Innovation Pharmaceuticals Inc. - Quarter Report: 2009 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
_______________________________
FORM
10 – Q
_______________________________
x QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2009
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:
000-52321
Cellceutix
Corporation
(Exact
name of registrant as specified in its charter)
|
Nevada
|
13-4303398
|
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
|
|
Incorporation
or Organization)
|
Identification
Number)
|
100
Cumming Center, Suite 151-B
Beverly,
MA 01915
(Address
of principal executive offices and zip code)
(978)-633-3623
(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 Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
|
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
Transitional
Small Business Disclosure Format (check one): Yes ¨ No x
The
number of shares outstanding of the Registrant's Common Stock as of April 20,
2009 was 91,791,000 shares.
CELLCEUTIX
CORPORATION
FORM
10-Q
INDEX
|
PART
I FINANCIAL INFORMATION
|
||||
|
I
1. Item 1. Financial
Statements
|
||||
|
BBalance
Sheets- March 31, 2009 (Unaudited) and June 30, 2008
(Audited)
|
2
|
|||
|
StStatements
of Operations (Unaudited) - For the Three and Nine Months Ended March 31,
2009 and 2008, and for the cumulative period from June 20, 2007
(Date of Inception) through March 31, 2009
|
3
|
|||
|
Statements
of Changes in Stockholders Deficit (Unaudited)- For the cumulative period
from June 20, 2007 (Date of Inception) to March 31, 2009
|
4
|
|||
|
StStatements
of Cash Flows (Unaudited) - For the Nine Months Ended March 31,
2009 and 2008, and for the cumulative
period from June 20, 2007 (Date of Inception)
to March 31, 2009
|
5
|
|||
|
N Notes
to Financial Statements (Unaudited)
|
6
|
|||
|
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
9
|
|||
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
9
|
|||
|
It
Item 4. Controls and Procedures
|
10
|
|||
|
PART
II OTHER INFORMATION
|
11
|
|||
|
I Item
1. Legal Proceedings
|
11
|
|||
|
Item 1A.
Risk Factors
|
11
|
|||
|
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
|
11
|
|||
|
Item
3. Defaults Upon Senior Securities
|
11
|
|||
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
11
|
|||
|
Item 5. Other
Information
|
11
|
|||
|
Item
6. Exhibits
|
12
|
|||
|
Si
Signatures
|
12
|
|||
|
|
||||
1
Part
1. Financial Information
Item
1. Financial Statements
Cellceutix
Corporation
(A
Development Stage Enterprise)
Balance
Sheets
|
March
31, 2009
|
June
30, 2008
|
|||||||
|
(unaudited)
|
(audited)
|
|||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
|
$
|
160,690
|
$
|
351,860
|
||||
|
Prepaid expenses
|
7,702
|
97,917
|
||||||
|
Total
current assets
|
168,392
|
449,777
|
||||||
|
Total
assets
|
$
|
168,392
|
$
|
449,777
|
||||
|
Liabilities
and Stockholders' Deficit
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts payable, including related party payables of $312,505 and $0,
respectively
|
$
|
317,935
|
$
|
13,730
|
||||
|
Accrued expenses
|
47,400
|
20,349
|
||||||
|
Accrued salaries and payroll taxes
|
870,172
|
345,378
|
||||||
|
Convertible
debentures
|
400,000
|
-
|
||||||
|
Due to officer
|
32,310
|
32,310
|
||||||
|
Total
current liabilities
|
1,667,817
|
411,767
|
||||||
|
Long
term liabilities:
|
||||||||
|
Convertible debentures
|
-
|
400,000
|
||||||
|
Total
liabilities
|
1,667,817
|
811,767
|
||||||
|
Commitments
and contingencies
|
||||||||
|
Stockholders'
deficit:
|
||||||||
|
Preferred
stock; $.0001 par value; 10,000,000 shares
|
||||||||
|
authorized;
0 shares issued and outstanding
|
-
|
-
|
||||||
|
Common
stock; $.0001 par value; 300,000,000 shares
|
||||||||
|
authorized;
91,791,000 and 91,891,000 shares issued and outstanding,
respectively
|
9,179
|
9,189
|
||||||
|
Additional
paid in capital
|
178,758
|
148,623
|
||||||
|
Deficit
accumulated during development stage
|
(1,687,362
|
)
|
(519,802
|
)
|
||||
|
Total
stockholders' deficit
|
(1,499,425
|
)
|
(361,990
|
)
|
||||
|
Total
liabilities and stockholders' deficit
|
$
|
168,392
|
$
|
449,777
|
||||
The accompanying notes are an
integral part of these financial statements.
