10-Q 1 g4524.txt QTRLY REPORT FOR THE QTR ENDED 9-30-10 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended September 30, 2010 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number 000-53486 ENOX BIOPHARMA, INC. (Exact name of registrant as specified in its charter) Nevada 26-0477124 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 303-1687 W. Broadway, Vancouver BC V6J 1X2 Canada (Address of principal executive offices)(Zip code) Tel: +1 (604) 637-9744 Fax: +1 (888) 224-7259 (Registrant's telephone number, including area code) Not Applicable (Former name, former address, and former fiscal year, if changed since last report) 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 [ ] Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition 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] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The issuer has 13,272,920 shares of common stock outstanding as of November 15, 2010. ENOX BIOPHARMA, INC. (A DEVELOPMENT STAGE COMPANY) INDEX TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 3 Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009 3 Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009, and from June 28, 2007 (Inception) through September 30, 2010 (Unaudited) 4 Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009, and from June 28, 2007 (Inception) through September 30, 2010 (Unaudited) 5 Notes to the Financial Statements (Unaudited) 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 ITEM 3. QUANTATATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 19 ITEM 4. CONTROLS AND PROCEDURES 19 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 20 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 20 ITEM 3. DEFAULTS IN SENIOR SECURITIES 20 ITEM 4. REMOVED AND RESERVED 20 ITEM 5. OTHER INFORMATION 20 ITEM 6. EXHIBITS 20 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Enox Biopharma, Inc. (A Development Stage Company) Balance Sheets

See accompanying notes to financial statements 3 Enox Biopharma, Inc. (A Development Stage Company) Statements of Operations (Unaudited)

See accompanying notes to financial statements 4 Enox Biopharma, Inc. (A Development Stage Company) Statements of Cash Flows (Unaudited)

See accompanying notes to financial statements 5 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) NOTE 1 NATURE OF OPERATIONS Enox Biopharma, Inc. (the "Company" or "Enox") was organized and incorporated under the laws of the State of Nevada on June 28, 2007. The Company is focusing on the development and commercialization of advanced Nitric Oxide technologies for a variety of medical uses. Enox's patented platform technology can be utilized across a wide spectrum of applications ranging from the treatment of upper respiratory tract infections, prevention of hospital acquired infections, innovative solutions to assist in the prevention of the common cold and to protect people from a diverse array of life threatening and drug resistant infections. The Company has not yet received required approvals to commercially sell any of its products that are in development. NOTE 2 BASIS OF PRESENTATION The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information as of December 31, 2009 is derived from the audited financial statements presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. The unaudited condensed interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management's Discussion and Analysis, for the year ended December 31, 2009. Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended September 30, 2010 are not necessarily indicative of results for the full fiscal year. NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DEVELOPMENT STAGE The Company's financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include equity based financing and further implementation of the business plan. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial 6 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) statements and accompanying notes. Such estimates and assumptions impact, among others, the following: the fair value of options and warrants granted as compensation, estimates of the probability and potential magnitude of contingent liabilities and the valuation allowance for deferred tax assets due to continuing operating losses. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates. RISKS AND UNCERTAINTIES The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, and regulatory risks including the potential risk of business failure. Also see Note 3 regarding going concern matters. RESEARCH AND DEVELOPMENT Research and development is expensed as incurred. SHARE-BASED PAYMENTS Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards' grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded in cost of goods sold or general and administrative expense in the consolidated statement of operations, depending on the nature of the services provided. DERIVATIVE FINANCIAL INSTRUMENTS Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments. Once determined, the derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments 7 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) such as warrants, are also valued using the Black-Scholes option-pricing model. At September 30, 2010 and December 31, 2009, respectively, the Company had derivative liabilities in the amounts of $71,996 and $0, respectively. EARNINGS PER SHARE In accordance with accounting guidance now codified as FASB ASC Topic 260, "EARNINGS PER SHARE," basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. The Company had the following potential common stock equivalents at September 30, 2010 and December 31, 2009: September 30, 2010 December 31, 2009 ------------------ ----------------- Warrants 780,753 1,005,586 Options 854,416 -- --------- --------- Total common stock