) plus 2.75% per year Amortization of debt issue costs I Interest expense I Sale of convertible notes in the principal amount of $3,000,000 in June 2007. Loss on extinguishments of I convertible debt Material changes of items in Biocurex's Statement of Operations for the year ended December 31, 2007, as compared to the same period in the prior year, are discussed below: Increase (I) Item or Decrease (D) Reason ---- --------------- ------ Revenue I Payment required by terms of Licensing Agreement with Abbott Laboratories General and Administrative I Increase in stock based Expenses compensation and public relations expenses Professional and Consulting fees D During 2006 the Company became involved in a lawsuit as a result of its efforts to have a transfer agent remove the restricted legend on shares of common stock which were given to the Company by an unrelated third party as partial payment for a license to use technology developed by the Company. The lawsuit was resolved in favor of the Company. The Company was not involved in any litigation during the year ended December 31, 2007. Research and development I Increased use of chemicals and laboratory supplies. Accretion of discount I Sale of convertible notes in the principal amount of $3,000,000 in June 2007 Interest expense I Sale of convertible notes in the principal amount of $3,000,000 in June 2007 17 Recent Accounting Pronouncements -------------------------------- See Note 2 to the financial statements which are included as part of this report. Critical Accounting Policies ---------------------------- Biocurex's significant accounting policies are more fully described in Note 2 to the financial statements included as a part of this report. However, certain accounting policies are particularly important to the portrayal of Biocurex's financial position and results of operations and require the application of significant judgments by management. As a result, the consolidated financial statements are subject to an inherent degree of uncertainty. In applying those policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. These estimates are based on Biocurex's historical experience, terms of existing contracts, observance of trends in the industry and information available from outside sources, as appropriate. Biocurex's significant accounting policies include: Revenue Recognition. Biocurex recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition in Financial Statements." Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility is reasonably assured. Registration Payment Arrangements. Biocurex accounts for registration rights arrangements and related liquidated damages provisions under EITF 00-19-2 "Accounting for Registration Payment Arrangements" ("EITF 00-19-2"), which addresses an issuer's accounting for registration payment arrangements. EITF 00-19-2 defines a registration payment arrangement as an arrangement where the issuer i) will endeavor to file a registration statement for the resale of financial instruments, have the registration statement declared effective, or maintain its effectiveness and ii) transfer consideration to the counterparty if the registration statement is not declared effective or its effectiveness is not maintained. EITF 00-19-2 requires the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, to be separately recognized and measured in accordance with Financial Accounting Standards Board ("FASB") No. 5, "Accounting for Contingencies" and FASB Interpretation No. 14 "Reasonable Estimation of the Amount of a Loss". Long-lived Assets. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. Biocurex recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. 18 Investments. Investments consist of equity securities classified as "available-for-sale" securities under SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and are reported at fair value. Accordingly, unrealized gains and losses on these investments are reflected as other comprehensive income in stockholders' equity. Stock-based Compensation. Biocurex records stock-based compensation in accordance with SFAS No. 123R "Share Based Payments", using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS. See the financial statements attached to and made a part of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable. ITEM 9A. CONTROLS AND PROCEDURES Ricardo Moro, Biocurex's Chief Executive and Financial Officer, has evaluated the effectiveness of Biocurex's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report, and in his opinion Biocurex's disclosure controls and procedures were effective. There were no changes in Biocurex's internal controls over financial reporting that occurred during the fiscal year that have materially affected, or are reasonably likely to materially affect, Biocurex's internal controls over financial reporting. Management's Report on Internal Control Over Financial Reporting ---------------------------------------------------------------- The management of Biocurex 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). Internal control over financial reporting is a process designed under the supervision of the Chief Executive andFinancial Officer of Biocurex to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Biocurex's financial statements for external purposes in accordance with U.S. GAAP. While Biocurex believes that its existing internal control framework and procedures over financial reporting have been effective in accomplishing its objectives, Biocurex intends to continue the practice of reevaluating, refining, 19 and expanding its internal controls over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Biocurex's management assessed the effectiveness of its internal control over financial reporting as of December 31, 2008. In making this assessment, Biocurex's management used criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Based on this assessment, Biocurex believes that, as of December 31, 2008, its internal control over financial reporting was effective based on those criteria. This report does not include an attestation report of Biocurex's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by Biocurex's registered public accounting firm pursuant to temporary rules of the SEC that permit Biocurex to provide only management's report. ITEM 9B. OTHER INFORMATION Not Applicable ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information concerning Biocurex's officers and directors follows: Name Age Position ---- --- -------- Dr. Ricardo Moro 56 President, Principal Executive, Financial and Accounting Officer, and a Director Dr. Phil Gold, PhD 70 Director Each director holds office until his successor is duly elected by the stockholders. Biocurex's officers serve at the pleasure of the Board of Directors. Dr. Ricardo Moro, MD. - has been an officer and director of Biocurex since March 2001. Since 1996, Dr. Moro has been the President of Pacific Biosciences, formerly named Curex Technologies Inc., where he developed the RECAF(TM) cancer marker concept. From 1980 to 1985, Dr. Moro worked in cancer research at the French National Cancer Institute near Paris, France. From late 1985 to 1988, he worked at the University of Alberta, Edmonton on onco-developmental biology. From 1989 to 1996, he was engaged in various entrepreneurial ventures relating to diagnostics and instrumentation. Dr. Phil Gold, C.C., O.Q., MD., PhD. - has been a director of Biocurex since March 2001. From 1978 to 1980, Dr. Gold was Director of the McGill Cancer Centre in Montreal, Quebec. From 1980 to 1984, he was Physician-in-Chief of the Montreal General Hospital. From 1985 to 1990, he served as Chairman of the Department of Medicine at McGill University in Montreal. His present positions 20 include Physician-in-Chief, Department of Medicine, The Montreal General Hospital; Professor of Medicine, McGill University; Professor, Departments of Physiology and Oncology, McGill University; and the Director of the McGill University Medical Clinic at the Montreal General Hospital. Biocurex does not have a compensation committee. The directors of Biocurex serves as its Audit Committee. Biocurex does not have a director serving as a financial expert. Biocurex does not believe a financial expert is necessary since Biocurex has only minimal revenues. Dr. Phil Gold is the only director who is independent, as that term is defined in Section 803 of the listing standards of the NYSE Alternext US. Biocurex has adopted a Code of Ethics which is applicable to its principal executive, financial, and accounting officers and persons performing similar functions. The Code of Ethics is available on Biocurex's website located at www.biocurex.com. Compensation Committee Interlocks and Insider Participation ----------------------------------------------------------- Biocurex's directors act as its compensation committee. During the year ended December 31, 2008 each director of Biocurex participated in deliberations concerning executive officer compensation. During the year ended December 31, 2008, no officer of Biocurex was also a member of the compensation committee or a director of another entity, which other entity had one of its executive officers serving as a director of Biocurex or as a member of its compensation committee. Dr. Gerald Wittenberg resigned as an officer and director of Biocurex on February 17, 2009. ITEM 11. EXECUTIVE COMPENSATION The following table shows in summary form the compensation received by (i) Biocurex's Chief Executive Officer and (ii) by each other executive officer who received total compensation in excess of $100,000 during the two years ended December 31, 2008. All Other Annual Restric- Com- Name and ted Stock Option pensa- Principal Fiscal Salary Bonus Awards Awards tion Position Year (1) (2) (3) (4) (5) Total ------------ ------ ------ ----- -------- ------ ------- ----- Dr. Ricardo Moro 2008 $120,000 -- -- $255,000 $375,000 Chief Executive Officer 2007 $135,000 -- -- $260,000 -- $395,000 21 Dr. Gerald Wittenberg 2008 $ -- -- -- $255,000 $255,000 Principal Financial 2007 $ -- -- -- $260,000 -- $260,000 Officer, Secretary and Treasurer (6) (1) The dollar value of base salary (cash and non-cash) earned. Pacific BioSciences, a Company owned by Dr. Moro, is paid to conduct all research on behalf of Biocurex. During the years ended December 31, 2008 and 2007 Dr. Moro did not receive any cash compensation from Biocurex but received $120,000 and $135,000, respectively, as salary and dividends from Pacific BioSciences. (2) The dollar value of bonus (cash and non-cash) earned. (3) During the periods covered by the table, the value of the shares of restricted stock issued as compensation for services to the persons listed in the table. (4) The value of all stock options granted during the periods covered by the table. (5) All other compensation received that could not be properly reported in any other column of the table. (6) On February 17, 2009 Dr. Wittenberg resigned as an officer and director of Biocurex. Biocurex does not have a compensation committee. The directors of Biocurex approve their own compensation since decisions regarding compensation to be paid to the officers and directors of Biocurex are made by the directors. Biocurex does not have any policy which prohibits or limits the power of directors to approve their own compensation. Employment Contracts -------------------- Biocurex does not have any employment contracts with its executive officers. During the past two years Biocurex compensated its two officers, Dr. Moro and Dr. Wittenberg, with option grants. The number of options granted each year was determined by dividing $225,000 by the average closing price of Biocurex's common stock for the two weeks prior to the date options are awarded, which typically is in March of each year. The exercise price of the options was set at $0.001 per share. Long-Term Incentive Plans - Awards in Last Fiscal Year ------------------------------------------------------ None. Employee Pension, Profit Sharing or Other Retirement Plans ---------------------------------------------------------- None. 22 Compensation of Directors During Year Ended December 31, 2008 ------------------------------------------------------------- Name Paid in Cash Stock Awards (1) Option Awards (2) ---- ------------ ---------------- ----------------- Dr. Phil Gold -- -- $60,000 (1) The fair value of stock issued for services computed in accordance with FAS 123R on the date of grant. (2) The fair value of options granted computed in accordance with FAS 123R on the date of grant. Directors' fees paid to Dr. Moro and Dr. Wittenberg are included in the Executive Compensation table. Dr. Wittenberg resigned as an officer and director of Biocurex on February 17, 2009. Stock Option and Bonus Plans ---------------------------- Biocurex has a Non-Qualified Stock Option Plan and a Stock Bonus Plan. A summary description of these Plans follows. In some cases these Plans are collectively referred to as the "Plans." Non-Qualified Stock Option Plan ------------------------------- The Non-Qualified Stock Option Plan authorizes the issuance of shares of Biocurex's common stock to persons that exercise options or warrants granted pursuant to the Plan. Biocurex's employees, directors, officers, consultants and advisors are eligible to be granted options or warrants pursuant to the Plan, provided however that bona fide services must be rendered by such consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction. The exercise price of the option or warrant is determined by Biocurex's Board of Directors. Stock Bonus Plan ---------------- Under the Stock Bonus Plan, Biocurex's employees, directors, officers, consultants and advisors are eligible to receive a grant of Biocurex's shares, provided however that bona fide services must be rendered by consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction. Other Information Regarding the Plans ------------------------------------- The Plans are administered by Biocurex's Board of Directors. The Directors serve for a one-year tenure and until their successors are elected. A Director may be removed at any time by the vote of a majority of Biocurex's shareholders. Any vacancies that may occur on the Board of Directors may be filled by the Board of Directors. The Board of Directors is vested with the authority to interpret the provisions of the Plans and supervise the administration of the 23 Plans. In addition, the Board of Directors is empowered to select those persons to whom shares or options are to be granted, to determine the number of shares subject to each grant of a stock bonus or an option and to determine when, and upon what conditions, shares or options granted under the Plans will vest or otherwise be subject to forfeiture and cancellation. In the discretion of the Board of Directors, any option granted pursuant to the Plans may include installment exercise terms such that the option becomes fully exercisable in a series of cumulating portions. The Board of Directors may also accelerate the date upon which any option is first exercisable. Any shares issued pursuant to the Stock Bonus Plan and any options granted pursuant to the Non-Qualified Stock Option Plan will be forfeited if the "vesting" schedule established by the Board of Directors at the time of the grant is not met. For this purpose, vesting means the period during which the employee must remain an employee of Biocurex or the period of time a non-employee must provide services to Biocurex. At the discretion of the Board of Directors, payment for the shares of common stock underlying options may be paid through the delivery of shares of Biocurex's common stock having an aggregate fair market value equal to the option price, provided such shares have been owned by the option holder for at least one year prior to such exercise. A combination of cash and shares of common stock may also be permitted at the discretion of the Board of Directors. Options are generally non-transferable except upon the death of the option holder. Shares issued pursuant to the Stock Bonus Plan will generally not be transferable until the person receiving the shares satisfies the vesting requirements imposed by the Board of Directors when the shares were issued. The Board of Directors of Biocurex may at any time, and from time to time, amend, terminate, or suspend one or more of the Plans in any manner they deem appropriate, provided that such amendment, termination or suspension will not adversely affect rights or obligations with respect to shares or options previously granted. The Board of Directors may not make any amendment which would materially modify the eligibility requirements for the Plans or materially increase in any other way the benefits accruing to employees who are eligible to participate in the Plans, without shareholder approval. The following tables show the options granted to and the options exercised by the persons named below, during the three fiscal years ended December 31, 2008, and the period ended March 25, 2009. All options were granted pursuant to Biocurex's Non-Qualified Stock Option Plan. Options Granted --------------- Exercise Options Price Expiration Name Grant Date Granted (#) Per Share Date ---- ---------- ----------- --------- ---------- Dr. Ricardo Moro 2/23/2006 230,000 $0.001 2/28/2010 Dr. Phil Gold 2/23/2006 55,000 $0.001 2/28/2010 Dr. Gerald Wittenberg 2/23/2006 230,000 $0.001 2/28/2010 Dr. Ricardo Moro 1/31/2007 260,000 $0.001 1/31/2010 Dr. Phil Gold 1/31/2007 60,000 $0.001 1/31/2010 24 Dr. Gerald Wittenberg 1/31/2007 260,000 $0.001 1/31/2010 Dr. Ricardo Moro 2/14/2008 255,000 $0.001 2/28/2010 Dr. Phil Gold 2/14/2008 60,000 $0.001 2/28/2010 Dr. Gerald Wittenberg 2/14/2008 255,000 $0.001 2/28/2010 Dr. Ricardo Moro 3/17/2009 1,578,947 $0.001 3/19/2011 Dr. Phil Gold 3/17/2009 684,210 $0.001 3/19/2011 Options Exercised ----------------- Date of Shares Acquired On Value Exercise on Exercise (1) Realized (2) -------- ------------------ ------------ Dr. Phil Gold 12/11/2006 25,000 $17,725 (1) The number of shares received upon exercise of options. (2) With respect to options exercised, the difference between the option exercise price and the market value of the shares purchased on the date the options were exercised. The following tables show the options held by the persons named below as of March 25, 2009. All options were granted pursuant to Biocurex's Non-Qualified Stock Option Plan. Shares underlying unexercised options which are: ------------------------------ Exercise Expiration Name Exercisable Unexercisable Price Date ---- ----------- ------------- -------- ---------- Dr. Ricardo Moro 225,000 0.001 1/31/12 Dr. Ricardo Moro 450,000 0.001 3/31/12 Dr. Ricardo Moro 260,000 0.001 1/31/10 Dr. Ricardo Moro 230,000 0.001 2/28/10 Dr. Ricardo Moro 650,000 0.001 3/31/14 Dr. Ricardo Moro 255,000 0.001 2/28/10 Dr. Ricardo Moro 1,578,947 0.001 3/19/11 Dr. Phil Gold 25,000 0.001 1/31/12 Dr. Phil Gold 60,000 0.001 1/31/10 Dr. Phil Gold 55,000 0.001 2/28/10 Dr. Phil Gold 60,000 0.001 2/28/10 Dr. Phil Gold 684,210 0.001 3/19/11 25 Shares Issuable Upon Exercise Exercise Expiration Name of Warrants (1) Price Date ------ --------------- -------- ---------- Dr. Gerald Wittenberg 252,278 $0.05 12/31/08 Dr. Gerald Wittenberg 1,275,000 $0.08 01/15/09 (1) Warrants were not issued pursuant to Biocurex's Non-Qualified Stock Option Plan. Dr. Wittenberg resigned as an officer and director of Biocurex on February 17, 2009. On February 24, 2009 Dr. Wittenberg exercised options and warrants to purchase 2,070,000 shares of Biocurex's common stock. The exercise price of the options and warrants was $0.001 per share. The closing price of Biocurex's common stock on February 24, 2009 was $0.08 The following table shows the weighted average exercise price of the outstanding options and warrants granted pursuant to Biocurex's Non-Qualified Stock Option Plan as of December 31, 2008. Biocurex's Non-Qualified Stock Option Plan has not been approved by Biocurex's shareholders. Number Number of Securities Remaining of Securities Available For Future Issuance to be Issued Weighted-Average Under Equity Compensation Upon Exercise Exercise Price of Plans (Excluding Securities of Outstanding of Outstanding Reflected in the Plan category Options Options First Column of This Table) -------------------------------------------------------------------------------------- Non-Qualified Stock Option Plan 3,890,000 $0.001 2,587,723
The following table shows the number of outstanding stock options and stock bonuses granted by Biocurex pursuant to the Plans, as of March 25, 2009. Each option represents the right to purchase one share of Biocurex's common stock. Total Shares Shares Remaining Reserved Options Options Issued As Options/Shares Name of Plan Under Plans Outstanding Exercised Stock Bonus Under Plans ------------ ------------ ----------- --------- ----------- -------------- Non-Qualified Stock 12,500,000 4,533,157 7,642,277 N/A 324,566 Option Plan Stock Bonus Plan 5,500,000 N/A N/A 4,606,981 893,019
26 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table shows, as of March 25, 2009, information with respect to the shareholdings of (i) each person owning beneficially 5% or more of Biocurex's common stock, (ii) each officer and director of Biocurex, and (iii) all officers and directors as a group. Unless otherwise indicated, each owner has sole voting and investment powers over his shares of common stock. Number of Percent of Name and Address Shares (1) Class ---------------- ---------- ---------- Dr. Ricardo Moro 4,003,947 8.3% 1007-1625 West 13th Avenue Vancouver, British Columbia Canada V6J 2E9 Dr. Phil Gold 884,210 1.96% 3225 The Boulevard Westmount, Quebec Canada H3Y 1S4 Dr. Gerald Wittenberg 4,762,203 10.3% 6857 Churchill Street Vancouver, British Columbia Canada V6P 5B4 All Officers and Directors 4,888,157 10.2% as a Group (2 persons) (1) Includes shares issuable upon the exercise of options or warrants granted to the following persons, all of which are presently exercisable. Shares Issuable Upon Exercise Name of Options or Warrants Exercise Price ---- ---------------------- -------------- Dr. Ricardo Moro 3,648,947 $0.001 Dr. Phil Gold 874,210 $0.001 Dr. Gerald Wittenberg 252,278 $ 0.05 Dr. Gerald Wittenberg 1,275,000 $ 0.08 27 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE. Pacific BioSciences conducts all research relating to the technology under development by Biocurex. Dr. Ricardo Moro owns 100% of Pacific BioSciences. See Item 1 of this report for information concerning amounts billed to Biocurex by Pacific BioSciences. As of December 31, 2008, Biocurex owed Pacific BioSciences $328,269 for research and administrative expenses paid by Pacific Biosciences on behalf of Biocurex. As of December 31, 2008 Biocurex owed Dr. Gerald Wittenberg $7,000 for advances made by Dr. Wittenberg to Biocurex. The advances are unsecured, non-interest bearing and due on demand. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Manning Elliott LLP, Chartered Accountants ("Manning Elliott"), served as Biocurex's independent public accountants for the fiscal year ended December 31, 2008 and 2007. The following table shows the aggregate fees billed to Biocurex for the year ended December 31, 2008 and 2007 by Manning Elliott. 2008 2007 ---- ---- Audit Fees $59,905 $41,128 Audit Related Fees -- -- Financial Information Systems -- -- Design and Implementation Fees -- -- Tax Fees -- -- All Other Fees -- -- Audit fees represent amounts billed for professional services rendered for the audit of Biocurex's annual financial statements and the reviews of the financial statements included in Biocurex's 10-QSB reports for the fiscal year. Before Manning Elliott was engaged by Biocurex to render audit or audit related services, the engagement was approved by Biocurex's Directors. ITEM 15. EXHIBITS Exh No. Exhibit Name Page Number ------- ------------ ----------- 3.1 Certificate of Incorporation Incorporated by reference to Exhibit 3.1 to Biocurex's Registration Statement on Form 10-SB. 3.2 Bylaws Incorporated by reference to Exhibit 3.2 to Registration Statement on Form 10-SB.
