UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_______________________________

 

FORM 10 – Q

_______________________________

 

x QU ARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended September 30, 2012

 

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 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):

 

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

The number of shares outstanding of the Registrant’s Common Stock as of October 31, 2012 was 93,174,151 shares.

 

 

 

 


 

 

 

 

CELLCEUTIX CORPORATION

FORM 10-Q

INDEX

 

  TABLE OF CONTENTS

 

 

 

 

PART I    FINANCIAL INFORMATION

 

 

 

 

 

Item

1

Financial Statements

 

 

 

 

 

 

 

Balance Sheets-September 30, 2012 (Unaudited) and June 30, 2012 (Audited)

3

 

 

 

 

 

 

Statements of Operations (Unaudited) - For the Three Months Ended September 30, 2012 and 2011, and for the cumulative period from June 20, 2007 (Date of Inception) to September 30, 2012

4

 

 

 

 

 

 

Statements of Changes in Stockholder’s Deficit  (Unaudited) - For the cumulative period from June 20, 2007 (Date of Inception) to September 30, 2012

5

 

 

 

 

 

 

 

Statement of Cash Flows (Unaudited) - For the Three Months Ended September 30, 2012 and 2011, and for the cumulative period from June 20,  2007 (Date of Inception) to September 30, 2012

6

 

 

 

 

 

 

Notes to Financial Statements (Unaudited)

7

 

 

 

 

Item

2

Management’s Discussion & Analysis of Financial Condition and Results of Operations

14

 

 

 

 

Item

3

Quantitative and Qualitative Disclosures About Market Risk

16

 

 

 

 

Item

4

Controls & Procedures

16

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

Item

1

Legal Proceedings

16

Item 

2

Unregistered Sales of Equity Securities Use of Proceeds

16

Item

3

Default Upon Senior Securities

17

Item

4

Mine Safety Disclosures

17

Item

5

Other Information

17

Item

6

Exhibits

17

 

 

Signatures

18

 

 

 

2

 

 


 

 

 

Part 1.  Financial Information

 

Item 1.  Financial Statements

 

Cellceutix Corporation

 

(A Development Stage Enterprise)

 

Balance Sheets

 

September 30, 2012

June 30, 2012

(Unaudited)

(Audited)

Assets

              Current assets:

Cash

$

           124,865

$

27,703

Prepaid expenses

 

              15,971

 

                 325

Total current assets

 

           140,836

 

              28,028

Total assets

$

           140,836

$

              28,028

Liabilities and Stockholders' Deficit

Current liabilities:

Accounts payable (including related party payables of $1,695,683 and $1,695,820, respectively)

$

        1,866,223

$

        1,966,026

Accrued expenses (including related party accruals of $369,802 and $316,130, respectively)

           369,802

           330,880

Accrued salaries and payroll taxes

        2,996,797

        2,789,571

Note payable to officer

        2,022,264

        2,022,264

Accrued settlement costs, current

 

           279,163

 

           270,055

Total current liabilities

 

        7,534,249

 

        7,378,796

Long Term Liabilities

Accrued settlement costs, net of current

 

           275,229

 

           275,229

Total liabilities

 

        7,809,478

 

        7,654,025

Stockholders' Deficit

Preferred stock; $.001 par value; 9,500,000 shares authorized

Series A convertible preferred stock; $.001 par value; 500,000 shares designated, 0 and 0

shares issued and outstanding as of September 30, 2012 and June 30, 2012, respectively

                         -

 -

Common stock:

Class A, $.0001 par value; 300,000,000 shares authorized; 95,886,235 and 94,968,905

shares issued as of September 30, 2012 and June 30, 2012 and 93,124,151 and 92,206,821

 

shares outstanding as of September 30, 2012 and June 30,  2012, respectively

                9,589

                9,497

Class B (10 votes per share); $.0001 par value; 100,000,000 shares authorized, 0

shares issued and outstanding, respectively

                         -

 -

Additional paid in capital

        9,867,214

        9,229,157

Deficit accumulated during development stage

   (17,017,712)

   (16,336,918)

Treasury stock 2,762,084 shares at cost as of September 30, 2012 and June 30, 2012

respectively

 

         (527,733)

 

         (527,733)

Total stockholders' deficit

 

     (7,668,642)

 

     (7,625,997)

Total Liabilities and Stockholders' Deficit

$

           140,836

$

              28,028

 

 

The accompanying notes are an integral part of these financial statements.

 

 

 

3

 

 


 

 

 

 

 

Cellceutix Corporation

(A Development Stage Enterprise)

 

Statements of Operations
(unaudited)

(Date of Inception) through September 30, 2012

 

For the Three Months Ended

September 30,

2012

2011

Revenues

$

 -

$

 -

$

 -

Operating expenses:

Research and development, gross

           184,953

           102,902

             5,281,965

Grants

 

                         -

 

                         -

 

              (733,438)

Research and development, net of grants

           184,953

           102,902

             4,548,527

General and administrative expenses

              24,020

                6,839

                 558,791

Officers' payroll and payroll tax expense

           113,974

           652,322

             7,707,658

Professional fees

              77,315

           132,091

             2,656,226

Patent expense

 

                8,650

 

                         -

 

                 176,943

Total operating expenses

 

           408,912

 

           894,154

 

           15,648,145

Loss from operations

         (408,912)

         (894,154)

        (15,648,145)

Interest expense - net

           (60,080)

           (67,299)

              (643,108)

Warrant expense

                         -

                         -

              (439,892)

Net loss before provision for income taxes

$

         (468,992)

$

         (961,453)

$

        (16,731,145)

Provision for income taxes

 

 -

 

 -

 

 -

Net loss

$

         (468,992)

$

         (961,453)

$

        (16,731,145)

Deemed dividends

 

         (211,802)

 

                         -

 

              (277,488)

Net loss attributable to common stockholders

$

         (680,794)

$

         (961,453)

$

        (17,008,633)

Basic and diluted loss per share attributable to

common stockholders

$

                (0.01)

$

                (0.01)

Weighted average number of common shares used in basic

and fully diluted per share calculations

 

92,496,542

 

91,916,872

 

                                 The accompanying notes are an integral part of these financial statements.