2
Cellceutix
Corporation
(A
Development Stage Enterprise)
Statements
of Operations
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||
|
March
31, 2009
|
March
31, 2008
|
March
31, 2009
|
March
31, 2008
|
June
20, 2007 (Date of Inception) Through
March
31,
2009
|
||||||||||||||||
|
Revenues
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
Operating
Expenses
|
||||||||||||||||||||
|
General
and administrative
|
10,156 | 7,318 | 30,569 | 16,298 | 56,198 | |||||||||||||||
|
Research
and development
|
381,587 | — | 381,587 | — | 381,587 | |||||||||||||||
|
Payroll
expenses
|
228,757 | 137,500 | 524,794 | 183,334 | 870,172 | |||||||||||||||
|
Professional
fees
|
9,533 | 31,391 | 69,991 | 50,674 | 160,174 | |||||||||||||||
|
Stock
based compensation expense
|
11,843 | — | 135,125 | 43,533 | 178,658 | |||||||||||||||
|
Total
operating expenses
|
641,876 | 176,209 | 1,142,066 | 293,839 | 1,646,789 | |||||||||||||||
|
Loss
from operations
|
(641,876 | ) | (176,209 | ) | (1,142,066 | ) | (293,839 | ) | (1,646,789 | ) | ||||||||||
|
Interest
expense-net
|
(8,696 | ) | — | (25,494 | ) | — | (31,494 | ) | ||||||||||||
|
Net
loss before provision for income taxes
|
(650,572 | ) | (176,209 | ) | (1,167,560 | ) | (293,839 | ) | (1,678,283 | ) | ||||||||||
|
Provision
for income taxes
|
— | — | — | — | — | |||||||||||||||
|
Net
loss
|
$ | (650,572 | ) | $ | (176,209 | ) | $ | (1,167,560 | ) | $ | (293,839 | ) | $ | (1,678,283 | ) | |||||
|
Basic
and Diluted Loss
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||
|
Weighted
average number of common shares used in basic and diluted per share
calculations
|
91,791,000 | 91,791,000 | 91,858,153 | 39,297,295 | ||||||||||||||||
The accompanying notes are an
integral part of these financial statements.
3
Cellceutix
Corporation
(A
Development Stage Enterprise)
Statement
of Changes in Stockholders' Deficit
For the
Cumulative
Period
June 20, 2007 (Date of Inception)
through
March 31, 2009
(Unaudited)
|
Common
Stock
|
Additional
Paid
|
Deficit
Accumulated
During
Development
|
||||||||||||||||||
|
Shares
|
Par
Value $0.0001
|
In
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Shares
issued June 20, 2007 (Inception)
|
1,000,000
|
$
|
100
|
$
|
-
|
$
|
-
|
$
|
100
|
|||||||||||
|
Net
loss
|
-
|
-
|
-
|
(530
|
)
|
(530
|
)
|
|||||||||||||
|
Balance,
June 30, 2007
|
1,000,000
|
100
|
-
|
(530
|
)
|
(430
|
)
|
|||||||||||||
|
Share
exchange with Cellceutix Pharma, Inc. December 6, 2007
|
(1,000,000
|
)
|
(100
|
)
|
-
|
100
|
-
|
|||||||||||||
|
SharS
Share exchange in reverse merger with Cellceutix Pharma, Inc. December 6,
2007
|
82,000,000
|
8,200
|
-
|
(8,200
|
)
|
-
|
||||||||||||||
|
Shares
exchanged in a reverse acquisition
of
Cellceutix Pharma, December 6, 2007
|
9,791,000
|
979
|
-
|
(979
|
)
|
-
|
||||||||||||||
|
Issuance
of stock options
|
-
|
-
|
43,533
|
-
|
43,533
|
|||||||||||||||
|
Forgiveness
of debt from a
stockholder
|
-
|
-
|
50
|
-
|
50
|
|||||||||||||||
|
Capital
contribution from a stockholder
|
-
|
-
|
50
|
-
|
50
|
|||||||||||||||
|
Shares
issued for services, April 28, 2008 at $1.05
