Innovation Pharmaceuticals Inc. - Quarter Report: 2010 November (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 September 30, 2010
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 000-52321
Cellceutix Corporation
(Exact name of registrant as specified in its charter)
|
Nevada
|
30-0565645
|
|
|
(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 a check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes¨ No ¨
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):
|
Large accelerated filer ¨
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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 number of shares outstanding of the Registrant's Common Stock as of November 18, 2010 was 91,914,500 shares.
CELLCEUTIX CORPORATION
FORM 10-Q
INDEX
TABLE OF CONTENTS
|
PART I FINANCIAL INFORMATION
|
|||
|
Item
|
1
|
Financial Statements
|
|
|
Balance Sheets-
September 30, 2010 (Unaudited) and June 30, 2010 (Audited)
|
2
|
||
|
Statements of Operations (Unaudited) - For the Three Months Ended September
|
3
|
||
|
30, 2010 and 2009, and for the cumulative period from June 20, 2007
|
|||
|
(Date of Inception) to September 30, 2010
|
|||
|
Statements of Changes in Stockholder’s Deficit (Unaudited) - For the
|
4
|
||
|
cumulative period from June 20, 2007 (Date of Inception) to September 30, 2010
|
|||
|
|
Statement of Cash Flows (Unaudited) - For the Three Months Ended September 30, 2010
and 2009, and for the cumulative period from June 20, 2007 (Date of Inception) to
September 30, 2010
|
5
|
|
|
Notes to Financial Statements (Unaudited)
|
6
|
||
|
Item
|
2
|
Management’s Discussion & Analysis of Financial Condition and Results of Operations
|
10
|
|
Item
|
3
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Quantitative and Qualitative Disclosures About Market Risk
|
12
|
|
Item
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4T
|
Controls & Procedures
|
12
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|
PART II OTHER INFORMATION
|
|||
|
Item
|
1
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Legal Proceedings
|
13
|
|
Item
|
2
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Unregistered Sales of Equity Securities Use of Proceeds
|
13
|
|
Item
|
3
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Default Upon Senior Securities
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13
|
|
Item
|
4
|
Submission of Matters to a Vote of Securities Holders
|
13
|
|
Item
|
5
|
Other Information
|
13
|
|
Item
|
6
|
Exhibits
|
13
|
|
Signatures
|
14
|
1
Part 1. Financial Information
Item 1. Financial Statements
Cellceutix Corporation
(A Development Stage Enterprise)
Balance Sheets
|
September 30, 2010
|
June 30, 2010
|
|||||||||
|
(unaudited)
|
(audited)
|
|||||||||
|
Assets
|
||||||||||
|
Current assets:
|
||||||||||
|
Cash
|
$
|
12,736
|
$
|
3,994
|
||||||
|
Prepaid expenses
|
100,048
|
97,826
|
||||||||
|
Total current assets
|
112,784
|
101,820
|
||||||||
|
Total assets
|
$
|
112,784
|
$
|
101,820
|
||||||
|
Liabilities and Stockholders' Deficit
|
||||||||||
|
Current liabilities:
|
||||||||||
|
Accounts payable, including related party payables of $982,561 and $900,870, respectively
|
$
|
1,154,312
|
$
|
1,187,434
|
||||||
|
Accrued expenses, including related party rent accrual of $91,637 and $68,885, respectively
|
122,489
|
89,302
|
||||||||
|
Accrued salaries and payroll taxes
|
2,440,066
|
2,157,485
|
||||||||
|
Note payable to officer
|
1,525,217
|
1,005,217
|
||||||||
|
Convertible debentures
|
460,000
|
460,000
|
||||||||
|
Total current liabilities
|
5,702,084
|
4,899,438
|
||||||||
|
Total liabilities
|
5,702,084
|
4,899,438
|
||||||||
|
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; 91,914,500 and 91,939,500 shares issued and outstanding, respectively
|
9,191
|
9,194
|
||||||||
|
Additional paid in capital
|
873,156
|
631,721
|
||||||||
|
Deficit accumulated during development stage
|
(6,471,647
|
)
|
(5,438,533
|
)
|
||||||
|
Total stockholders' deficit
|
(5,589,300
|
)
|
(4,797,618
|
)
|
||||||
|
Total liabilities and stockholders' deficit
|
$
|
112,784
|
$
|
101,820
|
||||||
The accompanying notes are an integral part of these financial statements.