 

 

4

 


 

 

 

Cellceutix Corporation

 

(A Development Stage Enterprise)

 

Statement of Changes in Stockholders' Deficit

 

For the cumulative

 

Period June 20, 2007 (Date of Inception)

 

through June 30, 2012

 

(Unaudited)

 

Deficit

Accumulated

Common Stock

Preferred Stock

Additional

During the

Treasury Stock

Par Value

Par Value

Paid-in

Development

Shares

 $      0.0001

Shares

 $        0.001

Capital

Stage

Shares

 Amount

Total

Shares issued June 20, 2007

(Inception)

1,000,000

$

     100     

 -

$

 -

$

 -

$

 -

-

$

 -

$

100

Net loss

-

-

-

-

-

             (530)

-

-

          (530)

Balance, June 30, 2007 Share exchange with Cellceutix Pharma, Inc.

1,000,000

       100

             (530)

           (430)

December 6, 2007 Share exchange in reverse merger with Cellceutix Pharma, Inc.

(1,000,000)

     (100)

 -

 -

 -

               100

 -

 -

 -

December 6,2007 Shares exchanged in a reverse acquisition of Cellceutix

82,000,000

   8,200

 -

 -

 -

         (8,200)

 -

 -

 -

Pharma, December 6, 2007

9,791,000

        979

 -

 -

 -

             (979)

 -

 -

 -

Issuance of stock options Forgiveness of debt from a

-

-

-

-

    43,533

 -

 -

 -

        43,533

Stockholder Capital contribution from a Stockholder

-

-

-

-

             50

-

-

-

50

Shares issued for services

-

-

-

-

            50

-

-

-

                50

April 28, 2008 at $1.05

100,000

          10

 -

 -

       4,990

 -

 -

 -

        05,000

Net loss

-

-

-

-

-

      (510,193)

-

-

      (510,193)

Balance June 30, 2008 Cancellation of shares issued

91,891,000

9,189

-

-

148,623

      519,802)

-

-

      (361,990)

for services, December 31, 2008

(100,000)

       (10)

 -

 -

    (104,990)

 -

 -

 -

      (105,000)

Issuance of stock options Shares issued for services

 -

 -

 -

 -

       142,162

 -

 -

 -

        142,162

June 11, 2009 at $0.38 Shares issued for services,

20,000

            2

 -

 -

           7,598

 -

 -

 -

             7,600

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 Shares issued for services,

91,836,000

9,184

 -

 -

202,890

(2,005,133)

 -

 -

(1,793,059)

July 6, 2009 at $0.43 Shares issued for services,

25,000

                    2

 -

 -

         10,748

 -

 -

 -

          10,750

February 5, 2010 at $0.30

3,500

 -

-

 -

           1,050

 -

-

 -

             1,050

Issuance of stock options Shares issued for services

-

 -

-

 -

       383,291

 -

-

 -

        383,291

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 Shares issued for services,

91,939,500

9,194

 -

 -

631,721

(5,438,533)

 -

 -

(4,797,618)

July 6, 2010 at $0.55

50,000

            5

 -

 -

         27,495

 -

 -

 -

          27,500

Cancellation of shares issued

(75,000)

          (8)

 -

 -

       (33,742)

 -

 -

 -

        (33,750)

Issuance of stock options

 -

 -

 -

 -

   3,060,691

 -

 -

 -

    3,060,691

Modification of stock options Forgiveness of liability in connection with settlement

 -

 -

 -

 -

       237,098

 -

 -

 -

       237,098

with stockholder Repurchase of common stock

 -

 -

 -

 -

       932,966

 -

 -

 -

        932,966

in connection with settlement Shares issued for services,

 -

 -

 -

 -

 -

 -

4,602,313

 859,388)

      (859,388)

March 1, 2011 at $0.32 Shares issued for services,

184,375

          18

 -

 -

         58,982

 -

 -

 -

          59,000

February 8, 2011 at $0.20

70,000

            7

 -

 -

         13,993

 -

 -

 -

          14,000

Cancellation of treasury stock Shares issued for services,

(460,229)

               (45)

 -

 -

       (99,955)

 -

(460,229)

   100,000

 -

May 26, 2011 at $0.81

12,000

            1

 -

 -

           9,719

 -

 -

 -

             9,720

Net loss

 -

 -

 -

 -

 -

   5,938,297)

 -

 -

  (5,938,297)

Balance, June 30, 2011

91,720,646

9,172

 -

 -

4,838,968

(11,376,830)

4,142,084

(759,388)

(7,288,078)

Issuance of stock options

                     -

                   -

                 -

                  -

   2,114,386

                      -

                    -

                    -

    2,114,386

Convertible debentures converted to common stock

707,277

       71

                 -

                    -

       353,564

                      -

                    -

                    -

        353,635

Shares issued for services, August 29, 2011 at $0.38

100,000

          10

                 -

                    -

         37,990

                      -

                    -

                    -

          38,000

Shares issued for services, November 8, 2011 at $0.41

125,000

         13

                 -

                    -

         51,236

                      -

                    -

                    -

          51,249

Shares issued for services, January 11, 2012 at $0.45

200,000

          20

                 -

                    -

         89,980

                      -

                    -

                    -

          90,000

Shares issued for charitable contributions, March 7

2012 at $0.52

265,228

          26

                 -

                    -

       137,894

                      -

                    -

                    -

        137,920

Shares issued for services, April 26, 2012 at $0.46

300,000

         30

                 -

                    -

       137,970

                      -

                    -

                    -

        138,000

Shares issued for services, May 3, 2012 at $0.49

100,000

         10

                 -

                    -

         48,990

                      -

                    -

                    -

          49,000

Shares issued for services, May 29, 2012 at $0.53

25,000

           2

                 -

                    -

         13,248

                      -

                    -

                    -

          13,250

Shares issued for services, June 29, 2012 at $0.62

50,000

            5

                 -

                    -

         31,145

                      -

                    -

                    -

          31,150

Issuance of capital stock

2,500,000

       250

                 -

                    -

       582,143

                      -

                    -

                    -

        582,393

Reclassification of warrants into equity

                     -

                    -

                 -

                    -

       857,500

                      -

                    -

                    -

        857,500

Cancellation of treasury stock

(1,380,000)

    (138)

                 -

                    -

    (231,517)

                      -

(1,380,000)

       231,655

                      -

Issuance of preferred stock

                     -

                    -

10,000

         10

         99,990

                      -

                    -

                    -

        100,000

Deemed dividend's

                     -

                    -

                 -

                    -

         65,686

       (65,686)

                    -

                    -

                      -

Conversion of preferred stock to common stock

255,754

         26

(10,000)