|
100,000
|
10
|
104,990
|
-
|
105,000
|
|||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
(510,193
|
)
|
(510,193
|
)
|
|||||||||||||
|
Balance,
June 30, 2008
|
91,891,000
|
9,189
|
148,623
|
(519,802
|
)
|
(361,990
|
)
|
|||||||||||||
|
Cancellation
of shares issued for services, December 31, 2008
|
(100,000)
|
(10)
|
(104,990)
|
-
|
(105,000)
|
|||||||||||||||
|
Issuance
of stock options
|
-
|
-
|
135,125
|
-
|
135,125
|
|||||||||||||||
|
Net
loss for the nine months ended
March
31, 2009
|
-
|
-
|
-
|
(1,167,560
|
)
|
(1,167,560
|
)
|
|||||||||||||
|
Balance,
March 31, 2009 (unaudited)
|
91,791,000
|
$
|
9,179
|
$
|
178,758
|
$
|
(1,687,362
|
)
|
$
|
(1,499,425
|
)
|
|||||||||
The
accompanying notes are an integral part of these financial
statements.
4
Cellceutix
Corporation
(A
Development Stage Enterprise)
Statements
of Cash Flows
(Unaudited)
|
For
the Nine Months Ended March 31, 2009
|
For
the Nine Months Ended March 31, 2008
|
For
the Cumulative Period June 20, 2007 (Date of Inception)
through
March
31, 2009
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net
loss
|
$
|
(1,167,560
|
)
|
$
|
(293,839
|
)
|
$
|
(1,678,283
|
)
|
|||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Stock
based compensation
|
135,125
|
43,533
|
178,658
|
|||||||||
|
Cancellation
of stock issued for services
|
(17,500
|
)
|
-
|
(17,500
|
)
|
|||||||
|
Forgiveness
of accounts payable
|
-
|
500
|
-
|
|||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Prepaid
expenses
|
2,715
|
(15,000)
|
9,798
|
|||||||||
|
Accounts
payable including related party payables of $312,505 and $0,
respectively
|
304,205
|
28,682
|
317,985
|
|||||||||
|
Accrued
expenses
|
27,051
|
20,949
|
47,400
|
|||||||||
|
Accrued
salaries and payroll taxes
|
524,794
|
183,334
|
870,172
|
|||||||||
|
Net
cash used in operating activities
|
(191,170
|
)
|
(31,841)
|
(271,770
|
)
|
|||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Capital
contribution from a stockholder
|
-
|
-
|
50
|
|||||||||
|
Loan
from officer
|
-
|
32,310
|
32,310
|
|||||||||
|
Sale
of common stock
|
-
|
-
|
100
|
|||||||||
|
Proceeds
from convertible debentures
|
-
|
-
|
400,000
|
|||||||||
|
Net
cash provided by financing activities
|
-
|
32,310
|
432,460
|
|||||||||
|
NET
(DECREASE) INCREASE IN CASH
|
(191,170
|
)
|
469
|
160,690
|
||||||||
|
CASH,
BEGINNING OF PERIOD
|
351,860
|
-
|
-
|
|||||||||
|
CASH,
END OF PERIOD
|
$
|
160,690
|
$
|
469
|
$
|
160,690
|
||||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:
|
Stock
issued for acquisition
|
$
|
-
|
$
|
9,079
|
$
|
9,079
|
||||||
|
Forgiveness
of debt
|
$
|
-
|
$
|
-
|
$
|
50
|
The
accompanying notes are an integral part of these financial
statements.
5
Cellceutix
Corporation
(A
Development Stage Enterprise)
Notes to
Financial Statements
March
31, 2009
(Unaudited)
1. Background
Information
EconoShare,
Inc. was incorporated on August 1, 2005 in the State of Nevada and was organized
for the purpose of developing a B2B (Business to Business) website for an Asset
Sharing market place and transaction system.