2
Cellceutix Corporation
(A Development Stage Enterprise)
Statements of Operations
(Unaudited)
|
For the Cumulative
|
||||||||||||
|
Period from June 20, 2007
|
||||||||||||
|
Three Months Ended
|
(Date of Inception) through
|
|||||||||||
|
September 30, 2010
|
September 30, 2009
|
September 30, 2010
|
||||||||||
|
Revenues
|
$ -
|
$ -
|
||||||||||
|
Operating Expenses
|
||||||||||||
|
General and administrative expenses
|
26,148
|
34,874
|
227,452
|
|||||||||
|
Officers’ payroll and payroll tax expense
|
401,146
|
314,498
|
2,660,778
|
|||||||||
|
Research and development
|
446,047
|
121,813
|
2,837,630
|
|||||||||
|
Professional fees
|
119,286
|
57,422
|
549,188
|
|||||||||
|
Patent expense
|
-
|
-
|
37,342
|
|||||||||
|
Total operating expenses
|
992,627
|
528,607
|
6,312,390
|
|||||||||
|
Loss from operations
|
(992,627
|
)
|
(528,607
|
)
|
(6,312,3900
|
)
|
||||||
|
Interest expense-net
|
(40,487
|
)
|
(9,851
|
)
|
(150,178
|
)
|
||||||
|
Loss before provision for income taxes
|
(1,033,114
|
)
|
(538,458
|
)
|
(6,462,568
|
)
|
||||||
|
Provision for Income taxes
|
-
|
-
|
-
|
|||||||||
|
Net Loss
|
$
|
(1,033,114
|
)
|
$
|
(538,458
|
)
|
$
|
(6,462,568
|
)
|
|||
|
Basic and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||||||
|
Weighted average number of common
|
91,961,783
|
91,838,174
|
||||||||||
|
shares used in basic and diluted
|
||||||||||||
|
per share calculations
|
||||||||||||
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 September 30, 2010
(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
|
—
|
|||||||||||||
|
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
|
—
|
—
|
142,162
|
—
|
142,162
|
|||||||||||||||
|
Shares issued for services, June 11, 2009 at $0.38
|
20,000
|
2
|
7,598
|
—
|
7,600
|
|||||||||||||||
|
Shares issued for services, June 30, 2009 at $0.38
|
25,000
|
3
|
9,497
|
—
|
9,500
|
|||||||||||||||
|
Net loss
|
—
|
—
|
—
|
(1,485,331
|
)
|
(1,485,331
|
)
|
|||||||||||||
|
Balance, June 30, 2009
|
91,836,000
|
9,184
|
202,890
|
(2,005,133
|
)
|
(1,793,059
|
)
|
|||||||||||||
|
Shares issued for services, July 6, 2009 at $0.43
|
25,000
|
2
|
10,748
|
—-
|
10,750
|
|||||||||||||||
|
Shares issued for services, February 5, 2010 at $0.30
|
3,500
|
—
|
1,050
|
—
|
1,050
|
|||||||||||||||
|
Issuance of stock options
|
—
|
—
|
383,291
|
—
|
383,291
|
|||||||||||||||
|
Shares issued for services, June 1, 2010 at $0.45
|
75,000
|
8
|
33,742
|
—
|
33,750
|
|||||||||||||||
|
Net loss
|
—
|
—
|
—
|
(3,433,400
|
)
|
(3,433,400
|
)
|
|||||||||||||
|
Balance, June 30, 2010
|
91,939,500
|
$
|
9,194
|
$
|
631,721
|
$
|
(5,438,533
|
)
|
$
|
(4,797,618
|
)
|
|||||||||
|
Issuance of stock options
|
—
|
—
|
10,584
|
—
|
10,584
|
|||||||||||||||
|
Shares issued for services, July 6, 2010 at $0.55
|
50,000
|
5
|
27,495
|
27,500
|
||||||||||||||||
|
Cancellation of shares issued for services, June 1, 2010 at $0.45
|
(75,000
|
)
|
(8
|
)
|
(33,742
|
)
|
—
|
(33,750
|
)
|
|||||||||||
|
Modification of stock options
|
—
|
—
|
237,098
|
—
|
237,098
|
|||||||||||||||
|
Net loss for the three months ended September 30, 2010
|
—
|
—
|
—
|
(1,033,114
|
)
|
(1,033,114
|
)
|
|||||||||||||
|
Balance, September 30, 2010
|
91,914,500
|
$
|
9,191
|
$
|
873,156
|
$
|
(6,471,647
|
)
|
$
|
(5,589,300
|
)
|
|||||||||
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 Three Months Ended September 30, 2010
|
For the Three Months Ended September 30, 2009
|
For the Cumulative Period June 20, 2007 (Date of Inception) through
September 30, 2010
|
|||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net loss
|
$
|
(1,033,114
|
)
|
$
|
(538,459
|
)
|
$
|
(6,462,568
|
)
|
|||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Stock based compensation
|
234,862
|
12,862
|
737,405
|
|||||||||
|
Issuance of common stock for services
|
—
|
5,062
|
19,400
|
|||||||||
|
Cancellation of stock for services
|
(11,250
|
)
|
-
|
(28,750
|
)
|
|||||||
|
Amortization of prepaid expenses
|
16,378
|
-
|
56,576
|
|||||||||
|
Accrued stock based compensation
|
—
|
153,243
|
—
|
|||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Prepaid expenses
|
(780
|
)
|
(28,147
|
)
|
(11,611
|
)
|
||||||
|
Accounts payable
|
(33,122
|
)
|
16,343
|
1,154,362
|
||||||||
|
Accrued expenses
|
33,187
|
12,598
|
182,489
|
|||||||||
|
Accrued salaries and payroll taxes
|
282,581
|
228,755
|
2,440,066
|
|||||||||
|
Net cash used in operating activities
|
(511,258
|
)
|
(137,743
|
)
|
(1,912,631
|
)