      (10)

               (16)

                      -

                    -

                    -

                      -

Net loss

                     -

 

                    -

                 -

 

                    -

 

                    -

 

   (4,894,402)

                    -

 

                    -

 

  (4,894,402)

Balance June 30, 2012

94,968,905

$

9,497

                 -

$

                    -

$

9,229,157

$

(16,336,918)

2,762,084

$

(527,733)

$

(7,625,997)

Issuance of stock options

         31,597

          31,597

Shares issued for services, July 25, 2012 at $0.59

25,000

        3

         14,747

          14,750

Shares issued for services, August 26, 2012 at $0.60

50,000

          5

         29,995

          30,000

Exercise of stock options

250,000

         25

         49,975

          50,000

Issuance of preferred stock

30,000

        30

       299,970

        300,000

Deemed dividends

       211,802

      (211,802)

                      -

Conversion of preferred stock to common stock

592,330

                 59

(30,000)

      (30)

               (29)

                   (0)

Net loss

 

 

 

 

 

 

 

 

 

      (468,992)

 

 

 

 

      (468,992)

Balance September 30, 2012

95,886,235

$

9,589

                 -

$

                    -

$

9,867,214

$

(17,017,712)

2,762,084

$

(527,733)

$

(7,668,642)

 

 

 

 

5

 


 

 

Cellceutix Corporation

 

(A Development Stage Enterprise)

 

 

Statements of Cash Flows

 

(Unaudited)

 

For the cumulative

period from June 20, 2007

(Date of Inception)

through September

30, 2012

 

 

For the Three Months Ended

 

September 30,

 

2012

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

         (468,992)

$

         (961,453)

$

           (16,731,145)

Adjustments to reconcile net loss to net cash used in

operating activities:

Common stock and stock options issued as payment for

services compensation, services rendered, and

charitable contributions

             76,347

           641,070

               6,765,464

Cancellation of stock issued for services

                        -

                        -

                   (28,750)

Amortization of accrued settlement costs

               9,108

             17,086

                    95,004

Gain (loss) on financial instruments

                        -

                        -

                  439,892

Changes in operating assets and liabilities:

Other receivables

                        -

           204,144

                               -

Prepaid expenses

            (15,646)

                   222

                     (7,485)

Accounts payable

            (99,803)

         (222,004)

               1,866,272

Accrued expenses

             38,922

             52,912

                  587,213

Accrued officers' salaries and payroll taxes

 

           207,226

 

           188,388

 

               3,929,762

Net cash used in operating activities

 

         (252,838)

 

            (79,635)

 

             (3,083,773)

CASH FLOWS FROM FINANCING ACTIVITIES:

Capital contribution from stockholder

                        -

                        -

                            50

Sale of common stock

                        -

                        -

                          100

Sale of preferred stock

           300,000

                        -

                  400,000

Payment of settlement liabilities

                        -

                        -

                 (400,000)

Loan from officer

                        -

             20,000

               1,925,587

Proceeds from convertible debentures

                        -

                        -

                 (167,099)

Redemption of convertible debentures

                        -

                        -

                  400,000

Proceeds from subscription

                        -

                        -

               1,000,000

Exercise of stock options

 

             50,000

 

                        -

 

                    50,000

Net cash provided by financing activities

           350,000

             20,000

               3,208,638

NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS

             97,162

            (59,635)

                  124,865

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

             27,703

 

             68,661

 

                               -

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

           124,865

$

               9,026

$

                  124,865

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest

$

                        -

$

                        -

$

                    14,826

SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW

FINANCING ACTIVITIES

Common stock issued for acquisition

$

 -

$

 -

$

                       9,079

Forgiveness of debt

$

 -

$

 -

$

                            50

Reclassification of accrued interest to note payable and

convertible debentures

$

                        -

$

                        -

$

                  197,964

Cancellation of common stock for services

$

 -

$

                        -

$

                 (138,750)

Settlement of accrued payroll and payroll taxes

$

 -

$

                        -

$

                  932,966

Cancellation of common stock as a result of settlement

$

 -

$

                        -

$

                  859,388

Debt converted to common stock

$

                        -

$

           353,635

$

                  353,635

Cancellation of treasury stock

$

                        -

$

                        -

$

                 (231,655)

Reclassification of warrants to equity

$

                        -

$

 -

$

                  857,500

Deemed dividend from beneficial conversion

feature on preferred stock

$

             53,032

$

                        -

$

                    70,678

Deemed dividend - warrants

$

           158,770

$

                        -

$

                 206,810

Conversion of preferred stock into common stock

$

                   (30)

$

                        -

$

                           (46)

 

 

The accompanying notes are an integral part of these financial statements.

 

6

 


 

 

 

Cellceutix Corporation

(A Development Stage Enterprise)

 

Notes to Financial Statements

 

September 30, 2012

(Unaudited)

 

1.         Background Information

 

 

Cellceutix Corporation, formerly known as EconoShare, Inc., (the “Company” or the “Registrant”) 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, the Company 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. . We are an early stage developmental biopharmaceutical company.  The Company has no customers, products or revenues to date, and may never achieve revenues or profitable operations. 

 

On January 14, 2008, a majority of the shareholders of the Company 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. 

 

On December 29, 2010 shareholders adopted and approved the 2010 Equity Incentive Plan and authorized an amendment to the Company’s Articles of Incorporation to authorize Class B common stock convertible into Class A common stock on a 1:1 basis, however the Class B Common Stock shall entitle ten votes for each share of Class B Common Stock. All shares issued as of balance sheet dates are Class A common stock.

  

In January 2012, Cellceutix filed a patent application for Prurisol , also known as KM-133, a compound to treat psoriasis. 

 

In March 2012, Cellceutix entered into an agreement with Beth Israel Deaconess Medical Center (BIDMC), a teaching hospital of Harvard Medical School, on an innovative research project with our anti cancer compound, Kevetrin. The Medical Center wishes to exploit the nuclear and/or mitochondrial pro-apoptotic function of p53 in melanoma and renal cell carcinoma, two types of cancer that are particularly resistant to therapy. BIDMC hopes to improve therapy for melanoma and renal cell carcinoma, cancers that are particularly resistant to therapy.