On
December 6, 2007, EconoShare, Inc. acquired Cellceutix Pharma, Inc., a privately
owned Delaware corporation (“Cellceutix Pharma”), pursuant to an Agreement and
Plan of Share Exchange (the “Exchange”), with Cellceutix
Pharma becoming a wholly-owned subsidiary of EconoShare,
Inc. Cellceutix Pharma, Inc. was incorporated under the laws of the
State of Delaware on June 20, 2007. Its assets consisted of rights
assigned to it for six early stage pharmaceutical compounds by three different
scientists. Upon consummation of the Exchange, EconoShare, Inc. adopted the
business plan of Cellceutix Pharma, Inc.
Pursuant
to the terms of the Exchange, EconoShare, Inc. acquired Cellceutix Pharma, Inc.
in exchange for an aggregate of 82,000,000 newly issued shares of Econoshare
Inc.’s common stock, par value $0.0001 per share (the “Common Stock”), resulting
in an aggregate of 91,791,000 shares (the “Exchange of Shares”) of EconoShare,
Inc. Common Stock issued and outstanding. As a result of the Exchange,
Cellceutix Pharma, Inc. became a wholly-owned subsidiary of EconoShare,
Inc. The Exchange Shares were issued to the Cellceutix Pharma, Inc.
shareholders on a pro rata basis, on the basis of 82 shares of Common Stock for
each share of Cellceutix Pharma, Inc. common stock held by such Cellceutix
Pharma, Inc. shareholder at the time of the Exchange.
The
former holders of Cellceutix Pharma Common Stock now beneficially own
approximately 89% of the outstanding shares of our Common Stock. Accordingly,
the Exchange represented a change in control. As of the date of this report,
there are 91,791,000 shares of Common Stock issued and
outstanding. For financial accounting purposes, the acquisition was a
reverse acquisition of EconoShare, Inc. by Cellceutix Pharma, Inc., under the
purchase method of accounting, and was accounted for as a recapitalization as of
June 20, 2007 with Cellceutix Pharma, Inc. as the accounting
acquirer.
On
January 14, 2008, a majority of the shareholders of EconoShare, Inc. approved an
amendment to the Registrant’s articles of incorporation to change the name of
the Registrant to Cellceutix Corporation (“the Company”). Upon the
filing of a Definitive Information Statement and effectiveness of the name
change the Company applied to the National Association of Security Dealers to
change its stock symbol on the Over the Counter Bulletin Board, resulting in the
Company’s new stock symbol of “CTIX”. The Company is considered a development
stage company at this time.
2. Financial
Statements
In the
opinion of management, all adjustments consisting only of normal recurring
adjustments necessary for a fair statement of (a) the results of operations for
the three and nine month periods ended March 31, 2009 and 2008, (b) the
financial position at March 31, 2009 and (c) cash flows for the nine month
periods ended March 31, 2009 and 2008 have been made.
The
unaudited financial statements and notes are presented as permitted by Form
10-Q. Accordingly, certain information and note disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. The
accompanying financial statements and notes should be read in conjunction with
the Company’s Form 10KSB for the fiscal year ended June 30, 2008. The results of
operations for the three and nine month periods ended March 31, 2009 are not
necessarily indicative of those to be expected for the entire year.
3. Going
Concern
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. For the period since June 20, 2007 (date of
inception) through March 31, 2009, the Company has had a net loss of $1,678,283,
no sales and a working capital deficit of $1,499,425 at March 31,
2009. As of March 31, 2009, the Company has not emerged from the
development stage. In view of these matters, the ability of the Company to
continue as a going concern is dependent upon the Company’s ability to generate
additional financing. Since inception, the Company has financed its activities
principally from the use of equity securities and debt issuance to pay for its
operations. The Company intends on financing its future development activities
and its working capital needs largely from the issuance of debt and the sale of
equity securities, until such time that funds provided by operations are
sufficient to fund working capital requirements. There can be no assurance that
the Company will be successful at achieving its financing goals at reasonably
commercial terms, if at all.
The
recent economic downturn and market instability has made the business climate
more volatile and more costly. If the current equity and credit
markets deteriorate further, or do not improve, it may make necessary debt or
equity financing more difficult, more costly and more
dilutive. Failure to secure any necessary financing in a timely
manner and on favorable terms could have a material
6
3. Going
Concern (continued)
adverse
effect on the Company’s growth strategy, financial performance and stock price
and could require the delay of new product development and clinical trial
plans. Currently, the Company has not made any arrangements for
equity or any other type of financing.