equivalents 1,635,169 1,005,586 ========= ========= Since the Company reflected a net loss in for the periods ended September 30, 2010 and 2009, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-06, "IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS ("ASU 2010-06"). ASU 2010-06 amends ASC 820, "FAIR VALUE MEASUREMENTS" ("ASC 820") to require a number of additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the reasons for any transfers in or out of Level 3, and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. The ASU also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The amended guidance was effective for financial periods beginning after December 15, 2009, except the requirement to disclose Level 3 transactions on a gross basis, which becomes effective for financial periods beginning after December 15, 2010. ASU 2010-06 did not have a significant effect on the Company's consolidated financial position or results of operations. In April 2010, FASB issued ASU No. 2010-17, Revenue Recognition -- Milestone Method (Topic 605): Milestone Method of Revenue Recognition. ASU No. 2010-17 codifies the consensus reached in Emerging Issues Task Force Issue No. 08-9, "Milestone Method of Revenue Recognition." ASU No. 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development 8 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non-substantive milestones, and each milestone should be evaluated individually to determine if it is substantive. ASU No. 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its results of operations or financial condition. NOTE 4 GOING CONCERN As reflected in the accompanying financial statements, the Company has a net loss of $1,001,435 and net cash used in operations of $304,917 for the nine months ended September 30, 2010. The Company is in the development stage and has not generated any revenues. The ability of the Company to continue its operations is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company's existence. The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. NOTE 5 LOANS PAYABLE RELATED PARTY In May 2010, the Company executed a loan with its founder and president for $100,000. The loan bears interest at 12%, is unsecured and due May 15, 2011. The amount of principal and interest outstanding as of September 30, 2010 was $100,000. NOTE 6 DERIVATIVE LIABILITY On June 23, 2010 and August 12, 2010, the Company issued 12,500 and 50,000, respectively, of Series "A" warrants to investors, as more fully discussed in Note 7. In connection with ASC 815, "DETERMINING WHETHER AN INSTRUMENT (OR EMBEDDED FEATURE) IS INDEXED TO AN ENTITY'S OWN STOCK," the Company determined that the warrants (ratchet down of exercise price based upon lower exercise price in 9 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) future offerings) are not indexed to the Company's own stock and, therefore, is an embedded derivative liability (the "Embedded Derivative"), which requires bifurcation and to be separately accounted for. The Company measured the fair value of the derivative liabilities using a Black-Scholes valuation model. The fair value of the derivative liabilities are summarized as follow:

The Company recorded a derivative expense at the commitment dates of August 12, 2010 and June 23, 2010 of $60,500 and $15,141, respectively. The fair value of the derivative liabilities at issuance was based upon the following management assumptions: Exercise price $4.00 Expected dividends 0% Expected volatility 150% Expected term: warrants 2 years Risk free interest rate 0.55 - 0.74% MARK TO MARKET At September 30, 2010, the Company remeasured the derivative liabilities, and recorded fair value adjustments of $3,398 for the three months ended September 30, 2010. The following management assumptions were considered: Exercise price $4.00 Expected dividends 0% Expected volatility 150% Expected term: warrants 1.7 - 1.9 years Risk free interest rate 0.61% 10 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) NOTE 7 STOCKHOLDERS' EQUITY I. FOUNDER SHARES, COMMON STOCK AND WARRANTS YEAR ENDED DECEMBER 31, 2007 On June 28, 2007 (inception), the Company issued 6,350,000 shares of common stock to founders and 400,000 shares of common stock to consultants for a total of $683 ($0.0001/share). During 2007, the Company had the following private placement: DECEMBER 28, 2007 * 3,819,227 units for $234,883 ($0.06/unit), * Each unit consisted of one share of stock (3,819,227) and one warrant (3,819,227 Series "A"), * Series "A" warrants have an exercise price of $0.20/share and an expiration date of two years, YEAR ENDED DECEMBER 31, 2008 During 2008, the Company had the following private placements: (A) JULY 15, 2008 * 304,000 units for $76,000 (0.25/unit), * Each unit consisted of one share of stock (304,000) and two warrants (304,000 Series "A") and (304,000 Series "B"), * Series "A" warrants have an exercise price of $0.30/share and an expiration date of one year, * Series "B" warrants have an exercise price of $0.40/share and an expiration date of two years. * On July 13, 2010, 160,000 of the Series A warrants were exercised resulting in the Company receiving $64,000. (B) JULY 20, 2008 * 183,000 units for $55,000 ($0.30/unit), * Each unit consisted of one share of stock (183,333) and two warrants (183,333 Series "A") and (183,333 Series "B"), * Series "A" warrants have an exercise price of $0.35/share and an expiration date of one year, * Series "B" warrants have an exercise price of $0.45/share and an expiration date of two years. * On July 13, 2010, the Series B warrants were exercised resulting in the Company receiving $82,500 11 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) (C) DECEMBER 25, 2008 * 142,857 units for $50,000 ($0.35/unit), * Each unit consisted of one share of stock (142,857) and one