  

BIDMC initiated combination studies with multikinase inhibitors which activate pro-apoptotic activity by translocation of p53 in mitochondria thereby inducing apoptosis. Apoptosis is enhanced by MDM2 inhibitors by stabilizing p53. As presented at the American Association for Cancer Research (AACR) meeting in April, KevetrinphosphorylatesMDM2 which activates and stabilizes p53 by monoubiquitination inducing apoptosis. Prior data from the BIDMC laboratory showed that agents of this class can augment the pro-apoptotic and antitumor effects of MDM2 antagonists and is expected to have a synergistic effect with Kevetrin.BIDMC will test the effects of Kevetrin alone and in combination with FDA-approved VEGFR antagonists in

the renal cell carcinoma and melanoma studies. In vitro study endpoints include apoptosis by measuring caspase activation and PARP cleavage. In vivo endpoints include efficacy in a xenograft model, tumor vascularity, p53 levels, p21 expression and apoptosis. This study will provide vital insight to exploit the nuclear and/or mitochondrial pro-apoptotic function by Kevetrin in combination with other multikinase inhibitors in treatment of these difficult to treat malignancies. 

 

On May 7, 2012, Cellceutix announced that Syracuse University’s basketball coach Jim Boeheim joined Cellceutix as an advisor to the Company.

 

On May 8, 2012, the Company entered into a subscription agreement for Series A Convertible Preferred shares with an accredited investor for an aggregate of $1,000,000.  The Subscription Agreement provides for installment Funding Amounts, at Cellceutix’s discretion, to take place every thirty days after initial closing date  for an amount of the lesser of  (i) $75,000 or  (ii) twenty five  (25%) per cent of the dollar value of the total volume traded during the preceding 22 trading days.   The Series A Preferred Shares are convertible into common stock at the lesser of 85% of the closing bid price on the date of prior to each closing, or 85% of the lowest bid price for the fifteen (15) days prior to conversion.  At no time may a holder of shares of Series A Preferred Stock convert shares of the Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding.Additionally, for each common share issued upon conversion of Series A preferred share, a five year common stock purchase warrant is issued to the Subscriber.  The warrant is exercisable at the conversion price of the common shares issued.  The fair value of the common stock into which the Series A Preferred Stock is convertible will exceed the price at which the common stock will be issued on the date of issuance of the preferred stock.  The amount by which the fair value of the common stock exceeds the issue price of the common stock is a beneficial conversion feature.  The Company will recognize the beneficial conversion feature as a one-time, non-cash deemed dividend to the holders of the Series A Preferred Stock on the date of issuance, which is the date the preferred stock first became convertible.   The Series A Convertible Preferred shares do not pay dividends.   The Common shares underlying the Series A Preferred Shares and the common stock purchase warrants are subject to piggy back registration rights. As of September 30, 2012 a total of $400,000 Series A Convertible Preferred shares were subscribed too and there remains a balance of $600,000 for the Company to draw upon in installment funding per the agreement.   

 

7

 

In June 2012, Cellceutix participated in a pre IND meeting with the U.S. Food and Drug Administration ("FDA") pertaining to Prurisol™, our drug for treating psoriasis. The Company had requested the meeting for guidance on its initiatives to seek a section 505(b)(2) designation for Prurisol™, which would allow the Company to forgo early-stage trials and advance Prurisol™ into latter-stage clinical trials.  Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. In September 2012, Cellceutix selected Dr. Reddy's Laboratories as its vendor to manufacture and formulate Prurisol for planned clinical trials.

On June 21, 2012, the U.S. Food and Drug Administration ("FDA") approved the Investigational New Drug (IND) application for Kevetrin™, Cellceutix's novel anti-cancer compound. The Phase 1 trials are being conducted at Harvard Cancer Center's Dana-Farber Cancer Institute and partner Beth Israel Deaconess Medical Center.  The clinical trial will test Kevetrin against a variety of different solid tumor cancer types in patients with advanced-stage cancers. Primary endpoints for the study will be safety, tolerable dosing levels and establishing the dose for a future Phase II clinical trial. The trial is registered on www.clinical trials.gov. http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&rank=1

 

On September 10, 2012 Cellceutix announced that it is in discussions with a major European university wishing to conduct clinical trials on Kevetrin.  The university wishes to test Kevetrin as a combination therapy for leukemia with drugs proprietary to one of the world’s largest pharmaceutical companies. Pursuant to a confidentiality agreement, Cellceutix cannot identify the university or the pharmaceutical company at this time. 

 

On September 13, 2012, the company filed a Certificate of Correction with the State of Nevada to correct the par value of the preferred shares from the amended articles of incorporation filed June 24, 2011 from $.0001 per share to $.001 per share. 

 

The Company’s Common Stock is quoted on the Over the Counter Bulletin Board (OTCBB), symbol “CTIX”.

 

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, 2012 and 2011, (b) the financial position at September 30, 2012 and (c) cash flows for the three month periods ended September 30, 2012 and 2011, 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, 2012.  The results of operations for the three month period ended September 30, 2012 are not necessarily indicative of those to be expected for the entire year.  

 

The company has evaluated all subsequent events through the filing date of this form 10-Q with SEC, to ensure that this form 10-Q includes subsequent events that should be recognized in the financial statements as of September 30, 2012, and appropriate disclosure of subsequent events which were not recognized in the financial statements.

 

  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, 2012, the Company has had a deficit accumulated during development stage of $ 17,017,712 and a working capital deficit of $7,393,413 at September 30, 2012.  As of September 30, 2012, 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 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.  

 

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 September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%.

 

ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of this guidance will not have a material effect on the Company’s financial statements.

 

In December 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU No. 2011-11 is intended to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.  The adoption of this guidance will not have a material effect on the Company’s financial statements.

 

 

8

 

 

In December 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-11 is intended to supersede certain pending paragraphs in Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private, and non-profit entities. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter.  The adoption of this guidance will not have a material effect on the Company’s financial statements.

 

In July 2012, the FASB issued Accounting Standards Update (ASU) No. 2012-02, Intangibles--Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles--Goodwill and Other, General Intangibles Other than Goodwill.

 

Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period.

 

The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of this guidance will not have a material effect 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.