These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability of the recorded assets or the
classification of liabilities that may be necessary should the Company be unable
to continue as a going concern.
4. Commitments
and Contingencies
Consulting
Agreements
On April
15, 2008 the Company signed a service agreement with a consultant to provide
public relations and strategic communications advice and services to the Company
for one year beginning April 28, 2008. In October, the Company was notified of
the death of the consultant and the agreement was terminated in accordance with
its terms. The 100,000 shares of the Company’s common stock
previously issued to the consultant were returned to the Company and
cancelled.
On March
2, 2009, the Company entered into an agreement with a patent attorney to prepare
patent applications for Cellceutix products. The Company expects to file
multiple patent applications during the term of this agreement. The
agreement provides that the Company will grant 40,000 options to purchase shares
of the Company’s common stock as compensation for each application filed in lieu
of cash compensation. The options will be granted on the day that the work on
the application begins. As of March 31, 2009, the attorney had been issued
80,000 options for the preparation of two patents, valued at $11,843 and
recorded in the accompanying Statements of Operations as stock compensation
expense. The average exercise price of the options is $0.14 per
share.
Pharmaceutical
Compounds
On August
2, 2007, the Company was assigned all right, title, and interest to three
pharmaceutical compounds; Kevetrin, KM 277 and KM 278, by their inventors. On
October 17, 2007, the Company was assigned all right, title, and interest to an
additional three pharmaceutical compounds; KM 133 KM 362 and KM 3174. In
exchange for these compounds, the Company agreed to pay the inventors 5% of net
sales of the compounds in countries where composition of matter patents have
been issued and 3% of net sales in other countries. Kevetrin, KM 277, KM 278 and
KM 362 were acquired from our President and director, Dr. Krishna
Menon. The Company intends to file patent applications for each of
these six compounds as funds become available.
The
Company is continuing the research and development of these Compounds and has
therefore, assigned no value to these Compounds.
Employment
Agreements
On
December 7, 2007, the Company entered into employment agreements with its two
executive officers, George Evans, Chief Executive Officer, and Krishna Menon,
Chief Scientific Officer. Both agreements provide for a three year term with
minimum annual base salaries of $200,000 in the first year, $300,000 in the
second year and $400,000 in the third year. In addition, the
agreements provide for bonuses according to the following schedule:
Upon
receiving New Drug Application (“IND”): $250,000 if received within 10
months
$150,000
if received within 12 months
$100,000
if received within 16 months
Completion
of Phase 1with clinical results that would have Kevitrin proceed to Phase
2/3:
$450,000
if received within 18 months
$350,000
if received within 24 months
$150,000
if received within 28 months
Start
Phase 2/3:
$500,000
if within 36 months
$350,000
if within 42 months
$150,000
if within 48 months
The bonus
obligations do not commence until the Company receives a financing commitment in
an amount of at least $4,000,000.
The
agreement with Mr. Evans also provides a grant of options to purchase 918,910
and 917,910 shares of the Company's stock with exercise prices of $0.20 and
$0.15 per share and fair values of $123,282 and $43,533, for the nine months
ended March 31, 2009 and 2008, respectively. The agreement calls for
the issuance options to purchase up to 1% of the common shares outstanding at
each subsequent anniversary year.
7
5. Related
Party Transactions
Office
Lease
Dr.
Menon, the Company’s principal shareholder, President, and Director, also serves
as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On
December 7, 2007, the Company began renting office space from KARD, on a month
to month basis for $900 per month. At March 31, 2009 and June 30,
2008, payables of $14,400 and $6,300 to KARD were included in accrued
expenses.
Clinical
Studies
As of
September 28, 2007 the Company engaged KARD to conduct specified pre-clinical
studies necessary for the Company to prepare an Investigational New Drug
Application (“IND”) submission to the US Food and Drug Administration
(“FDA”). The Company does not have an exclusive arrangement with
KARD. All work performed by KARD must have prior approval by the
executive officers of the Company, and the Company retains all intellectual
property resulting from the services by KARD. To date the Company has incurred
$381,587 of research and development expenses by KARD, of which $312,505 is
included in accounts payable.