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Capital contribution from a stockholder
|
—
|
—
|
50
|
|||||||||
|
Loan from officer
|
520,000
|
85,000
|
1,525,217
|
|||||||||
|
Sale of common stock
|
—
|
—
|
100
|
|||||||||
|
Proceeds from convertible debentures
|
—
|
—
|
400,000
|
|||||||||
|
Net cash provided by financing activities
|
520,000
|
85,000
|
1,925,367
|
|||||||||
|
NET INCREASE (DECREASE) IN CASH
|
8,742
|
(52,743
|
)
|
12,736
|
||||||||
|
CASH, BEGINNING OF PERIOD
|
3,994
|
140,380
|
—
|
|||||||||
|
CASH, END OF PERIOD
|
$
|
12,736
|
$
|
87,637
|
$
|
12,736
|
||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:
|
Common stock issued for acquisition
|
$
|
—
|
$
|
—
|
$
|
9,079
|
||
|
Forgiveness of debt
|
$
|
—
|
$
|
—
|
$
|
50
|
||
|
Common stock issued for services
|
$
|
27,500
|
$
|
10,750
|
$
|
143,250
|
||
|
Cancellation of common stock for services
|
$
|
(33,750
|
)
|
—
|
$
|
(138,750)
|
||
|
Options issued for services recorded as prepaid expenses
|
$
|
12,820
|
$
|
8,063
|
$
|
12,820
|
The accompanying notes are an integral part of these financial statements.
5
Cellceutix Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
September 30, 2010
(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, Cellceutix Corporation, formerly known as EconoShare, Inc., (the “Company” or the “Registrant”) acquired Cellceutix Pharma, Inc., a privately owned Delaware corporation pursuant to an Agreement and Plan of Share Exchange (the “Exchange”). 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.
Pursuant to the terms of the Exchange, the Company acquired Cellceutix Pharma, Inc. in exchange for an aggregate of 82,000,000 newly issued shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). As a result of the Exchange, Cellceutix Pharma, Inc. became a wholly-owned subsidiary of the Company. The Company’s 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. This resulted in the former holders of Cellceutix Pharma, Inc. Common Stock, upon Exchange, owning approximately 89% of the outstanding shares of the Company’s Common Stock. Accordingly, the Exchange represented a change in control. For financial accounting purposes, the acquisition was a reverse acquisition of the Company by Cellceutix Pharma, Inc., under the purchase method of accounting, and was treated as a recapitalization with Cellceutix Pharma, Inc. as the legal acquirer. Upon consummation of the Exchange, the Company adopted the business plan of Cellceutix Pharma, Inc.
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. Upon the filing of a Definitive Information Statement and effectiveness of the name change on February 1, 2008, the Company applied to the National Association of Security Dealers (NASD) to change its stock symbol on the Over the Counter Bulletin Board which resulted in the Company’s stock symbol being changed to CTIX.
The Company’s Common Stock was quoted on the Over the Counter Bulletin Board (OTCBB), through August 2010. In September 2010, the firm (market maker) making a market in CTIX common stock on the OTCBB withdrew due to a lack of trading volume in the Company’s common stock. This resulted in the Company’s common stock being delisted from the OTCBB. Trading in the Company’s common stock presently are transacted on the PINKSHEET market.
On November 5, 2010, George Evans resigned his position as a director and Chief Executive Officer of Cellceutix Corporation (the “Registrant”). Mr. Evan’s resignation was a result of a disagreement with the Company regarding his compensation. Mr. Evans has made financial demands from the Company which the Company is presently reviewing. On the same date, Leo Ehrlich, the Company’s Chief Financial Officer, was appointed to serve as interim Chief Executive Officer, and Chairman of the board of directors until his successor is duly appointed and qualified. Mr. Ehrlich will also continue serving as Chief Financial Officer of Cellceutix.
On November 5, 2010, shareholders holding 58% of the Registrant’s outstanding common stock adopted and approved an amendment to the Registrant’s Articles of Incorporation to effect a reverse split of the Registrant’s common stock on a 1 for 50 basis (the “Split”). The Split will be effectuated immediately upon filing the proper disclosure reports with the Commission, or anytime thereafter at the sole discretion of the Board of Directors. As of the filing date of this Form 10Q, the Board has not approved the Split.