 

 5.           Commitments and Contingencies

 

Settlement Agreement

 

On February 14, 2011, the Company announced it reached a settlement agreement on all outstanding claims and issues between the Company and our former CEO, Mr. Evans. Each party dropped their respective claims and as a result all of Mr. Evans accrued salaries and options were cancelled.  The terms of the agreement provide that the Company purchase 4,602,312 common shares held by Mr. Evans and/or Mr. Evans’ sons over a period of three years for a total sum of one million dollars.   Payment by the Company in the amount of $100,000 was made upon signing of the agreement, which resulted in reducing the liability owed to Mr. Evans; cancelling 460,229 shares of common stock.  On February 4, 2012, the Company made the second payment of $300,000 to Mr. Evans and cancelled 1,380,000 shares of its common stock.  The remaining 2,762,084 shares of common stock held in escrow until additional payments are made under the agreement are shown as Treasury Stock on the Company’s Balance Sheet. 

 

The Company had initially recorded this settlement at December 31, 2010 as a liability of the present value of the future payments and treasury stock. The Company had also recorded the forgiveness of Mr. Evans’ accrued payroll and related payroll taxes as a capital contribution of $932,966.  As of September 30, 2012, the settlement liability is $554,392 of which $279,163 is due in February 2013 and recorded as current liability. 

 

9

 

Legal

 

Toxikon Corporation, a vendor, has initiated litigation with claims that it is owed a balance of approximately $100,000 plus interest and legal fees. Cellceutix has retained a lawyer and is disputing these claims and believes there is no balance owed.  We have filed a motion seeking leave to file a countersuit seeking damages for loses suffered due to Toxikon’s delays in completing the project in the amount of approximately $350,000.

 

Formatech is a former vendor of ours which had received Cellceutix common stock and had also gone bankrupt. In July 2012, Cellceutix was advised that a US Bankruptcy Court judge has allowed Formatech’s bankruptcy trustee to sell 184,375 restricted shares of Cellceutix Class A Common Stock. The proceeds of the sale will be held in escrow pending the outcome of Cellceutix’s claims against Formatech. Cellceutix has engaged an attorney with the aim of recovering these funds.

 

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 29, 2010, the Company entered into employment agreements with its two executive officers, Leo Ehrlich, the Company’s Chief Executive Officer, and Krishna Menon, Chief Scientific Officer. Both agreements provide for a three year term with each executive receiving an annual base salary for $350,000 per year commencing January 1, 2011, with an annual increase of 10% for each year commencing January 2012. In addition, the Company’s Board awarded stock options exercisable at $0.11 per share pursuant to the Company’s 2010 Equity Incentive Plan to each executive officer as follows:  a total of 18 million options with 6 million options vesting on December 29, 2010, 6 million options vesting on June 30, 2011 and 6 million options vesting on January 3, 2012.    The Board, at its discretion, may increase the base salary based upon relevant circumstances.

 

The Company has recorded accrued officers’ salaries and payroll taxes are as follows:

 

    

 

September 30,

2012

 

 

June 30,

2012

 

Krishna Menon

 

$

1,538,750

 

 

$

1,442,500

 

Leo Ehrlich

 

$

1,301,250

 

 

$

1,205,000

 

Accrued Payroll Taxes

 

$

156,797

 

 

$

142,071

 

 

 

$

2,996,797

 

 

$

2,789,571

 

 

 

10

 

 

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, 2012 and 2011, payables of $52,200 and $41,400 to KARD were included in accrued expenses, respectively. For the three months ended September 30, 2012 and 2011 and the period June 20, 2007 (date of inception) through September 30, 2012, the Company has included $2,700, $2,700 and $52,200 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, 2012 and 2011 and the period June 20, 2007 (date of inception) through September 30, 2012, the Company incurred $0, $9,990, and $2,601,110 of research and development expenses conducted by KARD, respectively.  At September 30, 2012 and June 30, 2012 the Company has included a total of $1,685,515 and $1,685,515 in accounts payable to Kard respectively.

 

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 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%.   During the year ended June 30, 2011, Mr. Ehrlich loaned the Company an additional $997,047 which brought the balance of the demand note to $2,002,264.  On April 1, 2011, the Company amended the Ehrlich Promissory Note C and agreed to retroactively convert accrued interest of $96,677 through December 31, 2010 into additional principal.

 

On May 8, 2012, in connection with the renegotiation of an outstanding loan to Mr. Ehrlich, the Company issued 2,000,000 Equity Incentive Options exercisable at $0.51 per share equal to 110% of the closing bid price of $0.46 per share on May 7, 2012. Options are valid for ten (10) years from the date of issuance.

 

  At September 30, 2012, $317,602 is accrued as interest expense on this note. As of September 30, 2012, the balance of the demand note is $2,022,264 

 

8.  

Stock Options and Warrants :

   

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, 2012, the Consultant has been awarded a total of 420,000 options to purchase common stock valued at $196,938 to be vested over one year from date of issuance.  For the three months ended September 30, 2012, the Company has expensed $15,006 to professional fees expense, related to these options.

 

 

11

 

 

The fair value of each option for the three months ended September 30, 2012 and 2011 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, 2012

 

 

Three Months Ended September 30, 2011

 

Expected term (in years)

 

 

 5-10

 

 

 

                                             3-10 

Expected stock price volatility

 

 

136.05% - 137.33

%

 

 

143.49%-145.28

%

Risk-free interest rate

 

 

1.53% - 1.72

%

 

 

1.98%-3.00

%

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.

 

 

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, 2012

 

 

41,277,500

 

 

$

0.14

 

 

 

8.46

 

 

$

21,186,225

 

Granted

 

 

60,000

 

 

 

0.67

 

 

 

7.42

 

 

 

---

 

Exercised

 

 

(250,000)

 

 

 

0.20

 

 

 

 

 

 

 

Forfeited/expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2012

 

 

41,087,500

 

 

$

0.14

 

 

 

8.21

 

 

$

35,440,250

 

Exercisable at September 30, 2012

 

 

41,022,500

 

 

$

0.13

 

 

 

8.19

 

 

$

35,405,553

 

 

 

The Company recognized $76,347, $641,070 and $6,765,464 of stock based compensation costs related to stock and stock option awards for the three months ended September 30, 2012 and 2011 and the period from inception to September 30, 2012, respectively, and there is $38,675 of unamortized compensation cost expected to be recognized through September 30, 2013.  

  

As of September 30, 2012, there were 6,312,084 warrants issued and outstanding with a weighted average exercise price of $0.84.  Of these warrants, 2,964,000 warrants were to expire in September 2010, however in September 2010; the Company approved the extension of these warrants to December 31, 2013. 