warrant (142,857 Series "A"), * Series "A" warrants have an exercise price of $0.20/share and an expiration date of three years. YEAR ENDED DECEMBER 31, 2009 During 2009, the Company had the following private placements: (A) JULY 2, 2009 * 14,285 units for $5,000 ($0.35/unit), * Each unit consisted of one share of stock (14,285) and one warrant (14,285 Series "A"), * Series "A" warrants have an exercise price of $0.50/share and an expiration date of three years. (B) JULY 22, 2009 * 57,143 units for $20,000 ($0.35/share) (C) JULY 28, 2009 * 250,000 units for $75,000 ($0.30/unit), * Each unit consisted of one share of stock (250,000) and one warrant (250,000 Series "A"), * Series "A" warrants have an exercise price of $0.40/share and an expiration date of two years. (D) NOVEMBER 23, 2009 * 111,111 units for $100,000 ($0.90/unit), * Each unit consisted of two shares of stock (222,000) and one warrant (111,000 Series "A"), * Series "A" warrants have an exercise price of $0.60/share and an expiration date of two years. (E) DURING 2009, THE COMPANY HAD THE FOLLOWING WARRANT EXERCISES: * July 10, 2009 - 50,000 shares at $0.20/share for $10,000. * November 12, 2009 - 250,000 shares at $0.20/share for $50,000. * December 28, 2009 - 593,663 shares at $0.20/share for $118,732 12 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, 2010 On April 30, 2010, the Company granted 200,000 warrants to acquire intellectual property from two individuals. These warrants have an exercise price of $1.00, and expire in 2 years. The grant date fair value of these warrants was $52,960. The Company determined the fair value of these share based payments based upon the following assumptions: Expected term 2 years Expected volatility 150% Expected dividends 0% Risk free interest rate 0.97% Expected forfeitures 0% During 2010, The Company had the following private placements: JUNE 23, 2010 * 25,000 units for $50,000 (2.00/unit), * Each unit consisted of one share of stock (25,000) and1/2warrant (12,500 Series "A"), and * Series "A" warrants have an exercise price of $4.00/share and an expiration date of two years. AUGUST 12, 2010 * 100,000 units for $200,000 (2.00/unit), * Each unit consisted of one share of stock (100,000) and1/2warrant (50,000 Series "A"), and * Series "A" warrants have an exercise price of $4.00/share and an expiration date of two years. See Note 6 for treatment of these warrants as derivative liabilities. WARRANTS EXERCISED DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2010 On July 13, 2010, the Series B warrants to acquire 183,333 shares of common stock issued in July 2008 were exercised for net proceeds of $82,500. On July 23, 2010, the Series A warrants to acquire 160,000 shares of common stock issued in July 2008 were exercised for net proceeds of $64,000. The following is a summary of the Company's warrants that are outstanding and exercisable at September 30, 2010, December 31, 2009 and 2008: 13 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited)

II. STOCK OPTIONS (A) STOCK OPTION GRANT IN 2008 On December 20, 2008, the Company granted 100,000 stock options having a fair value of $14,363 for services rendered. (B) STOCK OPTION GRANT AND EXERCISE IN 2009 On September 25, 2009, the Company granted 350,000 stock options having a fair value of $36,519 for services rendered. On September 25, 2009, the Company issued 192,857 shares of common stock in connection with a cashless exercise provision related to all 450,000 stock options previously granted. (C) STOCK OPTION GRANT IN 2010 During the nine months ended September 30, 2010, the Company granted 3,896,938 stock options, having a grant date fair value of $1,619,667, and recognized $374,633 of expense associated with these share based payments as follows: On January 1, 2010, the Company granted 800,000 stock options having a grant date fair value of $328,521, which vest evenly over a thirty six month period, for services rendered. On January 9, 2010, the Company granted 1,886,938 stock options having a grant date fair value of $783,702, which vest evenly over a thirty six month period, for services rendered. 14 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) On February 1, 2010, the Company granted 200,000 stock options having a grant date fair value of $82,069, which vest over a two year period, quarterly, at 50,000 shares beginning August 1, 2010 through February 1, 2012, for services rendered. These options are considered outstanding, but not exercisable. On February 15, 2010, the Company granted 1,000,000 stock options having a grant date fair value of $410,315, which vest evenly over a thirty six month period, for services rendered. On August 1, 2010, the Company granted 10,000 stock options having a grant date fair value of $15,060, which vest evenly over a thirty six month period, for services rendered. The Company determined the fair value of its share based payments based upon the following assumptions: 2010 2009 2008 ---- ---- ---- Expected term 5 years 2 years 2 years Expected volatility 150% 100% 100% Expected dividends 0% 0% 0% Risk free interest rate 2.35-2.69% 0.30% 0.30% Expected forfeitures 0% 0% 0% The following is a summary of the Company's options that are outstanding and exercisable at September 30, 2010, December 31, 2009 and 2008:

15 Enox Biopharma, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2010 (Unaudited) NOTE 8 COMMITMENTS AND CONTINGENCIES (A) LITIGATIONS, CLAIMS AND ASSESSMENTS From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse affect on its business, financial condition or operating results. (B) EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS In 2010, the Company entered into agreements with individuals who will serve as officers and directors. The terms of these agreements are as follows: 1. President (January 1, 2010) a. Monthly fee of $6,000. b. 800,000 stock options having a grant date fair value of $328,521, which vest evenly over a thirty six month period. 2. Chairman (January 9, 2010) a. Entitled to receive monthly cash payment based upon Company's on hand cash resources. Currently, the Company does not have sufficient resources to meet the agreed upon amounts. b. 1,886,938 stock options having a grant date fair value of $783,702, which vest evenly over a thirty six month period. 3. Consultant (February 1, 2010) a. Annual salary - $50,000 b. 200,000 stock options having a grant date fair value of $82,069, which vest over a two year period, quarterly, at 50,000 shares beginning August 1, 2010 through February 1, 2012. This agreement was terminated in July 2010. 4. Chief Financial Officer (February 15, 2010) a. 1,000,000 stock options having a grant date fair value of $410,315, which vest evenly over a thirty six month period. 5. Investor Relations & Public Relations (March 15, 2010) a. Monthly retainer of $8,000. Under the agreement until the company has raised capital in the amount of at least $3,000,000, the company shall pay $2,500 per month, whereas the remaining $5,500 per month shall be deferred until the Investment Threshold is reached. This agreement was terminated in May 2010. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. Such forward-looking statements appear in this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," and include statements regarding our expectations regarding our short - and long-term capital requirements and our business plan and estimated expenses for the coming 12 months. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. The business and operations of Enox Biopharma, Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. We undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading "Risks Related To Our Business, Strategy, And Industry" in Part I, Item 1, "Risk Factors" in our registration statement on Form S-1 no 333-154763, which was declared effective on October 31, 2008. Readers are also urged to carefully review and consider the various disclosures we have made in this report. OVERVIEW Enox Biopharma, Inc. ("Enox", "us", "we" and "our") was incorporated on June 28, 2007 in the State of Nevada. We are a development stage biotechnology company, and to date have not earned any revenue and currently do not have any significant assets. Our corporate offices are located at 303-1687 W. Broadway, Vancouver BC, V6J 1X2, Canada. Our telephone number is (604) 637-9744 and our fax number is (888) 224-7259. We do not have any subsidiaries. We have a website at www.enoxbiopharma.com, however, the information contained on our website does not form part of this Quarterly Report. We are focusing on the development and commercialization of advanced Nitric Oxide technologies for a variety of medical uses. Enox's patented platform technology can be utilized across a wide spectrum of applications ranging from the treatment of upper respiratory tract infections, prevention of hospital acquired infections (HAI), innovative solutions to assist in the prevention of the common cold and to protect people from a diverse array of life threatening, drug resistant, infections. During the fiscal period ending September 30, 2010 we further expanded our IP portfolio by strengthening our worldwide patent applications. In addition to patents issued in China and South Africa we pursued national phase with Enox's original patent. We have completed field tests for our manufacturing device which is now fully in operation and renewed our service agreement with the University of British Columbia enabling us to continue our research and development efforts. Collectively our efforts strengthened our position in global business opportunities. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2009 During the three months ended September 30, 2010, we incurred operating expenses of $328,251, an increase of $202,747 or approximately 162% from the three months ended September 30, 2009. Operating expenses increased during the three month 17 ended September 30, 2010 from the comparative period primarily due to the recognition of stock based compensation related to stock options issued during 2010. Other significant elements include: * research and development costs of $74,202, which increased from $30,500 during the same period in the prior year, an increase of approximately 143%, due to payments on the purchase of intellectual property acquired in 2010; * general and administrative fees of $254,048, which is an increase from $159,044 during the same period in the prior year, an increase of approximately 167%, due to increase in consulting, professional fess related to accounting and legal services, increase in travel and other related expenses; During the nine months ended September 30, 2010, we incurred operating expenses of $929,440, an increase of $709,528 from the nine months ended September 30, 2009. Operating expenses increased during the nine months ended September 30, 2010 primarily due to the vesting of stock options issued for consulting services. These services included consulting for the Company by the President and Director of the Company, a Director of the Company, and the CFO of the company. An increase of approximately $107,000 in legal fees was the result of the acquisition of international patents and for the procurement of investments. Other consulting costs of $35,308 were incurred for a business plan and patents. Other significant issues were: * Research and Development expenses increased by $133,338 and travel costs increased by approximately $32,000. These expenses were incurred during the process of seeking capital and for the procurement of patents. Other noteworthy increases were in Investor Relations, having an increase of $20,598 and a Derivative expense of $60,516. NET LOSS We incurred a net loss of $1,001,435 for the nine months ended September 30, 2010, compared to a net loss of $219,912 for the nine months ended September 30, 2009. LIQUIDITY AND CAPITAL RESOURCES To date, we have had negative cash flows from operations and we have been dependent on sales of our equity securities to meet our cash requirements. We expect this situation to continue for the foreseeable future. We anticipate that we will have negative cash flows from operations in the next twelve month period. As of September 30, 2010, we had cash of $408,124 representing a net increase in cash of $174,048 since December 31, 2009. There was $248,755 cash generated from the sale of common stock and warrants and an additional $146,500 generated from the exercise of warrants during the nine months ended September 30, 2010. In May 2010, the Company accepted a loan in the amount of $100,000 from a stockholder which is due in full on or before May 15, 2011. Interest payments of 12%, or $1,000 are paid each month. Because we have not generated any revenue from our business, we will need to raise additional funds for the future development of our business and to respond to unanticipated requirements or expenses. There can be no assurance that additional financing will be available to us, or on terms that are acceptable. Consequently, we may not be able to proceed with our intended business plans or complete the development and commercialization of our product. If we fail to generate sufficient net revenues, we will need to raise additional capital to continue our operations thereafter. We cannot guarantee that additional funding will be available on favorable terms, if at all. Any shortfall will affect our ability to expand or even continue our operations. We cannot guarantee that additional funding will be available on favorable terms, if at all. 18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As required by Rule 13a-15/15d-15 under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as of September 30, 2010, we have carried out an evaluation of the effectiveness of the design and operation of our Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Company's management, our President (Principal Executive Officer) and Treasurer (Principal Accounting Officer). Based upon the results of that evaluation, our management has concluded that, as of September 30, 2010, our Company's disclosure controls and procedures were effective and provide reasonable assurance that material information related to our Company required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management to allow timely decisions on required disclosure. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: * Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; * Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and * Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -- Integrated Framework. Because of the material weaknesses described below, our management, under the supervision of and with the participation of our President and Chief Financial Officer, concluded that, as of September 30, 2010, our internal control over financial reporting was not effective based on the criteria in Internal Control -- Integrated Framework issued by the COSO. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of September 30, 2010, we identified that our material weaknesses derived from the small size of our Company. That small size makes the proper identification and authorization of transactions difficult, as we have essentially only two individuals overseeing this process, which and creates difficulties with separation of duties for handling, approving and coding invoices, entering transactions into the accounts, writing checks and requests for wire transfers. Additionally, the Company's officers are also its sole board members. This does not provide an adequate level of layers of internal controls, 19 which in turn make it difficult to accumulate information required to be disclosed by our Company in the reports that it files or submits under the Exchange Act. This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal control over financial reporting identified in connection with the evaluation described above during the quarter ended September 30, 2010 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. REMOVED AND RESERVED. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS (a) Pursuant to Rule 601 of Regulation SK, the following exhibits are included herein or incorporated by reference. Exhibit Number Description ------ ----------- 31.1 Certification of CEO Pursuant to 18 U.S.C. ss. 1350, Section 302 31.2 Certification of CFO Pursuant to 18 U.S.C. ss. 1350, Section 302 32.1 Certification Pursuant to 18 U.S.C. ss.1350, Section 906 32.2 Certification Pursuant to 18 U.S.C. ss. 1350, Section 906 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Enox Biopharma, Inc. By: /s/ Prof. Yossef Av-Gay -------------------------------------------- Prof. Yossef Av-Gay, President (Principal Executive Officer) Dated: November 15, 2010 By: /s/ Itamar David -------------------------------------------- Mr. Itamar David, Chief Financial Officer (Principal Financial and Accounting Officer) Dated: November 15, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Prof. Yossef Av-Gay -------------------------------------------- Prof. Yossef Av-Gay, President (Principal Executive Officer) Dated: November 15, 2010 By: /s/ Itamar David -------------------------------------------- Mr. Itamar David, Chief Financial Officer (Principal Financial and Accounting Officer) Dated: November 15, 2010 By: /s/ Amir Avniel -------------------------------------------- Mr. Amir Avniel, Chairman of the Board of Directors Dated: November 15, 2010 21

Enox Biopharma Inc 10-Q