6. Due
To Officer
As of
March 31, 2009, Leo Ehrlich, CFO loaned the Company $32,310 for working
capital. The loan is not interest bearing and is not collateralized.
The Company expects to repay this loan during the 2009 fiscal year.
7. Stock
Options and Warrants:
Stock
Options
The
Company granted 918,910 and 80,000 options to an employee and a patent attorney
during the nine month period ended March 31, 2009. The fair value of
the options was estimated on the date of grant using the Black Scholes model
that uses assumptions noted in the following table. Expected volatility is based
on the monthly trading of a similar Company’s underlying common stock (as the
Company does not have an adequate trading history for an accurate calculation)
and other factors.
|
Expected
term (in years)
|
3 | |||
|
Expected
stock price volatility
|
111.2% - 114.9 | % | ||
|
Risk-free
interest rate
|
1.27% - 1.28 | % | ||
|
Expected
dividend yield
|
0 | % | ||
|
Estimated
fair value per option granted
|
$ | 0.13 - $0.15 | ||
The following table
summarizes all stock option activity for options granted during the periods
ended March 31, 2009:
|
Number
of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Aggregate
Intrinsic
Value
|
||||||||||||
|
Outstanding
at June 30, 2008
|
917,910
|
$
|
0.15
|
2.44
|
$
|
385,522
|
|||||||||
|
Granted
|
998,910
|
$
|
0.20
|
2.71
|
$
|
4,800
|
|||||||||
|
Outstanding
at March 31, 2009
|
1,916,820
|
$
|
0.17
|
2.22
|
$
|
50,696
|
|||||||||
|
Exercisable
at March 31, 2009
|
1,916,820
|
$
|
0.17
|
||||||||||||
8
The
Company had previously recognized $43,533 and $135,125 of stock based
compensation cost related to option awards granted for the year ended June 30,
2008 and the nine months ended March 31, 2009, there is no unamortized
compensation cost at March 31, 2009.
As of
March 31, 2009 and 2008, there were 2,964,000 warrants issued and outstanding
with an exercise price of $0.81. The warrants expire in September
2010.
8. Convertible
Debentures
On May 7,
2008, the Company issued Convertible Debentures, at 9% per annum, for a total
amount of $400,000. The principle and related accrued interest are
due December 2009, and are secured by the Company’s assets. The
Debentures and any accrued and unpaid interest are convertible into the
Company’s common stock, at the holder’s request, at a conversion price of
$1.50.
9. Subsequent
Events
On April
1, 2009, the Company entered into a three month
agreement with a Consultant who will assist the Registrant's Chief Scientific
Officer to organize, manage and display data from animal studies as well as
information relating to Active Pharmaceutical Ingredients and formulations of
the Registrant's products. The Consultant will be compensated at the rate of
$4,000 per month payable on the last day of each month. In addition, at the end
of each month of services provided, the Consultant will be granted options to
purchase 10,000 shares of Registrant's common stock.
On April
5, 2009 the Board of Directors of the Registrant adopted the 2009 Stock Option
Plan ("the Plan"). The Plan permits the grant of 2,000,000 shares of both
Incentive Stock Options ("ISOs"), intended to qualify under section 422 of the
Code, and Non-Qualified Stock Options.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion of the Company's financial condition and the results of
operations should be read in conjunction with the Financial Statements and Notes
thereto appearing elsewhere in this document.
The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that in addition to the description of historical
facts contained herein, this report contains certain forward-looking statements
that involve risks and uncertainties as detailed herein and from time to time in
the Company's other filings with the Securities and Exchange Commission and
elsewhere. Such statements are based on management's current expectations and
are subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those, described in the forward-looking
statements. These factors include, among others: (a) the Company's fluctuations
in sales and operating results; (b) risks associated with international
operations; (c) regulatory, competitive and contractual risks; (d) product
development risks; (e) the ability to achieve strategic initiatives, including
but not limited to the ability to achieve sales growth across the business
segments through a combination of enhanced sales force, new products, and
customer service; and (f) pending litigation.
Management’s
Plan of Operation
We are an
early stage developmental biopharmaceutical company. We have no product
sales to date and we will not receive any product revenue until we receive
approval from the FDA or equivalent foreign regulatory bodies to begin selling
our pharmaceutical candidates. Developing pharmaceutical products, however, is a
lengthy and very expensive process. Assuming we do not encounter any unforeseen
safety issues during the course of developing our product candidates, we do not
expect to complete the development of a product candidate for several years, if
ever.
In August
and October 2007, we acquired exclusive rights to a total of six pharmaceutical
compound candidates that are designed for treatment of diseases which may be
either existing or diseases identified in the future. The Company will
initially spend most of its efforts and resources on its anti-cancer compound,
Kevetrin, for the treatment of head and neck cancers. This compound
is furthest along in in-vivo studies in small animals. Based on the
results, the Company has decided to advance it along the regulatory and clinical
pathway. We anticipate using our expertise to manage and perform what we believe
are the most critical aspects of the product development process which include
the design and oversight of clinical trials, the development and execution of
strategies for the protection and maintenance of intellectual property rights
and the interaction with regulatory authorities internationally. We expect to
concentrate on product development and engage in a very limited way in product
discovery, avoiding the significant investment of time and financial resources
that is generally required before a compound is identified and brought into
clinical trials. In addition, we are currently engaged in pre-clinical testing
of one of our product candidates and intend to out-source clinical trials,
pre-clinical testing and the manufacture of clinical materials to third parties.
We are
now engaged in organizational activities and sourcing compounds and materials
and have incurred $381,587 in research and development expenses. We have
not obtained any funding for our drug development business plan, nor have we
generated any revenues, nor do we not expect to generate revenues in the near
future. We may not be successful in developing our drugs and start selling our
products when planned, or that we will become profitable in the future. We have
incurred net losses in each fiscal period since inception of our
operations.
Liquidity
and Capital Resources
On May 7,
2008, the Company issued Convertible Debentures, at 9% per annum, for a total
amount of $400,000. The principle and related accrued interest are
due December 2009, and are secured by the Company’s assets. The
Convertible Debentures and any accrued and unpaid interest are convertible into
the Company’s common stock, at the holder’s request, at a conversion price of
$1.50.
On March
2, 2009, the Registrant entered into an agreement with a patent attorney to
prepare patent applications for Cellceutix products. The agreement provides that
the Registrant will grant 40,000 options to purchase shares of the Registrant
common stock as compensation for each application filed in lieu of cash
compensation. The Options will be granted on the day that the work on the
application begins. On March 3, 2009 the Registrant issued 80,000 options for
preparations of two patents at the average exercise price of $0.14 per
share.
As of
March 31, 2009 the Company had a cash balance of $160,690. Although
in May 2008, the Company received $400,000 from the issuance of convertible
debentures, the Company will need to raise substantial funds in order to execute
its product development plan. Based upon our expected rate of
expenditures, we currently do not have sufficient cash reserves to meet all of
our anticipated obligations through our fiscal year end of June 30,
2009. The Company will seek to raise capital through an offering of
our common stock or other securities of the Company. However, there can be no
assurance that we will be successful in securing the capital we require or that
we may obtain financing on terms that are favorable to us.
9
Requirement
for Additional Capital
The
recent economic downturn and market instability has made the business climate
more volatile and more costly. If the current equity and credit
markets deteriorate further, or do not improve, it may make necessary debt or
equity financing more difficult, more costly and more
dilutive. Failure to secure any necessary financing in a timely
manner and on favorable terms could have a material adverse effect on the
Company’s growth strategy, financial performance and stock price and could
require the delay of new product development and clinical trial
plans.
Research
and Development Costs. The Company has incurred $381,587 in research
and development activities for the nine months ended March 31,
2009. We currently do not have funds to meet our planned drug
development for the next twelve months and we may not be able to obtain the
necessary financing. Assuming that we are successful in raising additional
financing, we plan to incur the following expenses over the next twelve
months:
1 Research
and Development of $3,000,000: Includes planned costs for Kevetrin of $1,500,000
for additional in-vivo and in-vitro studies which should result with the data
required to file an investigational new drug application (“IND”) with the FDA;
and $1,500,000 in preclinical development costs for our other
compounds.
2 Clinical
trials -Assuming we are successful with our “IND” filing for
Kevetrin, and are granted the ability to begin human clinical trials, we have
budgeted $3,000,000 for our Phase 1 trials.
3 Corporate
overhead of $750,000: This amount includes budgeted office salaries, legal,
accounting and other costs expected to be incurred.
4 Capital
costs of $450,000: This is the estimated cost for equipment and laboratory
improvements. The Company plans to incur these costs if the planned trials in
the calendar year of 2009 show improvement over present treatments.
5 Staffing
costs of $500,000: The Company expects to incur these costs for the filing of an
investigational new drug application with the FDA. This is the estimated
cost of hiring additional scientific staff and consulting firms to assist with
FDA compliance, material characterization, pharmaco-kinetic, pharmaco-dynamic
and toxicology studies.
The
Company will be unable to proceed with its planned drug development, meet its
administrative expense requirements, capital costs, or staffing costs without
obtaining additional financing of approximately $7,700,000 to meet its budget.
The Company does not have any arrangements at this time for equity or other
financings other than the financing completed on May 7, 2008. If we
are unable to obtain additional financing, our business plan will be
significantly delayed.
Subsequent
Events
On April
1, 2009, the Company entered into a three month
agreement with a Consultant who will assist the Registrant's Chief Scientific
Officer to organize, manage and display data from animal studies as well as
information relating to Active Pharmaceutical Ingredients and formulations of
the Registrant's products. The Consultant will be compensated at the rate of
$4,000 per month payable on the last day of each month. In addition, at the end
of each month of services provided, the Consultant will be granted options to
purchase 10,000 shares of Registrant's common stock.
On April
5, 2009 the Board of Directors of the Registrant adopted the 2009 Stock Option
Plan ("the Plan"). The Plan permits the grant of 2,000,000 shares of both
Incentive Stock Options ("ISOs"), intended to qualify under section 422 of the
Code, and Non-Qualified Stock Options.
Off-Balance
Sheet Arrangements.
The
Company does not have any off-balance sheet arrangements, as defined in Item
303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as
amended.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not
applicable
10
Item
4T. Controls and Procedures
The
Company’s Chief Financial Officer and Chief Financial Officer has evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2009
covered by this Quarterly Report on Form 10-Q. Based upon such
evaluation, the Chief Executive Officer and Chief Financial Officer
has concluded that, as of the end of such period, the Company’s disclosure
controls and procedures were not effective as required under Rules 13a-15(e) and
15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief
Executive Officer and Chief Financial Officer does not relate to reporting
periods after March 31, 2009.
Changes
in Internal Control over Financial Reporting
No change
in the Company’s internal control over financial reporting occurred during the
quarter ended March 31, 2009, that materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
None.
Item
1A. Risk Factors
As a
small reporting company, the Company is not required to provide the information
required by this Item 1A of Part II.
Item
2. Unregistered Sales of Equity Securities
Item
3. Defaults Upon Senior Securities
None
Item
4. Submission Of Matters To A Vote Of Security Holders
None
Item
5. Other Information
None
Item
6. Exhibits
11
Item
6. Exhibits
(a) Exhibit
index
|
Exhibit
|
|
|
|
10.1
|
SECURITY
AGREEMENT, dated as of May 7, 2008, between Cellceutix Corp. and Putnam
Partners, White Star LLC, and Dahlia Nordlicht.
|
|
|
10.2
|
CONVERTIBLE PROMISSORY
NOTE dated as of May 7, 2008, between Cellceutix Corp. and Putnam
Partners, White Star LLC, and Dahlia Nordlicht.
|
|
|
10.3
|
GUARANTY
dated as of May 7, 2008, between Cellceutix Corp. and Putnam Partners,
White Star LLC, and Dahlia Nordlicht.
.
|
|
|
31.1
|
|
Certification
of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31.2
|
|
Certification
of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32.1
|
|
Certification
of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
32.2
|
|
Certification
of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
(b) Reports
on Form 8-K
None
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.
|
CELLCEUTIX
CORPORATION
|
||
|
/s/
George W. Evans
|
||
|
George
W. Evans
|
||
|
Title:
|
Chairman,
Chief Executive Officer
|
|
|
(principal
executive officer)
|
||
|
/s/
Leo Ehrlich
|
||
|
Leo
Ehrlich
|
||
|
Title:
|
Chief
Financial Officer
|
|
|
(principal
financial officer)
|
||
|
Date:
|
May
8, 2009
|
|
12