 

During the months of October, November and December 2011, warrants to purchase 2,500,000 shares of the Company’s Class A common stock were issued to an investor pursuant to his purchase of 2,500,000 shares of the Company’s Class A common stock at $0.40 per share. Under ASC 815-40-25, the fair value of these warrants should be reported as a liability, Pursuant to the Warrant Agreement, because there is currently no effective registration statement covering the shares of common stock underlying these warrants, these warrants are currently subject to a cashless exercise whereby the warrant holders may surrender their warrants to the company in exchange for shares of common stock. The number of shares of common stock into which a warrant would be exchangeable in such a cashless exercise depends on both the exercise price of the warrants and the market price of the common stock, each at or near the time of exercise. Because both of these factors are variable, it is possible that the company could have insufficient authorized shares to satisfy a cashless exercise. In this scenario, if the company were unable to obtain shareholder approval to increase the number of authorized shares, the company could be obligated to settle such a cashless exercise with cash rather than by issuing shares of common stock. Further, ASC 815-40-25 requires that we record the potential settlement obligation at each reporting date using the current estimated fair value of the warrants, with any changes being recorded through our statement of operations. The warrants were valued at $417,608 at the time of issuance and recorded as a liability. At December 31, 2011, the warrants were valued at $1,327,500 and the warrant liability was increased by $909,892. On January 12, 2012, the subscription agreement was modified to remove the cashless exercise provision, and provide for “piggy-back” registration rights. The warrants were valued as of January 12, 2012 and the value reduced by $470,000.  The remaining $857,000 of warrant value was reclassified from a liability to equity.  As of September 30, 2012, these 2,500,000 warrants are outstanding with an exercise price of $1.00 and expire in October, November and December 2014.

 

 

12

 

On August 1, 2012, warrants to purchase 153,061 shares of the Company’s Class A common stock were issued to an investor pursuant to the conversion of 7,500 shares of Series A Convertible Preferred Stock into 153,061 shares of the Company’s Class A common stock at $0.49 per share of common stock.  The exercise price of the warrants is $0.49 per share.

 

On August 23, 2012, warrants to purchase 154,639 shares of the Company’s Class A common stock were issued to an investor pursuant to the conversion of 7,500 shares of Series A Convertible Preferred Stock into 154,639 shares of the Company’s Class A common stock at $0.485 per share of common stock.  The exercise price of the warrants is $0.485 per share.

 

On September 19, 2012, warrants to purchase 142,315 shares of the Company’s Class A common stock were issued to an investor pursuant to the conversion of 7,500 shares of Series A Convertible Preferred Stock into 142,315 shares of the Company’s Class A common stock at $0.527 per share of common stock.  The exercise price of the warrants is $0.527 per share.

 

On September 24, 2012, warrants to purchase 142,315 shares of the Company’s Class A common stock were issued to an investor pursuant to the conversion of 7,500 shares of Series A Convertible Preferred Stock into 142,315 shares of the Company’s Class A common stock at $0.527 per share of common stock.  The exercise price of the warrants is $0.527 per share.

 

9.           Equity Transactions

 

On May 8, 2012, the Company entered into a subscription agreement for Series A Convertible Preferred shares with an accredited investor for an aggregate of $1,000,000.  The subscription agreement provides for installment funding Amounts, at Cellceutix’s discretion, to take place every thirty days after initial closing date  for an amount of the lesser of  (i) $75,000 or  (ii) twenty five  (25%) per cent of the dollar value of the total volume traded during the preceding 22 trading days.   The Series A Preferred Shares are convertible into common stock at the lesser of 85% of the closing bid price on the date of prior to each closing, or 85% of the lowest bid price for the fifteen (15) days prior to conversion.  At no time may a holder of shares of Series A Preferred Stock convert shares of the Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding.Additionally, for each common share issued upon conversion of Series A preferred share, a five year common stock purchase warrant is issued to the Subscriber.  The warrant is exercisable at the conversion price of the common shares issued.  The fair value of the common stock into which the Series A Preferred Stock is convertible will exceed the price at which the common stock will be issued on the date of issuance of the preferred stock.  The amount by which the fair value of the common stock exceeds the issue price of the common stock is a beneficial conversion feature.  The Company will recognize the beneficial conversion feature as a one-time, non-cash deemed dividend to the holders of the Series A Preferred Stock on the date of issuance, which is the date the preferred stock first became convertible.   The Series A Convertible Preferred shares do not pay dividends.   The Common shares underlying the Series A Preferred Shares and the common stock purchase warrants are subject to piggy back registration rights.

On September 13, 2012, the company filed a Certificate of Correction with the State of Nevada to correct the par value of the preferred shares from the amended articles of incorporation filed June 24, 2011 from $.0001 per share to $.001 per share. 

 

On July 3, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of seventy five thousand dollars ($75,000) for the purchase 7,500 Series A Convertible Preferred Shares. 

                                                                                                                          

On June 25, 2012 the subscriber converted 10,000 Preferred Shares equal to $100,000 face value at $0.39 per share based on 85% of the closing bid price on May 7, 2012 of $0.46.   The company issued to the subscriber 255,754 shares of Cellceutix common stock.  In connection thereto the Company issued 255,754 warrants to purchase common shares of Cellceutix Corporation at $0.39 per share valid for five years.

 

On July 30, 2012, a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of seventy five thousand dollars ($75,000) for the purchase 7,500 Series A Convertible Preferred Shares.

 

On August 1, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.49 per share based on 85% of the closing bid price on July 25, 2012 of $0.59.   The company issued to the subscriber 154,799 shares of Cellceutix common stock.  In connection thereto the Company issued 154,799 warrants to purchase common shares of Cellceutix Corporation at $0.49 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

On August 23, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.485 per share based on 85% of the closing bid price on August 14, 2012 of $0.571.   The company issued to the subscriber 154,639 shares of Cellceutix common stock.  In connection thereto the Company issued 154,639 warrants to purchase common shares of Cellceutix Corporation at $0.485 valid for five years.

 

On August 31, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares.  

 

On September 19, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012 at $0.62.   The company issued to the subscriber 142,315 shares of Cellceutix common stock.  In connection thereto the Company issued 142,315 warrants to purchase common shares of Cellceutix Corporation at $0.527 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

On September 20, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares.

 

On September 24, 2012 the subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012 of $0.62.  The company issued to the subscriber 142,315 shares of Cellceutix common stock.  In connection thereto the Company issued 142,315 warrants to purchase common shares of Cellceutix Corporation at $0.527 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

The shares and the warrants of the above fundings, and all subsequent fundings pursuant to Series A Convertible Preferred shares, are subject to piggy back registration rights.