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 month periods ended September 30, 2010 and 2009, (b) the financial position at September 30, 2010 and (c) cash flows for the three month periods ended September 30, 2010 and 2009, 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 10K for the fiscal year ended June 30, 2010. The results of operations for the three month period ended September 30, 2010 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 September 30, 2010, the Company has had a cumulative net loss of $6,462,568, no revenues and a working capital deficit of $5,589,300 at September 30, 2010. As of September 30, 2010, 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, debt issuance and loans from an officer 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 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.
In addition the Company’s former Chief Executive Officer has made significant financial demands pursuant to his employment contract with the Company. The Company presently is reviewing this matter.
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. Recent accounting pronouncements
|
In October 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance for revenue recognition with multiple deliverables. This new guidance impacts the determination of when the individual deliverables, included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, it modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. This new guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, however early adoption is permitted. The adoption of this guidance will not have a material effect on the financial statements.
In January 2010, the FASB issued new guidance which improves disclosures about fair value measurements. The new standard is effective for interim and annual periods beginning after December 15, 2009, except for certain disclosures regarding Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010. The Company is evaluating the impact of this guidance on its financial statements and does not expect this new guidance to have a material effect on the financial statements.
In February 2010, the FASB issued updated guidance to address certain implementation issues related to an entity’s requirements to perform and disclose subsequent events. This update requires SEC filers to evaluate subsequent events through the date the financial statements were issued and exempts SEC filers from disclosing the date through which subsequent events have been evaluated. The updated guidance was effective upon issuance, and did not have a material impact on the Company’s financial statements.
Other recent accounting pronouncements issued by FASB (including EITF), the AICPA and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
6
5. Commitments and Contingencies
Consulting Agreements
On October 22, 2009, the Company signed an agreement with Toxikon Corporation to conduct preclinical studies required for an Investigational New Drug (IND) filing for its cancer drug Kevetrin™. The studies covered by the agreement are designed to confirm that Kevetrin meets FDA safety requirements for studies in humans.
On March 13, 2010, the Company signed a manufacturing agreement with Formatech Inc. for the aseptic filling of Kevetrin. Aseptic filled vials of Kevetrin are required by the FDA for use in human clinical studies.
On August 23, 2010, the Company signed a consulting agreement with International Pharmaceutical Consultants, Inc. (“IPC”) to provide medical consulting and monitoring services for a planned phase 1 trial of Kevetrin™.
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. The Company was assigned all right, title, and interest to an additional three pharmaceutical compounds on October 17, 2007, KM 133 KM 362 and KM 3174. In July 2009, the Company was assigned all right, title, and interest to KM 732. 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 filed a patent application for Kevetrin and intends to file patent applications for each of the other six compounds as funds become available.
In December 2009, the Company was assigned all right, title and interest to a new compound, KM-391, which it intends to develop for the treatment of autism. In exchange for this compound, the Company agreed to pay the inventors $10,000 plus 4.5% of net sales the compound in countries where a composition of matter patent has been issued and 3% of net sales in other countries.
Employment Agreements
On December 7, 2007, the Company entered into employment agreements with its two executive officers, George Evans, Former 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 IND: $250,000 if received within 10 months
$150,000 if received within 12 months
$100,000 if received within 16 months
and no bonus if received thereafter or not received.
Completion of Phase 1with clinical results that would have Kevetrin 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
and no bonus if received thereafter or not received.
Start Phase 2/3:
$500,000 if within 36 months
$350,000 if within 42 months
$150,000 if within 48 months
and no bonus if received thereafter or not received.
The bonus obligations do not commence until the Company receives a financing commitment in an amount of at least $4,000,000.
The agreement calls for the issuance of options to purchase up to 1% of the common shares outstanding at each subsequent anniversary year during the employment term. The agreement with Mr. Evans also provides a grant of options to purchase 918,610, 918,910 and 917,910 shares of the Company's stock with exercise prices of $0.35, $0.20 and $0.15 per share and fair values of $257,834, $123,282 and $43,533 for the years ended June 30, 2010, 2009 and 2008, respectively. During the three months ended September 30, 2010, the Company approved a two year extension of the expiration dates and $203,260 of additional compensation expense was recorded as the options were revalued.
As of September 30, 2010, the Company has recorded accrued officers’ salaries and payroll taxes are as follows:
|
George Evans
|
$
|
833,333
|
||
|
Krishna Menon
|
833,333
|
|||
|
Leo Ehrich
|
600,000
|
|||
|
Accrued Payroll Taxes
|
173,400
|
|||
|
$
|
2,440,066
|
The Company’s former Chief Executive Officer, George Evans has made significant financial demands pursuant to his employment contract with the Company. The Company presently is reviewing this matter and has not accrued any additional expenses as of September 30, 2010.
7
6. 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 September 30, 2010 and June 30, 2010, payables of $30,600 and $27,900 to KARD were included in accrued expenses, respectively. For the three months ended September 30, 2010 and 2009 and the period June 20, 2007 (date of inception) through September 30, 2010, the Company has included $2,700, $2,700 and $30,600 in general and administrative expenses, respectively.
Clinical Studies
As of September 28, 2007 the Company engaged KARD to conduct specified pre-clinical studies necessary for the Company to prepare an IND submission to the 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. For the three months ended September 30, 2010 and 2009 and the period June 20, 2007 (date of inception) through September 30, 2010, the Company incurred $275,660, $0 and $1,639,049 of research and development expenses conducted by KARD, respectively. At September 30, 2010, the Company has included a total of $982,561 in accounts payable to Kard.
7. Due To Officer
During the year ended June 30, 2010, Mr. Ehrlich, an officer of the Company, converted previous amounts provided in cash to the Company of $32,310 into a loan (the “Ehrlich Promissory Note A”). The Ehrlich Promissory Note A was an unsecured, 6% per annum simple interest bearing, demand note. During the same period, Mr. Ehrlich provided an additional $85,000 in cash in the form of a loan to the Company (the “Ehrlich Promissory Note B”). The Ehrlich Promissory Note B was an unsecured, 6% per annum simple interest bearing, demand note.
During the year ended June 30, 2010, Mr. Ehrlich, loaned the Company a total of $972,907. A condition for this loan was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C. The Ehrlich Promissory Note C combines the balance of Ehrlich Promissory Note A, plus the additional loan amount of $972,907. During the three months ended September 30, 2010, Mr. Ehrlich loaned the Company an additional $520,000 which brings the balance of the demand note to $1,525,217. The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum and is convertible into the Company’s common stock at $0.50 per share. The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%. As of September 30, 2010, the Company has recorded interest of $61,037 in accrued expenses.
|
8.
|
Stock Options and Warrants:
|
On July 13, 2010, the Company’s board of directors extended all previously issued three year options to five years, and on September 10, 2010 all previously issued warrants were extended to December 31, 2013.
For fully vested options, this modification resulted in a total charge of $237,098, of which $224,278 has been expensed in July 2010 and the remaining $12,820 recorded in prepaid expenses to be expensed over the remaining service period. For those modified options that were not fully vested on the modification date, a total of $3,435 will be expensed over the remaining vesting period.
On April 1, 2009, the Company entered into an agreement, subsequently amended, with a Consultant to assist the Company'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 Company's products through November 2010. The Consultant was 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 is granted options to purchase 10,000 shares of Company's common stock. Effective September 1, 2010, the Company has extended the current agreement and beginning in August 2010, the monthly fee was increased to $5,000. The remainder of the agreement remains unchanged. As of September 30, 2010, the Consultant has been awarded a total of 180,000 options to purchase common stock valued at $64,926 to be vested over one year from date of issuance. For the three months ended September 30, 2010, the Company has expensed $16,508 to professional fees expense, related to these options.
On May 6, 2010, the Company entered into a two year agreement with an individual for consulting services. In exchange for these services, the Company granted the Consultant 200,000 options to purchase common stock. The options were valued using the Black-Scholes option model for $62,015, which includes the option modification expense. As of September 30, 2010, the Company has $49,797 remaining in prepaid expenses related to this agreement and expensed $7,863 for the three months ended September 30, 2010.
The fair value of each option for the three months ended September 30, 2010 and 2009 was estimated on the date of grant or grant modification using the Black Scholes model that uses assumptions noted in the following table.
|
Three Months Ended September 30, 2010
|
Three Months Ended September 30, 2009
|
||||||||
|
Expected term (in years)
|
5
|
3
|
|||||||
|
Expected stock price volatility
|
121.23% - 151.9
|
%
|
111.1% - 111.9
|
%
|
|||||
|
Risk-free interest rate
|
0.20%– 1.60
|
%
|
1.45%– 1.62
|
%
|
|||||
|
Expected dividend yield
|
0
|
%
|
0
|
%
|
|||||
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.
8
Stock Options
The following table summarizes all stock option activity:
|
Number of Options
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (Years)
|
Aggregate Intrinsic Value
|
||||||||||
|
Outstanding at June 30, 2009
|
2,066,820
|
$
|
0.17
|
2.04
|
—
|
||||||||
|
Granted
|
1,288,610
|
0.39
|
2.52
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Forfeited/expired
|
—
|
—
|
—
|
—
|
|||||||||
|
Outstanding at June 30, 2010
|
3,355,430
|
$
|
0.25
|
1.61
|
$
|
986,950
|
|||||||
|
Granted
|
30,000
|
0.58
|
4.92
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Forfeited/expired
|
—
|
—
|
—
|
—
|
|||||||||
|
Outstanding at September 30, 2010
|
3,385,430
|
$
|
0.26
|
3.37
|
$
|
1,211,234
|
|||||||
|
Exercisable at September 30, 2010
|
3,177,097
|
$
|
0.25
|
3.29
|
$
|
1.163,569
|
|||||||
The Company recognized $239,990, $12,862 and $753,982 of compensation costs related to option awards granted during the three months ended September 30, 2010 and 2009 and the period from inception to September 30, 2010, respectively, and there is $23,273 of unamortized compensation cost expected to be recognized through September 30, 2011. This includes the additional compensation costs related to the Board of Director’s approval to extend the term of all outstanding options an additional two years.
As of September 30, 2010, there were 2,964,000 warrants issued and outstanding with a weighted average exercise price of $0.81. The warrants were to expire in September 2010, however in September; the Company approved the extension of these warrants to December 31, 2013. There were no new warrants issued during the three months ended September 30, 2010.
9. Equity Transactions
On July 6, 2010, the Company entered into two one year agreements with two Consultants to serve as scientific advisors and to participate as members of the Company’s Scientific Advisory Board. In exchange for these services, the Company has granted the Consultants 25,000 shares of common stock each. The 50,000 shares of common stock are valued at a total of $27,500 and recorded in prepaid expenses. For the three month period ended September 30, 2010, $3,438 has been expensed.
On June 1, 2010, the Company entered into a three month agreement with a company for consulting services. In exchange for these services, the Company paid $30,000 and granted the company 75,000 shares of common stock valued at $33,750. As of June 30, 2010, the Company recorded $42,500 in prepaid expenses related to this agreement and expensed $21,250. In September 2010, the agreement was terminated due to non-performance and the 75,000 shares were returned to the company for cancellation.
10. Convertible Debentures
On May 7, 2008, the Company issued Convertible Debentures, at 9% per annum, for a total amount of $400,000. The principal and related accrued interest were due December 2009, and secured by the Company’s assets. The Debentures and any accrued and unpaid interest were convertible into the Company’s common stock, at the holder’s request, at a conversion price of $1.50.
During January, 2010, the Company extended and amended the original Convertible Debenture agreements by extending the original maturity date to December 31, 2010. The conversion price of the principal and any unpaid interest was changed to $0.50 per share. The Company and debenture holders also agreed to convert accrued interest of $60,000 through December 31, 2009 into additional principal. At September 30, 2010 $30,852 is accrued as interest expense.
In November 2010 the Company was notified that it has been awarded approximately $730,000 in total grants under the Qualifying Therapeutic Discovery Project program. Cellceutix was awarded a grant for each of its three active research programs. The Company's lead program is Kevetrin™, which is being developed for drug resistant cancers. Cellceutix is also developing KM-391 for autism and KM-133 for psoriasis. Each grant amounted to slightly more than $244,000. The grants are awarded to therapeutic discovery projects that show a reasonable potential to (a) result in new therapies to treat areas of unmet medical need or prevent, detect or treat chronic or acute diseases and conditions, (b) reduce the long-term growth of health care costs in the United States, or (c) significantly advance the goal of curing cancer within 30 years.
See also “Section 1. Background Information” for additional subsequent events.
9
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.
We acquired exclusive rights to a total of eight (8) pharmaceutical compound candidates that are designed for treatment of diseases which may be either existing or diseases identified in the future. The Company has spent most of its efforts and resources on its anti-cancer compound, Kevetrin, for the treatment of certain cancers. Based on the experimental studies results to date, the Company has decided to advance Kevetrin 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: (i) the design and oversight of clinical trials; (ii) the development and execution of strategies for the protection and maintenance of intellectual property rights; and (iii) the interaction with regulatory authorities internationally. We expect to concentrate on product development and engage in a 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.
Significant Milestones In Kevetrin’s Development
The following are studies completed or substantially completed and will be incorporated into our investigational new drug application (IND) FDA submission.
cGMP synthesis
In-vitro studies
In vivo studies
Pharmacodynamics of Kevetrin- the study of the physiological effects of drugs on the body.
Pharmacokinetic (PK) -Pharmacokinetics includes the study of the mechanisms of absorption and distribution of an administered drug, the rate at which a drug action begins and the duration of the effect, the chemical changes of the substance in the body and the effects and routes of excretion of the metabolites of the drug.
GLP safety pharmacology studies
GLP toxicology studies
IN PROGRESS
The formulation of Kevetrin for administration during the Phase I clinical study is ongoing. Kevetrin will be prepared as lyophilized material which will be reconstituted then administered in patients as an intravenous infusion.
Bio Markers
The Phase I clinical protocol is currently being drafted is designed as a dose escalation study to determine the maximum tolerated dose as a primary endpoint and efficacy as a secondary endpoint.
In January, 2010, the Company had a “pre- IND” meeting with the U. S. Food and Drug Administration (FDA). The purpose of the meeting was to obtain comments from the FDA on the protocols for the toxicity and pharmacology studies that are required for IND filing. The FDA provided comments on the protocols, which were adopted by the Company. We are currently engaged in preparing Kevetrin’s IND for submission to the FDA. An approved IND is necessary to test a drug candidate in humans (clinical testing). It is anticipated the IND will be submitted approximately April 2011.
We have incurred $2,837,630 in research and development expenses from inception through September 30, 2010. We have not obtained sufficient 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.
Summaries and graphs of the results of experiments with Kevetrin in animal models of drug resistant lung cancer, breast cancer and colon cancer have been made available on the Company’s website at www.cellceutix.com. A brief summary of the results are as follows:
|
·
|
Lung Cancer
|
|
|
Kevetrin was studied in two cell lines of multi-drug resistant lung cancer. In two studies with the A549 cell line, Kevetrin showed average tumor growth delay of 72% and average tumor volume reduction of 81% compared to controls. Both tumor growth delay and tumor volume reduction were also significantly greater with Kevetrin than with paclitaxel (Taxol) (p<0.001).
|
|
·
|
In two studies with the NCI-H1975 cell line of multi-drug resistant lung cancer, Kevetrin showed average tumor growth delay of 149% and tumor volume reduction of 94% compared to controls. Both tumor growth delay and tumor volume reduction were greater with Kevetrin than with paclitaxel (p<0.001).
|
|
|
|
10
|
·
|
Breast Cancer
|
|
|
In animal model testing on a taxane-resistant, estrogen receptor-negative breast cancer human cell line, MDA-MB-435s, tumor volume was reduced by 72% and tumor growth was delayed by more than 52% with Kevetrin when compared with paclitaxel (Taxol) (p<0.01) or with cisplatin (p<0.01).
|
|
·
|
Colon Cancer
|
|
|
Kevetrin showed tumor growth delay of 43% compared to controls and paclitaxel when tested on animals with HCT-15 P-glycoprotein drug resistant colon cancer.
|
KM-391- compound in development for the treatment of autism
We announced positive results in an animal study of its autism compound, KM-391. In a carefully conducted study, KM-391 was given orally over 90 days to groups of rats at two dosage levels. At each dosage level, KM-391 demonstrated significant improvements in the test animals when compared to both the “no treatment” group and the “active control” (fluoxetine) group on the parameters of brain plasticity, serotonin levels and behavioral function. These parameters were selected as important indicators of the effect needed to successfully treat autism.
Further experiments are planned.
KM-133- Psoriasis
KM-133, a small molecule compound, acting on the principles of folate mechanism, is in development for Psoriasis. After a series of chemical optimization exercises, the Company has completed an animal study in a xenograft model of psoriasis.
KM-133 was studied in mice that were irradiated then engrafted with human psoriatic tissue. Groups of ten mice were treated orally for 14 days with either 10 mg/kg KM-133 once/day, 10 mg/kg KM-133 twice/day, 7.5 mg/kg methotrexate once/day or acted as controls. The mice were followed for 180 days. Endpoints were skin appearance, histological observations, and blood levels of PRINS, IL-20 and 12-R lipoxygenase. For these parameters, KM-133 was compared to controls and methotrexate. CD4+ and CD8+ lymphocyte counts were also measured and compared to efalizumab.
KM-133 significantly reduced all psoriatic endpoints measured relative to controls (p<0.01). The higher dose of KM-133 reduced psoriatic endpoints more than methotrexate (p<0.01). In addition, there was no recurrence of psoriasis in animals treated with KM-133, whereas psoriasis recurred after an average of 61 days in animals treated with methotrexate. Immunosuppression in animals treated with KM-133 was less severe than in those treated with efalizumab.
In July 2010, the Company contracted with Destum Partners to find a development partner for KM-133.
Liquidity and Capital Resources
As of September 30, 2010, the Company had a cash balance of $12,736. 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, 2011. The Company may 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 and conditions that are acceptable to the Company.
During the year ended June 30, 2010, Mr. Ehrlich, an officer of the Company, converted previous amounts provided in cash to the Company of $32,310 into a loan (the “Ehrlich Promissory Note A”). The Ehrlich Promissory Note A was an unsecured, 6% per annum simple interest bearing, demand note. During the same period, Mr. Ehrlich provided an additional $85,000 in cash in the form of a loan to the Company (the “Ehrlich Promissory Note B”). The Ehrlich Promissory Note B was an unsecured, 6% per annum simple interest bearing, demand note.
During the year ended June 30, 2010, Mr. Ehrlich, loaned the Company a total of $972,907. A condition for this loan was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C. The Ehrlich Promissory Note C combines the balance of Ehrlich Promissory Note A, plus the additional loan amount of $972,907. During the three months ended September 30, 2010, Mr. Ehrlich loaned the Company an additional $520,000 which brings the balance of the demand note to $1,525,217. The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum and is convertible into the Company’s common stock at $0.50 per share. The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%. As of September 30, 2010, the Company has recorded interest of $61,037 in accrued expenses.
11
Requirement for Additional Capital
Research and Development Costs. The Company has engaged in limited research and development activities. We currently do not have sufficient funds to meet our planned drug development for the next twelve (12) months and we may not be able to obtain the necessary financing on terms and conditions acceptable to the Company. Assuming that we are successful in raising additional financing, we plan to incur the following expenses over the next twelve (12) months:
|
Research and Development of $1,900,000: Includes planned costs for Kevetrin of $900,000 for completion of in-vivo, in-vitro, pharmaco-kinetic, pharmaco-dynamic, toxicology studies, cGMP materials, and formulation costs; and $1,000,000 in preclinical development costs for our other compounds.
|
|
|
2
|
Clinical trials – We have budgeted $2,500,000 for our Phase 1 trials (assumes success of Company’s IND filing for Kevetrin).
|
|
3
|
Corporate overhead of $1,250,000: Budgeted office salaries, legal, accounting and other costs expected to be incurred.
|
|
4
|
Capital costs of $200,000: Estimated cost for equipment and laboratory improvements.
|
The Company will be unable to proceed with its full planned drug development program (s), meet its administrative expense requirements, capital costs, or staffing costs without obtaining additional financing of approximately $5,850,000 (as per current management’s budgets). The Company does not have any arrangements at this time for equity or other financings towards meeting this financing requirement. If we are unable to obtain additional financing on terms and conditions acceptable to the Company, our business plan will be significantly delayed.
Subsequent Event
In November 2010 the Company was notified that it has been awarded approximately $730,000 in total grants under the Qualifying Therapeutic Discovery Project program. Cellceutix was awarded a grant for each of its three active research programs. The Company's lead program is Kevetrin™, which is being developed for drug resistant cancers. Cellceutix is also developing KM-391 for autism and KM-133 for psoriasis. Each grant amounted to slightly more than $244,000. The grants are awarded to therapeutic discovery projects that show a reasonable potential to (a) result in new therapies to treat areas of unmet medical need or prevent, detect or treat chronic or acute diseases and conditions, (b) reduce the long-term growth of health care costs in the United States, or (c) significantly advance the goal of curing cancer within 30 years.
On November 5, 2010, George Evans resigned his position as a director and Chief Executive Officer of Cellceutix Corporation. Mr. Evan’s resignation was a result of a disagreement with the Company regarding his compensation. Mr. Evans has made financial demands from the Company which the Company is presently reviewing. On the same date, Leo Ehrlich, the Company’s Chief Financial Officer, was appointed to serve as interim Chief Executive Officer, and Chairman of the board of directors until his successor is duly appointed and qualified. Mr. Ehrlich will also continue serving as Chief Financial Officer of Cellceutix.
Off-Balance Sheet Arrangements.
The Company does not have any off-balance sheet arrangements, as defined in Item 304(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
Item 4T. Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have 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 September 30, 2010 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have 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 September 30, 2010.
Changes in Internal Control over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2010, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered sales of equity securities
On July 6, 2010, the Company entered into two one year agreements with two Consultants to serve as scientific advisors and to participate as members of the Company’s Scientific Advisory Board. In exchange for these services, the Company has granted the Consultants 25,000 shares of common stock each. The 50,000 shares of common stock are valued at a total of $27,500 and recorded in prepaid expenses. For the three month period ended September 30, 2010, $3,438 has been expensed.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
On November 5, 2010, shareholders holding 58% of the Registrant’s outstanding common stock adopted and approved an amendment to the Registrant’s Articles of Incorporation to effect a reverse split of the Registrant’s common stock on a 1 for 50 basis (the “Split”). The Split will be effectuated immediately upon filing the proper disclosure reports with the Commission, or anytime thereafter at the sole discretion of the Board of Directors.
Item 5. Other Information
In June 2010, the Company entered into a three month agreement with a company for consulting services. In exchange for these services, the Company paid $30,000 and granted the company 75,000 shares of common stock. In September 2010, the agreement was terminated due to non-performance and the 75,000 shares were returned to the company for cancellation.
Item 6. Exhibits
(a) Exhibit index
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Exhibit
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31.1
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Certification of Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
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31.2
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Certification of Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
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(b) Reports on Form 8-K
The Company filed a Form 8-K on November 5, 2010 related to Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers and Item 8.01: Other Events.
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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
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/s/ Leo Ehrlich
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Leo Ehrlich, Interim Chief Executive Officer and Chief Financial Officer and Chairman of the Board of Directors
(Principal Executive, Accounting and Financial Officer)
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/s/ Krishna Menon
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Krishna Menon,
President and Director
Dated: November 22, 2010
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