28 Exh No. Exhibit Name Page Number ------- ------------ ----------- 4.1 Non-Qualified Stock Option Plan Incorporated by reference to Exhibit 4.1 of Biocurex's Registration Statement on Form S-8 (Commission File No. 333-103259). 4.2 Stock Bonus Plan Incorporated by reference to Exhibit 4.2 of Biocurex's Registration Statement on Form S-8 (Commission File No. 333-103529). 10.1 Asset Purchase Agreement Incorporated by reference to Exhibit relating to the acquisition 10.2 to the Company's report on of Lagostar Trading S.A. Form 8-K dated February 20, 2001. 10.2 Asset Purchase Agreement with Incorporated by reference to Exhibit 10.2 to Curex Technologies, Inc. Biocurex's report on From 10-KSB for the year ended December 31, 2001. 10.3 Securities Purchase Agreement Incorporated by reference to Exhibit 10 (together with schedule filed with the Company's 8-K report required by Instruction 2 to dated June 9, 2007. Item 601 of Regulation S-K) pertaining to Series K notes and warrants, together with the following exhibits to the Securities Purchase Agreement: A) Convertible Notes; B) Warrants; C) Security Agreement; and D) Registration Rights Agreement. 10.4 License Agreement with Abbott Incorporated by reference to Exhibit 10.4 Laboratories (portions of of Biocurex's Registration Statement on Exhibit 10.4 have been omitted Form S-1 (Commission File No. 333-144879 pursuant to a request for confidential treatment. 31 Rule 13a-14(a) Certifications __________________________________ 32 Section 1350 Certifications __________________________________
29 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 INDEX Report of Independent Registered Public Accounting Firm F-1 Balance Sheets F-2 Statements of Operations F-3 Statements of Cash Flows F-4 Statement of Stockholders' Equity (Deficit) F-5 Notes to the Financial Statements F-13 30 Report of Independent Registered Public Accounting Firm To the Directors and Stockholders Whispering Oaks International, Inc. (dba Biocurex, Inc.) (A Development Stage Company) We have audited the accompanying balance sheets of Whispering Oaks International, Inc. (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, cash flows and stockholders' equity (deficit) for the years then ended and accumulated for the period from January 1, 2001 to December 31, 2008. These financial statements are the responsibility of the Company's management. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes 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 internal control over financial reporting. An audit also includes 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 Whispering Oaks International, Inc. (A Development Stage Company) as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended and accumulated for the period from January 1, 2001 to December 31, 2008, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficiency and has incurred significant operating losses since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Manning Elliott CHARTERED ACCOUNTANTS Vancouver, Canada March 25, 2009 F-1 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) BALANCE SHEETS (Expressed in U.S. dollars) December 31, December 31, 2008 2007 $ $ ASSETS Current Assets Cash 45,625 1,372,598 Investment securities (Note 3) 18,014 61,366 Prepaid expenses and other (Notes 6(a) and 8(a)) 137,672 109,045 Notes receivable, net (Note 4) 2,666 35,497 ------------ ------------ Total Current Assets 203,977 1,578,506 Deferred financing costs (Note 7 (b)) 321,651 536,084 Patents (Note 5) 446,946 360,812 ------------ ------------ Total Assets 972,574 2,475,402 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable 174,400 105,505 Accrued liabilities 377,627 359,854 Due to related parties (Note 6) 335,269 344,355 Convertible notes payable (Note 7 (a)) 194,828 194,828 Current portion of convertible debt (Note 7 (b)) 688,754 371,712 ------------ ------------ 1,770,878 1,376,254 Convertible debt (Note 7 (b)) 1,136,604 266,618 ------------ ------------ 2,907,482 1,642,872 Commitments and Contingencies (Notes 1, and 11) Stockholders' Equity (Deficit) Common stock Authorized: 125,000,000 shares, par value $0.001 Issued and outstanding: 43,713,399 and 42,143,275 respectively 43,713 42,143 Additional paid-in capital 15,178,205 13,899,938 Common stock subscribed 40,050 - Accumulated other comprehensive loss (15,529) (42,189) Accumulated deficit (114,175) (114,175) Deficit accumulated during the development stage (17,067,172) (12,953,187) ------------ ------------ Stockholders' Equity (Deficit) (1,934,908) 832,530 ------------ ------------ Total Liabilities and Stockholders' Equity (Deficit) 972,574 2,475,402 ------------ ------------ The accompanying notes are an integral part of these financial statements F-2 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) STATEMENTS OF OPERATIONS (Expressed in U.S. dollars) Accumulated During the Development Stage Year Ended January 1, 2001 December 31, to December 31, 2008 2007 2008 $ $ $ Revenue 1,000,000 50,000 1,464,456 ------------ ------------ ------------ Operating Expenses Amortization 37,758 27,896 174,015 General and administrative (Note 6(a)) 928,845 1,260,865 5,215,709 Professional and consulting fees 381,421 313,925 4,797,456 Research and development (Note 6(a)) 675,302 662,944 3,739,837 ------------ ------------ ------------ Total Operating Expenses 2,023,326 2,265,630 13,927,017 ------------ ------------ ------------ Loss From Operations (1,023,326) (2,215,630) (12,462,561) ------------ ------------ ------------ Other Income (Expense) Accretion of discounts on convertible debt (1,280,531) (791,092) (2,941,154) Amortization of debt issue costs (214,434) (107,217) (321,650) Gain (loss) sale of equity investment securities (16,389) - 168,926 Interest expense (569,982) (242,628) (874,212) Interest income 8,164 12,956 383,679 Loss on extinguishments of convertible debt (906,496) - (872,912) Loss on impairment of patent cost (67,620) - (67,620) Loss on issuance of shares (43,371) (10,708) (79,668) ------------ ------------ ------------ Total Other Expense (3,090,659) (1,138,689) (4,604,611) ------------ ------------ ------------ Net Loss for the Period (4,113,985) (3,354,319) (17,067,172) Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities 26,660 (115,061) (15,529) ------------ ------------ ------------ Total Comprehensive Loss (4,087,325) (3,469,380) (17,082,701) ------------ ------------ ------------ Net Loss Per Share - Basic and Diluted (0.10) (0.08) ------------ ------------ Weighted Average Shares Outstanding 42,917,000 41,127,000 ------------ ------------
The accompanying notes are an integral part of these financial statements F-3 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars) Accumulated During the Development Stage Year Ended January 1, 2001 December 31, to December 31, 2008 2007 2008 $ $ $ Operating Activities: Net loss for the period (4,113,985) (3,354,319) (17,067,172) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discounts on convertible debt 1,280,531 791,092 2,941,154 Allowance for uncollectible notes receivable 32,831 - 98,129 Amortization 37,758 27,896 174,015 Amortization of debt issue costs 214,433 107,217 321,650 Loss on extinguishments of debt 906,496 - 872,912 Loss (gain) on sale of investment securities 16,389 - (274,000) Loss from impairment of patents 67,620 - 67,620 Loss on issuance of shares 43,371 10,708 79,668 Stock-based compensation 729,402 666,650 4,886,464 Changes in operating assets and liabilities: Notes and interest receivable - - (6,296) Prepaid expenses and other (28,627) 5,767 (64,305) Accounts payable 166,027 95,082 1,285,615 Accrued liabilities 17,775 139,968 266,828 Deferred revenue - - (162,000) Subscriptions receivable - - (100,682) ------------ ------------ ------------ Net Cash Used in Operating Activities (629,979) (1,509,939) (6,680,400) ------------ ------------ ------------ Investing Activities: Net Proceeds from notes receivable - - 1,711 Patent costs (191,512) (59,704) (484,113) Proceeds from sale of investment securities 53,621 - 438,515 ------------ ------------ ------------ Net Cash Used in Investing Activities (137,891) (59,704) (44,427) ------------ ------------ ------------ Financing Activities: Due to related parties (9,086) (14,408) 401,420 Proceeds from convertible debt - 3,000,000 3,639,743 Repayment on convertible debt (825,000) (300,000) (1,178,000) Debt issue costs - (532,500) (532,500) Proceeds from private placements of common stock and share subscriptions received 258,950 124,750 3,186,472 Proceeds from the exercise of stock options and warrants 16,033 85,333 1,144,454 Share issuance costs - (11,188) (133,688) ------------ ------------ ------------ Net Cash (Used in) Provided by Financing Activities (559,103) 2,351,987 6,527,901 ------------ ------------ ------------ Net (Decrease) Increase in Cash (1,326,973) 782,344 (196,926) Cash - Beginning of Year 1,372,598 590,254 242,551 ------------ ------------ ------------ Cash - End of Year 45,625 1,372,598 45,625 ------------ ------------ ------------ Non-cash Investing and Financing Activities: Share issued to settle debt 140,500 118,000 818,347 Note payable converted into common shares 175,000 - 1,033,076 ------------ ------------ ------------ Supplemental Disclosures: Interest paid 359,453 205,133 565,365 Income taxes - - - ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements F-4 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD FROM JANUARY 1, 2001 (INCEPTION OF DEVELOPMENT STAGE) TO DECEMBER 31, 2008 (Expressed in U.S. dollars) Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ Balance at January 1, 2001 8,225,022 8,225 46,775 - - - - (114,175) - (59,175) Capital contributed relating to the forgiveness of advances payable (February 2001) - - 59,175 - - - - - - 59,175 Issuance of common stock at $2.00 per share for patents and intellectual properties (February 2001) 1,950,000 1,950 (1,950) - - - - - - - Issuance of common stock at $1.51 per share in settlement of convertible notes payable (May 2001) 1,544,404 1,545 464,616 - - - - - - 466,161 Issuance of common stock for cash: October 2001 - $1.25 per share 52,000 52 65,000 - - - - - - 65,052 December 2001 - $0.97 per share 32,260 32 31,406 - - - - - - 31,438 Issuance of common stock at $2.00 per share for services rendered (December 2001) 11,000 11 21,989 - - - - - - 22,000 Issuance of warrants - - 175,000 - - - - - - 175,000 Cumulative foreign currency translation adjustment - - - - - - 28,213 - - 28,213 Net loss for the year - - - - - - - - (1,089,464) (1,089,464) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance at December 31, 2001 11,814,686 11,815 862,011 - - - 28,213 (114,175) (1,089,464) (301,600) Issuance of common stock at $0.75 per share (January 2002) 105,313 105 78,880 - - - - - - 78,985 Issuance of common stock at $0.10 per share to settle convertible notes payable (December 2002) 1,100,000 1,100 108,900 - - - - - - 110,000 Issuance of common stock for services rendered April 2002 - $0.64 per share 77,149 77 49,062 - - - - - - 49,139 July 2002 - $1.25 per share 7,400 8 9,207 - - - - - - 9,215 Issuance of common stock for consulting services at $0.05 per share (November 2002) 2,300,000 2,300 112,700 - - (115,000) - - - - Issuance of common stock to settle accounts payable at $0.08 per share (December 2002) 929,244 929 74,181 - - - - - - 75,110 Fair value of stock options granted - - 21,042 - - - - - - 21,042 Fair value of warrants issued - - 207,188 - - - - - - 207,188 Reclassification of warrants and options to liability - - (529,785) - - - - - - (529,785) Reclassification of warrant liability to equity - - 71,675 - - - - - - 71,675 Beneficial conversion feature of convertible debt - - 99,800 - - - - - - 99,800 Cumulative foreign currency translation adjustment - - - - - - (28,213) - - (28,213) Net loss for the year - - - - - - - - (646,771) (646,771) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance - December 31, 2002 16,333,792 16,334 1,164,861 - - (115,000) - (114,175) (1,736,235) (784,215) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- -----------
F-5 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ Balance - December 31, 2002 16,333,792 16,334 1,164,861 - - (115,000) - (114,175) (1,736,235) (784,215) Issuance of common stock for cash: January 2003 - $0.07 per share 900,543 900 62,137 - - - - - - 63,037 November 2003 - $0.21 per share 288,095 288 60,195 - - - - - - 60,483 Issuance of common stock pursuant to exercise of stock options: March 2003 - $0.07 per share 1,560,000 1,560 107,640 - - - - - - 109,200 May 2003 - $0.16 per share 1,000,000 1,000 159,000 - - - - - - 160,000 June 2003 - $0.17 per share 305,822 306 51,594 - - - - - - 51,900 November 2003 - $0.001 per share 450,000 450 - - - - - - - 450 March 2003 - $0.07 per share 135,000 135 9,315 - - - - - - 9,450 June 2003 - $0.17 per share 294,118 294 49,706 - - - - - - 50,000 October 2003 - $0.18 per share 277,777 278 49,722 - - - - - - 50,000 November 2003 - $0.24 per share 104,167 104 24,896 - - - - - - 25,000 Issuance of common stock for services: March 2003 - $0.40 per share 156,250 156 62,344 - - - - - - 62,500 October 2003 - $0.16 per share 1,000,000 1,000 159,000 - - (160,000) - - - - Fair value of stock options granted - - 841,349 - - - - - - 841,349 Amortization of deferred compensation - - - - - 141,667 - - - 141,667 Fair value of warrants issued - - 274,601 - - - - - - 274,601 Fair value of beneficial conversion feature related to convertible notes - - 255,142 - - - - - - 255,142 Fair value of warrants issued for loan provided - - 99,778 - - - - - - 99,778 Reacquisition value of beneficial conversion feature - - (33,584) - - - - - - (33,584) Unrealized gain on investment securities - - - - - - 48,000 - - 48,000 Net loss for the year - - - - - - - - (2,618,955) (2,618,955) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance - December 31, 2003 24,983,564 24,983 3,741,470 - - (133,333) 48,000 (114,175) (4,355,190) (788,245) Issuance of common stock for cash: January 2004 - $0.19 per share 100,000 100 18,900 - - - - - - 19,000 March 2004 - $0.15 per share 633,334 633 94,367 - - - - - - 95,000 March 2004 - $0.19 per share 315,790 316 59,684 - - - - - - 60,000 July 2004 - $0.50 per share 500,000 500 249,500 - - - - - - 250,000
F-6 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ July 2004 - $0.60 per share 33,333 33 19,967 - - - - - - 20,000 Dec 2004 - $0.47 per share 320,600 321 150,361 - (150,682) - - - - - Issuance of common stock for services: February 2004 - $0.22 per share 142,928 143 31,301 - - - - - - 31,444 March 2004 - $0.23 per share 25,000 25 5,725 - - - - - - 5,750 July 2004 - $0.91 per share 200,000 200 181,800 - - - - - - 182,000 October 2004 - $0.72 per share 60,000 60 43,140 - - - - - - 43,200 December 2004 - $0.63 per share 79,616 80 50,078 - - - - - - 50,158 Issuance of common stock pursuant to the exercise of stock options for cash: March 2004 - $0.14 per share 40,000 40 5,560 - - - - - - 5,600 March 2004 - $0.22 per share 200,000 200 43,800 - - - - - - 44,000 April 2004 - $0.14 per share 65,000 65 9,035 - - - - - - 9,100 April 2004 - $0.001 per share 150,000 150 - - - - - - - 150 July 2004 - $0.14 per share 125,000 125 17,375 - - - - - - 17,500 July 2004 - $0.07 per share 25,000 25 1,725 - - - - - - 1,725 July 2004 - $0.001 per share 200,000 200 - - - - - - 200 September 2004 - $0.07 per share 20,000 20 1,380 - - - - - - 1,400 October 2004 - $0.73 per share 128,000 128 93,312 - - - - - - 93,440 Fair value of stock options granted - - 419,204 - - - - - - 419,204 Issuance of common stock pursuant to the exercise of warrants for cash: June 2004 - $0.07 per share 628,571 629 43,371 - - - - - - 44,000 June 2004 - $0.19 per share 105,263 105 19,895 - - - - - - 20,000 July 2004 - $0.05 per share 30,000 30 1,470 - - - - - - 1,500 July 2004 - $0.30 per share 153,945 154 46,030 - - - - - - 46,184 August 2004 - $0.21 per share 338,095 338 70,662 - - - - - - 71,000 September 2004 - $0.07 per share 271,972 272 18,766 - - - - - - 19,038 September 2004 - $0.001 per share 200,000 200 - - - - - - - 200 Issuance of common stock pursuant to the exercise of warrants for cash: December 2004 - $0.08 per share 145,683 146 11,509 - - - - - - 11,655
F-7 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ December 2004 - $0.05 per share 337,313 337 16,528 - - - - - - 16,865 December 2004 - $0.30 per share 206,300 206 61,684 - - - - - - 61,890 Amortization of deferred compensation - - - - - 106,499 - - - 106,499 Unrealized gain on investmen securities - - - - - - 174,000 - - 174,000 Net loss for the year - - - - - - - - (1,406,455) (1,406,455) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance - December 31, 2004 30,764,307 30,764 5,527,599 - (150,682) (26,834) 222,000 (114,175) (5,761,645) (272,973) Issuance of common stock for services: February 2005 - $0.71 per share 15,492 15 10,985 - - - - - - 11,000 March 2005 - $0.90 per share 30,000 30 26,970 - - - - - - 27,000 May 2005 - $1.26 per share 15,000 15 18,885 - - - - - - 18,900 July 2005 - $1.00 per share 70,000 70 72,930 - - - - - - 73,000 December 2005 - $0.89 per share 25,000 25 22,225 - - - - - - 22,250 Issuance of common stock for cash: May 2005 - $1.00 per share 25,000 25 24,975 - - - - - - 25,000 June 2005 - $1.00 per share 135,000 135 134,865 - - - - - - 135,000 June 2005 - $1.10 per share 4,545 5 4,995 - - - - - - 5,000 Issuance of common stock pursuant to the exercise of stock options for notes receivable: February 2005 - $0.60 per share 209,000 209 125,191 - - - - - - 125,400 April 2005 - $0.60 per share 5,000 5 7,495 - - - - - - 7,500 Fair value of stock options granted - - 384,500 - - - - - - 384,500 Issuance of common stock pursuant to the exercise of stock options for cash: March 2005 - $0.001 per share 1,750,000 1,750 - - - - - - - 1,750 March 2005 - $0.07 per share 25,000 25 1,725 - - - - - - 1,750 December 2005 - $0.001 per share (cancellation) (1,750,000) (1,750) - - - - - - - (1,750) Issuance of common stock pursuant to the exercise of warrants for cash: January 2005 - $0.30 per share 26,305 26 7,865 - - - - - - 7,891 January 2005 - $0.38 per share 65,789 66 24,934 - - - - - - 25,000
F-8 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ March 2005 - $0.21 per share 50,000 50 10,450 - - - - - - 10,500 March 2005 - $0.001 per share 450,000 450 - - - - - - - 450 June 2005 - $0.21 per share 682,714 683 142,687 - - - - - - 143,370 Issuance of common stock pursuant to the exercise of warrants for cash: June 2005 - $0.10 per share 600,000 600 59,400 - - - - - - 60,000 August 2005 - $0.75 per share 77,266 77 57,873 - - - - - - 57,950 December 2005 - $0.001 per share (cancellation) (450,000) (450) - - - - - - - (450) Issuance of common stock pursuant to the cashless exercise of warrants: February 2005 (139,474 warrants) 70,643 71 (71) - - - - - - - March 2005 (272,903 warrants) 213,576 213 (213) - - - - - - - Issuance of common stock pursuant to the conversion of notes payable (February 2005) 955,800 956 142,414 - - - - - - 143,370 February 2005, fair value of warrants issued on conversion of note payable - - 67,829 - - - - - - 67,829 December 2005, fair value of warrants issued for services - - 222,587 - - - - - - 222,587 Proceeds from stock subscriptions receivable - - - - 150,682 - - - - 150,682 Proceeds from common shares subscribed pursuant to warrants exercised - - - 85,962 - - - - - 85,962 Amortization of deferred compensation - - - - - 26,834 - - - 26,834 Unrealized loss on investment securities - - - - - - (18,000) - - (18,000) Net loss for the year - - - - - - - - (1,755,930) (1,755,930) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance - December 31, 2005 34,065,437 34,065 7,099,095 85,962 - - 204,000 (114,175) (7,517,575) (208,628) Issuance of common stock for services: June 2006 - $1.50 per share 25,000 25 37,475 - - - - - - 37,500 July 2006 - $0.72 per share 37,500 38 26,962 - - - - - - 27,000 July 2006 - $0.77 per share 37,500 38 28,837 - - - - - - 28,875 September 2006 - $0.80 per share 100,000 100 79,900 - - - - - - 80,000 October 2006 - $0.75 per share 225,000 225 168,525 - - - - - - 168,750
F-9 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ November 2006 - $0.86 per share 50,000 50 42,950 - - - - - - 43,000 Issuance of common stock for debt settlement: January 2006 - $0.78 per share 200,000 200 155,800 - - - - - - 156,000 January 2006 - $0.83 per share 6,250 6 5,181 - - - - - - 5,187 February 2006 - $0.73 per share 6,850 6 4,994 - - - - - - 5,000 June 2006 - $0.95 per share 90,000 90 85,410 - - - - - - 85,500 September 2006 - $0.55 per share 15,000 15 8,235 - - - - - - 8,250 September 2006 - $0.80 per share 200,000 200 159,800 - - - - - - 160,000 October 2006 - $0.72 per share 90,000 90 64,710 - - - - - - 64,800 Issuance of common stock for cash: April 2006 - $0.50 per share 150,000 150 74,850 - - - - - - 75,000 July 2006 - $0.50 per share 150,000 150 74,850 - - - - - - 75,000 July 2006 - $0.70 per share 110,000 110 76,890 - - - - - - 77,000 September 2006 - $0.50 per share 460,000 460 229,540 - - - - - - 230,000 October 2006 - $0.50 per share 1,995,000 1,995 995,505 - - - - - - 997,500 Share issuance costs - - (122,500) - - - - - - (122,500) Issuance of common stock pursuant to the exercise of stock options (December 2006) $0.001 per share 25,000 25 - - - - - - - 25 Fair value of stock options granted - - 375,457 - - - - - - 375,457 Fair value of stock options modified - - 68,067 - - - - - - 68,067 Issuance of common stock pursuant to the exercise of warrants for cash: January 2006 - $0.10 per share 500,000 500 49,500 (50,000) - - - - - - January 2006 - $0.05 per share 719,244 719 35,243 (35,962) - - - - - - Issuance of common stock pursuant to the conversion of notes payable (September 2006) 1,167,834 1,168 137,377 - - - - - - 138,545 September 2006, fair value of warrants issued on conversion of note payable - - 65,160 - - - - - - 65,160 Unrealized loss on investment securities - - - - - - (131,128) - - (131,128) Net loss for the year - - - - - - - - (2,081,293) (2,081,293) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance, December 31, 2006 40,425,615 40,425 10,027,813 - - - 72,872 (114,175) (9,598,868) 428,067 ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- -----------
F-10 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ Balance, December 31, 2006 40,425,615 40,425 10,027,813 - - - 72,872 (114,175) (9,598,868) 428,067 Issuance of common stock for services: January 2007 - $0.62 per share 135,000 135 83,565 - - - - - - 83,700 August 2007 - $0.63 per share 15,873 16 9,984 - - - - - - 10,000 August 2007 - $0.56 per share 17,857 18 9,982 - - - - - - 10,000 December 2007 - $0.72 per share 57,142 57 41,085 - - - - - - 41,142 December 2007 - $0.62 per share 10,488 10 6,492 - - - - - - 6,502 December 2007 - $0.53 per share 223,000 223 117,967 - - - - - - 118,190 Issuance of common stock for debt settlement: May 2007 - $0.65 per share 100,000 100 55,900 - - - - - - 56,000 Jul 2007 - $0.62 per share 100,000 100 61,900 - - - - - - 62,000 Issuance of common stock for cash: June 2007 - $0.45 per share 220,000 220 98,780 - - - - - - 99,000 May 2007 - $0.43 per share 23,256 23 9,977 - - - - - - 10,000 April 2007 - $0.45 per share 35,000 35 15,715 - - - - - - 15,750 Share issuance costs - - (11,188) - - - - - - (11,188) Fair value of stock options granted - - 412,545 - - - - - - 412,545 Issuance of common stock pursuant to the exercise of warrants for cash: March 2007 - $0.15 per share 266,667 267 39,733 - - - - - - 40,000 March 2007 - $0.17 per share 266,667 267 45,067 - - - - - - 45,334 Fair value of warrants issued - - 22,106 - - - - - - 22,106 Issuance of common stock pursuant to the cashless exercise of warrants (December 2007) 246,710 247 (247) - - - - - - - Fair value of warrants issued with convertible debt - 1,426,381 - - - - - - - 1,426,381 Intrinsic value of beneficial conversion feature on convertible debt - - 1,426,381 - - - - - - 1,426,381 Unrealized loss on investment securities - - - - - - (115,061) - - (115,061) Net loss for the year - - - - - - - - (3,354,319) (3,354,319) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance, December 31, 2007 42,143,275 42,143 13,899,938 - - - (42,189) (114,175)(12,953,187) 832,530 =========== ======== =========== ========== ========== ========= ======== ========= =========== ===========
F-11 Deficit Accumu- lated Other during Compre- the Stock- Common Stock Additional Common Stock Sub- Deferred hensive Accumu- Develop- holders' Paid-in Stock scriptions Compen- Income lated ment Equity Shares Amount Capital Subscribed Receivable sation (Loss) Deficit Stage (Deficit) ------ ------ ---------- ---------- ---------- --------- ------- ------- -------- --------- # $ $ $ $ $ $ $ $ $ Balance, December 31, 2007 42,143,275 42,143 13,899,938 - - - (42,189) (114,175)(12,953,187) 832,530 Issuance of common stock for services: December 2008 - $0.17 per share 36,000 36 6,084 - - - - - - 6,120 December 2008 - $0.15 per share 469,914 470 70,017 - - - - - - 70,487 Issuance of common stock for debt settlement: January 2008 - $0.53 per share 100,000 100 52,900 - - - - - - 53,000 April 2008 - $0.70 per share 125,000 125 87,375 - - - - - - 87,500 Issuance of common stock for cash: March 2008 - $0.60 per share 200,000 200 119,800 - - - - - - 120,000 June 2008 - $0.43 per share 230,000 230 98,670 - - - - - - 98,900 Exercise of stock options at $0.001 per share 33,333 33 - - - - - - - 33 Fair value of stock options granted - - 372,848 - - - - - - 372,848 July 2008, fair value of warrants issued for services - - 27,150 - - - - - - 27,150 Exercise of warrants at $0.19 per share 84,210 84 15,916 - - - - - - 16,000 Fair value of warrants/options modified - - 252,799 - - - - - - 252,799 Notes payable converted into common shares at $0.60 per share 291,667 292 174,708 - - - - - - 175,000 Common stock subscribed - $0.15 per share - - - 40,050 - - - - - 40,050 Unrealized loss on investment securities - - - - - - 26,660 - - 26,660 Net loss for the year - - - - - - - - (4,113,985) (4,113,985) ----------- -------- ---------- ---------- ---------- --------- ------- ---------- ----------- ----------- Balance, December 31, 2008 43,713,399 43,713 15,178,205 40,050 - - (15,529) (114,175)(17,067,172) (1,934,908) =========== ======== =========== ========== ========== ========= ======== ========= =========== ===========
F-12 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS Whispering Oaks International, Inc. (dba BioCurex, Inc.) (the "Company") was incorporated on December 8, 1997, under the laws of the State of Texas. During the first quarter of 2001, the Company ceased its business activities relating to the acquisition and sale of thoroughbred racehorses when a change of majority control occurred. On February 21, 2001, the Company acquired intellectual properties and patents relating to cancer diagnostics and therapeutics. The Company is now in the business of developing, producing, marketing and licensing cancer diagnostic kits and is currently considered a development stage enterprise as defined by Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting by Development Stage Enterprises". The financial statements are prepared in conformity with 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 does not have sufficient cash nor does it have an established source of revenue to cover its ongoing costs of operations. As of December 31, 2008 the Company has a working capital deficiency of $1,566,901 and accumulated losses of $17,067,172 since the inception of the development stage. These factors raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's anticipates expenditures of $3,429,000 over the next twelve months. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenses and restructuring its convertible notes payable into common stock. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the financial statements and the reported amounts of revenues and expenses during the periods. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, valuation of patent costs, valuation of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of F-13 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Use of Estimates (cont'd) which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Cash and Cash Equivalents The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. Registration Payment Arrangements The Company accounts for registration rights arrangements and related liquidated damages provisions under EITF 00-19-2 "Accounting for Registration Payment Arrangements" ("EITF 00-19-2"), which addresses an issuer's accounting for registration payment arrangements. EITF 00-19-2 defines a registration payment arrangement as an arrangement where the issuer i) will endeavor to file a registration statement for the resale of financial instruments, have the registration statement declared effective, or maintain its effectiveness and ii) transfer consideration to the counterparty if the registration statement is not declared effective or its effectiveness is not maintained. EITF 00-19-2 requires the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, to be separately recognized and measured in accordance with Financial Accounting Standards Board ("FASB") No. 5, "Accounting for Contingencies" and FASB Interpretation No. 14 "Reasonable Estimation of the Amount of a Loss". 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 to United States dollars in accordance with SFAS No. 52 "Foreign Currency Translation" using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. F-14 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue Recognition The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements." Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility is reasonably assured. The Company's revenue consists of license fees related to the licensing of its RECAF(TM) technology. Currently, there is one license agreement. Long-lived Assets In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes an impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. Research and Development Costs Research and development costs are charged to operations as incurred. Financial Instruments/Concentrations The fair values of cash, investment securities, notes receivable, accounts payable, due to related parties and convertible notes payable, and convertible debt were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company's operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk to the Company's operations results from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Financial instruments that potentially subject the Company to credit risk consist principally of cash. Cash was deposited with a high quality credit institution. For the years ended December 31, 2008 and 2007, revenue from a single customer represented 100% of total revenue. F-15 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes". The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Investment Securities The Company reports investments in debt and marketable equity securities at fair value based on quoted market prices or, if quoted prices are not available, discounted expected cash flows using market rates commensurate with credit quality and maturity of the investment. All investment securities are designated as available-for-sale with unrealized gains and losses included in comprehensive income. The Company regularly reviews investment securities for impairment based on criteria that include the extent to which the investment's carrying value exceeds its related market value, the duration of the market decline, the Company's ability to hold to recovery and the financial strength and specific prospects of the issuer of the security. Unrealized losses that are other than temporary are included in the determination of income. Realized gains and losses are accounted for on the specific identification method. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at December 31, 2008 and 2007, the Company's only component of comprehensive income was unrealized gains and losses on available-for-sale investment securities. Earnings Per Share The Company computes net loss per share in accordance with SFAS No. 128, "Earnings Per Share," which requires presentation of basic earnings per share and diluted earnings per share ("Diluted EPS"). The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted-average number of outstanding common shares during the period. Diluted earnings per share give effect to all potentially dilutive common shares outstanding during the period. The computation of Diluted EPS does not F-16 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Earnings Per Share(cont'd) assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. As of December 31, 2008 and 2007, the Company had approximately 20,650,000 and 22,709,000 respectively, of anti-dilutive securities, including options, warrants and equity instruments related to convertible notes payable. Stock-based Compensation The Company records stock-based compensation in accordance with SFAS No. 123R "Share Based Payments", using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Reclassifications Certain reclassifications have been made to the prior period's financial statements to conform to the current period's presentation. Recent Accounting Pronouncements In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF No. 03-6-1"). According to FSP EITF No. 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities under SFAS No. 128. As such, they should be included in the computation of basic earnings per share ("EPS") using the two-class method. FSP EITF No. 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, as well as interim periods within those years. Once effective, all prior-period EPS data presented must be adjusted retrospectively. The Company is currently evaluating the impact of the adoption of EITF No. 03-6-1 on its financial position and results of operations. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60". SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to F-17 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements (cont'd) financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise's risk- management activities. SFAS No. 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company's financial statements. In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The adoption of this statement is not expected to have a material effect on the Company's financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company's financial statements. F-18 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 3. INVESTMENT SECURITIES In November 2002, the Company entered into a licensing agreement ("the Agreement") with a third party whereby it licensed part of its technology in exchange for cash and 600,000 shares of the third party's publicly traded common stock that had a fair value of $162,000. The 600,000 shares of common stock are classified as "available for sale" in accordance with SFAS No. 115 and are reported at fair value. During the year of 2008, the Company sold 259,300 shares for proceeds of $53,621, resulting in a realized loss of $16,389. As of December 31, 2008 the Company has 124,235 shares and the fair market value of these shares was $18,014. 4. NOTES RECEIVABLE December 31, December 31, 2008 2007 ------------ ------------ $ $ Note receivable including interest at prime plus 73,489 73,489 4% Notes receivables from employees 35,497 35,497 Less: allowance for doubtful accounts (106,320) (73,489) ---------------------------------------------------------------------------- Total 2,666 35,497 ---------------------------------------------------------------------------- Notes receivable from various employees are pursuant to stock options exercised and are non-interest bearing and due on demand. 5. PATENTS Patents relate to developing the method for diagnostic and treatment of cancer using a new cancer marker called "RECAF." These patents are presently registered in 23 countries with ongoing registrations currently being conducted. Patents are stated at cost and have a definite life. Once the Company receives patent approval, amortization is calculated using the straight-line method over the remaining life of the patents. Patent costs of $191,512 and $59,704 were capitalized during the years ended December 31, 2008 and 2007, respectively. As of December 31, 2008, the management decided to recognize an impairment loss on patent costs incurred in Japan as the respective patent was allowed to lapse. The Company has recorded an impairment loss of $67,620 in the year ended December 31, 2008. F-19 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 5. PATENTS (Continued) A schedule of the patents is as follows: December 31, -------------------------- 2008 2007 $ $ Patents 688,581 497,069 Less: Accumulated amortization (174,015) (136,257) Loss on impairment of patent cost (67,620) - ---------------------------------------------------------------------------- Net Carrying Value ---------------------------------------------------------------------------- Amortization expense totaled $37,758 and $27,896 for the years ended December 31, 2008 and 2007, respectively. The estimated future amortization expense is as follows: $ 2009 37,758 2010 37,758 2011 37,758 2012 37,758 2013 37,758 Thereafter 258,156 -------------- 446,946 -------------- 6. RELATED PARTY TRANSACTIONS December 31, --------------------- 2008 2007 $ $ Due to Pacific BioSciences Research Centre Inc. (a) 328,269 337,355 Due to officers (b) 7,000 7,000 ----------------------------------------------------------------------------- 335,269 344,355 ----------------------------------------------------------------------------- F-20 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 6. RELATED PARTY TRANSACTIONS (continued) a) The Company's research and development is performed by Pacific BioSciences Research Centre ("Pacific"). Pacific is 100% owned by the President of the Company. During the years ended December 31, 2008 and 2007, Pacific performed research and development for the Company valued at $674,326 and $651,009, respectively. Pacific also provided general and administrative services during the years ended December 31, 2008 and 2007, valued at $242,583 and $220,320, respectively. Included in these amounts were rent expense of $57,098 and $59,444, respectively. During the year ended December 31, 2008, Pacific charged interest of $7,241 (2007 - $15,667), calculated at bank prime rate on the monthly balance owed. The amount due to Pacific is unsecured and due on demand. A total of $100,000 was paid to Pacific for prepaid expenses as at December 31, 2008. b) The amounts owing to officers are unsecured, non-interest bearing and due on demand. c) During the year ended December 31, 2008, the Company granted 570,000 (2007 - 580,000) stock options to three directors at a below market exercise price of $0.001 per share. d) On August 28, 2008, the Company extended the term of 1,300,000 fully vested stock options for two directors. The Company recognized an incremental compensation cost of $446 for these modified stock options. e) On December 3, 2008, the Company extended the term of 925,000 fully vested stock options for three directors. The Company recognized an incremental compensation cost of $43 for these modified stock options. f) On December 3, 2008, the Company extended the term of 1,977,278 share purchase warrants for one director. The Company recognized an incremental compensation cost of $34,902 for these modified share purchase warrants. 7. CONVERTIBLE DEBT a) The Company received funds during 2003 relating to ten convertible notes payable totaling $529,743, bearing interest at 5% and due on demand. One of the notes payable in the amount of $53,000 was repaid in April 2003. A gain of $33,584 was recorded on the date of repurchase of the convertible debenture as determined through the calculation of the intrinsic value of the beneficial conversion feature on the date of extinguishment. Under the convertibility terms of the notes payable, the principal, plus accrued interest, can be converted immediately, at the option of the holder, either in whole, or in part, into F-21 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 7. CONVERTIBLE DEBT (continued) fully paid common shares of the Company. The conversion price per share is equal to the lesser of the stated price (ranging between $0.05 and $0.23) or 75% of the average closing bid prices for the five trading days ending on the trading day immediately before the date of the conversion. In conjunction with the issuance of the notes, the Company issued 2,434,088 warrants to the note holders entitling them to purchase 2,434,088 shares of common stock at exercise prices between $0.08 and $0.38. The warrants expired two years after the issuance date. In accordance with EITF 00-27 "Application of Issue No. 98-5 to Certain Convertible Instruments" and EITF 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the proceeds were allocated between the debt and warrants based on their relative fair values. The value assigned to the warrants totaled $274,601 and was expensed immediately due to the notes being due on demand. The fair values were determined using the Black-Scholes option pricing model using the following weighted average assumptions: average risk-free interest rate of 1.49%; expected life of two years; expected volatility of 473%; and no expected dividends. In addition to the shares to be received upon conversion, the note holder will also receive an equal number of warrants to purchase shares at 110% of the conversion price amount. The beneficial conversion feature was calculated under EITF 00-27, and equaled $255,142. Due to the notes being due on demand, the discount was expensed in fiscal 2003. The convertibility feature expires five years after the date of the Agreement. In February 2005, a note in the amount of $143,370 was converted into 955,800 units, consisting of one common share at $0.15 per share and one common share purchase warrant entitling the holder to acquire an additional common share at an exercise price of $0.17 per share expiring on March 9, 2010. In accordance with EITF 00-27, the Company recognized $67,829 for the intrinsic value of the embedded conversion option. In July 2006, a note in the amount of $61,890 was converted into 343,833 units, consisting of one common share at $0.18 per share and one common share purchase warrant entitling the holder to acquire an additional common share at an exercise price of $0.20 per share expiring on July 7, 2011. In accordance with EITF 00-27, the Company recognized $29,506 for the intrinsic value of the embedded conversion option. In July 2006, a note in the amount of $11,655 was converted into 233,092 units, consisting of one common share at $0.05 per share and one common share purchase warrant entitling the holder to acquire an additional common share at an exercise price of $0.055 per share expiring on July 7, 2011. In accordance with EITF 00-27, the Company recognized $5,565 for the intrinsic value of the embedded conversion option. F-22 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 7. CONVERTIBLE DEBT (continued) In July 2006, a note in the amount of $65,000 was converted into 590,909 units, consisting of one common share at $0.11 per share and one common share purchase warrant entitling the holder to acquire an additional common share at an exercise price of $0.12 per share expiring on July 19, 2011. In accordance with EITF 00-27, the Company recognized $30,089 for the intrinsic value of the embedded conversion option. The effective interest rate of the remaining convertible notes at December 31, 2008 is 335%. b) On July 7, 2007, the Company received proceeds of $3,000,000 from the issuance of convertible notes (the "Notes"), plus share purchase warrants, to two private investors. The share purchase warrants allow the holders to purchase up to 3,500,000 shares of the Company's common stock at a price of $0.60 per share expiring June 25, 2012. The Notes bear interest annually at a rate of prime (as adjusted monthly on the first business day of each month) plus 2.75% per year. The Notes are due and payable on June 25, 2010 and are secured by substantially all of the Company's assets. Interest is payable monthly with the first interest payment due on August 1, 2007. Beginning on November 1, 2007, the Company is required to make monthly payments of $100,000 towards the principal amount of the Notes. If the Company fails to make any interest or principal payment when due, the Notes will become immediately due and payable. At the holders' option the Notes are convertible into shares of the Company's common stock at a conversion price of $0.60 per share. The Company may elect to pay the monthly redemption amounts and accrued interest with shares of its common stock, which will be determined by dividing the amount to be paid by the lesser of the conversion price then in effect or 80% of the weighted average price of the Company's common stock for the ten trading days preceding the payment date. In order to make principal or interest payments with shares of its common stock certain conditions must be met, including the condition that the number of shares to be issued in payment of principal or interest cannot exceed 25% of the total shares traded for the ten trading days prior to the payment date. The Company agreed to file a Form SB-2 Registration Statement ("SB-2") with the U.S. Securities and Exchange Commission in order that the shares of common stock issuable upon the conversion of the Notes or the exercise of the share purchase warrants may be resold in the public market. The Company was required to file the SB-2 no later than July 30, 2007 (filed), to cause the SB-2 to become effective by November 26, 2007, and to keep the SB-2 continuously effective until the shares covered by the SB-2 have been sold or can be sold pursuant to Rule 144(k). F-23 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 7. CONVERTIBLE DEBT (continued) In the event the closing price of the Company's common stock is $1.20 or greater for ten consecutive trading days, the holders will be required to exercise the 3,500,000 share purchase warrants within ten days notice by the Company. Following the exercise of the share purchase warrants, the Company will issue to the holders 3,500,000 new share purchase warrants, which will entitle the holders to purchase 1,750,000 shares of common stock. Two share purchase warrants will be exercisable at a price of $1.20 per share at any time prior to the later of June 25, 2012 or three years from the date the new share purchase warrants are issued. In accordance with EITF 00-27 and EITF 98-5, the proceeds were allocated between the debt and warrants based on their relative fair values. The relative fair value assigned to the share purchase warrants totaled $1,426,381 and was determined using the Black-Scholes option pricing model using the following weighted average assumptions: average risk-free interest rate of 4.76%; expected life of five years; expected volatility of 176%; and no expected dividends. These amounts were recorded as a debt discount and will be amortized as interest expense over the term of the convertible debentures. The effective interest rate at December 31, 2008 is 406%. For the year ended December 31, 2008, the Company recorded $976,064 (2007 - $791,092) of accretion expense related to the convertible debt. On August 18, 2008, the Company agreed to re-price the 3,500,000 share purchase warrants to an exercise price of $0.25 per share. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental interest expense is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental interest expense of $192,264 for these modified purchase warrants. On November 26, 2008, the Company received notification from the note holders which modified the terms of the Notes. Pursuant to the notification the interest and principal payments payable in December 2008 and all subsequent principal and interest payments were deferred until May 1, 2009. In addition the principal amount outstanding was increased by $255,000 to $1,955,000. F-24 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 7. CONVERTIBLE DEBT (continued) In accordance with EITF 02-04 "Determining Whether a Debtor's Modification or Exchange of Debt Instruments in within the Scope of FASB Statement No. 15" the Company determined that the creditor did not grant a concession even though the payments were deferred as the total amount owing by the Company was increased. As at November 26, 2008, prior to the modification of the convertible notes, the carrying value of the convertible notes was $613,738. The remaining unaccreted discount of $304,467 related to the convertible notes was charged to operations. In accordance with EITF 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company determined there was no beneficial conversion feature on the modified convertible notes. The Company recorded a discount of $130,298 which was equal to the difference of the face value of the new note and the present value of the revised cash flows. The effective interest rate of the new notes is 6.56%. The Company incurred $643,301 in debt issue costs for these convertible debentures. The debt issue costs will be expensed over the term of the convertible debt. During the year ended December 31, 2008, the Company expensed $214,434 (2007 - $107,217) of the debt issue costs related to the convertible debt. 8. COMMON STOCK For the year ended December 31, 2008: a) In December 2008, the Company issued 505,914 shares of common stock at a fair value of $76,607 to eight employees and one consultant for services provided from December to January 2009, a total of $37,672 was recorded as prepaid expenses as at December 31, 2008. b) In December 2008, the Company received stock subscriptions of 267,000 shares of common stock at $0.15 per share for proceeds of $40,050. Each unit consisted of one share of common stock and one half share purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.30 per share expiring on November 30, 2010. c) In June 2008, the Company issued 230,000 shares of common stock at $0.43 per share for proceeds of $98,900. Each unit consisted of one share of common stock and one half share purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.65 per share expiring on May 1, 2010. F-25 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 8. COMMON STOCK (Continued) For the year ended December 31, 2008: d) In June, 2008, the Company issued 42,105 shares of common stock pursuant to the exercise of share purchase warrants for proceeds of $8,000. e) In April, 2008, the Company issued 33,333 shares of common stock pursuant to the exercise of 33,333 stock options for proceeds of $33. f) In April, 2008, the Company issued 42,105 shares of common stock pursuant to the exercise of share purchase warrants for proceeds of $8,000. g) In April, 2008, the Company issued 125,000 shares of common stock at a fair value of $87,500 to settle debt. h) In March 2008, the Company issued 291,667 shares of common stock at $0.60 per share for the conversion of debt of $175,000. i) In March 2008, the Company issued 200,000 shares of common stock at $0.60 per share for proceeds of $120,000. j) In January 2008, the Company issued 100,000 shares of common stock at a fair value of $53,000 to settle debt. For the year ended December 31, 2007: a) In December 2007, the Company issued 57,142 shares of common stock to a consultant at a fair value of $41,142 for consulting services, of which $6,857 was expensed and $34,285 was recorded as prepaid expenses as at December 31, 2007. b) In December 2007, the Company issued 10,488 shares of common stock to a consultant at a fair value of $6,502 for consulting services of which $3,251 was expensed and $3,251 was recorded as a prepaid expense as at December 31, 2007. c) In December 2007, the Company issued 223,000 shares of common stock at a fair value at $118,190 to eight employees and one consultant for performance bonuses. d) In December 2007, the Company issued 246,710 shares of common stock pursuant to the exercise of 250,000 warrants. This exercise was based on the cashless exercise provision of the warrants. F-26 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 8. COMMON STOCK (continued) For the year ended December 31, 2007: e) In August 2007, the Company issued 33,730 shares of common stock to a consultant at a fair value of $20,000 for consulting services. f) In July 2007, the Company issued 100,000 shares of common stock at a fair value of $62,000 to settle debt. g) In June 2007, the Company issued 100,000 shares of common stock at a fair value of $56,000 to settle debt. h) In June 2007, the Company issued 533,334 shares of common stock for proceeds of $85,334 pursuant to the exercise of share purchase warrants i) In June 2007, the Company issued 220,000 units at $0.45 per unit for proceeds of $99,000. Each unit consisted of one share of common stock and one share purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.66 per share expiring on April 9, 2009. The Company paid a commission of $9,900 in connection with this private placement. j) In May 2007, the Company issued 23,256 units at $0.43 per unit for proceeds of $10,000. Each unit consisted of one share of common stock and one share purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.68 per share expiring on May 31, 2009. The Company paid a commission of $500 in connection with this private placement. k) In April 2007, the Company issued 35,000 units at $0.45 per unit for proceeds of $15,750. Each unit consisted of one share of common stock and one share purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.66 per share expiring on April 30, 2009. The Company paid a commission of $788 in connection with this private placement. l) In January 2007, the Company issued 135,000 shares of common stock at a fair value at $83,700 to eight employees for performance bonuses. F-27 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 9. SHARE PURCHASE WARRANTS A summary of the changes in the Company's share purchase warrants is presented below: Weighted Average Number Exercise Price ------ --------------------- $ Balance, December 31, 2006 9,154,416 0.46 Issued 3,878,256 0.60 Exercised (783,334) 0.11 Expired (358,666) 2.46 --------------------------------------------------------------------- Balance, December 31, 2007 11,890,672 0.47 Issued 473,500 0.48 Exercised (84,210) 0.19 Expired (505,000) 0.81 --------------------------------------------------------------------- Balance, December 31, 2008 11,774,962 0.35 --------------------------------------------------------------------- As at December 31, 2008, the following share purchase warrants were outstanding: Exercise Price Warrants $ Expiration Date ----------------------------------------------- 2,455,000 0.90 February 01, 2009 126,317 0.19 March 31, 2009 220,000 0.66 April 06, 2009 35,000 0.66 April 30, 2009 23,256 0.68 May 31, 2009 225,000 0.50 July 15, 2009 100,000 0.60 July 17, 2009 1,275,000 0.08 January 15, 2010 955,800 0.17 March 09, 2010 115,000 0.65 May 01, 2010 541,666 0.12 October 31, 2010 F-28 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 9. SHARE PURCHASE WARRANTS (continued) Exercise Price Warrants $ Expiration Date --------------------------------------------------- 199,311 0.17 November 11, 2010 133,500 0.30 November 30, 2010 233,092 0.06 July 07, 2011 343,833 0.20 July 07, 2011 590,909 0.12 July 19, 2011 252,278 0.05 December 31, 2011 450,000 0.00 March 31, 2012 3,500,000 0.25 June 27, 2012 --------------------------------------------------- 11,774,962 --------------------------------------------------- In January 2008, the Company extended the term of 1,275,000 share purchase warrants. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental compensation cost is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental compensation cost of $2,675 for these modified share purchase warrants. In July 2008, a total of 225,000 warrants were issued to a consulting firm at an exercise price of $0.50 per share expiring on July 15, 2009. The fair value of warrants of $27,150 was charged to operations. The fair value was determined using the Black-Scholes option pricing model using the following assumptions: risk-free interest rate of 2.35%, expected life of 1 year, expected volatility of 66% and no expected dividends. The grant date fair value of these warrants was $0.36 per warrant. In August 2008, the Company extended the term of 3,185,977 share purchase warrants. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental compensation cost is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental compensation cost of $15,710 for these modified share purchase warrants. F-29 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 9. SHARE PURCHASE WARRANTS (continued) In December 2008, the Company extended the term of 4,432,278 share purchase warrants. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental compensation cost is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental compensation cost of $41,660 for these modified share purchase warrants. 10. STOCK OPTIONS Stock Bonus Plan Under the Company's Stock Bonus Plan, employees, directors, officers, consultants and advisors are eligible to receive a grant of the Company's shares, provided that bona fide services are rendered by consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction. A total of 5,500,000 common shares are reserved pursuant to this Plan, with 1,769,411 (2007 - 2,500,325) common shares available for future issuance as of December 31, 2008. Non-Qualified Stock Option Plan The Company's Non-Qualified Stock Option Plan authorizes the issuance of common shares to persons that exercise stock options granted pursuant to this Plan. The Company's employees, directors, officers, consultants and advisors are eligible to be granted stock options pursuant to this Plan, provided that bona fide services are rendered by such consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction. The stock option exercise price is determined by a committee and cannot be less than $0.001. A total of 12,500,000 common shares are reserved pursuant to this Plan, with 2,587,723 (2007 - 2,844,390) common shares available for future issuance as of December 31, 2008. On January 31, 2007, the Company granted 580,000 stock options to three directors at a below market exercise price of $0.001 per share. On May 30, 2007, the Company granted 180,000 stock options to a consultant at an exercise price of $0.60 per share expiring on May 30, 2009. On September 15, 2007, the Company granted 66,666 stock options to a consultant at an exercise price of $0.60 per share expiring on September 15, 2010. F-30 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 10. STOCK OPTIONS (continued) On February 14, 2008, the Company granted 570,000 stock options to three directors at a below market exercise price of $0.001 per share. On August 28, 2008, the Company extended the term of 1,300,000 fully vested stock options for two directors. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental compensation cost is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental compensation cost of $446 for these modified stock options. On December 3, 2008, the Company extended the term of 925,000 fully vested stock options for three directors. In accordance with SFAS No. 123R, modifications to the terms of an award are treated as an exchange of the original award for a new award. Incremental compensation cost is measured as the excess, if any, of the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. The Company recognized an incremental compensation cost of $44 for these modified stock options. A summary of the changes in the Company's stock options is presented below: Weighted Weighted Average Average Aggregate Exercise Remaining Intrinsic Number of Price Contractual Value Shares $ Life (Years) $ ------------------------------------------------------------------------------- Outstanding, December 31, 2006 3,065,000 0.05 Granted 826,666 0.13 Expired (225,000) 0.64 -------------------------------------------------------------------------------- Outstanding, December 31, 2007 3,666,666 0.03 Granted 570,000 0.001 Exercised (33,333) 0.001 Expired (313,333) 0.367 Outstanding, December 31, 2008 3,890,000 0.001 2.99 774,110 -------------------------------------------------------------------------------- Exercisable, December 31, 2008 3,890,000 0.001 2.99 774,110 -------------------------------------------------------------------------------- F-31 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 10. STOCK OPTIONS (continued) The fair value for stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model and the weighted average fair value of stock options granted during the year ended December 31, 2008 and 2007 were $0.64 and $0.51 per share, respectively. The weighted average assumptions used are as follows: December 31, 2008 2007 ------------------------- Expected dividend yield 0% 0% Risk-free interest rate 1.97% 4.84% Expected volatility 63% 89% Expected option life (in years) 2.0 2.78 As at December 31, 2008, there was $nil (2007- $14,447)) of total unrecognized compensation costs related to non-vested share-based compensation arrangements. The total fair value of shares vested during the year ended December 31, 2008 and 2007 were $364,252 and $412,545, respectively. A summary of the status of the Company's non-vested shares as of December 31, 2008, and changes during the period of December 31, 2008, is presented below: Weighted Average Grant Date Number of Fair Value Shares $ ---------------------------------------------------------------------------- Non-vested at December 31, 2006 - - Granted 180,000 0.19 Vested (105,000) 0.19 ---------------------------------------------------------------------------- Non-vested at December 31, 2007 75,000 0.19 Granted 570,000 0.001 Forfeited (30,000) 0.19 Vested (615,000) 0.19 ---------------------------------------------------------------------------- Non-vested at December 31, 2008 - - ---------------------------------------------------------------------------- F-32 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 11. COMMITMENTS a) On April 4, 2006, the Company entered into a consulting agreement with a term of six months for consideration of 75,000 common shares. As of December 31, 2008, the Company has issued 37,500 common shares and 37,500 common shares are still owed to the consultant. b) On April 10, 2006, the Company entered into a consulting agreement with a term of one year for consideration of 75,000 common shares. As of December 31, 2008, the Company has issued 37,500 common shares and 37,500 common shares are still owed to the consultant. 12. INCOME TAXES The Company has adopted the provisions of SFAS 109, "Accounting for Income Taxes". Pursuant to SFAS 109 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in the consolidated financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company has incurred operating losses of approximately $10,572,264 which, if unutilized, will expire through to 2028. Future tax benefits, which may arise as a result of these losses, have not been recognized in these consolidated financial statements, and have been offset by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of the loss. Net Loss Expiration Date -------- --------------- 1999 $89,948 2019 2000 24,052 2020 2001 793,976 2021 2002 231,928 2022 2003 1,120,379 2023 2004 1,400,412 2024 2005 1,645,391 2025 2006 1,888,080 2026 2007 2,327,750 2027 2008 1,050,348 2028 ------------ $10,572,264 ============ F-33 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 12. INCOME TAXES (continued) The Company is subject to United States federal and state income taxes at an approximate rate of 35%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company's income tax expense as reported is as follows: Year Ended Year Ended December 31, December 31, 2008 2007 $ $ ------------------------------ Income tax recovery at statutory rate 1,439,895 1,140,468 Convertible debt interest (448,186) (346,138) Loss on convertible debt modification (317,274) - Stock based compensation (255,291) - Other (19,255) (2,895) Change in tax rates 95,219 - Valuation allowance change (495,108) (791,435) ----------------------------------------------------------------------------- Provision for income taxes - - ----------------------------------------------------------------------------- The significant components of deferred income tax assets and liabilities as at December 31, 2008 and 2007 are as follows: December 31, December 31, 2008 2007 $ $ ----------------------------- Net operating loss carryforward 3,700,292 3,237,452 Intangible assets 32,268 - Valuation allowance (3,732,560) (3,237,452) ----------------------------------------------------------------------------- Net deferred income tax asset - - ============================================================================= F-34 WHISPERING OAKS INTERNATIONAL, INC. (dba BIOCUREX, INC.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in U.S. dollars) 13. SUBSEQUENT EVENTS a) On January 2, 2009, the Company received stock subscriptions of 307,692 shares of common stock at $0.13 per share for proceeds of $40,000. Each unit consisted of one share of common stock and one purchase warrant entitling the holder to purchase one share of common stock at an exercise price of $0.17 per share expiring on January 2, 2011. b) On January 8, 2009, the Company issued 150,000 shares of common stock at a fair value of $36,000 to settle debt. c) On January 9, 2009, the Company issued 31,250 shares of common stock at a fair value of $5,000 to settle debt. d) On January 9, 2008, the Company issued 56,000 shares of common stock at a fair value of $8,960 to an employee for services rendered in December 2008 and January 2009. e) On January 21, 2009, the Company advanced $50,000 to Biocurex China, in order to complete the incorporation procedures and comply with Chinese laws and regulations. f) On February 20, 2009, the Company issued 639,142 shares of common stock at a fair value of $89,480 to eight employees and one consultant for services provided from February to March 2009. g) On March 3, 2009, an employee returned 33,333 shares with a fair value of $2,666, to settle an amount owing to the Company in the amount of $20,000. A total of $17,333 was recorded as bad debt expense in the fiscal year ended December 31, 2008. h) On March 17, 2009, the Company granted 2,263,157 stock options to two directors at a below market exercise price of $0.001 per share. i) On January 8, 2009, the Company issued 267,000 units for $40,050 ($0.15 per unit) which was received in December 2008. Each unit consisted of one share of the Company's common stock and one half share purchase warrant. Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $0.30 at any time on or before November 30, 2010. F-35 SIGNATURES In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 27th day of March 2009. WHISPERING OAKS INTERNATIONAL INC. By: /s/ Dr. Ricardo Moro ------------------------------------- Dr. Ricardo Moro - President, Chief Executive Officer, Principal Financial and Accounting Officer Pursuant to the requirements of the Securities Act of l934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Dr. Ricardo Moro Director March 27, 2009 ---------------------- Dr. Ricardo Moro /s/ Dr. Phil Gold Director March 27, 2009 ---------------------- Dr. Phil Gold WHISPERING OAKS INTERNATIONAL, INC. FORM 10-K EXHIBITS