 

On September 7, 2012 a consultant exercised their option to purchase 250,000 shares of Class A common shares at $0.20, resulting in a payment to the Company of $50,000 and the issuance of 250,000 shares of Class A common stock.

 

13

 

10.          Subsequent Event

On October 24, 2012 the Company issued a total of 50,000 Class A common shares to consultants for services through December 31, 2012, valued at $43,500 based on the closing bid price as quoted on the OTC Bulletin Board on October 23, 2012 at $.87 per share.

  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 a biopharmaceutical company that has recently transitioned to a clinical stage company. In June 2012, Cellceutix participated in a pre IND meeting with the U.S. Food and Drug Administration ("FDA") pertaining to Prurisol™ our compound targeting psoriasis. The Company had requested the meeting for guidance on its initiatives to seek a section 505(b)(2) designation for Prurisol™, which would allow the Company to forgo early-stage trials and advance Prurisol™ into latter-stage clinical trials.  Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol.

 

On June 21, 2012, the U.S. Food and Drug Administration ("FDA") approved the Investigational New Drug (IND) application for Kevetrin™, Cellceutix's novel anti-cancer compound. The Phase 1 trials are being conducted at Harvard Cancer Center's Dana-Farber Cancer Institute and partner Beth Israel Deaconess Medical Center.  The clinical trial will test Kevetrin against a variety of different solid tumor cancer types in patients with advanced-stage cancers. Primary endpoints for the study will be safety, tolerable dosing levels and establishing the dose for a future Phase II clinical trial. The trial is registered on www.clinicaltrials.gov. http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&rank=1

 

Kevetrin, the Company’s flagship compound against cancers, has demonstrated the potential for a major breakthrough in cancer research by exhibiting an activation of p53 in both wild and mutant types of p53. p53, often referred to as the “Guardian Angel Gene” or the “Guardian Angel of the Human Genome” due its crucial role in controlling cell mutations, is a tumor suppressor protein that is encoded by the TP53 gene in humans and has been widely regarded as possibly holding a key to the future of cancer therapies. Additional studies have shown that Kevetrin has potent anticancer activity in a wide range of tumor types by targeting histonedeacetylase (HDAC).

 

In March 2012, Cellceutix entered into an agreement with Beth Israel Deaconess Medical Center (BIDMC), a teaching hospital of Harvard Medical School, on an innovative research project with Kevetrin. The Medical Center wishes to exploit the nuclear and/or mitochondrial pro-apoptotic function of p53 in melanoma and renal cell carcinoma, two types of cancer that are particularly resistant to therapy. BIDMC hopes to improve therapy for melanoma and renal cell carcinoma, cancers that are particularly resistant to therapy. 

 

BIDMC initiated combination studies with multikinase inhibitors which activate pro-apoptotic activity by translocation of p53 in mitochondria thereby inducing apoptosis. Apoptosis is enhanced by MDM2 inhibitors by stabilizing p53. As presented at the American Association for Cancer Research (AACR) meeting in April, Kevetrin phosphorylates MDM2 which activates and stabilizes p53 by monoubiquitination inducing apoptosis. Prior data from the BIDMC laboratory showed that agents of this class can augment the pro-apoptotic and antitumor effects of MDM2 antagonists and is expected to have a synergistic effect with Kevetrin. BIDMC will test the effects of Kevetrin alone and in combination with FDA-approved VEGFR antagonists in the renal cell carcinoma and melanoma studies. In vitro study endpoints include apoptosis by measuring caspase activation and PARP cleavage. In vivo endpoints include efficacy in a xenograft model, tumor vascularity, p53 levels, p21 expression and apoptosis. This study will provide vital insight to exploit the nuclear and/or mitochondrial pro-apoptotic function by Kevetrin in combination with other multikinase inhibitors in treatment of these difficult to treat malignancies. At this time the study is in progress. We expect human trials to begin on this study only after a few months have passed in our Kevetrin study on solid tumors.

 

On September 10, 2012 we announced that we are in discussions with a major European university wishing to conduct clinical trials on Kevetrin.  The university wishes to test Kevetrin as a combination therapy for leukemia with drugs proprietary to one of the world’s largest pharmaceutical companies. Pursuant to a confidentiality agreement, Cellceutix cannot identify the university or the pharmaceutical company at this time.  We have been informed that the clinical protocol is now being written. 

 

 

14

 

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, and on Prurisol, for the treatment of psoriasis. Based on the experimental studies results to date, the Company has decided to advance these drugs 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. 

 

Liquidity and Capital Resources

 

As of September 30, 2012, the Company had a cash balance of $124,865.  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, 2013.  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.

 

On May 8, 2012, the Company entered into a subscription agreement for Series A Convertible Preferred shares with an accredited investor for an aggregate of $1,000,000.  The Subscription Agreement provides for installment funding Amounts, at Cellceutix’s discretion, to take place every thirty days after initial closing date for an amount of the lesser of  (i) $75,000 or  (ii) twenty five  (25%) per cent of the dollar value of the total volume traded during the preceding 22 trading days.   The Series A Preferred Shares are convertible into common stock at the lesser of 85% of the closing bid price on the date of prior to each closing, or 85% of the lowest bid price for the fifteen (15) days prior to conversion.  At no time may a holder of shares of Series A Preferred Stock convert shares of the Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding.   Additionally, for each common share issued upon conversion of Series A preferred share, a five year common stock purchase warrant is issued to the Subscriber.  The warrant is exercisable at the conversion price of the common shares issued.  The fair value of the common stock into which the Series A Preferred Stock is convertible will exceed the price at which the common stock will be issued on the date of issuance of the preferred stock.  The amount by which the fair value of the common stock exceeds the issue price of the common stock is a beneficial conversion feature.  The Company will recognize the beneficial conversion feature as a one-time, non-cash deemed dividend to the holders of the Series A Preferred Stock on the date of issuance, which is the date the preferred stock first became convertible.   The Series A Convertible Preferred shares do not pay dividends.   The Common shares underlying the Series A Preferred Shares and the common stock purchase warrants are subject to piggy back registration rights.

As of September 30, 2012 a total of $400,000 Series A Convertible Preferred shares were subscribed too and there remains a balance of $600,000 for the Company to draw upon in installment funding per the agreement.   

