10QSB 1 filing_231.htm STELLAR PHARMACEUTICALS 10-QSB STELLAR INTERNATIONAL INC






UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________________________________________

FORM 10-QSB


(Mark One)

 

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the period ended September 30, 2006

 

OR

 

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

EXCHANGE ACT OF 1934

 

For the transition period from ___________________ to ______________________.


Commission file number 0-31198


STELLAR PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)



ONTARIO, CANADA

 

N/A

(State or Other Jurisdiction

of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)



544 Egerton St

London, Ontario Canada

N5W 3Z8

(Address of principal executive offices)



(519) 434-1540

(Registrant’s Telephone Number, Including Area Code)


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

The number of outstanding common shares, no par value, of the Registrant at:


September 30, 2006: 23,622,69






STELLAR PHARMACEUTICALS INC.

SEPTEMBER 30, 2006

CONTENTS

 

 

 

 

 

PAGE

PART I

 

ITEM 1 CONDENSED INTERIM FINANCIAL STATEMENTS

3

CONDENSED BALANCE SHEETS

4

CONDENSED INTERIM STATEMENTS OF OPERATIONS AND DEFICITS

5

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

6

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

7 – 15

ITEM 2  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

16-22

ITEM 3 CONTROLS AND PROCEDURES

23

PART II

 

OTHER INFORMATION

23


 



























STELLAR PHARMACEUTICALS INC.

CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian Funds)

(Unaudited)

SEPTEMBER 30, 2006



Page 3




STELLAR PHARMACEUTICALS INC.


CONDENSED BALANCE SHEETS

(Canadian Funds)

  

ASSETS

 

 

 

 

 

 

 

 As at

 

 

 As at

 

 

 

 

September 30, 2006

 

 

December 31, 2005

 

 

 

 

 (Unaudited)

 

 

 (Audited)

CURRENT

 

 

 

 

 

 

 

Cash and cash equivalents (Note 2)

$

1,077,177

 

$

2,108,755

 

Accounts receivable, net of allowance $0 (2005 - $0)

 

224,947

 

 

157,749

 

Inventories (Note 3)

 

210,998

 

 

288,337

 

Prepaid, deposits and sundry receivables (Note 4)

 

84,548

 

 

152,514

 

 

 

 

1,597,670

 

 

2,707,355

PROPERTY, PLANT & EQUIPMENT (Note 5)

 

903,573

 

 

959,999

OTHER ASSETS (Note 6)

 

45,171

 

 

46,187

 

 

 

$

2,546,414

 

$

3,713,541

LIABILIITIES

 

 

 

CURRENT

 

 

 

 

 

 

 

Accounts payable

$

143,024

 

$

487,359

 

Accrued liabilities

 

51,062

 

 

122,999

 

Deferred revenues

 

2,400

 

 

43,397

 

 

 

 

196,486

 

 

653,755

SHAREHOLDERS' EQUITY

 

 

 

CAPITAL STOCK (Note 7)

 

 

 

 

 

AUTHORIZED

 

 

 

 

 

 

 

Unlimited

Non-voting, convertible, redeemable and retractable preferred shares with no par value

 

 

 

 

 

 

Unlimited

Common Shares with no par value

 

 

 

 

 

ISSUED

 

 

 

 

 

 

 

 23,622,690

Common shares (2005 - 23,470,190)

 

8,159,492

 

 

8,100,253

 

 

Paid-in capital options - outstanding

 

545,218

 

 

545,025

 

 

                                         - expired

 

194,761

 

 

98,913

Beginning Deficit

 

 

(6,549,543)

 

 

(5,684,405)

DEFICIT

 

 

2,349,928

 

 

3,059,786

 

 

 

$

2,546,414

 

$

3,713,541


See accompanying notes to financial statements.


Approved on behalf of the Board:


/s/ Peter Riehl___        

/s/Arnold Tenney                     

 

DIRECTOR

     DIRECTOR

    






Page 4




STELLAR PHARMACEUTICALS INC.


CONDENSED INTERIM STATEMENTS OF OPERATIONS AND DEFICITS

(Canadian Funds)


(Unaudited)


 

 

 

For the Three Month Period

 

 

For the Nine Month Period

 

 

 

 Ended September 30

 

 

 Ended September 30

 

 

 

2006

 

 

2005

 

 

2006

 

 

2005

PRODUCT SALES (Note 8)

$

332,423 

 

$

405,275 

 

$

1,025,903 

 

$

1,186,189 

COST OF GOODS SOLD

 

89,175 

 

 

67,957 

 

 

303,652 

 

 

253,577 

MARGIN ON PRODUCT SOLD

 

243,248 

 

 

337,318 

 

 

722,251 

 

 

932,612 

OTHER PRODUCT COST (Note 16)

 

41,949 

 

 

- 

 

 

41,949 

 

 

- 

ROYALTY AND LICENSING REVENUES (Note 8)

 

97,445 

 

 

92,514 

 

 

290,164 

 

 

233,239 

GROSS PROFIT

 

298,744 

 

 

429,832 

 

 

970,466 

 

 

1,165,851 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

491,784 

 

 

533,026 

 

 

1,571,380 

 

 

1,789,399 

 

Research and development

 

50,817 

 

 

339,390 

 

 

174,310 

 

 

624,075 

 

Amortization

 

38,973 

 

 

38,497 

 

 

117,324 

 

 

106,179 

 

 

 

581,574 

 

 

910,913 

 

 

1,863,014 

 

 

2,519,653 

LOSS FROM OPERATIONS

 

(282,830)

 

 

(481,081)

 

 

(892,548)

 

 

(1,353,802)

INTEREST AND OTHER INCOME

 

4,063 

 

 

27,916 

 

 

27,410 

 

 

98,670 

NET LOSS FOR THE PERIOD

 

(278,767)

 

 

(453,165)

 

 

(865,138)

 

 

(1,255,132)

DEFICIT, beginning of period

 

(6,270,776)

 

 

(4,745,878)

 

 

(5,684,405)

 

 

(3,943,911)

DEFICIT, end of period

$

(6,549,543)

 

$

(5,199,043)

 

$

(6,549,543)

 

$

(5,199,043)

LOSS PER SHARE (Note 9)

$

(0.01)

 

$

(0.02)

 

$

(0.04)

 

$

(0.05)

WEIGHTED AVERAGE NUMBER OF

 

 

 

 

 

 

 

 

 

 

 

COMMON SHARES OUTSTANDING (Note 9)

 

23,472,690 

 

 

23,250,877 

 

 

23,530,318 

 

 

23,143,930 





See accompanying notes to financial statements.








Page 5




STELLAR PHARMACEUTICALS INC.


CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Canadian Funds)


(Unaudited)


         

 

 

 

 

 For the Three Month Period

 

 

For the Nine Month Period

 

 

 

 

 Ended September 30

 

 

Ended September 30

 

 

 

 

2006

 

 

2005

 

 

2006

 

 

2005

CASH FLOWS PROVIDED BY (USED IN)

 

 

 

 

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

$

(278,767)

 

$

(453,165)

 

$

(865,138)

 

$

(1,255,132)

 

Amortization

 

38,973 

 

 

38,497 

 

 

117,324 

 

 

106,179 

 

Issuance of shares and options for services rendered

 

22,909 

 

 

57,299 

 

 

106,380 

 

 

178,235 

 

 

 

 

(216,885)

 

 

(357,369)

 

 

(641,434)

 

 

(970,718)

 

Change in non-cash balances related to operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

2,438 

 

 

(2,212)

 

 

(67,198)

 

 

6,430 

 

 

Inventories

 

70,733 

 

 

(45,219)

 

 

77,339 

 

 

101,367 

 

 

Tax recoverable

 

- 

 

 

- 

 

 

- 

 

 

38,131 

 

 

Prepaid, deposits and sundry receivables

 

17,972 

 

 

1,340 

 

 

67,966 

 

 

(32,175)

 

 

Accounts payable and accrued liabilities

 

(66,745)

 

 

212,112 

 

 

(416,272)

 

 

127,388 

 

 

Deferred revenues

 

2,400 

 

 

(50,465)

 

 

(40,997)

 

 

(132,213)

 

 

 

 

(190,087)

 

 

(241,813)

 

 

(1,020,596)

 

 

(861,790)

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(32,981)

 

 

(41,686)

 

 

(59,882)

 

 

(145,822)

 

Additions to other assets

 

- 

 

 

- 

 

 

- 

 

 

(4,492)

 

 

 

 

(32,981)

 

 

(41,686)

 

 

(59,882)

 

 

(150,314)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

- 

 

 

26,599 

 

 

48,900 

 

 

170,667 

CHANGE IN CASH AND CASH EQUIVALENTS

 

(223,068)

 

 

(256,900)

 

 

(1,031,578)

 

 

(841,437)

CASH AND CASH EQUIVALENTS, beginning of period

 

1,300,245 

 

 

2,588,333 

 

 

2,108,755 

 

 

3,172,870 

CASH AND CASH EQUIVALENTS, end of period

$

1,077,177 

 

$

2,331,433 

 

$

1,077,177 

 

$

2,331,433 




See accompanying notes to financial statements.






Page 6




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

1.

BASIS OF PRESENTATION

These condensed interim financial statements should be read in conjunction with the financial statements for the Company’s most recently completed fiscal year ended December 31, 2005.  They do not include all disclosures required in annual financial statements but rather are prepared in accordance with recommendations for interim financial statements in conformity with United States generally accepted accounting principles.  These financial statements have been prepared using the same accounting policies, and methods as those used by the Company in the annual financial statements for the year ended December 31, 2005.

The accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments), which are necessary to present fairly the financial position as at September 30, 2006 and December 31, 2005, and the results of operations and cash flows for the three and nine month periods ended September 30, 2006 and 2005.

a)

Cash and cash equivalents include cash and all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase.  All cash and cash equivalents are under the custodianship of two major Canadian financial institutions.  

b)

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

c)

Statement of Financial Accounting Standards No. 130 (SFAS 130), “Reporting Comprehensive Income”, establishes standards for the reporting and display of comprehensive income and its components and requires restatement of all previously reported information for comparative purposes.  For the three and nine month periods ending September 30, 2006 and 2005, comprehensive income was the same as net earnings.

2.

CASH AND CASH EQUIVALENTS

 

 

September 30,

 

 

December 31,

 

 

2006

 

 

2005

 

 

 (Unaudited)

 

 

(Audited)

 

 

 

 

 

 

Cash

$

232,629

 

$

169,974

Short-term investments

 

844,548

 

 

1,938,781

 

$

1,077,177

 

$

2,108,755




Page 7




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

3.

INVENTORIES

 

 

September 30,

 

 

December 31,

 

 

2006

 

 

2005

 

 

 (Unaudited)

 

 

(Audited)

Raw material

$

91,293

 

$

71,131

Packaging materials

 

34,889

 

 

27,457

Work in process

 

40,902

 

 

145,418

Finished goods

 

43,914

 

 

44,331

 

$

210,998

 

$

288,337

4.

PREPAID, DEPOSITS AND SUNDRY RECEIVABLES

 

 

September 30,

 

 

December 31,

 

 

2006

 

 

2005

 

 

 (Unaudited)

 

 

(Audited)

Prepaid operating expenses

$

41,330

 

$

81,761

Materials for use in clinical trials

 

-

 

 

47,138

Deposit on manufacturing process (Note 10 (d) )

 

37,412

 

 

-

Interest receivable on investments

 

5,806

 

 

23,615

 

$

84,548

 

$

152,514

5.

PROPERTY, PLANT AND EQUIPMENT

 

 

September 30, 2006

 

 

(Unaudited)

 

 

 

Accumulated

 

Net Carrying

 

 

Cost

 

Amortization

 

Amount

Land

$

90,000

 

$

-

 

$

90,000

Building

 

560,927

 

 

51,273

 

 

509,654

Office Equipment

 

39,394

 

 

28,619

 

 

10,775

Manufacturing Equipment

 

577,774

 

 

346,487

 

 

231,287

Computer Equipment

 

108,455

 

 

46,598

 

 

61,857

 

$

1,376,550

 

$

472,977

 

$

903,573

 

 

 

 

 

 

 

 

 

 

 

December 31, 2005

 

 

(Audited)

 

 

 

 

Accumulated

 

Net Carrying

 

Cost

 

Amortization

 

Amount

Land

$

90,000

 

$

-

 

$

90,000

Building

 

536,759

 

 

30,663

 

 

506,096

Office Equipment

 

39,394

 

 

26,019

 

 

13,375

Manufacturing Equipment

 

542,061

 

 

267,889

 

 

274,172

Computer Equipment

 

108,455

 

 

32,098

 

 

76,356

 

$

1,316,668

 

$

356,669

 

$

959,999



Page 8






STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

6.

OTHER ASSETS

 

September 30, 2006

 

(Unaudited)

 

 

 

 

Accumulated

 

Net Carrying

 

Cost

 

Amortization

 

Amount

Patents

$

49,006

 

$

3,836

 

$

45,170

Goodwill

 

1

 

 

          -

 

 

1

 

$

49,007

 

$

3,836

 

$

45,171

 

 

 

 

 

 

 

 

 

 

December 31, 2005

 

(Audited)

 

 

 

 

Accumulated

 

Net Carrying

 

Cost

 

Amortization

 

Amount

Patents  

$

49,006

 

$

2,820

 

$

46,186

Goodwill

 

1

 

 

          -

 

 

1

 

$

49,007

 

$

2,820

 

$

46,187


7.

CAPITAL STOCK

(a)

Common Shares

During the nine month period ended September 30, 2006, the Company issued 152,500 Common Shares, of which 150,000 were issued for options exercised by directors, officers and employees with an average exercise price of $0.33.  The remaining 2,500 were issued to a consultant for services rendered, with an average price per share of $0.91.


 

Number of

 

$

 

Shares

 

Amount

Balance, December 31, 2005

23,470,190

 

$

8,100,253

Issued for services

2,500

 

 

2,275

Issued for options exercised

150,000

 

 

56,964

Balance, September 30, 2006

23,622,690

 

$

8,159,492


 

(b)

Paid-in Capital Options

The changes to the paid-in capital options are as follows:




Page 9




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

7.

CAPITAL STOCK (continued)

Balance, December 31, 2005

$

545,025

Expense recognized options to consultants/employees/directors

 

104,105

Options expired/exercised

 

(103,912)

Balance, September 30, 2006

$

545,218

(c)

Stock Options

During the nine month period ended September 30, 2006, there were no stock options granted. The Company recorded $104,105 (September 30, 2005 - $178,235) for options granted in 2005 which vest quarterly over an 18 month term. Of these options the Company expensed $70,864 (September 30, 2005 - $33,945) to stock option – employee compensation as selling, general, and administrative costs for options issued to directors, officers and employees.  The remaining $33,241 (September 30, 2005 - $144,290) was related to options issued to consultants; these were expensed as selling, general, and administrative costs.  

The total number of options outstanding at September 30, 2006 was 1,235,000 (December 31, 2005 – 1,540,000).  During 2006 there were 5,000 options which had not yet vested and were forfeited by an employee who has left the Company, in addition, there were 150,000 options previously granted to a consultant, that expired during the three month period ended September 30, 2006.

On September 30, 2006, the maximum number of Common Share options that may be issued under the plan is 4,629,452 (December 31, 2005 – 4,629,452).  

The average fair value of options expensed during the period ended June 30, 2006 was estimated at $0.28 on the date of grant using the Black-Scholes option-pricing model with the following assumptions.



Risk-free interest rate

2.93% - 3.89%

Expected life

3 years

Expected volatility

41.2% - 58.9%

Dividend yield    

0%

(d)

Paid in Capital Options

Paid in Capital Options includes outstanding stock options amounting to $545,218 and expired stock options of $194,761 at September 30, 2006 (December 31, 2005 - $545,025 and $98,913, respectively).

  




Page 10




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

8.

REVENUES

Revenue for the nine month period includes products sold in Canada, international sales of products and raw materials sold at cost to our European licensee.  For the three month period ended September 30, 2006, the Company has used estimates for its calculation of royalty revenues from the European licensee sales, as these sales numbers were not available to the Company at the time of this reporting.  The licensee is not required to report these sales numbers to the Company until 45 days subsequent to the end of quarter at which payment is also received.  This estimate is based on historical experience and based on trends set.  The total of this estimate for the three month period ended September 30, 2006, is $94,606 (2005 - $92,514).  Any adjustments due to a difference in sales from the estimate will be treated as a current period adjustment.  Revenue earned for the nine month period is as follows:

 

 

Unaudited

 

 

September 30,

 

 

2006

 

2005

Products sales

 

 

 

 

 

 

Domestic sales

$

939,766

 

$

1,145,813

 

International sales

 

80,757

 

 

28,399

 

Other revenue

 

5,380

 

 

11,977

 

 

$

1,025,903

 

$

1,186,189

Royalties & licensing revenue

 

 

 

 

 

 

Royalty payments

$

287,325

 

$

233,239

 

Licensing fees

 

2,839

 

 

                 -

 

 

$

290,164

 

$

233,239

9.

LOSS PER SHARE

Loss per share is calculated on the basis of the weighted average number of Common Shares outstanding for the nine month period ended September 30, 2006 totaling 23,530,318 shares (September 30, 2005-23,143,930).

The diluted loss per share is not computed when the effect would be anti-dulitive. The following table sets forth the computation of loss per share:

 

 

2006

 

2005

Numerator for net loss per share available to common  shareholders

 

$

(865,138)

 

$

(1,255,132)

Denominator for basic earnings (loss) per share – Weighted average common shares outstanding

 

 

23,530,318

 

 

23,143,930

Loss per share

 

$

(0.04)

 

$

(0.05)

10.

CONTINGENCIES AND COMMITMENTS

(a)

Royalty Agreements

In September 2000, the Company entered into a royalty agreement for sales of Uracyst® product.   



Page 11




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

10.

CONTINGENCIES AND COMMITMENTS (continued)

The agreement involves royalty payments, which initially were based on 5% of the total sales of

Uracyst at a declining rate of 1% per year over a three year period, declining to a 2% rate effective October 1, 2003. This royalty will remain at 2% until the end of the agreement on September 30, 2008. In this quarter, royalty payments were $1,161 (September 30, 2005 - $759).  The total royalty payments for the nine month period ended September 30, 2006 were $3,556 (September 30, 2005 - $2,593). These amounts have been recorded as royalty expense in selling, general and administrative.

In February 2002, the Company entered into a royalty agreement for products which were introduced to the Company by a consultant.  The agreement involves royalty payments, which will be paid based on gross dollar sales.   The schedule for royalty payments is presently calculated on SkeliteTM sales as follows:

First $1,000,000 in sales – 3%

        

Second $1,000,000 in sales – 2%

         

All sales over $2,000,000 – 1% out to the 5th year.

(b)

License Agreements

In July 2006, the Company finalized an exclusive licensing agreement with Bio-Technic Romania SRL for the distribution and sale of NeoVisc in Romania.  In exchange for the right to market and sell NeoVisc, Romania is responsible to obtain all necessary regulatory approvals at its sole cost and will pay Stellar a specified volume purchase price per box of NeoVisc.  This agreement has an initial three-year term from the date of regulatory approval in Romania and may be renewed for an additional three-year term with the mutual agreement of both parties.

(c)

Distribution Agreement

There are no changes to the licensing agreements as disclosed in Note 13 (d) of the annual financial statements for the 2005 fiscal year.

(d)

Manufacturing Agreement

There are no changes to the manufacturing agreements as disclosed in Note 13 (e) of the annual financial statements for the 2005 fiscal year.  The Company has committed to the manufacturing of product within 90 days of the period ended September 30, 2006 and has recorded deposits made for these processes in prepaid, deposits and sundry receivables (Note 4).  There are no other commitments regarding this agreement.

(e)

Leases

The Company presently leases office equipment under operating leases.  At September 30, 2006, the future minimum lease payments under operating leases are $2,261 (December 31, 2005 - $4,429).



Page 12




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

11.

SIGNIFICANT CUSTOMERS

During the three month period ended September 30, 2006, the Company had one customer that represented 34.1% of sales (September 30, 2005 – 33.0%).  During the nine month period ended September 30, 2006, the Company had one customer that represented 34.3% of sales (September 30, 2005 – 32.9%).

12.

RELATED PARTY TRANSACTIONS

The Company entered a fiscal advisory and consulting agreement with LMT Financial Inc. (a company beneficially owned by a director and his spouse) for services to be provided in 2006. Compensation under the agreement is $6,000 per month.  For the nine month period ended September 30, 2006, the Company has recorded $54,000 (2005 - $54,000) as selling, general and administrative costs.

13.

RECONCILATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")

These financial statements where prepared in accordance with GAAP in the United States.  The Company has included the significant differences which would result if the Canadian GAAP were applied in the preparation of the Condensed Interim Statements of Operations, the Condensed Balance Sheets and the Condensed Interim Statements of Cash Flows.   These statements are as follows:


Condensed Interim Statements of Operations

 

 

 

 

 

For  the Nine Month Period Ended September 30

 

2006

 

 

2005

Net income (loss), as reported under United States GAAP

$

(865,138)

 

$

(1,255,132)

Adjustments to arrive at Canadian GAAP

 

 

 

 

 

        Research and development expense

 

-

 

 

624,075

        Amortization expense

 

(202,340)

 

 

(106,179)

Net income (loss) based on Canadian GAAP  

$

(1,067,478)

 

$

(737,236)

Earnings per share

- United States GAAP net loss

$

(0.04)

 

$

(0.05)

 

 -  Impact on accounting change

 

(0.01)

 

 

0.00

 

 - Canadian GAAP net loss

$

(0.05)

 

$

(0.03)


Condensed Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

As at September 30, 2006        

 

December 31, 2005

 

 

United States

 

Increase

 

Canadian

 

 

United States

 

Increase

 

Canadian

 

 

GAAP

 

(Decrease)

 

GAAP

 

 

GAAP

 

(Decrease)

 

GAAP

Current assets

$

1,597,670

$

     -    

$

1,597,670

 

$

2,707,355

$

-     

$

2,707,355

Property plant and equipment

 

903,573

 

     -    

 

903,573

 

 

959,999

 

-     

 

959,999

Other assets

 

45,171

 

978,181

 

1,023,352

 

 

46,187

 

1,180,521

 

1,226,708

 

$

2,546,414

$

978,181

$

3,524,595

 

$

3,713,541

$

1,180,521

$

4,894,062

Current liabilities

 

196,486

 

     -    

 

196,486

 

 

653,755

 

-    

 

653,755

Shareholders’ equity

 

2,349,928

 

978,181

 

3,328,109

 

 

3,059,786

 

1,180,521

 

4,240,307

 

$

2,546,414

$

978,181

$

3,524,595

 

$

3,713,541

$

1,180,521

$

4,894,062



Page 13




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006

13.

RECONCILATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

Condensed Interim Statements of Cash Flows

For the Nine Month Period Ended September 30

 

2006

 

 

2005

Cash flows for operating activities, as reported under United States GAAP

$

(1,020,596)

 

$

(861,790)

 Development costs deferred for Canadian GAAP purposes

 

            -

 

 

68,456

Cash flows for operating activities, Canadian GAAP  

$

(1,020,596)

 

$

(793,334)

Cash flows for investing activities, as reported under United States GAAP

$

(59,882)

 

$

(150,314)

 Development costs deferred for Canadian purposes

 

             -

 

 

(68,456)

Cash flows for investing activities, Canadian GAAP  

$

(59,882)

 

$

(218,770)

Cash flows for financing activities, as reported under United States GAAP

$

48,900

 

$

170,667

Change in cash and cash equivalents

 

(1,031,578)

 

 

(841,437)

Cash and cash equivalents, opening  

 

2,108,755

 

 

3,172,870

Cash and cash equivalents, closing

$

1,077,177

 

$

2,331,433


Amortization of certain other assets is being provided for on the straight-line basis as noted below:


Asset Classification

Useful Life

Deferred development costs – products available for sale

5 years

Accumulated gross development costs as at September 30, 2006 were $1,358,593 (2005 - $369,455) for products which are all available for sale.  For the period ended September 30, 2006, the Company did not incur any additional manufacturing development costs associated with the development of products. Costs associated to deferred manufacturing development costs for Canadian GAAP purposes cannot be capitalized under United States GAAP.  Amortization in regards to these development costs starts once the product is ready for sale in the market.

14.

INCOME TAXES


The Company has had no taxable income under the Federal and Provincial tax laws for the nine month periods ended September 30, 2006 and 2005.  The Company has loss carry-forwards at September 30, 2006 totaling $4,500,046 (2005 - $3,764,780) that may be offset against future taxable income.  If not utilized, the loss carry-forwards will expire between 2007 and 2016.


The loss carry-forwards are the only significant temporary difference at September 30, 2006 and 2005.  As it is more likely than not that benefits from these losses will not be realized, no deferred tax assets have been recognized in the accompanying balance sheet.

15.

COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the current period presentation.





Page 14




STELLAR PHARMACEUTICALS INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(Canadian funds)

(Unaudited)

SEPTEMBER 30, 2006


16.

OTHER PRODUCT COSTS

In November 2005, the Company experienced reports of side effects with one of its products. After the completion of extensive tests, the Company has decided to write-down the value of the remaining product being held.  This product was carried in the past as raw material, work in process and finished goods.



Page 15




Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

This document was prepared on November 8, 2006 and should be read in conjunction with the September 30, 2006 unaudited interim financial statements of the Company.  All amounts are in Canadian funds.

OVERVIEW

Stellar Pharmaceuticals Inc. ("Stellar" or the "Company"), founded in 1994, is a Canadian pharmaceutical company involved in the development and commercialization of high quality, polysaccharide-based therapeutic products used in the treatment of osteoarthritis and certain types of cystitis.  Stellar also markets a test kit that confirms the existence of bladder lining defects in interstitial cystitis ("IC") (an inflammatory disease of the urinary bladder wall) patients and identifies those patients who should respond positively to the Company’s proprietary therapeutic product. Stellar’s product development strategy focuses on seeking novel applications for its product technologies in markets where its products demonstrate true cost effective therapeutic advantages.  Stellar is also building revenues through in-licensing products for Canada that are focused on similar niche markets and out-licensing to international markets.

Stellar has developed and is marketing three products in Canada based on its core polysaccharide technology:

(i)

NeoVisc®, for the treatment of osteoarthritis;

(ii)

Uracyst®; for the treatment of IC, and;

(iii)

Uracyst® Test Kit, Stellar’s patented technology for the diagnosis of IC.  

Stellar also has acquired the exclusive Canadian marketing and distribution rights for:

(i)

Millenium Biologix Inc.’s Skelite™, a proprietary synthetic bone grafting product; and

(ii)

Matritech’s NMP22® BladderChek®, a proteomics-based diagnostic test for the diagnosis and monitoring of bladder cancer.  

Effective December 2001, Stellar entered into a strategic licensing agreement with G. Pohl-Boskamp GmbH & Co. ("Pohl-Boskamp") for the sale of Uracyst products in Europe. In December of 2003, Pohl-Boskamp received approval to begin selling Uracyst in Europe. Pohl-Boskamp continues to make sales progress in the European markets in which it currently sells Uracyst (Germany, Netherlands, Austria, UK and Scandinavian countries).

Stellar began selling Skelite to the Canadian market in February 2004 and NMP22 BladderChek in Canada, in October 2004.  Skelite has had a small impact on 2006 sales, NMP22 BladderCheck has shown improvement in sales growth in 2006 and is expected to play a larger part in the sales mix going forward.

In June 2004, Stellar entered into a NeoVisc licensing agreement with Triptibumis Sdn. Bhd. for Malaysia, Singapore and Brunei. The first shipment to this market was initiated in October 2004.


In July 2005, Stellar entered into an exclusive licensing agreement with INNOGEN İLAÇ SAN. TİC. LTD. ŞTİ. ("Innogen") for the sale of NeoVisc in Turkey. Sales of NeoVisc will not commence until Innogen is in receipt of all required approvals from Turkish authorities. Stellar believes that sales of NeoVisc in Turkey should commence in late 2006. Viscosupplementation therapy is well established in Turkey, representing a market value in excess of US $12,000,000 per year.

In August 2005, Stellar signed a licensing agreement with TECHNIMED of Anteljas, Lebanon in respect of the distribution and sale of NeoVisc in Lebanon.

In September 2005, the Company entered into a licensing agreement with Shanghai Ya Jun Medical for the sale of Uracyst in China. Stellar also entered into a licensing agreement with Mega Pharm for the sale of Uracyst in Israel in December 2005.




Page 16




In November 2005, the Company signed a distribution agreement with Al-Mohab Co. for the sale of NeoVisc® in Kuwait.


In July 2006, the Company finalized a licensing agreement with Bio-Technic Romania SRL for the distribution and sale of NeoVisc in Romania.              

Stellar markets its products in Canada through its own direct sales force of commissioned and salaried sales people. The Company’s focus on product development continues to be both in-licensing and out-licensing for immediate impact on the revenue stream allowing Stellar to fund its own in-house product development for future growth and stability.

RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2006


Revenues for the three month period ended September 30, 2006, decreased by 13.6% to $429,868 from $497,789 compared to the same quarter in 2005. This decline was the result of a slow July and August sales period compared to 2005, which had higher sales volumes due to a then pending price increase. A return to normal movement was seen in September 2006 with sales increasing for all products, growing by 17.2% over September 2005.


Canadian Uracyst sales grew by 54.7% for the quarter compared to the same quarter in 2005, as the Canadian sales and marketing strategy on Uracyst continues to show good results. Royalty revenues for Europe continue to be estimated for this period.  For the third quarter of 2006, the Company estimated an increase of 5.3% in these royalties over the same period in 2005 based on the prior six months sales and an estimated lower uptake in sales for the UK.

Sales for NMP22 BladderChek decreased by 3.6% for the quarter compared to the same quarter in 2005. Sales demand was flat in July and August but grew by 107% in September 2006 compared to September 2005.  This growth is expected to continue into the last quarter as more and more urologists recognize the benefits offered by BladderChek.

Stellar’s operating loss for the third quarter of 2006 declined by 41.2% to $282,830 from $481,081 for the same period in 2005. This decrease is related to the Company’s efforts to reduce costs with its goal to move to profitability.  

RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006

Revenues for the nine month period ended September 30, 2006, decreased by 7.3% to $1,316,067 compared to $1,419,428 for the same period in 2005. The decline in sales in 2006, was driven by a reduction in Canadian NeoVisc sales for the nine month period, down 25.6% compared to the same period in 2005. The Company attributes this to weaker demand in the last two quarters compared to the previous year and aggressive competition from two new viscosupplement entries in the Canadian viscosupplement market.


Canadian sales of Uracyst continued to show a positive upward trend, with sales growing by 38.2% for the nine month period ended September 30, 2006, compared to the same period in 2005, as the Canadian sales and marketing strategy on Uracyst continues to show good results. Sales for the European market for the third quarter of 2006 were not available at the time of this report and therefore have been estimated based on historical experience. Although there can be no assurance, it has been estimated that these sales will be up by 24.4% over the same period in 2005.

Sales for NMP22 BladderChek increased by 43.9% for the nine month period ended September 30, 2006, compared to the same period in 2005. However, this growth remains slower than forecasted but is showing good signs of improvement as more and more Canadian urologists recognize the benefits offered by BladderChek.  



Page 17




Consulting costs for the nine month period ended September 30, 2006 increased due primarily to a service agreement the Company entered into with Advisory Associates Inc. to assist in finding new opportunities for its products in the United States market. There were also increased costs during this period associated with the Company’s focus on successfully acquiring a European CE mark for NeoVisc and Domain registration for both Uracyst and NeoVisc in Europe.  The total costs associated with these two projects in the nine month period ended September 30, 2006 was $112,206, these costs have been expensed to selling, general and administrative.

Stellar’s operating loss for the nine month period ended September 30, 2006 declined by 34.1% to $892,548 from $1,353,802 for the same period in 2005. This decrease is related to the Company’s efforts to reduce costs with its goal to move to profitability.  

Cost of Sales

Cost of goods sold for the nine month period ended September 30, 2006, was $303,652 or 29.6% of product sales compared to $253,577 or 21.4% of product sales for the same period in 2005. During the nine month period ended September 30, 2006, the cost of sales was negatively affected by a $48,624 expense, which was associated with ongoing stability testing for the new high molecular weight NeoVisc.

Other Product Costs

The Company has recorded $41,949 as other product costs, which includes a write-down of raw material, finished goods in process and finished goods relating to a previous product recall.

Research and Development

Stellar continues to invest in research, which is essential to advancing the use of its products in Canada and in international markets. In the nine month period ended September 30, 2006, the Company incurred $174,310, in research and development costs compared to $624,072 during the same period in 2005. The completion of manufacturing process development work which occurred throughout 2005 is the main reason for the reduction in research and development costs in the 2006 period.

Expenditures incurred over the last two years on process development are expected to improve Stellar’s competitiveness in the global viscosupplement market. Stellar continues work on an open-label, community-based, clinical trial for Uracyst, which will assist Stellar in demonstrating the effectiveness of Uracyst in the treatment of GAG deficient cystitis, such as IC. The Company also continues to invest in development research with the University of Oklahoma related to Uracyst. During the first nine months of 2006 costs associated with this work totaled $123,285.


Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine month period ended September 30, 2006 were down 12.2% to $1,571,380 compared to $1,789,399 for the same period in 2005. This includes the cost of $104,105 related to non-cash expenses for the vesting of Common Share options issued to directors, officers, employees and consultants. During this period, the Company provided in cash, remuneration to members of the board of directors, totaling $31,500 (2005 - $32,166).

Business Development

Progress continues to be made as Stellar focuses on a number of business development activities associated with out-licensing Stellar’s current products in international markets, in-licensing products for the Canadian market and developing additional products.  As previously referenced to in the overview, Stellar entered into a new out-licensing and distribution agreement in 2006 for NeoVisc distribution in Romania and continues to work on expanding its global presence. The Company anticipates revenues to continue to build from these out-licensing agreements during 2006 and on.



Page 18




During the nine month period ended September 30, 2006, $53,502 was incurred in Business Development costs. Total fees of $45,907 were associated with obtaining the CE mark in Europe.  The remaining expense related to costs associated with ongoing international agreements. These costs are included in selling, general and administrative expenses.

INTEREST INCOME AND GAIN ON INVESTMENTS

Interest and other income during the nine month period ended September 30, 2006 was $27,410 (2005-$98,670). This amount includes interest received on a short-term investment for both 2005 and 2006, and the gain on a sale of short term investments for 2005. Cash will be maintained in liquid investments.

SUMMARY OF QUARTERLY RESULTS


Quarter Ended

Revenues*

            Net loss

Loss per share

September 30, 2006

429,868

(278,767)

(0.01)

June 30, 2006

440,282

(232,327)

(0.01)

March 31, 2006

445,917

(354,044)

(0.02)

December 31, 2005

522,823

(485,366)

(0.02)

September 30, 2005

497,789

(453,165)

(0.02)

June 30, 2005

496,341

(347,312)

(0.02)

March 31, 2005

425,298

(454,655)

(0.02)

December 31, 2004

499,192

(374,488)

(0.02)

* Total includes revenues from product sales, royalty revenues and licensing fees.

SELECTED FINANCIAL RESULTS AND HIGHLIGHTS

A discussion of the reasons behind the variations in the following numbers can be found under the heading “Results of Operations for the Twelve Month Period Ended December 31, 2005” on the Managements Discussion and Analysis for the year ended December 31, 2005.

Income Statement for the year ended

2005

2004

2003

Total revenue

$1,942,251 

$1,832,325 

$   1,109,431 

Cost of goods sold

450,591 

340,123 

216,609 

Other product costs and write-down

Expenses (excluding amortization)

159,390

3,027,875 

-

2,845,088 


1,623,920 

Loss before amortization

and other income


(1,695,605)


(1,352,886)

           (731,098)

Net loss (1)

$(1,740,498)

$(1,345,109)

$ (803,801)

  - basic

(0.08)

(0.06)

(0.05)

  - fully diluted

n/a

n/a

n/a

Notes:

(1) The fully diluted loss per share is not computed when the effect is anti-dilutive.




Balance Sheet as at

Dec. 31, 2005

Dec. 31, 2004

Dec. 31, 2003

Cash and cash equivalents

$ 2,108,755 

$ 3,172,870 

$     255,237 

Total assets

3,713,541 

4,815,384 

899,735 

Total liabilities

653,755 

596,447 

540,012 

Cash dividend declared per share

- 

- 

- 



Page 19






Shareholders’ equity

 

 

 

  - options and warrants

 643,938 

441,975 

307,208 

  - capital stock

8,100,253 

7,720,873 

2,651,317 

  - deficit

                    (5,684,405)

(3,943,911)

(2,598,802)

Total liabilities and shareholders equity

                    $ 3,713,541 

$ 4,815,384 

$      899,735 


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $1,077,177 at September 30, 2006 as compared with $1,300,245 at June 30, 2006.

At September 30, 2006, the Company did not have any outstanding indebtedness.

While the Company has generated royalty revenue and revenue from the distribution of pharmaceutical products in Canada, this revenue has been insufficient to fund the Company’s business activities to date. The Company continued to incur losses in the first nine months of 2006 and drew from its holdings of cash and cash equivalents.  It is not anticipated that the Company’s goal to move to a profitable status by the end of 2006 will be achieved.  This is principally due to lower than anticipated sales volumes and a product recall. However, the Company's financial performance continues to improve as domestic and international sales continue to grow and additional licensing agreements are put in place.  This improved financial performance will help the Company fund its future growth from the sale of its products, from milestone payments and from the royalty income resulting from out-licensing agreements for at least the next 24 months.

The Company may seek additional funding, primarily by way of one or more equity offerings, to carry out its business plan and to minimize risks to its operations. The market for equity financing for companies such as Stellar is challenging and there can be no assurance that additional funding will become available by way of equity financing. Any additional equity financing may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including technology licensing, co-development collaborations, and other strategic alliances. Such funding, if obtained, may reduce the Company’s interest in its projects or products. Regardless, there can be no assurance that any alternative sources of funding will be available.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPE), which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

RELATED PARTY TRANSACTIONS

The Company entered a fiscal advisory and consulting agreement with LMT Financial Inc. (a company beneficially owned by a director and his spouse) for services to be provided in 2006. Compensation under the agreement is $6,000 per month or $54,000 for the nine month period ended September 30, 2006.



Page 20




CAPITAL STOCK

The Company has authorized an unlimited number of Common Shares, without par value. There are no other classes of shares that are issued. During the nine month period ended September 30, 2006, the Company issued 152,500 Common Shares to employees, directors and consultants, who exercised stock options, with an approximate average price per share of $0.33. As of the date of this report, the Company had 23,622,690 Common Shares outstanding.

As of the date of this report, the Company had 1,235,000 Common Share options outstanding at various exercise prices and expiry dates.

SIGNIFICANT CUSTOMERS

During the third quarter of 2006, the Company had one significant customer, a national wholesaler, which represented 34.1% of sales, in comparison to 33.0% in the same quarter for 2005 and 34.3% for the nine month period ending September 30, 2006 compared to 32.9 % for the same period in 2005.

OUTLOOK

As of the date of this report, the Company had working capital of $1,396,013. The Company is debt free and management feels certain that it can continue to fund its ongoing operations from several sources, including the sale of its products, milestone payments and royalty income resulting from out-licensing agreements for at least the next 24 months.

As discussed above under the heading "Liquidity and Capital Resources," the Company may seek additional funding, primarily by way of one or more equity offerings, to carry out its business plan and to minimize risks to its operations. The market for equity financings for companies such as Stellar is challenging, and there can be no assurance that additional funding by way of equity financing will be available. The failure of the Company to obtain additional funding on a timely basis may result in the Company reducing or delaying one or more of its planned research, development and marketing programs and reducing related personnel, any of which could impair the current and future value of the business.  Any additional equity financing, if secured, may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including technology licensing, co-development collaborations, and other strategic alliances, which, if obtained, may reduce the Company’s interest in its projects or products. There can be no assurance, however, that any alternative sources of funding will be available.

RIDER #1


EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES


Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.


As at the end of the period covered by this MD&A, management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this MD&A, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings (as such terms are defined under the Canadian Securities Administrators’ Multilateral Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings) and other reports filed or submitted under Canadian securities laws is recorded, processed,



Page 21




summarized and reported within the time periods specified by those laws and that material information is accumulated and communicated to management of the Company, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

FORWARD-LOOKING STATEMENTS

Readers are cautioned that actual results may differ materially from the results projected in any "forward-looking" statements included in the foregoing report, which involve a number of risks or uncertainties. Forward-looking statements are statements that are not historical facts, and include statements regarding the Company’s planned research and development programs, anticipated future losses, revenues and market shares, planned clinical trials, expected future expenditures, the Company’s intention to raise new financing, sufficiency of working capital for continued operations, and other statements regarding anticipated future events and the Company’s anticipated future performance. Forward-looking statements generally can be identified by the words "expected", "intends", "anticipates", "feels", "continues", "planned", "plans", "potential", "with a view to", and similar expressions or variations thereon, or that events or conditions "will", "may", "could" or "should" occur, or comparable terminology referring to future events or results.                      

The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors, including those listed under "Risks and Uncertainties", any of which could cause actual results to vary materially from current results or the Company's anticipated future results. The Company assumes no responsibility to update the information contained herein.

RISKS AND UNCERTAINTIES

Stellar is subject to risks, events and uncertainties, or "risk factors", associated with being both a publicly-traded company operating in the biopharmaceutical industry, and as an enterprise with several projects in the research and development stage. Such risk factors could cause reported financial information to not necessarily indicate future operating results or future financial position. The Company cannot predict all of the risk factors nor can it assess the impact, if any, of such risk factors on its business, or the extent to which any factor, or combination of factors, may cause future results or financial position to differ materially from those reported or those projected in any forward-looking statements. Accordingly, reported financial information and forward-looking statements should not be relied upon as a prediction of future actual results.


Some of the risks and uncertainties affecting the Company, its business, operations and results include, but are not limited to: the Company’s dependence on a few customers and a few suppliers, the loss of any of which would negatively impact the Company’s operations; the need to develop and commercialize new products which will require further time-consuming and costly research and development, the success of which cannot be assured; the Company’s dependency on third parties for manufacturing, materials and for research, development and commercialization assistance and support; the Company’s dependency on assurances from third parties regarding licensing of proprietary technology owned by others; government regulation and the need for regulatory approvals for both the development and commercialization of products, which are not assured; uncertainty that the Company’s products will be accepted in the marketplace; rapid technological change and competition from pharmaceutical companies, biotechnology companies and universities, which may make the Company’s technology or products obsolete or uncompetitive; the need to attract and retain skilled employees; risks associated with claims of infringement of intellectual property and of proprietary rights; risks inherent in manufacturing (including up-scaling) and marketing; product liability and insurance risks; risks associated with clinical trials, including the possibility that trials may be terminated early, delayed or unsuccessful; exchange rate fluctuations; political, economic and environmental risks; the need for performance by buyers and suppliers of products; the Company’s dependency on performance by its licensees regarding the sale of our licensed-out products, NeoVisc and Uracyst; and the risk of unanticipated expenses or unanticipated reductions in revenue, or both, any of which could cause the Company to reduce, delay or divest one or more of its research, development or marketing programs.



Page 22




ADDITIONAL INFORMATION

Additional information relating to the Company is available on SEC at www.sec.gov, SEDAR at www.sedar.com or visit Stellar’s website at www.stellarpharma.com.



Page 23




Item 3. Controls and Procedures


Not applicable


PART II - OTHER INFORMATION


Item 1. Legal Proceedings.


Not applicable


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


Not applicable


Item 3. Defaults Upon Senior Securities.


Not applicable


Item 4. Submission of Matters to a Vote of Security Holders.


Not applicable


Item 5. Other Information.


Not applicable

  

Item 6. Exhibits


 

 

EX-31.1

CEO CERTIFICATION PURSUANT TO SECTION 302

EX-31.2

CFO CERTIFICATION PURSUANT TO SECTION 302

EX-32.1

CEO CERTIFICATION PURSUANT TO SECTION 906

EX-32.2

CFO CERTIFICATION PURSUANT TO SECTION 906




Page 24




SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.


Date: November 13, 2006

STELLAR PHARMACEUTICALS INC.

By:

/s/Peter Riehl

 

Name: Peter Riehl

 

Title: Chief Executive Officer





 






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