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: 

 

1. Research and Development- $1,500,000 in preclinical development costs, including costs to manufacture Prurisol.

 

2. Clinical trials – $3,000,000.  We have budgeted $1,500,000 for our Phase 1 Kevetrin trials and $1,500,000 for the Prurisol pilot study and phase 2/3 trials.

 

3. Corporate overhead of $1,250,000: Budgeted office salaries, legal, accounting and other costs expected to be incurred.

 

4. Capital costs of $100,000: 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. 

 

 

15

 

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 4.  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, 2012 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, 2012.

 

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,  2012, 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

 

Toxikon Corporation, a vendor, has initiated litigation with claims that it is owed a balance of approximately $100,000 plus interest and legal fees. Cellceutix has retained a lawyer and is disputing these claims and believes there is no balance owed.  We have filed a motion seeking leave to file a countersuit seekingdamages for loses suffered due to Toxikon’s delays in completing the project in the amount of approximately $350,000.

 

Formatech is a former vendor of ours which had received Cellceutix common stock and had also gone bankrupt. In July 2012, Cellceutix was advised that a US Bankruptcy Court judge has allowed Formatech’s bankruptcy trustee to sell 184,375 restricted shares of Cellceutix Class A Common Stock. The proceeds of the sale will be held in escrow pending the outcome of Cellceutix’s claims against Formatech. Cellceutix has engaged an attorney with the aim of recovering these funds.

 

Item 2. Unregistered sales of equity securities

 

On May 8, 2012, the Company entered into a subscription agreement for Series A Convertible Preferred shares with an accredited investor for an aggregate of $1,000,000.  The subscription agreement provides for installment funding Amounts, at Cellceutix’s discretion, to take place every thirty days after initial closing date  for an amount of the lesser of  (i) $75,000 or  (ii) twenty five  (25%) per cent of the dollar value of the total volume traded during the preceding 22 trading days.   The Series A Preferred Shares are convertible into common stock at the lesser of 85% of the closing bid price on the date of prior to each closing, or 85% of the lowest bid price for the fifteen (15) days prior to conversion.  At no time may a holder of shares of Series A Preferred Stock convert shares of the Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding.Additionally, for each common share issued upon conversion of Series A preferred share, a five year common stock purchase warrant is issued to the Subscriber.  The warrant is exercisable at the conversion price of the common shares issued.  The fair value of the common stock into which the Series A Preferred Stock is convertible will exceed the price at which the common stock will be issued on the date of issuance of the preferred stock.  The amount by which the fair value of the common stock exceeds the issue price of the common stock is a beneficial conversion feature.  The Company will recognize the beneficial conversion feature as a one-time, non-cash deemed dividend to the holders of the Series A Preferred Stock on the date of issuance, which is the date the preferred stock first became convertible.   The Series A Convertible Preferred shares do not pay dividends.   The Common shares underlying the Series A Preferred Shares and the common stock purchase warrants are subject to piggy back registration rights.

On July 3, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of seventy five thousand dollars ($75,000) for the purchase 7,500 Series A Convertible Preferred Shares. 

                                                                                                                          

On June 25, 2012 the subscriber converted 10,000 Preferred Shares equal to $100,000 face value at $0.39 per share based on 85% of the closing bid price on May 7, 2012 of $0.46.   The company issued to the subscriber 255,754 shares of Cellceutix common stock.  In connection thereto the Company issued 255,754 warrants to purchase common shares of Cellceutix Corporation at $0.39 per share valid for five years.

 

On July 30, 2012, a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of seventy five thousand dollars ($75,000) for the purchase 7,500 Series A Convertible Preferred Shares.

 

On August 1, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.49 per share based on 85% of the closing bid price on July 25, 2012 of $0.59.   The company issued to the subscriber 154,799 shares of Cellceutix common stock.  In connection thereto the Company issued 154,799 warrants to purchase common shares of Cellceutix Corporation at $0.49 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

On August 23, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.485 per share based on 85% of the closing bid price on August 14, 2012 of $0.571.   The company issued to the subscriber 154,639 shares of Cellceutix common stock.  In connection thereto the Company issued 154,639 warrants to purchase common shares of Cellceutix Corporation at $0.485 valid for five years.

 

On August 31, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares.  

 

 

16

 

On September 19, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012 at $0.62.   The company issued to the subscriber 142,315 shares of Cellceutix common stock.  In connection thereto the Company issued 142,315 warrants to purchase common shares of Cellceutix Corporation at $0.527 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

On September 20, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares.

 

On September 24, 2012 the subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012 of $0.62.  The company issued to the subscriber 142,315 shares of Cellceutix common stock.  In connection thereto the Company issued 142,315 warrants to purchase common shares of Cellceutix Corporation at $0.527 valid for five years.   The shares and the warrants are subject to piggy back registration rights.

 

The shares and the warrants of the above fundings, and all subsequent fundings pursuant to Series A Convertible Preferred shares, are subject to piggy back registration rights.

 

On September 7, 2012 a consultant exercised their option to purchase 250,000 shares of Class A common shares at $0.20, resulting in a payment to the Company of $50,000 and the issuance of 250,000 shares of Class A common stock.

 

On October 24, 2012 the Company issued a total of 50,000 Class A common shares to consultants for services through December 31, 2012, valued at $43,500 based on the closing bid price as quoted on the OTC Bulletin Board on October 23, 2012 at $.87 per share. 

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4.  Mine Safety Disclosures

 

None

 

Item 5.  Other Information

 

None

 

Item 6. Exhibits

 

(a)   Exhibit index

 

Exhibit  

  

 

 

 

31.1

  

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.

 

 

31.2

  

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.

 

 

 

(b)  Reports on Form 8-K

 

None

              

 

17

 

 

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/ Leo Ehrlich

 

 Leo Ehrlich, Chief Executive Officer and Chief Financial Officer and Chairman of the Board of Directors

(Principal Executive, Accounting and Financial Officer)

 

 

 

 

/s/ Krishna Menon

 

Krishna Menon,

President and Director

 

 

 

 

Dated: November 19, 2012                                                                                      

 

18

 

                                                       

                                    

 

 

 

    Exhibit 31-1

   

CERTIFICATION PURSUANT TO RULE 13a-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

I, Leo Ehrlich, certify that:

 

1.           I have reviewed this report on Form 10-Q of Cellceutix Corporation;

 

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.           The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and we have:

 

a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)           designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed und